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as amended (46 U. S. C. 11). That section provides for the documentation of vessels in the names of corporations organized and chartered under the laws of the United States or of any State thereof, provided the president and managing directors are citizens of the United States. Since no vessels owned by corporations may be documented as vessels of the United States unless they first qualify under section 4132, it is apparent that the provisions of the draft legislation, insofar as they propose to permit transportation in certain American-built documented vessels when owned by a corporation of which only a majority of the officers and directors are citizens, are either nugatory or only partially effective. Further, section 2 of the Shipping Act, 1916, as amended (46 U. S. C. 802), defines the term "citizen of the United States," as applied to section 27. That definition includes language similar to that contained in section 4132, cited above, with respect to the organization of the corporation and the citizenship of the president and managing directors. It further requires that the controlling interest in the corporation be owned by citizens of the United States but provides that in the case of corporations operating any vessel in the coastwise trade the amount of interest to be owned by citizens shall be 75 percent.

This Department will not authorize the documentation of any vessel as a vessel of the United States for the purpose of engaging in the coastwise trade unless, in the case of corporate ownership, the corporation fully qualifies as a citizen as defined in section 2 for the purpose of engaging in that trade, that is unless 75 percent of the interest in the corporation is owned by citizens.

The definition in section 2 is also applicable to sections 9 and 37 of the Shipping Act, 1916, as amended (46 U. S. C. 802, 835). Those sections require the approval of the Maritime Administration before any vessel owned by a citizen of the United States may be sold, transferred, or chartered to one who is not such a citizen. Thus, under those sections, a charter to a corporation as defined in the proposed proviso would be subject to the requirement for approval by the Maritime Administration if the corporation was not a citizen within the meaning of section 2 but if such approval were granted, no penalty would accrue under section 27 since that section does not penalize the transportation of merchandise in a vessel properly qualified by ownership and documentation merely because of the citizenship of the charterer. Again, the provisions of the proposed bill appear to be ineffectual in accomplishing the results obviously desired.

Finally, this agency is of the opinion that the tests proposed for determining whether any corporation is qualified to receive the exemption under clauses (b) to (d) as set out above would be extremely difficult for this Department to apply and would require extensive investigation beyond the capacity of the employees available for the purpose. It would seem to this Department that, if a bill is to be enacted, it would be better to provide for a statement or declaration of qualifica-. tion to be submitted by the corporation with a provision for appropriately severe civil penalties against the vessel and the corporate officers should it be found that any such statement or any portion thereof has been falsified. Civil penalties are recommended for ease of enforcement and to permit the exercise of the discretionary authority in this agency to remit or mitigate penalties incurred in deserving cases (46 U. S. C. 7).

The most important point for consideration here is the matter of policy. If the bill should be enacted in its present form or in a revised form designed more effectively to realize the purposes of the bill, if that seems necessary and desirable, such enactment would constitute a major revision of the longstanding legislative policy as expressed in the coastwise laws. Whether any such revision should be made is a question for the consideration of the Congress. However, the committee will doubtless wish to give this matter careful consideration, since it is conceivable that a number of corporations will wish to take advantage of the benefits extended and since any enactment along these lines may enable foreign corporations to acquire or establish subsidiary corporations which could own and operate vessels in the coastwise trade of the United States. In this connection, the committee may also wish to give some attention to the question of whether, if corporations of the kind described are to be accorded the privileges of corporations having the status of citizens of the United States, the definition of the term should not be amended so that such corporations would be permitted to own and operate all classes of vessels, not merely barges and towing vessels. That concludes the statement, Mr. Chairman.

The CHAIRMAN. There are several Members of the House present. The committee will hear the House Members who are here in the order they choose to appear before the subcommittee.

Is the gentleman from Tennessee here?

Mr. RIVERS. You are taking up my bill, Mr. Chairman?
The CHAIRMAN. That is what the committee has met to do.

Mr. RIVERS. Shall I testify?

The CHAIRMAN. It is perfectly all right to me if you want to prescribe the procedure of the committee.

I was merely doing this to grant the courtesy to the visiting Members of the House, Mr. Rivers. If you care to testify first, you go ahead and testify.

Mr. RIVERS. No; I will not testify until after they finish. I just want to find out.

The CHAIRMAN. I understood you to be a member of the committee. Mr. RIVERS. I am not a member of the subcommittee.

The CHAIRMAN. All right, Mr. Rivers.

