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AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 1977 \04

GovERNmEN1 FOR CERTAIN MARITIME PROGRAMS

Storage

AY 2 5 19 75

TH LIBRARY

KANSAS STATE 

UNIVERSIHEARING

KSU LIBRARIES 

BEFORE THE

SUBCOMMITTEE ON MERCHANT MARINE

OF THE

COMMITTEE ON COMMERCE

UNITED STATES SENATE

NINETY-FOURTH CONGRESS

SECOND SESSION

ON

S. 820

TO AUTHORIZE APPROPRIATIONS FOR THE FISCAL YEARS

1976 AND 1977 FOR CERTAIN MARITIME PROGRAMS OF THE

DEPARTMENT OF COMMERCE, AND FOR OTHER PURPOSES

FEBRUARY 2, 1976

-13 Serial No. 94-59

f1.1

ul

Printed for the use of the Committee on Commerce

0

rl

U.S. GOVERNMENT PRINTING OFFICE

66-783 WASHINGTON : 1976
• ••-•11 .

COMMITTEE ON COMMERCE

WARREN G. MAGNUSON, Washington, Chairman

JOHN 0. PASTORE, Rhode Island

VANCE HARTKE, Indiana

PHILIP A. HART, Michigan

HOWARD W. CANNON, Nevada

RUSSELL B. LONG, Louisiana

FRANK E. MOSS', Utah

ERNEST F. HOLLINGS, South Carolina

DANIEL K. INOUYE, Hawaii

JOHN V. TUNNEY, California

ADLAI E. STEVENSON, Illinois

WENDELL H. FORD, Kentucky

JOHN A. DURKIN, New Hampshire

MICHAEL PERTSCHUK, Chief Counsel

S. LYNN SUTCLIFFE, Genera/ Counsel

RICHARD J. DASCHBACH, staff Counsel

MALCOLM M. B. STERRETT, Minority Counsel

DAVID CLANTON, Minority Counsel

JAMES B. PEARSON, Kansas

ROBERT P. GRIFFIN, Michigan

HOWARD H. BAKER, JR., Tennessee

TED STEVENS, Alaska

J. GLENN BEALL, Maryland

LOWELL T. WICKER, JR., Connecticut

JAMES L. BUCKLEY, New York

SUBCOMMITTEE ON MERCHANT MARINE

RUSSELL B. LONG, Louisiana, Chairman

JOHN 0. PASTORE, Rhode Island

ERNEST F. HOLLINGS, South Carolina

DANIEL K. INOUYE, Hawaii

JOHN V. TUNNEY, California

J. GLENN BEALL, Maryland

ROBERT P. GRIFFIN, Michigai

TED STEVENS, Alaska
CONTENTS

Page

Text of S. 820 2

LIST OF WITNESSES

Blackwell, Hon. Robert J., Assistant Secretary for Maritime Affairs,

Department of Commerce 4

Prepared statement 17

Hood, Edwin M., president, Shipbuilders Council of America 22

ADDITIONAL ARTICLES, LETTERS, AND STATEMENTS

Blackwell, Hon. Robert J., Assistant Secretary for Maritime Affairs,

Department of Commerce, letter of March 9, 1976 27

Clark, Earl W., and Talmage E. Simpkins, codirectors, Labor-Management

Maritime Committee, letter of February 3, 1976 26

Griffin, Hon. Robert P., U.S. Senator from Michigan, letter of February 10,

1976 27
.
AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 1977

FOR CERTAIN MARITIME PROGRAMS

MONDAY, FEBRUARY 2, 1976

U.S. SENATE,

COMMII1EE ON COMMERCE,

SUBCOMMITTEE ON MERCHANT MARINE,

Washington, D.0 .

The subcommittee met at 2:10 p.m., in room 5110, Dirksen Senate

Office Building, Hon. J. Glenn Beall presiding.

Senator BEALL. The hearing will come to order.

This afternoon the Merchant Marine Subcommittee of the Senate

Committee on Commerce will receive testimony on legislation to authorize appropriation of funds for the maritime programs of the Department of Commerce for fiscal year 1977, which begins on October

1,1976.

The Congressional Budget and Impoundment Control Act of 1974

requires that all legislation authorizing appropriations of money must

be reported to the Senate by May 15. Thus, this hearing is being held

before the administration's request legislation has been sent to the

Congress for introduction.

Last February, Chairman Magnuson introduced S. 820, the administration request for maritime authorizations for both fiscal years 1976

and 1977. This committee did not report that measure. Rather it sent

an original bill S. 1542 to the Senate. That legislation authorized

appropriations for fiscal year 1976 only. Thus, S. 820 is technically

still before this subcommittee. Although I realize that the administration proposes to amend the fiscal 1977 request differing from the

S. 820 amounts, we will use that bill as the vehicle for this hearing.

[The bill follows:]

Staff member assigned to this hearing: Richard J. Daschbach.

(1)
94TH CONGRESS

1ST SESSION

2

S. 820

IN THE SENATE OF THE UNITED STATES

FEBRUARY 21 (legislative day, FEBRUARY 21), 1975

Mr. MAGNUSON (by request) introduced the following. Which was read

twice and referred to the Committee on Commerce

A BILL

To authorize appropriations for the fiscal years 1976 and 1977

for certain maritime programs of the Department of Commerce, and for other purposes.

1 Be it enacted by the Senate and House of Represcnta2 tires of the United States of America in Congress assembled,

3 That funds are hereby authorized to be appropriated without

4 fiscal year limitation as the appropriation Act may provide

5 for the use of the Department of Commerce, for the fiscal

6 years 1976 and 1977, as follows:

7 (a) acquisition, construction, or reconstruction of

8 vessels and construction-differential subsidy and cost of

9 national defense features incident to the construction,

10 reconstruction, or reconditioning of ships, $245,000,000

II
•

1

2

3

4

5

6 • (c) expenses necessary for research and develop7 ment activities, $12,232,000 for fiscal' year 1976, and

.8 $18,000,000 for fiscal year 1977;

9 (d) reserve fleet expenses, $4,242,000 for fiscal

10 year 1976, and $4,437,000 for fiscal year 1977;

11 (e) maritime training at the Merchant Marine

12 Academy, at Kings Point, New York, $11,500,000 for

13 fiscal year 1976, and $12,301,000 for fiscal year 1977;

14

15

16

17

18

19

20

21

22

23

24

25

26

2

for fiscal year 1976, and $251,000,000 for fiscal year

1977;

(b). payment of obligations incurred for operatingdifferential subsidy, $315,936,000 for fiscal year 1976,

and $334,000,000 for fiscal year 1977;

and

(f) financial assistance to State marine schools

$4,708,000 for fiscal year 1976, and $3,658,000 for

fiscal year 1977.

SEC. 2. In addition to the amounts authorized by section

1 of this Act, there are, authorized to be appropriated for the

fiscal years 1976. and 1977 such additional supplemental.

amounts for the activities for which appropriations are authorized under section 1 of this Act as may be necessary for

increases in salary, pay, retirement, or other employee benefits authorized by law, and for increased costs for public

utilities, food service, and other expenses of the Merchant

Marine Academy at Kings Point, New York.
4

Senator BEALL. Our witnesses today will be Assistant Secretary of

Commerce for Maritime Affairs, Robert J. Blackwell, and Shipbuilders Council of America president, Edwin M. Hood.

Mr. Blackwell, we have reviewed your statement. You may proceed

in any way you wish.

STATEMENT OF HON. ROBERT J. BLACKWELL, ASSISTANT SECRETARY FOR MARITIME AFFAIRS, DEPARTMENT OF COMMERCE

Mr. BLACKWELL. Thank you, Mr. Chairman.

I will attempt to summarize my statement, Mr. Chairman, and with

particular emphasis on those elements of the Maritime Administration budget for which we are seeking authorization authority.

Mr. Chairman, I am helve today in support of the Maritime Administration request for authorizing legislation for fiscal years 1977 and

1978. The Maritime Administration request totals $444,782,000 in appropriations authority for 1977. This request is a decrease of $99,245,-

000 from fiscal year 1976 authority and consists of the following:

$403,721,000 for operating-differential subsidies; $19,500,000 for research and development activities of the Maritime Administration;

$4,560,000 for support of the National Defense Reserve Fleet; $13,-

260,000 for support of the Merchant Marine Academy; and $3,741,000

for the State marine schools.

No appropriations authority is requested for the 1977 subsidized

ship construction program, since $247 million will be available in 1977

from existing funds. This compares with an estimated $202,011,000

program level for fiscal year 1976 and for the transition quarter. The

budget request also includes a total of $659,061,000 in appropriations

authority for fiscal year 1978.

Now, if I may, Mr. Chairman, I will turn to the specific authorization requests for 1977.

As I mentioned earlier, and as contained in my statement, no new

appropriation authority is requested for the fiscal year 1977 ship construction program. The current projection for the remainder of 1976

through 1977 indicates that shipbuilding programs over the next 2

years can be contracted for with subsidy funds currently available.

These funds total $449,011,000 and consist of $213,000,000 from appropriations for 1976 and the transition quarter, in addition to $236,011,-

000 from 1975 funds available to the Maritime Administration but

which are unobligated at this time. Available funds will be distributed

to provide program levels of $200,011,000 in 1976;, $2,000,000 in the

transition quarter; and $247,000,000 in 1977. This compares with an

actual 1975 program level of $101,580,000. Therefore, it reflects some

confidence in the recovery of commercial shipbuilding demand. Subsidized construction contracts in 1977 are provided for eight ships,

comprising six LNG carriers and two containerships, as well as the

conversion of two existing vessels.

The LNG- carriers are expected to be ordered in connection with

gas projects now under consideration by the Federal Power Commission. Final contracts for the purchase of LNG for these projects

from Algeria and from Indonesia have already been signed. Our

ship construction program includes funding for three of these ships

in 1976, six in 1977, and the remainder in subsequent years. Contracts
5

for the construction of containerships are expected to result from an

increasing interest of the industry in this type of vessel as their older

ships require replacement.

The appropriation authority requested for our operating-differential

subsidy program is $403,721,000, which is an increase of $57,550,000

over the revised 1976 requirements.

