Mr. MCCLOSKEY. Is there any meeting in your association as to contributions to specific individuals for any purpose? Mr. MASKIN. No. Our members, of course, always have the option of making contributions as individuals, but I can never recall a discussion at any association gathering regarding contributions. Mr. MCCLOSKEY. You say there is no formal or informal discussion of congressional or Presidential candidates that might be supported by the industry? Mr. MASKIN. No, sir. Mr. MCCLOSKEY. You are familiar with the cargo preference bill that passed through this Congress as such? Mr. MASKIN. Yes, sir. Mr. MCCLOSKEY. And rather substantial contributions were made to Congressmen individually from people in the industry? Mr. MASKIN. Yes, sir. Mr. MCCLOSKEY. Any individual from your association, or any officer make any substantial contributions to these people? Mr. MASKIN. I do believe there were contributions made by individuals in our association. I could not enumerate those nor do I know whether the contributions would be termed substantial. Mr. MCCLOSKEY. What is the basis of your statement that you just made? What is the source of your knowledge? Mr. MASKIN. Word of mouth. Mr. MCCLOSKEY. Word of mouth? Mr. MASKIN. Yes. Mr. MCCLOSKEY. The difficulty is that we all come under considerable criticism, and I think justifiable criticism, when it turns out that substantial contributions have been made to individuals who supported that legislation. Are you able to furnish us particulars with contributions that have been made, say since 1970, to additional Members of Congress, by either officers or people associated with the companies in your association? Mr. MASKIN. May I confer for just a moment with my colleagues? Mr. MCCLOSKEY. Certainly. Mr. MASKIN. My response to the question, Mr. McCloskey, would be that I have no official accounting of any contribution which may have been made by any individual members within our association. What I can do is give you a list of the officers of the member companies of our association, that is the chief executive officers, and if they have made any contributions, I would assume that these are a matter of record required by law. [The following was submitted:] Ogden Marine, Inc. New York, New York 10017 New York, New York 10005 New York, New York 10017 New York, New York 10022 New York, New York 10004 American Foreign Steamship Corp. 80 Broad Street New York, New York 10004 Morris Ginsberg, President Transport Commercial Co Alton Steamship Co., Inc. P.O. Box 7180, High Ridge Park Edmund Davis, President Transoceanic Cable Ship Co., Inc. Morristown, New Jersey 07960 Sam Maddalidna, General Manager Elizabeth, New Jersey 07207 Capt. Robert J. Murray, General Mr. MCCLOSKEY. They have been since the recent campaign. The concern I have, I think, is readily apparent. I remember recently, that when legislation was passed, there were substantial contributions. I would like to clear it up Mr. MASKIN. You have asked me for a list of ships and tonnage, and with that list I will supply you with the names of the chief executive officers of each company, and as I say, if they had made contributions, that should be a matter of record. Mr. MCCLOSKEY. Thank you very much. I appreciate it. Mr. MASKIN. Thank you. Mr. DOWNING. Thank you very much, gentlemen, for your interesting testimony. The third and final witness this afternoon is Mr. Philip J. Loree, chairman of the Federation of American Controlled Shipping. Welcome to the committee, Mr. Loree. STATEMENT OF PHILIP J. LOREE, CHAIRMAN, FEDERATION OF AMERICAN CONTROLLED SHIPPING; ACCOMPANIED BY EUGENE A. YOURCH, EXECUTIVE SECRETARY Mr. LOREE. Thank you, Mr. Chairman. My name is Philip J. Loree. I am chairman of the Federation of American Controlled Shipping, otherwise known as FACS. With me today is Eugene A. Yourch, the executive secretary of our organization. Mr. Chairman, I have a statement which I think is significant and important, but I propose to gloss over parts of it because of the time factor, and ask that you permit the entire statement to be submitted as part of the record. Mr. DOWNING. Without objection, the entire statement will be submitted in the record. [The statement referred to follows:] 62-989-76—13 STATEMENT OF PHILIP J. LOREE, CHAIRMAN FEDERATION OF AMERICAN CONTROLLED SHIPPING My name is Philip J. Loree. I am Chairman of the Federation of American Controlled Shipping (FACS). With me today is Eugene A. Yourch, the Executive Secretary of our organization. We fully support the general propositions that U.S. flag merchant shipping has strong national defense and national security overtones, and that it is in the national interest to continue to expand the merchant marine under the subsidy provisions of the Merchant Marine Act of 1970. In this regard, we believe that the 1970 Act has already produced positive results in building up an internationally competitive and commercially viable merchant marine. We believe that this program continues to deserve the support of Congress and the Administration. Our primary purpose in testifying is to make sure that the record of your oversight hearings is factually correct in terms of the national security contributions of the U.S. effective control fleet. This fleet is made up of Liberian, Panamanian and Honduran flag ships which American companies have committed to be made available to the United States in the event of war or national emergency. These commitments are based on war risk insurance agreements, voluntary undertakings and/or contractual agreements which, in effect, provide that the ships will be made available in times of crisis in the same manner as U.S. flag vessels. In recent years, the more outspoken advocates of building up the U.S. flag merchant marine have adopted a stance that only U.S. built and registered merchant ships represent an asset in terms of the national security. I agree with what they are saying, except for the word "only." I do not believe that anyone can seriously contend that having the U.S. effective control fleet available as a large reserve fleet for use or requisition in time of war or national emergency is not a plus