The CHAIRMAN. If we had alternative language other than the language presently in H.R. 4769 concerning shippers' councils that would clarify the questions that you raised that under the present wording would be time consuming, regulatory in nature, and let us call it an impediment to your clientele, and when we clear that up, would you then be in a position to support shippers' councils? Mr. MERWIN. I do not believe they are necessary, Mr. Chairman. As far as the users are concerned. As far as the shippers are concerned, we have organizations presently such as TAA, California Manufacturers Association, the National Industrial Traffic League, Maritime Committee, which are capable of sitting down with conferences collectively to discuss broad subjects such as filing of tariffs, notice to the Commission of changes of rates, things of that nature.

We already have that machinery but historically in shippers dealing with the FMC, we learned that the counsel at the FMC some 15 years ago ruled that the conferences collectively could not sit down with our present groups to discuss these broad programs, and that more or less became their steadfast position.

I would hope that somewhere, as I mentioned in my testimony, we would urge the FMC to grant the carriers and the conferences the ability to sit down with us. We are prepared right now.

The CHAIRMAN. In discussing the FMC, what is the primary reason for the FMC's delay in that agency, proceedings as you see it?

Mr. MERWIN. Well, I have not had any proceedings before the FMC, Mr. Chairman. It is the delay in approval of the agreements, and the lengthy hearings, some of which we have participated into a minor degree.

The entire thrust of my presentation here today is, there should be a time limit on the approval of these section 15 agreements, or they should be presumptively approved upon filing, and definitely we should get the antitrust people out of these agreements, because in our dealings with the foreign lines, in our U.S. conferences, who, of necessity, must carry some of our goods, they hesitate to talk to us. They are concerned.

We have tried to get organized, to talk just to our American steamship presidents. The presidents of American-flag lines, on a very informal basis.

The administration of the act, since the Bonner bill was passed, because of some decisions of the FMC and the courts, these people do not even want to sit down and talk to us about broad things. We are not talking about rates, we are not talking about restraint of trade, or anything. We are talking about the ability to improve the amount of cargo carried by the American-flag lines. We want more sailings in certain trades.

We want these people to be able to talk to us as our competitors in Europe talk to their national-flag lines, without the restraints that are placed upon not only the U.S.-flag lines, but the foreignflag lines that serve our country, and are a necessary part of our export and import programs.

The CHAIRMAN. Mr. Kyros?

Mr. KYROS. Thank you, Mr. Chairman.

Mr. Merwin, you have told me earlier, you testified during the Bonner hearings in 1960?

Mr. MERWIN. Yes, sir.

Mr. KYROS. We have tried in this draft that the committee has prepared, to provide shippers' councils that would organize and consult with conferences, not only about general rate matters, and surcharges, but actually about the external and internal functions of the conferences.

For example, permitting third flags as members, and other questions related to conference structure. So assuming that as an objective, do you think that would be a good objective, to have shippers' councils able to consult fully with conferences minimizing the involvement of the FMC?

Mr. MERWIN. It probably would.

Mr. KYROS. Now, I understood one of your complaints, on page 4, if I perceive it correctly, is that you do not want the FMC to exert regulation over the shippers' councils, as the bill currently provides on page 16, section 207, where it states, 207(c), that the Federal Maritime Commission would be allowed to review the minutes of all shipper council meetings, audit all shipper accounts, and have full access to council documents, and council officials.

I daresay that is what you are addressing your complaints to. Mr. MERWIN. First of all, I think we better get this in context, as to what the shippers require of the conferences.

We believe there are certain broad things about publications of rates, orderly distribution of tariffs, perhaps independent action, early withdrawal from a conference agreement, if it no longer meets your requirements, and we should be able to sit down, not in confrontation circumstances, but in a friendly dialog.