Mr. RIVERS. Wait a moment, Mr. Chairman. I just asked what the procedure was going to be. I am not telling you how to run it. The CHAIRMAN. That is correct, Mr. Rivers. Since ber of the committee, I would like for you testify first.

Go ahead, sir.

you are a mem

Mr. RIVERS. No. I wanted you to understand that I did not consider myself a member of the subcommittee so that I prefer that you let the other gentleman testify first.

The CHAIRMAN. Any way you want to do it is all right.

Mr. RIVERS. Let them testify first. I do not want to offend you. The CHAIRMAN. You do not offend me. I wanted to grant the courtesy to the other Members of the House to testify first. Which of you gentlemen wants to testify?

STATEMENT OF HON. CARROLL B. REECE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE

Mr. REECE. Mr. Chairman, I might say by way of preface that it is my understanding that the Rivers bill will be considered. I see that Mr. Rivers is a member of the committee and is very much interested in this. I would not take much time. I would be very happy myself for Mr. Rivers to make the general statement and let us follow. However, I will make a statement to this effect, if I

may.

Mr. Chairman, without going into the details of the bill which the counsel of the committee no doubt will familiarize himself with on behalf of the committee, I will say simply that this is a matter of very great economic interest to our community.

The Bowater Paper Co. will purchase this year some $13 million worth of pulpwood and will have an annual payroll of some $9 million. It would be very greatly to the interest of the operation if they should be given the right to operate the barges along the Tennessee River, because this pulpwood will all be purchased on the Tennessee and its tributaries.

Without knowing that it might run counter to the law, they did acquire nine barges for this purpose and, immediately upon learning the legal situation, they got permission of the Maritime Commission to dispose of them and did dispose of them and then undertook to follow the procedure of coming before your committee in the hope of getting

the Maritime Act amended so as to permit them to operate these barges. I have read the various reports that have been submitted.

I cannot conceive of a situation obtaining that would not permit the Maritime Act to be amended in such a way as, without affecting the national security in the slightest, to permit this company or any other company in a similar situation to operate the small barges.

It means a great deal to the economy of our area.

I know your committee and your staff will go into it very carefully. I am not going to impose on the time of the committee. When the time comes I do want Mr. Rivers, whose situation is affected likewise, to make a more detailed explanation.

I am looking at it more or less as a layman who was born and reared on the banks of the Tennessee River. It is beyond my comprehension that Congress would be unable to work out an amendment to the Maritime Act to permit this operation to go on without adversely affecting the national security.

I hope the committee may find it possible to do this and will do this. Thank you very much.

The CHAIRMAN. Mr. Reece, we appreciate your coming before the committee.

Mr. Reece, I wanted some time, if you will, to have you comment on the reports which affect the general policy of the coastal trade. Now, Mr. Rivers, will you testify, please?

Mr. RIVERS. We have Mr. Frazier.

The CHAIRMAN. From Mr. Reece's testimony, these gentlemen will base their testimony on yours.

Mr. REECE. Mr. Chairman, that is the reason I did not undertake to do so. I thought Mr. Rivers would be the appropriate one to do

that.

STATEMENT OF HON. L. MENDEL RIVERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA

Mr. RIVERS. Mr. Chairman, I am glad that I did not offend you. I did not intend to offend you.

By way of preface, Mr. Chairman, the Port Authority of the State of South Carolina, through their representatives and the members of the ship operators in Charleston, came to my office and I had a meeting with them and the Bowaters people. A lot of them belong to the Merchant Marine Institute. They told me that the Bowaters was the second biggest user of the port of Charleston. I did not know that.

The trouble that we are having is in getting material entered around their large plant in Mr. Frazier's district and Mr. Reece's district where the plant is located on an inland waterway. All paper plants are not on waterways. A lot of them are inland but all the plants in my part of the world are on waterways. The big International Paper Co. at Georgetown in Mr. McMillan's district and the big West Virginia plant at Charleston are all on waterways.

The Bowaters were going to also build a plant in Mr. Hemphill's district, which is Mr. Richards' old district, close to Charlotte, N. C. We found out that under our constitution in South Carolina they could not own acreage so that the Government convened the legislature

and without one dissenting vote a referendum was ordered and the result of a referendum makes it permissible for Bowaters to own acreage in South Carolina without one dissenting vote. That is what we think of Bowaters.

We got together and drew this legislation for one purpose: to keep this fine company.

The Bowaters Southern is a United States corporation in a competitive position with other companies. They are the second largest newsprint manufacturer in the entire world and they want to stay in business. They hire some 1,500 people in Mr. Frazier's county and will hire equally that many in Mr. Hemphill's district whenever they get the plant fully implemented. It will cost some $1 million to construct it.