The existing 1976 appropriation authority for this program is

$315,936,000. Draft legislation is being prepared to increase this

authority by $30,235,000, to a revised total of $346,171,000. The increase is necessary for the support of the bulk carriers that will carry

the U.S. share of the 1976 Soviet purchases of U.S. grain.

Subsidized U.S.-flagship operations planned for 1977 include 5.8

ship years of passenger and passenger/combination ships, 169.4 ship

years of general cargo ships, and 34.8 ship years for bulk vessels.

The total 1977 ship years for bulk ships include 13.6 ship years—a

decrease of 17.9 from adjusted 1976 levels—for carriage of anticipated

Soviet purchases of grain during the year. The 1977 purchases are

estimated at a total of 6 million metric tons, the minimum purchase set forth in the current United States-U.S.S.R. grain purchase

agreement.

Exclusive of this U.S.-flag carriage, the requested authority will

provide for an increase of 15 ship years over 1976 levels. This is

primarily the result of delivery of seven new bulk and two new cargo

ships into the subsidized fleet during 1977 and the full operation in

1977 of ships which entered the subsidized fleet in 1976.

The primary factors contributing to the increase in subsidy in 1977

are: the escalation of U.S. foreiom operating costs over 1976 costs

which involves a total of $22,754,000; and the establishment of a new

base period 1977 for wage subsidies, which will cost $20,918,000. The

remainder of the increase is due as I mentioned, to additional ship

years and payments for prior ship year operations.

The appropriation authority reauested for research and development in 1977 is $19,500,000. This includes an increase of $7,268,000

over appropriation authority enacted for 1976.

The total funding for 1976 R. & D. programs was $19,768,000, which

consisted of an appropriation of $12 million and funding from deferrals of prior year appropriations totaling $7,768,000. The 1977

appropriation authority will provide for continuance of the 1976

program at essentially the same levels, with some adjustments for

individual projects as they advance toward implementation or

completion.

The appropriation authority requested for the National Defense

Reserve Fleet totals $4,560,000, which is an increase of $318,000 over

the 1976 program.

The increase is primarily associated with higher costs of supplies,

utilities; and repair maintenance for the fleet's service craft. In addition, funds have been requested to institute a program for salvage

of machinery items of ships scheduled for scraping. These items are

intended for use as spare parts on the ships we retain in the fleet,

principally victory vessels.

The 1977 appropriation authority requested for the Merchant

Marine Academy is $13,276,000, which is an increase • of $1,740,000

over the 1976 level.

66-788-76 2
6

This level of appropriation will provide sufficient resources to meet

significant increases in operating costs and continue the facilities

modernization program and provide an increased level of funding

for ongoing maintenance and repair programs at the Academy. The

1976 modernization program includes a major renovation of Bowditch

Hall, one of the three principal academic buildings, which contains

most of the classroom space on campus. Renovation will also be provided for classrooms, laboratories, and academic office space. The

1977 program also includes funds for design work for Fulton Hall,

the third and final principal academic building to be renovated at

the Academy. Five other smaller projects will also be funded. This

program primarily represents renovation and modernization of buildings that are 34 years old and does not represent any significant expansion of facilities.

The appropriations authority requested for the State maritime

schools in 1977 totals $3,741,000, a decrease of $967,000 from 1976

levels.

The requested funding level for State maritime school programs

continues the 1976 program level, with a small increase in funds

requested for increased costs of maintenance and repair of schoolships. A small increase in the number of cadets receiving allowances

will also be provided for. This is offset by a decrease in funds associated with a one-time increase provided in 1976 for procurement and

installation of pollution control systems on the schoolships.

Mr. 'Chairman, members of the committee, this completes my summary statement. I will be pleased to answer any questions that you

might have.

Senator BEALL. Thank you, Mr. Blackwell. Because he has to leave,

I will yield to Senator Inouye.

Senator INourE. Thank you very much, Mr. Chairman.

Mr. Secretary, in your testimony before the House Merchant Marine

and Fisheries Committee last week you stated that the shipbuilding

industry in the United States and throughout the world is a "disaster."

Does that mean that the 1970 act is no longer working?

Mr. BLACKWELL. No, I think the act is working rather well. Shipbuilding was not the only element of the 1970 act, Senator. We have

built 58 new ships under that act and converted 20 existing vessels.

The ship construction subsidy program has put over a billion dollars

in our shipyards, matched by over $2 billion of private capital. As a

result of the 1970 act, which contained a 10-year commitment to revitalize the merchant marine, the private shipyard sector, by the end

of the current calendar year, will have pumped in over a billion dollars

to modernize their facilities.

The fact of the matter is we are not building ships today because

of one significant factor, that is the downturn in oil consumption that

followed the Arab or OPEC nations cutting off oil to the world,

particularly the industrialized West and Japan.

As you know

'

countries all over the world were building up to a

very significant increase in oil demand and oil movements in international trade. That has not only stopped, that is, the projected increase, but has actually declined somewhat.

Consequently there is tremendous overcapacity in the world fleets

in every country, including this country. The shipbuilding demand all
7

over the world was largely sustained by tanker building, which has just about stopped. New orders have stopped and there have been tremendous numbers of cancellations.

I think we should be honest and say we are not building as many ships as we thought we were going to build. I do not think it is the fault of the program I do not think it is the fault of the shipyards. I think our shipyards have met the challenge that the 1970 act laid down to them, to modernize their facilities. They have done that. The fact of the matter is one very significant section of the market has just fallen out.

I think it is going to take a little time and I think that within a

year or two we will be building at a reasonably significant pace in this country.

Senator INourE. Would you say that one of the causes is the lack of cargo for us?

Mr. BLACKWELL. There is a substantial amount of oil moving today

all over the world. There happens to be in the tanker segment many

more ships to carry that cargo. The cargo is there, we just have more

ships than we need to carry the oil.

Senator INOUYE. What about the 35-percent construction subsidy

guideline? Is that creating any problem?

Mr. BLACKWELL. Yes, it is, Senator. We are having a difficult time

meeting that 35-percent guideline rate, which is prescribed in the

statute for the rate of construction subsidy, that is, the limit on the

amount of subsidy that the Maritime Administration can pay in

the current fiscal year.

Another problem is that that authority to accept negotiated pricing

runs out on June 30, 1976. The Maritime Administration will no longer

be able to accept negotiated contracts for shipbuilding, regardless of

whether the contract meets the prescribed 35-percent rate or is even

below it, because our total authority for negotiated contracting runs

out on June 30.

Senator INorryE. Is the Administration submitting legislation to

cure this?

Mr. BLACKWELL. The Maritime Administration has submitted a

draft proposal which we believe would remedy the current dilemma

we find ourselves in. The proposal is currently being processed through

the executive branch.

Senator INou YE. Do you have any thoughts on H.R. 11504, the bill

introduced by Mrs. Sullivan?

Mr. BLACKWELL. I have not read the bill. It was introduced, I believe,

the day before my testimony in the House last week. As I indicated

to the chairman of the House Merchant Marine Subcommittee, I am

not authorized to comment on the bill, because an administration position has not been formulated.

I did say, however, that it is extremely difficult, given the current

low prices prevailing in Japan and Europe, and given the increasing

strength of the dollar, to make the 35-percent CDS rate for this year

on conventional vessels. By conventional vessels I mean tankers, container ships, product carriers, and dry bulk carriers. We can still make

the 35-percent rate on LNG vessels and major conversions of ships in

our yards. It is quite clear, Senator, that we should do something.
8,

It would be tragic, in my opinion, if we do not allow the Government

to have the flexibility of approving negotiated contracting for ships.

Competitive procurement of vessels is extremely inefficient, time consuming, very cumbersome, gh d in fact in many respects it is the antithesis of the principles contained in the 1970 act for standardized

ships in series construction which we, the administration and the Congress, thought would significantly lower the costs of building ships in

our country.

So, while I am really not authorized to comment on the legislation, I

'did indicate that it would be the Maritime Administration's position.

to come up with something along the lines of the legislation that Mrs.

Sullivan has introduced.

Senator INOUYE. When can we expect that bill, sir?

Mr. BLACKWELL. I do not know. All I know is we have done our job,

and the bill has gone forward. I suppose we should do a little more

pushing to see if we can break it loose.

Senator INOUYE. Mr. Secretary, when was the last MarAd contract

executed for the construction of a new ship?

Mr. BLACKWELL. I believe it was last June.

Senator INou-YE. June 1975?

Mr. BLACKWELL. Yes.

Senator INOUYE. How many new ships were contracted in calendar

year 1975?

Mr. BLACKWELL. Calendar year 1975?

Senator INOUYE. Or fiscal year 1975, whichever.

Mr. BLACKWELL. I think three or four.

Senator INOUYE. Three or four?

Mr. BLACKWELL. The last contracts we executed, Senator, were three

ships for the Avondale shipyard. They were product carriers.

Senator INOUYE. If I recall, the 1970 act had some great dream of

building 30 ships per year for 10 years.

Mr. BLACKWELL. Well, it was not a dream. It was a plan that quite

honestly was not very well conceived, not by the Congress, but by the

people who were the proponents of the legislation in the executive

branch, which includes the Maritime Administration.

We simply underestimated the tanker demand that would be developing. The 1970 act was largely predicated on building dry cargo

ships, both bulkers and liner vessels. As a matter of fact, if you look

at the program, the progress that has been made, the emphasis of the

1970 act has almost been exclusively on energy carriers, which are

much larger and much more expensive than the smaller ships that

we contemplated building back in 1968 and 1969.

Senator INOUYE. How many U.S. ships built or converted since 1970

have been laid up?

Mr. BLACKWELL. We have 19 tankers in our laid-up fleet, with an

aggregate deadweight tonnage of about 700,000 tons. It is about 11

percent of our tanker fleet.

As bad as that sounds, we have less tankers laid up in this country.

than any other major shipbuilding nation in the world on a deadweight basis, by numbers, or by a percent of the fleet.

There are several trades that U.S. tanker owners are capable of

operating in that others cannot. One is the up-coast movements of oil,

which, in weather like this today, helps, and those rates are the highest
0

9

they have been in many, many years. We have a number of U.S. ships in that trade. In addition, the Soviet grain movements in U.S. tankers

is another area where our tankers have found employment.

