Our devotion to the sanctity of antitrust principles would lead us to expect in this situation that the trade routes dominated by strong conferences would have higher rates than the trade routes covered by conferences subjected to Shipping Act regulation with an ever-increasing influence given to antitrust philosophy. Very frequently this expectation is not achieved. We suggest that because the foreign-to-foreign conferences are able to keep the available tonnage closely in line with the available quantities of cargoes, their members' vessels are able to sail full or nearly full on most voyages and profit at modest rates; whereas, the United States legal climate encourages overtonnaging of trade routes so that vessels depart half full, and these lesser cargoes per vessel must pay rates which meet the cost of moving the entire vessel's capacity. Since conferences subjected to a regimen of regulation seem to produce generally higher rates than conferences which are left free to pursue rate policies without regard to governmental regulation, it would seem to be a rather dubious policy to try to improve the position by imposing additional regulation. Dare it be suggested that perhaps we need less regulation rather than more? COMMENTS ON SPECIFIC PROVISIONS OF TITLE IX We turn now to an examination of the several sections in Title IX, in the event that it is decided that something along this line should be enacted notwithstanding the good reasons why it should not. The declaration in Sec. 901 of Congressional sentiment with regard to “unreasonable" disparities raises the threshold problem of the criteria for recognizing an "unreasonable" disparity. The concept of a reasonable rate has evolved over decades of case-by-case adjudication to a point where the concept has an established meaning, although one may well quarrel as to the benefit to the public in view of the sorry state of regulated domestic transportation. However, even the questionable elements determining a reasonable rate are of no help in ascertaining what is a reasonable or unreasonable disparity be tween two rates, each of which may very well be a reasonable rate. Secs. 902, 903 and 904 raise two important questions for examination before the language of the sections themselves can be commented upon. The two questions presented for first consideration are: (1) What is the standard by which a disparity will be determined to be "unreasonable," a matter we have mentioned above; and (2) Is not the power to alter "unreasonable" freight rates actually the power to fix those rates, and if so, is it wise to involve the Federal Maritime Commission in rate-making to a greater extent than at present? The intent and purpose of the Shipping Act, 1916, and each of its legislative amendments has been to foster and expand the maritime commerce of the United States. Not surprisingly, then, we see that the threefold test for Maritime Commission rejection of an ocean freight rate has been whether the rate in question (1) "is unjustly discriminatory between shippers or ports", (2) is “unjustly prejudicial to exporters of the United States as compared with their foreign competitors", or (3) is "so unreasonably high or low as to be detrimental to the commerce of the United States". Those are, verbatim, the standards established in Sections 17 and 18(b) (5) of the Shipping Act [46 U.S.C. $$816, 817]. Perhaps those standards are not ideals of precision, but Sec. 904 of this bill would mandate Commission disapproval of any rate which reflects an "unreasonable" inbound-outbound or third-country disparity, regardless of the effect of such rate upon shippers, ports, exporters or commerce generally. Worse yet, though the bill establishes new tests for rates which hinge upon determination of "unreasonableness" of a disparity, nowhere is it stated what constitutes such "unreasonableness". It is clear that under the present provisions the Commission may reach a fairly measured determination as to unjust discrimination or prejudice as between shippers, ports and domestic and foreign exporters, or may determine what is so unreasonable as to be actually detrimental to the commerce of the United States: this can be done because fairly concrete standards of measurement are supplied, e.g., a rate is unreasonable if in fact detrimental to commerce and either exorbitantly high or so low as not to recoup out-of-pocket costs of carriage. However, one seeks in vain in this bill for that standard which, by comparison to the adduced facts, determines whether a disparity is simply reasonable or "unreasonable". In effect, the Commission would be ordered to sail through these shoals before the wind—but without a chart. The problem could not be put more succintly than in the Commission's own words: "The mere existence of a disparity does not necessarily mean that the higher rate is 'detrimental to the commerce of the United States.'" Iron and Steel Case (9 F.M.C. at 191). "The mere fact that the rate in the reverse direction is substantially lower does not justify a finding