reasonable demands of those whom we seek to serve, our customers. Thus, I believe that before a resolution of this type can be considered, maximum evaluation must be made of whether the U.S.-flag cruise fleet potential would be augmented to the extent of meeting not only present cruise demand, but one which seems to be growing by leaps and bounds. If this potential is judged to be real, consideration might be given to this endeavor.

A second shortcoming of the cabotage-type principle

The CHAIRMAN. I anticipate our next witness is going to be the General Counsel for the Maritime Administration. I hope he is listening to what you said.

Mr. SHAPIRO. I do, too, sir.

A second shortcoming of the cabotage-type principle suggestion is that it is necessarily confined to cruises. It in no way seeks a solution to safety in the foreign trade passenger business covering transocean voyages in the Atlantic or Pacific, or elsewhere. It strikes me that if our national motivation is what I consider it to be; namely, to improve the safety quality of passenger ships, this should be done on a broad basis.

The person getting on board a ship bound for Europe is entitled to identical protection with that of a person going on a cruise. The cabotage-type effort necessarily leaves the transocean traveler who boards a foreign-flag ship naked in this regard.

In summary, Mr. Chairman, what am I suggesting? One, we proceed with reasonable national legislation to get our own house in order. mandate vessel performance, and make the passenger aware of the physical nature of the vessel on which he may be contemplating taking his voyage.

Two, we place maximum emphasis on seeking to correct the problem in a steady fashion, however slowly, through an international approach, looking ultimately to the fact that all passenger vessels will be built of incombustible materials.

Should the second step fail, we denounce the treaty and withdraw from IMCO. After all, this is basically a safety organization. If it chooses to ignore this very basic safety issue, we do not belong in it. Some will say that we cannot do this, except after a 5-year notification. Oh, these boys find all of the excuses in the world, and technically they are correct. But I worry less about this problem because the step of denunciation, should it become necessary, in my opinion. gives us freedom for unilateral or bilateral action which we could not indulge in until the treaty is denounced.

Mr. Chairman, I want to inject at this particular point, I think the prospects of improving this situation through bilateral action are very happy. I am not the least bit grim about a bilateral approach to this by which we deal with the individual nations whose vessels have slapped up on their bow an international certificate, that in the long run may really be meaningless. I don't think those people want unsafe vessels on the seas, and there are only four or five countries. by and large, that do this. They don't mean to do this out of malice. Alternatively, Mr. Chairman, I think that those countries who have failed properly to administer the grandfather clause in all of these years have themselves violated the treaty, or certainly its intent, and

we might well move to seek their expulsion from the SOLAS Treaty privilege, thus requiring of them full Coast Guard inspection under our standards.

Thank you, Mr. Chairman.

The CHAIRMAN. Of course, there is no question about it, the best way to do this would be to have the international organizations upgrade their standards and to point the finger at those you just mentioned at the end of your statement. This would be the best way.

But sometimes we find that these things grind slowly and maybe too slowly. There is no reason why we can't pass appropriate legislation which I understand you endorse, which would move parallel with this. Then, if the SOLAS group or the international group should exceed our hopes and boost up this whole safety standard all over the world, we wouldn't need to even administer one of these things.

Mr. SHAPITO. Mr. Chairman, I do not know what you refer toThe CHAIRMAN. I am referring to my long experience with trying to get international agreements. Once in a while we have to have hearings like this and pass legislation to push the interested parties into it. Mr. SHAPIRO. I quite agree; I quite agree.

The CHAIRMAN. I have sat around on fishing and merchant marine for years around here, and nobody will move unless somebody lights a firecracker under them.

Mr. SHAPIRO. You said it far better than I, Senator, and I was intrigued with the State Department invitation extended to you.

The CHAIRMAN. And in this particular case, although they come to these international conferences on safety at sea, they may have some equal standing in other types of ships. However, when we get to cruise ships, we have the biggest stake. No. 1, because testimony is that 9 out of 10 of the passengers generate in the United States. Mr. SHAPIRO. No question about that.

The CHAIRMAN. And we have a responsibility to protect those people.

Mr. SHAPIRO. I agree, sir.

