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The CHAIRMAN. Mr. Sharood has a question.
Mr. SHAROOD. My only question relates to section 18(b) (6), the $1,000 civil penalty violation.
The existing law, and as you propose to amend it, would still speak in terms of each day a violation continues. Is that concept completely applicable to each subparagraph of section 18(b) ?
In other words, under 18(b) (3) we are talking about rebates and activities of that nature. How does that relate to each day of continuing violation? Shouldn't the penalty provision of 18(b) reflect the different types of illegal acts that are proscribed by section 18(b)?
Mr. PIMPER. That has been in the 1916 statute, the Intercoastal Shipping Act, and unless I am mistaken, it is in the ICC Act. I do not know that anybody has really ever tried to determine its breadth. I have heard people say that if in a violation of section 15, the same violation lasts for 3 years, the conference and its members and perhaps individually each member is liable for a penalty of $730,000, if it lasts for 2 years.
In other words, 365 days, $1,000 a day, and each individual member is liable for that penalty.
Mr. SHAROOD. Is not that a rather meaningless penalty provision then? It does not realistically cover the problem, does it?
Mr. PIMPER. Why not?
Mr. PIMPER. No. But it may sometime give people pause for thought. One of the problems that you face here is that for so many years there were not any penalties under this statute. Now suddenly somebody decides that the statute should be enforced. We may get to the point where a recent ICC—and by recent I mean within 3 years—decision where the railroads got a penalty of $330,000 and the shipper settled with Justice for the same. So that it is not beyond the realm of possibility that you could go to penalties of this size.
Mr. SHAROOD. Thank you, Mr. Chairman.
Mrs. Bentley, I would like to commend you for your fine presentation.
When we speak of infractions, I assume we are referring to falsifications of such things as billings and classifications.
In your statement you mentioned new shipping concepts, such as containerization, with which I am familiar.
First, I would like you to give examples of the kinds of infractions of the law to which you are referring.
Second, and more important, how do these new concepts of shipping, such as containerization, provide more opportunities for such infractions? Is it because there are perhaps only one or two persons inspecting the container at each of the points of departure and entry, while under previous methods of shipping, there were many more opportunities for inspection, et cetera ?
İs that what we are talking about? Mrs. BENTLEY. That is one aspect of it; yes. Mr. PIMPER. With rates on a basis of either weight or on the basis of a commodity, once that commodity is in the container and the man certifies that he has put in there, let us say old cloth, when in fact he has loaded it with televisions, and the rates, one to the other, there would be a relation of 200–300 to 1, it is much simpler to hide that fact, when it is in a filled container, than it would be if it was just shipped as a normal package.
Mrs. BENTLEY. The old way.
Mr. PIMPER. Additionally, a container is very easily moved. It may well be that the shipper-the steamship company in order to get the business is perfectly willing to haul it right to the plant. His rates really only cover the movement from a port to another port, but he will move it if he can get the business over the road and into the hinterland. That is another type of thing he can more easily do, absorb a certain inland charge if it is in a container than if it is not in a container.
Mr. ANDERSON. When the container is initially filled, let us say that it is coming to this country from a foreign port, is there any formal inspection of it at the port of entry or do we wait until it reaches its final destination, and then open it for inspection?
Mrs. BENTLEY. It depends, Mr. Anderson, totally for whom the cargo is destined. Whether it is LCL movement, in other words, number of shipments in a container, or point to point, in other words, like all Magnavox, say, going to the Magnavox Co. at Fort Wayne. Normally that would not be opened until it arrived at Fort Wayne, Ind. The LCL lots, with a number of lots in there, would be opened at the dockside or over in the warehouse area and broken down for distribution.
Our own longshore contract negotiations sort of change the concept of containerization in this area somewhat; namely, that on the eastern gulf, they require that anything moving within a 50-mile radius of the port, regardless of where it is destined for the point of discharge, that they open that and repack it, to build up their own man-hours. So we are working in conjunction with labor requirements as well as with the container, which is set up for initially, you know, point-topoint distribution.
