itle I, has to do with the merchant marine, and will insure that the eral Maritime Board continues to have exclusive jurisdiction over ter transportation between Hawaii and the mainland. This is portant, but it does not cover the situation about which we are cerned. We are suggesting that a subsection be added, which will ke clear that certain provisions of the Merchant Marine Act of clearly pertaining to Hawaii as a Territory, will not be affected Hawaii's becoming a State. The amendment we propose is quite simple, and will not in any way nge the present basic law. We are only suggesting that the words and State" be added to the present description of Hawaii as an and Territory," so that there will be no question but that the nent sections will continue to apply to Hawaii after it becomes a far as I know, there is no opposition to this amendment. Everyconcerned is agreed upon the advisability of its inclusion in the hood bill, including the Maritime Administration. Mrs. Farringas did her husband before her, favors the amendment, in order to re to Hawaii the continuance of all of its present shipping facilities. have just been advised that the House committee has voted to de the provision in the Hawaiian portion of its statehood bill; it appear as an amendment to H. R. 2535 when that bill is reported the House within the next few days. identally, the sections of the Merchant Marine Act we propose mend have no application to Alaska, so we are not concerned with part of the statehood bill. he sections of the Merchant Marine Act of 1936 that will require erfecting amendment have to do with the subsidy provisions of act, with which I am sure you are all generally familiar. Briefly, American-flag vessels must face substantial foreign competition The essential trade routes that they serve, provision is made for the ment of operating differential subsidies, designed to put American rators on a parity with their foreign competitors. They are also led to have vessels constructed in American shipyards for use in e services with the help of construction subsidies, intended to alize foreign and domestic shipyard costs. There is also provision, der certain circumstances, for the chartering of vessels from the ritime Board at reduced rates in order to meet this foreign com tion. However, the Merchant Marine Act restricts the use of vessels t with the aid of construction subsidies, or chartered at reduced s, or receiving operating subsidies, to the foreign trade. We are permitted to employ vessels in the coastwise or intercoastal trade at the same time enjoy the subsidy benefits. There are certain specified exceptions, however, to this prohibition inst employing a subsidized vessel in the coastwise or intercoastal e. One of these exceptions permits a vessel engaged in the foreign e to stop at an island possession or island Territory of the United es without losing subsidy for the foreign part of the voyage. To be specific, section 605 (a) of the Merchant Marine Act of 1936 ides as follows: operating-differential subsidy shall be paid for the operation of any vessel voyage on which it engages in coastwise or intercoastal trade: Provided, er, That such subsidy may be paid on a round-the-world voyage or a round ge from the west coast of the United States to a European port or ports or a 59823-55--7 round voyage from the Atlantic coast to the Orient which includes intercoasta ports of the United States or a voyage in foreign trade on which the vessel ma stop at an island possession or island Territory of the United States. * * * Trade with Hawaii, so long as it remains a Territory, is clearl covered by this exception, and the vessels of United States Line trading from the east coast, as well as the vessels of these other line. that trade from the west coast, have been able to stop at Hawaii t take on or discharge cargo, passengers, and mail in the course of thei longer foreign voyages without endangering their subsidies. O course, they do not receive a subsidy for the domestic part of thes voyages; the section goes on to provide for the reduction of the subsidy by the proportionate amount that the revenue from the domestic leg of the voyage bears to the revenue from the entire voyage. In othe words, trade between the mainland and Hawaii is considered coastwise or intercoastal, and the subsidy is reduced accordingly; however, the operator is not disqualified from receiving subsidy for the foreign part of the voyage. But what effect will Hawaii's statehood have upon this proviso of the Merchant Marine Act? We feel there may be some question as to whether the words "island possession or island Territory of the United States" will continue accurately to describe Hawaii after it becomes a State. To avoid any such possible ambiguity and to make sure that the present law continues in full force and effect, we are proposing that S. 49 be amended by adding the words "island State" to the present description. There are two other sections of the Merchant Marine Act, having identical provisions, that may be similarly affected upon Hawaii's becoming a State and no longer accurately to be described as a Territory. These are sections 506 and 714 of the act, having to do with construction subsidies and the chartering of vessels. Section 506 provides: Every owner of a vessel for which a construction differential subsidy has been paid shall agree that the vessel shall be operated exclusively in foreign trade * * * or on a voyage in foreign trade on which the vessel may stop at an island possession or island