factor in terms of the national security. This is particularly so when you consider the enormous size of the U.S. effective control fleet-311⁄2 million deadweight tons of carrying capacity, most of it modern tankers, combination vessels, and dry bulk carriers. The replacement value alone of these ships today, if they were to be built in U.S. shipyards, would be upwards of 8 billion dollars— a staggering figure when you consider that the current construction subsidy expenditures amount to about one quarter of a billion dollars per year. I might add that it would probably take as much as two decades to build a comparably sized and varied fleet in domestic yards. In addition, the cost of providing a fleet of 461 vessels with operating subsidies, if these ships were under U.S. registry. would be equally staggering, amounting to at least one-half billion dollars each year. It also should be kept in mind that when we describe the U.S. effective control fleet, we are not talking about some naval architect's plans on a drawing board or an aging fleet in mothballs. These U.S. effective control ships represent a fleet in being, which can be called upon immediately if a war or national emergency erupts. As the Department of Defense and indeed our own organization has pointed out over the years, it has never been intended that U.S. effective control ships should be a substitute for U.S. flag ships. To contend otherwise would be tantamount to suggesting that the existence of a large number of naval vessels in the NATO fleet does away with the need for a strong U.S. Navy. Instead, U.S. effective control ships represent an auxiliary fleet which is available to be called upon in a crisis to supplement the sealift capacity offered by the U.S. flag fleet. As government officials have emphasized on various occasions, the primary task for U.S. effective control vessels during war or national emergency is not to provide direct support to the armed forces, although it is likely that some ships would be employed in this fashion. Instead, as the Department of Defense informed your Committee at the start of these hearings, the value of these vessels lies in "transporting critical materials in times of crisis." In this regard, I should point out that the carrying capacity of these ships is so great that, together with U.S. flag ships, they provide the nation with a sizeable sealift capacity in terms of transporting bulk cargoes under emergency conditions. For example, assuming that during a crisis, conservation, rationing and other measures did not result in a drastic cut back in U.S. oil imports, U.S. effective control tankers alone would have the capacity to deliver 100 percent of current waterborne petroleum imports to our shores. At the same time, under emergency conditions shipping requirements for current import levels of other raw materials, such as iron ore and bauxite, could easily be handled several times over by the combination vessels and bulk carriers under U.S. effective control. It should be kept in mind that the potential value of these ships to the United States goes beyond a shooting war. For example, it is certainly conceivable that in the event of another oil embargo, a national emergency could be declared by the President. Under such circumstances the benefit of having American controlled tankers readily available should be apparant. U.S. effective control tankers and combination vessels, excluding those on ballast voyages, are at any given point in time carrying oil cargoes equal to about 15 days supply in terms of this nation's current consumption of imported oil. Over the years there have been several smokescreen arguments advanced by critics in an obvious effort to discredit the availability and reliability of the U.S. effective control fleet. In all fairness I must say that to my knowledge no such critic has ever gone so far as to suggest that the American companies controlling these vessels would throw patriotism to the winds and refuse to direct the ships to follow orders issued by the Department of Defense. Instead, the criticism has centered on questioning the loyalty of the crews, the alleged refusal of ships to sail during the Vietnam conflict, the sizes and types of the ships, the trading patterns of the ships, and even on the possibility that the flag states might somehow take action which could effectively prevent these ships from being made available under emergency conditions. In the time remaining, I would like to comment on each of these general criticisms. THE CREWS The crews on U.S. effective control vessels are foreign nationals. With respect to the ships controlled by FACS members, about 83 percent are manned by licensed personnel who are nationals of friendly European nations, with the predominant nationality being Italian. I would like to note here that there is a definite advantage in having flexibility in crewing U.S. effective control vessels. In the event that a nation whose nationals are serving on these ships should ever become hostile to the United States, those crews could readily be replaced with nationals of more friendly nations. This, incidentally, is exactly what was done in 1935 with respect to German crews on foreign registered tankers controlled by American interests. As you can appreciate, it would be rather unlikely for a knowledgeable American business enterprise to invest from $10 to $70 million in a ship without making extra sure that it had an expert and reliable master and crew to man the vessel. For economic and safety reasons, as well as security reasons, the shipowner has a direct and continuing interest in recruiting and retaining the highest caliber crews available. That is why the seafarers on ships controlled by FACS member companies receive wages and benefits equal to and almost always greater than those received by crews of their own countries' vessels. Many of these seafarers, especially licensed personnel, have become long term employees working for the same company for many years and participating in company pension and savings plans as well as other benefit programs. In short, they have the same ties to their owning companies