Mr. CAPONE. If I may comment, Mr. Chairman. I think so far as interstate commerce carriers are concerned, my recollection-I could be wrong-is that they are not required to maintain any and every sort of record in each State. That would be, I think, a burden upon the conference lines.

The CHAIRMAN. But they are not.

Mr. CAPONE. Whereas our understanding is that the FMC proposal would require the maintenance, continual maintenance of original or duplicative originals of records, the extent of which apparently has not been set out in detail; all on the possibility that there might be a need to subpena some of those documents.

Now, what we would end up doing is trying to decide the extent of the documents which would be required and whether they would be useful or not useful. Every carrier would have to maintain a total set of all of its finnacial books, records, vouchers, invoices in the United States as well as wherever it may have its headquarters or other places, and it would get to be a totally impossible situation from a practical viewpoint.

Thank you.

Mr. KYROS. Mr. Russell, you said that the imposition of American rules and jurisdiction over foreign carriers would seem to violate fundamental international comity. I think that is what you were talking about.

You also state, on page 6, "Any suggestion that it is a privilege for foreign nations to participate in the U.S. trades, and that the whole world must conform to your rules and regulations misses the mark in an economically interdependent world."

That is a grand and eloquent statement. The fact is that since 1916, foreign carriers have been filing section 15 agreements under the Shipping Act. Is that fair?

Mr. RUSSELL. To the best of my knowledge, yes.

Mr. KYROS. And they have not been paying rebates under the criminal penalties that would follow under section 18(b) of the act? Mr. RUSSELL. As between 1916 and some later date deferred rebates were allowed.

Mr. KYROS. And the dual rate contract provisions, a tie-in device to maintain some kind of conference loyalty, has been observed under the Shipping Act, that is in the American trades?

Mr. RUSSELL. So far as I am aware.

Mr. KYROS. Do not foreign carriers today obey the laws, the American shipping laws that exist in the liner trades of the United States?

Mr. RUSSELL. They obviously obey the laws insofar as they are not in conflict with their own laws.

Mr. KYROS. Then why not go one step further and do as the Federal Maritime Commission Chairman who has had considerable experience regarding this matter and sees the problem before him and suggests the appointment of a resident agent who would keep the records, and I do not think the recordkeeping would be as difficult as Mr. Capone suggests. I am sure the FMC, with its ability to deal with prolixity and records, could streamline the procedure. Do you not think so, Mr. Russell?

Mr. RUSSELL. Well, I am not experienced in this trade in detail. What I do understand from various comments that have been made, that the operation is not a speedy one, that much remains to be done.

One of the proposals, one of the points that is put forward by those lines which operate in this trade is that the effect of the regulation and the rules under FMC in recent years has itself been a major burden, and what is being said now is this would appear to be producing an increasing burden, an intolerable one, and that it also has implications against the background of the conduct of the trade under these rules and regulations which give rise to bringing into the ambient of U.S. law foreign sovereignty.

Mr. KYROS. That is why your testimony is helpful to spread before the members of the committee means by which they may streamline the process that has been encrusted through years of litigation with unnecessary recordkeeping.

But let us get back to the case, and that is that we had testimony before the committee repeatedly that malpractices in the U.S. liner trades are causing instability and threatening our international trades. Yet you can say, on page 3 of your testimony:

And my own information from CENSA carriers in the U.S. Pacific and North Atlantic trades is that where there had been a problem in the past, this has now been largely overcome through substantial and continuing investment in self-policing.

Are you saying that there is no rebating or malpractices occurring in the U.S. liner trades because of the self-policing that has been instituted?

Mr. RUSSELL. No. What I am saying is that, as a result of the introduction of the neutral body system in self-policing, these malpractices have substantially largely disappeared in recent times, and the situation as it existed some while ago is no longer as serious today.

Mr. KYROS. You remember

Mr. RUSSELL. Mr. Capone is pointing out to me that he understands that elsewhere in these committees and hearings it has beenevidence has been given or testimony has been given by other witnesses that this is so.

