T DOCUMENTS DEPT. UC-MRi c ill! OF THE UNIVERSITY OF K caufort^ «u;-:S:f;';n::!'r ■:'{::. STATEMENTS V^^ of -'^ MR. WILLIAM DEN)iIAN, Chairman.., DOCUMENTS DEPARTMENT before the UNITED STATES HOUSE COMMITTEE ON APPROPRIATIONS 64th CONGRESS United States Government Printing Office Washington UNITED STATES SHIPPING BOARD STATEMENTS OF MR. WILLIAM DENMAN, CHAIRMAN, AND MR. THEODORE BRENT, COMMISSIONER OF THE SHIPPING BOARD, AND CAPT. CHARLES YATES, COAST AND GEODETIC SURVEY BEFORE THE '^SUBCOMMITTEE OF HOUSE COMMITTEE ON APPROPRIATIONS ^ IN CHARGE OF SUNDRY CIVIL APPROPRIATION BILL FOR 1918 SIXTY-FOURTH CONGRESS SECOND SESSION WASHINGTON GOVERNMENT PRINTING OFFIC£ 1917 Documents DeptJ* At OOCUMENTS OEPT. UNITED STATES SHIPPING BOARD. Saturday, Fkbruaky 10, 1917. UNITED STATES SHIPPING BOARD. STATEMENTS OF MR. WILLIAM DENMAN, CHAIRMAN, AND MR. THEODORE BRENT, COMMISSIONER OF THE SHIPPING BOARD, AND CAPT. CHARLES YATES, COAST AND GEODETIC SURVEY. GEXEH.M, I'l.AN OK OIUiA MXA TION . The Chairman. You have submitted an estimate of $700,000. Will you please explain, now, just how you expect to ex]:)en(l this money ? Mr. Denman. Our statement will be very full. It will arouse the opposition of our powerful foreign competitors, but we feel that (\;neress shou.ld know what our expenditures are aimed to help in accomplishino;. This board has to perform two cla>ses of functions: First, it has reofulatorv duties as an administrative board of the Government: and second, it has to run a business. That business may be of either one of two things : It may be either the chartering of vessels, bought witli this $50,000,000 apjn-opriation, to other people, so that private owners and private carriers may be stimulated to conduct the over- seas business of the country without the fear of Go\ernment com- petition, or it may consist of the formation of a corporation or cor- porations in which the $50,000,000 may go and be used for the pur- chase of the chartering of vessels to be operated by the Government itself — the general running (d" a transportation business. You can see the two classes of functions, one the administrative function, such !is the prevention of discrimination, the examin;iti< n into couiplaints of various evils that ari.se in the shipping trades, the reporting on discriminations by foreign Governments, and the preparation of reports to Congress for future legislatjf)n. That is one class of function. Then there is the other, the operating (sr chartering a l)usiness. In that, I think, we are unlike anj other (irovernmeiit board. There is no other board which is called upon by Congress to run a business which takes its jilace in the world of commercial .activity. As to the governuiental function, we have to come to you for our appropriation. As to -the business functions, we can either get the money from Congress or we can form these corporations and spend the $50,000,000 that is already appropriated to us through the bond issue. Our feeling about it is that we should not. if we can avoid it. enter into competition through a corporation with existing transpor- tation agencies, and that we should do everything in our power to 8 ivi04;j0(;5 4 UNITED STATES SHIPPIXG BOARD. assist private American capital to continue the transportation busi- ness and new capital to .2:0 into it, and at the same time to persuade the American boys to man our ships. The charters ^Yhich we should make when we ^et the vessels should be charters to private persons and to stimulate private interest in over-sea carriage. If we can not do that — as we can not unless we get the money from you for that purpose — we shall have to form corporations and enter into the ship- ping trade ourselves. As to the funds for administrative purposes of the Government side of the activities of the board we have come to you. in any event. It will be a matter of the policy of Congress, expressed in the grant or nongrant of funds, whether it wishes us to go into this private corporation and enter into the field of management or wish us to simply have supervision over the ships we have, distributing them by charter to the private owners, to be used in over-seas trade, which will stimulate the flow of our products in various directions. Our hope is and our estimates are based on the theory that you desire us to give the experiment of private ownership and operation as long a trial as we can before we go over into the field of public operation by this series of corporations which we might form, and consequently we haA'e asked for money for operating expenses. In order that we may not increase the expenditures in our pre- ferred plan over the method of corporation administration, it is our intention to spend not over $49,300,000 of our bond money unless an active military necessity compels us. Mr. GiixETT. On the other hand, does it not do this really : If Con- gress appropriates $700,000. that makes the general appropriation, instead of $50,000,000, $50.700.000 : and if you keep on in that way the $50,000,000 Avill still be in your hands and everything that goes to you now will be so much extra ? Mr. Denman. I think that is true. That is. we would have the $700,000 and we would have the $50,000,000: but if we do not get the money to administer these functions as contemplated, you compel us to form the corporations and force us over into the field of operating the corporations. We do not want to go there until the ])rivate o]")er- ator forces us. We want to see the present shipping men and the sons of the present shipping