serving as a naval and military auxiliary in time of war or national emergency, (c) owned and operated under the United States flag by citizens of the United States insofar as may be practicable, and (d) composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel. It is declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine.

C. Historical Development and Analysis This policy in its present form was expressed some 29 years ago at a time when the United States was essentially a self-sufficient nation. Today, in direct contrast to the situation in 1936, the United States is a raw material importing country (particularly in petroleum and metals) dependent as never before on overseas transportation for importing raw materials and exporting manufactured goods. Consequently, that portion of the national policy as outlined in subsection (a) above, "sufficient to carry its domestic water-borne commerce and a substantial portion of the water-borne export and import foreign commerce of the United States and to provide shipping service on all routes essential for maintaining the flow of such domestic and foreign water-borne commerce at all times", is applicable today but to even a greater extent than envisioned by the framers of this legislation. Sino-Soviet competition as part of their political-economic war could not have been anticipated at the time of the declaration of this policy, but its terms are broad enough to allow implementation to meet the challenge of any future economic confrontation.

The merchant marine has alternately been considered an instrument of peace and an instrument of war. The statement of national policy characterizing the merchant marine as a necessity of national defense has not been changed, but the period in which that policy is examined will reveal the tone of the times. Prior to World War I the merchant marine approached the vanishing point and again from 1920-1936 not a single ocean going dry cargo merchant vessel was constructed in American yards. Naturally the impetus provided by two World Wars substantially increased our merchant fleet on both occasions, but the fading din of battle revived. maritime apathy. Current preparedness programs and studies projecting future inadequacies have, however, focused the need for proper planning to fulfill the capabilities required under section (b) of the statement of policy, above, "capable of serving as a naval and military auxiliary in time of war or national

emergency." Other provisions of the act will permit unlimited expansion for emergency needs (§§ 210, 502 and 902 Act of 1936) subject only to allocation of funds. Consequently it must be concluded that legislation to meet emergency or wartime capabilities as set forth in section (b) of the statement of policy has been adequately provided for in the Act of 1936.

In a report of an Interdepartmental Committee on Shipping Policy appointed in 1935 by the Secretary of Commerce with the approval of the President, certain particular proposals with regard to the U.S. merchant marine were set forth. Fundamental objectives were established therein providing in part that the U.S. merchant marine should be privately owned, operated by citizens of the United States, with vessels built in the United States, and manned by U.S. officers. These objectives were considered desirable: (1) to secure steamship service over routes essential to our commerce which the steamship services of other countries might not provide, (2) to secure the beneficial effect of the control of general shipping rates which the existence of a U.S. controlled merchant marine assures, and (3) to have available at all times a supply of tonnage to meet our urgent needs in the event of the withdrawal of foreign ships in time of crisis or emergency abroad. Other considerations were the proper maintenance and organization of American shipyards and the support of a National Merchant Marine Academy. Consequently the basis for the statement of policy in subsection (c) above, "owned and operated under the United States Flag by citizens of the U.S. insofar as may be practicable," is apparent if the objectives outlined above are to be realized. Implementation of this statement of national policy is evidenced by the establishment of the differential subsidy program for both the construction and operation of merchant vessels. With minor changes throughout the years these subsidies have provided the needed impetus to maintain a merchant fleet under the U.S. flag to meet current needs. Projected needs are however, presently cause for concern and there are varied opinions as to how these needs can be met both within and dehors the framework of the Act of 1936.

That part of the national policy which provides that our merchant marine shall “(d) be composed of the best-equipped, safest, and most suitable types of vessels constructed in the U.S. and manned with trained and efficient citizen personnel," forms the basis for those advocates of a commercially competitive merchant fleet with a minimum of subsidy. Their position is

that the answer to foreign competition is mechanization and automation in both ships and ocean terminals which will permit the United States to compete successfully in the world market. The suitability of ships for national defense purposes is insured under the Act of 1936. Provisions are contained therein for the incorporation of national defense features on ships built under construction subsidies. In addition, extensive and comprehensive research and development programs insure the modernization of these ships. The manning of our merchant fleet is carefully regulated by Title III of the Act and only under unusual circumstances are departures from the stated policy, requiring that ships be manned by citizen personnel, permitted.

D. Adequacy

The declaration of national policy with respect to the merchant marine as contained in the Act of 1936 is therefore sufficiently broad in scope and flexible in application to accommodate our present needs. A revitalized, competitive merchant marine which can be self-supporting is the ideal. Whether this goal can be attained through modernization and automation is speculative; but however the ideal can be obtained there is nothing in our present national policy which would obstruct any foreseeable plans for modernization and expansion.

