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all investigative requirements, the lines should agree that they will answer any inquiries emanating from the responsible neutral body that has delegated the investigative requirements to another neutral body or responsible private investigative group.

Compliance audit-investigation represents another area where delegation of neutral body responsibilities from one neutral body to another would result in considerable improvement in self-policing. The financial costs, especially for travel, of conducting compliance audits in every line's home office and in its principal ports of call, restrict a neutral body's ability to cover all ports, decreasing the potential deterrent effect of the audit. For one neutral body to be able to request another neutral body to conduct a compliance audit in an area where the latter is located, and where the former cannot go because of exorbitant financial considerations, would increase immeasurably the effectiveness of the compliance audit program (see Appendix, Article XIII(C)). This same degree of mutual cooperation will have to come about if and when the investigator-auditor approach 18 adopted, especially in the imposition of financial controls (see Part XI).

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Some lines are immune from home office audits because . of costs involving geographical considerations (1.e., no neutral bodies are operating in the area) and language considerations. Such would be the case if and when the Soviets come under the neutral body umbrella. Consequently, the conference (s) should authorize the neutral body, or bodies, to embark on audits to cover all conferences in which the above lines are members. If a neutral body covers all the conferences in which the line trades, it would perform the audit, but, if several neutral bodies are responsible for the conferences, the audit could be a joint effort.

The present self-policing problem in cases in which some lines' home offices are not subject to compliance audits because of geographical/financial limitations represents a serious deficiency. It is time for the neutral bodies to remove the conference-imposed veil of secrecy and get on with the business of investigation.



A. Evaluation of Present Commission Oversight

Part V of the initial report contains an evaluation of the Commission's present oversight on self-policing, concluding that the Commission has, to date, failed to meet its statutory responsibility in assessing the adequacy of policing of agreements by the various conferences. One reason for the negative evaluation is that the Commission has had no effective procedures for determining adequacy of policing, noting in particular the meaningless reporting requirements that were in effect. As a result, no agreement was ever disapproved on the basis of inadequate policing, although there is much evidence to indicate that the Commission had reason to suspect inadequacy.

B. Standards for Evaluation of Self-Policing

There was evidence to show that the chairman system of self-policing had negligible value or was totally ineffective, but one of the main problems in making a determination that the self-policing was inadequate was that there were no standards upon which to judge its effectiveness. The notice and hearing procedures that precede revoking of an agreement dictate that the Commission should have standards to apply in making a finding. If the proposed standards had been in place, the Commission's findings could have been based on comparison of these standards with actual conditions in the various conferences.

Recommendations 1 through 12, and especially the implementation of Recommendation 11 as set out in Part X(D), should serve as standards by which the Commission could begin to make its future evaluations. Ideally, there would be a preliminary approval of the recommendations by the Commission before inception of any regulation-making procedures. This would be a signal to the industry that eventually they will have to adopt the neutral body concept for all conferences, including granting necessary power to the neutral bodies. At the time of Commission approval, the minimum required neutral body self-policing coverage also would be outlined.

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C. Commission Action on Self-Policing
1. Suggestion by Commission to Shipping Industry

to Adopt Recommendations

Because of the present failings of the Commission in its self-policing role, immediate measures should be taken. Assuming that the Commission agrees with the recommendations, it is proposed that the Commission suggest to the industry that those recommendations it approves should be adopted prior to institution of what are usually long, drawn-out proceedings to implement them. Immediate initiation of the proceedings could serve as notification to the industry. In light of the proposition that self-policing should be accepted by the industry on its own initiative and not be imposed (see Volume I, Part III (B)), the adoption of the suggestion by conferences would be an indication of the industry's determination to police itself irrespective of Commission regulations. Such action would render moot the recent recommendation of the Justice Department Task Force that the statutory requirement for self-policing be removed from the Shipping Act, and would demonstrate to others the industry's resolve to self-police in a meaningful way.

