Chapter Vi Regulation of Property

We have seen that the effort to rationalize the national economy in time of economic or war emergency may lead democratic governments to assert a power to acquire the raw materials of production and productive facilities. This power of acquisition may be designed or exercised as a sanction for the coercion of “co-operation” upon the part of the private units of the economy, or it may express the finding that particular stockpiling or production functions can only, or most efficiently be conducted by public agencies.

Significant as may be the readiness of democratic governments in time of critical economic or crucial war emergency to enter the market place or to produce, either to the exclusion of private enterprises or in competition with them, these are exceptional circumstances; rationalization of the economy is principally achieved by coercing private owners and producers to act consistently with a governmental definition of the public interest. It is such examples of direct governmental control of private entrepreneurs, producers, and distributors that are to be examined in this chapter.

CONTROL OF GOODS AND MATERIALS

In surveying the possible alternatives of a nation aware of a threatened or existing shortage of strategic raw materials or finished products it is appropriate to review first negative and general controls and thereafter to consider those which become increasingly particular and positive. An initial precautionary move in such circumstances is to prevent the escape of scarce materials from the country. Also relevant thereto is the conservation of domestic supplies. Beyond conservation, implementing these safeguards are affirmative programs encouraging increased domestic production of such materials as well as their importation from abroad. Such programs have been reviewed under the heading of government acquisition. It will be recalled that in addition to stockpiling strategic materials, the government created and operated new productive facilities in an effort to insure adequate supply. However, in addition to these measures the government generally has been unable to escape the necessity of establishing priorities and allocations systems to insure that whatever supply is available is utilized for successful prosecution of the war or to combat effectively any other domestic emergency.

Restrictions on Export: Congress, in the Tennessee Valley Authority Act of 1933, stipulated that no products of the Corporation could be sold for use outside of the United States, its Territories and possessions, except to the United States government for the use of its Army and Navy, or to its allies in case of war.

In a series of enactments, commencing with a joint resolution of May 1934, Congress sought to insulate the United States from the danger of involvement in foreign wars by embargoing the shipment of arms to foreign belligerents. The resolution mentioned enabled the President after consultation with the governments of other American Republics to proclaim that the prohibition of the sale of arms and munitions of war in the United States to those countries then engaged in armed conflict in the Chaco might contribute to the reestablishment of peace between those countries, after which it would become illegal to sell such material to the disputants or their agents. On the same day that he signed the Chaco resolution, President Roosevelt issued the proclamation contemplated by the Act. In August 1935 the embargo method was imposed uniformly without limitation as to area. The Neutrality Act of that year provided that if war broke out between two or more foreign states, the President should proclaim this fact, and thereafter it would be unlawful to export arms, ammunition or implements of war from any place in the United States, or its possessions to the belligerents, or to any neutral area for eventual trans-shipment to a belligerent country. In addition, the Act placed a blanket prohibition upon the export or import of arms, except insofar as authorized under license procured from the National Munitions Control Board established by the Act. When he had cause to believe a given ship was about to carry material to a belligerent, but the evidence was not deemed sufficient to justify forbidding the departure, the President could require the owner or commander to give a bond to the United States, with sufficient sureties, that the vessel would not deliver the men, or the cargo, or any part thereof to a belligerent.

Congress maintained a vigilant oversight over enforcement of its neutrality policy. Since the embargo authorized by the 1935 Act could be applied only on the occurrence of war between, or among, two or more foreign states, it could not be invoked in the Spanish Civil War. This situation Congress immediately rectified upon assembling in January 1937. Public Resolution No. 1, which became law on January 8, 1937, specifically prohibited the export of war material for use of either of the opposing forces in Spain. Thereafter it amended the 1935 statute, retaining its provisions virtually intact, but directing it at instances of internecine as well as international war. The same day that the President signed this law, he issued a proclamation finding that a state of civil strife unhappily existed in Spain and prohibited the direct or indirect export of material of war to either of the opposing armies.

A series of proclamations were issued under this and other contingent emergency statutes in September 1939. The prohibition on export of war material was narrowed to a prohibition on the export of such material until title had unconditionally passed to the foreign purchaser--the cash and carry system. A number of Presidential proclamations effected application of the new statute.

