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Has the State Department taken any steps to convene a conference of our trading partners to discover how to do this?
Mr. BANK. Yes, we have.
Mr. BANK. We are not sure. It will not be in the form of a conference per se, but it will be in discussions, yes.
Mr. MOCLOSKEY. So you have initiated a discussion with our trading partners to resolve this very problem?
Mr. Bank. Congressman, we have also initiated discussions on a number of occasions in the last year on similar problems regarding documents abroad under a case now being investigated by the Justice Department.
Mr. McCloskey. The Department of State office that handles maritime cases is yours. Is that right?
Mr. Baxk. That is right.
Mr. McCloskEY. How many people are allocated to the airline route traffic?
Mr. Bank. The Office of Aviation, which is a parallel office to mine, is a much larger office, which has a statutory
Mr. McCLOSKEY. Now, that is my question. Is it not possible that one of the alternatives we should pursue is to statutorily set up an office in the State Department charged with protecting U.S. shipping companies that same way we do for airline companies? Is that not consistent with what you earlier testified to today?
Mr. Bank. I believe that aim or that purpose which you have just described is the aim and purpose of the Office which I head. I think we do protect as much as we can, the U.S.-flag interests abroad.
Mr. MCCLOSKEY. I understand that. But the fact of the matter is that you have not done so because of our 13 companies, 3 have pled guilty and 6 of the remaining 10 are under investigation. The financial affairs of most of our liners are in grave difficulty and, obviously, we are not doing the job as we were all mandated to do under the 1936 act to build a strong profitable U.S. merchant marine, are we?
Mr. BANK. The protection of which you spoke and to which I referred, Congressman, has to do with the protection of the U.S.-flag interests abroad from discrimination by foreign governments.
Mr. McCLOSKEY. All right.
Now, is it not discrimination against the U.S.-flag interests when some foreign country rebates and will not cooperate with us in determining the extent and nature of the rebate?
Mr. BANK. It is not the classification.
Mr. MoCLOSKEY. Wait a minute. What is it, section 301 of the Trade Act?
Mr. BANK. That is one aspect. Section 19 of the Shipping Act as well.
Mr. McCLOSKEY. Section 19 of the Shipping Act. The executive branch is charged with protecting American foreign trade, including shipping against foreign discrimination?
• Mr. Bank. That is right.
Mr. MoCLOSKEY. Activities of foreign governments as well as foreign shipping lines?
Mr. BANK. Yes.
Mr. McCloskEY. Why is it only recently that you are convening these discussions to solve this problem?
Mr. BANK. This problem has been the basis of particular discussions on a case-by-case basis. To say that we have not had discussions, save for this discussion, is incorrect.
Mr. McCLOSKEY. How many times in the last 2 years has the State Department taken up a case of alleged competitive rebating by a foreign carrier ?
Mr. Bank. In this sense of rebating?
Mr. McCloskey. I will repeat the question and I will be very precise about it.
How many times in the last 2 years has the State Department taken up with a foreign government a case of alleged discrimination by a foreign-shipping company with the cooperation of that government?
Mr. BANK. None. We have not been asked by the Federal Maritime Commission, which has the statutory authority, as Mr. Blackwell pointed out, and the regulatory role in investigating rebating practices.
Mr. ZEFERETTI. Mr. McCloskey, if you have another question, go ahead and as soon as that question is over, we are going to adjourn the meeting.
Mr. McCLOSKEY. Mr. Chairman, I think that we ought to recall all the witnesses who testified today to give us the opportunity to specifically question them about what legislative recommendations they would make to solve this problem. The State Department has the obligation to tell us how to protect U.S. shipping companies from this kind of pervasive discrimination. The evidence is so clear and there are so many problems this has created for the industry, that it seems to me the State Department ought to review its past policy, its procedures and the number of people assigned to this task. In fact, one route Congress can choose to go is to statutorily charge the State Department to take up every case against a foreign carrier, and mandate you exercise the power to deny foreign companies entry into our ports, a power which I understand you have now but don't want to exercise.
Mr. BANK. Except that the Department would be acting in the role of the Commission on that.
Mr. McCLOSKEY. That may be. But, the Commission, because lack of employees, or lack of direction or lack of interest, or because in the past it has sometimes been a geriatric ward, has not come to anybody, you or Justice, to protect U.S. shipping.
If we are going to constitute the State Department as the new white knight to protect against discrimination in shipping, I would like to see the precise statutory language that you would recommend giving you the same powers as we have in the airline industry.
Mr. ZEFERETTI. Mr. Bank, I would suggest that maybe on October 20, you would come back and maybe draw up some specifics in which you can answer some of these questions.
Mr. Bank. Very good. I will be in contact with the committee. I believe I can make it. I do not have my schedule with me but I will be very happy to.
Mr. ZEFERETTI. We would suggest that you make every effort.
