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We have not come down the line to that, but I am sure we will eventually.

I think the negotiations we have had with a foreign government were an effort to avoid that hardnosed confrontation.

So, with respect as to whether we have reached that level of processing, I think we have, but we have avoided, so to speak, confrontations by trying to work our way around them. The government officials we met with and our Government, if I can speak for our Government, and the State Department, have committed themselves to avoid the situation where the blocking statute is imposed.

Mr. KYROS. Are you really?

Yesterday in the Journal of Commerce I read where your Commission, is getting involved in an analogous problem with Hapag-Lloyd, Intercontinental Transport, and Compagnie Generale Maritime in a case involving production of documents.

Is that not really analogous ?
You are going to have to face this problem over and over again.

Mr. DASCHBACH. There is a distinction which I think is significant. The issue is the same. However, in the Combi Line situation, Combi Line has come to the Commission seeking section 15 agreement approval.

In order for the Commission staff to make an analysis of whether that ought to be recommended for approval certain information and data which we are requesting from the Combi Line must be available.

In a sense we have hit the ball over to their side of the net. It is just laying there. They are requesting authority to proceed under agreement from us.

If they do not want to deliver the information, it seems to me they can default and lose the point.

Mr. KYROS. I do not think the case is distinguishable on those grounds. I think what is even more compelling to note is this, as you pointed out in a case where they are seeking something from the Federal Maritime Commission, some authority, they are still interposing their blocking statutes, a fortiori, in a case where they are defending themselves from you, they would certainly impose

Mr. DASCHBACH. I would say yes.

There is another element. From our point of view, or the Commission's point of view, I do not see any reason why we should exercise our power of persuasion over them to cooperate so that we can approve something they want.

In the case of settling an alleged rebating situation or violations of statute, we would like to bring it to an end, so we are therefore willing to bring the powers of the State Department and persuasive efforts of ourselves, to reaching an agreement.

Mr. Kyros. Has anyone of those foreign flags given you positive information that they will provide you with records necessary for your investigation?

Mr. DASCHBACH. Carriers ? Directly, no.

Mr. Kyros. So no foreign-flag carrier today has agreed to provide you their records?

Mr. DasCHBACH. That is correct.

The CHAIRMAN. Mr. McCloskey.
Mr. McCLOSKEY. Thank you, Mr. Chairman.

Mr. Daschbach. Do you approve or disapprove of this legislation now before the committee?

Mr. DASCHBACH. We have made a number of recommendations with respect to modifications. We do endorse the legislation with our modifications.

Mr. McCLOSKEY. Would your modifications grant amnesty for civil penalties?

Mr. DASCHBACH. Our modifications do not include amnesty.

Mr. McCloskey. In other words, you disapprove of any legislation that contains amnesty?

Mr. DASCHBACH. I want to think about that.
Mr. McCLOSKEY. Maybe I could clear this up with the chairman.
Mr. Chairman, you indicated we would go to markup on Tuesday.

Is it your intention to include the present amnesty provision in the legislation?

The CHAIRMAN. Amendments to the amnesty section will be offered on Tuesday, January 31, 1978. I will be pleased to grant 1 additional day of hearings to the minority on Friday the 27th. The rule provides the minority with the right to invite the witnesses they wish to testify. If the gentleman will have the gentleman from Michigan contact me I will accommodate the minority's desire for their day of hearings.

Mr. McCLOSKEY. I will be glad to do that.

Is it your position that the ranking member of the full committee must make this request, or may the ranking member of the subcommittee do it?

The CHAIRMAN. It is the ranking member of the full committee under the rules, or a majority of the minority.

Mr. McCLOSKEY. With all due respect, I had a different interpretation of the rule.

I thought the ranking minority member of the subcommittee had the right to make the request.

The CHAIRMAN. I do not think the gentleman from Michigan can quarrel with my granting to the minority an additional day of hearings.

Mr. McCloskey. I do not, either. But what about the interpretation of the rule?

