hot spot situation for the present time rather than project long-range requirements?

Secretary BOYD. No, not at all. We were looking at it from a longrange point of view and projecting the growth of both bulk and liner cargo substantially into the future.

Mr. REINECKE. And this also takes into account the obsolescence of the ships?

Secretary BOYD. Yes, sir.

Mr. REINECKE. That is what you meant by the replacement of the existing ships?

Secretary BoYD. Yes, sir,

Mr. REINECKE. You said this program was $230 million?
Secretary BOYD. $212 to $255 million.

Mr. REINECKE. It appears to me that one very real need of the problem is, No. 1, to know what our potential requirements are and know what our potential capacity is and try to get those two to coincide in the future. Have you considered the military requirements in making this statement!

Secretary BOYD. You mean have we made an evaluation of the military requirements?

Mr. REINECKE. Have you requested the military to advise you! Secretary BOYD. Yes, sir.

Mr. REINECKE. What did they indicate?

Secretary BOYD. The program which I have outlined will fully satisfy all military requirements.

Mr. REINECKE. I am aware of one military study that was made and it is about the size of the telephone book and the first page starts off by saying, "This survey assumes no hostile enemy action." Wa this the same survey made by the Navy that was referred to you? Secretary BOYD. I am unaware of that. I don't know.

Mr. REINECKE. It might logically follow on facetiously to say that, therefore, we don't need a Navy if we can assume no hostile enemy action. I think it is a rather ridiculous approach to make on any survey and I certainly hope that the survey information that you wer supplied is not based on that kind of a premise.

Secretary BoYD. The information which I have is to the effect that the program will satisfy our requirements. Now, I have no recoller tion as to whether the study contains any statement about assum" 2 no hostile enemy action, but I think one gets into sort of a never-never land if one begins to assume nuclear war generated by Russia or China or somebody else.

Mr. REINECKE. It doesn't have to be a nuclear war to start losing shipping.

Secretary BOYD. Well, I am not a military man. I don't speak for the Department of Defense. However, I believe that there are tw classifications of wars which are used for planning purposes; ore 2 general war which by definition today is nuclear war and one is limited

war.

Mr. REINECKE. That is what we have in Vietnam; is that rig Mr. LENNON. Will the gentleman yield to me just at that por Mr. REINECKE. Certainly.

Mr. LENNON. Did I understand yon, Mr. Secretary, to say for the record that the program you envision here and offer would inclu ** the necessities or requirements for the military and defense

Secretary BOYD. No, sir; it does not include the requirements for Defense. Defense as you know has its own program, Mr. Lennon, which is composed of a number of different elements, but insofar as Defense relies on the U.S. merchant marine we are advised that this program will satisfy those requirements.

Mr. LENNON. In other words, you are not transgressing upon the DOD's insistence in trying to get the Congress to authorize the FDL's? Secretary BOYD. No, sir. This is not related, to my knowledge. Mr. LENNON. We think it is. Thank

you.

Mr. REINECKE. That is my next question. Was the information given to you by DOD before or after the Congress had rejected the FDL program?

Secretary BOYD. Before.

Mr. REINECKE. So that the DOD's requirements may very well have assumed that they would have an FDL capacity?

Secretary BoxD. You would have to query DOD on that, Mr. Reinecke.

Mr. REINECKE. The merchant marine is supposed to be an economic as well as a military arm of our Government and we cannot go on sticking our head in the sand when it comes to the military requirements and I think that is what you are doing. You have indicated that you can't get along with these people because they have to have it their way or not at all. Yet you are doing the same thing. I think you are guilty of the same crime that you accuse these segments of the industry of committing.

Secretary BOYD. Mr. Reinecke, it concerns me personally that you would charge me with any crime. I think that I have carried out to the best of my ability the oath of office I took as Secretary of Transportation. I do not feel that I am here in the dock as a criminal. I do not feel that I am the spokesman for the Department of Defense.

