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inspection; (3) cargo inspection; (4) examination
of office records; and (5) other?
of the above bases for investigations?
(b) What is the relative deterrent effect of each
With regard to reporting systems, conferences and neutral bodies should be asked similar questions in connection with their approaches and procedures for developing sophisticated cash rebates and other such malpractices.
If replies had been received to the above questions, there would have been a good basis for determining whether self-policing was being performed adequately or was merely a pretext. If a negative investigations report is received, information still would be available to indicate whether the conference was or was not in fact policed effectively. The type of information indicated above is of such nature that it need be received only once a year.
One detail the Commission would not be able to ascertain from the above is the adequacy of the neutral body's assigned manpower to meet its projected investigative requirements. Accordingly, the Commission should request information, on a semi-annual basis, regarding the total pending investigative caseload of the neutral body for each conference it polices, projected investigative time required for the caseload, and the number of investigators assigned to the caseload. (The average production for an investigator is about ten cases a year.) Added to this projection would be compliance audit staffing requirements. The Commission should know, on an ongoing basis, that the neutral body can meet its investigative caseload. Thus, reports should be required on a semi-annual basis.
The Commission also should request information from the neutral body, on a semi-annual basis, regarding major investigations conducted. There should be no requirement for submitting details about minor malpractices. When an investigation results in an assessment of damages in excess of, for example, five thousand dollars, the Commission should require a sanitized synopsis of the case. (One neutral body used to report in this manner, and not once did the Commission
attempt to discover which line was involved.) Information that a neutral body has proven a major malpractice is important in assessing the effectiveness of the neutral body and its procedures, as well as revealing to the Commission the conditions in the conference and the trade involved.
This suggested type of reporting would give the Commission a general picture of self-policing in a conference. On-site visits to the conferences and the neutral bodies by Bureau of Enforcement personnel would supplement the reporting, giving the Commission a complete picture of the self-policing in a conference. As a result, meaningful Commission oversight would be a reality.
Commission Policing of Independents
Throughout the preparation of this study, conference officials have urged that something be done about Independents. The claim has been made that conference lines are losing shippers because of the malpractices of Independents. Most Independents are foreign lines, and, if the U.s. merchant fleet is being affected adversely by Independents who violate the shipping Act with impunity, it is a matter of utmost concern both to the Commission and the Congress.
The principal stumbling block to giving appropriate Commission investigative attention to alleged violations of Independents is the tremendous backlog of rebate cases in the Bureau of Enforcement. The situation is bleak because of the recent refusal by the Office of Management and Budget to authorize additional manpower. Hopefully, the pending Senate hearings will focus on the obvious need for additional personnel and will pass remedial legislation. The legislation proposed in this study (see Part XIV (B), below) should cause the Congress to realize that they have given the Commission responsibility without giving means to carry out the responsibility.
At the present time, no effort is being made by the neutral bodies to gather in a coordinated manner meaningful, substantial intelligence about alleged malpractices by Independents. No complaints of substance have been made to the Commission. However, if the neutral bodies were to be authorized by the conferences to improve their intelligence-gathering activities (see Part XI(C)) and to exchange among themselves data about improper practices of Independents, allegations of substantial malpractices could be referred to the Commission. If this were to occur, the Bureau of Enforcement would divert the necessary manpower to an allegation, because of the importance of the matter to U.S. foreign commerce.
At present, the only practical solution is for respective neutral bodies to isolate those activities of Independents which are malpractices. A neutral body would have to focus on specific Independent carrier malpractices and
gather as much information as possible about them. The neutral bodies would be able to do this if the conferences were to budget for the neutral bodies the funds necessary to support adequate investigative manpower. Use of the financial analysis approach and a high-level intelligence gathering group would enable the neutral body to formulate complaints of malpractices by Independents which the Bureau of Enforcement could focus on quickly, thus avoiding the need to spend time isolating violations, time the Bureau does not have.
The solution described above places the onus on the conferences and the neutral bodies, but such are the realities of the present situation. Only when the conferences agree to adopt the proposals set forth in Parts X(D) and XI will the neutral bodies be able to help resolve the problem of malpractices by Independents. The legislation proposed in Part XIV would assist neutral bodies in their quest to resolve the problem.
By proving significant disregard by Independents of filed tariffs, if such is the case, and by proving that conferences lose trade to Independents because of this, the Commission eventually would have evidence with which to proceed under Section 19 of the Merchant Marine Act. The suggested remedy would be to place each Independent line under the authority of a self-policing neutral body. Independent lines would be required to subscribe to selfpolicing the same as a line which is a member of a conference that has hired a neutral body on a part-time retainer basis. The record would indicate whether cargo and document inspection should also be imposed.
B. Voluntary Submission to Self-Policing by Independents
There is a recommended policy decision concerning Independents which, if resolved affirmatively by certain lines, along with the other recommended policy decisions outlined in Part XI(D), would immeasurably assist selfpolicing in general, and self-policing of Independents in particular. Specifically, for various reasons which do not concern self-policing, many lines operate within the conference structure in one direction of a voyage and operate as Independents in the other direction. These lines are in apparent agreement with the concept of self-policing because they operate under a neutral body's surveillance on one part of the voyage.
In line with this apparent acceptance of self-policing, these lines should declare their willingness to submit to the jurisdiction of a neutral body on that part of the voyage where they operate as Independents. Such a declaration would not only be a positive sign of the line's voluntary acceptance of self-policing, but would serve as an example to those Independents who do not belong to any conference and are not subject to any self-policing system.
A conference line accepting self-policing for the trade in which it operates as an Independent would submit voluntarily to a self-policing agreement with jurisdiction of the self-policing to the neutral body for the conference covering the voyage in which it sails as an Independent. The line would operate under the same self-policing rules, expressed in an agreement, as if it were in a conference which retained a neutral body on a part-time basis. The Independent would be assessed damages, including the amount of the costs of the neutral body's investigation, if it were found guilty of malpractice. If it were found not guilty of committing a malpractice, there would be no cost to the Independent for policing. Distribution of damages would have to be worked out, one possibility being that the Independent share in distribution of the damages as though it were a conference member.
Under the provisions of the above agreement, a neutral body could undertake on its own an investigation of an alleged malpractice committed by a line while sailing as an Independent, or the neutral body could investigate an allegation in response to a carrier complaint (see Appendix, Article IV (A) and (B)). These two conditions would serve as the standard for the minimum investigative coverage. The only variation from the part-time neutral body on retainer ground rules would be in the area of compliance audit/investigations. In this area, a conference line operating as an Independent would agree to submit to the two-week compliance audit only if it is being requested because the neutral body involved has reason to believe the line is committing malpractices, and the conference will pay the costs of the audit, irrespective of whether malpractices are found (see Appendix, Article XIII(C)). If the latter situation exists, and if the neutral body adjudicator determines that there is a malpractice as a result of findings from the audit, any assessment of