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negotiate with our trading partners in a manner which would preserve for U.S.-flag carriers an ability to conclude commercial agreements which would preserve equitable participation in our trade.
It is submitted that the problem of rebating is manifold and requires a number of steps to bring about its resolution, including the following
First, the authority of the FMC should be strengthened by the antirebating provisions of H. R. 9518—without amnesty-amended as suggested in my exhibit "A."
[The following was received for the record :]
SUGGESTED REVISION, H.R. 9518, PAGE 3, LINE 3, THROUGH PAGE 4, LINE 5 “(2) In the case of the depositions, written interrogatories, discovery procedures or subpoenas issued in relation to an investigation or hearing held under an order issued by the Commission under subsection (c) (1), notice of such depositions, written interrogatories, discovery procedures, or subpoenas shall be directed to all U.S. agents and subagents, as well as all employees or other representatives domiciled in the United States, in the case of any carrier which is not domiciled in and does not have its principal oflice and place of business in the United States. Failure on the part of any carrier thus served to comply, fully and within the time fixed by the Federal Maritime Commission, with such depositions, written interrogatories, discovery procedures, or subpoenas, shall :
(a) Toll the time within which the Commission shall issue a final order as provided in subsection (c)(1). The Commission shall further notify each of the agents and subagents, as well as all employees or other representatives domiciled in the United States, of such carrier that they are required, by order of the Commission, to cease and desist from representing or acting for, in any manner, such carrier from and after the date of receipt by them of such cease and desist order. Such order shall apply to all persons, firms, and corporations comprising or acting in concert with the named agents and subagents of such carrier. The cease and desist order shall remain in effect as to all such persons together with all other persons thereafter served with such order, including any agents or subagents, as well as all employees or other representatives domiciled in the United States, thereafter nominated by such carrier, until such carrier has fully responded to the depositions, written interrogatories, discovery procedures, or subpoenas involved, and the Commission has issued its order in the proceeding. Any agent or subagent, as well as all employees or other representatives domiciled in the United States, or any person, firm, or corporation comprising or acting in concert with any such agent or subagent, as well as all employees or other representatives domiciled in the United States, which shall violate this section of this chapter by failing to comply with such cease and desist order shall be liable to a civil penalty of not less than $25,000, and not more than $50,000, for each day such violation continues.”
Captain CLARK. Second, we need to facilitate the effectuation of pooling, equal access, and rationalization agreements, with prompt implementation on an interim basis, pending any required hearing, for example, pendente lite.
Third, we need to authorize closed conferences by which we can limit overtonnaging in our trades; we need to strengthen our conferences in order that they will be less subject to the invasion of our trades by outside carriers seeking to dump tonnage.
Fourth, we need an effective "third-flag” bill.
These measures would provide the means and incentives to resolve rebating problems in the only really effective manner in which this can be accomplished, by seeking equitable commercial solutions within the law.
Thank you, Mr. Chairman.
I will respond to any questions that you or other committee members might have.
Mr. Breaux. Thank you very much, Captain Clark. I must say that you come through loud and clear, even in the densest of fogs, and you have come through loud and clear in your two testimonies. And the committee appreciates the indepth amount of work that has gone into it.
You have suggested, I guess, in the first original set of testimony, on page 9, some suggestions as to how the rebating problem might be handled, and you have elaborated in your supplemental testimony. But on page 9 of the original testimony, you point out that you recommend amendment A, “Amending the Shipping Act, 1916, in such a manner as to strengthen the authority of the FMC to approve equal access, pooling and rationalization agreements."
It is my understanding that they can do that now, that it is allowable. What is the problem with it now? Why does it have to be amended ?
Captain Clark. Mr. Breaux, the problem now is that upon the submission of any section 15 agreement, there is a long delay in the approval of such agreements, particularly when a protest is made by any interested party, such as a competing carrier. This entails as much as a year's litigation, confrontations on the other end with our trading partners. Most of these countries have the equivalent of an FMC, they have national pride very much at stake. and they may change their mind in the meantime rather than submit or allow their lines to submit to the hearing process of FMC.
Mr. Breaux. I get the message that it takes too long to get these agreements approved by the FMC after they are approved by the shipping carriers.
Captain Clark. Yes, sir. What I am suggesting is here.
