May I finish?

Mr. ZEFERETTI. Please do.

Mr. BLACKWELL. We are not the exclusive agent in terms of dealing with maritime policy in this country, as you know, and you have made a number of speeches on that subject yourself.

Mr. MCCLOSKEY. Quoting a number of your speeches.

Mr. BLACKWELL. Yes.

The fact of the matter is that there is overriding authority, as I see it, in the Federal Maritime Commission acting in this area. This is clear from the participation of the Justice Department by testimony, both in the Senate and here, as well as in certain interventions and positions that the Justice Department has taken, that they should also be involved.

Quite clearly, the State Department, because of the foreign policy implications, has a role to play, and because rebating ant pernicious practices in the trade have an effect on the health and stability of the U.S. fleet, I think the Maritime Administration and the Commerce Department have a stake in this issue. We are willing to participate in such deliberations and, frankly, I would be willing to give this committee my views, or the views of the Maritime Administration.

But what you are talking about is recommendations for legislation, and you know, Congressman McCloskey, what the clearing process is like.

Mr. MCCLOSKEY. I know. That is why I asked you when.

Mr. BLACKWELL. That is why I said perhaps never. Because of the clearing process, and I am quite serious about this, it is very unlikely that we could ever get a piece of paper to this committee in terms of a legislative proposal, because we would be speaking for the Administration, without checking, and without having an input from the three other agencies that I have mentioned, plus others.

If you want my personal views, if you want my personal views. of the position of the Maritime Administration, without finding out what State's or the Maritime Commission's position is, which I believe has superior authority in this, I will oblige you. However, I think basically they have primary jurisdiction, because it is their function which impacts on a lot of other areas.

It impacts on States

Mr. ZEFERETTI. Mr. Blackwell, we would appreciate it if you have some specific recommendations that are going to, you know, be part of the record, we would like you to give them to us. If you can get to the point of what would control rebating.

Do you have any specific recommendations toward that end?

Mr. BLACKWELL. Well, yes. I think we ought to investigate, and have Congress, as well as the agencies involved, take a look at the dual rate contract provisions.

Prior to 1961, those provisions were all in favor of the conference carriers. After 1961, there was a considerable shift in terms of the effectiveness of dual-rate contracts. It is very easy today for a shipper that is signatory to a dual-rate contract, simply by changing the routing to avoid his covenant to the conference, to carry his major portion of the cargo.

Again, it is not a panacea, but if you could make the dual-rate contract provisions more effective-in terms of the loyalties to the shippers, to the conference lines, I think some parts of the rebating problem can be solved.

I frankly believe we should have shipper councils in this country. Again, I do not think shipper councils should be or will be the cure. But I think a better dialog

MS. MIKULSKI. Did you say shipper councils or council?

Mr. BLACKWELL. Councils, groups of shippers that are protected by law, to discuss common business practices with the people who provide their services. This is something that is done in Europe. The situation is different in Europe.

The freight is controlled by freight forwarders, in a way that it is not in this country, and I do not think we can adopt cleanly the European shipper council concepts. But there should be a shipper council concept that is compatible with our regulations.

I think that is possible. Again, it does not solve the problem, but I think it is a good way to do so. I think we should not have closed conferences. I think closed conferences, as they are conducted in Europe and throughout the rest of the world, are basically repugnant to the way Americans do business.

But I do think, I do think there should be some control of entry into our trades.

I think when the Federal Maritime Commission, and perhaps in consultation or cooperation with Justice, State, and the Maritime Administration, comes to the conclusion that the U.S. trade has become chaotic, that pernicious practices are abounding, service is not reliable, rates are dropping precipitously, not only to the injury of the Americans, but the foreign carriers, and the trade as well, they should be able to issue an order, even if they cannot prove rebating. They can issue an order stating that the status of this trade has become chaotic. We are going to control entry in terms of additional carriers, or capacity, coming onto the route.

I think that Mr. Hillsheimer's suggestions of Sea-Land is also quite sensible. I would cast it somewhat differently than his.

