We would recommend that the penalty for failure to furnish such documents by either the carrier or its agent, whether sought by discovery, by subpena, or by any order pursuant to section 21 of the Shipping Act, be the same as suggested for a finding of rebating, described earlier in this statement. Upon enactment of such legislation, those foreign carriers already operating in our trades should be required to establish such a resident agent within a reasonable period of time.

In closing, Mr. Chairman, I want to stress to you my commitment to pursue our present enforcement program against rebating. Admittedly, there is a long road to go before we will be able to say that we have rebating under control, but I do think the Commission is headed in the right direction with Fact Finding Investion No. 9.

As conditions and newly developed information warrant, we will undertake additional investigations and settlement procedures. Our focus will be on the activities of shippers, consignees, and carriers, whether those carriers operate as independents or as conference members.

With respect to conference members, I do want to emphasize that I intend that the Commission monitor the self-policing activities of the liner conferences with great diligence. In this area, the Commission has recently redrafted its rules on conference self-policing, and I am awaiting the input of Messrs. Ingolia and Pankopft before a decision is made whether to issue these proposed new rules. A program for closely monitoring the self-policing reports filed by conferences has also recently been instituted by the Commission.

If the Commission becomes convinced that a particular conference is merely paying lip service to its self-policing obligations under section 15 of the Shipping Act, we should not hesitate to disapprove the outstanding agreement under which the conference is permitted to operate. Incredible as it may seem, since the Commission was created in 1961, it has never instituted a proceeding to disapprove an agreement on a conference's failure to adequately police the obligations under its enabling agreement.

This section 15 disapproval authority is one regulatory tool already available to the Commission that can and should be far more vigorously relied upon in our effort to curb illegal rebating within the conferences.

Once again, I thank you very much for the opportunity to appear before you today. I look forward to working closely with you and the committee in the future as we attempt to make the Commission and the statutes it administers more relevant to current times and conditions. There is much to be accomplished, but I am looking forward to the many challenges that I have been presented.

The Commission staff and I are prepared to work closely with the committee staff on H.R. 9518 in resolving any matters that may still be pending upon the completion of these hearings.

This concludes my testimony, Mr. Chairman. I will be happy to answer any questions you and the other committee members may have. Thank you.

The CHAIRMAN. Thank you, Chairman Daschbach.

The Federal Maritime Commission authorization and staffing, does that come strictly from the Office of Management and Budget and the executive branch?

Mr. DASCHBACH. Yes.

The CHAIRMAN. It does not come through the Congress at all? Except for the appropriating process?

Mr. DASCHBACH. Under current law, that is correct. A bill has passed the Senate which would create an annual authorization process, and it may also require the Commission to submit its budget concurrently to the Office of Management and Budget and to the Congress.

The CHAIRMAN. All right.

Is the Commission adequately staffed today to fulfill its functions? Mr. DASCHBACH. Frankly, I am not yet ready to say that it is not. There are about 330 employees, and I do not believe 5, or 6, or 10 people ought to try to do the work that the Congress and the Office of Management and Budget believe over 300 should do. But before I would say we do not have enough people, I want to make sure that all 330 people are pulling on the rope. Right now I am not in a position to say we do not have enough people. For the presest fiscal year, the Congress has given us authority to hire 29 additional persons, having increased our appropriations by about $440,000.

I might add that I do not believe that the Office of Management and Budget has raised our ceiling yet to permit us to have these people on board at the end of the fiscal year, but we do have authorization to hire 29 additional persons this fiscal year, and we are currently in the process of seeking those people. Most of them will be in the enforcement and investigation area.

The CHAIRMAN. The Federal Maritime Commission is not the only regulatory agency that has had the problem of staffing in order to properly fulfill its mission and role. If at any time you feel that the Federal Maritime Commission is not properly staffed, and is receiving insufficient funding, if you would communicate that to this committee, we would make every eort to see that you get sufficient funds.