We got together to work out something to let these people operate on inland waterways with their shallow draft, non-self-propelled barges. That is the genesis of this bill.

I have read all of the reports, Mr. Chairman, which you have been generous enough to send to my office. I noticed that most of them who oppose this bill said, "in its present form." Now, in response to your inquiry, Mr. Chairman, that I make some reference to these reports, the Treasury Department said we would run into all these difficulties. It mentioned mostly coastwise trade. The Bowaters is not in the coastwise business.

I have no pride of authorship or construction of this bill. This fine corporation has over 90 percent of its employees American. Everything it does is American. It employs American people and all we are asking is that at the time when employment is such a vital thing this corporation should have sympathetic consideration.

There are those who oppose this bill because they say, "We don't want to touch the Merchant Marine Act. We don't ever want to touch it." I cannot discuss it with those people. We even amended the Constitution of the United States twenty-odd times.

There are those who are eager to protect American-flag vessels. This is barges on inland waterways.

Of course, if they were very eager to protect American-flag vessels, there would not be so many foreign flags on American ships, Panamanian and the like, so that that is not consistent.

This is our objective that we tried to accomplish. Let me read you some of the things that this company does, Mr. Chairman.

All of the raw materials for the mill of Tennessee were obtained in the United States. All of the raw material is purchased in Tennessee and in the six surrounding States. They just want to haul it to their mill and keep in a competitive position. There is only one thing that they ask. That is, if in the wisdom of this committee this legislation is so drafted or redrafted as to fulfill these objectives that if and when they carry a load of their materials they be permitted to charter them to somebody else so that it will not be a one-way haul altogether, and they cannot operate. They have been perfectly honest, as Mr. Reece has told you. They bought some of these barges. When they found there was a question, they went to the Maritime Commission and properly and promptly disposed of them, and it was not profitable.

The only thing I am trying to do is to bring this problem to this distinguished committee, and in its thoroughness I know that we have the capacity to fulfill the objective to keep this company in a competi

tive position, because, for all intents and purposes, it is an American corporation, American money, and everything else; the John Hancock Insurance Co. and the Metropolitan Life Insurance Co. and everything else. The union of the workers is for it. It means so much to them. The labor unions involved, I understand, are going to sanction the objectives of this bill.

Mr. Chairman, I dislike to take much time, but I am perfectly open to questions, and I have two witnesses here. When you will have heard from the Members of Congress so that they can return to their duties, I would like you to pose questions of the two witnesses I have here this morning from Bowaters.

Mr. Chairman, we are not interested in protecting the use of foreignbuilt barges in the United States. They will all be built in the United States. As to the use of foreign personnel on the barges, the bill protects against that. As to lack of adequate control of the vessels in case of emergency, we put that in the bill. All they want to do is to stay in a competitive position with these little shallow-draft barges. This is a very simple bill. It may not have been drafted properly, but the objective is what I have stated.

We also put in there language to protect against what the Treasury Department has stated, that these people will either be in the manufacturing or mineral business. If you do not like that we can change that but in every way that we could think about it we tried to protect the American way of doing business and American individuals and investment. I believe that is all, Mr. Chairman, that I tried to do, and we tried to do, in this bill.

My colleagues who are so vitally interested and who tried to help us on this matter and who are part and parcel of it, the same as Î, had that objective also.

As I say, the State Port Authority of South Carolina, who operate the ports of Georgetown, Port Royal, and Charleston, S. C., do not operate any inland waterways to my knowledge and they are vitally interested in this thing because they feel that Bowaters is fulfilling an American objective and making a worthwhile contribution to the economy of this country, and the pulp business is a big business in my part of the world.

Mr. Chairman, I am perfectly willing to submit to any questions and am eager to try to answer anything I can. The TVA is for this. They know more about it, I think, than anybody, because they are right there. I did not see the Navy report, but I understand the Navy is in favor of this.

The Treasury, as I say, Mr. Chairman, claim they are not for it in its present form but if they can arrange it so that the Bowaters can stay in business, I am sure they would be willing to restrict it to the proprietary interest they hold. We have sense enough to know that I cannot bring a bill here for just Bowaters. It has to be a general law. We have no pride in the construction of it. Those of us who sponsored the bill will be perfectly willing to agree to whatever construction you want to protect the interests of the United States.

That is all I have to say. If you want me to bring my other witnesses up or we can let these other Congressmen testify, we will do whatever you want, Mr. Chairman.

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