charters for world-wide trading. These schedules, which are commonly referred to in the market as USMC or Maritime Commission rates, are regularly used in connection with consecutive or singlevoyage charters, subject to percentage additions or subtractions, according to the state of the market at the particular time involved. The fluctuating character of the market for spot-tanker charters is illustrated by the following summary of rates for the past 4 years. During 1947, tanker rates, in all trades, remained fairly consistently at the USMC base rates established by the Government during the war, until the latter part of the year, when the normal seasonal demand for heating oils began an upward trend, in September, which rapidly rose to USMC base rates plus 250 percent in the peak of the winter, that is January and February of 1948.

The decline thereafter was just as rapid, and during 1948 rates ranged, during the summer and fall, from USMC flat to USMC minus 25 percent. During 1948-49, winter rates did not follow their usual seasonal pattern and declined rather than rose, so much so that the spring and summer of 1949 saw rates go to an historic low of USMC, minus 50 percent, with many tankers in lay-up and competition rife for the existing business.

The low-rate picture carried well into 1950, when, in the fall of that year the seasonal rise coupled with the demands for Korea once again brought rates rapidly to a winter peak of USMC plus 200 percent. The usual spring decline ensued with rates varying during the 1951 summer from USMC plus 10 to plus 30 percent.

The pattern is now maintained quite regularly, and from September 1951, when rates again rose rapidly to a winter peak of USMC plus 200 percent in November, we have seen a steady market at USMC plus 200 percent for 3 months.

Charter of American-flag tankers: While the Ship Sales Act provides that neither the contract of sale nor the mortgage shall restrict the lawful or proper use or operation of a ship, the approval of the former Commission was required by law in any case where a ship owned by United States citizens was to be transferred to a foreigner. Such approvals must now be obtained from the Maritime Administration.

Senator MCCLELLAN. May I ask, at that point: Would that include the transfer of stocks owned by citizens to a noncitizen?

Admiral COCHRANE. I think as of the time we are discussing, that was not considered to be the case. We are so considering it today, sir. In other words, we are requiring that they advise us in case there is transfer not only of title to the vessel, but transfer of title to the company.

Senator MCCLELLAN. You say such approvals must now be obtained from the Maritime Commission. Now, such approvals did not have to be obtained from the old Maritime Commission?

Admiral COCHRANE. That was my understanding, and it was not a provision of the contracts. The contracts recently made provide that there must be approval of the transfer not only of the vessel but of the company itself.

Section 9 of the Shipping Act, 1916, makes it unlawful to sell, mortgage, lease, charter, or in any manner transfer to any person not a citizen of the United States any interest in any ship owned in whole or in part by a citizen of the United States and documented under

the laws of the United States, unless this approval is first obtained. Senator MCCLELLAN. That law has been in existence how long? Admiral COCHRANE. Since 1916.

Senator MCCLELLAN. Since 1916; and, of course, it applied to the Commission. In other words, it applies to the Maritime Administration?

Admiral COCHRANE. That is correct, sir.

Senator MCCLELLAN. That part of the law was not, of course, observed by the old Commission?

Admiral COCHRANE. I am not sure. There are a number of amendments to the act, but I don't believe-section 9 has been the subject of a number of amendments and I haven't verified as to the date of those. Senator MCCLELLAN. You mean you are unable to verify the statement you have just made?

Admiral COCHRANE. No; I was just checking to make sure there had not been some amendment added subsequently, but I don't believe that was the case.

Section 37 of the same 1916 act, which section comes into effect when the United States is at war or during any national emergency, declared by the President, makes it unlawful, without approval, to sell, mortgage, lease, charter, or in any manner transfer any vessel, owned in whole or in part by a citizen of the United States, or by a corporation organized under the laws of the United States, regardless of where the ship is documented.

Additionally, the section makes it unlawful to enter into a contract to construct a vessel in the United States for any person not a citizen of the United States without approval.

Senator MUNDT. In section 9, Admiral, it would seem to me that where it is unlawful to transfer any interest in any ship, that must certainly include stock in the corporation.

Admiral COCHRANE. We so consider it, Senator.

Senator MUNDT. You so consider it; and consequently, unless approval is first obtained under the law of 1916, that would be an unlawful act.

Admiral COCHRANE. That is our view.

