Our total budget request for the next fiscal year for Maritime Administration activities is $372,967,000. This is $61,887,000 more than the total amount ($311,080,000) appropriated by the Congress for all Maritime's activities for the current fiscal year.

I should now like to comment in more detail on the major items contained in our appropriation request for fiscal year 1968.

SHIP CONSTRUCTION

We have requested $143 million for ship construction for the next fiscal year. This is $36,315,000 more than the amount Congress appropriated for ship construction for the current fiscal year. However, in this connection, I should point out that the comparable figure including funds from prior years make a total amount available for ship replacement for fiscal year 1967 of $141,085,000, an amount sufficient to contract for 13 new ships in fiscal year 1967. Our request for fiscal year 1968 will also enable us to contract for 13 new ships in that year.

I think it might be helpful in placing our current budget request in context to mention the amounts appropriated, the amounts obligated, and the number of ships placed under contract in each of the fiscal years 1958 through 1966.

There follows a listing of fiscal years 1958 through 1966. with the amounts of dollars appropriated, the amounts of dollars obligated by the Maritime Administration and the ships contracted for in each year.

The number of ships which can be constructed with the funds requested for fiscal year 1968 is in the same range as the number for recent years, and for example is the same number as was placed under contract in fiscal year 1960 and fiscal year 1962. But the total amount of dollars required to contract for this number of ships is of course very substantially above the total amount required in fiscal year 1960 or in fiscal year 1962. Some of this increase is, of course, attributable to an increase in construction costs above that of 6 and 8 years ago. And a significant amount of the increase is due to the fact that we will be contracting for larger, faster, and more productive ships than were built with the funds appropriated 6 and 8 years ago.

In 1965, the Maritime Subsidy Board published in the Federal Register a "Statement of General Policy" to the effect that beginning in fiscal year 1967, the Board, in allocating construction subsidy funds, would consider among other things the following:

Upon the realization that many members might not be able to be present during the week following Lincoln's Birthday, no announcement of the February 15 date was released until the next feasible date could be ascertained.

In view of the slow rate of House activity at the beginning of this session, the earliest feasible date seemed to be today, March 1.

Even though the public notice of this meeting was relatively shortit was the Chair's desire to proceed with this hearing at this time.

In recent days, there has been much in the press about a long-awaited new maritime program, including the transfer of the Maritime Administration to the Department of Transportation.

I do not consider that this hearing is pertinent to these other developments which are still apparently in the formative stage.

The Maritime Administration is still in the Department of Com

merce.

This hearing relates to the program embodied in the budget for fiscal year 1968.

As far as the future program which I understand the Secretary of Transportation is attempting to develop is concerned

I think we should devote our attention to that when it is completed and is presented to us for the enactment of legislation-hopefully, in the next several months.

Even though we are well aware of efforts which are now being made to mold a new program-I think it is our responsibility to review at this time the only program which is actually before the Congress.

I hope and urge that members will devote their attention at this hearing to the testimony of the Department of Commerce and the Maritime Administration.

Our first witness will be Hon. Alexander B. Trowbridge, Acting Secretary of the Department of Commerce-accompanied by Hon. James W. Gulick, Acting Maritime Administrator, and Carl C. Davis, General Counsel, Maritime Administration.

STATEMENT OF HON. ALEXANDER B. TROWBRIDGE, ACTING SECRETARY OF COMMERCE; ACCOMPANIED BY JAMES W. GULICK, ACTING MARITIME ADMINISTRATOR, AND CARL C. DAVIS, GENERAL COUNSEL, MARITIME ADMINISTRATION

Mr. TROWBRIDGE. Good morning, Mr. Chairman.

My name is Alexander Trowbridge. I am Acting Secretary of Commerce and as you just stated I am accompanied by James Gulick, the Acting Maritime Administrator and Carl Davis, the General Counsel of the Maritime Administration.

With your permission, Mr. Chairman, I have a statement which I believe you have copies of and I would propose to read this statement, during the course of which there will be some numbers. I may just skip over those to speed up the presentation if this is agreeable with you, sir.

The CHAIRMAN. Yes, sir.

Mr. TROWBRIDGE. Mr. Chairman and members of the committee. I appreciate this opportunity to appear before your committees to explain our proposed budget for the Maritime Administration for the fiscal year 1968.

Our total budget request for the next fiscal year for Maritime Administration activities is $372,967,000. This is $61,887,000 more than the total amount ($311,080,000) appropriated by the Congress for all Maritime's activities for the current fiscal year.

I should now like to comment in more detail on the major items contained in our appropriation request for fiscal year 1968.

f;

SHIP CONSTRUCTION

We have requested $143 million for ship construction for the next fiscal year. This is $36,315,000 more than the amount Congress appropriated for ship construction for the current fiscal year. However, in this connection, I should point out that the comparable figure including funds from prior years make a total amount available for ship replacement for fiscal year 1967 of $141,085,000, an amount sufficient to contract for 13 new ships in fiscal year 1967. Our request for fiscal year 1968 will also enable us to contract for 13 new ships in that year. I think it might be helpful in placing our current budget request in context to mention the amounts appropriated, the amounts obligated, and the number of ships placed under contract in each of the fiscal years 1958 through 1966.