There is no set rule that everybody handles it one way or the other way. There is nothing firmly established in that way yet. Mr. ANDERSON. The reason I asked this is because some time ago
I heard a speech along this same line, somewhat contrary to your remarks, in which it was pointed out that containerization was going to make it so much easier and cheaper and better to control these kinds of goods, because the container would be opened only once or twice. It was argued that you would be able to effectively control such a situation.
Whereas, under the old methods, there were so many different occasions for pilfering the merchandise.
Mrs. BENTLEY. Mr. Anderson, the initial concept for which containerization was designed, which is what you are talking about, and what is happening are two different stories. Containerization in the United States is not working as it was initially designed. It is actually having adverse affect on our trade, because of that. It is working that way when it is moving from, let us say, one foreign country to another one, forgetting the United States, and all of our own rules and regulations. That has been one of my hues and cries and one of the reasons frankly that I am very much disturbed about what the negotiations with the longshoremen going on today with the threatened strike tonight on the west coast may result in, and come September 30 on the eastern gulf coast.
The initial concept for containerization definitely was point-to-point distribution. This would eliminate pilferage or the potential of pilferage at the dockside. It would eliminate delays. It would eliminate breakage, et cetera, and then you could have your points inland where the containers could be checked.
We do not have that in this country, and it is unfortunate that we do not. We are losing, and our costs are going up because of it. If the 50-mile limit is extended to 100 miles or more, which ILA is now threatening, it could be even more detrimental to our whole foreign trade picture in the coming years.
I am very disturbed about it. But we have the problem of working inside the contract that is negotiated between the steamship companies and the union as well as the whole concept of containerization.
Now from time to time on another aspect of this, the FMC has checked containers and their contents to see whether they adhere to requirements. We are doing more of that, but we have no power to go in and do it on our own. We have to do it in conjunction with the steamship lines, spot checks, in order to see that the contents listed are in the container.
As we build up with more inspectors, we hope to do that on an increasing basis. Again, we can do that only in conjunction with the steamship lines, but not on our own authority as it now stands.
Mr. ANDERSON. Thank you, Mr. Chairman.
Mr. LENNON. Madam Chairman, how many instances since you have been with the Federal Maritime Commission have we had, where you have actually charged a shipper or agent or officer or other person with false billing, false classification, false reports of weight?
Could you give me this for the record ?
NUMBER OF VIOLATIONS We understand the question to refer to only those instances in which an actual determination has been made that such a violation has occurred
The total number of such instances since October 8, 1969, the date on which Mrs. Bentley took her oath of office, is seven.
Mr. LENNON. Also for the record, would you furnish the number of instances in which they accepted the decision or judgment of the Federal Maritime Commission, which would then indicate the number of appeals de novo that you have appealed to the district courts that would give us some indication of the time-consuming factor, plus this way it would expedite these cases and keep the companies in mind.
År. PIMPER. That latter figure will be very difficult. If we can give you a figure where they agree, whether with us or with Justice, as where they agreed to plead, rather than trial de novo, that would be all right. We cannot distinguish upon whether they agreed with us or Justice.
Mr. LENNON. I understand that.
Mr. LENNON. And imposition of whatever the fine was made by the Maritime Commission.
Mr. PIMPER. Yes, sir. Generally speaking, it is only my impresion, but only about two have been contested.
Mr. LENNON. Only two have been uncontested?
Mr. PIMPER. Have been contested, actually contested. Most of them agree.
Mr. LENNON. That raises a question in my mind. I thought the thrust of this legislation was to avoid the indeterminate delay of appeals de novo to the various district courts across the United States and the delay. But now you tell me in converse that 99 and nine-tenths percent of them have accepted the decision.
Mr. PIMPER. After it gets to Justice. I will give you a for instance, without mentioning the name. We had a case against the shipper. We started a proceeding. After the proceeding had been going on for a period of time, he came in and said, “I would like to plead to a certain number of violations."
