MERCHANT MARINE OF THE UNITED STATES. 



525 



ity with the American materials used in the construc- 

 tion, equipment, engines, boiler, and other appurte- 

 nances of such steam or sail vessel ; provided that in 

 ascertaining such drawback the duties on such iron or 

 steel shall be computed on iron and steel advanced in 

 manufacture not beyond the point of plates, angles, 

 bars, and rods : and- provided further that this section 

 shall apply only to vessels commenced alter the pas- 

 sage of this act. 



SEC. 19. That such sums shall be paid in the same 

 manner and from the same funds as drawbacks on 

 customs duties and under such regulations as may be 

 adopted from time to time by the Secretary of the 

 Treasury, and shall be regulated and the amount 

 thereof determined prior to the registry of such ship 

 or vessel. 



Section 20 provided for a new form of registry 

 certificate. Section 21 allowed a drawback of 

 duties on foreign materials used in the construc- 

 tion of vessels for foreign account. Section 22 

 exempted all vessels employed in foreign trade 

 from state and municipal taxation ; and section 

 23 simply repealed conflicting legislation. 



The report of the full committee which ac- 

 companied this bill briefly reviewed the condi- 

 tion of American shipping and the difficulties 

 with which it was beset, and justified the pro- 

 visions recommended for its relief. In regard 

 to the drawback on materials provided for in 

 section 18, the committee gave the following 

 illustration of its intended effect : 



For the purpose of illustrating what would be the 

 practical working of the foregoing plan, we have ob- 

 tained from the Delaware Eiver Iron Ship-building 

 and Engine- Works a schedule of the materials actu- 

 ally used in constructing two first-class passenger and 

 freight steamships for the Pacific trade of 2,131 tons 

 each, having a speed of thirteen knots. It appears that 

 3,709,845 pounds of iron, mainly in the form of plates, 

 angles, and bars, were used in the construction of the 

 hull, engines, boilers, etc., of each steamship. The 

 duty on iron, if imported in these forms, would aver- 

 age under the present tariff about li cent per pound, 

 or about $26 for each ton of the steamship. The duty 

 on the other materials used hi the hull, equipment, and 

 furniture of the steamship would carry up the draw- 

 back allowed from the Treasury to about $34. As the 

 cost of each of the steamships to which we have re- 

 ferred was $286,317, or $134 per ton, the net cost to 

 the original owner of a similar steamship under the 

 foregoing plan, after deducting the drawback, would 

 be apout $100 per ton, which, from all the information 

 obtained by your committee ? would be substantially 

 the cost of a similar steamship built upon the Clyde. 

 If the steamship were intended only for freighting, 

 with the speed of seven or eight knots, usually found 

 in English freighting steamers, the quantity of iron 

 used, and consequently the drawback and cost, would 

 be considerably reduced. In the case of iron sailing- 

 vessels only about five eighths of the iron used in a 

 first-class steamship for hull, engines, etc., is required 

 for a given tonnage, and the drawback would be about 

 $15 per ton. The proposed drawback, therefore, will 

 practically effect the increased cost of building an iron 

 steamship in the United States over its cost on the 

 Clyde. This is the unanimous judgment of ship-build- 

 ers and owners, so far as your committee have heard 

 from them. This is the judgment also of the Board 

 of Trade of San Francisco, which proposed this plan ; 

 the Maritime Association of New York, and other 

 commercial boards. So far as the original cost of any 

 kind of a vessel affects the question of the restoration 

 of the American flag to its proper position on the 

 ocean, there is good reason to believe that the policy 

 proposed will solve the problem. It should be borne 

 in mind, however, that the United States Treasury re- 



ceives annually about $1,500,000 from the tax on ton- 

 nage engaged hi the foreign trade. This tax is not 

 imposed on vessels engaged in the coastwise trade or 

 on any other industry. In 1880 this tonnage tax 

 yielded $1,490,544, of which $237,863 was paid by 

 American vessels. During the last fiscal year the 

 amount of the tax was little less, but it is certain to 

 increase as our foreign commerce enlarges. There 

 would be a general concurrence in the justice of abol- 

 ishing the tax were it not for the fact that England 

 and most foreign nations impose a similar tonnage tax 

 on all vessels entering their ports, and the further fact 

 that five sixths of our tonnage tax is paid by foreign 

 and only one sixth by American vessels, and on ac- 

 count of reciprocal commercial treaties the tax can not 

 be abolished as to our own vessels without also work- 

 ing abolition as to foreign vessels. We can, however, 

 and should use this tax or its equivalent to encourage 

 our own merchant marine employed in the foreign 

 trade. This was precisely what England did when 

 she granted $10,000,000 out of her tonnage tax to 

 make the Clyde the most favorable location in the 

 world for iron ship-building. 



On the reasonable supposition that the tonnage tax 

 will amount to $10,000,000 during the next five years 

 this alone would meet the drawback demands under 

 the plan proposed for at least 400,000 tons of new 

 steamships and sailing-vessels for the foreign trade 

 during that period. This increase of tonnage would 

 itself go far to revive our foreign carrying-trade, with- 

 out taking a single dollar from the ordinary revenue. 

 If the addition to our tonnage should be more than 

 this, the additional appropriations required would be 

 wisely expended. From any point of view the experi- 

 ment is one which affords much promise, and in view 

 of the general indorsement it has received from Boards 

 of Trade and commercial men, and the national im- 

 portance of the end sought to be reached, ought to 

 be given a thorough trial. If in addition to this di- 

 rect aid the United States shall imitate Great Britain 

 in giving contracts to private ship-yards to build a 

 portion of any steel war-steamships which it may be 

 deemed wise to construct for our navy, there is reason 

 and hope that favorable results would, follow. As it 

 is essential for our iron and steel ship-yards to place 

 themselves in a position to secure contracts for build- 

 ing vessels for South America and perhaps other for- 

 eign countries, your committee recommend that a 

 drawback of 90 per cent be allowed on any imported 

 materials of a vessel constructed in the United States 

 for foreign account. 



In regard to exemption from taxation the 

 committee said : 



There is no one thing that has had more to do in 

 rendering it difficult to sail an American vessel in 

 competition with an English steamship than the dif- 

 ferent system of taxation of shipping, as well as other 

 invested capital in the two countries. The English 

 system of taxation is on incomes, ours on the value 

 of the property. For example, a steamship valued 

 at $500,000 and earning 8 per cent net, or $40,000 an- 

 nually, would pay in England an income-tax of about 

 2 per cent, or only $800. A similar steamship under 

 the laws of every State but Massachusetts and New 

 York (which have recently exempted vessels from 

 local taxation engaged in the foreig'n trade), and pos- 

 sibly Pennsylvania, would pay a tax of about 2 per 

 cent on the value, or $10,000. Thus in the single 

 item of taxation, the steamship under the English 

 flag would have every year an advantage of $9,200, 

 which in so close a "business as the foreign carrying- 

 trade would of itself be enough to make it impossible 

 to sail an American steamship in competition with 

 an English rival. Your committee are unanimously 

 of opinion that it is of vital importance to the revival 

 of the American foreign carrying-trade that this diffi- 

 culty should be removed either by State or Federal le- 

 gislation. Your committee think that the element of 

 local taxation enters so largely into the solution of the 



