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Mr. HEINEMANN. Yes, sir.
Mr. BEECHER. In my testimony I think I was able to find but one single and very trifling case where the shipper was deprived by these rules of any benefit that he
possessed under the Harter Act. If you have found more than that one very minor instance, perhaps you could, without discussing them, just briefly name them.
Mr. HEINEMANN. I referred to the receipt and delivery, and if you people add the suggestions made there to connect up your Harter Act with your rules; that would cover that. Did you hear Mr. Laws testimony yesterday, wherein he pointed out several inconsistences?
Mr. BEECHER. No. I take it in my question it is assumed that the Harter Act is not in any way affected as to any period of time not covered by these rules.
Mr. HEINEMANN. Well, your assumption and the rules would present a difficult thing to reconcile in actual application.
Mr. BEECHER. I may assume that the committee, if it reaches the conclusion that the rules do not do what I say on that point, will amend the bill so as to make them do it; because I do not think it was ever the intention of Mr. Edmonds, who introduced it, or of the committee, so far as I am aware, and certainly not of any of the proponents of the bill or the delegates, to in any way affect the Harter Act as to any period of time not covered by the rules. So at I do not think it is a very difficult assumption, before we are through, if it does not do it, that the bill will have the effect which I have stated before it is passed.
Mr. HEINEMANN. I do not need to repeat all that Mr. Laws stated yesterday, and he certainly stated it very clearly and made a splendid presentation of it and pointed out severeal places wherein the rules conflicted with the Harter Act and with one or two other statutes existing at the present time and suggested a modification of them in that respect.
Mr. BEECHER. Do you consider, really, those conflicts, which you do not stop to enumerate, are so unfavorable to the shipper that, despite the very great advantages gained by the shipper under these rules with respect to limitation, the shifting of the burden of proof, the destruction of excess clauses, and the like—despite all of those very material advantages, do you still feel that the shipper would be better off if we left the Harter Act as it stands to-day, with no changes whatever, and abandoned the rules completely? Am I right in assuming that?
Mr. HEINEMANN. You certainly are. Mr. BEECHER. I think that clears up your position. Mr. HEINEMANN. Summarizing the specific and principal objections to these rules: First, is the fact that they have not covered the period of receipt and delivery; second, is the impossibility of complying with their claim provisions; third, is the deviation clause, against which the shipper has no protection and which is certainly something that is going to work disaster on us if they continue as they are and have been in the past; fourth, is the granting to the carrier of the right to alter these rules so far as liberality is concerned to favorite shippers. Now, you can not expect to accomplish that which these rules seek to accomplish if those provisions are left unimproved or unchanged.
I believe that is all, Mr. Chairman.
Mr. ENGLAR. Mr. Heinemann, in your last few words you mentioned three or four objections to the rules. Do you mean those to be the particulars in which the rules are less favorable to the shippers than the Harter Act?
Mr. HEINEMANN. I did not so state; no, sir. Mr. ENGLAR. You do not so state, or I would not have asked you the question. What I wanted to know was whether that was intended as a statement of the particulars in which these rules are less favorable to the shipper than the Harter Act.
Mr. HEINEMANN. Why, of course, that is not.
Mr. ENGLAR. No; I assume not. Apart from the question of whether the Harter Act applies before and after the rules apply, assuming, as Mr. Beecher does, if there is any doubt that it will be cleared up, could you, without great inconvenience and very briefly, state any particular,just mention any particular in which the rules would be less advantageous to the shipper than the Harter Act?
Mr. HEINEMANN. You mean aside from that through movement?
Mr. ENGLAR. Aside from the question of what happens before and after the rules apply and assuming that is still governed by the Harter Act.
Mr. HEINEMANN. Do you want me to repeat all I have said? I would have to go back over this whole thing. The Harter Act is not a perfect law; the bill of lading is not perfect. The Hague rules are anything but a perfect document.
Mr. ENGLAR. I do not want you to repeat your testimony, but, if you can, to mention offhand any one particular in which the rules would be less favorable to the shipper.
Mr. HEINEMANN. I can mention it; I can go back and read those particular cases to which I have referred. I thought you were present.
Mr. ENGLAR. I was present; I have been present throughout your testimony. Mr. HEINEMANN. I am sorry you neglected to listen to that. I recited repeatedly clauses which differed from the Harter Act some more favorable and some less favorable.
Mr. BEECHER. I want to say I have been listening very attentively during most of your testimony, but I have been unable to understand wherein, if at all, you consider the rules are less favorable to the shipper than the Harter Act, and I would like very much if you could tell Mr. Englar and the committee one or two particulars in which you feel that they are less favorable than the Harter Act.