What did that mean? We had to first get him to agree that he would plead to a certain number of violations in proceeding, and then we had to go over to the Department of Justice and see if we could work out substantially the same, or similar deal with the Department of Justice. Justice then filed the proceding in the court. And the judge then levies the fine, which had been probably to a certain extent prior arranged.
You see, if this legislation was in effect, you would stop it before it got any further than the first suggestion that the shipper wants to settle up and not go all the way through the referral to the Department of Justice and then in court.
Mr. LENNON. You are saying by this procedural method that you would avoid the Department of Justice in its entirety and you would avoid the de novo trial, trial de novo when they left the Commission?
Mr. PIMPER. Yes, sir. He would get it, in my opinion, most of them would be solved right when they first start.
Mr. LENNON. Would you repeat that?
Mr. PIMPER. They would be solved or settled right away. In many of them you would not even have a Commission proceeding.
Mr. LENNON. You mean they would accept the charges and pay off whatever fine was imposed ?
Mr. PIMPER. Yes.
Mr. LENNON. How long does it take the Commission after it gets evidence of this kind to bring to its consideration one of these violations and the imposition of a fine as a result? Is that a long drawn out procedure? I am afraid it is.
Mr. PIMPER. It has taken too long in the past. I think now it is being done much more promptly, and that actually many of them which have occurred, which occurred during 1970, were taken care of in 1970, that is those which occurred in fiscal year 1970, were taken care of in 1970.
Mr. LENNON. Thank you.
In this "for instance" case that you mentioned, how much time did it take for that case to get settled, when it went through the Department of Justice? Do you know?
Mr. PIMPER. If I had to guess, I would say about a year from the start to finish.
The CHAIRMAN. You could have settled it, say, within a month?
GRAHAM & JAMES,
ATTORNEYS AT LAW,
Re E.R. 755.
tives, Washington, D.C. DEAR MR. GARMATZ: Thank you for your letter of July 8, 1971, to Mr. Leonard James of this office, extending to us the opportunity of filing a written statement expressing our opposition to the subject proposed legislation, which we do herewith.
Preambulatorily, we would express our regret that, as we gather from your letter, previous knowledge of our position and concerned interest had not apparently heretofore reached your attention. In fact, however, Mr. James wrote to a ranking Minority Member of your Committee, Mr. Mailliard (who also happens to be the Congressman from this District, which includes major offices of a large number of steamship clients), on February 5, 1971, stating in pertinent part as follows:
"I read in the Congressional Information Bureau of January 29 that the FMC has again persuaded Mr. Garmatz to introduce a bill to give the Commission the power to assess penalties for every violation of the Shipping Act that the FMC itself determines. This is H.R. 755. The bill has been introduced each year for the past three? and, so far, there have not been hearings on it. If, however, your Committee should hold hearings, we will want to be heard in opposition."
This letter was acknowledged in a February 12 reply by Congressman Maillaird's staff (in the Congressman's temporary absence), but, obviously, did not reach the official files of the proposed legislation. (By the same taken, a year previously, Mr. James had also written to Mr. Mailliard, expressing his opposition to the immediate predecessor of the current bill, H.R. 15518 in the previous Congress—to which bill your letter also makes reference in a letter dated February 3, 1970. This letter received the Congressman's own acknowledgment shortly hereafter, only apparently to suffer the same fate, of subsequent disappearance.)
On the merits of the bill, we as attorneys fo ra significant portion of the U.S. West Coast steamship industry, subject to regulation by the Federal Maritime Commission, are indeed strongly opposed to enactment of H.R. 755. Its chief feature—to which we are opposed—would be the transferral of penalty-assessment powers for violations of the Shipping Act from the federal district courts, where they presently reside, to the Federal Maritime Commission itself. In our considered view such a proposal undermines the very con
* A recent Journal of Commerce report states that in fact similar bills hare been introduced for the past ten years—a statement confirmed by the Commission Chairman's own observation before your Committee that, “The Commission has been seeking this authority since its creation in 1961.” This is the first year, however, that it has moved beyond the mere introduction stage,
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