men owners of the business. AVe do not want to disturb them. Mr. SiTERLEY. Plow far are you now able to segregate your esti- mate into expenditures for your board purely as a governmental agency and how far for its work in promotion of the merchant marine ? Mr. Den MAX. We have attempted to make a segregation of the functions, but they overlap in places. For example, we would have to have agents in South America to advise us on our charters, and those agents would be sending home reports of other South American conditions, and those reports would be taken over and considered by our division of investigation and legislation. One division would work into the other. The busiess agents would gather knowledge for scientific compilation. Mr. Shehlev. If it were possible to make a division of the sum total you ai-e asking, then this roinniittee and (^ongress subv;e(iuontly could, by the amount ol" the appropriation, deteimine the policy. UNITED STATES SHIPPING BOARD. 5 Mr. Denman. 1 think this, as engaging in business througli the corporation or mere chartering, shoukl be done only with the cer- tainty that Congress lias in mind what it is doing. As ab()\e indicated, it would be unfortunate foi- our merchant marine il' it did so. because we feel very definitely that if we are going toaccom[)lish what has to be accomplished in the way of getting more men and more ships from private entei'prise cut there on the seas we should not tie the hands of j)rivate enterprise by the fear — which alone is enough to make them hesitate — that the (i<)\ernment is going to come in, and by the power which the (ilovernment has to artificially direct trade, destroy established private business. The Chairman. Your present estimate is based upon the theory that you will not, unless an exceptional situation should arise, organ- ize a corporation during the next fiscal year!' Mr. DioNivrAN. Yes, sir. The CiiAiioiAX. And if you do not organize the corporation then the entire $50,000,000, as the proceeds of the bonds, would be available for the chartering or acquisition of ships? Mr. Den MAX. Yes. sir. The Chairman. I understand that the money will be devoted ex- clusively to the acquisition of ships and not utilized in current or operating expenses!' Mr. Denman. Exactly. By chartering and not operating. The Chairman. Through going concerns? Mr. Denman. Yes, sir; by chartering only. The Chairman. At this time the board has determined upon the policy of proceeding upon the theory that if it can be carried out it will be more desirable and beneficial not to organize the corporation, but to have the power of merely acquiring and chartering ships as they have operated under private owners? Mr. Denman. That is the attitude of the board. Operation in trades needing stimulation over initial difficulties. If, after a fair trial, the trade will not support itself, the ships should go elsewhere. But the time of the experiment should be ample. i\Ir. BiiENT. The estimate is made on the assumption that Congress will apjDropriate the money to carry on all the departments provided for by all the various sections of the shipping law. organization of board. The Chairman. With that understanding would you now state how you prepared the estimate and how you segregated it, wherever possible? When was the board appointed? Mr. Brent. The members were appointed on the 2'2d of December. The Chairman. Ajid when did it commence its business? Mr. Brent. The appointees commenced their w^ork just after Christmas. The Chairman. When did the board commence to go to Avork — immediately upon appointment or after confirmation? Mr. Brent. No; we were at work between Christmas and New Years. The board organized formally on the 30th of January. Mr. Denman. That was after confirmation. UNITED STATES SHIPPING BOAED. Mr. Brent. In the meantime the work on these estimates were going forward and the outlines of our organization carefully de- veloped. Mr. GiLLETT. Was there an}^ appropriation for the board last year? Mr. Brent. $100,000. to continue until June 30. LAW DIVISION. Mr. Denman. We have made six grand divisions of the functions of the board. The law division is really a subdivision of employees. The function of the law division will be scattered to a certain extent throughout the different divisions. In the divisions of complaints — that is, the division of regulation of transportation — of course the ex- aminers and experts will probably perform a large part of the work, and in many cases they Avill not be lawyers. The first administrative function is [pointing to the chart of organization] at the left of the second line. It is the division of regulation of transportation by water. A part of the functions of the board will be the regulation of com- mon carriers on the high seas and on the Great Lakes, and that regu- latory duty flows from our requirement to hear complaints concerning violations of the act, discriminations, refusal to accept goods, and simi- lar functions. I can tell you something about the present conditions there. There are two classes of discrimination that go on. One is the regular case of the big fellow trying to squeeze the little fellow, shipper or owner. The sea-transportation men favor the continu- ous customer against an occasional customer who wants to build up a new trade, and another class of carrier who is trying to monopolize entirely a certain line of trade so that his friends or his associates or those interested in a certain line of trade may have a monopoly. That is going on all the