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IIEGLLATORY FEATURES OF SHIPPING BILL

HEARINGS

BEFORE

THE COMMITTEE ON THE
MERCHANT MARINE AND FISHERIES

HOUSE OF REPRESENTATIVES

SIXTY-FOURTH CONGRESS
First Session

H. R. 14337

TO REGULATE CARRIERS BY WATER ENGAGED IN THE

FOREIGN AND INTERSTATE COMMERCE

OF THE UNITED STATES

APRIL 13 TO 22, 1916

WASHINGTON

GOVERNMENT PRINTING OFFICE

1916

COMMITTEE ON THE MERCHANT MARINE AND FISHERIES.
House op Representatives.

JOSHUA W. ALE
RUFUS HARDY, Texas.
MICHAEL E. BURKE, Wisconsin.
EDWARD W. SAUNDERS, Virginia.
PETER J. DOOLING, New York.
HENRY BRUCKNER, New York.
LADISLAS LAZARO, Louisiana.
WILLIAM S. GOODWIN, Arkansas.
JAMES F. BYRNES, South Carolina.
JESSE D. PRICE, Maryland.
CARL C. VAN DYKE, Minnesota.

XANDER, Missouri, Chair wan.

OSCAR L. GRAY, Alabama.

DAVID H. KINCHELOE, Kentucky.

WILLIAM S. GREENE, Massachusetts.

ASIIER C. HINDS, Maine.

CHARLES F. CURRY, California.

GEORGE W. EDMONDS, Pennsylvania.

WILLIAM A. RODENBERG, Illinois.

GEORGE A. LOUD, Michigan.

LINDLEY H. HADLEY, Washington.

FREDERICK W. ROWE, New York.
C. Bay, Clerk.

LIST OF WITNESSES.

Bush, Mr. Irving T.. prosident of the Bush Terminal Co., New York Gl

Dearborn, Mr. George S., president American-Hawaiian Steamship Co., New

York 91

Franklin, Mr. Philip A. S., receiver of the International Mercantile Marine Co.,

New York 116

Gregson, J^Ir. Fred P., traffic manager of Associated Jobbers of Los Angeles,

Cal ;■-■;■- 182

Johnson, Dr. Emory R.. professor of transportation and commerce. University

of Pennsylvania. Philadelphia, Pa 10

Jacobs, Mr. Isidor, president of the California Canneries Co., San Francisco, Cal . 45

Kirlin, Mr. J. Parker, attorney at law. New York 128

Mann, Mr. Seth, representing San Francisco Chamber of Commerce, San

Francisco. Cal 158

Rhett, Mr. R. G., president of the Chamber of Commerce of the United States,

Charleston, S. C '. 148

Sherman, Mr. Lawrence K., vice president of W. R. Grace & Co., New York. . . 77
Wettrick, Mr. S. J., attorney at law, Seattle, Wash 186

EXHIBITS.

r^ Page.

. Ia Text of H. R. 14337 5

^s^ Telegram from the chairman of the merchant marine committee of the Boston

<Jq\ Chamber of Commerce 41

N. Report of the special committee on merchant marine of the Boston Chamber of

\9^ Commerce 42

Letter from the secretary of the Philadelphia Board of Trade 44

Amendments suggested by the committee of the Chamber of Commerce of New

{ York 74

Letter from Mr. Duncan N. Hood, South American representative of Hill

■ Publishing Co. , New York '. 156

Letter from Mr. B.Muir, vice president of W. R. Grace & Co., New York 157

Legal status of a tramp steamer 194

Clipping from the New York Journal of Commerce of Mar. 17, 1916 195

Statement submitted by Mr. E. C. Plummer, Bath, Me 196

G79934

REGULATORY FEATURES OF SHIPPING BILL.

Committee on the Merchant Marine and Fisheries,

House of Representatives,
Washington, D. C, Thursday, April 13, 191 4.

The committee mot at 10.30 o'clock a. m., Hon. Joshua W. Alexan-
der (chahman) presiding.

The Chairman. Gentlemen, we have set down for hearing this
morning H. R. 14337, a bill to regulate carriers by water engaged in
the foreign and interstate commerce of the United States, with a view
of substituting its provisions for sections 9 and 10 of bill 10500. The
bill is as follows :

Be it enacted bij the Senate and House of Representatives of the United States of America
in Congress assembled, That the term " common carrier by water, " when used in this
act, means a common carrier engaged in the transportation by water of passengers or
property in the interstate or foreign commerce of the United States.

Tlie term ''common carrier by water" when limited by the term ''iji foreign com-
merce " means such a common carrier engaged in the transportation by water of passen-
gers or property between the United States or any of its Districts, Territories, or pos-
sessions and a foreign country, and includes both tlie import and export trade.

The term "common carrier by water" when limited by the term ''in interstate
commerce" means such a common carrier engaged in the transportation by water of
passengers or property between one State, Territory, District, or possession of the
United States and any other State, Territory, District, or possession of the United
States, or between one place in a Territory, District, or possession and another place
in the same Territory, District, or possession.

The term "'other person subject to this act" means any person not included in the
term "common carrier by water" and carrying on the business of forAvarding, ferrying,
toAving, or furnisliing transfer, lighterage, dock, warehouse, or other terminal facilities
in or in connection with the foreign or interstate commerce of the United States.

The term "person" wherever used in this act includes corporations and associations
existing under or authorized by the laws of the United States, or any State, Territory,
District, or possession thereof, or of any foreign country. ,

Sec. 2. That no common carrier by water in foreign commerce or in interstate com-
merce shall —

First. Pay or allow or enter into any coihbination, agreement, or understanding,
expressed or implied, to pay or allow a deferred rebate to any shipper. The term
"deferred rebate," as used in this act, means a return of any portion of the freight
money allowed by a carrier to any shipper as a consideration for the giving of all or any
portion of his shipments to such carrier, or for any other purpose, the payment of which
is deferred beyond the period for wliich it is computed and is made only if, during
both the period for wliich the return is computed and the period of deferment, the
shipper has given his slupments to such carrier in accordance with the terms of the re-
bate agreement or arrangement.

Second. Use, either separately or in conjunction with any other carrier through
agreement or othermse, fighting ships for the purpose of excluding, preventing, or
reducing competition. The term "fighting ship" as used in tliis act means a vessel
selected for and employed in a particular'trade by a carrier or group of carriers for
the sole purpose of driving another carrier out of said trade. The United States
shipping board (hereinafter known as the board), after full hearing upon a complaint
made, or after full hearing under an order for an investigation and hearing made by
the board on its own initiative, shall determine questions of fact as to whether said
carrier or carriers did select or employ a vessel as a fighting ship.

Third. Retaliate against any shipper by refusing, or threatening to refuse, space
accommodations when such are availal)le. or resort to other discriminating or unfair

6 REGULATOEY FEATURES OF SHIPPING BILL.

methods, because such shipper has patronized any other carrier or has filed a com-
plaint charging unfair. treatment or for any other reason.

Any carrier who violates any provision of this section shall be guilty of a misde-
meanor, punishable by a fine of not more than §25, 000 for each offense. If it shall be
determined by the board or adjudged by any coiu't of competent jmisdiction that any
vessel, whether of the United States or of any foreign country, is being operated in
violation of any provision of this section, the board or the court may, by its order,
judgment, or decree, jirohibit said vessel from entering at or clearing from any port
of the United States in \dolation of such order, judgment, or decree made or rendered,
until the board or court shall find that the violation of this section has ceased. A
penalty of $25,000 shall be imposed upon any vessel which shall enter or clear from
any port of the United States in \'iolation of the provisions of a judgment or decree
rendered as provided in tliis section for each and every such entry or clearance, which
penalty or penalties may be recovered by proceedings in admiralty in the district
court of the United States for the district in which said vessel may be, and the coiut
may direct the sale of said vessel for the purpose of realizing the amount of said pen-
alty or penalties and cost.

Sec. 3. That every common carrier by water in foreign commerce or in interstate
commerce, or other person subject to this act, shall file for approval with the board
a true copy, or, if oral, a true and complete memorandum, of every agreement, under-
standing, conference, or other arrangement, to which it may be a party, to to which
i1 may conform in whole or in part, fixing or regulating transportation rates or fares;
giving or receiving special rates, accommodations, or other special privileges or advan-
tages; controlling, regulating, preventing, or destrojdng competition; pooling or
apportioning earnings, losses, oi' traffic; allotting the ports or restricting or otherwise
regulating the number and character of sailings between ports; limiting or regulating
in any way the volume or character of freight or passenger traffic to be carried ; or in
any manner providing for an exclusive, preferential, or cooperative working arrange-
ment. All modifications and cancellations of such agreements, understandings,
conferences, or arrangements shall be immediately filed with the board and shall
not be effecti\-e imless approved by the board.

The board is hereby empowered to order canceled or modified any such agree-
ment. unders,tanding. conference, or arrangement, or any part thereof, that it may
find discriminating or unfair as between carriers, shippers, exporters, importers,
or ports, or between exporters from the United States and their foreign competitors,
or that it may find to operate to the detriment of the commerce of the United States
or-that may be in violation of this Act.

All such agreements, understandings, conferences, and arrangements shall be
approved or disapproved by the board, and when approved shall be excepted from
the provisions of the Act of Congress approved July 2. 1890, entitled '"An act to protect
trade and commerce against unlawful restraints and monopolies," and amendments
and acts supplementary thereto, and the provisions of sections 73 to 77, both inclu-
sive, of an act approved August 27, 1894, entitled "An act to reduce taxation, to
provide revenue for the Government, and for other purposes," and amendments
and acts supplementary thereto.

Any carrier by water, or other person subject to this act, who fails to file with the
board, within a reasonable time to be prescribed by the board, a true and complete
copy or memorandum of eveiy agreement, imderstanding, conference, or arrange-
ment, as required in this section, shall be liable for each such offen,se to a pcTialty
of $1,000 for each day during which such offense continues. Said penalty shall
accrue to and be recovered by the United States in a civil action.

Sec. 4. That it shall be unlawful for any common carrier by water, or other person
subject to this act, either directly or indirectly —

First. To charge, demand, collect, or receive from any person or jiersons by any
special rate, rebate, drawback, or other device a greater or less compensation for any
service rendered or to be rendered in the transportation of passengers or property
subject to the provisions of this act than it charges, demands, collects, or receives
from any other person or persons for doing for him or them a like service in the trans-
portation of a like kind of traflic under substantially similar circumstances and con-
ditions: J'roridrd, That nothing in this act shall prevent the carriage, storage, or
handling of property free or at reduced rates for the I'nited States. State, or municipal
governments, or for charitable purposes, or to or from fairs and expositions for exhibi-
tion thereat, or the giving of reduced rates to ministers of religion, or to municipal
governments for the transportation of indigent persons, or to inmates of the National
omes or State homes for disabled volunteer soldiers, and of soldiers' and sailors'
homes, including those about to enter and those returning home after discharge,
under arrangements with the board of managers of said homes.

REGULATORY FEATURES OF SHIPPING BILL. 7

Second. 'I'o make or t,nvo any undue or unreasonable preference or advantage to
any j)articular person, locality, or description of traffic in any respect whatsoever or
to subject, any particular person, locality, or description of traffic to any undue or
unreasonaI)le prejudice or disadvantage in any respect whatsoever.

Third. To allow any person or persons to obtain transportation for property at less
than the regular rates then established and enforced on the line of transportation of
such carrier, by means of false billing, false classification, false weighing, false report
of weight, or by any other device or means.

Fourth. To induce, persuade, or otherwise influence any marine insurance com-
pany or underwriter, or agent thereof, to prevent a competing carrier by water from
s'>curing a.s favoralile a rate of insurance on cargo carried, having due regard to the
class of vessel, as is granted to such carrier or person.

Any common carrier by water, or other person subject to this act, or, whenever
such carrier or person is a corporation, any director or officer thereof, or any receiver,
trustee, lessee, agent, or person acting for or employed by such corporation who,
alone or with any other person or party, shall knowingly and willfully do or cause to
be done, or shall willingly suffer or permit to be done, any act, matter, or thing in
this section prohi])iled and hereby declared to be unlawful, or who shall aid or abet
therein, shall be deemed guilty of a misdemeanor, and shall, upon conviction, be
subject to a fine of not to exceed $5,000 for each offense: Providrd, That if the offense
for which any person shall be con\dcted as aforesaid shall be an unlawful discrimina-
tion in rates, fares, or charges for the transportation of passengers or propertj% such
person shall, in addition to the fine hereinbefore provided for, be liable to imprison-
ment in the penitentiary for a term of not exceeding two years, or both such fine
and imprisonment, in the discretion of the court.

Sec. 5. That whenever, after full hearing upon a complaint, or under an order for
investigation made by the board on its own initiative, the board shall be of opinion
that any rates or charges demanded, charged, or collected by any common carrier
by water in foreign commerce are unreasonably high, or unjustly discriminatory
between shippers or ports, or unjustly prejudicial to exporters of the United States
as compared ^\dth their foreign competitors, or represent an unjust relation between
classes of commodities, the board is hereby empowered to determine and prescribe
what shall be the just and reasonable rates and charges to be thereafter observed as
the maximum to be charged, and to make an order that such carrier shall cease and
desist from publishing, demanding, or collecting any rate or charge in excess of the
prescribed maximum, such order to continue in force for such period of time, not
exceeding two years, as shall be prescribed in the order of the board, unless the same
shall be suspended, modified, or set aside by the board, or be suspended or set aside
by a court of competent jurisdiction. The board is hereby also empowered upon
formal complaint, or in proceedings instituted of its own motion and after full hearing,
or detennine, prescribe, and order enforced just and reasonable regulations and
practices relating to or connected wdth the receiving, handling, storing, and delivering
of property by any such carrier.

Sec. fi. That every common carrier by water in interstate commerce shall establish
observe, and enforce in interstate commerce just and reasonable rates, fares, and
charges and just and reasonable regulations and practices affecting cla.ssifications,
ra,t(>s, or tarilVs, the issuance, form, and substance of tickets, receipts, and bills of
lading, the manner and method of presenting marking, packing, and delivering
jjrojierty for transportation, the carrying of personal, sample, and excess baggage
the faciUties for transportation, and all other matters relating to or connected with
the receiving, handling, transporting, storing, and delivering of property. WTieneyer
the board shall, upon formal complaint or in proceedings instituted of its own motion
and after full hearing, be t)f opinion that any of the aforementioned rates, charges,
classifications, regulations, or practices are unjust or unreasonable, the board is
hereby empowered to determine, prescribe, and orrler enforced just and reasonable
rates, charges, classifications, regulations, and practices.

Every common carrier by water in interstate commerce shall file with the board and
keep open to i)ublic inspection, in the form and within the time prescribed by the
board, all the rates, fares, and charges for transportation between different points on
its own route and points on the route of an 3^ other carrier by water when a through
route and joint rate have been established, and if no joint rate over the through route
has been established the several carriers in such through route shall file the separately
estaljlished rates, fares, and charges applied to the tln-ough transportation. No in-
crease shall be made liy such carrier in the rates, fares, and charges, or joint rates, fares,
and charges which have been filed in compliance wdth the requirements of this sec-
tion, except after 10 days' notice to the board, which notice shall plainly state the
increase proposed to be made. The board is hereby empowered to determine and

8 REGULATORY FEATURES OF SHIPPING BILL.

prescribe what shall be the maximum rates, fares, and charges to be observed and
charged by such carrier, and to make an order that such carrier shall cease and desist
from demanding or collecting any rate, fare, or charge in excess of the piescribed
maximum, such order to continue in force for such period of time, not exceeding two
years, as shall be prescribed in the order of the board, unless the same shall be sus-
pended, modified, or set aside by the board, or by a court of competent jurisdiction.

Sec. 7. That whenever a common carrier by water in interstate commerce reduces
its rates on the carriage of any species of freight to or from competitive points below a
fair and remunerative basis with the intent of driving out or otherwise injuring a
competitive carrier by water, it shall not be permitted to increase such rates unless after
hearing by the board it shall be found that such proposed increase rests upon changed
conditions other than the elimination of said competition. Jurisdiction is herel)y
conferred upon the board after full hearing upon a complaint made, or after full hear-
ing under an order for investigation and hearing made by the board on its own initia-
tive, to determine questions of fact as to whether said carrier did reduce rates below
a fair and remunerative basis with the intent of driving out or otherwise injiu-ing said
competitor.

Sec. 8. That it shall be unlawful for any common carrier by water, or other person
subject to tliis act, or any officer, agent, or employee of such carrier or person, or for
any other person lawfully autlwrized by such carrier or person to receive informati(jn
therefrom, knowingly to disclose to or permit to be acquired by any person other than
the shipper or consignee, without the consent of such shipper or consignee, any infor-
mation concerning the nature, kind, quantity, destination, consignee, or routing of
any property tendered or deli\ ered to such common carrier for interstate transporta-
tion, or for transportation between the United States and a foreign country, which in-
formation may be used to the detriment or prejudice of such shipper or consignee, or
which may improperly disclose his business transactions to a competitor, or which
may be used to the detriment or prejudice of any carrier; and it shall also be unlawful
for any person to solicit or knowingly receive any such information which may be so
used : Provided, That notliing in this act shall be construed to prevent the giving of
such information in response to any legal process issued under the authority of any
court of a State or of the United States, or to any oflicer or agent of the (Tovernment
of the United States, or of any State or Territory, in the exercise of his powers, or to
any oflicer or other duly authorized person seeking such information for the prosecu-
tion of persons charged with or suspected of crime, or information given by a common
carrier to another carrier, or its duly authorized agent, for the purpose of adjusting
mutual traffic accounts in the ordinary course of business of such carriers.

Sec. 9. That the board is hereby empowered to investigate fully all complaints (or
to undertake investigation on its own initiative) against any common car-rier by water,
charging unfair treatment of sliippers in the matter of cargo space accommodations
or other facilities, having due regard for the proper loading of the vessel and the
available tonnage, or unfair or discriminating contra<ts with shippers based on the
volume of freight offered, or unfair treatment in the loatling and landing of freight in
proper condition, or unfair treatment in the adjustment and sett lenient of claims.
The board is hereby empowered to order the discontinuance of all unfair or discrim-
inating practices which it may find to exist, and to adopt all rules and regulations
which it may deem necessary to prevent such unfair or discriminating practices, and
to protect the complainant against any form of retaliation.

Sec. 10. That for the purpose of enabling it the better to carry out the j)urposes of
this act, the board is hereby empowered, in its discretion, to re(|uire any (common
carrier by water in foreign commerce (and if such common carrier is a corporation,
any director or officer thereof, or any receiver, trustee, lessee, agent, or person acting
for or employed by such corporation) to file with it any ix'riodical or s])ecial report,
or any account, record, rate, or charge, or any memorandum of any fads and trans-
actions appertaining to the carrier's business, conc(>rning any mailer about which the
board is authorized or required by this act to in(piire or keep itself informed or which
it is required to enforce, or to require from any such carrier specific answers to all
questions upon which the board may need information in carrying out this a(;t. Any
such reports, accounts, records, rates, charges, and nunnoranda, or answers to <}ues-
tions, shall l>e under oath whenever the board so rccpiires, and shall be furnished in
the form and within the lime prescribed by the board, if any carrier referred to in
this section (and if such carrier is a corporation, any director or ofiicer thereof, or any
receiver, trustee, lessee, agent, or person acting for or employed by such corporation)
shall fail to file any report, account, record, rate, charge, or memorandum, or shall
fail to make specific arswer to any question authorized by this section, within such
reasonable time as the board may prescribe, such <'amer shall forfeit to the United
States the sum of .'SlOO for each and everv dav it shall contiiuic to he h\ default with

RROULATOKV FEATURKS OF SHIPrJNCi IMLL. 9

respect thereto. Any person (or where the carrier by water it* a corporation, ai'y
director or officer thereof, or any receiver, trut^tee, lessee, agent, or person acting for
or em))loye(l l)y such corporation) who shall willfully falsify in any manner whatso-
ever,. or who shall willfully destroy, mutilate, or alter, or who shall willfully neglect
or fail truthfully to tile any such report, account, record, rate, charge, memorandum,
or answer, shall he deemed guilty of a misdemeanor, and shall be subject, \ipon con-
viction, to a hue of not more than $5, 000, or imprisonment for a term not to exceed
three years, or by both such fine and imprisonment.

Sec. 11. That any commo)i carrier by water or by railroad or other person subject
to this act, or whenever such carrier or person is a corporation, any director, officer,
receiver, trustee, lessee, or agent of, or person acting for or employed by such corpora*
tion who alone or w ith any other person willfully does or causes to be done or w illingly
suffers or permits to be done any act, matter, or thing in this act prohibiting or declared
to be unlawful, or who aids or abets therein, or violates any order or regulation made
by the board in ])ursuance of the provisions of this act, or who aids or abets therein,
or willfully omits or fails to do any act, matter, or thing in this act required to be
done, or causes or willingly suffers or permits any act, matter, or thing so directed or
required by this act to be done not to be so done, or aids or abets any such omission
or failure, or is guilty of any violation of this act, or who aids or abets therein, shall
be guilty of a misdemeanor, and upon cojuiction thereof in any district coiut of the
United States within the jurisdiction of wluch such offense was committed shall,
except as in this act otherwise provided, be subject to a fine of not to exceed $5,000
for each offense: Provided, That any person convicted as aforesaid of a A-iolation of
sections 5, 0, or 9 of this act shall be subject to a fine of not more than ?1,000 for
each day during wliich such A'iolation continues: Provided further, That any person
convicted as aforesaid of a violation of section 8 of this act shall be subject to a fine
of not to exceed $1,000 for each offense.

Every violation of this act shall be prosecuted in any court of the United States
having jurisdiction of crimes within the district in which such violation was com-
mitted, or through which the transportation may have been conducted; and wdienever
the offense is begun in one jurisdiction and completed in another it may be dealt
with, inquired of, tried, determined, and punished in either jui'isdiction in the same
manner as if the offense had been actually and wholly commiited therein.

Sec. 12. That any person who .shall be injured in his business or property by reason
of any common carrier by water or by rail, or other person subject to this act. doing,
causing to ))e done, or permitting to l)e done any act, matter, or thing in this act pro-
hibited or declared to be unlawful, or omitting to do any act, matter, or thing in this
act required to be done, may sue therefor in any district court of the United States
in the district in wliich the defendant resides or i-^ found, or has an agent without
respect to the amount in controversy, and shall recover double the damages by him
sustained, and the cost of suit, including a* reasonable attorney's fee.

Sec. 13. That it shall be the duty of every common carrier by water or other person
sul)ject to this act. within sixty days after the taking effect of this act, to designate
in w-riting an agent in the city of Washington, T3i.strict of Columbia, upon wdiora
service of all orders, notices, and processes may be made for and on behalf of said
common carrier or person in any proceeding or suit pending Ijefore the board, and to
tile such de.signation in the ofHce of the .secretary of the board, which designation
may from time to time be changed by like writing similarly fded: that thereupon
service of all orders, notices, and proces.ses may be made upon such carrier or per-
son by leaving a copy thereof with such designated agent at his office or usual place
of residence in the city of Washington with like effect as if made personally upon
such carrier or person; and in default of such designation of such agent service of any
order, notice, or process in any proceeding before the board may be made by post-
ing a copy of such notice, order, or process in the office of the secretary of the board.

Sec. 14. That the board shall execute and enforce the provisions of this act. in so
far as they may be applicable to the enforcement of, and not inconsistent with this
act, there is hereby made applicable to, incorjiorated in, and made a part hereof,
all the provisions of the acts entitled "An act to regulate commerce," approved
February fourth, eighteen hundred and eighty-seven; "An act making appropria-
tions to supply urgent defitiencies in appropriations for the fiscal year nineteen hun-
dred and tliirteen, and for other purposes," approved October twxnity-second, nine-
teen hundred and thirteen; "An act in relation to testimony before the Interstate
(Commerce Comnussion, and in ca.ses or proceedings under or connected with an act
entitled 'An act to regulate commerce,' a])pr()ved February fourth, eighteen hundred
and eighty-seven, and amendments thereto." apl)ro^'ed Fe])ruary eleventh, eighteen
hundred and ninety-three; "An act defining the right of immunity of witnes.ses under

10 EEGULATORY FEATURES OF SHIPPING BILL.

the act entitled "An art in relation to testimony l)efore the Inlerslate Commerce Com-
mission,' and so forth, approved l-'ebniary eleventh, ei^diteen hundred and ninety-
three, and an act entitled 'An act to establish the Department of Commerce and
Labor,' approved Febriiary fourteenth, nineteen hundred and three, and an act
entitled "An act to further refjulate commerce ^\^th foreii,'n nations and amons? the
States.' approved February nineteenth, nineteen huiidrcd and lhre(>. and an act
entitled "An act makinir appropriations for the leirislaiive, executive, and judicial
expenses of the Government for the fiscal year endinc: June thirtieth, nineteen hun-
dred and four, and for other ])urposes.' approved F'ebruary twenty-fifth, nineteen
hundred and three." approved June thirtieth, nineteen hundred and six; ''An act
to further re,e;ulate commerce with foreign nations and among the States." apj)roved
February nineteenth, nineteen hundred and three: "An act to expedite the hearing
and determination of suits in equity pending or hereafter brought under the act of
July second, eighteen hundred and ninety, entitled 'An act (o i)rotect trade and com-
merce against unlawful restrainis and monopolies." '.\n act to regulate commerce.'
approved February fourth, eighteen hundred and eighty-seven, or any other acts
having a like purpose that may be hereafter enacted," approved February eleventh.
nineteen hundred and three, and all acts amendatory thereof.

Sec. lo. That to carry out and give effect to the provisions of this act, the board is
authorized to emi^loy such experts and other assistants as may be necessary, and to
appoint special agents or examiners who shall have powers to administer oaths,
examine witnesses, and take testimony.

Sec. 16. That this act shall not be construed to afifect. or in any wise reduce or
impair the present power of the Interstate Commerce Commission over rates, or any
other subject matter heretofore committed to its jurisdiction and control.

Dr. Emory R. Johnson, of Philadelpliia, is hore this morning and
I will ask him to make a statement to the committee.

STATEMENT OF DR. EMORY R. JOHNSON, PHILADELPHIA,
PA.. PROFESSOR OF TRANSPORTATION AND COMMERCE,
UNIVERSITY OF PENNSYLVANIA.'

The Chairman. You have studied the provisions of XL K. 14337'^

Dr. Johnson. I have gone over it with some care, Judge.

The Chairman. You are also familiar with the provisions of H. R.
450, are you not ^

Dr. Johnson. I am; or at least I was.

The Chairman. I recall that you reviewed the provisions of that
bill at one time in an article, and while that bill was in preparation I
recall that Dr. lluehner and 1 had the benefit of your advice and
service in framing the bill. We would be pleased now to have you
proceed and give us your views on this bill.

Dr. Jonxsox. ^Ir. Cliairman, I think it is un(U>rstood by the com-
mittee that I ai)pear here to-day upon your invitation and not uj)on
my own suggestion; by wliicli 1 mean that 1 am very glad to come
if I can l)e of any assistance to the committee. That is my only
reason.

The Chairman. 1 invited Dr. Johnson to come for lh(>. reason I
have stated, that when we liad up the preparation of II. R. 17328,
in the Sixty-third Congress — of which li. R. 450 is an exact copy —
the bill under consideration being a co]iy of same, Dr. Johnson gave
us the ])ene(it of his views ojt the matter and of liis assistance, and
all the while has kept in touch with the work of the committee and
is familiar with the recommtMidations of the committee following tlie
investigation of what is known as the Shipping Trust.

Dr. Johnson. It seems to me, Mr. (Chairman, that 1 may most
advantageously present a brief prepared statement, which will not
take me more than 15 miiuites to read, setting forth the main provi-

REGULATORY FEATURES OF SHIPPIXG BILL. 11

sions of the bill and discussing certain principles which it seems to
me support and justify those provisions.

The Chairman. Before doing that. Doctor: you are an author of
various works on the question of transportation and rates, are you
not?

Dr. JoHNSOX. I did publish in 1911 a book upon railroad traffic
and rates and, in 1906, a book on ocean transportation, in which the
subject of steamship conferences and ocean rates was discussed. I
have also published other discussions of the subject and have endeav-
ored to keep myself impartially informed on the subject of ocean
transportation.

Shall I proceed ?

The Chairman. Yes.

Dr. Johnson. Believing that transportation by water as well as
by rail is a busmess of a public nature that should be performed in
accordance with the stanclards of reasonableness that the public has
come to expect all common carriers to observe, I am in accord with
the general purpose of the bill now before the committee. The meas-
ure is very similar to the ])ill that the committee reported to the House
in 1914, and which would probably, have, ere this, been enacted mto
law had not events in Europe given legislation on maritime and many
other subjects an unexpected turn.

The bill under consideration bj' the committee proposes to substi-
tute Government regulation in the place of unregulated competition
and micontrolled monopoly in the ocean transportation business,
the main purposes of the proposed regulation being to insure fair
methods oi competition, to put a limit upon private monopoly and
to prevent unreasonable discriminations in the rates, services, and
practices of ocean carriers. The l)ill seeks to extend to the ocean
transportation business the standards of fair competition that the
act to create a Federal trade commission requires of those engaged
in commerce. The measure aims to correct the evil results of un-
regulated, competition, the granting of rebates to favored sliippers,
the running of '"lighting ships'' to drive out undesired competitors,
and the penahzing of shippers who patronize independent carriers.

The bill recognizes tlie fact that ocean lines will inevitably form
associations or conferences for the purpose of regulating competition
among members of the conference and between the lines within and
those outside of the conference. These conferences formed by the
steamsliip companies are deemed by the companies to be absolutely
necessary, and the investigations made b}' tliis committee show that
the conferences have been, and can be, of service both to the carriers
and to sliippers. Tlie bill under consideration permits such con-
ferences to he formed, but prevents their actions from being injurious
by requiring all conference agreements to be subject to approval b}'
the Government.

It must be evident that these conferences of ocean carriers must
either be prevented or regulated, if independent American hues,
whether under private or Government ownership, are to engage in
the future, profitably, in the South American and other trades. The
ocean transportation field can be and is largely preempted by the
conference lines which, when it is to their advantage, make deferred
rebate contracts with the larger shippers and thus close the door of
opportunity to the independent carrier seeking cargo to keep his

12 REGULATORY FEATURES OF SHIPPING BILL.

ships regularly and full}* oinployed. It is necessary that the ocean
transportation field should be op(^n to all carriers on like terms.
Unless this is assured, the United States can not hope- to make much
j)rogress in the development of its merchant marine.

It seems to me this bill is fundamental, then; it is the first step in
the development of a merchant marhie under present conditions of
"conference'' regulation of the ocean transportation business.

Plaving provided for preventing unfair competition and for limiting
monopoly in the ocean transportation business, the bill makes it
unlawful for common carriers by water to make unreasonable dis-
criminations in rates or services or to indulge in secret preferential
practices, it being the evident purpose of the bill to apply to carriers
t)y water, in so far as applicable, the principles that have successfully
and with advantage to the public been apphed to carriers by rail.
The bill gives the board entrusted with the enforcement of the act
power in certain conditions to fix the maximum rates charged by
ocean carriers in the foreign trade. As this is such an important
feature in the bill, and inasmuch as it is especially important that
these features of the bill be exactly understood, not only by this com-
mittee but by others, I shaU at this point take the liberty, with your
permission, of quoting the two or three paragraphs which contain the
provisions in regard to regulation of rates.

It is provided by the bill :

That whenever, after full hearing upon a complaint, or under an order for inA-estiga-
tion made by the board on its own initiative, the board shall be of opinion that any
rates or charges demanded, charged, or collected by any common carrier by water in
foreign commerce are unreasonably high or unjustly discriminatory between shippers
or ports, or unjustly prejudicial to exporters of the United States as compared with
their foreign competitors, or represent an unjust relation between classes of com-
modities, the board is hereby empowered to determine and prescribe what shall the
just and reasonable rates and charges to be thereafter observed as the maximum to be
charged and to make an order that such carrier shall cease and desist from publish-
ing, demanding, or collecting any rate or charge in excess of the prescribed maximum,
such order to continue in force for such peiiod of time, not exceeding two years, as shall
t)(' prescribed in the order of the board, unless the same shall be suspendeil, modified,
or set aside by the board or be suspended or set aside by a court of competent juris-
diction.

The law, however, does not provide that the board shall require
carriers by water in foreign commerce to file their rates or tariffs.
Experience will show whether it is jiracticable and desirable to require
ocean carriers in the foreign trade to file their rates and to charge
oidy such rates as have })oen filed with the Government. This
difference between the pending measure and the present interstate
('omnKU'ce law is of present importance. This bill, if enacted into
law, wiU provide a very different kind of regulation, by the shipping
])oard, over the rates of ocean earners, than the Interstate Com-
merce C'ommission exercises over carriers by rail. In the case of
carriers by rail, their rates must be published and filed with the com-
mission; only the piddished rate may be charged; no change in the
rate, up or down, may be made except upon 30 days' notice to the
Government, and any important increase in rates may be suspend by
the Interstate Commerce Commission; thus giving the commission
])racti(^al control over the rates of the railroads. There is no such
proposition contained in the proposed measure.

REGULATORY FEATURES OF SHIPPING BILL. 13

The proposed measure subjects carriers by water in interstate
commerce to somewhat stricter regulation than is provided for car-
riers by water in foreign commerce. The bill provides:

TKat every common carrier l)y water in interstate commerce shall establish, observe,
and enforce in interstate commerce just and reasonable rates, fares, and charges and
just and reasonable regulations and practices effecting classifications, rates or tariffs,
the issuance, form, and substance of tickets, receipts, and bills of lading, the manner'
and method of presenting, marking, packing, and delivering property for transporta-
tion, the carrying of personal, sample, and excess baggage, the facilities for trans-
portation, and all other niatters relating to or connected with the receiving, handling,
transporting, storing, and delivering of projjerty. Whenever the board shall, upon
formal complaint or in proceedings instituted of its own motion and after full hearing,
be of opinion that any of the aforementioned rates, charges, classilications, regulations,
or practices are unjust or unreasonable, the board is hereby empowered to determine,
prescribe, and order enforced just and reasonable rates, charges, clas,sifications,
regulations, and practices.

The carriers by water in interstate commerce are further required
to—

* * * file with the board and keep open to public inspection, in the form and
within the time prescribed by the board, all the rates, fares, and charges for transporta-
tion between different points on its own route and points on the route of any other
carrier by water when a through route and joint rate have been established, and if
no joint rate over the through route has been established the several carriers in such
through route shall file the separately established rates, fares, and charges applied
to the through transportation. No increase shall be made by such carrier in the rates,
fares, and charges or joint rates, fares, and charges which have been filed in compliance
with the requirements of this section, except after 10 days' notice to the board, whicli
notice shall plainly state the increase proposed to be made. The board is hereby
empowered to determine and prescribe what shall be the maximum rates, fares, and
charges to be observed and charged by such carrier and to make an order that such
carrier shall cease and desist from demanding or collecting any rate, fare, or charge
in excess of the prescribed maximum, such order to continue in force for such period
of time, not exceeding two years, as shall be prescribed in the order of the board,
unless the same shall be susjjended, modified, or set aside by the board or by a court
of competent jurisdiction.

That section of the act, Mr. Chairman, is tlie only one, so far as
I read the bill, that required the pul)hcation and filing of rates, and
those are joint rates applying over connecting carriers.

To enable the board to carry out its important duties it is given full
power to investigate the rates and practices of carriers by water, and
to require the carriers to make such periodical or special reports as
the board may need in order to keep fully informed regarding the
business of the carriers.

The effective powers of the board as a supervisory and regulatory
body are strengthened by the section which provides that the pro-
visions of the interstate commerce act of 1887, and subsequent laws
for the regulation of railroads, shall, in so far as applicable to the
business of ocean transportation, be incorporated in, and made a part
of, the proposed law. It is, however, wisely provided that the pro-
posed act ''shall not be ^construed to affect, or in anywise reduce or
impair the present power of tlie Interstate Commerce Commission
over rates, or any other subject matter heretofore committed to its
jurisdiction and control."

So much, Mr. Chairman, as to the main provisions of the law.
Now a few words as to the general ])rinciples upon which this bill was
framed.

The proposed legislation is based upon principles that have not
hitherto prevailed in the laws of the United States for the regulation

14 REGULATORY FEATURES OF SHIPPIXG BILL.

of carriors, whcthor ])y rail or by water. The law proposes to allow
rival steamship lines to form eoiiferences and to enter into agreements
as to rates and services; it proposes to regulate rather than to pro-
hibit conferences of ocean carriers. In the past, the generally ac-
cepted theory has been that the public interest required that compe-
tition among carriers, whether by rail or by water, be enforced by
■ law, and that the cooperation as well as combination of rival carriers
b(> jiroliibited.

AVliatever the theory of legislation has l)een, tlie fact is that the car-
riers now engaged in the foreign trade of the United States are practi-
cally all members of conferences. The investigations maile by this
committee established this fact beyond question, it having been
found by the committee that —

It is the almost universal practice for steamship lines engaging in the American
foreign trade to operate, both on the inbound and outbound voyages, under the terms
of written agreements, conference arrangements, or gentlemen's untlerstandings,
which have for their principal purpose the regulation of competition through either
(1) the fixing or regulation of rates, (2) the apportionment of traffic by allotting the
ports of sailing, restricting the number of sailings, or limiting the volume of freight
which certain lines may carry, (3) the pooling of earnings from all or a portion of the
traffic, or (4) meeting the competition of nonconference lines.

The members of these conferences include steamship lines under
the American flag and under foreign flags. Whether it would be pos-
sible as a matter of practical legislation and administration to prevent
all carriers, foreign as well as American, engaged in the foreign trade
of the United States from entering into conference arrangements and
agreements I will not attempt to say. It is probable, however, that
a law ])rohibiting conferences could be enforcetl more effectively
against vessels under the American flag than against vessels under
for.>ign flags, and that such a law would be more effective against
conferences formed in the United States than against conferences
formed in foreign countries. Without going into this phase of the
subject in any detail, it seems to me that it would be impracticable
as well as inadvisable to prohibit steamship conferences.

This is equivalent to saying that the proposed legislation proceeds
in the riglit direction. It permits rival steamsliip lines to form con-
ferences and to enter into agreements for the regulation of services
and rates, but subjects the agreements and all the rates fixed by
agreements to government knowledge and regulation. Legislation
of this kind is sound in priiu'ij)le and is needed in the public interest.

At the present time ocean carriers, both coastwise and in the
foreign trade, form conferences and miter into agreements. Wliat
transpires in those conferences and what agreements are entered into
are kept from the public. Similarly each ocean line nuiy make secret
rates favoring such shi])pers and such ports as it may wdsh to aid,
there being nothing to prevent secret rebates and discriminations.
In a word, at the present time, ocean carrier* engaged in the domestic
and foreign trade of the United States are carrying on a business of
a public nature by secret methods, and are being permitted to estab-
lish such a degree of monopoly as it is possible by combination to
maintain. While it is well known that competition is active in many
parts of the ocean transportation business, it is also well known that
powei-ful steamship lines by conferences can (>sta])lish conditions
which contain elements of monopoly. Tlie vei-y j)Ui'pose of tlie con-

EEGULATORY FKATUHKS OF SllIPPlNG BILL. 15

fercnco agrecmoiits is to limit coinpctition. Monopoly is the opposite
of compotition.

The present condition of unregulated competition in ocean trans-
])ortati()n is desirable neitlier for the public nor for the carriers.
ComjK'tition must be regulated, and is regulated — not by means
known to the public and sul)ject to Government control — but secretly
by combinations of the carriers. The pu])lic interest requires that
the agreements of carriers shall be subjected to the fullest measure
of publicity, and that the rates, practices, and services of ocean car-
riers shall be subject to ap])roj)riate regulation by the Federal
Government.

The theory in accordance^ with which the bill has been framed is
that the law for the regulation of carriers by water sliall state with
precision what is required of carriers as regards their agreements,
rates, and practices. Instead of providing in general language that
ocean carriers shall not charge rates that are unreasonably high or
unjustly discriminatory as between persons, places, and commodities,
the bill contains specific prohibitions and a series of defii.ite require-
ments. Deferred rebates, "fighting ships," and retaliation against
shipj^ers are prohibited. The ])ill also prohibits unreasonable dis-
criminations in charges and the granting of special rates to favored
shii)pers. The carriers are recpiired to inform the Government of all
agreements with each other, and clianges in those agreements must
receive the approval of the shipping board. Carriers by water in
interstate commerce are also recpiired to hie their joint or interline
rates with the shipping board. If the charges of carriers by water,
whether in interstate or foreign commerce, are found upon investiga-
tion to be mireasonable, maximum rates may be established by the
shipping board. The proposed act thus confers specific powers upon
the shipping board, while at the same time it gives the board a large
measure of discretionary authority — it being left with the shipping
board to determine what reports shall be required of carriers by water
in foreign commerce and to determine to what extent the provisions
of the interstate-commerce act and other laws for the regulation of
commerce will be found to apply to the enforcement of the pending
act should it become a law.

The experience which the Interstate Commerce Commission has
had in the regulation of carriers by rail show^s the importance of m-
cluding m an act, such as the one mider consideration, a specific and
detailed enumeration of the prohibitions and requirements imposed
upon the carriers, and of the powers that may be exercised by the
board mtrusted with the administration of the act. A law less defi-
nite than the one proposed w^ould almost certainly lead to controversy
and litigation. The result would be an ineffective and unsatisfactory
regulation of ocean carriers.

It is important that an act for the regulation of ocean carriers should
not take from the Interstate Commerce Commission any of its powers.
The purpose of the proposed law is to extend the scope of regulation
of transportation w'ithout limithig or conflicting with the agencies of
of administration that have previously been established. While the
Interstate Conmnerce Commission has certam jurisdiction over such
carriers bv water as unite with railroads in forming through routes,
there ought to be no conflict of jurisdiction betAveen the Interstate

16 REGULATORY FEATURES OF SHIPPING BILL.

Commerce Commission and the proposed sliipping board. This con-
flict of jurisdiction will })r()bably be obviated by the last section of
the proposed law. which provid(>s tliat nothing in the act sliall impair
the powers of the Interstate Connnerce Connnission over mattei-s now
committed to its jurischction.

The CuAiRMAX. Referring to that last matter, that there is to bo
no conflict of jurisdiction between this board and the Interstate Com-
merce Commission, is it not your opinion that experience may de-
velop a situation where the two boards must act jointly — that is, the
Interstate Commerce Commission and tlu^ shipping board — with
reference to various matt<'rs and provider a form of a.ihninistration ?

Dr. JoHXSox. I thiidv tluit is entireh' possi})le, Mr. Chairman.
The two fields will, of course, touch each other; and the two boards,
in dealing with practical questions, will have to mark out the limi-
tations of the two fields. This proposed measure would be incom-
plete, however, if it did not do as it does do — that is, make perfectly
clear that this proposed measure^ is not a transfer of the powers, nor
in any sense an infringement upon the powers, of the Interstate
Commerce Commission.

The Chairmax. Yet it wifl take experience to develop and disclose
just where this joint control may be necessary?

Dr. JoHxsox. I think it will; yes, sir.

The Chairmax. In the committee, in the consideration of this bill,
the question has come up with reference to the tramp steamer. We
have no purpose to hamj^er them or circumscribe^ their activities or
limit their power in tlie way of competition and tlie regulation of
ocean rates. It is claimed by the conference lines that rates are
largely controlled by charter rates. Now, is there anything in this
bill which would do that ?

Dr. JoHxsox. I liave read the l^ifl carefully, Mr. Cluiirman, with
that query in my mind. I detun it impracticable to establish in the
ocean transportation business the situation that has been establishwl
in the rail transportation business, namely, that only the published
rates on file witli the Government may be charged. There is nothing
in this bill which requir(;s the owner of n tramp vessel to file his rates
with tlie shipping board. Nor is there anything in tliis bill that will
prevent him from quoting such a rate to-day as he deems com-
petitive conditions require him to quote. He is limited in his actio7i.
so far as I can discover, only by the section of the bill

Mr. Hardy. Section 3 ?

Dr.- Johnson. Section 3, which lays down certain standards of fair
competition. If he, by his individual, micon trolled act, violates
those standards, he runs the risk of a complaint l)y a rival or of an
investigation by the shipping board, which can correct liis practice
in the future.

Tlie Chairman. In other words, he is not permitted to practice
discrunination as between shippers or ports or in any other manner
that would not be ])ermitted to the regular lines?

Dr. Johnson. That is right.

Mr. Hardy. As I understand your construction, and that is what
seems right to me, an individual, single, line, or single shij)owner,
having no agreement witli any otlier sliipowner, is a free lance as far
as rates are concerned, ])rovided he does not discriminate between
persons or places?

REGULATORY FEATURES OF SHIPPING BILL. 17

Dr. JoiLWsoN. That is my undorstanding of the })ill.

Mr. Hardy. And this bill does not attempt to give the l)()ard
authority to fix rates that shall he charged, but they have the I'iglit
to prevent siieli discriminations by the c()m])ination lines or the con-
ference lines ?

Dr. Johnson. Your statement is in accordance with my under-
standing, and I think it well to emphasize a distinction that should
be kept in mind. The powers conferred by this bill upon the pro-
posed shipping board are purely corrective powers as regards rates.
They are not powers to prescribe, ab inito, a scheme of rates or a
system (»f rates to prevail in the field of ocean transportation. The'
line cari-iers, or individual shipowners, will go ahead after this law is
passed and work out their own rates, and will not even be obliged to
file them with the Government unless they are joint rates.

Dr. Hahdy. That is, you mean unless they are conference rates?

Mr. Johnson. No; unless they are joint interline rates over two
c;)nnecting water carriers.

.The ('Iiatrman. That is the interstate commerce act?

Dr. Johnson. The interstate commerce, act gives the commission
jurisdiction over joint routes and joint rates by rail and water lines,
including the wator portion of the joint route. This bill deals with
joint routes over connecting carriers by water and the shipping board
may require those interline water rates to be filed. But those are
the only rates that have to be filed with the board. All other rates
are made by the several steamship lines as they think best — of course
subject to the general limitations and requirements in this bill as to
fair competition. The same is true of the tramp steamer and even
perhaps in a larger degree, because the practice of tramp steamers is
to make rates not for periods of time or by schedules but v/ith refer-
once to a particular vessel sailing at a particular time. Do I make
myself clear?

Mi\ Byrnes. Doctor, how do you construe section 6 on page 10 ?

Dr. Johnson. That section states that every common carrier by
water in interstate commerce shall establish, observe, and enforce in
interstate commerce just and reasonable rat'^s, fares, and charges and
just and reasonable regulations and practices affecting classifications,
rates, or tarifi^s, and so forth.

Mr. Byrnes. Now the last part, beginning in line 23, ''Whenever
the board shall, upon formal complaint or in proceedings instituted
of its own motion."

Dr. Johnson. The early part of the section which I read imposes
upon the carriei's when they make their rates the standards of reason-
ableness. The latter part of the paragraph to which you specifically
refer gives the board the power to determine in particular cases
wheth(vr that standard of reasonableness has been observed or not.
If the ])oard finds it has been violated the board can correct what has
been done.

Mr. Byrnes. And onU^r in force what they consider to be just and
reasonable rates?

Dr. Johnson. Yes.

Mr. Byrnes. That is just interstate. Now, as to foreign, is there
not the same provision in section 5 — th(? power to fix a maximum
rate ?

38534—16 2

18 REGULATORY FEATURES OF SHIPPING BILL.

Dr. JoHxsox. A similar jiowor is ihovo granted. Tho ])art that
possibly you have in mind is tliat the bill does not limit the extent to
which the shippuig board may fix rates nor limit the time wliieh
those rates shall remain m force.

Mr. Byrnes. I was only inquiring because I understood you to say
that they had nothing to do with the fixing of rates or regulating.
Possibly I may have misunderstood you.

Dr. Johnson. I did not intend to say quite that. The board has
the power to correct a rate upon complaint or, upon investigation ,
upon their own mitiative. The rates, however, are made da}^ by day
by the tramp carrier. Wliat the board does is to pass in judgment
upon what the carrier does upon his own initiative. Now, in actual
practice what would come before the board would be a complaint not
against the rates m general of- an ocean carrier but a complaint
against certain specific charges; and any correction that the board
would make would deal with individual specific rates and not witli a
general schedule or classification of rates. The act hi its practical
workings would, I think, not transfer to the board the general rate-
makmg function.

Mr. Burke. Doctor, permit a question. In section 5, commenchig
on line 20, "prescribe what shall be the just and reasonable rates and
charges to be thereafter observed as the maximum"; that is, the
board is empowered to do that after an investigation upon complahit
made. What I desire to know is, Will the tramp ship be bound by any
maximum rates that the. board may make as a result of an investiga-
tion of a complamt ?

Dr. Johnson. Of course the order will run against the specific
carrier; it could not run against any other carrier than that one. And
if any other carrier deemed the conditions of transportation to be
different — conditions of competition and conditions of transportation
to be different — than they were when the order was issued against the
other carrier, 1 would say that the tramp owner would be free to take
such action as he deemed to be permissible under the requirements of
the act. In other words, to answer specifically, I do not thmk an
order running against me to-day would necessarily apply against you
to-morrow.

Mr. BuHKE. But the maxhnum fixed to-day agahist a given tramp
ship would continue against that ship, if it continued in the same
route, until changed ?

Dr. JoHNSOx. It would continue as long as the order of the l)oard
ran. It is customary to put a two-year limit on orders of the Inter-
state (commerce Commission. And, in fact, orders, I thiid<, are
limited to a two-year periotl by the bill.

The CiiAJHMAX. 1'here is a two-year lijiiit in tliis connection also —
it is not to exceed two ytnirs that the order shall I'un.

Mr. Hardy. Then this section 5 only prescribed the fixing of the
maxim ujn; that would not prevent a vessel from low(>ring the rate?

Dr. Johnson. Oh, no. It does not prescribe the absolute nor
minimum rate 'f

Mr. Greexe. I am very sorry I was not here all the time you were
talking, but frojn what I did hear it seemed to me you made the state-
ment that interstate commerce would be restricted or jnore re-
stricted than the regulation of foreign cojnmerce. That is to say,
this bill would affect more paiiicularly tiie interstate coiujnerce, the

EEGULATOKY FP^ATUEES OF SHIPPlXd 15] LL, 19

coastwise traffic, rather than the ocean traffic, and would affect com-
petition in the coastwise traffic more than it would in the over-seas
traffic. Ain I correct in that ?

Dr, Johnson. Essentially. What I said was that the regulation — -

Mr. Greene. I did not lioar all you said, because I Wiis unfortu-
nately called out.

Dr. Johnson. What I said was the proposed measure subjects
carriers by water in interstate commerce to a somewhat stricter regu-
lation than is provided for carriers by water in foreign commerce.
And then I called attention to the second paragraph of section 6,
w4iich gives the shipping board authority to require tlie fihng of the.
interline rates on two connecting carriers by water in interstate com-
merce. In the absence of an interhno rate fixed l)y the carriers form-
ing a joint route, the board may require the separate rates which
each carrier charges for tlie joint haul to be filed with the board.
And the rate thus filed can not be changed except upon 10 days'
notice.

That is a kind of a provision that is rather important and it does
not apply to carriers in the foreign commerce.

Mr. Greene. The purpose of this bill, as I understand it, was to
make it easier for Americans to do business in tlie foreign trade.
Now, is it necessar}'^ to interfere with the interstate commerce in
order to make the ocean commerce more advantageous to people
who v/ant to enter into that?

Dr. Johnson. Possibly you state one purpose rather than aU the
purposes of the bill.

Mr. Greene. I have stated the purpose that struck nie most forci-
bly in what I heard you say. I did not hear it all; but I thought
from what I heard you say, as I understood you, that you said this
bill would particularly affect the interstate commerce, but it could
not reach all the elements of the foreign commerce. The point I
want to make is this: This bill it seems to me — I may be incorrect in
it — is not ])eneficial to the American shipper, but is rather in the
interests of the foreign shipper. The American shipowner who goes
into the trade, or is in it now, or has been in it, and has his business
established, is more likely to be interfered wdth by this bill than he
would if the bill was not enacted into law. The men who have
established a foreign trade, have established it with a great deal of
competition, and that competition is liable to be very much more
severe when this war is over — I do not know when that will be — it
will be very much greater, and there will be a great many more
entanglements to which the American shipowner will l>e subjected
by reason of the enactment of this bill.

Now, I want to know wherein the bill in an}- way provides any
more freedom or more opportunity or more advantage to the Amer-
ican shipper than there would be if this bill was not put into law.
Does not tliis tie the American shipper up more and more; and it is
not to get at the foreign shipper, because the foreign shipper can not
be reached except, of course, he comes hito ovu- ports and thus be
subject to the same restrictive regulations; but ho will keep out of
our ports and do liis dir(>ct foreign trade without coming in, which
we want to get.

Dr. Johnson. Your question is so full}' stated that the reasons
back of it are made clear.

20 EEGULATORY FEATUEES OF SHIPPING BILL.

Mr. Greene. Yes.

Dr. Johnson. And it is those reasons I will attempt to consider
very briefly.

^Ir. Greene. What do j'oii mean by the ''reasons back of it?''

Dr. Johnson. The reasons for asking the question.

]\Ir. Greene. That is what I want to know. I do not ask the
question in an}^ sense of being a shipowner, which I am not, and
never did own a cent's worth of stock in a ship. I want to get the
purpose of this bill, if I can. It seems to me, as far as I read it,
it is not advantageous to American shipping.

The Chairman. The American exporters, though, think it is.

Mr. Greene. The men I hear from do not think so.

The Chairman. You may be sure they are not shipowners.

Mr. Greene. I do not know.

The Chairman. You will find out w^lien they come'^

Mr. Greene. I have a telegram I would like to read here.

The Chairman. I suggest that you wait until Dr. Johnson answers
the ciuestion. I beg your pardon, Doctor, for interfering myself.

Dr. Johnson. It would be accomplishing the opposite of what is
intended if the result of this bill was to make it more difficult for
American shipowners to enter the business of ocean transportation
and if it were made more difficult for the American merchant marine
to develop. Your feeling is, if I get your thought correctly, that by
imposing the requirements of this law upon ocean transportation,
upon the ocean carriers, the effect may be to make it more difficult
for American shippers to enter the field and develop a merchant
marine ?

Mr. Greene. Then I am attacking it on the ground that they will
be subject to foreign competition, which was severe for a great man}^
years — a well-established competition — and is to-day well estab-
lished, notwithstanding the war; that when the war is over the
competition w^ill be very much more severe, and w^e are not able to
get at that and try to destroy it — we may try to destroy it. but our
measures will be ineffective — and at the same time it will bind the
liands and tie the feet of the American shipowner and the American
exporter.

Dr. Johnson. That very question was considered in general terms
in w^hat I stated in the beginning and with your permission I will
restate that, and then extend the thought slightly. What I said was
that it must l)e evident that these conferences of ocean carriers must
either be pi-ovented or regulated, if independent American lines,
whether under ])rivate or Government ownership, are to engage in
the future, ])i'ofitably, in the South American and other trades. The
ocean transj)ortation i'u'ld can be and is largely preempted by the
confcirence lines which, when it is to their advantage, make deferred
rebate contracts with the larger shippers and thus close the door of
opportunity to the independent carrier seeking cargo to keep his
smps regulailv and fully (nnployed. It is necessary that the ocean
transportation field should be open to all carriers on like terms.
Unless this is assured, the United States can not hope to make much
progn^ss in the develo]un(Mi1 of its merchant marine.

In order to engage yM'ofitubly in a trade })etween the Ignited States
and South Anuu'ica, a new steamsliip line must enter an open trans-
portation fi(\ld. The conferences now liave covered the larger part

REGULATORY FEATURES OF SHIPPING BILL. 21

of the traflic from South America to the United States by coiiferenco
agreements including the deferred rebate contract. ""I'he great diffi-
culty of starting a new line from the United States to South America
is that <a large number of the big shippers hare pledged themselves to
patronize only the existing lines. In other words, the conditions of
competition at present are unfair to the now line. The development
of the merchant marine means the profitable establishment of new
lines and new services. And it seems to me that the first thing that
must be done is to require every hne that enters an American port,
that is, engages in the foreign trade of the United States, to submit
its conference agreements to an American board, and to do away with
these secret practices which now close the field against fair com-
petition on the part of new lines.

I have answered your cpiestion as well as I can.

Mr. RowE. Now, the same relation practically exists in other
trades besides South America?

Dr. Johnson. I take that simply as an illustration.

(Thereupon, at 11.55 o'clock a. m. the committee took a recess
until 2 o'clock p. m.)

AFTER RECESS.

The committee reconvened pursuant to the taking of recess.

Mr. Greene. Did you complete all you had to say in answer to my
question ?

Dr. Johnson. Much more might be said.

Mr. Greene. I would like to get something that would give light
on what I asked for. If you want to enlarge on it, I am willing you
should.

The Chairman. I thought his answer was complete.

Mr. Greene. You might think so, but it seems to me it is not, and
if he can make it more definite I would rather have it, even though
it be against my view. I wiU ask the stenographer to read my
question.

Tlie Stenographer (reading) :

Then I am attacking it on the ground that they will be subject to foreign competi-
tion, which was severe for a great many years, a well-established competition, and is
to-day well established, notwithstanding the war; that when the war is over the com-
petition will be very much more severe, and we are not able to get at that and try
to destroy it — we may try to destroy it, but our measm-es will be ineffective— and at
the same time it will bind the hands and tie the feet of the American shipowner and
the American exporter.

The Chairman. Now, I suggest that the answer of Dr. Johnson to
your question be read also.

The Stenographer (reading) :

That very question was considered in general terms in what I stated in the begin-
ning, and with yom- permission I will restate that and then extend the thought
slightly. What I said was that it must be evident that these conferences of ocean
carriers must either be prevented or regulated, if independent American lines, whether
imder private or Government ownership, are to engage in the future profitably in
the South American and other trades. The ocean transportation field can be and is
largely preempted by the conference lines which, when it is to their advantage,
make deferred rebate contracts with the larger sliippers, and thus close the door of
opportunity to the independent carrier seeking cargo to keep his sliips regularly and
fully employed. It is necessary that the ocean transportation field should be open

22 REGULATORY FEATURES OF SHIPPING BILL.

to all carriers on like terms. Unless this is assured the United States can not hope to
make much progress in the development of its merchant marine.

In order to engage profitably in a trade between the United States and South
America, a new steamship line must enter an open transportation field. The con-
ferences now have covered the larger part of the traffic from South America to the
United States by conference agreements, including the deferred rebate contract.
The great difficulty of starting a new line from the United States to South America
is that a large number of the big shippers have pledged themselves to patronize only
the existing lines. In other words, the conditions of competition at present are
■unfair to the new line. The development of the merchant marine means the profit-
able establishment of new lines and new ser^dces. And it seems to me that the
first thing that must be done is to require every line that enters an American port —
that is, engages in the foreign trade of the United States — to submit its conference
agreements to an American board and to do away with these secret practices which
DOW close the field against fair competition on the part of new lines.

Mr. Greene. There is one other question I wanted to ask you, and
that is this: I think you said something about tramp steamers not
being subject to regidation, did you not; that they would not be sub-
ject to reguUition hke the other hues?

Dr. JoHxsox. Their rates woukl be subject to regulation in the
sense that they woidd be subject to correction upon complaint and
upon investigation by the shipping board ; but each tiamp ship owiter
would be free day by day to cjuote such rates as he thought the cir-
cumstances warranted.

Mr. Greene. Is not that a rather discrimination in favor of the
tramp steamei ? Are not the tramp steamers the principal com-
petitors in that trade to-day; and if they are free, would there not
be a discrimination in theii favor ?

Dr. Johnson. As was stated this morning, the law leaves to the
steamship lino, as well as to the individual vessel owner, the power to
make and c{Uote rates. The rates do not have to be published and
filed either in the case of the vessel lines or the tramp steamers. They
wiU have to be made, if this bill should become a law, in compliance
with certain general principals and requirements set forth in tlie act;
and if the rates are violative of those principles they may, upon com-
plaint and investigation, be corrected by the shipping board. That
IS what I understand the proposed law to be.

^Ir. Curry. Would we have the authority to regulate the shipping
rates on this Government-owned Braziliaii line under this law?

Dr. Johnson. I suppose the Brazilian line in taking traffic out of
New York would have to take it in accordance with the provisions
of this law.

Mr. Curry. From Brazil to the United States '.

Dr. Johnson. Xo; I said from New York, outbound. I think we
might have the theoretical right to fix the rates under which traffic
shall be brought into this country; but it is probably not a right that
we could exercise in actual practice.

Mr. C'l'RRY. You think then that under this bill, if it becomes a law,
this board which is proposed to be created would only Itave the
authority to regulate export and not import trade ''.

Dr. JoHXSOX. I said as a matter of practical enforcement of the
law I doubted whether the shipping board could fix the rates from a
foreign port to the United States.

Mr. Hadley. Then there could be no such thing as regulation of
foreign commerce or the deep-sea commerce coming to our ports?

EECiULATOHY FEATURES OF SHIPPING BILL. 23

Dr. fJoiiN.soN . 1 think that certain practices of stoan:ship coinpanies
might ho roiriilated. and if there were n-'.anifest discrirrinations as
hetweeii ports I think possiV)ly the shipphig hoard could correct those
discriininations. But as for saying to the Tlanihurg-American Co.
what rates it shall charge froTu Hanihurg to the United States that is
a sovereign j)o\ver wliich the United States could hardly exercise in
practice.

Mr. C'ruuY. I agree with you.

Dr. JoHXSCiX. I say that for the reason that Germany would have
the same power that we would have and it might well happen that
Germany would hold to l>e perfectly lawful rates from Ham})urg to
the United States wiiich our shipping hoard would hold to be unlawful,
and tliere would follow a conflict of sovereignty vdiich miglit make
impracticahle the enforcement of the provisions of tlie act.

Mr. IIadley. The German, French, British, and the Japanese do
make discriminating rates, even among their own people, and they do
provide for rebates, and they give a preference to one shipper over
another at home: and under this bill we could iiot correct that evil.

Dr. Johnson. I think we could require every line engaged in com-
merce at an American port, every foreign line a member of a confer-
ence, to hie with the shipping board a copy of its conference agree-
ment. I think we can throw light upon practices of the foreign
steamship companies.

Mr. Hadley. But not correct them (

Dr. Johnson. How far we can go in actual practice I am not pre-
pared to say. I do think, as I have alread}^ stated, that it would not
be practicable for the United States Government actually to fix the
rates from foreign ports to the United States.

Mr. Hadley. Do you think we can go even as far as you suggest
without changing certain treaties ?

Dr. Johnson. I am not prepared to answer that, because, candidly,
I have not examined the treaties with that in view.

Mr. Hadley. I mean the commercial treaties, of course.

The Chairman. Dr. Johnson, let me put this case to you: Suppose
ainanufacturer in the United States was submitting a bid on a com-
modity with the same commodity manufactured in England to a
purchaser in Buenos Aires. There is a steamship line from England
to Buenos Aires and a steamship line from the United States to
Buenos Aires. Now, these are British-owned lines, members of the
conference, and this line quotes the English bidder a rate, considering
the distance and the service, that discriminates in favor of the Eng-
lish manufacturer to the extent that the American bidder can not
compete with him. Is it your opinion that under the provisions of
this bill that line might be compelled to treat the American manu-
facturer on equal terms with his foreign competitor or else be subject
to the fuie provided in this bill: or you might go even so far as to say
if you discriminate against the American manufacturer we will
exclude you from our ports ^

Dr. Johnson. As you have stated, I thhik the American representa-
tive of that foreign line might be prosecuted under this act for dis-
crimination against the American importer.

The Chairman. These are both exporters, one from England to
South America and one from the United States to South America.

Dr. Johnson. I beg your pardon, I misunderstood you.

24 REGU1,AT0RY FEATURES OF SlIIPPIXG BILL.

The Chairman. All we want is oquul troatmeiit.

Dr. Johnson. Yes. I think tlie inaltor of export rates clearly
can be brouglit in practice under the act. My ai^swer to Congress-
man Curry had reference to rates on imports.

Mr. Edmonds. You mean then, Doctor, foUowiiig uj) Mr. Alex-
ander's question, that you could take the agent of this English line —
we will assume it is an English line — running boats from New York
to South America and from England to vSouth America — that you
could take him to task for an act committed in England, entirely
out of the supervision of the United States, and it would not lead to
international complications if you did such a thing?

The Chairman. I did not say anything of that sort; i do not
want you to inject that into my question.

Mr. Edmonds. I want to bring it in because it is necessary, Mr.
Cliairman.

The Chairman. Oh, no, it is not necessary at all. I am assuming
now, as a matter of law, that we may compel foreign ships entering
and trading from American ports, to treat us right, and if they do
not they can not come to our ports. Will you l)e able to change that,
do you think ?

Mr. Edmonds. I will stop nt that point, then, and I won't say
"international complications"; I will say this: Could you take an
agent in New York to task for an act committed entirely in England
and under English supervision ?

The Chairman.' It is not entirely in England. That ship comes
to our port, the vessel comes here, and that contract is carried out
here. In other words, do you mean to say because a contract is
made abroad and partly executed in this country, that we have no
jurisdiction over the contract or its terms, or how it may be enforced ?

Ml'. Edmonds. My understanding is you are trying to find out
whether we would have any control over agents in New York on
account of making a higher rate here than th<\y did over in England
to South Anierica.

The Chairman. They might do that, and under the provisions of
the bill you could even go to the extent of excluding them from com-
ing to an American port.

Mr. Edmonds. T think you might have that right. The only ques-
tion I had in mind was what it might lead to.

The Chairman. Yes — I say whether we shall sul^mit to discrimi-
nations such as that supinely without any effort to correct it. Some
])eople might be willing to submit to such discriminations as that, but
1 do not care to.

Mr. (JuRRY. I think we have that right, and I hope W{; will get a
bill out of here which we can all agree can be enforced.

I think possibly you may not have understood or I did not under-
stand the question of the chairman. I understood what the chairman
intended to ask, or at least w^hat I understood liim to ask, was that a
British line makes a contract to carry goods from Liverpool, we will
say, to Ruenos Aires, and they cany those goods from Liverpool to
Buenos Aires cheaper than the same line carries similar goofls from
New York to Buenos Aires. Under this bill will we have a right to
compel that same British line to carry from New York to Buenos Aires
as cheap as they do from Liverpool to Buenos Aires?

REGULATOKV FKATUin:S OF SHIPPINC BILL. 25

Di-. Johnson. No; we would not havo the ri<rlit to compel them to
(•hartje tlie same rate, but we would have a right to eutertam a com-
plaiut against the rate that was ((uoted from. New York and to test the
reasonableness of that I'ate on thorougli investiiration.

Mr. C'lhry. Now we are getting at it. Then tliis board would have
the right to say to your line you nmst carry the goods at such a rate ?

Dr. Johnson. Yes; the act gives the board tlie power to fix a
maximum rate for a particular service.

The Chairalvn. Equality of treatment it provides for; that is,
assuming the distance is the same, the service the same, and the cost
the same.

Dr. Johnson. Of course it does not follow that the rate would
necessarily be the same from New York as from England.

The Chairman. Oh, no.

Dr. Johnson. The service might be different. There might be
difference enough in the two services to warrant a difference in the
rate.

Mr. Curry. There is not much difference in the ser^ ice from
fjiverpool to Buenos Aires antl from New York to Buenos Aires.

^Ir. liowE. But you think they couhl make a just rate from New
York, based on the rate from I^iverpool ?

Dr. Johnson. This law runs upon the principle that rates from
New York to Buenos Aires and other ])oints shall be reasonable, and
it gives the shipphig board the ])ower to investigate and determine
the reasonableness of the actual rates.

^fr. Hardy. And if the board should fhid this particular line was
discriminating against an American port by high freights, unreason-
ably high, and low freights there, possibly making up on our high
rates what they lost on their low rates, we would have a riglit to
forbid that practice and to stop it, even by refusing the vessel the
right of clearance from our port? Would that be your idea?