Senator MCCLELLAN. Any interest in any ship, certainly has to include stock.

Mr. FLANAGAN. If we could just take a hypothetical case here, assume that the ABC Corp. owns title to a vessel. If the stockholders decide to sell their stock to a group of noncitizens, would that not be a violation of section 9?

Admiral COCHRANE. We so interpret it. I am not sure; I mean, we have made special provisions in the contracts we have approved since we have been here.

Mr. FLANAGAN. But what contracts were approved by the previous Commission? You mean to say they would allow the controlling stock interest to be transferred to a foreigner?

Admiral COCHRANE. No, I didn't mean to say that. What I am attempting to say is that I can not say what their interpretation was, not having been here at the time. I do say that as of today, with my own administration here, we have so interpreted it. I am not clear as to what their interpretation was.

Senator NIXON. Speaking as of today, was the law different in 1947 than it is today?

20 SALE OF GOVERNMENT-OWNED SURPLUS TANKER VESSELS

Admiral COCHRANE. I believe not, Senator.

Senator NIXON. Section 9 was amended?

Admiral COCHRANE. Section 9 was subject to some amendments. Senator NIXON. But you do not know of any amendments between 1947 and now, between then and now?

Admiral CoCHRANE. I think not.

Senator NIXON. If you had been confronted with that problem then, would you have considered it illegal for stockholders to make such a transfer?

Admiral COCHRANE. To foreigners? Yes, sir.

Senator NIXON. You would have considered it illegal?
Admiral CoCHRANE. We would.

Section 41 of the act provides that approval required under either section 9 or 37 may be absolute or upon prescribed conditions. If the approval is conditional, a violation of the condition makes the person subject to the same fines and penalties, and the ship subject to forfeiture as if the approval had not been granted.

In considering application for approval under the above sections, the former Commission and the Administration consider each application on its merits.

Section 37 was in effect during World II, and until July 25, 1947, when, by the terms of Public Law 239, Eightieth Congress, the Congress declared the national emergency of September 8, 1939, and May 27, 1941, terminated insofar as they related to section 37 of the Shipping Act, 1916. The declaration of emergency by the President on December 16, 1950, again brought the provisions of section 37 into operation.

On December 6, 1945, the Maritime Commission promulgated General Order 59, which granted blanket approval under sections 9 and 37 for charters of American-owned ships to foreigners if the charters were limited to periods of not more than 12 months.

Apparently, because of the then shortage of tankers, the former Commission on January 30, 1948, withdrew tanker charters from this blanket approval; thereafter specific approval of each charter of a tanker to a noncitizen was required.

When there no longer appeared to be a shortage of tankers, the former Commission, presumably for this reason, on February 17, 1949, revoked its action of January 30, 1948, requiring specific approval of each charter foreign. Thereafter, General Order 59, as amended on February 17, 1949, again granted blanket approval to charters of tankers to noncitizens for periods of not more than 12 months. On October 12, 1950, General Order 59 was again amended so as to require specific approval of any charter of ships for the carriage of cargo to Russia or to countries within the iron curtain. No such approvals have been granted.

Due to the world-wide tanker shortage, the Administration on January 22, 1951, revised General Order 59 to require that all charters of tankers owned by citizens of the United States and documented under the laws of the United States receive the specific approval of the Administration. This order was effective only as to charters entered into on or after January 24, 1951, and was not intended to be retroactive; thus, existing charters entered into under the previous blanket approvals could be carried out.

SALE OF GOVERNMENT-OWNED SURPLUS TANKER VESSELS 21

I again wish to thank the committee for its cooperation and I sincerely hope the assistance of the staff of the Maritime Administration has been of value. If further information necessary is required, you can be assured of my wholehearted cooperation and the assistance of my staff.

Mr. FLANAGAN. Admiral, I just have one point to clear up here. On page 13 of your statement, at the very bottom, it says that on September 19, 1947, these first five tankers were allocated to the American Overseas Tanker Corp. for American title and foreign-flag operation. Now, was American Overseas Tanker Corp. the only company which was permitted to buy tankers for American title and foreignflag operation?

Admiral COCHRANE. My recollection, Mr. Flanagan, is that there were certain others. My staff, however, advise that that was the only one, or it was certainly that last one on which that arrangement was made.