We have one President who appointed a Secretary of Defense and on whose judgment he relies, I presume. This is up to the President. It is not up to me.

Now, you are certainly free to criticize me in any way you wish, but I must tell you I don't look with kindness on your comments about me being a criminal.

Mr. REINECKE. I am sorry you don't. I didn't accuse you of being a criminal. I said you are guilty of the same crime that you are accusing the segments of industry of committing. If you are not accusing them of a crime then I am not accusing you of one but that is a matter of academics and I don't care much about it.

I don't like to make a personal thing out of this but I think the American people through their representatives in Congress have something to say in the issue and I think you are defiantly ignoring the will of the people of this country and I think the President is just as guilty as you.

Let us get back to the testimony. I tried to come up with some numbers out of your statement. You indicate that the subsidy is anticipated to cover 490 ships in 1979. Do I understand that you mean by the year 1979 you will have subsidized 490 ships either foreign or domestically constructed?

Secretary BOYD. I understand by my testimony that by 1979 und this program there will be 490 ships under operating subsidy operati under the U.S. flag with U.S. crews, U.S. ownership.

Mr. REINECKE. These are not necessarily new constructions? Secretary BOYD. These are not necessarily new constructions. Mr. REINECKE. I see. Now, the program of 30 ships a year, will you feel, replace the present level of merchant marine capacity! Secretary BOYD. No, sir.

Mr. REINECKE. Will it expand it?
Secretary BOYD. No, sir.

Mr. REINECKE. So that what we are doing is continuing the dor ward trend of capacity of our own shipping industry? Secretary BOYD. No, sir.

Mr. REINECKE. Is it reasonable to assume that if we are going to crease the status of our merchant marine and our capability that should try to expand the capacity and the carrying ability of our or fleet?

Secretary BoYD. Yes, sir.

Mr. REINECKE. That is a very good answer. What percentage Government-impelled cargoes are we handling at this time? Secretary BoYD. What percentage?

Mr. REINECKE. Not according to statute but actually. Do you any figures available on that?

Secretary BoYD. I can obtain those figures for you from the Mariti Administration. I do not have those figures.

Mr. REINECKE. I think it would be interesting. I have had inform tion come to me that, while we are supposed to be carrying 50 percen we are not actually carrying that much.

Secretary BOYD. It may be that we are not carrying that much. If we are not it is due solely to the lack of U.S. bottoms available for the carriage.

Mr. REINECKE. I would appreciate having that information made available.

Secretary BOYD. That will be submitted for the record.

(The information follows:)

GOVERNMENT-BILLED CARGOES COVERED BY PUBLIC LAW 664,1 CARRIED BY U.S.-FLAG VESSELS,

Mr. REINECKE. On the question of the rebuilding of the national defense reserve fleet, I may have missed the testimony the other day. How many ships were going to be reconstructed or refurbished?

Secretary BoYD. The program calls for a total of 100 ships over 5 ars. However, I testified that that was subject to change depending on agreements reached between the operators of U.S. shipping and e Department of Defense for the availability of ships for less than al emergency situations.

Mr. REINECKE. These are primarily the AP-5's, I believe you said. Secretary BOYD. These are completely the AP-5's.

Mr. REINECKE. So that whatever we can do with those will depend yon DOD requirements; is that what you said?

Secretary BOYD. Well, that is one way to put it. Another way is that will depend on the ability of DOD and the operators to reach agreeents for availability of tonnage.

Mr. REINECKE. Have we any reason to believe that the insurance tes will continue at the young-age rate even after these ships pass e 20 or 25 year mark?

Secretary BOYD. It is my understanding that the insurance rate deends on surveys which have to do with the condition in which a parcular ship is in, and despite the fact that there was some disagreeent the other day, I indicated my understanding to be that the AP-5's e somewhat similar to 1947 Chevrolets with low mileage on them. hey are in good condition and, of course, if they were reconditioned. nd modified they would be in better condition. That being the case, my understanding of the way insurance rates are set is correct, the ites would continue at a fair level.