time. How much that is going to be, we, of course, will know accurately before very long. We took this class of work up with the interstate commerce people and figured as to the prospective business under that head that we might have 300 cases to investigate a 3'ear. That investigation re- quires an examiner or a member of the board, and, so far as possible, it should be a member of the board so that he can keep in touch with actual business conditions as he moves from port to port, going out to the district in which the alleged violation has transpired and sit- ting there and taking testimtmy and having an expert and possibly an attorney Avith him. The expenses of the Interstate Commerce Commissicm, we are informed, are about $500 a case for that class of investigations. A very large portion of that is in the cost of the copies of the testimony, the record. Taking 300 cases at $500 each would bring us up to the neighborhood of $150,000. Our figures run up in the neighborhood of $1()0,000, because they include other oper- ations shown by the chart of organization. Mr. GiLLETT. Would not your jurisdiction overlap the Interstate Commerce Commission ? Mr. Denman. Not in that class. There may be ovcrlapi)ing juris- diction. We are going to be very careful to avoid that, because they luive the sujjcrior power over us; wherever there is a conflict they prevail. What we want to do is to protect the shipping, not gather UNITED STATES SUIPPINU BOARD. 7 power. The Interstate Commerce Commission is very efficiently doing: many things that come within that class of juriscliction. Mr. SiiKHLKY. Is not the trade commission in that field also to a certain extent? Mr. Den MAN. Merely for the purpose of reporting. I do not tliinlv they have the general power of investigating discriminations in transportation on the water and to impose fines and penalties. Mr. Shkhlet. But they are supposed to look into the question of unfair competition? Mr. Den MAN. Yes, sir. Mr. Sherley. In this case you are estimating on the basis of about 300 cases a year. Have you any real basis for an estimate as to the extent of these cases? Mr. Den MAN. When you consider the hundreds of thousands of individual shipments in water-borne interstate and foreign com- merce, it is much too small. We are not going to expand the em- ployees in this division until the actual need arises, and we will not broaden the agency of the board until the business comes in to be performed by the board. There is one class of cases that is coming in all the time — peace and wai- times. Now couie the war cases. The foreign shipping lines, and now their (rovei-nments, have constantly discriminated against or.r Amer- ican merchants in oversea transportation. You can not cavil at that. That is perfectly natural for them to do. The result, however, is that the American merchant is being trimmed out of his business. Mr. GiLLETT. You mean that they are using their w-ar power for the definite purpose of helping their trade and hurting ours? Mr. Denman. No: not necessarily, but at least for the definite purpose of helping their trade, w^hich they can tax. They sa}^ " Our merchants are bearing the taxation of the war and that it is entirely justifiable. We should help them out." That is the instinct of every British and German shipowner; it is the instinct of every British and German captain; and it is the pride of every British and Ger- man commission house. There are 4.000 alleged complaints of this class of discrimination now in the State Department, and during the last year there has been a falling off, merely because the complainants, or the possible complainants, have felt that nothing is being done for them. When we open up our channel of redress that rate of 4,000 in two years is going to be accelerated rather than diminished, and we have got to take care of these complaints. The manner in which these cases arise is this: You are a New York mechnnt and 3'ou have a customer in Holland: jou have had him for 30 years and you want to sell him a bill of neutral goods. The customer is not a part of a certain oversea trust and he is not in with the crowd that is running things between Holland and certain other foreign countries. You go down to the ship with your parcel of goods and the bill of lading and hand it to the master of the vessel, who is neutral. It is the Holland-American Line, for instance. He says, " I am very sorry, but you have not your letters of assurance," and you say, "What' the devil are those?" and the captain says, •'That is something you get from a certain foreign trade ao:ent,'so 8 UNITED STATES SHIPPING BOARD. and so,' or his assistants." Then you go around to " so and so " — that is, if 3^ou can stomach it — and you say, " Please, may I trade with my old customer of 30 years over there? I want to sell him some liver pads. He has been buying this American nostrum all these years." Then " so and so " says " That is very nice, but 3'our customer is not in with the trust, and we are controlled b}^ some orders that make it im- possible for us to give these assurances. Of course, we do not say you can not put your goods on this vessel, but we can not give you the letters of assurance."' You go back and persuade the Holland-American captain to ^o to sea with his vessel with goods to your old customer which are neutral goods. The vessel is overhauled by a man-of-war, because the items of the ship's manifest probabl}'' will get around to " so and so," the foreign consular agent. The vessel is overhauled by a man- of-war