shipper, consignor or consignee to certify under oath that it is using and will use reasonable diligence to insure that it is paying filed tariff rates without rebates, allowance, absorption, or concession and that it will fully cooperate with the Federal Maritime Commission in any investigation of illegal rebating in United States foreign and domestic trades and in its efforts to end such illegal procedures. As a matter of administrative convenience the certification required herein of shippers, consignors or consignees, may be required to be made as part of the documentation furnished to or required by another agency of the United States."

Mr. Aмoss. Mr. Chairman, Congressmen, committee counsel, my name is Walter James Amoss, Jr. I am president of Lykes Bros. Steamship Co., Inc. of New Orleans, Louisiana. I also serve and am appearing today as chairman of the liner council of the American Institute of Merchant Shipping [AIMS]. The AIMS Liner Council is an industry association consisting of nine American-flag lines involved in shipping services on all major U.S. trade routes.

One of the AIMS Liner Council members, Delta Line, has elected to make its own statement, which I understand will be delivered today. However, let me state that the AIMS Liner Council members unanimously and strongly support effective antirebating measures and commend the initiative of this committee in devising a bill containing comprehensive changes in the Shipping Act which are designed to eliminate illegal rebating of ocean-freight charges in the foreign commerce of the United States.

The AIMS Liner Council wishes to propose certain amendments to the present wording of H.R. 9518 which it believes would strengthen the effectiveness of this legislation. These changes will be set forth as three separate proposals, each dealing with specific aspects of the rebating and enforcement problem. We believe these proposals to be both necessary and practical.

In the matter of amnesty portion of H.R. 9518, the liner council takes no position either in support of or in opposition thereto, leaving the way clear for liner council members to express their individual views should they so desire. I would like to state that the position of my own company, Lykes, and of Farrell Lines is in strong opposition to the amnesty provisions of H.R. 9518, and I have been authorized, on behalf of Farrell, to deliver that message this morning.

We do not believe that amnesty is either necessary or a substitute for effective investigation by appropriate authorities, and it is indeed unfair to those carriers and shippers who have been damaged by rebating practices.

I will discuss the first amendment to be proposed by the AIMS Liner Council. By its very nature rebating involves at least two parties. One who gives and one who receives an illegal inducement. The rebate itself is not necessarily in cash. Indeed, it more commonly consists of the provision of service or other benefit contrary to the tariff on file and without charge to the shipper. Since these rebates are illegal, they are frequently made through agents, or affiliates, of carriers and shippers so as to minimize involvement of the principals. Thus, in order to effectively eliminate as much rebating as possible, we believe that the language in H.R. 9518 must be broadened to include, insofar as possible, all persons who might be engaged in rebating.

The initial paragraph of section 16 relating to shippers applies to both shippers and related interests.

In this sense, a shipper is one who is the owner or controller of cargo to be booked with a carrier. It is not clear that its counterpart in section 16 paragraph 2, which is applicable to carriers, also applies to carrier agents and employees. Nor does section 18(b) (3) so apply. Moreover, section 16 initial paragraph-which is the only section which might apply to shippers receiving rebates-is much narrower than section 18(b) (3), and there therefore is a question whether mere receipt of rebates by shippers is prohibited even in situations in which payment by carriers clearly violates the act. We believe section. 18(b) (3) should be broadened to include shippers and agents and employees of both carriers and shippers.

We recommend that the persons added to section 18(b) (3) by the foregoing provision may be made respondents in a proceeding brought under the provisions of section 2 of H.R. 9518.

Our second amendment concerns section 2(c) of H.R. 9518 which does not require persons controlling, controlled by, or under common control with a respondent carrier to comply with reasonable and proper depositions, interrogatories, motions to produce or subpenas. We believe that the records of such persons must be made available if the Federal Maritime Commission is to effectively police rebating. Similarly, shipping interests are not presently covered by section 2(c), but they and agents and employees of carriers will be included. as the result of the amendment to section 18(b) (3) which we have proposed.

The enforcement provisions of the bill are deficient in that only the vessels of the respondent carrier are affected rather than all ships operated by the controlling, controlled or related companies.