You were created by the Congress, and created for a specific role and mission, and if you are not properly given the tools to carry that out, it is the Congress' responsibility, I think to get you the proper funding, notwithstanding what we all understand as the dollar fight within the Office of Management and Budget.

Mr. DASCHBACH. I certainly appreciate the responsibility that the Office of Management and Budget has with respect to the entire budget. I do not want it to be implied that I do not intend to support the President's budget submission made for the Commission.

At the same time the Office of Management and Budget officials are aware, you and I are aware, of the appeals process for funding, and I do not intend to be reticent about letting the Congress know what I believe the Commission needs.

The CHAIRMAN. How many people do you have in the Enforcement Branch?

Mr. DASCHBACH. We have 48 total employees. Thirty-four are investigators. In addition, we are seeking to fill 29 new positions. Not all of those, however, will be within the Bureau of Enforcement.

To a certain degree, we are now experiencing the difficulty of a bottleneck developing in that investigative work being generated by the Bureau of Enforcement coming into a narrow neck in the General Counsel's office. It is not the usual bottleneck which lawyers often create and I am a lawyer myself. It is purely a question of manpower to process the work that is coming up from the Bureau of Enforcement.

Not all of those 29 new positions will be strictly investigators, or enforcement officers. Some of those resources will be used in the General Counsel's office, to continue to carry the process to its ultimate conclusion.

The CHAIRMAN. Would you submit, in legislative form, the proposals you have made here today to this committee?

Mr. DASCHBACH. Yes, sir, we will.

[See departmental report on p. 9.]

The CHAIRMAN. Mr. Kyros?

Mr. KYROS. Thank you, Mr. Chairman.

Mr. Daschbach, just a couple of questions.

First, you remember the Sea-Land service settlement that took place before you became Chairman. I am sure you had a chance to review the civil penalty settlement that was imposed on Sea-Land. Was that penalty fair, in your estimation?

Mr. DASCHBACH. Well, that obviously calls for a subjective answer. I would say yes, it does. Yes, it was.

A portion of my statement which I did not read indicates that the greatest benefit derived from the Sea-Land disclosure is that the Commission gained hard evidence indicating a pattern of rebating worldwide. So I think that in addition to the monetary penalty which was assessed, and which will be paid into the General Treasury, the Commission has gained a wealth of invaluable information.

Mr. KYROS. There is no information, other than what has been stated last spring in the testimony before the Senate hearings that that will be paid in full, in installments as required by the settlement agreement?

Mr. DASCHBACH. That is correct.

Mr. KYROS. You stated you have 18 foreign-flag carriers under investigation?

Mr. DASCHBACH. Yes.

Mr. KYROS. And eight American flag?

Mr. DASCHBACH. I believe it is nine American flag lines.

Mr. KYROS. Now, in relation to any of the 18 foreign-flag carriers, have you received any documents and have you entered into any discussions with any of them about settlement of the rebating problems?

Mr. DASCHBACH. Let me digress for one moment. With the pendency of this legislation, and actually prior to its introduction, going back to March of this year when the amnesty issue arose and speculation about it commenced, no carriers have been willing to enter into settlement agreements. As you know, one of the final provisions in the bill would lock carriers into those settlements. We received indi

cations from carriers that they are not going to conclude agreements as long as they are hanging in the balance on the amnesty issue. Mr. KYROS. But the bill provides once they have notice in any way of being investigated, they cannot receive amnesty.

Furthermore, let me ask you this about amnesty.

As I understand it, the agency opposes amnesty for all violations of law arising from rebating.

Suppose it were limited to rebating and no other violations? Under any conditions you do not think amnesty would be a good idea?

Mr. DASCHBACH. I am not saying we are opposed to amnesty. I just have some very serious concerns about it.

The interesting thing, as you know, is that every agency that has testified, both before this committee and on the Senate side, has opposed amnesty, particularly those agencies that are administering some of the criminal statutes. If amnesty were granted only from Shipping Act sanctions, but not from the criminal sanctions, I do not believe anybody would be forthcoming.