Presidential proclamations also reflect the change in emphasis of statutory prohibitions of the export of war materials. In September 1939, the President issued a clearly neutrality-oriented proclamation prohibiting enlistment in, or recruitment for, belligerent armed forces, provisioning of belligerent ships, and subsequent proclamations of 1940 and 1941 were equally clearly concerned with preserving adequate domestic stocks of strategic materials.

Upon amendment of the July 1940 Act in June 1942, the President was authorized to prohibit or curtail the exportation of any articles, technical data, materials, or supplies, except under such rules and regulations as he might prescribe. Unless the President otherwise directed, the functions and duties of the President under this section of the Act were to be performed by the Board of Economic Warfare. The Export Control Act of 1949 empowered the President to prohibit or curtail the exportation from the United States, its Territories and possessions, of any articles, materials, or supplies, including technical data but excluding agricultural commodities in excess of domestic requirements. The purpose here was to protect the United States from the excessive drain of scarce materials. The Atomic Energy Act also prohibited the export from or import into the United States or curtail the exportation from the United States, its Territories and as authorized by the Atomic Energy Commission upon a determination by the President that the common defense and security would not be adversely affected thereby.

Obviously embraced within the power to embargo is the power conditionally to permit exports. Thus, in December 1941 following Pearl Harbor, Congress permitted the President, whenever he deemed it to be in the interest of national defense, to authorize the Secretary of War to sell, transfer title to, exchange, lease, lend, or otherwise dispose of, to the government of any country whose defense the President deemed vital to the defense of the United States, any defense article procured from funds appropriated for the military establishment prior to or since March 11, 1941.

In formulating an export policy for the period following World War II era, Congress doubtless has been influenced by the post war inflation. The Export Control Act of 1949, in granting the President power to prohibit or curtail the exportation of certain materials, including technical data, made explicit the Congressional intent to protect the domestic economy from the excessive drain of scarce materials and to reduce the inflationary impact of abnormal foreign demand.

Domestic Conservation: With a view to stabilizing prices and encouraging the conservation of deposits of crude oil situated within the United States Congress in 1935 prohibited the interstate shipment of contraband oil (i.e., oil produced in excess of state imposed quotas). Two different provisions of the Second War Powers Act of 1942 related to conservation of strategic materials. Section 801 empowered the President to direct the Administrator of the Federal Security Agency to assign the manpower of the Civilian Conservation Corps to the extent necessary to protect the munitions, aircraft, and other war industries, municipal water supply, power and other utilities, and to protect resources subject to the hazards of forest fires. Section 1201 permitted the Director of the Mint to vary the metallic composition of five cent pieces to conserve strategic metals.

Priorities and Allocation: In late May 1941, Congress provided that whenever the President was satisfied that the fulfillment of requirements for the defense of the United States would result in a shortage in the supply of any material for defense or for private account or for export, the President could allocate the material in whatever manner he deemed necessary or appropriate in the public interest and to promote the national defense. This provision was retained in the Second War Powers Act of 1942. In a joint resolution of March 1947 declaring the need for maintenance of a technologically advanced and rapidly expandable domestic rubber-producing industry and for a Congressional study of the problem, Congress provided that in the interim, pending the enactment of permanent legislation, the government should continue allocation, specification, and inventory controls of natural and synthetic rubber. A year later this power was continued. The President was authorized to exercise allocation, specification, and inventory controls of natural rubber and synthetic rubber to insure the consumption of general-purpose synthetic rubber as a part of the estimated total annual consumption of natural rubber.

The First Decontrol Act of 1947, providing for the termination of certain of the provisions of the Second War Powers Act, permitted the continued exercise of power to allocate materials which were certified by the Secretaries of State and Commerce as necessary to meet international commitments. Section 101 of the Defense Production Act of 1950 empowered the President to allocate materials in such manner, upon such conditions, and to such extent as he deems necessary or appropriate to promote the national defense. A related section provided that no person should accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which had been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation. The Atomic Energy Act of 1946, as amended in 1951, expands the allocation power to its logical extreme by allocating all fissionable material to the federal government, making it unlawful for any person to possess or transfer any fissionable material, except as authorized by the Atomic Energy Commission.

