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the administrative processes are here to stay and notwithstanding that a few are still voicing rigid opposition the long battle over the fundamental desirability or undesirability of establishing administrative agencies and of continuing to rely upon their processes is rapidly diminishing and may be about ended." The authority which would be conferred by H.R. 755 is not unique. The administrative imposition of penalties is commonplace. As pointed out in my statement, there are numerous agencies and departments which have authority to impose civil sanctions. The Federal Maritime Commission itself has such authority under P.L. 89_777. The power which the Commission has with respect to violations of section 44, covering the licensing of freight forwarders, is if anything more awesome than proposed in H.R. 755. By the simple expediency of revoking the license, the effect can be to deprive the party involved of his entire livelihood. That is indeed a severe penalty and one which we seek to avoid by H.R. 755. Under this proposal, the Commission would have a choice.
In one of the cases cited by Mr. Fawcett, the Court of Appeals rejected the Commission's conclusions. In reversing the Court of Appeals, in that case, Consolo v. Federal Maritime Commission, 383 U.S. 607, 620, the Supreme Court commented favorably on the administrative process as follows: "It frees reviewing courts of the time consuming and difficult task of weighing evidence, it gives proper respect to the expertise of the Administrative tribunal, and it helps pro mote the uniform application of the statute.” (emphasis added) Arbitrary or capricious action or abuse of discretion, or action otherwise not in accordance with law are grounds for setting aside agency's finding.
At page three of the Fawcett letter reference is made to the Commission's "crusading zeal" with respect to its “characteristic agency ‘reshaping process". Cited as an example is a recent case in which "the Commission outlawed as both unapproved and unapprovable the whole concept of steamship conference limitations and/or restrictions on wastefully duplicative ports-of-call--practices time honored in its own and its predecessors' reported cases, consistently and repeatedly beginning as far back as 1929.” This apparently has reference to the Commission's decision in Docket 70–11, Pacific Coast European Conference--Rules 10 and 12, Tariff No, FMC 14. Mr. Fawcett's expressed understanding of that decision is misleading. The statement that these restrictions go back to 1929 is factually misleading and irrelevant. There were great gaps of time during the 1929-1970 period when these restrictions were not in effect. Moreover, the historic existence of such restrictions would not render them any more legal.
This point brings into question the Commission's ability to use discretion in the process of creating new law. It is this discretion factor whch will determine whether a violation of a newly created law or policy will be a violation meriting the imposition of a penalty.
Indeed, Mr. Fawcett is well aware that the Commission can and does utilize discretion in respect to this point. He and his associates were counsel for respondent in Docket No. 70-11 which is cited to the committee as illustrative of the danger that the Commission could create a new law, determine a violation, and impose a penalty on the basis of the violation of such newly created law.
Mr. Fawcett fails to point out his personal knowledge to the contrary that the Commission can and does exercise discretion in avoiding precisely these dangers that he alleges. Pending at the same time as the above proceeding (Docket 70-11) which he cites, was yet another proceeding involving similar issues in which Mr. Fawcett and his associates were also counsel for respondent. See Pacifio Coat Australaisian Tariff Bureau Tariff Rule 1(C)--Local Tariff No. 15-F.M.C. No. 4; Tariff Rule 1(d)--Overland Freight Tariff No. 16-F.M.C. No. 6 (Docket No. 71-38); (Order to Show Cause, served April 9, 1971.) When the Commission issued its report in the former proceeding (Docket 70–11), Mr. Fawcett and his associates withdrew the similar tariff rules in Docket No. 7136 and moved to discontinne. Despite the fact that the mere ezistence of the similar tariff rules in this latter proceeding would have constituted a technical violation of section 15, Shipping Act, 1916, which would bave given the Commission a basis to continue the proceeding and determine a violation, the Commission, exercising discretion, granted the motion to discontinue.
At page four of his letter, Mr. Fawcett sharply criticizes the makeup of this Commission because three members are not lawyers. He accuses the Commission of exercising its authorities in a liberal fashion, substituting its judgment to overrule its “seasoned trial examiners." Mr. Fawcett would have you believe that the majority of the Commission's decisions overrule the recommended deci. sion of its hearing examiners. This again is contrary to the actual facts. A far greater proportion of the Commission's decisions uphold the examiner, sometimes by adoption, and in other cases by a brief decision adopting the examiner's decision. Many decisions of the examiner become final and binding upon the Commission simply because the Commission elects not to review the examiner's decision.
