U.S. flag. Since this is the case, I suggest that it is safe to assume that there is some national security benefit inherent in large vessels, even though their direct utility in terms of military operations may be minimal. Furthermore, I believe that it is worth mentioning that VLCCS and large combination carriers represent only about 20% of the ships in the U.S. effective control fleet. The many smaller, handy size ships include 182 tankers under 50,000 deadweight tons each, a category which, as the Department of Defense recently advised your Committee, is "considered appropriate for direct military support." There are an additional 63 tankers under 90,000 deadweight tons each, which fit the Defense Department's second category of being useful for "oil delivery to military forces under some circumstances." 2 TRADE OUTSIDE THE UNITED STATES From time to time it has been pointed out, quite correctly, that U.S. effective control ships trade throughout the world, operating for the most part outside the U.S. foreign commerce. In citing this fact, it has been suggested, primarily by the Maritime Administration, that these ships could not be withdrawn by the United States from other trades under emergency conditions without creating "serious economic and political consequences." I have some trouble following this particular line of reasoning. Tankers and bulk cargo vessels are not liner-type vessels operating as common carriers on designated trade routes. They are essentially tramp vessels, in that they trade throughout the world, carrying commercial cargoes on a contract basis. Consequently, it would be unlikely that a particular ally would be in the position of claiming that specific vessels should not be taken out of its trade. Furthermore, it would seem to me that in those situations in which U.S. effective control policy would come into play, the rules of the game as they apply to normal commercial relationships would abruptly change. Surely the United States would have to look at its own needs first and would requisition as many U.S. effective control vessels as it required. Conceivably any excess tonnage would be allocated by the United States to serve the needs of its closest allies. In short, without even considering the fact that there is a worldwide surplus of tankers and bulk cargo vessels, I cannot believe that MarAd is correct in suggesting that the United States would allow the shipping requirements of other nations to take precedence over this nation's needs in time of war or national emergency. FLAG STATE INTERVENTION Recently a new line of criticism directed at the U.S. effective control fleet has emerged which can be traced to the 1973 war in the Mid-East. The critics claim that the President of Liberia issued an executive order prohibiting Liberian flag ships from carrying munitions to the Arab states and to Israel during that conflict, and that this action demonstrated that U.S. effective control vessels might not be allowed to be made available under emergency conditions. I would like to believe that this argument is the last in a line of misstatements and misinformation about the U.S. effective control fleet which began in 1962. At that time a maritime union leader told a Joint Congressional Committee that U.S. effective control ships were trading with Cuba during the Cuban missile crisis. That misinformation was quickly and effectively rebutted by the Department of Defense. Next in line was the constant stream of misinformation about U.S. effective control vessels in Vietnam, which government officials had to rebut time and again. The latest criticism as to the potential effect of the Liberian executive order has been repeated so much and so often since 1973 that apparently even some government officials are beginning to believe that Liberia would or could inhibit the availability of the U.S. effective control fleet. I say this because two weeks ago I heard Mr. Robert A. Carl, a Special Assistant for Transportation to an Assistant Secretary of the Navy, testify before this Committee that this order actually prevented U.S. effective control vessels from being made available to the United States government. As I recall Mr. Carl's comments, he claimed that the U.S. effective control fleet "failed us in the Mid-East situation, and it could fail us tomorrow." The remainder of the U.S. effective control fleet includes some other relatively small ships such as 54 dry bulk carriers under 50 000 deadweight tons each, 8 small refrigerated vessels. 11 general dry cargo ships and 11 small special product tankers. Well, I am here to tell you that Mr. Carl was woefully misinformed, and I hope that the Department of Defense will correct his testimony for the printed record of your hearings. The facts are that the United States did not requisition or charter, and did not seek to requisition or charter, any Liberian ships in the U.S. effective control fleet during the 1973 war. Consequently, the Liberian order simply could not have interfered with the availability of such ships to the United States. In fact, we are told that the Military Sealift Command did not even try to charter U.S. flag ships during that period. Furthermore, and far more important in terms of the availability of the U.S. effective control fleet then, now and in the future, the attachments to this statement confirm that the Liberian government would not regard any such order as applicable to U.S. effective control vessels requisitioned, chartered or used by the United States. This is so because of the overriding effect of Liberian Maritime Regulation 1.41, which covers the use, charter or requisition of Liberian ships in the U.S. effective control fleet. Simply stated, the official position of the Liberian government is that when it approves in advance U.S. effective control agreements, it is in effect ceding its authority subsequently to control the movement of those vessels in the event they are chartered, requisitioned or used by the United States government. Those are the facts, and they are verified by the attached correspondence