Now, if the user panel from TAA requested a group of conferences to meet here in this room, in a forum, we would not object at all if the Chairman, and all the Commissioners of the FMC sat in and watched what we were doing. We do not want an adversary proceeding, and we think by forming a shippers' council, subject to review by the FMC, it creates an adversary type of procedure. Mr. KYROS. Now, to consult on general rate increases, or to consult on surcharges, we are now talking about allowing shippers to meet, either as a national shippers' council, or regional, to communicate with a group of carriers.

Now, the antitrust people would, of course, say that is concerted action, a group of people talking about rates. To take care of that, the bill provides that the shippers would have antitrust immunity, and we would make regular consultations between shippers' councils and conferences.

Mr. MERWIN. Mr. Kyros, this may come as a surprise, but in my experience I have never seen any concerted drive on the part of unrelated shippers to get collectively together to fight general increases that may come about in a particular conference trade. There has been concern about the application of surcharges, which I believe are completely different than rates, and rate structures. Perhaps not in an adversary proceeding, but in comments to the Commission, the Commission may come up with some method to arrive at the fairness of surcharges, but I do not think that a group meeting with the conferences, outside of the FMC, would be

violating any statute, if all we were doing was saying to the lines, in the granting of these bulker fuel surcharges, which certainly the lines are entitled to in the situation we find ourselves presently, that we could set up certain standards. I deal with foreign conferences from South America, for example, and we have sat down and arrived at a method of determining what that surcharge should be. Now, in that particular trade, with these particular lines, we have reached an amicable agreement, and I can find no reason why this would not-why we could not do it here in the United States. But I think if you put all this under regulation, then by the time the lines would get their agreement for a bunker surcharge, time would have passed.

In the case of dealing foreign-to-foreign conferences, we do it by sitting down, in one day.

Mr. KYROS. Mr. Merwin, I think we are talking, both the same point, that is, in the European situation, foreign-to-foreign trading, for example, European shippers' councils meet with the conferences, and they discuss exactly what surcharges, what general rate levels should be, and their accountants check out the carriers' figures, and they come to agreements.

Over here, if you have a group of shippers together, and attempted to do that with conferences, the conference would certainly incur antitrust problems, because it is discussing something beyond the present approved agreements.

Section 15 does not permit that kind of agreement between conferences and shippers, group of shippers, to discuss general rate increases, or surcharges.

Mr. MERWIN. Mr. Kyros, I do not think that the shippers' councils in Europe, either individually or collectively, are as effective as is generally thought to be. I think that certain organizations that we have here in the United States, representing shippers, one of which is the TAA, does a more effective job as to an orderly development of a good transportation system, without the shippers' councils.

There would have been no European shippers' councils, had it not been as a result of the passage of the Bonner bill. That is my personal opinion. But in order to prevent something like the Bonner bill being passed in the foreign countries, and so on and so forth, the lines came up with the code of conduct of liner shipping, which I think was an admirable thing to do.

Whether this is better than our system or not, I do not know. There are minuses and pluses.

Mr. KYROS. Well, would you not prefer, from your experience, to see the commercial relationships evolve on the high seas, between carriers and the shippers, without the intervention of the Federal Maritime Commission?

Mr. MERWIN. Yes, sir.

Mr. KYROS. No further questions.

The CHAIRMAN. Thank you very much, Mr. Merwin.

The committee will stand adjourned.

[Whereupon, at 12:22 p.m., the subcommittee adjourned, subject to the call of the Chair.]

OMNIBUS MARITIME BILL

MONDAY, DECEMBER 3, 1979

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON MERCHANT MARINE,

COMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10 a.m., in room 1334, Longworth House Office Building, Hon. John M. Murphy (chairman of the subcommittee) presiding.

Present: Representatives Murphy and Anderson.

Mr. MURPHY. Good morning.

The subcommittee will please come to order.

This morning the subcommittee continues its consideration of H.R. 4769, a bill to revitalize maritime policy, reorganize certain Government agencies, and reform regulation of maritime affairs in the United States.

