NATURE OF THE MARITIME FUNCTIONS AND OF THE PRESIDENT'S PLANS

As is indicated in the reorganization plan, the Government maritime functions fall into three basic categories, that is, regulatory, subsidy, and operational. With respect to regulatory type functions, the Maritime Commission exercises limited regulatory responsibilities affecting rates and services of carriers, reviews agreements among carriers, and protects shippers against illegal and discriminatory practices. In the discharge of subsidy functions, the Commission awards differential subsidies in connection with the construction and the operation of vessels. Among its operational functions, the Commission administers construction and operating subsidy contracts, constructs ships for Government account, charters and sells Government-owned ships, maintains the reserve fleet, and provides maritime training services.

Plan No. 21 would create within the Department of Commerce a three-member Maritime Board and a Maritime Administration. Under the plan, the Maritime Board would have independent authority to perform all regulatory functions. With regard to subsidy functions, the new Board would determine the recipients and the amounts of individual awards-and, Mr. Chairman, you will note I have changed the words in my written statement from "subject to" to read "guided by"-guided by the general policies set by the Secretary of Commerce and his determinations with respect to route patterns. The operational functions would be transferred to the Secretary to be conducted by the Maritime Administration. Administration would operate as a regular bureau of the Department of Commerce. The Chairman of the new Maritime Board would be the Maritime Administrator. In the performance of his duties as Administrator, he would be under the direction of the Secretary of Commerce. In the interest of efficiency and economy, the plan permits. the combining of the staff of personnel to serve the new Board and Administration, insofar as practicable. Finally, the plan provides for an Under Secretary for Transportation.

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The President's message transmitting plan No. 21 provided a complete statement of the purposes underlying the plan. Consistent with the previously mentioned independent studies of the Government's maritime functions, one primary purpose of the reorganization plan is to place the operational functions of the Maritime Commission under a single executive. A second purpose is to achieve coordination of the promotional program with respect to the maritime industry and other promotional programs relating to transportation. Experience dictates that normal operational type functions are more likely to be administered successfully under a single executive than under a commission. The proposed plan recognizes that the particular part of the promotional function having to do with the determination of recipients and amounts of individual subsidy awards is a matter appropriate for independent decision by a bipartisan board. This power and the present regulatory powers are left wholly in the hands of the Board.

The new Maritime Administration would occupy a position generally like that of the Civil Aeronautics Administration or the Bureau of Public Roads within the Department of Commerce. The presence

of the Maritime Administration within the Department would permit coordination of its policies with those of the transportation agencies now in the Department and with those of other segments of the Department dealing with foreign and domestic commerce and with business interests generally. As a result of unified administration achieved by this plan, maritime activities could be meshed more readily and effectively with related activities of the executive branch, such as the Military Establishment.

REGULATORY FUNCTION

In the exercise of its regulatory powers over rates and services, agreements between carriers, and discriminatory trade practices, the Board would be independent of the Secretary of Commerce and would be free to report directly to the Congress. The present independence of decision enjoyed by the Maritime Commission would, therefore, be continued in the Board, with respect to these quasi-legislative or quasi-judicial regulatory functions.

If, in the exercise of these functions, the Board should wish to avail itself of any of the facilities of the Department, I should, of course, be glad to see that the Board is accorded full cooperation. However, such cooperation would not, in my opinion, interfere with the independence of the Board in the exercise of its regulatory functions. On the contrary, the decisions of the Board on regulatory matters would be made with complete independence, on the basis of the facts before the Board, subject only to court review. Its consideration of regulatory problems would not be subject to supervision or control by the Department, and its decisions would not be subject to review, or approval, or reversal by the Secretary or the Department. This method of operation has been found satisfactory in the case of the Civil Aeronautics Board, and I foresee no difficulty in applying the same principle to the regulatory functions of the proposed Federal Maritime Board.