Next, Mr. Fawcett would have the Committee believe that "hearsay evidence" is not only freely admitted, without regard for judicial exclusionary rules, but it is frequently the sole basis for this Commission's determination of past violation. Although hearsay evidence has quite properly been received in Commission hearings in accord with the principles of the Administrative Procedure Act and applicable case law, the Commission has not to date depended solely on hearsay in making findings in any proceeding.
Mr. Fawcett also condemns the Commission's use of show cause orders, notwithstanding that this practice has been uniformly observed by the courts. Again, the letter is misleading. Mr. Fawcett states that evidentiary hearings are afforded only if the respondents can persuade the Commission of their absolute need. Whatever interpretation can be put on the word "absolute", the Commission has, in fact, referred many proceedings which were instituted by show cause orders to the Chief Examiner for evidentiary hearings. Mr. Fawcett himself was informed in a very recent proceeding (Docket 71-16) that an evidentiary hearing would be forthcoming if he requested it. He is well aware that the Commission uses the show cause proceedings in lieu of evidentiary hearings when there is no factual issue and no need for an evidentiary hearing. In such a proceeding, In Re: Pacific Coast European Conference, 7 F.M.C. 27 (1961), a case in which Mr. Fawcett and his associates participated as counsel for respondent, the Commission made this clear, stating “The questions raised by the order, and by the correspondence between respondents and the [Commission) which preceded the order were purely legal. There was no factual issue and hence no occasion to compile an evidentiary record in a hearing." See also American Export & Isbrandtsen Lines et al. v. Federal Maritime Commission and United States, 334 F.2d 185 (1964). The experience of this Commission has been that in most in. stances involving this type of proceeding the respondents recognize that evidentiary hearings would be unnecessary and a waste of time, and involve unnecessary expense. In fact, in very few instances where the Commission has instituted a show cause proceeding, have any respondents requested evidentiary hearings.
The convoluted effort of Mr. Fawcett, extending through almost three pages of his letter, to the effect that the Commission assesses penalties in order to offset the appropriation costs of running the Commission shows the extreme lengths to which he goes in attempting to persuade the Committee. The comparison of the Federal Maritime Commission's proposal with the judicial system dealt with in Tumey v. Ohio, 273 U.S. 510, is ludicrous.
The Federal Maritime Commission is required by law to annually report its activities to the Congress. Reorganization Plan #7 of 1961, section 103(e) and section 208 Merchant Jarine Act, 1936. It has always been considered that the Congress would be vitally interested in any violations of the statutes and the actions being taken by the Commission with respect to such violations. We simply cannot understand Mr. Fawcett's characterization of such reports as “boastful accomplishment”. The “spectre” of Tumey v. Ohio simply is not present in H.R. 755. Neither the Commission nor any member of its staff has any pecuniary interest in the penalties assessed by the Commission or imposed by the courts after referral of its violations for prosecution. In cases where the Commission imposes penalties for violations of the Shipping Statutes, the deposits, of course, go into Miscellaneous Receipts of the Treasury as do those imposed by Justice and the Courts. It would be just as logical for Mr. Fawcett to attack the judicial system on the ground that employees of the Department of Justice, or even the judges of the Courts have a pecuniary interest in the imposition of fines and penalties, since each of these parties also is on the Federal payroll. We find it difficult to believe that the tirade on pages 6 to 8 was intended to be taken seriously.
Mr. Fawcett opposes H.R. 755 also because he believes that the courts are placing too much reliance on the "agency's expertise", citing in this respect Consolo 1. Federal Maritime Commission, 383 U.S. 607 and Federal Maritime Commission v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238. We think the court's remarks in these cases quite pertinent. If Mr. Fawcett's protest is because the court's remarks, which we have already quoted, lend support for placing the authority to impose sanctions for violations in the agency, we agree that such
support can be found in the court's language. Mr. Fawcett also faulted the Supreme Court in both of these cases for departing from its "customary practice of remanding the case back to the lower courts for 'further proceedings consistent with this opinion' and by-passing such further appellate court proceedings entirely (and) simply itself affirmed the Commission and directed that the case be dismissed forthwith." The reason for so doing is fully explained in both decisions, a fact which Mr. Fawcett conveniently overlooked. See, for example, the court's comments in Federal Maritime Commission v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 252. “These proceedings were commenced more than eight years ago, and this is the second time the controversy has been appealed to the reviewing courts. On the second appeal to the Court of Appeals, that court took the extraordinary course of simply reversing, without remanding to the Commission for further action. Since we have found that the Commission's findings and order are supported by substantial evidence and since there are no other meritorious contentions raised by the respondents, we think that it is time for a final disposition of the proceedings.” Coincidentally, an almost identical situation eixsted in the Consolo case and the court so stated.