CONTROL OF PRODUCTIVE FACILITIES

Priorities: Particularly in the conversion period preceding full-scale defense production it is necessary to compel producers to accord first priority to fulfillment of government contracts. During such interval prior to all-out defense mobilization, when his competitors may be satisfying the demands of consumers, the businessman has ample cause to fear that in giving priority to government orders disgruntled private customers will be permanently lost to competing firms. Accordingly, a June 1940 statute provided that, in the discretion of the President, fulfillment of Army or Navy contracts was to take priority over all deliveries for private account or for export. In a year this was amended to extend the President’s power over priorities to include contracts or orders for the Government of any country whose defense the President deemed vital to the defense of the United States and contracts or orders, or subcontracts or sub-orders, which the President deemed necessary or appropriate to promote the defense of the United States. In May 1941 the Maritime Commission was empowered to demand that work on its contracts take priority over the furnishing of materials or performance of work for private account or for export. The Second War Powers Act continued in effect the provision of the June 1940 and May 1941 statutes by providing that all orders for vessels, equipment, and weapons placed by the Army and Navy were, in the discretion of the President, to take priority over all deliveries for private account or for export.

To repair the Spring 1945 flood damages, Congress in June of that year granted the War Production Board, and every other governmental agency which had jurisdiction over allocations and priorities relating to farm machinery and equipment, authorization to take such steps as might be necessary to provide for the necessary allocations and priorities to enable farmers in the areas affected by floods in 1944 and 1945 to replace and repair their farm machinery and equipment which was destroyed or damaged by floods, or windstorms, or fire caused by lightning, and to continue farming operations.

Again, the Defense Production Act of 1950 gave the President virtually plenary power to require that defense orders be given priority by private industry: “The President is hereby authorized ... to require that performance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defense shall take priority over performance under any other contract or order.” Perhaps not classifiable as examples of an assertion of governmental priority in the use of productive facilities are three enactments under which the Federal Government has exercised the right to withhold issuance of patents and to reserve certain inventions for its exclusive use whenever the public safety or defense so require.

Compulsory Orders: The establishment of priorities for the fulfillment of contracts presupposes voluntary fulfillment of government contracts by private industry. Do the principles of democratic government preclude conscription of industrial plants, regardless of the willingness or unwillingness of owners to execute war contracts? Having conscripted physically eligible young men under the Selective Training and Service Act of 1940 Congress also established therein priority for industrial performance on military orders, and a provision to compel acceptance and priority performance on defense orders. The President was empowered, through the head of the War Department or the Navy Department, to place orders with any individual, firm, association, company, corporation, or organized manufacturing industry for whatever materials might be required, and which were of the nature and kind usually produced or at least capable of being produced by the productive units involved. General Motors produced automobiles, but they could also produce tanks or trucks as the Army required. Compliance with all such orders for products or materials was obligatory and took precedence over all other orders and contracts previously placed. The use of plant seizure by the government as the sanction for infraction of the provision has previously been reviewed in the section on acquisition. In the Second War Powers Act of 1942 the President was given the plenary power to require acceptance of and performance under defense contracts or orders in preference to all other contracts or orders. More recently, the Defense Production Act of 1950 and the 1953 amendment to it authorize the President to require acceptance and performance of such contracts or orders as he deems necessary or appropriate to promote the national defense.

Protection of Quality: Only one example in this category has been discovered. In 1940 Congress amended an old World War I law, vintage 1918, that provided punishment for the willful injury or destruction of war materials or war premises used in connection with war material. Sections 5 and 6 of this Act imposed maximum penalties of $10,000 fine and ten years imprisonment for willfully injuring or destroying national defense materials, whatever they might be, premises or utilities, or willfully making defective defense material or equipment utilized for the production of defense material. An important element of the offense was existence of an intent to injure, interfere with, or obstruct the national defense of the United States. While laws against sabotage have been enforced vigorously, this 1918 law was designed to protect the Government against shoddy workmanship and poor equipment.

