tion for the banning of vessels of a line of their nationality from U.S. ports.

Hence, we fear that the effect of implementing the sanctions which this legislation provides would be to hurt U.S. operators simultaneously-and on a broader scale than our actions were affecting their foreign competitors.

There is an additional danger to U.S. shipping interests and to those of our traditional shipping allies. With the lines of our trading partners banned from U.S. ports and U.S. ships barred from the ports of the other country involved, either by government or labor union action, would bilateral trade between the United States and the other country cease? We believe that trade would most likely continue. However, it would be carried by third-flag operators. Hence the ultimate result of the sanctions which this legislation would impose could well be to provide new or enlarged footholds in U.S. trades for third-flag carriers-and almost certainly state-owned operators would be prominent among them.

We believe from our experience in related contexts, particularly in the antitrust area, that many foreign governments' opposition to permitting the release of information results from pique at having their shipping lines and other companies presented with unilateral U.S. investigative demands for documents physically located outside of the United States. We believe that prior intergovernmental consultation regarding the scope and purpose of an investigation, and making clear its importance to the United States, can help to eliminate these problems and to secure a larger measure of cooperation from the foreign governments concerned. In short, since the control of rebating is a problem which involves foreign laws, we believe that the only way to obtain the necessary documents is to negotiate a regime of cooperation with other major shipping nations. We are not advocating ignoring rebating or giving in to foreign laws prohibiting production of documents, but we believe that negotiation is the only practical way to obtain the necessary information and avoid fruitless and damaging conflicts of laws.

We believe that the prospects for achieving such cooperation are promising. In a note delivered to the Department of State on September 27, 1977, the governments of 10 major maritime nationsBelgium, Denmark, Finland, The Federal Republic of Germany, Italy, Japan, The Netherlands, Norway, Sweden, and the United Kingdom-emphasized that they also disapprove of the malpractices to which this bill is addressed. At the conclusion of their note, these governments pledged that they:

Would be willing, in any investigation of such matters which involved their carriers and where relevant material and information was located in their jurisdiction, to enter into discussion with the United States authorities, with a view to finding a solution which would put an end to unfair and discriminatory trading practices in a manner compatible with the law and practices of both sides.

Mr. ZEFERETTI. Mr. Bank, would you just excuse us for about 10 minutes? We are going to go down and vote, and then come right back.

[Short recess.]

Mr. ZEFERETTI. Mr. Bank, do you want to conclude your statement, please?

Mr. BANK. Yes. Thank you, Mr. Chairman.

I believe, for those who were following my prepared statement, that I stopped following the quotation from the diplomatic note which the Department received on September 27 of this year, which indicated that the foreign governments concerned would be willing, as I noted:

In any investigation of such matters which involved their carriers and where relevant material and information was located in their jurisdiction, to enter into discussion with the United States authorities, with a view to unfair and discriminatory trading practices in a manner compatible with the law and practices of both sides.

We believe, however, that a clear expression of congressional concern over the problem of rebating, which will be provided by these hearings, and those which have taken place in the Senate, would enhance serious efforts by the concerned agencies to seek the cooperation of foreign governments, and thus could provide the basis for a more fruitful investigation.

Moreover, we are concerned that the U.S. courts might be reluctant to uphold the imposition of drastic sanctions on firms engaged in the foreign trade of the United States where the firms' inability to comply with the FMC orders stemmed from prohibitions under foreign laws. In similar situations, the courts have been sensitive to the principles of international comity, which require each sovereign in the exercise of its jurisdiction to give proper weight and effect to the legitimate interests of other states.

Mr. Chairman, the Department of State is fully prepared and looks forward to working with your committee and its staff, the Federal Maritime Commission, and other agencies in order to formulate a joint plan of action to confront and resolve the serious problem of rebating in our ocean commerce.

Thank you, and I will be glad to answer any questions.

Mr. ZEFERETTI. Thank you, Mr. Bank.

Has the State Department been called upon to assist the Federal Maritime Commission with obtaining required documents from foreign-flag carriers?