SUBSIDIARY FUNCTIONS UNDER THE PLAN

The plan contemplates a division of promotional functions. The basic responsibility of the proposed Maritime Board will be to determine the recipients and amounts of subsidy awards. The responsibility of the Secretary will be that indicated in the President's message and recommended by the Hoover Commission. In the exercise of its powers with respect to the award of subsidies under the plan, the Board is to be guided by the general policies of the Secretary of Commerce, under section 106 of the plan, and will operate within the framework of route patterns established by the Secretary, but its actions with respect to making, amending, and terminating subsidy contracts under section 105 (1) are to be final.

This aspect of the plan appears to me to be both appropriate and practicable. This arrangement facilitates and insures coordinating the subsidy program with the programs and general policies of the executive branch relating to national defense and the national transportation program. In light of the need for consistency in the determinations made throughout the executive branch concerning the promotion of transportation services, and in view of the substantial

national defense aspects of such determinations, it seems entirely proper and essential that general programs regarding the promotion of maritime services should be placed under a Cabinet member reporting directly to the President. At the same time, the plan leaves to the independent judgment of the Board the determination as to which individual concerns are to receive the subsidy contracts and as to the amounts of the individual subsidies. I should like to make it clear that under the plan the Secretary has no authority either to award a subsidy or to direct the action of the Board on a subsidy application.

Under the plan, the Federal Maritime Board is to be an agency within the Department of Commerce. This status does not, in my view, give the Secretary or Department any authority over the regulatory functions, which the Board is to exercise independently, nor does it give the Secretary or the Department authority to alter or reverse the actions of the Board with respect to those subsidy functions as to which its actions are final.

OPERATING FUNCTIONS UNDER THE PLAN

I believe there is little controversy regarding the desirability of placing the present operating and administrative functions of the Maritime Commission under unitary executive leadership. This objective was strongly urged by all three of the groups mentioned previously which studied the maritime program.

The Maritime Commission is composed of the Office of Chairman and Commissioners, the Office of the General Manager, and the following seven bureaus: Vessel Custody, Maritime Services, General Services, Finance, Engineering, Law, and Government Aids. Of the total personnel numbering 5,444 as of January 1, it is estimated that all but 200 or 300 were engaged exclusively in operating or administrative type functions. Under plan No. 21, the Bureau of Engineering, to a limited extent, and the Bureaus of Law and Government Aids, to a more substantial extent, would serve the Maritime Board as well as the Maritime Administration.

The Bureau of Vessel Custody, composed of 2,297 employees, has the responsibility for administering the reserve fleet program including additions to and withdrawals from the fleet, and the maintenance of the sites and of the ships. The Bureau of Maritime Services, composed of 960 employees, has responsibility for the Commission's programs with respect to recruitment, training, and promotion of seagoing personnel and maintenance of their records. The Bureau of General Services, composed of 753 employees, administers activities of the Commission with respect to property management, warehousing, terminals, and laid-up shipyards. This Bureau also conducts the purchase of property, equipment and supplies, and provides office services. The Bureau of Finance, composed of 676 employees, is responsible for the complex and extensive accounting, claims, insurance, and auditing activities with respect to all of the diverse functions of the Commission. The Bureau of Engineering, composed of 333 employees, has responsibility for determining basic characteristics of Maritime Commission constructed vessels, for final plans and specifications of Maritime Commission designed vessels, for preparing cost estimates on vessel construction or conversion, for preparing and conducting ap

praisal surveys of ships in which the Maritime Commission has an interest, and for the inspection and supervision of repair of Maritime Commission vessels.

GENERAL ADMINISTRATIVE RELATIONSHIPS AND THE NEW UNDER SECRETARY

In view of the already very heavy load of supervisory responsibilities in the Department and in view of the important and dynamic nature of the transportation activities of the Department, it is essential to effective leadership of the Department's transportation activities that an additional Under Secretaryship should be established. The proposed Under Secretary for Transportation would be my deputy with respect to the programs and activities embraced within the proposed Maritime Administration, Bureau of Public Roads, Civil Aeronautics Administration, and the Inland Waterways Corporation. It would be the responsibility of the Under Secretary for Transportation to exercise general policy supervision on my behalf over all transportation activities in the Department and to assure program consistency among these several transportation agencies. He would play a major role in developing a coherent over-all transportation policy and in assuring the effective administration of these transportation activities lodged in the Department.

