Any information developed in this manner would be in the form of questions and answers that could be inserted in the record imme diately following the witnesses' testimony. If such information cannot be developed in this manner, and the committee believes that it is required for a meaningful record, the witness will be requested to appear in person again. There have been many bills introduced on this legislation, and I'm certain more will be introduced in days to come. If there is no objection, I will request the bills introduced to date plus any introduced in the future, all be inserted at this point including any and all departmental reports. [The bills and departmental reports follow:] [H.R. 7320, H.R. 7460, H.R. 7536, H.R. 7541, H.R. 7577, H.R. 7633, H.R. 7606, H.R. 7668, H.R. 7853, H.R. 7865, H.R. 7929, H.R. 8193, H.R. 8206, H.R. 8802, H.R. 8912, H.R. 8944, H.R. 8950, H.R. 9218, H.R. 9343, H.R. 9378, H.R. 9576, H.R. 9689, H.R. 9795, H.R. 9913, H.R. 9918, H.R. 9980, H.R. 10018, H.R. 10082, H.R. 10244, H.R. 10285, H.R. 10291, H.R. 10308, H.R. 10454, H.R. 10676, H.R. 10681, H.R. 10716, H.R. 10781, H.R. 10785, H.R. 11489, H.R. 11900, H.R. 12224, H.R. 12227, H.R. 12277, H.R. 12837, H.R. 13393, 93d Cong., 1st sess.] BILLS To require that a percentage of United States oil imports be carried on United States-flag vessels Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 901(b)(1) of the Merchant Marine Act, 1936, as amended (46 U.S.C. 1241), shall be further amended by striking the colon after the words 'in such manner as will insure a fair and reasonable participation of United States-flag commercial vessels in such cargoes by geographical areas," inserting a period, and adding the following: "The appropriate agency or agencies shall also take such steps as may be necessary and practicable to assure that at least 20 per centum of the gross tonnage of all petroleum and petroleum products imported into the United States on ocean vessels, including movements (i) directly from original point of production and (ii) from such original point to intermediate points for transshipment or refinement and ultimate delivery into the United States, shall be transported on privately owned United States-flag commercial vessels to the extent such vessels are available at fair and reasonable rates for United States-flag commercial vessels, in such manner as will insure fair and reasonable participation of United States-flag commercial vessels in such cargoes by geographical areas: Provided, That the quantity required so to be carried in United States-flag commercial vessels shall be at least 25 per centum after June 30, 1975, and at least 30 per centum after June 30, 1977, if the Secretary of Commerce shall on December 31 preceding each such date determine that United States tonnage existing or on order and scheduled to be delivered by such date would be adequate to carry such quantity". GENERAL COUNSEL OF THE DEPARTMENT OF COMMERCE, Hon. LEONOR K. SULLIVAN, Washington, D.C., October 29, 1973. Chairman, Committee on Merchant Marine and Fisheries, DEAR MADAM CHAIRMAN: This is in further reply to your request for the views of this Department concerning H.R. 8193, a bill-To require that a percentage of United States oil imports be carried on United States-flag vessels. The Department of Commerce is opposed to the enactment of H.R. 8193 for the reasons set forth by Assistant Secretary Blackwell in his testimony before your Committee on October 9, a copy of which is enclosed for your convenient reference. We have been advised by the Office of Management and Budget that there woud be no objection to the submission of this report to your Committee and further that enactment of H.R. 8193 would not be in accord with the program of the President. Sincerely, KARL E. BAKKE, General Counsel. GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE, Hon. LEONOR K. SULLIVAN, Chairman, Committee on Merchant Marine and Fisheries, DEAR MADAM CHAIRMAN: This is in response to your request for the views. of the Department of Defense on H.R. 7304 and H.R. 8193, identical bills "To require that a percentage of United States oil imports be carried on United States-flag vessels." The purpose of the bills is to restrict a portion of the ocean transportation market to the employment of United States-flag tankers to encourage the development of a larger United States-flag tanker fleet. The growing dependence of the United States on foreign oil is a matter of great concern to the Department of Defense. That dependence poses a threat to the security and well-being of the nation in the event that foreign oil should be denied at some future date, whether for political, economic or military reasons. One of the key factors in ensuring the continued availability in time of political or economic stress, or in time of war. United States-flag vessels with American crews are of course the most reliable source of ocean transport, and on that ground the Department of Defense is in agreement with the ultimate purpose of H.R. 7304 and H.R. 8193, an expanded United States-flag tanker fleet. We believe however that there are off-setting disadvantages in the bills which warrant serious consideration. The United States has now entered a period of domestic shortages in both crude oil and refined petroleum products. For the foreseeable future the nation will be heavily dependent on petroleum imports from multiple sources throughout the world. Given the existing and prospective narrow balance between world oil supply and demand, any action which might impede the access of all prospective importers, both large and small, to foreign oil supplies, could impact adversely on the supply and demand balance in the United States, with deleterious effect on the economy and well-being of the populace. H.R. 7304 and H.R. 8193 would appear to require that a foreign refinery from which a domestic importer sought to purchase products would be required to obtain a portion of its feedstock supply by means of United States-flag vessels. Such a requirement might be attainable by the larger, fully integrated