Dr. Johnson. My idea would be that if it were shown that the
services from Liverpool and from New York to Buenos Aires were
substantially the same, and if it were shown that the rates quoted from
Liverpool were much lower than the rates quoted from New York,
that would be very strong evidence against tiie reasonableness of the
rates from New York, and tlie shipping board would probably be
disposed to place as the maximum from New York the prevailing
rates from Liverpool. I would assume that that would be their line
of reasoning in a concrete case.

Mr. Hardy. As to the question about the power of our shipping
board or of our Government: Have not we the right, both legally and
treaty rights, to prescribe the conditions and terms on which any
vessel, either ours or a foreign vessel, provided we make them the
same, may enter and clear at our ports ?

Dr. Johnson. We can go to the extent of actual embargo.

Mr. Hardy. And so long as we made no distinction in favor of our
ships, is there any treaty we would be violating if we imposed like
conditions on both ships ?

Dr. Johnson. My answer to Congressman Curry a few moments ago
was that I have not examined our commercial treaties with this act in
mind, and would prefer not to testify on their relation to this act.

Mr. Hadley. In view of your testimony, so far as you are advised,
do you not think it is a very material (question that this board shoulcl

26 REtJULATOBV FEATURES OF SHIPPING lill.L.

determine wliether the coiuinercial treaties were l)ein<; iiiii)airecl or
contravened by this act before attempting to pass it?

Dr. JoHXsox. I had assumed this committee in working out a bill
had considered that pertinent question and 1 have not thought it
necessary to go into it myself.

The Chairman. It has been before the country for (wo years j^ast
and nobody has even suggested it.

Mr. Hadley. I confess I have not been a M(?m])er of Congress very
long, but the matter has not been under consideration before this com-
mittee since I have been a Member of Congress.

The CiiAiRMAX. When I say this bill has been Ix-fore the country,
I mean the commercial bodies in this country; and that fj[uestion
has never been raised, that it would violate any treaties.

Mr. Curry. If necessary, this bill could contain a section authoriz-
ing a readjustment of those treaties.

The Chairman. Oh, yes. I say where there is equality of treatment
it would not violate any treaty. If we were to discriminate in favor
of American ships, then I could readily understand why it might
violate some of our commercial treaties.

Mr. Saunders. I think we would.

Mr. Curry. I have a concrete case that was developed before this
committee some days ago. There was a representative of a steel
works from Birmingham, Ala., before the committee who stated they
were the lowest bidders in a contract for delivering steel to some
place in Chile. The next lowest bidder, I believe, was a British firm.
But the British firm got the contract after a great deal of backhig
and fillmg, because the Birmingham firm could not get the rates,
they could not get as good rates from Alabama, through the canal to
Chile, as the British firm could, I think, from Birmingham, England,
to Chile. That was a clear case of discrimination in rates, wnere a
big contract amounting to several hundred thousand dollars, if not
millions of dollare, was lost to this country.

It seems to me, if it is possible, that this condition ought to be
rectified. Wliether it can be done or not under int(>rnational law
I do not know.

Dr. Johnson. At least, you would probably feel it might be wise
to have some public authority look into the question to determine
whether there had been an unfair discrimination against the American
exporter or not ?

Mr. Curry. This bill, I think, will contain a section creating a
shippmg board with authority to look into those conditions. It
ought to.

Mr. Saunders. In that connection. Doctor, I would like to point
out that that presents a situation tliat conceivably could not be
reached by this board at all. The English exporter mioht very well
have gotten better rates from England to this point in Chile than the
American exporter got without having "jotten them as the result of
an unfair discrimination of any particular line. If that was so, of
course that would present a situation that under this section could
not be reached.

Dr. Johnson. I do not tliink Congressman ('urry intended to sug-
gest that the existence of a shi])})ing l)()ard would necessarily guar-
antee to us as many ships out of American ports as there are out of

HE(iULATORV FEATURES OF Sllll'l'IXG BILL. 27

English ])orts and rates that prevail as low from the United States
as prevail from any other country.

Mr. Saunders. No. I was just calling- attentioji to tho limitations
in that section. 1 was trying to point out tliat a situation which
would create a hardship, you might say, on our American exporter
did not necessarily present a situation that would l)e reached hy
this section. There would have to be some discrimination in there
on the part of the line going out of our ports.

Mr. Hardy. It occurred to me while we were discussing this that
one of the very functions of this board would be to make a full
investigation of our rights and the best possible means of ascertaining
them and correcting the evils — that that would be one of its useful
functions. And along that line there was a proposition to insert a
paragraph giving them full power of investigation.

Mr. Greene. And to hold up the cargo in the meantime?

The Chairman. Oh, no.

Mr. Edmonds. I am glad Judge Hardy is getting over to my idea.
I said to stop at section 3 and then let the board suggest the regula-
tions. Now, the judge is getting over my way.

Mr. Hardy. If the gentleman thmks we are getting together, I
hope we are. I want to do something while we wait.

Mr. Edmonds. In the first paragraph, section 4, I would be glad
to have you tell me what effect that would have on regular lines and
also on tramp steamers.

Dr. Johnson. The section to which you refer provides that it
shall be unlawful for any common carrier by water, or other person
subject to the act, either directly or indirectly, to charge, demand,
collect, or receive from any persoh or persons by any special rate,
rebate, drawback, or other device a greater or less compensation for
any service rendered or to be rendered m the transportation of pas-
sengers or property subject to the provisions of this act than it
charges, demands, collects, or receives from any other person or
persons for doing for him or them a like service in the transportation of
a like kmd of traffic under substantially similar circumstances and
conditions. That is the clause to which you refer?

Mr. Edmonds. That is the clause to which I refer. The balance
of it does not affect it.

Dr. Johnson. To attack a big question by piecemeal I would
suppose that it prohibited a rebate or a drawback on a rate. I think
that would be an absolute prohibition.

Mr. Edmonds. Yes.

Dr. Johnson. Now, a prohibition also runs against any special rate,
which is, of course, the crux of the question as far as rate making is
concerned by line steamers and by tramp steamers. If a different
rate is given to one shipper than is given to another for the transpor-
tation of a like kind of property, and it is done lawfully after this
becomes a law, there must be substantially dissimiliar circumstances
and conditions surrounding the two services. Now, to what extent
dissimilar circumstances and conditions prevail at the beginning of
the lading of a vessel and at the end of the lading of a vessel that is
on the berth, for instance, is a question which I would not like to
determine at the present time. In other words, a board might pos-
sibly hold that the owner of an individual vessel that is on a berth
seeking cargo might ])e justified in making a slightly different rate

28 KEGULATORY FEATURES OF SHIPPING BILL.

for two different shippers on the same article, provi(U>(l one shipper
shi]3s in ix very hii-ge quantity and another in a small quantity.
There might, ])ossibly, to take an extreme case which would,
perhaps, be the most difficult case to arise, be justifying circum-
stances and conditions warranting different rates to different
shippers on the same steamer. I do not say that there would,
but there might be. I doubt whether the canon reasonableness
that would recjuire exactly the same rate for every shipper of
the same kind of a commodity on a tramp steamer. The line
usually has established rates on the line vessel. Any deviation
from that by a line would probably constitute a special rate coming
under the prohibition of the law. That I would be fairly clear about.
But whether the provision of the law would impose absolutely the
same rate upon all shippers by a vessel upon the berth, I would
somewhat question. It would depend, I think, upon the decision
which an intelligent board might reach after looking into the ques-
tion.

Mr. Edmonds. Suppose I had two steamers in Philadelphia and
they were both .5,000-ton boats, both owned by myself. I load one
of those with 5,000 tons of coal to go to Brazil, we will say. A couple
of days after that a man comes along, another shipper, and says,
' ' I will take that other boat of yours ; what are you going to do with
it." "I am going to load it with ballast," I will say, "and send her
over to Spain: I haven't got a cargo here for it," or I am going to
send it somewhere else. "Say, now; you look here; if you will take
another 5,000 tons of coal for Brazil," at a rate, we will say, of 25 cents
a ton less than I am getting on the other steamer, "I can get that
cargo for you." The natural supposition would be I would take
that cargo, lacking cargo for my boat. I would then be making a
special rate to the second shipper for exactly the same service.

Dr. Johnson. I am not sure you would be making that second
rate under circumstances and conditions exactly similar to those that
prevailed when you were making the first rate.

Mr. Edmonds. Would not that lead to a whole lot of legal com-
plications, complaints before the board, and hearings that would never
be finished; and would not the shippers be coming down here to
Washington time after time and time after time to appear at these
hearings ?

Dr. Johnson. I do not know how that would work.

Mr. Edmonds. You know yourself — you are a member of the
Maritime Exchange of Philadelphia, and you know exactly what
would ha])pen; and so do I.

Dr. JonxsoN. I do know that the most troublesome clause for-
merly in the interstate commerce act was the clause "under sidistan-
tiaUy similar circumstances and conditions"; and I do know that the
flexibility of conditions of rate regulation in England grows out of that
veiy phrase "under substantially sinfilar circumstances and condi-
tions."

But in answer to your first c{uestion, I do believe that that phrase
gives flexibility enough to the statute to obviate the necessity of
quoting every shipper the same rate for the shipment of like kinds of
commodities.

Mr. Edmonds. You would api)rove then of keeping that in this bill
at the present time ?

REGULATORY FEATURES OF SlilPPIXti BILL. 29

Dr. Johnson. I wouli] koop it in and try it out until I found out
how the thing workcnl. .Vnd th{Mi if oxjiorience seemed to suggest
modifications of it, I would modify it.

Mr. RowE. Don't you think that this law as you have it (h-awn
here, at least for the first two or three years, would work

Dr. Johnson. I did not draw it.

Mr, RowE. As it is drawn here — no; I know you did not; pardon
me — will work a hardship more on our domestic ships sailing under
our American flag than under foreign flags; for instance, ship com-
panies doing business between the United States and South America.

Dr. Johnson. I know what you mean. But on the whole, as I said
in answer to Mr. Greene's question that was asked before luncheon,
I think that the American steamship line and the American ship in
the future will have a better opportunity if this act is passed than it
will have if it is not passea.

Mr. RowE. That is your belief under this act?

Dr. Johnson. Yes; that is. I recognize that regulation involves
more or less limitation of action; that is the essence of regulation, of
course. And from time to time that limitation upon individual
action may be a hindrance to the development of the export and
import business; but the total effect, I think, of such a measure as
this would be to give a fairer field and larger opportunity to the
American shipper.

Mr. RowE. Just one other question: Has it not occurred to you in
reading over and studying this bill that the operator of the tramp
steamer will have an advantage over the regular lines?

Dr. Johnson. Yes; I think he is less restrained by the act than the
regular lines.

The Chairman. He is under existing conditions, is he not?

Dr. Johnson. Oh, yes; he has no restraint whatever now, does he?

Mr. RowE. Under tlie nev/ conditions he would have very much
less than the regular lines. You can get at the regular lines, in other
words, and regulate them; but it is very hard to regulate a tramp.

Dr. Johnson. You see, this law deals first witli tiie general condi-
tions of competition and second and most specifically with conference
agreements and the lines that are members of the conference. So that
the law proceeds some distance in the regulation of lines before tramps
are reached at all. Do I make my point clear >.

Mr. RowE. Yes; I think you do. Now, would tranqis, in your judg-
ment, come under control like tramps started out \)\ English and
German lines combined, as they were before the war, to break up a
trade ?

Dr. Johnson. The law proliil:)its fighting ships.

Mr. RowE. Fighting ships, not tramps?

Dr. Johnson. It prohibits unreasonable discriminations; it pro-
hibits secret rebates; it prohibits a whole lot of things. And the pro-
hibition runs just as mucli against the foreign-owned vessels as it is
against the American-owned vessels.

Mr. RowE. You know in some of the English l)oats they incorporate
every boat of any size into a separate company. vSuppose that follows
in the United States as it does in Englind, how are you going to con-
trol them by your board ?

Dr. Johnson. I (hi not see, ofl'hand, Mr. Rowe, how incorporation
affects the situation. The law would reach the l)oat owned by indi-
vidual persons just as much as by a corporation.

30 EEGULATORY FEATURES OF SHIPPING BILL.

Mr. RowE. Yes; but then it would only act each time in reference
to the individual boat, would it not

Dr. JoHxsox. Yes; I said that.

Mr. RowE. Instead of the line? As long as 20 boats are con-
trolled by one line, then you can have your effect; but when you get
down to 20 different companies

Dr. Johnson. If those 20 different companies operated their ves-
sels under a common management, over a defuiite line with fixed
sailings and all that, it would become a line service, I would say, sub-
ject to the provisions of this act just as much as it would be if there
were not 20 different ownerships. Of course, I do not pretend to
speak on that point after any mature reflection, because it is a new
point to me; but offhand, I do not see that that would affect the
situation,

Mr. RowE. But you just said a few minutes ago — and that is what
brought that idea out — that your decision would affect the individual
compan}^ rather than affect the trade from your port.

The Chairman. No; he said ''as well."

Mr. RowE. I understood him to say it would affect the individual
company; that the proceedings of the board would be against that
company, not against the trade from that port and other companies
trading from that port.

Dr. Johnson. No; I was merely stating the question of law. The
order of a commission, as well as of a court, runs against the parties
in the case. That is all I meant by that statement. The order that
may run wholly against me would apply to me and to the act that I
committed. Congressman Edmonds has not been covered by that
order necessarily, although he would probably, in view of the order
against me, not do this very same tiling I have done.

Mr. RowE. In proceedings under this bill you can bring in all other
people carrying on the same trade, if you wished ?

Dr. Johnson. Tliey could substantially be brought in. The order
would not I'un against him; it would only run against the parties
at issue in the case.

Air. Hardy. ^Vlong that line, to begin with, my understanding of
the custom of incorporating the separate boats is a sort of a special
American practice.

Mr. Row^E. Oh, no; it is an English custom more especially. We
are adopting it now.

Mr. Hardy. It is very especially so here in order to avoid liability.
But leaving that cpiestion out, if it were apparent the one manage-
ment controlled 20 different l)oats each separately incorporated,
acting together, does it not occm* to you that it would bo within the
province of the court trying that ([uestion to hold that method is
simply evasive of this law and enter its order against' that whole
management ?

Dr. Johnson. The line itself can l)e made a party respondent and
it would run against the whok; line.

Mr. Hardy. Including the whole of the ships under that control?

Dr. Johnson. I would assume that.

Mr. Hardy. That is what seems to me to l)e the case.

Dr. Johnson. I perhaps did not understand your question.

Mr. RowE. I am just asking for information.

Di'. Johnson. I did not understand your ciuestion.

REfiUI.ATORV FEATURES OF SHIPPING BILL. 31

Mr. Hardy, I would like to follow tliat Idea out, because it seemed
to mo a new oiu^ when you suggested it, but it seems to me if one
company adopted tli(^ rule of incorporating ships separately in order
not to have the ships excluded from our ports because of the manner
in which they were operating, the court would investigate and go
into that question.

Mr. Saunders. I would like to ask two or three questions along the
line Mr. Edmonds was pureuing a moment ago. Take the case he
suggested of the two tramp ships owned by one man; the first ship
loads coal for a Soutti American port at a certain rate; and, under
the conditions that he suggested, the second ship loads coal for the
same port at a lower rate. Now, just asking for your interpretation
of the law and not what some future board may interpret it to mean — ■
because of course we can not fix that — but looking at the bill as you
see it, don't you think there is enough authority given in the bill —
you are interpreting it — to allow you to hold under the conditions
stated by Mr. Edmonds those tw^o ships could be la\\'fully allowed
to carry the coal at the different rates suggested i

Dr. Johnson. That was my answer or the sense of it.

Mr. Sai'nders. I say would not you interpret the bill as giving you
suflicient authority for that ruUng ^

Di. Johnson. I was rather guarded, but that was essentially my
answer to Mr. Edmonds.

Mr. Saunders. Such a ruling as that would be in the interest of
trade and commerce, would it not?

Dr. Johnson. Yes, if the courts upheld it.

Mr. Saunders. I mean now in your judgment, ilon't you think
that ruling would ])e in th.e interests of fair dealing and of trade and
commerce (

Dr. Johnson. Oh, yes. I would not ))e disposed to put a straiglit
jacket upon the foreign trade of the United States.

Mr. Saunders. Then, as a conclusion from all that, is it not fair
for us to presume that a board of such a personnel as we contemplate
this board would be would make such a ruling, upon such a set of
facts as I have suggested, as you have indicated you would make?
In other words, a ruling that would promote American trade and
American interests (!

Dr. Johnson. I will let the chairman answer that question, if
I may.

Mr. Saunders. I think any of us might answer that; but don't you
think it would be fair to assume that such a board as I have indicated
would make such a ruling, and that it would be in conformity with
what you say is the authority given in the law and would be in con-
formity, also, with what you say would be in the interest of American
trade and American commerce ?

Dr. Johnson. I would say any board would be disposed to inter-
pret the law with a view to promoting rather than hindering the
foreign trade of the United States.

Mr. Saunders. In other words, trying to promote om" interests
rather than hampering and crippling them, since this bill is ostensibly
and actually designed to promote these interests, that it would be
given an interpretation that would carry it out and give it effect
along those lines ?

Mr. Edmonds. I would like to say. Judge Saunders, that if that
interpretation is correct, there would be no difficulty for any tramp

32 REGULATORY FEATURES OF SHIPPING BILL,

to make any rato wliidi it chose to make simply by saying he can not
get any commerce at the other rate.

^Ii'. Saunders. He can not make a fictitious reason. A man can
not impose on a tribunal in any such way as that; you would soon get
hauled up if you came into court with a fictitious excuse.

Mr. Edmonds. I would like to ask Dr. Johnson a question on
another line. I beheve you studied the Pacific conditions pretty
well when you were at Panama, did you not ?

Dr. Johnson. I have made some study of Panama matters; yes.

Mr. Edmonds. The Japanese line is subsidized to about the extent
of 5 per cent on its capital, I believe — the Ihie running to San Fran-
cisco — and a Ime competing Vvith it would not be subsidized. You
would not be able to make a freight rate on the American Ime less
than you would on the Japanese Ime, and the Japanese line can run
for cost and still make 6 per cent on its capital. How is this gomg
to aid m building up these two competing lines by rate supervision 'i

Dr. Johnson. I do not think that this bill would nmch change the
present situation. Of course, as you say, the Japanese lines now are
subsidized and the American lines are not. Tliat is a situation which
this bill does not reach at all. I do not know that tliose who drafted
the bill thought that it would reach that condition. Does my answer
seem evasive ?

Mr. Edmonds. You said this would build up a merchant marme,
and I am trying to find out how it would do it.

Dr. Johnson. I am not testifying here as to what has been claimed
for it; but my testimony this mornmg was that the bill was framed
in accordance with right prmciples. That is, I made an argument
in support of regulation and took the position that this bill was
drafted according to right principles. I do not want to be drawn into
this larger question of how we should aid the American marine,
because that is not really before the committee, as I understand, at
the present time.

Mr. Edmonds. Yes; but you made the statement a few minutes
ago, since I have been here, that you thought if this was put mto
operation, it would build up our merchant marine. I am trying to
find out how it would.

Dr. Johnson. No; I think the conditions won Id ])e better with it
than they would if it were not enacted; that is what I intended to say.

Mr. Edmonds, It may be you said that. I thought your answer
to Mr. Curry's question was that this was going to make a })etter
condition of affairs for the American merchant marine.

Dr. Johnson. Yes; that is what I inten(hHl to say.

Mr. Hadley. lender the terms of this bill as you have interpreted
it, I would like to know how an American line out of Seattle or Puget
Sound ports is going to undertake to compete from Hongkong witli
a British line from Hongkong to \^ancouver, British (\)hrnd)ia, meet-
ing the railroad terminals^

Dr. Johnson. That again is a situation, as I said just now to
Mr. Edmonds, that is reached by this bill, is it not?

Mr. Hadley. I ask you if you interpret this that the American
line is to be subject to the regulation of this boar(h

Mr. Johnson. It should be subject.

Mr. Hadley. If we can reach out and i-egulate the British line
that does not touch our ports at all, all right; but I understood y(m

KEGULATORY FEATUKEti OF SHIPPING I'.ll.l.. 33

to concede and everybody to concede that it can not be done. Now,
that hne conies into direct competition witli us because the moment
it strikes the American seaboard at Vancouver, the terminal of the
Canadian line, of course it has immediate access through our porta
by rail and there would be no way on earth of controlling it.
I am getting at the condition we would be in on the Pacific coast
under the operation of this bill.

Dr. Johnson. Would not the scope of that competition affect any
decision as to reasonableness of the rates from Seattle? The ques-
tion that would arise would be as to the reasonableness of tlie rate
from Seattle to Yokohama, we will say, and if the reasonableness of
the rate was questioned, would not any board in determining the
question before it take into consideration all of the conditions of
competition which had to be met in the making of that rate? la
that not so (

Mr. Hadley. J am askmg your view of it. I can see that there is
force ill that and that there are other lines that will compete with the
Puget Sound line I referred to, and there will be complications between
those lines; and when you come to regulate between a foreign line and
an American line at any Puget Sound ports you have also to take into
consideration other circumstances, such as competition between Amer-
ican lilies; and if one line can not make any discrimination at all as
against another one, then I do not see how you can take advantage of
the similar ckcumstances and conditions under this bill, with the
British or foreign line competing in a British port and thence raihoad
into our country tlie products of foreign countries.

Dr. Johnson. The Interstate Commerce Commission in many cases
has justified lower rates for services performed under exacting condi-
tions of competition than it justified for another service without those
conditions of competi^.ion. And I would think that that broad prin-
ci])le would apply in ])assiiig upon the reasonableness of the rate from
Seattle. It might be that Seattle because of its location, close to the
Canadian border, would be entitled to a lower trans-Pacific rate than
San Francisco.

Mr. Edmonds. It is the same as the AUan Line steamers from Mon-
treal and Nova Scotia to England.

Ml'. CuKKY. I would like to know what would happen to San Fran-
cisco then?

Mr. Hadley. That is what I had in mind in asking the question;
and while this may seem to be afield, I do not think it is at aU. I
think it is immediately in point. I simply want to get your view,
I have not a well thought-out view of this myself. It is a matter of
new consideration and I want your view while you are here, and then
I will give it my own consideration.

Dr. Johnson. I do not think regulation means a level rate among
all Pacific ports on export traffic nor level rates on export traffic to
Europe from all the several Atlantic ports. The reasonableness of the
rate is determined by all the conditions which surround the service
and the rate.

Mr. Curry. Would not the reasonableness of the rate apply only
to a single ship that was carrying the goods, or would it apply to a
line or to a class of ships ?

38534—16 3

34 REGULATORY FEATURES OF SHIPPING BILL.

Dr. Johnson. I think under this act that any one of those questions
could be brought forward on complaint; that is, a rate on the specific
article, a rate on the particular vessel, or a particular schedule of Une
rates. I think they coidd all be subject to investigation and deter-
mination under this act.

Mr. Curry. I am interested in knowing who would have the right
to make a complaint. Would any one except a party at interest,
such as the shipowners, the shippers or the importers ?

Dr. Johnson. The bill is indefinite there. It does not state who
may be complainant. Perhaps that is a point to be considered.

Mr. Curry. Of course the ship ought not to be subject to bo held
up and tied up by a trouble maker who has no financial interest,
directly or indirectly.

Dr. Johnson. As I read the bill, there is nothing in the bill which
states who may enter a complaint.

Mr. Greene. The point you seem to make — I do not know that I
am correct on it — is this: You talk about the reasonableness of a rate,
as to whether it is too low or too high. An American owning a ship
getting no assistance from the Government and coming in competi-
tion with others that have assistance from their Government, could
not afford to make a very low rate unless he ran his business for
nothing or nm his vessel at a loss. He could not afford to name a
lower rate and continue in business; he would have to name a higher
rate. He would be discriminated against by reason of somebody else,
some foreign line, runnirg near Seattle or in that region — Puget
Sound — by those vessels which are subsidized, like the Japanese or
the English Government, or a preferential rate of the English Govern-
ment, running also the Canadian Pacific Line. It seems to me he is
at a direct disadvantage under this bill by being regulated by the
United States; it seems to me clear he would be at a disadvantage.

Dr. Johnson. Let me suggest, Mr. Greene, that discriminations
are of two kinds, reasonable and unreasonable. A discrimination of
itself is not necessarily an unlawful act. If a carrier charges a higher
rate, an American carrier, than a Japanese competitor charges, and
can show that his costs of service are higher, can show that the
Japanese Line receives a subsidy and he does not, he may be able to
justify locally a higher rate; that is, he may justify a lau^ul discrimi-
nation.

Mr. Greene. Oh, I do not question but what he can justify it, but
my (question is he would not get the business; he woidd be starved to
death.

The Chairman. Tliat would not be the fault of this law, but be-
cause the other fellow performs the same service for less money.

Mr. Greene. No, it is because we do not make any provision for
him to give the man a chance to compete; you have the law so tight
the man can not get any chance to compete. If you put a subsidy in
your bill, then you will have something to do it with. That is really
what ought to go into the bill.

The Chairman. I want to say to you. Brother Greene, it may
possibly be that ultimately we wiU have that to do.

Mr. Greene. But I do not want you to strangle every shipper
before that is done.

The Chairman. I do not want anything like that unless we have
this law on the statute books first.

REGULATORY FEATURES OF SHIPPING BILL. 35

Mr. Greene, I want to keep this law oft", because I think it would
strangle them to start with.

The Chairman. Oh, yes; you would like to subsidize the lines and
give them a free hand to exploit the trade. I do not want to do
that. I want to regulate them first.

Mr. Greene. I want to regulate them.

The Chairman. I have some regard for the consumer.

Mr. Greene. I have, too.

Mr. Saunders. You have read this bill with reference to the proposed
control over the interstate water carriers. Does it occur to you that
there is anything in the provisions of the bill that is intended unrea-
sonably to oppress or harass that traffic ?

Dr. Johnson. No; I do not see anything in the bill that will put
any handicap upon the commerce by water in interstate traffic,

Mr. Saunders. I believe rate regulation of the railroads through
the medium of the Interstate Commerce Commission is fully justified
to-day by pubhc opinion, is it not? Can we not say that that is so ?

Dr. Johnson. I believe so. I would like to make just a brief state-
ment in this connection

Mr. Saunders. I just want to finish out what I was going to say,
that if there is any sufficient reason justifying the regulation of rates
of the railroads by the Interstate Commerce Commission, is there any
objection to conferring upon some like tribunal a control and juris-
diction over the water-borne traffic in interstate traffic ?

Dr. Johnson. In general answer to that question, I think the
interstate-commerce act has justified itself, and I do not think that
even the carriers themselves would care to go back to the conditions
of 1887.

Mr. Saunders. That is what 1 was seeking to develop.

Mr. Greene. Is there not a vast difference between water and
land transportation ?

Dr. Johnson. I was just going to make a brief statement in this
connection. I do not think it would have been wise for this com-
mittee to have subjected the carriers by water to the same kind of
regulation to which we now subject carriers by rail; and the bill, if
it proposed to subject carriers by water to the same kind of regulation
that the railroads are now subjected to, would not meet with my
approval. But what is proposed is something very different. The
carrier by rail must publish and file every rate he charges on inter-
state traffic with the Interstate Commerce Commission; and in prac-
tically every State he must file with the State authority his intrastate
rates. He can not charge any other rates; he can not change them
except upon 30 days' notice. The rates are established by law,
practically.

I do not think it would be practicable to conduct the water trans-

{)ortation, ocean transportation, under such restrictions. This bill
eaves it to the steamship line to work out its rates, which it does
not have to print, even if it does not choose to ; certainly it does not
have to file them. The owner of a vessel seeking traffic makes such
rates as he feels that he can afford. There is no requirement that he
has to notify anybody about it, except the part}'^ who is interested in
it. The only rates that are required to be filed are those applying on
a joint shipment over two or more connecting water lines. With that
freedom of rate making and the ability to change the rates hourly,

36 REGULATOKV FEATURES OF SHIPPING BILL.

if necessary, subject only to very broad requirements that the ratt^s
shall conform to the standard of reasonableness set down in the act,
I believe it is possible for the ocean carrier to go ahead and conduct
the business without the degree of limitation that would be really
restrictive in a business sense.

That was the general statement 1 wanted to make.

Mr. Saunders. My question, which you have answered, was deal-
ing solely with the authority proposed to be conferred by this bill
upon the board. There was nothing in my question that suggested
that we should give to this board the same authority over interstate
water traffic as is given to the Interstate Commerce Commission over
railroad rates. I asked, in substance, having in mind that that
commission had justified itself, if there was any reason why we
should not give such a control as was contemplated in this bill to a
like tribunal or board.

Dr. Johnson. My answer to that is that there is no reason as I
stated this morning. Tlie business of transportation upon the ocean
is a busniess of a pubfic nature. It ought not to be conducted
secretly; it ought to be conducted under conditions known to the
Government and under conditions that enable the Government to
correct unfair practices. In other words, it is not a purely private
business: it is a business of a public nature that ought to be sub-
jected to that degree of publicity and Government regulation that
corresponds with the nature of the business.

Mr. Saunders. And I believe you assented to the proposition that
there is nothing in this bill, so far as you have examined in the pow-
ers given to this board over the present interstate commerce water
carriers that is calculated to oppress or depress or in a general way
to operate prejuditially against the business of such carriers.

Dr. Johnson. I do not think so.

Mr. Saunders. If there is, we would like to have you point it out.

Dr. Johnson. I do not think so. Judge Saunders.

Mr. Hadley. In the statement this morning, if I remember your
analysis of the biU — I did not hear all of the statement — in the do-
mestic trade the board, under its corrective power would have the
power and authority to fix a rate irrespective of any maximum
would it not in the coastwise trade ?

Dr. Johnson. Perhaps I do not understand you. It has the
power to fix the maximum rate.

Mr. Hadley. I thought that was in the case of the foreign trade.

Dr. Johnson. That applies to both kinds.

Mr. Hadley. It does? There is a limitation iipon the domestic
trade that does not exist in the foreign trade, if 1 understand your
analysis this morning. I would like to have you restate that,
because I am not sure I got your idea.

Dr. Johnson. The additional limitation upon domestic commerce,
that is, carriers by water — in interstate commerce— is that they shall
file with the boa-d and keep open to public inspection the rates be-
tween points on their own route and points on a connecting route of a
carrier by water.

Mr. Hardy. What line is that you are reading from ?

Dr. Johnson. Lines 5 to 12, page 11.

Mr. Curry. But in that case there would practically be a fixing of
rates where there are two boat lines that perform a service; because

REGULATORY FEATURES OF SHIPPING BILL. 37

if they do not tile thair joint rates, each separate company has got to
tile its rates, according to line 13.

Dr. Johnson. It might work out that way. I assume that the
purpose of those who drafted that part of the bill must have been to
guarantee to the shipper a through sei'vice and a through rate with
the accompanying bills of lading, so that a man who wants to ship to
a distant point wiiich he can reach by two connecting water lines,
can compel those two connecting lines to take that through traffic
and to give him a through bill of lading. If the boat lines do
not establish a joint route, the board can establish a joint route,
but they need not establish a joint rate. Th3 board can require
the carriers to file with it the rates that they severally charge, their
two local rates, and of course the board can pass upon the reason-
ableness of those two local rates. It was found necessary in the his-
tory of the interstate commerce act to grant authority to the Inter-
state Commerce Commission to establish through routes and through
rates in order to secure to the shippers the through service which the
traffic required. That was provided by the act of 1906, the Hepburn
act, as regards tlii'ough routes by rail ; and by section 1 1 of the Panama
act of August 24, 1912, which gives the commission the power to es-
tablish a through route by rail and a connecting water line and also
gives the commission the power to order a physical connection be-
tween the rail and the water carriers. I am inclined to think if I had
been drafting the particular section we now have under consideration,
that I would have put in a little more and have required the initial
carrier to provide through billing.

Mr. RowE. Instead of compelling the separate companies to file
rates ?

Dr. Johnson. I would not have disturbed that; I think that is
logical.

Mr. RowE. That in most cases would make known to everybody
the rates. For instance, the boat line on the Eric Canal bringing
goods down to New York and transferring to the ship line to Savan-
nah, Ga.

Dr. Johnson. Yes.

Mr. RowE. Both companies, in case they did not file a joint rate,
would have to file their rates for that transportation ?

Dr. Johnson. Yes. Is there any objection to that?

Mr. RowE. I thought you said the theory of this bill was not to fix
rates; not to make them absolute.

Dr. Johnson. Even in that case the requirement is that those who
fix the rates shall file them; that is, the companies who make. the rates
shall file them with the board.

The Chairman. It does not say that the board shall fix the rates
for them; they fix them themselves.

Ml'. RowE. It does, if they do not do it. These several carriers in
such through routes shall file the separately established rates. Now,
in that case, you can order them to file the rates.

Mr. Curry. That is the same as the Interstate Commerce Commis-
sion, and yet pi-actically the Interstate Commerce Commission fixes
the rates.

Mr. Hadley. There is a section in this bill that provides for the
correction of rates where there is discrimination. a,7id that amounts
to the fixing of rates indirectly.

38 EEGULATORY FEATURES OF SHIPPING BILL.

Dr. Johnson. Yos.

Mr. Hadley. That is a distinction without a difference. Tliey fix
t\e. rates upon a comphiint and correction — the authority exists to fix
a rate. It does not matter wnether they fix the rate in the first
instance or fix it by correction.

The Chairman. Are you in favor of discriminations?

Mr. Hadley. No.

The Chairman. Then, this would result in a remedy by having
the board fix the rates.

Mr. Hadley. I am not discussing the merits of the question.

Mr. RowE. We are trying to get at what the effect will be.

The Chairman. If the effect is to avoid discrimination and the
rate is a reasonable one, I suppose everybody would be happy.

Mr. Hadley. I am in favor of preventing discriminations if it is
bad and would strangle anybody, but that is another question.

Dr. Johnson. May I add to the answer I gave a moment ago ? It
seems to me there is, in effect, a very substantial difference between
the power to revise and the power to prescribe. If you leave to the
carrier the initiation of rates and vest in the public authority the
power only to correct such particular rates as are found, upon com-
plaint and investigation, to be erroneous, it seems to me 5^ou are
giving the Government a very much narrower range of powers than
you are if you give them the power of prescribing rates generally.

Mr. Hadley. It has not the initial power, but simply depends
upon the initiation of somebody else.

Dr. Johnson. Under this bill the carrier not only has the power
to make the rate, but it does not have to publish or file it. The
Government comes into the matter only when a particular rate is
complained of or when the Government discovers an unreasonable
practice through investigation which it initiates.

Mr. Curry. The interstate water commerce of California is super-
vised by the public service commission out there, and it works very
well.

Mr. Edmoxds. 1 do not find much fault with the interstate com-
merce. It is easier to handle interstate commerce.

Mr. IIardy. I do not know that I undorst; nd you, hut it soems to
me section 6 does require intcrstat(5 commerce water carriers to iile
their mtcs.

;Mr. Kowe. That is the very one we are talking about, on page 11.

Mr. Hardy. Yes; page 11. from line 5 down' — every common cir-
rier by w-itcr in interstate commerce sh-! 11 file with the board; that is,
in tho interstate (ommcrce. I ]>e]haps <lid not underst'Mid 3^ou.

Dr. Johnson. I h;;vo wrcithMl with that ;? long time, Judge Hardy;
but if you will go to line '.) you will find that it s-iys, referring to rates:
" between dilierent ])oints on its own route and points on the route of
any other carrier l)y w.itei." It is between points and pohits —
points (m one route and ])oints on a connecting water carrier. So it
IS interline trafiTic.

Mr. Hardy. I thii\k 3'our interpretation' — it is at least diiterent
from mine. I think that means it sIimU not only file its rates between
])oints on its own n)ute, but ;'lso its rat(>s between ]>oints on its own
route ;«nd ])oints on the other line.

Dr. Johnson. Xo; I do not so r»^"(l it.

REGULATORY FEATURES OF SHIPPING BlLl . 39

Mr. Hardy. If you will gt) down tlurc to the lower p.irt of it, you
will iiml " no iiu ref.se shall be mr<le by sueh eurrier in the rates, fares,
find chnro'es, or joint rates, fares, and charges whieh have been filed."
So that it f'les its rates, fs res, and dir.r^'eson its own lines, as well as
joint riites, fares, and chiirges.

Dr. Johnson. No; but you sto]) in line 17 with the word ''iilcd, "
whirh word is modi'ied by the following; phr.- se: " in conijditince with
the requirements of this section."

Mr. Hardy. Certainly.

Dr. Johnson. And as I read this section, or this para<?ra])h in this
section, the rates in question are interbne rates between points on one
route and points on a connecting route, both water routes.

Mr. Hardy. It seems to me reading from line 5, tliat that is the
intention of the conmiittee, to recpiire tliese water carriers in inter-
state commerce to file their rates, cliarges, and fares, and also where
they have a joint rate to file that. And then if they want to increase
those rates and fares, even on their individual lines, or. their joint
rates, it does not take effect until approved.

Mr. Burke. I think if you will turn to line 11, the words "if no
joint rate over the through route has been established" prove that
the words "from different points on its own route" mean there
might be a half a dozen points from which it would ship over a
through route onto another. That clearly proves that they are not
recjuired to file their rates from one point on their own line to another
point on their own line — diflerent points in their own line. There
may be a dozen different shipping points on a railway, and a dozen
different shipping points on the connecting line. I think if you put
the two phrases together, it means just what the professor says.

Mr. Saunders. Section 13 applies to separate rates, etc., applied
to through transportation.

Mr. Burke. Yes; take the two in connection.

Mr. Saunders. I think Prof. Johnson's interpretation of that is
right.

The Chairman. Is there anything else from Dr. Johnson ?

Mr. Curry. I have just one question more I would like to ask in
this connection, so as to have it complete. I do not know whether
this bill would stop the different lines from dividing a territory
among themselves. If it does not, it ought to. There is a custom
in some of the interstate commerce waterways of the United States
of two to three companies dividing u]) a territory among themselves.
For instance, we will say there are three lines running from St. Louis
to Xew Orleans; those three linos will divide up the territory — this
line wiU stop at a number of towns; the other line will stop at a num-
ber of towns; and the other line will stop at a numebr of towns — or
they will divide up the liver into throe separate sections. That
would result, of course, in the shippers not receiving the service they
should from the three lines, but a discriminatory service. Would
this bill give the board the right to interfere, and to adjust and
rectify those conditions?

Dr. Johnson. I think it would. Congressman Curry. Beginning
at the bottom of page 5 and continuing upon page 6, are provisions
which give the board power to order canceled or modified any agree-
ment, understanding, conference, or arrangement, or any part

40 EEGULATOEY FEATURES OF SHIPPING BILL.

thereof, that it may find discriminatino- or unfair, as between car-
riers, shippers, exporters, importers, or ports, or between exporters
from the United States and their foreign competitors, or that it may
find to operate to the detriment of the commerce of the United
States, or that may be in violation of the act; and all such agree-
ments, understandings, conferences, and arrangements shall be ap-
proved or disapproved by the board, and when approved shall be
excepted from the provisions af the act of Congress of July 2. 1890.

Mr. Curry. That would apply to service as well as to rates ?

Mr. RowE. Yes; the board could even tell the carriers, I should
think, what ports they would have to stop at.

Dr. Johnson. The language is very broad. It gives the board the
power to determine what is and what is not in accordance with the
public weal in those agreements. It is a very broad power and wisely
so, because those argeements, when approved, arc by the following
language of the act taken out from under the antitrust law.

Mr. Edmonds. To return to my two ships, Dr. Johnson, where I
ovnied two ships and I made a different rate on coal from Philadel-
phia to Brazil on two different ships. At the end of the page there,
line 24, page 7, it says, ''to make or give any undue or unreason-
able preference or advantage to any particular person." What
would be the effect on me if I did that ?

Dr. Johnson. If you did it, and you were complained of, you
would have to show that the preference which you granted was due
and reasonable; and if you could not do it, why, of course, you would
pay the fine.

Mr. RowE. You would pay tlie fine mentioned over here in the
back.

Dr. Johnson. But the very fact that you granted a preference
would not incriminate you; it would, however, be incumbent upon
you to show that it was a due and reasonable prelorence.

Mr. Edmonds. I want to ask the doctor one other thing, and that
is this: If you fine a foreign captain under this provision, you make
him liable to imprisonment. Is that a good thing ?

Dr. Johnson. If I were judge, I would fine him; I would not work
the im]:)risonment clause against him.

Mr. Edmonds. I am simply assuming in the case of the American
ship, you would eitlier take the captain up and fine him or imprison
him. Now you have a Japanese steamer which has done exactly the
same thing. He comes into your port. You can take away his
license, if there is such a thing, or bar him from the port, and fine liim
$500 for breaking your rules. That is true. But when you come to
imprison a captain of one of those foreigi\ ships, somebody is going to
say something.

Dr. Johnson. Yes ; it would j^robably raise (UjJomatic negotiations ;
but any foreigner doing business in this country has to do it under
American law the same as anybody else, of course.

Mr. Edmonds. I know, but should such an offense of tliat kind be
an imprisonable offense ? It is not a criminal offense.

Dr. Johnson. It is made so by this statute.

Mr. Edmonds. Should it be made so, in your opinion ?

Dr. Johnson. Person ally, I do not believe that tlie imprisonment
feature is desirable. Let me give the reason which impels me to
think that imprisonment is not a good penalty. If the penalty be

REGULATORY I'EATURES OF SHIPPING BILL. 41

severe, leading to imprisonment, those who have knowledge of the
violation of the law will be slow to complain and endanger the per-
sonal freedom of those who have violated the law. You will find, of
course as you know, in the enforcement of the interstate commerce
act and in the enforcement of the Sherman Act, the imprisoimient
penalty has not actually been imposed. I beUeve it was in one in-
stance, but I do not know that anybody has actually gone to prison
for a violation of those two statutes.

I might know of a violation of the proposed law by somebody I am
acquainted with, and I might consider it my pubhc duty to complain
and cause him to suffer the fine; but I would be slow to take measures
that would lead to the imprisonment of a man I knew. We all have
that feeling.

Mr. Burke. Would that be true if you were injured in any way by
the violation, or are you simply expressing your opinion as a disin-
terested citizen who might observe a violation of law ?

Dr. Johnson. I was speaking as a disinterested citizen, of course.
But this is the kind of an offense the punishment of which we associate
with fines rather than with prisons, I think.

The Chairman. All the penalties in this act read in the alternative.

Dr. Johnson. Yes.

The Chairman. The experience with juries, 1 think, has been that
they are disinclined to enforce the imprisonment penalty, because
these acts are performed by agents and the agents are acting under
authority. In other words, they feel that the people higher up are
the ones who control the policy, and these agents who may be indicted,
are performing the service merely as agents; and they are not dis-
posed to visit the penalty of imprisonment upon them. And I pre-
sume that is in many instances the reason why they are disinclined
to enforce that part of the penalty. But in this bill that penalty is
in the disjunctive; that is, they may impose one or both, in the dis-
cretion of the court.

Dr. Johnson. I do not think there is any special objection to the
imprisonment penalty being in the bill; but, frankly, I do not think
it would be imposed in the actual enforcement of the law.

Mr. Hardy. There is only one way. Doctor, where it seems to me
that miglit become material. Sometimes these great corporations,
of immense wealth, pay very little attention to a fine; they do not
care much about it. But if we have a little imprisonment it would
bring them to terms and to respect the law at once.

The Chairman. I am very much obliged to you. Doctor, for having
come here at my request.

Mr. Greene. I have a communication from the executive com-
mittee of the Boston Chamber of Commerce, and I have also a tele-
gram wliich I woidd like to have go into the record.

(The telegram and communication referred to by Mr. Greene are as
follows:)

Boston, Mass., April 12, 1916.
Hon. Wm. S. Greene,

1107 Seventeenth Street, Washington, D. C.
Sections 5 to 7 of House resolve 14337 are drastic provisions for governmental regu-
lation of ocean rates to wliich Boston Chamber Commerce is utterly opposed. Our
position on this point is covered in report sent you few days ago. Kindly present our
views to the committee and oblise.

Elwyn G. Preston,
Chairman Merchant Marine Committee.

42 REGULATORY FEATURES OF SHIPPING BILL.

report of the special committee on merchant marine on the bill for the
government ownership and operation op vessels in the foreign and coast-
wise trade.

March 25, 1916.
To the executive committee and board of directors:

A year a,?o the special committee on merchant marine of the Boston Chamber of
Commerce, in a report duly approved by the directors of the chamber, made earnest
objection to the original McAdoo bill for Government ownership and operation of com-
mercial shipping. That bill was defeated in the Congress that closed last spring, but
another bill, also based on Government ownership and operation, but otherwise greatly
changed, has been reintroduced (H. R. 10500) and referred for consideration to the
House Committee on Marchant Marine and 1 isheries.

Our committee of the Boston Chamber of Commerce, though frankly recognizing
that a real emergency exists in the inadequate tonnage and high rates of present ocean
trade, can not escape the conclusion that the new bill would not meet this emergency,
but, on the whole, would aggravate it by discouraging private capital and enterprise,
which have already filled American shipyards with orders for the construction of 100
steamships of from 3,000 tons to 12,000 tons gross register, soon to be available for ocean
service, t urther orders await only the lifting of the menace of Government ownership
and the securing of requisite steel materials and building space. There is every pros-
pect that the American merchant marine during the present war will increase at an
unexampled rate if not forced into unequal competition with the wealth and power of
the National Government.

Some of the features of the revised bill can be approved. A United States shipping
board for the general supervision of the merchant marine would serve a valuable
purpose if its powers were carefully defined by law and if its energies were not wasted
in an effort to outdo the overworked Interstate Commerce Commission and minutely
regulate the rates charged by all the tens of thousands of merchant vessels under
thousands of different ownerships that now convey the water-borne trade of the United
States, a task of doubtful wisdom or necessity and utterly impossible of fulfillment.
Unless its powers are so defined and do not include the power to make rates we do not
feel warranted in approving the creation of such a l)oard.

In the face of present abnormal conditions, such suitable naval auxiliaries and
transports as are not required in peace may Vv'ell be transferred to the shipping board
for lease or sale to shipowners engaged in the foreign trade of the United States, though
this at best is only a small expedient, and there is undoubted risk of international
complications if a Government auxiliary under private charter be arrested or sunk
by a belligerent cruiser. This is the only feature of the new bill that holds any
promise of immediate relief. Public opinion will everywhere approve the eiu'ollment
of citizen officers and men of the merchant marine in a volunteer naval reserve,
properly compensated by retainers from the Government.

Tiie remainder of the bill, the features involved in Government ownership and
operation, is unsound and ineffective, and deserves the united opposition of the busi-
ness organizations of America. No large, enduring good can come from the provision
authorizing the Governmeut to build, purchase, or charter in this country or abroad a
fleet of naval auxiliaries, and lease or sell these ships for purposes of trade. Our naval
auxiliaries, like American battleships,- cruisers, and submarines, ought to be built
exclusively in the United States— not in foreign yards, under the observing eyes of
oHicers of foreign Governments. All shipyards in this country and in Europe are now
overwhelmed with work — no Government ships could be contracted for and com-
pleted within two or three years. Before that time the emergency will have ended,
either through a general peace or tiie financial exhaustion of the belligerent i\ations
that are now abnormal consumers of imported goods.

But far worse than the commitment of the Government to the building of a fleet
of auxiliary merchant siiips, which private capital and expert management can create
more quickly and at loMcr cost, is the provision in section 8 of the bill authorizing the
Government to embark not merely in the ownership but in the "equipment, main-
tenance, and operation" of merchant vessels in the overseas and presumably also in
the general coastwise trade of the United States. This is the most radical proposition
yet made. There has never been the shred of a pretense that private American capital
had failed to utilize the coastwise situation. On the contrary, under the century-old
law reserving the coastwise trade to American ships and sailors, the American coast-
wise fleet has grown prodigiously to a tonnage exceeding the total home and foreign
tonnage of the German Empire, or thrice the whole merchant shipping of either France
or Norway. There is no "monopoly " in the American coastwise trade. Only a small
fraction of its vessels run in regular lines. Six-sevenths of its huge tonnage is com-

REGULATORY FEATURES OF StllPPlNG RILL. 43

posed of "tramp" cargo craft, steam or sail, controlled or operated by thousands of
different owners, under severe competitive conditions.

To allow the Lnited States Government to come into competition with our immense
fleet of private-owned coastwise ships is a gratuitous menace to an American industry
that has jiistified itself by a strong, constant growth and is to-day the chief auxiliary
' reserve of our ocean defense and the great nursery of American seamen.

Whether in the coast trade or in the foreign trade, Government-owned ships operated
without regard to profit and guaranteed against loss by the National Treasury would
mean the swift destruction of all spirit of American maritime enterprise and personal
initiative. In the foreign trade, private-owned American ships fighting against heavy
odds with the cheap wages and subsidies of foreign competitors, would be compelled to
meet a new competition in the subsidized ships of the United States Government.
Their own country w^ould be making war on American shipowners.

The difference in the cost of operation, due chiefly to different wages and standards
of living and only in small part to our navigation laws and rules, would be just as great
between Government-owned American ships and foreign ships as it would be between
private-owned American and foreign vessels. The handicap due to subsidies, bounties,
or other national aid to foreign ships would be as heavy in the one case as in the other.
But this difference would be made up to the Government-owned American ships out
of the Federal appropriation of the shipping board. If there were a deficit it would be
compensated for — to Government-owned ships — in this wav. Every Government-
owned sliip would thus be a subsidized vessel, subsidized in disguise, not only against
all foreign ships but against all private-owned American competitors as well. There
would then be this grotesquely unfair situation — all Government-owned ships sub-
Bidized; other American ships in the same trade unsubsidized, discriminated against,
and driven from the ocean.

If there are to be subsidii s. it is a fundamental principle of honesty and fair play
that they should be given on the basis of equal opportunity to all American ships,
or to none. The Government-ownership bill inexcusably violates this principle. It
creates a special-privileged class of American ships in the limited fleet of vessels
owned by the Government itself — ships, 49 per cent of the stock in which may be held
by a few private investors. Can anyone hope to defend and justify such a scheme as
this to the American people?

A real emergency exists. SometHng must be done. The great war has focused
the attention of the country as never before upon the sea and ships. There is an unex-
ampled opportunity to lay broad and deep the foundations of an adequate American
merchant marine. An undoubted obligation rests upon all those who oppose Gov-
ernment ownership and operation to point to another and a better way.

That way can be found in the recommendations of the Chamber of Commerce of
the United States in connection with its referendum of last spring, when the manu-
factm-ers, merchants, and bankers of the country, overwhelmingly rejecting the idea
of Government ownersliip and operation, even more overwhelmingly approved positive
legislation of another kind, as follows:

1. Carefully supervised and guarded subsidies from the Government sufficient to
offset the difference in cost between operation of vessels under the American flag and
operation in the same deep-sea trade under foreign flags.

2. Subventions from the Government to establish regular mail and freight lines
under the American flag to countries in which the commercial interests of the United
States are important and to American dependencies

3. The creation of a Federal shipping board with carefully defined jurisdiction
to investigate and report to Congress regarding the navigation laws, and to have author-
ity under the law in all matters pertaining to oversea transportation.^

4. Amendment to the ocean mail law of 1891 by readjusting the required speed of
first and second class steamers and by making the compensation adequate to permit
the establishment of lines of steamers carrying both mail and freight.

These recommendations were referred to and approved by our special committee
on merchant marine and were formally accepted June 15, 1015, by the directors of
the chamber. Under these policies, when conditions become normal after the war,
both swift regular mail ships and slower but indispensable cargo carriers would be
encouraged and upheld against foreign competition by the United States Governnient,
which would leave the ocean trade to the energy and courage of its shipowners and
seamen.

A year ago our committee declared that "we believe it to be a sound principle that
the Federal Government should not engage in business which under suitable condi-
tions can be conducted to equal or better advantage by private enterprise."

' This was not understood by the committee to contemplate the regulation of rates.

44 REGULATOBY FEATURES OF SHIPPING BILL.

Everything that has transpired since then has emphasized the force of this con-
viction. We. therefore, recommend that the chamber disapprove these features of
the present bill (H. R. 10500) which involve Government o\\nership and operation
of commercial \essels and Government regulation of ocean rates.
Respectfully submitted.

Elwyn G. Preston. Chnirmun.
Edward E. Blodgett,'
l. a. coolidge,
Frederick Foster,
Theodore Jones,
WiN'THROP L. Marvin,
Robert S. Peabody,
George F. Willett,
Special Committee on Merchant Marine

Mr. Edmonds. Mr. Chairman, may I put this letter from the
Philadelphia Board of Trade in the hearing ?
The Chairman. Yes.
(The letter referred to by Mr. Edmonds is as follows:)

Philadelphia Board of Trade,

Fhifadelphia, April 12, 191^
Hon. George W, Edmonds,

House of Representatives, Washington, D. C.

My Dear Mr. Edmonds: Referring to your favor of the 8th instant, covering
House bill No. 14337, in wliich you announce that a hearing upon same will be held
on the 13th instant, I beg to say that I regret that the board of trade will not be able
to be represented there.

The committee on foreign and coastwise commerce, to wliich this bill has been
referred, has not yet been able to make such study of it as would justify its being
represented at the hearing in question.

A cursory examination of the bill, however, proves that it would certainly meet
with the opposition of the board of trade, wMch is upon record in opposing the ship
purchase bill in a memorial which has been forwarded to Congress. The proAdsion
in that bill regarding the licensing of foreign vessels and an attempt to force regula-
tion upon same was considered as most unwise and likely to provoke dangerous con-
troversies with the maritime nations, who would not fail to resent the impairment of
any right contrary to treaty or custom.

The amended measure seems equally, if not more, drastic in its character and to
have been drafted without much regard for any of the conditions surrounding the
transportation of merchandisa by ocean carriage. This is particularly emphaeized
if the provision in section 4, page 7, be understood to mean that under no circum-
stances could a vessal charge a different rate upon a like kind of merchandise or
traffic. This provision seems to ignore entirely the varving condilion of trade in the
markets of the world.

_ You will readily understand that there are times in the changing conditions men-
tioned when it is absolutely necessary for vessals, in order to complete their loading,
to be able to make such reduction in rates of freight as will secure sufficient cargo to
properly load the vessal.

I am sure it is entirely impractical, unless the entire business of ocean carriage is
to be revolutionized, to attempt to name a maximum rate over tlie time mentioned
in the bill, and should such a rate be named to apply to foreign vessels that the nations
under wliich they s.iil would not hesitate long before they would retaliate by some
restrictive' order upon American vessels which would undoubtedly lead to interna-
tional complications.

The closing paragraph of the bill, in which reference is made to sundry prior acta
of Congress, makes it impossible at this time to understand the full purpose of the
measure without a study of the several acts referred to.

As far as understood, I can not see that any consideration ha^ been given to the ques-
tion of the regulation of what might l)e termed "tramp" boats, that are chartered for
full cargoes from the different ports of the United States, and whidi represent a large
percentage of the carrying of the produce of the country.

As you know, this board of trade is o]iposed to the principle of the sliip-purchaso bill
and finds notliing in the way of improvement in the amendments sought to be incor-
porated in the measure, as preseiited to ;"o:\i;re.s.s.

> Mr. Blodgett was out of town when this report was adopted and, therefore, did not have opportunity
to pass upon it.

REGULATORY FEATURES OF SHIPPING BILL. 45

If tlie pie.sent legislation aa now presented to Congi-ess be for tiie purpose of the re-
eatablishmeiit and upbuildine; of tlie American mercliant marine, it will prove a failure.
I am convinced that the enactment into law of the proposed bill (H. R. 14337) would,
after the abnormal conditions due to tlie war have passed away, be the means of de-
creasing the amount of American tonnage and preventing the profitable handling of
fame under the American flag.
Yours, very truly,

J. P. Seeckiz, Secretary.

(Thei'oupon, at 4 o'clock p. m., the committee adjourned until to-
morrow, April 14, 1916, at 2 o'clock p. m.)

Committee on Merchant Marine and Fisheries,

House of Representatives,
Washington, D. C, Friday, April 14, 1916.
The committee met at 2 o'clock p. m., Hon. Joshua W. Alexander
(chairman) presiding.

The Chairman. Mr. Jacobs is here from the Pacific coast and in
his organization he has done some work on merchant-marine matters.
He is on his way to Europe and I thought the committee would like
to hear him briefly on H. R. 10500; that is, on any provisions of the
bill to which he cares to address himself. We have under considera-
tion especially at this time the provisions of bill 14337.

STATEMENT OF ME. ISIDOR JACOBS, SAN FRANCISCO, CAL.,
PRESIDENT OF THE CALIFORNIA CANNERIES CO.

Mr. Jacobs. I am president of the Calif or aia Canneries Co., of
San Francisco; president of the Inland Waterways Association of
California; also director in the Canners' League of the State of Cali-
fornia.

Mr. Edmonds. Is that a private concern?

Mr. Jacobs. The California Canneries Co. is. The California
League is, an organization of practically 95 per cent of all the fruit
and vegetable canners of California, associated together not for
profit but for mutual protection of the industry.

The Chairman. Lias your league given any consideration to this
question of shipping?

Mr. Jacobs. Yes, sir. At the annual convention which was held
at the Palace Hotel, San Francisco, in January, at which an output
practically of $20,000,000 per annum was represented, a resolution
was presented and was carried unanimously, after considerable dis-
cussion, indorsing the bill that you have for the creation of a merchant
marine.

The Chairman. H. R. 10500?

Mr, Jacobs. Yes. I think the resolution was sent to your chair-
inan.

The Chairman. Yes; it is in the record — page 226, of the hearings
on H. R. 3 0500.

Mr. Jacobs. Yes.
(Mr. Edmonds. Did you have the bill at that meeting?

Mr. Jacobs. Yes. The Commercial Club had it there.
■ Mr. Edmonds. How was the action taken — reading it by sections
iihd taking up each section; or did you take it up as a whole ?

46 REGULATOKY FEATURES OF SHIPPING BILL.

Mr. Jacobs. They took it up as a whole. The bill was read and
then was taken up as a whole. The reason it was not considered sec-
tion by section was because there was no opposition manifested in the
discussion. The discussion took the line of something being abso-
lutely necessary to roheve the present burdensome conditions that the
fruit industry is laboring under in seeking foreign markets and which
it has been laboring under for a long time. The discussion took"
entirely the Une of addresses on the necessity for prompt action to
relieve the situation.

We are confronted there by practically a loss of our entire industry
unless some relief is had, unless we can get ships to move our products
to the markets. The foreign trade heretofore has been nearly entirely
in the hands of the British steamship owners and, whether by com-
bination or otherwise, rates have been estabhshed by the different
companies at the same time and the same rates. After the Pacific
Mail was purchased by the Atlantic Transport Line — the rates had
been very high — they dropped the rates to get some of their steamers
loaded for Englard ard immediately the other hues all dropped at
the same time. The rates are now about 600 per cent higher than
they were before the war started, but even before the war started,
they found their ability to advance rates, and although the opening
of the Panama Canal reduced the time in transit from San Francisco
to Liverpool ard London to 30 days instead of 60 days — although
some of the steamers used to take 90 days around via the Straits of
Magellan — they gave the shippers no concessions at all as a considera-
tion for the opening of the canal; the rates remained the same. They
did not consider there was any advantage obtained as far as the ship-
pers were concerned and, of course, that means the producers of our
State as well — there was no advantage obtained by the fact that the
canal had been opened, and the fact that their cost of transportation
had been reduced considerably upon that account.

Mr. Edmonds. What percentage of your goods goes to foreign
markets ?

Ml'. Jacobs. Personally, our own concern, 85 per cent of our busi-
ness is in foreign markets. But of the output of our California canned
fruits, about 35 per cent — probably from 35 to 40 per cent.

Mr. Edmonds. Goes to foreign markets?

Mr. Jacobs. Yes. In our own trade, though, it is 85 per cent in
our own business.

I may say that this question of an American merchant marine
has been up before our annual conventions for the last 12 years;
every year the same discussion has come up, and we favored the ship
purchase bill which was defeated in the last Congress. We believe
if that bill had been adopted the present conditions would have been
relieved, because we would have had sufficient tonnage controlled,
either directly or indirectly, by the Government to have kept a
leverage upon rates. If I remember correctly — I was chairman of the
committee of the league at the time — I think it was expected that the
Government would control, either directly or indirectly, over 600,000
tons, and that would have been sufficient in this country not only in
California, but for the fruit trade of the country and the East as well
as West, to have kept a leverage upon the freight rates which to-day,
although they say they are based entirely upon supply and demand,
as a matter of fact are based upon all they can get. And, as I say,

REGULATORY FEATURES OF SHrPPING BILL. 47

they keep on; there is no stabihty now. If we to-day should enter
into contracts in Nonvay and Sweden — they started in by telhng
us the rates would'be 100 shillings; by the time we got the contract,
they said now the rate is 150 shillings. Well, we said we would have
to submit that to the buyer on the other side. Two days later, if we
had an order come m, they would say the rate is 170. And so it
went on, and we got disgusted and just quit trying to quote at all.

Mr. Edmonds. Still, you expected the buyer on the other side to
pay the freight rate, whatever it was ?

Mr. Jacobs. Naturally. The goods are sold "c. i. f.;" that is, tho
goods are sold cost, insurance, and freight delivered in the foreign
markets. But we would figure the thing down just as low as we
possibly could and if there was anything in it we would take the
order; but as it turned out, for instance at Genoa, last year, wo
made a contract wdth a shipping company in New York, the Italian
line, and we sold tho goods based upon that freight rate. The goods
went thi-ough the Panama Canal — it was before the slide started;
when they got to New York, they got there, so they said, one day
after the steamer had sailed on which they expected to put these
goods and they boosted the rate on us. And on that little shipment
we lost $1,800 below the absolute cost of the goods. So we just quit
the business after that; we would not quote at all.

Mr. Edmonds. You are selling goods to-day. though, subject to
those conditions?

Mr. Jacobs. Very few, though, on account of the high fr?ight
rates. We are practically stopped now on account of the tremen-
dous freight rates. You can imagine what it amounts to w^hen I tell
you that the present freight rate to England is $1.37 a case for two
dozen cans of fruits, when at the beginning of last year the rate was
35 cents a case.

Tho Chairman. It is now how much ?

Mr. Jacobs. $1.37.

The Chairman. As against 35 cents last year?

Mr. Jacobs. Yes. So you can see that it practically means the
cessation, the absolute impossibility, of sending any more goods there
under these rates, unless they are absolutely necessary. If the Gov-
ernments over there buy some of these goods and have to have them,
of course, they will pay that rate; but it has knocked off the French
trade completely. We started in to send 30,000 cases of goods to
Paris through Havre and engaged a ship to Havre, but the rates from
New York became so tremendous we could not ship them. To show
there was no stability to it, we had our own office in New York, and
they thought we had the goods coming on the way to New York and
they had to go on one of these steamers, so they boosted the rates to
200 shillings. I immediately wired the office in New York and told
them to keep the goods there and not to ship them, and they reduced
the rate to 150 shillings the next morning, a difference of 50 shillings.

Mr. Edmonds. Yes; they were getting the best price they could
get, there is no doubt; I do not think there is any question about it —
just the same as you would do for your goods or any other man, get
the best price he can.

Mr. Jacobs. Yes. We believe the national-bank reserve act has
reheved the fuiancial stress upon business by reheving us from pan-
ics or panicky conditions, and we believe that the time has come

48 REGULATORY FEATURES OF SHIPPING BILL.

now that the United States Goveinniont should rchevo the business
conditions, in getting a foreign market, by reguhiting tlie steamship
business under the American flag. We think that it can be done.
It has been tried for 40 years without regulation, and nothing has
been accomplished, just as we had been trying for years with the
currency act and never had been able to accomplish the results with
that. I l)elieve the purpose of the currency act was to relieve busi-
ness conditions so tliat they might not tremble all over this country;
and I believe the business men now know where they are. I believe
the same thing about the j^Vinerican merchant marine. I might say,
though, pereonally, that our large organizations have been fighting it —
the large chambers of commerce throughout the country — but we
beheve they do not represent the general run of business interests
in this country to-day in connection with the establishment of an
American merchant marine any more than they did in connection
with the reserve act.

The Chairman. Wliy do you think that?

Mr. Jacobs. Because we find in getting out these referendunis that
the United States Chamber of Commerce got out that in our local
chambers of commerce in all large cities like San Francisco, Los
Angeles, Portland, Seattle, and in the East, New York and all the
large ports, they sent out a letter to their members. We will say
that our local chamber of comn^erce in San Francisco consists of
3,700 members and they will send out a letter to them saying, "We
are asked by the Cliamber of Commerce of the United States to take
a referendum upon whether you believe in the establishing of an
American merchant marine; we recon\mend that you answer "yes.'"
"Do you believe in the establishing of an American merchant marine
by the Governmert having anything to do with it? We recommend
that you answer 'no.'" "Do you believe in it by means of subsidy?
We recommend that you answer 'yes."'

I tested that by sending out a letter myself to the members of our
local chamber of commerce. The answers received by the chamber
of commerce itself were between 500 and 600 out of 3,700 members.
I got over 800 answers directly opposed to the referendum that the
chamber of commerce took, but I did not suggest how they should
.answer the questions.

Mr. Greene, May I ask you a question?

Mr. Jacobs. Yes.

Mr. Greene. Do you mean to say that the chamber of commerce
in their document that they sent out indicated how they wanted
them to reply ?

Mr. Jacobs. Yes, sir; and I have one in my possession.

Mr. Greene. I would be glad to see one.

Mr. Jacobs. I would be glad to send it to you.

Mr. Greene. I know, but where is it? Is it at the hotel?

Mr. Jacobs. I would be glad to send it to you.

Mr. Greene. I have the documents and I have never seen any-
thing of the kind.

The Chairman. He is going to send it to you he says.

Mr. Byrnes. He is talking about the organization sending it to
the members ?

Mr. Jacobs. Yes; in San Francisco.

REGULATORY FEATUHKS OF SI I li'l'I i\(; BiLI.. 49

Mr. Greene. Oh, yes; 1 know what he said, llo said they liked
to have you vote "ves;" '"we bohovo 'ves.'" Or "wo want you to
vote 'no.'"

Mr. Jacobs. I did not say that.

Mt; Greene. What did you say (

Mr. Jacobs. I said the local chunilx'r of conimerce sent a letter to
their members with the referendum and in this letter they said "Our
board of directors on merchant marine, or committee, have agreed
to recommend that you vote 'no' to this ()uestion," and so forth.

Mr. Greene. That is different. I understood you to say the
United States Chamber of Commerce.

Mr. Jacobs. No; I did not say that.

Mr. Hadley. He was not clear in it and I was about to ask the
question to which one he referred, myself.

The Chairman. I was not clear about it myself.

Mr. Greene. I understood you to say the United States Chamber
of Commerce sent out that appeal. They sent out a direct appeal
without makhig any recommendation at all to the people about
how they should reply to it.

Ml-. Jacobs. I beg your pardon; they did not send out any direct
appeal at all; they only sent it to the local chambers of commerce.
They only sent it to the members of the United States Chamber of
Commerce, which is made up of the organizations and some in-
dividuals.

Mr. Byrnes. I understood the gentleman.

Mr. Edmonds. Mr. Jacobs, I was visited by a man the other day
who runs quite a largo fruit and vegetable farm — he grows tomatoes,
and so on — and he wanted me to draw up a bill for the Government
to go into the canning business. He said the exactions of the canners
were so severe and the price paid for the tomatoes so small, he thought
the Government ought to go into the canning business.

Mr. Jacobs. Yes, sir.

Mr. Edmonds. That is something on the same order as going into
the shipping business. That would be perfectly justified and I pre-
sume your association would recommend that if I put in a bill?

Mr. Jacobs. I do not thmk it is a perfectly smiilar situation at all.
But I do not think I would object to it if it was for the benefit of the
people. I think they would recommend it if it was for the benefit of
the people.