Mr. FLANAGAN. I know it was the last one. My question is: Was it the only one?

Admiral COCHRANE. There were apparently a number of them that were sold to United States citizens for citizen ownership and Panamanian registry in order that they could have those considered under a ruling made by the Navy Department, that those should not be considered as transfers foreign, in view of the fact that they were clearly available to the United States should they be required in an

emergency.

Mr. FLANAGAN. Then you say there were others?

Mr. COCHRANE. According to the record that I have here, there were a total of 71, including the American Overseas Tanker Corp.

Senator MUNDT. Were they all in exactly the same category? Admiral COCHRANE. I think that the difference that has been developed here at the moment with the staff was that in some cases these were Panamanian corporations.

Senator MUNDT. Yes, they were for foreign ownership and foreign flag. What I want to know: Were there any other cases where the title was to be American and the flag Panamanian?

Admiral COCHRANE. I think the answer to that is no, that there were

not.

Senator MUNDT. The AOTC was the only company which was allowed by the old Commission to take American title and register the flag foreign?

Admiral CoCHRANE. Yes. I understand that that is correct.
Senator MUNDT. Thank you.

Senator MCCLELLAN. Assuming, or if it developed as a fact, that the application for these eight vessels in question was filed and considered by the Commission, there was an application or a sales contract in existence for the citizen stock, the citizen-owned stock, to be transferred to noncitizens, thus transferring substantial ownership of the .vessel to noncitizen interests, and assuming that the Commission failed to enforce or observe the provisions of section 9 of the Shipping Act of 1916, which made it their duty to see that it remained under the control of American interests, what rights or what remedy has the Government now, under those circumstances?

Admiral COCHRANE. The Government has legal power to repossess those vessels through action of the courts.

Senator MCCLELLAN. Through action of the courts?
Admiral COCHRANE. By libel proceedings.

Senator MCCLELLAND. It does have the right to repossess?
Admiral COCHRANE. That is my understanding, sir.

Senator MCCLELLAN. That is your understanding.

Now, advise us whether, in this instant case, your administration has examined into the case sufficiently to determine whether any such fraud was practiced, or dereliction of duty on the part of the Commission, in failing to observe the law, which would now warrant your taking action to repossess the vessel, and whether you have given that any consideration.

Admiral COCHRANE. Well, Senator, these cases have been referred to the Department of Justice for its consideration.

Senator MCCLELLAN. With any recommendation from you, as the Administrator?

Admiral COCHRANE. We simply pointed out where we believe possibilities of difficulty might occur. And I would say that one of the vessels which was involved in this over-all case, or a similar case, the Meacham, has been libeled.

Senator MCCLELLAN. Action has been taken against one of the vessels?

Admiral COCHRANE. One ship, yes.

Senator MCCLELLAN. Only one.

Do I understand that as Administrator you have called the attention of the Justice Department to the other seven and the circumstances surrounding their sale and their disposition and abstracted the facts or briefed the facts and presented them to the Justice Department? Admiral COCHRANE. That is correct, sir.

Senator MCCLELLAN. So that it is now in the hands of the Justice Department, with all of the facts that are available to you as Administrator?

Admiral COCHRANE. All that we could turn up, working in conjunction with various staffs.

Senator MCCLELLAN. Then you have taken the appropriate action so far as your authority as Administrator is concerned?

Admiral COCHRANE. We believe that we have, yes, sir.

Senator MUNDT. Mr. Chairman, could we have the date as to when this evidence was supplied to the Justice Department?

Admiral COCHRANE. June 15, 1951.

Senator MUNDT. Did that same date apply to the Meacham?
Admiral COCHRANE. Yes; I think it was all one bundle.

Senator MUNDT. And will you also give for the record the date when the last three transfers were made? Five were transferred on September 19, you say, and I believe the others were transferred later in that year.

Mr. FLANAGAN. We want the date of allocation, which is the important date. That date is December 30, 1947, is it not? And three additional tankers were allocated to American Overseas Tanker Corp.? Admiral COCHRANE. Just a minute. I will have to check that. I don't remember it.

The date of approval was December 30, 1947, and the delivery date for the first one, the Meacham, May 18, 1948.

For the Kettleman Hills, April 29, 1948, and for the Antelope Hills, January 12, 1949.