and taken into a certain foreign port. Xow, what happens in that port is simply the ordinary visitation and search, and they spend a lot of time viseing and searching the vessel, and they do not fmd anything, and after the vessel has lost perhaps ten or fifteen thousand dollars in demurrage she continues on. The Holland- American Line has possibly got freight from you amounting to about $500, and has paid ten or fifteen thousand dollars in demurrage to get the vessel to its destination. It is very natural they are not going to accept business under those circumstances: but they have declined to perform the duty of a common carrier if they do not accept your goods, and the shipper may have his right against that company, and he can enforce his right before our body, if the facts are as I have described them, and Ave have got to adjudicate the case. Xow. it is entirely conceivable, if the war continues for a couple of years, wc will have a couple of thousand more of those cases. The Chairman. Mr. Denman, there are cases like this of which I have knowledge: A concern in New York which imported bulbs from Holland for years had a number of shipments sent over here, and the mails in which the invoices were being transported were seized and examined and detained. The merchant or importer goes to the customhouse to get out his goods, and has no invoice. He can not get them out even by giving a bond, because he can not iden- tify or locate them. Several weeks afterwards the invoices come over, and they deliver the goods, which are of a perishable charactei-, and are then of no value. Does your board, under the law, have authority to investigate such cases? Mr. Denman. Yes; whether or not we have jurisdiction to award damages, we may have to examine it to determine whether it is con- nected with the matters under section 26 of The Chairman (interposing). This is a claim now against an alien or a foreign Government. Mr. Denman. Strangely enough Congress has given us the duty of investigating that. The Chairman. Where is that in the law? Mr. Denman. Section 2G of the law, page 10. We can not award damages under that section, but we can investigate and are compelled to investigate. The Chairman. That would be a matter, at any rate, for rej^re- sentation through diplomatic channels? UNITED STATES SILIPPINU BOARD. 9 Mr. Dknman. Yes; but Congress, as I understand it, has instructed us to prepare the story and the reason. As we understand it, wliat Congress had in mind when it gave us tliis authority was that it wanted us to study (hiring the war the conditions that wouhl un- doubtedly prevail after the war. when the European nations, having nationalized their resources, begin to compete with us as national units. If Congress did not have that in mind. I am sorry, because it must be perfectly apparent to anybody who has studied European conditions to-day that Europe intends — each country possibly by itself — to enter into the world of trade as if entering into a big inter- national w^ar, and the instrumentalities they will use will be all the instrumentalities of government. You know about the bunkering agreements which they now liave. under which they are squeezing everything into tlie line of their trade and the ways they want their trade to run our sliips. I had a client in San Francisco who had a bill of goods for Manila. This man. of an American house, was on the black list, and was the largest American exporting house on the Pacific coast outside of a certain foreign house. He wanted to send a bill of goods to Manila to an old customer. He found that the American steamship line going ther* would not take his goods, because the steamship line had a bunkering agreement with a certain European-owned port in China, which made them agree not to carry goods for a blacklisted i)erson. Now. this was an American house, 50 years old, with a competitor who was a member of the legislative branch of a foreign government, try- ing to send his goods on an American steamship line to an Ameri- can customer in the Philippines, and was not able to get it there. Xow, I take it what Congress wants us to do under section 26 Mr. GiLLETT (interposing). By bunkering agreement, you mean they had to take their coal from them? Mr. Denmax. Yes. Mr. GiLLETT. It is not a great distance from China to Manila, and I should not think that would make very much difference. Mr. Denmax. No; but it is coming back. With the value of their tonnage to-day for purposes of carriage, they do not want to have to carry all the return coal out. Mr. (tillett. And they can not get it at Manila? Mr. Den:max. No: and consequently they have got us, and they have got the world. Talk about freedom of the seas, if they want to exercise their power there is no such thing as commercial freedom of the seas. We laugh at certain people for using that phrase, but it is a vital phrase when it comes to conmiercial Avarfare. They have got the freedom of the seas for themselves because they have got control of the necessities of steamships. We see a way out of that for us in the use of the Diesel engine, which gives an enormous sailing radius to an oil-burning vessel. You can go almost clear around the world with the oil in your water-bottom space with a Diesel engine. The Scandinavian and Danish ships are already doing almost that. I have clients who come to California with the oil they have taken on in Norway. Ultimately we are going to get around the difficulties we now have, but no vessels burning coal can do anything but sign the bunkering agreements mentioned. 