Admiral LAND. Unfortunately, no. Although Congress told us to do it that way, we could not get anybody to buy ships. So we went ahead and started on our own program, and up to 1939 we had sold all that we started. It should be the other way around, but it seldom was. Mr. WIGGLESWORTH. When the differential is allowed, you allow it on the theory of the difference between the cost of construction here and abroad, is that right? Admiral LAND. Yes. Mr. WIGGLESWORTH. Under present conditions I do not suppose that can be established? Admiral LAND. No, sir. Mr. WIGGLESWORTH. When you say the law requires the payment of the subsidy, my question is, Is that provision mandatory or is it optional? Admiral LAND. The Congress, at our recommendation, froze the construction subsidy as of July 1939. Mr. WIGGLESWORTH. What is the character of that freezing? Is it a mandatory freezing, or did we just authorize you to go ahead on thtt basis-or what? Admiral LAND. It was a statutory freezing so far as title V was concerned; yes. Mr. WIGGLESWORTH. So that you cannot decrease the subsidies under title V? Admiral LAND. We pay the same differential as was found correct by us in the summer of 1939. That carries over into 1940 and 1941. Mr. WIGGLESWORTH. And that law compels you to do that, or authorizes you to do it? Admiral LAND. It authorizes us to do it. Mr. FARBACH. The statute provides that any citizen of the United States may make application for the construction subsidy. And inferentially he is entitled to it if he complies with all of the requirements of the Act. We could not refuse to grant him a subsidy capriciously or for any reason not stated in the act. OPERATING-DIFFERENTIAL SUBSIDY Mr. WIGGLESWORTH. With, reference to your operating subsidy, I notice that you have pulled that down from $19,000,000 a couple of years ago to $6,700,000 this year, and to $6,100,000 for the next year. What is the basis of that? Can we eliminate it entirely under present conditions? Admiral LAND. The basis of that is that we felt the competition as called for by the law, due to the world state of affairs, was such as not to justify much of the subsidy that was being paid, and so we arbitrarily took the position that we were going to cut it. We also arbitrarily deleted all ships over 20 years old. In order to comply with the statute, with some legal requirements, in order to keep the operating subsidy alive, we determined after many months of study to give these contractors a wage differential and keep everything else down to zero. We had some hearings on objections that were made, and we finally lined them up on that basis. So that the operating differential subsidy is cut down to about one-third, maybe less. There is some competition. At least, there was when this action was taken. Mr. WIGGLESWORTH. So far as the law is concerned, could you not eliminate it? Admiral LAND. You could eliminate everything except the existing competition. Mr. WIGGLESWORTH. That is pretty well gone, is it not? Admiral LAND. It was not up to 24 hours ago. But it has, of course, diminished in the last 48 hours. There are four lines that kicked and we had public hearings on the matter with two of them. They put up a pretty good case. But it was not satisfactory to the commission, and it was not satisfactory to them, so we arbitrarily made this decision eliminating 20-year old ships from any subsidy whatsoever on the operations side, and cutting this down to the one item of wages. We are paying much higher wages in this country than anywhere else in the world, and we cut this down to less than one-third. EXCESS PROFITS RECAPTURE FROM CONTRACTORS AND SUBCONTRACTORS Mr. WIGGLESWORTH. Will you show something in the record on the excess-profits-recapture picture, if anything? Admiral LAND. Yes, sir. In our shipbuilding program, the Commission has recaptured to November 30, 1941, approximately 2,300,000 from various contractors and subcontractors. This sum represents payments to the Commission as excess profits. It does not include unliquidated recapture claims, the amounts of which are determinable only after the conclusion of guarantee periods and of the contractor's taxable periods. As to operating-differential subsidies, the following is a complete statement prepared by our Finance Division which will be included in the Commission's annual report for 1941. The statement shows $1,570,529 recaptured under the so-called temporary agreements and the terminated long-term agreements. It also shows the amounts subject to recapture at the termination of the long-term agreements or at the end of 10-year periods, as authorized by law; actual recapture occurs only at the end of the 10-year period prescribed by the Merchant Marine Act, 1936, or upon the earlier termination of the related contract. nowing total operating-differential subsidy paid or accrued from inception through Dec 31, 1940, disposition of profits from subsidized operations in excess of 10 percent per annum of "capital employed," and tentative comparison of balances in statutory special reserve funds at No. 31 Dec. 31, 1940, with statutory requirements based on estimated figures submitted by the operators pursuant to the Commission's General Order 66358-41-19 112, 950. 46 $3, 514, 862. 25 $3, 036, 890. 45 $3, 514, 862. 25 $2.087,112.60 $5, 601, 974. 85 11 37, 920, 686. 61 51, 420, 105. 67 14, 102, 060. 72 37, 318, 044. 95 1, 570, 528. 69 18, 069, 439. 55 10, 704, 581. 27 18, 069, 439. 55 6, 973, 495. 44 25,042, 934.99 1 Conditionally available for distribution to stockholders. ? Required to be deposited into a statutory reserve fund-one-half of such profits being recapturable by the Commission subject to the applicable provisions of the Merchant 4 The amounts shown in this column as representing additional deposit requirements to Dec. 31, 1940, were not required to be actually so deposited until thereafter. Red figures 8 Includes $400,000 by transfer from special-reserve fund. The long-term operating-differential subsidy agreement with this operator expired by limitation Feb. 10, 1940. 10 The long-term operating-differential subsidy agreement with this operator terminated May 25, 1940. 11 Does not include $479,198.39 paid American Mail Line, Ltd., and $416,269.35 paid Baltimore Mail Steamship Co., under temporary agreements, of which no part was recapturable by the Commission. where we will now have more representatives, because we will have more ships in places where they never were before. Archangel is an example; London will probably be an example. NUMBER OF SHIPS UNDER THE SEVEN PROGRAMS Mr. WIGGLESWORTH. Admiral, I take it that you have given us or will give us for the record these seven programs broken down separately, so that we can see how many ships are in each, and the total cost of each, and the number under construction? Admiral LAND. Yes, sir; those are in the sheets that I have mentioned to you. LIBERTY SHIPS Mr. DIRKSEN. Admiral, none of the ships under the act of February 6 have been completed? Those are the Liberty ships? Captain VICKERY. It is a question whether we will get two or four this month. Mr. DIRKSEN. Those represent the first completed ships? Mr. DIRKSEN. How long does it take from the time of launching until the ship is actually commissioned and put into service, for a normal ship? Admiral LAND. Anywhere up to 3 months, depending upon how efficient the people may be. Just to make that clear, you can launch a ship when it is 33% percent completed or when it is 99 percent completed. It is up to the management of the yard as to when it is launched, depending on facilities that you have by way of fitting out basins and piers and so forth. Mr. DIRKSEN. So the first of those Liberty ships will actually go into service when? Admiral LAND. They will actually go into service this month. That is about 10 to 11 months from the time we were told to do it, and about 9 to 10 months from the time the contracts were let until the ship is completed. Mr. DIRKSEN. From there on, commissionings will accelerate and there will be a few more each month? Admiral LAND. That is right. |