But we do have ships laid up. We had 32 about 1 year ago; we are

down to about 19. But quite honestly there is not much hope to get

that number reduced significantly.

Senator INOUYE. When you consider the productivity and technical

know-how, how would you rate our shipyards with the shipyards in

the rest of the world?

Mr. BLACKWELL. I think you have to recogniz- e that the amount of

money that was poured into our yards was put into yards that were

comparable to World War II yards. The devastation that was brought

to Japan and Western Europe permitted those yards in those two areas

to essentially start fresh. So, by the 1950's, they basically had very

modern shipbuilding facilities. Many of our yards are approaching

that today.

However, we are not getting the productivity out of the entire system

from the workers to mechanization that I would like to see. But I

think our yards have made a tremendous improvement. After all, you

know, they have only been operating about 4 years under contracts in

the Merchant Marine Act of 1970, and I think they have made remarkable progress.

The unfortunate thing is just as they were beginning to more or

less make incremental progress in terms of efficiency, then you have

this dearth of orders', and the problems of laying off manpower, retooling, starting up again, and losing qualified people, just compounds

the problem we already have.

This is one of the reasons that the standardized ship was developed

and the desire of the program to get series construction, so we could

get the learning curve and the benefits of scale at the same time.

Senator INOUYE. Mr. Secretary, in your judgment, is price the only

reason the Japanese are building 84 ships to our 0? Would you say

that national cargo preference requirements or practices of other

nations are a factor ?•

Mr. BLACKWELL. The ships the Japanese are building are for export.

Now, they have a number of things going for them in Japan. First

of all, they are very dedicated, and have an excellent work force. But

today I think quite clearly the only thing that is causing people to

build those ships in Japan is price.

I mean their prices are so below ours, and so below Western

Europe's and are such bargains at today's prices that people who

might otherwise have gone someplace else are literally forced to buy

in Japan.

Now there are a number of other things the Japanese can do. They

can make attractive finan_ciat requirements, can build for export and

can have another element of the industrial complex provide a longterm charter for the foreign purchaser. That is what really finances

the ship.

The Japanese are good in terms of keeping their word. There are

many other pluses.

But right now it is price.

Senator INOUYE. I note that in our grain agreement with the Soviet

Union we will be carrying one-third of the cargo.
10

Mr. BLACKWELL. Yes, sir.

Senator INOU IE. Why can't we make it one-half?

Mr. BLACKWELL. Well, because we negotiated one-third.

Senator INOUYE. I realize that. But do we have the ships to carry

one-half?

Mr. BLACKWELL. One-half? On the assumption that they purchased

say 18 million tons this year, we would have to carry 6 million tons.

We have the capacity in our tanker fleet to carry 6 million tons.

Senator INOUYE. But not nine?

Mr. BLACKWELL. No, I do not think we could carry nine. We have

other needs for the ships. It was felt at the time the original maritime

agreement was negotiated in 1972, with negotiations commencing in

kite 1970, that it would not have been appropriate for the United

States and the Soviet Union to execute an agreement which would

monopolize the carriage of the trade between those two countries

without giving other nations an opportunity to carry a portion of

the cargo. It was felt there might be some recriminations. Some of

the countries who would have been shut out of the Soviet grain traffic

might have retaliated against American shipping.

Senator INOU YE. My final question, sir, and I thank you very much.

On the basis of numbers and tonnage, where would you rank the

United States merchant fleet?

Mr. BLACKWELL. We are roughly tenth on the basis of total deadweight tonnage. If you include the Great Lakes fleet we are a little

higher than that. We have about 600 ships in our fleet, which are

very modern, very efficient.

In terms of deadweight capacity, I would think that with just the

ships we have on the ways today—we have about 80 ships, fairly large

size, that will be delivered over the next several years—I would think

on the basis of that backlog, without new orders, the United States

will rise to about seventh or eighth.

Senator INOUYE. Where is the Soviet Union?

Mr. BLACKWELL. Well, it depends on what kind of count you want

to make. In terms of total vessels dedicated to liner service of some

type, the Soviet Union would probably be No. 1. There would be included in that fleet a very, very large number of smaller vessels which

have no ability other than to conduct services on the rivers of the

Soviet Union or in their domestic commerce.

But regardless of how you would want to rank them, they are a

very potent competitor in terms of building modern efficient container

ships. They are building tankers, and they have an integrated maritime organization in which their shipbuilding industry, their navy,

their oceanographic services and their merchant marine, as well as

fishing, operate in terms of a common goal, which we do not always

have here.

Senator INOUYE. We have been told the Soviets are now building

30 new container ships. How many container ships are being constructed in U.S. shipyards now?

Mr. BLACKWELL. Well, not too many. We have the largest container

fleet in the world under the U.S. flag, numbering about 130 vessels.

They are not all new; some of them were converted. But I think that is a fleet we can be very proud of. The Soviet Union's container fleet

and the ones they are building do not come close to matching that.
11

But the fact is they are making great progress, and no one should

stick their head in the sand about that. They are not building the high

speed type vessels like Sealand has, the type of ships U.S. Lines has,

the type of vessel Farrell Lines is attempting to get bids on at the

current time. But that is not to say the Soviet Union is not a very

potent threat, not only in trades that do not serve the United States,

but in trades that do serve the United States.

They have a growing operation off the west coast, a very small portion of that operation serves the Soviet-Siberian area, but most of it is

service to Japan, Malayasia, Indonesia and the Philippines.

Senator INOUYE. Thank you very much. Thank you, Mr. Chairman.

Senator BEALL. Mr. Blackwell, a couple of years ago you suggested

that the administration did not support the cargo preference legislation which I introduced in the Senate because it would be an admission

that our maritime policy had failed.

Would you care to revise your thinking on cargo preference in view

of what has happened to the shipbuilding or ship construction program

in the last couple of years?

Mr. BLACKWELL. It was a comment based on the philosophy underlying the 1970 act, Senator Beall. The 1970 act was designed to try to

encourage the Government to commit more funds to the industry over

a longer period of time, thereby encouraging both ship owners and operators to become more efficient with less dependence on U.S. subsidies.

The point I made in termgof it being somewhat inconsistent was that

a reservation of cargo is one thing; getting your fleet to the point where

they can be efficient and competitive is another thing. It was the assumption back 2 or 3 years ago, when we testified, that if U.S.-flag

ships could be truly competitive then there was no need for cargo

preference.

What we see today is the result of basically a single act by the oilproducing countries in the Middle East that has so changed the competitive picture that even U.S.-flag ships today that can operate on a

parity with foreign-flag ships, only have the opportunity of losing as

much money as their foreign counterparts.

We can make, through the subsidy program, an American tanker

owner as competitive today as his foreign counterpart. And, all he

would be able to do would be to go out there and go into that service

and lose about as much money as his foreign competitor. That is not

the way to build up an American merchant marine.

Senator BEALL. In other words, you are saying that bidding for

cargo is so intense that people are bidding it at a loss?

Mr. BLACKWELL. There.is no question about it.

Senator BEALL. All right. If we had a cargo preference act in the

United States, would not a percentage, say one-third, of our cargo have

to be brought in in U.S. bottoms, and therefore would not that cargo

be outside of the bidding process?

Mr. BLACKWELL. That is right.

Senator BEALL. Then it would be helpful now.

Mr. BLACKWELL. There is no question about it. As I understood the

cargo preference proposals, there would be a certain amount of cargo

reserved for U.S.-flag ships; and that the cargo would be reserved

whether the ships were subsidized or not subsidized. If the ships were
12

not subsidized, then you obviously would have to have rates that were

quite high.

The question was how much was it going to cost and who was going

to pay the price. The administration position was that the cargo preference bill would have been inflationary. I think that would be their

position today.

Senator BEALL. Today?

Mr. BLACKWELL. I Would think so.

Senator BEALL. I am a little disturbed—a few minutes ago you indicated the bottom had fallen out of the oil market. Yet we are importing more of our oil needs today than we were 2 or 3 years ago when we

got into difficulty. We were told a couple of years ago that we imported

36 to 37 percent of our crude oil needs, and now I believe we are up to

40 percent of our daily needs.

So we have more oil imported into the United States today than we

did before, don't we?

Mr. BLACKWELL. That is probably true. There was a time when

actual oil imports into the United States decreased. Now it seems to be

going up somewhat.

Senator BEALL. How many of the oil-producing nations are enacting

cargo preference policies of their own?

BLACKWELL. A number of the countries in the Middle East have

cargo preference legislation on their books which appears to favor

their own flags. But I am not sure that they actually have implemented

that legislation. I am not saying they Ith.ve not. There is no question

that the OPEC countries are interested in building up their own fleets.

I personally do not think they need cargo preference, because I think

that in terms of selling their oil, they are going to obviously demand

that transportation be tied in with the purchase. In other words, you

can have x barrels of crude oil to carry from here to there, provided,

however, that x amount of that oil is carried on Saudi or whatever

country is selling that oil flag ships.

Senator BEALL. They would like to sell to the United States, too,

wouldn't they?

Mr. BLACKWELL. Yes.

Senator BEALL. And they have to retain a market for their oil. So,

conversely it would seem logical to me that if they like the U.S. market,

they will bring their oil to this market in our ships, because they like

U.S. dollars.

Mr. BLACKWELL. Well, they like hard currency.

Senator BEALL. We have that. Maybe not as much as we would like.

Wouldn't a national cargo policy—a broad national cargo policy—

have some effect on ship construction in the-United States?

Mr. BLACKWELL. I am not sure, in terms of tankers.

Senator BEALL. I am talking about a national cargo policy now,

affecting everything we import or export.

Mr. BLACKWELL. It could have. One does not know, but it could have

just the opposite effect.

Senator BEALL. Why?

Mr. BLACKWELL. Because we do reasonably well in our liner business. We carry roughly 30 percent by weight of all of the liner cargo

that moves in and out of this country. And we have a higher percentage of the high valued cargo, if you look at it on the dollar basis. So
13

we have a very substantial stake and we have made tremendous inroads into that category of service. If we demand that U.S. ships

carry a certain portion of our cargo, it may be that other countries

would also demand their ships—

Senator BEALL. Don't they demand that now?

