Mr. Ross-BELL. Mr. Kyros, that is very largely correct. But I believe I said-I do not have the text in front of me-a fully representative American shipowner association.

The CHAIRMAN. Yes, we know that quite well in this committee. Mr. KYROS. In talking about-CENSA represents, as I understand, our major European trading partners and Japan, is that correct, Mr. Russell?

Mr. RUSSELL. That is right.

Mr. KYROS. And that includes Belgium, Denmark, France, the Federal Republic of Germany, Greece, Italy, Germany, Norway, Sweden, the United Kingdom and some individual liner operators. Mr. RUSSELL. Yes. There are 12 countries.

Mr. KYROS. When was CENSA organized?

Mr. RUSSELL. 1963.

Mr. KYROS. Under what particular authority was it organized, do you remember?

Mr. RUSSELL. The authority is perhaps not the right word. It grew out of the discussions of the problems facing shipowners in trading. It grew out in some ways of a previous organization, CES, which was still in existence, which had to do with the problems of the liner companies dealing with the United States, and it also had reflections of government concern and the relationship of shipowners in conferences, and with shippers.

Mr. KYROS. But, substantially, it is an organization of the shipowners themselves, the carriers?

Mr. RUSSELL. Entirely of the shipowners themselves as an asociation, yes.

Mr. KYROS. The tramps?

Mr. RUSSELL. Yes.

Mr. KYROS The tankers?

Mr. RUSSELL. Yes.

Mr. KYROS. Bulkers?

Mr. RUSSELL. Yes, indeed.

Mr. KYROS. One thing that intrigues me, as I was reading your testimony and reading Mr. Ross-Bell's remarks to the National Industrial Traffic League did you have to file a section 15 agreement in order to organize an organization like CENSA to operate in the United States?

Mr. RUSSELL. Not to my knowledge. Mr. Capone might be able to answer that.

Mr. CAPONE. No, an agreement was not filed. And in our judgment, in the early days, it was concluded it was not necessary to obtain approval of such an agreement.

Mr. KYROS. Did the Department of Justice ever discuss a section 15 agreement with you? You have mentioned them throughout here as being ubiquitous, I understand.

Mr. CAPONE. No, the Department of Justice never questioned the right of CENSA to exist.

Mr. KYROS. Where is the headquarters of CENSA?

Mr. RUSSELL. In London.

Mr. KYROS. And you keep records in the United States?

Mr. RUSSELL. There will be some papers of some kind but of limited degree.

Mr. KYROS. Do you have organizations in everyone of the member nations that is France or Norway?

Mr. RUSSELL. No, we have no representation other than through the national associations themselves.

Mr. KYROS. But, however, you do have representatives in the United States for CENSA?

Mr. RUSSELL. We have a representative here.

Mr. KYROS. Do any foreign governments give any support directly to CENSA or is it self-supporting through its own shipowners' group?

Mr. RUSSELL. Self-supporting entirely. There is no government subvention.

Mr. KYROS. Are you familiar, Mr. Russell, with certain foreign government blocking statutes which certain governments have which would prohibit cooperation with the United States in obtaining information from the foreign carriers?

Mr. RUSSELL. Only as to their existence.

Mr. KYROS. The United Kingdom has the Shipping Contracts and Commercial Documents Act, 1964, is that correct?

Mr. RUSSELL. I understand that would be the right definition. Mr. KYROS. Did most of these blocking statutes-were they mostly enacted after the Celler hearings in 1961?

Mr. RUSSELL. I could not answer specifically, but I would think it is possibly true.

Mr. KYROS. No, there are some countries and many of them, indeed, that not only have blocking statutes, but they have treaties of friendship, commerce and navigation, with the United States. Mr. KYROS. Some are self-executing, a foreign-flag carrier, by viris that true?

Mr. RUSSELL. One would imagine that to be so.

Mr. KYROS. Do you know how a blocking statute operates? Mr. RUSSELL. I think they vary. In France and Germany, are blocking. In the United Kingdom, they are permissive, and, as I understand, it requires action by a Minister in Council.

