Jargest and most modern in the world and includes 
105 containerships, 23 lighter or barge carrying ves- 
sels, and 14 roll-on/roll-off vanships. It now appears 
that the expected tonnage penetration range in this 
area may still be achieved. However, the value pene- 
tration level originally expected is not likely to be 
attained. 
Under the 1970 program, it was originally ex- 
pected that the tankers to be built would yield capac- 
ity sufficient to carry about 10 percent of the liquid 
bulk cargoes moving in the U.S. foreign trade. The 
trade forecast upon which this expectation was 
based, however, did not anticipate the explosive 
growth in U.S. dependence on foreign oil and on 
more distant sources of foreign oil. As a conse- 
quence, even though U.S. tanker construction has 
greatly exceeded original estimates, trade penetration 
gains have not been large. 
In 1969, U.S.-flag tanker carriage represented 3.2 
percent of total tanker tonnage. In 1976, this pene- 
tration was 4.2 percent. Because of the currently 
depressed state of the world tanker market and the 
unanticipated need to carry large quantities of 
Alaska oil to U.S. Gulf Coast markets via Panama, 
foreign trade penetration gains in the short term will 
remain difficult to achieve. Some U.S. vessels that 
would otherwise. be expected to engage in foreign 
commerce if rates were stronger will be drawn to 
the protected domestic carriage of Alaska oil until 
such time as a pipeline is developed to transport the 
West Coast surplus to other U.S. markets. As capac- 
ity is released from the Alaska trade (after comple- 
tion of one or more of the proposed West Coast 
pipelines), U.S. foreign trade penetration could im- 
prove substantially, depending on the level and 
source of total U.S. oil imports, the condition of the 
world tanker market, and the ability of U.S. carriers 
to compete for foreign trade cargoes. 
As noted previously, the dry bulk segment has 
been the least responsive element of the U.S. fleet to 
the new expansion incentives provided under the 
1970 Act. Only two ore/bulk/oil carriers have been 
built under the program, and the U.S. dry bulk trade 
penetration level today is lower than the 1969 level. 
Originally, the construction of a substantial number 
of dry bulk carriers was anticipated and the expected 
1982 U.S. penetration level was set at 14 percent of 
total tonnage. It is evident that this level of penetra- 
tion is not likely to be achieved, although MarAd is 
actively investigating new initiatives in an attempt to 
improve performance in this area. 
During the first 5 years of the new maritime pro- 
gram, the construction subsidy rate objectives in- 
corporated in the 1970 Act were met fully. All CDS 
contracts awarded in fiscal year 1971 were held be- 
low the 45 percent ceiling established for that year 
and, as the ceiling declined by 2 percentage points 
each year thereafter, these goals too were met 
through the end of fiscal year 1975, by which time 
the CDS ceiling had fallen to 37 percent. In part, 
this early success was aided by the two dollar de- 
valuations that occurred in December 1971 and Feb- 
ruary 1973. In addition, however, improved ship- 
building productivity encouraged under the 1970 
Act, also contributed significantly to this success. 
Since enactment of the 1970 Act, the shipbuilding 
industry has invested more than $1 billion in mod- 
ernization and capital improvements. 
Progress in reducing CDS rates ended abruptly in 
fiscal year 1976, however, as the recession in the 
world shipbuilding industry became severe. In the 
wake of numerous order cancellations, the competi- 
tion for replacement orders became acute and for- 
eign construction prices plummeted. As a conse- 
quence of these developments, the U.S./foreign 
construction cost differential widened and the CDS 
rate objective of 35 percent for fiscal year 1976 
became unattainable. 
Since authority to award competitive bid contracts 
with CDS rates up to 50 percent was still available 
under the 1970 Act, a contract for the construction 
of two vessels was awarded in fiscal year 1976 under 
this provision at a CDS rate just under the 50 per- 
cent ceiling. Negotiated contracts, however, were not 
authorized at the higher rates because use of that 
procedure had been conditioned on meeting the spe- 
cific CDS objectives. 
Only July 31, 1976, the declining construction 
subsidy rate goals were completely abandoned with 
enactment of a new amendment to the Merchant 
Marine Act, which reinstated negotiated contracting 
authority without regard to CDS objectives. Under 
this authority, which extends through June 1979, the 
50 percent CDS statutory maximum rate still applies 
as it does in the case of competitive bidding. All of 
the other requirements associated with negotiated 
contracting must still be met, but the lower CDS 
ceiling requirements previously imposed have been 
eliminated. It should be emphasized that the con- 
struction of LNG vessels has been possible at CDS 
rates well below the statutory maximum. In fact, all 
CDS-sponsored LNG construction to date has been 
at rates below the goals originally set in 1970. 
In looking at the total record of progress since 
enactment of the Merchant Marine Act of 1970, it 
is clear that while the pace of maritime revitalization 
has not been as rapid as originally hoped, and while 
' progress has been extremely disappointing in some 
areas, many significant gains have been made. For 
example, although the number of privately owned 
vessels in the U.S. fleet declined from 793 in 1970 
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