10 UNITED STATES SHIPPINC4 BOARD. Xow. I take it that under section 26 it is our business to investi- gate whenever a comphiint is made to us. That section provides: The board shall have power, and it shall be its duty whenever complaint shall be made to it. to investigate tlie action of any foreiiin irovernnient with respect t(< the privileges afforded and bnrdens imposed npou vessels of- the United States enjiaged in foreign trade whenever it sliall appear, etc. The Chairman. The case to which I have referred does not affect vessels, does it? This was a case of taking and searching the mails. ■Mr. DEx:>rAX. That, of course, is beyond us. I thought it had to do with the control of the invoice of ithe ship or the control of the bill of lading of the ship itself. It is a part of our duty of com- parison of American and foreign shipping conditions. Mr. Brext. It does affect the goods as well as the ship. Mr. Chairman. My understanding is that they seized the mails. It may be the}'^ took the ship's manifest and held that up. Mr. Denmax. And took the shipping papers, the actual bills of lading, and held them. Mr. Brent. That section goes on to say : " Or in respect of the passage or transportation through such foreign country of passen- gers or goods intended for shipment or transportation in such vessels of the United States." It covers goods as well as vessels. Mr. Denman. There are two classes of functions there, as you can see. One is a discrimination that ordinarily comes under our juris- diction in time of peace, a discrimination which, whether it arises out of warfare or otherwise. Ave have got to take notice of: and the other is a discrimination of a foreign government itself under section 2G. Xow. when the war is over other foreigners who have not j'et had the chance are going to treat us just as badly, because in the South American trade the}'' are now discriminating, or were before the war began, by throwing ever}^ possible ton of shipping of the manufactured products of their countries down to South America direct, and only bringing the raw materials from South America up here. They complete the third leg of the voyage back to Europe with American raw material to iMirope, thus giving a continuo\is floAv of their vessels so their manufactured products go to South America while none of their tonnage sei'ved our trade to that port. And I have no doubt all of them will do this, both the Ciermans and the English. I am shipping on, say, an English line from Cali- fornia to Liverpool. I have a customer over there, and my British commercial rivals in San Francisco want to get my tratle. The re- lationship between the British shipping house and commission house and the British steamship line is very close, and very soon I find that a smart Britisher comes to me and says, " You are selling to so and so in Great Britain. Now. 3'our profit is such and such. The cost of transportation is so much. We will buy those goods from you right here in San Francisco at the dock and pay you enough to give you the same or better profit.'' I think it o\er and say, " Heav- ens alive! All my business through that British steamship line is goind to be viseed in this same way. I have not got a chance. I had better sell right hei-e now." Now, the British house gets that foi'eign customer, keeps the trade for itself, and makes all the in- termediate profits of trad(>. That is another form (»f disci-iuiiiia- tion. rXiTED STATKS SIIII'IMNC I'.OAUI). 11 Germany will do the Siinu' thing, and 1 ha\e an idea if we ever got into the game Ave would be doing the same thing, because that is human nature, and we are all alike. The (juestion i.s whether or not we are going to have the instrumentalities and power to get around those things, because we can not change human natiii-e, or whethci' wo are going on in the same laissez faire method -which has put all our foreign connnerce or a vei'V large poi'tiou of it in the hands of other people.. Mr. GiLLETT. I thought the ti'ani]) steamers did the greater pai't of this transportation and would not be subject to such control. Mr. BuEXT. There has not been a tramp steamer of any value in the (lulf for 10 years. Our Gulf trade is absolutely conti-olled by the liners. Mr. GiLLETr. AMiat do you mean by the Gulf? Mr. Brent. I mean the Gulf coast — Xew Orleans. Mobile, Gal- veston, etc. It is liner business. We do not know any other. Mr. Denmax. That whole tramp-steamer discussion arose out of the commerce of the port of New York. Xew York is so near to Washington that it gets its story in, but the exact reverse exists with regard to the potential commerce of the Pacific. Xow, the trans- Pacific commerce used to be done, 25 per cent of it, by American bottoms; that has been cut down, Ave are reliably informed, to be- tween 2 and 3 per cent through the competition of the Japanese and by the enormous freights that the Atlantic side now offers. But whatever may be the cause of its leaving us, the Japanese have gotten it. They are potentially the greatest maritime nation in the world. Their skill in handling their fleet is marvelous. Xow, we want our ships to go back there, and Ave want to return Avith regular estab- lished liners, so our merchants can have a regular service betAveen their San Francisco houses and their Asiatic houses. But Avhat is likely to happen is this : As soon as they attempt to do that the Japa- nese may come in and take the " velvet '■ out of the transportation of the American liner competitor. Their