Mr. KYROS. Some are self-executing, a foreign-flag carrier, by virtue of the laws of secrecy of a particular nation can state we shall not give you any documents because the law says so. Others require some action by some Minister?

Mr. RUSSELL. Yes.

Mr. KYROS. Are these blocking statutes in conflict with the treaties of friendship and commerce that the United States also has with these nations?

Mr. RUSSELL. That, I think, is for those who govern us in some way or another to tell us what is required at international levels. Mr. KYROS. We talked about these various flag nations and flag owners. Do you know which of those nations permit rebating in their trades?

Mr. RUSSELL. Do you mean deferred rebates as such?
Mr. KYROS. Deferred rebates or-

Mr. RUSSELL. Legal rebates?

The CHAIRMAN. Rebates or other terms.

Mr. RUSSELL. To the best of my knowledge, every country-in every country. I am just questioning in my mind, and Mr. RossBell is, too, whether it does apply to Japan. I am not quite certain.

Mr. KYROS. So in the foreign-to-foreign trades, of these foreign nations that the flags are involved in, even of the CENSA group, they could utilize, deferred and regular rebates?

Mr. RUSSELL. Yes.

Mr. KYROS. And it is a customary practice?

Mr. RUSSELL. Yes.

Mr. KYROS. Now, what is your feeling then about the foreign-flag carrier operating perhaps illegally in the U.S. trades and also operating legally under the laws of his own nation?

Does he not have a conflict? If the flag carrier of some nation, and let us take a French flag as an example, by the laws of his nation he can rebate, and yet he comes into a trade between France and the United States, then he could do something legally by his national laws that he cannot do by the United States laws, is that correct?

Mr. RUSSELL. That would appear to be a true definition.
Mr. KYROS. Mr. Russell, how is that conflict resolved?
The CHAIRMAN. I think that question has to be clarified.

Mr. RUSSELL. I am sorry, Mr. Chairman. Mr. Ross-Bell is pointing out perhaps where I have missed a point possibly. Trades into and out of the United States do not practice deferred rebating. Trades which operate to other areas outside the United States practice deferred rebating.

Mr. KYROS. I believe that was your answer in the first instance. Mr. RUSSELL. It was intended to be.

Mr. KYROS. All I did ask you, though, was the foreign-flag carriers whose nation permits rebating in its non-U.S. trades then has to wear a different kind of hat when he operates in the U.S. trade. That is all I am saying toyou.

Mr. RUSSELL. He has to wear a different hat, yes, he does.

Mr. CAPONE. I do hope we are clear what we are talking about, Mr. Kyros. Maybe the witness understands it.

Is the discussion about deferred rebating or rebating, secret rebating?

Mr. KYROS. Both. Deferred rebating and secret rebating.

Mr. RUSSELL. I am sorry again, Mr. Chairman, I thought I specifically said we are talking about the deferred rebating system. To me that means a legal system.

Mr. KYROS. What about secret rebating?

Mr. CAPONE. I cannot, I think, express what the law is in various countries in regard to dealing with such practices.

Mr. Russell is making the point as one makes it in our testimony, and with the attachment, that we come back to the point of the source of problems. And that is if you can run the trade in a specific way, one can avoid the problem of malpractices in rebates. Mr. KYROS. In your testimony

Mr. CHAIRMAN. Will the gentleman suspend?
Mr. McCloskey.

Mr. MCCLOSKEY. You speak of the secret rebating practices in foreign countries. How is it done? How is it policed? I am speaking now of the trades between foreign countries, the conferences that exist other than in the U.S. trades.

Mr. RUSSELL. In the India/Pakistan trade, which Mr. Hudson has elaborated on so much in his paper, there is nobody, because it is not required. In the trades in which I have operated, most of my time in shipping, the Australian and New Zealand trades, there are no policing regulations because they are not required. In the trades into the East there is a regulating operation whereby lines can suggest that some malpractice is taking place and there is an organization which can then take up such allegations or can develop questions if it would appear appropriate to do so.

