It is a very complex issue. However, the survival of a privately owned, competitive, and strong cargo fleet flying the U.S. flag is kind of what's at stake here.

Therefore, this committee will make some hard decisions on this legislation in the next few weeks.

Mr. Bank and Ms. Bello, we also appreciate your expert testimony. I hope you understand that this committee is weighing the issues of foreign policy and free trade, with the preservation of the American shipping industry.

It is, as you know from our previous hearings, a very critical situation.

Thank you very much.

Mr. KEENEY. Thank you.

Mr. BANK. Thank you.

The CHAIRMAN. Our next witness is the Chairman of the Federal Maritime Commission, Hon. Richard J. Daschbach.

If you would kindly identify the gentlemen with you, Mr. Daschbach, we will proceed.

STATEMENT OF HON. RICHARD J. DASCHBACH, CHAIRMAN, FEDERAL MARITIME COMMISSION; ACCOMPANIED BY JOSEPH INGOLIA, ESQ., GENERAL COUNSEL, AND ARTHUR PANKOFF, ESQ., MANAGING DIRECTOR

Mr. DASCHBACH. To my left is Arthur Pankoff, Managing Director of the Commission, and on my right is Joe Ingolia, our General Counsel, and Charles Haslup, our Legislative Counsel.

I appreciate the opportunity to appear before the subcommittee this afternoon to discuss H.R. 9518.

I do not have a prepared statement, but I did want to inform you of what we have been doing in the area of investigating rebating since I was last here on November 1, 1977.

At that time the Office of General Counsel had 23 rebate cases referred to it. Seven of these cases were assigned. Two of the seven were sent to the Department of Justice, and in five, notice of claim letters were sent. Negotiations either are pending or the cases have been closed in four instances.

As of January 20, 1978, 15 additional rebate cases have now been assigned. In 26 of them, notice of claim letters have been transmitted. Negotiations are pending in 10 cases, and 4 have been closed. At the investigative level, as of January 20 of this year, 201 cases were under investigation. Since the Commission reestablished its Bureau of Enforcement in May of 1976, 42 additional cases were closed for reasons varying from the expiration of the statute of limitations to the dissolution of the entity under investigation. As indicated above 38 more were forwarded to the General Counsel's Office for settlement or prosecution.

In all cases in which the rebating investigation has been completed, the Commission is actively pursuing settlement-none are backlogged or inactive. In areas where the investigation is in progress, we are continuing our efforts to complete those cases as promptly as possible

so that they can immediately be referred to counsel for settlement or, if necessary, referral to the Department of Justice for prosecution.

In addition to these internal efforts in the rebating area, and in accordance with the concerns expressed by your subcommittee, the Commission has taken other action regarding rebating by foreign carriers. Representatives of the Commission and the State Department have met with foreign government representatives and we are presently negotiating with them.

With respect to H.R. 9518, we made certain legislative suggestions before the subcommittee on November 1, 1977. In response to the request of the staff, we have prepared a draft of those recommendations and have given it to them.

Finally, in keeping with my commitment to work with you toward the improvement of our maritime regulatory statutes, I have established a Statutory Review Committee within the Commission, which will thoroughly review our present authorities and recommend needed changes. I will personally chair the Committee, and have given it the highest priority. I recognize the magnitude of such an undertaking, but I am optimistic and I believe this undertaking will produce a meaningful work product.

Thank you.

The CHAIRMAN. Thank you, Mr. Daschbach.

Mr. Kyros.

Mr. KYROS. Mr. Daschbach, to recount what you just stated, when you appeared the last time, there were 215 cases under investigation, consignor and consignee, is that right?

Mr. DASCHBACH. Yes.

Mr. KYROS. Twenty-seven U.S.- and foreign-flag carriers?

Mr. DASCHBACH. Yes; that is right.

Mr. KYROS. And now did you say in your opening statement that some of these have now been closed because the statute of limitations has run?

Mr. DASCHBACH. No; none of the 27 carrier cases.

