was felt that these changes would, for the first time, 
make the construction subsidy provisions of the Act 
responsive to the needs of bulk shipping operators as 
well as liner operators. 
In an effort to keep operating subsidies to a mini- 
mum and encourage effective collective bargaining 
by ODS recipients, the 1970 Act revised the wage 
subsidy provisions of the Merchant Marine Act by 
tying subsidizable U.S. wage expenses to a general 
U.S. wage index. Under this system, wage increases 
in excess of the amount allowed by the index were no 
longer authorized for subsidy, and wage levels which 
were kept below the index level would yield extra 
subsidy income for the operator. A limit was placed 
on the extent to which true wage costs could vary _ 
from the index-based “subsidizable wage cost,” and 
every few years (not less than two or more than 
four) a new base period was to be established at 
which time actual wage rates would be used as a 
new starting point for subsequent years. Through 
this program ODS operators were given important 
incentives to keep subsidizable wage cost increases 
to a minimum. 
The 1970 Act extended eligibility to establish tax 
deferred Capital Construction Funds, under the 
terms of Section 607 of the Merchant Marine Act, to 
virtually all U.S. vessel operators. Before 1970, 
this program was available only to ODS recipients. 
Although all U.S. operators can now establish such 
funds, the use to which these funds may be put is 
limited. Such tax deferred funds may be used only 
for the construction or reconstruction of vessels for 
use in U.S. foreign commerce, for use on the Great 
Lakes or in the non-contiguous domestic trades, or 
for use in the fisheries of the United States. Hence, 
these funds may not be used for the construction of 
vessels for the inland and intercoastal domestic 
trades. 
Similar, although much more limited, tax deferral 
benefits are available, however, through the Con- 
struction Reserve Fund program (Section 511), 
which does not preclude the construction of vessels 
intended for inland and intercoastal domestic serv- 
ice. Basically, this program allows any U.S. operator 
to establish a fund into which gains on the sale or 
other disposition of a vessel may be deposited on a 
tax-deferred basis. However, this program does not 
allow other tax-deferred deposits (such as earnings) 
so it is generally used only for accumulating funds 
to construct vessels ineligible for the Capital Con- 
struction Fund Program. 
Under the Merchant Marine Act of 1970, the 
operating subsidy recapture provisions of the 1936 
Act were repealed. As indicated previously, subsi- 
dized operators before 1970 were required to pay to 
the government one-half of profits (averaged over a 
10-year period) in excess of 10 percent on capital 
necessarily employed in subsidized operations up to 
the amount of subsidy actually received. Elimination 
of recapture was justified principally because much 
the same function was now performed by higher 
corporate tax rates and over the years the program 
had become expensive and difficult to administer. 
In addition to the major program elements dis- 
cussed above, the 1970 Act also contained numerous 
other provisions affecting various maritime promo- 
tion programs and their administration. The ceiling 
on the amount of outstanding debt which could be 
guaranteed under Title XI was raised from $1 bil- 
lion to $3 billion. (Subsequent amendments have in- 
creased this ceiling to a current level of $7 billion.) 
The 1970 Act established a Commission on Amer- 
ican Shipbuilding to study the U.S. commercial ship- 
building industry and report within 3 years. A new 
position of Assistant Secretary for Maritime Affairs 
was established in the Department of Commerce, al- 
though the new position was required to be occupied 
by the same person who serves as Maritime Ad- 
ministrator. The Act included a provision requiring 
agencies subject to cargo preference to administer 
their preference responsibilities in accordance with 
regulations promulgated by the Secretary of Com- 
merce. And finally, the 1970 Act specifically identi- 
fied the Great Lakes as a fourth seacoast and re- 
quired that it be given equitable treatment under the 
Merchant Marine Act with respect to its foreign 
trade requirements. 
These were the major provisions of the Merchant 
Marine Act of 1970, which were intended to provide 
the legislative foundation for a 10-year program of 
U.S. maritime renewal. In the next section a number 
of other general support activities carried out by the 
Maritime Administration will be discussed and the 
following section will describe progress achieved to 
date under the terms of the 1970 Act and the pro- 
gram deficiences which have emerged. 
General Federal Maritime Support Activities 
Beyond the specific shipping and shipbuilding aid 
programs carried out by the Maritime Administra- 
tion, a number of additional general support activi- 
ties are conducted which are designed to further 
overall U.S. maritime policy objectives and provide 
support for other broad national goals. Included in 
this category are programs in such areas as research 
and development, maritime manpower, market de- 
velopment, environmental protection, and national 
security. Brief consideration will be given to the 
major developments in these areas since 1970. 
Over the years, programs sponsored or conducted 
directly by the Maritime Administration and its 
predecessors have spawned major technological ad- 
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