As in the case of the other bureau heads, the Maritime Administrator would be ultimately responsible to me as Secretary. The Maritime Administrator would be responsible for the operations of his agency and would be vested with suitable authority to fulfill that responsibility. While the Department requires adherence to certain administrative standards and practices in the interests of economy and progressive management, it is my policy to give operating bureaus wide operating latitude. This policy would apply to the Maritime Administration, in conformance with the administrative pattern of the Department prevailing with respect to the Bureau of Public Roads, Civil Aeronautics Administration, and other major agencies.

THE ROLE OF THE AMERICAN MERCHANT MARINE

Reorganization Plan No. 21 does not attempt to solve any problems arising out of the basic legislation affecting the marine industry. It does not attempt to change the statutory basis of the regulatory and promotional and operational functions now vested in the Maritime Commission. Such changes would not be appropriate in the reorganization plan. Any changes in the basic legislation which might be desirable should be enacted by the Congress after careful study and investigation.

The sole purpose of Reorganization Plan No. 21 is to place the existing functions in the location where they can be most effectively handled so as to make the most effective and efficient use of the resources which are being devoted to the industry and to make the maximum contribution to the industry.

In conclusion, I feel that the pattern of organization provided by Reorganization Plan No. 21 for the Maritime functions is fundamentally sound and that it will both make for more effective administration of e important programs and for better coordination of ther F vities with which they are related. As the head of

the Department of Commerce, it will be my endeavor to see that the plan accomplishes the benefits or advantages which it is designed to achieve. Accordingly, I urge the committee to support the plan. The CHAIRMAN. Thank you, Mr. Secretary. Do any of the members have questions?

Senator HUMPHREY. I have one.

The CHAIRMAN. All right.

Senator HUMPHREY. I would like to ask the Secretary for purposes of clarification and to get his more expressed point of view: Do you consider the proposal of the President in this reorganization plan to meet the requirements as established in the report of the Hoover Commission, pertaining to the Department of Commerce?

Secretary SAWYER. Well, I am not too familiar with that report, but my understanding is they do not separate the regulatory and sub-. sidy activities, and I think to the extent they were not separated, it does not follow that report. I think the basis for most of these Hoover reports, which was a streamlining of administrative functions, is carried out by this Plan No. 21.

Senator HUMPHREY. The next question I would like to ask is: How far do you believe that the authority of the Secretary of Commerce would go in establishing the general policy as pertains to subsidy?

Secretary SAWYER. As you will recall, Senator, I suggested as I read this the change in the words "subject to" to "guided by" because I think there is a distinction. In my opinion, the word "guided" is directory and not mandatory, if I may use those two words to interpret the language that is used.

In other words, an effort is made here to see that the Board in their subsidy functions be guided by the policies of the Secretary. My interpretation is that they are not required to follow the policies of the Secretary.

Now, it may be said, as Senator Brewster indicated when he was questioning Mr. Lawton: Well, would honest and high-minded men refuse to be guided by the policies of the Secretary? My assumption would be that if the policies of the Secretary were sensible, they would follow them; but I believe that they are not required to follow them. I assume that the Board would follow them.

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I may say, furthermore, that it seems to me there is a complete answer to the fear that the Secretary might by some quirk of mind completely haywire, because in the last analysis Congress always retains control of anything of this sort that might be done. Any operation by the Secretary of Commerce which would be a complete departure from congressional mandate, or the theory the Congress had, could be very promptly rectified.

I might also add that the same possibility with reference to a general abandonment of subsidies, which was mentioned a while ago, is effective right now. The Commission could do the same thing.

Senator HUMPHREY. I would just like to develop that point a little more. Does the reorganization plan give to the Maritime Commission, or under this to the Maritime Administrator, any new powers? Secretary SAWYER. I think not.

Senator HUMPHREY. Does the reorganization plan take away any of the existing powers pertaining to the development of the merchant marine and the subsidies involved therein pertaining to the merchant marine?