various subject matters involved would dilute the effort because of manpower and time limitations in trying to resolve the other specific discrimination problems.

Mr. MCCLOSKEY. Are you saying if you are burdened to hold a conference to educate us as to what law should be enacted, it would interfere with your ability to deal with individual problems?

Mr. BANK. We would be spread thinner than we are now.

Mr. MCCLOSKEY. I would like to suggest, if I could ask the privilege, that the witness, within a reasonable number of days, furnish us a specific recommendation of such a conference, telling us what should be discussed, which countries should be invited, where it might be held, and what we might accomplish.

I think it bears a great deal on the decision we have to make. They did not hesitate to voice their views on cargo preference. I should think they would be happy to do it immediately.

Without prejudicing your ability to do the work in advance, it seems to me we ought to shoot for January. Does that sound. reasonable?

Mr. BANK. I would like a little more time.

Mr. MCCLOSKEY. February.

Mr. BANK. There are a number of conferences going on; for example, the Pollution Conference in London in February.

Mr. MCCLOSKEY. Are they all going to be there in London in February for the Pollution Conference?

Mr. BANK. All, plus many others.

Mr. MCCLOSKEY. Is it reasonable that this committee or representatives of it try to journey over there and try to resolve it in February? Mr. BANK. Under the aegis of the Pollution Conference?

Mr. MCCLOSKEY. Maybe after that conference concludes for the day we could have an hour to discuss.

Mr. BANK. I don't know. As for conferences with representatives of foreign governments, we have always thought them to be an excellent idea, especially conferences with members of the staff and Congress. Mr. MCCLOSKEY. I have exceeded my time.

The CHAIRMAN. You will make that response to the question Mr. McCloskey asked you?

Mr. BANK. Definitely, Mr. Chairman.

The CHAIRMAN. You were talking about Brazil and you separated their cargo into government cargo and private cargo. Where government cargoes are mandated for a country's flag liner, a percentage, say 50 percent, would you recommend that the United States do the same thing?

Mr. BANK. Only where the U.S. operator, by virtue of the fact of the foreign law, is unable to compete in a significant portion of the trade, say the portion of the trade that he would be satisfied with, do I think that we have to take some action.

The CHAIRMAN. What action?

Mr. BANK. It depends on the situation. Sometimes we could get a a release of a government requirement for the United States as a trading partner and therefore allow it to compete. Often we have gone along with and in fact supported equal access agreements be

tween the countries involved so that the U.S. carrier has the same right to solicit that government cargo as the domestic carrier.

That has been the situation in Brazil,

The CHAIRMAN. That is government cargo.

How about private cargo?

Mr. BANK. We go through negotiation. We have not found that private cargoes are, to a significant degree, subject to those laws abroad. Perhaps that is due to a wide definition of government cargoes in those countries.

We have estimated in the case of Argentina-and if Mr. Blackwell were here, he would bear this out-that of all the southbound cargo imports from the United States, 90 percent of the cargoes coming in are government-related based on government loans by the Central Bank of Argentina or certain government agents in Argentina. Such cargoes have the touch of government regulation and is under control of the Argentine Maritime Agency.

The CHAIRMAN. Would you recommend, notwithstanding the colloquy we have just had, that a portion of our all U.S. government cargo be American-flag?

Mr. BANK. Yes. It is the law and we support that.

The CHAIRMAN. What do you do to correct overtonnage on a trade route?

Mr. BANK. It depends on what the basis of the overtonnage is. If the basis of it or the reason is that the extra tonnage comes in because of availability or the desire of the carrier to use predatory rate practices, we try to fight this; if it is through discriminatory practices, we try to fight this as well.

Generally speaking, the Department's role is not one that per se fights overtonnage in a trade. We do participate with the other agencies though in trying to solve this problem.

The CHAIRMAN. Mr. Corrado?

Mr. CORRADO. Thank you very much, Mr. Chairman.

Mr. Bank, I would like to refer to the note on page 5 of your statement that these 10 foreign nations sent. Is it your opinion that this note gives some credence to the thought that there will be negotiation and some agreement with respect to the production of documents by foreign nations?