Mr. MCCLOSKEY. In the closed conferences that exist, let us take between Europe and the Far East, how is the membership of those conferences determined? Is it by intergovernmental discussions or by discussions merely between the private companies involved?

Mr. RUSSELL. I can only answer that in general terms, Mr. McCloskey, because I am not directly associated with the conferences themselves. I think the proper answer would be to say that it has been developed through the commercial field. Possibly where national lines are concerned there has been a reflection of some Government opinion. But other than that, negotiations are being pursued through commercial relationships with the parties.

Mr. MCCLOSKEY. Well, let us just take the British situation for example.

How many major British liner companies are there?

Mr. RUSSELL. Well, it is a somewhat more difficult question to answer than it was a few years ago, with the introduction of the container system, because the liner companies as they operated have tended to shrink into consortia. My own company, which was a very substantial operating company in the Australian and New Zealand trades, has seen the whole of its trade in those liner services placed in the hands of a consortia. So I would say there are three major consortia.

Mr. MCCLOSKEY. Let me make sure that I understand the terms that you are using.

Are you representing the Council of European and Japanese National Shipowners Association?

Mr. RUSSELL. Yes.

Mr. MCCLOSKEY. What is a national shipowners association?

Mr. RUSSELL. The association of all of the shipping companies within that country.

Mr. MCCLOSKEY. So there is a Britsh National Shipowners Association?

Mr. RUSSELL. There is U.K. National Association, Norwegian, Swedish, French, Italian, et cetera.

Mr. MCCLOSKEY. How many national associations make up CENSA?

Mr. RUSSELL. Twelve.

Mr. MCCLOSKEY. What are the European countries involved, and what are the other countries involved?

Mr. RUSSELL. Norway, Sweden, Denmark, Germany, France, Belgium, Italy, Finland, Greece, the Netherlands, the United Kingdom, and Japan.

Mr. MCCLOSKEY. Taiwan?

Mr. RUSSELL. No. Japan is the only country outside Europe as a member of CENSA.

Mr. MCCLOSKEY. Now, to what extent is the U.K. National Shipowners Association affected by or directed by the U.K. Government?

Mr. RUSSELL. It is not directed by the U.K. Government in any way. It does, like all substantial bodies of its kind, have relationships with various bodies of government.

Mr. MCCLOSKEY. Let us take the trade, say, from Europe to Japan. How many Norwegian ships, how many U.K. ships, how many Japanese ships, and how is the mix determined in a closed conference?

Mr. RUSSELL. The mix in closed conferences has been determined in the general way from past practices.

Mr. MCCLOSKEY. Say it again.

Mr. RUSSELL. Past practices. Past performance.

Mr. MCCLOSKEY. Well, Japan presumably came into this business in 1945 with no shipping at all. How was the Japanese percentage in the various trades determined?

Mr. RUSSELL. That, I could not answer, because I do not know. But I would assume it would be based on past performance before 1939 plus the question of the trade with the country as it developed.

Mr. MCCLOSKEY. Well, as that trade developed, what I am interested in is whether or not the government of these respective countries desired to keep a certain percentage of the trade to and from their country in their own ships and therefore took a hand with the closed conferences to try to assure that a certain percentage of the trade was carried in their own ships?

Mr. RUSSELL. There has been, to the best of my knowledge, no direct intervention in the operations of conferences that I have been associated with other than at times when it was proposed in some cases that a national line might be introduced into the trade. In that case, there are expressions sometimes publicly and sometimes privately.

Mr. MCCLOSKEY. Well, if we pursue the suggestion of closed conferences in the U.S. trades in the model that you have pursued elsewhere, would you contemplate a non-U.S. Government determination as to how many U.S. ships were involved in the conference? Mr. RUSSELL. A non-U.S. Government?

Mr. MCCLOSKEY. That is correct.

Mr. RUSSELL. I would indeed.

Mr. MCCLOSKEY. Would you leave it to the American shipping companies which would presumably form a council such as the national councils that make up CENSA?

Mr. RUSSELL. Indeed.

Mr. MCCLOSKEY. So you would have a private negotiation between shipping councils of the United States with shipping councils from other countries with respect to each trade?

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