that a rate under attack is unreasonable or in any other way detrimental to our commerce". Edmond Weil v. Italian Line "Italia" (1 U.S.S.B.B. 395,399). The second problem posed by the regulatory provisions of Title IX is the potential involvement of the Maritime Commission in rate-making in international trade. It is beyond dispute (or should be) that the power to alter rates comprehends the power to make them. That rate-making would be the practical result of this bill is beyond doubt from the addition of 'unreasonableness" in Sec. 902 to Sec. 17 of the Shipping Act, which would then provide that the Commission may "alter [such rate, fare or charge] to the extent necessary to correct . . . unreasonableness." This is tantamount to a proposal to vest the Commission with rate-making power. That idea is not a new one; indeed, the matter was considered at length on the occasion of the major amendment of the Shipping Act in 1961, when Sec. 18(b) (5) was added. The original bill was the antecedent of P.L. 87-346 (H.R. 4299, 87th Cong., 1st Sess., February 15, 1961), and contained the following insertion in Sec. 15 of the Act: "Whenever the Board finds any rate, fare or charge to be detrimental to any segment of the commerce of the United States it may fix and order enforced a reasonable maximum or minimum rate, fare or charge, as the cast may be, which it has determined not to be detrimental to any segment of the commerce of the United States." This language which, it should be noted, is far more definite and concrete than that now proposed, was dropped in draft revision No. 2 of H.R. 4299, printed on April 13, 1961, following consideration by the House Committee on Merchant Marine and Fisheries. It never crept back in. Nor was this deletion a casual one-it was made at the request of the then Chairman of the Federal Maritime Board, for reasons explained in his testimony: "The effect of this language which we have asked to be stricken is to put authority in the Board to direct the change of a rate in the foreign commerce of the United States where a trade from one foreign country to another foreign country could be said to be detrimental to our commerce. "We do not think that that is a proper basis upon which we should have that authority. "We do not think that this Board, No. 1, should have authority to affirmatively fix the rate in foreign commerce. We think that we should have the authority, and we do have it under the present law, to strike down a rate if we determine that it is detrimental to the commerce of the United States. "We think that, if this country took the position that it should set the minimum and maximum rates in foreign trade, it would be too much of a departure from the method by which international trade is carried on. "We think that the best system of setting rates in international trade is by the establishment of strong conferences, properly policed, and we think that this system is a good system and that, properly regulated by the Board, the conferences are the best method of setting the rates in international trade.” (Hearings Before The Special Subcommittee on Steamship Conferences of the Committee on Merchant Marine and Fisheries, House of Representatives, 87th Cong., 1st Sess. on H.R. 4299 (1961), pp. 47-48.) And compelling reasoning was forthcoming from this very Committee, expressed at n. 25 of S. Ren. No. 860, 87th Cong. 1st Sess. (1961): "That which is our foreign commerce in New York is Italy's in Genoa. If we set such a pattern, despite our many treaties of friendship, commerce, and navigation, what is to deter Great Britain from exercising a similar power? Since it requires no imagination to hypothesize the chaos which would result if we determined that a $40 rate on particular commodity moving to Great Britain was so unreasonably high as to be detrimental to our foreign commerce and Great Britain made the opposite determination, we cannot subscribe to any statute proclaiming such a right in our Government. This position has been urged upon us by the Department of State, the Department of Commerce, all American and foreign flag ocean common carriers, and many American Importers and exporters." The late Senator Kefauver, author of the present Sec. 18(b) (5) of th ping Act, made his position perfectly clear: ༄“ *་ "It is not the intention of this amendment to institute a ratemaking scheme such as that of the Interstate Commerce Commission or that of some of the other regulatory agencies." Index to the Legislative History of the Steamship Conference/Dual Rate Law, Public Law 87-346 (75 Stat. 762), Sen. Doc. No. 100, 87th Cong., 2nd Sess. (1962), p. 424. In response to questioning by Senator Engle, Mr. Kefauver was equally explicit, and the following brief colloquy indicates the precise understanding with which the present Sec. 18(b) (5) was adopted: “Mr. KEFAUVER. It is not the intention of the amendment to authorize the Commission to try to fix specific rates. It is the intention of the amendment to give the Commission similar authority to that the Civil