Because of the severe impact of a finding of noncompliance with discovery, we have added a provision for expedited review of the compliance issue before the full Commission. Finally, we believe a carrier should not be barred from service for refusal by its agent to comply with discovery procedure if it terminates the agency promptly upon notice of such noncompliance.

Conversely, an agent, who may represent a number of carriers or himself be a carrier, and also an agent for others, should not have all tariffs, which he has on file for other principals or himself, suspended because of a refusal to comply by one carrier principal that he represents. The agent should be permitted to protect himself by terminating his relationship with the offending carrier. We suggest contracts with agents be written or amended to enable the carrier principal or the agent to terminate the agency in the event the carrier principal or the agent refuses to comply with discovery orders. The various perfecting changes we suggest in subparagraph (c) (2) beginning at page 3, line 3, of H.R. 9518 as follows, and I will skip the delineation.

Our third recommendation is that an entirely new section be added to H.R. 9518 to require that all common carriers and shippers be required to certify under oath that they are using diligence to insure that they are in compliance with the law. We believe that certification of compliance is an effective enforcement tool because responsible of

ficials of carriers and shipper interests will not falsely certify under oath that they are in compliance.

Last July 26, AIMS Liner Council members sent the chairman of this subcommittee and other Members of Congress a draft antirebating bill that is quite similar to the antirebating provision of S. 2008. Our draft included a section requiring certification of compliance with the law.

Since our July recommendation, the Senate and House Conference on the Maritime Administration fiscal year 1978 authorization bill adopted an amendment requiring certification by carriers having operating differential subsidy contracts. I understand the authorization bill would contain this amendment as was passed by the House yesterday.

We believe that this amendment is inequitable and unfairly discriminates against ODS contractors because it does not apply antirebating sanctions to non-ODS U.S.-flag, or any foreign-flag carriers. We believe that the record is clear that the carriers in these latter two categories have been primarily responsible for rebating abuses. However, because of our conviction that antirebating legislation is necessary, members of the AIMS Liner Council have not opposed the limited certification amendment at any time since it was originally recommended by Representative McCloskey.

We believe that this limited certification amendment provides a sound basis for a certification requirement that applies to all common carriers engaged in the foreign trade of the United States and to all shippers utilizing those carriers.

We, therefore, urge the addition of the following new section to H.R. 9518.

That concludes my prepared testimony, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Amoss.

On page 8 of your statement, you indicate that a certain amendment to the Maritime Administration authorization bill would be discrimination. Why?

Mr. AмOSS. Because it simply requires a small portion of the carriers to certify they are not involved in rebating, and it leaves the large mass of their competition, both American nonsubsidized and foreign, free of such certification. We certainly think that that is discriminatory.

The CHAIRMAN. I think that was probably the philosophy of the Conference in their deliberations and, of course, the House when it passed the Maritime Authorization Conference Report yesterday. Mr. Kyros.

Mr. KYROS. Thank you, Mr. Chairman.

Mr. Amoss, sorry we made you wait so long before we got you on here. The other day the Department of Transportation submitted a statement, and although they have not testified, there are some views that you have taken in the past before the Senate on discussion of shipping policy and rebating that I want to call to your attention. In the Department of Transportation's statement, prepared by Mr. Shefler, and I think you have a copy of the statement, he indicates the Department's affection for independent action by a conference

member. Other people in this industry say that independent action might be a way to save the conferences from being forced into rebating. So, there is the controversy.

I would like to know if you could review Mr. Shefler's testimony, and briefly set out your position on independent pricing by a conference member.

Mr. AмOSS. Thank you, Mr. Kyros. I do not know whether I heard that correctly, but it is my understanding that Mr. Shefler embraced the independent action concept, and I would like to answer in that

vein.

I have read Mr. Shefler's testimony, and I would like to say that it strikes me as one that could be prepared by a reasonable and intelligent person who has no idea of the workings of a conference ratemaking group or the practical effect of such a group. It is simplistic; it is, in fact, a simple solution to a complex problem which is very generally a disaster.