Controlling Labor Relations: Emergency provisions regulating labor relations in private enterprise appear to have four different motivations. First, wide scale control of the relations between employers and employees may constitute an integral part of a total program aimed at countering an economic depression. Second, it may be aimed at preventing unethical practices. Third, the purpose may be to avoid interruption of vital production. And, fourth, the control may be designed as a precaution against espionage, sabotage, or other violation of the national security.

The National Industrial Recovery Act obviously conceived as emergency legislation which it indubitably was, is the outstanding example of an endeavor in part through the regulation of employer-employee relations, to overcome an economic depression. The objective of course was to increase consumer income and purchasing power, which in turn was to stimulate production, with related chain effects. Section 7 (a) required that every code of fair competition established under the Act guaranteed employees the right to bargain collectively, and to join or refrain from joining a union. Company unions were outlawed. Employers were to comply with the maximum hours or labor, minimum rates of pay, and other conditions of employment, approved or prescribed by the President. In Section 4 (b) the President was granted the unprecedented power whenever he found “that destructive wage or price cutting or other activities contrary to the policy of this title were being practiced in any trade or industry or any subdivision thereof,” to license business enterprises in order to make effective a code of fair competition or an agreement that would carry out the policy of the Act. Once a finding had been made, and publicly announced, no one could carry on any business, if in interstate commerce, unless a license had been obtained. Any order of the President suspending or revoking any such license was to be final if in accordance with law.

Title II of the Act, pertaining to public works projects, closely regulated employment practices on projects contracted under the Act: Convict labor was prohibited; no one, except in an administrative or executive position could work more than thirty hours a week; all employees were to be paid just and reasonable wages sufficient to provide a standard of living in decency and comfort; wherever possible ex-servicemen with dependents were to be given preference in employment; and human labor in preference to machinery was to be used wherever practicable and consistent with sound economy and public advantage. In June 1934 Congress authorized the establishment of labor boards to enforce the labor relations provisions of the N.I.R.A. As is well known these sweeping provisions were later swept aside in the famed case of Schechter Poultry Corporation v. United States, wherein Mr. Justice Cardozo, speaking for a unanimous Court, said “this is delegation run rampant.”

Next to be considered are controls designed to forestall interruption of vital production. Section 8 of the War Labor Disputes Act required 30 days notice of a prospective strike and secret balloting of the union members concerned. Other sections of the Act authorized government seizure of struck plants, and made it unlawful to interfere with government operation of plants. The Labor Management Relations Act of 1947 set forth procedure whereby the President may secure injunctions postponing strikes or lockouts which will, if permitted to occur or to continue, imperil the national health or safety.

Controlling Profits: The campaign of the 1930’s to take the profits out of war is well known. Correlative to the deeply felt aspiration in time of peace to end the resort to war as an instrument of policy, is the popular thesis that war and the profitability of war production have a causal connection. In time of war, the public, on the other hand, is receptive to the proposal that command of the services and lives of mature young human beings warrants conscription of capital at least to the extent necessary to avoid profiteering, or to the extent such conscription facilitates the attainment of other worthy defense goals. In harmony with these beliefs the Vinson-Trammell Act of 1934 authorizing naval construction within the limits of the Washington and London treaties of 1922 and 1930 instructed the Secretary of the Navy to make no contract for the construction and/or manufacture of any complete naval vessel or aircraft, or any portion thereof unless the contractor agreed to certain conditions: (1) he had to agree to pay any profit in excess of ten percent of the total contract price to the United States Treasury (twelve percent was allowed as the profit margin on aircraft); and (2) he could make no subdivisions of any contract or subcontract for the same article or articles for the purpose of evading the provisions of the Act.

In 1938 provisions for close supervision of the leasing of naval petroleum reserves also were imposed upon the Navy Department, obviously directed in part at precluding extortionate profit-making from such leases.

