Free Or Reduced Rates on Water Carriers

The subcommittee met at 10:30 a. m., in room G-16, United States
Capitol, the Honorable Warren G. Magnuson presiding.
The CHAIRMAN. Come to order, please.

We have before us today S. 4158, a bill prohibiting the issuance by certain common carriers by water of free tickets or passes in certain

cases.

(S. 4158 is as follows:)

[S. 4158, 85th Cong., 2d sess.]

A BILL Prohibiting the issuance by certain common carriers by water of free tickets or passes in certain cases

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That no common carrier by water subject to the Shipping Act of 1916, as amended; the Merchant Marine Act of 1936, amended; or any other Act; shall directly or indirectly issue any ticket or pass for the free or reduced-rate transportation to any official or employee of the United States Government (military or civilian) or to any member of their families, traveling as a passenger on any ship sailing under the American flag in foreign commerce or in commerce between the United States and its Territories and possessions; except that this restriction shall not apply to persons injured in accidents at sea and physicians and nurses attending such persons, and persons rescued at sea, and except that this restriction shall not apply to persons referred to in section 405 (b) of the Merchant Marine Act, 1936, as amended (46 U. S. C. 1145 (B)), relating to steamship companies carrying mails of the United States. Nothing contained in this Act shall prohibit any common carrier by water, under such terms and conditions as the Board may prescribe, from interchanging with any other common carrier by water, free tickets, free passes, or free or reduced-rate transportation for their directors, officers, and employees and their immediate families, unless such individuals are also employees of the United States Government.

The CHAIRMAN. When the bill for the construction and sale of the two superliner passenger vessels was under consideration, an amendment was offered to accomplish generally what the bill now before us proposes. The amendment was accepted by the Senate but proved objectionable to the House conferees, on the grounds that it was not pertinent, and should be considered as separate legislation.

When the conference report was discussed in the Senate, I assured the sponsor of the amendment that the committee would hold a hearing on S. 306, which he had introduced in the last session. Today's hearing is the result. However, the bill before us today is a modi

NOTE. Staff members assigned to this hearing: August J. Bourbon and Gerald B. Grinstein.

fication of the original bill, in that it would exempt certain Post Office officials in connection with carriage of mail.

Senator Williams, who sponsored both bills, as well as the amendment to the superliner bill, is here to testify on S. 4158.

And we have for the record reports from the Departments of Commerce, Navy, State, and Treasury, the Post Office Department and the General Accounting Office. We will put all these in the record. (The above-mentioned papers are as follows:)

Hon. WARREN G. MAGNUSON,

THE SECRETARY OF COMMERCE,
Washington, D. C., July 23, 1958.

Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C.

DEAR MR. CHAIRMAN: This is in reply to your letter of July 19, 1958, inquiring whether I desire to have a representative present to testify, or to present a written statement at hearings to be held by your committee on July 25, 1958, on S. 306, to regulate the granting of free or reduced-rate transportation of passengers by common carriers engaged in foreign commerce and in commerce between the United States and its Territories and possessions. I also have your letter of July 21, 1958, suggesting that testimony be directed, if possible, with respect to S. 4158, introduced by Senator Williams as an amendment to S. 306, a copy of which you enclosed.

As you know, this Department submitted views in writing to your committee on March 29, 1957, with respect to S. 306. Although there are certain differences between S. 306 and S. 4158, such as the latter bill not being limited to United States flag passenger vessels, the comments which were submitted with respect to the former are, in general, applicable to the latter. I do not, therefore, desire to have a representative present to testify or to present a written statement with respect to this matter.

I appreciate your courtesy in giving me an opportunity to present my views orally with respect to these bills. Sincerely yours,

Hon. WARREN G. MAGNUSON,

SINCLAIR WEEKS, Secretary of Commerce.

THE SECRETARY OF COMMERCE,
Washington, D. C., March 29, 1957.

Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C.

DEAR MR. CHAIRMAN: This letter is in reply to your request of January 10, 1957, for the views of this Department with respect to S. 306, a bill to regulate the granting of free or reduced-rate transportation of passengers by common carriers by water engaged in foreign commerce and in commerce between the United States and its Territories and possessions.