Mr. BLACKWELL. Not necessarily.

Senator BEALL. Some countries do, don't they?

Mr. BLACKWELL. Some countries do.

Senator BEALL. Japan?

Mr. BLACKWELL. You can not find it in Japanese law, Mr. Chairman.

It seems to work that way, though.

Senator BEALL. How about Russia as a matter of policy?

Mr. BLACKWELL. Russia has executed a series of bilateral agreements, not similar to the agreement we have with 

them, 

on maritime

matters. Most of the Soviet agreements with other countries are much

more general and broad than the one we have, and the Soviets do extremely well in terms of their success in gathering a very significant

amount of the cargo.

They basically control the amount of cargo going on Soviet ships

by terms of carriage.

Senator BEALL. I understand that today 6 percent of our overall

trade is carried in American bottoms.

Mr. BLACKWELL. That is about right, 6.4 percent.

Senator BEALL. I have a hard time following how on the one hand

you can get much worse than 6 percent, but that a national cargo

preference policy would be disadvantageous to us.

Mr. BLACKWELL. Well, we have 6 percent. We do not carry wood

chips, for instance; the Japanese do. There are a number of cheap

low-rated commodities in the bulk business that U.S. ships simply

do not engage in.

Senator BEALL. We could exempt them from the cargo preference.

Mr. BLACKWELL. If you have a law that is successfully implemented

that guarantees that U.S. ships will get CO amount of some cargo that

our trading partners are now carrying, and we are carrying and have

a pretty good capacity on our ships, I think the answer is in that category of cargo, it would probably induce some shipbuilding. I think

there is a possibility of losing some cargo by having trades in which

we are now carrying 40 and 50 percent reduced by having our trading

partner increase his share of the carriage.

Senator BEALL. Some of our trading partners are already doing that,

aren't they?

Mr. BLACKWELL. Not really. There are really strong national shipping preferences in Europe. Here again you cannot find it on the

statutes, but many of the European countries, particularly through

their banking organizations and freight forwarders, which operate

somewhat differently than our freight forwarders, have a strong national preference for their own flag. This is something that simply

does not exist in the United States. They do have an advantage. I

think that is clear.

Senator BEALL. It would seem to me it would be to our advantage,

therefore, for the government to suggest, either by law or otherwise,

that this same policy be adopted in the United States.

66-788-76-----3
14

It seems to me if the European countries are showing this preference for their own ships, I would suspect that their governments

are encouraging the private interests to do this, aren't they?

Mr. BLACKWELL. Yes, I would think so.

We have cargo reservation in this country, and where we have had

it, it has been a disaster quite honestly. My job is basically to promote

the American merchant marine. I have been called a knee-jerk

:maritime enthusiast. I am kind of proud of that.

We have a Public Law 480 program that is a disaster in my opinion.

The Government has poured billions into a program which in 20

years has not built a ship. My attitude about national cargo preference is basically colored by things I know about in that program.

We have other programs that work rather well.

Senator BEALL. But nothing is working too well right now as far as

ship construction is concerned.

Mr. BLACKWELL. No, as far as ship construction is concerned. Despite the fact that we still have the highest order book in the peacetime history of the United States, many shipyards in this country,

even if they got orders tomorrow, would still have to lay people off.

That is unfortunate.

Senator BEALL. I am familiar with some of those problems.

Mr. BLACKWELL. Yes, I know you are Senator.

Senator BEALL. And you do not think a national policy—assuming

there are too many ships and not enough cargo—in view of the fact

that other countries, directly or indirectly are practicing that, would

be of assistance to us, whether we did it directly or were more subtle?

Mr. BLACKWELL. I do not know what a national cargo policy is.

However, I think it is obvious that if there is a law that literally dictates that U.S. ships carry cargo that they are not now carrying,

and if U.S. ships do not have the capacity to carry that cargo, ships

will have to be built and that is good for the shipbuilding industry.

I do not think anyone can deny that.

But there must be some other considerations—how much will it cost,

how much cargo will be reserved, what type of cargo will be reserved.

TTntil I really see those details spelled out much more clearly than

I am familiar with now, I just could not say.

Quite honestly, I do not think the administration could say, because

obviously there is a cost. And we have to determine what that cost is,

whether it is worth paying, and who pays it.

Senator BEALL. To switch to another subject, you indicated that over

the past 5 years the Merchant Marine Academy and the State marine

schools have graduated about 2,500 persons qualified to serve as deck or

engineering officers. Have the employment opportunities existing over

the last 15 years been equal to that?

Mr. BLACKWELL. No. We have not been able to absorb but a fraction

of those young men and now soon to be women.

Senator BEALL. go what happens to them?

Mr. BLACKWELL. Some of them go into the military. They all have

Naval Reserve commissions. Some go into NOAA, some .go into the

Coast Guard. Others go into graduate work. Many of them go into

marine related activities ashore, in steamship companies, brokerage

houses, insurance, and ship design.
1.5

Thirty to forty percent on a more or less long term basis find employment on seagoing vessels. But because of the problem, we have

tried to induce the oil rig business, crew boat business, and people running ferries to look at these young men. Many of them have for example in the• Great Lakes, found . a more or less secondary source of

maritime employment.

Senator BEALL. In view of the difficulties, is there justification to

continue to have the same number of academy graudates and the same

number of people receiving Federal allowances at the State schools?

Mr. BLACKWELL. Yes. I think so. I think we have been holding down

at the State schools on the basis of limiting allowances. This program

of training maritime personnel is not just for a short period of time.

We are relying on these people in case of a national emergency, when

we need skilled deck and engine officers to come to the aid of their

country. And we think that whether they are going to sea or not, they

still represent a very significant reservoir of marine-oriented talent

that the country can use.

Senator BEALL. So you are going to increase the State schools, the

number of State school people receiving allowances this year?

Mr. BLACKWELL. Just a limited number, particularly in Massachusetts.

Senator BEALL. Why?

Mr. BLACKWELL. They have a real problem at that school as a result

of the Vietnam conflict. During that conflict there were heavy enrollments and tremendous amounts of money were put into a physical

plant. They once had a school ship. They build very significant numbers of dormitories.

Senator BEALL. Is this a never-ending sort of thing? We are going to

support the schools when the demand for their graduates is decreasing.

Mr. BLACKWELL. The support of the schools is essentially nominal.

What you have is a $600 a year payment to certain cadets to defray

expenses of uniforms and books. The sum hasn't changed in over 18

years that I am aware of.

I believe it is 18 years. So, what you are dealing with now is you

are giving these cadets, despite the fact you keep the level at $600,

you are really giving them about $280. As inflation impacts upon

that payment, it is less and less of an inducement for the boy to come

to that academy.

It seems to me that the law of supply and demand will eventually

take effect. If there are no jobs, and the student has to pay a significant amount of tuition, and- they pay very handsomely at some of

these schools, then they will opt for something else. I think that is a

better way of determining the level of manpower in that area than

have the government, -particularly the Maritime Administration, each

year determine what is necessary, because it is very hard to do.

Senator BEALL. Senator Stevens. -

Senator STEVENS. What is the leadtime now on LNG tankers?

Mr. BLACKWELL. If leadtime means from the time you sign the

contract until the time you cut steel I would say about a year. If

leadtime means from the time you sign the contract to the time

of ultimate delivery I would say about 3 years. The main problem

that we have been having is with the fabrication of the containment

•
16

systems—the tanks—and on the assumption which I think is an

appropriate one, that that probably will be ironed out I would

think that it would be about 3 years from the date of signing to

delivery.

Basically, the LNG is nothing more than a conventional ship with

a lot more steel in it, plus tanks that carry the gas and what essentially is a refrigerated or a thermos bottle. There is no refrigerator

on the vessel that just contains it within the cylinders.

, Senator. STEVENS. I am sure you are familiar with our preference

for the Alaska route for our gas from Prudhoe Bay down to the LNG

facilities.

Mr. BLACKWELL. That is my preference, too, Senator Stevens.

Senator STEVENS. Do you see any difficulty in our securing a sufficient number of tankers to carry that gas should we get the necessary authorization?

Mr. BLACKWELL. Absolutely not. No. I do not think you need an

authorization. Those ships are not operating 

Senator STEVENS. I mean authorization for the pipeline. We need

an authorization for that route for the pipeline.

Mr. BLACKWELL. Yes.

Senator STEVENS. You don't see any difficulty in acquiring tankers

to serve that route if that is the decision?

Mr. BLACKWELL. Not a bit. I think we calculated 12 ISGs would

be necessary, and by that time we will have debugged the 9 vessels

we have built. They will very likely be one of the three designs we are

currently building in this country. I think that building of those ships

will be a piece of cake.

Senator STEVENS. They are very necessary and I hope you will keep

up your support for them. We have many other areas in Alaska that

have a potential for natural gas production, and with one exception,

they are all tidewater areas.

We see no reason to pay for a pipeline that goes through Canada

that will be of little use to us when these floating pipelines could

serve almost any area of potential onshore or offshore gas production

in Alaska.

Mr. BLACKWELL,. There is another benefit, the maritime or marine

benefit. As I understand the El Paso proposal, it really is an all American plan that just about everything associated with it will be bought

in this country, including the pipe to bring the gas down the

Prudhoe.

As you know, at the current time much of the oil pipeline was procured in Japan. But in terms of the amount of work that those LNG

tankers would create in the shipyards, the amount of secondary work

in the plants of the component manufacturers, it just makes a very

attractive package, I believe, for this country.

Senator STEVENS. The only other question I have—I haven't heard

any more about the shortage of anhydrous ammonia barges. Has that

been taken care of?

Mr. BLACKWELL. Thank God. It should be taken care of. As you

know, the barge sunk. There is a Norwegian LNG vessel or vessel

capable of handling anhydrous ammonia in there.

The American vessel is being built—

Senator BEALL. A replacement is now being built?
17

Mr. BLACKWELL. Yes.

Senator BEALL. Do you know when it will be delivered?