In permitting emergency negotiation of contracts for the acquisition of construction of war vessels or material with or without competitive bidding, upon determination that the price was fair and reasonable the Act of June 28, 1940 to expedite national defense afforded the Secretaries of War and Treasury authority to modify existing contracts, including Coast Guard contracts, as the Secretary concerned believed necessary. Presumably upon a later finding that an agreed price was not fair and reasonable, profits could be revised downward through resort to Section 9 permitting contract modification at the discretion of the Secretary. Again, the Second War Powers Act of 1942, in permitting the Secretary of the Navy, when authorized by the President, to negotiate contracts for the acquisition, construction, repair, or alteration of complete naval vessels or aircraft, or any portion thereof, stipulated that the cost-plus-a-percentage-of-cost system of contracting should not be used unless considered necessary by the Secretary of the Navy, in which case the percentage was not to exceed seven percent. By way of enforcement the government reserved the right to inspect the plants and audit the books of contractors.

Authority to award contracts without competitive bidding was not freely granted. A Supplemental Defense Appropriations Act of 1942 required the Secretaries of War and Navy to report to the Congress all defense contracts in excess of $150,000 and to justify those awarded without competitive bidding. The Secretaries were authorized and directed to insert in any contract for an amount in excess of $100,000 a provision for the renegotiation of the contract price. In 1951, declaring that sound execution of the national defense program requires the elimination of excessive profits from contracts made with the United States, and from related subcontracts, in the course of such program, Congress enacted the Renegotiation Act of 1951 providing for the renegotiation of defense contracts netting contractors more than a reasonable profit.

CONTROL OF CREDIT, EXCHANGE, PRICES

Credit: The major purpose of the Defense Production Act of 1950 was to place the national economy on a war production footing with minimal possible effect upon civilian production and consumption. An effort was made to expand the total productive facilities of the nation beyond the levels needed to meet the civilian demand, thus reducing the need to curtail civilian consumption. To some extent, however, it was anticipated that normal civilian production and purchases would have to be curtailed and redirected. In this connection the Federal Reserve Board by law was empowered to impose consumer credit controls pursuant to an Executive Order until such time as the President determined that the exercise of such controls were no longer necessary. The controls, of course, were to be directed at carrying out the objectives of the Defense Production Act. In addition, the President was authorized from time to time to prescribe regulations for regulating real estate construction credit as he believed necessary to prevent or reduce excessive fluctuations in such credit. He was empowered to prescribe maximum loan or credit values, minimum down payments, trade-in or exchange values, maximum maturities and maximum amounts of credit. These, of course, were direct controls, as distinguished from inducements or incentives designed to reduce civilian demand for materials and productive facilities needed by the military establishment.

Opposite to the use of credit controls as a means of reducing effective consumer demand is direct intervention to insure that adequate credit is available to finance business activities declared by the Government to be essential to national defense. Conceivably the government could require that lending institutions, under certain conditions, make such grants. In lieu thereof it sought to provide incentives to lending institutions to make loans to defense producers, and avoided compelling extension of such credit. In fact, credit was made available through the Reconstruction Finance Corporation, the Smaller War Industries Administration and most recently the Small Business Administration. As a quid pro quo the government compels the recipient of such aid to submit to supervision. Equally effective as loans in financing needed defense construction or production are advances to contractors. In providing for the construction of pipe-lines for the transportation of petroleum products, Congress in 1941 permitted the President to make such advances as he deemed advisable, through such departments as he might designate to the contractors. It also authorized the Secretary of Navy to advance to private salvage companies such funds as the Secretary thought necessary to provide for the immediate financing of salvage operations.

Exchange: The May 1937 amendment to the Neutrality Act made it unlawful, when the President had issued a proclamation that a state of war between two or more states or a state of civil war in a foreign state existed for any person in the United States to purchase, sell, or exchange bonds, securities or other obligations of the governments of any belligerent states or to loan, or to collect contributions. The First War Powers Act of 1941 echoed this provision, providing in Title III, Trading with the Enemy, that the President in time of national emergency declared by him might investigate, regulate, or prohibit any transactions in foreign exchange, transfers of credit or payments. The Export Control Act of 1949 permitted the President to stipulate the rules which should apply to the financing, transporting, and other servicing of exports.