Section 3 says: Whenever any hearing is conducted by committee or subcommittee on any measure

The CHAIRMAN. Keep reading.

Mr. McCLOSKEY. Then it says: Minority members of the committee shall be entitled

The CHAIRMAN. It says all members shall be entitled to recommend in writing to the chairman the names of witnesses to appear.

Now, I have directed the majority counsel to ask the minority each week of the hearing process who they want to testify on this important legislation.

We have not received a single request for a witness from the minority in November, December, or this month.

Now, you want to read further, and it says: Minority members of the committee shall be entitled, prior to completion of hearings and upon request to the chairman, by ranking minority member, or majority of the minority, to call witnesses selected by minority to testify with respect to the measure or matter pending at least 1 day during the hearing.

Of course, the House rule is not as specific as our rule. But, I have set that day aside in any event to accommodate the gentleman from California.

Mr. McCloskey. Thank you, Mr. Chairman.

Chairman Daschbach, have you thought out your answer on that question of amnesty?


The major problem I have with respect to giving you a specific answer, and I appreciate your desire to get a "yes" or "no," is that to date we are not fixed upon the terms of amnesty. As we heard from the Department of Justice witnesses, they have still got that block hanging, so that is one problem.

Are we talking about something that will be effective or not?

The other is, that for me as a Chairman of the Commission to endorse the concept of amnesty is inconsistent with our current efforts to bring people to settlement.

If I am to sit here today and say, “yes, properly worded we are for amnesty," where does that leave us with respect to carriers and governments with whom we are currently negotiating?

I am sure their attitude would be, well, he wants us to pay, but then he speaks to the Congress that no one should pay, if they voluntarily disclose —

Mr. McCLOSKEY. Is it possible you could obtain the cooperation you need from the carriers under investigation, if they could be assured they were free from potential criminal liability under either an ordinary conspiracy to violate the civil rebating statute or an aggravated conspiracy to violate the civil rebating statute, where the conspiracy included defrauding the Federal Maritime Commission?

Would that guarantee of amnesty, freedom from criminal prosecution, be adequate to continue on with the settlement of pending cases under investigation?

Mr. Daschbach. Under your hypothetical, you are saying the Shipping Act, there would not be immunity from Shipping Act violations themselves?

Mr. McCloskey. That is correct. That would not change the civil penalty with which Sea-Land was faced.

Mr. DASCHBACH. I would think so.

When we met with foreign government representatives, this issue was raised. That is, what about criminal liability? As Mr. Bank said, he was not in a position, nor was I in any position to say, “do not worry, we will take care of that,” because we cannot. I would be in a better bargaining position if there were immunity from criminal sanctions associated with rebating, the civil violation.

Mr. McCLOSKEY. I wonder rather than implementing this legislation now before us should we instead go back and do what one of your predecessors, Mrs. Helen Bentley, suggested in her testimony to Congress in 1972.

If I can quote from her letter to the Speaker, she said : It also changes the general penalty provision of section 32 of the act by making all violations of sections under the jurisdiction of the Federal Maritime Commission, for which no penalty is specifically provided, subject to a civil penalty instead of a criminal penalty.

If this loophole in the law is left so that section 371 of the criminal code is available to prosecute a conspiracy, and we merely removed that portion of potential criminal liability, in your judgment would there be any need for further legislation by this committee?

Mr. DASCHBACH. In the area of amnesty-amnesty or rebating?

Mr. McCloskey. The purpose of this bill is to provide a solution to rebating practices in U.S.-foreign trade.

Mr. DASCHBACH. Well, I think it would be still very appropriate to make other modifications to the statute.

As an example, it may well be that right now it is profitable to rebate, based on level of the fine and level of the revenue generated. A carrier might make money even though it paid the fine.

Mr. McCloskey. What are your thoughts on the results of the Sea-Land base. In the long run, did they make money by paying that $4.5 million fine, and undergoing legal travail involved?

