Question. Are the Merchant ships presently being operated with subsidy money the types best suited for national defense purposes?-Ranking Minority Member McCloskey.

Answer. In addressing the broad issues raised by these questions, I will discuss in some detail the suitability of vessels for direct military support purposes as a part of our mobility forces. With respect to adequacy and need for U.S.fleet vessels for carriage of strategic commercial materials and minimal nonstrategic commercial materials, these are matters of national civil preparedness and need, with the DoD role being that of one of the several claimant agencies for the end product. For this reason, we must defer to the agencies possessing the complete scope of the issues in question.

A list of the vessels built and contracted for under the Merchant Marine Act of 1970 is furnished herewith. With respect to delivery of military cargo, the list of 55 vessels contracted for construction since 1970 includes 32 that would be suitable. This includes 9 barge carriers (LASH and SEABEE) and 4 Roll On-Roll Off vessels considered highly suitable for the movement of military cargo and supplies falling in the dry cargo category, plus 10 tankers in the size range (35,000 and 38,300 Dead Weight Tons) considered appropriate for direct military support. It also includes 9 tankers of 89,700 Dead Weight Tons (DWT) that could also be used for oil delivery to military forces under some circumstances. In addition, the 18 containerships and partial containerships produced and to be produced through conversions accomplished under the Act of 1970, would be useful to varying degrees in the transportation of military cargo.

We do not see a direct military application for the 12 large tankers (225,000 to 390,770 DWT) or for the 2 Oil-Bulk-Ore (OBO) carriers contracted for under the Act. These, however, may well be essential for the movement of strategic commercial materials. The nine Liquid Natural Gas (LNG) carriers contracted for may also be useful for the movement of strategic materials in time of war, assuming that LNG continues to be available for importation. In addition, six of the LNG carriers can be converted for delivery of military oil supplies if this is necessary.

With respect to both vessels constructed under the post-1970 Construction Differential Subsidy (CDS) and operated under the Operating Differential Subsidy (ODS), we are concerned toward inflexibility and its impact on direct military use. The tankers of over 50,000 DWT are limited because of their inability to enter many ports and service military installations. Of much greater concern, however, is the trend away from the versatile and flexible conventional general cargo vessel, carrying its own cargo handling gear and useable under essentially any circumstances and for almost the entire range of cargo characteristics. Not only were these vessels flexible, they were also the substance of the "always available," but now vanished tramp fleet. The barge carrying (LASH and SEABEE) and Roll On-Roll Off vessels shown on the accompanying list retain this flexibility to a large degree. The container vessel, however, is limited by category of cargo that can be containerized. Furthermore, the trend of container vessel construction and conversion is toward a large and simple transporting hull, devoid of on-board equipment for container handling. The ports that can accommodate these vessels are limited to economically advanced trading nations, and, even then, possess a degree of vulnerability. Conversely, contingency response capability dictates that we be able to put cargo ashore under the most primitive conditions, including over open beaches.

The general cargo vessels that are being built and operated today represent highly efficient and effective cargo carrying systems, and this is essential to the economic survival of the liner segment of the U.S.-flag merchant marine, but their flexibility limitations give us some real problems. We are currently conducting major research and development efforts to improve our ability to use these modern vessels. These efforts are primarily centered on cargo transfer in areas lacking sophisticated port facilities, in support of amphibious operations, and in the ability to containerize a broader range of cargo.

In summary, we have some preference for the large carrying and Roll On-Roll Off vessels. We are committed to container vessels, and elimination of obstacles in the way of their wider utility for Defense purposes, but they cannot meet all our requirements. We would look to a renewed National Defense Reserve Fleet, and possibly a small in-house capability, for availability of the mostversatile conventional (break-bulk) cargo vessel.

62-989-76- -2

Question. Whether there continues to be a national defense need for so-called National Defense Features incorporated in some United States-flat merchant vessels?-Chairman Downing.

Answer. We believe that the need for National Defense Features in merchant vessels does in fact continue. We must rely on merchant ships for most of our wartime military and economic support shipping, and the National Defense Features are intended to enhance their utility and survivibility in these applications.

