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mistakes, by the proposals that we make and the industry agrees with, there would have to be some kind of a method, which I will deal with later in my statement, of ascertaining whether someone else shipped at the same time and should also have the benefit of the lower rate. And this checking, this type of checking is so much of a burden that we had to change our original proposal from the House into one that imposed less of a burden on industry to determine who else is affected by these adjustments. And in fact this was the second, I mentioned one already, the second big change that the industry wanted and we agreed with in the original House bill, and from S. 1905.
However, what I would suggest about this is that we make a report to you very shortly at some length dealing with the question you asked. I have given you off-the-cuff opinions, and, of course, you will want to ask Mr. Mahoney and we will submit a letter to you on this subject very shortly.
Senator BARTLETT. All right. You may continue, Admiral.
Admiral HARLLEE. The view that the shippers should be granted relief in those cases where a clerical or administrative error has resulted in the imposition of an unintended rate is, I feel sure, shared by the entire shipping industry. I know of no opponents to the objectives of our proposal.
Since the proposed legislation, S. 1905, was referred to your committee, there have been hearings on the companion House bill, H.R. 9473, before the House Subcommittee on Merchant Marine. Testimony before that subcommittee indicates that some revisions to S. 1905 are desirable to clarify the proposed statute. As introduced, there were no restrictions as to the type of cases in which the Commission could grant an application for permission to refund or waive an undercharge. We agree that this authority should be limited as requested by the industry to cases of clerical error or inadvertent failure to file, and ask that the following be substituted for the first proviso in S. 1905. The other changes from the original text would make it clear that the bill would apply specifically to the foreign commerce and to conferences as well as independent "carriers.”
I would suggest this language, which is the same as the House bill which was reported out:
Provided, however, That the Federal Maritime Commission may in its discretion and for good cause shown permit a common carrier by water in foreign commerce or conference of such carriers to refund a portion of freight charges collected from a shipper or waive the collection of a portion of [its] the charges from a shipper, "? where it appears that there is an error in a tariff of a clerical or administrative nature or an error due to inadvertence in failing to file a new tariff and that such refund or waiver will not result in discrimination among shippers;
Although the bill would require a demonstration of good cause and i a determination by the Commission that refund or waiver would not result in discrimination among shippers, there is always the danger that it could become a tool wbereby unethical carriers and/or shippers la could extend or obtain unfair competitive advantages for such carriers and/or favored shippers. For this reason, we included in the bill statutory safeguards which were designed to discourage its use as such a device. The second proviso requires that before applying for permission to make a refund or waive collection of a portion of the freight charges, the carrier must have filed with the Commission a new tariff setting forth the rate on which the refund or waiver would be based.
The third proviso as originally introduced would have required that the resulting rate be effective for the period commencing 30 days prior to the date of the shipment until 30 days subsequent to the date of application for refund or waiver or until 90 days subsequent to the shipment or shipments involved, whichever is later. This proviso i would have required that the corrected rate be applicable for a sufficient period of time to discourage any attempt at discrimination or favoritism since the parties concerned, especially the carriers, would know that the resulting rate would be applicable to all shipments for the specified span of time. Thus, if the lower rate was merely an effort to accommodate a particular shipper, this provision would prevent the assessment of a higher rate during the specified period thereby making any attempted favoritism uneconomical.
Now that proviso is the third major change made in accordance with the House hearings and industry's position; we eliminated that because of very undesirable features which were pointed out in which we concurred. Section 18(b) of the statute presently requires that before any tariff change can be effective which results in an increased cost to shippers, a new tariff or tariffs must be published and filed with the Commission at least 30 days prior to the date such increase will become effective. In the event a carrier or conference of carriers is operating under an approved dual rate contract system, a change resulting in an increased cost to shippers can only become effective by publishing and filing any such increase with the Commission at least 90 days in advance. Changes resulting in a decreased cost to shippers may become effective upon publication and filing with the Commission.
Upon reconsideration in light of the testimony before the House subcommittee, it appears to us that these safeguards; that is, the 30-day notice and the 90-day notice, already built into the statute, are such that it would be unnecessary to freeze the rates as provided in the original bill. We think that the flexibility presently in the act, that is the ability to increase or decrease rates upon proper statutory notice in order to meet competitive market conditions, should be preserved.
