Mr. MCCLOSKEY. But this legislation refers to shippers, too. What about shippers? Why should we give amnesty to shippers?

Mr. AVERY. We think that's a matter you people should decide. Mr. MCCLOSKEY. Do you support granting amnesty to shippers in this legislation or not?

Mr. AVERY. We are not taking a position on that.

Mr. MCCLOSKEY. I thought you supported the legislation as writ

ten.

Mr. DONELAN. Mr. McCloskey, the testimony, I believe, was that we support the objectives of the legislation. We are here by invitation

Mr. MCCLOSKEY. One of those objectives is to give amnesty to shippers. Do you support that objective?

Mr. DONELAN. Well, as the witness said, when all the evidence is in

Mr. MCCLOSKEY. Counsel, you know what a yes or no answer is. Do you support the objective to give amnesty to shippers?

The CHAIRMAN. If the gentleman will suspend. Now, we are not going to have witnesses come here and have them answer yes and no to questions that require elaboration on their part. We are dealing, as we all know, in a very difficult area. We have had extensive hearings so far. The solutions to the American flag problem are not simply yes and no; those problems are in a vast gray area, a vast area in some instances practices are centuries old in other countries. And these witnesses are testifying, I am sure, to the best of their ability, and we will accept their responses in good faith that they are trying to contribute to this hearing, which is an evidentiary hearing-there is nobody on trial, we are not attacking anybody or defending anybody. We are trying to lay a foundation so that this committee can properly legislate.

And I hope that the committee and its members will act accordingly in their questioning and in their deliberation on the bill. The gentleman may proceed.

Mr. MCCLOSKEY. Let me clarify the question to the witness. One of the objectives of this legislation is to grant immunity to shippers against any criminal prosecution arising out of their unlawful acceptance of rebates.

Do you support that objective of this legislation?

Mr. AVERY. Again, we have no position on that portion of the legislation.

Mr. MCCLOSKEY. You have no knowledge about any rebating practices engaged in by shippers?

Mr. AVERY. That is correct, sir.

Mr. MCCLOSKEY. May I ask the chairman if the committee would direct an inquiry to the Federal Maritime Commission to list for us all shippers in the United States who are now under investigation by the Commission so that it might furnished to this witness. Then he might have a better basis on which to either support or oppose the objectives of the legislation.

The CHAIRMAN. The Chair will take the suggestion up with the chairman of the FMC. We understand that there is a confidentiality in these cases. Of course, to prematurely make public some of the

areas we are dealing with could be prejudicial to a person's basic prerogatives under our law.

But I will take the matter up, and if we can acquire that information for the committee's use, we will do so.

Mr. MCCLOSKEY. I'd like to go to a different part of your testimony. You desire a minimum of regulation with respect to access to the U.S. trade. Another bill presently before this committee tries to deal with the threat of Russian entry into the trades. Does the National Industrial Traffic League have any position at all on the use of Soviet ships when they quote lower rates than U.S. ships or ships in U.S. foreign conferences?

Mr. AVERY. Yes; Mr. McCloskey, the league has previously opposed prior legislative efforts and controlled carrier regulation as being too broad and therefore unduly restrictive. We have the new bill under study; we have not reached the decision in the league, although we understand that it would encompass the vessels of some 40 countries.

Mr. MCCLOSKEY. Let me pose a problem to you that bothers me. You state it is in the best interest of the country to have adequate U.S. ships so that U.S. importers and exporters are dealt with fairly and aren't subject to unfair rates by foreign countries. We are certainly trying to expand foreign trade in every way we can. One means of expansion is to make your freight costs low as possible so your goods can compete overseas and thereby increase your foreign export market.

Despite construction and operating subsidies we are paying U.S. liner companies, many of them are in financial difficulties, which they say in their testimony to us in a result of overtonnaging in their conferences, the only open conferences in the world, and because of the Soviet threat.

The code of liner conduct presupposes a 40-40-20 division by governmental negotiation. We now see a number of governments, particularly Latin American countries, insisting on a 50-percent carriage of goods to and from their countries. Three European countries now indicate they are prepared to support that code of conduct which mandates a 40-40-20 division.

