Cargoes: Title
47
/IT7'
40
BRITISH WMmtw
Kay loth, 1*4.
Bo. 448 ^
Jiy Lord,
Z have the honour to acknowledge the
fLf-   receipt of Your Loroohip's despatch Ho. 138
(A 8C8/561/45; of February Bth, regcrding the
effects of the ;.7nltet5 "tttee Neutrality Act on
the position of British Shipping,
ta In this despatch you enclosed a copy
of a letter dfttetf -ebruary 1st from the Ministry
of   hipping asking for **a full report on the
present situation in general".     The most striking
ana perhaps the most important result of the
Neutrality «ct from the point of view of its
effect on British snipping policy as a whole has
been the compulsory withdrawn! of all United "tatee
ships from trace with those Kuropenn countries
within the "combat brea".    The immediate reeult of
this has been considerably to reduce the number of
ships available for the transport of cargoes from
this country to Great Britain and irance, to
aggravate the difficulties caused by other factors
such as the loea of tonnage from onei«y action, the
delays due to the convoy system etc. and to render
it increasingly difficult to wake a sufficient
number of fthlps available for the transport to the
Allied countries of their iiurcheaes in this country.
To meet this problem the Ministry of ".hipping are
among/
The Riflftt Honourable L; JF: PRHLS: MAB
The Viscount Halifax, K.O.
etc.       etc. <ftc.
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among other things, as Your Lordship will be
•ware, endeavouring to purchase •'.me r loan
merchant chips,   fiome thirty such ships have
nIreway been bought from different .mericun
firms ana the ;UniGtry of "hiin£ are now in
negotiation for aeveral more.   The -Jniteo tatea
. aritl...c    oi.iir.i. :-ion whose approval far the transfer
to British flag of cuch ships has to be obtained,
is however under considerable pressure from
variouo   uerican vested interests to withhold
their sanction and of lets on several occasions
it haa only been after considerable delay and with
some difficulty that the necessary approval haa
been secured for the completion of the purchases.
The Importance of these purchases to Hit* Majesty's
Government has been emphasised store than once to
the met* "epartment and their intervention with the
Maritime rommisnion hae been informally requeatad,
on each occasion with i.atisf actory results. It
seemed however oomc weeks ago that before long and
•specially if it were desired to purchase sou.e of
the Government-ownec laid up fleet, it mi^ht be
necessary ts> ^alcc a moro formal approach to the
State .apartment and officially aek for their
active aaaistance in the matter, of this and other
shipping difficulties which confront the Alliea,
by pointing out that unless His iajesty'n Government
could purchase sons store .'j&srloan ships it might
bucouie increasingly difficult for them to maintain
or increase the level of their purchases In this
coantry.     Hints to thin effect had ulreacy been
conveyed/
conveyed to the state   opartaent during »r»
Aahton-fSwatkin'o converea Hons and were
sympathetically received   and 7 have bten
considering In consolation with   ir f?nley
sparks how bc.-t ts present oar cane.
5. The position kM however been
altered Quite recently by events in Scandinavia
and the plane K*de for the use of the Norwegian
ioerchant fleet an* thr urran&eaente which it la
hoped to make for the employment of the anlah
¦fr|f* o*ay rentier the purchaae of   ujerican chips
no longer so luportunt, and obviate the n*eeealty of
any approach to the   tate   -epartiaent on this
particular question*
4. As the Ministry of ahippln* are of
oourae in clone touch with   lr ..ahley parks
on this natter,  | hardly think that I need say
more on thic aspect of the oonuequences of the
: f utrallty ct.