1 want to give you an idea by something that is on record here in
Washington right now. It has not boon generally known — although
I was engaged in that fight — but it is exactly the same tiling that is
going on to-day with these matters. Under President Roosevelt
we brought to the attention of the administration in Washington
that the Pacific Mail Steamship Co. going out of San Francisco was
not seeking any business and that formerly when it was organized
by the Southern Pacific, the railroad owning 55 per cent of the
stock of that c(nr.pany, they received a subsidy of $900,000 a year
from the transcontinental railroads to go out of the port of San
Francisco eni])ty on their business to tiie Atlantic. When the
contract was broken up through our efl'orts or, rather, an organ-
ization which I formed out there, the Pacific Mail still did not seek
any business, and a comiuittcH' of the chamber of conimerce was

.38.5.34—16 4

50 lti:oLLAiOKY lEA'lLKES OF SUimisG lilLL.

appointed to -investigate. After a great deal of trouble wc had a
committee appointed to investigate the matter; we called the atten-
tion of the administration in Washington to it and Mr. Taft, who
was then Secretary of War, sent Mr. Bristow out. He was appointed
special Panama commissioner to go out and examine into the condi-
tions we had comphxined about. He reached .California and went
up and down the State; he had a hearing hi the State of Oregon,
one hi Washington, and in different places hi California, too; but
he could not get any expression on the part of the mercliants because
they were afraid to express themselves hi the presence of tlie rail-
road officials and the steamship officials. .4nd I made the suggestion —
altliough we have been large shippers always — the only way he would
get at the facts was to invite them to his liotel and get in secret the
information they were afraid to give in public. And in his report
which is on file in Congress— you have the report somewhere, T know,
and you can find it very easily — he says lie then obtained the true
facts. Notwithstanding tliat, the chamber of commerce brought in
a report acknowledging the conditions — that is, the committee did —
and objecl^ed to any interference on the part of the Government.
And immediately we came on here and we saw Mr, Bernard Baker,
who was then in "the shipping business, and he said if the situation did
not change he would start a steamship line to relieve the situation,
and immediately the Amcn-ican-Hawaiian Steamship Line was started
and there was an increase in the ocean-borne traffic from 15,000 tons,
I think it was, per annum — I have the correct figures in my suit case —
to something like 225,000 tons ])er annum in one year. And from
that time on it commenced to increase. So that the chambers of
commei-ce do not represent — our chamber of commerce, and I am a
member of it, and I do not hesitate to tell them just what I am
8 lying right here — the business interests of the country. They
r.^present generally the one ir.an who is able to control the boards
ol" directors in those organizations.

Mr. Hadley. You predicate that general statement upon what
you observed in San Francisco ?

Mr. Jacobs. Ai\d elsewhere. I have made it my business, and I
am doing it at my own expense. I have been up and down the coast
tryhig to break up this system, and I delivered an address to the
chamber of commerce in Portland about four months ago. I deliv-
ered five addresses up there to the diffareiit commercial organizations
in two clays, and when I was invited there I wrote to the president
that they would not like what I had to say. He said, "Well, we are
here to hear what you have to say." And when I finished, there was
quite a crowd there and ex-Gov, West of Oregon got up and said
he was gohig to get off his chest something he had had there for a
long time, and he substantiated what I said. And the vote was
taken there, and it was nearly unanimous on the part of the mem-
bers, repudiathig the action of the Chamber of Commerce of Port-
land hi connection with the shipping bill.

The Chairman. I was there and met with the subcommittee that
had the shipping bill under consideration, and the majority of the com-
mittee was made up of railroad and steamship men, ana their report
never was submitted to the chamber of commerce for ratification; yet
you have their report as the sense of that organization. And at Seattle,
the Commercial Club indorsed the old ship purchase bill, and the

REGULATORY FEATURES OF SHIPPING BILL. 51

chamber of coinmorce, made up of those mterests and controlled by
the same elements to which you refer, opposed it.

Mr. IIadley. I want to disclaim any acquiescence in the last
statement of the chairman, as to the nature of the organization of
the Seattle Chamber of Commerce.

The Chairman. T was told that by tiie secretary of the Commer-
cial Club.

Mr. Hadley. I am not going to debate it; 1 just want to (hsclaim
the statement. I know something of the situation in Seattle.

Mr. Edmonds. A situation like that is not true of the eastern
chambers of commerce; I will say that. I do not know anything
about the West.

Mr. Greene. It is not true in Massachusetts.

The Chairman. Mr. Rosenthal said two memb(>rs of the Com-
mercial Club of Chicago — composed of 5,000 members — made the
report on this bill, and his statement has gone unchallenged so far.

Mr. Edmonds. But even on the face of your own statement, the
canners have not taken up this situation at all; they have only
taken up the question of Government ownership.

Mr. Jacobs. I did not say that; I said that the sentiment at our
meeting was that it does not make much difl'erence how we get an
American merchant marine as long as we are going to get it in the
right way.

Mr. Edmonds. All you want is a merchant marine?

Mr. Jacobs. Yes; that is what we want.

Mr. Edmonds. That is exactly what I am driving at, and on the
face of your statement I say you did not study this bill any more
than the chamber of commerce did.

Mr. Jacobs. I did.

Mr. Edmonds. You may have, personally, but the f)rganization
did not.

Mr. Jacobs. I did not say they did.

Mr. Edmonds. You know just as well as I do how those things are
conducted. I belmg to boards of trade and chambers of commerce,
and I know myself, and I will say this, in the East that we never get
anything through without having a big fight on our hands, particu-
larly when it is anything as big as this.

Mr. Jacobs. At the Inland Waterways Association, which has
probably a much larger and more representative organization of
men, because it is composed largely of producers in the State, the
bill was debated, and the reason it was debated was that the resolu-
tions committee of 19 brought in a favorable report — a unanimous
report on the bill.

The Chairman. Where was that?

Mr. Jacobs. The Inland Waterways Association at its annual
convention. You have a copy of their proceedings here. I think I
left it with you this morning. The bill was ]3resented on the floor, and
the first man to get up and oppose it was Col. Irish, the same man we
have always looked to oppose everything; the same man who fought
us when we had the Pacific Mail matter up years ago, when we wanted
to reheve the situation; but I, as president of the organization, did
not feel it was right for me to attack his position, so I said nothing
and was just ready to preside, which I did. Finally, a gentleman
from the northern part of the State, a large producer up there, got

52 KEt;ULATOKY FEATURES OF SHIPPING BILL.

the floor, and he showed that Col. Irish had always represented, in
connection with his attitude on questions of that kind, the special
interests, and, in fact, was employed by the special interests.

The Chairman. What do you mean by ^'special interests?"

Mr. Jacobs. I mean the large railroads and others who have })cen
in the past opposed to measures of this kind.

Mr. Edmonds. Is not the canners association a special interest?

Mr. eJACOBS. No; the Canners League, as I say, is an association
not for profit. I am not representing the association here. That
is a much larger concern than we are.

Mr. Edmonds. You are a special interest, so it works out in Cali-
fornia.

Mr. Jacobs. We are one of the independents, then, because we are
not affiliated with them. After the debate took place there were
two speakers that opposed this bill, and the attitude on the part of
both of them was well known in the convention before they even
came there. And here was a representative gathering of men from
all parts of California — in fact, the report says it was the largest and
most representative gathering held in 12 years of a league conven-
tion; the big room in the Palace Hotel was packed to the doors —
and it was carried practically unanimously. I think there were two
or three votes against it, but they were so few no attention was paid
to them. And the whole thing was fought out on the ground of
Government interference in the shipping business.

Now, I do not say that I favor Government interference; I do favor
an American merchant marine, but I am not like a great many of
our directors in our chambers of commerce who howl loud for an
American merchant marine, but only want it one way, and that is
by means of su])sidy. I favor an American merchant marine to
relieve the conditions in this country, but not for my own interests,
because I hope to be out of business very shortly; I am pretty near
through witli business.

Mr. Edmoxds. Would you ba satisfied if the Go/ernment were to
buy $50,033,093 worth of sh'pi and ^our association or an association
of the shippers in San Francisco could charter one or two of those
ships, or three or four of them at a reasonable price and carry your
goods ?

Mr. Jacobs. Would I be satisfied?

Mr. Edmonds. Yes.

Mr. Jacobs. I do not know. I have not given any thought to it,
but I think so.

Mr. Edmoxds. Or do you want the Government to run a compaay
from San Francisco to London and Paris for the 200 cases or 300 cases
that you lia /o to sh'p ?

Mr. Jacobs. I will tell you I believe if the Government put $50,000,-
000 into ships and leased them to private companies and lost the
whole $50,000,000 in a year, they would save this country two hun-
dred million in a year by the regulation of freight rates, and that
would redound to the benefit of the producers and business men of this
country.

Mr. Hadlky'. Is your discussion on the theory that is what is to be
done?

Mr. Jacobs. 'Vo lose the money?

REGULATORY FEATURES OF SHIPPING BILL. 53

Mr. Hadley. No; I say is your discussion <m the theory that is
what is to be done in the bill ?

Mr. Jacobs. No; I understand in the bill the Government is not to
operate the steamers at all unless they can not find individual compa-
nies to operate them; that the Gov^ernment is merely to provide the
money and if they build the steamers they are to lease them to private
corporations and they are to retain control over them by certain
regulations and the Government is to have the right, the same as the
English Government did in loaning money to the Cunard Line to
build the Mauretmvi and the LusiHnia, they have the right to make
naval auxiliaries of them in case of war. And I believe if we had a
war to-morrow our N avy would not be worth 2 cents because we could
not" get steamers to supply our navy with what they need; with the
present shortage of steamers it would be a pretty hard proposition.

Mr. Hadley. That is what you understand in reference to the bill ?

Ml'. Jacobs. The general tenor of it.

Mr. Hadley. I mean that feature of it ?

Mr. Jacobs. Yes.

Mr. Edmonds. The board would have the right to establish lines
any place they please.

Mr. Jacobs. If they found they could not do it in any other way.

Mr. Edmonds. There is no limitation in it.

The Chairman. I assume the board would have as much sense as
we would, i'.nd I am sure Brother Greene would not establish a line
where the tr<.de was being amply served and at reasonable rates. I
know I would not.

Mr. Jacobs. We believe the Government ought to have started a
line of steamers on the Pacific at the time the Pacific Mail Steamship
Co. made refusal to haul the freight and had to go out in ballast. We
were all bottled up and could not get freights and had to pay what-
ever the rates were. On the Atlantic your Government had a line
of steamers running to the Isthmus, but we could not get any relief
on the Pacific; and in that case I believe they should have started it.

The Chairman. Senator Bristow introduced a bill for a Govern-
ment owned and operated line of ships from the Panama end of the
canal to the Pacific coast.

Mr. Jacobs. I think Senator Flint did, too.

The Chairman. Well, Senator Bristow did; just to meet that
situation, I think.

Mr. Jacobs. Now, as to this other bill here, of course I only
had it to-day and just looked over it — bill 14337. I want to say I
am most heartily in favor of a bill of this nature, because I think if
the Government is going to give us an American merchant marine
they sliould retain control over the shipping business by seeing there
is no discrimination I believe the big concerns and the big steam-
ship companies do discriminate against the general run of shippers,
and I believe this bill would stop that very thing and would regulate
the shipping on the seas just as well as it is by land.

Mr. Edmonds. You believe, then, they ought to establish positive
rates ?

Mr. Jacobs. Yes, sir. I think no one is going to object if every-
body is treated alike; but I am opposed to this discrimination that
gives the large concerns an advantage over the smaller concerns.

The Chairman. You mean in the way of rebates?

54 REGULATOEY FEATURES OF SHIPPING BILL.

Mr. Jacobs. Rebates, yes; various tilings. For instance, they will
establish a rate and they will say it is the rate less such and such a
percentage. In fact, they won't oven estabhsh like rates: you can
not tell what they will do, they do not tell you; but we know in-
tuitively that some of the shippers do o;et the inside track.

Mr. Edmonds. If you had a cargo ship and a man came to you and
offered to fill three-quarters of the tonnage of that ship with cargo,
would not you feel hke making a concession!'

Mr. Jacobs. You moan if he bought the canned goods from us?

Mr. Edmonds. No; I am not talking about canned goods. Sup-
pose you owned a ship and I come to you and say — it is a 5,000-ton
ship and you wanted $1 a ton freight to some point — "I will give
you 4,000 tons in this ship if you will take it at 90 cents."

Mr. Jacobs. I do not think it ought to be done any different than
the railroads do it; the same rule ought to apply that applies to the
railroads. We might ship a hundred cars of goods by rail and get no
better rate than the man v/ho ships one car. And in saying this, I
may be talking against my owii interests, because we have hundreds
of cooperative small concerns in California that ship just a few cars
of goods, and before the regulation of the freight rates they were put
out of business. I know California was just full of canneries put out
of business because of discriminations in railroad rates. And I was
the one who started the investigation in California by our railroad
commission and stopped rebates which were as high as 35 per cent in
some cases-^not that I had any personal interest at stake at all, except
the interest of my State.

Mr. Edmonds. You own this ship again; you either have to take
that 4,000 tons of cargo at 90 cents or take 4,000 tons of ballast in
the ship and not carry any cargo; what will you do? There is no
comparison between a ship and a railroad.

Mr. Jacobs. If there was no regulation, I would do the best I could.

Mr. Edmonds. If there was regulation, you would go out and lose
money by operating the ship.

Mr. Jacobs. Yes, I would have to respect the law.

Mr. Edmonds. Then how would you build up a merchant marine
by that process?

Mr. Jacobs. I could not answer that question. That would de-
pend altogether on the circumstances. The question of loss by run-
ning an American merchant marine by the Government, I presume
you mean ?

Mr. Edmonds. 1 am not talking about loss to the Government; I
am talking about building up a merchant marine; that is what we are
trying to do.

Mr. Jacobs. I do not know. That has been the process for the
last 40 years and you have not built up a merchant marine yet in
this country; you have had that method for 40 years.

Mr. IIakdy] Having cutthroat methods, cutting and slashing,
hauling freight entirelv free here, and for a big price there, making
up on th(^ little man what you lose on the big man, has that ever
resulted in buikling up any kind of industry?

Mr. Jacobs. I do not think it has.

Mr. Hardy. Now, when you get Mr. Edmonds's question, strictly
speaking, to leave the shippers at perfect liberty to charge as they
please, to give the big man low rates and the little man high rates,

REGULATORY FEATURES OP SHIPPING BILL. 55

won't that in every case absolutely cut the throat of tlio little man and
leave the big man alone ?

Mr. Jacobs. That is exactly what the effect has been and will be.

Mr. Hardy. That has been the result of such methods in the past ?

Mr. Jacobs. Yes, sir.

Mr. Hardy. Now they have, as a whole, the same trade; and
whether it is carried at reasonable rates or whether it is carried for
nothing to-day and two prices to-morrow, these ships have the total
amount of freight to carry eventually?

Mr. Jacobs. Yes.

Mr. Hardy. And if they simply adopted business methods they
would not be going empty or in ballast ?

Mr. Jacobs. We believe there is })usiness enough for all, like any
men competing with each other.

Mr. Hardy. And if there is not, somebody has got to retire from
business ?

Mr. Jacobs. Yes.

Mr. Hardy. But if you have no regulation you have just simply
a condition of chaos.

Mr. Jacobs. That is true.

Mr. Greene. What do you do in your canning business ? Do you
have a settled price that every man in the canning business on a case
charges the same price, or do you go in and compete ?

Mi\ Jacobs. We do not have any settled price. We go in and com-
pete; and wliilc I can not say I am going to speak in favor of settled
prices, I know that the result is terribly disastrous.

Mr. Greene. You have a regular cutthroat business in your line ?

Mr. Jacobs. It is a regular cutthroat business. At the present time
two-thirds of the canners of California are not making a dollar; and
we would not make a dollar ourselves if it was not for the fact we have
a trade-mark on which our goods are sold in foreign countries. That
is why we liave gone into the foreign trade so heavily. As I explained
before, 85 per cent of our business is in foreign markets, because we
can not make any money in the domestic market. On account of the
cutthroat rules, if it w^as not for the fact we have our trade-mark estab-
lished in Europe, that the people over there want, we could not exist
to-day.

Mr. Edmonds. Do you sell a man 5,000 cases for the same price that
you sell 5 cases ?

Mr. Jacobs. No, sir; we do not.

Mr. Edmonds. You make a different price?

Mr. Jacobs. Yes, sir.

Mr. Greene. As to the effect on shipping on the Pacific coast, as
between Vancouver and vSeattle, for instance, how far would this bill
regulate the rate at Vancouver or any other British port ?

Mr. Jacobs. I do not suppose it would have any control over it
if they did not touch at American ports.

Mr. Greene. But they have that competition, do they not, in
Vancouver — they have the competition at Vancouver on the Pacific
coast ?

Mr. Jacobs. Under the present laws ?

Mr. Greene. Under any law; even if we get this law?

-Mr. Jacobs. Under the law I do not believe a vessel loading at
Vancouver can deliver goods to an American port ; I do not believe
it can load there and deliver goods.

56 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Greene. Suppose they are brought in to A'^aucouvor and de-
Hvered in the United States by rail ?

Mr. Hadley. He is speaking of the foreign trade.

Mr. Greene. Yes; the foreign trade.

Mr. Jacobs. A¥hat regukition woukl that be ?

Mr. Greene. Yes; I want to Ivuow liow far this bill would regulate
the business at Vancouver which would come in competition with
Seattle ?

The Chairman. In what trade, Mr. Greene ?

Mr. Greene. In any trade. Take Australia, for instance.

Mr. Jacobs. I could not answer that question, because it is some-
thing that the working out of the bill would have to prove and
demonstrate.

Mr. Greene. I thought you had examined the bill and thought
you could tell me whether there was any provision in this biU.

Mr. Jacobs. You mean in this biU ?

Mr. Greene. Yes; this bill.

Mr. Jacobs. This one here ?

Mr. Greene. Any bill; I do not care whether it is this one or the
other, either 10500 or 14387, or any other bill — any bill that would
protect American men in business as vessel owners or business men
as against the competition of the foreigner in l)usincss right adjoining
them — whether or not this bill would be of any advantage at all to
the American shipowner or the American shipper?

Mr. Jacobs. I do not know that it would be of any more advantage
than it is to the American shipper by rail, and the rail rates are regu-
lated.

Mr. Greene. Oh, but that is cjuite different; on the land you have
specific places to run. Here on the ocean you are going out on a free
ocean. And what I want to ask you is this: The regulations in this
measure are very much different from the regulations anywhere else;
they practically tie the hands of the American shipper and tie the
feet of the American shipper; he can not do this and he can not do
that without being liable to prosecution or imprisonment, and he can
not do this or that; and yet the man at Vancouver or any of the
British ports would not be tied in that way.

The Chairman. At this point I want to state that this bill does not
do anything of that sort; there is not a line in the bill that would
justify any such statement as that.

Mr. Greene. Read the bill; anybody who can read can see that.
I can read and you can read.

The Chairman, I am quite familiar with the bill and there is no
one wlio understands it who would venture such an assertion as that.

Mr. Greene. Then I am thickheaded; I will put myself down as
being thickheaded, although I do not think I am.

The Chairman. Here is a condition that I do not believe subsidies
or anything else would meet. For instance, if a line from Vancouver
to Australia can quote a rate of $1.50 a hundred on lumber or $15 a
thousand on lumber, the only way Seattle could compete with Van-
couver would be by giving the American lumbermen as good a rate.
Is not that true ?

Mr. Greene. Yes; that would be

The Chairman. And I do not suppose it would make any differ-
ence, under this bill, a subsidy bill, or any other bill.

HKCiULATORV KI'^ATUKKS OF SHIPPING BILL. 57

Mr. Greenp:. But I ain in favor of a subsidy to cover that, and you
do not provide it here.

The Chairman. I do not care how much you would subsidize an
American merchant marine, it would not affect a situation hke that.
In other words we would have to compote just as we do in transcon-
tinental rates on the railroads; our American railroads must compete
with the Canadian railroads. And in the foreign trade, our water
shippers must have just as low a rat(^ as the foreign shipper.

Mr. Greene. But in their use of the money put in this bill to build
up a merchant marine, if you used the money in the form of a subsidy
it would meet the difference.

Mr. Jacobs. Except to this extent, that under this bill the benefits
would go to the manufacturers and producers in this country instead
of going to the shipowners.

Mr. Greene. It does not make any difference who gets it.

Mr. Jacobs. I think it makes quite a difference.

Mr. Greene. The difference goes to those who are entitled to it;
that is what it would be in either case.

Mr. Hardy. Mr. Jacobs, you were asked by Mr. Edmonds a minute
ago whether you had one price for 5,000 cans or 5 cans of goods ?

Mr. Jacobs. Yes.

Mr. Hardy. Is it not generally recognized there is a big difference
between a private producer conducting a private business and a
quasi public institution like the railroads, whose rates and dealings
are regulated ?

Mr. Jacobs. Yes, sir.

Mr. Hardy. Now, you would not be in favor of a law, nor would
anybody I know of be in favor of a law, that would prevent you
giving drawbacks to customers who traded with you for a whole
year; there is nothing improper in your case with that.

Mr. Jacobs. No; if the law permitted us.

Mr. Hardy. As a matter of practice, if you see proper to induce
a man to trade with you during all the year by giving him back 10
per cent, you can ?

Mr. Jacobs. I think there is a law that prevents that now unless
we do it with all similar customers.

Mr. Hardy. Do it with all customers. That is not the kind of
little drawback down in South America we are complaining of; that
is a very different thing — a drawback from a line and in your indi-
vidual trade — is it not ?

Mr. Jacobs. Your question before would probably answer that.
I will explain the situation in the canning bushiess in California
to-day. In selling goods, one man will go out and give all the way
from 5 to 20 per cent private discounts to buyers; and the result is
if it is a customer of somebody else, they will give 20 per cent, be-
lieving that they can do a portion of the business at a loss. Some of
our concerns will do that in order to get away somebody else's cus-
tomers. And the result is nobody is able to make any money.

Mr. Hardy. Now that conduct has been charged up particularly
to the Standard Oil people in the sale of oil, to drive out competion,
and there has been a good deal of agitation for a law and in some
States a law has been passed requiring the big producer to have a
uniform price and if they cut the price to drive out competition in
one place they are required to do it elsewhere. Those are special

58 REGULATORY FRATURKR OF SHTPPTNO BTI.L.

illustrations of special attempts to curb the power of stupendous
capital. It has not been applied to the small individuals or small
enterprises, as far as I know, but this question of railroad regulation
and ship regulation is the regulation of quasi public carriers — at
least quasi public.

Mr. Jacobs. On which the backbone of our country (k^pends to-day.

Mr. Hardy. And if you do not control thenx they beconie an
"uncontrollable monopoly. So it is a very different question wlien
they ask you about canned goods and ships.

Mr. Jacobs. I think so.

Mr. Edmonds. That might be true as far as corporation lines are
concerned, but I do not think that would be true as far as a private
individual owning one or two boats.

Mr. Hardy. I think you will find, Mr. Edmonds, in the case of
the public lines, according to our investigation, which you remember,
th?i individual tramji steamer did not have much show to live if they
set out to kill him.

Ml'. Edmonds. I think 3^our statement regarding a quasi public
service might be true as to the lines of a single carrier. This gentleman
is performing a quasi public service in taking products and canning
them.

Ml*. Hardy. Are you opposed to all regulation ?

Mr. Edmonds. I am simply saying Mr. Jacobs does not know what
this bill is.

Mr. Hardy. That is not a question; that is argument.

Mr. Edmonds. He says he wants freight rates positively settled.

Ml". Jacobs. Yes, sir.

Mr. Edmonds. The bill does not positively settle freight rates.

The Chairman. I think he is wrong about that.

Mr. Jacobs. You mean this last bill, this one I read to-day. It
prevents discriminations; that is the principal thing and I think that
is a very wise provision.

Mi\ Hardy. Yes; and it allows the board to fix reasonable rates
where they have been oppressive.

Mr. Jacobs. If it does not settle the rates positively, possibly
that is just as well. I think it is just as well if it does not, if it will
prevent discriminations; that is the important thing, so that people
will know what they are paying and that they arc not being dis-
criminated against.

The Chairman. We sent out, when we were investigating the so-
called Shipping Trust under House resolution 587, some 2,500 or
3,000 letters, principally to merchants, exporters, and importers on
the Atlantic, Pacific, and Gulf. Their answers were confidential,
and we classified and discussed them in our report. And that is
'One of the things they said, that they did not know in some instances
whether they were really being discriminated against or not, but
they had reason to belie v^e they were and they wanted it stopped.
So far as everybody being treated alike — so far as that question was
concerned— they did not complain. In other words, it was just like
it used to be with the railroads, when rebates were granted to the
big shippers and the little shipper did not get those favors. Now it
is prohibited on the railroads and I assume that we would he glad if
the same thing was true on our water-borne commerce.

Mr. Edmonds. We asked an association I belong to in Philadelphia
once whether the members did not think they were l^eing discrim-

REGULATORY FEATURES OF SHIPPING BILL. 59

iiiated against by the wholesalers and every member said he thought
he was, but he could not put his finger on it; just exactly as they tell
you about shipping.

"Mr. Hardy. Don't you think they were right ?

Mr. Edmonds. I haven't the least bit of doubt some fellow got it
on some line where another fellow got it on another.

^fr. Greene. How many canning companies are there on the
Pacific coast ?

Mr. Jacobs. There are 8 or 10 large concerns and probably 30 or
35 smaller concerns.

Mr. Greene. How long has yours been a large concern?

Mr. Jacobs. We are the largest concern in existonco in California
and we would have been out of business long ago if it was not for our
trade-mark.

Mr. Hadley. The canneries you speak of are the fruit and vegetable
canriers?

Mr. Jacobs. Yes. We have been in business since 1880, our con-
i'eni. I went in there in 1880, 35 years ago the 1st of February.

Mr. Greene. How do these other people in the business live; have
they trade-marks, like yourself ?

Mr. Jacobs. No, sir,

■ Mr. Greene. How^ do they manage?

Mr. Jacobs. They don't manage. The small concerns keep start-
ing up and going out every year. Half a dozen concerns start up
eivery year, aiui are wiped right out. The farmers contribute capital
to them and at the end of the year it is all gone. Sometimes they
contribute for two years and then wind up and assess the farmers for
for their loss and the machinery is broken up.

Mr. Greene. Why do the farmers do that ? Do you offer so low a
price for their products they can not afford to sell to you ?

Mr. Jacobs. Sometimes I imagine that is the case; or they find they
can do better by selling themselves.

Mr. Greene. You run a combination of farmers

Mr. Jacobs. We haven't any combination.

Mr. Greene. A quasi public corporation formed for the benefit of
the people, and you want the Government to benefit the people ?

Mr. Jacobs. We have no combination.

Mr. Edmonds. I think I wall take up that bill of mine for having
Government canneries.

Mr. Jacobs. The smaller concerns are up against it on a great
many propositions. Formerly they were up against high railroad
rates — the little concerns in the State — then again they are up against
the special discounts, as I was telling you, and they operate so that
the small concerns without a reputation for their goods can not sell
them.

■ Mr. Greene. Do you make any special discounts '(

Mr. Jacobs. Certainly we do. We have to or we would not bo
in business. W^e don't want to do it, though.

Mr. Greene. I thought you carried on a high plane of morahty
and justice.

Mr. Jacobs. Tlie Federal Trade Commission is in San Francisco
now, at least, I saw their representative from Washington — I have
his card here — who was investigating that very thing. He came to
me, and I said, ''There are the books; 3^ou can go at them and satisfy

60 REGULATORY FEATURES OF SHIPPING BILL.

yourself." But he asked me whether we were giving special dis-
counts, and I said why certainly we were, because others were doing
the same thing, and we had to do it or lose our trade. I will tell you
we lost customers we had for 25 years, even for this special trade-
mark, because they had been oflFered the goods by some of our
competitors at a price and special discounts away below what we
could afford to pack the goods for, and we just lost the business.

Mr. Edmonds. We are trying to got out a bill that will take care
of our merchant marine without injuring business; that is what we
are hunting for.
Mr. Jacobs. Yes.

Mr. Edmonds. The same class of competition met in the canning
business is met here, and therefore when we get out a bill we must
get it in such shape that it won't injure tlie merchant marine.

Mr. Jacobs. You do not think a subsidy is going to regulate that
at all? It will just help make some of those steamship owners get
more than they are getting now.

Mr. Greene. What are you going to do with this $50,000,000 in
the bill?

Mr. Jacobs. I believe if the whole $50,000,000 is lost and you can
get an American merchant marine that will open up opportunities
to the markets of the world, it will be worth $200,000 a year to this
country, even if you lost $50,000,000 a year in doing it. You may
call that a subsidy, but it is of some value to the business interests
of this country; whereas a subsidy to the steamship owners I do
not believe would be of any value to the business interests of the
country.

Mr. Greene. Of course, that has not been decided; that is a new
idea and has not been decided.

Mr. Hadley. "V^Hiere are your principal markets?
Mr. Jacobs. In England.

Mr. Hadley. And who are your principal competitors ? Have you
any foreign competitors in the same markets ?
Mr. Jacobs. Oh, yes.

Mr. Hadley. Where are they located principally?
Mr. Jacobs. In California.
Mr. Hadley. I mean foreign competitors.

Mr. Jacobs. Oh, we have foreign competitors in the Enghsh mar-
ket; but of course we have a preference because we have a trade-mark
that they want; otherwise we would be out of business.

Mr. Greene. Wliat is the nature of your trade-mark; what is its
value ?

Mr. Jacobs. It has been in existence for over 35 years, since we
started in 1880; and the English people when they start in buying any-
thing that is satisfactory to them, you can not get them to change,
that is all —like any other business. And we can get living prices
out of those goods; we do not have to meet that kind of competition
we arc confronted with in this country as the most of them have to
meet it.

The Chairman. We are very much obliged to you, Mr. Jacobs, for.
appearing.

(Thereupon, at 3 o'clock p. m., the committee adjourned until
Tuesday, April 18, 1916, at 10 o'clock a. m.)

REGULATORY FEATURES OF SHIPPING BILL, 61

COMMITTKK ON THE MERCHANT MaRINE AND FISHERIES,

House of Representatives,
W asMngton, D. 6'., Tuesday^ April 18, 1916.

The committee met at 10 o'clock a. m., Hon. Joshua W. Alexander
(chairman) presiding.

The Chairman. The hearing to-day is set at the request of the
representatives of the Chamber of Commerce of New York on H. li.
14o37, Avhich the ctnnmittee has under consideration, which it is sug-
gested be substituted for the provisions of sections 9 and 10 of
H. R. 10500.

Who will be heard first?

STATEMENT OF MR. IRVING T. BUSH, OF NEW YORK, N. Y.,
PRESIDENT OF THE BUSH TERMINAL CO.

Mr, Bush. I will speak first and introduce the other speakers.

The Chatr^ian. Who else will speak?

Mr. Bush, Mr. Franklin will be the second speaker, Mr. Sherman
will be the third, and Mr, George S, Dearborn will be the fourth,
Mr. Dearborn will be followed by Mr. Kirlin.

The Chairman. You may proceed,

Mr, Bush. Mr, Chairman and gentlemen, I wish to make one or
two points clear at the beginning of our testimony. Tlie committee
of which I am chairman of the Chamber of Commerce of New
York is empowered only to speak upon shipping matters pertaining
to the foreign trade.

In bill H, R, 14337, which is before us to-day, there are a number
of sections which will apply, if passed, to the interstate trade, but
our committee, as a whole, will have nothing to say upon those sec-
tions, because we are not empowered by the chamber of commerce
to speak upon them.

Mr. George S. Dearborn, president of the ^American-Hawaiian
Steamship Co., who is a member of oiu- committee, will speak in his
turn, as an individual, and as the president of his company, upon
those sections.

I also wish to make it clear that in appearing and giving our sug-
gestions upon this bill, we have not changed our views as to the
desirability of the measure which was introduced by Mr. Rowe
and which was prepared by the Chamber of Commerce of the State
of New York, or of the desirability of the suggestions which were
submitted by Mr. Kirlin, who is counsel to our committee.

As to the substitution for the regulatory provisions in House bill
10500, we have prepared here a number of suggestions, amounting
to about 21, which, for the purpose of the record, I will introduce,
but I will not attempt to speak upon more than three of them, the
three which we consider fundamental; and leave to Mr. Kirlin,
when he speaks, the duty of describing the other changes. Many of
the changes are technical in nature (the introduction of a work or
the substitution of a phrase) and he, in his turn, will point out the
reasons why the changes are suggested.

Before speaking of the three fundamental ])oints which I have in
mind, I would like to say, as I am very sure has occurred to the
mind of everyone here, that we are making history very rapidly in

62 llEGULATOKY FEAJ UKES OF SiilPPiNG BILL.

shipping matters, and the point of view of our committee would,
perhaps, be different to-da}^ if we had commenced to study this
problem previous to two years ago when we first undertook the work.
At that time Ave were profoundly convinced that it was necessary
to offer some inducements to American capital to invest in American
vessels; but the wealth of this country has been added to so rapidly
by the enormous exports during the war and by the splendid eco-
nomic conditions of the country that, instead of needing any great
inducement to American capital to go into the construction of Ameri-
can flag ships, it has seemed to us that it would be sufficient to have
a general air of encouragement surround the shipping business.
And even that view has been changed by some of the members of
our committee.

And while I am not empowered to say this for our committee, I
have heard a great manv experienced and important steamship men
say that at the present time the condition has so changed that if no
legislation could be enacted they believe the shipping problem would
take care of itself. It is perhaps my own view that the condition has
so changed that instead of needing an inducement to American capital
to go into the construction of American-flag ships on the basis of a
friendly attitude on the part of the Government, that it will be
sufficient to have an attitude which the steamship men would in-
terpret as not unfriendly. I do not use that phrase in any sense
which could be objected to by any man here, for we are perfectly
certain that every member of your committee is entirely friendly to
an American merchant marine; but it is a question of what the
steamship man or possible investor in a steamship property would
consider as possibly unfriendly to his investment when made. And
it is our fear that something may be done by Congress which will
have a deterrent effect in preventing us from taking advantage of
this first gi-eat opportunity Avhich we have had, really, to do some-
thing substantial and constructive toward putting on the great
high seas a merchant marine under the American flag which has
caused us to scrutinize with such great care all of the provisions in
this bill which we are considering to-day.

The deterrent force which is operating, it seems to me, both on this
side of the water and on the other side, toward building up a
merchant marine either under our own flag or the flags of the great
belligerent powers, is fear. On the other side they fear the after-
math of the war and the great burden of taxation which may be
placed upon that property there. And the P]nglishman or any of the
belligerent investors in ship property who considers putting his
money into vessels at the present time faces the jn-oblem of what
the burden of taxation is going to be to him as a vessel owner after
the M'ar is over. That may be a source of comfort to us on this side
of the water, because any additional burden of expense, whether
operating cost or taxation expense, is another step toward equaliza-
tion of operating cost which we, as a committee, feel is essential
before anything constructive or permanent is done in the upbuilding
of our merchant marine.

On this side of the water the man Avho is considering investing
money in vessel property is confronted also with fear, and the fear
is the uncertainty of possible Government competition, and also
the uncertaintv of the danger of competition which he must face

REGULATORY FEATURES OF SHIPPING BILL, 63

when, after the war is o\ev and the great tonnage which is now
used for naval and military purposes comes back into the world com-
petition. And it is not, gentlemen, it seems to me, the question of
what is the intent in your mind, for we are convinced that your in-
tention is to do everything possible to stimulate the upbuilding of a
merchant marine, but it is a question of what is in the mind of the
man who stands upon the threshold of possible investment in
American tonnage and is deciding for himself the question of
whether or not he shall invest his money in a steamship property.

I think my own case may be a fair statement of the mind of the
average investor. At the present time I have not any investment in
vessel property, although I ha^e been closely associated with vessel
owners and the shipping business. I have considered a number of
times during the past year wdiether I should invest some money,
which I was fortunately in a position to do, in a steamship property.
But I have yet no interest in that class of property, and I know, in
my own case — and I say it with perfect sincerity — that the deterrent
force has been the fear— or lack of knowledge, at least — of what
the Government was going to do in the way of regulating the rates
and the possibility of Government competition with privately owned
steamship property.

When the Alexander bill was introduced in the last Congress, the
gentlemen whose names were most closely associated with the meas-
ure made repeated utterances to the effect that the reason it was neces-
sary that the Government go into the ownership and operation of
vessel property was because private capital was doing nothing; and,
as I had the privilege of pointing out to your committee, at that time
private capital was doing nothing in any line of business; private
capital was paralyzed. But since that time the country has become
more confident of the future and private capital has become active
in all lines, and it has for the first time taken an interest in the de-
velopment of ship property; private capital has filled the shipyards
of this country with orders for merchant vessels. And it seems to me
that the arguments which were advanced then for the Government
ownership and operation have ceased to be of force at the moment,
and I wonder sometimes very seriously whether this is not a time for
us all to stop, look, and listen, foi- the Government to consider
whethei- the premises upon which we began the investigation of this
great subject two years ago have not so radically changed that the
country, as a Avhole, will be better off if our own bill, formulated by
the chamber of commerce, is not torn up and the Alexander meas-
ure is torn up and the development of the merchant marine left to
work out its own destiny until we can see more clearly what is
needed.

I wish to say, however, we stand absolutely l)ehind ovir own meas-
ure because we believe that is absolutely automatic; that if condi-
tions equalize themselves, as it seems probably they may to a very
large degree, the operation of our bill absolutely ceases, and it is
only called into effect again when a difference in operating costs
arises. It is not like an ordinary sul)sidy, where the subsidy is paid
irres])ective of whether there is a difference in operating ccst or not.
It would only be paid when there is a difference in the operating
cost. And if my thought is at all correct that the burden of taxation
on vessel properties owned by the great belligerent nations is to be

64 KEGULATORY FEATURES OF SHIPPING BILL.

heavy after the war, it would seem to me there may be a very great
probability that the increased taxes of Europe will to a very large
degree, perhaps entirely, offset the increased operating costs of vessel
property in this country, which our investigations showed were not
so great as is sometimes supposed.

I will speak very briefly of the three fundamental suggestions
which I am to cover in my statement, and then I will introduce Mr.
Franklin as the next speaker, and leaving to JSIr. Kirlin the covering
of the detailed suggestions which are to follow.

The first thought wdiich I wish to advance, or the first suggestion,
is that there seems to be running all through this bill, a power of
investigation without any sworn complaint having been filed.

The burdens of ordinary business are sufficiently great to encounter
for the business man who is struggling for success, without having
hanging over his head an investigation of all of his pl'ivate affairs
being started because of the whispered comment of somebody who
may have some particular grudge against his business. That power
vested in a commission of this kind, wdiich can start an investigation
which will not only take a great deal of his time, but which might
reveal, unfortunately^ for him, a great many of his business secrets
which are properly kept in the confidence of his own office. We be-
lieve no investigation should be started Avithout a sworn complaint
of somebody who has a real interest in the matter. We do not think
that it is within the province of the Government or within the prov-
ince of a commission of this kind to aid in an introduction of trivial
complaints; that if a man has had an injustice done him, that that
injustice should be corrected, but if he has not sufficient courage or
not sufficient interest in the matter to file a sworn complaint which
wdll definitely state his grounds for complaint, we do not think he
should be considered. A man in beginning an ordinary acti( n in
civil litigation has to swear to his complaint, and we do not think
that the trivial complaint, the half-whispered insinuations which
would sometimes start a Government investigation, should be en-
couraged by a board of this kind. We therefore believe and hope
that your committee will take the view that the power to start an
investigation Avithout a sworn complaint should be eliminated from
the bill.

The Chairman. You mean to say that the board should not have
the power to start this investigation on their own initiative?

Mr. Bush. We do not think the board should have the power to
start an investigation unless a sworn complaint has been filed.

The Chairman. These provisions are taken in turn from the in-
terstate-commerce law. Ts that power abused now by the Interstate
Commerce Commission ?

Mr. Bush. I am not in a position to say whether it is abused or not.

The Chaikaian. The exact language of the intei'state-commerce
law as to the power vested in this board is the power now vested in
the Interstate Commerce Commission.

Mr. Bush. I am not sufficiently familiar with the intei-state-
commerce law to, perhaps, discuss that intelligently. But we be-
lieve there is a very great difference between regulations which
should surround interstate commerce, where it is entirely without our
own country and where the entire control is vested in the Interstate
Commerce Commission and regulations whicli should surround ocean

REGULATOKV FKATURES OF SHIPPING RILL. 65

shippiiio; which is not within the confines of our borders and not even
within the ownership of our own people. And while I would prefer
not to be drawn into a discussion of the interstate-commerce act, with
which I am not familiar in detail, we do maintain it is sufficient at
the present time to su<!;<;est that your ship industry is not developed
and built up as is the case with the railroads, and you are trying to
frame laws which will encourage the development and building up
of our merchant marine. And until that has been accomplished and
until we have a merchant marine on the high seas and until it has
been demonstrated that there is a necessity for regulation of this
character, we believe it will be more helpful — and we believe that is
the aim of this committee — if it is said to the man who is investing
money in steamship ])roperty that he is not going to take the chance of
having all his private affairs investigated at any time upon the
initiative of this commission, and that they can only be investigated
and brought into the public light if some one takes a sufficiently
definite interest in them to come forward with a sworn complaint
that he has done something that requires investigation. And if that
is done, we believe he should be investigated.

The second subject which 1 shall cover is the matter of regulation
of rates. We do not believe this commission should be given the
power to regulate rates excei)t to the extent of the prohibition of
unfair practices. We believe it is impossible to regulate rates with
any degree of fairness. It may be that this committe has within its
knowledge some facts of which we are not in possession, but the
steamship men who are a part of our committe fail to se any way in
which a fair rate can be established by a commission of this charac-
ter. The character of vessels differs; their costs differ, and the
rate which might be established for one class of vessels would be
entirely improper for another.

Vessels which were constructed before the war cost perhaps $40
or $50 per ton: some of the vessels which are constructed to-day will
cost $150 a ton: and if you are going to base your rates upon the
earning power of a vessl it would manifestly be unfair to establish
the same rate on the vessel which cost $40 a ton and the vessel which
cost $150.

Vessels are built to carry different kinds of cargo; some are built
to carrv heavy cargo, some light cargoes, and they are entirely dif-
ferent. And "we fail to se how it is possible for any counnission to
regulate with any degree of fairness rates of that character, and we
believe that the welfare of the people. Avhich is the first consideration,
is sufficiently safeguarded by a provision which gives the board the
power to prohibit any unfair practices and to say that they can
collect a fine from any one who is guilty of unfair practices.

Mr. Saunders. AVe appreciate the force of what you say. AVhat
particular provision of the bill do you have in mind that would
bring about those results?

Mr. Bush. We have drawn here a short section— —

Mr. Saunders. No; I mean to Avhat particular section of the bill
do your remarks refer?

Mr. Bush. As I was about to say, we have drawn here a short
section to take the place of sections 4 and 5 of y<mr bill.

38534—16 5

66 REGTJLATOEY FEATURES OP SHIPPING BILL.

The Chairman. Mr. Saunders would like you to point out in sec-
tions 4 and 5 where this would happen.

Mr. Saunders. You indicated there was a possibility of trouble ?

Mr. Bush. Yes.

Mr. Saunders. Is there an,ything in oui- hill to create tlie situation
which you indicate?

]\[r. Busir. I think there is. AVe will turn to section 5. if you
please, on page 0. It provides in your bill —

Tlmr wlienever. nfter full hearings ui""i si coinplaiiu. or under an order for
i n vest i. nation made by tlie l>o;ird on its own iuiriarive. tlie hoard sludl he of
(ipiuiou that any rates or charjj;es deuiaiided, charj;ed, or colected hy any com-
mon carrier l)y water in foreijrn commerce are unreasonahjy high, or unjustly
discrlDiinatory between shippers or ports, or unjustly i)rejudicial to exporters
of the United States as compared with their foreign competitors, or represent
an unjust relation between classes of commodities, the board is herel)y em-
I'owered to determine and prescribe ^^■hat shall l)e the just and reasonable rates
and charges to be thereafter observed as the maxinnnn to be charged, and to
make an order that such carrier shall cease and desist from publishing, de-
manding, or collecting any I'ate or charge in excess of the prescribed maxi-
nnnn, etc.

I won't read the whole section, because I think I can make our point
clear already. We believe, in the first place, that beginning again at
section 5, that whenever, after full hearing upon a sworn complaint.
AVe believe, for the reason which I have already stated, that a man
who makes a complaint should make it in public and swear to his
complaint.

Then, we prefer to strike out " or under an order for in\estigation
made by the board on its own initiative," for the reason which I have
alread}'' given. And then we continue :

* * * the board shall be of opinion that any rates or charges demanded,
chai-ged. or collected by any common carrier by water in foreign commerce are

unjustly discriminatory —

Leaving out " unreasonably high *' —

a. * * .^i-e unjustly discriminatory between shippers or ports, or unjustly
prejudicial to exporters of the United States as compared with their foreign com-
petitors, the board is hereby empowered to alter the rates or charges demanded
to llie extent necessary to correct such unjust discrminati(»n or prejudice and to
make an order that such carrier shall cease and desist from such unjust dis-
crimination or prejudice. The board is hereby also empowen>d upon sworn
comiilaint. after full hearing, to determine, prescribe, and order enforced just and
i-easonable regulations and practices i-elating to or connected with the receiving,
handling, storing, and delivering of property by any such carrier.

Our point being that we have no objection to the board having the
power to prohibit unjust and discriminatory rates or practices be-
tween shippers or anything which will be discriminatory or unjust
as between the connnerce of this country and the connnerce of other
counti-ies. AVe do object to the power being given to the boai'd to
determine what shall be a fair rate or whether a rate is unreasonably
high or not. AVe believe that so long as the rate is fair as between
all the shippers and no prejudice is done to the commerce of this
country as against the connnerce of other countries, that the interest
of the public welfare is entirely safeguarded; that there is no way in
Mhich this board or any other board can determine wliat shall be a
fair rate when it covers vessels of iierh-iips a hundred different types,
carrvinjr different cargoes, and of vessels of different costs.

EEGULATORY FEATURES OF SHIPPING BILL. 67

Mr. Saunders. Just a word in that connection, ^'oii think, as a
matter of sound public policy in the United States, for instance, the
railroads ought to be allowed to charge unreasonably high rates ^
Leaving out for the present the difference between inter.state railroad
transportation and commerce on the high .seas, do you think the rail-
roads ought to be allowed, in the interests of public policy, to charge,
unreasonably high rates?

Mr. Bush. I think it is the established policy of the country that
the railroads shall not be so allowed.

Mr. Saunders. That is controlled by a commission ?

Mr. Bush. That is controlled by a commission.

Mr. Saunders. In other words, that the Government is allowed to
apply the law- of reasonableness to railroad transjiortation, forbid-
ding the railroads, if they had the opportunity to do it, from charg-
ing unreasonably high rates'!'

Mr. Bush. Yes.

Mr. Saunders. That is a matter of administration in the hands of
the Interstate Commerce Commission ?

Mr. Bush. Yes.

Mr. Saunders. Xow. having in mind the traffic on the high seas,
which it is proposed to have controlled by a board, why should a
man engaged in traffic of that sort be allowed to charge unreasonably
high rates, and why would not a board, composed of the same type of
men that compose the Interstate Commerce Commission, be as well
able to apply the law of reasonableness to the traffic on the high seas
as to traffic on the i-ailroads? What is there to hinder them from
doing it?

Mr. Bush. I think the difference is that on the railroads you are
haulinga train of cars made upof small units, where the fixed operating
cost is more or less permanent and more or less easily determined.
It is a very difficult thing to determine even in the case of the rail-
roads. But Avhere you are operating vessel property, wdiere, perhaps,
one man may own one ship — that may be the extent of his invest-
ment — unlike the New York Central or the Pennsylvania Railroad,
where the law of averages is spread over thousands and thousands of
cars, he has one property. I do not like to answer questions in the
Irish fashion, but I would like to know^ first how are you going to
determine the reasonableness of the charge— are you going to base it
on the return on the investment? If you base it on the return on the
investment, how are you going to protect the man Avho has a boat
for which he has paid $140 a ton as against a man who has paid $iO
a ton?

Mr. Saunders. Taking up the suggestion that you make, which \f.
a perfectly fair and legitimate one, you suggest difficulties rather
than a possibility. It may be that all of those elements and those
factors you speak of ought to enter into the determination by the
board, but that does not make it impossible for them to ari-iAC at a
determination. For instance, it is a perfectly plain proposition,
after you have all the factors before you, it seems to me, to ascertain
whether a man in this business is making more profit than :ie reason-
ably ought to be allowed to make at the expense of the public.

Mr. Bush. I think I should rest our objection to thsit upon two
points

68 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Saunders. Just let me finish that in connection with the dif-
ferent costs of the vessels you speak of. That would he fairly con-
sidered, of course, by the commission. But when that is fairly con-
sidered why would not a mind that is capable of suijijovsting tlie dif-
ficulties and appreciating them be able to arrive at a just conclusion?
It is merely u]'ou a new state of facts or a new equatu)n that the ap-
plication of the law^ as to reasonableness is made and why can not
that bo done?

Mr. Bush. I can only answer that by saying we searched the minds
of the steamship operators in New York and have not been able to
find thiit mind, although it may exist; but Ave have not been able to
find a mind which can suggest a way by wdiich all those different
difficulties can be overcome. It is no secret I am personally not an
experienced steamship man, but we have men here who are per-
fectly capable of giving direct answers to (juestions of that char-
acter. I should rest my own answer upon two or three points. In
the first i)lace, I would again like to make the point that we have
not a merchant marine as we had a railroad system when we began
to regulate the railroads. One of the most important things is that
in enacting restrictive legislation it is going to discourage American
investors from going into the steamship business. I think that the
thought in his mind that if he invests half a million or a million
dollars in one steamer, that the entire earning power of that steamer
is going to be in the hands of a board of eminently just and fair-
minded men, but not men experienced in the steamship business; I
think that fact itself is enough to prevent me, at least, from going
into the steamship business, and if it prevents me, I think it will pre-
vent a great many others from doing the same thing.

Mr. Saunders. You are afraid that some board might exercise
these powers to discourage American commei'ce — which, it seems to
me, Avould hardly be a reasonable or a likely thing for it to do — if
vested with powers which will enable them to control foreign com-
]ietitors in the interest of American shippers and the capitalist who
is disposed to invest his means in American ships. You suggest,
which is true, that we are building up an American merchant marine.
Is it not fundamental to that process of building it up that you
hhould have some way of holding a restraint OAer this foreign com-
petition? That is an essential factor in the upbuilding of this
budding merchant marine of America on the high seas, it seems to me.

Mr. BusiT. We have no confidence that this country can legislate
our foreign competitors out of business.

Mr. Saunders. We do not propose to do that.

Mr. BusiT. We believe that all business must ultinuitely rest upon
equal conditions, and when equal conditions have been established
it depends then upon the energy and enterprise of the men con-
ducting the business.

Mr. Saunders. I believe that is fundamentally true.

Mr. Bush. We believe that fundamental theory which has to un-
derlie the establishing of an American merchant marine is the equal-
ization of conditions, and we do not believe you can create that by
legislatiA'e means.

Mr, Saunders. Let us see about that. Is not one of the difficul-
ties — certainly developed, we thought, in the investigation made
some years ago by this committee — the fact that there are practices

REGULATORY FEATURES OF SHIPPING BILL. 69

among the foreign trades, among the merchant marine and the capi-
tal of foreign countries invested in the merchant marine, that are to
the distinct prejudice and disadvantage of the capitalists of this
country seeking to go into that business ^vith American ships?

Mr. Bush. If you refer to rebates and fighting ships, and prac-
tices of that kind, Ave believe those practices have existed.

Mr. Saunders. Have existed?

Mr. Bush. That at the present time, very largely, they do not
exist, but they may come back.

Mr. Saunders. If we can curb them, is nut that an advantage to
the American capitalist?

Mr. Bush. We believe the power should be given to this board to
regulate to the fullest possible extent in the interest of fair play
and in the preventing of any discriminatory practices or any unfair
practices; but we have not been able yet to see a way in which can
be determined what is an unjustly and unreasonably high rate, and
we came down here with a full desire to learn of such a way if it
does exist.

Mr. Saunders. I perfectly understand that, and that is the reason
we are talking over these problems with you now. But you know
it is only the maximum rates our bill refers to. while in the regula-
tion of railroad rates, in the interstate-commerce law, it is both maxi-
mum and minimum rates. I refer to line 21, page 9-

The Chair^vian. You speak about the difficulty of determining
what will be a reasonable rate. Does not the Interstate Commerce
Commission have that same problem to solve ? It costs twice as much
per mile to build some railroads, or many times more to build some
railroads, than it does to build others; yet they do not allow one
rate on a railroad which costs so much more to build and maintain
than they do on the other. Don't they take all those factors into
consideration in determining what is a reasonable rate on the several
lines?

Mr. Bush. I think all those things are spread out on the railroads
by the law of averages.

The Chairman. I suppose that would be true in the merchant
marine, too, would it not? You would not expect because a man
paid $150,000 a ton for his ship and the other paid $50 a ton, that
the first man should charge three times as much? There Avould have
to be an average, otherwise the man who paid the higher price in
the business could not compete with the man who had the cheaper
ship.

Mr. Bush. I was speaking not so much of the average in the
cost of construction as I was of the average of operating conditions
on the railroad, that is spread over the handling literally of hundreds
of thousands of cars. But here, you have running between this and
any given European port such a steamer as Mr. Franklin operates,
perhaps, capable of carrying 20,000 or 25,000 tons of freight, and also
the small steamer capable of carrying 3,000 tons. They are running
in exactly the same service. We are not willing to admit the theory,
although we admit the intent is there to do justice, that it can be
done fairly ; we are not willing to accept the statement that it can be
done simply on faith in encouraging the upbuilding of a merchant
marine, until it can be shown how it can be done. Our theory that
this thing would be done or that thing can be done is a matter of

70 REGULATORY FEATURES OF SHIPPING BILL.

speculating on business conditions, and very often when you are
confronted Avith the actual necessity of shoAving how to do it it is
quite a different matter. Before you gentlemen prescribe laws wliicli
will give anyone the power to make such drastic regulations of the
earning power of vessel property, we think it is up to you, before
you pass such a law, to show us a reasonable way in which it can
be carried out. And so far that has not been done.

Mr. Hakdy. Do you think in the interests of the welfare of the
whole people that an established line, for instance, like the Pacific
Mail, running to the Orient from our western coast, having a patron-
age which makes it splendidly prosperous, should be allowed to
double the rates on their freight without any power in existence
to say. "■ You shall be somewhat reasonable to the public,'" and to
prescribe a maximum? That is all this bill does. Here is a rate on
this line that has been perhaps increased 1,000 pev cent because busi-
ness conditions permit them to do it and the trade is bound to submit.
Ought there to be nowhere under the sun a power to restrain the fear-
ful grasp that uses such conditions to oppress the people?

Mr. Bush. Those conditions are conditions which are the result
of an emergency.

Mr. Hardy. Granted.

Mr. Bush. And if you attempt to legislate for emergency condi-
tions for established lines and which are going to be in force for
all time, I think the chances are you Avill do a greater injustice

Mr. Hardy. You do not establish rules to be enforced for all
time further than you establish a power Avhich shall be in force
for all time Avhich Avill prevent this robbery for all time. Is your
ansAver that there should be nothing? Is your position that there
should be nothing to prevent that ?

Mr. Bush. Our ansAver and our position is that the power should
not be granted, that there should be no poAver of that kind granted
until you can shoAv the business public how you can fairly apply it.

Mr. Hardy. Does not the ])resent condition and the condition
AA'hich has existed for nearly a year and a half, shoAv that there comes
a time Avhen the helpless public needs a power in the hands of a
restraining board Avhich prevents oppression?

Mr. Bush. It Avould be my ansAver to that, ffudge Hardy, if that
poAver had been vested in the Government to-day, that the American
shipper Avould liaA^e to stand on the seaboard Avith his A\'ares and the
ships Avould be employed in other trades: that the oAvner of the
steamship, Avhich is not like a i-ailroad that has to run betAveen tAVO
fixed points, is free to move upon its own bottom anywhere in the
Avorld. In the present condition, unless i)eople Avho ship goods from
America are Avilling to pay the rates of the Avorlcl. the American
shipper Avill be Avithout ships, and no greater injustice could be done
the American producer than just such legislation as you are suggest-
ing noAv.

Mr. Hardy. On the other hand, you thing on those goods from
here that have to be transpoi-tod. that the ship carrier, knoAving they
have to be transported, should be i:)ermitted simply to charge any-
thing he pleases? It is taking advantage of necessit,y.

Mr. Bush. I do not think I agree Avith you on that, Mr. Hardy.
I thinlc the American people must pay the competitive rate for ocean
tonnage.

REGULATOKV FEATUUKS Oh' SllirriNG Ull.L. 71

Mr. IIahdy. Is not tlie Europoaii countrv bound to have her food
supplies ?

Mr. Bush. What is that^

Mr. PIakdt. Is not the Kuropean coiiiitry bound to have her food
supplies?

Mr. Bush. It is bound to have its food supplies; but we are ncjt
the only producer of food supplies.

Mr. Hardy. But we are the only ade(|uate supplier now (possibly
we are not the only supplier) not only of food supplies but of other
supplies. It simply seems to me that it gets down to the question
of Avhether there ought to be any i)ower anywhere to prevent mo-
nopoly, because it is a question of ])reventing monopoly. If com-
petition was free. I do not think there would be any need of it; but
you are aware that our investigation demonstrated the great shi])
lines were all in combinations and up to the present time they have
had the power, whenever conditions arose, to fix arbitrarily just
such rates as they thought proper.

Mr. Bush. M}^ oavu view. Judge Hardy, is that, broadly speaking,
spread over a long ])eriod of years, there is no industry in the woi'ld
which is so regulated by the law of supply and demand and com-
petition as the steamship industry. There have been special cases
where there have been combinations in that trade, as there have
been in all other trades, but just as soon as a combination is estab-
lished in the ocean-carrying trade, which produces an unduly higli
rate, there are other vessels, as there are always in normal times,
that are capable of carrying the cargo, those vessels would be di-
verted into that trade in a clay's time. You do not have to build a
road or a concrete factory, but merely to transfer it. and instead of
sending the ship from Boston to South America, say. to send it fi-om
Boston to London.

Mr. Hardy. To give you an illustration of that kind. I will apj)ly
it to a little town in my own State, w^hicli undertook to charter such
a vessel because they were charged just such rates. Thev sent that
vessel to Baltimore to secure a cargo. Thev kneAv that if the rates
charged bv the combination were lived up to. that vessel would pay
and Avould make an ample and magnificient return on the investment;
but before the vessel got started here was a fighting ship that the
combination sent along.

Mr. Bush. That, understand, w^e ai)prove of — eliminating fight-
ing ships.

Mr. Hardy. I understand vou approve of eliminating fighting
ships: but if we go down to South America that fighting ship will
drive them out of business. And it is apparent that, without any
restraint at all, the big combination will drive all competition out
of existence. And in that connection South America and other con-
ditions might be gone into. So that to-day the combination is left
to fix just such rates as they see proper, and you have not the com-
petition of the laAV of supply and demand of which vou speak.

]\rr. Bush. I think that at heart we have absolutely the same thing,
and the only difference in our conclusion is we conclude we should
eliminate all unfair practices, including fighting ships, rebates, or
any discriminatory practices; but we do not believe that the power
to regulate as to what is a reasonable rate should be given to this
board until the gentlemen who frame that legislation can say to us

72 REGULATORY FEATURES OF SHIPPING BILL.

definitely and clearly just how you can determine what is a reason-
able rate and upon what basis.

Mr. Saunders. Just in that connection, let me ask you a question
suggested by some of the facts that Judge Hardy brought out, be-
cause we want to get at our respective points of view in this mat-
ter. Supjjose you were on this board that it is contemplated be
created, and we are dealing with present conditions: Is it your judg-
ment that the American producer is not to-day oi* within the past
12 months has not been paying unreasonably high rates?

Mr. Bush. I do not believe the American producer has had to
pa}^ the rates; I think it has been the foreign buyer who has had to
pay the rates.

Mr. Saunders. Of course that gives rise to the old argument as to
which end of it pays the freight. Then we will say somebody in
the business. Is it your idea no unreasonable rates have been paid
on shipments from the United States? That will eliminate the ques-
tion of who pays it.

jNIr. Buspr. It Avould be my i)ersonal opinion, speaking as an indi-
vidual alone, that some of the rates which have been charged have
given a very large profit to the steamship owner. But I think that
has been due to the fact that the vessels could only be persuaded to
go into this trade if they were permitted to charge the rates which
gave them such earnings, because if they had not been able to charge
such rates they would have gone into other trades. And I further
believe the burden, if it has been a burden, has not rested upon this
country but has rested upon the foreign countries.

Mr. Saunders. I eliminated that feature.

Mr. Bush. Mr. Chairman, I do not wish to decline to answer all
these questions; I want to give all the information I can; but as I
have frequently stated, I am not a steamship man. I am here,
primarily, because I am not: I am merely neutral in these matters
iind as a neutral was api)ointed chairman of this committee. We
iiave with us gentlemen who are very much more able to answer
these questions and give more enlightenment than I can.

Mr. Saunders. I understand, but I want to follow that up a little.
1 asked you, as a matter of fact, in your judgment, if shippers from
this country had not paid unreasonable rates and your answer to that
was there had been some of those ships that had returned a very
great profit to the people who received those rates. Now, I think
Avi> all agi'ee that there was a certain volume of commerce that con-
diti(ms of trade made it absolutely necessary to move from this
country. It is true, evidently, that there is a great volume of stuff
in this coimtry and tliat conditions were such that it had to go to
those countries.

Mr. Bush. If that is so.

Mr. Saunders. Is not that so?

Mr. BusTi. I think that is so; if it is so, what injustice is done to
tliis coimtry if it is moved and they pay the expense of moving it?

Mr. Saunders. Then you come back to this proposition, that all
tliose gigantic rates, of which these people are complaining, have not
been really an injustice to this country?

Mr. Busii. I think in many cases they have not been an injustice
to this country. I have not had the privilege of hearing all the com-

REGULATORY Fh:ATURES OF SHIPPING BILL. 73

plaints you have heard; but I think in many cases I have heard of
the entire burden has been borne abroad and in many cases the Ameri-
can steamship owner has reaped a very hirge profit which has come
into this country and stimuLated industry in this country.

Mr. Saunders. You say in the main these very high rates have not
been a disadvantage to the people of this country, but a distinct
advantage ?

Mr. Busii. I think in the main they have stimulated the upbuild-
ing of the merchant marine; that they have been a stimulus to the
upbuilding of our merchant marine and have done a great deal more
than (jur bill or your l)ill could possibly do.

Mr. Greene. Are not the prices on merchandise shipped from this
country made in this country before the shipment goes to the other
side and paid for before it is delivered on the other side, or payment
arranged for?

Mr. Busii. I think that is a correct statement.

Mr. Greene. That is the party who has grain to sell, or any kind
of merchandise that goes abroad, names the price that he will sell
for and then the man who buys the material, or his agent here, pro-
vides for the means of shipment?

Mv. Bush. I think, broadly speaking, if you can make any gen-
eralization, that is true. I would except, perhaps, the price of grain
where it is perhaps regulated by the grain producing countries of
the world, and certain other great commodities of that kind, where
the price of grain here must be determined by the amount of export
grain from Argentina, Russia, and Austria. But, broadly speaking,
taking manufactured articles, I think your statement is correct.

Mr. (treene. The price of grain is fixed before the grain leaves
here and determined?

Mr. Bush, Yes; it is.

Mr. Greene. And is paid for regardless of what the freight rate is?

Mr. Bush. The price is agreed to before it leaves here.

Mr. Greene, That is it, exacth\ Then I do not see why these
other questions that have been argued enter the case at all.

Mr. Edmonds. If this bill were in existence to-day and the board
were to set a maximum rate on freight from this country to Euro-
pean ports, what would be the effect on the shipments from here
compared to the shipments, say, from Canada? Would not the
majority of shipments go to Canada, and would not the goods be
shipped from Canada where the ships could get high freights?

Mr. Bush. I have no doubt a great many of the products would
go to Canada and be shipped from there, and the ships would refuse
to come here unless they could get the rates.

INIr. Edmonds. In other words, the shipment of grain and other
products would be transferred to Canadian ports and our ports
would suffer?

Mr. Bush. I have stated I think it would be the most disastrous
thing under the present emergencies, with all the surrounding cir-
cumstances, that could possibl)^ happen to the American shipper.
AVhile theoretically it seems to be a perfectly simple practice, in
the end it would deprive the American shipper of the ships wdiich
are available to get his commodities abroad, and if his commodities
went abroad many Avould possibly pass through Canadian ports,
which would not be regulated in that wav. I am verv much em-

74 KEGULATORY FEATURES OE SHIPPING BILL.

barrassed. gentlemen, because I think I am takino; a great deal more
time than I have a right to, and I would like the following speakers
to get a full opportunity.

The Chairman. You are here and, so far as I am concerned, I
am very interested in wliat you have to say and I do not want to
limit you imduly.

Mr. Bush. I am trying to limit myself; but I have been asked
questions and have to answer them.

The Chairman. We would prefer to have you conchule your state-
ment.

Mr. Bush. I may simply conclude my statement by pointing out
that the third fundamental Avhich I will cover in my statement is,
we believe, that any of the rulings of this commission should be
subject to review by the courts of the country. That is the protec-
tion which is accorded every other kind of industry. This board will
undoubtedly be a very eminent board and composed of just and
wise men, but we believe no one is infallible unless it is the Supreme
Court of the United States; and that court of last review is open
to every other class of business, and we believe the privilege of
revieAv by the courts of the United States should be accorded the
vessel owner.

Mr. Saunders. Have you looked at section 14 of the bill, where we
utilize for the purposes of this new board all the procedure and
rights provided for the Interstate Commerce Commission?

Mr. Bush. We suggest that those general clauses be eliminated,
and I will leave Mr. Kirlin to explain more in detail; and we have
suggested the substitution of the specific procedure established in
the Interstate Commerce act.

Mr. Byrnes. You say Mr. Kirlin will present that?

Mr. Bush. Mr, Kirlin will present all of those details.

N(jw I should like to file, for the purposes of the record, a state-
ment of the changes which we suggest, which, I think, cover 20 or 21
< hanges. Many of them are of very minor importance.

Then I should like to have the privilege of* introducing Mr.
Franklin as the first speaker.

The Chairman. We just do not want any procedure adopted that
would prevent a wind-up at some time; we would like to see the end
of the controversy in our lifetime.

Mr. Bush. We always have an end in the Supreme Court.

(The changes in the bill referred to by Mr. Bush are as folloAvs:)

AMEXDMEXTS TO If. K. 14337. SCOOESTED HY THE COMMITTEE OF THE CHA.ALnEK OK

<0.\rMEHrE OF NEW YOUK.

Note. — Instructions of our committee from the cliiunher rehite only to tlie
foreign trade. As a committee we make no sufisestions except with reiiard to
the provisions of the bill dealinj,' with such trade. Individual meinl)ers of the
committee interested in coastwise trade will explain tluMr own views.

Section 2, page 4. line 14, before the figui-es " ,$2."'),0(IU," insert the words " not
more than."

Section 3. page G, line 17, after the word "who," ins(>rt the woi-d "willfully."

Section .3, page 6, line 21, before the ftgures " $1,000," insert the words " not
more than."

Section 3, page 6, line 4, strike out the words " shall be approved or " and
insert in lieu thereof " if not."

Section 3, page 6, line 5, strike out the words " and when approved."

Section 4, pages 7 and 8 and first nine lines of page 9, delete the entire sec-
tion.

KEGULATOliV FKATUKKS OF SH[PP1X(; lUI.L. 75

Section 5, strike out tiie sei-tion as i)riii(('(l and suhsfidilc the followiii.i:- :
"Sec. 5. Tliat wlieiiever, after full hearin.;,' upon a sworn fonijtiaint, tlie
board sliall he of ojiinion tliat any rates or cliarj^es deniand(>(l, eiiarjied, or col-
lected by any common carrit'r by water in foreii^n co'umr'rcc are unjustly dis-
criminatory i)etween shippers or ports, or unjustly prejudicial to exporters of
the United States as compared with their foreij,'n com])etitors, the board is
hereby empowered to alter the rates or char.ues demanded to the extent neces-
sary to correct such unjust discrimination or prejudice, and to make an order
that such carrier shall cease and desist from such unjust discrimination or
I)rejudice. The board is hereby also empowered upon sworn complaint, after
full hearing, to determine, prescribe, and order enforced just and reasona1)le
regulations and practices relating to or connected with the receiving, handling,
storing, and delivering of property l)y any such carrier."