Mr. HEINEMANN. Well, you first have your receipt and delivery, and that is a thing I am going to keep harping on, because it is of the utmost importance.
Mr. BEECHER. I do not know what you mean by receipt and delivery.
Mr. BEECHER. Then you have an exception clause which in your Harter Act is predicated upon the fact that the carrier shall have made the ship seaworthy and in your rules that condition does not apply.
Mr. BEECHER. That is the one point to which I called attention in my testimony.
Mr. HEINEMANN. So far as your Harter Act is concerned now, of course, you have po provision in there now on the filing of claims. That is a defect of the Harter Act which will be cured. You have no provision in there to protect against deviation and certainly you have none in these rules.
Mr. BEECHER. Then the rules are no worse in that respect than the Harter Act?
Mr. HEINEMANN. You have no protection there, as I say. The Harter Act is a definite thing, whereas section 5 in your rules gives the chipowner the right to alter this to suit his own idea and convenience, so far as liberality is concerned.
Mr. BEECHER, But he must be more liberal with the shipper.
Mr. HEINEMANN. You state he must be more liberal with the shipper, but there is no reason why he should give all shippers the same.
Mr. ENGLAR. He can not waive any of his rights under the Harter Act.
Mr. ENGLAR. What I am trying to get at is the respect in which the rules are less favorable to the shipper than the Harter Act.
Mr. HEINEMANN. Do I have to go back and read this over again? Mr. ENGLAR. No; you have not told us any except receipt and delivery, and we all agree on that, and Mr. Beecher does.
Mr. HEINEMANN. I will go back. Are we all satisfied you understood the receipt and delivery provision?
Mr. ENGLAR. Yes.
Mr. HEINEMANN. Are we all satisfied your exemption clause must be predicated upon the fact that the ship shall have been made seaworthy?
Mr. ENGLAR. That is not quite correct on the fact that the owner must have used due diligence to make the ship seaworthy.
Mr. HEINEMANN. That is another way of putting it; put it that way, then. Shall I read each of those exemption clauses?
Mr. ENGLAR. If you think they are particulars in which the rules are less favorable to the shipper than the Harter Act, I would like to hear them, yes; one or two
anyway. Mr. HEINEMANN. Can we argue to the contrary if that condition precedent is omitted?
Mr. ENGLAR. If you will name thèm, I am perfectly willing to let Mr. Beecher pass on them, if he holds the rules are less favorable than the Harter Act.
Mr. BEECHER. We are only trying to get your suggestions, because I am inclined to think that the rules are subject to some criticism and necessarily must be, but then I have never thought, with the exception of the particular in which I pointed out, they are less favorable to the shipper than the Harter Act. I can understand your position, which I think you made entirely clear as you went along, namely, that the Harter Act is defective; it is not sufficiently favorable to the shipper and ought to be made more favorable to the shipper, and that the rules do not improve the Harter Act as we think the Harter Act ought to be improved; but until I asked you definitely, at the conclusion of your remaks, whether or not you preferred to have the Harter Act unamended, or the rules as they stand, I would have supposed you would immediately have said, “Why the rules, of course; but we ought to have better rules and a better Harter Act.” And therefore I do think the present inquiry brings out a brand new thought on which it would be very helpful if you would point out what Mr. Englar has suggested.
Mr. HEINEMANN. All right. In section 3, you require the carrier before and at the beginning of the voyage to exercise due diligence to make his ship seaworthy. Now, the Harter Act first requires him to make his vessel seaworthy and capable of performing the intended voyage. That may seem a small thing, but it is not a small thing; there is a distinct difference between the two.
I explained the difference so far as the issuance of the bill of lading is concerned, between the forms. That question of unseaworthiness, of course, I have already discussed, the owner being required to exercise due diligence to make the vessel in all respects seaworthy.
The matter of the fire clauses was discussed by Mr. Laws.
Those, so far as the existing Harter 'Act is concerned, seem to be the principal points.
Mr. EDMONDS. Mr. Heinemann, let me ask you something: Suppose the Harter Act was not on the statute books and we were only taking up the question of from tackle to tackle, so far as the ship is concerned, and you were presented with the Harter Act and you were presented with these rules and told you had to take either the one or the other, which would you take?
Mr. HEINEMANN. I believe I would take my chance under the Harter Act.
Mr. HEINEMANN. In some respects; yes.
Mr. HEINEMANN. No; I do not, Mr. Edmonds, and especially they would not be enough unless you are going to have some interpretive clauses in here. It is all right to have these attorneys tell you what the intent is, but it is another thing when you are arguing with your steamship claim man.
Mr. Edmonds. I should think, in enacting this legislation, if they could possibly be gotten in there, you should have those interpretive clauses.
Mr. HEINEMANN. I agree with you absolutely, and without them you are in for endless trouble.