oil companies in connection with the long-term fixed-quantity contracts, but it appears highy unlikely that foreign refiners other than those whose primary market is the United States, could or would be inclined to routinely employ higher-cost United States-flag tankers against the possibility of shortterm or seasonal purchases by United States customers. The result could be the denial of otherwise available foreign oil supplies. particularly to the smaller non-integrated importers upon whom we are critically dependent at the margin, and the further deterioration of the supply situation in the United States. This nation is already encountering oil shortages which may grow larger in the next few years, and those shortages have impacted adversely on the ability of the Department of Defense to provide fuel support to the military departments and civil agencies of the Government. We believe enactment of H.R. 7304 or H.R. $193 would aggravate this situation. The enactment of legislation which would restrict the exercise of a free market in the empoyment of tankers in international trade would establish a precedent for similar legislation by other seafaring nations as well as oil producing nations. The resultant compartmentalizing of the international tinker fleet could adversely affect the ready availability of tankers in time of tension or war and would thus be inimical to the security of the United States. We believe that the Merchant Marine Act of 1970 provides an adequate instrument for the development of a fleet of United States-flag tankers, without the disadvantages which would result from enactment of H.R. 7304 or H.R. $193. For the reasons set forth above the Department of Defense opposes enactment of H.R. 7304 or H.R. 8193. The Office of Management and Budget advises that there is no objection to the presentation of this report for the consideration of the Committee and that enactment of these bills would not be in accord with the Program of the President. Sincerely yours, L. NIEDERLEHNER, Acting General Counsel. U.S. DEPARTMENT OF THE INTERIOR, Hon. LEONOR K. SULLIVAN, Chairman, Committee on Merchant Marine and Fisheries, DEAR MADAM CHAIRMAN: This responds to your request for this Department's views on H.R. 7304 and H.R. 8193, identical bills "To require that a percentage of United States oil imports be carried on United States-flag vessels." We recommend against enactment of these bills for the reasons stated herein. Section 901 of the Merchant Marine Act of 1936 as amended, 49 Stat. 2015, 46 U.S.C. § 1241(b)(1), requires that 50 percent of any cargo procured by the United States from a foreign nation or furnished by the United States to a foreign nation without reimbursement, shall be transported in United Statesflag commercial vessels. For the purposes of the Act, United States-flag vessels must be documented under United States laws and must have a United States crew. If the ship was built or rebuilt outside of the United States, or if it had been documented under a foreign flag, to qualify as a United States-flag vessel it must be documented under United States laws for three years. H.R. 7304 and H.R. 8193 would amend the Act to require that 20 percent of all petroleum products imported into the United States on ocean vessels be transported in privately owned United States-flag commercial vessels to the extent such vessels are available at fair and reasonable rates. The requirement would be increased to 25 percent in 1975 and 30 percent in 1977 if the United States tonnage is adequate to carry that quantity. We oppose both bills for several reasons. First, while the United States and many other nations now have cabotage laws restricting trade between domestic ports to vessels of their own flag, very few countries impose these flag restrictions. The United States has traditionally favored international free trade for private shipping. Enactment of these bills is therefore contrary to that tradition and might prompt similar restrictions by other countries on their imports or restrictions by oil producing nations on their exports. Second, the bills would substantially increase the cost of imported oil to consumers. American crews are two to three times more costly than foreign crews. The increased cost of imported oil would be borne mostly by east coast consumers. Assuming that this country's dependence on foreign oil increases at the current rate, the bills could raise the cost of imported oil by hundreds of millions of dollars annually by 1985. While we recognize the importance of the nation's security and economy of a strong domestic shipping industry, we note that there are presently a number of Federal programs designed to revitalize the domestic shipping industry on both the building and operating levels. Moreover, in time of emergency the United States can call upon ships from the "effective control fleet." This fleet is comprised of ships sailing under Panamanian, Honduras and Liberian flags and owned by the United States citizens who agree to transfer control of the ships to the United States in the event of a national emergency. Moreover, many United States owned vessels sailing under for eign flags of convenience never sail into ports controlled by countries of the flag they are flying. The ties these vessels maintain with such countries are often minimal and for appearance only. Any danger of these vessels coming under exclusive control of the foreign country where they are registered is thus remote. Therefore, we do not feel that the national security benefits these bills are intended to achieve justify the conflict with free trade policies, and the unavoidable increase in costs to consumers of imported oil. The Office of Management and Budget has advised that there is no objection to the presentation of this report and that enactment of H.R. 7304 or H.R. 8193 would not be in accord with the program of the President. DEAR MRS. SULLIVAN: The Secretary has requested me to respond to your request for the views of the Department of State on H.R. 7304 and H.R. $193. identical bills which "require that