Price Control: In time of war the capitalist economy is transformed into a closely administered economy regulated in an effort to maximize war production and minimize dislocation of the civilian economy. To prevent speculation and dissipation of tax and consumer dollars through continuous and unchecked price increases, it becomes necessary that prices be subjected to government control. This was the aim of the Emergency Price Control Act of 1942. Whenever in the judgment of the Price Administrator the price or prices of a commodity or commodities threatened to rise to an extent inconsistent with the purposes of the Act, the Price Administrator could establish whatever maximum price or prices he thought equitable and fair. The only guide lines for “fair and equitable” in establishing a maximum price were the prices prevailing between October 1 and October 15, 1941. He was further empowered to recommend stabilization or reduction of rents in defense-rental areas. Where state or local boards failed to heed the recommendation the Administrator could by regulation or order establish maximum rents for such accomodations as in his judgment would be generally fair and equitable and would effectuate the purposes of the Act. Rent levels were established on the basis of those prevailing on April 1, 1941. The Act was amended in October 1942 when Congress authorized and directed the President on or before November 1, 1942, to issue a general order stabilizing prices, wages, and salaries affecting the cost of living. Stabilization was so far as practicable, to be on the basis of the levels which existed on September 15, 1942. The President was also given power by regulation to limit or prohibit the payment of double time except when, because of emergency conditions, an employee is required to work for seven consecutive days in any regularly scheduled work week.

In an effort to adapt the price control program to postwar reconversion and prepare for its eventual termination Congress in July 1946 extended the life of the Price Control Act of 1942 to June 30, 1947, admonishing the Office of Price Administration and other agencies to use their price powers to promote the earliest practicable balance between production and demand: Congress wanted the control of prices and the use of subsidy powers to be terminated as rapidly as possible. The President was directed to recommend to the Congress legislation needed to establish monetary, fiscal, and other policies adequate to supplement the control of prices and wages during the balance of the fiscal year 1947. A Joint Resolution of March 1947 continued the price control program with regard to sugar until October 31, 1947. Rent control as well as other war production controls continued in effect by the Defense Production Act of 1950 which authorized the President to establish a ceiling or ceilings on the price, rental, commission, rate, fee, charge or allowance paid or received on the sale or delivery, or the purchase or receipt, by or to any person, of any material or service. And the same Act required that the President issue regulations and orders stabilizing wages, salaries, and other compensation. Once the Korean War ended, all controls, price, rent and credit were swept off the statute books.

CONTROL OF COMMON CARRIERS

Congressional enactments under this head generally fall into three major categories: control of domestic transportation, control of carriage by American ships, and control of foreign vessels in American ports. Our interest is confined exclusively to emergency controls exercisable by the Interstate Commerce Commission and similar federal regulatory agencies.

Control of Domestic Common Carriers: The Emergency Railroad Transportation Act of 1933 was designed to facilitate rehabilitation of the depression ridden American railroads. An Act addressed to economic rather than military emergency, it had nonetheless military overtones. The maintenance of an efficiently functioning railroad system capable of meeting potential American defense needs was an objective that could not be overlooked in the formulation of a successful railroad policy. The Act set up a Coordinator of Transportation who was to divide the railroad lines into three groups: eastern, southern, and western. A number of railroad coordinating committees were created to carry out the purposes of the Act--i.e., elimination of unnecessary duplication of services and facilities, control of allowances, etc., and avoidance of undue impairment of net earnings, and other wastes and preventable expense, and promotion of financial reorganization. Whenever unable to carry out these reforms the committees were to recommend action to the Coordinator who might, at his discretion, issue an order embodying their recommendations. When the committees failed to act on matters brought to their attention by the Coordinator he was authorized and directed to issue and enforce such order, giving appropriate directions to the carriers and subsidiaries subject to the Interstate Commerce Act as he found to be consistent with the public interest.