I would say that to support his views he uses an example that I, in 30 years in the steamship industry, have never known to occur, and it reinforces a fallacious belief with a ridiculous example. The example that I am referring to is the example, in which a shipper comes to a conference with a brand new product, and since he finds that there is no specific rate in the tariff, he tries to sell his product, using the general cargo, not otherwise specified rate, and of course he does not have any sales when he tries to use that rate. Well, such a shipper has not been in business very long and is not getting any good advice from any source whatsoever about transportation if that is the way he goes about his business, because, in fact, the general cargo, not otherwise specified rate, is really a rate that was brought about by a regulatory process in the first place.

When tariffs were first required to be filed and tariff rules set up by the Federal Maritime Commission, the rule basis required that a rate could be reduced on filing notice, which is roughly the time that it takes the notice to be received by the appropriate authority, the tariff authority in the Federal Maritime Commission. But a rate cannot be raised except with 30-days notice for a conference that has no dual-rate contract system, and 90 days for a contract that has a dual-rate system.

Many conferences, perhaps more than 50 percent, are dual-rate conferences, and the practical effect is that a rate that represents any kind of increase over any level of similar rate, would require 90 days. to be filed. So, practically speaking, all conferences adopted a sort of ceiling rate which they called cargo n.o.s., and any time a new commodity comes into the market, then the conference can adopt a rate lower than that on 24 hours notice.

Mr. KYROS. N.o.s. means "not otherwise specified?"

Mr. AMOSS. Not otherwise specified. If you come with 600 pounds. of brass monkeys and want to ship them, you probably will have to pay the cargo n.o.s. rate, and you get pretty good transportation for your 600 pounds of brass monkeys.

But if you are a shipper in business and you are going to do consistent business, you are certainly going to find every conference that

I have known prepared to look at the details of your commodity, the value of it, the critical factors of weight and volume that will occupy the specifics of its sensitivity and stowage in a ship, and the kinds of packing, and those criteria and set of rates that are fair. And I simply have not known such an example to occur.

But here it is thrown out as a typical case to support a fallacious argument.

Mr. KYROS. DOT says that insidious

The CHAIRMAN. DOT, Treasury or Transportation?

Mr. KYROS. Department of Transportaiton says that insidious shipper transportation involved in rebating will be ameliorated, in their own words, by the exercise of independent action by carriers.

Will there be any effect on rebating if a law were enacted whereby independent pricing action were required as a condition of all the conferences?

Mr. Aмoss. Certainly, such a law, applying generally to all conferences, will create a free-for-all. It will create, in fact, no conferences at all, and we might just as well say that we will outlaw conferences. That kind of provision simply puts it into the hands of each carrier, and the stronger the carrier, the stronger the ability to make use of this provision, and the ability to go out and make a deal with shippers for a percent of their cargo, and then slap them the rates. And this will happen, not once, but twice or three times, because shippers know how to play this game, and there will be just a deterioration of the whole structure, and the shakeout of the carriers. that are not the strongest, and ultimately a loss of tremendous amounts of available competitive tonnage, and then a return to recouping those losses.

Mr. KYROS. The right of independent action has been supported, not only by the Department of Transportation [DOT], but in testimony which he termed personal, Mr. Blackwell, the Maritime Administrator, indicated that that is a possible consideration, and also, if I recall correctly, Mr. Daschbach, of the Federal Maritime Commission, and the Justice Department thought that perhaps it would be a tool to provide greater flexibility within the conference, to speed up conference ratemaking procedures, and therefore it would be a useful tool, but apparently you take the other position.

Mr. AMOSS. I do not say that it would not be a useful tool, as long as it is not a useful sledgehammer tool. If it is mandatory to all conferences, then you have got to look for some other way, for shipping in an international field, as you well know, is composed of too many various and incomparable economic elements to operate with a device like that. It is a tool, and it is in fact used by conferences, and my company is in conferences, where that tool is adopted by approval of the members, and has been approved by the Federal Maritime Commission.

When it is carefully under control, it can be useful. It can even be useful in fighting rebates. But one would have to be naive to think that independent action would really do away with rebates, because aside from making rebates in a sense legal, by letting every carrier go out and cut his own deal on the interesting parcels of cargo that