Mr. BLACKWELL. I would say in about 18 months to 20 months. I

do not know exactly, but I remember there was recently a request for

the extension of the present waiver for the Norwegian vessel to the

Secretary of the Treasury. My recollection is he granted it for 1 year

based on the fact that the American vessel would very likely be ready

by that time.

Senator STEVENS. Good.

Senator BEALL. Thank you Mr. Blackwell. Senator Griffin may have

some questions on your testimony today. If so, he will submit the

questions to you in writing and you can submit your answers for the

record.

Mr. BLACKWELL. Perhaps I should apologize to Senator Griffin in

advance. I deleted from the oral portion of my testimony a great deal

I had to say about the Great Lakes.

Senator BEALL. We will include your entire testimony in the record.

Thank you very much.

[The statement follows:]

STATEMENT OF ROBERT J. BLACKWELL, ASSISTANT SECRETARY FOR

MARITIME AFFAIRS, DEPARTMENT OF COMMERCE

Mr. Chairman and Members of the Committee: I am appearing before your

Committee today in support of the Maritime Administration requests for authorizing legislation for fiscal years 1977 and 1978.

The Maritime Administration requests a total of $444,782,000 in appropriations

authority for 1977. This request is a decrease of $99,245,000 from fiscal year

1976 authority and consists of:

$403,721,000 for operating-differential subsidies. This program level provides

for the continued competitive operation of U.S.-flag ships in 1977;

$19,500,000 for research and development activities. This amount will continue to support the practical application of innovations and new technology to

U.S. shipbuilding and ship operations;

$4,560,000 for support of the National Defense Reserve fleet;

$13,260,000 for the Merchant Marine Academy; and,

$3,741,000 for State marine schools.

No appropriations authority is requested for the 1977 Ship construction program. $247,000,000 is estimated to be available in 1977 from existing funds. This

compares with an estimated $202,011,000 program level for 1976 and the Ttansition Quarter.

The requested legislation also includes a total of $659,061,000 in appropriations

authority for fiscal year 1978. My testimony will explain the 1977 amounts. I am

prepared to address 1978 in response to any questions you may have.

Our request supports the Federal government's continued commitment to maintain a strOng, competitive and productive American merchant marine and shipbuilding industry adequate for both the commercial and national security needs

of our Nation. Before I turn to the specific authorization request for 1977, I

would like to review briefly our progress under the Merchant Marine Act of 1970.

SHIPBUILDING

The Merchant Marine Act of 1970 added the maintenance of efficient facilities

for shipbuilding and ship repair to the list of major national maritime objectives.

There are 25 U.S. shipyards which have the facilities to build moderate-size

commercial ships. These 25 yards currently have a total of about 98,000 plant

employees as opposed to 79,000 prior to the 1970 Act. Subsidized shipbuilding

accounts for 25 to 30 percent of the overall contract value in these yards; the

Navy program accounts for about 50 percent; and private unsubsidized work

currently provides 20 to 25 percent. However, the Maritime Administration ship

construction program has been concentrated primarily in eight major U.S. shipyards since enactment of the 1970 Act. Among these eight yards, subsidized ship-
18

building represents 71 percent of the total contract value of work. Subsidized

construction contracts since enactment of the 1970 Act have generated a total of

about $3 billion in contract value of shipyard work, including $2 billion of

private funds. These contracts cover the construction of 58 new ships, totaling

5.9 million deadweight tons, and the conversion of 20 existing ships.

As you know, there have been setbacks in the ship construction program. Contracts for nine tankers, valued at $385 million, were cancelled in U.S. shipyards

in 1975. Of the eight major U.S. shipyards primarily dependent on subsidized

construction, four need new contracts now. This situation may be traced directly

to the 1973 oil crisis, which generated a downward trend in ship orders worldwide. However, there has been a continuing demand for bulk carriers, general

cargo ships and some containerships, with new orders concentrated primarily in

Japan. Still, available information indicates that for the nine months through

September 1975, the U.S. ranked second (behind Japan) among the nine major

shipbuilding nations in new orders for ships of 20,000 deadweight tons or more.

Also, there are definite indications of interest in the subsidized U.S. construction

of containerships and liquefied natural gas carriers during the 1976-77 time

frame.

Current low prices in the world shipbuilding market—particularly in Japan—

along with a strengthening of the dollar and some lessening of foreign inflation,

are placing upward pressure on U.S. shipbuilding subsidies. All subsidized shipbuilding contracts since enactment of the 1970 Act have been awarded under

negotiated contracting authority. The subsidy levels for ,these contracts have

stayed within the guideline rates, which declined two percent annually from 45

percent in fiscal year 1971 to the current rate of 35 percent. Higher rates are

permissible when the competitive bidding process is employed. The Department

is currently studying whether rates in excess of 35 percent are needed for certain

ship types or whether the current 35 percent rate is adequate. There will be no

difficulty in maintaining subsidy rates below 35 percent for liquefied natural gas

carriers and for ship conversions. Shipyard-ship purchaser negotiations will continue to be an integral part of contract development even if competitive bidding

precedes negotiations. Such negotiations will contribute substantially to holding

down subsidy levelly.

OPERATING-Mk YERENTIAL SUBSIDIES

The operating-differential subsidy program provides subsidies to U.S.-flag ship

operators where necessary to permit the operation of U.S.-flag ships at costs

competitive with those of foreign-flag operators. This program assures continued

U.S.-flag participation in essential foreign commerce.

U.S.-flag carriage in the liner trades has increased from 23 percent in 1970 to

an estimated 29 percent in 1975. This means that last year U.S.-flag liner vessels

topped their 1970 movement by about 3.5 million tons. In addition, with the

operating subsidy assistance provided for the first time under the 1970 Act, the

U.S.-flag tanker presence in the foreign trade is increasing despite the current

market slump. However, in December 1975, 20 U.S.-flag tankers representing 11

percent of U.S. tanker tonnage, were in lay-up. This compares favorably with the

current 17 percent worldwide lay-up level. U.S. lay-ups are down from 32 in

September 1975, but we do not expect an appreciable further decrease.

The U.S. subsidized fleet is appreciably more modern and productive since

enactment of the 1970 Act. The average age of the subsidized fleet declined from

an average age of 12.7 years in 1970 to 10.4 years in 1975. Further, although the

number of ships in the subsidized fleet has decreased from 215 ships in 1970 to

190 ships currently, the total deadweight tonnage has increased by almost 30

percent. Thus, the industry has attained greater utility to the Nation through

increases in capacity, with a lesser number of ships requiring subsidy.

Even with these productivity improvements in the subsidized U.S.-flag fleet,

subsidy requirements continue to increase. The dominant factor contributing to this is increasing wage subsidies. Subsidy for wages represents about 86 percent of total U.S. subsidy costs. Although foreign wages have been rising more rapidly than U.S. maritime wage levels, the foreign rates of increase apply to

lower base costs. As a result, incremental increases in foreign wages produce smaller dollar amounts than U.S. incremental increases. The strengthening of the dollar relative to foreign currencies tends to magnify the difference between

U.S. and foreign wage casts. Some increases in U.S. wage costs are also attribut- able to the requirement for more proficient—and, as a consequence, more highly paid—crews on the newer mechanized ships in the U.S.-flag fleet.
19

With the institution of a wage subsidy index system, the 1970 Act provided an

effective method for minimizing subsidy increases for U.S. wage costs. This system also provides an incentive to U.S. ship operators to minimize wage increases

reached in collective bargaining negotiations. This is accomplished through use

of a wage index developed by the Bureau of Labor Statistics which is tied to

collective bargaining increases for non-maritime wages. The system also provides

for readjustment of the index every two to tour years by establishment of new

base wage costs. A readjustment will be made in 1977. Control over wage subsidy

increases is also realized through review and approval by the Maritime Subsidy

Board of manning schedules for new ships built with subsidy. Additional reductions in operating subsidies are being accomplished through the gradual

elimination of subsidy for U.S. ship maintenance and repair and for hull and

machinery insurance. U.S. costs for these items no longer appear to impose an

appreciable competitive disadvantage on U.S. operators.

Two bilateral Agreements which will have a significant and beneficial impact

on U.S.-flag shipping were negotiated last year. The U.S./U.S.S.R. Grain Purchase Agreement was negotiated primarily to assure reasonably predictable levels

of U.S.S.R. purchases of U.S. grain, and, thereby, to avoid disruptions in the

U.S. agricultural economy. This Agreement, which was signed on October 20,

1975, provides for annual Soviet purchases of six million metric tons of U.S.

grain over the next five years beginning October 1976. In addition, a new six-year

U.S./U.S.S.R. Maritime Agreement, effective January 1, 1976, was executed in

December 1975. This Maritime Agreement provides for U.S.-flag carriage of onethird of commodities including Soviet grain purchases from the United States

moving in the trade between the two Nations, or an amount equal to Soviet-flag

carriage, whichever is greater. Together, these Agreements will assure the employment of U.S.-flag tankers and other bulk carriers in the carriage of at least

two million metric tons of cargo per year over the next six years. While these

Agreements will certainly benefit the U.S.-flag fleet, they will also provide significant benefits to the overall economy of the United States.

RESEARCH AND DEVELOPMENT

The Maritime Administration research and development program, conducted

under cost-sharing agreements with private industry, supports the development

and dissemination of information and technology intended to yield reductions in

shipbuilding and ship operating costs and, hence, to minimize subsidy requirements. Industry cost-sharing in these activities has increased from zero before

the 1970 Act to approximately 35 percent currently. Specific accomplishments in

this program include—

Effective implementation in five shipyards of a shipbuilding automation

system which improves and accelerates shipyard preparation of structural

plans for new ships and provides for automated control in the cutting of

steel;

Improved performance in propulsion systems, such as that provided by

gas turbine engines, which require less ship space and entail lower operating

costs than conventional systems;

Improvements in ship-to-ship and ship-to-shore communications for increased ship safety and utilization; and

Development of a marine simulation capability used to analyze and evaluate problems concerning ship design, operations and maneuverability.

Maritime research and. development programs will be continued in 1977 at

about current levels. Reductions have been made where possible as some program activities have been substantially completed and require only continuing

support funding.