Section 9, page 18. line 2.5, after th-? word "all," insei-t the word "sw(»rn."
Section 9, page 13, line 25, strike out at bottom of page 18 and top of page 14
the words " or to undertake investigations on its own initiative."

Section 9, page 14, line 9, after the word " empower," insert the words " on a
hearing of such complaint."

Section 9, page 14, line 11, strike out the words " adopt all rules and regula-
tions " and insert in lieu thereof the words " make such order as."
Section 9, page 14, line 12, strilve out the word " whicli."
Section 9, page 14, line 14, add at the end of the .section the following:
" AVlienever the shipping board shall have reason to believe, from any
sworn complaint submitted to it. tliat any such person, i)artnership, or cor-
poration lias been or is using any unfair practice, undue discrimination, or
unfair method of comiietition in coastwise or foreign conunerce, or has other-
wise violated any provision of this act, it may cause to be issued and served
upon the party complained of a statement of its cliarge and a notice requiring
an answer from the party so charged witliin the period of thirty days after the
service of the statement. If the answer of the party .so charged shall be un-
satisfactory, the board may, at such time and place as it may determine,
require the party comiilained of to attend with witnesses at a hearing of
which at least thirty days' notice shall be given. The party complained of
shall have the right to appear at the place and time so fixed, and upon any
adjourned days of the hearings, and show cause why an order should not be
entered by the board requiring the party complained of to desist from the
violation of law so charged in the statement. The testimony ou such hearing
shall be I'educed to writing, filed in the otlice of tlie board, and a copy thei-eof
shall be furnished to the party complained of. If, upon such hearing, tlie
board shall be of opinion that the matter complained of is prohibited by this
act, it shall make a report in writing in which it shall state its findings as to
tlie facts, and shall issue and cause to be served on such person, partnership,
or corporation comphiined of an order requiring such person, partnership, or
corporation to cea.se and desist from using such unfair practice, undue dis-
crimination, or unfair method of competition complained of. Until a tran-
script of the record in such hearing sliall have been filed in tlie circuit court
of appeals of the Ignited States as liereinafter provided, the board may at any
time, on its own motion or on motion of the party complained of, rehear the
subject matter of the complaint, and codify or set aside, in whole or in part,
any report or any order made by it under tliis section.

" If the party complained of fails or neglects to obey such order of the board
while the same is in eflect, the board may apply to the United States circuit
c(mrt of appeals within the circuit where the unfair practice, undue disc!'imina-
tion, or unfair method of competition in question was used, or where such per-
son, partnershp, or corporation resides or has its principal place of business for
the enforcement of its order and shall certify and file with its application a
transcrijit of the entire record in the proceeding. On such filing of the applica-
tion and transcript of record the court shall cause notice thereof to he served
upon such person, partnership, or corporation and thereupon shall have juris-
diction of the proceeding and of all questions involved therein.

"It shall have power to make and enter, upon the pleadings, testimi>ny, and
I)roceedings .set forth in such transcript, and upon such fniMher ])i-oofs as in its
discretion, and in the furtherance of justice it may grant leav(> to any party in
interest to adduce, a decree aflirming. iiKxlifying. or setting aside the order of tlie
board.

" The judgment and decree of the court shall be final, subject to review of the
Supreme Court upon certiorari, as provided in section two hundred and forty of
the .Tudicial Code.

76 EEGULATORY FEATURES OF SHIPPING BILL.

"Any party required by an order of the hoard to cease and desist from doing
any act comphiined of may ohtain a review of sucli order in tlie circuit court of
appeals by filing in the court a written petition praying that the order of the
board be set aside.

"A copy of such petition shall he forthwith served iipon the board and there-
upon the board shall serve and tile in the court a transcript of the record, as
hereinabove provided.

" Upon the filing of the transcript the court shall have the same jurisdiction
to affirm, set aside, or modify the order of the board as in the case of the appli-
cation of the board for the enforcement of this order, and shall have the like
discretion with regard to granting leave to any party to adduce further proofs.

" Proceedings under this act in the United States circuit court of appeals
shall, upon the aiiplication of any party, be given precedence over other cases
pending therein and shall be expedited.

" Complaints, orders, and other processes of the board may be served by any
person duly authorized by the board either (a) by delivering a capy thereof
to the party served, or to a member of the partnership to be served, or to an
executive officer of a corporation to be served, or (h) by leaving a copy thereof
at the pi'incipal office or offices of such person, iiartnershi]), or corporati(ni, or
(c) b,v registering and mailing a copy thereof addressed to such person, partner-
ship, or corporation at his or its principal othce or place of business.

" The verified I'eturn by the person deputed to make such service, setting
forth the manner in which it has l)een made, shall be proof of the same, and
the return post-office receipt shall be ]»roof of the service of any process by
registered mail."

Section 10, page 14, line 17 after the word "' empowered," strike out the
words " in its discretion " and insert in lieu thereof the words " on the hearing
of a sworn complaint."

Section 10, page 14, line 24, after the words "to the," insert the words "said
complaint."

Beginning witli the word " carrier," in said line 24, strike out the remainder
of that line, all of line 2.5, and on page 15, lines 1, 2, 3, 4, to and including the
words " out of this act."

Section 10, page 15, strike out lines 9 to 17, inclusive, and the first half of
line 18, to and including the word " thereto."

Section 11, page 16, delete the entire section.

Section 12, page 17, delete the entire section.

Section 13, page 18, delete the entire section.

Section 14, page LS, delete the entire .section.

The committee wishes to make it clear that they prefer the alternative sec-
tion with regard to regulations, which was drawn by INIr. Kirlin and submitted
to the chairman to be incorporated in House bill 10500 in place of sections 9 and
10. but have submitted the foregoing suggestions for clianges in House bill 14337
in a sincere desire to take the form of legislation suggested by the committee
and modify it so that it would be less objectionable from a practical operating
point of view.

Mr. Bush. Mr. Chairman, I would like to introduce next Mr.
Lawrence K. Sherman, who is vice president of W. R. Grace & Co.
I would like to call your particular attention to the fact that W. R.
Grace & Co. began their business primarily as export mercliants to
foreign countries, and while they are now interested both in the mer-
chandising and the steamship business, the steamship business is
secondary to the merchandising business. They began as merchants
and found it necessary, in order to carry their goods to foreign
countries, to employ sailing vessels in the first place (one of their
large trades being to the west coast of South America), and the sail-
ing vessel has gradually grown into a steamship. But their interests
in steamships, while large, is supplemental to their interests as mer-
chants.

Mr. Sherman can speak both from the standjioint of a shipper and
as a steamship man. Also, if you desire to ask him upon that point,
he can give you a very definite statement about the difference in cost
of operating under the English and American flags, because he has in

REGULATORY FEATURES OF SHIPPING BILL. 77

his office records of the exact operating cost under the English flag
and the exact operating cost of the same vessels after transferring to
the American flag. And before making the transfer all those figures
were considered.

The Chairman. I suppose he is in the same class as the Standard
Oil Co. and the United States Steel Corporation, who found it neces-
sary, in order to develop the foreign commerce in their counnodities,
to own ships themselves so as to provide the necessary tonnage and
also to insure for themselves reasonable rates in order to com]:)ete
with their foreign competitor. I think it very wise on his part, and
1 wish other merchants would do the same thing.

STATEMENT OF MR. LAWRENCE K. SHERMAN, VICE PRESIDENT
OF W. R. GRACE & CO., NEW YORK, N. Y.

Mr. Sherman. As Mr, Bush has stated, our commercial interests
are greater than our steamship interests. Our beginning in the
transportation business dates away back of the question of any dis-
crimination, or anything of that sort. We ran sailing vessels 50
years ago to South America, and, like all merchants who have gone
into shipping, we did it because we found it necessary to carry on
our business. In the course of time we fomid it convenient to take
outside freight and in general to develop in a steamship way, which
latter business has been gradually growing. To-day our steamship
interests are considerable, but our commercial interests are consider-
ably greater.

Mr. Franklin has covered this bill pretty fully, I think, from a
steamship point of view, and I concur in what he has said along that
line. My objection to the bill, generally, is rather from the other
point of view. I think it would be detrimental to our commerce; I
think it would prevent the rapid development of the opportunity
we now have of extending our commerce, and I do not think we
need it.

I do not think there has been any unjust discrimination system-
matically practiced in favor of Europe as against the commerce of
the United States. If there has, I have not seen it in 25 or 30 years'
experience. I do not doubt you can find instances here and there,
but in the main the United States in the trade with which I am famil-
iar — to South America — has had rates which compared favorably
with Europe. There are items, like cement, where vessels which
would otherwise have to go back in ballast take the cement at a very
low rate. But that is a condition we can not compete with. If you
were to regulate the rates you would have to recognize that. ^Miere
the vessel goes back loaded with freight to Europe and with no re-
turn cargo you can get better rates from Europe than you can get
from the United States, because they can afford to go out for less.

On the question of pipes, the freights from Argentina to Europe
have been higher than they have from the United States. We have
been bringing coffee and cocoa to New York and transshipping to
Europe because we could do so more economically than we could
ship direct. Those are all instances which come up from time to
time.

The rates of the regular lines to South America and the classifica-
tions have corresponded pretty closely to the classifications and rates

78 REGULATOEY FEATURES OF SHIPPING BILL.

from this side. On some articles Ave have had to make rates slightly
lower to try to divert the business. If we did not make such rates,
or if we had no power to make such rates, we would not get the busi-
ness: and if we have to consult and the other fellow does not, we
shall lose the business. There is a lot of business that won't come to
us exce])t ui^on a t-ompetitive basis; and if the European line is free
to do what it pleases upon a moment's notice and if we have to con-
sult a commission here and talk it over, the opportunity will be lost
before Ave can get a decision.

Rates in the main are controlled by the supply and demand. The
business is open competition at any moment. It is impossible to
carry on any unreasonable rate in a trade for any length of time,
simply because the other boats will flock in and take the business.

That is all I have to say generally. I would be glad to answer any
questions j^ou care to ask about the business.

]\Ir. Hadley, What do you think would be the effect of the passage
of this bill. 14337, upon the effort to build up the trade Avith South
America ? You have been engaged in that trade?

iNIr. SiiERMAx. I think the effect Avould be detrimental rather than
beneficial.

Mr. Hadley. Why ?

Mr. Shermax. Because Ave have to-day competitive business Avith
the Avorld ; Ave have to compete Avith all the world, and, Avorking on
that basis, we are not paying higher rates as a rule. If Ave are re-
stricted by a maximum rate of tariff, at times we will be deprived
of sufficient tonnage to develop our business; if Ave have to consult
a commission in order to change our rates, we would lose time, and
3^ou can not Avork it because Ave would lose the business.

The CiiAiiiMAx. If that poAver Avere eliminated. Avhat objection
Avould you luiA-e to it then ? In other Avords, let me see hoAv you stand.
You are a steamship man. Are you in favor of permitting your com-
pany to charge, demand, collect, or receive from any person or per-
sons by any special rate, rebate, draAvback, or other device a greater
or less conii)ensation for any service rendered or to be rendered in
the transi)ortation of passengers or property subject to the provisions
of this bill than it charges, demands, collects, or receives from any
othei- i)erson or persons for doing for him or them a like serA^ce in
the trausi)ortation of a like kind of traffic under substantially similar
circumstances and conditions?

Mr. Sherman. You are speaking noAv from the steamship point
of view ?

The Chairman. Yes.

Mr. Sherman. I do not object to that. I do not Avant discrimina-
tion in any way. I was speaking there of the bill from the general
point of A'leAv of the merchant; but I do not Avant as a merchant the
right to discriminate.

The Chairman. This is leveled at you and it is from the standpoint
of the merchant who Avants fair treatment; he does not Avant you to
play favorites with his competitors.

Mr. Sherman. Quite so; I do not want favorites.

The Chairman. Very Avell. Then you do not object to that pro-
vision, do you? ,

Mr. Sherman. No. I do not object to anything that aviII affect
everybody ; I think everybody should be treated the same.

REGULATORY FEATURES OF SHIPPINO ]?II.I.. 79

Mr. RowE. Which paragraph is that?

The Chairman. Page 7, the first paragrapli. Again, do you
object to this prohibition of you as an operator of steamships, to
make or give an}^ undue or uni-easonable preference or advantage to
any particuhir person, locality, or description of trallic in any re-
spect Avhatsoever or to subject any particular person, locality, or de-
scription of traffic to any undue or unreasonable i)rejudice or disad-
\antage in any respect Avhatsoever — do you object to that?

INIr. SiiER]\rAN, No ; I do not object to it.

The Chairman. Do you think you ought lo ha\e a right to do
that?

Mr. Sherman. I do not object to any part of that. There is noth-
ing in it that is objectionable, beyond the difficulties it might create
and the annoyances it might give you; otherwise it is of no con-
seffuence.

The Chairman. There won't be any trouble if you deal fairly with
the merchant, and if you do not deal fairly with him, then you ought
to have trouble?

Mr. Sherman. I am speaking as a merchant.

The Chair^nian. I am talking about steamship men. I can not
imagine how any merchant could object to it. Of course, if he is
a favored merchant, he -would object; just like wdien the railroads
were permitted to give rebates, and in Kansas City (that is right at
my door) the merchants on the first day of the month found envelopes
on their desks with their rebates — the big shippers. They did not
complain; it was the little fellow.

. Mr. Sherman. I understand. I do not want that at all. That is
of no interest to me from either point of view.

Mr. Hardy. There is one question, Mr. Sherman : You say that
your opportunity as a shipowner W'Ould be lost to carry certain
freight if you were not allowed to change rates without consultation
Avith the board; that while you were doing that your opportunity
would be lost?

Mr. Sherman. No; I say my opportunity as a merchant which
would enable me to compete in business which may come here or to
go to England may be lost.

Mr. Hardy. What is there in that? There is nothinir in that to
]5revent you naming a lower rate than the maximum fixed by the
board.

Mr. Sherman. You can not change without their agreement: you
have to get the board to let you make the alterations.

Mr. Hardy. There is no requirement for you to go to the board
for lower rates, provided you malce the i-eductions uniform and non-
discriminatory.

Mr. Sherman. Yes; but a company in transacting business can not
change a tariff in order to get large lots that come at times. For
instance, suppose a man wants 500 cars and a steamship comjiany
wants to change its tariff, based upon one. two, or- three cars; he could
not make any change in his tariff to get the contract, but the
European competitor does change bis tariff in order to get that
contract.

Mr. Hardy. There is nothinir to ])i'event you from lowcrimr youi-
rates under this bill, as T read it.

80 KEGULATORY FEATURES OF SHIPPING BILL.

Mr. Sherman. No; but there is to prevent me from imiking special
rates on special business.

Mr. Hardy. From discriminating with reference to some par-
ticular customer, yes. I want to ask you another question : Are not
Grace & Co., the shipping company, a member of conference agree-
ments ?

Mr. Sherman. No, sir; we have no conference agreements in the
west coast trade.

Mr. Hardy. You have not been in any conferences ?

Mr. Sherman. No, sir; never have.

Mr. Hardy. The largest ship lines in the world are in them?

Mr. Sherman. Yes; they are in them.

Mr. Hardy. They can not make those changes.

Mr. Sherman. Yes; they do. They have what they call "open
list,*' which take care of just such occasions as that, and they make
the rates for that special business.

Mr. Hardy. So their agreements do not amount to anything when
the necessity to break them arises?

Mr. Sherman. No; there is an agreement they may change their
rates on those articles which are on the open list. That is public
property; everybody knows that.

Mr. Hardy. I understand those agreements are pretty vital and
binding.

Mr. Sherman. That is part of the agreement; they do not break
the agreement. There are certain agreements they can not break,
but on the open list they can make special arrangements for those
open lists without affecting the regular tariffs.

ISIr. Hardy. But you have here a proposition for the board simply
to fix maximum rates, not minimum rates, with no provision that
you can not, at any time, go under that maximum rate; and if you
have an opportunity as a shi])per to make such a trade I take it all
that would be required would be that the ship company should treat
you just like it did everybody else, and it could not lower to you
unless it was going to lower to everybody else. Now, if your emer-
gency requires special rates to you, then I am in favor of giving
them to you, but I want everybody else to have the same oppor-
tunity you have.

Mr. Sherman. I do not object to that. I am speaking broadly.

Mr. Hardy. This law will let the shipowner give you a lower rate,
provided it is ready to give everybody else a lower rate if they give
you a lower rate.

Mr. Sherman. But this law would involve a change, as I under-
stand it, of the tariffs; whereas they want a special rate for a sjjecial
job, that is all, without affecting the ordinary current rates. That
you would probably call a discrimination.

Mr. Saunders. You mean to say if you have a correct application
of this law, you suggest a situation in which you are placed at a dis-
advantage with your foreign competitor, because he could make a
rate which you could not ?

Mr. Sherman. No; I say he could make the rate instantly, while
I have to go and get the a]:)pfoval of the board. That takes time,
and it would mean we would lose the business.

Mr. Saunders. Here is a maximum rate but not a minimum rate.

Mr. Sherman. Yes, sir.

KlUiUl.ATOlU FEATURES OF SHIPPING BILL. 81

Mr. Saundkhs. AVhere is there anything in tliis bill that woiihl
prevent you from reducin<r the rate in order to meet that com))etition
which yon speak of?

Mr. SiiEUMAN. 1 shoiihl have to make a special rate. I do not
want to reduce the rate: 1 want to make a special rate.

Mr. Saundeus, That is the same.

Mr. SiiEKMAX. No; it would be making one rate for this special
transaction without reducing the current rates.

The Chairman. Where is there a line in that bill that prevents it?

Mr. Saunders. I want to know where there is in that bill anything
that prevents you doing that same thing?

Mr. Byrnes. I think, if I may suggest, you have the interstate
commerce and the coastwise commerce mixed up.

Mr. Saunders. I am asking him to point out the section that is
his stumbling block.

Mr. Sherman. That very section -1 provides that it shall be un-
lawful to charge, demand, collect, or receive from any person or
persons by any special rate, rebate, drawback, or other device a
greater or less compensation for any service rendered or to be ren-
dered in the transportation of passengers or property subject to the
provisions of this l)ill than it charges, demands, collects, or receives
from am' other person or persons for doing him or them a like
service.

Mr. Saunder. Just continue on: do not stop at that point.

Mr. Sherman. For doing him a like service.

Mr. Saunders. In the transportation of a like kind of traffic under
substantially similar circumstances and conditions?

Mr. Sherman. Yes, sir.

]\Ir. Saunders. They are to give effect to that.

Mr. Sher:man. You would have to reduce your rate under that. I
fancy, for everyone, because you are handling the same material to
the same ports.

Mr. Saunders. Supi)ose you do that for the time being: you can
not take any more than a particular amount. That would not be a
discrimination against anybody. You might say under these condi-
tions. " I am willing to transport stuff to South America," or wher-
ever you are going. " at such and such a rate."

Mr. Sherman. I do not ask the transportation company to do tliat.
I only ask them to make a rate for this particular job; that is all.

]Mr. Saunders. Are you s])eaking from the steamship end or the
other end ?

Mr. Sherman. I am speaking from the merchant's end. because it
will not enable the steamship company to give that elasticity T want
to develop our business ; that is all.

Mr. Saunders. Let us go to the steamship end of it. The steam-
ship end of it is the one this bill deals with : not the merchandising
end.

Mr. Sherman. Yes: this deals with steamshJi)s. but it so regulates
the steamships as to hamper them in giving the facilities we want in
our merchandising business.

Mr. Saunders. That is what I am trying to bring out. How do
you think the steamship will be hampered in doing that very thing?
Here is something suddenly develops: the steauishi])s have been ti'ans-

38.534—16 6

82 REGULATORY FEATURES OF SHIPPING BILL.

porting to South America at a reasonable rate, and all at once there
develops in the world traffic a reduction of rates by yimv competitors.
AVhat is there to hinder tlie steamship company from reducino; its
I'ate to meet that competition? And that would give the advantage
to your merchant you are speaking of.

Mr. Sherman. That is not quite the situation I am trying to get at.

Mr. Saunders. What do you mean ?

Mr. Sherman. The situation is I do not care anything about the
regular rate if it is on a line with European rates. P^urope main-
tains those regular rates on the ordinary transactions, but they make
special rates for the big contracts; and I do not see how a steamship
company could give me a s})ecial rate for a big contract without dis-
criminating against some other shipper.

Mr. Saunders. Why not ^ It would offer those rates for any big
contract of that sort: everyone with a big contract of tliat sort would
be treated on decidedly the same terms.

Mr. Sherman. Yes, sir; but it would haxe

Mr. Saunders. Oh. it would have to hold itself out to do it for every-
body else; certainly. It says to everybody who comes along with such
a contract as this, '' I will give you those rates; I am not giving them
to this particular man, because everyone who offers a contract of this
character I will give him those rates." What is there to hinder a
steamship company from doing that, and that would meet just the
situation you have in mind ?

Mr. Sherman. From my understanding of that clause, I do not
think he could ; he would have to consult the board as to whether those
rates were reasonable.

Mr. Saunders. That raises a question of legal construction; but if
this enables them to do that, your objection is removed ?

Mr. Sherman. That would remove that difficulty.

Mr. Hadley. But 3"ou will still have to consult the board?

Mr. Sherman. You would still have to consult the board, which is
the fundamental objection.

The C'HAiiniAN. No; tliere is nothing in there saying you should
consult the board.

Mr. Saundkhs. Where is there anything saying you should considt
this board?

Ml'. Sheraian. You would still have this further objection — if you
do not have to consult the board, it would not matter: That if you
gave a public hearing you would disclose the rate, which would en-
Mble the Kuropean competitor to beat it; that is all.

Mr. SAiNDKiis. Thci'c is iiothina' in there about a i)iil)lic hearing
at all.

Mr. Shi:i!.man. No: nothing.

Mi-. Saindeks. That is the reason I was suggesting this, because
we want to get at the real difficulties aiul want to get at the appre-
hension ])e()i)le have about this mattcM-, and if the a])prehension is
well founded we will correct it.

Mr. (iKEi.NE. Why should you want this in here, if it is not going
(o aiuounl to anything — why do you want those things in?

Mr. Saunders. AVe are dealing with a particular difficulty Mr.
Shei-n)an had in mind, and we Avanted to ascertain what section of
the bill he relied upon to create that difficulty for him.

EEGULATORY FEATURES OF SHIPPING BILL, 83

Mr. Greene. If it is not ^oing to be troublesome at all, wliy is
it there ?

The Chairman. It would be troublesome in certain e\ents, but not
the event he had in mind.

Mr, Saunders. This is intended to prevent discrimination, but not
to prevent what he has in mind. That is what T am trying to bring
out.

Mr. Sherman. Our business is largely competitive with Europe:
we must have the same facilities they have. And after all, they have
built up their commerce without any rate regulation oi- anything of
this sort and our own is now developing pretty well.

The Chairman, You would like to have a free hand?

Mr, Sherman, We Avould, sir. We have an opportunity to-day
that comes once in half a dozen lifetimes and we want the freest
possible hand to take ad\"antage of it.

Mr. Saunders. W"e want to give you a free hand for development.

Mr. Sherjian. Our own exports to South America since 1904: have
increased from 40,000,000 to over 3-20.000,0O0, and our imports from
53,000.000 to 107.000.000.

The Chairman. But we don't want you to suggest difficulties that
do not present themselves in this bill.

Mr. Sherman. That would present itself in any bill. We want
freedom; we Avant to be left where we are: we want to be left to
compete on the same basis that Ave have to meet German and English
competition.

The Chairman. You are setting up men of straw and then knock-
ing them down ; we want legitimate objections to this bill. If there
is anything in it that operates to the prejudice of you as a merchant
and shipowner, we want to know what it is ; but we do not want you
to state things that do not exist under the provisions of the bill, as we
understand it,

Mr, Saunders, We want to keep out anything that will hinder or
hamper,

Mr, Sherman, The whole object of this bill is to do that, as I
understand it,

Mr, Saunders, What?

Mr, Sherman, It is to provide for the control of rates,

Mr. Saunders. It provides for the regulation of rates.

Mr. Sherman. For the regulation of rates.

Mr. Saunders. If you want to pick out any features there we
would be very glad to have you do that.

Mr. Sherman. Mr. Franklin has already covered that, so there is
not much use for me to go over the same ground, because anything
I would have to say would simply be a repetition of what he has
already stated.

Mr. Saunders. On the ]:>arti('ular feature to Avhich I have directed
your attention, I understand you agree if this laAv Avill allow you
as a shipowner to meet such a situation as you presented, from the
point of view of the merchant, then you have no objection to it?

Mr. Sherman, I Avas not speaking from the point of view of the
shipowner that I want to make such a rate; I am speaking from the
point of vieAv of the merchant, I Avant to go to some other steam-
ship company and have them free to make me that rate.

84 REGULATOEY FEATURES OF SHIPPING BILL.

Mr. Saundeijs. I am trying to get you to ))oint out wherein this
bill would hinder you in doing that ^

Mr. EnaroNDS. It was stated in the committee the other day, Mr.
Sherman, in discussing the first paragraph of section 4, that if the
ship was in a harbor aiad had a half a cargo of coal offered it at a
dollar rate and could not get any other cargo, and some other shipper
came along and said, " I will giYe you the balance of that ballast in
coal at 75 cents," and rather than ballast up or go empty he took that
second cargo, that would come under the head of this substantially
similar circumstances and conditions and would excuse him for
making that rate.

Mr, Sherman. Suppose that happens now, and, in order not to
go empty, you were obliged to take it at 75 cents and a dollar?

Mr. Edimonds. It would not l)e under the same circumstances. I
brought that question up in the committee and Judge Saunders, wdio
has spoken of it here, said that a condition like that might exist.
And :sYhat would happen if it did? Here are two separate shippers
filling the ship with the same commodity; one is going at one rate
and another at another rate; and the committee in talking it over
said that under this clause " substantially similar circumstances and
conditions" I would be excused in making that second rate.

Mr. Sherman. I do not quite gather, then, wdiat is the object of
your bill; Avhat advantage does anybody get out of the bill?

The Chairman. There are two shippers there at the same time. I
can tell you just exactly what advantage you get. Here is a ship on
the berth in Philadelphia, loading with coal; one man only has half
a cargo and both want to ship; you let one man have the dollar rate
and the other the 75-cent rate; do you think that is fair? Would
you want to have that privilege of loading both at the same time in
all tonnage?

Mr. Sher3ian. No.

The Chairman. That is what we intend to prevent by this bill.

Mr. Sherman. You say you can do that in case the vessel is short
of a cargo — to fill it up at a cheaper rate?

Mr. Loud. If the first half would not make sufficient ballast, he
would be entitled to do that to get a full ballast — he would have two
prices on the same cargo and they would both be reasonable.

Mr. Saunders. They might be.

Mr. Greene. And he might be fined the penalty provided in the
bill and be subject to imprisonment.

Mr. Saunders. You observe that is reasonable, and that is ]:)re-
cisely what Mr. Sherman wants to do — that very thing; and we are
simply pointing out to him that the bill allows him to do that.

Mr. Edmonds. That is the question I brought up. I also brought
up the question that a ship might take freight to Alanila and Hong-
kong, running, say, to both places, and might make the same rate
from Hongkong to San Erancisco as it did from Manila to San
Francisco, although the boat Avould travel GOO miles farther in going
to Hongkong than in going to Manila ; and you said that if they
charged a higher rate there, owing to the difference in the distance
carried, it would be perfectly legitimate under this clause of sub-
stantially similar circumstances and conditions.

Mr. Sherman. Under the rates to-day, in a number of trades, you
frequently get twice the haul for less money. Eor instance, you take

REGULATORY FEATURES OF SHIPPING BILL. 85

the I'iite New York to Valparaiso via Panama, and the rate Kiel to
Valparaiso via Magellan, which is 2,000 to 2,500 miles farther.
Although the rate is less from New York that is due to the fact
that the Panama Railroad has got to compete with Europe via
Magellan, and has to take a lower rate.

Mr. Saundj^rs. That is tlie verv reason this language is put into
the bill.

Mr. Hadley. But would not the fact remain in ever}' case that it
would be a question of fact to be determined by the tribunal as to
whether the conditions were similar or not, before you would know
whether you could make the rate ?

Mr. Sherman. Ocean rates are not a question of cost and distance.
The}' are a question of competitive conditions. The field is wide open
and you have to make -rates that will get the business. The world
rates to-day are abnormally high everywhere. You say the rates are
outrageous to the exporter — and they certainly are enormously high;
but we have not had ships enough to move the tonnage in New York.
Under our rates we have to get trans-Atlantic ships, and if the
rates were unbalanced we could get all the ships in the world coming
in and taking the stuff out, but they have not done so. I know, as
a matter of fact, that the rates from Argentine to Europe have been
higher than from the United States constantly for the last six or
eight months.

Mr. P^DMONDS. Is it not true in the case of the seller of the goods,
in a great many cases he has made the rates himself by competitive
bidding?

Mr. Sherman. You mean the purchaser of the goods?

Mr. Edmonds. Either one. The shipping man has nothing to do
with it. he simply sits back and takes the best offer he can get, and
he gets it either from the man who wants to purchase or the man who
wants to sell the goods.

Mr. SiiER^iAx. It is a question of supply and demand; and if he
goes out in the market and they want $1,600, if the shipper can get
another ship cheaper, why, he does not pay it.

Mr. Edmonds. Have not people come into your office and offered
higher rates for moving certain stuff?

Mr. Sherman. Oh. yes: they have made all sorts of offers. AVe
have had them offer much higher rates than we could get in other
routes; certainly.

Mr. Ed:monds. That is. a case where they made the rates them-
selves ?

Mr. Sherman. Frequently they make the offer because they can
not get anything.

Mr. Greene. Let me see if I understand you correctly. As I under-
stand you, if you are in the market competing with a foreign ship-
owner and a foreign merchant, they are at liberty to make such rates
as they please and such agreements as they please, but you would be
handicapped because you could not make an agreement under this
bill?

Mr. Sherman. We could not.

Mr. Greene. This bill ties your hands and ties your feet so you
can not make an agreement unless you get in communication with the
board and get them to act?

Mr. Sherman. In Washington here.

86 REGULATORY FEATURES OF SHIPPING BILL.

The CiiAiHMAN. I will give a new hat if he shows where that is
true.

Mr. Greene. I do not care whether he shows it, that is the belief.

The Chairmax. I will giAe a new hat if yon can show Avhere that
is in the bill.

Mr. Greene. That is all right, I am not betting hats; I am asking
the plain question of what the effect of the laAv is.

The Chairman. He can not answer fi-om that bill and show us
where it is true.

Mr. Greene. This gentleman is here — a man who has had wide
experience. He says he has been connected in the business for over
50 years and has had a wide experience both wdth foreigners and
Americans. And then I ask the plain question, if his competitor can
make an agreement wdthout conferring with anyboclj^, just as he
Avants to, being perfectly free to make it, and this witness, being an
American shipper and going out of an American port like New
York — whether or not this bill would not put him at a disadvantage?
That is what I Avant to get at.

Mr. Sherman. Yes; it certainly Avould, because the other man is
free and I am not.

Mr. Greene. Whether he explains the difference or does not, the
bill puts him at a disadvantage — whether he picks out "A" here or
" B " there.

]\Ir. Saunders. Now, Mr. Sherman, your competitor would not be
at a disadvantage by being compelled to charge higher rates than }- ou,
that is certain?

Mr. Sherman. No.

Mr. Saunders. Then, in order to be at a disadvantage he must be
in a position— in competition — where he can charge lower rates than
you? That is the only way to put you at a disadvantage?

Mr. Sherman, No; he can make rates without consulting anyone;
he is free and he can act instantly.

Mr. Saunders. He must then be able to give better rates than you?

Mr. Sherman. He may be and may not.

Mr. Saunders. If he charged higher rates than you, that certainly
is not going to put you at a disadvantage. Now, take the bill and
show Avhere in any section you have in mind, or combination of
sections, your competitor is able to act more instantly than j^ou for
the purposes of competition, and charge a more desirable rate than
you for the purpose of competition? We all agree that if this
l)ill is going to ham])er American commerce and put you at a disad-
\ antage and bring the other fellow in and jnit the American out, it
is a Ijad l)ill; and the way to do is to take the bill and point out the
sections that will operate to that end.

Mr. Sherman. Yes, sir.

Mr. Saunders. Now. take up the one you have in mind, or the
two. or whatever it is.

Mr. Sher.man. The clause I just read. Of course you say you
uHtdify that.

Mr. Saunders. You say if that clause has the meaning that w^e
attribute to it, you have no objection to it?

Mr. Sherman. No; I have not made myself clear on that. I
object to any restrictions at all. As I said at the beginning, I want

REGULATORY FEATURES OF SHIPPING BILL. 87

to be as free to do business in any way that suggests itself from day
to day or minute to minute as the man I compete with.

Mr. Saunders. As your competitor?

Mr. Sherman. As my competitor.

Mr. Saunders. Show us where you are not just as free to do busi-
ness as your competitor !'

Mr. Sherman. In England or in (lermany my competitor has no
restrictions whatever; he does not have to ask anybody to wait a little
while to see whether he can do it, or to wonder whether a board will
place this construction on it or that; he goes ahead and does it.

Mr. Saunders. You are stating things not in the bill. Just get
down to the bill. Have you in mind a German competitor trading
out of New York to Buenos Aires ?

Mr. Sherman. No, sir; because he has to meet the same conditions
I have. I am talking about the man who goes to Hamburg.

Mr. Saunders. Who ha\e you in mind?

Mr. Siierjman. The German shipper over the German lines to the
west coast of South America from Hamburg, the Swedish shipper,
or the English shipper on any of the English lines from a British
port.

Mr. Saunders. Have you in mind now shippers on your vessels
from British ports to South American ports?

Mr. SiiER>rAN. I am not having in mind my vessels at all: I am
talking purely as a merchant.

Mr. Saunders. We are talking about .ships, not merchants.

Mr. Sherman. I am talking about the way it will injure American
trade.

Mr. Saunders. We just ha^e in mind the shipowners — the Ameri-
can capital in ships.

Mr. (Greene. Are you not interested in American trade?

Mr. Saunders. Yes.

JNIr. Sheriman. Mr. Franklin has gone into the bill from the ship-
owner's point of view. There is no use of my going over the same
ground, because I would merely be repeating what he has already
said.

Mr. Saunders. But you are i)ointing out difficulties.

Mr. Sherman. My ol)jection is raised as a merchant and not as a
shipowner. Mi". Franklin has taken cai'e of the shipowner's side of
the question.

Mr. Saundei!S. ^'ou are pointing out difficulties with respect to
which this bill does not undertake to deal at all.

Mr. Sherman. I agree with you it does not.

Mr. Saunders. The difficulties you have in mind we are not deal-
ing with, because we can not deal with them. You, as an- exporter
or as a merchant, can make any rates at all that you want with the
German shii)s plying from Hamburg to South America.

Mr. Sherman. I know that; but I can not increase my American
business by doing that.

Mr. Saunders. What I want to point out is liow this bill operates.
Ha^■e you in mind American ships plying from our ports to South
America and German ships plying from our ports to South America
that it would put the American line of ships at a disadvantage in
dealing with the .American exporters as compared with the German
line?

88 REGULATORY FEATI^RES OF SHIPPING BILL.

Mr. Stikuman. There is no difference there. <is you apply the same
law; they are both under the same disadvantage.

Mr. Sauxdi:i;s. Then thei-e is nothinji; in this bill — >ve will just
leave tlfe merchants out for the time being — which will operate to
the disadvantage of the American shi]:)owners and the capitalists
l)utting money in ships, is there? If there is. what is that thing?

Mr. Shkrman. I do not raise any question of that sort under this
law, of ships plying in the same trade: that is. trade from the United
States. They do not try to discriminate against the American shi])-
])ei's there. I claim it is brcader than that: that it will tend to
hamper the development of American trade in competition Avith the
European trade, that is all.

Mr. Sattndeks. I will not take up that i)hase of it: we are dealing
Avith a shipping bill.

Mr. Byr>'es. Yonr idea is. as a merchant, that if you want a ship-
oAvner at your port to ship a cargo to South America and you asked
for a special rate for this very large cargo, the shi]:)OAvner AA'ould
hesitate to make you that rate because he would be in doubt as to
whether or not it Avould be construed as being substantially similar
circumstances and conditions: and by reason of his refusing to make
you a special rate it Avould put you at a disadvantage Avith your for-
eign competitor ?

Mr. Sherman. That is exactly it. You have to discuss whether he
can do it. and in the meantime your oi)portunity is gone.

Mr. Byrnes. If that section is modified in any Avay Avhereby he
Avould have no doubt about his ability to make that special rate for
that cargo, then you Avould have no ol)jection?

Mr. Sherman. Then I Avould l)e that much better off. The rea-
son I am making the objection noAv is that you can not foresee all the
conditions that Avill arise from day to day in the shipping business,
and on the other side they have no limitation at all; they can go
ahead is they like.

Mr. Byrnes. I am asking you about this particular section that I
have referred to and of Avhich you have spoken; if that is removed,
then what other objection have you to that section^ Ia4 us stick to
that one; that is the (me you have referred to.

Mr. SiiERiMAN. Section 4, the first ]iaragrni)h, is what I objected to.

Mr. Byrnes. You and I have agreed, now, if that is removed you
luive no objection?

Mr. Sherman. Would there be any objectum to ])utting in that the
carrier may make special rates, a specific statement, for certain lots
of cargo at certain times, :md those i-ates shall not atFect the general
tariff? I am speaking now from the steamshij:) ])oint of vieAV.

Mr. r>YRNES. If that is arranged hereafter, what othei- objectior^
haA'e you?

Mr. Sherman. To that secticm?

Mr. Byrnes. To that whole section.

Mr. Sherman. I have no objection to the rates being made the
same for all; that is the essence of that section.

Mr. Byrnes. The only other objection you have made to the bill
is the maximum rate provision, is it not?

Mr. Sherman. Certainly.

Mr. Saunders. I said I Avould not ask you any (luestion from the
point of view of the shipper, but I will ask you one. The difficulty

REGULATORY FEATURES OP SHIPPING BILL. 89

you have in mind from the viewjDoint of the shipper, as you outlined
in your answer, is that you are afraid when you approach the Ameri-
can shipowner he would not be able to deal with you as promptly
as the treatment 3 our foreign competitor would receive. If under
this bill the American shipowner is able to deal with you, as an
American, as promptly as the foreign shipowner is in a position to
do with your competitor, that is, to give you as prompt an answer,
then there is no objection from that standpoint.

Mr. Sherman. If he is able to deal as promptly and freely as the
other fellow, no.

Mr. Saunders. It is our interpretation this bill would do that. It
is a mere question of interpretation.

Mr. Sherman. My interpretation is the bill is a hindrance; that
is all.

The Chairman. We have no patience with that view ; I have not,
at least.

Mr. Saunders. That was the objection of all the railroads to the
regulation that the Interstate Commerce Commission placed upon
them — that they ought to be left alone.

The Chairman. That is the argument the railroads made — just let
us alone.

Mr. Sherman. The railroads are quite different. You have trans-
portation here that is open to everybody ; it is wide open. Anybody
can engage in it and it is wide open.

The Chairman. This report on the investigation of shipping com-
binations shows that is not a fact; and if you will read that report
and tlie hearings, you will conclude it is not the fact.

Mr. Sherman. It is substantially the fact.

The Chairman. The combinations on the seas prior to this war
were quite as close and effective betAveen all of the regular lines as on
the land.

Mr. Loud. Before this witness leaves I Avish to have such informa-
tion as he can give us of the cost of operating under the American
flag and the foreign flag.

The Chairman. He can go into that after lunch.

(Thereupon, at 12.55 o'clock p. m., a recess was taken until 2 o'clock
p. m.)

ak'J'er recess.

The committee reconvened at 2.30 o'clock p. m., pursuant to the
taking of the recess.

STATEMENT OF MR. LAWRENCE K. SHERMAN— Continued.

Mr. Hadley. Reference was made by Mr. Bush in introducing you,
Mr. Sherman, that you had some statistical data, either in mincl or at
hand, on the difference in cost of operating ships under the American
flag and foreign flags, and Mr. Loud was seeking to have it presented
to the committee, giving them information on the difference of cost
between here and abroad.

Mr. Sherman. The difference on the ships we have transferred is
from $700 to $800 a month.

Mr. RowE. What grade of ship is that?

90 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Sher:man. Tluit is a ship of 9,600 tons total dead-weight
cargo boat — an ordinary English cargo boat.

Mr. Gkeenp:. xVs 1 understand it, under the American flag you had
to pay that much nioi-e ^

Mr. Sherman. Dii'cctly we transferred the boats. Now, the cost
is increasing; both costs are increasing.

The Chairman. Why did you transfer your vessels to the Ameri-
can flag?

Mr. Sherman. We thought it was a good thing to do after the war
broke out, of course, under this law, and we transferred several; but
we still have six under the l>ritish flag. We did not transfer them all.

The Chairman. Did you invite this increased cost for no other rea-
son than you wanted to get them under the American flag?

Mr. Sherman. I beg your pardon.

The Chairman. Whj'- did you incur this additional cost?

Mr. Sherman. Because we thought it advisable to get them under
the American flag, in view of the war ; that is all.

The Chairman. Why was it advisable to put them under the
American flag during the war?

Mr. Sherman. Because we lost two ships under the British flag.
They w ere sunk by German cruisers. We thought it safer to get them
under the American flag after w^e lost those two ships.

The Chairman. For the protection of the flag?

Mr. Sherman. Yes, sir.

The Chairman. How many ships do you operate?

Mr. Sherman. Sixteen.

The Chair:man. Are you compelled to have larger crews?

Mr. Sherman. Yes; the crews are larger and the wages are more.

The Chairman. Now, just for the information of the committee,
how many more men do you have to have in a crew — just a general
statement ; we will not go into detail ?

Mr. Sherjian. I think it is three or four more men ; I am not
certain.

The Chairman. On these ships how many men are there in the
crew, in all departments?

Mr. Sherman. Thirty-nine or forty.

Mr. RowE. About 10 per cent more?

Mr. Sherman. Yes.

The Chairman. Where is that increase — in the deck crew or the
engine room, or in what department of the ship?

Mr. Sherman. I could not answer that question. I am not in
charge of the operation of the shii)s, and T do not know generally.
I can send that data if you like.

Mr. Greene. You can furnish it?

Mr. Sherman. I can furnish it, absolutely; yes, sir.

Mr. Hadley. I wish you would do that.

Mr. Sherman. Certainly.

Mr. Edmonds. Will you show that in detail ?

Mr. Sherman. Certainly. No objection at all.

The Chairman. What is the name of the ship ?

Mr. Sherman. The (^hincha.

The Chairman. I am much obliged to vou, Mr. Sherman.

REGULATOEY FEATURES OF SHIPPING BILL. 91

STATEMENT OF MR. GEORGE S. DEARBORN, PRESIDENT AMER-
ICAN-HAWAIIAN STEAMSHIP CO., NEW YORK, N. Y.

Mr. Dearborn. Mr. Bush said I was a member of this committee
of the chamber of commerce Avhich has to deal with the features of
the bill pertaining to foreign trade. Of course, the company I
represent is in the coastwise trade; that is, during normal times.
The ships are now distributed in the foreign trade. So my state-
ment will be particularly in regard to what I call a technical point —
this rate-making power. I am speaking, you might say. for tlie
American Line Steamship Co.

I beg to remonstrate against those provisions of the bill which
w^ould give the shipping board the power to fix rates for water car-
riers, and would prohibit any change in rates except upon 10 days'
notice; first, upon the principle that the water carrier receives noth-
ing from the State, that the ships are operating out of the jurisdic-
tion of the State most of the time, and that owners can not be com-
pelled to operate their ships.

The status of water carriers is entireh^ different from that of rail-
roads, which have a franchise and the right of eminent domain, and
are compelled to operate. A.ship's status is no different from that of
a manufacturing concern; in fact, a ship is a manufacturing plant,
producing transportation. Therefore the earning power of ships
should not be fixed any more than that of any other industry and
should be governed by conditions of supply ancl demand.

To apply rate-making powers would be most difficult and in prac-
tice would make the business of the water carriers unworkable. It
would be necessary to define a reasonable rate. This would be com-
paratively simple if relativeness of rates in other trades were to be
considered; but if it is the purpose of this bill to fix a rate based
upon a return upon the investment the cost of every individual ship
of a fleet in a service would have to be considered, and as the cost of
ships in commission to-day vary from $40 to $180 per ton ; therefore
different rates would have to be applied to different ships. Ships
that are being built to-day will cost 100 per cent more than most of
the ships now in commission; therefore a reasonable rate for the
new ships would be an excessive one if applied to old ships.

Ships are of all sizes and types and can not be treated alike in
the application of rates. Some are designed for special trades and '
are very much more efficient in handling cargces peculiar to those
trades. A tramp steamer has no overhead charges, while there is
applied to steamers comprising a fleet in a regular service, a large
expense for terminals. The American-Hawaiian Steamship Co.,
tor instance, with its 26 steamers, in the coast-to-coast service, has a
rental expense for terminals, which, if capitalized, would amount to
$5,000,000, or about one-quarter of the cost of the ships.

The power to fix rates implies that carriers would be compelled to
take all freight offered, which would be impracticable in the case of
a ship. A snip, the water carrier's unit, is inffexible. There would
be only a certain number of ships to deal with, and the character of
the cargo each ship could carry would be governed by conditions dur-
ing different stages of her loading. A ship requires a limited amount
of bottom cargo, then medium and light measurement freight. The

92 REGULATORY FEATURES OF BllIPPlXG BILL.

stabilit}- of a ship has to be considered, as well afe a pi()i)er phice to
stow freight that could damage other freight.

So that, under all of these conditions, which actually exist in the
operation of ships, a tariff would be inelfective, as ships would not be
physically (pialilied to take all of the freight covered by it. Fixing
rates and filling tariffs would not provide space in ships but place
a burden upon the shipowners with no compensating benefits to the
shippers. The requirement of a 10-day notice before a change could
be made in a tariff -svould deprive the ship of a class of freight that
Avould be necessary to complete her loading and freight that was
available at short notice, and also deprive the shipper of such freight
of the space in the ship. Tramp steamers which go on the berth to
load from time to time, and are really the most effective rate regu-
lators for regular lines, would find it very difficult to secure freights
under the regulations proposed, and, certainly, there should be no
discrimination made by statute between individual ships designated
as tramp steamers and those that comprise a fleet under one manage-
ment. The tramp steamer would disappear in a trade under regu-
lation, which would remove that competition from the regular lines,
whereas if they are exempted they would become unfair competitors.

The American-Hawaiian Steamship Co. has been transporting the
Hawaiian Island sugar crop to the Atlantic coast for 10 years under
a contract at a rate of freight. If the shipping board has the rate-
making power, could it not say that the rate which has been mutually
agreed upon by the shipper and the steamship company was unrea-
sonable, and this would give the board the powder to abrogate the
contract. Under such conditions, a steamship company would hardly
enter into a contract, and the shippers whose transportation require-
ments are for 300,000 tons annually would be deprived of a re-
liable service which they absolutely depend upon. The American-
Hawaiian Steamship Co., when it resumes its regular service through
the Panama Canal, will find its rates fixed to a minimum by the radi-
cal reduction made by the transcontinental railroads for the purpose
of competing with the canal route, and with the consent of the Inter-
state Commerce Commission.

I still hold to the opinion, as expressed in a statement made in
February, that less litigation and not more is essential for a continu-
ance of the wonderful development of our merchant marine which
' is now in process, as evidenced by the unprecedented number of ships
now under construction in this country and those that have been
transferred to our flag.

Why apply a drastic remedy to a ])atient whose coudition is im-
proving so riii)idly without one? Let well enough alone. Kemove
the menace of Government interference in a healthy growing busi-
ness, except so far as unfair practices are concei-ned. Steamship
business, in a regular service, dealing with thousands of shipinn-s and
trying to please them, makes a greater demand upon the nerves of
the managers than most any other, and to have to s^rve another
master and be subject to inquiry and espionage, such as there would
be under Government control, woidd make it irksome to continue
business under such conditions; particularly at this time, when the
i-equirements of England for transportation are so pressing that
there is a great indiicement to accept the fabulous prices that are
being offered for the purchase of ships.

REGULATORY FP:ATURES OP SHIPPING BILL. 93

The CiiAiijMAx, England at this time has her curb on her shipping
and is compelling her ships to carry goods at much lower rates than
they would charge if they had a free hand; is not that true?

Mr. Dearborn. I did not understand you.

The Chairman. I say England has a curb on her shipping now,
and is compelling them to carry freight at a much less rate at this
time than they would if they had a free hand.

Mr. Dearborn. Under war conditions?

The Chairman. Yes.

Mr. Dearborn. I say that is a war measure.

The Chairman. I know that is true. So that there are conditions
under which the Government must interfere to prevent unfair treat-
ment?

Mr. Dearborn. Well, I suppose the proper way to conduct a war
is to put everything under martial law.

The Ciiair:man. Your remarks were addressed particularly to the
section of the bill relating to interstate commerce?

Mr. Dearborn. And to the rate-regulating power.

The Chairman. You do not think any governmental body should
have any power whatever to interfere, if a transportation company
by water should practice extortion?

Mr. Dearborn. No. The question would first come, I think. What
is the definition of extortion?

The Chairman. Well, charging several times more than a service
is worth.

Mr. Dearborn. What is the service worth? Take conditions to-
day.

The Chairman. I would say, under ordinary conditions, you
should take into consideration the investment, the cost of the Service,
and a reasonable return in the way of profit.

Mr. Dearborn. Therefore, then, your pur})ose in this bill is to fix
a rate based upon the earning poAver of the ship?

The Chairman. No; under this bill I do not think we go that far.
You asked me what I considered a reasonable rate. Tl!is bill does
not undertake to go that far at all.

Mr. Dearborn. If I were a member of this board to be a})pointed,
and received my power from this committee, I would naturally ask
the chairman of the committee to define this section referi-ing to the
rate-making power — what is it to be based upon?

The Chairman. I think you would take the language of the hnv
itself and give it a reasonable construction in the light of conditions
if you administered the law intelligently.

Mr. Dearborn. Yes; but there is a condition of suppW and demand.
My point is that dealing with steamships is no different from dealing
with manufacturers.

The Chairman. Your opinion is, then, if one man had control of
all the flour and bread in the community that he should charge any
price he chose for it?

Mr. Dearborn. Well, I can not draw^ upon my imagination to such
an extent as to make such a picture.

The Chairman. But that is the effect of monopoly. Under the
provisions of this bill we recognize agreements and that there are
certain combinations that may be fair and reasonable, and if these
lines — vour line and other lines — should enter into a fast agreement

94 REGULATORY FEATURES Of SHIPPING BILL.

by which eoiiipetition was shut out. aiul by reason of the elimination
of that competition you shoukl charge just what you })lease. you
tiiink the people ought to stand it. do you ?

Mr. Deakborx. 1 think you are theorizing. ]\Ir. ("hairman, on a
wrong situation.

The Chairman. I want to illustrate a principle. Is that true?

Mr. Dearhorn. I agree Avith you that if it was possible for any
man or group of men to control any industry in this coimtry and fix
the price. I should certainly think the Government ought to step in.

The Chairman. Sui-ely. I do not think there is any disagreement
on that.

Mr. Dearrorn. Xo, never. Except in transportation on railroads,
I have never heard of such a situation existing.

The Chairman. Not to the same extent, maybe ; but what I wanted
to get from 3^ou, Mr. Dearborn, is Avhether or not you indorse, as a
principle, if the conditions existed by which the tonnage is abso-
lutely controlled by a combination, that this ship})ing board should
have no power to relieve the public from extortion i

Mr. Dearrorn. You are dealing with two situations. You are
dealing with a trade where these methods have been adopted of doing
business under conferences and combinations ; and practically in this
bill you have given immunity from the Sherman Act.

The Chairman. If it is reasonable, yes. Does that meet with your
approval ?

Mr. Dearborn. I should say it would seem logical from the stand-
point of this committee, in consideration of this privilege, to have
some control of the rates.

The Chairman. Yes.

Mr. Dearborn, But take from the hands of those on the board the
pur]iose to apply this regulating powder, not only to those w^ho are
working to-day in defiance of the Sherman Act but those w^ho have
no such methods of business, who are foot free, as our company is,
wdio would then be i)laced under this embargo with no compensation.
That is where Ave differentiate between the two methods of doing
business.

The Chairman, There are always men who are fair in business and
the law is not aimed at them. Just like our criminal law is not
aimed against the law-abiding citizen, but against the other felloAv.
Now, I assume that the American-Hawaiian Steamship Co. belongs
to the class that is free from these conditions — that is, in its business
methods, has not provoked this class of legislation.

Mr. Dearborn, Yes.

The CiiAiRiMAN. But oui- investigation of the Shipping Trust dis-
closed conditions out of Avhich these suggestions have been developed.

Mr. Dearborn. As a felloAv says, "We are almost too good to be
true."

The Chairman. No.

Mr. Dearborn. I mean to say that it has not been necessary for us.
We have gone about our business, that is all.

The Chairman. We investigated you along with the other people,
and we practicall}^ ga.ve you a clean bill of health, so far as that is
concerned. In the coastAvise trade you say you do not think it is
practical to vest in the Interstate Commerce Commission, or in this
board, the poAver to supervise rates? The Interstate Commerce Toni-
missiori does do it noAv. Avhere there is a joint rate, and I noticed the

BEGULATORY FEATURES OF SHIPPING BILL. 95

other day that the Ocean Steamship Co. had proposed to increase the
rates about 15 per cent and the Interstate Commerce Commission
Avoiild not permit it.

Mr. Dearborn. That is in connection with arrangements with
other raih'oads when they make through rates.

The Chairman. Yes.

Mr. Dearborn, Of course, that is quite different from making
rates from port to port.

The Chairman. Why should it be?

Mr. Dearborn. That is done because the interstate LaAv clearly
states that, that steamship companies having arrangements with
railroads and participating or having a division of rates are under
the law\

The Chairman. That is true; it is under the law.

Mr. Dearborn. Yes.

The Chairman. But why should not steamship companies and
regular lines in the port to port business come under the law, too?

Mr. Dearborn. I will ask you a question

The Chairman. I am asking for information.

Mr. Dearborn (continuing). How are you going to define a reason-
able rate? Take in our own case; we have a fleet of 26 steamers, and
our last ship came out about two weeks ago. The average cost of our
ships is probably $60 a ton less than the highest price paid — oh, more
than that — $100 a ton. Suppose you are going to fix a reasonable
rate. We are already in the business. Another concern is going into
the business and has paid those high prices for ships. Is that rate
to be fixed upon the highest cost of ships in the service? If so, then
our rate, if it is fixed on that basis, would be unreasonably high;
and if it was fixed upon our cost, the other fellow could not com-
pete with us. If it was fixed one rate based upon the cost of one
ship and another rate based upon the cost of another ship, the rates
would be different in both services. When you touch upon this rate
regulating power I do not believe for a moment you mean to fix
your rate of freight upon that basis ; but, nevertheless, you are giving
this board a power to fix a reasonable rate — a maximum rate.

The 'Chairman. When Ave investigated the so-called Shipping
Trust the regular lines and the coastwise services on the Atlantic
and Pacific filed with us what they said were their schedules of rates.
How did they fix them ?

Mr. Dearborn. I will tell you. There are certain services that are
not subject to competition. I mean to say you take these Atlantic
coast lines, lines running between (Charleston, New York, and Savan-
nah; they have regular service, have their terminals, their regular
freight, and they do not have competition. In another trade, such
as ours, between New York and San Francisco, where the volume is
very large, we have all kinds of competition. Now, you take a tramp
steamer — I understand it is not your purpose to apply this regula-
tion to tramp steamers ?

The Chairman. We are not going to say that she can not charge
a low rate. They would be amenable to the law if they charged an
unreasonably high rate, I suppose, and complaint were made.

Mr. Dearborn. Well, a tramp steamer is hardly likely to charge
li higher rate, because they are in a position to make very much low^er
rates.

96 KEGUI.ATORV FKATUKKS OK SHIPPING BILL.

The Chaihman. You have a reguhir line service from the Athiiitic
coast to the Pacific coast, liave you not?

Mr. Dearboijx. Oh, yes.

The Chairman. Is there any greater reason why those lines from
New York to Savannah and XeAV York to Xew Orleans and Xew
York to (ialveston should be regulated than that your line in the
intercoastal trade should be supervised and regulated?

Mr. Dkarhorn. That is my point exactly, Judge. Conditions are
so diiferent in different trades that you can not standardize a method
of treatment for all trades, and if you can not standardize them 1
do not see how j^ou are going to do it.

The Chairman. Take the lines on the Pacific coast, take the line
from Seattle to Los Angeles, and from Seattle to San Francisco,
is there any reason Avhy different rules should be applied to them
than to those Atlantic coast line services i'

Mr. Dearp.orn. No: I think they are in the same category. I do
not think the lines running between Savannah, New York, and
Charleston would care a bit about working under the interstate law
to-day. practically, because they are making rates to interior points
through arrangements with the railroads, and their volume of busi-
ness is limited. I mean to say that they carry a general cargo, mis-
cellaneous freight and freight that a tramp could not get because
a tramp could not give the service, whereas in our business there is
a great volume of business, and a great deal of it would comprise the
coarse freight and round lots of carload freight. AYe are dealing in
our business in normal times, eastbound and westbound, with prob-
ably 3,000,000 tons of freight. Now, there is no such volume of
business in the coast trade. If there is, why, they would charter an
outside steamer. I mean to say, if there was a cargo of phosphate
to come np here from the Gulf of Mexico or from Tampa that is
done in full cargoes. The regular lines do not attempt to deal with
that class of freight.

So, if I were before your committee to-da}^ and this bill had been
passed and the law was in effect, and we w^anted to develop our
business, or if I were a new man in the business and wanted to de-
velop — Ave were nnder regulation and we had never been under regu-
lation before — I would say, '* Please tell us what is the limit of profit
we can make in our l)usiness? Please tell us what your rate regula-
ti(m means? What is the definition of a maximum rate? "

The CHAiR:NrAN. Do you not think, having a monopoly of the
coastwise trade, that it would be a reasonable exercise of the i)ower
of the (lovernment to say that?

Mr. Dearborn. That is where it comes again. I think you might
do that where conditions are uniform and permanent. That would
happen in the trade, for instance, between New York and Charleston
and Savannah. I do not think the factors in that business have
changed in years. With our business it is absolutely different.

The Chairman. 'Jliis bill is elastic enough for the shipping board
to recognize those differences, is it not?

Mr. Dearborn. Yes. I discussed this matter once about four
years ago with the Committee on Interstate Commerce, on the canal
rate tolls. I went to some length

The Chairman. I i-ead youi- statement then with a gi-eat deal of
interest myself.

REGULATORY FP]ATURES OF SHIPPING BILL. 97

Mr. Dearborn. You remember it, then?

The Chairman. Yes.

Mr. Dearborn, I do not see how it is workable. I do not see
how.it is with the types of ships and the differences in cargoes you
are dealing with. It is a strange thing. You take a regular service —
take our service: We have 20.000 or 30,000 ton ships; we are getting
a class of cargo that tramp steamers could not get because they
could not give the same service. And here our terminals enter into
the total cost of our plant, or about 25 per cent of the cost of our
ships.

The Chairman. Do you own your terminals in New York?

Mr. Dearborn. No; we lease the terminals. We pay Mr. Bush —
it is considered the biggest pier in the world — $165,000 a year. We
have capitalized that really on the value of three millions or three
and a half millions. I think probablv the cost of our terminals go
up nearer G.OOO.pOO than 3.000.000. "l can not see how we would
work if this law should apply to us. We must go to the board and
get the privilege of changing our rates. We often have ships, for
instance, leaving the Pacific coast, on which we engage freight. It
is all one-sided between the ship and the shipper; the ship is always
obligated to take the freight, but the shipper is never obligated to
ship it. Now, that is a matter of experience. I mean to say, in the
busy season when California products are moving this way, they come
in and book, and say, " Here, we will book this freight, about 50
per cent of the space, but we Avill book all of it." Now, they fall
down, and a ship is going out with 500 tons of space ; they fall down
on the freight, and we ha"\'e no recourse on the shipper. A ship at
all times in the regular service in the country must please its ship-
pers: it must have the good will of the shipper: it must give him
privileges that he is not entitled to.

The Chairman. You are speaking now of the regular-line service?

Mr. Dearborn. The regular line.

The Chairman. And that would apply to your service?

Mr. Dearborn. That would apply to our service, if we wanted some
freight in a hurry.

The Chairman. You call the other ships that are in the irregular
service — they are not exactly tramp ships, but their conditions are
different from the regular-line service. Do you have regular-line
service to Hawaii ?

]Mr. Dearborn. No. We have a service from Puget Sound to
Hawaii, and then we take our westbound cargo from New York down
mere, and then also local freight from Puget Sound, and then we
come back with sugar.

The Chairman. Do you have regular sailings?

Mr. Dearborn. Oh, yes. We have in our service sailings about
every 10 days for the islands, a regTilar sailing. I brought up there
tlie rate-making power, as dealing with this contract we have with
the sugar factories in Hawaii. They come to us and say, "We have
so many .sugars to move. We w^ant you to move all those sugars.
We want you to agree to do this; we don't agree to ship by you any
sugars except those we are going to send .to the Pacific coast, and we
can not tell how many we are going to send." That is a one-sided
contract.

38.5.34—16 7

98 REGUl.ATORV FKATUHES OF SHIPPING BILL.

The C'liAiHMAN. Do you think ii' this were a hiw it would inter-
fere with your contract with the sugar phmters^

Mr. Deakbokx. That is what I want to know.

The CiiAiHMAX. You have read the bill, have you not?

Mr. Dearborn. Yes; I have read the bill, but j'ou have the rate-
making power. What is it? I am still asking the <]uestion. I have
heard discussions here this forenoon in respect to the present high
rates of freight, and (lod knows they are exorbitant and fabulous.
Is this rate-making power to be api)lied, for instance, to this situa-
ti(m, or is it to be applied to any other situation?

The Chairman. I Avould say this, that under the provisions of
this bill, this board has the ])()wer to consider conditions and deter-
mine whether or not the conditions are extraordinary, and if they are,
they will have the power to recognize that fact and not impose any
unreasonable restrictions.

Mr. Dearborn. But then they must have some idea in their minds
as to what a seasonable rate would be.

The Chairman. How did the Interstate Commerce Commission,
in this case to which I referred, ascertain that the proposed increase
of 15 per cent was unreasonable as applied to the Ocean steam-
ship Co.?

Mr. Dearborn. Take the Interstate Commerce Commission. The
Interstate Commerce Connnission is trying to find a basis now upon
which to make rates, is it not? They are going through a process
of valuing the railroads. Ultimately they expect to make a rate
based upon the return on the investment, or a return, I will say, upon
the value of their property. As it is to-day the Interstate Commerce
Commission will make rates, I suppose, based upon the dividends as
evidencing the prosi)erity of the railroad they are dealing with. Of
course, one railroad is prosjierous and another is not prosperous,
and the same rate applies to both.

The ]ioint I want to make as fundamental in this thing, is whether
3'OU are dealing with companies operating a fleet or dealing w^ith a
few ships or one ship, the unit is a ship ; you are putting the ship in
the same category as the railroad. .Now, you have trade commis-
si! ns. \ ()U have Sherman Act to govern unfair ]))'actices in general
business and manufacturing. A ship is nothing but a manufactur-
ing plant, but it gets nothing from the State. AVhat do they get,
except when you give them the privilege of foi-ming conferences?
You do gi\e them something there; I will adn)it that.

Mr. Hardy. Right at that point, I want to know^ if the board can
not fix reasonable rates; how do you think the conference lines do
it? Do you form a conference and agree on rates?

Mr. Dearborn. That is the point I have been making. I say you
have to differentiate the rates. There are companies, steamship com-
panies, doing business under conference agreements.

Mr. Hardy. With the rates agreed upon?

Mr. Dearborn. Yes; with the rates agreed u])on.

Mr. Hardy. And divisions agi'eed upon?

Mr. Dearborn. Yes; and divisions agreed upon.

Mr. Hardy. But just a moment ago, I understood you to say that
this board, neither for the individual ships, nor for the lines — it
doesn't make any difference whether they weie tramps or lines oper-

REGULATORY FEATURES OF SHIPPING BILL. 99

ating together — that the ship was a unit and that the board could
not fix any rates.

Mr. Dearborn. Before you came in I said, of course, I would dif-
ferentiate between steamship companies doing business under those
methods, and steamship companies — which are the great majority —
which are foot free.

Mr. Hardy. If I get at your proposition — I think maybe I do —
3'ou think this board could regulate the rates for conference lines or
regular lines, but could not regulate for the tramps?

Mr. Dearborn. Yes; on those now doing business under confer-
ence arrangements.

Mr. Hardy. Do you think this board should regulate the rates for
regular lines?

Mr. Dearborn. In theory. I have said to my confreres on this
committee, that I do not belieAe in this rate regulating power, and
w^hy? As I say, the ship as such, gets nothing from the State, but
if ship companies doing business under a conference get immunity
from the Sherman act, then, they are getting something from the
State.

Mr. Hardy. I want to go back, then, and pin something down.

Mr. Dearborn. Yes.

Mr. Hardy. As I understood you, you admit that the lines that
have regular sailings and regular routings might be regulated ?

Mr. Dearborn. Yes; if you think it is necessary to do business
that way, 3^ou are giving them a privilege, and, I think, fundament-
ally they are getting something from the State.

Mr. Hardy. You admit — just as a conference would agree upon
the rates — then, this board could fix rates w^ith such as much reason-
ableness as conference lines can agree upon rates?

Mr. Dearborn. Yes ; except that it would be very difficult.

Mr. Hardy. ^Vliat would be difficult?

Mr. Dearborn. It would be very difficult to fix a rate.

Mr. Hardy. How do the conference lines fix them? They fix
them, do they not?

Mr. Deai{born. Of course, going back to normal conditions, these
ccnfereiice lines, I believe, Avere formed not for aggrandizement,
not to extort money from the public at abnormal profits, but for self-
preservation.

Mr. Hardy. That is perfectly natural. I do not blame men for
getting together.

Mr. Dearborn. Yes; but going back to the purpose of these con-
ference lines. I don't think, before the war started and these abnormal
rates existed, that there would be any complaints from shippers about
the rates themselves. There might be complaints about practices. Of
coui'se, the company I represent has never been in that kind of busi-
ness, has not lieen in any conference, and never expects to be.

Mr. Hardy. Then I imderstand your chief objection to this is that
you can not apply this to the tramp steamer?

Mr. Dearborn. To what?

Mr. Hardy. To the tramp steamer.

Mr. Dearborn. No. I am taking our own case. I do not think
our steamers — ^we have "26 performing this service; we are not
tramps.

Mr. Hardy. Have you any regular lines?

100 KEGUl.ATORY l^EATURES OF SHIPPING KII.I..

Mr. Dearborn. Oh. we have a legular service.

Mr. Hardy. As I umlei-stand you. are y<ai nc t in any of these con-
ference ao'reements ?

Mi-. DEARmniN. No.

Mv. Hardy. AA'lis'.t has become of all the ships that are in the con-
ference agreements ?

Mr. Deari'.orn. My dear sir. our service was in the coastwise trade.
We have a lot of competition.

Mr. Hardy. You don't mean to say that you ha\e not any con-
ference agreements in the coastwise trade?

Mr. Dearkohx. Not in oui" trade.

Mr. Hardy. AVhat sort of trade is yours?

Mr. Dearrorn. Our ti-ade is trade in which we oi>erated shijjs be-
tween the Atlantic coast ports and the Pacific coast ports, and to
Hawaii and back to New York. AVe used to operate through JSIagel-
lan. Originally we operated sailing ships around Cape Horn. AVe
have developed a fleet of twenty-six 10,000-ton steamers, and it all
came from the time that the navigation laws were applied to Hawaii.
AAHien Hawaii Avas taken over in 1898 the navigation hnvs were
apjjlied to Hawaii, and we staited in. AA^e said, "Here is our oppor-
tunitv to get return rargo.*' In those times we could get cargo to the
Pacific coast, but Ave could not get it back.

