Question: (a) How many people does MarAd have stationed in Tokyo?

(b) What duties do these people perform?

(c) What is the total cost (salaries, office rental and supplies, living expenses) of maintaining this office?

Answer: (a) MarAd has one U.S. professional stationed in Tokyo with two foreign national assistants for a total staff of three. The foreign nationals perform duties as translators as well as program, administrative and clerical functions.

(b) The principal functions performed by this office are to gather and translate data and information relating to foreign ship operating costs and practices, and ship construction costs and practice in foreign shipbuilding centers required in the overall determination of foreign costs related to the ship operating and construction-differential subsidy programs; and to obtain and translate data and information on potential market leads and cargo opportunities for U.S.-flag ship operators both subsidized and nonsubsidized.

The Tokyo representative is responsible for the entire Far East including the shipbuilding centers and ship operators in Korea, Hong Kong, Singapore and Taiwan and also monitors the area for market opportunities.

The importance of this information is underscored by the fact that Japan has about 25 percent of the world orderbook for new ship construction, is also one of the principal ship operators in the world, and is a significant trading partner of the United States.

(c) The total annual cost of maintaining this office is budgeting at $164,000 of which $102.000 is for salaries and benefits: $15,000 for office space and supporting services provided by the US Embassy, $35,000 (consistent with applicable State Department standards) for living quarters for the U.S. national and his family; $4,000 for miscellaneous costs for telephone, supplies, subscriptions to the local periodicals and publications; and $8,000 travel, with additional travel required every other year for home leave.

Question: The National Security Support activity surveys "privately owned U.S. shipyards for their strategic capability for national mobilization purposes." (a) What are the results of this survey?

(b) Please provide copies of survey.

Answer: (a) Under Sections 210, 211 and 502(f) of the Merchant Marine Act of 1936, as amended, the Maritime Administration conducts an annual survey to obtain information from the shipbuilding and ship repair industry that is used primarily to determine if an adequate mobilization base exists for purposes of national defense and for use in national emergency. Each year a survey form is mailed to approximately 220 American shipyards and ship repair facilities. Industry responses are consolidated into an annual "Report on Survey of U.S. Shipbuilding and Repair Facilities," the 1978 issue of which is attached.

Of particular interest, the Report includes a narrative and facilities layout plan for each of 28 major shipyards capable of constructing a vessel having a minimum length of 475 feet overall and a minimum beam of 68 feet. Other sections and exhibits in the Report provide substantial additional information concerning the U.S. shipbuilding and repair industry.

In addition to this annual survey, MarAd has conducted with the Navy two classified scenario-based studies of the adequacy of the U.S. shipbuilding mobilization base, the most recent completed in mid-1978. The major conclusions of this study are that the mobilization base would be marginally adequate in a short major war and would need some augmentation in a long war. Results are sensitive to wartime attrition estimates, and these are now undergoing revision. The study will be done again when the new attrition estimates are available.

(b) Copy of the survey is attached.

Question: Please provide a list of all studies proposed, in progress, under review or approved in fiscal year 1979, which were undertaken by MarAd, either "in-house" or through another agency or private contractor to further the goals of the 1936 Act.

Answer: A list of major studies for the current fiscal year is attached. Study titles

National Fleet Productivity Analysis; American Flag Competitive Assessment; Maritime Corporate Financial Performance; Cost Impact of Government Regulations: Pacific Coal Slurry Transportation; Marine Transportation for National Petroleum Reserve, Alaska; Harbor Support Craft; Winter Navigation; Analysis of Foreign Maritime Research; Ocean-Going Tug/Barge Conference; Air Stabilized Ocean Platform; Ship Maneuvering in Critical Channels-Great Lakes; Improved Ship Controllability; Tanker Maneuvering Risk Analysis; Hull Fouling Control; Advanced Propulsion Theories; Tandem Propellers; Shipyard Technical Survey; Competitive

