MERCHANT MARINE

Under the impulse of the merchant marine act of 1928 the transfer to

private enterprise of the Government-owned steamship lines is going forward

with increasing success. The Shipping Board now operates about 18 lines,

which is less than half the number originally established, and the estimate

of expenditures for the coming fiscal year is based upon reduction in

losses on Government lines by approximately one-half. Construction loans

have been made to the amount of approximately $75,000,000 out of the

revolving fund authorized by Congress and have furnished an additional aid

to American shipping and further stimulated the building of vessels in

American yards.

Desirous of securing the full values to the Nation of the great effort to

develop our merchant marine by the merchant marine act soon after the

inauguration of the present administration, I appointed an

interdepartmental committee, consisting of the Secretary of Commerce, as

chairman, the Secretary of the Navy, the Postmaster General, and the

chairman of the Shipping Board, to make a survey of the policies being

pursued under the act of 1928 in respect of mail contracts; to inquire into

its workings and to advise the Postmaster General in the administration of

the act.

In particular it seemed to me necessary to determine if the result of the

contracts already let would assure the purpose expressed in the act, "to

further develop an American merchant marine, to assure its permanence in

the transportation of the foreign trade of the United States, and for other

purposes," and to develop a coordinated policy by which these purposes may

be translated into actualities.

In review of the mail contracts already awarded it was found that they

aggregated 25 separate awards imposing a governmental obligation of a

little over $12,000,000 per annum. Provision had been imposed in five of

the contracts for construction of new vessels with which to replace and

expand services. These requirements come to a total of 12 vessels in the

10-year period, aggregating 122,000 tons. Some other conditions in the

contracts had not worked out satisfactorily.

That study has now been substantially completed and the committee has

advised the desirability and the necessity of securing much larger

undertakings as to service and new construction in future contracts. The

committee at this time is recommending the advertising of 14 additional

routes, making substantial requirements for the construction of new vessels

during the life of each contract recommended. A total of 40 new vessels

will be required under the contracts proposed, about half of which will be

required to be built during the next three years. The capital cost of this

new construction will be approximately $250,000,000, involving

approximately 460,000 gross tons. Should bidders be found who will make

these undertakings, it will be necessary to recommend to Congress an

increase in the authorized expenditure by the Post Office of about

$5,500,000 annually. It will be most advantageous to grant such an

authority.

A conflict as to the administration of the act has arisen in the contention

of persons who have purchased Shipping Board vessels that they are entitled

to mail contracts irrespective of whether they are the lowest bidder, the

Post Office, on the other hand, being required by law to let contracts in

that manner. It is urgent that Congress should clarify this situation.

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