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Our view, our goals are to try to cast light on what have been in too many parts of the past very murky issues, and we are trying to raise the level of dialog to a level which can get us the kind of intelligent policy choices that hopefully all of us are interested in making.

If that shall be a dedication to destroying the conference system in your view, then we we would have to accept that characterization. But we do not accept that characterization.

Mr. CORRADO. Obviously not. But what do we end up with in the ocean trades if we follow your dedication?

You know that you are opposed to the present ocean regulatory scheme. You are opposed to closed conferences with independent bodies or shipper councils. You opposed our very modest intermodal bill in the last Congress that just extended antitrust immunity between the ocean carriers and conferences and the inland modes.

I just wonder where you would lead us. You know, one of the alternatives you mentioned this morning was to increase the subsidy program. Well, the foreigners who worked so hard to destroy our cargo equity lull a couple of weeks ago, a few weeks after that were talking about increasing the construction and operating subsidies. The fact is that the mood of the Congress today is antisubsidy. I do not see that that is any solution at all, frankly.

Mr. SIMS. I guess I really cannot give you an ultimate answer. If I could, I would be volunteering it, not only here but every other place.

The CHAIRMAN. We will have to conclude.

Gentlemen, thank you very much. The committee stands adjourned. [Whereupon, at 12:12 p.m., the committee adjourned, subject to the call of the Chair.]

REBATING PRACTICES

TUESDAY, JANUARY 24, 1978

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON MERCHANT MARINE OF THE

COMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10:27 a.m., in room 1334, Longworth House Office Building, Hon. John M. Murphy, chairman, presiding.

The CHAIRMAN. The subcommittee will come to order.

This morning we will continue hearings on H.R. 9518, a bill to amend the Shipping Act, 1916, to provide for a 3-year period to reach a permanent solution of the rebating practices in the U.S. foreign trade.

The subcommittee has already held 5 days of extensive hearings commencing on October 14, 1977.

There are three major subjects addressed in H.R. 9518: first, expediting the procedure for complaints related to rebating; second, severe penalties are provided for failure of any carrier to comply with discovery procedures, including denial of entry into U.S. ports; and third, the provision narrowed by testimony thus far, for a limited form of immunity confined to rebating violations, under paragraph 2 of section 16 and section 18(b) (3) of the Shipping Act, 1916, and for criminal conspiracy to rebate.

In order to obtain specific recommendations in regard to these and other provisions concerning rebating we have requested that the Federal Maritime Commission, the Department of State, and the Department of Justice provide further testimony today.

In assessing the various provisions in the bill before us it is necessary to insure that these laws will be applied in an evenhanded manner so that a competitive disadvantage is not forced on U.S.-flag carriers in relation to foreign flags.

Although there has already been comprehensive testimony adduced in these hearings from all Government agencies involved, U.S.-flag carriers, and trade associations both foreign and domestic, we have not yet heard from shippers or shippers' associations. It is appropriate that we have with us today representatives from the National Industrial Traffic League, a shipper organization which represents all types of shippers nationwide, who will give us their views in order to complete the record on these hearings.

We are happy to have back with us this morning the Honorable. Richard Bank, who is testifying on behalf of the Department of State.

STATEMENT OF RICHARD BANK, DIRECTOR, OFFICE OF MARITIME AFFAIRS, DEPARTMENT OF STATE, ACCOMPANIED BY JUDITH HIPPLER BELLO, OFFICE OF LEGAL ADVISER

Mr. Bank, if you will proceed.

Mr. BANK. Thank you very much, Mr. Chairman.

I would like at this time to introduce Judith Bello, who is sitting with me at the table. She is from the Office of the Legal Adviser, Department of State.

Mr. Chairman, as I have noted in conversations with your staff, we are very happy to be here to answer any questions which the committee might have in regard to activities which have transpired since the last time we appeared before the committee on this matter. As you recall, Mr. Chairman, we had discussed the proposed legislation in regard to its effect on foreign policy and our relationship with individual foreign countries. We have pointed out that we had received a diplomatic note which had been entered in the record, a note dated September 27, from a number of European countries, pledging cooperation in trying to resolve problems that we see in rebating and malpractices.