ness of United States Shipyards; Atmospheric Electrical Standards; Tank Level Indicator; Condensate Polishing; Ship Structures Committee; Maritime Research Information Service; Sea Use Council; Ten Basic Research Studies by various universities; Great Lakes Western Coal Market Assessment; Grain Commodity Flow; Markets Large Volume Shipments; Port Energy Handbook; Emergency Berthing; Statewide Comprehensive Port Plan-Oregon; Cargo Potential and Port LocationAlaska; Texas State Port and Waterborne Trade Study; Commodity Movement Study for Hawaii Ports; Port Economic Impact Assessment Methodology; Spare Parts Provisioning of Merchant Ships; Vessel Emissions in Port; Non-Destructive Testing for Liquefied Natural Gas Tanks; Waterborne Trash Recycling Plant; Analytical Model for Hull Performance Assessment; Improving Bulk Transfer Productivity in Greak Lakes; Port Facilities Inventory Information System; Vessel In-Port Locator; Public Marine Terminal Electronic Data Interchange; Port Throughout Capacity Handbooks for National Emergencies; Offshore Terminal Instrumentation for Measuring Mooring Loads and Forces; Sea Shed; Containership Conversion for Military Sealift Command, Phase II; Reefer Monitoring; Moisture Control; Terminal Layout and Control.

Question: The Budget Appendix states that additional authorization legislation will be proposed for each major program.

(a) When can we expect these legislative initiatives?

(b) What issues will they address?

Answer: (a) The additional authorizing legislation mentioned in the Budget Appendix for each major program, pages 260-262, refers to the bill currently being considered by this committee-namely, to authorize appropriations for fiscal years 1980 and 1981 for certain maritime activities pursuant to Section 209 of the Merchant Marine Act, 1936.

(b) No program issues are addressed in the proposed authorizing legislation. Question: Please provide the detailed justification for the annual limit on Title XI guarantees which was proposed in the fiscal year 1980 budget appendix.

Answer: A $1 billion limitation has been proposed. The imposition of this limitation is one of the initial administration efforts to control Federal credit programs. This effort is based on concerns that the budget understates the extent of Government involvement in credit markets, and that, consequently, our understanding of the relationships between credit policy and monetary and fiscal policies, and of the impact of Federal credit activity on the economy as a whole is limited.

In response to these concerns, the administration has drawn up proposals for controlling Federal credit. The system is designed to achieve four principal objectives:

To inform the public more fully about what the Government is doing;

To encourage rational choices between public sector and private sector activities; To allocate credit resources better among alternative Government activities; and To improve the understanding, and control over, the Government's financial impact on output, employment, and inflation.

To meet these goals the proposed control system would contain the following major features:

A credit information system would supply regular and timely reports on actual program operations and on estimates for future years, for all Federal credit programs and for Government-sponsored enterprises. The information provided would be the basis for monitoring the performance of credit programs, estimating their impact on credit markets and the economy, modifying credit program targets accordingly, and making more informed decisions about the scope and scale of individual credit programs.

The control system would adopt as its basic mechanism annual limitations on gross loan activity for both direct lending and loan guarantee programs. These limitations would be proposed in the budget, reflected in Congressional Budget Resolutions, and established in regular appropriation acts.

Credit program scorekeeping would take the form of tracking net changes in the amount of direct loans outstanding plus the net change in guaranteed loans outstanding. Budget authority and outlays associated with direct loans would not be reflected in the outlay totals or budget authority, but would be included in the control system displays as limitations on gross loan activity.

Question. (a) How much has MarAd paid out to satisfy Title XI guarantees resulting from the Pacific Far East Line (PFEL) bankruptcy?

(b) Who has title to PFEL's Title XI-guaranteed assets?

(c) How will MarAd use these assets to recover the money it has paid out? (d) When will MarAd make this recovery?

(e) How much has this bankruptcy cost MarAd in terms of administrative and interest costs?