Mr. DASCHBACH. I have no idea.

Mr. McCLOSKEY. You think that civil penalties, though, ought to be stiffened to be a real deterrent to continued rebating?

Mr. DASCHBACH. That is right.
Mr. McCLOSKEY. What other changes.

Mr. DASCHBACH. We have recommended that the Commission have the authority to assess penalties. Such a provision may have been in the original bill in 1972, I cannot recall.

Authority to assess penalties ourselves and the authority, notwithstanding the State Department's objection, to lift a carrier's tariff for its unwillingness to cooperate with the Commission, and increasing the penalty for operating without a tariff--are among the recommendations which are in the draft which we submitted to the committee. I think with respect to your question of amnesty, immunity from criminal prosecution under 371 in toto, I would assume, I can only make an assumption as to what a carrier's or shipper's feeling would be, would make the situation dramatically different.

With respect to the U.S.-flag carriers, they are still going to be subject to SEC and IRS and currency violations, which may be serious in themselves

Mr. McCLOSKEY. You feel that may still inhibit their cooperation with FMC, even thongh the conspiracy liability is removed?

Mr. DASCHBACH. I think that is a possibility.

Mr. McCLOSKEY. I think their failure to cooperate with you then gives you the power to suspend their tariffs, does it not?


We never contemplated the notion of suspending tariffs of U.S.flag carriers, because we could compel their cooperation.

Mr. McCloskey. You have the ability to compel American carriers to cooperate with your investigation, do you not?

Mr. DASCHBACH. Yes, sir.
Mr. McCLOSKEY. What is your remedy if they refuse to cooperate?
The CHAIRMAN. The committee is going to recess for about 1 hour.

We ask the witnesses to come back at 2:15 and we will proceed with the testimony from the Chairman of the FMC and then go to Mr. Avery, and his panel, from the National Industrial Traffic League.

We regret that the hearing is a long one, but we need a complete record even though we are operating under a time constraint that was placed on us by the maritime authorization bill.

We will reconvene at 2:15.

[Whereupon, the hearing recessed for lunch at 12:50 p.m., to reconvene at 2:15 p.m.]

[The subcommittee reconvened at 2:48 p.m., Hon. John M. Murphy, chairman, presiding.)

The CHAIRMAN. The subcommittee will come to order and I believe we had a pending question from the gentleman from California, and if the chairman would like that question read back.

Mr. DASCHBACH. Please.

The REPORTER. I regret to say, Mr. Chairman, that the reporter for this morning took the notes of this morning's meeting with him.

The CHAIRMAN. Well, if the gentleman from California would repeat his question.

Mr. McCLOSKEY. Could the gentleman who was going to answer the question remind me what it was about. I have the feeling it was something so crucial it required an answer, but I have forgotten it.

Well, if I may go forward. I have now looked at an eight-page document entitled "A Bill to Amend the Shipping Act 1916, to Provide a Solution to the Rebating Practices in the U.S. Foreign Trade." I gather this draft was submitted by the Commission to the committee following our last hearing and contains suggestions that might be acceptable, or at least are worthy of debate.

Is that correct?
Mr. DASCHBACH. That's correct.

Mr. McCLOSKEY. Mr. Chairman, I don't know what amendments you plan to offer next Tuesday when we go to mark-up, but I think it would be worthwhile to make a record of the Commission's draft document. I would like to go down the provisions one by one and find out why they feel this language is preferable to the committee bill.

The CHAIRMAN. The gentleman may proceed. Unless you would rather do it on Friday when he has his witness here.

Mr. McCloskey. I had not anticipated calling the FMC witnesses back.

Which witness at the table is best suited to respond on the specific provisions of this draft bill.

Mr. DASCHBACH. Charles Haslup, who is our legislative counsel, would probably be the best person.

Mr. McCLOSKEY. I wonder if you would go down section by section and tell us why you have recommended this language, how it differs from the committee bill and what your language would achieve.

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