Like the N.I.R.A. the Act contained a provision dealing with labor relations. The Railroads were prohibited from reducing the number of their employees below the number as shown by the pay rolls of employees in service during the month of May, 1933, after deducting the number who had been removed from the payrolls after the effective date of the Act by reason of death, normal retirement, or resignation. A regional committee system was established for the representation of employees, and provision made for regional boards of adjustment to settle controversies between carriers and employees. Carriers and employees were to be equally represented on such boards. The Railway Labor Act of 1926, as amended in 1934, attempted to establish a pattern of free union-management negotiation of disputes with ultimate recourse to a National Mediation Board.

Air transportation received the attention of Congress in a June 1934 statute establishing a commission to make a report to the Congress recommending an aviation policy. The Commission was to report its recommendations of a broad policy covering all phases of aviation and the relation of the United States thereto. Subsequently the Civil Aeronautics Act of 1938 was enacted, embodying congressional policy in this field. In 1950 a security provision was added to the Act, permitting the Secretary of Commerce whenever he determined such action to be required in the interest of national security to establish airspace zones in which civilian flights could be restricted or prohibited.

Another original statute in this field was the Communications Act of 1934, whereunder interstate and foreign commerce in communication by wire and radio is regulated. Federal controls were aimed at insuring existence of a rapid, efficient, Nation-wide, and world-wide wire and radio communication service for the convenience of the public and for the purpose of national defense. Created thereunder was the Federal Communications Commission to which elaborate regulatory powers were granted. During the continuance of a war in which the United States was engaged, the Act authorized the President to direct that such communications as in his judgment were deemed to be essential to the national defense and security should have preference or priority with any carrier subject to the Act. He could give these directions at and for such times as he determined and he could modify, change, suspend or annul them. The President also was authorized to prevent any obstructions by physical force or intimidations by threats of physical force of interstate and foreign radio or wire communications.

The pipe-line construction provision of July 30, 1941 required that pipe lines constructed with government aid be constructed subject to whatever terms and conditions the President prescribed as necessary for national defense purposes. The second War Powers Act of 1942 gave the Interstate Commerce Commission wartime authority with respect to motor carriers, to be exercised under circumstances and procedure equivalent to the authority it had with respect to other carriers. It could issue reasonable directives with respect to equipment, service and facilities of motor carriers and require the joint use of equipment, terminals, warehouses, garages, and other facilities. Motor carriers were to be subject to the same penalties for failure to comply with action taken by the Commission as any other carriers under its jurisdiction. In June 1953 Congress continued in effect traffic priority powers of the I.C.C. which had been granted during the war and continued by the Emergency Powers Continuation Act.

Control of Carriage by American Vessels: The Neutrality Act of 1935 had provided that, following a presidential finding of the existence of war between two foreign states, it would be unlawful for any American vessel to carry any arms to any port of the belligerent or to any neutral port for trans-shipment to, or for the use of, belligerents. Penalty for violation of this prohibition might include $10,000 fine, five years imprisonment, and, in addition, the vessel, her tackle, apparel, furniture, equipment and armaments would be forfeited to the United States. In addition vessels were prohibited from carrying war material to belligerent warships which presumably would effect transfer at sea. If the President or his delegate had adequate reason to believe a ship about to carry war material to a belligerent warship, he could prohibit departure; or if the evidence did not warrant this, the owner or commander could be required to give a bond to the United States, with sufficient sureties, in whatever amount the President deemed proper, conditioned so that the vessel would not deliver the men or the cargo, or any part thereof, to any warship. Evasion of this prohibition subjected a vessel to the possibility of being confined to port for the duration of the war. Application of this Act to Spain was effected by a Joint Resolution of January 8, 1937.

The prohibition of American carriage of war material to belligerents in international or civil war was rephrased in the 1937 amendments to the Act but kept essentially intact. Section 10 of the 1937 Act explicitly prohibited the arming of American vessels engaged in commerce with any belligerent state, or any state wherein civil strife exists. President Roosevelt immediately issued a Proclamation finding the existence of civil war in Spain, promulgating a list of articles to be considered material of war, and prohibiting their carriage to Spain by American vessels.

