Ships with new midbodies built in foreign shipyards and installed in United States— 1961-65

Mr. FOSTER. I think that will be helpful.

Can you give the committee an idea as to the number involved in each?

Mr. JOHNSON. Surely. Up through 1964-from 1961 through 1964 there were 17 ships jumboized in U.S. shipyards with U.S. components. There were 27 that were jumboized abroad during 1961 and 1962. In 1965 we have had a substantial amount of jumboizing in U.S. shipyards with U.S. components. But for the comparable periods involved, 1961 and 1962, the numbers done in the United States would be even less: 11 in the United States and 27 abroad.

Mr. FOSTER. Do I understand the trend to be increasing to jumboized in the United States and not abroad, from the figures you have given?

Mr. JOHNSON. As a consequence of the 1961 amendment the operators have in fact been precluded from having work done in foreign yards; that is correct.

The vessels involved here in U.S. shipyards come under the provisions of the Vessel Exchange Act, which requires by definition that the work be done in the United States. So there is in fact no option available to the owner. It is one of the conditions for exchanging the ship.

Mr. FOSTER. I would think that probably anything that was done prior to 1961 and 1962 depending upon the date of the contract and the date of delivery, would reflect the fact that quite a bit was being done before that law was passed, and you would expect there to be a reduction in that effort after that, I would think. So I think the more meaningful period would be after 1962, in terms of what the operators have been doing.

I think it would be helpful to try to find out whether or not most of the operators have been going abroad to obtain their midbodies when they were trying to jumboize, or have most of them been doing that here since 1962?

Mr. JOHNSON. It is my understanding that four U.S.-flag ships have gone abroad since 1962.

Mr. FOSTER. When I say go abroad, of course I mean going abroad to obtain the midbody. I am not talking about constructing abroad. I am talking about going abroad to get a midbody.

Mr. JOHNSON. That is correct.

Mr. FOSTER. Your understanding is that no operator has obtained a midbody from abroad to jumbo size since 1962?

Mr. JOHNSON. Our understanding is that four U.S.-flag vessels have been jumboized in the United States with foreign midbodies since 1962; they are:

During 1963, 1964, and 1965, there were three ships redocumented under U.S. flag from foreign flag. But to my knowledge only one of those involved a foreign midbody inserted since 1962; the Sandy Lake was jumboized in 1965 in Japan as a Liberian tanker and then documented in the United States.

Mr. FOSTER. You wouldn't have to redocument the vessel if you were jumboizing here in U.S. shipyards by obtaining a foreign built midbody, would you?

Mr. JOHNSON. Yes, you would need to have it redocumented, Mr. Foster.

Mr. FOSTER. Thank you.

Thank you, Mr. Chairman.

Senator BARTLETT. Just perhaps one further question.

If they haven't been using these foreign midbodies, the center sections in the time you named, I am not quite clear as to what thishow this will be hurt by the bill.

Mr. JOHNSON. You are not quite clear as to what, Mr. Chairman? Senator BARTLETT. What damage, what hurt this bill would do. In other words, why are you against it under these circumstances? Mr. JOHNSON. I think our answer to that, Mr. Chairman, would be that this would simply impose an additional burden and restriction on the owners that is not now there. At least it would be further foreclosing an opportunity that exists to some extent today.

Senator BARTLETT. All right.

Thank you, gentlemen.

Mr. JOHNSON. Thank you, sir.

Senator BARTLETT. The next witness is Lane C. Kendall, Commercial Shipping Adviser, Military Sea Transportation Service, Department of the Navy, Washington, D.C.

Thank you, Mr. Kendall. Before you start, will you define for us your capacity as Commercial Shipping Adviser to the Commander, Military Sea Transportation Service? Are you with the Government?

STATEMENT OF LANE C. KENDALL, COMMERCIAL SHIPPING ADVISER TO THE COMMANDER, MILITARY SEA TRANSPORTATION SERVICE, WASHINGTON, D.C.

Mr. KENDALL. Yes, sir. I am a civilian attached directly to the staff of the Commander, Military Sea Transportation Service, who is vice admiral, U.S. Navy. I am the person responsible on his staff for keeping him informed of developments within the merchant marine and where policy matters are concerned, relating to the merchant marine, I am one of his principal advisers.