2. Delegation of Oversight Responsibility on

Self-Policing to the Commission's Bureau
of Enforcement

Recognizing the many additional burdens placed recently on the Bureau of Enforcement, it is not the intent of this recommendation that oversight on self-policing be the proverbial straw to break the Bureau's back. Nevertheless, the Bureau is in the business of investigation of violations of the Shipping Act, as are the neutral bodies. Since the Bureau has a much broader overview of the selfpolicing system than do other Commission personnel, it is in a much better position to know what the conferences are doing, or not doing, with regard to self-policing. It seems more reasonable that evaluation of policing methods be done by those Commission personnel who are involved in policing.

3. Method of Bureau of Enforcement Evaluation

The Bureau has the intelligence capability to assist in the evaluation process. Coordinated input here would keep Bureau personnel attuned to the climate of the industry. Additionally, the Commission should publish a new, more meaningful reporting format for collection of

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self-policing data. These data will serve as a supplement to intelligence information. But, more importantly, Bureau personnel are in a position to visit officials of conferences and/or neutral bodies to discuss their standards of policing. They can visit conference chairmen who have self-policing responsibilities and make on-site evaluations. Evaluation of self-policing should be an affirmative responsibility of Bureau personnel based upon the above input, rather than a dormant vehicle for receipt of meaningless reports, as at present (see (6), below).

4. Necessity for Review of Neutral Body Files

As indicated in the initial portion of this study, industry officials were asked whether an independent entity under contract with the Commission or the latter's personnel should make the evaluation of the adequacy of self-policing. The majority of industry officials preferred that an independent party make the evaluation after informal review of the neutral bodies. This concept possesses considerable mer it but, under present restrictive conditions, is not feasible.

Specifically, during the latter stages of this study, no meaningful discussions could be held with FCS officials on investigative methods, procedures and adjudications because of the conferences' imposition of a confidentiality of records barrier. The Neutral Enforcement Authority was not approached because of previously expressed confidentiality barriers and present sensitive discussions on self-policing. On the other hand, visits were made to the neutral body offices of the Associated North Atlantic Freight Conferences in London, New York, Charleston and New Orleans. All types of policing coverage, allocation of manpower, administrative controls, and investigative techniques were discussed at length. Specific violations were mentioned, but only in relation to overall investigative procedures and coverage, and the adjudication process was reviewed. Because no confidentiality barrier was raised, and confidentiality was not breached, an extremely useful dialogue was possible.

As mentioned in the Discussion of Recommendation 5 in Part IX (A), enough information was available to allow an evaluation of ANAFC's self-policing with only a cursory review of its files, had that been the purpose of the visits. No evaluation of fcs' effectiveness was possible because of the above-mentioned restraints. The heavy assessment of damages activity of FCS in and of itself is no indication of adequacy

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because of FCS procedures in which the assessment of
damages is increased with each violation, irrespective
of the degree of seriousness. Overall, the impression
gained was that FCS provides adequate self-policing, but
in no way is there a firm basis for such an evaluation.

The recommendation that Bureau personnel assume oversight responsibility is made because they would not have to operate under ground rules imposed by the conferences. In this regard, an honest evaluation cannot be made when there are prohibitions on the areas of review and discussion. If Recommendation 5's Revision were implemented, Bureau personnel would not be subject to the restrictive confidentiality barrier, and meaningful discussions could be held.

Commission personnel insist that they have the authority to review a neutral body's files although, admittedly, most can see little benefit from exercising that authority. Conversely, many industry officials maintain that the Commission has no right to review the files, and point out that the issue becomes moot when the records are located overseas. Irrespective of which viewpoint one espouses, action by the Commission to make an issue of its right of review would be a handicap to effective self-policing and would be as self-defeating as the conferences' insistence upon the restrictive confidentiality clause.

One reason the Commission should not review neutral bodies' files is that, if it were to make a review, take notes and transpose the information to Commission files, the materials could not be protected by the Commission because of this country's Freedom of Information Act. Unrestricted disclosure of investigative records is a questionable luxury which all investigative bodies find very difficult to live with. Assuredly, it would make the neutral bodies' self-policing job impossible. (A possibility for protection might be the tenuous "business confidential" exemption.) Thus, to avoid what potentially could be disastrous disclosure situations, Bureau personnel should not routinely review files or take notes on facts of cases.

Another reason for non-review is that an evaluation can be made without a review of the files so long as there is no confidentiality obstacle to meaningful discussions of all cases in relation to self-policing conditions, problems,

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