Mr. EDMONDS. Of course, my idea here always has been in drafting an act to prevent, as far as possible, going to law and going into the courts, and I have tried to do that with every act with which I have had anything to do. Unfortunately, I suppose that the courts make so many decisions that you have to write an act almost like a book in order to keep away from the courts, if you want to keep away from them.
Mr. HEINEMANN. I think a writer some time ago referred to international conventions and stated "an ambiguous phrase is introduced which leaves both contentions open, or some qualifying words are used which rob the statement in the main provisions of all effectiveness. These devices of ingenious draftsmen facilitate the acceptance of conventions, but they solder no difficulties and are certain to fall to pieces the moment they are tested in practice.'
Mr. EDMONDS. We had a case of that kind in the Panama Canal treaty, where we had a clause in there that you could read either way. Unfortunately for us, it was misread, of course.
Mr. CAMPBELL. I take it the people whom you represent are indifferent to the principle of uniformity?
Mr. HEINEMANN. No, sir. We recognize it would be nice if we could reach this Eutopian state and have uniformity, but for Heaven's sake, get it.
Mr. CAMPBELL. You do not think uniformity can be reached by each nation, the United States, England, France, Germany, and Japan, attaching to these rules interpretive reservations, do you?
Mr. HEINEMANN. I have grave doubts you will ever reach uniformity. I think the best thing we can do is to look out for ourselves first.
Mr. CAMPBELL. Look out for No. 1 and cast aside the principle of uniformity, is what would guide you?
Mr. HEINEMANN. No; if there is any hope of attaining uniformity, well and good.
Mr. CAMPBELL. You do not think it can be attained by attaching reservations, do you?
Mr. HEINEMANN. I doubt if it will ever be attained in one document.
Mr. HEINEMANN. If the reservations are material ones and are followed in each country, perhaps you would not; but, as I say, they are going to follow you-whatever you set out in there they are going to follow.
Mr. CAMPBELL. If they are going to follow us, why did we go over and have this convention?
Mr. HEINEMANN. I have often wondered the same thing, but have never found any
Mr. CAMPBELL. The fact it was necessary to call this convention shows the only way to reach uniformity is through a conference.
Mr. HEINEMANN. When you say reach uniformity, so far as our people are concerned that is just what we did on the inland carriage; we got the people concerned in it in a room and let them talk it out. • Mr. CAMPBELL. You can not compare inland carriage with high-seas carriage. Your inland carriage is regulated by the Federal Government; the United States is in a position where it can absolutely dominate and control the inland carriage. I can not control the high seas trade. That is the difference in the situation.
Mr. HEINEMANN. It is not a question of controlling the high seas trade. You are the people who control the shipping act; if that is good law, it will control the conditions therein described.
Mr. CAMPBELL. But it won't control competition, whatever the necessity or emergency, between the shipowners of England and the shipowners of the United States.
Mr. HEINEMANN. Probably not. But we in this country, who are interested in this problem, could reach an agreement; but they have never sought to reach an agreement.
Mr. CAMPBELL. You could not reach an agreement with the shipowners, I do not believe.
Mr. HEINEMANN. We could not reach an agreement with the shipowners? We came very near doing it over in the Interstate Commerce Commission. The whole trouble has been, just as was explained by Mr. Haight at the London Conference, as one of the proponents. He said:
“The shipper will practically agree to any form, because he is doing it to-day in a multitude of varieties. He will be devoutly thankful if anyone will present him with a form written in language he can understand.'
In other words, the shipper will accept anything they come along and offer him; he does not need a voice in the making of it.
(The committee thereupon took a recess until 2 o'clock p. m.)
The committee reconvened, pursuant to the taking of the recess, Hon. William S. Greene (chairman) presiding.
The CHAIRMAN. We will now hear from Mr. Paton. Just give your name, address, occupation, etc.
Mr. Paton. My name is James B. Paton; address, 5 Nassau Street, New York,
STATEMENT OF MR. JAMES B. PATON, GENERAL COUNSEL OF THE
AMERICAN BANKERS' ASSOCIATION.
Mr. Paton. Mr. Chairman, I expect to take but a few brief minutes. I am general counsel of the American Bankers' Association and secretary of its committee on Federal legislation.
The American Bankers' Association is an association composed of upward of 22,000 members—National banks, State banks, trust companies, and savings banks in every State of the Union. On this subject, these Hague rules, we left them to the consideration of and they were only considered by the committee or commission on commerce and marine of the association.
The CHAIRMAN. Where is that commission located?
