deferment for taxes that would have to be paid eventually, is that correct? You Mr. McLEAN. As I understand, it is pure tax deferment. don't gain anything in dollars in the long run. If you are able to defer $1 million of the taxes and put it into a new ship, the depreciation basis of the new ship would be reduced by the amount of the $1 million which was tax deferred that went into the new ship. Mr. FOSTER. And the Government might be expected to increase its tax revenue to the extent that the economy was stimulated by the investment created or encouraged by the deferment of the taxes? Mr. McLEAN. Well, that is a chance, if the program is correct, and we know what we are doing, and the Government increases its income by the amount of the money that the new ships were built. If you are ever able to pay for the new ships, you have to make some money, so the Government would get the benefit of that. No money can come out of this program and go into the pocket of a stockholder without paying the normal tax. Mr. FOSTER. This money that would be set aside would be set aside for vessel construction or the equipment associated with the vessel, that and that only? Mr. McLEAN. That, plus the payment of bills for the new ships that you construct, chassis, and equipment. Mr. FOSTER. I have no further questions. Senator BARTLETT. Just one further one on this very point. What segments of the American merchant marine now receive the benefits of the tax treatment that are contemplated in this bill? Mr. McLEAN. The subsidized lines all receive it. There is an indirect reciprocation of this type of legislation. If you are in the oil business and you want to run a tanker offshore, of course, you can go to Panama and build the tanker and you are exempt from any taxes and exempted in the change of the law in 1962 provided the American company wanted to build what they call the flag of convenience ship and they exempted them from taxes. Senator BARTLETT. Who exempted them? Mr. McLEAN. The Internal Revenue Service. Senator BARTLETT. Made that exemption? Senator BARTLETT. What controls does the U.S. Government exercise over those ships? Mr. McLEAN. Not any, other than their, I suppose, being in the hands of friendly countries. And they are supposed to be available at time of war, in time of emergency. Senator BARTLETT. Then is it literally true or not, you say that the domestic segment of the industry is the only one without this tax advantage? Mr. MCLEAN. Yes, sir; that is correct. Senator BARTLETT. Mr. Kenney? Mr. KENNEY. With respect to the $100 million worth of: which is certainly an impressive figure, over what period of estimate this will take? Mr. McLEAN. Our schedule calls for getting those vesse in 1966, and completed at the end of 1967, 2 years. Th mum. Actually, we had in our schedule, six schedules, $ if this bill passes we will go ahead with the six vessels. Mr. KENNEY. How many do you except to buy if we do bill? Mr. McLEAN. We can't go into this program at all for se if we don't. We are going to complete these conversions, ships I spoke about earlier, but so far as new building, v any way we can do it for several years without this bill. Mr. KENNEY. Thank you, Mr. McLean. Mr. McLEAN. Mr. Chairman, may I expound a little domestic shipping? Senator BARTLETT. I wish you would. Mr. MCLEAN. I am 50 years old, 51 years old. I st business when I was 17 years old. And my competition was the steamship industry. I started from the South to east. And there were steamship lines everywhere. Th Georgia Line, there was the Merchant Marine Line, th Cloud Mallory Line, the Morgan Line, and all of the li up and down the east coast, and your competition agains was the steamship line. Now I remember that strongly, from the time I started because when you start you always remember the thin you the most. That is how I happened to get back into because I knew if I could put the ship in the water and cheapest method of transportation, I could revitalize that died during the war, provided you put the right eco ture on it. And we have been successful in doing it. Now, there is no reason that the industry can't expan they have a chance to build and apply the technologi ments that have been made available in the last few yea Senator BARTLETT. What do your trucking friends th of this? Mr. McLEAN. They quarrel about it, but we have growing economy. One segment of the industry can't all of the growth, if somebody else wants to do som participating. There is room for everybody. Senator BARTLETT. I think those are helpful words, kind of words that anyone would like to hear, the spirit of competition. Mr. MCLEAN. We do business with the trucking c do business with railroads, we do business with shipp a lot of business that wouldn't even move were it not and the cheap water transportation. In our country, you wouldn't believe that there was of goods moving from Anchorage over Kodiak per we there when we started