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Does that mean that one of those 18 foreign-flag carriers may be well ready to produce documents and make settlement with the FMC on allegations of rebating violations.

Mr. BANK. I would say that there is not only 1, but more than 1 out of 18.

Mr. Kyros. And how imminent, in terms of time, months, for example, are these settlements ?

Mr. BANK. I would say months. I cannot say exactly the time. When we speak on a government-to-government basis, of course, we as governments do not negotiate the final settlement. I am sure that is apparent. The talks create a climate for negotiations between the carriers involved and the Federal Maritime Commission.

Perhaps Mr. Daschbach, in his testimony later on, can be somewhat more precise on the number of months. But it is a number of months. In fact, when you ask whether this involves documentation, I can say that it does. It involves sufficient documentation to satisfy the Federal Maritime Commission in its attempt to resolve this particular problem

Mr. Kyros. Would this mean that you believe you follow this method of negotiation with all the foreign nations that are included within the 18 foreign countries charged with rebating, and achieve production of documents that would settle or resolve these cases?

Mr. BANK. Mr. Kyros, I cannot guarantee that every case will be resolved. I cannot guarantee that every case is going to be handled in the exact same way. One must look to the particular situation involved, the laws in that particular country, and the history of the negotiations already taken place between the Federal Maritime Commission and the carriers involved.

I can say, however, that my staff and the staff of the Federal Maritime Commission are working very hard in isolating and preparing particular cases vis-a-vis certain governments.

May I also say that governments which are not participants in that diplomatic note are also being considered, and have been the subject of discussions between my office and the Federal Maritime Commission in considering whether to raise these matters on a government-to-government basis.

Mr. Kyros. Let me ask you this. In this government-to-government basis, the discussions concern themselves fundamentally, basically, and ultimately, I assume, about the production of documents to the FMC, so that FMC can proceed on a case, is that right?

Mr. Bank. Well, production of documents, Mr. Kyros, is one aspect of it. We all are looking toward the same thing, the same goal, and that is resolution of an existing problem, or at least resolution of a symptom, as you would like to call it, of a larger problem, which is rebating or other malpractices that are involved.

Whether this is obtained, we are talking about resolutions to the satisfaction of the Federal Maritime Commission, through production of documents, and through production of evidence satisfactory to the Commission.

Mr. Kyros. Yes; but sticking to the immediate cases before the FMC, and not going to the broader question of intergovernmental negotiation in regard to malpractices in the ocean trades, sticking

just to the cases, in terms of production of documents, that is one of the elements you discussed, is that right?

Mr. BANK. Yes.

Mr. Kyros. Did you ever discuss with these same foreign governments the fact that as a result of production of these documents, and the coming forward by the foreign carrier producing these documents, that they may well subject themselves to criminal charges for conspiracy?

Mr. Bank. This has been raised, of course, depending upon which level of discussions we are at. But, yes, I can recall one series of discussions where this was raised by the foreign government.

Mr. KYROS. What is their attitude toward that? Mr. BANK. This is, of course, a question that they raise on behalf of their operators who through them raise certain questions. Of course, we cannot assure them that there would not be prosecution. We are not the Justice Department. Of course, the Justice Department could not, I am sure, make a decision based on an absence of facts. But I am sure, although I cannot speak for it, that the Commission, speaking for itself in negotiations with particular carriers, would assure freedom from prosecution, as far as it itself is concerned.

I daresay they would not speak for the Justice Department, IRS, or any other Government institution.

Now, of course, when a case is settled to the satisfaction of the Federal Maritime Commission, one would assume that the settlement would go a long way in resolving the problem as it would exist from the point of the view of the Justice Department, IRS, or others, perhaps depending again on the facts.

Mr. Kyros. Have you discussed this with the Justice Department, in regard to obtaining records from a foreign carrier, and then the question whether Justice would or would not proceed against that foreign carrier for conspiracy for rebating violations?

Mr. BANK. We have not spoken to Justice directly on particular cases themselves, just in general terms. I believe that the Commission, Chairman Daschbach, can speak more particularly in this area.