Mr. Paton. That commission's chairman is Mr. Fred I. Kent, vice president of the Bankers Trust Co. of New York, and that commission, with authority from the association, adopted this resolution which I will read and leave on file:
“Resolved, That the commission (that is the commerce and marine commission) reaffirms its support of the principle of the Hague rules, 1921, providing for uniform ocean bills of lading, and recommends that the committee on Federal legislation of the American Bankers Association take up the matter immediately and that Congress be urged to enact appropriate legislation legalizing documents in conformity with those rules, any due and proper interpretation of the rules being specifically given in such legislation."
Now I understand this bill, H. R. 14166, is virtually an enactment of the rules. It is not my purpose to go into any detailed discussion of the points of difference that have been brought out this morning, but simply to say a few brief words, if I may be able to express myself, on the tremendous importance, not only to the bankers, but to the commercial world, of uniformity in the laws governing commercial documents and in the documents themselves; for it is really the banker whose money goes into the financ
ing of these documents and without that money trade and commerce would be seriously clogged and hampered.
Now, it won't take long, and I think it might be illustrative just to go back a little with regard to this movement for uniformity. It originated in this country some 20 or 25 years ago in a need that was felt for uniformity in the laws of the different States governing bills and notes, virtually the instruments of commerce, used in payment of commercial transactions. Our country, while commercially one, nevertheless had 48 States whose legislatures and courts were enacting separate and differential rules governing the validity and negotiability of promissory notes and bills of exchange and checks, which the banker was called upon to finance and to pay. Such a condition greatly clogged commercial transactions and the subject was taken up by the American Bar Association and, through their initiative, legislation was enacted in the various States creating a commission on uniform laws, four or five representative commissioners being appointed by the governor of each State, and these commissioners met in annual conference to consider the subject of uniformity of commercial laws.
The first production of that commission was a uniform negotiable instruments act and that act has now been enacted in every State of the Union except Georgia. It demonstrates the great need of uniformity. It has been of immeasurable benefit to the commercial world. The bankers got behind that act and, in the different State legislatures, cooperated with the commissioners in procuring its enactment.
Likewise, on the subject of warehouse receipts, the commissioners on uniform laws, recognizing the difference in the laws of the different States with regard to warehouse receipts and the need for uniformity and laws which would make the warehouse receipt a bankable document, good as secureity to the banker, provided and recommended a uniform warehouse act and that act has now been enacted in all but, I think, four States of the Union. I can not, from memory, state that four.
Then came the subject of bills of lading. The farmer, for example, needs a cash market at his own door. He can not wait until his grain is sold and the money is collected from the ultimate purchaser at a distance. In order to have that cash market, there must be a buyer found him and a shipper, and in order that that shipper may get the cash to pay the farmer, he must have a document which will be good. He gets the money from the banker on a bill of lading, and in order that he may get that money it must be a bankable document; it must be relied upon by the banker at security for the money. That underlying thought led to the drafting and recommendation of the uniform bills of lading act, and that uniform bills of lading act has now been enacted in about half of the States of the Union.
Following that, and by virtue of certain decisions of the courts which restricted the uniform bills of lading act to intrastate shipments, shippers in the same State, necessity was felt for a Federal bills of lading act, and for some 9 or 10 successive years such an act was down here before the Congress, and finally was enacted in 1916, based upon and containing many. of the provisions of the State uniform act.
Now, under the Federal bills of lading act, the bill of lading means something to the banker. He knows the liability of the carrier under it; he knows his rights under it; he can advance money under it. Now it seems to me that the same reasons which required uniformity of the laws throughout the different States apply to the uniformity. o1 laws in commercial transactions in the different countries, and that this attempt to make uniform the laws governing contracts of carriage by sea or ocean bills of lading is very vital and important to the successful carrying on of commerce. Those are the general ideas of the bankers on this subject.
With regard to the specific clauses in this bill, those are primarily matters between the shipper and the carrier and the insurance men. The banker simply desires to see that they are fair and adequate and uniform, that he may know what laws govern the document upon which he advances money and what the contract rights are in that document. With regard to the specific provisions, there is just one clause in this bill to which I desire to direct attention. The bill requires that, after receiving the goods, the carrier shall, on demand, issue to the shipper a bill of lading and it provides, paragraph (d), at the top of page 4, that such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described, in accordance with paragraph (c), 1, 2, and 3 of this section.
The question arises whether that weakens the obligation of the carrier as provided in section 22 of the Federal bills of lading act. One of the chief or vital elements of that bills of lading act was the liability of a carrier to the bona fide holder of a bill for the goods as recited in the bill; that is to say, if the carrier's agent, by collusion with the shipper, or, as a matter of accommodation, issued a bill of lading for which there were no goods, section 22 of the Federal bills of lading act provided that the carrier should be liable to the holder for value of the bill for the goods recited therein. Now this particular provision says that the bill shall only be prima facie evidence of the