Mr. KYROS. Yes. But the testimony was given, Mr. Russell, is that it was not self-policing that had reduced or eliminated rebating or malpractices. On the contrary, it was the very active enforcement of the Federal Maritime Commission and perhaps, as some witnesses suggested, even the action of this very committee and the Senate committees in regarding rebating as a serious matter.

You cite in your testimony the Bonner hearings in 1961; perhaps you even took a part in them at that time

Mr. RUSSELL. No.

Mr. KYROS. There was a gentleman from the British Shipping Council that took a part in them. At that time, the subject of selfpolicing was discussed around the question of dual-rate contracts. Again the same question arose, whether to allow the conferences to be closed or to open them up. In any event, self-policing was dis

cussed and, in fact, provisions were put in the 1916 act to require self-policing in all the section 15 agreements and conferences.

Now, is it your testimony that self-policing itself has been an effective method of controlling rebating and malpractices since 1961, let us say?

Mr. RUSSELL. I am not suggesting that, no. I am suggesting that in recent times, with changes in attitude, there has been a decrease in the level of malpractices.

Now, one can obviously argue that it could have been effective by one way or another. It is the view of the lines of the trade that the addition of neutral body regulation, independent self-policing, is an effective factor.

Mr. KYROS. Well, the Federal Maritime Commission had initiated a study-I do not know if you are aware of it, Mr. Russell, by a gentleman named Mr. de Venoge, who has prepared study on neutral body self-policing. However, I would like to also ask you at this time, based upon all of your testimony, given the legal situation as it is today in the United States, how is the United States going to enforce its laws when foreign carriers refuse to come forward and produce their records and answer requests for records and information?

Mr. RUSSELL. I would think the only answer that I could give to you is that the-what is being discussed here is the effects of the existence of present restrictions on the operations of international carriers. For a long period of time, certain exceptions to the antitrust regulations were allowed and trades seemed to have moved rather more easily.

What we say, I think, is that what we need to remove is the cause; that the cause could be removed if total immunity was given to international carriers, American carriers and international carriers, against the antitrust provisions, and that some degree of deregulation might follow. We appreciate the law, the institutions, as they exist now. We think that, based upon experience of a more flexible approach to these problems, you would find that our experience, as we have found with our experience, that the problems would themselves begin to disappear.

Mr. KYROS. We admire your experience, Mr. Russell. But at this moment there are 18 foreign carriers in our trades under investigation.

Are you saying by your testimony this morning that the FMC and the Federal Government might as well drop those cases because nothing is going to come of it? Is that what you are saying?

Mr. RUSSELL. I cannot say where and how you will proceed in the investigation and in whatever other stages of the development there are. It would appear, so far as I am aware at the present time, that those who are involved are not prepared to come forward and testify.

Mr. KYROS. And as far as you know, the nations which those flags may represent are prepared to utilize blocking statutes so they would not come forward?

Mr. RUSSELL. So far as I understand it.

Mr. KYROS. How about retaliation? You cited Captain Clark, of Delta for the fact that foreign nations might retaliate against the United States if we were to act against foreign carriers. What kind of retaliation do you envisage if, in fact, such a retaliation took place?

Mr. RUSSELL. I was talking there, Mr. Chairman, about the major points that have been made in this new proposal, in this bill, about the closure of ports. It is very difficult for someone sitting in my position to suggest what retaliatory action could be taken, and it could be, of course, in a very wide field. It could be, I am certain, against the best interests of the U.S. carriers, its trade, and all those who are involved in it.

But the basis of what we are talking about is that to eliminate malpractices, we have to remove the incentive and the incentive is provided under the present system.

Mr. KYROS. Mr. Russell, I assure you this morning, we will have the opportunity to discuss these matters with you and get them on record. We can discuss the closed conference system and all the suggestions. But for the purposes initially, where there is a backlog of cases before the FMC, the feeling I get from you, the expression either implied or direct is that the United States should not go forward and will not successfully go forward against the foreignflag carriers that are now alleged to have violated our laws by rebating. And that is 18 of them.