Answer. (a) MarAd has honored all of the guarantees on the PFEL vessels in the total principal amount of $97,822,540.03 plus accrued interest of $4,219,006.95.

(b) At the present time PFEL has title to all of the vessels except certain barges which are owned by the Bank of America and chartered to PFEL.

(c) MarAd's recovery will result from the foreclosure sales of the vessels with respect to which the Title XI guarantees were honored. At the present time MarAd has initiated foreclosure proceedings on three LASH vessels, the ATLANTIC BEAR and 400 barges (which are all the barges located in the U.S.).

(d) It is anticipated that most foreclosure sales will commence in April of this year at which time all or most of the equipment will be sold.

(e) As of February 26, 1979, MarAd had made payments of $4,095,651.63, limited to insurance premiums, advances to the Marshal, payments to the shipyard, and other related expenses, which amounts can be recovered from the sale of the vessels. Question. (a) Has MarAd paid out any funds to satisfy Title XI obligations resulting from the States Steamship Company (States) bankruptcy?

(b) If so, who has title to States' assets which MarAd has had to back?

(c & d) Have Title XI funds been paid on any of the vessels in the sale/charter transaction with Lykes? If so, how and when will MarAd be compensated for its Title XI payments?

Answer. (a) No payoff of the Title XI guarantees on the States' vessels has effectively been made. However, on December 20, 1978, MarAd advanced funds to States in the amount of $2,448,386.95 for the payment of principal and interest due on Title XI obligations relating to the SS MAINE, the SS NÊVADA and the SS ARIZONA. On the same date an advance in the amount of $999,440.00 was made to Wilmington Trust Company, as trustee owner for the benefit of First Chicago Leasing Corporation and Beverly Bank for the SS ILLINOIS, for payment of principal and interest due on Title XI obligations issued with respect to this vessel. The SS ILLINOIS is bareboat chartered to States and the inability of Wilmington Trust Company to make principal and interest payments resulted from a default by States in the payment of charter hire. Both advances were made in anticipation of a possible sale/charter arrangement involving these vessels which would obviate the payment of MarAd of the guarantees of the total Title XI debt related to these vessels, which was then in excess of $65,000,000.

(b) The SS ARIZONA is currently owned by Lykes Bros. Steamship Co., Inc. (Lykes). The advance related to this vessel was totally repaid by Lykes with interest on January 29, 1979.

The SS MAINE and the SS NEVADA are now owned by Whitney National Bank of New Orleans, as trustee owner for the benefit of the Secretary of Commerce. These vessels are on bareboat charter to Lykes for a minimum of three years. The charter hire payments made by Lykes will parallel and equal the payments of principal and interest due with respect to the Title XI debt related to these vessels and the advance made with respect to these vessels. In addition, Lykes will pay a guarantee fee.

The SS ILLINOIS is still owned by Wilmington Trust Company, as owner trustee. MarAd is continuing to work with the beneficial owners to find alternative employment for this vessel.

(c & d) Payment of the Title XI obligations issued with respect to the SS ARIZONA and the accrued interest thereon was made from the Federal Ship Financing Fund on February 21, 1979. The funds needed for this payment had been deposited in the Federal Ship Financing Fund on January 29, 1979, from the proceeds of the sale of the vessel to Lykes.

Title XI funds will be utilized to pay the trustees fees of Whitney National Bank of New Orleans and Crocker National Bank in connection with the chartering of the SS MAINE and SS NEVADA to Lykes. Such trustees fees will be fully offset by the guarantee fees paid by Lykes with respect to the two vessels.

Question: The estimated fiscal year 1980 administrative costs of the Title XI program are $4.2 million. Many vessel purchasers have complained about the paperwork involved in a Title XI application.

(a) How many Title XI applications are received each year?

(b) How many are approved?