Mr. ZEFERETTI. Thank you all, and we are going to adjourn until October 20, at 10 a.m. [The following was received for the record :]
FEDERAL MARITIME COMMISSION,
Washington, D.C., November 28, 1977. Hon. JOHN M. MURPHY, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN: This refers to the testimony given before the Subcommittee on Merchant Marine and Fisheries on H.R. 9518, held on October 14, 1977. During those hearings, Congressman McCloskey asked two questions. One dealt with the constitutional rights of individuals who give information to the FMC in rebating investigations and the other dealt with various statutes that exist which relate to discriminatory practices resulting from rebating. Enclosed are two documents which answer and elaborate on them.
Further, please accept my compliments regarding your staff. They do their jobs with the kind of energy that is contagious, and I am looking forward to becoming better acquainted with you and them in the future. Have a happy holiday. Sincerely,
JOSEPH N. INGOLIA,
General Counsel. Enclosures.
REBATING INVESTIGATIONS AND CONSTITUTIONAL GUARANTEES The right to be protected guaranteed by the Fifth Amendment provision insuring against self-incrimination is the right against criminal prosecution, and the Commission's current inquiry into the conventional anti-rebating provisions of the Shipping Act, 1916 [see Sections 18(b) (3), 16 Initial Paragraph and 16, Second, (46 U.S.C. 817 (b) and 815)] entail only civil penalties. While certain types of rebating practices may also qualify for the misdemeanor provisions of Sections 14 and 16, First (46 U.S.C. 812 and 815), the Commission's present investigation of rebating practices by carriers and shippers has involved only those Shipping Act provisions dealing with civil penalty sanctions, and therefore the need to warn or protect against self-incrimination insofar as those provisions are concerned would not in our judgment be called into play.
It is true that although the sanctions against general rebating practices are only civil penalties, the words “any offense against the United States” in the criminal conspiracy provisions of the U.S. Code (18 U.S.C. Section 371) have been held to include offenses punishable solely by civil penalties. See e.g., II unsaker v. U.S., 279 F.2d 111 (9th Cir. 1960); U.S. v. Wiesner, 216 F.2d 739 (2d Cir. 1954); U.S. v. Hutto, 256 U.S. 524 (1921). And while the Justice Department would have the last word on whether or not criminal prosecution could be or would be instituted on a conspiracy count against civil penalty violators of the Shipping Act, would first be necessary for the Commission (or the Justice Department, independently) to uncover and establish the civil penalty violation, without which there is no conspiracy case.
The law is not completely clear on whether shippers or carriers engaged in the ordinary rebate situation could be convicted of a conspiracy. Before one may be convicted of a conspiracy to engage in a violation of a substantive offense, acts separate and a part from the substantive offense itself would seem to be required. Some authority indicates that one cannot be convicted of a conspiracy to violate a statutory provision when the very acts which are said to constitute the conspiracy are the necessary elements of the violation of the substantive provisions itself. See, e.g., U.S. v. Nasser, 476 F.2d 1111 (7th Cir. 1973), and also U.S. v. Lupino, 480 F.2d 720, 725 (8th Cir. 1973), and cases there cited. It may therefore be contended that in a situation in which a single shipper or consignee and a carrier consent (act in collusion) to effect the payment of a rebate, there is no act apart from the substantive offense which could constitute a conspiracy. It has been held that shippers receiving and carriers granting rebates in violation of the Interstate Commerce Act cannot be convicted of conspiracy to violate such act. See U.S. v. New York Cent. H.R. R. Co., 146 Fed. 298, 302–305 (S.D.N.Y. 1906), aff'd 212 U.S. 481. See also Thomas v. U.S., 156 Fed. 897 (8th Cir. 1907).
There may be individual circumstances in which acts apart from those involved in a substantive violation of the anti-rebating situations may take place, and thus the conspiracy element is present. For example, a scheme to obtain rebates may involve several shippers or consignees acting in concert. Since the ordinary rebating situation would involve one carrier and one consignee or shipper, the collusive action of several shippers or consignees could be said toconstitute a conspiracy to obtain transportation at less than the lawful rates, as distinguished from the substantive violation. See e.g., Gebardi v. U.S., 278 U.S., 112, 122 fn. 6 (1932).
Exceptions to the general rule that a conspiracy is a separate offense from the substantive violation have little application to rebating offenses under the Shipping Act. One such category of exceptions relates to actions such as adultery, bigamy, dueling, etc., where not only are the crimes characterized by the general congruence of the agreement and the substantive offense, but where the immediate consequence of the crime rests on the parties themselves rather than on society at large. See e.g., Iannelli v. U.S., 420 U.S. 770, 782–784 (1975). Another excepted category is where there has been a legislative intent to relieve one party to certain conduct from liability, see e.g., U.S. v. Nasser, 476 F.2d, supra at 1118-1120. This latter exception, however, could be argued not to apply where both the giving and receiving of rebates is made unlawful.
How the conspiracy law would be applied to rebate transactions under the Shipping Act may be significantly influenced by the factual setting. For example, we are uncertain what Justice or the Courts would do with the conspiracy concept in a situation in which a carrier pays a rebate abroad to a foreign shipper in a country where such payments are not unlawful. Would the law of the situs control, and if so, is there even a conspiracy? In applying the conspiracy statute to another ordinary rebating situation, i.e., one shipper and one carrier, one could be faced with the somewhat anomalous situation where a shipper could be convicted of a conspiracy to receive rebates from a carrier, since a shipper need not act in concert with a carrier to violate Section 16, First Paragraph, but a carrier could not be convicted of a conspiracy to give such rebates since 16, Second makes the payment of such rebates itself an offense.