The CHAIRMAN. I don't think we will have too much trouble in the safety at sea conferences, even though they grind slowly on our other safety, in other types of ships; and I thoroughly agree with what you said about building up our own.

We had some suggestions, as you well know, that we abandon all passenger ships, take the American flag off the seas. But 9 out of 10 of the people that are going on them are Americans. Then we are going to really have some problems. We will have no criteria to make a comparison on safety or on efficiency of crews. So if we don't tackle this thing and take some affirmative initiative action, it could drag along.

I am very pleased to find that we are going to make a beginning in May. That is only a couple of weeks off, and I think as you point out we will know a little better the climate and what we can do then.

Then further on, later in May, we will get another signal from this and

Mr. SHAPIRO. I think, Mr. Chairman, the objectivity of this hearing, and the voice expressed by you, that we are looking for equitable

resolutions of these problems, and the fact that they are problems cannot but help have a favorable impact on our May proceeding.

The CHAIRMAN. This must be a lucrative business for these people, and I am not upset with that. I don't think anybody is upset if the Maritime people can make a profit by having these cruises. This is fine. This is our way of doing business.

But it seems that when we are furnishing 9 out of 10 of the passengers, we have a little more responsibility as to what kind of ship it is than maybe they think they have.

Mr. SHAPIRO. I quite agree, and this is why we hope to provide the ! leadership in May.

The CHAIRMAN. And the American people are much more alert to these things, give more concern to it, than some other nationals. No one want to have trouble at sea, but a lot of other nationals don't require the standards that we require. Their people are probably not used to those standards. They would take the ship anyway, but our people are more selective. They require it in the air, and we are going to require more of it on the highways, and we hope at sea.

So we have that problem.

Now, it is not all black or all white; I understand that. That is what you said. But it surely is black and white that we have American citizens that are involved.

Mr. SHAPIRO. Absolutely, and they are entitled to protection.
The CHAIRMAN. The bulk of it.

Now, I thoroughly agree with you that we should attack this grandfather clause, both internationally and domestically, but the existence of those who are gradually disappearing. What we are talking about now is three ships, domestically.

Mr. SHAPIRO. Under American flag, three. But under foreign flag, considerably more. I think we can even handle the problem of grandfather clauses where they are abused by taking up this inspection. The CHAIRMAN. I am sure that you didn't imply that there shouldn't be any liability in this field?

Mr. SHAPIRO. Oh, no.

The CHAIRMAN. What you were suggesting is that this is a complex field, and that there is no real rule of thumb that it involves the intric acies of marine liability, marine insurance, and that we should get some expert advice on it, which we are going to do.

Mr. SHAPIRO. Mr. Gerity, who is here as a witness for many of us, is an expert.

The CHAIRMAN. I don't know just what the ceiling should be. I haven't any idea if I am responsible for $5 million, what my premium would be. But I suppose it would be pretty high?

Mr. SHAPIRO. Mr. Gerity and Mr. Anderson can answer that very easily.

The CHAIRMAN. But when we talk about these figures of $5 million, we are talking about the absolute extreme. But I don't suspect that our merchant marine or foreign merchant marines are building ships or making regulations; they are trying to make regulations and to build ships to reduce that.

Mr. SHAPIRO. The impact of the liability problems that we deal with as a problem, is that it falls so much overwhelmingly with us as it does on others.

The CHAIRMAN. I know enough about the merchant marine. It has financial difficulties as well. Another thing, it seems that passenger travel on the maritime is on the upgrade all over the world, where we slumped considerably. There are a great number of people that like to go on a ship.

Mr. SHAPIRO. Under the Great Society it will even improve.

The CHAIRMAN. Particularly for those that are older, because people are living longer, they are going to have more leisure time, and they don't need to take a supersonic plane to enjoy a week or two of pleasure. Mr. SHAPIRO. You are quite right, sir.

The CHAIRMAN. So I think this is a very important field which we are pursuing.

Mr. SHAPIRO. It certainly is.

The CHAIRMAN. Now, do you want to submit a statement on this liability matter?

