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Mr. Haslup. I would be glad to, Mr. McCloskey. First, starting with section 2 of our bill, we have increased the penalties under section 16 of the act from $5,000 to $25,000 per violation.

Mr. McCLOSKEY. Now, is that per count?
Mr. HasLUP. Yes.

Mr. McCLOSKEY. In other words, if one article of goods got a rebate in a shipment, that would be $5,000?

Mr. HasLUP. That's subject to the same problem of interpretation that now exists under section 16. It's the same language- I believe it's per violation in section 16. I have merely made the dollar change in this particular instance. As we get down into section 18, in refining that, I have defined the penalty as per shipment, and then defined the shipment, to avoid the problem that now exists in 18.

Mr. McCLOSKEY. Just to give us a practical frame of reference, with respect to the Sea-Land violations and the computation of the $4 million fine, how many accounts were involved in the Sea-Land computation? Do you have any recollection?

Mr. HASLUP. I don't recall, Mr. McCloskey.

Mr. McCLOSKEY. Well, would the $5,000 figure presently in the act have been adequate to cover Sea-Land's $4 million fine?

Mr. HASLUP. I don't understand the question. Sea-Land's penalties, as I recall, were primarily under section 18(b) of the act, but then I am not intimately familiar with the Sea-Land details.

Mr. McCloskey. Let's go on to the next section. You are increasing from $5,000 to not less than $5,000 and no more than $25,000.

Mr. Haslup. Yes. There is a particular reason for that. In the discussions in General Counsel's office within the Commission, we thought that it would be worthwhile to have a floor on the penalty, so that the court, in assessing the penalty under the present statutory scheme, or if, as this draft bill sets forth, the Commission ultimately assesses the penalty, that once having found that a violation occurred, then there couldn't be just a nominal penalty. That has happened to the Commission in past instances. I recall one particular Seatrain instance in which there was a penalty up in New Jersey I think you are very familiar with where the court awarded rather nominal amount of damages or penalties in case of a rebating violation.

Mr. McCLOSKEY. I am glad you mentioned that, because it makes reference to the Justice Department's testimony this morning. It seems to me that the Seatrain criminal prosecution and fine was a signal to the rest of the shipping community that the courts were not going to treat these offenses very seriously.

Mr. Haslup. That's one of our concerns, yes.
Mr. McCLOSKEY. What about your proposed changes to section 3.

Mr. Haslup. Section 3 starts off in subparagraph 6 in this bill by establishing a requirement that each carrier and conference establish a resident agent within the United States, that that agent be a citizen of the United States and have access to and authority to produce the applicable records of that carrier or conference, and also that the agent be the agent of the carrier or conference for service of process in the United States.

Mr. McCLOSKEY. What is the attitude of foreign nations to that? Wouldn't that conflict with their sovereignty claims and the existing blocking statutes that these nations have?

Mr. Haslup. I gather in the past that the State Department has opposed the provision in other bills similar to this, for those reasons. We, or at least I personally have not had any discussions with the State Department on this particular provision, and I am not certain as to what their position is.

Mr. McCLOSKEY. Has OMB given clearance to this particular provision ?

Mr. Haslup. No; they have not.

Mr. McCLOSKEY. Does the Federal Maritime Commission, as an independent agency, commonly seek OMB approval or clearance of your testimony on legislation?

Mr. DASCHBACH. Mr. McCloskey, we submitted our testimony, the testimony which we initially delivered to this committee, in October, to OMB. We did not receive clearance as such; we received neither a negative nor positive response from them.

And the provisions in the draft were in that narrative testimony.

Mr. McCLOSKEY. I see. In the narrative testimony, you discuss these provisions although you did not submit the statute itself?

Mr. DASCHBACH. Yes; sir--we have not submitted this draft, but we submitted to them narrative text which clearly speaks of this resident agent. To further clarify this-or, at least, not necessarily clarify it, but on this point-during the month of October and some period thereafter, the officials of OMB and the Commission had a discussion with respect to submitting testimony for clearance in draft legislation. We now submit our legislation and testimony to OMB. Mr. McCloskey. That's very well put, Mr. Chairman. Mr. DASCHBACH. Thank you.