In summary, the bill would amend the 1916 Shipping Act to prohibit common carriers by water, subject to the act, to issue free or reduced-rate transportation to any passenger in foreign or interstate commerce, except that under conditions prescribed by the Federal Maritime Board such transportation may be issued to their officers, employees, and their immediate families; attorneys and witnesses attending legal investigations in which the carrier is interested; persons injured at sea and attending physicians and nurses; persons rescued at sea; and to any person in order to provide relief in cases of epidemics or other calamities. Under conditions prescribed by the Board, these carriers may interchange with other common carriers by water free or reduced-rate transportation for their directors, officers, employees and their families.

The provisions of the bill would not apply to such carriers with respect to vessels documented in a foreign country and owned, leased or chartered by a foreigner.

This Department recommends against enactment of S. 306.

The bill would favor foreign lines as they could continue to offer the usual inducements for development of business which would be prohibited to domestic carriers. These inducements include reduced fares to travel agents who sell

about 80 percent of passenger travel, free tickets to organizers of group travel, and reductions to officials of railroads which grant fair concessions to steamship officials. The Interstate Commerce Act permits giving free transportation to a great variety of persons, organizations and institutions (49 U. S. C. 1 (7)). Interchange of passes is permitted with railroad officials and employees in recognition of the mutual contributions which each makes to the traffic of the other. The bill permits such interchanges only with other common carriers by water, thus rail carriers could give passes to steamship officials (U. S. v. Erie R. R., 236 U. S. 259), but United States-flag water carriers could not reciprocate.

Passenger liners in the South American trades give reduced fairs to students traveling to and from schools in the United States. This is done in order to attract and stimulate student travel, some of which has heretofore gone to Europe rather than to the United States. Families of students are also encouraged to travel and students themselves are inclined to continue such travel in after years. Such a concession improves our relations with other American Republics and indirectly benefits the steamship lines. The State Department has favored this concession.

To encourage their passenger agents to attend international travel conventions and to familiarize themselves with the steamship services they are trying to sell, steamship passenger lines usually grant reductions in fair to bona fide travel agents and their families. Although these agents work for the passenger lines, they could not be considered as their officials or employees, and, consequently, they could not be granted reduced fares under the bill.

Passenger lines also give reduced fares for official Government travel. Government bookings are made by some of the lines at the minimum first class fare even if all the minimum fare rooms are sold. At least one of the United States flag passenger lines has a contract with the Military Sea Transportation Service for the transportation of army dependents at the minimum cabin class fares during the off season when space is difficult to fill. Such a contract benefits the line in that it brings business at a time when business is needed and saves the United States Government money. Such a contract might not be possible under the bill. Generally speaking, steamship passenger lines, under uniform conditions established by their conference agreements and set forth in tariffs filed with the Federal Maritime Board, also offer fare concessions to ministers of religion, blind persons who must be accompanied by an attendant, and occasionally to others who because of limitations of income or physical disability are handicapped. Such concessions are permitted under the Interstate Commerce Act. Steamship lines both from the standpoint of public relations and of social consciousness have been granting such concessions for years, but always with uniform application to everyone in a particular class. Some lines issue passes to ministers for the purpose of conducting religious services on shipboard and otherwise attending to the spiritual needs of their passengers.

These established steamship practices are designed to stimulate travel and to promote full utilization of a ship at all times and should not be prohibited.

Section 15 of the 1916 act authorizes the Board to disapprove or modify discriminatory or unfair conference agreements, or agreements which operate to the detriment of the commerce of the United States. Section 16 of the act prohibits giving undue preferences or advantages to any person, locality, or description of traffic. Violations are punishable by substantial fines (46 U. S. C. 814, 815).

The statutory designation of specific classes of persons to whom free or reduced-rate passages may be given would be helpful from a regulatory standpoint. At present, regulation of free or reduced fare passage is based mainly on section 16 of the 1916 Shipping Act, above cited. Since passenger fares ordinarily differ depending on the time of travel, type and class of accommodation, and there is not the same competitive situation in passenger transport as there is in cargo transport, it is often difficult to determine whether a fare concession is undue or unreasonable. A provision of law which defined the classes or persons to whom fare concessions could be made would simplify the problems involved.

As stated the bill applies only to United States-flag passenger ships and not to their foreign competitors. Since the bill is more restrictive than the 1916 Shipping Act, United States-flag carriers would be placed at a severe competitive disadvantage. Party organizers who do so much toward filling a ship would turn virtually all of their business over to the foreign-flag ships which granted them a party organizer's allowance-usually free passage for a specified number of bookings. Unless the law applied equally to all carriers, the effect upon the

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