There follows a listing of fiscal years 1958 through 1966. with the amounts of dollars appropriated, the amounts of dollars obligated by the Maritime Administration and the ships contracted for in each year.

The number of ships which can be constructed with the funds requested for fiscal year 1968 is in the same range as the number for recent years, and for example is the same number as was placed under contract in fiscal year 1960 and fiscal year 1962. But the total amount of dollars required to contract for this number of ships is of course very substantially above the total amount required in fiscal year 1960 or in fiscal year 1962. Some of this increase is, of course, attributable to an increase in construction costs above that of 6 and 8 years ago. And a significant amount of the increase is due to the fact that we will be contracting for larger, faster, and more productive ships than were built with the funds appropriated 6 and 8 years ago.

In 1965, the Maritime Subsidy Board published in the Federal Register a "Statement of General Policy" to the effect that beginning in fiscal year 1967, the Board, in allocating construction subsidy funds, would consider among other things the following:

(1) Number of ships proposed for construction by the appli

cant.

(2) Cubic and deadweight capacities and speed of the proposed ships.

(3) Proposed cargo handling equipment and techniques for transfer of cargo in and out of ships and to and from inland points. In this connection, the applicant will be required to set forth the estimated rate of loading and of discharge of cargo, as well as the adaptability of the proposed ship to integrated systems of transportation embracing both ocean and overland transportation.

(4) Estimated domestic cost of construction.

(5) Estimated revenues and cost of operation; and with respect to wage cost, the proposed manning schedule on the proposed ships.

(6) The applicant's intention to seek operating subsidy and if so, the duration and amount of such subsidy payments.

In allocating the funds consideration is also given to such factors as the age of the ships to be replaced, the trade route requirements, and the operator's financial situation.

The Board has already allocated the ship construction funds for fiscal 1967 and part of the funds for fiscal 1968 as follows:

Eleven of the 20 ships allocated are Lash (lighter aboard ships) ships. These are for Prudential and Pacific Far East Lines. Three of the 20 ships are Lykes sea barge ships. The object of the design of both ships is to improve the turnaround of the ship by avoiding requiring the ship to go into the dock. The lighters and barges are floating containers. They will be taken off the ships outside the dock, and other loaded ones for the return voyage will be taken on.

I might say, Mr. Chairman, that we have here some photographs of drawings of this type of vessel with some operating characteristics and I will submit them for the record and perhaps the membership of the committee would like to see them.

The CHAIRMAN. Yes, sir.

Mr. TROWBRIDGE. The Lykes barge carrier will have a bale cubic (cargo space) of 1,420,000 cubic feet in the barges, and the ship will have a speed of 20 knots.

The Lash ship will have a bale cubic of 1,215,000 cubic feet in the lighters, and the ship will have a speed of 22.5 knots.

Five of the ships are for Farrell. These are combination general cargo and container ships. The number of containers each ship should

carry is still under study. The ship will have a speed of 23.6 knots and a bale cubic in the hull of 1,100,000 cubic feet for dry cargo and 100,000 cubic feet for reefer cargo.

The ship for American Mail Line is essentially a conventional ship though it will carry some containers. The ship will have a speed of 20 knots and a bale cubic in the hull of 1,018,000 cubic feet.

OPERATING SUBSIDIES

We have requested a total of $200 million for fiscal year 1968 for operating subsidy payments. This is $25 million more than the amount appropriated for this purpose for fiscal year 1967. We anticipated that 50 ships would be on charter to MSTS during fiscal year 1967, which would reduce the accrual of subsidy obligations during this year. However, to date, it has developed that an average of only 21 ships have been on charter to MSTS, which means more subsidy obligations on the part of the Government will be accruing during the current fiscal year than anticipated last year. This also means, of course, we will need additional funds during fiscal year 1968 to liquidate the increased amounts accruing during the current fiscal year.

In addition, our increase for additional funds for operating subsidy is needed because there have been wage and benefit increases under new collective bargaining agreements, with a consequent impact on subsidy payments during the next fiscal year.

In making our estimate for operating subsidy appropriation for fiscal year 1968, we have assumed that 27 subsidized ships will be on charter to MSTS during the next fiscal year.

We expect that the computation and approval of final subsidy rates and completion of the audit of annual accountings will make it possible for us to complete payment in fiscal 1968 of all subsidy accrued through December 31, 1961, with partial liquidation for calendar year 1962 through fiscal year 1968. As of June 30, 1968, we estimate there will be a backlog of unpaid subsidy in the amount of $110 million, consisting of amounts withheld pending final rate and audit determinations for operations subsequent to the calendar year 1961, plus estimated amounts earned in the final quarter of fiscal 1968 for which bills will not be presented during the year.

To place our operating subsidy appropriation request in perspective, the amounts appropriated for this purpose for each of the fiscal years from 1952 through 1966 are as follows:

As you see, Mr. Chairman, there follows two columns ranging from fiscal year 1952 through 1966 in the amounts ranging from $20 million through $180 million.