File No. 656.119/798

The Chairman of the Shipping Board ( Hurley) to President Wilson 1

Report on Negotiations Arising Out of Requisitioning of Dutch Vessels

On March 20, 1918, the President issued a proclamation taking over, in accordance with international law and practice, and under authority of the act of June 15, 1917, all vessels of Netherlands registry “now lying within the territorial waters of the United States.” The proclamation authorized the Secretary of the Navy to take over the vessels, and directed that they be manned, equipped and operated by the Navy Department and the United States Shipping Board, “as may be deemed expedient.” The Shipping Board was directed to make compensation for the vessels “in accordance with the principles of international law.”

Under authority of this proclamation there were taken over by the Navy Department 87 Dutch vessels, of 522,746 deadweight tons, lying in widely scattered ports of the United States, including Porto Rico and the Philippines. Several vessels in the Panama Canal Zone were at first taken, but were almost immediately, upon instructions from the State Department, released, in view of treaty obligations prohibiting the exercise of belligerent authority in the Zone.

To fit this great merchant fleet for service proved to be a task of the first magnitude. Many of the ships were out of repair; most of [Page 1537]them required gun mounts and extra gun crew quarters; many were loaded with rich colonial and South American cargoes for which storage space must be found. All the Netherlands crews had to be removed and the vessels completely re-manned, from deck hand to master, with American civilian or naval crews. The rapidity with which the vessels were put into service, despite these obstacles, has been an achievement which only the large resources of the Navy Department and of the Shipping Board have made possible.

In general, the Dutch vessels assigned for transatlantic service were manned by the Navy Department, and those used in coastwise and South American services essential to the prosecution of the war were manned by the Shipping Board. In manning the latter vessels, the Board did not follow its usual practice of assigning the vessels to private corporations or to the Emergency Fleet Corporation, to man and operate for government account, but itself directly employed the crews, so that there might be no doubt as to the governmental character of the use of the vessels, and no suggestion of any commercial element in their operation.

In addition to the operation of a substantial number of the Dutch ships, the Shipping Board has been concerned with the following matters, directly arising out of the requisitioning of the ships, to which this report is especially directed:

Negotiation and settlement of terms of compensation for the use of the ships.
Maintenance and repatriation of the Dutch crews, and settlement of indemnity for losses incurred by them.
Care and disposition of cargoes on the vessels, and settlement of terms of compensation to Dutch cargo owners.

The progress and present status of these three matters will be dealt with under separate headings.

i. terms of compensation of shipowners

In recommending the terms of compensation to shipowners which the United States Government should offer to the Netherlands Government, the Shipping Board was guided by two considerations: first, that the terms of compensation for ships taken by force should be at least as favorable to the shipowners as the most liberal terms which had theretofore been offered or agreed upon for ships voluntarily chartered; and second, that the terms should be, so far as possible, identical with the terms proposed by Great Britain for the Dutch ships requisitioned by her at the same time.

On March 21 (the day after the issuance of the President’s proclamation), the Shipping Board cabled its London representative, Commissioner Stevens, to propose to the British authorities a rate [Page 1538]of hire, per month, of 35 shillings per deadweight ton for vessels trading in the war zone, and for safe trades a rate based upon prevailing Chartering Committee rates, the United States assuming in all eases all expenses of operation and both war and marine risks. The British authorities proved to be strongly of the opinion that the 35 shilling rate be allowed for all vessels, whether used in the war zone or in safe trades, on the ground that they were committed to that course by precedents established in the case of neutral ships requisitioned by them earlier in the war. Since there was much to be said for the justice of treating all the vessels alike, the Shipping Board instructed Mr. Stevens to acquiesce in the British proposal, and on April 12 identical statements were cabled to the American and British Ministers at The Hague, and transmitted to the Netherlands Government. It is believed that the prompt announcement and publication in Holland of these liberal terms did much to quiet the fears of the Dutch shipowners, and laid the foundation for the friendly spirit in which all subsequent negotiations have been conducted.

No formal acceptance of this proposal has been received from the Netherlands Government. Payment in accordance with the proposed terms has, however, been made monthly to the shipowners, and receipted for in full of all claims for hire. It may be assumed, therefore, that the terms are acceptable.

One important matter remained to be settled—the terms upon which the owners should be compensated for vessels lost while in the service of the United States. In the identic note of the British and American Ministers at The Hague, the shipowners were offered the option of payment in cash according to a scale of values later to be communicated, or substitution of the lost vessel by a new vessel, as soon as possible after the war. The establishment of a satisfactory scale of values proved to be exceedingly difficult. The Shipping Board was strongly of the opinion that the lowest values which could be considered were those which had been previously agreed upon in the case of Swedish chartered ships—namely, £50 per deadweight ton for ships under 10 years of age, £45 per deadweight ton for ships from 10 to 30 years of age, and £35 per deadweight ton for ships over 30 years of age. The British authorities, however, were impressed with the danger that if these liberal terms were offered the owners might elect to receive money rather than new ships, and that the withdrawal of funds consequent on the heavy payments involved would disturb the exchange rate between London and Rotterdam to an extent which would be disastrous to the large program of Holland purchases.