NEW VESSEL DELIVERIES AND CONVERSIONS UNDER THE MERCHANT MARINE MARINE ACT OF 1970

Under section 501 of the Merchant Marine Act of 1936, the Secretary of Commerce is required to submit plans and specifications for vessels, for which construction differential subsidy is proposed, to the Navy Department for examination and such changes as may be necessary to make the vessels suitable for economical and speedy conversion into naval or military auxiliaries, or otherwise suitable for the use of the United States Government in time of war or national emergency. The costs of National Defense Features are funded in the Departmnet of Commerce budget.

At present, the National Defense Features considered most important include compartmentation, improved shock resistance, additional electrical power and evaporating capacity, and increased speed. On certain roll-on/roll-off ships, additional side ports and portable ramps have been provided, hatch and door heights have been increased, additional vehicle lashing points have been installed, and some low-cost modifications have been made to facilitate the loading of combat tanks. Some features are accounted for in design at no additional cost. For example, it is a Natinal Defense Feature objective that no one hatch or level should be a bottleneck in loading and discharging and this is, of course, a basic objective of the ship designer.

In the tanker program, National Defense Features consist of replacing gray cast iron with cast steel or malleable iron fittings and, where appropriate, providing fittings for fueling at sea and highline transfer operations. In addition, as a no cost feature of design, MarAd ensures that piping and deck fittings are arranged to provide maximum clear deck space for lifts of opportunity. You may recall that during World War II, aircraft, tanks and landing craft were loaded on the decks of tankers to take advantage of all possible lift capacity. In 1944, this produced the equivlent of 475 additional dry cargo vessels.

The desired minimum National Defense Feature speed is 20 knots to enhance productivity of the wartime shipping system.

Over the years, the National Defense Features program has led to upgrading of ship design standards, with the result that many characteristics which were once peculiar to the NDF program are now conventional elements of merchant ship design. Compartmentation for survivability is an example. Although the improvements motivated by the NDF program are generally as much for the benefit of the ship owner as of the Government, if we did not have the program it is doubtful that we could count on voluntary adherence by shipowners to national defense design standards. In addition, we need to keep the program in being as the basis for reacting to future requirements as they arise. For example, a potential need has been identified for the capability to refuel VSTOL aircraft on selected merchant ships. We cannot now predict what other new NDF requirements might arise, but when they develop, we shall need the authority to satisfy them.

As a matter of perspective, the national defense features represent a very minor portion of the total vessel cost, running under one percent on the several classes of merchant vessels built over the last ten years.

Question. Whether there continues to be a national defense need for the socalled National Defense Reserve Fleet authorized by Section 11 of the Merchant Ship Sales Act of 1946, as amended (50 U.S.C. App. 1744), and the current status of that Fleet?-Chairman Downing.

Answer. The Maritime Administration is responsible for management of the National Defense Reserve Fleet (NDRF) as a national asset and I am sure there are many points regarding this Fleet that they will want to talk about. The Fleet is very necessary in our defense planning, however, I do believe our views can be helpful.

Both the DoD Military Sealift Command nucleus fleet and the U.S. Merchant Marine are economically sized to meet low level cargo lift requirements. Our mobility studies and analyses clearly indicate that these resources alone are inadequate for a major contingency and require the NDRF and allied vessels. In a non-mobilization contingency, Defense plans on implementation of the Sealift Readiness Program (SRP) to obtain responsive shipping. Under the Sealift Readiness Program, vessels of the U.S. Merchant Marines are withdrawn from their normal trade routes and placed under the Military Sealift Command for carriage of military cargo. The National Defense Reserve Fleet is the only pool of vessels the U.S. can turn to for augmentation of the U.S. Merchant Marine. These vessels do require up to several months for activation and manning. Therefore, they become a resource for maintaining a mobilization pipeline, and in a non-mobilization contingency will replace commercial ships obtained under the SRP, which can then return to their designated trade routes. There are presently 138 general cargo sealift vessels in the NDRF including 130 victory ships of World War II vintage. We would like to see these vessels, over a period of time, replaced with any newer vessels which become excess or are replaced on existing commercial trade routes. By this means the NDRF can be modernized for an assured long-term capability. The NDRF is an essential shipping resource upon which DoD depends. We have plans to support the Maritime Administration in substantially reducing the readiness time for some of these vessels.

