These areas are those which give the Commission most of its enforcement problems in its day-to-day operations. Under present procedures, since the Commission has no authority to impose sanctions, the only course available to it in instances involving a violation of one of these provisions is to thoroughly document the violation and refer it to the Department of Justice for prosecution. Because of the time consuming efforts required to adequately document such cases, considerable time elapses between the commission of the offense and the actual referral to the Department.

With the authority to assess penalties vested in the Federal Maritime Commission, the additional review and sometimes additional investigation by the Department of Justice would be eliminated. Further the additional time spent by the Department in establishing a case de novo would be avoided.

Under these existing procedures there necessarily and unavoidably is a certain amount of dual and overlapping effort on the part of the Commission and the Department. The Commission has used its own judicial machinery to determine the existence or nonexistence of a violation. In the event it determines the existence of a violation and refers it to Justice, the Department must establish de novo in the U.S. district courts not only the bases for fixing or assessing penalties, but the factual existence of the violation itself.

When the actual complaint is filed in the court there may lapse a considerable period of time before the case may be assigned for trial because of the tremendous backlog of cases confronting most of the Federal courts.

Thus, under present procedures the penalty for violations of the Shipping Act may not be assessed for many months, and in some instances years after the infraction has occurred. By the time the penalty is imposed, any impact it has on business practices in the industry is diluted or lost completely.

Further, where there has elapsed a considerable period of time from the infraction to the trial, the courts frequently are inclined to impose a much lighter sentence than if the case had been prosecuted promptly. No regulatory purpose is accomplished in these instances since the amount of penalty is usually insufficient to deter the offender from future transgressions.

The penalties should be in sufficient amounts to take away from the guilty party any profits which could be attributed to the violations plus such additional amount as will serve to discourage future violations. Not only could this be accomplished by the Commission under H.R. 755, but also the Commission's assessment of penalties would be more uniform.

Under present practices, penalties vary widely depending upon the court having jurisdiction. At present, penalties are fixed and assessed by various judges in various U.S. district courts. They have no special awareness of the intricacies of the shipping industry and the appropriate amount of penalties sufficient to constitute effective deterrents. They also lack awareness of the amount of penalties imposed by other judges of other U.S. district courts upon other violators who have similar prior records and who have committed similar offenses.

Consequently, the fixing and assessing of penalties has become largely a function of when, where, and by whom the fixing and assessing is done, rather than a function of consistency and relativity.

Here also there is a certain amount of dual and overlapping efforts. The initial trial of the issue of the existence or nonexistence of a violation may occur before the Federal Maritime Commission, with appeal to a U.S. court of appeals.

It is conceivable that the trial of that same issue, plus a basis for fixing and assessing penalties, could occur de novo in a U.S. district court upon initiation by the Department of Justice, of penalty proceedings, with appeal to a U.S. court of appeals. The result could be a hopeless tangle of trial and appellate channels all concerned with the same issue.

Conflicting procedures between the various forums involving trial and appellate channels, such as the Commission and the courts, would be eliminated by H.R. 755. For instance, at present, the trial and appellate channels invoked when the issue of the existence or nonexistence of a violation is determined by the Federal Maritime Commission are primarily concerned with the observance of administrative procedure, whereas when that issue is determined de novo by a U.S. district court (and the bases for fixing and assessing penalties), the trial and appellate channels are primarily concerned with the more formal and rigid judicial procedure. The result is that not only are there multiple trial and appellate channels involved in determining the same issue, but there are multiple procedural standards with which each must be concerned.

Although the misdemeanor sections suggest more serious offenses than those sections that are civil, our regulatory efforts are actually more impotent in the former. In criminal proceedings the burden of proof is greater, often causing added delays in correcting a problem that could be handled more promptly and effectively under less stringent civil procedures.

The Commission believes that better administration of the shipping acts will be derived from making these offenses civil rather than criminal and empowering the Commission to adjudge them and assess appropriate penalties based upon the nature of the violation and the Commission's expertise in shipping areas. In this way the Commission could resolve civil violations as a part of its quasi-judicial functions.

The Commission's primary function is regulation. Its day-to-day operations bring it into contact with many apparent violations. Because of this the Commission has developed a certain expertise which enables it to separate the wheat from the chaff. It knows what to look for and how to go about it and is better equipped to properly evaluate the offense and to adjudge an appropriate penalty designed to take the profit out of the crime, and to deter the offender from further violations.