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After protracted conferences both in London and Washington, and several interchanges of cables, it was agreed to offer the Dutch the Swedish values, with the proposal, for the protection of the exchange rate, that 50 per cent. of any money payable as compensation be invested in the United States or Great Britain for a period of years, and 50 per cent. covered by loan in Holland. This proposal has recently been discussed in London by British, American and Dutch representatives, and in principle agreed to by the Dutch. An exchange of notes confirming the agreement will be necessary to close the matter.

ii. maintenance and repatriation of dutch crews

There were on the Dutch vessels, at the time they were requisitioned, no less than 2,934 seamen of Dutch or Dutch colonial, and in some cases Chinese, nationality. Whatever the technical obligations of the United States might be toward these men, it was clearly of the utmost importance that they be given the most hospitable treatment, and that any losses which they might sustain be repaid them liberally. Many of the men were without funds, and did not know the language, and to have thrown them on their own resources would have caused them severe hardship. Obviously, we could not afford to have nearly three thousand Dutch subjects return to Holland with a grievance, to disseminate ill feeling against the United States.

Instructions were, therefore, issued by the Navy Department to inform all the Dutch crews that they should consider themselves guests of the American Nation; that their former wages would be paid them until they were repatriated; and that their maintenance and travelling expenses would be defrayed. The Bureau of Immigration of the Labor Department then took charge of the men and arranged for hotel accommodations and transportation to the port from which they were to sail. The Shipping Board saw to it that the men were kept in funds, by advancing them, through its local offices, a half month’s wages.

The Dutch liner Nieuw Amsterdam was due to sail on March 28, and all the men for whom accommodations could be found were rushed to New York to catch this ship. In all, 1,651 sailed on the Nieuw Amsterdam. In the haste of their departure many officers and men were obliged to leave trunks, and other personal belongings, on the Dutch vessels. In all such cases the Board either defrayed the expense of replacing the lost belongings, or made adequate money compensation.

The scarcity of sailings to Holland and to the Dutch colonial possessions necessitated long delays before the remainder of the men [Page 1540]could be repatriated; but by July 3 all but three of the men desiring repatriation had sailed.

The three were detained by illness and have since returned. During the period of waiting, of course, the United States was under obligation to pay them wages and maintenance.

At first, the policy was adopted of assigning the men to hotels, and instructing the hotels to bill the Government for their maintenance. This course met with some objection, since it left the men without pocket money, and led to complaints that certain hotels were taking advantage of them by furnishing inferior accommodations. A scale of maintenance allowances was therefore drawn up, in conference with the Netherlands Consul General, and paid the men weekly by the Paymaster of the Shipping Board. The scale was liberal, and the weekly disbursements, because of the large number involved, were necessarily heavy; but it was felt that this was obviously not a field in which a niggardly policy would be justified.

As to wages, the Shipping Board recommended to the State Department that the United States Government pledge itself to pay full wages up to the date of repatriation, or in the case of men who remain in the United States, up to the date of discharge, and, in addition, one month’s wages, to compensate for loss of employment, and on instructions from the State Department this proposal (which was identical with that submitted by the British) was made to the Netherlands Government by the American Minister at The Hague. Arrangements have been made by which the total amount so promised is being paid the men on their arrival by the Holland shipping companies, the companies being reimbursed by the American Consul General at Rotterdam, who, in turn, draws on the Emergency Fleet Corporation for repayment.

In addition, the Shipping Board has defrayed medical and hospital expenses of several members of Dutch crews who were injured or ill, and the State Department, on the recommendation of the Shipping Board, has pledged the United States to assume insurance liabilities for Dutch crews in accordance with Dutch law. It is not believed that there will be any expenses on this account, since the return of the men to Holland and the colonies occurred in every case without mishap.

It is impossible as yet to make a final estimate of the total expense under this heading. To date, bills for transportation (railroad and steamship), hotel expenses, maintenance allowance, and wages, either paid or approved for payment, amount to $862,836. As a rough estimate, the total may be $1,300,000. Since there is probably no Shipping Board appropriation available from which this expense [Page 1541]can be met, it will be necessary to request an allotment under the President’s emergency fund.

iii. disposition of cargoes and settlement of claims of cargo owners

Twenty-one of the Dutch vessels requisitioned on March 20 contained cargoes owned by or consigned to Dutch subjects. Complicated questions have arisen, first as to the disposition of the cargoes, and second as to the settlement of pecuniary claims of the owners of the cargoes.