running over there. Senator BARTLETT. I would not have, I didn't know Mr. McLEAN. You wouldn't believe that you could Kodiak, a town of only 2,000 people, and start bringi all the way to New York, that never moved before, and it moved in small quantity because it had to move by These things provide a development of transportati ment of commodities. I am using those two examples, insofar as the overall picture that we are talking a wouldn't believe that we were moving cargo today from the Dominican Republic, would you? Senator BARTLETT. I should have doubted it. Mr. McLEAN. Inner revolution there, we can't find the fellow who is shipping it, but we are moving it twice a week. [Laughter.] We can't find the guy who is shipping it, but he is arranging to get it to the port. Senator BARTLETT. You don't even know what side he is on? Mr. McLEAN. All we know is the freight moves collect, we collect our money on the other end, and we don't have any problem in the Dominican Republic. We quit for a month, I don't know why we quit, we started back up in the middle of it. But the first vessel we sent back in there, which was 2 weeks ago, right in the middle of this revolution, it was filled to capacity. Senator BARTLETT. Let's talk some more about these king crabs, that is always a good subject. [Laughter.] Are you bringing out quite a little tonnage? Mr. MCLEAN. We are beginning to bring not only king crab out, we are getting the frozen halibut. I don't know what else they get there, but we are bringing in a lot of goods out of Kodiak. Senator BARTLETT. Well, if the Japanese and Russians leave any in the sea, our fishermen will bring a lot more to Kodiak for you to transport. Mr. McLEAN. But the economics of transportation in the general rule will make commerce move. We have an economical system to promote and it provides a way for a man to get to the market with the product he couldn't otherwise get there. Senator BARTLETT. Thank you very much, Mr. McLean and Mr. Ragan. Mr. RAGAN. Thank you very much, Senator and counsel. STATEMENT OF GEORGE M. STEINBRENNER III, PRESIDENT, THE KINSMAN MARINE TRANSIT CO., CLEVELAND, OHIO Mr. STEINBRENNER. I am George M. Steinbrenner, and I am president of the Kinsman Marine Transit Co. of Cleveland, Ohio. Since my last appearance here in 1963, I have added in this order two more steamships-one more kid-and a Little League baseball team. Managing the latter has caused me about 50 percent more grief in the past 2 years than my Canadian and foreign competitors. Basically, however, little has changed since my visit in 1963-the Washington Senators are still bringing up the rear, and so is the U.S.-flag Great Lakes fleet. Therefore, I am happy to have been chosen by my industry to testify again today in favor of Senate bill S. 1858 and I thank you gentlemen for this opportunity. Senator BARTLETT. May I interrupt you to say the committee also is glad you were chosen, because this promises to be a repetition of your testimony the last time, which was very good. Mr. STEINBRENNER. Thank you. As I stated in 1963-I am one of the few remaining Great L independent steamship operators-we are likened to the great Ar can buffalo, fighting to avoid complete extinction, and even buffalos are gaining on us. However, I am not too easily discoura 68-376-66- 3 You see, I was a football coach at Northwestern University where the team was so bad that the only way we could get to the Rose Bowl was to enter a float. I shall not burden you gentlemen with a lengthy oratory full of facts and figures, which I am sure you have available to you. I would rather make my pitch from a strictly practical and human side. For an independent can't really afford the luxury of theoretical research in this business today. As an independent, I know that the Great Lakes vessel industry needs many of the things set forth in S. 1858. The vessel owners need them, the thousands of seamen need them, the longshoremen and grain workers in Buffalo, Duluth, Chicago need them; the steelworkers in Pittsburgh, Cleveland, Chicago, and Buffalo need them; the autoworkers in Detroit need them; and millions of others who are affected by the prices of steel or the cost of bread. They need them, too. Make no mistake about it, we on the lakes today are in a real battle. You can cover it up with flowery tribute and speeches of excellent relations. You can deny it. You can even walk away from it and say it doesn't exist. But it is still there. Do you know how much American grain has moved from American ports on the Great Lakes in American ships up to June 1 of this year?-15,150,000 bushels. This sounds like a lot, doesn't it? Well, do you know how much American grain has moved from American ports on the Great Lakes in Canadian ships up to June 1 of this year?31,462,000 bushels. Now tell me it doesn't exist. Do you have any idea how much American grain has moved from American ports on the Great Lakes in foreign ships up to June 1 of this year?