Mr. BANK. Mr. Chairman, to date we have not, in particular investigations of rebating or other matters of that nature. That is not to say that we have not worked with the Federal Maritime Commission in other areas, including discrimination areas abroad and other international areas, but in specific cases of rebating or, in particular, situations which would involve the conflict of law which I spoke of before, we have not been asked.

Mr. ZEFERETTI. Do you feel that you could be of help in this particular area?

Mr. BANK. Very definitely, Mr. Chairman.

In fact, we have held out our hands, so to speak, in the past to participate in this and to work with the Federal Maritime Commission. We understand, through regular, recent, and in fact quite positive contacts on a daily basis with the Commission, that we will be working with it in this area.

Mr. ZEFERETTI. You also, in your statement, state that intergovernmental negotiation is the way to secure foreign documents in an investigation.

Is is not a fact that many foreign governments, and specifically Japan, have resisted and denied access to such documents?

Mr. BANK. Well, there have been cases before the Federal Maritime Commission, where various governments have indicated their beliefs that the jurisdictional problem involved would prevent their carriers from turning over certain documents.

As I noted, in response to your earlier question, Mr. Chairman, we have not participated with the Federal Maritime Commission in that particular case, nor has that case been pursued beyond this last stage of it, which was the refusal.

Mr. ZEFERETTI. Have you any specific procedures that you might recommend to obtain documents required from foreign-flag carriers? Mr. BANK. Mr. Chairman, I think, as I pointed out in my prepared statement, that we are reaching a significant point in time in our negotiations or discussions with our European counterparts in the area of production of documents or, in fact, in the larger area of cooperation in the entire shipping area. I think there is a great realization worldwide, perhaps through the greater participation of government in the shipping area throughout the world, that there has to be cooperation between governments in this area, that trade, of course, is on both sides of the Atlantic or both sides of the Pacific, and to allow each nation to hold themselves or their—

Mr. ZEFERETTI. Mr. Bank, I am asking for specific procedures.

Mr. BANK. Well, I believe the procedures are through these diplomatic negotiations, through the discussions based on the particular cases involved.

I think the evidence, though, indicates, in these FMC type cases, and in a case now pending before the Justice Department and the grand jury—on an antitrust matter-that we are receiving some cooperation.

Mr. ZEFERETTI. I am reminded that in your testimony you say that we want discussions, we want to meet. You do not give an affirmative type of procedure that you will put together to enable us to obtain these documents. You just want to talk about it. You want to discuss it, but you have not gone in there and said how do we get them.

Mr. BANK. It has not been decided on vet, Mr. Chairman. We have to first have these discussions with the foreign governments, recognizing where the conflicts of law exist now and, at that point, negotiate with these governments for specific release of information on specific cases.

It is a case-by-case situation, Mr. Chairman.

Mr. ZEFERETTI. I understand that on the Senate side there was testimony given by the Japanese that they refused to give the documents. There has not been an approach between the State Department and the Government of Japan in this issue. The refusal by the Japanese, from what I understand, has been in a case before the Federal Maritime Commission. The Federal Maritime Commission has obtained this refusal, and that is step No. 1, or really step No. 2.

Mr. BANK. There has yet to be a response from the Federal Maritime Commission. We are working on it to prepare the next step. Mr. ZEFERETTI. Are you saying we are going to get the documents? Mr. BANK. I am not saying we are going to get the documents. I am saying that if we are asked to assist the Federal Maritime Commission, if it desires to get those documents, we will assist the Federal Maritime Commission on a diplomatic level and Government level so that those companies, Japanese companies or other companies involved, operate under the laws of the United States.

Mr. ZEFERETTI. În your judgment, do you think we are going to get those documents?

Mr. BANK. I can not answer that question. I do not know.

We will do what we can to get those documents.

Mr. ZEFERETTI. OK. One other area, specific recommendations. How would you control the unlimited entry of foreign-flag carriers into the U.S. trades? Would you have any specific recommendations toward that end?