II. RESPONSIBILITY OF SECRETARY OF COMMERCE FOR CARRYING OUT THE NATIONAL POLICY, TITLE 46 U.S. CODE SEC. 1120

A. Historical Development

The Secretary of Commerce traditionally has not been charged with the responsibility of carrying forward the national policy as set forth in the Merchant Marine Act of 1936. Originally, under the Act, this responsibility was vested in the United States Maritime Commission although serious consideration had been given at the time the Act was introduced to placing much of the responsibility for its enforcement under the Secretary of Commerce. (Senate Report 1226, 74th Cong., 1st Sess., on Merchant Marine Act of 1936). It was reasoned that the vesting of this responsibility in the Interstate Commerce Commission was inappropriate because although it is concerned with transportation, it is essentially a regulatory body dealing with transportation over land, principally railroads. Burdening the newly created Maritime Commission with the responsibility was also considered to be inappropriate because it was obvious that

it would be immediately unable to cope with the many problems heaped upon it. In spite of these misgivings the Commission was initially saddled with all of the regulatory and administrative responsibilities under the Act of 1936. The United States Shipping Board had applied itself with some degree of success under the earlier Merchant Marine Acts of 1920 and 1928 and it was reasoned that the U.S. Maritime Commission would similarly be in the best position to oversee and be responsible for carrying forward the national policy.

It was not long after the Act of 1936 had been put to its most severe test during World War II that the inadequacies of this delegation of responsibility were recognized.

In 1947 the President's Advisory Committee on the Merchant Marine, and in 1948 a management survey of the Senate Committee on Expenditures in the Executive Department and the Hoover Commission agreed that the Maritime Commission's position was anomalous. It was an independent agency of the executive branch of the Government outside the control of the President since he had no authority to require that it conform with the general policies of the Government. The matters with which the Commission dealt affected many other departments and agencies but it was able to operate without regard to national policy. In performing its quasi-judicial, quasi-legislative and regulatory duties there was an advantage in shielding it from political influence and reprisal. However, as a promotional agency, as an operating arm of the Government and as a potential military auxiliary it was considered that it should be controlled directly or indirectly by the President and be operated in conformance with current national policy.

The Hoover Commission recognized that the main objection to the Maritime Commission was that it was at the same time both regulatory and operating and promotional. It felt that these regulatory functions should be performed by an organization separate from that which is responsible for the operating and promotional activities.

Plan #21 of the Reorganization of 1950 proposed placing many of the functions of the Maritime Commission under the Secretary of Commerce. In establishing the Department of Commerce the Congress had provided in the organic act of the Department that:

It shall be the province and duty of the said Department to foster, promote and develop the foreign and domestic commerce . . . shipping . . . and the transportation facilities of the U.S.

Consequently it seemed logical that the Secretary of that Department should have the responsibility for carrying forward the national policy of the United States with regard to the merchant marine. This proposal was not met with unanimous approval. Opponents feared that the problems of the merchant marine would be too far removed from those who were familiar with them and that bureaucratic control would cause the whole system to bog down in politics.

The advocates of the plan reasoned that it would eliminate the objectionable merger of regulatory and promotional functions, previously discussed; that it would improve the general administration of the Maritime Commission; that all facilities of the Department of Commerce could be effectively used; and that trade routes could easily be controlled by Congress although there was no reason to fear the Secretary would abuse his authority with regard to their scheduling. The Director of the Bureau of the Budget strongly favored the plan envisioning it as "the development of a sound and effective organization of transportation programs."

The Plan became effective on 24 May 1950. It created a three member Federal Maritime Board assigned the responsibility of the regulatory functions under the Act of 1936 and the authority to determine and award construction and operational subsidies, the determination of such awards not being subject to modification. Also created was a Maritime Administration which assumed most of the administrative functions of the deposed Maritime Commission. All other functions were transferred to the Secretary of Commerce and he was made generally responsible for giving guidance to the Maritime Board. The Maritime Administration was placed under the Secretary and the responsibility for carrying forward national policy was vested directly in the Secretary.

In 1961 it again became apparent that the organization established in 1950 was unsatisfactory, particularly relating to the authority vested in the Federal Maritime Board to award subsidies and related promotional functions. Accordingly, in 1961 Reorganization Plan #7 abolished the Federal Maritime Board and established in its place the present Federal Maritime Commission. Its functions were now limited to regulatory ones. The determination and award of subsidies and other promotional and operating activities were concentrated in the head of the Department of Commerce. The Maritime Administration was retained in essen

tially the same capacity as provided for in the Reorganization Plan of 1950. The Secretary of Commerce redelegated his newly acquired authority, to determine and award subsidies, to the Maritime Subsidy Board of the Maritime Administration.