Mr. BANK. Yes; it does, Mr. Corrado.

Mr. CORRADO. I would like to read the end of this note because I would like the record to reflect that I do not think it does. It says:

To enter into discussions with United States authorities with a view to finding a solution which would put an end to unfair and discriminatory trading practices in a manner compatible with the law and practices of both sides.

That is pretty tricky language that these guys have put forward. But I don't see anywhere where anyone is saying anything about producing documents or cooperating with FMC investigations. The crux of our problem is twofold: One, the dumping in our open trades by all the other maritime nations which have closed conferences. Two, the lack of ability of U.S. authorities to get necessary documents from foreigners who are in competition with us.

Until we can solve these two problems, we have got an almost insurmountable situation to contend with.

We have had bad experience with these foreign nations with respect their opposition to cargo preference based on their allegations of so-called violations of treaties of friendship, navigation, and convenience. Incidentally, we never could get any legal memorandum from the State Department concerning the allegations of violations of these treaties although we asked many times over the last 7 years. You may think, Dick, that this language says they are going to produce documents, but it doesn't say that.

Mr. BANK. Mr. Corrado, I think your skepticism is based on the past and it is healthy and I don't deny your right to have it. With regard to the language you characterize as tricky, I can point out that the preceding sentence makes reference to the information located within their own jurisdiction and by reading it with the last sentence, it does, in fact, make reference to documents.

We will be more optimistic.

As I mentioned in the earlier testimony, if this does not succeed, we will be back.

Mr. CORRADO. Well, you know, of course, naturally I read the whole thing, and while the preceding sentence does allude to where relevant material and information is located, the language in question at the end of their note does not refer to the production of documents at all, and that language is the very essence of it. Until we get some agreement with the foreigners there will be no equality of treatment between U.S. and foreign carriers. This captions note does not give us any help at all in securing their documents and records.

Mr. BANK. From our discussions and the receipt of this note, it is a first step. I agree in order to have the laws of this country work, in order to obtain the information, it must be applicable to foreign carriers operating in our trade as it is applicable to U.S. carriers. We stand foursquare with you on that. We are going to attempt to try through negotiation with these foreign governments, to secure that information required by the Federal Maritime Commission to continue its investigations and to succeed in ruling out rebating in U.S. trades. We will work together with you on this.

Mr. CORRADO. That is well and good; but we have never been able to get documents even going back to the Volkswagen case. You and I know it and everybody in the industry knows it.

Mr. BANK. As I said earlier, we have not been required to assist the Federal Maritime Commission in government-to-government negotiations.

There have been individual attempts by the Federal Maritime Commission Chairman to try to resolve these problems. Some have been successful, most unsuccessful. We hope to work very closely with the current Chairman of the Federal Maritime Commission in setting forth those cases we are working on and working with the foreign governments to get this information.

Mr. CORRADO. All I can say in closing is that we still be negotiating with these rascals when there isn't any U.S.-flag fleet left. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

The next witness is the Honorable Richard J. Daschbach. Chairman of the Federal Maritime Commission.

It is a great pleasure for the committee to welcome Chairman Daschbach. It is his first appearance here before this committee, and we have had a long and happy association with him from his Senate days, and we know the Commission is in good hands, under his good leadership.

STATEMENT OF HON. RICHARD J. DASCHBACH, CHAIRMAN, FEDERAL MARITIME COMMISSION; ACCOMPANIED BY JOSEPH N. INGOLIA, GENERAL COUNSEL, AND ARTHUR PANKOPF, MANAGING DIRECTOR

Mr. DASCHBACH. Thank you, Mr. Chairman.

I have a 21-page statement which, in view of time restraints, I am willing to forgo reading and submit for the record, and submit myself to your questions.

The CHAIRMAN. Perhaps I can do this. I plan to sit until about 5 o'clock tonight. We will break about 1 for 1 hour and 15 minutes, but I would like to get into this, and try and make the record as detailed and accurate as possible.