As a result of the hearings in August on H.R. 9473, the Merchant Marine and Fisheries Committee on November 9, 1967, ordered favorably reported to the House, a substitute bill. We have carefully reviewed this substitute bill and are of the opinion that it accomplishes the purposes which prompted the Commission to seek legislative authority to permit refunds and at the same time contains adequate safeguards to prevent the use of this legislation as a rebating tool.
First, the present statutory filing requirements of section 18(b) are retained, i.e., the 30 or 90 days' notice and filing as to increases must by complied with.
Second, it makes mandatory refunds applicable all shippers for similar shipments made from the date of shipment until the date of application, without freezing the rate.
Third, it makes mandatory the publishing of appropriate notice concerning the erroneous rate. If there is no adequate method of notification available, the Commission may require conferences and/or carriers to take positive steps to ascertain other shippers entitled to a similar refund and in such instances to provide direct notice to such other shippers.
A requirement that application be filed with the Commission within 180 days from the date of shipment appears in the final—fourthproviso of this revised bill. The third proviso specifies that “additional refunds or waivers as appropriate shall be made with respect to other shipments in the manner prescribed by the Commission in its order approving the application.'
If the application for refund or waiver is filed within the prescribed 180-day period and is approved, the Commission would enter order of approval authorizing the refund or waiver. The Commission also would prescribe the method of notice to be given by the carrier to other shippers, that a refund is due and of the rate on which the refund or waiver is based. As a result of that notice other applications may be submitted directly to the conference or carrier and would not have to be acted upon by the Commission. A report to the Commission of resulting refunds would suffice.
An example of the application of this bill would be as follows: A shipment is booked on January 1 at a $20 rate negotiated between the carrier and the shipper. Through inadvertence, the carrier fails to file the $20 rate and the shipment is assessed the published rate of $30. The error is discovered and on May 1 application is filed with the Commission for authority to refund the
difference. A proceeding would be instituted to ascertain whether a mistake had been made and the precise calculation of refunds attributable to the mistake. Of course that would be a shortened proceeding.
The Commission's order of approval would specify the type of notice to be given, e.g., where the conference employs a dual rate system and maintains a comprehensive shippers' mailing list, the order might specify that a copy of the notice be mailed to each contract shipper, and such action would constitute sufficient notice under the statute. All other shippers assessed the erroneous rate on or after January 1, would be entitled to a refund, and on receipt of the notice would file claims directly with the carrier.
In those instances where the conference or carrier does not maintain a mailing list, which in the judgment of the Commission could be considered sufficiently comprehensive for adequate notice, the order of approval would specify the steps that the carrier or conference would have to take to notify or ascertain all shippers of the same commodity during the period and to make appropriate refunds.
I would like to interject here that these last few paragraphs have dealt with the final objection of the industry which was their interpretation—and I think it was a correct one—that the original bill would have required them in these cases to search through all of their manifests and to notify the shippers of a change stemming from these proceedings which they felt to be—and I think it probably is from what they have told us--a very difficult and unnecessary burden, to look through all manifests for a particular commodity, when they may have thousands or tens of thousands of them. Therefore we reached agreement on a means of seeing that other shippers would know about the change in rate by notice to contract shippers, or to a mailing list, or as a last resort searching the manifests. I think that was the last objection they had to the original bill.
To summarize, the Commission supports the amended bill reported by the House Merchant Marine and Fisheries Committee because, in
our view, where no discrimination results from the approval of an application for permission to refund or waive an undercharge, an innocent party should not be required to bear the consequences of a carrier's mistake in failing to file a tariff rate which the carrier intended to file and which the carrier and shipper acting in good faith had agreed would be applicable. Accordingly, we recommend that S. 1905 be simiarly amended and would strongly favor its enactment. We think this bill is clearly in the public interest. A
copy of the bill which we recommend be enacted is attached and I would request that be put in the record.
(The bill recommended by the Federal Maritime Commission follows:)
A BILL To amend provisions of the Shipping Act, 1916, to authorize the Federal Maritime Commission to
permit a common carrier by Water in foreign commerce of conference of such carriers to refund a portion of the freight charges
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 18(b) of the Shipping Act, 1916 (46 U.S.C. 871(b)), is amended by changing the period at the end of subsection (3) thereof to a colon and adding the following provisos:
“Provided, however, That the Federal Maritime Commission may in its discretion and for good cause shown permit a common carrier by water in foreign commerce or conference of such carriers to refund a portion of freight charges collected from a shipper or waive the collection of a portion of the charges from a shipper where it appears that there is an error in a tariff of a clerical or administrative nature or an error due to inadvertence in failing to file a new tariff and that such refund or waiver will not result in discrimination among shippers;
"Provided further, That the common carrier by water in foreign commerce or conference of such carriers has, prior to applying for authority to make refund, filed a new tariff with the Federal Maritime Commission which sets forth the rate on which such refund or waiver would be based;
“Provided further, That the carrier or conference agrees that if permission is granted by the Federal Maritime Commission, an appropriate notice will be published in the tariff, or such other steps taken as the Federal Maritime Commission may require, which give notice of the rate on which such refund or waiver would be based, and additional refunds or waivers as appropriate shall be made with respect to other shipments in the manner prescribed by the Commission in its order approving the application; and
“Provided further, That application for refund or waiver must be filed with the Commission within 180 days from the date of shipment.”