OPERATIONS AND TRAINING

Three activities within the operations and training appropriation require

separate authorization; these are the National Defense Reserve Fleet, the

Merchant Marine Academy, and the State Marine Schools programs. The remaining activities in Operations and training are authorized by Section 209(a)

of the Merchant Marine Act, 1936, as amended.

The primary objective of the National Defense Reserve Fleet is to maintain a

sufficient number of effectively preserved ships to supplement the active fleet in

time of war or national emergency. In addition to about 100 ships that will be

sold for scrap, the number of retention ships in the reserve fleet has now reached

a fairly stable level of about 280. Merchant ships represent 144 of this total; the
20

rest are Navy ships. The merchant ships in the reserve fleet are an important national asset since they form a principal source of break-bulk shipping capacity to meet national emergency sealift requirements.

Through the authorizations and appropriations for the Merchant Marine Acad- emy and State Marine Schools, the Maritime Administration continues to support quality education and training for the American Merchant Marine. Over the past five years, the Academy and the State Marine Schools have graduated a

total of about 2,500 persons qualified for service as deck or engineering officers in the American Merchant Marine. Six States currently participate in the State Marine Schools program California, Maine, Massachusetts, Michigan, New York and Texas. These institutions and the Federal Academy provide the training

necessary to maintain the high quality of the American Merchant Marine.

GREAT LAKES

At this point, -I'd like to briefly review some specific actions that are being taken to assure that the Great Lakes area receives an equitable portion of Mari- time Administration efforts. These actions will be elaborated in our report to you which is required by the fiscal year 1976 authorizing legislation.

In the construction differential subsidy program, an application was received in January 1975 for ships to be built for the Great Lakes-foreign trade. This application involves the construction of three multi-purpose bulk ships. The Mari- time Administration has reviewed this application and is awaiting final financial arrangements by the prospective owners prior to completing the reviews. There

are other indications of interest in shipbuilding for the Great Lakes trade, and

we are looking forward to receiving more applications in this area.

A long-term operating-differential subsidy contract has been awarded to Lykes Bros. Steamship Co., Inc. to support its service between Great Lakes and Medi- terranean ports. Farrell Lines Incorporated, in accordance with its existing op- erating-differential subsidy contract on an Atlantic to South and East Africa

voyage, has also called at several Great Lakes ports. Additionally, a Great Lakes Region Office has been established with Headquarters in Cleveland, Ohio. The Office will be staffed with specialists in such areas as ship operations, domestic shipping, and port systems. There are also Maritime Administration field rep- resentatives in market development offices in Chicago and Detroit working to

promote U.S.-flag service in the Great Lakes for th foreign and domestic

commerce.

I would now like to turn to the specific authorization request for 1977.

No new appropriation authorization is requested for the 1977 ship construction

program.

Current projections for the remainder of 1976 through 1977 indicate that ship- building programs over the next two years can be funded within amounts currently available. These amounts total $449,011,000 and consist of $213,000,000.

from the appropriations for 1976 and the Transition Quarter and $236,011,000'

from 1975 unobligated balances. The available funds will be distributed to provide program levels of $200,011,000 in 1976; $2,000,000 in the Transition Quarter;

and $247,000,000 in 1977. This compares with an actual 1975 program level of

$101,580,000 and therefore reflects substantial confidence in recovery of commercial shipbuilding demand. Subsidized construction in 1977 is projected for eight

ships, including six liquefied natural gas carriers and two containerships. The

conversion of two ships is also planned.

The liquefied natural gas carriers in the 1977 program are expected to beordered in connection with liquefied natural gas projects now under consideration by the FPO. Two of these projects will involve the U.S. construction of a

total of 11 ships. These projects have already achieved final contracts for the

purchase of liquefied natural gas from Algeria and Indonesia. The ship.construction program includes the funding for three of these ships in 1976, six in

1977 and the remainder in subsequent years. Contracts for the construction of

containerships are expected to result from the increasing interest of the industry

in this ship type as older ships require replacement.

The appropriation authorization requested for operating-differential subsidies

is $403,721,000. This is an increase of $57,550,000 over revised 1976 requirements.

The existing 1976 appropriation authority for this program is $315,936,000.

Draft legislation is being proposed to increase this authority by $30,235,000 to a

revised total of $346,171,000. The increase in funds is necessary for support of

the bulk Carriers that will carry the U.S. share of 1976 Soviet purchases of

U.S. grain.
21

Subsidized U.S.-flag ship operations planned for 1977 include 5.8 ship years for passenger and passenger/combo ships, 169.4 ship years for general cargo ships and 34.8 ship years for bulk ships. The total 1977 ship years for bulk ships include 13.6 ship years—a decrease of 17.9 from adjusted 1976 levels— for the carriage of anticipated U.S.S.R. purchases of grain during the year. The 1977 purchases are estimated at a total of 6.0 million metric tons—the minimum purchase set forth in the current U.S./U.S.S.R. Grain Purchase Agreement. Exclusive of this U.S.-flag carriage, the requested authority will provide for

an increase of 15 ship years over 1976 levels. This is primarily the result of de- livery of seven new bulk and two new cargo ships into the subsidized fleet during

1977 and the full year operation in 1977 of ships which entered the fleet in 1976. The primary factors contributing to the increase in subsidy in 1977 are: (1) the escalation of U.S. and foreign operating cOsts over 1976 costs which involves

a total of $22,754,000; and (2) the establishment of a new base period cost in

1977 for determining wage subsidy which will cost $20,918,000. The remainder of

the increase is due to additional ship years and payments due for prior year ship

operations.

Appropriation authority requested for research and development in 1977 totals

$19,500,000. This includes an increase of $7,268,000 over the appropriation authority enacted for 1976.

Total funding for the 1976 research and development program was $19,768,000

consisting of an appropriation of $12,000,000 and funding from deferrals of

prior year appropriations totaling $7,768,000. The 1977 appropriation authority

will provide for the continuation of the 1976 program at essentially the same

levels with some adjustments for individual projects as they advance toward

implementation or completion.

The appropriation authority requested for National Defense Reserve Fleet

expenses totals $4,560,000.

The increase of $318,000 over 1976 in this program is primarily associated

with higher costs of supplies, utilities, and repair and maintenance for the fleet's

service craft. Also, funds have been requested to institute a program for

salvage of machinery items from ships scheduled for scrapping. These items

are intended for use as spare parts on retention ships, principally the VICTORY

ships.

The 1977 appropriation authority requested for the Merchant Marine Academy

is $13,260,000. This represents an increase of $1,760,000 over the 1976 level.

This level of appropriation will provide sufficient resources to meet significant

increases in operating costs, continue accomplishment of the facilities modernization program, and provide an increased level of funding for the ongoing

maintenance and repair program.

The 1977 modernization program includes major renovation of Bowitch Hall.

This building is one of three principal academic buildings and contains most

of the general classroom space. Renovation will provide improved space for

classrooms, laboratories, and academic office space; improve lighting to meet

current standards of illumination; improve heating and ventilation; and replace

deteriorated fenestrations, piping, wiring, and other facilities to bring the building up to current generally accepted standards for academic buildings. The 1977

program also includes funds for design work for Fulton Hall, the third and

final principal academic building to be renovated. Five other smaller projects will

also be funded. Accomplishment of the modernization program at the Academy

has been planned to minimize disruption to the Academy's overall program.

This program primarily funds renovation and modernization of buildings that

are 34 years old and does not represent any significant expansion of facilities.

Your Committee's support of this program is greatly appreciated.

Appropriation authority requested for State Marine Schools in 1977 totals

$3,741,000. This is a decrease of $967,000 from 1976 levels.

The requested funding level for the State Marine Schools program continues

the 1976 program level with a small increase in funds requested for increased

costs of maintenance and repairs of the schoolships. A small increase in the

number of cadets receiving allowances will also be provided for. This is offset

by a decrease in funds associated with the one-time increase provided in 1976

for the procurement and installation of pollution control systems on the

schoolships.

This completes my prepared statement. I will be pleased to address any questions you may have.
•

22

Senator BEALL. Our next witness is Mr. Edwin M. Hood, president

of the Shipbuilders Council of America.

It is nice to see you, Mr. Hood. You may proceed as you wish.

STATEMENT OF EDWIN M. HOOD, PRESIDENT, SHIPBUILDERS

COUNCIL OF AMERICA, WASHINGTON, D.C.

Mr. HOOD. I have a brief statement; it won't take very long.

Mr. Chairman, this opportunity to discuss the present posture of

subsidized merchant shipbuilding in the United States within the

framework of the proposed fiscal year 1977 Maritime Administration

authorization bill (S. 820) is greatly appreciated. As you may recall,

the Shipbuilders Council of America is composed of major shipbuilders, ship repairers, and ship component manufacturers in all sections of the country. On behalf of our membership involved in the

construction of merchant vessels, I will try to put the current situation

in timely perspective.

Section 2 of the Merchant Alarine Act of 1970 states:

That the Congress hereby finds and declares that the national policy set forth

in section 101 of this act (the Merchant Marine Act of 1936) requires that there

should be authorized and appropriated for fiscal years 1971 through 1980 such

sums as may be necessary to construct 300 ships of such size, types and designs

as the Secretary of Commerce may consider best suited to carry out the purposes

and policies of this act.

The above language clearly mandates support for the construction

of 300 merchant vessels over a 10-year period. It is the "law of the

land" despite disclaimers suggesting that the Congress intended something else; a lesser total number of "national" or "equivalent" vessels

of larger ship size is frequently mentioned in this context.

Nevertheless, by any criteria, it becomes increasingly evident that

implementation of the 1970 act is falling far short of its statutorily

enacted objectives for the construction of merchant ships for foreign

trade operations.

Availability of CDS funding has not been the problem. The Congress has consistently authorized and appropriated sufficient money

for this purpose: The sum of $187.5 million in fiscal year 1971, $229.7

million in fiscal year 1972, $425 million in fiscal year 1973, $305 million

in fiscal year 1974, $275 million in fiscal year 1975, and $195 million in

fiscal year 1976. Approximately $150 million from previous years' appropriations are still available and uncommitted.

At a CDS rate of 35 percent, $450 million would support the construction of merchant ships with a total value of nearly $1.3 billion.