That would be like the Metropolitan Police saying come on in and talk with us about your traffic violations, and we will forgive them. We will give you amnesty, but we also know that you have got them with a stolen car. So, come in and talk to us about traffic violations, but we'll arrest you for stealing the car.

It seems to me it would be an interesting twist if the situation were. actually reversed, and amnesty was granted from criminal sanctions or penalties if a party was forthcoming to the Federal Maritime Commission and paid penalties under the Shipping Act.

I am not necessarily suggesting that, but if you think of it in those terms, party will be granted amnesty from the criminal statutes if it goes before the Federal Maritime Commission and pay a civil penalty.

Mr. KYROS. So far in the hearings, Mr. Chairman, there has been really no great appreciation of, I thought, the hard efforts you must go through in the Commission to get all these carriers in and get their documents and strike a settlement.

The idea has been that people have committed wrongs, and they should pay their way. The amnesty position was only a suggestion, a recommended way to assist your Commission. It really has not flown. People are genuinely not interested.

Even you suggested other alternatives, a series of penalties, which would give you greater clout in your investigation of rebating.

Thus far, the amnesty provision has not been supported at all. I want you to be aware of that. Unless you want to come back and say there ought to be something to be an inducement for carriers and shippers to come in, thus far it has not been supported.

Mr. DASCHBACH. It seems to me it would certainly be an inducement to be granted amnesty from criminal wrongdoing, even if not from Shipping Act violations.

Mr. KYROS. The Department of Justice does not like it.

Mr. DASCHBACH. Yes, that's correct.

Mr. KYROS. Neither does the Securities and Exchange Commission. They have serious objection to giving somebody umbrella immunity. Mr. DASCHBACH. We could not comment on the propriety of granting amnesty from those violations. From our view, if amnesty for

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violations of the Shipping Act were granted but not for criminal acts, people would not be forthcoming.

Mr. KYROS. Mr. Bakke said at one time it would take 2 years to complete the investigation. You have 27 carriers and 215 shippers and consignees under investigation.

What are you estimating now down the road for completing this investigation and achieving settlements?

What are you estimating the timespan to be?

Mr. DASCHBACH. I am not aware that we have modified the estimates. I believe that was this past March, before the Senate Commerce Committee. Since then three carriers have moved to quash subpoenas which the Commission has issued against them.

Mr. KYROS. Zim is one of them?

Mr. DASCHBACH. Yes, along with Phoenix and OOCL.

Mr. KYROS. All foreign carriers?

Mr. DASCHBACH. Yes.

Mr. KYROS. This could mean protracted litigation on the issue of production documents?

Mr. DASCHBACH. Yes.

Mr. KYROS. That is one of the reasons why it was thought that by some kind of legislation we could apply a systemwide approach to attacking rebating, instead of having it strung out for years and months on end with the necessary harm to the industry, by having all the industry tagged as wrongdoers for a long time.

Now, you have the problem of going forward with the penalties and the alternatives which you propose, which are prospective in

view.

What are you going to do about achieving settlements in past rebating?

Mr. DASCHBACH. I certainly share your feeling. From an administrative standpoint, to achieve the objectives that I have for the Commission it would be very beneficial if we could just wipe the slate clean and forget about the past.

Obviously, I am somewhat on the fence about amnesty from the Shipping Act penalties. I do not mean to be difficult about it, but it is really a policy judgment that the Congress needs to make, Mr. Kyros.

Mr. KYROS. Yes; but we expect recommendations from the Commission.

You are the ones who are the experts in this area, who are struggling with the particular weapons. We only want to add a string to your bow so you can do your job.

The CHAIRMAN. We have a vote on the ERDA authorization.

I think we will break at this time until 2:15 o'clock.

[Whereupon, at 1:05 p.m., the subcommittee recessed, to reconvene at 2:15 p.m., the same day.]

AFTERNOON SESSION

The CHAIRMAN. The committee will come to order.

Mr. Kyros.

Mr. KYROS. Thank you, Mr. Chairman.