In disposing of the cargoes, the first consideration has necessarily been the freeing of the ships and of essential dock and storage space for war purposes. The cargo was, therefore, stored wherever storage space was procurable, it being often necessary, owing to the congestion in the principal ports, to send cargoes hundreds of miles away to ports less congested. In view of the uncertainty as to what would be our liability, the cargo was stored “for account of whom it might concern”; but the expense of transhipping and storing the cargo was borne by the Shipping Board, and the cargoes were covered by insurance at the Shipping Board’s expense.

The second consideration, of almost equal importance, was the protection of the interests of the owners of the cargoes. To appreciate the importance of this consideration, it must be realized that the cargoes were of great value—individual cargoes were worth up to $2,000,000—that they were made up of a large number of individual shipments, represented by bills of lading widely scattered throughout the banks and commercial houses of Holland and her colonies, and that the holders of the bills of lading were threatened with serious financial embarrassment if their interests were not protected. If the most serious resentment in Holland was to be avoided, it was necessary to deal promptly and fairly with the owners of the cargoes.

Every effort was made, therefore, to forward to the original destination on substitute vessels, such cargo as it was possible to forward. Cargoes in transit for South America were transhipped to sailing vessels and small steamers, unsuitable for transatlantic trade. A Dutch vessel was chartered to forward cargo consigned to the Dutch East Indies. Cargoes taken over on the Pacific Coast, or at the Philippines, and consigned to Atlantic ports, were forwarded on the original Dutch vessels. At the present time virtually all the cargo capable of being forwarded has been delivered. With respect to these cargoes the Shipping Board recommended to the State Department that the United States Government agree to bear any expense due to the necessity of transhipping and forwarding the cargo, beyond the normal cost of delivering the cargo in the original vessel. This proposal [Page 1542]was made by the State Department to the Dutch Government, and accepted by the Dutch Government as fully protecting the interests of cargo owners.

More difficult to deal with were the claims of owners of cargo consigned to Holland, which could not be forwarded.

A considerable portion of this cargo was damaged, and in danger of rapidly deteriorating. To avoid serious loss, quick action was necessary; it was not possible to consult the many hundreds of holders of bills of lading. The Shipping Board, therefore, considered itself entitled to exercise the discretion conferred by maritime law on the master of the vessel, by selling the cargo for the interest of all concerned. The undamaged cargo has been held in storage pending receipt of formal authority to sell from the owners.

A memorandum proposing a basis of settlement with the cargo owners was transmitted by the Chairman to the President, and by him approved on April 16. It recommended that the United States Government offer to reimburse the owners of the cargoes on a basis of the prices the goods would have brought in Holland, less the expenses of shipment from the United States to Holland. This proposal was made to the Dutch Government by the State Department, on June 7.1 The Dutch Government replied, accepting the proposal, as to two of the vessels, and proposing as an alternative, for three others (comprising Dutch colonial cargoes), a settlement on a basis of values at place and time of shipment, on shipped weights and qualities, plus certain additions covering freight, insurance and interest from point of shipment to the United States. This counter suggestion was urged on the ground of its greater simplicity and the greater promptness with which settlements could be made. It involved a basis of value which was much lower than the one proposed by the United States; on the other hand it placed on the United States the loss due to damage and shrinkage of cargo.

After a careful weighing of the alternative plans, the Shipping Board recommended to the State Department that the counterproposal be accepted in principle. The State Department so advised the Dutch Government, and a reply has been received confirming the agreement as to these vessels.

This settlement involves, it should be noted, the purchase by the United States of the cargoes involved. The Shipping Board will undertake, thereupon, to sell the cargoes, and arrangements in this direction are already being made, under competent expert guidance. Much of the cargo is of value to the War and Navy Departments, and can be sold to them.

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The principles to be followed being thus virtually agreed upon, there remains a large amount of detailed work in the application of these principles to the thousand or more individual claims involved. A committee has been designated by the State Department to represent the Shipping Board in adjusting these claims, and the work of gathering the necessary data is under way.

The net cost of these settlements will probably not be very large, since receipts from the sale of the cargo can be set off against the expenditures. It will be necessary, however, from time to time to request the President to set aside, out of his emergency fund, sufficient to meet the expenditures, as they are incurred. To what extent these expenditures can be reimbursed out of receipts is a question which will probably require a decision from the Comptroller of the Treasury.

  1. Copy sent to the Secretary of State on Sept. 26, 1918.
  2. Note of June 7 to the Netherland Chargé not printed.