We are privileged today to have as our first witness Mr. John Arwood, president, Trans Freight Lines, Inc.

For the record, would you identify Mr. Dougherty and Mr. Tepper?

STATEMENT OF JOHN R. ARWOOD, PRESIDENT, TRANS FREIGHT LINES, INC., ACCOMPANIED BY JOHN H. DOUGHERTY, ATTORNEY; ARTHUR L. TEPPER, GENERAL COUNSEL AND CORPORATE COUNSEL, TRANS FREIGHT LINES, INC.

Mr. ARWOOD. Thank you. To my left is Mr. John Dougherty, an outstanding counsel, an attorney whom we use from time to time in regards to our affairs with the Government, and particularly with the Federal Maritime Commission.

To my right is Arthur Tepper, our corporate general counsel. Mr. Chairman and members of the subcommittee, I am grateful for this opportunity to testify with respect to the proposed legislation of H.R. 4769. We are heartened that the subcommittee is desirous of hearing the views which can be expressed by a strong independent carrier.

While we do not presume to speak for independents as a group, we feel we represent a position that is sound in terms of any responsible national maritime policy and, therefore, deserves careful evaluation by this subcommittee.

Trans Freight Lines (TFL) is a nonconference containership operator sailing four ships from U.S. North Atlantic ports to Europe and two ships from U.S. South Atlantic ports to Europe.

The company is a U.S. corporation registered in Delaware with our principal offices in Secaucus, N.J. We are fully subject to the tax laws and all other laws of this country, just as fully as if

ownership of our company were totally American. Trans Freight Lines was organized in April 1976 and commenced operations in July 1976.

TFL is a subsidiary of Thomas Nationwide Transport Limited (TNT), an Australian publicly held corporation. TNT is recognized and accepted as a multinational conglomerate with extensive worldwide operations in all modes of transport.

We operate four Singapore-flag vessels owned by a sister subsidiary of TNT and charter additional vessels from time to time to meet our needs. Most of these vessels fly one or more European flags.

In a study done by the Federal Maritime Commission in April 1979, it was estimated that we are carrying between 7 percent and 8 percent of the traffic in the North Atlantic trade.

Many provisions of the proposed bill would have direct effect on our current operation, some gravely adverse effect. I would like to say early on that we do not share the generally stated opinion that current law controlling maritime affairs in our country is inherently bad or must be drastically changed.

If some portions of our shipping law have failed their purpose, there is still much in existing law that is of great value and should be preserved, perhaps even strengthened, not scrapped.

We are, literally, a product of the existing law. The success we have achieved in market share and the profits we have made attest that, fundamentally, the existing rules and regulations still work. Of course, a hospitable legal climate isn't enough.

There must also be room for those good old-fashioned American principles of hard work, good common business sense, ingenuity, and honest endeavor. We would urgently remind the subcommittee that casting aside the complete law, as we now know it, might well produce a more blackened pot.

A cursory analysis of the seven major carriers constituting conference membership in the North Atlantic-European trade will show that only U.S. Lines and Seatrain Lines have an operating history of 25 years or more under the same corporate structure and, during the last decade, even U.S. Lines has had three different ownerships.

Sea-Land Service, the largest carrier in this group, was conceived, founded, and has emerged to its preeminence under the existing law. The technological advancements of containerization have undoubtedly been the principal factor leading to the amalgamations that form the other lines operating in this trade.

We are concerned that the current draft of the bill does not deal with the realities of multinational ownership and control within the shipping industry. The definition of a "national shipping line" addresses the geographic location of the head office of that line. It is common today, and we predict will become much more prevalent in the future, that the owner of a vessel, the operator of the vessel, and the user or charterer of the vessel might, in fact, be three separate persons, whether corporate or individual.

The bill becomes unclear when an absolute differentiation is not made as between requirements based on national registry of the vessel or national registry of the corporation.