At pages 9 and 10, Mr. Fawcett challenges my statement that the Civil Aeronautics Board has authority to impose civil penalties for violations of the economic regulatory provisions of the Federal Aviation Act. In this respect we need only refer to letter of June 16, 1971, from the Civil Aeronautics Board to the Chairman, Merchant Marine and Fisheries Committee, commenting on H.R. 755. We quote in part from that letter:
“The provisions of the bill are comparable to the civil penalty provisions of the Federal Aviation Act of 1958, which were made applicable to economic violations by a 1962 amendment to section 901 (a) of the Act (49 U.S.C. 1471)
As we noted in a 1970 report to your Committee with respect to a bill (H.R. 15548) containing provisions identical to those of the current bill, the Board has found that the availabiliy of civil penalties for economic violations has resulted in a more flexible administration of the Act."
Also, informal discussions with the staff of the Civil Aeronautics Board confirm that in actual practice the CAB does impose civil penalties both for statutory violations and for violations of the Board's orders, rules and regulations. They are not referred to the Department of Justice for institution of court action unless necessary to effect collection. Similarly, Mr. Fawcett's interpretation of section 1474, which provides for the imposition of civil penalties by the Secretary of the Treasury, is in error. Here again, the Secretary of the Treasury, through the Bureau of Customs, imposes civil penalties for the violations covered therein.
Mr. Fawcett, on page 10 of his letter, states that the Federal Maritime Commission does not make clear why it has singled out two particular provisions of section 16 of the Shipping Act for conversion from criminal to civil sanctions. As explained during my appearance before the Committee in response to a question from Congressman Downing, the Commission would have preferred to change all of the penalty provisions of the 1916 Act, where now criminal, to civil. But in deference to objections by the Department of Justice, it limited the desired changes to only those sections which are covered in H.R. 755. It is true, as Mr. Fawcett states, that the Interstate Commerce Act carries a criminal sanction for violation of "false billing” provisions in the Interstate Commerce Act. It is also true that a violation of Title IV of the Federal Aviation Act, covering Air Carrier Economic Regulation, which is knowingly and willfully committed, is subject to a criminal sanction. However, the Federal Aviation Act also provides for the imposition of civil penalties, which, as we have already pointed out, may be imposed by the Civil Aerona utics Board for violations of Title IV. Sincerely,
HELEN DELICH BENTLEY, Chairman.
BURLINGHAM UNDERWOOD WRIGHT WHITE & LORD,
New York, N.Y., June 26, 1971. Hon. EDWARD A. GARMATZ, Chairman, U.S. House of Representatives, Committee on Merchant Marine and
Fisheries, Longworth House Office Building, Washington, D.C. DEAR CONGRESSMAN GARMATZ: I am writing to you as Chairman of and on behalf of the Committee on Maritime Legislation of the Maritime Law Association of the United States, at the request of the Association's President, Mr. John C. McHose, to offer some comments, hopefully helpful ones, on two of the four pieces of maritime legislation scheduled for hearings before your Committee next week and in early July. Since there has not been, at this writing, time to obtain an Association position, the comments below are those of the Committee on Maritime Legislation and not of the Association itself. It will be very much appreciated if these remarks are made a part of the record of the hearings on the bills as to which the comments are directed, namely HR 6239 and HR 5286, both dealing with a single proposed amendment of the Ship Mortgage Act of 1920, and HR 755, concerning the substitution of civil for criminal penalties in the Shipping Act of 1916.
HR 5286 and HR 6239. In balance, and after careful consideration, the majority of our Committee responding to this proposed legislation has registered opposition. It should be pointed out that the obligation of inquiry upon a party intending to supply services to a vessel to ascertain the existence of an agree ment, such as a charter, containing a prohibition of lien clause, is not a heavy one. All that would appear to be required is a question to the master whether the vessel is under charter and if so whether the charter or like agreement contains a clause prohibiting liens. If such a clause exists, the supplier of the services then has to decide whether to withhold the service or to supply it on the credit of the charterer. It would seem likely that inquiry of this sort, should it uncover the existence of a charter containing a prohibition of lien clause, would quickly result in the effecting of security arrangements satisfactory to the supplier of the services if he intended to rely upon the credit of the vessel rather than that of the party with whom he has contracted.