-22,044,000 bushels. As a matter of fact, just yesterday there were 16 ships loading grain in Duluth, Minn., from American elevators. Of these 16 ships, 15 were Canadian or foreign vessels, and the 1 American vessel happened to have been my steamer. Now, do you have any idea how much Canadian grain moved from Canadian ports in Canadian vessels up to June 1 of this year66,981,000 bushels a nice, tidy little figure. Now, do you have any idea how much Canadian grain moved from Canadian ports in American vessels up to June 1 of this year-exactly zero bushels. Nothing, zip, naught, cipher-as Webster would say, "the point intermediate between positive and negative quantities. Now can anyone here convince me we aren't in this ball game right up to our elbows. We have got opposition that makes the Cleveland Browns defensive line look like four sopranos from the Vassar Glee Club. Now, as to the exact provisions of this bill, which I feel are needed, let me first clearly state that I do not feel that the construction of a new vessel is anywhere in the picture for the Great Lakes independent operator. The cost is too high and the business available to us is too uncertain for the independent to justify the expenditure. Basically, the major portion of the iron ore movement on the lakes is closely controlled by companies who own their own fleets of ships. By this I do not mean to imply that many of these companies have not been helpful to the independent operator when it has been possible. I, personally, owe much of my existence today as a small independent to Jones & Laughlin Steel Corp., United States Steel Corp., and several others. However, if it is the primary purpose of this bill to assist the small independent operator to survive and to continue to operate, then I say, forget the "new construction" portion of this bill as it relates to the Great Lakes for it cannot be a factor of any consequence to the small independent operator. In the end it can only be harmful to those of us who are fighting this battle from a survival basis rather than a cost basis. The "reconstruction" portion of this bill then is the part which I feel is so badly needed by the American-flag operators on the lakes. This portion of the bill is a must if those few of us left are to survive. Such reconstruction as tank top and side tank replacement, reboilering and stoker installation, major hull and plate reconstruction, rebuilding of quarters and deck machinery, and installation of bow thrusters, these things all must be included under the reconstruction program. The certificate-of-necessity program as it existed on the lakes would provide an excellent guideline for qualification under this program. The reconstruction program can do the job for the little independent as well as the larger corporate fleets, without harm to either. It is my contention that given a reasonable and practical reconstruction program through S. 1858, fairly administered to big and small alike, that the American lakes fleet can start back to its rightful posi I do not feel that we are seeking "something for nothing" as are so many others here in Washington from all over the world." All we are asking is a little old-fashioned, back home kind of consideration for American-flag vessels, with good old-fashioned American news serving American ports and American industries. For if I can transport iron ore economically enough in my Americanflag vessel, then an American seaman will deliver it to an American steelworker and that American steelworker will manufacture steel for an American autoworker, and that American autoworker will build cars to sell to an American consumer. I am a great battler for this kind of very uncomplicated philosophy. And I will be back in 2 more years, if you will have me, and I will still be battling and I will have in this order three more steamships, two more kids, and my own Little League stadium. Thank you for this opportunity to speak before you again. Senator BARTLETT. Congratulations, as always. What kind of steamship did you add to your fleet? Mr. STEINBRENNER. I bought two bulk carriers, what we call in the Great Lakes bulk carriers, not new vessels. I purchased them from United States Steel. Senator BARTLETT. Oh, yes, two ships here. What do you carry? Mr. STEINBRENNER. Ore, grain, and coal. Senator BARTLETT. What kind of a child did you have? You added one more child, you said. Mr. STEINBRENNER. A girl named "Jennifer." Senator BARTLETT. Why is it the Canadian ship hauls all this grain compared to such a small amount for the American ships? Mr. STEINBRENNER. I would like to know why they are getting so much. I know one thing is that they have had a very active and forward-looking program for ship reconstruction, quick writeoff, which has enabled them to increase their fleet fantastically in the last 10 years, as compared with a very slow and unprofitable method in this |