Now, in reference to dispensing with the coastwise laws, which you referred to, Mr. Chairman, as the Canadian vessel enabling section, permitting Canadian vessels to engage in the Alaska trade is a highly controversial subject which is covered by separate legislation now before Congress, and upon which extended hearings have been held.

The carriers were opposed to it as being no answer to the problem we are now confronted with, as in violation of commercial treaty and as not providing reciprocal privileges by Canada, and for many other reasons, in addition to which I might indicate that the section as drawn, Senate Joint Resolution 222 and House Joint Resolution 401, having to do with the power of the President to permit operation of Canadian vessels, has no termination, as has the remainder of the bill. It will stand for an indefinite period. We believe that matter should be dealt with by the committee under the separate bills which the committee now has before it.

In conclusion: After many months of consideration, and a month of continuous conferences with all concerned, we thought then and we think now that House Joint Resolution 396 and Senate Joint Resolutions 218 and 219 are as practical a solution of the problem involved as is presently available.

This conclusion is fortified by the fact that Senate Joint Resolutions. 218 and 219 cover a temporary period, which we believe should be only until December 31, 1949, within which time we hope for more settled conditions which will make possible resumption of operations upon a completely private free-enterprise basis.

And as I have previously indicated, we are willing to go along with the date suggested of September 30, 1949, rather than December 31,

1949.

I would be glad to respond to any questions.

Senator CAPEHART. I would like to ask Mr. Mellen: Do you have any other similar arrangements in the Maritime Commission, similar to Public Law 12?

Mr. MELLEN. No.

Senator CAPEHART. This is the only one of its kind?

Mr. MELLEN. That is right. Nor do I know of any such existing prior to the passage of Public Law 12.

Senator CAPEHART. Would your companies prefer to have Public Law 12 expire and not be renewed?

Mr. LONG. I don't think so, sir. We feel that the people of the Territory are entitled, at least until conditions become settled, to the subsidy which these resolutions provide for. And they are not subsidies to the operators; they are subsidies to the people of the Territory.

Senator CAPEHART. And your recommendation is that the act be extended in some form?

Mr. LONG. My recommendation is, sir, that the act be extended, taking the form of Senate Joint Resolutions 218 and 219 with the modifications and amendments suggested by Chairman Allen of the House subcommittee.

Senator CAPEHART. Would you rather have the act expire than to nave Senate Joint Resolution 222?

Mr. LONG. Yes, sir.

Senator CAPEHART. i do not believe I have any more questions. Mr. Allen?

Representative ALLEN. No questions.

Mr. LONG. I have two or three comments, if I might take the committee's time for just a moment.

Senator CAPEHART. Yes.

I

Mr. LONG. It has been suggested that after the passage of Public Law 12 there came out of the blue a 35-percent rate increase. refer to the committee report of the House on Senate Joint Resolution 122, which became Public Law 12, which very clearly indicates exactly what the situation was, what the rate increase would of necessity have to be if ships were purchased, if Public Law 12 did not pass, and what savings would be effected if Public Law 12 was enacted. And it very clearly sets forth in the formal report of the House on Senate Joint Resolution 122, ultimately Public Law 12-and I may say it is also in the Senate Committee report on the companion Senate resolution-that a 35-percent rate increase would be needed. And it was placed in effect. It was no surprise to anyone.

The purpose of the law was very clearly set forth in both the House and Senate report on Public Law 12 as well as the oral testimony at the hearings.

Senator CAPEHART. What is your opinion on this threatened strike of June 15?

Mr. LONG. My best information, sir, is that there probably will not be one. I could not guarantee that. I can assure you that the carriers are doing everything possible.

Senator CAPEHART. What is the basis of the strike threat?

Mr. LONG. The issue has to do with an interpretation of the TaftHartley bill, sir. I feel that a satisfactory agreement will be reached. I think it is to the interests of all concerned, the Territory, the carriers, the public, and the union that such an agreement be reached. I can't guarantee that it will be. We certainly have hopes that it will be, and it is my best judgment that we won't have a strike. Senator CAPEHART. I appreciate you cannot guarantee it.

Thank you very much.

Mr. LONG. I have just two or three others, Mr. Chairman.

I don't like to have the record stand unanswered on two or three points. I am not going to take the time of the committee to answer all of the suggestions which were made by Governor Gruening, but two or three of them I think should be pointed out.

It was stated by Governor Gruening here and before the House subcommittee that the rates on the same commodities were different to the canneries than they are to the town freight. That simply is not the fact.

If a sack of potatoes was bought by a cannery and shipped from Seattle to Kodiak, and another sack bought by a store in Kodiak, they would carry exactly the same rates.

Now, with reference to the south-bound and north-bound salmon: South-bound salmon is a commercial product. It moves by shipload in some millions of cases a year. North-bound salmon is simply a grocery item, like a can of beans, or a can of coffee. It moves several hundred cases, if that many, per year. There is an entire difference in the handling.