On the other hand, there is no way for the shipowner to protect himself from the unexpected assertion of the maritime lien, secret lien, if you will, resulting from services supplied to the vessel while under charter.
In effect, the problem presents the balancing of the risk of financial responsibility as between an innocent shipowner and the supplier of services, from which the latter by prudent inquiry alone is in a position to insulate himself. These are the considerations that prompted the Congress to enact into the Lien Act of 1910 and again into the Ship Mortgage Act of 1920 the provision now proposed to be repealed, and there does not appear to be any compelling new circumstances requiring a change of policy.
We believe that there is a consensus within the Committee on Maritime Legis lation, and more broadly in the Association itself, for enactment into our local law of the provisions of the Brussels Mortgage Convention of 1967. If these much more fundamental and far reaching amendments to the Ship Mortgage Act of 1920 should be considered, problems such as those prompting H.R. 5286 and H.R. 6239 could be dealt with by provision for the recording of maritime liens as a condition to enforceability. This would protect the supplier of the services and also protect the owner from the impact of secret liens appearing for enforcement after redelivery of the vessel by the charterer.
2. H.R. 755. While we have no strong consensus for a position within our Committee on this proposal to substitute civil for criminal penalties under the Shipping Act of 1916, the Committee, by simple majority of those reporting, is in opposition. While it is recognized that there has been a general tendency, perhaps in response to notions of uniformity, to substitute civil for criminal penalties in other Sub-Titles of Title 46 of the United States Code, objection to this policy as applied to the Shipping Act of 1916 stems from the consideration that an administrator, strongly pressing policy directives, is apt to react unfavorably to opposition, even reasoned opposition, and attempt to smoothe the administrative path by imposition of civil penalties. In the case of a real contest the parties in such matters probably
would prefer to submit themselves to the dispassionate justice of the courts. This is not, of course, to say or imply that the administrative agencies generally or any in particular do not usually perform their functions fairly and with restraint. But it has been suggested that enforcement of the provisions of the Shipping Act of 1916, involving concepts closely related to competition, and keen competition at that, often require a form of juridical determination better left to the courts.
If our Committee can supply any assistance in your most commendable efforts, please do not hesitate to call upon us. With best wishes, Yours sincerely,
HERBERT M. LORD. (Whereupon, at 11:10 a.m., the hearing in the above-entitled matter was adjourned.)
Mr. McCloskey. I have no further questions.
The CHAIRMAN. Mr. Avery, Mr. Merritt, Mr. Donelan, we appreciate your being here with us. Many times we have difficulty with the Department of Agriculture and the Department of Defense in their use of American flag transportation, which the law requires them to use.
You can see that we are in a difficult position in a controllable source of freight to the American merchant marine; but also we are dealing in a vast public sector where it is a perplexing problem for us to try to comply with the law. That law requires us, of course, to have an American flag merchant marine, manned by Americans, that will carry a substantial portion of our commerce. We are presently transporting 4.9 percent of our commerce—and that is by no means a substantial portion. This committee has the statutory responsibility, to insure, for a number of reasons and purposes-national security being probably foremost, but economic security being another consideration, that we have a strong American flag merchant marine.
We generally support a free-enterprise, free-trade system. However, the system of the past century may require different legislative solutions today. And, it is our responsibility on the House side to legislate and adjust accordingly. It's not going to be easy to legislate a solution that is liked by all elements of the foreign trade community in the United States.
But, we hope to do that job. We appreciate your coming here today, and further elaborating on a position that we feel is necessary to carefully consider before we legislate.
Mr. McCLOSKEY. Mr. Chairman, could I ask one final question ?
Mr. McCloskey. Counsel, if a congressional committee requests advice from a group of shippers on how to draft legislation to form a shippers' council, which is essentially the same information as we have been trying to elicit from the FMC, Justice, and State, would that give you the ability to resist the Justice Department claim that shippers meeting for that purpose were in violation of the anti-trust law?
Mr. DONELAN. I would say if at this point we were researching the concept of a shippers' council with the objective of having a lawful shippers' council-I hope we haven't reached the stage where that is unlawful.
Mr. McCloskey. The reason I ask is that at the meeting I attended with shippers in New York, I was astounded at the number of hours each of them said they had to spend with their counsels to make sure just talking with one another at lunch on subjects connected with shipping was allowable.
Mr. DONELAN. This is a very sensitive area. We have an extremely able and aggressive Assistant Attorney General in charge of the antitrust division who has been giving notice to the world that he means to do a job; and I think these shippers are well-advised, if it isn't a self-serving statement to consult with their anti-trust counsel.