Inexorably, we are being pushed toward what you oppose, an increase in governmental intervention in ocean shipping, which has traditionally been free.

Mr. AVERY. We share that concern, yes, sir.

Mr. MCCLOSKEY. The question no longer is whether or not we have government intervention; it's what kind of intervention is necessary to protect a U.S. maritime industry that can successfully compete and make profits. If free competition gets you the advantage of lower rates the Soviets might offer, and U.S. ships pass out of existence, what do we do when U.S. exporters suddenly wake up one day and there are no U.S. shipping lines to compete against foreign ships?

This is a real problem and I don't find it addressed in your testi

mony.

Mr. AVERY. Well, let me address it, if I might. The League does have a policy favoring the Federal Government's policy of supporting ocean shipping under the U.S. flag sufficient to serve such trade

routes as are determined essential to our foreign commerce, and to provide an effective auxiliary to national defense.

We believe that the American shipping public understands the unique role of the U.S. carrier and supports the U.S. carriers to the extent the services required can be provided at affordable prices. The passage of this legislation would aid the U.S.-flag carriers through enhancing equality of treatment under the law.

In a very recent MARAD publication, it identified that in the period 1971 to 1976, U.S.-flag share of total American liner trade has increased from 21 percent in 1971 to a shade under 31 percent in 1976. Many of us participate on the Shippers' Advisory Council to the National Maritime in support of the American flag.

The question is that the services required have to provide the pricing that the commercial transaction requires, and there is no simple panacea for all such commercial transactions. And if you continue to go down the route-if we all encompass going down the route of further closing competitive opportunities that the American industry has grown up under, we may very well be harmed, because we know of no scenario under which a single conference or group of carriers can provide all services at all rate levels the shippers in that trade route require.

We do have a law that the rate in effect is the rate you pay at time of shipment-and there is only one rate in effect.

Mr. MCCLOSKEY. Let me ask you as an American businessman about one of the objectives of this legislation which you testified you support. It would relieve those in the shipping business of criminal liability for any IRS and any security violations. Do you support that? Do you think American businessmen in the shipping industry should be relieved of criminal liability?

Mr. AVERY. Well, Mr. McCloskey, we don't believe that it is our jurisdiction to even comment about it. We believe if the Department of Justice and the Federal Maritime Commission and this Congress believe it should or should not be, that's your judgment.

Mr. MCCLOSKEY. You are, however, testifying today in support of this legislation and I want to know the basis for that support. You are telling me you don't take a position on one of the primary parts of this legislation.

Mr. AVERY. That is correct.

Mr. MCCLOSKEY. You support the goal of the legislation.

Mr. AVERY. That is correct.

Mr. MCCLOSKEY. Do you support relieving anybody in the shipping business of criminal liability for any past crimes they may have committed?

Mr. AVERY. I keep passing the ball back to the judicial bodies to determine whether that is wise or prudent to do.

Mr. MCCLOSKEY. You testified the FMC investigations into rebating are becoming effective. On what basis do you make that statement?

Mr. AVERY. Just in the public announcements that state that they are making progress. That's all we have to go on, so far.

Mr. MCCLOSKEY. You heard their testimony today. Would you call that progress?

Mr. AVERY. No; I would not.

25-684 0 - 78 - 40

Mr. MCCLOSKEY. They have 27 companies under investigation and 215 shippers under investigation yet, they have come up with only one agreement and that was with a company that went to them voluntarily and made a full disclosure. Is that progress, in your judgment?

Mr. AVERY. NO; I didn't hear it that way.

Mr. MCCLOSKEY. Well, did what you hear satisfy you that the FMC investigations into rebating are becoming effective?

Mr. AVERY. Public announcements that they were making significant progress and had so many and would shortly have more; that was it. I believe we made that statement last fall.

Mr. MCCLOSKEY. Would you make it again today after hearing the testimony you heard this morning?

Mr. AVERY. No; I don't believe we would. We believe, Mr. McCloskey, that it is extremely important to settle this question, and that this legislation direction to provide the Federal Mariime Commission with the additional authority they need to get the facts should be accomplished, so that we can address that facet of the entire business correctly.