governmental organization is so perfected that it may be A^ery difficult for us to stop that b}^ anv form of regulation. We are not asking the power to regulate tramps, but Ave ought to have the poAver — and Ave are asking for it in a bill noAv before Congress — to be able to interrogate the Japanese tramp, so that we will be able to fortify the felloAVs Avho Avant to go into ther trans-Pacific business with a regular line by such legislation and regulation as may be shown by actual experience to be Avise. In other Avords, Avhatever certain Congressmen may knoAv that entitles them to say the liners are a wacked band of robbers on the Atlantic side, they are the people Ave must look to to give us our regular Asiatic trade on the Pacific. Nobody saAv auA" virtue in the liners' organization at the time the power over the tramp Avas taken aAvay from us. They Avant to leave the tramp as an uncontrolled regulator of trans-Atlantic rates. What Ave want to do is to leave him as an uncontrolled regulator of rates, but to haA'e the poAver to study him on the Pacific and elsewhere, so that, after we have gotten the statistics and information Ave need, we can really regulate him in some Avay or other so that he giAes our American line a chance. We are asking for an amendment giving us the power not to regulate but to investigate the tramp competi- tion. This will take some of the monej- Ave are asking for. 12 UXITED STATES SHIPPING BOAED. The Chairman. Suppose you go on, Mr. Denman, and take up these divisions. UIVISIOX OF WAU DISCKIMIXATIOXS. Mr. Denman. The second division is a division of discriminations that are of a war character. I think they will continue after the military war is over and our trade wars begin, but there are 4,000 cases pending now, and we may anticipate there Mill be a very large number hereafter that we will have to investigate and actually to try for the purpose of assessing damages. The Chairman. You estimate j'ou will spend from $12,000 to $20,000 a month on that work, do you ? Mr. Denman. Yes ; and maybe very much more. If so, we can come to Congress and obtain an emergency appropriation next fall. We do not fear that Congress will not respond if we have actual facts to show such increased needs. DIVISION OF VESSELS AND TERMINALS. In the division of vessels and terminals The Chairman. Is this to be a construction bureau or division? Mr." Denman. Yes. This division is dual with reference to the two functions we have referred to. We are supposed to buy and construct vessels, and we are at the same time supposed to assist in devising types that will meet these emergencies. For instance, I was speaking of coaling ports. We must assist in the development of the type that will carry our goods without the need of stopping at foreign coaling ports. We must have immediatel}^ pretty wide study of that subject. We have got to spend experimental money. The money that is spent on the actual construction of the vessel will be paid out of the $50,- 000,000, but the supervision of it will fall in this division of vessels and terminals, and there we have provided a list of employees, naval architects, and inspectors, which is comparatively small. It is a necessary part of the functions of the board and a very important part of the functions of the board. It is both for the construction of our own vessels and to aid others by our tjqies developed. We will lose some money in failures of types, but we Avill get it back a thousandfold if we succeed. The CuAnniAN. Will your work under this division in any nay duplicate the work of the Steamboat-Inspection Service? Mr. Denman. No; not in the least. The Chairman. Your inspecticm will not be for the i)uri)()se of ascertaining the seaworthiness of vessels actually in trade? Mr. Denman. No; other than our own fleet. 'We will have to keep our own fleet chartered out to carriers. The Chairman. That would be the work that any commercial con- cern would do itself primarily? Mr. Denman. Yes. The CiiAiR^rAN. It will not be for the purpose of ascertaining the seaworthiness of vessels not under your control. Mr. Denman. No; on the other hand, the ex})erimental and sci- tntific side of it will recjuire the inspection of a great many vessels r.ot for the advice of their owners but for our advice in developing UNITED STATES SKIPPING BOARD. 13 the type, and for that work, of course, we must ^et some excep- tionally fjood men. We can not get cheap men for that work and ari'ive anywliere. DIVISION OK SHIPIMNO MANAOEMKNT. Now that last section concerns structure and the building of vessels, and the next division concerns the management of the char- tered fleet. You must have a man who is looking after your ton- nage, whether you charter it or own it, and somewhere in that line you have got to have a vei-y expensive man. You have to employ a man on a par with the big shipping companies in New York, and tliey pay from $20,000 to $50,000 a year. We have got to get some one man of that type. The Chairman. Do you? Mr. Denman. Oh, yes. The Chairman. Why? Mr. Denman. Because the control of your fleet, chartered to mer- chants under charters outlining the proposed trade, is a very highly skilled profession. You get your information as to what the big men are doing by contract with them. We can not go in and take a partner, an American house, and haul that fellow up before the board and exact from him his business knowledge to find out Avhether we will charter what he terms a competitor: and we must have a man who knows the game in New York