Senator BARTLETT. Sir, you are the busiest man in the Navy then?
Mr. KENDALL. I keep myself pretty busy, sir.

I have a short prepared statement, which I would like to read.
Senator BARTLETT. Please proceed.

Mr. KENDALL. The present bill, S. 2600, would amend the Cargo Preference Act of 1904 by describing very precisely what is acceptable American-flag ship for the purpose of transporting military cargo.

The description proposed in S. 2600 would prohibit the Military Sea Transportation Service from using, under any circumstances, ships of American registry which have been built, rebuilt, or converted in foreign shipyards after September 22, 1965, until they have been registered under the American flag for 3 years. In periods when American ships are in adequate supply, this provision would have little impact upon the operations of the Military Sea Transporation Service. When there is a shortage of American-flag ships, for any reason, the restrictions imposed by S. 2600 could interfere with the capability of the Military Sea Transportation Service to provide the American-flag sealift dictated by the Cargo Preference Act of 1904. A specific example will make clear how S. 2600 would create problems in the carriage of military supplies to oversea destinations.

Military cargoes, by law, must be transported in ships of American registry when they are available. Often there is an urgent requirement that a certain military cargo be delivered by a specified date, and any delay can have serious consequences. Under the proposed legislation, if the only American ship that could meet the deadline delivery date were one which, although built and registered in the United States, had been rebuilt in a foreign shipyard within 3 years, that ship would be prohibited from carrying the cargo.

Ironically, under the circumstances that no American ship was available, the lift could be performed by a foreign-built and foreignowned ship, and no laws would be violated.

It requires little imagination to envision a situation where a shortage of American-flag shipping might make it desirable, as an immediate means of meeting actual and pressing military transportation requirements, to transfer to American registry a number of ships owned by American citizens but built abroad. The provisions of S. 2600 would nullify any possible benefit to the military of this program, since it would be illegal to carry military goods in these ships until 3 years had passed.

Because limitations of this sort on the capability of the Military Sea Transportation Service would be unacceptable, the Department of Defense opposes the enactment of S. 2600.

(The attachment follows:)

Hon. WARREN G. MAGNUSON,
Chairman, Committee on Commerce,
U.S. Senate, Washington, D.C.

DEPARTMENT OF THE NAVY,
OFFICE OF LEGISLATIVE AFFAIRS,
Washington, D.C., May 25, 1966.

MY DEAR MR. CHAIRMAN: Your request for comment on S. 2600, a bill "To prevent vessels built or rebuilt outside the United States or documented under foreign registry from carrying cargoes restricted to vessels of the United States," has been assigned to this Department by the Secretary of Defense for the preparation of a report thereon expressing the views of the Department of Defense.

This bill would limit the meaning of the term "vessel of the United States or belonging to the United States" so as to exclude from its application vessels which have been either (a) built outside the United States, (b) rebuilt outside the United States or (c) documented under any foreign registry until such vessel shall have been documented under the laws of the United States for a period of three years. The Department of the Navy, on behalf of the Department of Defense, is opposed to the enactment of this bill.

Under present law, (10 USC 2631) supplies of the Armed Forces must be shipped only in vessels of the United States or belonging to the United States, unless such ships are unavailable. The 1954 Cargo Preference Act (46 USC 1241(b)) requires that one-half of these military cargoes must be carried in privately-owned American-flag ships. Since its inception the Military Sea Transportation Service has complied with the spirit as well as the letter of these laws. In fiscal year 1965, 76% of the dry cargo and 65% of the petroleum lifted by Military Sea Transportation Service moved in privately-owned shipping.

A number of ships in the privately-owned U.S. flag merchant fleet engaged in carrying cargoes for the Department of Defense have been rebuilt or converted in foreign yards or have had major portions of their hull structure replaced with foreign built segments. Many tankers have been enlarged with foreign midbodies. It is likely that many of these ships would not be available for this purpose had not the work been performed in this manner.

