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Statement of—Continued

Page Ingolia, Joseph N., General Counsel, Federal Maritime Commission. 81, 588 Kahn, Joseph, chairman of the board, Seatrain Lines, Inc.-

701 Keeney, John C., Deputy Assistant Attorney General, Criminal Division, U.S. Department of Justice.

566, 663 Klein, Peter M., vice president, Law and General Counsel of Sea

Land Service, Inc.---
Kominers, Odell, American Institute of Merchant Shipping-
Ledebur, Lawrence F., Chief, Admiralty and Shipping Section, Civil
Division, Department of Justice..

27, 427
Prepared statement.
Merritt, Curtis R., chairman, Administrative Procedures and Legal
Services Committee, National Industrial Traffic League.--

606 National Industrial Traffic League.--

606 Opper, Franz F., Counsel, Subcommittee on Consumer Protection

and Finance, House Committee on Interstate and Foreign ComPankopf, Arthur, Managing Director, Federal Maritime Commission. 81, 588 Pitt, Harvey L., General Counsel, Securities and Exchange Commission..

306 Purnell, John A., Office of Maritime Affairs, Department of State.. 36 Ragan, William F., Washington Counsel, Sea-Land Service, Inc--

273 Rosenblat, Alan, Assistant General Counsel, Securities and Exchange Commission..

305 Ross-Bell, Ian, Secretary-General, CENSA...

457 Russell, W.R., chairman of an independent committee involved in

the self-policing arrangements of the European/Far East/European
Freight Conference

457 Sharood, Richard N., counsel, Great Lakes Terminals Association.

504 Shefler, Stephen A., Deputy Assistant Secretary for Policy and Programs, U.S. Department of Transportation...

424 Prepared statement.

422 Sieden, Elliott, Chief, Transportation Section, Antitrust Division,

Department of Justice..
Sims, Joe, Deputy Assistant Attorney General, Antitrust Division,
Department of Justice..

520, 663 Taylor, B. Franklin, Jr., Deputy Chief, Government Regulations and

Labor Section, Criminal Division, Department of Justice. 27, 427, 566, 663 Thayer, Ralph N., Office of Transportation Regulatory Policy, Department of Transportation--

Walsh, Edward P., president, Waterman Steamship Corp-
Additional material supplied-
American Shipper International Forum:

Why does the antitrust philosophy in the United States hurt the
overseas trade in liner shipping?

732 Avery, George F.: Dialog participants, Los Angeles, Calif.—November 3, 1977.--

624 Joint Committee on a U.S. Shippers Council: New York Chamber

of Commerce and Industry/American Importer's Association.. 618 Clark, Capt. J.W.:

Actions to adjust or meet conditions unfavorable to shipping in
the foreign trade of the United States..

410 Suggested revision of H.R. 9518...

413 Federal Maritime Commission:

Agencies and statutes relating to rebating and discriminatory
practices resulting from rebating ----

47 Rebating investigations and constitutional guarantees.-

45 Report on self-policing within the steamship conference system, by Harry C. deVenoge-

95 Justice Department:

Criminal actions filed by Criminal Division for Shipping Act

724 News release of July 12, 1977

689 Maritime Administration: Profit or loss from subsidized steamship liner operations, 1972–76..



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Additional material supplied—Continued

McCloskey, Hon. P. N.: FMC Criminal to Civil Penalties hearing

of June 30, 1971.. Russell, W. R.:

Institutional consultation between Sea Transport Commercial

Pools in Liner Shipping, by Leo G. Hudson.
Statement of Karl-Heinz Sager before Senator Inouye's sub-

Securities and Exchange Commission:

Court case: United States of America v. Douglas P. Fields ---
Summary of Public disclosures made by shippers and carriers of

rebates and other malpractices in the ocean trades.Transportation Institute: Requests for written views and comments Communications submitted

Avery, George F., Jr.: Letter of November 29, 1977, to Hon. John

M. Murphy -
Bell, Griffin B.: Letter of January 27, 1978, to Hon. Paul N. Mc-

Closkey, Jr..
Bennet, Douglas J., Jr.:

Letter of November 8, 1977, to Hon. Paul N. McCloskey, Jr.--

Letter of December 16, 1977, to Hon. John M. MurphyBlackwell, Robert, J.: Letter of November 30, 1977, to Hon. John

M. Murphy-.
Brand, Herbert:

Letter of December 30, 1977, to Mark Hathaway -
Letter of February 3, 1978, to Hon. John M. Murphy.

Letter of February 2, 1978, to Hon. Paul N. McCloskey, Jr.----
Gonson, Paul: Letter of January 19, 1978, to Hon. John M. Murphy-
Ingolia, Joseph N.: Letter of November 28, 1977, to Hon. John M.

Maskin, Alfred: Letter of January 11, 1978, to Hon. John M. Murphy-
McCloskey, Paul N. Jr.:

Letter of November 9, 1977, to Griffin B. Bell..
Letter of January 24, 1978, to James T. McIntyre.

