volved under certain provisions of section 16, where rebating is still criminal under certain circumstances. I think that the shipping community has to be convinced that the Martime Commission, the Congress, and everyone who is interested in this problem is going to take effective steps to eradicate rebating to the extent that they can. In order to do that, I think you are going to have to bring the enforcement of the Shipping Act, not only against the carrier, but against the shippers who participate, because the statute declares it is just as illegal to accept the rebate as to give one. Ty my knowledge, that has not been done, even though, as I understand from the statement by the chairman, there are hundreds of U.S. shippers who have indicated that they have participated in one way or another in receiving these rebates. That is illegal. The critical question is how the act is to be enforced against foreign carriers engaging in our foreign trade, whose operations and records are sited abroad. These are very difficult cases to put on. Before the act was changed, the standard of proof for demonstrating intent was the standard necessary in the criminal type of case and most of the criminal laws. That, I take it was changed by the conversion of the basic statute to a civil penalty. But you still need proof. You still have to show an administrative law judge that someone has violated the law, and you cannot do it with hearsay. Ms. MIKULSKI. Just to facilitate and speed this conversation, that is my original question. How are you going to do that? Can you do it? Let us get to the bottom line. Mr. BLACKWELL. We tried, in 1961, Congresswoman, and what we attempted to do was to procure documents from abroad on the basis of a substantial number of cases that had been referred to the Maritime Commission by the House Judiciary Committee. There had been elaborate hearings before the Judiciary Committee over the course of many months, and that committee sent to us literally hundreds of cases for prosecution. The Maritime Commission took the best of those cases, and sent them to trial. Where foreign carriers were concerned, it was impossible to locate appropriate documents in the United States. Attempts were made to obtain those documents from abroad, through the subpena process, through the discovery process, and through something at the Maritime Commission called section 21, which is an inquisitional type of order that they can issue. Through all those three processes, carriers located in the United States, served in the United States, were asked to get their documents from abroad. Within a matter of months the European reaction to our efforts was the passage of a whole series of national legislation, which effectively prohibited foreign carriers, domiciled in those countries, their own carriers, from providing the Maritime Commission with the appropriate information. That was the information we asked for. What you ended up with in that case was a clear conflict of law. You had in each instance a clear charge of sovereign power with one government saying do this, and another government telling its citizens, do not do that. Now, the only way that I know, out of that dilemma, other than continually trying these cases through the courts, is for some type of a cooperative working arrangement with the Government of Japan, and with the European governments. I read in some of the testimony on the companion bill in the Senate, that the State Department testified that in their most recent discussions wih the European countries who are involved in this problem, there have been some indications of a willingness to cooperate. I do not know exactly what form that is going to take. I would think, however, that it is an appropriate avenue to follow. Again, I do not think that any one approach here is going to be a panacea. We have a good many things in the basket to use, and certainly the Western European countries, I believe, abhor rebating. I think that the practice is frowned upon in the United Kingdom and Germany, and that they want their carriers to comply with U.S. law. I think they are tired of these confrontations and would be willing to work out some reasonable program that is consistent with what they consider to be their sovereign rights, in terms of making a contribution to solving this problem. Ms. MIKULSKI. Well, that answers my question, because one of my concerns is the workability of the bill. But to extend your argument a little bit further, or your point, I am very much concerned about the issue of dumping the foreign imports in the American markets. When dumping occurs, you need access to foreign accounting documents in order to say, "You really did not produce steel at this cost." Mr. BLACKWELL. I think the situation, in terms of the desire to get the documents, the dispositive proof, if you will, is about as difficult in each case. I do not think you can characterize rebating as dumping until such time MS. MIKULSKI. I am not characterizing it as dumping. Mr. BLACKWELL. I believe it can happen, but it is rare. That is when a carrier actually quotes a rate so low in terms of its own cost structure, that it could really be considered to be dumping, just as it could in industrial products, and we think that some carriers do that. MS. MIKULSKI. I have no further questions. Thank you. Mr. ZEFERETTI. Mr. McCloskey? Mr. MCCLOSKEY. Mr. Blackwell, in the 1936 act setting up the American Maritime Commission, certain functions were assigned to the Secretary of Commerce and the Commission. Section 212(g) of that act specified that the Commission make recommendations to Congress from time to time, for such legislation it deemed necessary to better effectuate the purpose and policy of the act. In the executive branch of Government today, who now bears this responsibility? Mr. BLACKWELL. The 1936 act, in terms of the authority provided, usually assigns the authority to the Secretary of Commerce. In most cases, as you have indicated, in reading that statement, in most cases, that responsibility is delegated to either the Maritime Subsidy Board or the Maritime Administration. So the responsibility Mr. MCCLOSKEY. Is with you? Mr. BLACKWELL. Would be with me, I would think, yes. Mr. MCCLOSKEY. That is because you are the head of the Subsidy Board as well as the Maritime Administration. Mr. BLACKWELL. I am the Chairman of the Subsidy Board, and the Assistant Secretary of the Maritime Administration. Mr. MCCLOSKEY. I find no recommendation of legislation to handle the rebating situation. Can you tell me what your recommendation is? Mr. BLACKWELL. I do not believe, Congressman McCloskey, that the paragraph in section 212 that you read, without studying it, but just from what I listened to, went to the issue of regulatory problems. I think Congress has clearly pointed out that the regulatory problems in the foreign trade of the United States are within the purview of the Federal Maritime Commission and the 1916 act. Mr. MCCLOSKEY. Let us examine then the Maritime Administration's obligations to promote a U.S.