Mr. Saunders. You say the ship does not get anything from the
'State. It seems to me in that very instance you have given of the
apidication of the navigation laA\s to Hawaii, which enabled you to
build ui) this trade, that you got something from the State.

jNIi-. Dkarhorn. Surely: but any other ship has the same right.

Mv. Saunders. Any other railroad could get the same charter as a
particular road.

Mr. Dearborn. No; rights that the railroad has can not be taken
away from it by any other. I say the ocean is free. AA^'e have no
trackage rights.

Mr. Saunders. No; not in this particular trade.

Mr. Dearborn. It is free to ships.

Mr. Saunders. It is not free in the trade you operate; it is free to
American ships, but it is not free to foreign ships.

Mr Dearborn. It is free to American ships. AA^e have no mo-
nopoly. A railroad has a monopoly of the territory through which
it goes.

Mr. Saunders. Not necessarily; they can build a parallel railroad.

Mr. Dearborn. I knoAV, but not in the immediate territory. A
ship does not control anything.

Mr. Saunders. Of course, the railroad controls the immediate
track it runs on, but it is not such a great thing. You say it gets
some benefit from the Commonwealth or the State that the ships do
not get. You illustrated the naA'igation laws that enabled you to
buiki up this great business. I have observed several times that the
question has been asked, as if it was an unsolvable one. How can we
define a reasonable rate?

Mr. Dearborn. Yes.

Mr. Saundeijs. In everyday business in this country we are con-
fronted with the same sort of thing, to define reasonable care. A
man is required to exercise reasonable care. How would you define
reasonable care? Have you ever served on a jury?

REGULATORY FEATURES OF SHIPPING BILL. 101

Mr. Deakroijx. There would be a deg-ree of care, whether it was
goino; to preserve a human life or do better than that.

Mr. Saunders. Xo; but the courts require you to exercise, under
certain conditions, reasonable care. If you ever served on a criminal
jury you would be instructed with regard to reasonable doubt. How
would you define reasonable doubt. It has been tried several times,
l>ut nobody has ever gotten any further than a reasonable doubt is a
reasonable doubt.

Mr. Dearborn. I say in a case of that kind it all depends upon the
evidence.

Mr. Saunders. What is a reasonable doubt?

Mr. Dearborn. You have the evidence pro and con, but in the case
of fixing a rate, there it is not necessary to get anything reasonable —
that is, to fix a rate. And what is it based on?

Mr. Saunders. I would have replied just as 3'ou have replied with
respect to a reasonable doubt; it would depend upon the evidence,
and the evidence in that case would depend upon the facts, and the
facts would be the factors in this business in respect to which the
rate is charged.

Mr. Dearborn. If j^ou were chairman of that board you would
say. "What is the property cost; what is a reasonable cost; what is
the return on the investment ? "

Mr. Saunders. I was just going to follow that up.

Mr. Dearborn. Yes.

Mr. Saunders. You can all tell in the ship business whether you
are making money or losing it?

Mr. Dearborn. Take a ship in normal times

Mr. Saunders. Take normal or abnormal times. Can not you all
tell whether you are making money?

Mr. Dearborn. Let us deal with the situation to-day. Those who
are building ships to-day and those who have bought ships at the
high pi'ices — as high as $180 a ton has been paid for ships

Mr. Saunders. Yes.

Mr. Dearborn. And there are ships in the service that have cost as
low as $40 a ton. Xow, if you ai'e going to fix a rate for the service
based upon the highest cost ship, it would be an unreasonable rate for
the loAvest cost ship.

Mr. Saunders. In that condition the element of prime cost would
be a pioper element to consider, but can you not, as a company, in
operating ships, determine whether you are making money or losing
money ?

Mr. Dearborn. In operating our ships we charge off 5 per cent for
depreciation. Now, you get down to a basis. Suppose it Avas put up
to you as chairman of this board, and we show 10 per cent after
charging off for depreciation, would you say that was an excessive
rate ?

Mr. Saunders. Whether that particular thing is a reasonable or
unreasonable rate would depend upon the facts in that case.

Mr. Dearborn. Yes.

Mr. Saunders. I am coming up to that. I ask you the same ques-
tion: Can you not, in your business, determine whether you are
making or losing money ?

102 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Deahboun, Thore have been times in the husiness when it was
merely a case of whether you took m more money than you paid out.
You didn't ha\e enough to go into it.

Mr. Saunders. AVith reference to the sahiries you are paying or
dividends you are paying — a man can tell whether he is prosperous
or not.

Mr. Dkakijohn. A\'hy. certainly.

INIr. Sauxdkks. Of course your answer to that must be yes.

Mr. Dearhokn. '^'es: a man knows whether he has got a dollar in
his pocket or not.

Mr. Saunders. A man can tell whether he is prospering greatly,
as compared with his condition of whether he is paying big dividends
or little dividends.

jNIr. Dearborn, ^'es: certainly.

Mr. Sainders. Now. when you ha\e all these factors it seems to
me it would be \ery easy to determine whethei- any particular rate
furnished great i)ros|)ei'ity or modeiate prosi>erity or just sufficient
to keep things going. When you all know those things I do not
think any man in this room would ha\e any difficulty to determine
whether it was a reasonable oi' unreasonable profit.

Mr. Dearborn. Sui)pose in our case we have a fleet of ships that
v.ere built recently and some other fellow comes along with a fleet
of shi})s. a dozen ships, that were built some time ago, and he was
satisfied with a mai-gin of profit that would luin us. You are not
going to deprive the [)ublic of those more economical ships ^

Mr. Saundeiss, Not a bit in the world. How^ does that hit you?

Mr. Dearborn. That hits me, because we are down and out.

Mr. Saunders. That is under the law of ethics of competition.

Mr. DEARBOitN. Suppose we had a dozen ships (I will reverse it).
Our ships were built some years ago. and I think now the axerage
cost of those ships would be perhaps $100 a ton less tlian the highest
price paid for shi])S recently, but, say, $?j5 a ton less than they are
paying foi- ships for delivery two years hence. Now, some man is
l)uilding ships perhaps for our trade. We do not know. They are
building a lot of American ships. If you fix a rate of freight based
upon this cost — my Lord, we are going to

Mr. Saunders. But that does not create any difficulty. If I follow
the thought you are suggesting, it is that, by reason of the fact that
you built your ships cheaper, you would be able at the same time and
at the same rate to i)ay nuu;h bigger di\i(lends.

INIr. Dearborn. No; if we were satisfied with a lower margin of
profit, we AYOuld cut the other fellow and drive him out of business.

]\Ir. Saunders. Very well ; do you think you ought to be alloAved to
do that, just simply to uiulercut for the ])urpose of driving somebody
else out of business^

Mv. Dearborn. If we are willing to do business at a low margin of
jjrofit, I should think we should be able to take the benefit of it.

The Chairman. That would be all right if, after ycui ha\e driven
the other fellow out. you did not raise the rates.

Mr. Saunders. That was to be my next (juestion. Do you bclievo
in that case those possibilities ought to be allowed ^

Mr. Dearborn. I am trying to point out the difficulties you are
trying to deal with. I really think it is uuw(U'kable. and it could
not be made equitable.

REGULATORY FKATURES OF SHIPPING BILL. 103

Mr. Saunders. Suppose, to follow out your suggestion — you say it
is unworkable; I do not see any great difficulty so far.

Mr. Dearborn. Then my words have had no effect upon you what-
ever-
Mr, Saunders. No; I do not put it that way at all, but 1 say the
illustration you have given is certainly solvable, so far as you ha\e
gone, because you have admitted you can tell whether you are making
big profits, reasonable profits, or little profits. I am taking that very
suggestion and taking that ship line you say was l)uilt a few years
!igo. that was built cheaply, and you are able, by reason of those
conditions, to make 100 per cent, whereas a fellow who is going into
the business now, with reference to the increased cost of his construc-
tion, operation, etc., could not make more than 10 per cent. Do you
think 3^ou ought to be allowed to go on and make 100 per cent and
tell me there is not enough authority and ability in the business world
to deal with a situation like that and say to you " (Jentlemen. 100 i)er
cent under these conditions is unreasonable and extravagant, and the
mere fact that you are able to do it does not justify the rashness and
impropriety of it."

Mr. Dearborn. In the underlying principles applied to an}' busi-
ness, every man knows no man can enjoy 100 per cent profit in his
business for any length of time.

Mr. Saunders. Don't take that illustration : make it r>0.

Mr. Dearborn. I say make a normal profit. We have to do busi-
ness on a normal profit, and then a great deal depends on the capi-
talization. You take a company that is capitalized conservatively;
that is, they have put their surplus earnings into new ships, and they
have allowed their companies to develop from surplus earnings; they
have not issued stock. Just think with how much smaller a margin
of profit they can do business.

Mr. Saunders. That is all right.

Mr. Dearborn. Take in our own case: We liave shi})s that cost
$20,000,000, and our capital is only $5,000,000. We luwe held the
dividends back and put our money into new ships.

Mr. Saunders. That is a problem for l)usiness men to deal with,
to see the extent to which you are prospering. Now, let me take that
very selfsame illustration. You take a line such as you have spoken
of, that has been a reasonable line, and you are making moderate
profits — and we all want to see prosperity — and conditions come
along in which, instead of making their usual normal dividends of
10 per cent, by reason of these conditions they can dedai-e for one
or two or three years 100 per cent dividend.

Mr. Dearborn, Yes.

Mr. Saunders. Now, is there any difficulty in detei'mining whether
that is an imreasonable rate?

Mr. Dearborn. But how are you going to start in to make a rate?
Are you going to consider the man who has had the courage to come
in and pay high prices for ships?

Mr. Saunders. So far as that is concerned, that does not enter
into the question of determining whether your rates are imreasonable
or not.

Mr. Dearborn. Suppose this man who has built the high-priced
ships and the man who has the low-priced ships are in the same
service.

104 REOULATORY FEATURES OF SHIPPING BILL.

Mr. Saunders. Yes.

Mr. Dearborn. It is not workable, I say, for one company to have
one rate and another company to have another rate.

Mr. Saunders. Oh, no.

Mr. Dearborn. The rates have got to be about the same.

Mr. Saunders. Of course. But you have in mind that you estab-
lish what for that business would be an unreasonable return. If
under that you made all the conditions fair, and you made the rates
indiscriminatory, if one man under the law of competition can not
live he must go out, as far as that is concerned.

Mr. Dearborn. The company in the stronger position wouhl l)e in
n position to monopolize then.

Mr. Saunders. No: that is exactly what we are going to i^revent
in this bill, because this law will prevent monopoly.

Mr. Dearborn. Judge, supposing that we are satisfied with a mini-
mum and reasonably low return on our cai)it;il or on our lo\v-i)ri('(Ml
ships.

Ml*. Saunders. Well?

Mr. Dearborn. If we made our rates based on that, it woidd i)ut
the other fellow out of business.

jNIr. Saunders. AVhat of it? So the public gets reasonable rates,
we are not concerned what the other fellow makes. We are not
concerned with that end of it.

Mr. Dearborn. No.

Mr. Saunders. We are concerned with this particular business be-
ing conducted on a reasonalile basis. I^'^pon that foundation all
prosperity is built.

Mr. Dearborn. As a matter of fact, as far as our own tratle is
concerned, to go back to that, the Interstate Commerce Commission
has allowed the railroads to make such low rates to meet the canal
comi)etition that our maxiuuim rate is fixed at a niinimmn. In
dealing Avith that case they allowed the railroads to fix a rate based
upon an out-of-pocket cost; that is to sa.v, ''What does it actually
cost you to carry this particular commodity? So much." And it
is about a dollar a ton in excess of that. "Well. y<ni can make this
rate." It is directed against this canal service. We who have to
pay a toll of almost a dollar a ton have to take that dollar otl'. and
naturally Ave have to take freight at a lower rate than the railroads.
You might say I am speaking to-day in rather an academic way.
So far as our oAvn business is concerned, we are so regulated now by
the Interstate C(>mmerce Commission's permission to the railroads
to meet canal competition that there is no danger of our ever charging
any excessive rates or showing excessive profits.

Mr. Sai-.ndehs. You then feel that you have been regulated ('

Mr. Deahbohx. We have been i-egulated.-

Mr. Sauxdkks. ^'ou have been i-egulated?

Mr. Deahboux. We have been regulated.

Mr. Saunders. And now, as a result of that, if you find that with
your rates you can make a profit

Mr. Dearborn. My dear sir, we are out of the business.

Mr. Saunders. What business are you speaking of?

Mr. Dearborn. The canal is closed. We were in business between
New "I'ork. PuL^'t Sound, and Hawaii. We had a fleet of 26 steamers.

REGULATORY FEATURES OF SHIPPING BILL. 105

Mr. Saunders, Do you mean you liave j^one out of that per-
manently ?

Mr. D?:akbokx. The canal closed last September.

Mr. Saunders. But that is temporary?

Mr. Dearborn. Yes; Ave had 17 ships. The canal remained closed,
and the prospects were that it would be closed for another year.

Mr. Saunders. What I am getting at is, you are not out of it
permanently?

Mr. Dearborn. No; but in ser\'ing ourselves and enjoying these
very high rates in going into the foreign trade we are doing some-
thing for the foreign trade, too. Judge Alexander said to me four
or five days ago, " Why don't you go into the South American trade?''
We have 13 ships in the South American trade, and I assure you we
are not making any sacrifices.

The Chairiman. Of course you are not. I would like for you to
explain what foreign trade you are operating in.

Mr. Dearborn. We have one ship going to Vladivostok, one going
to France, and one going to South Africa.

Mr. Saunders. I thought you meant the closing of the canal had
put you out of business.

Mr. Dearborn. No ; it served us well.

Mr. Saunders. It put you in a better business?

Mr. Dearborn. Yes; I am not making any complaint.

Mr. (treene. Is not that on accoimt of the abnormal conditions?

Mr. Dearborn. Oh, yes.

Mr. Greene. Ordinarily you would not have been there.

Mr. Dearborn. I take it that if you had power to-day to fix these
rates that you would expect your board to reduce the present abnor-
mal rates of freight?

Mr. Hardy. We certainly would.

Mr. Dearborn. That is what you would expect. Judge Hardy, and
let us see hoAv that would work. The rates ruling from Ncav York
to England and France are $25 a ton. You want to reduce those
rates to $10 a ton. Who gets that? The ammunition maker. Noav,
getting I'ight doAvn to the question of interest, you are more interested
in the steamship company than you are in the ammunition man.

The (^iiAiR:NrAN. But 00 per cent of our foreign trade, or more than
that, is in food products.

Mr. Dearborn. I knoAv : but in the products of munitions there is
a case in hand.

Mr. Hardy. When you have raised the price on our cotton shippers
from $1.50 to $15 a bale. Avliere it did not go into a Avar zone or get
into any danger, not including insurance or anything of that kind, Ave
think something ought to be done.

Mr. Dearborn. We think it is terriffic; but, at the same time, the
cotton man is getting as much for his cotton: the other fellow is
paying for it.

iVIr. Hardy. NotAvithstanding the fact that he is paying for it,
when you raise the price of cotton to the point Avhere peo])le Avill not
buy you can not get the consumption of it; those people can not
consume it.

The Chairman. He thinks the cotton man oyght to be satisfied
with bottom prices where the steamship man gets the Avar prices.

Mr. Dearborn. Well, the other felloAv fixes the price.

106 HKGULATORY FEATURES OP' SHIPPIXO BII.I..

Mr. IIahdy. You lune said the other fellow fixes the price?

Mr. DEAnu<ii;x. The American ships are in the minority; the for-
eign shii)s fix the price.

Mr. IlAifDY. 1 am talking al)OUt the man who fixes the price to the
shipper.

Mr. Ei),Ai(»Ni)s. Mr. Dearborn, let me ask you a (luestion. What
would you do if this boa id was now in existence to-day. and where
freight is $-25 a ton should reduce it to $10 a ton : Avhat would you do
with your ships? Would you continue to run them at $10 a ton?

Mr. Deauborn. In the first place, I would look out and see if we
could not get freight somewhere else.

Mr. En:M()Ni)s. You would see if you could not get freight froui
Argentina to London '.

]\Ir. Di:aiju()1{x. Yes.

Mr. Edmonds. Or from Vancouvei- to China?

Mr. DEAur.oHX. Yes. sir.

Mr. Edmonds. Or from Vancouver to South America?

Mr. Dearboun. Yes. The first effect Avould be, under the high rates
now — there is more freight than the ships can cari-y, and thei-efore if
3^ou are going to i-educe our rate on this — Ave are not engaged our-
selves in taking freight: we have time-chartered oui- ships

Mr. P^D:\roNDs. I am asking you. ns a shipowner, what would be the
natural thing to do?

Mr. Dearborn. As a shijiowncr. 1 would go where I could get the
highest price.

Mr. Edmonds. You Avould not care whether the ships run from Ar-
gentina to Australia, as long as you got the highest price?

Mr. Dearborn. Oh, no.

Mr. Edmonds. In other words, yon Avould sto]) running them in
this traffic and go wliei'e you could get the highest prices?

Mr. Dearborn. Oui- duty to our stockholders is to get the highest
price Ave can.

Mr. Eoave. Do vou tliink that if Judge Hardv had a l)ale of cotton
to sell he AA'ould sell it for $10 if he covdd get $-20?

Mr. Dearborn. I have more respect for .Judge Hardy than that.

Mr. Hardy. You understand that I said that I did not blame them
foi' charging $25 a ton if they can ^i^i it.

Mr. Dearborn. No.

Mr. Hardy'. And I do not blame the railroads for charging three
times the freight rates they do noAV. but I do say the Auierican peo-
ple are hardly capable of self-govei-nment if they permit the public
functionaries, the quasi-public institutions like railroads and great
steamship linos, to charge unrestricted i-ates. It is not that T blauie
the raiboad lines

Mr. Dearisorn. I understand.

Mr. Hardy (continuing). And the steamship lines for chargingtwice
as jHuch for freight, but if Ave as a people have no poAvei- to regulate
those freights under reasonable conditions we are a Aveak people, and
if Ave have the i)OAver and do not use it it is our fault and not the fault
of the people Avho charge those rates.

Mr. Dearborn. Let us take a concrete case. Suppose the board
was to reduce the rates on a shij); say Ave take a rate of freight and
reduce it to $10 a ton. Avho is going to get the benefit? vSuppose the

EEGULATOKY FEATURES OF SHIPPING BILL. 107

shipper gets the benefit of it (thi'ow out the idea or theory tliat the
purchaser or receixei- on the other side pays the price), or suppose
the farmer gets the heuefit. or supjiose the manufacturer gets the
benefit, are you going to reguhite his price?

Mr. Hardy. Somebody has got to get it.

Mr. Dearbokx. Is not he getting $10 a ton more than he sliould.
Why shouhl the money be taken ont of the shipowner and trans-
ferred to the manufacturer or the farmer?

Mr. Hardy. The same question could be asked, and was asked by
the railroads when we started to regulate them, and every railroad
in the country kicked like a bay steer over the idea that the (xovern-
ment should undertake to regulate its rates.

Mr. Dearborn. Yes, sir.

Mr. Hardy. To-da.y the railroads themselves realize tliat it has
been a great benefit to them.

Mr. Dearborn. Yes. sir.

Mr. Hardy. The public, I think, has not gotten as much benefit
out of that as the railroads.

ISfr. Dearborn. I think the railroads have really gotten more out
of the interstate-commerce act. Why? Because it has jjrevented
them from comjieting.

Mr. Hardy. Exactly; that is the idea. Now, the difference is
simply this: While to-day competition is desired there has been a
restraining hand of the Government to keep competition from being
absolutely oppressive. The difference is that your shi]) lines on the
ocean in the international and coastwise trade have formed an in-
finite number of combinations, and they have the power of destroy-
ing competition without any restraining power of the Government,
unless we pass some bill like this.

Mr. Dearborn. Oh, but the limitation of ship combinations are
so great as compared to the unlimited opportunities of railroads, if
tliey had a free hand, that there is no comparison.

Mr. Hardy. It is just possible that you can not oppress quite as
much by combination; but it has been demonstrated through two
years of hearings before this committee that on the Lakes, in the
coaostwise, overseas, and everywhere your regular lines are in vast
combinations from the Mediterranean to NeM' York and everywhere,
and that they by conferences fix their rates, their divisions, the earn-
ings, and tlieir poolings. You have no competition of that kind.
Competition has practically died out, except a few tramp steamers.
And then, that being the case, are you going to \\i\\e combination
Avithout iiny lestraiut at all?

Mr. Dearborn. But. Judge, just think Avhat a small investment it
takes to break up a combination of ships. You can not break u]^ a
combination of railroads. You will admit that is out of the question,
where Ijillions of dollars are involved.

]Mr. Hardy. I say the evidence is before us that you can not break
up these combinations on the oceans.

Mr. DEARBOitN. If there are four or five lines in a combination on
the ocean charging exorbitant rates you can go in there with four
or five shii)s and blow it wide open.

Mr. Hardy. Did you hear old man Bull's testimony about his
difficulties? He got there finally. He is on the inside now.

Mr. Dearborn. How did he get there?

108 REGULATOKV FEATURES OF SlllFl'INi; BILL.

Mr. Hardy. He got there by persuading them to take him in.

Mr. DEARBOR^'. I understand that okl man Bull was taken in and
he made them buy him out; then he became an independent and
made them take him in again.

Mr. Hardy. He has had quite a lot of ups and doAvns, and any
other man Avho e^er tried to run against this crowd has to have the
same experience that he had as to the methods thej' pursue.

Mr. Dearborn. Why does not this committee, l3efore it commits
itself to this bill, have a subcommittee make a study of the prac-
ticabilit}^ of fixing rates.

^Ir. Hardy. How long, how many years, would you ha\e us make
a stud\'? This committee has been studying this (juestion for the
past two or three years.

Mr. Dearborn. My Heavens, and here I am coming here repre-
senting our compan}^, which is in the foreign trade, and in our trade,
as our rates are fixed, they are low by reason of the competition of
the railroads. I do not think this bill is going to aifect us.

Mr. Hardy. Do 3'ou mean to say that the transcontinental rail-
roads compete with your ships through the canal fi'om Xew '^'oi-k to
San Francisco?

Mr. Dearborn. Oh, they would not take our business away.

Mr. Hardy. They can not compete with 3'ou ?

Mr. Dearborn. Yes; they can reduce their rates.

Mr. Hardy. Can they carry coal for less than twice what it costs
you to carry coal?

Mr. Dearborn. Oh, yes; oh, my, yes.

Mr. Hardy Does not the freight cost you half as much to carry it
from New York by water to San Francisco as it does the trans-
continental lines?

Mr. Dearborn. But, I say, the rate of freight they are making —
I will give you an example: The transcontinental lines are carrying
canned goods at $8 a ton.

^fr. RoM'E. You mean from Seattle to Xew York ?

]\ri-. Dearborx. From San Fi-ancisco to New York, foi' $.'^ a ton:
and we natui-ally have to take it at a lower rate.

Mr. Burke. Does not the difl'ereuce in that cost arise by reason of
the question of time? In the transportation of canned goods and
fruits, the railroads make better time, and for that reason the
.shipper is forced, in oi-der to i-each the market while his goods are
in good c(mdition. to use the railroads.

Mr. Dearborn. Oh, no; our time is satisfactoi-y.

Mr. Burke. How long does it take you to transport a cargo from
San Francisco to New York?

Mr. Dearborn. Twenty days.

Mr. Burke. How long does it take a fast freight?

Mr. Dearborn. Oh, 12 to 25 days, so that the difference in time
does not really count very much.

Mr. KowE. What Avere they charging before the canal opened?

Ml-. Dearborn. Fiffhtv-five cents a lumdred.

Mr. Hardy. That was $17 a ton?

Mr. Dearr.orx. They reduced the rate of freight from a maximum
of 85 cents a hundred to a maximum of 40 cents a hundred. The idea
of the canal was to i-egulate transcontinental rates, and it certainly
has.

REGUI.ATOin' FKATUKES OF SHIPPING BILL. 109

Mr. Hardy. That simply means that the raih-oad lines have been
allowed to make the intermediate points pay for the low rates to vSan
Francisco.

Mr. Dearbokx. Yes; there is a big complaint now from Spokane.
Yon know the rates for the longer haul are nnreasonably low.

Mr. Hardy. That does not mean that the railroads can compete
with yon. but by taxing the intermediate points they are making low
rates which compete Avith yon.

Mr. Dearborn. Yes; the railroads can make it up on their aA^erage.

Mr. Hardy. I only hope the time will come Avhen that average Avill
be regulated, too.

Mr. Edmonds. Mr. Dearborn, yon are bringing sugar from Hawaii
to San Francisco and shipping it to NeAv York by rail, and to Phila-
delphia, are you not?

Mr. Dearborn. We are.

Mr. Edmonds. What is the difference betAveen the cost of that
service between HaAvaii and Ncav York or Philadelphia, this way,
and through the canal?

Mr. Dearborn. Well, Ave had a canal rate of 47^ cents a hundred.

Mr. Edmonds. From Hawaii to New York?

Mr. Deiarborn. Yes; and Ave are paying the railroad GO cents a
hundred from San Francisco.

Mr. Edmonds, Sixtj^ cents a hundred?

Mr. Dearborn. That seems entirely out of line Avith the canned-
goods rate, does it not, of 40 cents a himdred?

Mr. Edmonds. Yes: it does.

Mr. Dearborn. We are contributing tAvo ships to carry sugar from
the islands to San Francisco free — donated.

Mr. Edmonds. You are doing that w^ork for nothing?

Mr. Dearborn. Why? Because it releases 13 ships for this other
and better business.

Mr. Edmonds. You are carrying sugar free from HaAvaii to San
Francisco and paying the railroads 60 cents?

Mr. Dearborn. Forty-seven and a half cents is our rate and 60
cents is the railroad rate.

Mr. Hardy. I do not understand Avhy you carry this sugar to San
Francisco for nothing.

Mr. Edmonds. The canal is closed and they were under contract to
carry this sugar and get it over to the refineries on the eastern coast.
They have agreed to carry, temporarily, sugar from HaAvaii to San
Francisco for nothing, and the railroads are now charging, as he says,
60 cents to carry it across the continent. That is $4 a ton more than
they are charging for canned goods.

Mr, Dearborn. And it is much better freight to handle.

Mr. Saunders. They are not really doing it for nothing then ; they
are doing it in order to compl.y with their contract.

Mr. Dearborn. It releases iS ships, and it is good business.

Mr. Saunders. You are not doing it for nothing, then.

The Chairman. But you Avould have brought your sugar around
the Horn while the canal Avas closed if it had not been for these large
rates in other trades of Avhich you are taking advantage?

Mr. Dearborn. We would liaA'e kept in the general service after the
canal closed the last of last September, or continued our Magellan
serA'ice. But it is a longer route, 50 days compared to 20. Avhich made

110 HKGULATORY FEATURES OF SHlPPlNd HILL.

it undesirable; and. furthermore, the embariro on traffic whicli the
lines put on all freight between Chicago and Xew York made it so
difficult for us to get it through and difficult to get freight to our
mills in our westbound service.

There was a prospect of the canal remaining closed, as Col. Goe-
thals stated not long ago, for six months more, or perhaps for a
year more, so we said, "What is the use? Why should we make a
sacrifice?" Our biggest shipper in Seattle, the biggest hardware
concern, Avho has been friendly to us. told us : " We liave no use for
your service now."

Mr. Edmonds. AA'e had the head of the Canneries Trust from San
Francisco before us the other day, one of 3'our interests, complaining
very bitterly about freight rates.

Mr. Dearborn. There are no rates to complain about.

Mr. Edmonds. I just wanted to see whether he had much to com-
plain about Avhen he gets $8 a ton across the continent and the San
Francisco sugar men have to pay $12.

Mr. Dearborn. That is from San Francisco. The rate from
Seattle is a little higher.

Mr. Edmonds. What I wanted to bring into the hearing was that
he paid about half for the fruit in San Francisco this year that he
did last year on account of the Avar.

Mr. Dearborn. He did not appeal to your sympathy, did he?

Mr. Edmonds. Not particularly to mine. I think he is a kind of a
skin, myself.

Mr. Greene. Are you familiar with the Lake rates, because a sug-
gestion was made here, I think, in the conversation that the freight
rates on the Lakes had been exorbitant? I thought maybe you knew
what they Avere.

Mr. Dearborn. No; I am not familiar with them at all.

Mr. Greene. At present, without this law being in existence, if
you made a contract for a portion of your cargo and ,you wanted to
fill up the balance you could do so, and at any price you could get,
so as to carry a full cargo?

Mr. Deareiorn. Yes.

Mr. Greene. What is your idea as to your ability to do that to-
day if this hnv were in effect?

Mr. Dearborn. Under this 10-day notice?

Mr. Greene. Yes.

Mr. Dearborn. Oh, it would operate very much against us; it
would deprive us of an opportunity that might be available, and it
Avould deprive the shipper of that opportunity to get that space at a
reduced rate.

Mr. (treene. Y^our vessel, under the law as it is drawn now, if you
were under that law, you could only carry a part cargo, because you
would be unable to name a price on which you could fill up your
cargo. And, really, the question Avould be whether you could name
one price for a cargo, for the part you had loaded, and then name
another price on caigo to fill up the balance of your ship, under this
bill, in your judgment?

Mr. Dearborn. Y^es.

jNIr. (treene. Do you think you could?

IVfr. Dearborn. No; it would very much hamper ships, which
would have to go out with that space.

REGULATORY FEATURES OF SHIPPING BILL. Ill

Mr, (iREEKE. Unless you could get into communication with the
shipping board ?

Ml". Dearborn. Yes.

Mr. Greene. And if you were a long distance away you would not
be very apt to do it, unless 3'^ou worked the wireless?

Mr. Dearborn. No. What we have been hoping for for years is a
merchant marine, and, my Heavens, it has come !

The Chairman. Where is it?

Mr. Dearborn. A hundred ships building in this country, and a
good many have been transferred to the flag, and capital interested
in ships and going into ships as it never has gone into it before.

The Chairman. Is your comi)any building any more ships?

Mr. Dearborn. We have just built three ships. We were consider-
ing building two more ships carrying about 13,000 tons each.

The Chairman. What other companies are building ships to put
under the American flag?

Mr. Dearborn. Why, the Grace Co., I believe

Mr. Sherman. Are building four.

The Chairman. Are they going to put them under the American
flag or under a foreign flag?

Mr. Sherman. Under the American flag.

Mr. Dearborn. I think all the ships that are built in this country,
Judge, are likely to stay under the American flag.

Mr. Greene. PIow^ about the Morse Ship Co.?

Mr. Dearborn. Which Morse?

Mr. Greene. Charles W. Morse.

Mr. Dearborn. Was Mr. Morse taken seriously?

Mr. Greene. A gentleman came here and testified before us that
Charles W. Morse controlled three or four shipyards and he is build-
ing ships at lightning speed, and could furnish the Government as
many vessels as we wanted.

Mr. Edmonds. And that he had 25 ships hidden away somewhere.

Mr. Dearborn. I think it is beneath my dignity to discuss Mr.
Morse.

Mr. Greene. I Avas not discussing Mr. Morse. The gentlemen I
was referring to claimed that he controlled several shipyards, and
named one at Noack, Conn.

Mr. Dearborn. Oh, there are a number of ships being built on the
Lakes for ocean service.

Mr. (treene. He said Mr. Morse was building a large number of
vessels and could get a dozen or 25 ships and could furnish the Gov-
ernment with them at once. I wanted to know if they were floating
around in the air.

Mr. Dearborn. I know a concern that is building four ships in
Bath, at the old Sewell yard there. We were talking about building
two steamers, and to tell you the truth, it came up to us about the
menace of this rate regulation. I have been in this business for 42
years. I Avent into it as a boy and grew up in the business, and my
partner w^ent into it as a boy, but, my Heavens, if we have got to
be haled to Washington and to be controlled as a railroad, and with-
out the compensating advantages that a railroad has. You have
got to consider the difference between the railroad and the ship busi-
ness. The steamship companies are built up with private capital.
You know hoAv the railroads were built up. You know it probably

112 ItKGri.ATOKV i'EATLKES OF SHIPPING BILL,

(lid not cost the promoters an.Ything. A const ruction company made
a contract and sold the bonds, and the stock cost the promoter
nothing. That has been the history of raih-oads.

Mr. Greene. And they have had large land grants.

Mr. De.vi!Boi!.\. In the steamship-owing business the people have
gone into their pockets, into their jeans, and put their good money
into it. AVhen 1 first went into this business IT years ago I risked
every dollar T had in it.

Mr. lI.MtDY. Did not the peoi)le who furnished the money to build
the railroads lisk their money in the railroads, too ^

Mr. Dr-AitnoKN. 'J'he promoteis did not care for that.

Mr. Haiu)y. Haven't you had some promoters in the steamship
business '(

Mr. Dearbokx. I think we have had a few; there have been a few
I suppose. I think there ha^"e been a few promoters in the steamship
business.

Mr. Sauxders. As far as the people who paid for stock in the rail-
road company are concerned, they had to go down in their jeans.

Mr. Hardy. Is it your idea, Mr, Dearborn, that the provisions of
this bill, in so far as they relate to these interstate-connnerce carriers
by water, would put you and the other interstate carriers out of
business: that you ^^ould lune to letire from that trailic?

Mr. Deahhorx. No; I do not imagine it would.

Mr. IIakuy. You will be able to conduct business in the interstate
traffic even if this bill passes ?

Mr. Dearborn. Yes; but I think we a\ ill be very much hampered.

Mr. Hardy. Your idea is that the opportunity^ for profit in the
future would not be as great if what you would conceive to be the
hampering provisions of this bill were enacted into law as they are
at present?

Mr. Dearborn. As a matter of fact, I say that the big concerns
with a great number of ships in a regular service would probably
stand the operation of this bill better than the small ships. Now, it
conies down to the question whether the tramp is to be regulated as
well as the regular line.

Mr. Hardy. You have tramps in the interstate business?

Mr. Dearborn. Yes. I claim the tramp is a great natural rate
regnlator.

Mr. HAitDY. AVhat I am trying to get at now is the interstate com-
merce traffic and not the foreign traffic,

Mr. Dearbokx. I am talking about the interstate traffic.

Mr. Hardy. Are there any tram]:)s to amount to anything in our
interstate ti-affic?

Mr. Dearborx. Between New York and San Francisco; oh, my,
yes. There are so many shii)s that are carrying lumber from the
Pacific coast, you knoAv, and seeking a cargo back. We had all kinds
of competition with tramp steamers.

Mr. Hardy. So far as the other coastwise traffic is concerned, the
bulwark of the interstate-commerce traffic by water, it is not con-
ducted by what you would call, properly speaking, tramp ships?

Mr. Dearp.orx. No. It is mostly short- voyage business; voyages
of three or four days, with sailings every other day, carrying pas-
sengers and high-class freight. A ti-amp can not go into that busi-
ness.

REGULATORY FEATURES OF SHIPPING BILL. 113

Mr. Hahdi-, You take those fellows who run on a pretty regular
schedule, with definite trips, there would be no difficulty in their
conforming to the requirements of this law ?

Mr. Dearborn, No; I do not think so.

Mr. Hardy. That would not be hampered ?

Mr. Dearborn. No; because under their arrangements with the
railroads, a good deal of their freight goes to interior points on th«
railroads.

Mr. Hardy. You say they are already under regulation^

Ml. Dearborn. Yes.

Mr. Hardy. Then this bill would not affect them at all^

Mr. Dearborn. I do not think it would affect them at all, but the
conditions are so different in different trades.

Mr. Hardy. There is an illustration you observe in reaching this
very commerce you speak of. there is a class of business going on,
apparently prospering, that is already required to conform to rea-
sonable rates.

Mr. Dearborn. Their position is the same as ours. So far as fixing
the maximum rates, the railroads with which they are in competi-
tion really fix the maximum.

Mr. Hardy. And their rates are fixed for them by the Interstate
Commerce Commission ?

Mr. Dearborn. They are fixed for them by the Interstate Com-
merce CommissioiL

Mr. Hardy. So you get back to Government regulation ?

Mr. Dearborn. Yes, sir; indirectly.

Mr. Greene. Do you tliink there is any way possible under this bill
to regulate the foreign shipowner in the transaction of his business in
competition with the American shipowner?

Mr. Dearborn. I understand the i)urposes of this bill are to regu-
late both foreign and American.

]Mr. Greene. How far could that be carried on?

Mr. Dearborn. I have said, Mr. Greene, that

Mr. (iREENE, In competition between London and any points in
Brazil, or in Chile, or anywhere else, it could not regulate that at all,
could it?

Mr. Dearborn. No; I do not see how a steamship manager here
could be responsible for any rates made l)etween London and Brazil.

Mr. Greene. That is, tliis shipping board would not be able to
regulate any of their rates in c(!mpetition with the American ship-
owner i

Mr. Dearborn. No.

Mr. Greene. Or if a Canadian shipowner, he could not be regu-
lated at all. in shipping across the water?

Mr. Dearborn. No.

Mr. Greene. But our shippers would be regulated and ordered as
to what they should do, and the other ships would said free?

Mr. Dearborn. Oh, they would be absolutely free, and you would
have a situation where if these ships could get business from these
other ports, the shijis would be withdrawn. Sui)pose. for instance,
this board fixed a rate, say, $15 a ton lower than the going rate.
These ships are not going to have these rates fixed arbitrarily. A
ship is worth more than that. It is true it is an exorbitant rate,

38534—16 8

114 REGULATORY FEATURES OF SHIPPING BILL.

but if they could not get that rate they would go to where they could
get better business. Of course, there would be certain adjustments
in this buisness. AVhere ships Avent from our trade to the other
trade, it would have a tendency to lower the rates in the other trade.
There is one thing a shij) can do that a railroad can not do. a ship
can strike.

The CiiAiRMAX. You are assuming that this board would be so
stupid in administering the law that they would force a strike?

Mr. Dkai{bok>\ I know, judge, but you read the law and read the
power. Perhaps this Avill be administered in a reasonable way, but
you are going to have all kinds of individuals on the board, and
you will hereafter.

The Chairman. AA"e never would haxe made one single stej) in
the direction of regulating railroads, or light companies, or street
railway companies, or any other public-service corporation, if heed
had been given to the objections you urge now.

Mr. Dearborn. But you do not seem to dilferentiate l»etAveen the
status of a railroad and a ship.

The Chairman, I think T do. T think this boai'd would recognize
the difference, too.

l\fr. Dearborn. What do we get from the State; what does the ship
get from the State?

The Ciiair:\ian. You get a great deal from the State.

Mr. Dearborn. No more than a manufacturer.

The Chairman. Yes; a manufacturer gets from the State, too.

Mr. Dearborn. He is in the State all the time, and when a ship is
beyond the 3-mile limit she is away from the State.

Mr. Hardy. Let me call your attention to the fact that this (Jov-
ernment si)ends millions every year imi)i'o\iiig rixcrs and harbors,
and the ships get it; somebody gets it.

The Chairman. The State is furnishing money out of which you
get commerce; it has deepened the hai-bors whei-e you get your com-
merce, and it is performing all those sei'vices for you. And you
have a mistaken idea about the ship being like a manufacturer; trans-
portation is sim])ly an instrument of counuerce. and those nations
that recognize that fact are the ones that are progressing most. Ger-
many has recognized that transportation is siui])ly an instrument of
connnerce, ancl controls it, too. Hence they have State-owned rail-
roads and State-owned canals, and evei-ything else: and exerythiug is
regtdated.

Mr, Deakuokn. T believe, as Mr. Uush belie\e>. and others, that capi-
tal going in the shipping field would feel that it is a great menace to
them. You do not think that way.

The CiiAiiiMAN. I have been on this couunittee for many years
past, and there have never been any suggestions uiade that there have
not been spooks raised; it is a menace in one way or a menace in souie
other way. But it does not make any difference whether there is any
menace ov not, whether there is anything d(me or not, you have not
developed your merchant marine and foreign trade and you are just
as impotent to-day as you ever were.

Mr. Dearborn. No; it is being developed. Take our case, for
instance. We are prospering. I am looking forward to going into
the foreign trade and building ships foi- the foreign trade. T think

REGULATORY FEATURES OF SHIPPING BILL. 115

we have more ships now than are required for our own trade. They
are already in the foreign trade now, but that is an emergency, and
we do not deserve any credit for that.

Mr. Sauxders. kSuppose you were on this board, Mr. Dearborn —
and it has been suggested you might very well be on the board, as it
is contemplated having men of your type and experience on the
b( :ird — what is there in this bill that would compel 3'ou to administer
it in such a way as to hinder the development of American couunerce?
A\nir.t is there in this bill that if you were confronted with an inter-
pi-etation of it you would have to put such an interpretation upon it
that it would operate as a handicap to American commerce? Can
you lay your finger on any section there that you would have to so
construe as to hinder American dexelopment ?

Mr. Dkarborx. I would say, right ort'. what is my understanding
of ;i reasonable rate. AVhat is it?

Mr. Saunders. We will leave that to you.

Mr. Dearborn. What are you going to allow these ships on the
investment?

Mr. Saunders. We will say that you ask that question of yourself,
and your colleagues on the board ask the same question. In answer-
ing that ({uestion you will get all the factors that enter into the equa-
tion. This would ])ermit you to do that, would it not? Then would
you not construe that (juestion of what is a reasonable rate. ha\ing in
mind those elements, in such a way as to develop and forward
American industry, or would you feel yourselves constrained to so
construe that as to destroy and break down American industry?

Mr. Dearborn. 1 think I would have to come to you as one of the
legislators and get your idea.

Mr. Saunders. No; it would be up to you to construe the bill.

Mr. Dearborn. You initiated this bill, and I shoidd have to come
to you as the source of power.

Mr. Saunders. You never go to the men who passed the law for
its interpretation.

Mr. Dearborn. Then I would say to one company : " You are
making 30 per cent now. What is the history for the last six years? "
" I didn't make l)ut 5 per cent." " T think you are entitled to a con-
siderable profit for a few years."

Mr. Saunders. That might be a proper interpretation.

Mr. Dearborn. I should hate to ha\e the job of interpreting that
bill.

Mr. Saunders. So that you ^^ ould be vested with the power — and
that is all I am saying — to construe that law in such a way as not to
destroy but to build up.

Mr. Dearborn. I can not imagine any board having the purpose
of this board Avishing to destroy this industry.

Mr. Saunders. Then the menace suggested in that respect would
seem to be eliminated.

Mr. Dearborn. Take that rate-making poAver out, Judge. As ap-
plied to ships the conditions of supply and demand and competition
always fix the rates on ships as reasonable freights — T am not speak-
ing of practices — and, as far as the rates of freight in the last 15
years are concerned, that has been true,

Mr. Saunders. If you are charged with the interpretation of the
law under these conditions that T have supposed, having in mind nil

ll(j HEGUl.ATORV FEATURES OF SHIPPING BILL.

of these things, if you could not interpret these things so as to build
up and forward, you would not interpret them so as to destroy.

Mr. Dearborn. Certainly not.

Mr. Saunders. Then, because they have the power, it does not
mean that it has to be abused.

Mr. Dearrorx. Do not give anybody a power that might be abused.

Mr. 8auni)ei{s. Did you ever realize that the poAver that the Su-
preme Court of the United States has can be so utilized as to de-
stroy? Our ^•ery institutions could be destroyed through interpreta-
tion by the judges of the Supreme Court.

Mr. Dearborn. Well, it is a judicial body.

Mr. Sai^nders. If it is just the i)ossibility, you need not be dis-
turbed about that.

Mr. Dearborn. It is a judicial body.

Mr. Saunders. We are creating a judicial body here.

Mr. Dearborn. If you put me on this board. I do not think T
would have a judicial mind.

Mr. Edmonds. Don't worry, Mr. Dearborn: we liave promised all
these positions already.

Mr. Dearborn, I am so sorry.

Mr. Hardy. I just want to call Mr. Dearborn's attention to one
thing. You said ctmipetition regulated trade and freights in the
last 15 years?

Mr. Dearborn. Yes, sir.

Mr. Hardy. I do not think you could possibly have read the evi-
dence taken before this committee in the investigatitm of the Ship-
ping Trust.

Mr. Dearborn. I have read some of it.

Mr. Hardy. If you do, you will find you are vastly nustaken about
competition fixing the freight rates.

Mr. Dearborn. Well, T made some exceptions to that, if you will
1 emember.

STATEMENT OF MR. PHIIIP A. S. FRANKLIN, NEW YORK, N. Y.,
RECEIVER OF THE INTERNATIONAL MERCANTILE MARINE
AND PRESIDENT OF THE ATLANTIC TRANSPORT CO.

Mr. Franklin. Cientlemen. I h\\\e not i)repai('(l any statement or
anything of that sort. I thought in the general discussion of the
mattei", if I could assist in giving any information T would be glad
to do my best in that direction, i-athei- than attempting to make any
l<!ng statement regarding the l)ill.

As previously stated to you. the conditions in shipping to-day are
{disolutely abnormal. The United States has an unheard-of oppor-
tunity to go into the general foreign shipi)ing business, and I believe
that it will be taken advantage of unless some legislation is passed
that will be too discouraging; and I am (|uite sure you gentlemen do
not want to do anything of that sort.

The seamen's bill is working at the moment in some ways that
are exceedingly delrimental. and T strongly ui'ge that you giv<> that
some consideration.

As regards bill 143;^j7. as far as the rebate policy is concerned, we
are in accord. As far as fighting ships are concerned we are in

REGULATORY FEATURES OF SHIPPING BILL. 117

accord; Ave see no objection to that. As far as the filing of agree-
ments is concerned we see no reason why this should not be done, ex-
cept that we feel that if the agreements are filed they should be, if
not disapproved, then excepted under the provisions of the act of
Congress approved July 2. 1890.

The Chairman. How is that now. Mr. Franklin?

Mr. Franklin. In other words, if we file the agreements with this
commission, and after an investigation those agreements are found
to meet with the approval or, rather, they are not disapproved by
the commission, then we believe they should be excepted from the
provisions of the act of Congress approved July 2, 1890.

Mr. Hardy. We had that so worded as to make it apply to the
(►riginal agreements.

Mr. Franklin. The original agreements, Mr. Hardy, or any modi-
fication of them, because you give a right later to have them modified,
and if they do not meet with your a]iproval to have them corrected.

Mr. Hardy. Onlj' in making corrections, we want some stability
in the rates. I think we would agree on that if we could get some
language to eft'ect it. There is to be, first, a rate fixed; that has
got to be fixed.

Mr. Franklin. This does not make any instability in the rate
fixing, Judge Hardy.

Mr. Hardy. I mean the agreement is filed.

Mr. Franklin. The agreement is filed.

jVfr. Hardy. Until that is disapproved, if it is the orignal agree-
ment, possibly it ought to be allowed to prevail; a reasonable time
ought to be given in which to operate without approvah But if
when once approved a subsequent modification or correction should
not be made without first obtaining the approval of this board. If
they could change them instantaneously from day to day, there would
1 e no use of the board supervising.

Mr. Franklin. I think your bill provides for that, because it says
a little later on, some place — I do not know where it is — ^that if the
agreement should be modified or altered, those modifications have to
be filed at once.

Mr. Hardy. You mean before they go into effect ?

Mr. Franklin. Yes.

Mr. Saunders. That is page 5, line 15.

Mr. Franklin. We do not object to that in the slightest. These
modifications have got to meet with the approval of the board. All
we say is we would like to knoAv, if we file an agreement, whether it
meets with the approval or disapproval of the board in a reasonable
length of time.

The Chairman. And shall continue in force until approved or
disapproved by the board.

Mr. Franklin. If they disapprove, whatever they disapprove of
Avill be corrected, and then we will not be protected under the pro-
visions of the act of Congress of July 2.

Mr. Byrnes. What page are you referring to now ?

Mr. Franklin. I am referring to page 6.

Mr. Byrnes. On page 6 does it not say all such agreements, ar-
rangements, understandings, and conferences shall be approved or
disapproved, and when approved, shall be excepted from the pro-
visions of the act?

118 KEGULATORY FEATURES OF SHIPPING BILL.

Mr. Franklin. Yes; but what I am getting at is '•until tliey are
approved." They might be approved two years from now, or some-
thing of that sort. Unless they disapi)rove them, automatically
they should couie under the exception.

The Chairman. I do not think there is any disagreement be-
tween us about that matter, and if you will suggest some appro-
priate language there, we will consider it.

Mr. Saundeus. We think that is the meaning of the bill.

Mr. Franklin. If that slight modification is acceptable

The Chairman. AVe have discussed that in the committee since the
bill was introduced and have it under consideration now.

Mr. Franki^n. We would like to know where we stand just as
quickly as possible.

Mr. Saunders. In other words, )^ou Avould like something like this,
if I catch your thought: When these agreements are filed, that the
same shall continue operative until disapproved?

Mr. Franklin. That is quite right — as operative until disap-
proved they shall escape from the act of Congress of July 2.

Mr. Hardy. But when once approved shall not be changed then
without first obtaining the approval of the board?

Mr. Franklin. That is right.

Mr. Hardy. We have been trying to get that in.

Mr. Franklin. That is right.

Mr. Hardy. That is what I started to say was our purpose.

Mr. Franklin. That is only reasonable, because we might make
some alteration that would entirely change the whole thing.

Then, Ave feel that no complaints should be investigated unless by
sworn complaint or some other similar form of protest. The traffic
is very vohiminous; you are dealing with a great many different
people. As regards New York, for the sake of argument, we are
dealing with practically everybody who use all the railroads run-
ning into New Y^ork. Now, if j^ou are going to have an investiga-
tion on simply somebody's suspicion that something is being done or
something is not being done — in other w^ords, anything that is of suf-
ficient importance to be investigated ought to be of sufficient im-
portance to the person who wants the investigation to make a sworn
complaint.

Mr. 8aunders. In other w^ords, in line 10, you suggest the addition
of the word " sworn " ?

Ml'. Frankein. Sworn.

Mr. Byrnes. You also want to strike out the words ''that they can
make the investigation u])on their own initiative"?

Mr. Franklin. Yes: that follows. Now. as regards the rate-
making paragraphs, I think they are 4. .5, and (i. We feel that the
boai'd should have no genei-al rate-making ])ower; that the condi-
tions in the foreign trade are such that if this ])ower is delegated to
them it Avill be luoi-e disadvantageous to the shii)pers than to the
steamers. We feel that the board's power should be limited to ad-
justing any discrimination between shippers or any injustice to the
American ship])ei' versus the shipper from another country to a
similar market: that the board should not have any general i-ate-
making power.

Ml-. r>i;r(KM:i:. \Vh\- not. Mi-. Franklin?

REGULATORY FEATURES OF SHIPPING BILL. 119

Mr. P'kaxklix. Because the coiulitioiis surroundiiig coniinerce with
the foreign countries are absolutely different from those covering
the railroads or any other trade that comes solely under the juris-
diction of any one government. Your merchants in this country are
in competition with the merchants of the world. If the United
States puts any burdens upon its shipping that other countries do
not, the ships will not come to the United States. The United States
has not sufficient ships to carry its own commerce by long odds. It
nmst attract ships from all over the world and from the connnerce of
the world. Xow, if you make a maximum rate that is lower than
the maximum i-ates from other countries, the ships will go to the
other countries. The very fact that you have a rate-governing power
will drive ships from your trade. Rates in the foreign trades ebb
and flow very rapidly. They fluctuate from day to day. They are
sometimes increased or decreased three times a day.

Mr. Bhuckxer. Are they uniform throughout the worlds

Mr. P'kaxklix. They are not uniform throughout the world, be-
cause they depend upon various conditions in every direction. But
the moment rates go up on any particular commerce the ships will
Hock there until the rates come down. Xow, you have an ever present
regulator of rates in the tramp and other steamers that can be readily
moved ; and if at any time you get the rates too high as compared
with the world's rates you are bound to have competition, and vice
\ersa.

Mr. Saunders. Just in that connection let me ask you a question ;
not exactly a new question, but it formulates the same thought a little
differently. You suggest difficulties there which I admit are ex-
istent and will exist; liit tell me why a board that will have the
capacity to determine whether a rate is unjustly discriminatory or
whether it operates to effect an unreasonable prejudice or disad-
vantage to American ports — it is a question of judgment determined
upon facts — tell me wh}' a board having the capacity to do that and
arrive at a just conclusion in that respect — and you are willing for
those provisions to remain in the bill — would in dealing with the
factors that would be projected into a determination of rates be un-
able to arrive at a just conclusion and determination whether or not,
as a matter of fact, rates were unreasonably high.

Mr. Franklin. Because the conditions are absolutely different, in
my mind.

Mr. Saunders. I admit that.

Mr. Franklin. If you have a commission and put before that
commission the facts first by the man who has made the sworn com-
plaint and then by the steamship lines against whom the complaint
has been made, you have the various facts by which it can be clearly
demonstrated whether they are right or whether they are wrong.
The commission can then weigh whether or not there has been a
discrimination. Now, when you attempt to make a reasonable rate,
a rate that might be reasonable to-day would be absolutely unreason-
able two weeks from now, and if made as a reasonable rate to-day
might be detrimental to the shipper two weeks from now more than
to the steamer, because the steamer would not be protected then by
that rate and the steamer would go elsewhere for its business. If
3^ou were like the railroads, if you had sufficient capacity to carry your
whole traffic yourselves, if you controlled your whole traffic yourselves,

120 REGULATORY FEATURES OF SHIPPING BILL.

you would have a different proposition. But you are competing with
the merchants of the world and your merchants are competing with
the other merchants for the ships.

Mr. Saunders. Yes. Now. do y<iu not think if you were on that
board you would have in mind all of those facts?

Mr. Franklin. Yes; but I could not fix a reasonable rate for
to-morrow\

Mr. Saunders. Let us see about that. You would ha\e in mind
all these facts. If 3'ou could not fix a reasonable rate, then you would
not operate to the prejudice of any one?

Mr. Franklin. Then why let a board feel it is their duty to at-
tempt to fix rates? That is exactly the reason we have recommended
to 3'ou gentlemen not to let the board consider they have the power
to generally fix rates.

Mr. Saunders. If upon the state of facts suggested by you it
proves to be impossible, you say it can not be done, to determine if
a rate is unreasonably high, is not the simple conclusion that the
board would not undertake the determination? Grappling with
the facts they would find : Here is something that is beyond our
powers of determination; we can not say this rate is unreasonably
high, owing to the very facts that you mention?

Mr. Franklin. Yes; but the very power that would give to the
board is what we are afraid of. If the public says this rate is un-
reasonably high, then what harm is it doing the public? The public
might say, "We are being discriminated against in competing with
some other market of the country, to Avhich we want to send our
business." Your commission will then see if it is a discrimination.

Mr. Saunders, You are afraid, then, this board will undertake to
do something that really they can not do? In other words, they
will undertake to declare that a rate is unreasonably high, when ns
a matter of fact they can not ascertain whether it is or is not un-
reasonably high?

Mr. Franklin. That is right. But what I am afraid of is this:
I am afraid to give this board or to suggest to this board any idea
that it is its duty to make rates. That is what I am trying to kee]>
clear from.

The Chairman, That is what we tried to avoid in section 5. We
did not want the board to make rates, because we did not think it
practicable for the board to make rates. Our investigation of the
so-called shipping trust demonstrated that fact, and the statements
filed with the committee by yourself and others representing the
steamshi)) interests were verv persuasive on that question. But here
in February we had this situation : An American manufacturer of
water pipe was represented by the president of the company at
Buenos Aires. The Argentine Bepublic. or the interests there, were
asking for bids on 28.000 tons of water pipe. The pivsident of that
companv cables his representative to get rates. The lowest rate
quoted from New York or from an American port to Buenos Aires
was $30 a ton. The rate quoted to the English competitors was $11
a ton less; I am not sure, but I think by the English representatives
of the same line. Now, do you think there should not be any relief
to the American exporter or competitor with the foreign manu-
facturer under such conditions as that?

REGULATORY FEATURES OF SHIPPING BILL, 121

Ml'. Franklix. You siiy in one case that they were quoted at $30
and in another case quoted at $11 — from England?

The CiiAiRMAX. $11 a ton less.

Mr. Franklin. Are you sure your facts are right?

The Chairman. That was the advice we got from the representa-
tive of the company — the American Cast Iron Pipe Co.

Mr. Franklin, t doubt very much wliether Enghmd would export
anything like that quantit}^ at this time.

The Cilmrman. We have the correspondence here before the com-
mittee, and I have in my possession statements from different parts
of the world where that same discrimination has been going on
against our American trade in favor of the British trade.

Mr. Franklin. If yoii take that very situation — the steamers going
out from England to South America empty and for a return cargo.
They will carry coal, or pipes, or they will carry anything else they
can get. Now, the ships are going from the United States to South
America with full cargoes. The trades are absolutely different: they
are net comparable. That is just the condition that j'ou have the
world over in the various trades. It is exactly the same situation as
you have seen when cement and other commodities were brought
from the Continent to the United States at two or three dollars a ton.
We have paid for ballast coming to the United States. We are pay-
ing to-day for ballast to bring ships to the United States from Eng-
land. If we could get pipes there as ballast we would be very glad
to carry them for a smaller rate. It is a condition of trade that will
constantly crop up. It is not to the disadvantage of the American in
any equally competitive market.

The Chairman. You think the same line should quote a differential
in favor of the British manufacturer over the American exporter, for
instance, to South American ports and at the same time be permitted
to come into our ports and trade from our ports and continue that
discrimination against our exporters, do you ?

Mr. Franklin. I do not think that they should be allowed to con-
tinue any discrimination. The matter should be investigated to find
out whether it really is a discrimination or not. If the conditions
are absolutely different, those conditions must be considered; but if
that same steamship company was pursuing that policy to a largely
consuming country, thus proving discrimination, I would say no.

The Chairman. We want to meet that condition in some reason-
ruble wa.y.

Mr. Franklin. Yes.

The Chairman. We are intending, if we can, to help our export-
ers; and while we are compelled to use the cleliA'ery wagons of other
nations, we do not want them to discriminate against us. There is
a great deal said about they won't come to our ports. Their ships
would rot at the docks if they did not come to our ports. They have
got to come here for tonnage. All we want is fair, reasonable
treatment.

Mr. Franklin. They will come here for tonnage, but the moment
they can make a little more out of their steamers elsewhere they will
go elsewhere.

The Chairman. AVhere have they the tonnage elsewhere?

Mr. Franklin. In normal trade conditions the tonnage would be
too large; they would have to come here. But that would level

122 REGULATORY FEATURES OF SHIPPING BILL.

itself; it all seeks its own level: it is a (luestioii of supply and denuuul,
and it seeks its own level.

The CnAiiJ^L\N. It is more than a <)iiestion of supply and demand;
it is a (juestion of discriminaticm which we want to j)revent.

Mr. FiJAXKi,ix. As far as disei-imination is concerned, rludge, we
,>.re not at all opposed to this board having a lioht to adjust anything
that they find, after careful investigation, is a discrimination.

The C'haiu.max. It is a (juestion of combination, too, because our
investigation showed that from 1909 to 1918 ocean freight rates
increased from 50 to 200 per cent, whereas the cost of operation of
the shii)s had not increased appreciably at all; and it also developed
that the combination was just that nuich moi'e effective. Now, we
do not want to break uj) combinritions; we think that destructive com-
petition is bad. AVe want reasonable regulation, and hence we pro-
\ide here that these agreements shall be submitted to the connnis-
sion, and if approved, or if they should continue in force until dis-
itpproved. to permit combination in certain trades. AVe recognize
there are certain advantages to flow from it. The question now is,
How far shall we go in the matter of regulation? That is all.

Mr. Greene. He stated from 1909 to 1913.

Mr. FitAKKLiN'. From 1909 to 1913 there is a stated cost of operat-
ing. It is unlike what it has been since the war. lliere w'as a stated
cost, but now things are absolutely abnornuil. AVe felt the recommen-
dation we made for the consideration of you gentlemen, that this
commission or boaid should have the power to adjust all discrimina-
tions between shippers or any injustice to the merchants of this coun-
try as compared with the merchants in the other countries, after
taking everything into consideration

The Chairman. That will have our best consideration, too.

Mr. Franklin (continuing). AA^e felt we were accomplishing or we
hoped in our recommendations _you would accom|)lish what has given
3^ou the greatest amount of anxiety, and that is fair play. Now
you will get fair play : that board can absolutely assure themselves
they will get fair play and they will take into consideration all the
various conditions of the trades of the w^orld.

The Chairman. There is another suggestion: That the power ol
this boaid to make this investigation on its own initiative should be
stricken out of the bill. I am not inclined to favor that at all, be-
cause we received hundi-eds of letters from large shi])pers who en
joyed secrecy, saying if they should disclose their complaint it woula
mean discrinjination. And hence it is very questionable whether this
board might not have this power to investigate.

Mr. Franklin. Your bill certainly, as I understand it, >Yould cor-
rect this, as supi)ose a shi})pei' should nud<:e a complaint and then a
steamship company should do anything against the shipper to punish
him for that complaint. That is coxered by your bill.

Mr. Hardy. There is a lot of diU'erence in having a right and
having to depend ui)on it for your protection.

Mr. Franklin. Quite a difference; but I think that is too picayun-
ish to bother much about.

Mr. Hardy. You might think so. but I know in my own little
town men were absolutely afraid — they were in the mercantile busi-
ness — to make complaint against the I'ailroad for fear they could not

KEGUl-ATOin FEATURES OF SHIPPING BILL. 128

get ship space. It might be a little thing in some places, but it is a
big thing in some phices, too.

Mr. Fkakklix. If he made r. sworn statement, it would not be
necessary to have it published.

Mr. Hardy. But those things lealv out. You can not get a caucus of
the Democratic Party here without every newspaper knowing every-
thing about it. You talk about things not leaking, but they do.

Mr. Byknes. What is your objectioji to that ])ower being lodged in
the board?

JSIr. Franklin. Tlie power of conducting it ^

Mr. Byrnes. The power of starting an investigation upon its own
initiative.

Mr. Franklin. My objections to that are not exceedingly strong,
except from an annoyance point of \ iew .

Mr. Byrnes. You assume the sliii)j)ing board would be an an-
noyance to you '.

Mr. Franklin. No; 1 do not assume the ship])ing board would be
an annoyance to us, but I think if the shipping board felt they had
to pay attention to every little complaint that came up they nnght
call upon us and call upon others more frequently and not put their
time and attention u[)()n the more imjiortant cases. 1 think it is a
protetttion to the shii)ping board as well as to the steamship o\\ner;
that is my opinion.

Mr. I>YRNEs. That is true; but do you think there is anything in
the bill, as you have read the bill, that requires the shipping board
(a board composed of the type of men that would naturally be ap-
pointed to that board) to i)ay attention to every little rumor about
discriminations; do you think it is a \alid objection?

Mr. Franklin. T jnit it this way to you; I do not think it is an
exceedingly serious objection, but 1 think it would simplify matters
and make the whole think work more comfortably and pleasantly
for everybody, and accomplisli the desired object without it.

]Mr. Hardy. Let me give you a situation I think you are aware of.
In the administration of the interstate-commerce act, my under-
standing is sometimes in the examination of one case the commission
ran against other matters and they had no power, until given to
them, to initiate any investigation upon their own responsibility.
This shipping board is not going to l)e set up to undertake every sort
of pessimistic and minimistic investigation : but it might be that in
an investigation they Avould run across other questions which were
very serious and ought to be investigated, and they coidd not do
it unless they had the authority to start an investigation upon their
own initiative. The matter of the nuisance to you or to anybody
else — I think that objection won't amount to much.

Mr. Franklin. T will tell you. Judge Hardy, Ave only suggest that
because we thought it Avould simplify matters. As far as the steam-
sliij) business is concerned, when it is in its normal condition, it is a
very narroAV-margin business. That is the reason Americans have
not gone into it; there was not profit enough. We are not over-
burdened Avith officials; Ave have few officials, and Ave do not Avant all
sorts of smaller cases coming up. In other words, anybody Avho had
an important case would not hesitate to put in a sAvorn statement.

Mr. Hardy. I do not think the railroud commission has ever in-
dulged in that.

Mr. P'ranklin. I do not think it amounts to anvthin<r.

1^4 REGULATORY FEATURES OF SHIPPING BILL.

The Chairman. I do not think there is any (lisn<<:reement between
us that any one who has a real comphiint shouhl be re(|nired to
submit it under oath; I think that is very reasonable.

Mr. Franklin. Then for this section 5. which we have just been
discussing, here is a memorandum prepared by Mr. Kirlin. T think
I had better not put it in the record, because I think Mr. Kirlin will
discuss it when he comes on.

Mr. Kirlin. I think it is already in. T think Mr. Bush put it in
with his remarks.

Mr. Franklin. There is another ({uestion — luiless there is some
further information you would like to have from me — about this
rate-making power. The question comes up about the tramp. The
rate-making power Mould not control the tramp and the tramp
is always there and is always a competitor. But if you allow the
tramp the freedom to come in and make any rate against your regu-
lar lines, you would simply weaken your regular lines and your regu-
lar lines are the carriers for the merchants who are doing a steady
business and building up the commerce of the United States.

Mr. Byrnes. Mr. Franklin, let me ask you two questions. As I
understand your position is if this shipping board were in existence
to-day and had the power to fix a maximum rate and, exercising that
power, fixed a rate which was lower than the shipowner could re-
ceive in other countries, that be would withdraw his vessels from
the American trade and seek the more profitable business elsewhere?

Mr. Franklin. Quite right.

Mr. Byrnes. Is that your position ?

Mr. Franklin. Yes,

Mr. Byrnes. You contend it would not be necessary for the ship-
owner to come into the American trade in order to secure sufficient
tonnage; that he could secure it elsewhere? Is that your position?

Mr. Franklin. Quite right.

Mr. Byrnes. Then you do not believe it would be necessary for
him to come here to secure foodstuffs to-day to carry to the belliger-
ent nations, for instance?

Mr. Franklin. That is entirely a question of supply and demand.
If the rate from the United States was fixed at a lower rate than that
same ship could get from Canada, from Argentine, from Australia,
from India, or from any other Avheat-producing and exporting
country, the ships would go to those countries first and you would
sell your wheat after those fellows had sold theirs. My contention is
that it would be more detrimental to the merchants of the country
than to the steamer, because the steamer can go wherever she can
make the greatest amount of money.

Mr. Byrnes. They would have to come here for cotton, though,
would they not?

Mr. Franklin. The United States, of course, is practically the
only large exporter of cotton and they would have to come here for
cotton.

Mr. Byrnes. That is all.

Mr. Saunders. You have in mind, Mr. Franklin, in answering the
questions just asked by Mr. Byrnes, rather the tramp steamers than
the established lines?

REGULATORY FEATXJREvS OF SHIPPING BILL. 125

Mr. P"kankli>c. Oh. yes; because the regular line steamers are in
many cases combination steamers and rely upon other classes of busi-
ness, and so on; but they are not the great burden carriers.

Mr. Saunders. I understand. I was simply bringing out the fact
they could not shift about in the manner you have indicated; but
that would be the tramp ^

Mr. Franklin. There are certain ships that could not shift at all;
they were built for the American market. But those same lines have
other steamers of the auxiliary type that could be moved and they
do move them no^v; they go to the cotton markets; they go to the
grain markets, or they take a cargo of be^ns, or anything you like,
and they go down to Argentine and elsewhere. My principal conten-
tion is it is international trade over which you have no control and
you have not steamers enough to handle it yourself.

Mr. Hardy. Your ])osition, reduced down, is simply that the Ameri-
can people, as a whole, have no power, right, or capacity to prevent
any kind of excessive rates?

Mr. Franklin. No; I do not say that. I say that they have the
power always.

Mr. Hardy. But it would be foolish to exercise it?

ISIr. Franklin. I say it would not be to their interests to apply
that power.

Mr. Hardy. That is what I mean.

Mr. Franklin. I think it would be to their disadvantage, because
their commerce is never charged a higher rate than the average cur-
rent rates of the world, if you analyze it at the time.

Mr. Hardy. Suppose you found they were?

Mr. Franklin. Then they Avould adjust themselves.