Do I understand that to be the case?

Mr. RUSSELL. No, it is not for me to put such a point, I think, or to suggest such a view. The individuals who are concerned, whom I do not know, obviously are involved in U.S. trade, have taken a view, will continue to take the view and, presumaby, and depending upon the situation of their government, will maintain their attitudes. but I really cannot answer the question.

The CHAIRMAN. If counsel would yield.

Mr. Russell, I believe you said that an immunity would be helpful in this situation for those companies who had perhaps engaged in some of these practices in the past, whether they were U.S. companies or otherwise.

Mr. RUSSELL. I refer to a continuing immunity for the future, Mr. Chairman, against the antitrust legislation which would allow the operation of conferences in a somewhat different way.

Mr. CAPONE. I think, Mr. Chairman, with apologies for interrupting, there has been some slight shift in the dialog here. We had anticipated that the discussion would focus upon whether legislation is necessary, whether there are practices that are undesirable and whether there should be remedies taken and what those remedies should be rather than a dialog specifically dealing with the issue of past violations and how or whether one could successfully prosecute past violations.

I would respectfully suggest that that particular area is a sensitive one and one that should be left to the investigative bodies or for a separate discussion elsewhere. I do not really believe that Mr. Russell is prepared to testify as to what particular carriers who are

being investigated would or would not do. And, of course, it is up to their governments to decide in respect to past violations what their positions would or would not be.

The CHAIRMAN. We understand that. Of course, we are beginning a dialog and probably because of our past hearings we have been basing some of our early questions now on the format of the legislative approach that has been recommended in some areas. And, of course, an immunity or amnesty is one of the key issues. And therefore we were asking Mr. Russell in this area, quite pointedly, for his opinions because we asked all U.S. witnesses these questions. But we are going to get to the point and, I think, very shortly as to some solutions, such as the UNCTAD Code, closing of conferences, what to do about COMECON carriers and bilateral arrangements, and what effect they would have overall on America's free trade and free shipping policies.

I would appreciate if you would make those comments.

Mr. RUSSELL. Mr. Chairman, when you referred to the amnesty law, then I would have to say that CENSA has not taken a position at this time. But I would say that to forgive is Christian and no

more.

Mr. KYROS. Mr. Russell, in pursuing and in keeping with Mr. Capone's admonition, one of the reasons for fashioning a limited use immunity in the bill was perhaps if we could get this whole backlog of cases behind the Federal Maritime Commission and behind. the international liner trades, we could then proceed on to the more serious problems, that is to structure American international shipping policy, and that is why, as the Chairman referred to, the use of immunity, my question is, given the fact that foreign carriers within their jurisdiction feel they need not come forward, should not come forward under their own laws, then if you had immunity, they could come forward, sign up, be immune from rebating penalties or criminal conspiracy penalties, and the slate would be clean, in effect, except they would not rebate in the future. Is that possible? Mr. RUSSELL. I do not think that there is anything really very much more that I could say because I am not familiar with the attitudes of the individual lines. One might say perhaps that--to reach the point of a new beginning, one could give a blanket immunity without going into any detail of any kind in relation to these cases, if that was the situation that was sought to be reached.

Mr. KYROS. What about the self-policing organizations you talked about? In your experience in shipping, which I know is considerable, do they regularly discover malpractices and apply sanctions against the conference members? Is that a regular thing that happens?

Mr. RUSSELL. Yes, it is, of course, relatively new in the last few years, and a developing philosophy. And its application will change and grow and adopt itself to the conditions which are required to apply.

Mr. KYROS. Let us turn and talk about CENSA because I think CENSA is a unique organization and, if I recall, recently Mr. RossBell spoke to a group-I think it was the National Industrial Traffic League, it was regrettable that Americans did not have a similar shipowners association, is that correct?