Territory of the United States * * *. Section 714, having to do with the chartering of vessels to subsidized operators serving essential trade routes, provides: Such charter shall provide for operation of the vessel exclusively in the foreign trade, *** or on a voyage in foreign trade on which the vessel may stop at an island possession or island Territory of the United States * * *. In both these sections, where the stop at an island possession or island Territory is an incident of the longer foreign voyage, there is again provision for reduction in subsidy or upward adjustment of the charter hire, based upon the ratio between the revenue from the domestic leg of the voyage and the revenue from the entire voyage. But clearly vessels built with the benefit of construction subsidies or chartered at reduced rates to subsidized operators may now stop at Hawaii in the course of their foreign voyages without endangering these subsidies. The question is again presented, however, as to whether the present description of "island possession or island Territory" will be sufficiently accurate to describe Hawaii after it becomes a State. It is proposed that the words "island State" be added to the description in both these sections also. It is important to emphasize again that none of these amendments will effect any change whatsoever in the present basic merchantmarine law; they will only serve to insure that these important provisions of the Merchant Marine Act of 1936 remain in full force and effect after Hawaii becomes a State. I think it should also be pointed out that any diluting effect that statehood for Hawaii might have upon the present merchant-marine law might have serious repercussions upon the islands' economy and prosperity. It would indeed be unfortunate if Hawaii were to be deprived of a good portion of its presently available shipping services, just because the language of these sections of the Merchant Marine Act was not sufficiently clarified to make certain that they will continue to pertain to Hawaii after it becomes a State. We have furnished you, Mr Chairman, with the exact language of the amendment we propose, and I understand that Mr. French has reduced it to committee print so that it is actually before you. I would like to have that amendment made a part of the statement. Senator JACKSON. Without objection, it is so ordered. (The amendment referred to follows:) [Committee Print, JANUARY 31, 1955, FOR USE AS A WORKSHEET BY THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS] [S. 49, 84th Cong., 1st Sess.] AMENDMENTS intended to be proposed by Mr. to the bill (S. 49) to enable the people of Hawaii and Alaska each to form a constitution and State government and to be admitted into the Union on an equal footing with the original States, viz: On page 23, line 22, after "SEC. 116." insert "(a)". On page 24, after line 5 insert the following new subsection (b): "(1) The first sentence of section 506 of the Merchant Marine Act, 1936, as amended (U. S. C., title 46, sec. 1156), is amended by inserting before the words 'island possession or island territory', the words 'island State' and a comma; "(2) section 605 (a) of the Merchant Marine Act, 1936, as amended (U. S. C., title 46, sec. 1175), is amended by inserting before the words 'island possession or island territory', the words 'island State' and a comma; and "(3) the second paragraph of section 714 of the Merchant Marine Act, 1936, as amended U. S. C., title 46, sec. 1204), is amended by inserting before the words 'island possession or island territory', the words 'island State' and a comma.' Mr. KLINE. With your permission, I would like to introduce Mr. Dewey, who would like to say a few words on behalf of the West Coast Lines that he represents. Senator JACKSON. Mr. Dewey. Mr. DEWEY. I am Ralph B. Dewey, Washington representative, Pacific American Steamship Association, headquarters in San Fran cisco. Mr. Chairman, Mr. Kline has adequately covered the intent and Scope of this amendment. I only want to add that we are avoiding a possible legal point that might be raised at some later time. The reason that we choose to amend this statehood bill rather than the Merchant Marine Act is that it is consistent with other amendments in the statehood bill whereby the statehood bill will not in and of itself come in another piece of legislation. Senator JACKSON. Do you have any further comments? Senator JACKSON. As I understand your proposal, Mr. Kline, in substance you would amend that part of the Merchant Marine Act relating to operating-differential subsidy, construction, differential subsidies, and the chartering provision to make it clear that the fact that Hawaii has become a State will in nowise change the basic policy of the Merchant Marine Act of 1936 as amended. Mr. KLINE. That is entirely right, Mr. Chairman. Senator BIBLE. I have no questions. Senator SCOTT. I have no questions, Mr. Chairman. Senator JACKSON. I also understand that there is no allowance at the present time in the operating-differential subsidy for that part of the voyage that is between the mainland and Hawaii, or coastwise or intercoastal. Mr. KLINE. That is correct, and this proposes no change in that, Mr. Chairman. Senator JACKSON. So there would be no change by reason of this amendment? Mr. KLINE. No; there would not. It will keep up the law as it is. Senator JACKSON. You are not compensated for the operatingdifferential subsidy in those waters just mentioned? Mr. KLINE. Mr. Chairman, we get a subsidy for the entire voyage, but we deduct