The comparable figure at a 40-percent CDS level would be more than

$1.1 billion—and exactly $1 billion at a 45-percent rate.

But because of the current world shipping recession and global

economic uncertainties, deriving principally from the 1973 Middle

East oil embargo, the outlook for merchant shipbuilding is today unclear and unpredictable. Most shipowners and operators worldwide

are hesitant about acquiring new ships at this time. In this country,

administration spokesmen, as you have just heard, see new building

prospects for no more than 15 vessels over the next 21 months—over

the balance of fiscal year 1976 and through fiscal year 1977.
23

With a reserve of $450 million, one can easily rationalize the action

of the administration in not asking for new CDS money as a part of

the proposed fiscal year 1977 budget. But it would be truly tragic if

an attitude of laissez-faire were to persist.

The Congress must take cognizance of the evidence that the enunciated policy goal of an average of 30 ships per year is not being met.

From the standpoint of hindsight, as Mr. Blackwell suggested earlier,

it might have been better to express shipbuilding goals in a different

manner, but the statute specifically prescribes the construction of "300

ships of such sizes, types, and designs" as may be necessary over a 10-

year period to enhance the purposes of the act. The number 300 is

plain.

In this regard, reports of the Congress, after enactment of the 1970

act, initially emphasized the construction of 300 ships over a 10-year

period and later switched to an emphasis on a 10-year program to improve shipyard efficiency.

In one instance (House Report 93-234) , the program was described

as envisionino•

''

"the construction of a substantial number of vessels

equivalent to 300 scr-called 'modern ship equivalents' over a 10-year

period." However, the 1970 act was never amended accordingly.

Numbers of ships are the units by which shipbuilding production

are measured, and it now seems clear that a goal of 300 ships by 1980,

as intended by the Congress in enacting the 1970 act, will not be

reached.

From 1971 through 1980 (10 years) , the time frame of the shipbuilding program contemplated by the 1970 act, a total of 83 CDS

subsidized ships will have been delivered by U.S. shipbuilders, for

an average of about 8 ships per year; these include 40 tankers (oil

and LNG), 2 oil/bulk/ore (OBO carriers), and 41 cargo vessels.

From 1960 through 1970 (11 years), under the then existing merchant ship replacement program, 156 CDS subsidized ships were

delivered by U.S. yards for an average of about 14 ships per year.

These were all cargo vessels (no tankers or bulk carriers).

From 1971 through 1980 (10 years) , 102 nonsubsidized merchant

ships, including 2 other vessels for Government account (icebreakers) , will have been built and delivered by American yards,

mostly for domestic operations.

On the basis of actual deliveries, the present outlook, and taking

into account the possibility of contracts for 15 additional ships (mentioned earlier) , the policy goal for 300 ships will not be achieved

by 1980. Actual and projected "slippage" in the 1970 act program

has to be placed at a total of 217 ships as of January 1,1976.

These statistics, Mr. Chairman, are supported by the tabulation

attached to my statement.

This pattern has regrettably been overshadowed by the dimensions

of the short-term U.S. merchant shipbuilding backlog which, in turn,

has tended to obscure the sharp slowdown in new contracts and the

impact of that slowdown on the shipbuilding industry 2 to 3 years

hence.

At the end of 1978, on the basis of today's outlook and delivery

schedules, U.S. shipbuilders will have only seven merchant vessels
24

under construction. Employment in that portion of the U.S. shipbuilding industry devoted to the construction of merchant ships will

therefore begin to drop sharply after mid-1977, perhaps sooner. Without new orders promptly, these shipyards

'

many of which are located

in areas of chronic unemployment, will face an uncertain future.

The consequences in real terms of retaining skilled workers, operational stability, utilization of new facilities, procurements from supporting industries and services, fiscal solvency, and tax revenues plus

offsetting social expenditures by the public treasury could be

significant.

Obviously, availability of CDS will not alone produce ship construction contracts. Other factors such as market conditions, availability of matching private capital, governmental policies, national

interests, and cargo stimulation are involved. The last element is perhaps all important and has a distinct correlation with the others. Unfortunately, however, the 1970 act does not effectively address the

issue of cargo stimulation. Nor does the prevailing laissez. faire policy

of the administration in this respect.

Nonetheless, without an increase in the volume of cargoes (exports

and imports) carried by U.S.-flag shipping, opportunities for the construction of merchant ships in American shipyards will be severely

circumscribed with a resulting serious erosion in the adequacy of

merchant shipping and shipbuilding capabilities to serve urgent national security, national defense, and national interest requirements.

Of course, the 1970 act has produced benefits for the American

merchant marine, not the least of which has been a significant volume

of contracts for U.S. shipbuilders. Those benefits have been properly

praised by all of us, and I can assure you our industry is truly grateful.

But on the other hand, the path of present trends that thwart congressional intentions as they involve merchant ship construction under Federal auspices should be a matter of abiding concern for the

Congress, for all of us.

It must be recognized that the numbers and trends here cited are

indicators of even more disturbing future developments unless effective countermeasures are promptly taken. For example, a national

cargo policy, as you mentioned earlier, Mr. Chairman, envisioning

programs to encourage not only the carriage of more U.S. exports

but also the carriage of more imports of vital materials, bulk and

liquid, exclusive of liner cargoes, in reasonable quantities, aboard U.S.

flag, U.S. built ships could shape substantial merchant ship construction opportunities for American shipbuilders and provide some

degree of long-term stability for shipyard operations and shipyard

labor.

At the same time, the purposes of the Merchant Marine Act of 1970

would be enhanced.

[The table referred to follows:]
0

25

MERCHANT TYPE VESSELS DELIVERED BY U.S. PRIVATE SHIPYARDS (1,000 GROSS TONS AND OVER)

Year

NumberGross

tons

Built with construction subsidy

Built for Government account

For U.S. flag, no

subsidy

For foreign

registry

Number

Gross

tons

Number

Gross

tons

Number

Gross

tons

Number

Gross

tons

1960 25 404, 200 9 90, 500 1 2, 700 13 255, 000 2 56, 000

1961 25 369, 100 18 190, 100 7 178, 900

1962 27 385,000 23 260,387 1 13,400 3 111,200

1933 34 421, 800 26 295, 600 8 126, 200

1964 16 223,800 11 122,200 5 101,600

1965 16 180,200 11 120,300 5 59,900

1966 13 161, 100 12 138, 100 1 23, 000

1967 13 162, 900 10 126, 300 1 12, 000 2 24, 600

1968 24 329,300 17 234,000 7 95,300

1969 22 416,100 14 209,100 8 207,000

1970 13 369,900 5 112,800 '8 257,100

1971 14 407, 100 6 150, 000 8 257, 100

1972 20 511,900 9 202,800 11 309,100

1973 34 886,600 18 511,900 16 374,700

1974 1 24 2 684, 300 11 445, 700 13 237, 600

1975 19 469, 300 5 242, 200 1 4,900 13 222, 200

1976 2 31 1, 245, 300 19 963, 700 1 4,900 11 281, 600

1977 2 20 1, 254, 750 9 710,450 11 544,300

1978 2 18 1, 519, 375 5 643, 375 13 876, 000

1979 2 5 471,000 1 199,000 4 272,000

1980 2 2 98,000 2 98,000

Includes 3 tankers for long-term charter to MSC totaling 46,500 gross tons.

2 Estimated on basis of orderbook as of Jan. 1, 1976.

Note: MSC (MIST) construction included under "Built for Government Account".

Senator BEALL. Thank you, Mr. Hood. The thrust of your testimony

is we can subsidize construction, but in the final analysis, if we don't

need the ships to haul cargo, we aren't going to be able to build them,

in spite of the subsidy?

Mr. Hoop. Absolutely correct.

Senator BEALL. You heard the arguments given in response to my

inquiry about the national cargo preference policy, or specific cargo

preference policy.

Mr. HOOD. Yes.

Senator BEALL. The principal objection appears to be the fear of

retaliation. How do you respond to that argument, about possible

retaliation?

Mr. HOOD. I believe there have been a number of reports issued over

the past 2 years, Mr. Chairman, which dramatically demonstrate that

most other maritime countries are, through either statute or osmosis,

channeling more cargoes to this own flag fleets.

I don't think we should necessarily have to match every country

in its actions in these respects. But I would suggest to you that a

modest increase from the 6-percent figure you cited to something like

15 percent would promote and stimulate substantial benefits for

American-flag shipping as well as for American shipbuilders.

Senator BEALL. It is my observation that the United States is inclined, as a 'natter of policy, to object to changes constantly out of the

fear of retaliation. As a result we generally suffer because of Ns seeming phobia we have that someone is going to retaliate against us.
26

We just went through the legislation extending the U.S. fishery

jurisdiction to 200 nautical miles and all we heard from the State

)Department is "Oh, you can't do that. Someone is going to retaliate."

Well, they are already retaliating, even before we have the legislation signed into law: I hope we can do something about this. It appears

the policies under the United Nations may be changing a little bit in

that respect under the new leadership and we may no longer have to

follow that policy with regard to the merchant marine.

Mr. HOOD. In a little different vein, Mr. Chairman, about 10 years

ago, Japan indicated a national direction to carry at least 75 percent

of its exports and imports aboard Japanese-flag vessels.

At that time I am not aware that any country in the world, including

the United States, threatened retaliation.

And, I would also remind you, that goal of 75 percent is moving

rapidly toward achievement.

Senator BEALL. Thank you for your testimony.

Mr. Hoop. Thank you, Senator.

Senator BEALL. This concludes the hearing for today.

[Thereupon, at 3:25 p.m. the hearing was adjourned.]

[The following information was received for the record:]

LABOR-MANAGEMENT MARITIME COMMITTEE,

Washington, D.C., February 3,1976.

1-10n. RUSSELL B. LONG,

Chairman, Subcommittee on Merchant Marine, Committee on Commerce, U.S.

Senate, Dirksen Senate Office Building, -Washington, D.C.

DEAR SENATOR LONG: The Labor-Management Maritime Committee composed of

major U.S. flag steamship lines and maritime unions supports the proposals

presented by the Assistant Secretary of Commerce for Maritime Affairs for

authorization for funding maritime programs for fiscal year 1977. These proposals were the subject of hearings before your Committee on February 2, 1976

(S.820).