The CHAIRMAN. I am going to ask our special counsel on this legislation, Mr. Kyros, to proceed.

Mr. KYROS. Thank you, Mr. Chairman.

Mr. Bank, last time when you appeared before the committee you brought the committee up to date on your attempts to negotiate with foreign governments to obtain records to assist the Federal Maritime Commission in their investigation of rebating.

Specifically, the Federal Maritime Commission has under investigation about 18 foreign-flag carriers. Are you aware of the nations represented by those 18 foreign-flag carriers?

Mr. BANK. In most part, yes, Mr. Kyros. In dealing with the Federal Maritime Commission we have been working closely in identifying those carriers and the nations whose flags they fly, in trying to develop cases in which meaningful government-to-government negotiations might take place.

If I can, Mr. Kyros, I will point out, if you would like, or describe the series of meetings we have had, both on a multilateral and on a bilateral basis with the governments of countries whose carriers have cases pending or under investigation with the Federal Maritime Commission.

Mr. KYROS. I think that would be very helpful for the record, Mr. Bank.

Mr. BANK. Thank you, Mr. Kyros.

As you recall, when we testified, I believe it was October 20, we pointed out that we received a diplomatic note from a number of countries indicating their desire to participate in negotiations or in discussions. We have had meetings with the Washington representatives of a good number of these countries, general meetings, on the 1st of November, and again on December 23. These meetings attempted to define what items should be discussed in relation to resolution of the rebating and malpractice problem in the U.S. trade.

Second, a larger series of discussions concerning larger theoretical shipping policies are also planned. In fact, meetings have taken place this past week in Europe among the Consultive Shipping Group, the CSG, an informal group of shipping countries which trade with the United States, in regard to activities which we have initiated.

We have also, in determining the agenda, presented the European representatives here in Washington last week with an agenda, or a series of agendas, for two such meetings. We hope to have a meeting again soon, hopefully next week, or the week after, with the Europeans to set a date for a meeting of shipping policy officials of those governments to actually tackle the substantive issues.

Now, it is our intention, and we have made this known to the Europeans and Japanese, that in the first instance we plan to concentrate on the rebate, malpractice, and FMC issues, as well as setting the groundwork for future meetings.

In conversations I have had with individual representatives from European governments I have been satisfied that they have taken our initiative and are considering the matters we have presented to them in all seriousness.

On one hand we have had significant multilateral contacts. On the other hand we have also had bilateral contacts with individual governments. As I noted to the Europeans and Japanese in general meetings, we have, and will reserve the right to continue discussions on a bilateral basis with a number of governments.

We have had meetings and discussions to differing degrees with a number of countries. I can give you three general descriptions of contacts which we have had.

May I say at the outset, Mr. Chairman, that these contacts and these discussions have been coordinated at all times with the Federal Maritime Commission. At no time in my memory, and I have been in shipping in the State Department since 1972, have we had as close a cooperative relationship with the Federal Maritime Commission in the field of rebating investigation, document procurement, and negotiation as we have today.

Mr. KYROS. What gave rise to that?

Mr. BANK. I can assume a number of things gave rise to it. There is no doubt that Congress interest in this area, and the interest of the entire shipping community is a factor. I think a good personal relationship between my staff and the FMC staff is also one which adds to it. Also, I think that after a number of years of an absence of success in trying to resolve these problems alone through direct Federal Maritime Commission negotiations with the lines involved, there is an understanding at the Commission, at least among the Commission staff and the Chairman, that a government-to-government negotiation might do better.

In the first instance, Mr. Kyros, with the first country which I can generally describe, where we have had discussions with the FMC and senior members of that government, I can report we are well on the way to resolution of past and present malpractices.

Mr. KYROS. Just stop there. Keep your thoughts in mind for one

moment.

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