a percentage of United States oil imports be carried on United States-flag vessels." The Department continues to support the objectives of the Merchant Marine Act of 1970-the encouragement of the construction and maintenance of a privately-owned fleet of such composition as is necessary to carry a substantial portion of the foreign commerce of the country in essential trades and to serve as a naval and military auxiliary in time of war. We consider the incentives of the 1970 Act as the best mechanism for promoting the bulk cargo-carrying segment of the U.S. merchant fleet. It is because of our support for a strong U.S. merchant marine and national economy that the Department cannot support H.R. 7304 or H.R. 8193. We believe that these bills would result in unnecessarily higher costs to the American consumers of imported petroleum and petroleum products. Higher costs would result from the building of ships in this country and from operating U.S.-flag vessels as compared to foreign flag vessels. Additionally, costs would also increase due to higher charter rates. The Department believes that these bills would have an adverse effect on the availability and security of the supply of petroleum and petroleum products. Reduction in flexibility in chartering tankers for our petroleum imports would not only affect security of supply, but, as noted, would also affect cost of supply due to the nature of the vessel charter market. Finally, the Department opposes the adoption of H.R. 7304 or H.R. 8193 because we feel an extension of U.S. cargo preference policies to commercial cargoes such as petroleum imports would be an undesirable precedent in U.S. shipping policy and would be counter to our long-established economic policies. Additionally, the passage of this legislation would cause our violation of many "Friendship, Commerce and Navigation" treaties in which these policies were embodied through the use of national treatment clauses. The Office of Management and Budget advises that there is no objection to the submission of this report and that enactment of H.R. 8193 or H.R. 7304 would not be in accord with the program of the President. Sincerely yours, MARSHALL WRIGHT, Assistant Secretary for Congressional Relations. Hon. LEONOR K. SULLIVAN, THE GENERAL COUNSEL OF THE TREASURY, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C. DEAR MADAM CHAIRMAN: Reference is made to your request for the views of this Department on H.R. 7304 and H.R. 8193, similar bills, "To require that a percentage of United States oil imports be carried on United States flag vessels." The proposed legislation would amend section 901 (b)(1) of the Merchant Marine Act of 1936, as amended, (46 U.S.C. 1241) to require that U.S. flag commercial vessels carry 20 percent of the gross tonnage of all petroleum and petroleum products imported into the United States on ocean vessels, to the extent such vessels are available at fair and reasonable rates. The gross tonnage requirement would increase to at least 25 percent after June 30, 1975 and at least 30 percent after June 30, 1977. The bills are contrary to the traditional U.S. position favoring international free trade for private shipping and their passage might be expected to provoke similar actions by other countries, especially oil producing countries. Enactment of the bills would have an immediate effect on costs for imported oil since crews of U.S. flag vessels are two to three times more costly than foreign crews. These increased costs would be borne by consumers. While we recognize the importance of having a strong domestic shipping industry, we do not feel that this proposed legislation will improve upon the Federal aid already enacted for the maritime industries. The four most important of these aids are operating-differential subsidy, construction-differential subsidy, various cabotage laws, and tax subsidies administered through the Federal tax system. Provisions of the Merchant Marine Act of 1970 call for a sizable increase in the form of construction subsidies and yet there exists considerable uncertainty over how much construction may take place, when it might be completed and how much it might cost. Current estimates are that 300 new vessels or their productive equivalent may be built over the next ten years. In consideration of the limited capacity of U.S. shipyards, the present utilization of U.S. flag tankers, and the projected increases in tanker capacity needed to carry imported and Alaskan oil through 1985, it seems unlikely that U.S. flag carriers operating at full capacity would be able to achieve a 20 percent carriage rate. We, therefore, conclude that the bills would have little positive effect on the U.S. maritime industry at this time, but that there well may be severe negative impacts concerning our ability to maintain an uninterrupted flow of imported oil. For these reasons, the Department is opposed to the enactment of H.R. 7304 and H.R. 8193. The Department has been advised by the Office of Management and Budget that there is no objection to the submission of this report to your Committee and that enactment of the proposed legislation would not be in accord with the program of the President. Sincerely yours, EDWARD C. SCHMULTS, Mr. CLARK. Our first witness this morning is the Honorable Robert J. Blackwell, Assistant Secretary of Commerce for Maritime Affairs. Mr. Blackwell, since you are the only witness this morning, we will not hold you to the 20-minute statement. You may proceed as you wish, sir. STATEMENT OF HON. ROBERT J. BLACKWELL, ASSISTANT SECRETARY OF COMMERCE FOR MARITIME AFFAIRS, MARITIME ADMINISTRATION, DEPARTMENT OF COMMERCE Mr. BLACKWELL. Thank you, Madam Chairman, Congressman Clark. I appreciate this opportunity to testify on behalf of the Maritime Administration, concerning H.R. 8193, a bill "To require that a percentage of U.S. oil imports be carried on U.S.-flag vessels." The objective of the proposed legislation is to expand the U.S.flag tanker fleet so that it will be capable of carrying a significant portion of U.S. oil imports. We share this objective. |