Section 1120 of 46 U.S.C. therefore currently provides:

It shall be the duty of the Secretary of Commerce to make a survey of the American Merchant Marine, as it now exists, to determine what additions and replacements are required to carry forward the national policy declared in section 1101 of this title, and the Secretary is directed to study, perfect, and adopt a long-range program for replacements and additions to the American Merchant Marine so that as soon as practicable the following objectives may be accomplished:

First, the creation of an adequate and well-balanced merchant fleet, including vessels of all types, to provide shipping service on all routes essential for maintaining the flow of the foreign commerce of the United States, the vessels in such fleet to be so designed as to be readily and quickly convertible into transport and supply vessels in a time of national emergency. In planning the development of such a fleet the Secretary is directed to cooperate closely with the Navy Department as to national defense needs and the possible speedy adaptation of the merchant fleet to national defense requirements. Second, the ownership and the operation of such a merchant fleet by citizens of the United States insofar as may be practicable. Third, the planning of vessels designed to afford the best and most complete protection for passengers and crew against fire and all marine perils.

It is obvious therefore, that the Secretary of Commerce now has vested in him the authority and responsibility to carry out the national policy with vigor and effectiveness.

B. Executive Order 10999 of 1962

In 1961 the Director of the Office of Civil Defense Mobilization issued Preparedness Order No. 2 which was essentially the same as the present Executive Order 10999 of 1962, assigning certain emergency preparedness functions to the Secretary of Commerce. It provides in part:

Section 1. Scope. The Secretary of Commerce . . . shall prepare national emergency plans and develop preparedness programs covering:

(a) Development and coordination of over-all policies, plans, and procedures for the provision of a centralized control of all modes of transportation in an emergency for the movement of passenger and freight traffic of all types, and the determination of the proper apportionment and allocation of

the total civil transportation capacity, or any portion thereof, to meet over-all essential civil and military needs.

(b) Federal emergency operational responsibilities with respect to: ships in coastal and intercoastal use and ocean shipping, ports and port facilities; and the Saint Lawrence, except those elements of each normally operated or controlled by the Department of Defense.

Section 2. Transportation Planning and Coordination Function. The Secretary shall develop long range programs designed to integrate the mobilization requirements for movement of all forms of commerce with all forms of national and international transportation systems including air, ground, water, and pipelines, in an emergency;

C. Additional Authority and Responsibility of the Secretary of Commerce for Emergency Preparedness Essentially this order vests in the Secretary of Commerce the responsibility for preparing national emergency plans and developing preparedness programs covering all modes of transportation with the exception of those elements normally operated or controlled by the Department of Defense.

Under Sections 210 and 502 of the Act of 1936, the Secretary is empowered and required to make periodic surveys of the American merchant marine and shipbuilding capacity and to study, perfect and adopt long-range programs for replacements and additions to the U.S. Merchant Marine. E.O. 10999 reaffirms this responsibility and also clearly defines the Secretary's responsibilities with regard to supporting facilities and allied transportation media for emergency planning.

Section 902 (a) of the Act of 1936 provides in part "Whenever the President shall proclaim that the security of the national defense makes it advisable or during any national emergency declared by proclamation of the President, it shall be lawful for the Commission to requisition or purchase vessels or other watercraft owned by citizens of the U.S. or under construction within the U.S. or for any period during such emergency, to requisition or charter the use of any such property."

Under the Emergency Foreign Vessels Acquisition Act (P.L. 569, 83d Cong., 2d Sess) in any period during which vessels may be requisitioned under § 902 of the Merchant Marine Act of 1936 the President is authorized and empowered through the Secretary of Commerce to purchase or to requisition or to take over title to or possession of any merchant vessel not owned by citizens of the United States which is lying idle

in waters within the jurisdiction of the U.S., including the Canal Zone, and which the President finds necessary to the national defense.

By law and executive order there is therefore conferred on the Secretary of Commerce both the responsibility and the authority to develop and coordinate planning for such merchant shipping needs as a national emergency would require.