Admiral HARLLEE. I would like to make a few other comments about the points you brought up, Mr. Chairman. I do want to make it clear that the comments that I made are definitely not unalterably in opposition to this for two or three reasons. One of the reasons is that I will of course need to check with the other Commissioners to get a vote on that subject after a proper discussion. But we can do that expeditiously, because I am very anxious, and I think you are too, to see this passed this session of Congress.
And in that connection, I want to say that we started efforts to get this legislative authority some time ago—in fact, back in February 1965—and of course the Bureau of the Budget had to check with many other agencies involved. We had to have many discussions with the Commissioners and the House and Senate have been so busy, as you know, that it is difficult to get hearings on these matters. So there has been a chain of circumstances, perhaps some our own fault, which resulted in delay. So I would like to see this concluded in this session. After discussing it with the other Commissioners and after hearing the industry's comments, we can give you a better answer to your question. I made the comments I did make in an effort to be helpful to you.
Senator BARTLETT. When did you first ask the Bureau of the Budget for clearance on legislation of this character?
Admiral HARLLEE. February 24, 1965, which was a month after we made the decision that we didn't have authority to do it.
Senator BARTLETT. When did you receive clearance?
Admiral HARLLEE. We received--well, it had to undergo changes and we finally received clearance I think early this year. It was November 1966.
Senator BARTLETT. That will be enough of that subject.
Admiral HARLLEE. Mr. Chairman, I do want to emphasize one point. I recognize the sort of ridiculousness of this position in a sense and would have made much more of a push on it had it been somewhat larger sums of money involved. But in the meantime we have set up a situation which is particularly difficult to reach with foreign carriers and conferences of compliance with the tariffs, integrity of the tariffs, and the moneys involves for any one party have been relatively small in terms of something like one-hundred-thousandths of 1 percent of the freight bill of the United States. But as you say, $1,000 to an individual is a lot, or even $10.
Senator BARTLETT. I wasn't trying to assess any blame against the FMC, I just wanted to find out how long it took the Bureau of the Budget to clear minor matters such as this.
Admiral HARLLEE. In defense of the Bureau of the Budget, let me say they don't sit on things, they have to check with the Department of Justice, they have to check with the ICC and CAB, and a good many other agencies. And these things also take time.
Senator BARTLETT. Yes. Let me say I am not wedded to this retroactive feature. I never thought of it before. I just wanted to bring it up:
Admiral HARLLEE. It might very well be after hearing the industry's testimony on that and looking into it a bit further, it may be entirely practical without the danger of discrimination. I will have to report to you later on that in letter form.
Senator BARTLETT. Admiral, your statement has been so lucid that I have no further questions to ask and I thank you, Mr. Day, and your associates for coming up this morning.
Admiral HARLLEE. Thank you, Mr. Chairman.
Senator BARTLETT. Our next and final witness will be Mr. Mahoney. STATEMENT OF JOHN R. MAHONEY, ATTORNEY, NEW YORK, ON
BEHALF OF STEAMSHIP CONFERENCES, ACCOMPANIED BY CHARLES D. MARSHALL, CHAIRMAN OF THE ASSOCIATED LATIN AMERICAN FREIGHT CONFERENCES, AND RICHARD GAGE, CHAIRMAN OF THE NORTH ATLANTIC-UNITED KINGDOM CONFERENCE
Mr. MAHONEY. Mr. Chairman, I am John Mahoney of Casey, Lane & Mittendorf, New York City. At my right sits Charles D. Marshall also of New York. He is
B chairman of the Associated Latin American Freight Conferences.it That is a group of a dozen or so of the conferences that are set forth in appendix A, which is attached to my statement. His area of the d world is roughly, or his beat, I would say, is South-Central American