Mr. SHAPIRO. Mr. Chairman, with your permission, I think that this issue is so fundamental and so important, that I would really like to have Mr. Gerity, if he is willing, to present his statement, at such time as you are ready to receive it, because it is of crucial importance.

The CHAIRMAN. We will hear from Mr. Davis, General Counsel of the Maritime, and then we will recess the hearings until the call of the Chair next week.

Mr. DEMO. We have one man here from England who has a short statement and I would like very much to have him give his short statement sometime before the day is ended.

The CHAIRMAN. All right. We will try and hear him, too. That is Mr. Watson? All right, we will hear Mr. Davis and Mr. Watson, and then we will recess.

Mr. Davis is the General Counsel for Maritime Administration, and we are glad to have you and the other people with you.

STATEMENT OF CARL C. DAVIS, GENERAL COUNSEL, MARITIME ADMINISTRATION, ACCOMPANIED BY WILLIAM R. BURCHILL, ASSISTANT GENERAL COUNSEL, DIVISION OF LEGISLATION, AND BARRY ZISMAN

Mr. DAVIS. I have with me Mr. William Burchill, Assistant General Counsel of our Division of Legislation, and Mr. Barry Zisman. Both of these gentlemen work with me on the interagency group developing and studying this problem.

The CHAIRMAN. I want to suggest to the witness that we will keep the record open. If you have anything you want to add to your testimony, or corrections as to figures or things of that nature, please submit them to the staff of the committee.

All right, Mr. Davis.

Mr. DAVIS. Mr. Chairman, in the interest of time, I have a rather long statement of nine pages, which I will be happy to submit.

The CHAIRMAN. Go right ahead. We haven't had the Maritime Administration up here for a long time, and we might want to divert and ask you a few other questions.

Mr. DAVIS. All right. Thank you for the opportunity to appear before your committee to present the views of the Maritime Adminis

tration of the Department of Commerce, and of the Department, on S. 1351, S. 2417, H.R. 10327, S. 3250, and S. 3251.

The bills are intended to deal with problems of safety of life at sea and the financial responsibility of shipowners, especially with respect to liability for injury and death to passengers and crew.

The CHAIRMAN. Before you leave that, I don't think the record has been quite clear as to what the owner's liability is now on the crew. Mr. DAVIS. On the crew?

The CHAIRMAN. Yes.

Mr. DAVIS. A crewmember who is injured or falls ill in service of the vessel is entitled to maintenance and care, Mr. Chairman, which is something comparable to workmen's compensation.

The CHAIRMAN. So they are now in a different legal position than the passengers, are they not?

Mr. DAVIS. They have this in addition. The crewmembers still has a cause of action for damages against the vessel for death or injury, growing out of unseaworthiness of the vessel or negligence of the owner with respect to the operation of the vessel. The point we are making here with respect to the crew is that in a disaster, their claims are subject to limitation of liability.

The CHAIRMAN. All right.

Mr. DAVIS. The act of June 19, 1886, as amended (46 U.S.C. 289) provides that no foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port, under a penalty of $200 for each passenger so transported and landed.

S. 1351 would amend this act by adding provisions which would prohibit foreign vessels from engaging in cruises from a port in the United States without a license issued by the Department of Commerce under penalty of $200 for each passenger carried.

The bill defines a cruise as a voyage originating and terminating at a port within the United States if the vessel is primarily engaged in the carriage of passengers on a round-trip basis.

The bill would authorize the Secretary of Commerce to make rules and regulations under which, after hearing, he would determine whether to issue a license for a foreign-flag cruise.

It would be mandatory that these regulations include requirements for:

(1) The filing of such information as the Secretary deems necessary to establish the applicant's financial responsibility, including, if deemed necessary, the filing of a bond to protect the public;

(2) The filing of proof that the foreign vessels not only comply with foreign classification requirements but also are in substantial compliance with standards required of vessels of American registry;

(3) The filing of proof that the operator is willing to charge such rates and follow such practices as will not be prejudicial to the operation of vessels of U.S. registry;

(4) A finding by the Secretary that the granting of such licenses is not detrimental to the commerce of the United States, its balance of payments, the comfort and safety of passengers, nor