Mr. McCLOSKEY. You have had no discussion, though, with the State Department about this particular provision?

Mr. DASCHBACH. Mr. Bank and I have had a number of discussions on this subject, a great number of discussions. He has told us that he is against it-and whether he speaks for the department I don't want to denigrate his role because we have had such marvellous cooperation from him, I would like to believe that he can speak for the department.

I am certain that the answer to your question, in one word, is negative. What would be the foreign carrier's reaction to the resident agent requirement, I am certain that it would be negative.

Mr. McCLOSKEY. During the last hearing, when we looked at section 212(g) of the 1936 act, Mr. Blackwell originally testified he thought there was some obligation on the Secretary of Commerce to recommend to Congress from time to time needed changes in maritime legislation which would address problems of just this kind. He subsequently wrote and said there was no such obligation on his part and if such a responsibility reposed anywhere in the Federal Government as a result of the 1936 act and subsequent administrative changes, it was over at FMC.

Have you taken a position on that as yet?



Mr. DASCHBACH. Two things have occurred to me with respect to that dialogue and correspondence that you had with Secretary Blackwell. One is that he has designated an official in the Maritime Administration to coordinate an interagency dialogue. The first meeting of which was held I believe it was last week or the week before last, 2 weeks ago, at the Commission. The other is as I indicated earlier this afternoon, that I have created at the Commission a statutory review committee in order to—as far as I am concerned starting with section 2 of the Shipping Act, and going straight through, to redraft the Shipping Act.

Now, what exactly will happen to that draft I can't say—and since my October discussion with OMB, I am in somewhat the same position as Secretary Blackwell, that is, clearing legislation through the Office of Management and Budget.

Mr. McCLOSKEY. I just wondered whether your setting up of this office and drafting and amending legislation, was merely an act of comity or perhaps you felt it was your obligation under section 212(g) of the 1936 act.

Mr. DASCHBACH. Well, I think it's a matter of survival.
Mr. McCLOSKEY. I do, too.

Mr. DASCHBACH. But, frankly, I really haven't analyzed 212(g) with respect to whether we have the obligation or not. Let me ask Mr. Pankopf to explain.

Mr. PANKOPF. Congressman McCloskey, if I might, I believe that Mr. Blackwell's response to you with regard to the application of section 212(g) and the Commission's responsibility thereunder was in the context of regulatory matters, such as the rebating issue. And in that context, yes, we do.

Mr. McCLOSKEY. In the regulatory context, that's correct.
Mr. PANKOPF. The regulatory context.

But, the application of the reporting requirements under 212 with respect to other than regulatory matters would fall under the jurisdiction of the Maritime Administration by virtue of Reorganization Plan 7.

Mr. McCloskey. Do I understand, then, that this 8-page bill you submitted to the committee is in response to and in agreement with Secretary Blackwell's feeling that under section 212(g), as it relates to regulatory matters, the Commission has an obligation to submit recommended legislation to the Congress?

Mr. PANKOPF. I don't have Mr. Blackwell's letter before me, but I believe what he was indicating was that with respect to those regulatory matters, yes; that would be the Commission's area of responsibility. That's what I believe he was conveying to you in his letter.

Mr. McCloskey. What I am trying to get at-and please say if you cannot give this testimony--is does the Commission accept a responsibility to remedy the regulatory aspects of the maritime law? Do yau accept the responsibility under the law to make recommendations to the Congress from time to time as to necessary statutory change?

Mr. PANKOPF. I believe that Chairman Daschbach has responded to that, Congressman, by virtue of his action establishing a Statu

tory Review Committee, the end product of which would be recommendations, if needed.

Mr. McCLOSKEY. But, that's my question. Did he do that just as a matter of comity and survival, or because he feels an obligation under section 212(g)?

Mr. PANKOPF. I will let him respond to that.
Mr. DASCHBACH. Why don't we say both?
Mr. McCLOSKEY. That's very fine.

Mr. DASCHBACH. With respect to the particular document before you, that specifically is in response to the request of Chairman Murphy that we submit a draft in legislative form of our recommendations emanating from our testimony. But as far as I am personally concerned, notwithstanding the existence of 212(g), and to whom it does or does not apply, as far as I am concerned I feel a responsibility, as the chairman of the Commission, to work toward a revision of the Shipping Act.