You, with your Interstate Commerce Commission, are familiar with the difference in rate making, depending upon the density of move

ments, the seasonal nature, the carload lots as against an individual bag of salt. They simply are not comparable.

And with reference to the movement of an automobile from Juneau to Haines, as I believe the statement was, the carriers, so far as I know have never received any complaint on that score. And I am sure that if these matters come to the Governor's attention he should take it up with the carriers instead of raising it for the first time before some congressional committee, and then the interests of the carriers would be much better preserved, and the economy of the Territory benefited.

Now, with reference to the suggestion that the bottling works in Anchorage has to pay more to ship a bottle of pop from Anchorage to Kodiak, that may be true. I haven't examined it. But I can assure you that the difference is not in the steamship rates. The difference is in the Alaska Railroad rates, under which it must move over to Seward and thence by ship.

Now, the Territory has appeared. You asked this morning whether or not the Territory has appeared in these rate cases, and made their position clear. They have appeared in all of the hearings having anything to do with myself in 20 years. And I would like to put in the record the report of the Maritime Commission examiners as a result of the last hearing on rates, Docket 661, which deals with the matters discussed and complained of by the Governors this morning, very graphically.

This is the proposed report filed December 31, 1947. Exceptions have been taken and argued, and the Maritime Commission has the final decision under advisement at the present time.

Now, the question of cannery traffic, concerning which we hear at all hearings, in both legislative and rate matters, is dealt with most thoroughly by the examiners as a result of hearings extending for several days in Seattle, and, I believe, supplemented by briefs and other material. That discussion is found on page 6 of the examiner's report. And I invite your careful attention to the findings, based upon evidence in the record.

It continues on page 7 and page 8 and over to the top of page 9, down to the paragraph entitled "Operating Costs."

I should like to have it in the record, if I may, sir. I think it is extremely helpful to an understanding of the problems. It is the official copy served upon the carriers by the Commission.

Senator CAPEHART. It is a rather long report, but without objection we will place it in the record.

(The report referred to is as follows:)

UNITED STATES MARITIME COMMISSION

No. 661

ALASKAN RATE INVESTIGATION No. 3

The Commission should find that the rates, fares, charges, regulations, and practices of respondents Alaska Steamship Company, Alaska Transportation Company, and Northland Transportation Company have not been shown to be unjust and unreasonable or otherwise unlawful.

The record should be held open for submission of additional evidence reflecting respondents' revenues, expenses, operations, and practices through the month of June 1948.

Stanley B. Long, Ira L. Ewers, and Albert E. Stephan for respondents.

Ralph J. Rivers, Malcolm D. Miller, Ralph L. Shepherd, Herald A. O'Neill, H. O. Berger, Donald Wallace, Germain Bulcke, Nathan Jacobson, Philip Eden, Omar O. Victor, Norman C. Stines, and Felix S. Cohen for interveners. Paul D. Page, Clarence D. Koontz, and Guy M. Carlon for the Commission, REPORT RECOMMENDED BY C, W. ROBINSON AND ROBERT FURNESS, EXAMINERS By Public Law 12, 80th Congress, approved March 7, 1947, the Commission was authorized to provide essential water transportation for the Territory of Alaska until July 1, 1948, pending the determination of a long-range policy with respect thereto. To that end, the Commission was empowered to enter into appropriate contracts, charters, and other arrangements with American citizens operating American flag vessels deemed by the Commission to be qualified to supply such service. Any such contracts might include charter hire of Commission ships at a nominal rate or rates, with marine insurance to be provided by the Commission both as to ships made available by the Commission and other ships operated by the contractors.1

On May 15, 1947, in accordance with the foregoing mandate, an interim agreement was entered into by the Commission and Alaska Steamship Company, Northland Transportation Company, Alaska Transportation Company, and Santa Ana Steamship Company, effective March 1, 1947, and terminating on the last voyage of any vessel commencing on or before June 30, 1948. The principal provisions of the agreement are as follows: (1) the Commission released to the contractors their privately owned ships which had been requisition-chartered during the war; (2) additional Commissioned-owned war-built ships were to be made available as necessary at charter hire of $1.00 per vessel per annum; (3) the Commission was to insure or reinsure, at its expense, the hull and machinery risks of both privately owned and Commission owned ships; (4) the operators agreed to operate the ships in such coordination as would most economically and efficiently serve the Territory; (5) all costs and expenses to be borne individually by the operators, and all revenues to accrue to them individually; and (6) the operators were to file new tariffs with the Commission pursuant to the Intercoastal Shipping Act, 1933, as amended.

By virtue of arbitration proceedings, the contractors were assigned the following areas of operation (there was no geographical restriction for military cargo):

Alaska Steam: Alaska generally, except that if Santa Ana resumed operation, either under the agreement or privately, Alaska Steam would not serve the Kuskokwim River-Goodnews Bay area;

Northland: Southeastern Alaska, except as to passenger and cargo operations on its remaining combination vessel in joint service with the four such remaining vessels of Alaska Steam;

Alaska Transportation: Southeastern Alaska only.