Mr. Kyros. Or Justice, because they will be here later this morning, Mr. Bank.

Mr. Bank. The answer is no, Mr. Kyros, we have not discussed any of the specific cases we are dealing with so far.

Mr. Kyros. You have not attempted to give any foreign government, because you could not, anyway, any assurance that the foreign carrier of that government would not be later subject to criminal action arising from a settlement of its rebating violations?

Mr. Bank. No, sir, we have not given that guarantee.

Mr. KYROS. As I understand it, you are optimistic that within the next several months you could get some, if not maybe all of these 18 foreign-flag carriers to come in, is that overstating the case?

Mr. BANK. I think it might be. It is not a question of coming in. It is a question of getting resolution of the problems in each of these


It has been the position of the Department of State, and as I mentioned during our earlier testimony, that it is our feeling that we should at least try, through negotiations. I have been gratified by the results we have had so far since the 20th of October. I am not going to be so naive to believe that we will obtain positive results in every case.

Aš I noted to Mr. Corrado, in responses to questions he had raised then, we would be back to the Congress to report, and not only that, but to participate in legislative drafting if necessary to resolve the problems if cooperation is not obtained.

Our view of this, Mr. Kyros, is that there are questions of sovereignty between two states, between ourselves and the foreign governments; and there has to be a coming together with comity, with cooperation. There is, in fact, room for negotiation, and there is middle ground which would be satisfactory, both under our system and their systems—valid legal sovereign systems of the foreign countries involved.

The CHAIRMAN. Mr. Bonker?
Mr. BONKER. No questions.
The CHAIRMAN. Mr. McCloskey.
Mr. McCLOSKEY. Thank you.

Mr. Chairman, I note the Justice Department witnesses are scheduled to testify after Mr. Bank. Without knowing what attitude the Justice Department will take on the prosecution question which was raised in the chairman's letter to the Justice Department, I would like to defer questioning Mr. Bank until we have the Justice Department testimony.

The CHAIRMAN. Mr. Bank, will you be available today during this hearing?

Mr. BANK. Yes.
The CHAIRMAN. You will be here with the Justice Department?
Mr. Bank. If you like, I would, yes.
Mr. McCLOSKEY. Thank you.
The CHAIRMAN. Counsel?
Mr. Kyros. Thank you, Mr. Chairman.

Mr. Bank, let me turn with you to a few provisions that have been discussed as being pertinent to the bill that is before us, and to be very concrete now.

First, there has been suggested a closing of entry of ports to ships of foreign nations within the United States. One way this could be achieved is by suspending tariffs after a show cause order, if a foreign carrier refused to produce documents under discovery proceedings.

Is that a legal and proper measure that the FMC may be empowered to utilize, in your opinion, as far as the State Department is concerned?

Mr. BANK. Mr. Kyros, in response to a similar question we had sent a letter to the committee with a legal opinion on that saying it was legal. However, we referred to the FMC under section 19, under existing law

Mr. Kyros. Mr. Bank, you said it was legal under section 19 of the 1920 act. But this is not what we are talking about. We are talking about a new statute now which would put into section 22 of the Shipping Act this same kind of power.

Mr. Bank. If it is legislated, then it would be legal. Our point is not the question of legality in this, Mr. Kyros. As we pointed out in

our testimony in October, we saw significant problems with closure of ports, either direct closure or suspension of tariffs. We believe if ports are closed in this country to certain carriers, through Government action in other countries, or through wildcat action by labor unions in those ports, we might in fact find all U.S. carriers barred from service in those ports.

In that situation, Mr. Kyros, we would be faced with a number of possible situations. First of all, there is a possibility that the

trade between that country and the United States would not move. However, I doubt whether that would happen.

Second, if trade does move, and the U.S.-flag carriers and the domestic carriers of that country could not carry it since each trading partner had closed its ports to the other, that would leave the trade in the hands of third-flag carriers. Whether third-flag carriers of a state-controlled type, or

Mr. Kyros. Do I understand from your testimony, sir, that you do not feel it is an effective method to provide in the statute closing of entry of ports, allowing discretion to the Federal Maritime Commission to do that, either by suspending the tariffs, or by other direct methods?