The Commission determinations under these sections would be subject to judicial review in a U.S. court of appeals under the Review Act of 1950. This would eliminate the necessity of a de novo district court penalty suit as is presently required and would enable the Commission to relate the amount of the penalty directly to the nature and circumstances of the violation.

Such a procedure, should, in most instances, reduce the total litigation expenses to both the Government and private parties, relieve the already overburdened Federal court dockets, while at the same time

retaining the safeguards of justice through the reviewability of Commissions in U.S. courts of appeals.

H.R. 755 would bring the Commission's practices into line with those of other Federal agencies. For instance, similar authority to impose civil penalties for infractions of law is contained in applicable statutes of other Federal agencies such as the Civil Aeronautics Board, U.S. Coast Guard, the Bureau of Customs, and Immigration and Naturalization Service, et cetera.

Further, this authority is consistent with the growing tendency to authorize the agency responsible for administering a particular statute, to appraise violations in the light of the agencies' expertise and to impose appropriate penalties within the limits provided in the statute.

The Commission now has such authority with respect to violations of the financial responsibility provisions of Public Law 89777 which requires that the owner or operator of a passenger vessel having accommodations for 50 or more passengers and embarking passengers at U.S. ports, or persons arranging, offering, advertising, or providing passage on such a vessel, establish with the Commission evidence of financial responsibility to meet liability for injury or death to passengers and for indemnification of the passengers in the event of nonperformance of the transportation.

The new shipping concepts-containerization, LASH-type ships, barges, intermodal shipments-all offer carriers and shippers alike more opportunity to follow the practices which are prohibited by the sections of the shipping acts which this bill would amend. Prompt enactment will provide this Commission with sorely needed tools to combat these malpractices. We urge enactment at an early date.

We propose a minor amendment in section 2 of the bill. The word "imposed" in line 12, page 3, should be changed to "assessed" in order to be consistent with the language in proposed new section 45 of the Shipping Act, 1916.

Thank you.

The CHAIRMAN. Thank you very much.

Mrs. Bentley, I know it is in your statement, but could you repeat the biggest advantage that this proposed change would have?

Mrs. BENTLEY. Well, simply expressed, Mr. Chairman, it would permit us to proceed to take care of more severe violations. It would permit us to proceed to take care of these, negotiate a settlement, to get them ironed out and not go through years of litigation.

As it is now, some of these things could drag on for 5 years or more through the various courts, and by the time you get to the end the penalty amount could be watered down considerably by the courts.

Also, the effectiveness of proceeding against the carrier or the person involved would be very weak because it has dragged on over such a period of time. If we have complete jurisdiction in our hands, we could proceed to get the thing out of the way and get it resolved, and put everybody on notice that we are moving into this area rapidly, and they are not going to get away with a lot of dragging out.

The CHAIRMAN. Thank you.

Mr. Downing.

Mr. DOWNING. Thank you, Mr. Chairman.

Madam Chairman, as usual, you made an excellent statement in support of this proposition. When the law was enacted, I suppose the criminal penalties were imposed as a deterrant to the violation.

Now, if you eliminate the criminal aspect, will there be less of a deterrent to commit this crime?

Mrs. BENTLEY. We do not believe so, sir. As a matter of fact, when the bill was first put up, the first proposal of it, we had recommended that there be other changes in it. The Department of Justice has objected to changing one of the sections-I forget offhand which one

it was

Mr. PIMPER. Sixteen, first and third.

Mrs. BENTLEY. Section 16. They objected on that count and said they felt that there should be some leverage in the criminal area on certain kinds of violations. So we agreed with them, and we are not asking for that change. Mr. Downing, today as you read the papers, as we read what is going on in our court systems, our courts are so weighed down with so many cases, so overburdened, that in many instances which we consider really criminal, people are getting away scot free just by dragging out of the procedure. By the time it comes to the end of the line, nothing is done about it because so much time has elapsed. We feel that if the fine is stiff enough, and if we go after them and we watch them, as we could do under the suggested changes, that this will be a greater deterrant, and they are not going to be prone to proceed to violate the law.

Mr. DOWNING. Do we have a report from the Department of Justice? Mr. CASEY. Yes. They have no objection.