Mr. KYROS. Some of the shippers' cases, consignors, consignees? Mr. DASCHBACH. Yes.

The 4 closures, which I specifically referred to, however, are cases which have been settled, but in addition to those 4, 42 have been closed-42 additional have been closed for reasons other than ultimate solution or settlement, and in that case it is either statute of limitations ran or corporation was liquitated or went bankrupt.

Mr. KYROS. So in several cases the statute of limitations ran?
Mr. DASCHBACH. That is right.

Mr. KYROS. Five-year statute of limitations?

Mr. DASCHBACH. Yes, sir.

Mr. KYROS. What was the reason for that? That is, the statute ran because you could not get sufficient facts on which to prosecute the case?

Mr. DASCHBACH. None of those instances occurred since I came to the Commission.

It is my understanding, that in at least one instance a case either was transmitted to the Department of Justice, and it died there, so

to speak or was closed at the investigative level because of statutory limitations.

Mr. KYROS. What was the name of the case?

Mr. DASCHBACH. We do not have that specific reference, but we can submit that for the record.

Mr. KYROS. Do you know what the magnitude of violation or the nature of violation was, Mr. Chairman?

Mr. DASCHBACH. No.

Mr. KYROS. How many other cases expired because of the statute of limitations, do you know, out of those 42?

Mr. DASCHBACH. I do not believe it was more than two or three. Mr. KYROS. There has been testimony here this morning that I am sure you listened to concerning both the efforts by the State Department and the Justice Department in regard to efforts to clear up rebating.

First, let me ask you this, Mr. Chairman:

Since you testified last, you say there have been some specific negotiations with foreign governments. Is there something that you could say in public about that?

Mr. DASCHBACH. Well, I can say it is promising, that I am optimistic that we will reach a settlement.

Mr. KYROS. With all 18 foreign-flag carriers?

Mr. DASCHBACH. No.

Let me put it this way: The Department of State has entered negotiations with more than one government. In only one instance of those negotiations have they reached a level at which the Commission has participated.

We have met with representatives of one government involving more than one carrier of that nation.

I cannot speculate as to whether or not, assuming that we reach a positive result in that instance, it will bring about the same result with respect to the remaining carriers.

I would like to believe, however, that if we are successful in reaching a final settlement with one government and its carriers, it may have a salutary effect with respect to others, or a domino effect, if I may use an older reference.

Mr. KYROS. Mr. Chairman, if this goes on for 12 months, 24, 36, have you made a study in your Commission when the statute of limitations would cause a lot of these cases to expire before anything else was done?

For example, violations might well have occurred 5 years before.

Mr. DASCHBACH. That is true in some instances; specific violations of the statute will run as time goes by. There is no way we can address all of these at the same time in this manner.

We are current with respect to the cases that we have before us and in those areas in which we are trying to avoid a government-togovernment confrontation, so to speak, they take time, and admittedly with respect to some specific acts the statute will run.

Mr. KYROS. Since the Sea-Land settlement in 1977, not a single U.S.-flag carrier has signed up with you?

Mr. DASCHBACH. That is correct.

No carrier of any flag has reached a final settlement with the Commission other than Sea-Land.

Mr. KYROS. It is now 13 months later despite your Factfinding Investigation No. 9, and the efforts of the Federal Maritime Commission.

Mr. DASCHBACH. Yes; that is correct.

Mr. KYROS. You have said in testimony that you would need additional strengthening of the Shipping Act to assist you in clearing up rebating.

Mr. DASCHBACH. Yes.

If I might go back to a point you made with respect to absence of any settlements by other carriers, I think it is fair to say that the pendency of amnesty legislation might well be holding carriers back. They want to wait and see whether they will receive amnesty or whether they will be before the bar and not be

Mr. KYROS. Pendency of this very bill is holding back settlements before the Federal Maritime Commission, both for foreign and U.S. flags?

Mr. DASCHBACH. I know of one specific instance in which a carrier has informed our Bureau of Enforcement or General Counsel, I do not recall which, that it does not want to pursue the settlement negotiations, but prefer to wait and see whether it will be granted amnesty.