It is your opinion that should not be included in the statute?
Mr. Bank. That is correct.

Mr. KYROS. What happens if in these negotiations with some foreign nation, and some nations have already so indicated through the use of blocking statutes, that they refuse to provide documents?

Assume this case for discussion. Assume they refuse to provide documents, or permit their foreign carriers to submit documents to the FMC, and the FMC cannot proceed in prosecution on this foreign carrier, what happens in that case? What powers does the FMC have, other than closing entry of ports to compel production of documents ?

Mr. BANK. Mr. Kyros, there are two points I would like to make on that. First of all, I think your statement that a number of nations have already refused is a bit premature. No nation has refused in this matter.

A number of lines of certain foreign countries, in their discussions with the Federal Maritime Commission have refused to comply.

The CHAIRMAN. I would consider it, if a nation has not responded yet affirmatively, that that is in effect a refusal.

Mr. BANK. Mr. Chairman, no nation has been requested by the Federal Maritime Commission, as yet. There have been requests, through submission of subpenas or discovery documents by the Federal Maritime Commission to the lines themselves, but not to the nations, or governments, themselves.

This is where we are trying to progress in dealing on a governmentto-government basis with these countries, in trying to resolve these problems, so that these further steps, serious steps, do not have to take place. If they fail to comply, then yes, there would have to be reconsideration of our attitude, and the attitudes of a lot of people. But it has been our position that there is no need at this point to go for draconian measures, since the problem has not been reached.

If it is reached, fine, we would be very willing and very happy to discuss this. Besides closure of ports, there are, of course, other remedies or actions

Mr. KYROS. We will discuss those. Just to get back to the point the chairman raised with you. Just the other day Hapag-Lloyd, Intercontinental Transport Consortium, made up of what countries

Mr. BANK. I believe it is Sweden, France, and Britain.
Mr. Kyros. And Compania Generale Maritime made up-
Mr. Bank. French.

Mr. Kyros. Those three nations, according to a report in the newspaper, have been backed into a corner by the FMC because they have failed to produce documents in a certain case.

Now, we had the Council of European and Japanese Shipowners testify here at length. They are very enlightening and very helpful. But they pointed out that foreign nations had a right to utilize blocking statutes, and foreign carriers had a right to resort to such statutes.

Your testimony is that your negotiations have been worthwhile to date, and look fruitful in the future. As of this moment you have also testified that no foreign carrier has of this date produced documents to assist FMC in the rebating investigation.

Mr. BANK. I can say, as I said before, Mr. Kyros, that the initiation of government-to-government discussions took place starting last fall. In one particular country's case we are very close to agreement in resolving an outstanding problem, and we are initiating discussions with two other countries. We have had discussions with government and shipowner officials already.

The Combi Line case, which you referred to, is one of a different type, but this does not go beyond the realm of our discussion.

We have not had discussions on a government-to-government basis in that type of situation as yet, other than on general terms. I am not saying that the statements by CENSA officials do not reflect the public attitude of either shipowners or their governments. However, as in negotiations of all types, whether they be on shipping matters, or war and peace in the Middle East, all negotiations benefit from quiet discussion rather than stridant breast beating statements that "we shall never

Mr. Kyros. I just asked you a simple question. I asked you simply whether or not any foreign government, foreign-flag carrier, and this is the third time you testified here, and this bill has been pending before the Congress since Mr. Murphy filed it October 12, 1977—has any foreign-flag carrier since that date, has anyone come forward with any records, and the answer is apparently simply no.

Mr. Bank. The answer is no, Mr. Kyros, but I beg to say it is not "simply no.” It is no, but we are moving in that direction.

Mr. Kyros. Not simply no. It is not an issue at this point that you plan to coordinate with foreign governments and to proceed to some kind of governmental framework that will work out the entire problem.

The issue before this committee is to do something about violations on rebating that exist in a backlog of cases that must be cleared up.

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