Under that same situation of chaos in the trade, if that could be a finding, I think the carriers, the American carriers, who are not really permitted to compete with the foreigners, because they cannot rebate, and if they do, they are going to get caught, should be permitted to take independent action in terms of freight rates, and outside the conference structure. I think they have to have that response to protect their own interests.

I will probably get some people at the State Department angry with me, but I think we should take another look at the 40-40-20 concept. I do not think that we should necessarily endorse the treaty that was the subject of the UNTAD Conference in Geneva sometime back, but I think that the trade, the world trade, is looking with great appreciation on the fact that unfettered competition in the international trading area is really a thing of the past.

The states who engage in that commerce now are controlling it. I think that we should begin to participate in terms of what is best

for the U.S. fleet, and what is best for the trade of the United States in terms of having cargo sharing arrangements.

Mr. ZEFERETTI. In your statement, Mr. Blackwell, you say you do not favor the amnesty provision that was incorporated. Don't you think that would encourage the carriers to come forward and disclose any past rebating practices, and maybe clear the air somewhat?

Mr. BLACKWELL. I do not know why they should be encouraged. They should be coming in right now.

Mr. ZEFERETTI. They should be, but they are not.

Mr. BLACKWELL. The Maritime Commission has the power and the authority, under its various provisions, to bring these people to justice. I recognize that most of the information, as I understand it, has come from shippers as a result of statements made by at least three American carriers, as well as from statements filed with the Securities and Exchange Commission.

I feel that there is no need to grant immunity. People who violated the law should be punished. If it is a criminal penalty, they should be criminally punished. If it is a civil, it should be a civil penalty.

I think it is totally inconsistent with what this committee is trying to do in terms of the rebate issue, to let people off scot free.

We are trying to convince the shipping community that this country is serious about stopping rebating. How are you going to maintain your credibility if you give immunity to the people who have done it? It seems to me to be totally inconsistent.

Mr. ZEFERETTI. Mr. Blackwell, counsel, Mr. Corrado has a question. Mr. CORRADO. Bob, you mentioned independent action a few minutes ago.

Do I understand that the Maritime Administration favors independent action on the part of conference members as a device in this situation?

Mr. BLACKWELL. I think when you have this extreme situation, and the American carrier is bound by the conference structure in terms of rates, or in terms of practices, he is bound in such a way that he is suffering irreparable damage by the fact that he is unable to move. He has a choice of getting out of the conference, where he loses a great deal of advantages of the conference, or staying in and literally getting clobbered; I think we should give him some flexibility of having some of the benefits of the conference system while, at the same time, being able to act independently when his best interests are involved, in terms of rates.

Mr. CORRADO. Will that give an advantage to one operator over another operator, as conference members, would you think? Would there be imbalance?

Mr. BLACKWELL. Yes, I think that is possibly so, Mr. Corrado. But I think it is worth paying the price when you are in that extreme position.

Look what theoretically can happen. There are independents in the trade, there are two American lines and five foreign lines in the conference, the independents are cutting rates or rebating, either one. They are attracting more cargo than their service ordinarily would.

attract. The American goes into the conference meeting and says, I want to cut rates, I want to cut rates in order to be able to compete with that independent who is either cutting rates or rebating. I want an effective rate.

The conference could say no. It is controlled by foreign carriers. They know they can rebate with immunity. They cannot get caught. But the American is stuck in that dilemma.

If he rebates, he gets caught. If he does nothing, he loses his business. I think that is a situation we should try to avoid, and giving independent action is simply one tool to provide that flexibility.

Mr. CORRADO. Does that require statutory change? How do we go about that?

Mr. BLACKWELL. I think you could do it, you could do it through the statute. I think it could be done through the ordinary mechanism of the conference agreement. There are certain situations when independent action is accorded to different members.

It might be that if appropriately drafted amendments to conference agreements could be prepared, it might be an appropriate requirement at the FMC to include this in the agreements.

I think it is too technical and complex a problem to have an answer to right now, but I am saying, conceptually, I think these are certain things that we should do.