Question. Whether the so-called "Effective U.S. Controlled" Fleet retains any national defense value to the United States?-Chairman Downing.

Question. The Department of Defense currently has contracts signed with U.S. owners of foreign-flag vessels. This so-called "U.S. effectively controlled fleet" is pledged to come back under the U.S. flag in time of war or national emergency. Is this fleet reliable? What are its numbers? Would it be feasible to meet the U.S. national defense needs by expanding and developing this concept rather than subsidizing a U.S.-flag fleet?-Ranking Minority Member McCloskey.

Answer. In theory, these vessels would come back to the U.S. in any conditions that required additional shipping. However, there are several points to consider in this matter. First, the fleet of the nation of which the vessel is operating could be a dominant factor since that country may not agree with a particular U.S. action and may order the ship to return to a neutral port or to actually commandeer the ship if it is in an area where the nation has some control or can look to friendly powers. Additionally, the loyalty of the crew could be open for question. As we have found out from instances in World War II, it is relatively easy to sabotage a merchant vessel and would require only one or two disloyal crew members to render a ship useless. Finally, there would be the question of manning it with U.S. merchant crews. The rapidly aging merchant union personnel and

declining number of ships point to a possible difficulty in the future in obtaining sufficient crews to take over these vessels. In view of these considerations, the "Effective U.S. controlled fleet" should not be considered a substitute for U.S.-flag shipping to accommodate defense needs. Further, the vast majority of these vessels are tankers or ore carriers. While these vessels may well prove valuable for transporting critical materials in times of crisis, their direct military utility is limited.

Question. One commentator has suggested that it would be virtually impossible to boycott the U.S. because of the great diversity of ownership of foreign-flat fleets, because most of these fleets are controlled by countries friendly to the U.S., because the U.S. is the world's largest trading nation, and because the U.S. would retain some shipping capacity through its domestic fleet which is required by the Jones Act to be under the U.S. flag. What validity does this contention have? Which nations might be expected to take positions contra to U.S. shipping needs in the next decade?-Ranking Minority Member McCloskey.

Answer, While the boycotting of the U.S. may be difficult in view of the diversity of ownerships of foreign flag ships, it is not beyond the realm of possibilities that an action taken by the U.S. and not popular with any other foreign government could result in a quasi boycott of U.S. ports. In particular, since certain foreign vessels are scheduled to specific ports of the world, it might be relatively easy for a few nations not in accord with our actions to boycott the area in which the action is occurring.

It would be very difficult to list any nations which might be expected to take positions contrary to U.S. shipping needs in the future. The answer to this would depend on many different world situations. What nation today might be with us could be either against us or neutral in the future. It might well be expected that in the majority of cases, Russian block nations would act contrary to our position along with those nations under immediate threat of the Soviets, I do not believe providing the nations by name is a worthwhile exercise since at that time it is too variable. We would defer to State Department for further views on this matter.

Question. What is the possibility of concluding a number of bilateral treaties with friendly countries to make certain portions of their merchant fleets available to the U.S. in times of war or national emergencies?-Ranking Minority Member McCloskey.

Answer. There exists a possibility of concluding some bilateral agreements with friendly maritime nations. The DoD has advocated this and both the Maritime Administration and the State Department, I believe, are considering or actively pursuing this angle. I am quite sure the Maritime Administration could address this question in greater detail. It should be pointed out that under the NATO agreements, foreign governments have committed themselves to providing ships to support the U.S. in a major war in Europe.

Question. Though most U.S. military cargo sent to Vietnam was carried in American ships, some was carried in foreign flag ships. How reliable was that service?-Ranking Minority Member McCloskey.

Answer. Of necessity, due to absence of U.S.-flag shipping, 17 foreign flag ships were taken under charter and an estimated 60 to 70 smaller shipments were made in foreign flag berth line service. There were a few instances where the shipment could not be made because of the political situation. This number was minimized through extra-ordinary measures taken by the Military Sealift Command in selecting the vessel to be used, but it cannot be characterized as being a satis factory situation.

Question. Whether there continues to be a national defense need for efficient American facilities for merchant shipbuilding and ship repair?-Chairman Downing.