Captain Clark. What I am suggesting here is that there be interim approval during any processing of the application and during any litigation or hearing procedures because, otherwise, you could be sitting there holding an agreement not in force for up to a year.
Mr. BREAUX. What would happen if, after the agreement had been started and the companies had been operating, then the FMC decided, after their hearing, that they did not approve it!
Captain Clark. Then there could be retroactive disapproval or there is provision within the law that the FMC has the authority to order modification, whatever the changes they want.
Mr. Breaux. I am told that that type of pooling and equal access provision, if it were put into effect, would create some problems in some of the North Atlantic and North Pacific trade areas. Do you agree with that and, if so, what are the problems there that make it different from other areas?
Captain Clark. It would be more difficult, Mr. Breaux, but I believe, and I have consulted with others in those trades, that if this were coupled with the closed conference system, with dual rate contracts, that this would be entirely practical means for implementing such agreements. It is certainly preferable from the domino effect of
the right of independent action type of combatting this type of thing.
Mr. BREAUX. I will yield to the counsel for some questions.
Mr. CORRADO. Captain Clark, did the FMC not just disapprove an equal access agreement between Argentina and one of the U.S. lines? Captain CLARK. Yes, sir, I understand they did last week.
Mr. CORRADO. Do you not think that is something that should be a cause for concern?
Captain CLARK. Yes, sir, it is something I do not fully understand.
The week before--a few weeks ago, they approved, on an interim basis, pendente lite, as I have suggested, an equal access pooling agreement with Peru. In the case of Argentina, well, I confess I am not completely familiar with all of the considerations at stake. Apparently there was not made enough of a forceful argument to convince the FMC that such an agreement was in the best interest of the trade, and everyone concerned. I want to look into that myself and find out why.
Mr. CORRADO. In the testimony that the committee has received, it has become somewhat clear anyway from the witnesses that equal access and pooling agreements are perhaps a device that would be useful to us and help our beleaguered merchant marine.
On the other hand, the State and Justice Departments have always opposed them. But it seems to me that if the FMC, if they have disapproved one, that this is an example of things to come, that the Congress is going one way and all the other agencies are going the other way, especially the agency that has responsibility for approving them.
Captain Clark. It is somewhat of a paradox. I want to look into it and find out what are the causes. But, as of now, I understand that sufficiency of effort was not made to convince the FMC that their agreement was required.
As I mentioned before, the equal access pooling agreement in most Latin American trades have worked toward the elimination of malpractices, and this is why I am advocating it.
Mr. CORRADO. Thank you, Captain Clark.
The CHAIRMAN. I would venture one of the answers to that, if the Sherman Antitrust Act is giving them problems, the committee and the Congress could decide to make some changes in that area to give the FMC additional leverage to approve those type of agreements.
Captain CLARK. Yes, sir.
The CHAIRMAN. The second thing that you recommended as a means of ending rebating is on page 9 again, paragraph (b), where you recommend, “Consideration must be given to prompt enactment of legislation to blunt the steady encroachment of predatory stateowned-controlled shipping cross trading on our essential U.S. foreign-trade routes."
Of course. I tend to agree that it is almost impossible for a U.S.owned company, which is—which has to answer to their stockholders and show a profit for you folks to compete against nationalized shipping companies. It is almost an impossible type of contest. It sounds like what you art talking about is a type of cargo preference type legislation. Is that what you are referring to in that paragraph (b)?
Captain Clark. Not necessarily, sir. I think inevitably sometime in the probably distant future we will come around to something similar to what is known as the UNCTAD cargo preference philosophy of the 40-40-20. But I believe that our suggestions of coupling closed conferences, the dual rate contract system, and also the suggested amendments here that we have given you for the production of documents through agents and stopping the agents of these predatory foreign lines from invading our trades, along with provision for rationalization, equal-access pooling agreements, even within the sophisticated trades, would do a great deal to stop this. Certainly we look to this in the trades where we serve, which are in the trades of the developing nations. The CHAIRMAN. Thank you very much, Captain. I recognize Mr. McCloskey. Mr. McCloskey. Captain Clark, you do not believe that it is a widespread practice in the trades?'