Mr. PELLY. Would you yield on that question?

Mr. REINECKE. I yield.

Mr. PELLY. Perhaps Mr. Davis would know the answer. I was under he impression that Lloyd's had issued a blanket increase in insurance remiums covering a class of ship not on a per-ship basis.

Mr. DAVIS. They have announced a blanket increase on all ships ver 25 years old subject to a survey process which involves testing out he hull, the amount of rust, and so forth.

Mr. PELLY. Hasn't that announcement practically rendered overged ships competitively obsolete?

Mr. DAVIS. No; it has not. It has some of them.

Mr. PELLY. As a rule, aren't the plates thin on these old ships so as o result in upgrading their premiums by insurance companies? Mr. DAVIS. Some of our older ships do come within that class, Mr. Pelly, but the AP-5's do not come within that class.

Mr. PELLY. I only know what I read. However, it seemed that inreased insurance premiums caused all of a certain class of our vessels to be economically infeasible to operate.

Thank you.

Mr. REINECKE. Mr. Secretary, on the funding of these ships, will this to be done out of Marad or out of DOD?

Secretary BOYD. That has not been resolved. My assumption is that it would be Marad.

Mr. REINECKE. Again, was this position taken before the FDL was

knocked out.

Secretary BOYD. Yes, sir.

Mr. REINECKE. So that this level of reconstruction may not be adequate according to DOD's requirements now; is that right?

Secretary BOYD. I do not understand DOD to consider the FDL pr gram to be a part of a merchant marine program for the Department of Defense. If my understanding is correct, then the FDL progra.. in or out would have no bearing on this aspect of our program,

Mr. REINECKE. Isn't it true that there is a tremendous capacity of our present merchant marine that has to supply the lift to Vietnam and as such it has a very definite effect on the commercial trade routes! Secretary BOYD. My understanding of the FDL program, Mr. Reinecke, is that it was not conceived to operate in point to poin delivery, that rather they were floating depots. I know of no U.S. merchant marine ships being used for that purpose today.

Mr. REINECKE. I agree, but if those floating depots are not available, is it not true that, therefore, more trade-route-plying ships would have to be applied to this same application? We can't put the boys ashore without the necessary supplies. If they don't come from an FDL they would have to come from merchant ships.

Secretary BOYD. I don't know that that follows.

Mr. REINECKE. How would you supply them?

In other words, if the materiel was not available from an FDL sh.p how else would we supply these troops?

Secretary BOYD. Well, there are various alternatives. One, of course. is land-based depot. Another is by air.

Mr. REINECKE. Well, now, the land-based depot, of course, if it is ir Vietnam, has to be supplied from the sea unless it is supplied by air, and we all know that something less than 2 percent of the total car going to Vietnam goes by air and the rest goes by sea; so that I thirs we have to address ourselves to that.

Mr. Secretary, the information which you received from DOD, was this transmitted to you from Marad on April 1 of this year in a letter from Bill Lettice?

Secretary BOYD. I have no idea, Mr. Reinecke. You must bear mind that from June 1965 until January of this year I was Under retary of Commerce for Transportation and the Maritime Administra tion was part of my responsibility. The evolution of the program e are discussing includes that total period and I am unable to tell yo at what time we were in communication with anybody in particula” The fact of the matter is that we have tried to be in constant comm nication with anyone within the Government as well as with the ma time interests outside the Government.

Mr. REINECKE. Could you have your staff make available to me t information from DOD that was the basis for you capacity requir ments!

Secretary BoyD. That information is classified, Mr. Reinecke, at am not in a position to declassify that information.

Mr. REINECKE. That is all.

The CHAIRMAN. Mr. Downing.

Mr. DOWNING. Mr. Secretary, I would like to know just where w are right now. Is this a program that you are going to submit to! President or have you submitted it to the President!

Secretary BoYD. No, sir: I have not.

Mr. DOWNING. When do you intend to submit a program to the Pre

ident?