Answer. The Department of Defense primarily relies on the U.S. peacetime economy to provide for a wartime capability. Shipyards are a capital intensive industry, and require a highly skilled labor force, both of which must be capable of expansion if Defense needs escalate as during a war. Efficiency of shipyards is of primary importance in that American shipyards must compete with foreign yards and the greater the efficiency the higher the probability that the American yards will prosper, assuring the ready availability of these resources for building and repair of naval ships.

Question. Whether the present capability of the American Shipbuilding Industry is adequate for both military and national defense commercial requirements?-Chairman Downing.

Question. What is the minimum shipyard capacity necessary for national defense needs, given DoD's various contingency plans and assumptions?-Ranking Minority Member McCloskey.

Answer. During the recent hearings conducted by the Seapower Subcommittee of the Committee on Armed Services House of Representatives that concluded in October 1974, the Deputy Secretary of Defense informed the Subcommittee of a number of actions that he proposed. Included among these actions would be a reassessment of the mobilization requirements of the U.S. for shipbuilding, overhaul, repair and conversion of naval and commercial ships and the readiness of the U.S. shipbuilding industry to support these requirements. Subsequently, the Maritime Administration and the Navy initiated two studies to determine the peacetime capability and the mobilization base capability of the shipbuilding industry. Presently, these studies are underway and are scheduled for review within the Department of Defense, Department of Commerce and the Office of Management and Budget during the summer of 1975.

Accordingly, it would be premature to attempt to determine the minimum shipyard capacity necessary for national defense needs. However, present indications are that the U.S. shipbuilding capability is sufficient to satisfy the immediate fiscal year 75 and fiscal year 76 budget requests and the longer range program that presently constitutes the Five Year Defense Plan.

Upon completion of the on-going studies and periodically thereafter, it it expected that pertinent congressional committees will be advised of the assessment of the shipbuilding industry by the Department of Defense and Maritime Administration.

Question. Could an adequate shipyard base for national defense purposes be maintained by relying on non-subsidized construction such as vessels for the domestic trades (Jones Act ships), military vessels, and any other nonsubsidized construction which might be attracted to U.S. yards?-Ranking Minority Member McCloskey.

Answer. As noted in the reply to the question regarding minimum shipyard capacity, a substantive answer as to the adequacy of a shipyard capacity, a substantive answer as to the adequacy of a shipyard base that depended on nonsubsidized construction is not available at this time. It is expected that the ongoing studies that are analyzing the overall capability of the shipbuilding industry will also identify the dependency of the industry on subsidized construction.

A preliminary review of the nation's present commercial shipbuilding program indicates that approximately 45 percent of the deep-draft merchant ships under construction were subsidized. If this work were taken out of the shipyards, the results as they pertain to individual shipyards would vary from no effect to the probable closing of some yards. Prior to the completion of the on-going studies, the Department of Defense considers the present facilities and work-force of the shipbuilding industry (naval and private) adequate to provide the quick reaction necessary in time of emergency. Although it cannot be stated positively, it is believed that the present private shipyard workload could not be sustained without a subsidized ship-building program. As previously noted, the present studies are expected to indicate the actual situation under prescribed conditions. Question. Has DoD analyzed the possibility of a boycott by foreign ship-builders against the U.S.? In view of the fact that foreign-flag vessels could always be transferred to the U.S. flag, how could such a boycott be possible?-Ranking Minority Member McCloskey.

Answer. The possibility of a boycott by foreign shipbuilders against the United States has not been analyzed by the DoD. Since the Navy is precluded by a provision written into the Department of Navy Appropriation Act from using foreign shipyards to build naval ships, such an analysis has not been undertaken.

If in fact an emergency situation necessitated the building of U.S. commercial ships in foreign yards for immediate use, a boycott could be effected by shipbuilding countries either by pointing to overloaded facilities or flat refusal to build such ships. The Maritime Administration is better qualified to respond fully to this question than we are in DoD.

Question. Is it feasible to arrange bilateral treaties with other countries to make their shipyards available for U.S. construction in times of national emergency?-Ranking Minority Member McCloskey.

Answer. It is feasible to arrange treaties with other countries to make their shipyards available for U.S. construction in times of national emergency. Whether it is practical or meaningful is the real question.