Captain CLARK. Mr. McCloskey, I have spoken to a lot of people in the shipping business, and you have heard the Chairman of the Federal Martime Commission, I believe, state something to the effect that only a relatively few shippers are under investigation, relatively few lines. I think the number was 27, of which I believe eight were alleged to be American-flag lines. And here I question the eight. I really do. I think that there is probably some confusion.
Mr. McCloskey. Captain Clark, that is forthright enough.
Why in the devil then, would the 10 U.S. subsidized carriers who receive $352 million operating subsidy each year object to having their chief executive officer, such as yourself, certify that they are using, and will use, reasonable diligence to insure that for the period during which these funds are to be received, no company owner, employee or agent will pay any rebates which are illegal under the Shipping Act of 1916, and will fully cooperate with the Federal Maritime Commission in its investigation of illegal rebating in U.S. and foreign and domestic trades and its efforts to end such procedures ?
Why would the chief executive officers object to that language in the law of the United States?
Captain CLARK. Mr. McCloskey, you are asking the wrong man. I responded to your particular correspondence, and I would like to refresh your mind, by which I signed a statement to that effect. I responded to your other letter.
Mr. McCLOSKEY. I am asking you why the other nine operators
Captain CLARK. I responded in the affirmative. I am perfectly happy to sign any such letter.
Mr. McCLOSKEY. Why would the other nine object?
Captain Clark. Mr. McCloskey, ask them. I do not speak for any other line but Delta Line. I divorced myself in this proceeding from the testimony of the Liner Council of AIMS; not that I disagree with them. They are my friends. I want to speak for myself. Let them speak for themselves.
Mr. McCloskey. I hope you will have the opportunity, because I respect the testimony that you have given.
Captain Clark, you believe that if we included a provision to deny foreign vessels entry to U.S. ports that did not comply with our law,
we would be going too far. You believe it would be a confrontation with other nations and yet you also point out that no other remedy we can take can help to be effective to end illegal rebating practices by the ships of those nations.
I have difficulty with those two conclusions.
Captain Clark. Mr. McCloskey, apparently you heard me wrong. I did not say that.
I suggested alternatives.
Mr. McCLOSKEY. Wait a minute. If I was wrong, I want to be corrected.
I thought you said: In short, it is my view that the port closure suggestion is something in the nature of a rusty blunderbuss which, if fired, is as likely to cause damage at one end as at the other. It is essential that we avoid the prospect of such a backfire which would injure both U.S. merchants and carriers.
I take it from that you object to the port closing remedy against foreign nations' shipping lines which didn't comply with our law. In that part am I correct?
Captain CLARK. That is correct. I object to that. I think it would bring massive retaliation.
Mr. McCLOSKEY. Now, the other side of that coin.
I thought you also testified that whatever we tried to do short of that to end the illegal rebating practices of other nations would be ineffective.
Captain Clark. I suggested, Mr. McCloskey, alternatives which I think would be more effective and I submitted also for the consideration of the committee amendments to the proposed legislation in lieu of the port closing aspect.
Mr. McCLOSKEY. Well, all right. Let's take up that alternative. If foreign-flag agents in this country are confronted with loss of representation here they will do their utmost to convince their principals of the wisdom and desirability of effecting compliance. Let's assume that a shipping company in Japan pays rebates to shippers in Japan in order to obtain cargo from Japan to the West Coast of the United States or the gulf coast.
Practically, we can end that practice by requiring something of the agent of that Japanese shipping line in this country?
Captain CLARK. Well, whether it is Moram or any other agency, you simply serve on them. They are under the effective control, your internal control, within this country, and you serve through them and state that unless your principal provides the production of the documents, then you must give up the representation.
Mr. McCLOSKEY. But then you go on to say that there is nothing to prevent the principal from furnishing us forged documents. At least that is your testimony; isn't it?
Captain CLARK. I beg your pardon? I didn't understand that. Mr. McCLOSKEY. Can you help me with this, counsel ? Here it is. A further problem which I must, at least, mention in passing is simply that there never will be any assurance that any documents or other information produced from abroad will be accurate. This is the simple result of the cold, practical fact that unless the individual attesting to the accuracy of the document or information is subject to prosecution for perjury, he is not subjected to the ultimate compulsive device which serves to guarantee the accuracy of his responses.