Mr. McCLOSKEY. I want to commend you for that statement because essentially that is what has been lacking in our situation thus far. We have not found a comparable feeling of responsibility on the part of the executive branch. While each of the departments may feel this responsibility, in this particular case, with four departments in disagreement, we haven't been able to get any consensus as to what those recommendations should be.

Mr. DASCHBACH. Well, I felt the same responsibility when I worked for the Senate Committee on Commerce. The only problem was, I was the only resource and I was responsible for the many, many bills that came over to our side, the Senate side, from this committee, and didn't have the opportunity. Now I have a few more resources and they have been put to this task. We have set a deadline of February 24th, for completion of the initial place of this project.

Mr. McCloskey. Let me go back to section 3, because I am intrigued by what you have recommended. You suggest that every common carrier by water in foreign commerce and every conference shall, as a condition precedent to its tariffs becoming effective, establish a resident agent in the United States who has access and authority to produce all of the records of that carrier or conference. Doesn't that also take care of our third flag problem?

The Russians aren't about to establish a resident agent here with the requirement that the agent process the authority to furnish all of the Russian records relating to the costs of their shipping lots, are they?

Mr. DASCHBACII. Well, I am not really sure that it takes care of all of them. It may be an opportunity to make some progress.

Mr. Haslup. If I can clarify that, Mr. McCloskey, the provision that we have drafted here does not require the maintenance of all records within the United States, or even duplicates of those records.

Mr. McCLOSKEY. But if the Russians were to have any part of the U.S. foreign liner trade, they would have to have an agent in this country and that agent would have to have the authority and the ability to produce all records of the Russian costs of operation, would they not?

Mr. HASLUP. That is correct.

Mr. McCloskey. So this plan would operate on a non-discriminatory basis as it would apply to all foreign countries. It would be opposed, as we have heard in previous testimony, by our European allies and the Japanese.

Mr. HASLUP. Yes.
Mr. McCLOSKEY. Could you go to section 7.

Mr. Haslur. Yes. That changes the penalty provisions now existing in 18(b) for all violations except those applying to rebating; and it would include the penalties for violating our resident agent provision; and it increases the penalties from $1,000 per day to—a range of $1,000 to $5,000 per day. And we have left it in this instance per day because of the nature of the penalties; they are failure to file tariffs, the resident agent failure to file the certificate—those kinds of violations.

In this instance in other words, we don't have as much of a problem with the per day as we did in the case of rebating violations.

Mr. McCloskey. May I ask if in the enforcement of these penalty provisions your action would be immediate, or would it require your 2-year hearing process?

Mr. Haslup. It would require a hearing process in almost all of these instances. However, there are expedited ways to do it; I can't promise that the Commission will act in less than 2 years, but we do have show-cause proceedings, for example. And if the carrier is obviously operating without a tariff, if the factual matter is not complex, the Commission has that alternative.

Mr. McCloskey. So if a foreign carrier did not appoint an agent or if you did not have an adequate certification of that agent's ability to comply, you could suspend the tariff immediately? You wouldn't have to wait through the hearing process?

Mr. Haslup. That's the way I read this provision, that we could do something immediate in that instance.

Mr. McCLOSKEY. Could you go to section 22 of the Shipping Act, your section 4!

Mr. Haslup. This is a revision of the so-called expedited proceeding that existed in the original bill. And what we have done first of all is to modify it to retain the right of the complainant to seek reparations under the first paragraph of section 22; turning specifically to subparagraph (b) under section 4, we have modified the second paragraph now existing in section 22, to delete the phrase "except as to orders for the payment of money," to make that consistent with our later suggestion in here that the Commission be given the authority to assess all civil penalties under the act.

We are concerned that that language now existing in section 22 would conflict with the authority that would otherwise be given, if this were enacted.

Then in paragraph (c), we have adopted, or we have tracked, I guess, the original bill's provision for setting up special powers or special proceeding relating to the investigation of rebating, and provided the power to suspend tariffs for failure to comply with subpoenas or with an order relating to discovery. And we have inserted what we think are appropriate due process safeguards in the procedure.

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