In time of normal operations, the proposed legislation would have relatively little impact on the efficiency of Military Sea Transportation Service operations. However, in time of emergency, the restrictions that would be imposed by this legislation could be detrimental to support of the Armed Forces. It is submitted that the present laws (10 USC 2631 and 46 USC 1241(b)) provide adequate protection for the American merchant marine. Any additional restriction on the selection and use of ships could handicap the delivery of essential supplies of the Armed Forces.

This report has been coordinated within the Department of Defense in accordance with procedures prescribed by the Secretary of Defense.

The Bureau of the Budget advises that, from the standpoint of the Administration's program, there is no objection to the presentation of this report on S. 2600 for the consideration of the Committee.

For the Secretary of the Navy.

Sincerely yours,

F. R. Downs, Commander, U.S. Navy. Director, Legislative Division Acting.

Senator BARTLETT. Thank you, Mr. Kendall. Has the Department of Defense confronted such an imaginary situation as you described where there was an urgent requirement that couldn't be met? Mr. KENDALL. And we have had to use foreign-flag ships?

Senator BARTLETT. Yes.

Mr. KENDALL. Yes, sir.

Senator BARTLETT. Are you experiencing a general shortage of ships now for the carriage of military cargo?

Mr. KENDALL. Shipping is in short supply, sir, and we have to use a great deal of ingenuity to meet our requirements.

Senator BARTLETT. This is amazing to me because I recall so clearly a couple of years ago, or 3 years ago, a statement issued by the De partment of Defense which led the reader to believe that shipping

would no longer be required in any substantial sense for military purposes. Everything would be lifted by air. An opposite discovery has been made, I infer, with respect to the situation in Vietnam? You need ships?

Mr. KENDALL. We need ships, yes, sir, approximately 98 percent of the cargo that is delivered in Vietnam at the present time has been carried by ship.

Senator BARTLETT. Are you confronting a constant shortage of American-flag shipping in respect to carriage of military cargo to southeast Asia?

Mr. KENDALL. There is no constant shortage, sir, it is a matter of positioning of ships and the urgency with which a certain cargo may be required. This is what I meant when I said it requires a good deal of ingenuity on our part to meet the requirements. We do our utmost to use only American-flag ships to Vietnam. Only under quite unusual circumstances do we employ foreign-flag ships. Specifically, we would use a foreign-flag ship which had a capability not available under the American flag, such as extremely heavy lift capability. If we had to move a landing craft utility, LCU, which weighs 120 tons, there is no American-flag commercial ship which can handle that lift.

Senator BARTLETT. Ships of what foreign flags can do this?

Mr. KENDALL. There are some German ships and some Norwegian ships which are the principal heavy lift carriers.

Senator BARTLETT. A rough estimate, if it is permissible for you to tell the committee, what the percentage of the military cargo to southeast Asia is now being carried on foreign-flag vessels?

Mr. KENDALL. I believe, sir, that in the testimony before Senator Douglas' committee last week, the figure of about 4 percent was used. This is, I believe, a correct figure. I can verify that if you wish, sir. Senator BARTLETT. That is close enough.

But would it be correct for us to believe that most of this 4 percent had to do with cargo of the type you described that could not be carried by American shipping in any case?

Mr. KENDALL. Pretty much, sir. We have had a few situations where the urgency of delivery was the overwhelming consideration, but this is very, very infrequent. The majority of the tonnage would be in the category which I described.

Senator BARTLETT. If that is so, then at this time, now, and now is a very important time because you are lifting so much cargo down there, the provisions of this bill really wouldn't be harmful, sir, only if we could not meet our requirements with American ships and there was some operators who were willing to bring foreign-flag ships under American registry, put American crews on board them, and run them as American ships. We would not be permitted to use those ships if 2600 were passed until a 3-year period had elapsed.

Do you think there would be any wild rush, no matter how much cargo was offered for the next 3 months in any given case, let's say, for these foreign owners to do this, to register

Mr. KENDALL. If they expected the opportunity would last only 3 months, there would be no rush.

Senator BARTLETT. You can't give any guarantees to them that there will be a long-term contract, can you?

Mr. KENDALL. No, sir.

Senator BARTLETT. Thank you.