Mr. KYROS. For some carriers?
Mr. DASCHBACH. Shippers.

Mr. KYROS. Is it a U.S. shipper?

Mr. DASCHBACH. Carrier.

Mr. KYROS. Mr. Daschbach, there is apparently a desire perhaps to use a kind of limited use immunity, is that right, which you infer from that kind of circumstance?

Mr. DASCHBACH. If I were a carrier or shipper or party of any sort, and I thought that I had a choice of paying a penalty or receiving immunity, I would wait and see if I could receive immunity. I would certainly prefer immunity to paying a fine.

Mr. KYROS. But you are not a carrier or shipper.

I am talking about them. They probably feel that immunity would be helpful to them.

You heard discussion by Mr. Keeney this morning, that discussion of limited use immunity that we had averted to when Mr. Taylor testified was that it included all conspiracies under 18 U.S.C. 371, had not adverted to the second part of 18 U.S.C. 371, namely, conspiracy to defraud the United States.

Now, if you exclude the portion to defraud the United States from any limited use immunity, would that make the immunity at all palatable to anyone?

Mr. DASCHBACH. I am sure it would make it effective. I think with the Sword of Damocles of a prosecution for defrauding the United States hanging over a party's head, it can be very uncertain as to whether it should come into the Commission.

Mr. KYROS. It would make immunity much less attractive?

Mr. DASCHBACH. I would frankly say it is the difference between effective and ineffective.

Mr. KYROS. It would make it ineffective if Justice retained that prosecutorial discretion, that is, the portion to defraud United States? Mr. DASCHBACH. That would be my opinion.

Mr. KYROS. In the Sea-Land case, if I recall the settlement, SeaLand was to address notice to its shippers

Mr. DASCHBACH. Please repeat the question.

Mr. KYROS. In the Sea-Land case, part of the settlement provision, Sea-Land was to send notice to various shippers, 37,000, 40,000 shippers it dealt with, is that right?

Mr. DASCHBACH. I have a copy of the Sea-Land settlement.

Mr. KYROS. I didn't mean to draw your attention to it in particular, but, in general, one of the settlement provisions was that they were to give notice to their shippers as required by this provision and that involved 30,000 or 40,000 shippers.

My point, Mr. Daschbach, is when you are talking today about 27 carriers that you have under investigation and 215 shippers, you are only touching a very tiny portion of the U.S. foreign trade, is that correct?

Mr. DASCHBACH. Yes; that is right.

Mr. KYROS. Six-hundred odd carriers and there are roughly hundreds of thousands of shippers.

Mr. DASCHBACH. Yes.

Mr. KYROS. We have just a small portion of the problem in front of us, when we talk about magnitude of what you are dealing with right now.

Mr. DASCHBACH. That is correct.

Mr. KYROS. And having a tough time dealing with it, too, is that not right? You have not got a settlement of a single carrier since Sea-Land, 13, 14 months ago?

That is no fault of your own.
Mr. DASCHBACH. Thank you.

I think on several other fronts we are proceeding. A subpena was issued to Zim Lines. A motion to quash the subpena was filed by Zim. That matter is in litigation.

A shipper, I believe the name is Kanematsu, challenged our authority under factfinding No. 9. A decision was made in that case in U.S. district court in San Francisco earlier this month sustaining the position of the Commission.

I am sure that that case will be appealed to the court of appeals. The point is, we are making some progress in addition to the reference that Dick Bank made with respect to foreign governments. We are not simply sitting waiting for voluntary disclosure. We are pursuing the leads which we have received both from Sea-Land settlement and from a number of other sources. However, we have not reached many settlements or come to a conclusion in many of those

cases.

I remain optimistic that we can make some progress in this area. Mr. KYROS. It has been difficult to make settlement as you point out, because of the position of the legal arguments, we have not come yet to solving the problem of blocking statutes.

Mr. DASCHBACH. Specifically you are correct.