The persons violating the anti-rebating provisions of the Shipping Act are generally companies or business associations of one type or another, and it is. well settled that the right against self-incrimination applies only to natural persons not corporations or other associations. See e.g., United States v. White, 322 U.S. 694 (1944) ; Bellis v. United States, 417 U.S. 85 (1974); McPhaul v. United States, 364 U.S. 372 (1960) ; Curcio v. United States, 354 U.S. 118 (1957) ; and United States v. Fleish chman, 339 U.S. 349 (1950). It is equally well settled that an individual cannot rely on the privilege against self-incrimination to avoid producing the records of a collective entity even when the records sought may prove incriminating to the individual. Such a result follows whether the requested information is sought from the organization itself or from individuals as organization officers. W'ilson v. United States, 221 U.S. 361 (1911); Dreier v. United States, 221 U.S. 394 (1911).
Since most of the Commission's investigative inquiries or subpoenas involving rebating have been directed to corporations or companies, Fifth Amendment warnings have not been given. Admittedly, our concern has not focused on possible criminal conspiracy cases that would be dependent on civil penalty rebate violations, which the Commission is charged with investigating under the Shipping Act. While it is possible that the Commission may have, by its rebating inquiries, compromised some collateral conspiracy prosecutions, any agreements settling rebate violations that the Commission has entered into pursuant to the compromise authority given it by P.L. 92-416 have expressly provided :
"It is understood by respondent that this Agreement shall not serve as a bar or defense to any criminal prosecution or civil litigation by the Commission or any other department or agency of the United States Government for violations of law by respondent, other than those referred to herein."
This provision was adopted for the Commission's settlement agreements pursuant to the request of Richard L. Thornburgh, Assistant Attorney General, Criminal Division, who advised the Commission on September 28, 1976: "Only with these restrictions will the complete future interests of the United States be protected from the potential prejudice of a premature civil settlement."
AGENCIES AND STATUTES RELATING TO REBATING AND DISCRIMINATORY
PRACTICES RESULTING FROM REBATING
I. FEDERAL MARITIME COMMISSION
Section 14 First of the Shipping Act, 1916, (46 U.S.C. section 812) prohibits the payment of any type of deferred rebate by a carrier to any shipper. A deferred rebate is a return of any portion of the freight money which is de ferred beyond the completion of the service for which it is paid in consideration for his exclusive business over a designated period of time.
Section 14 Fourth of the Shipping Act, 1916, (46 U.S.C. section 812) prohibits a common carrier from making any unfair or unjustly discriminatory contract with a shipper based on volume of freight. This section is interpreted to prohibit volume discounts only when the discount does not reflect an actual cost saving of the carrier created by the increased volume.
Section 16 of the Shipping Act, 1916 (46 U.S.C. section $15) makes it unlawful for any shipper to obtain or attempt to obtain transportation by water at less than the rates or charges in the tariff filed with the Federal Maritime Commission by any unjust or unfair device. The Commission has interpreted this section to make it unlawful for any shipper to solicit or knowingly accept a rebate from a common carrier.
Section 16 First of the Shipping Act, 1916 (46 U.S.C. section 815) makes it unlawful for any common carrier to make or give any undue or unreasonable preference or advantage to any person, locality or description of traffic or to subject any person, locality or description of traffic to any undue or unreasonable prejudice or disadvantage.
Section 16 Second of the Shipping Act, 1916 (46 U.S.C. section 815) makes it unlawful for any common carrier to allow any person to obtain transportation for property at less than the regular rates or charges.
Section 17 of the Shipping Act, 1916 (46 U.S.C. section 816) provides that no common carrier by water in the foreign commerce shall charge any rate which is unjustly discriminatory between shippers or ports, or unjustly prejudicial to exporters of the United States as compared with their foreign competitors. The Commission is authorized to alter any such charge to correct an unjust discriminaton or prejudice and make an order compelling the discontinuance of such unjustly discriminatory or prejudicial charges.
Section 18(b) (3) of the Shipping Act, 1916 (46 U.S.C. section 817) makes it unlawful for any common carrier by water in the foreign commerce or conference of such carriers to charge or demand a greater or less or different compensation for the transportation of property than is specified in its tariff on file with the Commission.
Section 19(1) (b) Merchant Marine Act, 1920 (46 U.S.C. section 876) author. izes the Federal Maritime Commission to make rules and regulations affecting shipping in the foreign trade to adjust or meet general or special conditions unfavorable to shipping in the foreign trade which arise out of or result from foreign laws, rules or regulations or from competitive methods or practices employed by owners, operators, agents, or masters of vessels of a foreign country.
Section 2 of the Intercoastal Shipping Act, 1933 (46 U.S.C. section 844) makes it unlawful for any common carrier by water in the Intercoastal Commerce to