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It is the loyalty of the crews themselves that presents the basic issue. This loyalty in a national emergency would not necessarily depend upon whether the capital invested in a foreign-flag ship in a given instance was American-owned or foreign-owned. Nor can any real assurance be placed in the concept that direction of the ships activities can be guaranteed by the parent American company. It must be remembered that even the foreign governments under whose flag the ships sail may, in given types of crises, exercise major influence upon the ship's conduct--even though traditionally they may be friendly nations. Evidence of this has occurred on ships of both Greece and Mexico of recent date.

For example, the EL MEXICANO, loaded full and down with Vietnam cargo, refused to sail upon orders from its government. When this occurred, reliance on foreign shipping and its related concept of effective control became suspect. This was augmented when the Greek vessel STAMATIOS S. EMBIRICOS refused to sail with cargo to Vietnam, its crew shouting "American imperialists" from the deck of the ship.

Mr. Lester Velie, in his article in Readers Digest entitled, "Our Leaky Pipeline to Vietnam," describes further situations

as follows:

"At various times, Indian and Chinese crews
aboard British ships, Japanese sailors, even
Okinawans, have refused to sail to Vietnam.
Seven crews turned us down in the space of
several weeks. Meanwhile, not only did our
NATO Allies not come forward with ships, but
some permitted their vessels to be chartered
by the Russians, thereby freeing regular
The bitter
Soviet vessels to supply Vietnam.
lesson is that we cannot rely on others for
ships.

In the light of these adverse experiences, it is time for the Department of Defense, and for that matter, all Government agencies involved with maritime affairs, to re-evaluate the degree to which American-owned foreign flag ships constitute a vital national asset. It is particularly important that the nation re-assess the national defense aspect

of this uncertain policy.

During the latter part of the last decade a greatly expanded foreign transfer policy was promulgated and progressively liberalized by the Maritime Administration. This was achieved principally through a statement of policy issued by the Federal Maritime Board and Maritime Administration on November 8, 1956. This document, commonly referred to under the heading, "Documentation, Transfer or Charter of Vessels Chapter 2, Sub-Chapter B, dealt with regulations affecting maritime carriers

and related activities.

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Title 46

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It brought about an exodus of American

ships on such a massive scale that the so-called runaway-flag ships now comprise in total over 450 vessels.

Of the total of 474 under so-called "effective control," 8 combination type ships are listed under the flags of Liberia and Panama; 84 freighters under all three flags; 104 bulk and ore carriers under the Liberia and Panama flags; and 278 tankers under the flags of Liberia and Panama. A total of 222

companies own or control the 474 ships.

Following is a summary:

4

FOREIGN FLAG VESSELS DEEMED BY THE

MILITARY SEA TRANSPORTATION SERVICE MERCHANT SHIP REGISTER TO BE UNDER EFFECTIVE U.S. CONTROL AS OF DEC. 31, 1966

(Tonnage in Thousands)

These ships not only avoid American wage and crew living standards, but reap a bonanza in tax avoidance as well. American parent companies thereby enjoy all the benefits of business citizenship in the United States but do not comply with American stars ards of shipping nor contribute to the nation's balance of payments. These companies obviously can never regain for the American economy, the losses in employment, wages, individual tax income or balance of payment contributions resulting from the shipping exodus. They can only return net foreign operating income whenever, if ever, such business earnings are repatriated.

The most damaging effect upon U. S.-flag shipping is the ruinous competition which these American-owned foreign-flag companies have created by their runaway operations. In practice, this constitutes a joining of forces with all foreign competitive interests in a process which has helped destroy the pre-eminent commercial position once enjoyed by the American Merchant

Marine.

The entire implementation of our national shipping policy should be so reconstructed as to bring back home the runawayflag ships and encourage their future registry under the American flag. Detailed recommendations to accomplish this are covered under sections dealing with bulk carriers.

UNSUBSIDIZED BERTH LINE CARRIERS

PROCESS THE LONG-DELAYED APPLICATIONS OF
UNSUBSIDIZED BERTH LINES FOR COST-PARITY
CONTRACTS UNDER THE 1936 MERCHANT MARINE
ᎪᏨᎢ .

PROVIDE OPERATING SUBSIDY TO SUCH LINES
WITHOUT UNFAIR ADVANTAGE OVER EXISTING
SUBSIDIZED CARRIERS, AND WITH ALL REASON-
ABLE DISPATCH, WHEREVER THE PROVISIONS OF
1936 ARE ADEQUATELY MET.

REQUIRE AND PROVIDE FOR REPLACEMENT, WITHIN
THE SHORTEST PRACTICAL PERIOD, OF NOT LESS THAN
THE TOTAL DEADWEIGHT TONNAGE AND CUBIC CAPA-
CITY REPRESENTED BY THE EXISTING FLEETS OF
THE UNSUBSIDIZED BERTH LINES SEEKING SUPPORT.

279

REQUIRE AS A CONDITION TO RECEIVING COST-
PARITY OPERATING SUPPORT THAT ALL COMPANIES
INVOLVED SUBJECT THEMSELVES TO THE NORMAL
REGULATIONS APPLICABLE TO EXISTING SUBSIDIZED
LINES AND DIVEST THEMSELVES OF FOREIGN-
FLAG OPERATIONS.

PROVIDE OPERATING EXPERIMENTAL CONTRACTS TO
UNSUBSIDIZED LINER COMPANIES FOR 3 TO 5 YEAR
PERIOD FOR THE PURPOSE OF DEVELOPING NEW IN-
CENTIVES TO ACHIEVE GREATER EFFICIENCY, PRO-
DUCTIVITY AND COMPETITIVE CAPABILITY.

Some 100 liner cargo ships are included in the berth line fleets
not currently subsidized. There has been practically no renewal
of these fleets over the past 20 years and it is patent that there
will be none unless the provisions of the 1936 Merchant Marine Act
are made applicable to them. Furthermore, this segment of our U.S.