stating the position of the Republic of Liberia. I hope that these facts will put to rest the misinformation and misunderstanding that has arisen since 1973. I would like to make one further point. If any flag state attempted to interfere with the use of U.S. effective control vessels in time of war or national emergency, the American companies controlling those vessels would have no choice other than to disobey the order or, alternatively, to transfer the vessels in question to another registry-which they are perfectly free to do. The essential fact here is that U.S. effective control ships are controlled by American companies. Putting aside all other considerations, the ultimate availability of the U. S. effective control fleet lies in the fact that these American companies, with American directors, American officers and American shareholders, have made this commitment. CONCLUSION In closing, I urge that your Committee view U.S. effective control vessels in their proper perspective-a large, modern fleet in being, available to supplement U. S. flag shipping capability in time or war or national emergency. APPENDIX The Federation of American Controlled Shipping ("FACS") is a trade association which was formed in 1958 to represent U.S. beneficial owners of vessels registered under the laws of Liberia and Panama. FACS members 1-all of which are American companies-control 332 such vessels with a carrying capacity totalling 27.4 million deadweight tons. Roughly two-thirds of this tonnage is controlled by FACS members as of June 30, 1974 showing types, tonnages and is controlled by independent shipping companies. The following is a listing of the Liberian and Panamanian registered vessels controlled by FACS members as of June 30, 1974 showing types, tonnages and registries of ships: 1 Includes 3 refrigerated vessels, 2 latex/container/dry cargo vessels and 3 LPG carriers. 1 The following companies are FACS members: Alcoa Steamship Company, Inc., Amoco International Oil Company, Atlantic Richfield Company, Bethlehem Steel Corporation, Chevron Shipping Company, Exxon Corporation, Getty Oil ompany, Global Bulk Transport. Inc., Gotaas-Larsen, Inc., Gulf Oil Corporation, International Ocean Transport Corporation. Marine Transport Lines. Inc.. National Bulk Carriers. Inc., Phillips Petroleum Company, Sun Transport, Inc., Texaco, Inc., and Union Oil Company of California. These Liberian and Panamanian registered ships have made it possible for American shipowners, in the absence of construction and operating subsidies, which were not available in any degree prior to October 1970, to compete in the world's commercial bulk cargo trades, the most open and competitive segment of the entire shipping industry. These vessels are competitive because they have essentially the same construction and operating costs as foreign controlled vessels which are predominant in these trades. Since available charters for commercial cargoes such as oil and ore invariably go to ships with the lowest costs and most efficient operations, unsubsidized American flag tankers and bulk carriers, with their much higher construction and operating costs, have been effectively priced out of this international market for several decades. FACS members also own or operate about half of the total tonnage in the privately owned American flag tanker fleet. FEDERATION OF AMERICAN CONTROLLED SHIPPING, Dr. FRANK L. WISWALL, Esq., New York, N.Y., June 6, 1975. DEAR MR. WISWALL: Yesterday I attended a hearing held by the Subcommittee on Merchant Marine of the House Merchant Marine and Fisheries Committee, at which Mr. Robert Carl, Special Assistant for Transportation to an Assistant Secretary of the Navy, testified, in effect, that an order issued by the Republic of Liberia during the 1973 war in the Mid-East prevented American controlled vessels in the U.S. effective control fleet from being made available to the United States government. As I recall Mr. Carl's testimony, he remarked that the U.S. effective control fleet "failed us in the Mid-East situation, and it could fail us tomorrow." Mr. Carl's testimony is wrong with respect to the facts. At no time during that period did the United States government seek to requisition or otherwise have made available to it U.S. effective control vessels. Furthermore, I believe that his testimony is equally misinformed in asserting that the Liberian government could have, by executive order, effectively prevented such vessels from being made available to the United States government during the October war or, for that matter, in another conflict. As you know, in 1960 the Liberian government promulgated Liberian Maritime Regulation 1.41 which provides that subject to written approval of the Liberian government, a Liberian flag vessel can be "made available for the use of, to be chartered or sold to, or requisitioned by another country." Equally important, the Regulation provides that "the granting of such approval shall also constitute approval for making the vessel available under the terms of the said commitment, agreement or arrangement." (Emphasis added.) It is our understanding that if such approval is obtained in advance from the Liberian government, Regulation 1.41 would result in cessation of Liberian control over the vessel upon its requisition or charter by the United States, and thus preempt any subsequent Liberian order or directive preventing or limiting the use of the vessel by the United States. We would appreciate it if you would obtain confirmation trom the Liberian government with respect to the overriding effect of Regulation 1.41 and advise us of the government's position in this regard. If possible, we would also appreciate being advised as to whether Liberia did, in fact, issue an executive order prohibiting Liberian flag vessels from trading with Mid-East nations at the time of the October war. Critics of the U.S. effective control fleet have time and again cited this as an actual fact, and the point has now been reached where some U.S. government officials such as Mr. Carl apparently are accepting