APRIL 1, 1968.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. GARMATZ, from the Committee on Merchant Marine and Fisheries, submitted the following

REPORT

[To accompany H. R. 15189]

The Committee on Merchant Marine and Fisheries, to whom was referred the bill (H.R. 15189) to authorize appropriations for certain maritime programs of the Department of Commerce, having considered the same, reports favorably thereon with an amendment and recommends that the bill as amended do pass.

The amendment is as follows:

Strike out all after the enacting clause and insert in lieu thereof the following:

That funds are hereby authorized to be appropriated without fiscal year limitation as the appropriation Act may provide for the use of the Department of Commerce, for the fiscal year 1969, as follows:

(a) acquisition, construction, or reconstruction of vessels and constructiondifferential subsidy and cost of national defense features incident to the construction, reconstruction, or reconditioning of ships, $237,470,000;

(b) payment of obligations incurred for operating-differential subsidy, $206,000,000;

(c) expenses necessary for research and development activities (including reimbursement of the Vessel Operations Revolving Fund for losses resulting from expenses of experimental ship operations), $11,000,000;

(d) reserve fleet expenses, $5,279,000;

(e) maritime training at the Merchant Marine Academy at Kings Point, New York, $5,177,000; and

(f) financial assistance to State marine schools, $2,035,000.

PURPOSE OF THE BILL

The purpose of this bill is to authorize certain appropriations for the Maritime Administration program within the Department of Commerce for fiscal year 1969.

This authorization is in accordance with Public Law 90-81, which requires that after December 31, 1967, only such sums as the Congress

may specifically authorize by law may be appropriated for the Maritime Administration of the Department of Commerce for the following

purposes:

(1) acquisition, construction, or reconstruction of vessels: (2) construction-differential subsidy and cost of national defense features incident to the construction, reconstruction, or reconditioning of ships:

(3) payment of obligations incurred for operating-differential subsidy:

(4) expenses necessary for research and development activities (including reimbursement of the Vessel Operations Revolving Fund for losses resulting from expenses of experimental ship operations):

(5) reserve fleet expenses:

(6) maritime training at the Merchant Marine Academy at Kings Point, New York:

(7) financial assistance to State Marine Schools: and

(8) the Vessel Operations Revolving Fund.

As stated in the committee report on Public Law 90-81 (H. Rept. 177 on H.R. 158, reported April 6, 1967), "Enactment of this bill would place the Maritime Administration on a basis comparable to that now in effect with regard to principal activities of the Department of Defense, the U.S. Coast Guard, the Atomic Energy Commission, the National Astronautics and Space Administration, and other major programs within the executive branch."

GENERAL STATEMENT

By Executive Communication No. 1434, dated January 31, 1968, the Acting Secretary of Commerce recommended legislation pursuant to Public Law 90-81 to authorize appropriations, without fiscal-year limitation, for certain maritime programs of the Department of Commerce for the fiscal year 1969. Pursuant thereto H.R. 15189 was introduced on February 7, 1968, covering six categories of maritime activities of the Department of Commerce administered under the Federal Maritime Administration.

Nine days of public hearings were held by your committee between February 27 and March 27, during which time testimony was heard from representatives of the Secretary of Commerce, the Federal Maritime Administration, the Bureau of the Budget, and all major segments of the maritime industry.

The bill as introduced would have authorized a total of $344,856,000 for the following categories of activity and in the amounts indicated:

(a) Acquisition, construction, or reconstruction of vessels and construction-differential subsidy and cost of national defense features incident to the construction, reconstruction, or reconditioning of ships, $119,800,000;

(b) Payment of obligations incurred for operating-differential subsidy, $206,000,000;

(c) Expenses necessary for research and development activities (including reimbursement of the vessel operations revolving fund for losses resulting from expenses of experimental ship operations), $6,700,000;

(d) Reserve fleet expenses, $5,279,000;

(e) Maritime training at the Merchant Marine Academy at King's Point, N.Y., $5,177,000; and

(f) Financial assistance to State marine schools, $1,900,000. As reported, your committee recommends an authorized total for the above items of $466,961,000 involving increases totaling $122,105,000 in items "(a)" ship construction and related matters, "(c)" research and development, and "(f)" State marine schools. This report also urges the obligation in fiscal year 1969 of $103,300,000 of unobligated carryover funds already appropriated for fiscal year 1968.

SUMMARY OF THE BILL AS INTRODUCED

The bill, as introduced, would authorize funds for fiscal year 1969 for all purposes required under Public Law 90-81, except the vessel operations revolving fund. In the latter case no authorization is being sought because the activities under the fund are being reimbursed by the Military Sea Transportation Service with respect to the operation of general agency ships.

The items covered by the bill and their history since 1964 are as follows:

(a) Construction subsidy, including acquisition of replaced ships, conversion or reconstruction of existing ships, and related administrative expenses, $119,800,000:

1 Additional funds provided for construction of a fifth ship for American President Lines. 2 Increased by $21,685,000. This amount plus $25,465,000 to be reprogramed would provide a total of $132,150,000, same as 1966 to construct 13 ships.

a Budget approval from MARAD request to Commerce.

The total authorization request of $119,800,000 for ship construction for fiscal 1969 is comprised of three activity requests: construction-differential subsidy contracts for new ships, $107,955,000; acquisition of replaced ships, $8,695,000; and $3,150,000 for administrative expenses.

This authorization would provide for the construction of about 10 new replacement subsidized liner vessels.

It would also provide for the acquisition of 14 ships whose replacements will be delivered in 1969. The vessels expected to be acquired are C-1, C-2, C-3, and VC-2 types which are due or overdue for replacement.

Administrative expenses related to this item are also included and are requested in the same amount as was appropriated for fiscal year 1968.

(b) Payment of obligations incurred for operating-differential subsidy, $206 million.

Since a chief objective of the Merchant Marine Act, 1936, was to insure frequency and regularity of ocean shipping service between the United States and foreign markets, minimum and maximum sailings are established for each essential trade route based on competitive conditions. Maximum sailings establish a ceiling to assure that any particular route will not be saturated with service disproportionate to demand conditions on that route. Minimum sailings assure that regular and frequent sailings are maintained and that American vessels are competitive on that trade route. In 1969 it is expected that 14 subsidized operators using an average of 289 ships of the 314 subsidized ships will make 1,754 sailings. It is also expected that the Department of Defense will charter the remaining subsidized ships to supply overseas bases, as is the case in this fiscal year.

This authorization is for the purpose of liquidating operatingdifferential subsidy accruals resulting from voyages undertaken by subsidized vessel operators in accordance with their contractual agreements.

The authorization increase of $6 million over the amount appropriated in 1968 for this purpose is required to cover net additional liquidation requirements in 1969 arising mainly from the built-in cumulative effect of prior year wage agreements containing escalation features. In addition, changes in MSTS charter requirements and adjustments in prior year obligations have increased the 1969 liquidation requirements.

(c) Expenses necessary for research and development activities (including reimbursement of the vessel operations revolving fund for losses resulting from expenses of experimental ship operations), $6,700,000.

The research and development projects of the Maritime Administration are designed to improve the competitive position of the American merchant marine while reducing the Government's share of the cost of its construction, operation, and maintenance.

During the past several years the Maritime Administration has had a directed research program aimed at reducing the cost of ship construction, ship operations, and port and related transportation system costs. Most of the efforts in this program were directed toward a more competitive merchant marine by adopting the existing technology in