]\Ir. Hardy. But I am talking about whether the American i)eople
have any reasonable right and power to regulate their rates to pre-
vent thoroughly excessive charges?

Mr. Franklin. They have the power, but if they exercised that
power and they put a maximum rate which would be

]\Ir. Hardy. It is a pity they have the power, as I understand your
position — that they have the power but it is a pity to use it?

Mr. Franklin. I think it would be a misfortune from a commercial
point of view to do it.

INIr. Hadley. Your position is that they have the j^ower. but it is
not expedient to exercise it?

jNIr. Franklin, I think at the moment it would be exceedingly un-
wise to attempt it.

Mr. Hardy. Don't you think not at the moment, but always?

Ml'. Franklin. T think in the future it Avould be detrimental to
commerce to apply it.

Mr. Hardy. But what you think now would be unwise would
alwnys be umvise. hereafter?

Mr. Franklin. I say it would be unwise to have the powder.

jMr. Hardy. Then it is unwise to have the power, l)ecause it would
be a misfortune to use it ?

IVFr. Greene. How is it about the running expenses of a foreign
owned and foreign built vessel as compared with the American owned
and American regulated and run vessel?

Mr. Franklin. Every vessel is different, and the conditions are
changing so rapidly to-day. We already have put in effect, or at

126 REfJUT.ATOKV FEATURES OF SIIIPPTNO BILL.

least we did yestei'day. an increase of wases. which will result in the
seamen gettin<^ in all similar ships $45 plus $10 instead of $27.50
plus $10, which is an inci-ease in tlie last five weeks.

Mr. Grekne. How does that effect the foreign shipper?

JVIr. Franklin. The foreign shipowner?

Mr. Greene. Yes.

Mr. Fraxkltx. It is very difficult to say how it will ultimately
affect the foreign shipowner. Whether the foreign slii])owner will
make a similar inci-ease or not during the wai* is an unknown prob-
lem.

Mr. Greene. But \mder normal conditions?

Mr. Franklin. Under normal conditions his Avages will be very
much loAver than they will be here.

Mr. Greene. They have been in the past?

Mr. Franklin. They always have been in the past and there is
every indication that they will be in the future. The ships which
have been transferred from the British flag and other flags over to
the American flag under the August. 1914. act have averaged five to
six hundred dollars a month for a steamer of about eight or ten
thousand tons increased wages and expenses.

Mr. Greene. Over what they were?

Mr. Franklin. Over what they were under their own flag.

The Chairman. What has been the increase in the ocean freight
rates since the beginning of the war?

Mr. Franklin. They have been very heavy.

The Chairman. From 500 to 1,000 per cent?

Mr. Franklin. No; I would not say that. I have never worked it
out from a per cent point of vieAv : per cent is very misleading, be-
cau.se the rates vary.

The Chairman. There has been an enormous increase in rates?

Mr. Franklin. A tremendous increase in rates.

The Chairman. And it is now for the first time the seamen have
gotten any increase: is not that true?

Mr. Franklin. No; I would not say that. The seamen have got-
ten a larger increase now than they have ever had before.

Mr. RowE. Tell us about the pay of seamen for two weeks or
whatever that pay is under the seamen's act.

Mr. Franklin. Under the seamen's bill we have to pay the seamen
half his wages the moment he arrives in a foreign port, which he im-
mediately spends in liquor. He becomes intoxicated and useless.
There is no argument against the terriflic advance in the rates of
freight and, therefore, that the steamei's can well afl'urd to pay the
extra wage incident to being transferred to a freindly flag.

Mr. Edmonds. But they won't continue to pay it after the war
is over?

Mr. Franklin. It is very difficult after a higher rate of wage is
paid to reduce it; whether it can be reduced or not is an open prob-
lem.

Mr. Edmonds. But then those ships will go back to foi-eign reg-
istry ?

Mr. Franklin. The ships that have been transferred, when they
find they are at a disadvantag, will very promptly transfer back
again; the question will be whether they will have a disadvantage
or not.

EEGULATOEY FEATURES OF SHIPPING BILL. 127

The Chairmax. I suggest that we liad better stick to this bill.
Proceed, Mr. Franklin.

Mr. Franklin. I think the balance of oiu' suggestions would be
much more ably and effectually dealt with by Mr. Kirlin. I notice
in this meuiojaudum about the coastwise business, and I think jMr.
Dearborn m ill cover that — the filing of rates and 10 days' notice to
change them I think is objectionable and unfortunate.

The Chairman. The Interstate Commerce Commissiou exercises
that right now.

Mr. Franklin. On through coastwise traffic.

The Chairman, Yes.

Mr. P^RANKi.TN. I think we ha\e coxeied this feature here

Mr. Hardy. Wliat sectif)ii was that you referred to last: do you
reuiember '.

Mr. Franklin. About the 10 days?

Mr. Hardy. Yes: what line and page would tliat be?

Mr. Saunders. Page 11. line 18. That is in interstate commerce.

Mr. Franklin. Yes: coastAvise.

Mr. Hardy. I undeistaud souie other gentleman will s|)eak more
particularly about it?

Mr. Franklin. On i)age 7. trans|K>rtation of ti-affic under sub-
stantially similar circumstances and conditions. One I'eason we felt
that the other paragraph should be substituted 'is that if you had a
ship at the last minute to fill up that might give serious difficulty,
and it would be a very great disadvantage to commerce.

Mr. Saunders. Do I understand you to say that on page 7 you
want that to be stricken out?

Mr. Franklin. We would like to ha\e that entire paragraph elimi-
nated.

Mr. Saunders. The whole section eliminated?

Mr. Franklin. Yes; that section 4. ^Ir. Kirlin will give you our
recommendation for a substitute for this.

Mr. Hadley. He mentions those tw^o lines as objectionable.

Mr. Saunders. I was just asking him if T understood he w^anted
those lines stricken out. because the very thing you suggested a mo-
ment ago, with reference to a shij) loading at the last moment, was
brought out by some questions asked by Mr. Edmonds a few days
ago. We argued it at that time and we concluded those lines were
necessary in order to take care of the conditions you name so as to
enable a distinction to be made which, if it could not be made, would
create hardships.

Mr. Franklin. Under substantially similar circumstances and
cimditions. We wei"e anxious to find out exactly what you had in
mind.

Mr. Saunders. Yes.

Mr. Franklin. As you put it to me it is all right.

Mr. Saunders. That is to cover the very situation you suggest.

Mr. Franklin. As you put it it is all right. We were afraid, in
reading that over, that we might not have a right to do that.

Mr. Saunders. No; we had in mind that would enable vou to do
that.

Ml'. Franklin, If you had that in mind and that is clear, that is
quite satisfactoiy to us. because that is an essential feature of the
business.

128 KEGULATORY FEATURES OF SHIPPING BILL.

The Chairman. We recognize that fully.

Mr. Fkanklix. We only wanted an explanation on it, and I hope
you Avill give careful (consideration to our substitute for that para-
graph as a whole.

STATEMENT OF MR. J. PARKER KIRLIN, LAWYER, OF NEW YORK
CITY, ENGAGED IN THE PRACTICE OF ADMIRALTY AND MARI-
TIME LAW.

Mr. KiHLiN. Mr. Chairman and gentlemen of the couunittee, my
functions as a member of this subcommittee of the chamber of com-
merce have been to advise them in so far as their deliberations have
carried them into the realm of admiralty and maritime law, where
my practice chiefly lies.

We have alread}' expressed to you at the previous hearing the
views of our committee about your priucipal project, House bill
10500. We have understood that the present hearing in relation to
House bill 14337 is with the view of getting an open discussion as
to the provisions of that bill so that your committee would be in a
position to make use of such parts of it as it may think desirable to
include in H. R. 10500 in place of sections and 10 of that bill.

The Chairman. Yes; we had that under consideration.

INIr. KiRLiN. Of course H. R. 14337 is a little broader than sections
9 and 10 of the original project. While we are still of the same
opinion with regard to the general policy of regulation, and think it
inadvisable and unnecessary to provide such stringent and minute
regulations as are covered by sections 9 and 10. and think of IT. R.
10500 that it would be very much better to embody a shorter and
more general provision prohibiting discriminations, unfair i)ractices,
and unfair competition, the chamber of commerce has been desirous
of meeting the wishes of this committee b}' expressing their views
after studying this bill. It has formed some views about H. R. 14337
and sent its committee down here to give you the benefit of them for
what they may be worth.

My own part in this discussion is chiefly in relation to the textual
aspects of the bill.

I ma}^ say at the outset that nobody on our connnittee has the
slightest doubt as to the complete power of (^ongress over the gen-
eral sul)ject. It hiis the absolute right to nudce the most minute and
drastic regulations that it pleases on the subject. Such regulations
would apply not only to American shipping generality but also to all
foreign shipping within our ports. You do touch at one or two points
in this bill, hoAvever, upon a very delicate question of power in those
provisions where yon deal with the actions of cari'iers abroad. To be
specific about it. there is a suggestion in the lull that a carrier trading
from Brazil to New York ought not to be a ]:)arty to any rebate sys-
tem at the other end of the voyage. Foi-eign commerce has two ends.
While the incoming commerce from Brazil is a i)art of our commerce,
it is also a part of the export trade of Brazil, and primarily, I should
say, it would be within the ]iower and authority of the Government
of Brazil, or ought to be within their power and authority, to de-
termine what trade methods should be permitted there. It seems to
me that it is to a certain extent presumptuous for a nation to assume
an authority over international trade which would lead to the pro-

EEGULATOEY FEATURES OF SHIPPING BILL. 129

jection of its regulations into the sovereign territory and into the
scope of authority of a foreign government.

Xow. while we entertain no doubt about the authority of Congress
to make these regulations, we think that the circumstances under
which we find ourselves at present, and so far as w^e can see, are
likely to find ourselves upon the conclusion of peace, are not such as
really call for such specific, detailed, and extensive regulations. I
hear a great deal in the ordinary course of business about legislation
in relation to the shipping trade. I hear it from importers, shippers,
consignees, shipping agents, shipowners, from persons w^ho are de-
sirous of investing in shipping property, and from banks which
would like to market the securities that might, with a very little
legislation, be made xevy attractive for investment. The consensus
of opinion that I hear- — and I do not speak alone of New York, be-
cause my business takes me into other regions along the seacoast and
the Gulf— is that any regulation that is put on shipping at the
present time is going to react against shippers.

I do not believe the steamship people are so very much concerned
nbout this bill. While there are a few ships that are so constructed
and specially designed for their trades that they can not engage in
any other, they are negligible in quantity and in the amount of
tonnage in determining a matter of national policy. The great mass
of the tonnage w^ould stay or go where the business was most at-
tractive.

The Chairman. As a practical proposition, where would that be?

Mr. KiRLiN. Where they could make the most money.

The Chairman. What country furnishes more tonnage than this
country ?

Mr. KiRLiN. I do not know that any country furnishes more cargo
tonnage than this country, but there is a great deal of choice of
cargoes in this country, and of course the exports from Argentina
and other parts of South America are growing, the exports from
Russia are grooving, and those from the Far East are growing. The
combined commerce of the world is certainly larger than the export
trade of the United States. The export trade of the United States
is diminishing so far as the great staple products are concerned,
although there has been a general increase in the export of manu-
factured products. The idea of shippers, as well as of shipowners,
is that if you put any clog on the shipping trade that is unnecessary,
but nevertheless constitutes in however small a degree a burden, it
is just adding that much to the fixed charges of the business.

I do not believe a^ou appreciate how much work some of the pro-
visions of this bill would put upon the carriers in the way of keep-
ing their accounts rates and records in such a manner as to be
able to present them immediately as required here, or the expenditure
that would be involved in answering every charge that came along
from a shipper, or in meeting an investigation which the board, on
its own initiative, might think it desirable to institute. These all
involve expense. Now it is not to be supposed that the shipowners
are going to pay those expenses out of their own pockets unless they
haA'e to. Those expenses are coming out of the freight; they are
going to be added onto the freight, and wdioever pays the freight
has got to carry the added burden arising from the regidations. Of

38534—16 9

130 REGULATORY FEATURES OF SHIPPING BILL.

course I agree that if regulation is necessary it ought to exist, no
matter who has to pay for it. But if it is not necessary is it not
^viser not to incur or achl that extra burtlen to the trade? That is
the feeling that has animated us in going through this bill.

I may say a woid or two more about the n(;cessity for regulation.
It has been suggested in the discussion here this morning that a prior
investigation of this committee showed the existence of vast combina-
tions of shipowners which controlled the trades of the world and
fixed the rates of freight for the world. But the fact must not be lost
sight of that those couibinations. as large as they were, were very suuill
in comparison with the whole carrying capacity of the steauishii)s of
the world. The steamsliips that were in those combinations, taking
them all together, were i)robab]y less than a third of the tonnage of
the world that is engaged in carrying cargoes, and a considerable
number of those that were in the combination were passenger steam-
ers. If you eliminate the passenger steauiers from those that were
engaged in combinations the percentage would be very much lower.
The unrestricted tramp tonnage, whose capa.city avsis certainly two-
thirds of the tonnage of tlie world, was running free, seeking the best
freight, going where it could make the most money, and constituting
the most practicable and effective rate regulator that the experience
of the world has ever devised. Why should this Nation, which is
just embarking on a nuiritime policy, depart in its legislation from
the universal experience of maritime nations of the world b}'' em-
barking upon an experiment in regulation which is bound to involve a
certain amount of friction, expense, and uncertainty, unless it is made
manifest that there is a practical necessity for it? Itseemstothe pub-
lic and to those who are uiost intimately conuected with the business
that the notion that regulation is reduired is more synthetic than eui-
pirical. The business, in times of peace, has got along satisfactorily
to ever3'bod3'' without it. There were, it is true, advances in freight
rates, as the chairman ])ointed out, from 1909 to 1912; but those had
been preceded by })eriods of great depression, so that taking the
average froui 1900 to 1912, I do not think anybody ■^^()uld contend
that shi])ping had made any undue profits.

The Chaiioian. I think this, Mr. Kirlin. if you will pardon me
for interrupting you there: From 1900, for several years, there was
active competition in the ocean-carrying trade, which depressed the
ocean freight rates, and the earning were not large. Beginning
about 1909, these combinations became effective. After that competi-
tion was eliminated and the rates increased. Xow. in this bill we do
not try to break u\) any legitiuiate couibination, because we recognize
that there are certain good features iu these agreements and coirfer-
ences under which these line are regulated. But the ocean freight
rates increased, I say from 50 to 200 per cent without any appi-ecia-
l)le increase in the cost of operation. 1 could show you the statement
of the Hamburg-American Line for the fiscal year, as I recall, ending
December 31, 1913, showing phenomenal profits for that year.

Mr. KiKLiN. I saw it. They set aside -1.000,000 marks for fighting.

The CiLMRMAN. Yes, and they built up their business each year and
l)aid a large dividend, put aside a large auiouut of money for surj^lus,
and contributed to the fund foi- fighting ships besides.

REGULATORY FEATURES OF SHIPPING BILL. 131

Mv. KiKLix. But, ]Mi'. Chairmcin, the illustration of a single line
like that, which is built especially as a facility for a certain port, is
not very helpful.

The C'liAiioiAX. But that was true of all these lines.

Mr, KiRLixN'. In forming an opinion al)out the Avide-open ti-ade of
the world

The CiiAiKMAN. It would be true of the International Mercantile
Marine if it had been capitalized on costs and not on a highly in-
flated valuation.

ISIr, KiRLix. It is very important in these matters to get the facts
right. I think, with all deference, Mr. Chairman, you are not quite
right in saying that the advance from 1909 to 1912 was due to the
absence of competition.

The CiiAiKMAN, I would not say it was wholly so, no.

Mr. KiRLix. Before that the rates were down on account of com-
petition. The rates were down on account of competition from 1900
to 1909, and they were also down because the quantity of exports was
dovrn. They were up from 1909 to 1912 because the quantity of ex-
ports was away up. If the advance in freight rates had been ab-
normal in comparison with the increase of exports, the great mass
of the tramp tonnage of the Avorld woidd have been knocking at our
doois for freight at rates v\'hich were less than the advance that
naturally developed during that period.

The Chairman. Oh, that did not apply simply to tracle to and
from our ports, but the world over; wherever the combinations were
effective, these increases occurred.

IMr. KiRLiN. They occurred everywhere; not only where the com-
binations were effective, but also on sugar from Java, or coal from
Cardiff, or grain from the Argentine; they occurred in every place
where the great staples of the world were moving in tramps, and the
freights that were paid on those staples in the great trades fixed the
mai-kets for the freights of the world. The steamers that came into
these lines operating in combination got the same comparative rates
and no higher rates than those that were fixed by the tramps. So
that while the advance of rates was coincident with the higher de-
velopuient of combinations it is a non sequitur to say that the ad-
vance was due to more effective combinations as a cause; since you
had at the same time the corrective effect of the great commerce of
the tramps which mo^ed the staple products and fixed the rates not
only for themselves but also for those steamers operating in the com-
binations.

]Mr. Hardy. I have no doubt you read the testimony before us in
that investigation.

Mv. KiRLix. I heard most of it.

Mr. Hardy. Now it was very clearly demonstrated to us that those
ship lines had their railroacl connections which gave them their
freight in preference, or by agreement, and that the tramp coming
into New York did not have much opportunity to get desirable
freight, high-priced freight: they got what was left, the great bulk
tonnage, and carried that. And these ship lines, through their agree-
ments with the railroads, carried the cream of the freight from this
country and to this country. Was not that your recollection of it?

Mr. KiRLiN. No: I can not say it goes quite to that length. I think
there has been no arrangement between the railroads and the foreign

132 EEGULATORY FEATURES OF SHIPPING BILL.

steamship lines in Xew York for a good many years, such as you
speak of.

Mr. Haiidy. We have their agreements in writing as a part of those
hearings with nearly every railroad line in the United States.

Mr. KiRLix. T defer to your superior knowledge about that.

Mr. Hardy. That is my recollection.

Mr. KiRLix. I personally know of no agreement with any railroad
on the jiart of any steamship line that has been in force for the last
six or eight years ■

Mr. Hardy. I will have to refer you to the page of those hearings
Avhere that is to be found.

Mr. KiRLix (continuing). Other than this, that where lines are
running with comparative regularity, that is. where they are estab-
lished, they do allow the railroads to issue through bills of lading and
take those up at the seaboard as they come along.

Mr. Hardt. Don't you recall the agreements between the railroads
entering at Mobile Avith the ship lines that went out from there—
their preferential agreements Avith them!'

Mr. KiRLix. I was thinking more of Xew -York. I do remember
that there Aras—

Mr. Hardy. Xew York did not have those agreements: Xew York
and Xew Orleans, I believe, were free from them.

Mr. KiRLix. I do remember that there was an understanding in
Mobile.

Mr. Hardy. And every other city, except Xew York City and one
other, had those agreements. Xew York did not.

The CiiAiRMAx. I would like to suggest that we would get more
accurate information if you read chapter 9. volume 4. of the "In-
vestigation of shipping combinations" under House resolution 587,
entitled " Traffic agreements between American railroads and foreign
steamship lines." I think that would be illuminating to those who
are not informed. And the accuracy of those statements has never
been questioned by any source, as far as I know.

Mr, KiRLix. I was only speaking about matters that I know of at
home. And Judge Hardy now confirms my recollection that there
were no such arrangements in Xew York. So that the result was that
during all that time there was an absolutelv open field in Xew York,
the greatest exporting point, for tramps to get everything that was
shipped from that port and to regulate the rates for the lines. If
the lines were charging an undue rate it was perfectly open for any
half dozen of those tramp owners to get together and form their
own line.

Mr, Hardy, Along that line, I will just read what the committee
had to say:

All exfojit 7 of the IS.") railway conipanics to whom this iiuniiry was directed
complied with the committee's request. These replies show that New York. New
Orleans, and Galveston are apparently "open ports," all of the railroads lead-
ing thereto having answered all the divisions of the ahove-mentioned inquiry
in the negative.

The other cities of our seacoast were in the combination.

Mr. KiRLix. I do not want to press our views unduly about this,
l)ut merely to outline what they are.

The CiiATRMAx. I will agree not to ask another question, because I
would like to have 3'ou present your views without interruption.

REGULATOBY FEATURES OF SHIPPING BILL. 133

Mr. KiRLiN. I like to ans^Ye^ questions, because it enables me to
illumiiuite matters, perhaps, that are in the miuels of the members.
It does not disturb me at all.

Mr. Hardy. I accept the chairman's suggestion on that.

Mr. KiRLiN. Passing to the textual criticisms, for convenience we
have handed in, in Mr. Bush's statement, a detailed list of the exact
amendments that have been proposed. It Avon't help matters at alJ
for me to go through those in detail now, because you will have them
in the record. I only Avant to refer to a few of the more important
of them.

I find, beginning at the very first mention of any penalty in the
act, what seems to me undue severity all through this act in regard
to penalties. The violations of this act are not going to involve any-
body in very serious trouble or financial loss, and they are easily
susceptible of remedy. Is it not, therefore, unreasonable to provide
anything in the bill which has a tendency to scare off those a^ou want
to have go into the Imsiness. It is true, as one of your members
has said, that the bill is made for the other fellow, but these bills
are not ahvays as plain to commercial people as they seem to be to
you. I have had many a client spend hours in my office to deter-
mine whether some arrangement he was engaged in was contrary to
the provisions of the Sherman Act. Any lawyer that ever had oc-
casion to advise on that act knows that for one period of 10 or 15
years one line of advice was right, and after that another line of
advice was right. Where you are dealing with statutes that are
framed in general terms so that even well-intentioned merchants or
well-intentioned lawyers have difficulty, or may see that they will
have difficulty, in determining wdiether a certain course of conduct
is within the law or not, what is the sense of providing that a man
shall be subject to a penalty of $25,000 for each offense against
the act?

Mr. Byrnes. That is on page 4?

Mr. KiRLiN. Yes; line 5. No jury would ever think of convicting
a man for an offense against the act if the punishment was to be a
fine of $25,000.

Mr. Byrnes. Does it not say, " not more than $25,000 " ?

Mr. KiRLiN. Yes ; not more than $25,000. But further down, in line
11, it does not even say " not more than " ; it provides that a penalty
of $25,000 shall be imposed. I suppose that is an oversight in
line 14.

Mr. Saunders. No ; that is not an oversight. Let me suggest that
is a case of contempt of the court order; and do you think a vessel
in contempt of a proper order should not be fined more heavily than
the other fellow?

Mr. KiRLiN. It is not only a court order ; it is also a board order.

Mr. Saunders. I should have said " board order." It would have
the effect of an order of the court.

Mr. KiKLiN. It is made for a board order.

Mr. Saunders. I say it is an order that has the effect of a court
order.

Mr. KiRLiN. But boards may make mistakes; even courts make
mistakes. The ship may find herself in a position where she must
leave port; the act proposes to refuse clearance. What is the ship

134 REGULATORY FEATURES OF SHIPPING BILL.

going to do^ She has a cargo of merchandise on board for delivery
in foreign ports. Is she going to lie still in port and allow the cargo
to rot because the board says her owners have violated some provi-
sion of the act? If the ship owner linds himself in circumstances
where he has to move the ship has he got to pa}' $25,000 for doing it?
The board has the poAver to punish for contempt; it does not need
any such drastic regulation as this. It is a deterrent thing that is
imnecessary in the bill, and therefore seems to me impolitic.

Mr. Saundkrs. Then, you would not have any authority to punish
for contempt '(

Mr. KiKLix. The court has general power to punish for contempt.
But the court would have no jurisdiction to impose any less fine than
$25,000 if it fou!id at the cud of a trial that a man had made a
mistake.

Mr. Sauxders. The board, you observe in that connection, does
not impose any penalty; the law saj^s a ship which shall defiantly
break a proper order that had been entered after a proper hearing
shall be subject to this fine.

Mr. KirLiN. It says an order of the board or of the court.

Mr. Saunders. Either one or the other.

Mr. KiRLix. Yes.

Mr. Saun'ders. But this relates to a hearing, and the ship in de-
fiance of the order of a properly constituted tribunal, either clears or
comes in. And as suggested on my left here, there is an appeal from
that order. Do you tliink it ought to be treated as a negligible thing
for a ship to disregard a proper order after there had been due pro-
ceedings ?

]\f r. KiRLiN. No : I do not think that at all : but I think the board
might very easily make a mistake. Of course, one maj' appeal, but
yon could not expect a ship to lie in the harbor with a cargo of fruit
and allow it to rot.

Mr. Saunders. What would you suggest?

Mr. KiRLiN. I would say " not more than." That would leave a
latitude to make the penalty fit the crime.

The CiiAiR^MAN. That can easily be modified.

Mr. Hardy. Yes. While Ave Avere discussing that several members
of the committee suggested there might be cases, for instance, a ship
might be in distress outside of a port and it Avould violate a decree;
and there might be some exceptions, too.

Mr. KiRLTN. Yes.

Mr. Saunders. But you notice that Avould have to be a fixed pen-
alty in that case; it can not be flexible like the other. That has got
to be fixed, because it is assessed upon a vessel that has violated an
order and a recovery is to be had by proceedings in court, and it could
not be flexible.

Mr. KiRi.iN. You lune llexible i)nnislimonts for other things —
robber}' and other crimes.

Mr. Saunders. Certainly. But let us take that case and follow it
out. Suppose you say a penally of " not more than $25,000 " shall
be recoA'ered; hoAv Avould you ])roceed to recover it? When you pro-
ceed to recover a penalty in court it is something that is fixed. You
do not say, "Here is a num Avho has violated an order; the penalty
is $25,000; Ave Avant to recover as much as ought to be alloAved."
That Avould haAe to be a proceeding to recover a fixed penalty.

REGULATORY FEATURES OF SHIPPING BILL. 135

Mr. KiKLix. We are doing that every day in New York under the
dumping act, prohibiting dumping in the harbors. The act provides
for iinprisonment or a maximum and minimum penalty.

Mr. Saunders. AVho fixes that penalty?

Mr. KiRLiN. The judge.

Mr. Saunders. The judge would fix that?

Mr. KiRLiN. The case is tried just like this, in admiralty.

Mr. Saunders. The judge would not fix this, Mr. Kirlin. I think
you have overlooked the distinction. The judge would not fix the
penalty in line Itt.

Mr. KiRLiN. Yes; he would determine in that case just how much
the penalty is to be.

Mr. Saunders. The law says if you A'iolate this order the fixed
penalty attaches, and then you would subsequently proceed in a
court of the United States to recover that penalty. The law fixes
that.

Mr. Kirlin. I am submitting to you that it is an unconscionable
penalty for that kind of thing— an unnecessarily large penalty.

Mr. Saunders. That is another thing. If you suggest $10,000 or
$5,000, that is a different proposition.

Mr. Kirlin. I am citing the analogy tif the dumping act to show
you that you do not have to fix tlie exact penalty. It is absolutely the
same kind of an act, and, as I say, we are administering that act
every day whore the judge sometimes allows a recovery of $500,
sometimes $1,000, and sometimes $250.

Mr. Saunders. This does not say that the tribunal shall award
the penalty, you notice.

Mr. Kirlin. It says the penalty may be recovered by proceedings
in admiralty.

Mr. Saunders. No; it says a penalty of so much shall attach, and
then, thereafter, that it may be recovered by proceedings in ad-
miralty in the district court of the United States for the district in
which said vessel may be, and the court ma.y direct the sale of said
vessel for the purpose of realizing the amount of said penalty or
penalties and cost.

I did not expect to take up so much time.

Mr. Kirlin. The next suggestion I have to make relates to the
matter at the top of page 6, where you deal with the question of
filing agreements and understandings. The matter was briefly ad-
verted to by Mr. Franklin. The suggestion of the committee is " that
all such agreements, understandings, conferences, and arrangements,
if not disapproved bv the board," should be excepted froiji the pro-
visions of the act. Instead of saying " shall ^e approved or disap-
proved " we propose to say " if not disapproved," and to strike out
" and when approved."

The Chairman. Is that one of your suggested amendments there?

Mr. Kirlin. That is one of our suggested amendments.

The Chairman. We will give that attention, then.

Mr. Kirlin. At the bottom of page G thei'e is another illustration
of an unduly severe. penalty, which I would suggest that your com-
mittee reconsider.

Now we come to section 4 and section 5. I do not want to go into
a prolonged discussion of the question as to what power or authority
ought to be vested in the board to deal with an " unreasonably high

136 REGULATORY FEATURES OF SHIPPING BILL.

rate." Tluit matter has been (>t)ne into, so that I think you liave the
views of the practical members of the committee on the subject. AVe
feel the first part of section 4 would be very difficult to act under
and to advise upon, and that section 5 embodies some matters that it
is unnecessary, and therefore undesirable, at this stage of the devel-
opment of the xVmerican merchant marine, to incorporate in the act.
Instead of those sections Ave propose to redraft section 5 so as to in-
clude in it the substance of the nuitter of sections 4 and 5 to the extent
necessar}' to i)revent injustice, if you conclude that you must have
regulation. As the revised paragraph is short, perhaps I had better
read it:

•Sec. 5. That whenever, after full hearing- npon a sworn complaint, the board
shall be of opinion that any rates or charges demanded, charged, or collected
by any common carrier by watei- in foreign connnerce are unjustly discrimina-
tory between shippei-s or ports, or unjustly prejudicial to exporters of the
United States as compared with their foreign competitors, the board is hereby
'empowered to alter the rates or charges demanded to the extent necessary to
correct such unjust discrimination or prejudice, and to make an order that such
carrier shall cease and desist from such unjust discrimination or prejudice.

And then we add the last sentence of your section 5.

Mr. Hardy. Does that include the last paragraph of section 5 ?

Mr. KiRLiN. Yes — " the board is hereb}^ empowered, upon sworn
complaint," etc.

Mr. Hardy. I wish you would read that provision of your pro-
posed section 5 over again so that I can get at it.

(Mr. Kirlin read the revised section again.)

Mr. Hardy. I understand why you left out fixmg rates; but did
you have any reason for leaving out line IS, that has reference to
unjust classifications?

Mr. KiRLix. Between classes of commodities ?

Mr. Hardy. Yes. You leave in the other parts of that.

jSIr. KiHLiN. Yes; we did. The reasons for leaving that out are of
a practical nature. They have to do with the distribution of weight
and measurement in loading a shi]). The members of the committee
feel that if carriers wei-e to be subject to complaints about rates rep-
resenting an unjust relation between chisses of commodities, a large
mass of litigation would develop as between owners of high-class
products, which are in the measurement class, and the owners of
heavy .stai)le products, which go in great bulk and are comparatively
low priced. As a matter of i)ractical business nutnagement it is not
possible to charge the same proportion of freight on all kinds of com-
modities. In shipping, where your space is limited and you have only
a certain amount of buoyancy, there must always be what would,
abstractly, be an unjust relation between the i-ates on different classes
of commodities.

Mr. Hardy. Then the substantial difference there between your
suggested provision and this is that you leave out the question of
unreasonably high rates and you leave out this question of unjust
relation between classes of commodities?

Mr. Kirlin. Yes. The provision now is that upon a complaint
being presented, the board shall have the power not merely to cor-
rect the discrimination or prejudice stated in the complaint, but may
go further and prescribe what shall be a just and reasonable rate
thereafter to be charged as a maximum.

EEGULATOEY FEATURES OF SHIPPING BILL. 137

Mr. Hardy. And yon wish to provide, in lieu of that, they shall
have the power to prohibit such discrimination ?

Mr. KiRLiN. Yes; and to alter the rates or charges demanded to
the extent necessary to correct such unjust discrimination or preju-
dice.

Mr. Hardy. You leave out fixing of the rates. That is as far as
you can go and be consistent with the rest of your provision there,
as I catch it.

Mr. KiRLix. Yes. Our idea is that it is not necessary to go any fur-
ther than empower the board to correct discriminations and preju-
dices.

Mr. Hardy. I will suggest you have left out one expression which
you insisted on in the argument and which I have incorporated in a
note here, "Under oath, by any party or parties interested." You
have not put that in.

Mr. KiRLiN. We suggest the first sentence should read, " When-
ever, after full hearing upon a sworn complaint," etc.

Mr. Hardy. I think somebody in the beginning insisted that com-
plaint should be made by an interested party.

Mr. Kirlin. I do not care whether the complainant is interested
or not ; all I suggest is that a man who comes forward with a griev-
ance ought to be compelled to make oath to it. If you insist on that
the board will get rid of a lot of annoyances from people suffering
from imaginary wrongs.

Mr. Hardy. I think we all accept that proposition.

Mr. Saunders. You leave out the words, lines 16 and 17, " or un-
justly prejudicial to exporters of the United States as compared
with their foreign competitors."

Mr. Kirlin. No; I keep that. Our idea is that if you give the
board power to protect the exporters of the United States so that
they have an equality of opportunity with the exporters of other
countries, they will need nothing more. It does not make any real
difference to them what the rates are — whether they are unreasonably
high or not — so long as their competitors have to pay just as high
rates. That is the object to be aimed at, to preserve the parity of
rates.

Mr. Hardy. I think I have your distinction pretty clear. It cuts
out that fixing of rates.

Mr. Kirlin. Yes. There may be cases where you can not preserve
the parity, because the conditions of the trade are different. Mr.
Sherman, I think, illustrated that this morning in dealing with the
complaint about the iron pipes. There was a condition where the
carrier from England was getting very high freights back from
South America to England, higher than the carriers from this coun-
try were getting down to Brazil or back from Brazil, so that it w^as
practicable to take these pipes from England to South America at a
lower rate than the carriers from New York to South America could
give.

Mr. Edmonds. I want to say that Mr. Lake, when he was before
this committee, acknowledged they were getting lower freights from
England.

Mr. Kirlin. So that it does not alw^ays prove a point against the
carriers from our ports to say that in respect of a certain commodity
our merchants are at a disadvantage as compared with their foreign

138 EEGULATOEV FE.\TURES OF SHIPPING BILL.

competitors in respect of a rate. There may be cases where they are;
in others he may have the advantage, but generally they are on
terms of equality.

Mr. Hardy. I will make this suggestion to you, Mr. Kirlin. that in
our investigation the representatives of foreign ship lines pretty well
sustained themselves in claiming there was no intentional discrimi-
nation against merchandise of this country; but Mr. Lake insisted
before us that under present conditions the foreign (M)untries, espe-
cially P^ngland. will see to it that their shipping is given i)referential
rates; and after this war England will start out with the purpose of
rebuilding her commerce and will seek, through ownership and con-
trol of the ship lines, to give the English commerce a preference over
American commerce. I believe in our hearing that the witnesses
demonstrated that that had not been done for nuiny years; that
Americans were given a prett}'' fair showing. But here is a new issue,
one of the future.

Mr. Kirlin. Let us wait until something develops along that line.
I do not think it will develop, as far as the trade of P^ngland as com-
pared with that of this country is concerned.

Mr. Hardy. I have always insisted that a corporation does not
have any patriotism; they are going where the monej^ calls them.

Mr. Kirlin. That is exactly right. Now, if 3'ou agree with me that
the only power the board needs is to prevent discrimination and
prejudices— —

Mr. Hardy. I can hardly agree with you in the presence of $15 a
bale on cotton ; I think a little something is needed to keep down ex-
cessive rates.

Mr. Kirlin. It must be borne in mind that the ship that carries
that cotton is going to incur very extraordinary risks.

Mr. Hardy. I am not going to interrupt further.

]\Ir. Kirlin. That reminds me to say that I recall havinjy heai"d a
gentleman, when I was present at a former hearing, speaking about
high rates, and arguing from them that it would be a good thing
for the Government to go into the shipping business and gather in
some of those high rates. He said that his client, one of Mr. Morse's
companies, had just dispatched a ship to Archangel on which the
freight yielded 170 per cent on the purchase price, out of which they
had declared a dividend right away of 100 per cent. I read in the
papers a few days afterwards that this ship had sailed right into the
prize court in England. She is there now and pi()bai)ly will be there
until the end of the Avar.

One of the gentlemen who spoke here to-daj' had one of his ships
laid up for about three months in consequence of a torpedo attack.
Another client of mine had a ship laid up for an ecjually long period
in conse(]uence of a similar attack. The delays in the business are
fearfid to contemplate. The business is so uncertain and the risks so
terrific that in my judgment it is not in any sense innnoral to take
the going rates. Some of the gentlemen here shied a little at the
high rates. I don't. I do not think there is'any such thing as an
uni-easonabl)^ high I'ate on a ship that is subject to such perils and
vicissitudes.

Mr. Saunders. How would that apply to a situation where these
perils and vicissitudes do not exist?

EEGULATOEY l^EATUEES OF SHIPPING BILL. 139

Mr. KiRLiN. Then, the high rate does not exist. I would take the
ilhistration that Judge Saunders gave to my friend, Mr. Dearborn,
of the definition of reasonable care. I would say that a reasonable
rate Avas any rate that a reasonably prudent man would charge in
the business for doing that kind of a service. What the markets of
the world determines to bo a proper rate, is a reasonable rate under
those conditions.

Mr. Saunders. In other words, you would not have any difficulty
in the construction.

Mr. KiRLLN. There is no monopoly now. There are not any com-
binations now. Do not entertain the notion that combinations exist
at present. They are all swept away. Everybody is on his own
footing.

Mr. Hardy. You do not need any combinations ?

Mr. KiRLiN. They do not need any combinations now.

Mr. Saunders. Let me ask you a question in that connection, be-
cause you presented a statement that is certainly not controlling
with what I understood to be the situation. You sa}^ there are no
verv hish rates now except where the risk is?

INIr.- KiRLiN. No; no rates such as have been characterized here;
none that have increased hundreds of per cent.

Mr. Saunders. The most ])henomenal of these great rates may be
where these risks are; but now there are plenty of instances, the
world over, of very great advances of rates that are not related to
any risks taken by the vessels charging those rates. Certainly that
is the information that seems to come to us.

Mr. KiRLiN. I do not think anybody complains about the rates to
South America, for instance, although the voyages there are not by
rtny means free from perils.

Mr. Saunders. Hoav about the Pacific rates?

Mr. KiRLiN. They are naturally controlled by the Atlantic rates.
The laAv of supply and demand applies there.

Mr. Saunders. There is no jieril there, and yet I understand some
of the rates are pretty steep.

Mr. KiRLiN. They are controlled by the market.

Mr. Saunders. Then. I was just bringing that out in reality,
from the fact that ships or lines charge these great rates where there
is no great peril, so that other causes have contributed to these great
advances ?

Mr. KiRLiN, It is the peril to the great world of trade that fixes the
rates; when the rates are fixed, the ships that want to earn money go
where those rates prevail.

Mr. Saunders. I think that is a very large view of it.

Mr. KiRLiN. I think that is a true view.

If section 5 should be revised, it would seem to us unnecessary to
retain section 4, because it would already be covered by the provisions
of section 5 as we have revised it. We have felt that there would be
a great deal of difficulty in practical operations under the first para-
graph of section 4, page 7. The question as to whether a different
rate for like commodities on board the ship is or is not made under
substantially similar circumstances and conditions, is one that is
bound to give rise to a great deal of difficulty, trouble, and probably
litigation.

140 REGULATORY FEATURES OF SHIPPING BILL.

A great deal of difference of opinion has developed here to-day
among men who are leaders on this general subject. They do not
know and I do not know Avhat I would advise on this question of
coal that was put here this morning, when the first half cargo is
taken at one rate and the second half at another rate. I do not think
any lawyer would be justified in telling his client how that would
work out until he got to tlie end of a lawsuit. A^'hat are "sub-
stantially similar circumstances and conditions " when one lot of
cargo comes under one arrangement and another lot of cargo comes
uncler another arrangement at a different rate is a matter about which
minds will inevitably differ. If you do not need a provision of that
kind, why embarrass the board and the trade by incorporating it?
So long as you have a general provision to prevent discrimination
that is all that you need, and anything that you have beyond your
needs is a detriment.

Now, we have suggested that in the latter part of this bill, begin-
ning Avith section 9, there is more provided for than is probably
needed in the way of means of investigating complaints.

Mr. Hardy. You have no special objection to section 6?

Mr. KiRLiN. I am not speaking. Judge Hardy, of interstate com-
merce. Our committee is appointed to deal with the foreign trade
only: so I am onh^^ referring to the sections that cover specifically
the foreign trade.

I think it is a detriment for a board to undertake investigations on
its own initiative. The American people do not like, to use a homely
phrase, to have persons snooping around into their business unless
there is some very good reason for it. and nobody cares enough
about a thing to come down to the board and make affidavit that
there is an abuse going on, the board ought to consider that there is
not any abuse going on. That idea runs through section 9 and sec-
tion 10.

Mr. Saunders. You want, then, in line 25, the word "sworn" put
in after "all"?

Mr. KiRLix. Yes; you will see in this little memorandum a refer-
ence to all places where it is suggested that " sworn " should be added.

Mr. Saunders. And then to strike out all bracketed matter?

Mr. KiRLiN, Yes. In the latter part of that section the board is
empowered, upon a hearing of such complaint, to order a discontinu-
ance of all inifair or disci'iminating i)ractices which it may find to
exist. Then, instead of a(lo])tiiig all such rules and regulations
which it may deem necessary. 1 slioukl say "make such order as";
that is, point such order directly at tlie ])i"actice and not establish
general rules and i-egulations. At the end of that section Ave have
suggested that there should be added a provision for procedure upon
hearing of complaints, a coi)y of which I submitted to Judge Alex-
ander a fcAv days ago.

The Chairman. That is under section 10?

Mr. Ktrlin. No; at the end of section 9. Take in so much of that
amenchiicnt that I sent you, and wliich is in this memortindum filed
by Ml'. Busli, as prescribes a method of procedure and review, and
leave out this long section 14 that makes referen(;e to a whole lot of
statutes without pointing out in any manner what relation they have
to this jjarticular lousiness. They really have to do with investiga-
tion and i-eview. Yet if anvbodv were for the first time to sit down

EEGULATOEY FEATURES OF SHIPPING BILL. 141

to determine what the scope of this act was by reference to all those
other acts, I do not know Avhat opinion he would form as to the power
and authority of the board or the procedure to l)e followed; whereas
if you can put down in two pages, which you can, the exact proce-
dure that ought to be followed, nameh', a procedure analogous to a
review of a finding of the Interstate Commerce Commission, 3^ou will
have no more procedure than is necessary.

Mr. Hardy. I would much prefer your method if you can get
accurately prepared a complete method of procedure prescribed in
two pages.

Mr. KiRLix. It won't make more than two printed pages.

Mr. Hardy. I am afraid I am so poorly posted on the interstate-
commerce act I would not know whether it was adequate or not when
I read it.

Mr. KiRLix. I Avill vouch for it being adequate for the protection
of both sides in any review of the findings of the board.

Mr. Saunders. I think it is much better statute making to yiut in
the body of your bill your pi'ocedure and what your remedy is.

]Mr. KiRLix. Yes. Xow, along the line of my remarks about the
deterrent effect of these large fines, may I say a word about section
11? The section does not refer to anything in particular, and yet
there are w^ords which seem to threaten everybody in the business
Avith all sorts of penalties for aiding and abetting and willfully suffer-
ing to be done, aided, and abetted any violation of the act. It does
not seem to me, with all due respect, that the section is the least bit
necessary to your purpose or at all desirable; for you have in section
10 a provision that any person, or where the carrier by water is a
corporation, any director or officer thereof, or any receiver, trustee,
lessee, agent, or person acting for or employed by such corporation,
who shall willfully falsify in any manner whatsoever, or who shall
willfully destroy, mutilate, or alter, or who shall willfully neglect or
fail truthfully to file any report, account, record, rate, and so on,
shall be deemed guilty of a misdemeanor. What is the use, Avhen you
proceed to provide for punishment of the people that are namerl. of
holding up a general threat against everybody else engaged in the
business? Somebody may fear he will l)e aiding and abetting, though
he may not be.

Mr. Hardy. Didn't we, have a case in some railroad investigation
where the l>ooks were desired to complete the investigation, that they
had all been destroyed and we found there was absolutely no penalty
for such a performance?

Mr. KiRLix. This I do not think covers that.

Mr. Byrnes. Section 10 covers that— mutilation and destruction.

Mr. KiRLTX. There are a great many laws that would apply.

The Chairman. That is a modification of section 10 of the act to
regidate commerce. This is almost hoc verbis the same.

Mr. KiRLiN. That act is very much larger, wider, more detailed,
and of much greater ramifications. There is much more possibility
and perhaps probability of fraiul in railroad commerce than there is
in the steamship business, where you have only one office (each con-
cern has but one office), one manager, and perhaps two or tliree
clerks, where you can lay your hands right on the person you want
and on the data that may be required for any hearing. These pro-
visions, which may be proper enough where 3'ou are going to control

142 REGULATORY FEATURES OF SHIPPIXG BILL.

a railroad with thousands of oflicers and dozens of offices that may
be "workin<T together to defeat the object of the investigation, have
not really any proper application to this class of business.

The Chairman. That may be.

Mr. KiRLix. They do not seem to have any proper place in a
small scheme of regulation like this.

Mr. Edmonds. On page IT, lines 7 to 15, there is a provision about
court ])rocedure. Did you cover that in your procedure you offered,
or ought not that to be in the bill ?

Mr. KiRLix. That is only a general provision that is found in all
the statutes. You can prosecute any crime in the district where it is
committed, under the general laws.

]Mr. Edmonds. Sometimes in drawing a bill, you know-, you want
to have a wdiole lot of words ahead of it so as to make it look nice.

Mr. KiRLiN. I- think the shorter the bill is the more adxantageous
it will be for this particular branch of commerce.

The Chairman. You think it is not necessary to put the pro-
visions in lines 7 to 15, inclusive, in this bill to give the courts juris-
diction ?

Mr. KiRLiN. No; the general statutes define where misdemeanors
shall be prosecuted, and as you provide in other places that violations
are misdemeanors, they may be tried under the criminal code in the
district where the acts are committed.

The Chairman. I say, it would not be necessary to incorporate
those provisions in this bill in order to give the courts jurisdiction of
violations under this act ?

Mr. KiRLiN. No. All you need to do here is to make the thing
you want to have punished a misdemeanor and then the general pro-
visions of the code dealing with prosecutions of misdemeanors ap-
plies to it. So that is unnecessary.

Mr. Saunders. Have you looked at the Penal Code to see that it
provides that an offense when begun in one jurisdiction and com-
pleted in another may be dealt with in either jurisdiction and pun-
ished in either jurisdiction in the same manner as if the offense had
been actually and wholly committed therein? Is that a general pro-
vision of law of the United States?

Mr. KiRLiN. No; I never tried a criminal case in my life. Judge
Saunders ; I can not tell you about that.

Mr. Saunders. If it is a general provision of the penal hiws of
the United States, it would not be necessary for us to put it into this
law.

Mr. KiRLiN. I should nijt think a i)ro\ ision of th;;t kind would be
any more necessary in a law of this kind than it would be in a law
pi'oviding for the punishment of misdemeanors genei-ally.

Mr. Saundp:rs. I know in a State's jurisdiction with respect to a
penalty you would lune to have an express statute covering sucli a
situation as that.

Mr. KiRLiN, I would assume the necessity for punishing misde-
meanors is very much greater in other bi'anches of jui'isprudence than
it is in this. And if there is any such provision as this in the inter-
state-connnerce act it must be in other acts as well and in a general
act, because there is much greater need for providing punishments
than there is here.

REGULATOEY FEATURES OF SIIIPPHSTG BILL. 143

Mr. 8a UZBEKS. If it is in tlie general act, I agree with you it is
not necessar^y to put it in here.

jSIr. KiRLix. So far as lines 7 to 15 ai'e concerned. I do not think it
makes any great amount of difference.

Mr. Ijyknes. We can investigate and find that out.

Mr. KiKLix. Yes.

Mr. Hardy. I would think it would be general law. but it may
not be.

Mr. KiRLix. Yes.

Mr. Edmoxds. You can put it in as a separate section.

Mr. KiRLix. Section 12 I think is vicious in principle in that it
proposes to hand over to private parties to a measureable extent the
means of ]>unishment for not living up to the act.

Mr. Hardy. What part of the bill are you referring to now?

Mr. KiKLix. I am now referring to section 12. It provides that a
party who thinks he has been injured can sue and recover double
damages. That is only an incentive to the worst class of people that
the steamships have to deal w^ith. persons who make it a business*to
speculate on lawsuits. It is not at all necessary.

Mr. Sauxdei.'s. Your only suggestion would be to strike out the
word " dou])le'*?

Mr. KiKi.iN. Yes. Anybody has a right to sue now for an improper
discrimination which is practiced upon him by a common carrier.
He does not need any separate authority for that.

I am finding so much fault here that I am afraid I will lose my
effectiveness; but I have one more section I think ought to come out,
and that is section 13.

The Ciiair:\iax. We want to hear you through.

Mr. KiRiJX. Section 13. I think, would awaken alarm in the steam-
ship people more than any other section in the bill. The idea that
they Avould have to keep a branch office in Washington in order to
receive and answer complaints from the shipping board would cause
\"erv grave concern.

The Cumr-^iax. This simply relates to notice.

Mr. Kirlix. Yes.

The Chairmax. How- would you serve notice on them?

Mr. Kirlix. Serve it on them where they are doing the wrong;
serve it on the agents, serve it on the people you want to reach.

Mr. Hardy. These shipping people have some pretty good attor-
neys, like Yourself, to tell them that does not mean that, have they
not?

Mr. Kirlix. What is the use of putting things in a statute that
are not necessary ?

Mr. Hardy. That is a question.

Mr. Sauxders. It is really put in for the convenience of all parties
concerned.

Mr. Kirlix^ You are saying continually we must assume the board
is going to act thus and so ; Congress should assume that the people
against whom complaints are made will be eager to answer these
complaints. All you have to do if you get a complaint about some
company is to let the company knoAv about it and you will get an
answer pretty promptly.

Mr. Hardy. Don't you think if this board was located here at
Washington that every one would have somebody here, almost ipso

144 REGULATORY FEATURES OF SHIPPING BILL.

facto, to look after their interests. I would be willing to swap
off this .section here if the companies would not have anybody in
Washington hanging around the board all the time.

Mr. Saunders. You will observe that is limited to the board pro-
ceeding — entirely a board proceeding. It was really put in here for
the convenience of the shipping people and, so far as they are con-
cerned, if they want this section out, I would be entirely willing
to do it.

]Mr. KiRLiN. The idea is conveyed by it that the board is going to
be a busybody board, encouraging complaints and asking informa-
tion about them all the time.

]\Ir. Hardy. They keep a bureau here all the time, I am sure;
and if you would just designate them as their Washington agents it
would just be adding to their duties.

Mr. Edmonds. Attorneys in Washington have to live, Mr. Kirlin,
you know.

_Mr. Kirlin. I hope I am not injuring the interests of anybody
in Washington, but I object to it. I think it is a detrimental thing:
I think it is unnecessary; it conveys the idea that you are going to
harass a trade and that those engaged in it must have somebody
here all the time to look after their interests; and that is just exactly
contrary to what you have in your minds.

The Chairman. Certainly.

Mr. Saunders. Just to have some one here upon whom service can
be made; and it seems to me that would be. possibly, for their con-
venience.

^Ir. Kirlin. It is not important in itself: it is just one of a number
of things that are sticking out all over the face of the bill, from
one end to the other, which have a deterrent effect upon persons con-
templating going into the shipping business. If this business is
going to be hedged around with so many restrictions and so much
regulation and inquisition, investors won't have anything to do with
it. but will put their money into some other kind of business.

The Chairman. We do not know just where to locate these gen-
tlemen. When Mr. Franklin was here before, in criticizing section 9,
he said. ''I am heartily in favor of the report of the committee and
also bill 450." Well, this bill has in it just ])art of the provisions of
bill 450.

Mr. Kirlin. What Mr. Franklin had in mind. I think, was the
conference provision — I Avish you had asked him about that this
morning. lie pointed out at the top of the ])age there that he did
not mean to include the regulatory ]H-ovisions in his indorsement.
Tie had in mind the ])rovisions (»f your iv])ort and of the bill that
you drew in relation to it. I understood he did not subscribe to the
doctrine in regard to the regulation of rates.

The CnAHniAN. Tiiis is ^Ii-. Franklin's statement :

We coiisidtM- Hint I lie liill. No. -I.")*). ])r<ivi(lin,i:- for a lioard. wiiicli your coiii-
iiiittoc iiilro(lucc(| aftci- a very cart'l'iil invest iuat ion of all llic sliiiMiinjr condi-
tions, is a very fair bill. We feel lliat there nii.irlit 1)(> some sli.udit modifica-
tions as to the control over rates that the hoard would have immediately be-
fore tliey had had an fipix'rl unity of tliorouuhly stiidyin.i,' the situation and be-
coinin'; conversant with i1.

Mr. Kirlin. That is what lie told you to-day, sul)stantially, as I
understood his testimony.

EEGULATOEY FEATURES OF SHIPPING BILL. 145

The Chairman. And then, again, he says, speaking of it:

Tlie Chatumax. Would it he worth while to have a board and just pay
salaries to them and not j;ive them any powers of supervision?

Mr. Fraxklix. No; I tliink the hoard should have absolute power of super-
vision. I feel the board, after they investiKate the matter thoroughly, if they
feel a steamshij) company is doinp; anythinji unreasonable, should have the
power to correct it.

The Chaikmax. That is what the provision is intended to do.

Mr. Fraxklix. I think H. R. 450 covers that.

The Chatrmax. We have tried to avoid the difhculties you have in mind in
this bill.

Mr. Fraxklix. As I told you before, in testifying before the committee at
that time. I was never ojjposed to that. I feel that the United States, with its
tremendous coimnerce, nnist have somebody here in Washington before whom
the shippers can make a plea ; that they can put before them anything that they
think, in their opinion, lias been an unrea.sonable act on the part of the steam-
ship comp.iny or steamship operators. But I feel that it would ))e a very seri-
ous mistake to pass any bill which includes a reference to the interstate com-
merce act. The conditions are absolutely different. One is a local and the
other an intei-natioiial question and can not be dealt with as are the railroads.

The Chaikmax. If the j)rovisions of section 9 were stricken out of this bill
and the provisions of H. K. 4.50 inserted in lieu of them, you think that would
make a better bill as far as r«?gulation is concerned?

Mr. Fraxklix. I say that that would make a decidedly better bill, to be
coupled with the elimination of the licen.se feature.

The Chairmax. I hardly think there would be any reason for the license
feature in that event ; that is, if the provisions of the House bill No. 4.50 were
incorporated in this bill and .section 9 stricken out.

:Mr. Fraxklix. My position has always l)een it is foolish to argue against
a board. The I'nited States should have some board of this kind. That board
should study the whole shipping problem. It should make its recommenda-
tions; it should be a lioard similar to the British Board of Trade. It should
have control over all rules and regvdations, measurements, inspections, and
everytliing else now covered by the Department of Commerce. It should be
the United States authority regarding shipping and the authority in control.

I do not knf»w whether I have made it sufficiently clear about the damage
that I fear might be done to the connnerce if the rates should be too sevei-ely
regulated : but if there are any questions on that I shall be glad to answer
them.

I have read all of his statement.

}>h-. KiRLix. Xow, Mr. Chairman, I am sorry that you did not
speak to Mr. Franklin about that to-day, because, as yon know, he
is friendly to the general object you have in view here.

The Chairman. I think his attitude has always been very fair.

]\Ir. Khu.in. AVhat he had in mind there — he had not the bill
before him and was not discussing it — was the general suggestion
that Avas contained in your report about controlling conferences,
filing of documents, and exercising proper supervision over the ship-
per and the shipping business and also the right to correct al)uses
in a broad way. But I do not think he intended to indorse or had
m his mind at the time these inquisitorial features of this bill to
Avhich I have made special reference.

Now. one of the members has just made a suggestion as to section
13. that reminds me of something else I wanted to say before I sit
down. Section 13 provides that it shall be the duty of every com-
mon carrier by water or other person subject to the act to designate
in writing aii agent in the city of AVashington. Xow, you have
not anywhere in this bill defined what you intend to include in the
denomination " common carrier."

Mr. Edmonds. At the top of the page 2, Mr. Kirlin.

38534—16 10

146 KEnULATORY FEATURES OF SHIPPING BILL.

Mr. KiKLiN. That is in interstiitc coinineivi'. On page i of the
bill "a co]nmon carrier is simply defined as a comnu n carrier."' A
common carrier hy water mean'^ siicli a common carrier engaired in
the trans})ortation business,'' and so on. Xow. a man who has one
ship may be a commoD carrier, or a man who has a dozen ships may
net be a common carrier at all, depending upon the manner in which
the sliips are operated. Nine-tenths of the tramp tonnage of the
world that comes into our ports does not operate here as a connnon
carrier nor sustain the relations of a common carier to American
shipi)ei"s. Such ships generally are bailees for hire; or, as the law
calls them, special carriers. As this bill now stands the board would
not have the slightest control or poAver over tlie tramp steamers that
come here, unle-s they go on the berth and are offered generally to
receive the goods of all shippers. So that if you have in mind the
enactment of regulations that will include more than 30 i)er cent
of the carriers tliat a isit our poits you will ha\e to make a different
definition.

Mr. Hardy. Let us get your idea clearly. Your opinion is that a
tramp steamer coming to New York, for instance

Mr. KiuLiN. Leading a cargo of grain.

Mr. LIaroy. Seeking a cargo is nut a common cai'i'ier?

IMr. KiRLix. No.

Mr. Edmoxds. And therefore would not be rei^uired to have an
office in Washington or anj^thing else under this act.

Mr. KiRLiN. It w^ould not have to have an office here or be in a
position to receive any notice here, or be subject to any of the pro-
visions of this act.

The CirAiiniAX. That is, for instance, if they were to go on the
berth and ship a cargo of coal to a foieign ])ort, it would not be a
connnon carrier:!

Mr. KiHLiN. No.

The Chairman. Suppose it would take part coal, part avooI, part
cotton, and different things?

Mr. KiRLix. If tramps went on the berth and offered themselves
genei-ally to receive goods of all shippers, they would be common
cai'riers. But there might be two charters on the same boat, such as
a chartei- of the meat space to one ]')erson and a chartoi- of the grain
space to anothei'.

The Chairman. It would be a common carrier then ^

]\Ir. KiuLiN. No; it would be a special cai'rier only, because it
would only be dealing on special agreements.

Mr. Hahoy. They would have to chai'tei- ceitain sj^ace and they
would carry theii' own risk.

Ml'. KiRLiN. Such ships would be subject to the liabilities of a
special cari-ier or bailee; that is, they would be liable for negligence
but not under an insurers liability as a couunon cari-ier. Xow tramps
do not come to New York, your connnittee should bear in mind, and
nialce their engagements here. Tramp steamers make theii' engage-
ments in the great chartering markets of the world, liefore a tram])
steamer would come to this country at all, it would have l)een
chartered, in time of peace, either in London or Hamburg or Rotter-
dam. The agreement would not be for the business of a connnon car-
rier at all. It woidd be one of two things, eithei- an agieenient to
furnishing the si)ace of the shi}) to one person for a lum[) sum, or

EEGULATORY FEATURES OF SHIPPIKG BILL. 147

nil a<j!:reeinent to carry gTain at so imicli a (Hiarter, or coal at so iiiiicli
a ton. Tliat agreenieiit would not be made here at all; the only trans-
action under it that would take place here would be the loadins; of
the cargo.

The C11AIR31AN. That kind of carrier does not come within the
provisions of this bilk

Mr. KiKLiN. Xo. Now^, how are you going to regulate the rates
on one-third of the tonnage of the world, which makes its rates at
the dock, with the shipper who brings his goods there, when the rates
for two-thirds of the tonnage of the world are made in foreign
poits?

^Ir. Hai;dy. Wliat [)ercentage of value does that <')(j§ per cent of
the tonnage amount to in the commerce of the world of the freight
carried ?

Mr. KiRLix. I could not give you an}' idea.

Mr. Hardy. I understand in bulk it is 66f per cent.

IVIv. KiRLiN. Yes.

Mr. IiAr.DY. The >alue, 1 presume, would not be 15 per cent,
would it ?

Mr. KiRLiN. Oh, yes.

Mr. Hardy. You think so?

Mr. KiRLix. Most of your cotton is carried that way.

]Mr. Hardy. Cotton is not a special!}' valuable commodity in pro-
■ portion to the space?

Mr. KiRLix. Well grain is carried that way almost entirely, ex-
cept small quantities that go on the big liners; nitrates, lead, ores,
and lumber are carried under such charters.

Mr. Hardy. What percentage of that GGf pei- cent is lumber^
That is a big percentage?

Mr. KiRLix. I have not the data about that. It would not be
projDer for me to speculate upcn it.

Mr. Edmoxds. I want to call your attention to section 13, requir-
ing offices in Washington. It says, " or other persons subject to this
act." You did not say anthing about that. It says here " or other
persons subject to this act'' must designate an agent in the city of
Washington. That means a man operating ships must have an
officer here in Washington; a man running a ferry must have an
officer here in Washington; a man running tugboats must have an
officer here in Washington ; a man running a transfer lighter must
have an officer here in Washington ; and a warehouseman would have
to have an officer in Washington ; and a man having terminal facili-
ties would have to have an officer in Washington upon whom service
of all notices could be made.

Mr. KiRLix. That term " common carriers" is a very wide term. I
reminded Mr. Bush, last night, that he would have to haA^e an agent
down here, because his lighters transfer goods as common carriers
from the railroad terminals at Jersey over to his terminals in
Brooklyn.

The CiiAiRMAX. It is very iini)ortant they should be regulated,
because we have a specific complaint by shippers of naval stores
that Avhile the rate to Xew York was reasonable, yet the lighters in
New York charged an unreasonable rate and discriminated between
shippers of naval stores.

148 EEGULATORV FEATURES OF SHIPPING BILL.

Mr. KiitLix. "^'oii Avoiild probably find, Avheii you came to sift tliat
complaint, that the particular shipper of the naval stores Avas not
in a position to get lighters, because he could give no assurance as
to when he would be able to get the stores off the lighters. When
the demand for lighter tonnage is as great as it is now lightermen
hesitate to take goods on lighters unless they are assured the ship-
])ers will be able to unload the lighters within some reasonable length
of time.

(Tliereiipon. at r».15 o'clock p. m., the conuuittee adjourned until
to-morrow. Wednesday, April 1*.>. IDIG, at 10.30 o'clock a. m.)

C'OMJUTTEE ox THE JNIeUCHANT MaKINE AND FlSHEUlES,

House or Representatives,
Wm7iin(/ton, D. (\. Thnrsdmj^ April 20^ 1916.
The committee met at 10.80 o'clock a. m.. Hon. Joshua W. Alex-
ander (chairman) presiding.

The Chairman. ]Mr. Rhett, president of the Chamber of Com-
merce of the United States, is here to-day at my invitation, and we
Avill hear him on H. R. 14337. which the committee has under con-
sideration.

STATEMENT OF MR. R. G. RHETT, CHARLESTON, S. C, PRESIDENT
OF THE CHAMBER OF COMMERCE OF THE UNITED STATES.

Mr. RiiETT. As I understand it. this bill is introduced as a substi-
tute for sections 9 and 10 of the shipping bill I

The Chairman. Yes ; H. R. 10500.

Mr. RiiETT. I only wish to state that in referendum Xo. 0. which
the chamber took in 1915. we had three ballots which directly refer
to this subject.

The fii-st l)allot was on the creation of a Federal shipping board
to investigate and report to Congress regarding the navigation hnys,
and to have full jurisdiction, under the law, in all matters pertain-
ing to over-sea ti-ansportation, upon which the vote Avas 039 to 116.
If this bill takes the place of sections 9 and 10 of the shipping bill,
it eliminates that clause Avhich is at lu-esent in section 9. D<) I
understand it is proposed to eliminate that altogether, or to provide
for that in some other way?

The CiiAiR.MAX. That part of section 9 which provides for an
investigati(m of our navigation laws will be taken caie of in another
way. I gave you a tentative di-aft of a section we have under con-
sideration.

Mr. RiiETT. I have read that draft whicli you have just handed
to me. and it seems to cover the point whicli is referred to in that
l)allot admirably.

Tlie CiiAiiniAN. You might let that go in the record.

(Tlic section ivferred to is as follows:)

'l"l::U il slijill lie llic <liil.v of llic lioai'd In unl licr :iii<l coiiiitUe infoniiiilioii coii-
(•(■i-niii;;- and to iiivfsl i;;ai(' llic rclaliM- cnsl oT buildiiifi- inei-cliiiiit v«'sst'ls in
tlic Unilcd Stales and in fdi-eiiiii niaritinio counlrii'S, and also the relative cost,
of oiiiTatintr in foi'ei,u:ii-trad<' vessels \indor American registry mid similar ves-
sels nndcr I lie lljigs of other nations. Tt shall also examine the navigation
laws of (lie United States and the rules and regulations based thereon, and

EEGULATORY FEATURES OF SHIPPING BILL. 149

make such reconiniendations to Conijress us it may deem proper for the auieml-
ment, improvement, and revision of such laws and for tlie develoi)ment of the
Ameriean mercliant marine. It shall aiso investijiiite the advanta.i;es and dis-
advantajies of operatin,!j; under Uniled States registry and under the registry
of other nations. It slnill also investigate the legal status of mortgage loans
on vessel property, with a view to improving the security of such loans and
encouraging investment in American shijiping. It shall report annually to
Congress tlie results of its investigations and its reconnnendations.

Mr. Khett. I have read this draft, and, as far as my judgment
goes, it covers the subject thoroughly.

The fifth question on the baHot presented the recommendation of
the chamber's connnittee that Federal licenses should be taken out
l)y lines, domestic and foreign, engaged in shipping between ports of
the United States and other countries; on this the vote was GlOto 120,
Section 10 of House bill 10500 provides for licenses. Do I under-
stand that it is intended to eliminate that provision^

The Chairman. If it is eliminated, it will be for the reason that
bill 14387 ])rovides specific penalties for violations of the law, and
in the event, I assume it will not be necessar}' to include the license
feature in section 10, However, that is a question that the com-
mittee has not determined finally.

Mr. Rhett. I just wanted to call attention to the fact, as I am only
recording the position which the chamber has taken in this referen-
dum.

The fourth question on our ballot was, Should there be legislation
abolishing deferred rebates and providing for supervision of rates
by the Federal shipping board, Avith requirements for filing with
the board schedules of rates and all agreements among over-sea lines ^
"With our referendum Avas i^rinted the bill — I think it was bill H. R.
450, which is practically the same as the bill now before us. except
that the present bill puts the jurisdiction in a shipping board instead
of in the Interstate Commerce Commission, and with a few other
changes.

The Chairman. It is in your referendum No. 9. It is the text
verbatim of bill No. 450, as I introduced it in this Congress.

Mr. Rhett. I would like to call attention to the fact that we only
dealt with the over-sea shipping; I do not think we have ever taken
any referendum on the subject of coastwise or lake shipping.

The vote approving regulation of over-sea shipping was GOl to
130, and the bill I have mentioned was printed in the referendum
pami)hlet as an exhibit, so that while we can not say that each
organization which voted affirmatively voted for the exact pro-
visions of the bill, it is a fair inference to be drawn. In printing
the results of the balloting we tabulate what each organization has
to sav in connection with its vote when it does not vote uncondition-
ally and s(iuarely upon the question presented. If any of you gen-
tleinen have this tabulation, you will see there are several images of
comment which the organizations made in connection with their
votes when they were unal)le to vote scjuarely on the proposition in
the referendum. For instance, the San Francisco Chamber of Com-
merce voted '' no," and filed this statement :

It would also prefer to divide the fourth cpiestion of the second ballot and
vote in favor of abolition of defcn-cd rebates, but against supervision of I'ates l)y
the shii)])ing board.

150 REGULATOBY FEATLTReS OF SHIPPING BILL.

Being unable to divide the question as presented in the referendum,
they voted against it entirely. We will be very glad to file with you,
if you desire, a complete statement of the A'otes and comments; it
will show the comments wherever the organizations did not vote
squarely on the questions as they were i)resented.

The organizations participating in the referendum cast GOl votes
to 130 for the creation of a Federal shipping board, with require-
ments for filing Avith the board schedules of rates and all agreements
among o^■er-sea lines.