Mr. DOWNING. I understand that the CAB has authority to assess penalties for violations of its rules, regulations and orders. Does the Shipping Act of 1916 provide any penalties for the violations of its rules and regulations?

Mrs. BENTLEY. No, it does not, sir. However, there is a provision in section 806 (d) of the Merchant Marine Act of 1936, and it is our view that this section also has application to a violation of an order, rule or regulation, issued by the Commission pursuant to the Shipping Act of 1916.

Mr. DOWNING. Do you not think a provision should be specifically included in the 1916 Act?

Mrs. BENTLEY. We certainly do.

Mr. DOWNING. I think so, too. I was wondering if you would submit for the consideration of the subcommittee an amendment which would include such a provision?

Mrs. BENTLEY. I would be happy to do so, Mr. Downing. (The information referred to follows:)

DRAFT OF BILL H.R. 755

To amend the Shipping Act. 1916, and the Intercoastal Shipping Act, 1933, to convert criminal penalties to civil penalties in certain instances, and for other

purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Shipping Act, 1916, (46 U.S.C. 801 et seq.) is amended as follows:

(a) By deleting that part of the first sentence in the last paragraph of section 15, immediately preceding the proviso, and substituting the following:

"Whoever violates any provision of this section or of section 14b shall be subject to a civil penalty of not more than $1.000 for each day such violation continues:"

(b) By deleting the last paragraph of section 16 and substituting the following:

"Whoever violates any provision of this section other than paragraphs First and Third herof shall be subject to a civil penalty of not more than $5,000 for each such violation."

"Whoever violates paragraphs First and Third hereof shall be guilty of a misdemeanor punishable by a fine of not more than $5,000 for each offense". (c) By deleting section 18(b) (6) and substituting the following: "(6) Whoever violates any provision of this section shall be subject to a civil penalty of not more than $1,000 for each day such violation continues." (d) By deleting section 32 and substituting therefor the following: "Sec. 32(a) That whoever violates any provision of sections 14 through 21 and section 44 of this Act, except where a different penalty is provided, shall be subject to a civil penalty not to exceed $5,000 for each such violation.

"(b) Whoever violates any provision of any other section of this Act, except where a different penalty is provided, shall be guilty of a misdemeanor, punishable by a fine not to exceed $5,000.

"(c) Whoever violates any order, rule or regulation of the Federal Maritime Commission made or issued in the exercise of its powers, duties, or functions, shall be subject to a civil penalty to be assessed by the Federal Maritime Commission of not more than $1,000 for each day such violation continues." (e) By adding the following as a new section 45:

"Sec. 45. Civil penalties provided for violations of sections 14 through 21 and section 44 of this Act may be assessed by the Federal Maritime Commission." (f) By renumbering present section 45 to section 46.

Sec. 2. The last sentence of section 2 of the Intercoastal Shipping Act, 1933 (46 U.S.C. 844), is amended to read as follows: "Whoever violates any provision of this section shall be subject to a civil penalty to be assessed by the Federal Maritime Commission of not more than $1,000 for each day such violation continues." Mr. DOWNING. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Mosher.

Mr. MOSHER. Mrs. Bentley's argument seems very convincing to me, Mr. Chairman. But I am a little bit curious about your statement, Mrs. Bentley, on page 8 that the new shipping concepts all offer carriers and shippers alike more opportunity to break the law, I guess that is what you are saying.

Now, do you want to expand on that just a little bit?

Mrs. BENTLEY. I am going to lean on my counsel if I muff this a little bit.

With the intermodal age and the containers, the through rates, joint systems of moving cargoes, it is much easier to hide various infractions of the law that are going on, or might go on. We feel that if we can get right at them directly it would be easier to watch.

Mr. MOSHER. You are saying prompt action will tend to discourage these infractions much more effectively than if it is going out into the courts?

Mrs. BENTLEY. Yes, sir.

Mr. MOSHER. And your observations are that infractions are increasing?

Mrs. BENTLEY. It is very easy where you have so many forms of transportation tied in with each other, making it easier to do today. We have had an increase in our workload, Mr. Mosher.

Of course, trade generally is increasing too, and this always provides more of an area for more infractions. But we feel if we can get at them faster, it will help.

Mr. MOSHER. Mr. Chairman, the minority counsel suggested this question.