the revenues from the domestic part of it. Senator JACKSON. What if we provided in here that in construing the voyage, the voyage shall commence after you leave Hawaii, for example? Mr. KLINE. Actually the voyage commences in our case on the east coast, and in the case of my friend here, on the west coast, but it goes through Hawaii, via Hawaii, to Far Eastern ports, Australia, New Zealand, and so forth. Senator JACKSON. You do not pick up any cargo, coastwise or intercoastal, and discharge it in the so-called domestic waters? Mr. KLINE. Yes; in our case we pick up cargo in New York and discharge it in Hawaii, or vice versa. We then have to give up that subsidy in proportion to the revenue of that part of the voyage. In other words, the ratio is the revenue from the domestic leg to the revenue for the entire voyage. Senator JACKSON. That is to prevent you from being in a more favorable competitive position on the nonsubsidized part? Mr. KLINE. That is right. In fact, the provision is there to protect the nonsubsidized line which also serves Hawaii. Senator JACKSON. If you carry freight from New York to Manila. and you stop in San Francisco and Hawaii, you merely pick up cargo, but do not discharge cargo, in any of those so-called domestic ports, you then get a subsidy for that part of the domestic voyage? Mr. KLINE. We get a subsidy for the foreign voyage to the Philippines, but in the case you put I don't think there is any domestic part of the voyage; is there? Senator JACKSON. Well, the domestic part of the voyage would be from New York to San Francisco. Mr. KLINE. You mean you are picking up cargo in San Francisco? Senator JACKSON. You are picking up as you go along. Mr. KLINE. If we had a private stopping in San Francisco for cargo, which we don't have, we would also have to give up that part of the revenue. Senator JACKSON. I thought the disclaimer on the subsidy only would arise if you picked up the cargo in a domestic port and discharged it in a domestic port, like picking it up in New York and discharging it in San Diego, or San Francisco. Mr. KLINE. That is correct, Mr. Chairman, except that one of the domestic ports, as you put it, would be Honolulu and, therefore, we would have to give up subsidy based on the revenue between New York and Honolulu. Senator JACKSON. But if you do not discharge it you do get an allowance for your subsidy? Mr. KLINE. Yes, sir; because it is a foreign voyage. There is no discharge at Honolulu at all. Senator JACKSON. So it is a foreign voyage for the purposes of the subsidy provisions of the Merchant Marine Act if you carry the cargo from New York, pick up some more on the west coast and some more in Hawaii, but do not discharge any cargo at any of those ports? Mr. KLINE. Picking it up, you would be right, sir. We would be engaged entirely in a foreign voyage with no domestic feature. Senator JACKSON. Thank you very much. Mr. KLINE. Thank you, Mr. Chairman, for the privilege of coming. (COMMITTEE NOTE.-The following report on the proposed amendment was received from the Maritime Board:) Hon. JAMES E. MURRAY, FEDERAL MARITIME BOARD, Washington 25, D. C., February 9, 1955. Chairman, Committee on Interior and Insular Affairs, United States Senate, Washington 25, D. C. DEAR MR. CHAIRMAN: This is in reply to your letter of January 29, 1955, asking for the views of the Maritime Administration on a suggested amendment to S. 49, a bill to enable Alaska and Hawaii to become States. The suggested amendment would amend sections 506, 605 (a), and 714 of the Merchant Marine Act, 1936, as amended, by inserting, in connection with the reference to "island territory" in such sections, the term "island state," in order to leave the sections unchanged in their application to Hawaii notwithstanding its admission to statehood. The apparent objective of the amendment is to maintain the existing status of Hawaii under the Merchant Marine Act, 1936, after Hawaii becomes a State. The amendment to section 506 of the 1936 act would continue in effect the authority to pay operating-differential subsidy on a vessel constructed with the aid of construction-differential subsidy, even if the operation of such vessel in foreign trade includes a stop at an island territory (such as Hawaii) subject to existing requirements of the section. The amendment to section 605 (a) of the 1936 act would continue in effect the authority to pay operating-differential subsidy for operation of a vessel in foreign trade which includes stops at an island territory (such as Hawaii), even though no operating-differential subsidy is normally payable for operation in coastwise or intercoastal trade, subject, however, to the condition that subsidy is payable only in respect to the foreign part of the voyage. The amendment to the second paragraph of section 714 of the 1936 act would continue in effect the authority to charter (with option to purchase) a Governmentbuilt vessel for operation in foreign trade which may include stops at an island territory (such as Hawaii) in the course of the foreign trade operation. In view of the close and direct relationship of the foreign trade operations by United States-flag vessels and trade between the mainland and Hawaii, we believe that the proposed amendment should be considered favorably by your committee. It would be desirable to continue in effect the sections above referred to in order to continue the shipping services by United States-flag vessels on the same basis as apply to Hawaii as a Territory. Most of the carriers by water serving Hawaii |