I think that is as much as I am able to go in making a statement
in the matter, as I am not an expert on shipping. I can only record
with you gentlemen what the members of the Chamber of Commerce
of the United States have voted on and hoAV they voted.

Mr. Hadley. I understand that bill Xo. 450 was not submitted as
a concrete example by the chamber.

Mr. RiiETT. No; it was only put as an exhibit, and therefore, of
course, it was net voted en specifically. It was only given as an
illustration of how it is proposed to make this regulation. I think
I might read this paragraph from the report of our committee,
based upon which the ballots were cast.

Mr. GREE^'E. On which line? On everything that was referred to
them under the referendum, or only on these items you have men-
tioned ?

Mr. Rhett. No; this is a paragraph in the committee's report re-
ferring specifically to the regulation which we are talking about,
which is included in H. R. No. 14337. The paragraph I am about to
read is in the report of a majority of the connuittee, and in the corre-
sponding question the balloting, as I have said, resulted in 601 affir-
mative votes and 130 negatives.

Legislation is pending providing for the suix-rvision of ocean freight rates, the
filing of sciii'dules and agreements between dilfereiit lines, granting the right of
shipi)ers to apply for rate redactions and to correct abuses, calling for ;i proper
system to secure payment of .just claims, al)olisliing deferred rebates and uniust
discriminations against shji>pers, recpiiring that concessions granted in advance
contracts must apply to all, and dealing with the correction and regulation of
shii)ping mattei's for public protection. Your connnittoe are heartily in favor
of such legislation, with all such matters jilaced in cliarge of the Federal ship-
ping board.

That w'as the report of the committee on that subject, and it was
upon this report that the question in the referendum about regulation
of over-sea lines was based.

I do not know that there is anything fiu'ther you gentlemen Avant
ot me.

Mr. Gree>;e. I would like to ask, does the paper that you have filed
cover the whole action of your association on all matters that were
referred to them relative to this shipping bill? For instance, do you
favor the Covernment undertaking the purchase, construction, or
charter of vessels for mercantile purposes, together with the oper-
ation of such vessels? Is that vote included?

Mr. RiiETT. In the ballot?

Mr. Greene. Yes; referendum No. 9.

Mr: Rhett. Oh, yes.

Mr. Greene. It shows that 89 people voted in favor and (iOO voted
as opposed to the purchase, construction, or charter of vessels for mer-
cantile purposes, together with the operation of such vessels?

RKGUI.ATORY FEATURES OF SHIPPING BILL. 151

Mr. KiiEJT. Yes; that is, 89 votes in favor and GOO opposed. The
votes are determined by the ballots of organizations, not of indi-
viduals.

Mr. Greene. And also in regard to the ownership of vessels by the
Government, to be operated by private parties under lease.

Mr. Rhe'jt. 51 in favor to 713 opposed.

Mr. Greene. That is all there?

Mr. Rhett. That is all there, in the same referendum. I was
speaking, however, only about the regulation that is proposed in bill
No. 14337.

Mr. Greene. There has been some testimony here by some parties
who have testified that these referendums Avere not taken with due
care, or with sufficient explanations to boards of trade that voted.
What is your understanding? Was it your understanding that they
voted blindly, or with a full understanding?

Mr. Riiett. Mr. Fahey presented to this committee some months
ago a complete tabulation of how these votes were taken by each
organization. I have a copy of that before me, and I can answer
you with reference to any organization, because I have here a com-
plete tabulation showing exactly how they arrived at their decision.

Mr. Greene. I think the thing was fairly taken. I am only asking
your view, wdiether it was fairly taken or unfairly taken. I am not
in opposition to your method of doing business ; I think this proposi-
tion w\as fairly taken by the various chambers of commerce, and was
a fair representation of the general sentiment of the commercial or-
ganizations throughout the country ; not perfect, probably, but fair.

The Chairman. You will find that same referendum offered by
Mr. Fahey on page 172 of our hearings on H. R. 10500.

Mr. Greene. I am not finding fault with that. I am simply
asking Mr. Rhett, as the present president of the chamber of com-
merce and an active man in the commercial business of the country,
and, consequently, responsible in the position he now holds, as to
what his view is as to the method which was pursued by the body
over M'hich he now presides, in their attempt to get at the business
sentiment of the country in regard to this shipping bill ; whether he
thinks it was fairly taken or unfairly taken; whether an honest effort
was made to secure the views, or whether it w^as a fake proposition.

Mr. Rhett. As to that I wish to say our purpose is to endeavor
to get the business men to think on these questions themselves, and
to that end we give them what information we can, try to state
the question fairly and squarely, and do all we can to see that in the
pamphlet used in taking a referendum the arguments that can be
fairly urged on both sides are impartially presented. We ask them,
after they have studied the question, to send us in their opinion.
We believe we are succeeding. We find their interest growing more
and more, and that the votes which are sent in are representative of
the sentiment of the communities represented by the organizations in
our membership. Here and there you will find a vote carelessly
taken, but for each referendum we now go to the officers, asking the
manner in which their organization is committed in the referendu.m.
This procedure on our part is resulting in these ballots being thor-
oughly representative of the business sentiment of the organization.

152 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Edmonds. Mr. Rhett, we had before us last week Mr. Isidor
Jacobs, president of the California Canneries Co., a New York con-
cern, who stated that the chamber of commerce of which his concern
is a member in California

Mr. Rhett. What chamber is that?

Mr. Edmonds. The Chamber of Commerce of San Francisco.

Mr. Rhett. Yes.

Mr. Edmonds. That his chamber sent out a notice, of which he
has sent us a copy, in which he said they were told how to vote, and
that they voted that wa}'. I think I am correct in that.

Mr. Hardy. I think so. Did he give a copy of the notice he said
they sent out ^

Mr. Edmonds. Yes. He said the result was that out of over 3,000
members not more than one-fifth responded, the other four-fifths
not responding to the referendum at all. He said :

You will understand that it is based niton this referendum (if llie Sail
Francisco Chanil)er of Conuuerce that tlie United States Chamber of Commerce
figures the referendum that tliey take from the San Francisco Chamber of
Commerce, so that it can readily l)e seen that the expression of the San
Francisco Chamber of Commerce is not an exiiression of the business interests
connected with the San Francisco Chamber of Commerce, and I have reason
to believe that practically all chambers of conuuerce in our lariie cities are
similarly handled.

Now^ he inclosed here a copy of the referendum as it was sent out, and
then he says that most concerns voted as was recommended to them.

Do you know anything about that? Did you recommend from
your parent chamber of commerce how ])e<)pk' should vote on this in
the different chambers of commerce ?

Mr. Rhett. Not at all. We have never attempted even to suggest
to them any form of procedure to use with their members. As I
have already indicated, we are trying to gather from them the forms
of procedure which they in fact use. But all we ask is that they send
a ballot which represents the business sentiment in their organiza-
tion, and that they adopt a foi-m best cak-ulated to gather that senti-
ment. AVe do not want a baHot that does not represent real business
sentiment. We discourage it. If we ]<now it does not represent that
we do not record it.

Mr. Edmonds. The system that was evidently adopted by the San
Francisco Chamber of (^onnnerce was this: They evidentl}^ referred
this bill to a committee, because I see it says here, " Recommendation
of the foreign trade and maritime affairs and harbor connnittees of
the San Francisco Chamber of Commenie in joint session." Noav^
this is the recommendation that he speaks of, and it probably was
referred to a special committee, and the committee, ha^•ing studied
the matter, told the members that they thought this w^as the right
way to vote, but gave them the opportunity to vote any way they
pleased. And they had that opportunity on the other side of the
page. And therefore Mr. Jacol)'s statement that it only expressed
the sentiment of one or two members was not correct?

Mr. Rhett. Not at all. In that case, for instance, they apparently
selected a committee of their members who are familiar with mari-
time affairs and ship})ingat San Francisco, and men in whom they had
confidence. They seem then to have asked this committee to investi-
gate the questions presented to the referendum and to give them the
benefit of their ^•iews. The committee of the San Francisco Chamber

REGULATOEY FEATURES OF SHIPPING BILL. 153

of Commerce seems to have submitted a report to its organization, and
their report and its reconmiendations seem then to have been phiced
before all the meml)ers of the organization that they might express
their individual approval or disapproval of the point of view ex-
pressed. It seems to me that that is a very intelligent way to handle
such a matter. The San Francisco chaml)er seems to have given its
members the benefit of this report, but they were not precluded from
voting the opposite way. In fact, the business of Congress is handled
that way; a committee investigates and makes its report, and Con-
gress can adopt it or not, as it sees fit.

Mr. EdiMoxos. In other words, they do the Avork in a businesslike
manner.

Mr. KiiErr. I think the method adopted at San Francisco would
seem to be very well calculated to bring fair results, although I do
not at the moment know what results it actually had in the instance
in question.

Mr. Edmoxds. 'Sir. Jacobs made the statement that one or two peo-
ple ran all these organizations, as near as I can remember the gist of
his testimony.

Mr. IviiK'n\ By way of repeating that statement, gentlemen, I can
tell you an incident in my own chamber, at Charleston, where a mat-
ter was up and the president was in favor of it. He selected a com-
mittee of 12 to pass on it. After they had discussed it, 11 voted
against the president. This incident shows that any general state-
ment of the kind you have mentioned is not sound.

I know that at first the referenda of the United States Chamber
of Commerce were not considered as cai'efully as they are now. It
was not realized Avhat value they had. Xow I think that our organi-
zations are very much more careful in sending us a ballot to see
that it represents business sentiment. Otherwise, the comeback on
them would be considerable. Their own members get after them. In-
quiries are made from all over the country" about these referenda, and
therefore each time we send out a referendum there is more care ex-
ercised to return to us the sentiment of the business men of the or-
ganizations.

Mr. P2dm()Nds. He says that only one-fifth of the members re-
sponded.

Mr. IviiETT. If you take the vote of San Francisco, for instance (I
do not know what the recommendations of the San Francisco cham-
ber's committee were) , they voted " No " on the first three propositions
and "Yes" on the fourth. Voting such as that indicates considera-
tion of the questions presented. They must have handled the refer-
endum fairlv intelligently. They did not merely follow recommen-
dations that were made by our connnittee. They voted "" Xo " on the
first proposition, which was the purchase by the Government of ves-
sels, together with their o})eration: they voted " Xo '' on the second
proposition, which was Government ownership of vessels, Avith ope-
ration by private parties under lease; they voted " Xo" on the third
proposition, which Avas subsidy ; they voted " Aye " on subvention ;
they voted " Xo " on the first recommendation of our committee. Avhich
Avas the shipping board; they A'oted " Xo " on the second j)ro])osition
of our committee, Avhich was for the Government to subscribe to the
entire stock of a marine development company; they voted *' Yes '' on
the third proposition, which Avas the ocean-mail hnv : they voted

154 EEGULATORY FEATUEES OF SHIPPING BILL.

" No '' on the fourth proposition, ^vhic'll was deferred rebates and
regulation of rates; and tliey voted '" Xo "' on the fifth proposition,
wliich Avas Federal licenses.

It looks to me as if the.y nnist have gone over the questions very
carefully. They certainly did not follow recommendations of our
committee.

iMr. RowE. They did not follow j^our recommendations?

Mr. RiiETT. They certainly did not.

Mr. Greene. It was not that he was complaining, as I understand,
but Mr. Jacobs stated before the committee you must not pay any
attention to the chamber of commerce, because it don't amount to
anything, but pay attention to Mr. Jacobs.

Mr. Rhett. I know it is our constant study to get the organiza-
tions not to send us in ballots until they have tested out thoroughly
the method they think best calculated to get the business sentiment
of their community.

Mr. EDM0^•DS. It is a matter of record that only one-fifth of the
San Francisco chamber voted, which is but natui-al, because probably
only one-fifth of the members were interested in the ship matters;
and when a man is interested in a question he pays more attention to
those things than the man who is not. I have found that out.

Mr. Rhett. That is so. You can not get a full vote and never can;
but there are usually men in each community who have the respect
of the community and in whom the community have confidence who
study these questions — merchant marine, for example— and the rest
of the community will follow them the same way they will expect to
be followed on questions with which they are familiar.

The Ciiair:max. I think, if you will read INIr. Jacob's testimony of
the manner in which the referendum was taken, that you will find
there is no material difference between the two.

Mr. Rhett. I tell you, gentlemen, we are constantly studying
means of making the results of our referenda truly representative
in any v^ay they ma}^ be shown to be defective.

Mr. Edmokds. I understood Mr. Jacobs to contend the chamber of
commerce vote did iiot really i-epresent the sentiment of the business
interests.

The Chairman. He said he took a refei-endum himself, with a dif-
ferent result. Just how he took it I do not knoAV.

Mr. Edmonds. He did that in his canneries association, did he not?
" In our association," he said.

The Chairman. No. This is what he said :

I tested that by sending out a letter myself to the nieinhers of our local
chamber of commerce and the answers received by the chamber of commerce
itself was between 500 and GOO out of 3J00 menibei-s. T got over SOO answers
diret-tly opposite to the i-efereiidum that the chiimber of commerce took, but I
did not suggest how they should answer the questions.

Mr. Hardy. Then he filed with the committee, as I understand,
the recommendations under w'hich the chamber's referendum was
made.

The Chairman. I do not see any objection to the manner in which
the referendum was taken by the San Francisco Chamber of Com-
merce, as far as that is concerned.

Mr. Edmonds. That is Avhat I wanted to bring in, because that is
the way I took it.

EEGULATORY FEATURES OF SHIPPING BILL. 155

The Chairman. He said their executive committee had investi-
gated it and filed their recommendations.

Mr. Edmonds. That Avould be a natural thing for a committee to do.

The C'liAiRMAX. I say, I do not see any objection to that.

Mr. Ehett. Mr. Chairman, will that be put in the record. We
would like very much to investigate that, because that is of very
vital importance to us. We Avant to know hoAV these things are
taken.

Mr. Hardy. I have another thing also, Mr, Rhett. I have a let-
ter — I can not recall the name of the man now — of some gentleman
who was invited to address the members of the Chamber of Com-
merce of San P^rancisco, and when he wrote them that he wanted
to talk on the question of free ships, they advised him not to make
any talk there, and he did not go. I have that letter.

Mr. IvHETT. Any information that you gentlemen can give will be
a very great favor to us. All we are trying to get is the business
sentiment. We are simply trying to get the business men to study
these questions, and to give you the benefit of their views. If you
can help us along that line by referring to us any of these letters,
they will be investigated, and they will be very helpful to us.

Mr. Hardy. I am satisfied that your purpose is to get the organi-
zation's attitude on the questions you are trying to solve.

Mr. Rhett. That is all.

Mr. Hardy. But I believe you agree with Mr. Jacobs, that a com-
mittee selected for their knowledge, making recommendations as
to how they should vote, Avould have very great weight in determin-
ing how those who were not posted should vote ?

Mr. RiiETT. Yes.

The Chairman. As INIr. Rhett says, we are investigating questions
here now, and we make recommendations to Congress, and they have
great weight, because v^'e investigate them thoroughly.

Mr. Hadley. That is the policy on which the parent organization
proceeds, as I understand, and if it is not Avorth anything, it had
better go cut of business; and that is the policy that the San Fran-
cisco Chamber of Commerce pursued, as the record now shows.

Mr. Hardy. That is a matter for argument as to how much a refer-
endum is Avorth, Avhen the vote is guided by suggestion.

The Chairman. The matter arose originally on an inquiry how
these referendums were taken. It developed that some chambers
of commerce referred referendum No. 9 to an executive committee
or some other committee and that committee would send in their
report as the report of that body to the Chamber of Commerce of
ihe United States, and the referendum Avas not put to the members
of the local chamber at all. That is true in some instances?

Mr. Rhett. Yes.

The Chairman. Mr. Benjamin J. Rosenthal testified before this
committee that they have S.OOO or more members of their asso-
ciated commercial bodies in Chicago, and that two men considered
and reported for those people, and the body of the organization never
expressed any opinion at all. You are trying to correct that, I know.

Mr. Rhett. We are trying to correct any such ])rocedure. We
have a tabulated statement here shoAving the manner in Avhich de-
cisions Avere reached by the organizations. A few chambers did it
that Avay — but very few. We are not trying to dictate to these

156 REGULATORY FEATURES OF SHIPPING BILL.

chambers any particular form: we are merely askin^; that they use
a form that will best express the business sentiment of the com-
munity. If we have a form sent in that we think does not do so
we send it back and tell them we do not w^ant a report of any
officers or any small clique amongst them, but we w ant a report that
Avill express the sentiment of their business conununity. and we
Avant to know how they are attempting to get it. Then we send out
the result to nil the members, in order that they may see how the
others do it.

Mr. Hadi.kv. How many organizations did you say did it that
way?

Mr. Khett. There were 11 organizations, for which the executive
officers undertook to act in referendum 0.

Mr. Hadley. What were the total number of reports on this
referendum t

Mr. KnETT. The total reports Avere -isl. and 11 voted by their
executive officers.

Mr. GuEENE. I am Aery Avell ac<iuainted Avith Mr. Fahey, Avho pre-
ceded yon. I kneAV him before he was elected president of your
chamber as a ncAvspaper man in Boston for years; he Avas a man of
very high standing and character, and I think he did great Avork as
president of your chamber of commerce.

Mr. KHfrrT. I am trying to pursue his footsteps as near as possible.

Mr. Greene. 1 knoAv you are. My (juestions were not in criticism.
They Avere rather in defense of the Avork you have done, because some
men haA'e made statements before this committee in criticism of the
Avork you have done, Avhich I did not think Avere justified.

Mr. Rhett. AVe Avill Avelcome any suggestions, gentlemen. All we
Avant to do is to give you the benefit of the business sentiinent of
this country, as far as Ave can, and any suggestions to the effect that
Ave are not doing it along the right lines Avould be promptly con-
sidered.

The Chairman. AVe are very much obliged to you, INIr. Khett, for
coming here to-day.

I have a letter here from Duncan N. Hood, South American repre-
sentative of the Hill Publishing Co., Hill Building, NeAV York, re-
ferring to his trip to South America, the conditions there, and the
present ocean freight rates. If there is no objection, I Avould like to
have it go in the record.

(The letter above referred to is as follows:)

llll.i. I'llil.isii INC Co..

.V( /r Vo;7,-. .1/-/// /N. I'.Uiu

11(111. Jo.SHf.V \V. .Xl.KXA.XDKK. .M . ( '..

('li(iiniia)i UoUNC of h'cijrcxoilnlin s Coiin/iitlcc

on Mcrcliotit Marine (tiid Fisli(ri(s. Wdsliiin/hni. I). <'.

Dear Sir: I have .just ivtunuvl I'l-oiu an IS niontlis" trip ilinniiili South
Aincricii i'oi- the purpose of ivporl iiij;- on romlil ions in lliosc markets for Auiori-
can iiiaiiufaclurcrs and our advertisers.

AVe have succeeded in iiiipressiii;;- our inanufacl nrers witli tiH> impoitance of
trying to jiet as much as jiossilih- of Soutli Anierica's 1.2(Kt million dollars
yearly imports, as this would mean a ."o ](er cent increase in our export.s. if
we get all of it.

In fact, one of our advertisers who formerly did a husiness of .S;S.000 a year
is now doing a liusiness in P.razil alone of .i?;*,7."i.0it0.

In spite of all that has ln'cn done so succt'ssfully thus far. we are ahoul to
lo.se almost all our traile there unless soinethiug is done immediately lo relieve
the situation.

REGULATORY FEATURES OF SHIPPING BILL.

157

Prior to the war frtM;j,iit ratt's to I{ueiio>i Aires were iihout $4 a ton. 'I'lie
averaj;;e piircliase pi-ice of a freiiiiit steamer is about .$.")(» jter ton. Ueceiit rales
liave aetiially readied S;."»L'.r)(» ju-r ton. ami this was jiaid )>ecanse it was abso-
lutely necessary.

So that frei.irht rates for a single .'?(>-(lay trip aiv now greater than tlu' i)>ir-
ehase price of the steaniei-s before tlie wai'.

If we fail tf) shi]! now. Soutli America will lie conii)elle(i to manufacture
tiiere what they now Imy fi-om us. and tliat market will be lost.

So tliat inmiedlate and jironi])! aclion is imperative.

Anything within our .iui'isdiction thiit floats should be consider(>d in the
]>lans for establishinti- marine lines from here to South America at normal
frei.uht rates. Interned steamers, coastwise vessels whose carjio can be han-
<lled by the i-ailroads, naval colliers. Army transi)orts. and some other naval
ves.sels should be impressed into service innuediately.

An emeruency, if n(»t a (Jovei-nment merchant marine, anythini;' at all will
do that will enable Amei'ican manufacturers to shiit I lie orders now held u[*
by the freight condition.

We have no interest in this in any way except to help our adx-ertisers and
American manufacturers.

Please bi-ing this matter before your connnittee and see that remeclial legis-
lation is pas.sed.

Y<uirs. vei\v truly,

DixcAX N. Hood,
Sijiitli AiiKiicdii RcjirvscHtiiilrc.

Mr. RowE. Mr. Chninnnn. Aviien Mr. Sherman, vice president of
tlie W. E. Grace Co., was before the committee, some one requested
him to give us a detailed statement of the diiference in cost of opera-
tion of simihir vessels under the American flag and the British flag,
and I have here a letter sent by another vice president of the W. R.
Grace Co.. which I wotdd like to have \)\\i in the record.

The Chairmax. If there is no objection, the letter will be printed
in the record.

(The letter above referred to is as follows:)

New Yokk. .1/>/// IU, 1!)10.

Hon, JOSHIA W. Al.KXAXDEK,

Conniiitlcc on McrclKiiif Marine and FiHlirricff.

llouxc of R('i)rcsciitatircs, Wafdiiiij/toii. J). ('.
I>EAK Sir: In reference to your inquiry to our Mr. L. H, Sherman, we beg
to advise that we have been operating American and British steamei-s side by
side for some years, and we have made diffei-ence in cost of oj)eration (on same
size boat) to be as follows:

American
(per month).

British
(per month).

ages.

Vietuallin;

American steamers require aimual inspection, while British steamers are
inspected each four years; estimated extra cost by reason of annual inspection.

$1,970
.S03

$1,342
649

or. say, .$807 extra ytev month for American boat.

The extra cost of victualling is not by statute, but by reason of less economy
on American steamers.

(Ml P>ritisli steamers, which we recently triinsferred to American flag, the
foreign crews struck for American wages the da.v of transfer and received them.
On same size boat as referred to above the crew under Ilrilisli Hag was ;^3
men, and the crew under Amei'ican flag was Hd men.
Yours, very truly,

W, U. (JliACE & Co.,
I), MriH. \ ice I'naidciit.

(Thereupon, at \L'M) o'clock a. m.. the committee adjourned to
Friday, April 21. llUC. at 10.80 o'clock a. m.)

158 EEGULATORY FEATURES OF SHIPPING BILL.

COMMI TTEF, OX THE jSIekCHANT MaHINE AND FiSllEKIES,

House of Repi{esentatives,

Saturday^ April '22, 1016.
The conmiittee met at 10.30 o'cloclc u. m., Hon J. W. Alexiinder
(chairman) presiding.

The CuAiitMAN. AA'e have present this morning- gentlemen repre-
senting, one of them iSeattle. another San Francisco, and another
Los Angeles. "W'e Avill be glad to hear them with reference to House
bill 14337.

STATEMENT OE MR. SETH MANN, REPRESENTING THE SAN FRAN-
CISCO CHAMBER OF COMMERCE, SAN FRANCISCO. CAL.

The CiiAULArAX. Please tell the committee who you are, what 3'our
profession is, and what your relations are to the San P^rancisco
Chamber of Commerce.

]Mr. Manx. iMr. Chairman and gentlemen of the committee, I am
the attorney and manager of the traffic bureau of the San Francisco
Chamber of Commerce. I am also the president of the Pacific Coast
Traffic League, w hich is an organization composed of the traffic man-
agers of the various conunercial bodies or civic institutions repre-
senting cities and conunercial communities within the States of Cali-
fornia, Oregon, and Washington situated west of the Sierra Nevada
and Cascade Mountains, and thus it deri\es its name, the Pacific
Coast Traffic League. It has been organized in this way so that we
shall have in our membership not the representatives of any particu-
lar line of business or of any particular interests, but only those rep-
resentatives Avho represent all the interests, as traffic managers or
traffic officials representing shippers and commercial communities
must do when they are engaged in their work, which is a work that
means the taking into consideration of all interests and not any
particulai- interest to the exclusion of others.

The Pacific Coast Traffic League in Jamuiry met in San Fran-
cisco, and, among otlier things, after discussion, adopted resolutions
to the elFect that they were opjioscd to any regulation of freight rates
on vessels engaged in any commerce. The San Francisco Chamber
of Commerce has had under consideration for some months past the
American merchant-marine bills, if I may so call them, one being
H. K. lonoo and the othei- the present bill before this committee, H. R.
14337. They, pursuing the custom which they have adopted on mat-
ters of serimis import, sent out what they call a refeieudum to the
members of the chambei-. There are some 3.()()0 membei\s of the San
Francisco Chamber of Conunerce, men engaged in all the lines of
busine.ss and manufactui-c that are cari'ied on on the Pacific coast,
including Avholesale. retail, and manufactiu-ing. The form of this
refeiendum is a printed form asking cei'tain (juestions of the members
and giving them an opportunity to vote either yes or no; and I Avant
fir.st. with your permission, to convey to you the i-esults of this refer-
endum, which was just recently conununicated to the chamber, and
wdiich I received just the day before yesterday in the form of a tele-
gram from the i)resident of the San I'^rancisco Chamber of Conunerce,
Mr. W. X. Moore, of the firm of Moore. AVatson & Co., wholesale dry-

KEGUr.ATOKY FEATUEKS OF SHIPPING BILL. 159

goods merchants, of San Francisco. The result of that i-eferenchim
was as follows: Aoiiinst the construction or purchase of ships by
the Goveinrnent, 8 to 1. Those fi^jures, of course, represent the pro-
portion of the vote and not the actual vote.

The Chaiumax. How many votes were cast? You say tliei-e are
3,000 membei's of the chaml)er of commerce.

Mr. Manx. I ha\e not that fi^rvire. Air. Chairman. It was not con-
veyed to me by telea'ram. and that information had not arrived at
the time when I left San Francisco, on the l^th instant. In faxov of
the alternate sugjiestion made by the Chamber of Commerce of the
State of Xew York eijualizing the building and operation of Ameri-
can and foreign ships the vote was 3 to 1 ; in favor of any new bill
providing merchant marine, the legislation being so framed that
ships may operate under regulations of the broadest liberality to meet
ovei--sea competition, 20 to 1.

Mr. Sauxders. Does that include subsich'?

Mr. Maxx. You understand that these questions were submitted
to the membership of the chamber in this particidar form, and the
vote therefore is upon the questions as I have read them.

The CHAiR:\rAX. They seem to realize the need of a merchant
marine?

Mr. Maxx. That seems to be a matter of general consent.

Mr. Hardy. And has been for some years.

Mr. Maxx. Yes, sir: and has been for some years. In opposition
to Government ownership and operation, the vote was 7 to 1 ; in oppo-
sition to regulation of freight rates to be charged and collected by a
ship, 5 to 1 ; and in opposition to regulation requirements for licenses
to vessels, 8 to 1.

Now. gentlemen, within the brief time that necessarily must be
granted in a matter of this kind, notwithstanding its importance, I
desire to confine myself very largely to the opposition to any attempt
to regulate the rate to be charged by vessels operating in either in-
terstate or foreign connnerce. and first I desire to invite your atten-
tion to statements made before the Senate Committee on Interoceanic
Canals in the Sixtv-second Congress, second session, on H. E. 219G9,
under date of March 29, 1912. That was the Panama Canal bill,
and the hearing was upon the Panama Canal bill. The statements
to which I desire to refer are statements of Judge Prouty, a member
for some 30 years of the Interstate Commerce Commission, and now,
as you know, in charge of the physical valuation of railroads, Avhich
is being carried on by a department of the Interstate Commerce Com-
mission. Judge Prouty had had occasion for many years, perhaps
20 years, to examine into the intermountain situation, as it is called,
and the effect of water competition between the Atlantic and Pacific
coasts, and also into other questions relating to the regulation and
the operation and the fixing of rates and fares by steamer lines in
connection with rail lines, those questions being under the jurisdic-
tion of the Interstate Commerce Commission by the terms of the act
to regulate commerce. At that time the question arose with respect
to the operation of vessels through the canal because the Pacific Mail
Steamship Co. desired to so operate, notwithstanding 51 per cent of
its stock was owned bv the Southern Pacific Co. Until within a

160 EEGULATORY FEATURES OF SHIPPING BILL.

few months this stock still remained in the ownership of the South-
ern Pacific Co.. hut has now been sold to W. R. (xrace & Co. At that
time, however, r)! per cent of the stock of the Pacific Mail Steamship
Co. was owned bv the Southern Pacific Co., and they were endeavor-
ing; to have the Panama Caual act authorize the oi)erati<)n of those
vessels belontiin*; to tiic Pacific Mail Steamship Co. throu<>;h the
Panama Canal when it was opened and ready for business. The
ojiposition of the Pacific coast and of the peoj)le of the Atlantic
coast and of the central part of the United States a^rainst this opera-
tion Avas that the Panama Canal was constituted, at least partly, to
control fi-eiofht rates between the Atlantic and Pacific coasts, or what
may be called the transcontinental railroad rates, by water competi-
tion, and the oi)inion was \igorously and successfully urged that
railroad comi)anies should not be })ermitted to own or control their
own water com})etition. The Pacific Mail Steamship Co., supported
by the Southern Pacific Co., contended that if the rates by vessels
operating through the Panama Canal should be put under the con-
trol and jurisdiction of the Interstate Commerce Commission or any
other congressicmal power the difficulty would pass away and that
steamers could then operate, notwithstanding that they were owned
by raili'oads covering the same transportation movements between
the same points, because the Interstate Commerce Commission could
always see that the rates maintained by those vessels were rates which
would not be railroad rates, but purely sea rates.

That was the contention of the railroad companies then, and it has
ever since been their contention, and it is to-day the desire of the
transcontinental railroads of this country to have the rates of the
steamers and vessels operating in opposition to and in competition
with them controlled and regulated by some regulating body for
many reasons, but, among others, that since the railroads themselves
are operating under the conditions of an act which require them to
i)ublish their rates and to make them public for 30 days before they
go into effect, they Avant the same conditions to apj^ly to tlie carriers
l)y water, which are the great natural regulators of railroad freight
rates. Tn response to that ])ro])ositi(m, and in response to the ques-
tion of why, with the Pacific ^Mail-Southern Pacific vessels oper-
ating thiough the Panauia Canal, the control of the Interstate Com-
merce Coumiission might not be invoked and the first objecticm
]'emoved, Mr. Prouty, of the Interstate Conunerce Commission, and
Mr. Franklin K. Lane, then a member of the Interstate Commerce
Comnnssion and now Secretary of the Interior, were invited to come
before the Senate Committee on Tnteroceanic Canals and make their
statements with resi)ect to their investigations and their opinions
as to the advisability, and. indeed, the ])racticability of endeavoring
to regulate steamei's at all, so far as their freight lates were con-
cei'ned. I am now reading from ])age S()l) of the I'ej^ort I have just
]eferre(l to, and this is what Judge l*rout\' said:

T do not IliiiiU tliiil tlic Iiitorstntc Commerce Coiinnission cnn regulate the
lMH't-to-|toi-t i-;il('s of a water cariMcr. bocauso tliero is no hasis for regulation.
We linve just been invest i^atin^i, in a case of wliieli I had cliai'jre, the port-to-
Itort water i-ates fi'oni \ew York to Calvestoii. There is a very hii'ge volume
of traflic annually fi'om Atlantic seaboard territory to New York, from New
York to (Jalveston liy water, and by rail from (ialveston to interior Texas and

EEGULATORY FEATURES OF SHIPPING BILL. 161

Southwestern points ; we liuve l)eon inquirini? into the reusonabieness of those
rates. Now, the evidence convinces me tlint it is entirely a (luestion of con-
ditions. If tlie ship runs full in one direction a low rate can he made; if it
runs full in both directions, a lower rate can be made ; if it runs lijiht, a
higher rate must be made in order to pay the expenses of operation. Our in-
vestigation in that case shows that 60 per cent of the expense is at the dock,
nnd only 40 per cent of the expense on the water. The expense, both at the
dock and on the water, is substantially the same whether a full load is obtained
or wliether only a part load is obtained, except the cost of loading.

I would like to insert this extract from the statement of Mr.
Franklin K. Lane before the same committee on the same subject:

Mr. Lane. I was talking about the railroads. I think the distinction you have
In mind perhaps is this: That a man who operates a boat line uses a highway
that is already created for him by nature, while a man running a railroad
creates a highway and operates a machine over it. Now, the artificial highway,
namely, the railroad, becomes a monopoly. Its franchise creates it as a
monopoly, and that is the basis for regulation. I think that, so far as the
natural highway is concerned — the water — that it is a very practicable thing to
allow traffic freedom of competition upon that ocean highway, whereas it is not
a practicable thing to allow traffic freedom of competition upon the artificial
highway.

The CHAinMAN. Why not?

Mr. Lane. For the very reason that if you do not control the railroad you are
going to have a demoralization in the service and in the rates ; and you are
going to have the condition that existed in this country 25 years ago when the
railroads were killing themselves. The act to regulate commerce is largely a
measure to protect the railroads against themselves.

The Chairman. Do you mean the intent of the interstate commerce act is to
prevent railroads from competing with one another?

Mr. Lane. Very largely so. And to prevent rebates, which are simply a means
of competition.

The Chairman. You talk about the freedom of the ocean. Is there anything
that prevents competing steamship companies from agreeing upon rates?

Mr. Lane. Theoretically there i.s, but practically there is not.

The Chairman. Then why do you expect this freedom of competition on the
ocean?

Mr. Lane. Because a man can hire a boat for a couple of hundred thousand
dollars, or for a verv little amount of money and put it on against a competitor
that may be worth $100,000,000.

The Chairman. I do not think that statement by Judge Prouty
relates to any proposition now being considered l)y this committee.

Mr. Mann. If the chairman please, it seems to me that it is germane
in this respect, that this bill under consideration does propose to
regulate and fix the rates to be charged by vessels on freight, and this
is a statement, as I understand it, against the advisability or prac-
ticability of doing that thing.

The Chairman. That is not a question that we are considering
now. Is there any objection to a commission having charge or con-
trol, so far as maximum rates are concerned?

Mr. Mann. Yes, sir; and it is that very objection. That is the
charge they now have of railroad rates.

The Chairman. You do not think that Congress or anybody
clothed with powers similar to the powers of the Interstate Com-
merce Commission should have any control wdiatever of the maxi-
mum rates to be charged by water carriers of either domestic or
foreign commerce?

The Chairman. Do you think they should have a free hand to do
as they please?

38534^16 11

162 EEGULATOEY FEATURES OF SHIPPING BILL.

Mr. Mann. Let me say in that regard, if the chairman please,
that there is no question that the legishiture or the Congress of the
United States, under the German Alliance Insurance case, decided
just a year or so ago by the Supreme Court of the United States,
have full power to regulate any business of any kind or character
which the court finds to be of a sufficiently public nature to justify
such regulation, irrespective of whether it be a monopoly or not;
so that the only question that will arise in this economic age will be
as to whether it is Avise or not to regulate such a business. The
question of power is out of the question, because that is granted.
There is nothing to be considered but the question of the advisa-
bility of doing it, and I am addressing myself now to the point of the
inadvisability of restricting this shipping business, which is not
a monopoly, but which necessarily almost must be a private concern
operating over the unmonopolizable highway of the sea.

Mr. Saunders. As I understand it, Judge Prouty said in respect
to the bill you referred to that if the traffic is good both ways lower
rates may be charged, but that if the traffic is light a diiferent rate
would be necessary to ])revent them from losing money. Now, in
what way does that differ from the situation of the railroads? If
a railroad's traffic is good, one rate would be justified, but if the
railroad's traffic, under particular conditions, is light, so that they
would be running on half time and operating at a loss, that would
be taken in consideration in determining what was a fair and reason-
able rate to the railroad ?

Mr. Mann. That same question was asked Judge Prouty; may I
read his answer?

Mr. Saunders. Yes ; I woidd like to have an answer to it.

Mr. Mann. Now, having in mind that what Judge Prouty said is
in answer to your question, I will read. He said :

Now, when you inquire wliat is a roasonalile rate on a railroad you have
something to jiuide you. You have other railroads; you know about the cost
of other railroads; you know about the cost of oi)eration ; you know about the
density of the tratfic ; you can institute a comparison between that railroad and
similar railroads. But all those distinctions fail when you undertake to inquire
what is a reasonable rate on the water.

Mr. Saukders. Does that appeal to you ? Do those distinctions
seem to you to be sound?

Mr. Mann. Yes, sir.

The Chairman. Is that tlic basis on which they make rates or de-
termine what is a reasonable rate on a railroad?

Mr. Mann. Yes, sir; very largely, and I have been bringing those
cases before the commission for 15 years. I have been bringing cases
before the commission involving the reasonableness of rates. I have
brought them both l^efoi-e the Interstate Commerce Commission and
before the railroad counnission of the State of California. We pro-
duce the best evidence we can get as to tlie rates charged under simi-
lar circumstances and conditious, either l)y thi^'^ same or other rail-
roads; or, rather, bv the same or similar railroads.

The Chairman. Take, for instance, the lines from Kansas City to
San Francisco; take the Santa Fe, the Hock Island, the Burlington,
and tlie Union Pacific; do they have different rates from Kansas
City to San Francisco upon the same commodities?

Mr. Mann. They are practically the same rates.

BEGTJLATOEY FEATURES OF SHIPPING BILL. 163

The CiiAimiAx. But there is a difference in the cost of the con-
striiction of those roads?

Mr. Mann. Competition goA^erns there.

The Chairman. Do they all have the same rates?

Mr. Mann. They do on the same business.

The CiiATiniAN. The net profit to the different roads, then, de-
pends upon the difference in the cost of construction, operation, and
maintenance, does it not? In other words, one road can perform tlie
same service and have a greater profit than another road by reason
of the difference in those factors — that is, the difference in the cost of
construction, maintenance, and operation?

Mr. Mann. Yes, sir.

The Chair:man. Then the rates are not determined on that basis,
are they?

Mr. Mann. Xot always. This distinction must be kept in mind
with respect to rate regulation or any other kind of regulation, and
that is the distinction Ijetween a reasonable rate, or a rate which the
public utlility is entitled to receive, which includes a fair return upon
its investment, that being a rate which the regulating body can fix
as the maximum, and that other very large body of rates, which may
perhaps be larger than the one I have just mentioned, and which are
fixed by reason of business conditions, the rules of political economy
and the law of supply and demand, and which may be condensed into
the one word " competition."' That is something which presents itself
in this way to the public utility : " You can take this business or leave
it, but if you take it you must take it upon a competitive basis, and
if you want to handle it on your rails you must make a rate that will
carr}^ it by rail under competitive conditions." Under that com-
petitive system the rate-making regulative body is not in the position
of fixing the maximum rate, but of permitting the public utility to
charge less than a reasonable rate. There are two methods of fixing
rates. One is to order a maximum rate and one is to permit the
charge of a less than reasonable rate.

Mr. Saunders. For the purpose of illustration, take the case cited
by Judge Prouty of traffic moving between Galveston and New York,
and let us see if the difficulty suggested by Judge Prouty is a real
one. Now, in the case of a line plying between New York and Gal-
veston, so far as rail competition is concerned, the competition would
be with railroad systems that are operating under fixed regulations.
That is true, is it "not? The railroad systems with which the ships
would compete are operated under fixed regulations prescribed by
the Interstate Commerce Commission, are they not ?

Mr. Mann. Not entirel}^ so, so far as the rates are concerned.

Mr. Saunders. Who else controls them?

Mr. Mann. The law of supply and demand and the law of compe-
tition.

Mr. Saunders. The freight rates are fixed by the Interstate Com-.
merce Commission: they have the right to fix them, and they are
net modified by the law of supply and demand, are they?

Mr. Mann. Yes, sir.

Mr. Sauisders. Can they change a rate fixed by the Interstate Com-
merce Commission under the law of supply and demand?

Mr. Mann. By permission of the Interstate Commerce Commissioii
they can.

164 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Saunders. That goes back to what I said — they are operating
under fixed regulations prescribed by the authority oi' the Interstate
Commerce Commission.

Mr. Manx. Either by order or permission.

Mr. Saunders, llien what difference does that make?

Mr. Mann. Because one rate is a reasonable rate, the other a less
than reasonable rate

Mr. Saunders (interposing). But under the law it is permissive
or prescriptive by the Interstate Commerce Commission ?

Mr. Mann. Yes, sir.

Mr. Saunders. Xow, having in mind that they are operating in
competition with a regulated system of transportation, and having
in mind what can be ascertained by the tribunal in respect to water
traffic, and having in mind what can be readily ascertained as to the
cost of handling the traffic, and having in mind what can be ascer-
tained in respect to the cost of the ship, and having in mind the
chances of loss, tell me why a tribunal with the means for ascertain-
ing all of those facts can not prescribe a maximum rate that would
be fair to all concerned ?

Mr. Mann. In the fiist place, the investment in one railroad is
very much the same, generally .^peaking, as it is in another. It
costs about as much to construct 1 mile of mountain railroad on one
line as on another, and it costs about the same amount to construct
a mile of railroad over a level country upon one line as on another
line, and it costs just about as much to buy a box car for one road
; s it does to buy the .a me kind of box car for another road. The
same thing is true with reference to locomotives, general expenses,
and the wages of train crews, and the operating conditions are sub-
stantially the same on one road as on another. The initial invest-
ment; however, is very large on any large or controlling railroad
system. We will say that $300,000,000 will represent the minimum or
the a\erage investment in the construction of a line from Chicago
to the Pacific coast. Xow. the railroad is entitled to receive a re-
turn upon its investment, and its investment, we will sav, is
$300,000,000.

jNIr. Salndehs. A reasonable i)rofit to the i)eople who put their
money in

Mv. Mann (interposing). 'J'hey are entitled to a reasonable return
upon the investment. Xow, a shipowner is entitled to a reasonable
return, and the question is, What is the investment? Suppose I own
a ship and you own a ship. My ship may cost only half as much
us you IS, or yours may cost ten times as much as mine. Mine may be
a ship of 1,000 tons burden, while yours may be a ship of 10,000 tons
bui-den ; my ship may cost $100,000, while yours may cost $1,000,000.
Therefore my initial investment is only one-tenth of yours. Then,
Avhen you make a voyage l)etween two ]:)oints — and it makes no dif-
ference what two points they are or what you ma}' do — you have got
to have your whole ship along with you. That is another considera-
tion. Xow. if I am I'unning a railroad, if I have only got a train
of 20 loaded cars, although I could haul 40 loaded cars, I can leave
20 empty cars at the depot and handle only my train of 20 cars. But
if I am going to operate a ship, I can not leave half of my ship
behind.

EEGULATOEY i-'EATUEES OF c;HlPPl^'G BI1,L. 165

The Chair^ian. Yon sav there would be a difference in the cost of
the operation of the raih-ond in carryinir a less number of cars?

Mr, Manx. Yes, sir.

The Chairman. So there is an econoni}- in leaving off 20 cars?

Mr. Manx. Yes. sir.

The Chairman. The saving would not be much.

Mr. Mann. Of coui-se, that is a matter of figures, and it can be
demonstrated. A i-ailroad, of course, does not save onedvalf of the
expense by operating 20 cars instead of 40, but they do save a great
deal by not having to move 20 empty cars. Furthermore, the einpty
cars not moved in that train may be used to load in another train.

Mr. Saunders. Having in mind all those considerations and fac-
tors which you have mentioned, which are entirely proper, the men
who have their money invested in shipping can tell whether they are
making money or not.

The Chairman. It takes the same engine and the same crew, a
little more pull and steam, but that is not very great '.

Mr. Mann. My difficulty is to understand how if we are sitting
down together and trying to fix a fair rate on 100 pounds, we will
say, of angle irons, structui'al iron and steel, that are going to move
from New York to Galveston, we are going to fix the rate on the
10.000-ton steamer and the rate on the 1.000-ton steamer, and yet fix
them at the same rate per 100 pounds, because certainly we can not
contemplate making one rate for one vessel and another rate for
another vessel, and yet give to each one of the steamers a fair return.

^fr. Saunders. Why can not that be met in this way, by classifica-
tion, steamers of a certain type and size, say, charge a maximum rate,
and steamers of another classification and size, another maximum
rate? There is no inequality in that.

Mr. Mann. I think you will find that the dock charges and general
expenses of operation will vary very materially in the two kinds of
ships, and still you might say that that will be taken into considera-
tion.

Mr. Saunders. AVould not that be an element to lie taken into con-
sideration ?

The Chairman. The regular lines on the Atlantic and Pacific
coasts have their rates now. They all filed their rates with this com-
mittee in its investigation of the so-called Shipping Trust. You
are assuming a difficulty which they are solving for themselves.

Mr. ]Mann. Each line has established a system of rates. They were
effective February 1, 1915. Prior to that time they had a very dif-
ferent system of rates indeed. Let us take, for example, the rates for
iron and steel.

(Thereupon an informal recess was taken.)

Mr. Greene. I wanted to ask Mr. Mann a (juestion along the lines
we Avere talking about when we took a recess. I would like to ask if
there is not one factor which disturbs this question of regulating
rates in the foreign trade, and that is the factor of the tramp ship.
We have had testimony before the committee that two-thirds of the
vessels in the foreign trade are tramp ships. Xow, if 6G per cent of
the vessels in the foreign trade p.re tram]> ships which are not reg-
ulated and which it is not proposed to regulate bv this bill, and
which can not be regulated because they are individual shii)s, why,
is not that one strong factor why we should not have regulation of

16G REGULATORY FEATURES OF SHIPPING BILL.

rates in the foreign trade? And then, furthermore, of course, we
are subject to foreign competition with foreign vessels which are
subsidized and all other conditions that arise in the foreign trade
which we can not control or which we might control only to a slight
extent, but Avhich in general we can not control, are not those im-
portant factors in the situation?

jNIr. Manx. I think, Mr. Greene, you are entirely right in calling
attention to the not onh' impracticability but the absolute impossi-
bility of controlling foreign freighters. Two-thirds of the foreign
trade probably does move in what ma}^ be called tramp vessels, but
what do you mean by tramp vessels? What do we mean b}' tramp
vessels? We mean vessels, if 3'ou please, that are privately owned,
but all vessels are privately owned in a sense. AVe mean vessels that
belong, we will say, to no regular line of steamers. Then, we will
take a regular line of steamers and ships operating way back prior
to 1870, the American-Hawaiian Steamship Co., a very fine line in-
deed, and they used to operate clipper ships around the Horn, and
they brought the commerce from New York and the Atlantic coast
to the Pacific coast, and it w^as the great competition of those steam-
ers, as Avell as other independent, if you please, tramp ships which
the railroads were compelled to meet in 18G9 when the golden spike
was driven which united the Central Pacific Railroad and the Union
Pacific Railroad at Promontory, Utah. It was for that reason the
railroads had to consider whether or not the}^ would keep the traffic
to the rails or let it go to the sea.

The American-Hawaiian Steamship Co.. commencing with clipper
ships, finally come to steamer lines. Finally the Tehuantepec Rail-
road was built across the southern part of Mexico from Salina Cruz
to Puerto, Mexico; and prior to the opening of the Panama Canal
a very excellent service, indeed, was given between the coasts by this
line, with an unloading on one side and a loading on the other side on
both east and west bound freight with a movement across the Isthmus
of Tehuante]:>ec. Then the Panama Canal was opened and the Ameri-
can-HaAvaiian Steamship Co., with its 26 ships, proceeded to operate
through the Panama Canal, in the same class of trade, you might say,
between the Atlantic and Pacific coasts and also to the Hawaiian
Islands in the sugar trade. There was a regular line of steamers. It
was a historic line. It operated in coastwise business and it operated
very hopefully for the future under a provision of the statutes which
confines coastwise traffic of the United States to American-built
vessels. It was as regular a line as could be imagined, and what has
happened to it? It is to all intents and purposes a tramp line. It
is not a line at all. The various high charter offerings which are
made for the transportation of freights over the oceans, particularly
between the Atlantic coast and Europe, have attracted ])ractically
all of these steamers into that trade, and those steamers, I am told,
in many cases are being chartered at the rate of $100,000 net per
month. What do you mean by a tramp line ?

You can not confine a shij) to any particular operation, but you
can confine and you must confine and you must consider as confined
a railroad company in operating a railroad. They can not run their
cars except over the rails, and they are held and firmly held to the
rails, and that is another instance of the monopoly of railroads and
the impossibility of a continuous monopoly on the sea.

REGULATORY FEATURES OF SHIPPING BILL. 167

Now we have all heard about the Baltic pool. AVe all know the
problems that ha\e been before Congress here. Some of us are
familiar with Franklin K. Lane's decision in the Baltic Pool case,
which resulted in requiring the railroads to publish the inland pro-
portion of the haul destined from a point in the United States to a
foreign country. We are all familiar with those conditions and we
find that as a matter of fact we are limited when it comes to an
attempt to control the commerce of the world.

I remember that Mr. William J. Bryan — I have always been a
Democrat and I have found myself supporting William J. Bryan
up to ver}' recently — said when he advocated the principle of IG
to 1 without the consent of any foreign nation, that if the United
States adopted this principle of 10 to 1 all the nations of the world
would have to do the same thing. Now, that was a prediction. We
never adopted 16 to 1, and therefore we do not know whether it is
true or not. Some of us believe that it probably was not true.

If you attempt to regulate the commerce of the world, and that is
what it seems to me you are trying to do under this bill as far as the
United States is concerned, by fixing rates of freights and fares, in
both import and export business, for that is the language of your
bill, gentlemen, it seems to me you are saying to the shipowners of
the world that if you are going to deal with the United States, either
by taking our freight to a foreigTi country or by bringing freight
from a foreign country to our shores, you must comply with all of
our rules and regulations as to how much income you are going to
get per ton. You are then going to meet one of two situations, and
perhaps both.

One situation will be that inasmuch as all steamers and vessels
may sail the waters of the globe wherever they please and may en-
gage in commerce wherever they find it to their advantage so to do ;
that ships and vessels of foreign ownership will abandon your ports ;
or secondly they will land their goods, let us say, in Canada and
bring them across to the United States when they are coming from
a foreign country, or vice versa, ship from the Canadian port to the
foreign country, and you are then practically erecting a Chinese
wall around all of the great seaports of the United States against all
foreign trade. Now, with respect to your interstate commerce or
your coastwise business, if you are going to have the principles of
political economy and freedom of government operate with respect
to this very valuable part of our transportation and commercial
system ; if you are going to have freedom in this line, you are going
to leave your domestic vessels untrammeled by restrictions with
respect to what they are going to charge, because when you say to a
shipping man, a man is about to invest his money in ships : " You
can not engage in bus;iness except under very severe penalties, and
unless you agree that you will always charge the same amount to one
man that you do to another, and that you will not charge any more
than your published rates," because in this bill we are discussing here
you have brought into the bill practically sections 2, 3, and 4 of
the interstate commerce act which prevents the obtaining of a differ-
ent rate through any device, method, or plan whatsoever; if you
are going to say to men who have money to invest in ships and to
engage in traffic on the seas, " You must come under this principle,
and you can not engage in business except by permission of the ship-

168 KEGULATORY FEATUEES OF SHimXG BILL.

ping commission, and exevy movement you make must be under their
control just as it is on a railroad," what is the man with money to
invest going to say about going into the business? He is going to
say, " I do not care to go into that business. I will abandon it to the
big lines," and instead of bringing about freedom of competition,
you will bring about monopolization, which is the thing that you
had intended not to do.

If you are going to control the rates of the shipping between
coasts ; if you are going to say to the big companies like the American-
Hawaiian Steamship Co., the Luckenbach Steamship Co., W. R.
Grace & Co., the people who have been operating through the canal,
'" you must file your tariifs and you can not change them except on
10 days' notice, and you can not make any different arrangement be-
tween one man and another," and this is going to apph^ to all vessels,
for there is no distinction that I can find in the act, Mr. Greene, be-
tween a regular line and a tramp line or between a privately-owned
steamer and any other, because it says that any person, firm, corpora-
tion, or other person is subject to the provisions of this act who is
engaged in said commerce, interstate or foreign, under those circum-
stances a man who is contemplating an investment in a ship is going
to say, " I do not want to go into the business. I can not compete
with the big and powerful lines like the American-Hawaiian Steam-
ship Co., the Luckenbach Steamship Co., now building six ships,
vrhicli will be delivered in 1917, of over 10,000 tons burden, and
W. R. Grace & Co., which has recently acquired the Pacific Mail
Steaship Co. I am not going to enter into any kind of opposition
to them." Why ? " Because I can not expect to compete with those
men unless I can compete on the question of rates; unless I can go
into the market and underbid," and that is competition. What is
^.•rong about competition, provided .you are not exercising a
monopoly?

Mr. Hardy. Suppose you reached the conclusion which I think was
unanimously reached in this committee after two years of investiga-
tion of shipping combines, that so far as competition was concerned,
the day of competition on the ocean was gone ; that combination had
taken its place, and that all laws against coml3inati()n Avere futile in
that respect, and that the time has come now to recognize combina-
tion and regulate it. Now, 3'ou will admit, will you n( t, that unre-
strained combination or monopoly is unendurable to the public?
Xow, if 3-ou have no restraints of law, but leave the l)ig fish and the
little fish all in the sea t( gether to work our their final destination
by themselves, it appeared to us and it was the unanimous conclusion
of those who sat and li.stened to the testimony, that the big fish would
eat up the little ones, and ultimately result either in a monopoly or
t;lse in such a combination as would be the same thing as a monopoly.
AVe concluded that under those conditions, finding it impossible to
prevent combination or monopoly, it was necessary to recognize it,
and the re]ircsentatives of the big shipping interests came before us,
and I think nearly every one of them said, "We believe you can not
prevent combination. We think you see that from the testimony,
and we believe that if combination exists some regulation must be
had."

Consequently, as the result of the conclusions of that connnittee,
Judge Alexander introduced bill No. 450, which is a counter))art and

RROTTr.ATORV FKATURES OF SHIPP1N(; 1511. f.. 160

practically the same as the bill we are having the hearing on now.
As I understood it then, the shipping men said that yon needed regu-
lation and that combination should be recognized. Now, when Ave
attempt to do that, they come in with a different story, and to-day I
understand you to say you want no regulation whatever.

Mr. Mann. Xo regulation of freight rates. We must have regula-
tion just as we have regulation in insurance companies.'

Mr. Hardy. Then, when competition ceases to be competition,
which is the point you are dwelling on now, and becomes combina-
tion, you w^ant no power under the sun to say, " Thus far you shall go
and no further. You can take my coat, my hat, my top shirt, and
we do not even want to stop at the bottom shirt or the undershirt;
we want this combination to have the power to take everything off."
Do you Avant absolutely no power at all vested in the GoA'ernment ?

Mr. Manx. Mr. Hardy, with your permission I will deny the fact
that the coastwise shipping is the subject of monopoly or combina-
tion, and in that respect I should fear the Greeks even when bearing
gifts. AVhen a combination comes before the committee and says,
" Yes; we would like to be regulated or w'e will justify regulation, or
we think, perhaps, you will have to- regulate us

Mr. Hardy (interposing). You, then, place no confidence in a con-
fession against interest?

Mr. Mann. Not under those circumstances.

The CiiAiKiMAx. Let us take a case right on your own coast. How
many lines are there from Seattle to San Francisco?

Mr. Mann. Three or four regular lines, I should say, are there not?

Mr. Wettrick. At least that many.

The Chairman. How many are in competition?

Mr. Mann. You will, of course, find them under a condition of
wise competition, not cut-throat competition, not monopolistic com-
petition, but you will find a fairly well settled run of rates.

The Chairman. Their rates are identical, are they not?

Mr. Mann. No; I can not say that. They are not identical in
passenger business ; I know that is true.

The Chairman. Are they the same in the freight business?

Mr. Mann. And I am not prepared to say they are the same in
freight business, because they ai"e not regulated, and they may change
those rates from time to time even if they publish the same rates, the
publicati(.n not being under statute.

The CuAiRiiAN. Are those lines railroad owned or conti'olled?

Mr. Mann. No, sir; the Pacific (^oast Steamship Co. is not rail-
road owned or controlled, nor the San Fi-ancisco c*c Po)tland Steam-
ship Co., nor the Alaska Pacific Steamship Co.. which is a Guggen-
heim company. I do not know of any line owned and controlled
by the railroads, except the I^nion Pacific has one line, has it not?

Mr. Wettrick. Yes, sir: from Portland to San Francisco; but the
Interstate Commerce Commission, you will remembeT". permitted
them to continue that line.

Mr. Mann. Yes; they have been permitted to continue that line.

The CiiAiRiviAN. How many lines are there from Seattle to Los
Angeles?

Mr. Mann. Well, those same lines, or many of them, nm down as
far as Los Angeles, sto])i)ing at the intermediate ports and taking on
goods for carriage at those ports.

170 REGULATORY FEATURES OF SHIiTlXG BILL.

The Chaiiolvn. Does the line f re m Seattle t< uch at San Francisco
on its way to Los Angeles?

Mr. ]Manx. Yes; the Pacific Coast Steamship Co. operates between
San Francisco and Los Angeles as well as between San Francisco
and Portland and Portland and Seattle, and the same is substan-
tially true of the San Francisco & Portland Steamship Co.

Mr. Hardy. You Avill admit we have no competition now of rail-
r(;ads?

Mr. Manx. Yes, sir; we have competition — what is known as com-
i:)etition of service.

Mr. Hakdy. Exactl\'; five ye.irs ago ( ur commission for the State
said that all competition in railroad traffic was gone, except one road
would have a little better service or better accommodation or a better
looking porter or something of that sort so far as passengers were
concerned; and in railroad freight, one road would be a little bit
quicker or a little bit more accommodating through its agents, but
they said it was competition in trying to give a better degree of
service.

Mr. Manx. I have answered too hastih' in saj'ing there is no com-
petition among railroads. It is true that the railroads are obliged
to make substantially the same rates for the mo^.ement of freight be-
tween the same points, but the}' do that very frequently, and espe-
cially in the case of a long line on the ground of the competition of
the shorter line, and the Interstate Commerce Conunission has held
that the competition of a shorter line between two points is an excep-
tional case justifying the longer line in meeting the rate of the
shorter line, and in those cases charging a higher rate to the inter-
mediate points, so that tliere is competition existing in rates.

Mr. Hardy. And therefore the long line has no competition where
it does not meet a shorter line, and really uses its intermediate points
as a means to club the short line to death, and the longer the line is
the stronger it is in its competition.

Mr. Manx. No; I should put it the other way, ]Mr. Hardy, and
there are not very many permanent deaths among railroads, either.

Mr. Hardy. I do not know whether you call them deaths, but they
go through a period of translation and they squeeze the little fellows
out and there is a receiver appointed and bonds are foreclosed, and
the stockholders who have had the property go gliuimering, and there
has been a period of rich rioting for the strong manipulators, but
also a period in which the people finally concluded that a coml)ina-
tion of railroads was inevitable and that they had to regulate the
rates. Xow, if the same condition exists on sea, what other remedy
is there ? There is only one other remedy, I will tell you now, either
you have got to regulate these rates or the Governuient ultiuiately
has got to come in and become the sole operator of such conq)anies.
A monopoly is an unendurable thing to free people. You give any
class of people an uncontrolled monopoly on a necessity of life, and
it is the power of taxation.

Mr. Manx. Yes; an uncontrolled monopoly.

Mr. Hardy. An unlimited power and only subject to their modera-
tion. Like Lord Clive said when he was in India, when he saw his
opportunities he was astonished at his own moderation. I do not
blame these people for charging all they can get. The carriers in

EEGULATORY FEATURES OF SHIPPIXG BILL. 171

this country, rail or otherwise, were never to blame for taking the
last dollar they could. It is the fault of the people who permitted it.

Mr. Manx. And yet. jNIr. Hardy, it seems to me a strange thing if
an,v of these larger coastwise companies have come to this committee
and admitted that there was a combination Avhich fixes rates when
we will

Mr. Hardy (interposing). The}^ do not admit it; they swear it.

Mr. ]Maxx (continuing). When we will find those same companies
next Monday represented by attorneys before the Interstate Com-
merce Commission claiming that the railroads are driving them out
of business. If any of you gentlemen come up before the Interstate
Commerce Commission next Monday, you will find that position
being maintained by those people — that the railroads have gone so
low that they are driving the ships out of business.

]Mr. Hardy. Is it astonishing to you to find various and sundry
conflicting contentions of representatives of some interests under dif-
ferent circumstances?

Mr. Maxx. Xo, sir: I see it almost invariably, and that is the
reason I doubt any contention coming from the Greeks.

Mr. Greexe. I would like to ask you a question. In view of the
fact that the question has been brought up here, that we have made
an investigation of these various lines and found that there were
conferences, agreements, and all that kind of thing, and while no
objection was made to the report that was made, because it con-
tained simply a statement of the facts, this bill No. 450 and bill No.
14337 are bills drawn, as we are informed, as the result of that in-
vestigation, and being a result of that investigation, this bill that we
are now considering — No. 14337 — proceeds to put on what I call strin-
gent regulations in regard to shippers, and while we say we are hav-
ing a bill prepared now to build up the American merchant marine,
at the same time it is my contention that this regulation provided for
in this bill ties the hands of the xVmerican shipper, and if in any way
it has any releasing features, it is because it can not tie the hands
of the foreigner in the same manner that it ties the hands of the
American shipper.

Mr. Maxx. With that I entirely agree.

Mr. Greexe. It is my contention that these regulations are unjust
and improper; that they ought not to be adopted; and they ought not
to be put in this bill if this bill is intended to build up the American
merchant marine.

Mr. Maxx. Replying to your question; out there on the Pacific
coast w^e have very powerful lines of steamers operating between the
Orient and the Pacific coast. They are Japanese lines, and my un-
derstanding is that they operate under subsidies which guarantee
them against any possible loss, even if they have to run empty. The
effect of the seamen's bill was to favor those lines, because they are
officered by Japanese officers, and, of course, Japanese crews w411
work for very low wages. Now, if j^ou attempt, or if Congress at-
tempts, to fix the rates of freight upon Japanese lines, I would like
to knoAv how we are going to prevent the Japanese companies from
giving rebates to the shippers from Japan to America or rebates to
the consignees in Japan. I can not see any possible way. I do not
see how you can prevent those rebates from any freight rate that
you may see fit to fix, or how you are ever going to be able to prove

172 REGULATORY FEATURES OF SHIPPING BILl.

it, and if it applies to the Japanese lines, whj' should it not apply
to the German lines, English lines, French lines, or any other lines
of steamers

Mr. Hardy (interposing). Did yon ever talk to Mr. Humphrey,
your Representative from the Pacific coast, upon the question or
preventing rebates and unfair combinations and practices by foreign
shipping lines coming into our ports? He introduced a bill along
that line, and talked for it here as long as he was on this committee.
J confess that he was not as anxious about the regulation of domestic
lines, but he wanted to regulate the foreign lines. We made an in-
Testigation of that, and undertook to determine what our powers
were. Among other things, he had a provision that upon a shipping
company being found guilty of being engaged in such conduct as I
?iave described, it should be denied the right of entry into any of our
ports.

The Chairman. Yes; and we passed a bill of that kind through
the House b}^ unanimous consent.

Mr. Mann. Of course it may be necessary for us, as I sa}'', in this
experimental age, to endeavor to control that situation so far as
foreign ships are concerned, but I do not think it will take long to
convince Congress that it is impracticable and impossible — —

Mv. Hardy (interposing). My impression was when the shoe was
on one foot, which was the foreign foot, the domestic ship owners
were rather inclined to rejoice in it, but now that it is on both feet
and includes both the domestic and the foreign ships you are kicking
like bay steers over it. Now, you do not doubt the power of this
Government to prevent rebates being given by ships at any of our
ports, do you?

Mr. Mann. I do not doubt the power of this Government to pre-
vent clearances or to take away licenses or to do any of those things,
but I do doubt the power of the Government to compel those foreign
ships to come into our ports.

Mr. Hardy. There is no question about that, and nobody will try
to compel foreign ships to come in.

The Chairman. Would you object to this provision going into

this bill :

That wlienever, after full hearing uijou a sworn complaint, the board shall be
of opinion that any rates or charf,'ei> demanded, cliarged, or collected by auy
common carrier by water in foreif?n commerce are unjustly discriminatory
between shippers or ports, or unjustly prejudicial to exporters of the United
States as compared with tlieir foreign competitors, the board is iiereby empow-
ered to alter the rates or charges demanded to the extent necessary to correct
such unjust discrimination or prejudice and to make an order that such
carriers shall cease and desist from such inijust discrimination or prejudice.
The board is hereby also empowered, upon sworn comi^laint after full hearing,
to determine, prescribe, and order enforced just and reasonable regulations and
practices relating to ov connected with the receiving, handling, storing, and
delivering of property by any such carrier?

Mr. Mann. Yes, sir; I object to any regulation of that kind or
character affecting freight rates upon any vessels.

The Chairman. That provision was approved by the Chamber X)f
Commerce of New York through Mr. Kirlin, their attorney; Mr.
Franklin, of the International Morcantilo Marino: nnd Mr. Bush,
superintendent of terminals of Ncav York, and otlicr gentlemen who
were here gave it their approval.

REGULATORY FEATURES OF SHIPPING BILL. 173

Mr. Mann. It comes for^vurd worthily and well qualified, but still
I object to it and could not possibly consent to it. My objection to it
is based upon a principle, and that is that any regulation of that kind
or character should be confined to monopoly, and I deny that the
sea is a monopoly or that it can be monopolized.

The Chairman. If you will read the report of our investigation,
you will have your mind disabused on that subject.

Mr. Mann. Let me develop for a moment the conditions govern-
ing the operation of ships at sea. It is necessary, in order that you
shall have independence and freedom of competition on the ocean
that the shipowner, or the tramp steamer, if you like, or any com-
peting steamer, if you like, shall be able to come into port and say
to the men who are ofi'ering goods for shipment, " I will take these
goods in order to fill my ship at the following rate, if you will give
the shipment to me " — which rate may be less than the amount he
has charged to another shipper on the same commodity moving in
the same \ essel. The reasons for that are legion. For instance, sup-
pose a ship about to leave port has had a thousand tons of space en-
gaged for a month, and then it is suddenly given up. We will sup-
pose that the man who engaged the space goes into insolvency or
something of that kind, and there is a thousand tons of space upon
that vessel unfilled. Now, the vessel must sail to-morrow ; she is
obliged to sail to-morrow or submit herself to damages for delay on
the complaint of other shippers. There is this thousand tons of
space, and what is the owner of that ship or the captain of the ship
going to do? He will endeavor to fill that space, if he can, and in
order to fill that space within the short time he has in which to fill
it, he will offer inducements that will bring the freight. He will
offer inducements that will induce somebody who did not intend
to ship to ship his goods. Now, in order to do that he must offer a
rate that is attractive, and it may be low^er than somebody else has
on the same commodities in the same ship.

Mr. Hardv. If I understand you, you are in favor of giving the
shipowner the right, without giving any reason for it, to discrimi-
nate between his customers and patrons whenever he sees proper?

Mr. Mann. Yes, sir; and that was the rule at common law.

Mr. Hardy. So you think that a ship sailing from San Francisco
should have the right to charge you, for instance, 100 per cent more
than it charges your competitor, as a steady-going and regular propo-
sition, because they simply desire to favor your competitor and to
crush you out of business?

Mr. Mann. Well, theoretically, yes, sir; but practically, no; be-
cause that is never done.

Mr. Hardy. I am not talking about whether it has ever been done.
Would you give them the power to crush one man by charging him
two prices over what they charge his competitor ?

Mr. Mann. That is what I said, but I said that that condition has
never occurred, that it never can occur, and never will occur, for the
reason that the sea is open, and the moment that thing happens
somebody is going to put a ship on and stop it.

