and the private shipyards. Merchant marine opera- 
tions are augmented by such activities as port 
cargo handling. Annual revenue accruing to the 
U.S. merchant marine, which encompasses U.S.- 
flag vessels operating in coastal and world trade, 
amounts to approximately $1.5 billion. If U.S.- 
owned, foreign-flag vessels were included in the 
definition, the revenue figure would be increased 
by as much as $4 billion, the bulk attributable to 
tankers owned by U.S. oil companies.? ! 
The other main segment of the sea transporta- 
tion industry, the U.S. shipbuilding industry, 
includes conversion, repair, and construction of 
both naval and merchant vessels. The yearly value 
for this activity exceeds $2.2 billion.?? Various 
shipyards also have been engaged in designing and 
constructing oil rigs, mining vessels, dredges for 
the Corps of Engineers, and oceanographic vessels, 
cutters, and other ships for the Coast and Geodetic 
Survey and the Coast Guard. 
Over the past 5-10 years, the small volume of 
cargo carried under U.S. flag and the decreasing 
number of merchant vessels built by domestic 
shipyards have been the subject of considerable 
concern. Several highly respected study groups 
have analyzed the problems of the U.S. merchant 
marine, especially such questions as operating and 
construction differential subsidies and foreign con- 
struction of U.S.-flag vessels. These problems are 
extremely complex and deserve more careful, 
concentrated thought than the panel was able to 
contribute in light of the broad scope of the 
Marine Resources and Engineering Development 
Act. 
The panel unequivocally believes that strong 
U.S.-flag shipping and private shipbuilding indus- 
tries are vital to the National interest. The impor- 
tance of domestic shipping and shipbuilding be- 
comes paramount during times of emergency or 
National crisis. In such circumstances, heavy reli- 
ance on foreign-flag shipping is not advisable 
though many of the ships may be under nominal 
U.S. ownership. 
31 Laird Durham (A.D. Little, Inc.), “The United States 
Ocean Industries,” April, 1966, p. 13. 
3? This figure reflects the value of work done during a 
year. Because most shipbuilding contracts extend over 
several years, “‘value of work done” is considered superior 
to “total cost of ships delivered” as an indicator of 
shipyard productivity. Shipbuilders Council of America. 
Furthermore, although ships under the flags of 
Panama, Honduras, and Liberia, the so-called 
“flags of convenience,” are deemed within effec- 
tive U.S. control, the international political impli- 
cations of U.S. attempts to wrest these ships from 
their sponsor nations during peacetime emergen- 
cies are great. Therefore, the panel believes that 
the rapid decline of the U.S.-flag merchant marine 
hinders the Nation’s ability to support overseas 
military operations and maintain vital imports in 
time of war. 
It is important to realize that U.S.-flag shipping 
in the foreign trade is an export commodity. The 
U.S. balance of trade is reduced every time a 
foreign-flag ship carries trade from a USS. port. 
Shipbuilding also is essential as a domestic 
industry during a National emergency, since the 
need for ships increases rapidly. In terms of 
emergency needs, many believe the Navy building 
program, constituting more than 75 per cent of 
total construction in private yards, keeps the 
domestic shipbuilding industry sufficiently active 
to maintain the needed industrial base. In addi- 
tion, the unused potential in U.S. shipyards can be 
mobilized readily in time of war. 
B. Trends 
Shipbuilding in the United States is a sizable 
industry, becoming more technologically-oriented 
because of the complicated equipment and design 
required for naval vessels which are more complex 
than merchant ships. However, the industry does 
not operate at peak capacity or optimum effi- 
ciency because most types of vessels are ordered in 
very limited numbers. Thus, the pace of capital 
investments in updated ship construction facilities 
has been in almost direct proportion to the 
available level of orders. 
However, the recent Navy trend toward multi- 
year, multi-ship procurement already has stimu- 
lated capital equipment improvement in shipyards. 
If contracting practices for merchant ship con- 
struction also followed this pattern, further mod- 
ernization could be expected. When a shipyard 
receives an order for several ships of a particular 
design, the experience and learning acquired in 
constructing the first few vessels of the series 
greatly reduces costs and improves efficiency for 
the remaining vessels. 
V-45 