We note that the total of $444,782,000 requested for fiscal year 1977 authorization provides some $99,245,000 less than for fiscal year 1976 due, in great measure,

to the absence of any provision for new construction differential subsidy funds.

This stems principally from changes in the international petroleum situation

where prices and marketing conditions have brought about a worldwide decline

in tanker operations with appreciable tanker layups. Worldwide over-tonnage in

this area has also brought about cancellations in planned tanker construction.

We note further that carry-over funds are considered adequate to proceed with

other types of programmed ship construction without additional authorization

and appropriations.

We have reviewed the requests submitted for other maritime funding requirements •and believe the justifications submitted by the Assistant Secretary of

Maritime Affairs are very valid. These requests include $403,721,000 for operating

differential subsidy; $19,500,000 for research and development; $4,560,000 for the

National Reserve Fleet; $13,260,000 for the Merchant Marine Academy, and

$3,741,000 for the State marine schools.

We hold forth hopes for later expansion of U.S. flag tanker operations as conditions change but believe this can be greatly advanced by passage of cargo

preference legislation such as is now proposed in H.R. 1071. We trust this legislation can be called up for hearings soon. Its enactment into law would greatly

enhance tanker construction in U.S. shipyards.

Meanwhile, we give full support to the request of the Assistant Secretary of

Commerce for new authorization for the appropriation of $444,782,000 broken

down as above for fiscal year 1977.

We respectfully request that this statement be made a part of the record in

the hearings on maritime appropriations for fiscal year 1977.

Respectfully,

EARL W. CLARK,

TALMAGE E. SIMPKINS,

Codireotors.
27

U.S. SENATE,

OFFICE OF THE ASSISTANT MINORITY LEADER,

Washington, D.C., February 10, 1976.

Hon. ROBERT J. BLACKWELL,

Assistant Secretary for Maritime Affairs,

Department of Commerce,

Washington, D.C.

DEAR MR. BLACKWELL : In connection with the recent Senate Commerce Committee hearings on the FY 1977 authorization bill for the Maritime Administration, I shall appreciate it if you will respond for the record, to the following

questions:

(1) What has been the per student costs at each of the State maritime schools

for each year since enactment of the Merchant Marine Academy Act of 1958?

Please provide the percentage of each student's costs received from the Maritime

Administration.

(2) What has been the Federal share of the total costs of each school for

each year since 1958?

(3) Please indicate the Federal cost on a per student basis for the U.S.

Merchant Marine Academy at Kings Point, for each year since 1958.

(4) If possible, provide for the most recent 5-year period, the number of

graduates from each school, and the percentage of those graduates who subsequently found jobs in maritime related fields. To the extent possible, could

you provide a breakdown of the types of jobs involved?

(5) Could you provide a comparison of the type and amount of Federal support for other maritime related schools as well as the amount of assistance for

students in other specialized schools, such as ROTC? Please indicate the Federal

share of student costs.

If you have any questions, please contact David Clanton of my staff at

224--2708.

With best wishes, I am

Sincerely,

ROBERT P. GRIFFIN,

U.S. Senator.

MARCH 9, 1976.

Hon. ROBERT P. GRIFFIN,

U.S. Senate,

Washington, D.C.

DEAR SENATOR GRIFFIN: This is in response to your letter of February 10, 1976,

requesting information on the Federal and State Academies. For your convenience we have listed your questions and our responses on the attached pages.

We trust that this information will be of assistance to you and will be glad

to assist you further should you require any additional information.

Sincerely,

HOWARD P. CASEY,

ROBERT J. BLACKWELL,

Assistant Secretary for Maritime Affairs.

Attachments.

Question 1. What has been the per student cost at each of the State maritime

schools for each year. since the enactment of the Maritime Academy Act of 1958?

Please provide the percentage of each student's costs received from the Maritime

Administration.

Answer. The following table shows our estimates of the total cost per student

per year at each school and what percentage of that cost was defrayed by

Maritime Administration funds.
28

STATE MARITIME SCHOOLS

[In dollars]

Fiscal

year

California Maine Massachusetts Michigan New York Texas

Estimated

total

cost 1

Marad,

percent 2

Estimated

total

Cost 1

Marad,

percent 2

Estimated

total

COSt 1

Marad,

percent 2

Estimated

total

Cost 1

Marad,

percent 2

Estimated

total

Cost 1

Marad,

percent 2

Estimated

total

COSt 1

Marad,

perCent 2

1959 (3) (2) (3) (3) (3) () 3 (3) () 3

1930 2,697 41 3, 183 31 2,768 45 3,077 25 

1961 2,938 39 2,901 34 3,421 39 3,087 26 

1962 3,657 32 3,171 33 3,452 39 3,519 24 

1963 3,408 34 3, 182 35 3,404 40 3,412 26 4 9, 502 4 43

1964 4, 169 30 2,897 31 3,754 38 4,741 18 8,811 33,

1965 4, 398 29 2, 892 33 3, 823 37 4, 532 19 6,693 28

1966 4,435 28 3,032 31 4,904 31 4,834 17 7,056 32

1967 4, 549 26 3, 082 29 4, 083 33 5, 057 16 5, 589 33.

1968 4,750. 28 3,296 29 4,464 34 5,325 15 5,634 37

1969 5, 161 28 3,725 28 4,246 33 5,741 15 6,636 41

1970 5,790 24 4,370 23 4,665 34 58,393 248 5,652 21 7,305 30

1971 6,623 34 4,485 27 5,649 38 7, 106 38 5,865 15 7,809 25

1972 6,691 32 5,073 21 4, 511 24 7,342 28 6, 131 13 8,091 24

1973 7,069 27 5,769 17 4,644 20 8,777 32 6, 382 14 9,913 31

1974 7,786 20 7, 176 20 4,872 24 7,701 36 7,020 17 14, 379 25

1975 8,405 21 7,957 21 5,230 21 7,306 40 7,708 18 13, 165 23

1 Includes Marad, State, student, and miscellaneous funds.

2 Reflects costs for maintenance and repair of the schoolship, grant to the school and student allowance payments, as

a percent of total, without differentiating subsidy status of cadets.

The Maritime Academy Act was approved on Aug. 18, 1958. Information for fiscal year 1959 is not readily available.

4 school commenced operating in June 1962.

5School enrolled its first class in January 1970.

Question 2. What has been the Federal share of the total costs of each school

for each year since 1958?

Answer. Please refer to the table provided in answer No. 1 which shows the

percent of the total cost per student per year defrayed by Maritime Administration funds. Information on Federal funds the schools may have received from

other Federal sources is not readily available.

Question, 3. Please inidcate the Federal cost on a per student basis for the .U.S.

Merchant Marine Academy at Kings Point, for each year since 1958.

Answer. The following table shows our estimates of the net Federal cost per

student per year at the U.S. Merchant Marine Academy.

Net Federal cost per student per pear"

Fiscal Year:

1958 $2, 453

1959 2, 472

1960 3, 030

1961 3,005

1962 3,14g

1963 3, 291

1964 3,449

1965 3, 538

1966 3, 769

1967 4, 597

1968 4, 783

1969 5, 192

1970 5, 873

1971 6, 151

1972 6, 875

1973 7, 497

1974 7, 703

1975 8, 300

These costs do not include expenditures for modernization and major repairs.
29

Question 4. If possible, provide for the most recent 5-year period, the number of graduates from each school and the percentage of those graduates who subsequently found jobs in maritime related fields. To the extent possible, could you

provide a breakdown of the types of jobs Involved?

Answer. Based on information furnished us by each of the schools we have

prepared the table below on the number of graduates from each school and the

percentage of graduates who found employment in maritime related fields.

Information on the specific types of jobs involved is not readily available on a

consistent basis for all the Academies.

Class ofSchools 1971 1972 1973 1974 197,5

U.S. Merchant Marine Academy:

Number of graduates 214 211 196 183 201

Percent maritime related 1 62 84 74 88 85

California Maritime Academy:

Number of graduates 71 61 61 52 56

Percent maritime related 1 56 93 92 100 91

Maine Maritime Academy:

Number of graduates 117 95 110 116 80

Percent maritime related 1 50 80 90 85 87

Massachusetts Maritime Academy:

Number of graduates 74 72 (2) 69 102

Percent maritime related 1 49 68 (2) 81 75

Great Lakes Maritime Academy:

Number of graduates 6 9 13 15

Percent maritime related 1 83 89 85 87

State University of New York Maritime College:

Number of graduates 109 108 124 ' 127 130

Percent maritime related 1 45 88 87 68 76

Texas Maritime Academy:

Number of graduates 30 15 14 16 18

Percent maritime related 1 90 100 100 100 100

1 Includes graduates who were employed in deep sea and domestic shipping, Navy, Coast Guard, and maritime related

areas ashore.

2 No graduating class due to a change in curriculum from a 3- to 4-year program.

Question 5. Could you provide a comparison of the type and amount of Federal

support for other maritime related schools as well as the amount of assistance

for students in other specialized schools, such as ROTC? Please indicate the

Federal share of student costs.

Answer. Under the provisions of section 603 of the Merchant Marine Act,

1936 (as amended), the Maritime Administration makes operating differential

subsidy (ODS) payments to specific companies. The U.S. cost elements on which

the calculation of ODS is based include all items of expense required through

collective bargaining agreements. The estimated portion of ODS payments made

to subsidized steamship companies, which can be directly related to company

contributions to industry training operations in fiscal year 1975, was $3,727,000.

Sufficient information is not available to compute the estimated Federal cost

per student.

With regard to Federal assistance for students in ROTC programs our information is limited to 'the Naval Reserve Officer Training Corps programs. We

understand that the Navy has a NROTC scholarship program which offers the

following benefits: all tuition paid, all books furnished, $100 per month subsistence allowance during the school year and a $1,000 uniform allowance. The

NROTC college program offers students not selected to receive a scholarship an

opportunity to participate in NROTC. The monetary benefits of the college program include a $1,000 uniform allowance and $100 per month subsistence allowance during the junior and senior years.
.