as employees here in the United States would have under similar conditions. In 1970 a Navy officer analyzed the crew loyalty issue in an article in the U.S. Naval Institute proceedings as follows: "One often forgets when considering the crew loyalty problem the elementary fact that a man goes to sea to earn a living. . . . In the maritime field, as in any other profession, man will follow the best source of income. Disregarding the 'extras' that most flag of convenience owners offer their crews to maintain the status quo, it is rather improbable that a man would cut off his paycheck by refusing to sail and thereby effectively blackball himself from future jobs with responsible operators. Indeed the commercial sailor may be compared in many respects to to the condottiere; he is paid to perform a service-that of moving goods from one place to another. He will go if he is properly paid, and if he is satisfied with his working conditions. To date no EUSC [U.S. effective controll vessel's crew has refused to sail to Vietnam when their ship has been scheduled for voyages to the war zone." Frankly, no one can say with certitude that under emergency conditions there would not be a single problem involving the crews on 461 different U.S. effective control ships. After all, it was during the Vietnam conflict that some dissident seamen on a U.S. flag ship mutinied and caused that ship to be diverted. But the actual experiences in World War II, the Korean conflict and again during the Vietnam conflict have been that none of the crews on U.S. effective control vessels refused to perform as they were directed. To me, this is hardly surprising because the masters and the crews are trained and conditioned to respond to orders from the owners. In fact, under emergency conditions, they would be even more dependent on their owners to direct them where to proceed, if only because the owners would have continuous direct contact with the ship plus the primary responsibility for assuring that the crew members, the ship, and the cargo would be protected. In summary, I do not think the foreign crews on U.S. effective control ships would present any more of a problem than the foreign seamen who occasionally sailed on some U.S. flag ships during the Vietnam conflict. History tells us that since these crews are carefully recruited, treated well and paid well, they can be expected to perform as directed. VIETNAM On countless occasions critics of the U.S. effective control fleet have sought to create the impression that somehow these vessels failed to perform during the Vietnam conflict. The fact is that during the early years of our involvement in Vietnam the Military Sealift Transportation Service (now Military Sealift Command) did experience a few isolated difficulties in dealing with foreign controlled ships.' But at no time did U.S. effective control vessels fail to perform. I believe that the best rebuttal of the baseless charges aimed at U.S. effective control vessels was provided to this very Committee by then Maritime Administrator Nicholas Johnson during March 1966. He testified: "The government believes these ships to be subject to the 'effective control' of the United States under emergency conditions. We are now not talking about ships owned by foreign citizens and registered in foreign countries-which have in a small number of cases refused to carry our defense cargoes-but ships owned by American citizens. We are talking of plans that, by and large, those ships will continue to serve the raw materials import trades that they now serve-although some of them would be directly involved in the defense effort (and are today). Certainly if the history of the Second World War and Korea is valid for purposes of future planning, history is on the side of this judgment. As a practical matter these ships have been available to the United States when needed." (emphasis added) Contrasted with the unfounded allegations offered by some critics is the actual record of performance by U.S. effective control tankers engaged in the carriage of essential petroleum products to South Vietnam on a commercial basis. We undertook a study in 1967 which revealed that during the 12 months period ending March 31st of that year there were 61 voyages to or between South Vietnamese ports which were made by U.S. effective control tankers. These ships delivered more than 5% million barrels of petroleum products. During the same period these ships spent an aggregate of 429 days in Vietnamese waters on floating storage or shuttle service duty, transporting petroleum products to and from other tankers, including MSTS vessels. I would like to add that none of the U.S. effective control tankers experienced any crew problems. SIZE AND TYPES OF SHIPS From time to time some government officials, including Assistant Secretary of Commerce Blackwell, have suggested that many U.S. effective control vessels are too large, and probably would not be of any direct value in terms of military operations. No one can argue that a VLCC or a large OBO would be ideal for refueling Navy oilers at sea or for transporting military supplies to bases throughout the world. But under emergency conditions these ships could very easily be utilized in transporting critically needed raw materials to the United States where cargoes could be off-loaded onto shallow draft vessels. The larger ships could also discharge at deepwater terminals nearby the United States such as in the Bahamas or the Canadian maritime provinces, where their cargoes could then be transshipped in smaller vessels. Whenever I hear this kind of criticism I am struck by the fact that the very officials who have questioned the size of some U.S. effective control ships, have approved subsidy contracts to build equally large ships for operation under the 1 Press reports during this period cited the cancellation of contracts by three Japanese shipping companies, to carry cargo to Vietnam for the Defense Department, the refusal of the El Mexicano, a Mexican flag ship to transport cargo to Vietnam, and the refusal of the Greek flag ship, Stamatios G. Embiricos, to carry the same cargo in question. |