The Neutrality Act was made more stringent in November 1939. While it was unlawful to export or transport war materials from the United States to a belligerent until all right, title, and interest therein had been transferred to some foreign government, it was unlawful for American vessels to carry any passengers or any articles or materials to any belligerent. Furthermore, the President was empowered to define combat areas, from which American vessels were by law excluded. The prohibition against arming American merchant vessels was continued. In August 1940, following the fall of France, and while the British prepared for a German channel invasion, the Act was liberalized to permit American vessels in ballast, unarmed and not under convoy to transport refugee children, under sixteen years of age, from war zones, or combat areas if the vessel were proceeding under safe conduct granted by all of the States named in the proclamations.

In 1953 Congress placed on the statute books a provision suggestive of the old neutrality acts. Under this law the Secretary of the Treasury, or anyone designated by the President, could seize and detain any carrier-vessel, vehicle or aircraft carrying munitions of war from the United States. The authority to “seize and detain” came into operation whenever an attempt was made to export, ship or take out of the United States any munitions of war or other materials in violation of law. Moreover, the law became operative as long as there was “probable cause to believe” that prohibited items were being removed from the United States in violation of the law.

The Merchant Marine Act of 1936 is, of course, another of those organic statutes designed to promote, rehabilitate, and regulate in the interest of the trade and of the public, a segment of the American transportation system. We have already seen that in this Act the government secured the right in time of war emergency to requisition American registered vessels. As a condition of the grant of subsidies toward the construction of vessels in American yards, the Maritime Commission reserved a power of final approval of the design of such vessels. This power was of course shared with the Navy Department which had to approve all defense features in the proposed vessel. Under the terms of the Act any vessels, the construction of which was subsidized, were to be so designed as to be readily and quickly convertible into transport and supply vessels in a time of national emergency. By permitting it to subsidize operation on approved routes, Title VI of the Act in effect enabled the Commission to control also the allocation of American shipping on the various world trade routes.

In July 1941 the President was given power, during the emergency which he had declared on May 27 of that year, to authorize the Maritime Commission to issue warrants entitling vessels to priority over merchant vessels not holding such warrants, in the use of facilities for loading, discharging, lighterage or storage of cargoes, the procurement of fuel, towing, overhauling, drydocking or repair of such vessels. Vessels holding warrants had priority among themselves in accordance with the rules of the Maritime Commission. In granting warrants, the Commission was to make fair and reasonable provision for priorities. The criteria for helping the Commission determine priorities were: (1) the importation of substantial quantities of strategic and critical materials, (2) the transportation of substantial quantities of materials when such transportation was requested by any defense agency, and (3) the transportation in the foreign or domestic commerce of the United States of substantial quantities of materials deemed by the Commission to be essential to the defense of the United States.

Certain controls were imposed on the staffing of American vessels. A statute of December 17, 1941 made it unlawful to employ any person or to permit any person to serve as radio operator abroad any vessel (other than a vessel of foreign registry) if the Secretary of the Navy disapproved the employment for any specified voyage, route, or area of operation and had notified the master of the vessel of the disapproval prior to the vessel’s departure. In 1934 a new stipulation permitted the Commission to suspend the rule requiring radio operators to have at least six months service before being qualified as a radio operator. However, suspension of this qualification could not be retained once the emergency had been terminated.

Control of Foreign Vessels in American Waters: The Neutrality Act of 1935, as amended in May 1937, empowered the President to place special restrictions on the use of the ports and territorial waters of the United States. The restrictions which could be imposed involved limiting access to American ports and territorial waters by the submarines or merchant vessels of a foreign state. Special restrictions could be imposed at the President’s discretion once he determined that such restrictions were needed to protect the commercial interests of the United States and its citizens, or to promote the security of the United States. Once limitations on port usage had been imposed, it became unlawful for any foreign submarine or armed merchant vessel to enter a port or territorial water of the United States. Only the President could prescribe the conditions and circumstances which would justify an exception to the rule.

On October 18, 1939, President Roosevelt issued Proclamation No. 2371 declaring it unlawful for belligerent submarines, whether commercial or ships of war, to enter the ports or territorial waters of the United States except when forced into such ports by force majeure. The Panama Canal Zone was exempted from this order. Following enactment of the November 4, 1939 amendment to the Neutrality Act, a new proclamation with identical provisions was promulgated in conformity with the revised law.