Mr. CORRADO. It seems to me it ought to be a policy matter on the part of the Government. If you leave it to the conference, we lose control, and almost anything might happen. It seems to me if we go that route, it ought to be rooted in something, and it ought to be a policy matter.

Thank you, Mr. Blackwell.

Thank you, Mr. Chairman.

Mr. ZEFERETTI. Thank you, Mr. Blackwell. We are going to excuse you for the moment, and hopefully you will hold yourself in readiness at recall for the next session.

Mr. BLACKWELL. The next session, not today?

Mr. ZEFERETTI. No.

Mr. BLACKWELL. I have some important business downtown.

Mr. ZEFERETTI. No, on October 20. I think the committee will meet next Thursday.

Mr. BLACKWELL. Thank you.

I will be glad to come back then.

Mr. MCCLOSKEY. I would like to commend the witness for his candor. In the last few minutes of his remarks, he gave us food for thought. But, I doubt it could not be cleared by OMB.

Mr. BLACKWELL. I am not so sure.

Mr. MCCLOSKEY. I want to thank you for incurring the wrath of OMB.

Ms. MIKULSKI. Whoever that might be.

Mr. BLACKWELL. Thank you.

Mr. ZEFERETTI. The next witness will be Mr. Lawrence F. Ledebur, Chief of the Admiralty and Shipping Section, Civil Division, Department of Justice.

STATEMENT OF LAWRENCE F. LEDEBUR, CHIEF, ADMIRALTY AND SHIPPING SECTION, CIVIL DIVISION, DEPARTMENT OF JUSTICE; ACCOMPANIED BY B. FRANKLIN TAYLOR, JR., DEPUTY CHIEF, GOVERNMENT REGULATIONS AND LABOR SECTION, CRIMINAL DIVISION, AND DONALD F. FLEXNER, CHIEF, REGULATED INDUSTRIES SECTION, ANTITRUST DIVISION

Mr. LEDEBUR. I am Lawrence Ledebur, Chief of the Admiralty and Shipping Section, Civil Division, Department of Justice. Accompanying me today, on my left, is Mr. B. Franklin Taylor, Jr., Deputy Chief, Government Regulations and Labor Section of our Criminal Division. On my right, Mr. Donald Flexner, Chief, Regulated Industries Section of the Antitrust Division.

I am pleased to be here today to present the views of the Department of Justice on H.R. 9518, a bill "to amend the Shipping Act, 1916, to provide for a 3-year period to reach a permanent solution of the rebating practices in the U.S. foreign trade."

The Department's recent experience under the antirebating law has been that the Federal Maritime Commission has referred two rebating cases to us this year. They were promptly put into suit. We would expect to act similarly on any future referrals that the Commission may make.

The Department of Justice favors efforts to end rebating and other illegal practices prohibited by the Shipping Act. In principle it also has no objection to the basic policy embodied in the proposed amendments to encourage voluntary disclosures of past violations and avoidance of future violations.

However, we defer to the Department of State as to the desirability of section 2(c) (2)'s interdiction from American trade of carriers. refusing to cooperate with Commission investigations. The Department of Justice is not able to assess the possible effect of that sanction on our foreign relations nor the likelihood of retaliation by foreign governments against American carriers.

And we are seriously concerned with certain language in section 3, specifically with the last 7 lines of the proposed subsection (d) (1). Such language would seem to immunize persons voluntarily disclosing enumerated violations of the shipping Act from any and all criminal prosecution, not only under the Shipping Act, but under any criminal statute.

Thus, for example, a person under investigation for violation of our income tax or security exchange laws, or for any of a number of crimes which might directly or indirectly be related to a violation of the Shipping Act, could seemingly avoid prosecution by voluntary disclosure of his Shipping Act violation pursuant to this bill, even if his non-Shipping Act crimes were fully documented and he was about to be indicted, as long as he did not have "actual notice" that he was under investigation.

It is our view that such blanket immunity is too high a price to pay, especially when Federal authorities already have gathered evidence of a criminal violation.

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