and San Francisco and is in constant touch and knows the men. in order to carry on the business. You see we are outside of the ordinary governmental functions. Congress has put us in business, but with the instruction tliat no board of directors ever gives its agents, namely. '• Do not destr(\v other American traders in building up your own." I antici- ])ate you do not expect a dividend from us. save in the national bene- fit from the newly developed trade. The Chairman. That type of man who acts as a broker Mr. Denman. No; this is not a broker. The Chairman. I mean the man who is chartering the ship and then peddling the space : that is the type of man you have in mind ? Mr. Denman. Oh. no: we will like to have a man with the skill of such men as Mr. Franklin or Herr Ballin, the German, who Avould feel at the same time that his board of directors were the American people. Gen. Goethals was such a man, but he was not trained in this profession. Herr Ballin is great because he is able to picture the whole world of moving commerce. He is able to tell Avhether or not there is going to be a drought in this country which will destroy crops here, whether or not there will be a tremendous shipment of cattle out of a certain district because there is not feed for them, whether or not Eussia is producing a certain amount of meat. He is able to get a comprehensive world grasj) of the flow of overseas commerce. (No German will admit there is another quite like him in the world, but he represents in some respects an ideal.) Now, those are the men who create successful enterprises. You can not get them cheap. You might be able to find a freak somewhere who had not been recognized and who had not been broken in. but the cliances are against getting such a man; and if you developed 14 UNITED STATES SHIPPIXG BOARD, such a man he would probably go to private employment if he got low pay from us. I think we know where to go to look, but it will not be done quickly. The Chairman. I asked you about the type of man you have in mind, because you are proposing to pay him from $10,000 to $18,000 a year. Mr. Brknt. That is right. Mr. Denman. I am quite certain that when we pick our man there will be an awful outcry, because we will probably be o'nliged to pick a man who is now playing in the game for somebody else, but in whom we recognize public spirit. That clamor will be in our ears and not in anybody else's. But we are ready to bear it. DIVISION OF XAVA.I. ArXILIARY, NAVAL RESERVK. AND ARMY TKAN.SI'OKT.S. The Chairman. Your next division is the Division of Xuval Aux- iliary, Naval Reserve, and Army Transports. Mr. Denman. The bulk of that work will be done by the Navy officials themselves, by assignment to us. but we must have some of our own men in there. The Chairman. Just what will be your relation to Army and naval transports and auxiliaries? Mr. Denman. Here is very likely what is going to happen: There will be a group of young merchants in New York who have got pep and ginger in them, who will come to us and say, " Here, we want to establish a line to South America "—and we want to get those boys in the game if Ave can — and we will say, " What type of ship do you want?" And they will say, " AYe want a half passenger and half cargo carrier." The Navy Department at that time is looking for colliers which will be available to them in case of an emergency. Now, we will have to adjust between those two demands — the demand of the merchants and the demand of the Navy Department. The Chairman. You mean they will come to you to charter a ves- sel of that type from you ? Mr. Denman. They will not do that. They will come to us and ask us to build a vessel and charter it to us. The Chairman. And then the question that must 1)0 determined is as to what extent you yield to their necessities and the necessities of the (Tovernment in case that ship is to be taken over? Mr, Denman. Yes. The Chairman. Aiul that will be one of your dixisions? Mr. Denman. Yes. The Chairman. The theory is that all these vessels that will be constructed will be of such types that . We are supposed to report on many of those under section 26. Mr. ISIoNDELL. But you do not go into them with a view to pre- paring them for diplomatic representation ; that is a function of the State Department. Mr. Denman. Yes. But our investigations will assist, and I may say our proffered assistance has not been without welcome. Mr. MoxDELL. And so far as those cases are concerned the only way in which you investigate them is for the purpose of making reports. Mr. Denmax. But suppose we ha\e an aggravated case in Hong- kong which really represents a principle. We may have to send out there and take testimony in Hongkong in order to report on that case. Although it is not the basis of a claim, it is the basis of a dis- covery of a method of discrimination. At the same time and out of the same kinds of action may come a direct complaint to us against a British common carrier who is declining to accept the goods destined to Hongkong for a blacklisted American firm, a San Francisco merchant. Mr. Brext. Under another provision of the laAv which requires an investigation for the purpose of correcting such a condition and awarding damages. Mr. MoxDELL. So, as a mattei- of fact, you feel it is incumbent upon you to investigate all those cases that are filed in the State Department? Mr. Denman. Of course, we may find that there is a group of cases all alike. We will say " We have investigated carefully this case and the facts are so and