the issuance of such an order as a fait accompli. Thank you in advance for any advice you may be able to provide. Sincerely, PHILIP J. LOREE, Esq. PHILIP J. LOREE. REPUBLIC OF LIBERIA, Chairman, Federation of American Controlled Shipping, New York, N.Y. DEAR MR. LOREE: This will acknowledge receipt of your letter of 6 June 1975 inquiring as to the policy of the Liberian Government underlying effective con trol agreements in general, and with specific reference to the 1973 war in the Middle East. I am directed by the Minister of Finance of the Republic of Liberia and the Commissioner of Maritime Affairs, R.L., to respond as follows: Please refer to Executive Order IV of 2 November 1973 regarding the carriage of arms by vessels of Liberian Registry to the combatants in the Middle East. The Executive Order never applied to vessels under approved commitments or effective control agreements provided for in Liberian Maritime Regulation 1.41. Such vessels are under approved commitment or agreement for use by another country and must, in accordance with sentence two on paragraph one of the regulation be made available if the agreement or commitment is invoked. The Executive Order is not intended to apply to such vessels in the event that such agreements may be invoked to utilize the vessels in the area referred to in the Order. Furthermore, the Executive Order was never passed into law and therefore automatically expired one year after it was issued. I must state that the Government of Liberia has no record of any invocation by the Government of the United States of an approved commitment or effective control agreement during the period of the 1973 Middle East war. Nor was any vessel nominated by the Government of the United States to carry any cargo to the Middle East during the 1973 war denied permission to do so by the Government of Liberia, irrespective of the existence of an approved commitment or effective control agreement. As a further clarification, let me point out that Executive Order No. IV could never in fact have taken effect even if it had been passed into law, as by its own terms it could have remained in force only "so long as a state of war exists in that geographical portion of the world." By the time that the draft Order reached the President of Liberia for signature, an agreed cease-fire was already in effect in the Middle East. I attach hereto a copy of Liberian Maritime Regulation 1.41, which sets forth, in the 2nd sentence of paragraph (1) thereof, the continuous statutory obligation of the Republic of Liberia with regard to effective control agreements. Yours sincerely, Attachment. 1.41. Commitments. Dr. F. L. WISWALL, Jr.. Admiralty Counsel, Bureau of Maritime Affairs. (1) It shall be unlawful after January 1, 1960, without the approval in writing of the Commissioner of Maritime Affairs of Liberia, or any one of his authorized agents, to make, enter into or execute any commitment, agreement or arrangement whereby a Liberian flag vessel is to be made available for the use of, to be chartered or sold to, or requisitioned by, another country. The granting of such approval shall also constitute approval for making the vessel available under the terms of the said commitment, agreement or arrangement. (2) Copies of any such proposed commitments, agreements or arrangements must be submitted, together with the application for approval, and, if approved a true copy must be filed with the Commissioner or Deputy Commissioner within thirty days after the formal execution of said commitment, agreement or arrangement. (3) This regulation shall not apply to day-to-day current commercial transactions providing for the carriage of cargo under booking contracts, contracts of affreightment, voyage charters and time charters. (4) Any violation of this regulation shall subject the offending party to cancellation of the certificate of registry of his vessel, as well as such other penalty as in his acts may be involved, as provided by the Maritime Law of the Republic of Liberia and Regulations thereunder. Eff. 9 Apr. 1960. Certified true and correct June 12, 1975. Mr. LOREE. Thank you very much. F. L. WISWALL, Jr. Basically, my purpose in testifying here today 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. As I am sure you know, this fleet is made up of Liberian, Panamanian, and Honduran flagships, 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 crises in the same manner as U.S. flag vessels. As you know, Mr. Chairman, we are talking about 31.5 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 would be upwards of $8 billion. It would also probably take about 20 years for U.S. yards to build comparably sized and varied fleet in domestic yards. In addition, the cost of providing this 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. We are not talking about some naval architect's plans on a drawing board or an aging fleet in mothballs. This is a fleet that can be called upon immediately if a war or national emergency results. Over the years, the Department of Defense and our own organization has stated on various occasions that 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. I should point out that the carrying capacity of these ships is so great that, together with U.S.-flagships, they provide the Nation with a sizable sealift capacity in terms of transporting bulk cargoes under emergency conditions. Now, in terms of the carrying capacity of this fleet, I can summarize this briefly by pointing out that, today, U.S. effective control tankers have the capacity to deliver 100 percent of our current waterborne. petroleum imports to our shores. Another fact to bear in mind is that these ships could be of value if we have a national emergency which did not result in 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 apparent. 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. In short, this is a fleet that exists. It has a tremendous carrying capacity. I do not think that anyone can act ostrich-like and overlook that it is here. 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. |