I am sure the gentleman knows that as detailed and accurate and as comprehensive a record we maintain on all legislation, is not satisfactory in some quarters. We are going to try to obviate that as we move forward legislatively in this regard.

Mr. DASCHBACH. In that case, I will commence to read my statement.

Mr. Chairman, I appreciate this opportunity to testify on H.R.

9518

The CHAIRMAN. We will take the whole statement for the record, which is a detailed statement, and then you can summarize it for us.

Mr. DASCHBACH. As you have stated, this is my first opportunity to testify before the committee since becoming Chairman of the Federal Maritime Commission, and I am particularly happy to testify before the House of Representatives after so many years' association in the other body.

I am accompanied today by Mr. Ingolia, our General Counsel, and Mr. Pankopf our Managing Director.

The CHAIRMAN. Mr. Pankopf was a very valued member of the staff of this committee also.

Mr. PANKOPF. Thank you, Mr. Chairman.

Mr. DASCHBACH. Upon my designation as Chairman by President Carter, I requested the Commission staff to analyze S. 2008, the companion bill in the Senate, and prepare some preliminary comments on that bill for my review. Since then, we have thoroughly analyzed the proposed legislation, and recognize both its positive aspects as well as some potential problems that might arise if it were to be enacted as now drafted. Moreover, we have discussed some alternative approaches to adressing the rebating problem, which are set forth in this statement.

The persistence of rebating in our oceanborn foreign commerce and the scale of violations we have recently uncovered make it.

abundantly clear that current law is in need of amendment. The complexity of the problem demands innovation and imagination.

In discussing statutory amendments, let me first state my conviction that any modifications the Congress approves must place the same responsibilities on foreign-flag lines as on American-flag carriers. We know that our regulatory procedures differ substantially from nearly all other nations in the world. The deferred rebate system is common commercial practice in many countries.

Nonetheless, our foreign trade is the richest in the world. It must be made clear to all foreign and domestic flag lines that participation in our ocean commerce is a privilege, not a right. Full cooperation by all liner carriers is therefore an end which should be reflected in any statutory modifications which are to be considered by the Congress. We have the duty to regulate our commerce in the best interests of the Nation, however, that may diverge from the laws of other nations. I believe the thrust of H.R. 9518 is in this direction.

H.R. 9518 logically can be divided into three major subject areas. First, the bill would revise the existing procedures and authority under section 22 of the Shipping Act, 1916, for complaints related to rebating and certain other malpractices. Second, severe penalties are prescribed for failure of a respondent in a rebate proceeding to comply with discovery or subpoenas. Third, the bill would grant amnesty for rebating that occurred prior to enactment of the legislation, removing both the civil penalties under the Shipping Act and criminal exposure under any other statute. I will address each of these three areas separately.

Section 22 of the Shipping Act currently provides any person the right to file a complaint with the Commission alleging a violation of the act and to seek reparation for the injury caused thereby. A proceeding instituted by the filing of the complaint is thereafter governed by the terms of the Administrative Procedures Act and by the Commission's Rules of Practice and Procedure.

H.R. 9518 would remove from this first part of section 22 any complaints which allege rebating violations. Incidentally, while we interpret the intent of the bill to be directed at, and limited to, rebating, we point out that a complaint filed under section's 16 initial paragraph, 16 second, or 18(b), as provided in H.R. 9518 may cover other subjects unrelated to rebating. Therefore, we suggest that the bill needs to be clarified in this area.

Complaints relating to rebating would be handled under a new section 22(c), and would require analysis and some affirmative action by the Commission before a proceeding could commence thereon. Not only would a complainant have no right to seek reparation under this procedure, but the Commission could deny him a forum for his complaint, without hearing, within 30 days, if the Commission deemed the complaint insubstantial.

These results, we believe, are undesirable, and may well violate a complainant's right to due process of law. At the very least, this provision could result in court litigation the first time the Commission found such a complaint to be insubstantial. Thirty days is also an insufficient amount of time to render an informed decision on such