so. The claim filed by this other gen- tleman is identical in its facts. Now, this line of discrimination pre- sents this evil." The Chairman. Arising from the detention of one ship there may be a great many claims ? Mr. Den MAN. Yes. Mr. MoNDELL. In connection with one of those cases that was not called to your attention directly, but which came to your attention through filing a claim or a complaint in the State Department, you might find it necessary to interrogate the parties in interest (ir the parties who filed the claim or made the complaint for the purposes of your investigation and information with reganl to that particular kind of discrimination ? Mr. Denman. Yes. Mr. P>ri:nt. It luiglit arise in this way. Mr. Mondell: The man might li\(' across the water, and lie would not dai-e to put certain TENTATIVE OUTLINE OF ORGANIZATION AND ESTIMATES OF COST OF ADMINISTRATION OF THE UNITED STATES SHIPPING BOARD FOR THE FISCAL YEAR 1918. UNITED STATES SHIPPING BOARD, FIVE COMMISSIONERS, $37,500. EXECUTIVE OFFICEH. SECRETARY OF BOARD, LAY , DIVISION. A^'iSl r,f« TJfi der'jlirisilfctlou otljoatd Ion of i!l>i|>F>liig ""'"?' f,°rc J in .11 qiiesiions coming before """". .,.;...:.:.:2 bjomre o?'arcf r™ nger sarvice iit Wasbtagto ntotoaippIM EXPLANATORY NOTES, ■ Will bo appointed by the SMpptaE Board. All olher posillons, in acoordBncB mui ihe provisions of tbe Shipping Act, must be filial .. Tiir ■ifir"-"""'"'""'' r-ii..l|iions and uncerlalntles pertaining losliiji- © REQULATION Vi DShington to be supplied ISr, aS) °iSmS?STGSsT°SScArsmp: w^^ *^ noport ^S* ol oblaining roQcl by diplomatic means or by special nets ol rSi' oSocretarj of Treasury results orioiasLigatlons ol diserlmiua- Ign \osso[3in American porlsflBamstAraorieansluppors lUb ping V Z',\, , ZZ'ti audiu^he Ue'lj j!'nia*beniiedLda r t o n pro nr'^aiiinE°n commBrcla practice at time and riacB allest maUd al9l OOU to (20 000 oKiC^ „»l„an,c«.g„„r>oc..«B,b.g.....b.™rnl..a<.r Appolntm 30 Clerks 10 IOC erks!! ^"ml erical oslablishmenl, appointments under olsupplies, custody of omccs. mails, flies, rte of UailVandEilMV-V- ."-."!"-" 2,400 „.^.d,.fODl„.io„ofb.J..,d,., nplo; ss et employ ees.includlni; conildontlnl clerks 3, telephone operators, messongerB , 1 aliorcrs. DIVISION OP VESSELS A ND TERMINALS. Standardization of plans and speoiGcs chnat Marine. Construction, repair, inspection and n cvolopmont of Amoilcan Mer- Estlmilod (Design and eorstructlon ol vcssols). monfb. nSSIIksr "'"""'"" " uchiiiery) uOO-OlHl TSrSf^^^i^i^'^''- ';;:::;::;:::;::;::: JK?§ Stoi^ecloK^tJIachinen' - ;" mereial practice at time and place. ^ NoTE.-Cleriealandmessenserswvlce by onioootChier Clerk. 5™' m«S".t'\v3lS"n' ,p.nj.lion ptovallibB in com- at Wosbinglon to be supplie,! the Shipping Board. Aonlysis ol cut ol tho various oporatio and dlsbur»inient3 arisine imder appro building ol American Merchant Marine. untlne conneolo"d wi prialfoii Of 530,000,0 <,e.».o, 0,.^"^""'°"""™^'"""'"" bo supplied by Oir e.ofCW.1 DIMSIONOFSm PPING UANAGEM ENT. "' . "'^^i^w'olflie I'IsUmaled JiiyjrM^J'Sna.'SS";;::: ■":: Sfc m ,,„; "" ployed by tlio day or moni'h" ».fe.ofW.,b.ng, m to bo supplied '^Cl^f(riy?mo Rocolpt, class Aaafstant Cliiof Note: Clorlca S^ ■rTSh "docomeots. rr.°ii fAnnn.. "™°™ .nge,..r ico to bo supplied by Om CO 01 fabler 1 1 DIVISIO. OENAV 'h "^ F^&FstSSt "^'^ RVEAND Encourai iili D P pment in OMperetlon vitb 1 to dSi^.'^mlJuirjS ."SSjfi' as may be reqnircd. Nom''™i?S"Sd' byOfneoofChiefCier 1 ■erve ttaining to be employed by the day or n the field as needed at rales o( CDm|ieiiSitioQ !fc,Sf,: Apr., May, H? Commlssfonersand Secretary ' (g,B75 io;ooo 'IE 95S,12S ' ' UNITED STATES SHIPPING BOARD. 23 facts relating to tlie matter in writing.- In order to got at the true facts Ave would have to go and sit down with him or send somebody to sit down with him who could get us the facts, not for publication but for the benelit of the United States (Jovernnient. Those things are occurring in our own country to-day. We know there are things they want to tell us, but they do not dare to i)ut it in writing for fear they will be innnediately cut off, Mr. Denman. It is not pleasant to see ^Vnierican merchants cringe to any power. They had to submit to Gernuin and other discrimina- tion before the war and will have to meet it again after. Now, it happens to be mostly British. These nations are all alike and will continue to be so so long as competition reigns on the sea. Every true American rejoices that Congress is keenly awake to this need for pro- tection, o $19,000 •1,500 8. 200 12,000 6,000 6,000 C.OOO 700 22,000 20,tXX) (100,000 ble this UNITED STATES SHIPPING BOARD. 23 facts relating to the matter in writing.- In order to get at the true facts we would have to go and sit down with him or send somebody to sit down with him wlio could get us the facts, not for publicaticHi but for the benelit of tlie United States (iovernment. Those tilings are occurring in our own country to-day. We know there are things they want to tell us, but they do not dare to put it in writing for fear they will be immediately cut olf. Mr. Den MAN. It is not pleasant to see ^Vmerican merchants cringe lo an\- power. They had to submit to German and other discrimina- tion before the war and will have to meet it again after. Now, it liappens to be mostly British. These nations are all alike and will continue to be so so Icmg as competition reigns on the sea. Every true American rejoices that Congress is keenly awake to this need for pro- tection. /' ^y !-'■€?' i C^ '(1^ *%