0. Xne particular point to which Your
Lordship's despatch refers ia the effect on
British shipping of the provisions of "action 8
(C>. («) snd(X) of the Neutrality Act which penult
United 'tatea and other neutral ships to carry
cargoes to certain "at. fa" belligerent areas without
transfsr of title, while insisting on transfer of
title when cargoes are carried to the stuae ureas
in belligerent ships.     It wss clear from the
•meant that thia clauae was inserts a in the Bill
during/
<
- 4 -
during the last stages of the debate in Congress
that it would impose a severe handicap on British
shipping and although it was generally agreed,
especially in view of the terms of the Secretary
of state's note of December 1st, that it would
be a mistake to make further official representations
to the United states Government on the subject,
I have been much concerned ever since over the
unsatisfactory state of affuirs.
6. The effect on British lines trading
to these "safe" areas has indeed been serious and
the position has of course been made worse by the
entry into such trades of the American ships thrown
oat of the North Atlantic route by the operation
of the Neutrality Act - a state of affairs which is
likely to be made still worse by the recent extension
of the combat area, which will compel the ftfeere
McCormack Line to employ elsewhere the vessels which
were hitherto on the Bergen run.   On the other hand
as Norway has been declared a belligerent, Norwegian
ships will cease to enjoy their former advantage
over British vessels*
7. I enclose herein a chart drawn up at
the end of last *iarch in Sir Ashley Sparks1 office
giving comparative figures for British, United states
and other sailings from this country to Australia,
Hew _ealand, India, the Persian Gulf, South Africa,
West Africa, Houth .'merica, China and the straits
Settlements.    It will be seen from this that the
British/
British ships sailing to these destinations
from North Atlantic ports have been halved,
while United   tates and other sailings have
greatly increased.     I also enclose 3 statements
to shovr how different British lines have been
individually affected - the first communicated
to a member of my staff in London last December
by Mr. Tallente of the New Zealand °hioping
Company, the other two prepared in Sir Ashley
Sparks' office in February and at the end of
March.     These le-ve no doubt of the ^reat
falling off in British shipping on these routes.
8. But thoagh Section 2 (g) and (1) of
the Neutrality Ac£ have as indicated above had
a serious effect on the different British lines
trading to the various "safe" belligerent areaB,
the real difficulty arises not so mucn from the
actual discrimination against British ships as
from the fact that apart from the question of
transfer of title, American shippers prefer whenever
there is an American or a neutral ship available to
ship their goods by it rather than take the risk
of shipping them on a belligerent vessel. This
situation is ouite natural and would no doubt
have arisen even had there been no Neutrality
/ct.     But the position is aggravated by the fact
that as American ships have been driven out of the
North Atlantic trade, there are more of them available
for service on the other routes than would normally
be the case.       The shortage of British tonnage makes
matters/
matters still worse.     The position is well
illustrated by the enclOMKi extract rro;u a
letter fro* Sir Aenioy   _urke, uated /©bruary
14tht ? t. that It was ths ©onaiaereu opinion
of British only,in* rsprsssatativss In Kew York
that of the difficulties bein^ experienced by their
companies, only E6". ware due to the "discriminator/*
rovisions of the Neutrality Act.   The r©wainln& 798
ware <lua to "tha greater eufety of the cargo on
/.merloan or neutral ships and the fact that shippers
and consignees would rather have the car^o than
eoDect the in»urt*&cs"«
hen I originally expressed the view in wy
telegram Ko. 97"» of '.-eoember 7th that It would be
undesirable for tils Majesty's Juabaaey to make
official representations to the   tate epartment
with a view to sscurln*. the amendment >£ the
"discriiuliiotory" clauses in tha ?«satrullty ."ct it «aa
hoped that the American interest*   concerned mlcM«
in view of the inconvenience to «hich they would be
put by having to transfer title of *,oode which they
wished to ahip to "safe" belligerent porta on British
shipe, bo prepared themaelvee to taks the matter up
with the  initad   tutea authorities.    a that ti&e,
as reported in my telegram To* 673 enc in   ir .-shley
Sparks' telegram to ths Ministry of   hiypinj; feast
No«fi£, these American lnteraata were understood to be
contemplating auatestlnc the amendment of ths Neutrality
ct, so as to delete all references to tranafer of
title from tM   ct sal to provide in some way that
even/
even though the title to goods consigned to
belligerent countries did not pass out of
American hands, yet no losses incurred by
the American owners in respect of these goods
whilst in transit should be made the basis of
any claim by the United States Government. Such
a provision already exists in the Act in respect
to the export of copyright articles -   see the
last sentence of Section 2 (c).   Had such a
suggestion been acted on, the amendment would
presumably have applied to goods carried on
ships of all nationalities.    But for the reasons
given in a further extract (enclosed herein)
from Sir Ashley Sparks* letter of February 14th,
the American shippers founu easier methods of
over-coming their difficulties and lost interest
in endeavouring to obtain the amendment of the Act.