(c) What is the average cost to an applicant for submitting a Title XI application? (d) Has MarAd evaluated this program with an eye to reducing unnecessary administrative costs and paperwork delays?

(e) If so, what are MarAd's conclusions?

Answer: (a) Approximately 50-60 new applications are received each year.

(b) Approximately 30-35 applicants receive approval for Title XI financing each year.

(c) The cost of submitting an application involves fees charged by MarAd as well as the legal, accounting and printing fees associated with the submission and processing of the application. The MarAd fees consist of a $1,000 filing fee and an investigation fee which approximates 8 of 1 percent of the amount to be financed with Title XI guaranteed obligations. The filing fee is credited against the investigation fee. The legal, accounting and printing fees for a relatively simple transaction could amount to $15,000. However, as the transaction becomes more complex (i.e., leverage leasing financing, partnerships, etc.) and the number of parties involved increases (i.e., owner trust, owner participants, etc.) the amount of documentation involved increases thus raising both the legal and printing fees. Although MarAd has little control over these fees, we work very closely with the applicant to try and minimize these expenses. For example, although most final documentation submitted by the applicants is produced by professional printers, there is no requirement to do so and MarAd has always indicated to the applicants that typewritten documentation (which should be less expensive) is also acceptable.

(d) Yes, in an attempt to reduce the applicant's and MarAd's administrative costs, as well as the time necessary to process an application, we have looked for methods to reduce the amount of paperwork.

(e) Our efforts have indicated that various procedures or actions could be implemented to reduce the level of paperwork. Chief among these procedures are standardization of documentation and improvement of the written instructions to the applicants. With respect to standardization of documentation two major programs have been undertaken. First, MarAd has implemented a system whereby certain applicants, if they so desire, can have their applications processed by one of the MarAd region offices, who will provide the applicants with virtually the entire documentation package necessary for the transaction. This not only significantly reduces the printing and legal fees, but also speeds up MarAd's documentation review. Second, MarAd is now in the process of evaluating and selecting a qualified printer to print standard documentation for all Title XI transactions. Implementation of this procedure would also reduce legal and printing fees in addition to speeding up the documentation review process.

With respect to the written instruction, two major activities have taken place. First, on December 29, 1978, the new Title XI regulations were published in the FEDERAL REGISTER. These new regulations will provide the applicants with a more precise understanding of the current requirements and administration of the Title XI program, and should reduce the time and expense involved in applying for Title XI assistance. Second, MarAd is developing a new application form which will not only incorporate the requirements contained in the new regulations, but also provide MarAd, in a clear and concise manner, all the information necessary for the processing of an application. Thus, the new application form should reduce the time necessary to process an application for both MarAd and the applicant.

This is in response to your letter of March 19, 1979, which poses several questions as to the "competitiveness" of U.S. shipyards.

I indicated at the hearing on March 1, 1979, that I would
provide a ranking of the yards if it were possible. Our
investigations, however, indicate that there is no clear-cut
way to rank the "competitiveness" of shipyards. The information
provided below should help clarify the situation.

Question 1: a ranking of yards in order of technological capability (your recent technological survey of major U.S. shipyards should help you here);

Its

Answer: As part of its continuing National Shipbuilding
Research Program, the Maritime Administration recently
completed a Technology Survey of Major U.S. Shipyards.
purpose was not to compare the technological capability of
one U.S. shipyard with another, but rather to make an
assessment of the level of U.S. versus foreign technology.
It identified general areas where U.S. yards are superior to
foreign yards and areas where U.S. yards lag behind. The
National Shipbuilding Research Program has as its purpose the
practical application of technology to the shipbuilding
industry. The Technology Survey pointed out areas where
MarAd projects might improve U.S. yards' level of technology.

The study, because of the proprietary nature of the data involved, did not identify any yards by name. In addition, it did not make any overall technology assessment by yard, only by specific production area. There is no way to aggregate the rankings by production area into a single ranking for each yard.