Mr. Hardy, Do you think that somebody could put a ship on now
to beat a combination of this sort, when the evidence before us was
that they could drive out any kind of competition

174 REGULATORY FEATURES OF SHIPPING BILL.

ISlv. Ma^n (interposing). Your are speaking of a gigantic pool.

Mr, Hardy. I am speaking of the pool operating between New
York and Galveston.

Mr. Maxn. Not now.

Mr. Hardy. Yes. Of course, everything is torn to pieces, and a
ship can get all the transj^ortation it wants at from four to six prices.
I am talking about the conditions that will confront us if this com-
bination should be permitted to go on unrestrained, and I just wanted
to see whether you were Avilling that a shipping combination shall be
permitted to operate unrestrained and charge you steadily and con-
tinuousl,y twice as much as they charge your competitor.

Mr. Mann. Of course, if we admit your premises, 3'our conclusion
is unassailable, but your question is based upon the premise that there
is a combination existing on the sea, both between coast ports, or in
coastwise traffic, as well as in foreign traffic, absolutely contrary and
opposed to justice, and that there is nothing to fight it or overcome
it except some such act as the one proposed here. If that premise
were true, and I were convinced of it. I would agree with you.

Mr. Hardy. You are not convinced that there is a combination ?

Mr. Mann. I am not convinced that there is any combination in
coastwise traffic.

Mr. Hardy. Did vou ever read the evidence that was taken before
this committee, consisting of four volumes?

Mr. Mann. No, sir.

Mr. Hardy. I wish you would read that and then tell me whether
you believe there was any combination prior to this war.

Mr. Mann. I know this, that large steamship companies that are
operating through the canal in coastwise commerce were favorable
to allowing the Pacific Mail steamers which were owned by the
Southern Pacific Co. to continue in operation through the canal, and
I think I can divine the reason why they wanted the railroad-owned
vessels to continue to operate through the canal. I think the reason
was that they felt that if they had three hundred or four hundred
million dollars behind a steamship company that was operating
through the canal, that that company would ultimately help to hold
up the rates through the canal, and that they would not be lowered
by any general competition.

Mr. Hardy. In other w^ords, they did not believe that the railroads
and steamshij)s would comi)ete with each other if they were owned
by the same parties?

IVIr. Mann. 1 know myself that the American-Hawaiian Steamship
Co., when the canal was opened, lowered its rates on steel to 30
cents j)er 100 or $G per ton, and even Avent as low as $5 per ton
or 25 cents per 100 ])ounds, and then the railroads, upon application
to the Interstate (Commerce Commission, were authorized to put in
low^ rates on iron and steel and many other products, because of the
heavy movement through (he canal, aiul that the commission has now
leopened those cases to see if relief can not be allowed from those
rates. I know that there were at least six dilferent lines of steamers
operating through the canal prior to the war. but now all of them
have been taken away because of those high charters. I lune heard
from one leading shipowner who says that as soon as this war is
over and the canal is open — as it is now — the competition through

EEGULATORY FEATURES OF SHIPPING BILL. 175

the canal will be keener and stronger than was ever experienced in
coastwise trade before.

Mr. Hardy. Is it your opinion that railroads can possibly actu-
ally compete with steamship lines through the canal ?

Mr. Mann. Do you mean if they do not own the steamers?

Mr. Hardy. Can they actually compete with a steamship line
through the canal, in other words, can you carry freight as cheaply
from New York to San Francisco by rail as 3^ou can carry freight
by water?

Mr. Mann. That is generally conceived to be true; and I believe it
to be true.

Mr. Hardy. Of course, so far as I am concerned, I say to you that
that is a condition which I think ought to be regarded. I do not
think the railroads ought to be allowed to rob interior points in
order to make fictitious com]3etition at seaboard ports, or a competi-
tion which can not possibly be real

Mr. Mann (interposing). Of course, that involves the long-and-
short-haul clause.

Now, the Panama Canal act, perhaps, unnecessarily, but, at any
event, specifically makes the Sherman Act applicable to vessels oper-
ating through the Panama Canal, therefore, there is no question
that, so far as any combinations of the kind or character that have
been referred to are concerned, the Department of Justice may im-
mediately take control and stop them, because all of those vessels
operating in the coastwise traffic are thoroughly and completely
under the control of the United States authorities. Now, so far as
the railroads are concerned, you asked if they do not have the same
rates from Chicago to Portland, Seattle, and Los Angeles? Yes;
they do. Then, you asked, " Don't they meet together and agree
on those rates?" Yes; they do, and that is illegal. That is unlawful,
and it has been held to be so in the trans-Missouri case and in a
number of other cases. President Taft, when the railroads proposed
to agree to advance the rates from Chicago to intermediate points,
had a bill drawn up by the Department of Justice under the Sherman
Antitrust Act; it was filed in court and served upon the railroad
carriers, and it said to them : " We are going forward now with this
proposition under the Sherman Antitrust Act and — unless you vol-
untarily continue and extend the effective date of your filed tariffs —
until there can be a hearing before the Interstate Commerce Com-
mission and a determination made thereon as to whether you can
justifiably advance these charges or not, we will proceed."

The railroads yielded ; they did not want to try that question, be-
cause there was no question; there was no question, because it had
been decided. An agreement with respect to rates may be tacitly per-
mitted to continue because of the necessities of the case

Mr. Hardy (interposing). You admit that such agreements should
be the subject matter of regulation. I have some doubt about the
effectiveness of it, but we should hang onto whatever advantage we
have. There have been instances in which railroads charged three
or four times as much under supposed regulation than they did where
they had real water competition. Therefore I do not think that that
regulation amounts to very much, but it is the best we can do, and if
there is anything in it, let us get it by all means.

176 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Mann. I suppose it is hardly necessary to enter into a defense
of the great work of the Interstate Commerce Commission. Of
course, the Supreme Court has held that the main object of our inter-
state commerce act is to bring about equality and to do aAvay with
discrimination, and undoubtedly that is the principal purpose. Un-
doubtedly 90 per cent of the discrimination that formerly existed or
that was formerly practiced by the railroads in favor of persons and
f/laces, particularly in the granting of rebates and passes, has been
wiped out; and that is the reason why the railroads are able to earn
revenues sufficiently large to pay good dividends to their stockholders,
notwithstanding the fact that their rates have been reduced by many
millions of dollars throughout the whole United States. They are
«ble to pay dividends, notwithstanding the lowering of their rates,
l.ecause they are not permitted to give any more rebates or passes.
The result is that they are able to clo business and make money at a
less rate. Now, as to the proposition that the railroads of the United
States, generally speaking, charge rates that are very materially
higher than reasonable rates, I want to say that, as a general propo-
sition, it is my opinion that that is not the fact. There are, of course,
many cases where, on special commodities, we say that the railroad
rates are unreasonably high, and Ave are fighting them on it all the
time

ISIr. Hardy (interi)osing). If a railroad charges just three times
as much for hauling a commodity half the distance as they charge for
hauling — not the same character of commodity, but the same com-
modity — for twice the distance, would you think that an inireason-
able charge or practice?

Mr. Mann. I should not be suri)rised to find a larger charge for
the shoi'ter than for the longer distance, although it does seem to me
that the relationshij-* of three to one is unduly high.

Mr. Hardy. But that does actually apply to the biggest commodity
in my State.

INIr. Mann. You should appeal to the Interstate Commerce Com-
mission.

Mr. Hardy. We have appealed to the State railroad commission,
and they did not relieve us.

Mr. Mann. Louisiana got some relief in the Shreveport case.

The Chairman. I have before me tariffs Nos. 23, 24, and 26 of the
Eastern Steamship Corporation, giving their interdivision and joint
passenger tariffs of one-way and round-trip fares from New York
City to destinations in Maine, Massachusetts, New Hampshire, and
Vermont, in the United States, and New Brunswick, Newfoundland,
Nova Scotia, Ontario, and Quebec, in Canada, and also from Boston,
Mass., and Portland. Me., to destinations in Delaware, District of
Columbia, Florida, Geoi-gia, Illinois, Kentucky, Louisiana, Mary-
land, Missouri. New Jersey, New York, North Carolina, Ohio, Penn-
sylvania. South Carolina, and Virginia, which, of course, have been
approved by the Interstate Commerce Commission. Now, you say
that it is in'ipracticable to regulate rates in the coastwise trade, and
yet the Intei-state Commerce Commission is doing it.

Mr. Mann. Yes, sir; in this way

The Chairman. Just the other day some steamship companies pro-
posed to increase their rates 15 per cent, and the Interstate Commerce
Commission would not permit it. Now, do you not suppose that any

EEGULATORY FEATURES OF SHIPPING BILL. 177

commission or board organized under the terms of this bill, or the
board that we are proposing to create here, could exercise the same
good sense and discretion Avith reference to that subject that the
Interstate Commerce Commission is exercising now in regard to that
traffic which is in part rail and in part w^ater where they are joint
routes and services?

Mr. Mann, The answer there, as I see it, is this, that the rail car-
riers do not make through routes and joint rates with water carriers
unless those water carriers are what are called regular lines. I never
heard of a through route and joint rate being established with any
but a regular line. That is the reason, as I understand it, wdiy the
interstate-commerce act gives the commission jurisdiction over rates
on traffic moving partly by rail and partly by water, under common
ownership or control

The Chair:max (interposing). They can charge a less rate if they
want to. We are not interfering with their activities in that direc-
tion at all, nor are we doing anything to prevent them from making a
lower rate. In any event, we will not undertake to do more than to
supervise it so as to prevent discriminations and prescribe the maxi-
mum rate. That is what the Interstate Commerce Commission is
doing to-day Avith respect to water lines that have joint traffic ar-
rangements with railroad companies.

Mr. Mann. My understanding of the act was that it would apply
to any owner of any ship. This bill provides —

That every coimnoii carrier by water in interstate commerce shall establish,
obsei've, and enfoice in intei-state commei-ce just and reasonable rates, fares,
and charges and just and reasonable regulations and practices affecting classifi-
cation, rates, or tariffs, etc.

The same provision is made with respect to foreign commerce.

The Chairman. Not the same.

Mr. Mann. It is similar. The bill provides —

That whenever, after full hearing upon a romplaint, or under an order for
investigation ma<le by the board on its own initiative, the board shall be of
opinion that any rates or charges demanded, charged, or collected by any com-
mon carrier by water in foreign commerce are unreasonably high, or unjustly
discriminatory between shippers or ports, or unjustly prejudicial to exporters
of the United States as compared witli their foreign competitors, or represent
an unjust relation between classes of commodities, the board is herel>y em-
powered to determine and prescribe what shall be the just and reasonable rates
and charges to be thereafter observed as the maximum to be charged, and to
make an order that such carrier shall cease and desist from publishing, de-
manding, or collecting any rate or charge in excess of the prescribed maximum.

Now, this act follows the plan of the interstate commerce act in
requiring interstate vessels and foreign vessels to file their rates and
charges with the commission and not to deviate from those rates and
charges except upon the authority of the commission, or upon filing
new rates upon 10 days' notice

The Chairman (interposing). There is not a word in there to the
effect that the}^ can not reduce their rates — not a w^ord.

Mr. Hadley. I call attention to the language in line 18, page 11.

Mr. Mann. It provides that no increase shall be made. The pro-
vision on page 11, from line 15 to line 18, reads as follows :

No increase shall be made by such carrier in the rates, fares, and charges, or
joint rates, fares, and charges which have been filed in compliance with the

38.534—16 12

178 REGULATORY FEATURES OF SHIPPING BILL.

requirements of this section, except after 10 days' notice to the board, which
notice shall plainly state the increase proposed to be made.

Now, suppose a tramp carrier has filed its rates, as the hiw re-
quires, and then it lowers its rates. It must, of course, file its rates
in order to loAver them, and then, in order to get the rates up again
to the maximum which they are allowed to charge, the carrier must
give 10 days' notice to the board. In other words, any change by
way of lowering a rate must be made by filing the rate, which is the
same rule, if the chairman please, that applies to railroad companies
at the present day. I suppose there are thousands of tariffs filed
every day with the Interstate Commerce Commission lowering the
rates of railroads. The railroads file the tariffs and they go forward
and become the rat€ unless some objection is made. If a shipper
makes objection, the commission has the power to suspend that rate,
whether it has been lowered or raised, until the commission can in-
vestigate the justice of the reason for lowering or raising the rate.
Of course the lowering of a rate may produce a discrimination that
is unjust to other communities. If, however, no protest is made, the
rate goes into effect by the time named without any action by the
Interstate Commerce Commission at all, and that is true whether the
change involves a lowering of the rate or a raising of the rate. Now,
I submit that this provision here Avith respect to vessels is substan-
tially the same.

The Chairman. We can not agree about that, and it is a waste of
time to discuss it.

Mr. Mann. I am simply calling the attention of the committee to
my construction of the law.

The Chairman. It is not susceptible to that construction, to my
mind.

Mr. Mann. Now, in conclusion, so far as my statement is con-
cerned — and with many apologies to you for taking up so much of
your time — I do not suppose that there are enough people in the
United States who are opposed to an increase of the American mer-
chant marine to be entitled to the designation " minority." It is, of
course, the practically unanimous desire of everyone throughout the
United States to see the American merchant marine come into exist-
ence. It has practically no existence now to speak of, so far as the
over-sea commerce is concerned. The figures used to be only 11 ships
for the United States in the actual over-sea commerce — that is to
say, in the commerce between the ITnited States and Europe or the
Orient— while England had 4,000, Germany 2,000, and France 1,500.

Those numbers have not been materially modified, except so far
as the war has affected them and brought some vessels under Ameri-
can registry. Now, then, what is the problem and what is the solu-
tion or, rather, what is the solution of the problem we have been
considering? It seems to me we can not solve it by legislation, but
we can solve it perhaps by legislation in the form of repeal. It is
only by freedom of trade upon the ocean that you can ever expect,
in my opinion, to bring about an inci-ease of the American merchant
marine. I think that we can all look with a great deal of interest
and insti'uction to the policy of England in this regard. She has
the largest number of ships in commerce and she has more freedom
a thousand times than Ave liaA'e. We have too many restrictions that

REGULATORY FEATURES OF SHIPPING BILL. 179

have been imposed ever since 1846. If we could have that kind of
freedom, I believe that competition upon the ocean will ultimately
bring about the desired result. Permit me to advance this one
thought, because it concerns our American merchant marine very
closely, particularly in coastwise commerce.

The tolls upon the Panama Canal, which, I am sorry to say, have
been imposed upon American shipping engaged in coastwise com-
merce, in which respect I must seriously differ, together with Demo-
crats of high standing, with the President of the United States; but
be that as it may and to one side, the tolls which are imposed now
upon American vessels through the American canal at Panama are
collected upon the basis of the net tonnage of the vessels passing
through. The net tonnage of the vessels passing through the Panama
Canal of American register is measured according to the American
laws, according to the laws of Congress, and the laws of Congress
are such that the American vessel which measures 5,000 tons is a ship
of 5,000 tons when it comes to the imposition of tolls for the Panama
Canal. The same ship, or a sister ship of exactly the same measure-
ment and same inside construction, would under the English laws
measure only 4,000 net tons. I state that upon the information of
shipping men. I have heard it many times.

The Chairman. Capt. Dollar is your authority?

Mr. Mann. Yes; and Gen. Goethals, of the Panama Canal.

The Chairman. I know that Capt. Dollar has given that as his
opinion.

Mr. Mann. It is true that Capt. Dollar has said that, but I also
mention Gen. Goethals, who made that statement in his speech before
the San Francisco Commercial Club last year.

The Chairman. That must be the ruling, it is not the law?

Mr. Mann. That is the ruling upon which they are collecting the
tolls.

The Chairman. You will find in the hearings a statement by Mr.
Chamberlain, the Commissioner of Navigation, in which he says that
our rules are the same as the English rules. I agree with you that
in the past there must have been some inequality. I do not think
that this claim is without foundation, but just where the difficulty
was I confess I do not know. Mr. Greene has been upon the com-
mittee many years and he may have more information on that
subject.

Mr. Hardy. We have all agreed that it should not be so.

The Chairman. No American shipowner has ever come before this
committee and presented in a concrete form any question of that
sort.

Mr. Greene. It may have been presented before the Committee on
Interstate and Foreign Commerce, which regulates this matter of the
canal.

Mr. RoAVE. Do you not think that we could ascertain the situation
from Grace & Co. ? They operate both American and English ships
through the canal. I will write to them.

Mr, Hadley. There is now on the calendar a deck-load bill, re-
ported from the Committee on Interstate and Foreign Commerce.

Mr. Hardy. A bill to correct the condition you speak of would be
passed through this committee so quickl}^ that it would make your
head swim.

180 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Gkkene. Why not have the clerk to the committee write to
W. R. Grace & Co. ?

The CrrAii:MAN. I was going to suggest tliat our colleague do that

Mr. Mann. With the chairman's permission, I Avill hend to the
chairman and to this committee a statement in detail upon that sub-
ject, Avhich has been prei)ared by the maritime department of the
San Francisco Chamber of Commerce.

Mr. IIakdy. The first time that statement was ever made before
this committee it struck me — and I think the whole committee — like
a clap of thunder from an unseen cloud. None of us had ever heard
it before. It was stated by Mr. Dollar that he paid $750 more ton-
nage dues by reason of the American measurement than if it had
been the English measurement on a .ship of about 3,600 tons, accord-
ing to my recollection.

Mr. BuiiKE. That was directly contradicted by Gen. IJhler or Mr.
Chamberlain before this committee at this session.

Mr. Hardy. I asked him why he did not take it up with the ad-
ministrative department.

Mr. Hadley. That is not quite my recollection of the force of Mr.
Chamberlain's statement.

Mr. Burke. That is my recollection.

Mr. Hardy. It was never claimed by anybody before us that we
gave any advantage to the vessels of any other nation, but that we
converted their measurements into our measurements when they
came into our ports for the purpose of charging, and that in the
foreign ports where the vessels went that they accepted the certifi-
cates of the port because it w^as to their interest to accept it. I asked
Mr. Dollar why he did not take that up with the administration.
Mr. Chamberlain in his statement said that every vessel from a port
of the ITnited States has a duplicate, one gi>'ing the net measurement,
and another, if she goes to England, that gives the English meas-
urement, and that under our treaty rights the vessel can demand the
payment of the dues on the English statement. He made the state-
ment that the only difference between the charges in England and
America rested upon the fact that in America Ave had no load line,
and that in England they did.

The CirAiRMAN. That is in the record. Have you finished, Mr.
Mann?

Ml'. Manx. Yes, sir; with just this one sentence. I have men-
tioned the tonnage measurement luider the English and American
laws as a mere illustration or incident of the advantage of the Eng-
lish shipoAvnei- as against the American shipowner, and that is only
one of a great many. If we are going to im]:)ose more restrictions
upon OUT" commerce than we have now instead of less, we are ap-
j^roaching unfreedom instead of freedom.

Mr. Hardy. You are doing now what is so frequently done, you
are imdertaking to say that there are a great many discriminations,
but every man who says that finally gets down to one discrimination
and says that it is one of a great number. I have never found any
other.

Mr. Mann. I shall l)e glad, if the connnittee will indulge me, when
I get back to San Francisco, to furnish that information.

Mr. Hardy. I have asked a number of the witnesses and they have
never answered me.

Mr. Mann. T shall be fflad to make a memorandum.

REGULATORY FEATURKS OF SnTPPTXn P.ILL. 181

The Chairman. At the same time, please consider the statement
of Mr. Chamberhiin made before the committee on that subject, be-
ginning on page 196 of the hearings on H. E. 10500.

Mr. Burke. Mr, Mann has reference to the restrictions that he
claims should be repealed in the interest of navigation, as I under-
stand ?

Mr. Hadley. And a comparison of the regulations.

Mr. Mann. I mean the restrictions.

Mr. Burke. We want a list of the laws that you consider too re-
strictive and the repal of which would be of benefit to the American
merchant marine.

Mr. Hadley. That necessarily involves a comparison of the com-
panion regulations of other countries.

Mr. Burke. I suppose so. I want to see the laws.

Mr. Hadley. I want to see also the comparison with other regu-
lations, so as to help to support the conclusion.

Mr. Hardy. You were getting very interesting to me when you
spoke of freedom, and I should like to know what is involved in
that term ?

Mr. Mann. I consider that Ave are inclined, nowadays, to go a
little mad on the proposition of regulation. Any kincl of regula-
tion is a restriction. Any kind of a restriction is a limitation of
freedom and liberty.

Mr. Hardy. That is true; but you want to repeal restrictive laws?

Mr. Mann. Yes, sir.

Mr. Hardy. Not laAvs passed nowadays, but laAvs which have been
on the statute books a long time. Please tell us what laAvs you want
repealed.

Mr. Mann. I am not prepared now to point to a particular law,
but I shall be glad to send to this committee

Mr. Hardy (interposing). You are not prepared to point out any
particular law that you want repealed?

Mr. Mann. Yes, sir. I will point to some provisions of modem
laws.

Mr. Hardy. Our merchant marine was destroyed not under modern
laws. I Avant to knoAv the laAvs that have destroyed our merchant
marine and the ones Avhich you want repealed.

Mr. Hadley. And what provisions of the modern laAvs you think
should be repealed if we are to benefit the merchant marine?

Mr. Mann. I shall certainly include both.

The Chairman. All ancient and modern laws; that is the fair
thing.

Mr. Mann. I will read the protective tariff laws of the United
States in connection therewith.

Mr. Hardy. Read the one which provides that the American ships
must be constructed in American yards alone. Do not fail to put
that in.

Mr. Mann. I will be glad to do so; that will be No. 1. On that
proposition there is a strong feeling out on the Pacific Coast that we
ought to be allowed to buy ships of foreign registry to carry lumber
through the canal.

Mr. Hardy. GiA^e us the full sentiment.

The Chairman. We are much obliged to you, Mr. Mann.

Mr. Mann. I thank you very much for your time and attention.

182 EEGULATORY FEATURKS OF SHIPPING BILL.

STATEMENT OF MR. FRED P. GREGSON, LOS ANGELES, CAL.

Mr. Gregson. I am the traffic manager of the Associated Jobbers
of Los Angeles and director of the Pacific Coast Traffic League. The
association which I represent, gentlemen, is rather small — 150 mem-
bers. That association of 150 members, located at Los Angeles, possi-
bly controls about TO per cent of the tonnage of the city, the tonnage
handled both by rail and by water.

I have followed Mr. Mann very carefully. I am fully in accord
with everything and every word that Mr. Mann has set forth and
stated. Therefore, it would be useless for me to consume over one
minute.

I Avant to clear up a statement made by the chairman that the
tariffs of the steam lines were upon file and published. Of these
150 large receivers of freight not one of them can obtain a tariff
either of the American-Hawaiian Steamship Co. or of the Lucken-
bach Steamship Co., or the W. R. Grace Co., or the Atlantic &
Pacific Steamship Co. The tariffs or rates can only be had upon ap-
plication. Sometimes it may take a week to obtain rates upon com-
modities. So much for the tariffs.

The Chairman. I said that they were filed with this committee
at the time that we were making an investigation of the shipping
trust.

Mr. Gregson. I beg pardon. I misunderstood you. Neverthe-
less, I want this committee to know that these rates are not published
rates as are the railroad rates, and that the rates may be had only
upon application. The rates are always not alike. There is not an
absolute combination which has been spoken of here. I am now
speaking from the standpoint of the shipper, the man who handles
the rates between the steamships, the railroad companies and the
large shippers, and have had 20 years experience in both the steam-
ship and railroad making of rates. The rates, to reiterate, may only
be had upon application and they are not all alike. So much for the
rates.

The Chairman. They are not all alike and the big shipper has a
differential over the small shipper?

Mr. Gregson. No, sir; not the big shipper, but the larger tonnage
and the time and place of shipment may be the j^revailing factors.
As has been pointed out here, there are seasons when the ships go
back east rather light or come west rather light and at those seasons,
where the traffic is light, we are able to obtain rates that are not
alike from certain steamship lines. As to the matter of tramp lines,
it is a historical fact that trade only follows transportation and not
the reverse. A tramp vessel in order to make its own tonnage will
©ften buy cargoes and transport those cargoes to some favorable
port and sell the cargoes after arrival at that port. How will you
regulate a proposition of that kind? A proposition of that kind
should not be regulated. I will give you a little incident. Just be-
fore the breaking out of the war an English vessel arrived at Argen-
tina with a cargo of merchandise, not a regular line— a tramp — and
loaded her with corn and sought a market on the Pacific coast, such
as could be obtained, and a return cargo from the Pacific coast.
Now, there Avas no regularly established line. There was no regular
rate obtaining from Argentina to the Pacific coast of the United

REGULATORY FEATURES OF SHIPPING BILL. 183

States. It would be impossible in that case to file a rate with a
shipping board; and it would be impossible for the ship to operate
under any regulations whatever.

The Chairman. That ship, under those exact circumstances,
would not come under the provision of the bill.

Mr. Gregson. I do not so understand it. All ships that carry for
hire. That ship carried a cargo of merchandise to Argentina for
various parties and it left the Port of Buenos Aires with a cargo of
corn to be distributed upon the Pacific coast. That corn was sold
to various parties.

The Chairman. The cargo of corn was its own?

Mr. Gregson. At that particular time.

The Chairman. That is, when it was carried?

Mr. Gregson. Yes, sir; but it was sold to other parties. You have
mentioned Capt. Dollar in regard to how foreign commerce is built
up. Capt. Dollar himself with his own capital, carrying for hire
through freight, will purchase, in order to make his entire tonnage
from China, a hundred or possibly a thousand tons of Chinese pig
iron.

Mr. Hardy. It would not make any difference what the rate was
on his own property?

Mr. Gregson. He could carry tliat for nothing.

Mr. Hapj)y. Or he could carry it for $1,000 a ton and it would be
the same thing?

Mr. Gregson. Yes, sir; but at the same time he is carrying pig
iron for hire for other parties.

Mr. Hardy. As to that, he may be a common carrier, but the rate
would not affect his own goods?

Mr. Gregson. It may be the shipowner's purchase, it may be a
speculator's purchase, it may be my own purchase.

Mr. Hardy. Do 3'ou believe that he should be permitted to charge
one speculator one rate and another speculator another rate ?

Mr. Gregson. I believe, in order to encourage foreign commerce
and trade, he should be permitted to make any rate that will carry
tonnage and fill up his vessel.

Mr. Hardy. You have now reached the very proposition that I
want to pin you down to. There is a vessel at Argentina being loaded
with corn and there are two speculators who want to ship freight to
the United States ; your idea is that the shipowner should be allowed
to charge one speculator $20 a ton and the other one $10 a ton, so as
to prevent the one speculator from getting into the competition?

Mr. Gregson. If the first speculator has not filled the ship's bot-
tom and it is going out 1,000 tons light

Mr. Hardy (interposing). Let us leave that. Do you believe that
a shipowner should be given the privilege of saying to one shipper,
"We will charge you $20 a ton," and another shipper right by his
side, presumably putting the material in the same hold and the same
partition, if need be, " We will charge you $10 a ton " ?

Mr. Gregson. That would be an unfortunate case, and it may be
that that should not be allowed.

Mr. Hardy. Do you not think that the big owners, like the Steel
Trust and other people, would threaten to break up the competition
by giving certain parties favorable rates?

Mr. Gregson. That might be.

184 REGT'I.ATOEY FKATURES OF SHIPPTNr; BIT.L.

Mr. Hardy. Are they not doing- so?

Mr. Gregsox. I can not say.

]Mr. Hardy. Does not that action result in these companies driving
out of business entirely the little man who has not any standino; in
the world by holdin^^ over their heads the threat that they will
charge the big shipper a smaller rate, and then charge the other
fellow enough to make up what they have lost on the big shipper?

Mr. (iREGSOK. There is one way to get around that, and we have
done it in California. AVhen you speak of the small fellow ^

Mr. Hardy (interposing), T want to remove that from the record,
just discrimination.

Mr. Gregsox. Regulation would prevent that.

]Mr. Hardy. You are opposed to any regulation?

Mr. Gregsox. I am absolutely opposed to regulation upon the sea.
I am opposed even to the California regulation, but there is pro-
tection to the small fellow. "We regulate the established lines, and
under that provision the small man can always live.

JNIr. Hardy. What provision is that? Preventing the regularly es-
tablished lines from discriminating?

Mr. Gregsox. The regularly established lines in California are
lines operating under a schedule. Along comes a small steamer in
the lumber trade

Mr. Hardy (interposing). What do you do with the regularly es-
tablished lines?

Mr. Gregsox. We regulate them.

Mr. Hardy. But 3'ou are opposed to regulation?

Mr. Gregsox. Personally, yes.

Mr. Hardy. Then you get back to the proposition that you are in
favor of letting the shipowner say to one man, " I am going to dis-
criminate against you until T drive you out of business; that is what
I am going to do."

Mr. Gregsox. I am in favor of this: The ships should be allowed
to make their rates

Mr. Hardy (interposing). But by reason of your regulation in
California you say that the little fellow can live?

Mr. (iregsox. He does live.

Mr. Hardy. Do you want to remove that regulation?

Mr. Gregsox. No, sir; not at the present time. Under this act you
will kill the little fellow and 3'OU will kill what we are trying to
build up.

Mr. Hardy. Either you want to remove the regulation or you do
not — you want to kill the little man or you do not.

The CiiAiRMAx. You have a State law in California to regulate the
water lines engaged in intrastate commerce?

Mr. Gregsox. Yes, sir.

I will agree with you, Mr. Hardy, you have asked a very embar-
rassing question.

Mr. Hardy. Is it not the whole of the proposition involved in this
bill that we have asked you?

Mr. Gregsox. No; as I understand this bill it is to regulate all
transportation by water, interstate or foreign commerce. I am try-
ing to point out that under the operations of a tramp steamer you can
not regulate

KEGULATOEY FEATURES OE SHIPPING BILL. 185

Mr. Hakdy (interposing). We are going to agree with you about
the fellow w^ho bought his own cargo down in Argentina and brought
it up here in his own vessel. We can not say what he shall charge
himself.

Mr. Gregson. Whether lie bought the cargo or not, to my mind or
to the mind of any business man, you can not regulate a tramp
steamer in foreign trade.

The Chairman. Did you ever hear of a tramp steamer charging a
higher rate than the regular line ?

Mr. Gregson. Yes, sir; I have.

The Chairman. Could you give us an instance of that sort ?

Mr. Gregson. I can not give yon a concrete instance, but I have a
number of them in mind. A tramp steamer lives upon that very
proposition. A tramp steamer takes advantage of markets and ship-
ping conditions. He may go into a port where regular established
steamer lines have rates back and forth, and he may go into that port
and find the wharves with plenty of .tonnage and no bottoms in port,
and he may go into that port under those conditions and make his
OAvn rates, which may be several times higher than the regular estab-
lished line of steamers.

The Chairman. I think right now you will find tramp steamers
getting above former normal rates wdierever they are needed.

Mr. Gregson. Yes; and then we have this condition on the Pacific
coast: I really believe, gentlemen, you are looking more toward the
great Atlantic coast than to the Pacific coast. We of the Pacific
coast are very 3'oung, and that is especially true of Los Angeles. We
have only had a port a very few years; in fact, it is still under con-
struction. We have spent many million dollars there in trying in
every way to encourage foreign trade. I think that all agree that in
building up the business of the railroads of the United States the
business was built up without regulation — that is, at the beginning —
before the tonnage of the United States became so dense that there
was sufficient and ample for all. At that time, then there came regu-
lation. That is so with the steamers. If, after a time, the tonnage be-
comes so dense that the business is built up, then we may talk of
some scheme of regulation, where each port of the country, each
source of tonnage has been established permanently. But in the case
of the tramp steamer, he tramps around the world and picks up ton-
nage wherever he may find it, and he should be permitted to operate
without being trammeled.

Mr. PIadley. I would like to ask you a question. You have started
to make several statements and have been interrupted and I will not
go back to them. I also come from the Pacific coast and I am
interested in all coasts.

Mr. Gregson. Let me extend you an invitation to Los Angeles.

Mr. Hadley. I have seen your harbor and your port. I know the
situation and appreciate what you are saying. I want to know what,
in your view, will be the effect of the operation of this bill, if en-
acted into laAv, upon the Pacific coast business, and why.

Mr. Gregson. As I stated just a moment ago, we are young, and
we are building up a business. In order to build up that tonnage
w^e should be left untrammeled as trade follows transportation. The
transportation lines seek sources of trade for us. They will go into
China and go into all the obscure ports of the world with our com-

186 EEGULATORY FEATURES OF SHIPPING BILL.

missions, saying that we will charge you something reasonable.
They bring it to onr port and we take it from them. That has
opened up a certain line and established a source of s-upply. On the
other hand, if rates and regulations are made from this port to that
port and for all ports of the world, the steamers will cease to be
free lances and will say, ""'We can not possibly operate under this or
under that condition unless we have from you a certain guaranteed
amount of tonnage." Under those conditions, that would mean we
Mould have to take the venture and reverse the order of things and
have transportation follow the trade instead of the trade following
transportation. That is about as good an answer. I think, as T can
give.

Mv. Hadlet. And you think that would cripple the marine busi-
ness instead of increasing it?

Mr. Gregsox. I think it would. Another proposition is this: A
large steamer of 10.000 tons has a great advantage over a smaller
steamer. For instance, we take- from the Pacific coast to the Atlantic
€oast cargoes of grain at certain times and under certain market
conditions. We can not wait for 10 days to file our tariffs. We carry
lumber from the Pacific coast through the canal, and we can not
wait, in each instance, to file our tariffs. A small steamer goes back
empty. If he must file tariffs covering certain rates he will never
get a cargo. He has got to be left open and has to be left free. That
is the other condition.

STATEMENT OF MR. S. J. WETTRICK, ATTORNEY AT LAW,
SEATTLE, WASH.

The Chairman. Please give your name and profession.

Mr. Wettrick. S. J. Wettrick; attorney.

The Chairman. Are j^ou appearing here as attorney?

Mr. Wettrick. I am appearing here as attorney. I am regularly
the attorney for the transportation department of the new Seattle
Chamber of Commerce, and am here, as Mr. Mann has stated, on the
transc(!ntinental rate situation which is up before the Interstate Com-
merce Commission and to represent the chamber of commerce at this
hearing here.

If we are not trespassing too much upon the time of this com-
mittee, I just want to say a fcAV words. There is very little to add
to what has already been said from the standpoint which Ave take
out on the coast.

I am frank to say I have net given this matter any detailed study
or consideration. I was asked by wire yesterday to appear before
this couunittee, and I knew before, of course, that the chamlier of
commerce in Seattle had consistently opposed regulation along this
line: and in connecticm with my work there for the cjiamber of com-
merce we have fre(iuently cimsidered these ((uesti(His and have always
felt, as we feel now, that it would result in xevy serious harm a_nd
injury to the Pacific coast seaports if we Avere to i)lace u]Km marine
transportation a strait-jacket such as is proposed by this bill.

The Chairman. The Commercial Club of Seattle and the chamber
of commerce do not agree on that point, do thev?

Mr. Wettrick. Upon that ]5oint I will say, Mr. Chairman, that if
the cviinmercial club were informed upon this question — I Avill go

REGULATORY FEATURES OF SHIPPING BILL. 187

further than that and say that if they were organized as the Seattle
Chamber of Commerce is organized, Avith departments operated at
great expense, and with men in their employ whose duty it is to
study these questions, and could see far enough to realize what it
would mean, they would be taking the same stand as the Seattle
Chamber of Commerce. I make that prediction, and I say that be-
cause we are in great danger all the time up on Puget Sound. Seattle
is getting to be a port of considerable size. We are now the fourth
customs district in the country. We have got to depend to a large
extent upon our shipping. Congressman Hadley, who sits over there,
is from Bellingham, near the Canadian border, and I am wondering
what will happen if we get a board which begins to fix steamship
rates in the coastwise trade or to and from Seattle and ports in the
Orient that are, we Avill say, so low that the steamship companies do
not care to engage in the traffic, or else, if they do continue, they
will find that they can charge other and different rates to British
Columbia ports and will land their goods there and then bring them
into this country by rail.

Mr. Hadley. I asked that question of a witness the other day and
I would like to know what you think would happen.

Mr. Wettrick. I think that much the same would happen as has
happened in connection with some other shipping regulations w^e
have had, and I have in mind now, for instance, the seaman's bill
Avhich — Avhether the gentlemen of this committee understand it or
not — is a serious detriment to our Pacific coast shipping ports, and
there is not any question about that.

Mr. Hardy. I w^ish you Avould keep oft' of that subject because I
can not keep off of it, if you do not.

Mr. Wettrick. Yes; right in this connection, one of the speakers
here was asked to mention a number of shipping laws Avhich are said
to be restrictions

Mr. Hardy (interposing). And I will ask you that question, but
I w^ant you to confine it to a time Avhen they were not complaining
of the seamen's bill, because we have had no merchant marine for a
number of years, and we might just as w^ell leave out the seaman's
act because of course that did not kill our merchant marine, because
it was already dead.

Mr. Wettrick. I understood a moment ago that you excluded
from Avliat you wanted the speaker to advert to the seaman's law^
because it is modern history.

Mr. Hardy. Yes.

Mr. Wettrick. But I was going to say this : I have in mind the
law AA'hich proAades that foreign steamships shall not engage in the
ooastAvise trade. I am frank to say I haAe not given the question
enough consideration to see all the things that to open the coastwise
trade to them might lead to, and I am not expressing a personal
opinion because I Avant to give the matter more consideration before
1 do.

Mr. Hardy. On that subject you and I are together, I hope.

Mr. Wettrick. I came across the continent Avith a man Avho rep-
resented the Anderson Steamship Co. of NorAvay, a Mr. Hitching,
from NeAV York, the representative of that company on the Pacific
coast. I understand they haA^e some 50 or 60 steamers all engaged
in the tramp service, and Mr. Hitching said to me — how true it is

188 REGULATORY ■ FEATURES OF SHIPPING BILI,.

I do not know — that the United States would never develop a mer-
chant marine until they did open up the coastwise trade to foreign
steamers. If he did not put it that way he put it this way, and I
think this is perhaps more nearly correct — that if we removed that
restriction Ave would not be talking all the time about " What is the
matter with our merchant marine," and what we should do in order
to get a merchant marine,

Mr. Hardy. 1 agree with him fully.

Mr. Wettrick. Now, further, I had in mind the law which pro-
vides that a foreign-built steamship can not secure American registry
or fly the American flag.

Mr. HAHor. I do not go as far as your man did, but I say let our
own people buy these ships wherever built and put them under the
American flag and make them a part of our merchant marine to sail
in the coastwise trade and in the over-seas trade just as they see
proper.

Mr. Wettrtck. You would be in favor of that ?

Mr. Hardy. Certainly; and you would not need any further free-
dom, either.

Mr. Wettrick. 1 do not think, Mr. Hardy, that there is any danger
of them doing that if we enact the law we have under consideration
here, even though the other restriction should be removed.

Mr. Hardy. Right there I will just give you this suggestion. A
vessel of 10,000 tons is starting from New York to Hongkong by way
of the canal, passing en route San Francisco or Seattle. Under the
law that you say you are in favor of and Avhich I am very much in
favor of and always have been in favor of, that vessel, if it did not
get a full load from Hongkong to New York, could take half of its
cargo in freight to San Francisco, and then at San Francisco get the
balance of its cargo and go on to Hongkong. In that w^ay it could
earn possibly $50,000 more in freight from New York to San Fran-
cisco than she could under the present law under wdiich it is forbid-
den to take an ounce of freight from New York to San Francisco.
Instead of talking about a subsidy, if you will give our merchant
marine the privilege of carrying that kind of freight, and then give
them just as cheap a ship as they can get anywhere in the world they
can compete. It is larger than almost any subsidy ever proposed, so
far as that is concerned, and it relieves the pressure and the con-
gestion which is existing at every seaport town or which has been
existing, and it would give us more cargo space on carrying vessels,
and would be the thing you people need, if you have the nerve to face
the shipbuilding people of this country and say you want free ships.
That is what you want in this country.

Mr. Wettrick. Do you know what I have wished in this connec-
tion? I have wished that instead of proposing and considering \n\U
such as wo have here, a bill which a person can not read Avithout
thinking of thousands of questions that are going to arise that no
one noAv foresees or can foresee, that if Ave had a commission which
would start in at the bottom and go oA^er our ancient nierchani-
marine laws and shipping laAvs, study them up to the present time,
and w^ork up something in a constructive way

Mr. Hardy (interposing). Noav, let me stop you right there. We
have had the strongest legal talent representing shipping interests
and other interests there is in this country, having studied this ques-

KEGULATORV FEATURES OF SHIPPING BILL. 189

tion. to come before us. and T have asked every one of them to point
out some restrictive hnv which has hurt our merchant marine, and
no one has e\er pointed out more than two restrictions. One is this
measurement business which was spoken of here; and then they point
out the other one. which you are talking about now, which is the re-
svti'iction whicli prevents an American merchant from getting a ship
as cheaply as his competitoi". Outside of that there is not a restrictive
law. I have asked them, ''• Is there any restriction on the statute
books that you have ever sought to have repealed," and they have
said. " No."

In 50 years the shipping interests have not asked for the repeal of
a single restrictive law; but just as soon as w^e passed the seaman's
law^ they say that that causes the death of the merchant marine,
wlien the blame thing was dead 50 years ago, and we have been seek-
ing some remedy, because w^e fear we can not meet the forces of the
opposition; and I will admit that it is patchwork and the hope is
light, but Ave can not start it any other way. If you people who
have studied the thing will simply spead the news and let the people
of this country' know that we are ridden by an " old man of the sea "
who has been on the back of the commerce of this country for 50
years and you can not stir him; you can not shake his grasp, because
so few people Avill even mention it, then w^e may be able to accom-
plish something, and that is why I wanted my friend Mann to go a
little fui-ther.

Mr. AVettrick. May I ask what this " old man of the sea " is?

Mr. Hardy. It is the law which compels the American merchant
when he tries to compete with his foreign competitor to l)uy his ship
in an American shipyard and pay from 50 to 100 per cent more than
his competitor, and therefore he can not compete. If you had to
pay twice as much for your horse, you could not ride in opposition
vviith me in any kind of service; and here you have got a horse wdiich
carries the commerce of the United States; and if the man who
wants to carry it wants to carry it mider our flag, he has to pay two
prices, and consequently he will not put it under our flag.

Mr. Hadley. I started to ask the witness a question and he started
to answer, and then happened to mention the seaman's law, a very
important question, and was sidetracked and did not answer the ques-
tion at all. It is too late, perhaps, to go into that now. but I want
to ask another question. Has the Seattle Chamber of Commerce
had the United States Chamber of Commerce's referendum before
it on this bill like the San Francisco Chamber of Commerce has;
do you know ?

Mr. Wettrick. On this particular bill, Mr. Hadley, I am not ad-
vised. As I say, I just received a telegram from them. They had
one on the shipping bill.

Mr. Hadley. Do you know the result of that vote?

Mr. Wettrick. As T noticed in the published report of the hear-
ings before this committee wdiere they are all tabulated

Mr. Hadley. That is the old bill. No. 450.

Mr. Wettrick. Yes. I understand the bill now under considera-
tion is to take the place of certain sections of bill 10500 to which I
have just referred.

Mr. Hadley. Has 10500 been referred to the chamber of commerce'^

Mr. Wettrick. Yes, sir.

190 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Hadley. Have they voted on that?

The Chairman. The tabulated statement in the record gives the
vote of the chamber of commerce.

Mr. Hadley. Not on 10500.

Mr. Wettrick. Yes.

Mr. RowE. That is what they testified to before this committee.

Mr. Wettrick. That is what I referred to. Whether this question
has been specifically voted on or not. I do not know. As has been
stated here, our opposition to the bill and the purpose of our appear-
ance here is against the idea of regulating steamship rates.

Now, enough has been said probably about the question of dis-
crimination, but even discrimination can be removed without regu-
lating or fixing steamship rates.

Mr. Hardy. Without any legislation?

Mr. Wettrick. And furthermore, I want to say this, if I do not
say anything else, and that is there is no perfection anywhere, as
has often been stated, and I have an idea that when we are met as
we appear before this committee with an instance here and an in-
stance there of where discrimination resulted or where discrimina-
tion exists, that it is after all an extremely exceptional case, and that
the laws w^hich Congress enacts and the bill which this committee
reports ought to be designed to regulate the normal marine trans-
portation.

Now reference has been made to the fact that all the steamships
plying between San Francisco and Seattle charge the same rates.
I do not know whether they do charge exactly the same passenger
and freight rates or not, but if they do, it is only what anyone would
suppose they w^ould do, and because they do that, it does not neces-
sarily follow that any combination exists between those two steam-
ship com])anies. The transcontinental carriers all have the same
rates, but that does not mean there is any combination between them
which fixes those rates, but it means that the line which has the long
haul has to meet the line which has the short haul, and because the
steamship rates are the same means that they are so not by agree-
ment between them, but by the force which each steamship exerts
upon the other.

Mr. Hardy. Will you permit me to say that the evidence .before
us w^as that they had conferences and agreements covering all those
things?

Mr. Wettrick. There are undoubtedly conferences and agree-
ments.

Mr. Hardy. They might do that without conferences and agree-
ments, but the evidence was that they had the agreements.

Mr. Wettrick. I want to say further on that point that between
Seattle and San Francisco we have what we have across the Conti-
nent and what we have everywhere where there is interstate water
transportation in this country, namely, the competition of the car-
riers, and the steamships plying between Seattle and San Francisco
are held by the rail carriers and their rates to water rates which are
reasonable, and which are usually lower than the rail rates, and
which they have to make if they want to attract any of the passenger
and freight business between those cities. Likewise the water rates
through the canal fixed by lines that continually operate arc con-
trolled and determined, you might say, by the transcontinental rail

EEGULATORY FEATURES OF SHIPPING BILL. 191

carriers. Now the mere fact that they make the same rates does not
mean they are in a combination with each other. When the Panama
Canal was opened the steamship lines plying between the two oceans
reduced their rates to a point lower than almost anyone, I think,
expected the rates would ever go. There was not any evidence there
of a combination between them to keep rates up, and when they go
back into that service again, as they undoubtedly will now that the
canal is about to be opened, when the ships are available, their rates
are by force of the rail competition kept at a figure about which no
one will complain or can complain, and that ought to be taken into
consideration.

Now, as I said before, in Seattle we are building our public docks
and warehouses. We desire to attract all the steamship transporta-
tion we can. Our lumber people out there at the present time are
building steamships. According to the newspapers there are four
or five new shipbuilding concerns who have just recently started out
in Seattle or are about to start. They are building lumber carriers
for the lumber mills there, schooners and other ships. They have to
do that at the present time, because steamship transportation is not
otherwise available, and I take it that the view here is that the
schooner or the tramp ship owned by a lumber company engaging in
traffic for that particular company is not subject to the provisions of
this act.

Mr. Hardy. No.

Mr. Wettrick. But such a ship will go through the canal to New
York City and unload its cargo of lumber there, and instead of com-
ing back empty it will ask for other freight, a cargo of groceries, or
anything else.

Mr. Hardy. It will hold itself out for common hire?

Mr. Wettrick. Yes; that is the point I wish to make. The mo-
ment it does that, even though its business is that of carrying on the
trade of the company which owns it, it has to file tariffs with the
commission and it becomes subject to its regulations just exactly as
any other regular line.

And has this question been considered? We prohibit the railroads
from owning coal mines

Mr. Hardf (interposing). It was a long time before we thought
about that, was it not? The railroads had to get a powerful grasp
and control before we thought about prohibiting them from owning
such things, and I do not know whether we have now prevented it
or not.

Mr. Mann. That is a very serious question with the shipping peo-
ple just now.

Mr. Hardy. At any rate, you do not complain because we do not
go that far ?

Mr. Mann. No; I would not want to see you go that far.

The Chairman. I spent a month in Portland last June and came
in contact with large lumber interests, and one complaint was that
the owners of vessels on the coast would come in and say, " We will
buy your lumber but we will not furnish you a ship." The owner
of the vessel Avould, of course, make his profit on the transportation
and also on the lumber. I told those people out there to go to work
and build their ow^n ships. They have large interests and they have
good timber, and I told them to build their own ships and install the

192 REGULATOEi' FEATURES OF SHIPPING BILL.

Diesel type of engine and transport tlieir oAvn commodity, like the
Standard Oil Co. and the United States Steel Corporation, and be
relieved of that — I "will not call it an imposition, but that difficulty
in the way of developing their trade. I thought my advice was
sound, and the}' have been acting on it, at least the}' are taking steps
along that line, and I think that is the way for them to relieve them-
selves. The Standard Oil Co. builds its own ships. She does not
carry all her oil in the foreign trade, but she supplies her tonnage and
she regulates the rate. too. and so does the T'^^nited States Steel Cor-
poration, and it would not have been possible for those companies
to have extended their foreign commerce the way they have if they
had been willing to yield to the exactions of the Shipping Trust.

Mr. Mann. The same tiling is true of the I'nion Oil Co. and of
the Associated Oil Co.

Mr. Hardy. The only trouble with Judge Alexander's advice, so
far as its applicability to ordinary commerce is concerned, is that
when 3^ou charter a ship to carry your own goods, you will find, when
jou tr}^ to get a return cargo, that the fighting ship is there to make
you lose money instead of making money.

Mr. Wettrick. That has not happened in the coastwise trade.

Mr. Hardy. It did happen between New York and Galveston.

Mr. Wettrick. Is not that a very exceptional instance of some-
thing that did happen ?

Mr. Hardy. It was not an exceptional instance, but it was the com-
mon condition of our shipping along the Gulf coast. The chamber
of commerce of an ordinary little town could not afford to charter a
vessel, because they knew that a fighting vessel would run it to earth.

Mr. ^Yettrick. While talking of fighting ships may I express this
further thought? It has been stated by the chairman and other
memljers of the committee that the effort here was to give authority
to fix a maxinnim rate, and then you say that the carrier can make
as low a rate as it pleases, limited by the fact that it can not dis-
criminate in its rates and do things of that kind. Now, then, is a
ship which is regularly engaged in business, but which for some pur-
pose or other temporarily makes a low rate, a fighting ship. Does
that make it a fighting ship?

Mr. Hardy. No.

Mr. Wettrick. Why could not that ship be used in exactly the
same manner as a fighting ship is used, namely, to drive competi-
tors out of business?

Mr. Hardy. Whenever it is used for that purpose, the owner of it
can be subjected to a fine.

Mr. Wettrick. In other words, if you are going to enact such a
law as this at all, why should not the law provide that the board shall
have power to establish rates which are just, reasonable, and suffi-
cient ?

Mr. Hardy. Well, we thought you would object to that. You are
even objecting to the meager i^owers that we have given this board.

Mr. Wet'I'utck. I do not want you to go further at all.

Mr. Hardy. AYe thought we were doing as little as we could do,
considering the distressful situation we were trying to meet, and we
are doing so little that I am ashamed of it myself.

Mr. Wettrick. What I meant was that you ought not to go to
that extent. I had in mind to point out Avhat it is going to lead to.

REGULATORY FEATURES OF SHIPPIXG BILL. 193

Mr. Hardy. The commercial and shipping interests of tlie United
States would become better educated or informed by this board,
AYhich ought to be composed of enlightened men. whose conclusions
should be for the benefit of the common interest and general welfare
of the country. Among other things, it is expected that this body
will be clothed with power to investigate conditions, legislation, and
everything else affecting the shipping interests of the T'nited States.
We hope that it may be in some respects like the shipping board or
Board of Trade of England, and that it will study these subjects and
help us to find a solution for this trou.blous problem. It ought to
be a board composed of patriots, and I can not suppose that it Avill
be anything else, and they will somehow try to enlighten us.

ISIr. Wettrick. I want to call your attention to this proposition,
and that is that you can prevent rebates without fixing steamship
rates, if you desire to do so.

The Chairman. We know Ave can do that. Tell us S(;m^thing tliat
is not self-evident.

Mr. Wf:ttric'k. The reason I said that was that it would be pos-
sible to eliminate the isolated instances Avhere. in the (roinion of the
committee, injustice is done, Avithout going to the extent of doing
Avhat Ave are opposing here, namely, giving to this board the power
to fix these Avater rates, and we are opposing it because Ave believe
that it Avoiild ine vital ily result to the detriment of our Avater trans-
portation.

Mr. Hardy. Do you think that the California law that Avas re-
ferred to by the gentleman awhile ago ought to be repealed?

Mr. Wettrick. We have a similar laAv in the State of Washington.

Mr. Maxn. I think that laAv should be repealed, and I fought it
before the California Legislature. I caused them to Avithdraw an
amendment that Avould have given them jurisdiction of all steamer
lines. Tt noAV ajiplies to only the regular steamer lines. They Avith-
drcAv that amendment upon the same arguments and statements that
ha AC been made here.

Mr. Wettrick. We have a similar laAV in the vState of Washington,
but it has not been in operation long enough to enable us to knoAV
what its affects are. We liaA^e already experienced considerable dif-
ficulty, however, as to Avhether, for instance, it applies to fishing
boats, tugboats, and A'essels of that kind.

Mr. TL\RDY. Take the history of railroad-rate regulation, and you
will see that it Avas 20 years before they got doAvn to the point of
knowing Avhat they Avanted to do.

Mr. ]Manx. The regular lines on the Sacramento RiA-er complained
bittei'ly to the California Railroad Commission of the competition
of the unregulated steam launches that Avould go up the river in the
rich season, during the months of June, July, and August, and grab
up the barley shipments and A^egetable shipments. Avhich came in
large amounts. They Avould bring them down in big barges at-
tached to the steam launches, taking the shipments away from the
regular steamer lines. The regular steamer lines complained very
bitterly about that situation.

JSIr. Hardy. In my State we haA-e the same controversy over the
jitneys.

38534—16 13

194 REGULATORY FEATURES OF SHIPPING BILL.

Mr. Makk. There are certain things tliat legislation can not help.
The Chaihman. I am going to put into the record this brief in
reference to the legal status of tramp steamers.
(The brief referred to is as follows:)

LKGAI. STATfS OF IIIAMI' VKSSKI.S.

In the cousi(ieralii)ii of le.uislatinn foi- tlio rf.mih.tion of coniinoii caiTiers by
water it becomes important to know wlietb.er irnmi) vessels ever possess the
status of common carriers.

It may be stated :'.s an itlmost .ueneral proposition that sucli vessels seldom
or never can be considered as common carriers. Tramp vessels are almost uni-
versally chartered by a single shipper, even though in some instances that
shipper may lie a charter broker who has accumulated the shipments of a
number of small shippers. It has become well established by a long line of
decisions in the Federal courts that when a charter party gives the cliarterer
the full capacity of a ship the owner is not a common carrier but a bailee to
transport as a private carrier for hire.

The earliest case upon this point is (Jrwcie r. Palmer (S Wheat., 00r». 082
(1823)), in which tlie court said:

" The carrier may hire his vehicle, oi- his team, or his servant, for the pur-
poses of transportation ; or lie may undertake to employ them himself in the act
of transporting the goods of another. It is in llie latter case only that he
assumes the liabilities, and acquires the rights of a common carrier. So the
shipowner who let his ship to hire to ani>ther, wliether manned and efpiipped
or not, enters into a contract totally distinct from that of him who engages to
employ her himself in the transportation of the goods of another. In the former
case he parts with the possession to another and that other l)ecomes the cai-rier ;
in the latter he retains the possession of the ship, although the hold may be tiie
property of the charterer; and l)eing subject to tlie liabilities lie retains the
rights incident to the character of a conunon carrier."

While this statement of the court in this case is perhaps little more than
dicta the same principles have lieen applied in a nmnber of subsequent ca.ses
in the circuit and district courts. In Lamb r. Pnrknian (1 Sprague, .34.3; 14
Fed. Cas. No. 8020 (18.57)) it was definitely held that where a ship was let by
charter party to the defendant who was to furnisli a full cargo the owners
having no right to take goods for any other person were in no sense connnon
carriers, but only bailees to transport for hire.

This decision has been followed in I?ell r. Pidgeon (5 Fed.. (^U. 6P>S). the
Dan (40 Fed., 692), the 7V/ (1.54 Fed., :«3, 338), and the Royal Srriifrr (1S7
Fed., 224. 22G).

In Sunnier v. Caswell (20 Fed., 240, 2.51 ), the question was discussed at some
length. The court said :

"The charter appears to have conleinplated carrying the goods of the
freighters only. She was in no sense, therefore, a general ship, but only a
-ship hired foi-' a specific voyage to carry a particular cargo for the charterers.
Such a contract does not seem to be within the definition of a common cari-ier.
In the case of The Niagara v. Cordes (21 How., 7), a comnntn carrier is defined
as ' one who undertakes for hire to transport the goods of those who may choose
to employ him from place to place. He is, in general, bund to take the goods of
all who offer, unless his comiilement for the trip is full or the goods be of such
kind as to be liable to extraordinary danger or such as he is unaccuslomed to
convey.' None of these conditions attach to a contract of affreightment in
charter parties like the present. In Lamb v. Parkinan (1 Sprague, 353), it is
stated by Sprague, .!., that such contracts ' are not those of a connnon carrier,
but of bailees for hire, bound to the use of ordinary care and skill.' And such
is the view taken in Pars. Shipp. & Adm., vol. 1, pp. 245, 248. The most re-
cent discussion of the subject is in the case of Nugent v. Smith (1 C. P. Div. 19),
in which a liability like that of a common carrier was upheld by Brett, .1..
but was subsequeiitlv overruled in the court of appeals by Cockburn, C. .T.
(1 C. P. Div. 423 (187G).)

While, as pointed out by the court, the decision in this case did not rest upon
this distinction, the reasoning of the court in this case has been cited and
followed in several of the other cases cited in this memorandum.

In the Wildenfels (161 Fed., 864, 860), the court said :

"But, irrespective of these considerations, we are of the oiMinon that the
Rover was not pro hac vice, a common carrier. It is true that her owner was in

REGULATORY FEATURES OF SHIPPING BILL. 195

the lighterage business and was in the habit of taking goods for anyone who
wanted lighterage done. She had, however, no regular route, did not carry
between well-known terniina, and, on the occasion in question, was engaged to
carry, and had on board only, the jute of the libelant. She was not a general
ship, but was employed for this business exclusively ; no one else had a right
to put a pound of freight aboard her. She became a private carrier and liable
only as a bailee for hire. Her owner was under no legal obligation to carry this
.iute : he could have refused this and all other cargoes had he seen fit to do so
and no liability would have attached to his refusal."

and :!fter citing Sumner t?. Caswell, Lamb v. Parkman, and the Fri, pointed out
that, as held in Fish i?. Chapman (2 Ga., 349, 353), the liability to an action for
a refusal to carry is the safest criterion of the character of the carrier.

The Chairman. I offer the following clipping from the New York
Journal of Commerce of March 17, 1916, for consideration of the
question, should foreign-built ships admitted to American registry
under the provisions of H. R. 10500 be permitted to engage in the
coastwise trade where that trade is not being adequately serA-ed by
domestic lines:

LINES STAY OUT OF PANAMA SEKVICE — ATTRACTIVE OUTSIDE CHARTER RATES BRING

GOOD PROFITS LUCKENBACH, AMERICAN-HAWAIIAN, AND W. R. GRACE TO AWAIT

MORE NORMAL CONDITIONS AFTER THE CANAL IS REOPENED BEFORE RESUMING

OPERATIONS IN COAST-TO-COAST ROUTE PANAMA-PACIFIC LINERS " KROONLAND "

AND " FINLAND " WILL RETURN AS SOON AS DEFINITE ASSURANCES ARE RECEIVED.

So long as their tonnage commands handsome rates for time and trip charters
in outside services, the American steamship lines which until recently operated
fleets of vessels regularly between the Atlantic and Pacific coasts of the United
States via the Panama Canal will not return to the Panama trade route. This
is the verdict of the officials of the American-Hawaiian, Luckenbach, and the
Atlantic & Pacific Steamship (W. R. Grace & Co.) Cos., in response to inquiries
made yesterday concerning their respective plans, now that the prospects are
good tiiat the canal will be reopened to large-sized vessels on or about April 15.

While all the companies have not finally abandoned their plans for resuming
operations in the coast-to-coast trade via the Panama Canal, in nearly every in-
stance they have arranged time or trip charters for their steamers which were
formerly used in that trade at very attractive figures.

In view of the belief among steamship men that the present conditions of
shipping in all parts of the world are such as to insure handsome returns from
chartering operations in routes other than that via the Panama Canal, together
with the freight cargo difficulties arising from the congestion of the rail lines
leading to the seaboard points, the feeling is general that the Panama route
may well be abandoned until such time as outside shipping routes are not so
attractive and conditions generally more nearly normal. Thus, the Panama
Canal route may see the return of the regular lines whj<-h formerly operated
over it for some months to come after the canal is actually reopened, or possibly
until some time after the war in Europe is over.

The steamship men are skeptical as to the announcement that the Panama
Canal, which has been closed continuously to navigation since last September,
would be available for ships of 30-foot draft by the middle of next month.
Before they will even consent to consider plans for resuming service via the
waterway, the companies generally want more definite assurances than ai'e
given in the telegrams received from Col. Harding, acting governor in charge
of the Canal Zone.

Shipping men say that they will not believe that the canal is available until
steamers have actually passed through continuously for some time. They have
previously declared that their decision to suspend operations on the Panama
route, announced only a month or so ago, after many months of waiting, was
only made after considerable thought had been given to the subject, and the
abnormal conditions prevailing in the outside routes on the Atlantic had brought
them assurances of better terms and more handsome profits, with less difficulty
than that involved in the Panama orierations.

Having arrived at the decision to suspend the Panama business and satisfac-
torily made contracts for the outside use of their steamers at record rates of
profit to themselves, they see no reason for immediate plans looking toward a

196 REGULATORY FEATURES OF SHIPPING BILL.

resumption of tlie I'unama services, with domestic freight along the seaboard
so badly congested as to mean delavs to their shijis for periods of as long as
30 and 40 days.

No fear is entertained that other companies may undertake to operate fleets
in the Panama route for some time after the canal is reopened and thus afford
strong competition to them when they do decide to return to the business. This
is held to be highly improbal)le in view of the much higher rates and profits
wliich are obtainal)Ie by all owners in the other services, a condition which, it
is believed, will continue t(j prevail for some time after the canal is reopened.

The first of the old established lines which may return to the Panama Canal
trade is the Panama-Pacific Line, with the steamers Fiitltntd and Kroonliind,
both of ^^•hich vessels have lately been plying in the American Line service
between New York and Liverpool. These vessels, however, are mainly passen-
ger steamers. At tlie offices of the company it was said yesterday that they
would be returned to the service between New York and San Francisco via tlie
Panama Canal as soon as assurances had l)een received that the resumed canal
service would not be interrupted. Last year, before the ships left the Panama
route, they carried 0,000 passengers in less than six months, and the demand
for this service is expected to be strong during the sununer months.

At the offices of the Luckenbach Steamship Co. it was said that the company
would not change its plans for tlie continuous cliarter operation of its vessels,
mostly in the South American trade. No plans v;ere being made to return to
tlie Panama ti-ade for the immediate future at least, and it was unlikely that
the line would resume business over that route so long as it could obtain the
high rates for charters which it has done since suspending Panama operations.
The line will continue its vessel charter arrangements until shipping conditions
become more normal and tlie present high rates are no longer obtainable,
although the company has by no means decided to abandon the Panama trade
for all time.

At the American-Hawaiian Line it was stated that all the company's ships
had been chartered for other routes, ranging from the South American trade to
European freight carrying. Resumption of service through the canal would be
delayed, an official said, by a natural distrust of announcements that the
Panama Canal was to be opened, and, furthermore, the docks at New York were
so jammed with freight that loading took too long to be profitable.

(The following statement was submitted for the record by Ed-
ward C. Plummer, of Bath, Me.:)

Since this Inll is limited in its scope to " common carriers " by water, it is
important to understand what other carriers by wattn- engage in freight trans-
portation and their methods of doing business. While the bulk of the world'i*
freight on the ocean is carried by tramp ships, and this term has come to he
accepted largely as referring to steamers which have no regular lines ujion
which they operate, it includes sailing vessels also, the sailing vessels being
by far the larger part of the United States tramp fleet.

During the past 15 years quite a ]*espectable fleet of steam " tramps " in the
coasting trade of the Unite<l States have appeared, the excessive cost of opera-
tion keeping them, as a rule, out of the foreign trade during normal times, but
most of these steamers have been built for a special line of trade, largely coal,
and are not genei-ally "free lances" in the carrying trade. But tliei-e are
under the United States flag more than one and one-half million tons of sailing
vessels which are seeking any kind of a cargo to be found, mostly in the
coasting ti'ade. because of inability to match the low cost of operation of com-
peting vessels under the foreign flag in the foreign trade, and it is of the
character of these vessels and of (he manner in which tlu\v are operated that
this statement deals.

Practically all the million and a half tons of sail vessels referred to are indi-
vidually owned and independently operated. Prom 25 to 75 or more persons
join together to build, though .sometimes to buy, a sail vessel. One of these
owners is chosen the agent, or " ship's husband," as he is known to the courts. It
is his business to secure cargoes for her, collect the freight money, keep lier
in repairs, pay all ex])enses, and tiien divide any surplus remaining in his hands
among the owners, his compensation being a small percentage of the gross
freight money agreed upon by him and the other owners. For the purposes
of more successful operation and to secure an adequate income, this agent be-
comes an owner in several vessels, as a rule, and this collection of vessels,

EEGULATORY FEATURES OF SHIPPING BILL. 197

majxinii- I'loni 2 to 40. becomes known as his fleet. He is not, however, the
onwer, as is so often assumed ; he is merelj' the agent.

In every important shipping port there are a large number of men known
as ship brokers. As a rule they do not own any vessels, but their business is
to get track of possible cargoes and vessels suitable for carrying such cargoes
and bring about an agreement of terms, so that the vessel in question will
consent to carry the cargo at a price the cargo owiler is willing to pay. When
the ship broker has accomplished this he gets his reward in the shape of a
commission on the gross freight, from 2* to 5 per cent commonly.

The agent, or " ship's husband," is in touch with these brokers, and from the
bureau of American shii)ping tliese brokers know exactly what sort of a fleet
each agent controls. When, therefore, a lot of coal, for example, is sold to
Boston parties from Norfolk, a number <iC ship brokers quickly get in touch with
the purchaser, learn the particuhu-s of the transportation, ask what the owner
is willing to pay and learn that it is a little less than the last rate paid on
that kind of a cargo between those two points. These ship brokers also look
over the lists of vessels available, or soon to be available, for the voyage con-
templated and ask for ves.sels at a tigui-e lower than the maximum which the
coal owner has said he would pay if ho luul to. Then it is a case of several
agents competing for this contract, and as the income of the agent depends on
his getting a cargo to carry at some price, the rates during a time of few
cargoes are cut below what many agents would consider a living price. On
the other hand, if a cargo conies on the market wlien most vessels are other-
wise engaged, or it calls for a trip to the Gulf in the liurricane season, rhen the
agents insist on a better price, and tlie rate goes up.

In effect, therefore, it will be seen that bulk cargoes carried by these tramp
\essels are auctioned off, and the ship making the lowest bid gets the business.
As sea captains in these vessel are always looking for a larger ship, because
they are generally paid on a commission l)asis, the ordinary rate being $25 per
month and a per cent of the gross freiglit earned, whenever business becomes
prosperous they go to their friends and induce them to assist in building such
a vessel as the captain desires ; a ship agent joins in the work in order to in-
crease his fleet, and thus a full supply of vessels always is maintained. For
the 25 years that I have been intimately acquainted with the shipping business
I have never known any extended period when the ship wasn't htmting for
the cargo instead of the cargo hunting for the ship, until now.

It will be noted that these vessels are not " common carriers," because they
do not offer to carry the freight of anybody who offers; but they are chartered
as a whole to carry a specific cargo lietween specified ports for certain parties
at a specified rate mutually agreed upon. They are not permitted to carry
passengers, but are freight carriers pure and simple. They have never been
in any combinations, have no fixed rates, and have insured bulk cargoes the
lowest possible rates through the desire of too many an agent to do some busi-
ness that he may have a gross freight off which can come his coiumission, and
the other owners can see that their vessel is being kept in motion, whether she
is making profits for them or not.

(Thereupon, at 2.10 o'clock p. m., the committee adjourned.)