Mr. BANK. Well, in the general application of maritime policy, I can refer back to the statements made by Mr. Blackwell and Mr. Flexner in regard to the complexity of the scope of the issue. Whether I believe whether the Department believes in closed conferences or not, I can respond to that by saying that we have always felt that the more competition, the better. However, we also feel that U.S.-flag operators must be able to compete for that portion of the cargo which would permit them to operate in a profitable manner. Mr. ZEFERETTI. How is that done?

Mr. BANK. Well, under current legislation, in the current situation as it is now, we believe by stringent enforcement of existing law. Rebating, as you say, is a significant problem and we agree that it is; we believe that through these procedures which we discussed in trying to deal with the foreign government to obtain these documents so that we can assist the Justice Department and the Federal Maritime Commission in routing out rebating, I think that that will be a large step forward.

Mr. ZEFERETTI. Mr. Bank, I think we can all agree that the law is just one sided. How do we resolve the problem of foreign trade or foreign rebating?

Mr. BANK. Okay, Mr. Chairman.

The one-sidedness, we have heard this morning many times that the law is one sided and that it applies only to U.S.-flag carriers and not to foreign-flag carriers. Under the law, that is not correct. Under certain practical situations, it has been correct in that the obtaining of documents has been difficult, if not impossible, in certain situations.

To remedy that, to obtain those documents to permit the Justice Department or the Federal Maritime Commission to prosecute the cases equally as vigorously as they can against U.S.-flag operators whose documents are here in the Untied States would be a step forward in equalizing the law so that U.S. operators would not be penalized by the fact of having their documents here in the United States.

Mr. ZEFFRETTI. It has been my understanding that they have been meeting since 1960-61.

Mr. BANK. That is incorrect, Mr. Chairman. They have not been meeting since that time.

There were individual cases, there were individual situations back in the early 1960's during a certain investigation by the Federal Maritime Commission. Since, I would guess, 1965, and I am not sure of the date, there have been very few requests coming through us, if any, to obtain or to work with these foreign governments in order to get these documents.

Mr. ZEFERETTI. Mr. McCloskey.

Mr. MCCLOSKEY. Mr. Bank, do you know the general impression up here is that the State Department will never tell us anything?

I have read your testimony about the cargo preference bill 3 years ago concerning possible violation of treaties, and I have read the most recent legal memorandum about the same question written by the State Department to the Senate Commerce Committee.

How do we solve this problem in your judgment?

Mr. BANK. The rebating problem?

Mr. MCCLOSKEY. That is correct.

Mr. BANK. As I said in response to the chairman's answer, Mr. McCloskey, that I believe significant steps can be taken through application of stern and strict application of laws that exist now.

Mr. MCCLOSKEY. Let me just pose a question to you.

Let us say a U.S. company shipping between Tokyo and San Francisco, loses cargo to a Japanese company and believes the Japanese company has offered a rebate in order to get that cargo. The documents are all in Japanese and sitting in Tokyo.

How in the world is our Federal Maritime Commission, or any investigative agency, going to verify whether or not a rebate has, in fact, been illegally given?

Mr. BANK. Well, we agree that the best way to find that is to get. the documents located in Japan and through diplomatic negotiation, which had not been attempted up to now, because of a lack of request by the Federal Maritime Commission or the Justice DepartmentMr. MCCLOSKEY. Let me ask you this question.

The Justice Department has testified that it gets its information from either the Maritime Administration or from the Federal Maritime Commission. In April, Mr. Blackwell testified that he was not aware of the wholesale illegal rebating in the U.S. trades until about 3 hours before we asked him on April 25. So, clearly, the Maritime Administration either did not know or wanted to close its eyes to the fact that rebating was a problem.

The Federal Maritime Commission has 30 investigators. Following the Sea-Land disclosure, there has not been a single other settlement announced, to my knowledge. I may be wrong in that. I guess they have announced one.

Mr. BANK. There was one, Sony.

Mr. MCCLOSKEY. Sony, and I think a couple of other minor ones. But clearly the FMC is absolutely overwhelmed with the magnitude of this problem and has not been able in the 2 years, since Seatrain plead guilty, to handle this problem.

You say that on September 27, after these hearings were set, 10 foreign nations came in with a note saying we would like to cooperate.