-flag merchant marine which pertains to the 10 carriers in our trade routes now, does it not? Mr. BLACKWELL. Yes, and many others. Mr. MCCLOSKEY. Can you describe to this committee the financial condition of each of those 10 companies at the present time, Mr. Administrator? Mr. BLACKWELL. Generally speaking, yes. Mr. MCCLOSKEY. What is it? Mr. BLACKWELL. It is mixed. Mr. MCCLOSKEY. How many of the 10 subsidized operators are losing money this year? Mr. BLACKWELL. Well, not taking into account what the effects of this current longshore stoppage might be, I would say that Farrell Lines would be making money. I would say that Delta Line would be making money. I would say that Moore-McCormick Steamship Co. would be profitable. I would say that American President Lines would be profitable. I would say that American Export Lines would be profitable. For nonsubsidized lines, I have been advised that again Mr. MCCLOSKEY. You have just listed 5 of the 10 subsidized lines. Do I take it from your answer that the other 5 of the 10 are losing money this year? Mr. BLACKWELL. I think that it would be likely that State Steamship, which serves the Pacific and Far East, would either be losing money, or have marginal operations. Lykes Bros. for the first 6 months of this year, has put out a statement where they have lost, I think, $300,000 or $400,000, although they expect to be in a profit position in the second half, and to make a small profit for the year. Mr. MCCLOSKEY. You maintain rather careful statistics on the financial condition of each of these 10 subsidized carriers, do you not? Mr. BLACKWELL. Yes, we do. Mr. MCCLOSKEY. Mr. Chairman, I ask unanimous consent that Mr. Blackwell furnish for the record the financial information on the profit and loss of the U.S. steamship companies under his jurisdiction during the last 5 years? Mr. BLACKWELL. Yes, I would, with the caveat, sir, that certain of the information is deemed confidential. I think it is appropriate to give it to the committee, but Mr. MCCLOSKEY. Please designate what information, you think should be held in confidence. Mr. BLACKWELL. Fine, we would be very happy to do that. [The following was received for the record:] PROFIT OR (LOSS) FROM SUBSIDIZED STEAMSHIP LINER OPERATIONS, 1972-76 1 American President Lines, Ltd. absorbed American Mail Line Ltd. in 1973. 2 Grace Lines Inc. and Prudential Lines, Inc. merged on Dec. 19, 1969, and formed Prudential-Grace Lines, Inc. Under agreement, the corporate name changed back to Prudential Lines, Inc. in 1974. Mr. MCCLOSKEY. What I am driving at, Mr. Secretary, is has the point not been reached where legislative change is absolutely essential if we are to preserve a U.S.-flag merchant marine in the liner trades? Mr. BLACKWELL. Yes. Mr. MCCLOSKEY. Can we then expect to get your specific recommendations as to what legislation we should enact? Mr. BLACKWELL. Well, I have never viewed it Mr. MCCLOSKEY. Do you understand the question? Mr. MCCLOSKEY. Is this not a responsibility of yours under the law? Mr. BLACKWELL. Well, I believe you are quoting a provision of the act which refers to promotional responsibility. I think, in principle, that the authority to regulate in terms of rebating has already been decided by this Congress, and by the executive branch, in Reorganization Plan No. 7, where there is a clear dichotomy between regulatory responsibility and promotional responsibility. Mr. MCCLOSKEY. Did I misunderstand your earlier answer? I thought I asked you who had the responsibility outlined in the 1936 act and you said that responsibility was in your office. Mr. BLACKWELL. That is true. I think we have a disagreement on what that term means. Whatever that term means Mr. MCCLOSKEY. Let me read it again to you, because I want to know if under one of the subsequent reorganization plans this responsibility is no longer in your office and instead was placed in the Commission in the 1936 act. Section 212(g) reads as follows: To make recommendations to Congress from time to time for such further legislation as it deems necessary better to effectuate the purpose and policy of this act. Mr. BLACKWELL. Yes. Mr. MCCLOSKEY. If you are uncertain whether that responsibility reposes in the Federal Maritime Commission or somewhere elseMr. BLACKWELL. No; I think you are playing with words. Mr. MCCLOSKEY. I am not playing with the language of the statute. Mr. BLACKWELL. My statement is that we have the promotional responsibility, and that provision obviously directs us to make appropriate recommendations on promotional policy. The type of problem that we have here is essentially a regulatory problem. Mr. MCCLOSKEY. Overtonnaging is not a regulatory problem, is it? Mr. BLACKWELL. It certainly is. In terms of attempting to deal with overtonnaging problems when they are attempted to be resolved through pooling arrangements, or arrangements of that sort, except for the Federal Maritime Commission, there is no entity in the Government now that can tackle that problem. Mr. MCCLOSKEY. Mr. Blackwell, let me go back. Under the 1916 act we set up a system of open conferences and gave the Antitrust Office of the Justice Department the right to intervene, but provided an exclusion from antitrust enforcement if the Federal Maritime Commission accepted what the conferences filed. If the problem is overtonnaging, must we then not answer the question about whether or not we are going to move toward closed conferences or whether we are going to move toward multilateral and bilateral trading with other nations? If we do not lick the tonnaging problem, can we ever lick the rebating problem? Mr. BLACKWELL. No; I think I have answered that. I think the answer is no. Mr. MCCLOSKEY. We cannot handle the rebating problem without handing the overtonnaging problem? Mr. BLACKWELL. I think that dealing with rebating, as I mentioned to the chairman, is essentially dealing with the symptoms of the problem, and not the illness. Mr. MCCLOSKEY. If the question then goes to the 1916 act, is it not incumbent upon the Department of Commerce to present to the Congress with its opinions on the best way to deal with the overtonnaging problem? Should it be by going to closed conferences? Should it be by directing the State Department to negotiate a reduction of tonnage? Or should it be some other method? Mr. BLACKWELL. Again I do not want to split hairs with you. I think the Department should play an appropriate role. |