New initial tariffs were filed with the Commission, effective on varying dates between May 19 and 21, 1947, inclusive. A petition to suspend such rates (except as to Santa Ana), alleging unreasonableness and unlawful discrimination, was filed by the Territory of Alaska. The petition was denied but the Commission ordered a hearing as to the lawfulness of the rates, and named all of the contractors except Santa Ana as respondents. Such is the present proceeding.

Hearing was held at Seattle, Washington, from October 27 to November 5, 1947. Briefs were submitted on December 15 and 22, 1947. Pursuant to the request of Commission representatives, a large amount of financial and other statistical data was submitted by respondents at the hearing. The Territory also submitted economic and statistical analyses in opposition to the rates. The following intervened in the proceeding: Territory of Alaska, Alaska Development Board, United States Department of the Interior, Alaska Salmon Industry, Inc., Seattle Traffic Association, Tacoma Chamber of Commerce, International Longshoremen's and Warehousemen's Union (CIO), National Union of Marine Cooks and Stewards (CIO), United States Smelting, Refining and Mining Company, Fairbanks Chamber of Commerce, and Alaska Miners Association. The United States Department of the Interior was not represented at the hearing.

The general characteristics of the Alaska trade were described in Alaskan Rates, 2 U. S. M. C. 558, 559. The Commission recognized this trade as extremely hazardous and pointed out factors which seriously handicapped the maintenance of efficient and economical operation of steamship services in Alaska. Many vessels are withdrawn from service during the winter. Those conditions have not

1 During the recent war respondents operated their vessels as agents of War Shipping Administration and later of the Maritime Commission.

changed. During the war, respondents suffered their share of caualties resulting in substantial losses of bottoms. Other vessels are now in the trade. The war also contributed a large military personnel to the population of Alaska and added substantial military installations which are still important assets to the Territory. There have been some changes of ownership among respondents, but the operating and managerial personnel has experienced little change. So far as this record shows, there have been no improvements in dock or terminal facilities in Alaska with the exception of military fixtures.

Rate comparisons.-The tariff rates of all 3 respondents, where they operate to the same ports, are the same, and were designed to provide a 35-percent increase in revenue. During 1946 War Shipping Administration suffered losses in the Alaskan trade estimated at about $4,000.000. The percentage increase now under consideration on the various commodities range from 1⁄2 to 72 percent. As three important examples, the increase on freight n. o. s., under which most of the town freight moves, ranges from 39 to 50 percent; on groceries, from 25 to 51 percent; and on canned fish, from 43 to 58 percent. The rates on agricultural implements and building material, both important in the life of Alaska, were increased very little. At the request of the Territory, groceries were given a lower specific commodity rate and taken out of the general merchandise item. In view of the recommendations in this report, no further comparison need be made of the increases.

Comparison with rates in other trades.—The record indicates that the rates to Alaska are higher than those to Hawaii and to Puerto Rico, but this has no particular significance as conditions in the three trades are not similar. For instance, the Alaskan trade is highly unbalanced, some of the Territory is closed to navigation during the winter months, many of the ships are withdrawn at that time, and during the short canning season respondents must utilize all available equipment, often on short notice, to handle the tremendous cannery output. To this may be added the hazards and dangers inherent in the navigation of Alaskan waters. Moreover, wages in the Alaskan trade are higher than in either the Hawaiian or the Puerto Rican trade. The Hawaiian trade is a two-way operation and not seasonal. Furthermore, population, area, and number of ports are dissimilar in Puerto Rico and Hawaii.

Financial results of operations.—All the capital stock of Alaska Steam, which is the largest of the respondents, was acquired in 1944 by Skinner-Eddy Corporation, the main activities of which company are brokerage of salmon and the operation of Texas oil properties. Thirteen of its vessels are Government-owned and four are company-owned, three of the latter being combination passengercargo vessels. Northland is a partnership, two of the three partners being officers of Alaska Steam and Skinner-Eddy Corporation. Five of its vessels are Government-owned and the sixth, a combination passenger-cargo vessel, is owned by Alaska Steam and chartered to Northland at $1.00 per year. Two of the vessels have refrigerated space. Alaska Transportation operates four Government-owned vessels, of of which has refrigerated space.

The following two tables show the operating results through September 30, 1947, under the interim agreement: 2

*

2 Article 5 (a) of the interim agreement provides: "If at the end of the calendar year 1947, or at the termination of this Agreement, or at such other time or times as the Commission may require or the Operators may elect, the cumulative net voyage profit shall exceed ten percent (19) per annum on the Operator's capital necessarily employed in the business of the vessels * the Commission shall be reimbursed in the manner provided below with respect to additional charter hire (to the extent of such profits in excess of ten percent (10) per annum) for the actual amount of any otherwise unrecoverable costs and expenses incurred by it pursuant to Article 3 hereof not including, however, the total loss or constructive total loss value of vessels owned by the Commission."