Letter of February 6, 1978, to Patricia Wald.
Murphy, Hon. John M., Senator Daniel Inouye, Senator Ted Stevens:

Letter of November 3, 1977, to Griffin B. Bell..
Pitt, Harvey L.: Letter of January 25, 1978, to Hon. John M. Murphy-
Shenefield, John H.: Letter of July 12, 1977, to Keith I. Clearwaters.
Smith, R. L.: Letter of February 8, 1978, to Hon. John M. Murphy --
Smith, Tom: Telegram of January 25, 1978, to Congressman Paul N.

McCloskey, Jr.
Wald, Patricia M.:

Letter of October 25, 1977, to Hon. John M. Murphy
Letter of November 25, 1977, to Hon. John M. Murphy-
Letter of January 31, 1978, to Hon. John M. Murphy---
Letter of February 8, 1978, to Hon. Paul N. McCloskey, Jr.

728 706 706 725

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667 661


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Washington, D.C. The subcommittee met at 10 a.m., in room 1334, Longworth House Office Building, Hon. Leo C. Zeferetti (acting chairman) presiding.

Mr. ZEFERETTI. The subcommittee will please come to order.

First, I would like to state that Chairman Murphy is absent today on official business.

We are meeting this morning to commence hearings on H.R. 9518, a bill to amend the Shipping Act of 1916, to provide for a 3-year period, to reach a permanent solution of the rebating practices in the U.S. foreign trade.

The Committee on Merchant Marine and Fisheries has been seeking to enact legislation that will carry out our national shipping policy as stated in the Merchant Marine Act of 1936 and the Shipping Act, 1916. That is, to establish and maintain a strong merchant fleet, owned by American citizens, manned by American crews, and capable of serving as a naval and military auxiliary in time of war or national emergency.

This national policy also specifically provides that we have a merchant marine sufficient to carry a substantial portion of our commerce in our foreign trades.

Common carriers by water in the foreign commerce of the United States are regulated by the Federal Maritime Commission, the Commission does not have regulatory authority over the transport of bulk cargo, including tankers, via vessels owned or chartered by the operators. The routes served by common carriers in our foreign commerce are referred to, generically, as "iner trades."

One of the most pressing problems facing the U.S.-flag fleets is that of rebating. Although the Shipping Act, 1916, prohibits any carrier subject to the jurisdiction of the Federal Maritime Commission from offering any direct or indirect monetary inducement to attract cargo that departs from the rates contained in its published tariff, nevertheless, the Commission is now investigating 27 ocean carriers—9 U.S.-flag and 18 foreign-flag—and 215 shippers or consignees known or believed to have paid, or received rebates in our liner trades.

The basic cause of rebating is overtonnaging, and consequently, a measure of control over capacity is probably the long-term solution


to this problem. Nevertheless, our shipping laws prohibit this practice, although rebating is a commonly accepted competitive practice in virtually all foreign trades other than our own. That it is a harmful practice in the U.S.-liner trades is best described in a statement made by Manuel Diaz, president of Adherence Group, Inc., with 30years experience in ocean shipping:

It results in unreasonable preference and advantage or prejudice and disadvantage to shippers, ports and other concerned interests.

It never benefits the consumer and ultimately, must result in predatory competition leading to unbridled rate wars which will ultimately make it impossible for privately owned companies to continue to operate much less to replace their fleets.

In a nutshell, the result of illegal rebating, whatever its degree, is the enrichment of a few at the expense of the public interest and commerce between nations.

H.R. 9518, the legislation before us has already been introduced by Senator Inouye-S. 2008. I believe it will serve as an excellent framework for our committee to conduct hearings and fashion an effective and practical solution to the problem of maintaining equality of competitive opportunity among American carriers, and between American carriers and their foreign competitors, while best protecting the interests of all the shipping public.

The proposed legislation would provide for a 3-year period to reach a permanent solution of rebating practices in the U.S. foreign trades.

There are three major provisions in this bill:

One: All carriers and shippers in the foreign commerce of the United States must respond fully to an FMC order of hearing and investigation relating to rebates. Failure to cooperate subjects a carrier to severe penalties including denial of entry of such carrier's vessels into U.S. ports.

Two: An amnesty provision intended to encourage everyone who had engaged in rebating to come forward and disclose. This amnesty provision expressly will not affect any settlements already reached between the FMC and certain carriers, consignors, and consignees in any way.

Three: A requirement that the FMC within 18 months of enactment of this bill report to the Congress on the results of rebating disclosures encouraged by the amnesty provision.

I would like to make it clear that we expect all the Government agencies which have any effect on our national maritime policy to play an important role in any legislation which may be enacted on rebating. In particular, the Federal Maritime Commission, to which agency the Congress has delegated the responsibility for regulation of our ocean commerce must be prepared to assume effective leadership in this matter because the Agency must ultimately administer any law which the Congress enacts.

I have already reserved 2 days for hearings, October 14 and October 20, 1977, at which dates we expect to hear from numerous witnesses including all Government agencies which have statutory responsibilities, affected by illegal rebating.

[The bill and departmental reports follow:]

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