10. When it became apparent early in the year
that /onerlean interests were unlikely to pursue the
matter I contemplated handing an official aide
memo ire to the   tate Jjepartment setting out the
handicap inflicted on British shipping companies
by the operation of Section 3 (c), (g) and (1)
of the Neutrality Act.     Uj object would have been
not so much to press for the immediate amendment
of the Act as to brin^ home to the State apartment
the definite injuries caused to the British shipowners
and to impreseon tpM the fact that just as certain
of the war measures adopted by Hia Majesty's
Government/
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Government bore hardly on American Interests,
so British comr.ierciel interests were adversely
affected by the operation of the American
Neutrality 'ct.     But in view of "ir Ashley
Sparks* letter of February l^th referred to
tbove, *hich implied that the discriminatory
clauses of the Act were not themselves the main
cause of the trouble and that the position of the
British companies might not be greatly improved
even if these clauses were amended, I thought it
best to make no representations to the ^tate
Apartment.    Indeed I fear - and I know that
Sir Ashley "parks agrees with me - that in
the present circumstances no useful purpose would
be served by making official representations to the
ctate department on the subject, though til
suitable opportunities will be taken of reminding
them of our feelings on the subject. Recent
developments in connexion with Norwegian end
Danish shipping may reduce the handicaps under
which British shipping to these ,,sufen belligerent
ports are suffering, but as lon^ as there ie a
fair number of   .merican or neutral ships available
on these routes as compared with British vessels,
the situation woulc seem to be bound to remain
unfjatisfactory from our point of view.
11. Sir Ashley 'parks has however suggested
one direction in which some action mi^ht perhaps be
taken to improve   otters.   The American firm of
Soc'&ny Vacuum who used to ship their products to
their branches in r-ritish India by British ships
are/
are now un*ble to t'o bo because their brunches
beinfc. regarded as American firms, they are
unable to transfer title of the Ooot!8 to * non-
liierlcin interest before shipment*    If their
brtnchea were incorporated in Indie &nd ceased
to be treated as American, transfer of title
would then be possible.    :'ocony Vacuum are
apparently quite ready to revert to British
ahlpe but are reluctant to altar their organisation
in rndla*     ntr 'nhlry   parka suggests that possibly
so Ml preeeur** on them in the desired direction
alfcht be tukenin India.
IS* finally, I would refer to the uueetlon
raised in the Ministry of   hipping*a letter
concerning the affidavits requireu to be filed
under the "eutrulity   ct by shippers*    It is
true that during iht flr*t few weeks after the
passage of the Ml considerable confusion existed
In this respect owlnfc to conflicting rulings issued
by different United ntates authorities*   Kow however
these authorities have agreed on the form of affidavit
required, the shippers have learned exactly what
is needed and the delay* originally complained of
no longer occur,   fllr ' hley   parks assures :ae
that the whole procedure ie now working quite
smoothly, that Hritleh shipowners have no longer
any grounds of complaint and that no representations
froia thie -xabaasy are culled for.
X have the honour to be.
with the highest reapeot,
Hy Lord,
Your   01   ship's iaoat obedient,
humble servant,
{soo) lothiaw