We are greatly concerned at all of the testimony that has come forward that has identified a panacea of ills of substance, because we can't operate if we don't have an effective international transportation service system. We don't believe there is enough data available yet today to significantly address each of these.

We believe this legislation would help remarkably to address the question of rebating-where does it exist, to what extent does it exist, how does it occur, is it for commercial or just outright fraud reasons? We have no idea at this point of the extent of the American trade that is involved. And we would like to know.

It has been suggested that if certain carriers come forward-certain carriers have come forward and suggested that under their operations, be it closed conferences from Europe or bilateral trade agreement in Latin America, that they are not faced with this problem. Is that true? We don't know that. We believe that through the Commission's investigations under the authority granted in this bill this data could be defined, facts could be developed.

Mr. MCCLOSKEY. The bill might accomplish that, but at a time when the Congress has just turned down amnesty for people who disagreed with the Vietnam policy, to suggest to the Congress of the United States that we grant amnesty to businessmen in a particular industry

Mr. AVERY. I have the same problem with that, Mr. McCloskey.

Mr. MCCLOSKEY. I have no quarrel at all with you on the goals. We have got four governmental agencies whose integrity is affected here. The State Department is having a difficult time negotiating; the FMC is having a difficult time investigating: and the Maritime Administration is having a difficult time despite its subsidy program of promoting a prosperous U.S. merchant marine. Of the 13 major liner companies, 3 have pled guilty to illegal rebating and 6 more are under investigation right now. That testimony is clear. The Attorney General is having difficulty enforcing the law equally against U.S. and foreign shipping lines.

I don't quarrel with your recommendations. I just wonder at the sort of bland assumption this bill is the way to achieve the end we all desire.

Mr. AVERY. I think the end that we feel very strongly is necessary is the development of the necessary commercial facts at issue so that all of us can deal with suggested solutions.

Mr. MCCLOSKEY. I might say, however, that you have come here to testify in support of legislation, and upon cross-examination have admitted that you don't agree with one objective of the legislationMr. AVERY. Mr. McCloskey,

Mr. MCCLOSKEY. Second, you have no knowledge on one of the other major aspects.

Mr. AVERY. [Continuing] We wrote in support of the objectives of the legislation, and your committee asked us to appear to give further testimony, which we have freely done, and are here to continue to do.

Mr. MCCLOSKEY. Let me ask you this. Isn't it also a fact that your organization has been working for a number of years on the concept of shippers' councils?

Mr. AVERY. The Industrial Traffic League has not, sir.

Mr. MCCLOSKEY. Mr. Angolia. What is that group in New York that has prepared a charter?

Mr. AVERY. That was the International Traffic Committee of the New York Chamber of Commerce, which worked in close conjunction with the AIA in fleshing out what a shippers' council might be and presenting a pro forma to the Justice Department to ask for a business advisory letter

Mr. MCCLOSKEY. I don't mean to be critical of your testimony. It's a real pleasure for us to have businessmen come voluntarily to Congress and instead of complaining about what we do here, instead give us affirmative suggestions as to what we might do to remove government intrusion into business.

I would like to request that you look into this question of shippers' councils and what we might do to balance the cartel of a shipping conference with corresponding economic power of a shippers' council. I note your reference to the Australian situation, where the government backed out of the process completely, or at least primarily. They have shippers' councils dealing directly with shippers' conferences, and the government stays in the background until one side or the other cries "Foul!" It seems to me that would accomplish your goal of reducing government intrusion and regulation to a minimum. Counsel can correct me if I am wrong, but right now whenever shippers meet for any kind of collaborative action, they're faced with the question of whether they violate the antitrust laws, and the Justice Department has refused to give them an opinion.

Mr. MERRITT. We certainly do, at least the first-I am not familiar with the second, although I did see where a New York law firm did ask for a ruling from Justice and my recollection is that Justice declined to do so on the ground that the particular association was then under investigation.

Mr. MCCLOSKEY. If shippers would participate in this five-way tangle we are involved in by telling us what legislation is necessary to form a shippers' council; what relationship a shippers' council might bear to a shippers' conference; whether a conference should be