III. INTERDEPARTMENTAL AGREEMENT BETWEEN THE DEPARTMENT OF COMMERCE AND THE DEPARTMENT OF DEFENSE PROVIDING FOR THE DEPARTMENT OF DEFENSE SHIPPING REQUIREMENTS (WILSON-WEEKS AGREEMENT OF 1954) AND FLAGS OF CONVENIENCE

A. Shipping Necessary to the Department of Defense on Continuing Basis and in Case of Emergency; Nucleus Fleet

There is in addition a responsibility placed on the Secretary of Commerce to operate a substantial part of U.S. controlled ocean shipping to provide sealift for the Department of Defense during times of emergency and at other times. An agreement providing for this sealift capability is the Wilson-Weeks Agreement of 1954. It recognizes the necessity for the Department of Defense to have under its exclusive custody, jurisdiction and control at all times, a nucleus fleet of size and composition to meet current conditions and military requirements. The availability of such a nucleus fleet to the Department of Defense not only assures rapid response to its needs but also provides a base for expansion and opportunity for invaluable training and experience for those personnel who are assigned to its management. In times of national emergency one of the most critical problems is obtaining personnel who can manage expanded ocean shipping necessary for sealift. Management experts from commercial shipping lines are available in limited numbers to assist, but maintaining a nucleus force, experienced in present and prospective needs of the Department of Defense, will permit more rapid and orderly expansion in time of national emergency.

The framers of the Wilson-Weeks agreement did not envisage at the time of its adoption the wide range of contingencies which may confront the Department of Defense requiring commercial ocean shipping support and procedures regarding the use of U.S. controlled ocean shipping. Consequently, there is a present need to update this agreement to reflect such changes and delineate the responsibilities of agencies of

the Department of Defense and Commerce accordingly.

B. Foreign Flags Under Effective Control

A significant part of the U.S. Merchant Marine fleet reserve for mobilization purposes consists of those ships being operated by U.S. interests under foreign flags, sometimes referred to as "flags of necessity" or "flags of convenience." These are ships to which subsidy aid is not available because they are not operated as liners on essential trade routes. Accordingly, U.S. operators find it uneconomical to use U.S. flag ships because of the high operating costs. Consequently, these ships, although essentially U.S. owned, are registered primarily in the countries of Panama, Liberia and Honduras (PANLIBHON). They are engaged in purely commercial foreign trade and are comprised mostly of tankers and dry bulk carriers. The practice was initiated prior to World War II and during the war they were promptly assimilated into the war effort and greatly contributed to the efforts of the United States and its allies. They have since been considered a significant part of the United States capability and in effect under United States control for mobilization purposes.

The U.S. owners have resisted all efforts to place these ships under U.S. flags, contending that foreign registry is an economic necessity without which they would be unable to operate because they could not compete in international trade with low-cost foreign shipping. They have threatened to sell their ships to foreign shipping interests if they are denied the right to operate under foreign flags.

Naturally the United States would prefer to exercise complete control over these ships, particularly in the event of a national emergency, but in the absence of this ideal, effective control has been substituted. This control is predicated principally on assurances by the owners that specific ships will revert to U.S. control in such event. A limited number of former U.S. flag vessels transferred to PANLIBHON registry are under effective control as a result of stipulations in the Transfer Contract Approvals granted by the Maritime Administration. There are, however, no assurances by the countries of registry and no governmental treaties provide for this reversion.

"Effective control" of these ships has become a heated issue particularly with the maritime unions who regard it as a tenuous theory severely weakened by recent events in Cuba and Panama.

Proponents of the "effective control" theory point out that there are no restrictions in the existing maritime laws of the countries concerned which restrain U.S. control over these ships; that the national bond of allegiance of the owners to the United States augmented by written agreements strengthens U.S. control; that the countries in which these ships are registered have limited capabilities to operate and maintain these vessels and would be unable to expropriate U.S. property or dispute U.S. assumption of control; that the United States would afford these ships the best protection in time of war and they would gravitate back to the United States; that the U.S. government will provide war risk insurance to these ships and that § 902 of the Merchant Marine Act of 1936 empowers the Maritime Commission to requisition or purchase ships owned by citizens of the United States and these rights are stipulated in all Maritime Administration approvals of transfer to PANLIBHON flags.

Opponents of the "effective control" theory are generally the same interests which oppose registry and operation of U.S. owned ships under "foreign registry"; foreign shipping interests, foreign governments and U.S. and international maritime labor organizations. Their arguments are that the introduction of the U.S. merchant ships into foreign registry created unfair competition with foreign interests, depressed seamen's wages and presented owners with unfair tax advantages in their operation. They deny that "effective control" of these ships by the United States exists and point out that in time of national emergency or war these shipping interests could choose to ignore their agreements and use their ships for trade outside the combat area denying their use to the United States.

Perhaps the most serious threat to the availability of the "effective control" fleet is the attitude of the owners and operators. Their fear of labor boycott and the possibility of U.S. intervention in their operation has been evidenced by a reluctance to expand under the PANLIBHON registries. Many have turned to registry under traditional maritime flags of Western Europe for practical and economical purposes. It must be realized however, that effective control of these ships is greatly diminished and in some cases lost.

The undeniable facts of the situation must therefore be realized. The United States depends on "effective control" of the "foreign (Continued on page 102)