Aeronautics Board has in connection with international airline rates. In that case the rates are fixed. or suggested, by the international body. Then they are submitted to the CAB and the CAB can throw them out if it thinks they are unreasonable. That kind of concept is what I have in mind in connection with this amendment. "Mr. ENGLE. But the rates have to be unreasonable to the point that they are detrimental to the commerce of the United States. Mr. KEFAUVER. That is what the amendment states. "Mr. ENGLE. With that understanding, and with that legislative record on the matter, I am perfectly satisfied to accept the amendment." (Index, supra, p. 426) (emphasis ours). Finally, Senator Kefauver gave the following explanation in clarification: "... the language in the amendment merely codifies existing administrative interpretation of the Shipping Act of long standing. . . ." "... no one would seriously advocate international rate control by the Commission. . . ." (Index, supra, p. 427) We submit that the reasoning which prevailed on this question in 1961 retains complete validity when expressed in the context of our consideration in 1971. The economic picture in the United States has changed during the past ten years-that is simple fact, and it is responsible for the production of S.2754. But the potential for misadventure in investing the Maritime Commission with the power and the duty to fix international ocean freight rates is at least as great, and probably much greater than it was ten years ago. In an atmosphere already charged with resentment over unilateral United States action affecting the international economy, we can confidently predict that foreign governments will not submit passivly to unilateral United States control of ocean freight rates in international trade. With specific references to Secs. 902 and 903 of the proposed Title IX, we would then make the following brief observations: Sec. 902 (a) would require the carriers and their conferences, without the aid of any specified criteria, to guess whether the Commission would guess that any individual rate disparity was "unreasonable"; if they guess that any disparity might be guessed in "unreasonable" they must then guess what would be guessed a reasonable disparity and file the appropriate rate with the Commission. Sec. 902 (b) would require the Maritime Commission-again without any expressed criteria-to guess whether it was the intent of the Congress that any given disparity be deemed "unreasonable". The Commission would have to guess at the reasonableness of each disparity and, if the Commission guessed any given disparity "unreasonable," it would then have to guess what rate would produce a reasonable disparity and would then be empowered to translate that unrestrained guess into law by fixing a new rate, fare or charge in place of that which it has guessed to produce an "unreasonable" disparity. Under Sec. 908, any disparity between a higher outbound rate and a lower inbound rate, though its mere existence is meaningless, would be forbidden unless "explained" by the carriers of their conferences. If the explanation does not satisfy the Commission, it may order a hearing to determine whether the disparity is "unreasonable”-again without any specified criteria for determination of reasonableness. And then appears a clause of propesed Sec. 903 which virtually leaps at the eye from the printed draft. The flatly stated purpose of this clause is to overturn the burden of proof at Commission-instituted hearings and to require the carrier to prove that any apparent disparity is “reasonable”. About the kindest remark one can make of this clause is that it seeks to create a presumption of guilt rather than of innocence; but beyond that, it flies in the fact not only of the sense of fair play which is just the fame of American jurisprudence, but also of the philosophy of the Administration Procedure Act (5 U.S.C. §§551-559; 701-706). In the course of its deliberations on that legislation, the Senate Committee on the Judiciary stated: . . except as applicants for a license or other privilege may be required to come forward with a prima facie showing, no agency is entitled to presume that the conduct of any person or status of any enterprise is unlawful or improper. . . .” (Sen. Rep. No. 752, 79th Cong., 1st Sess. 1945) (emphasis ours). And while the congressional deliberations which culminated in the Shipping Act, 1916, were in progress, the Supreme Court specifically stated, in Louisville and Nashville R.R. v. U.S., 238 U.S. 1, 11 (1915) that: "Where an existing freight rate is attacked, the burden is on the complainant to establish that it is unreasonable in fact." The proposed burden is vastly greater than the mere "burden of going forword" which the Maritime Commission has, without statutory authorization, applied to carriers in several recent cases in which it has sought to have them "justify" rates. This was recognized by the Commission itself in one such case, Rates in the Hong Kong-United States Trade, 11 F.M.C. 168, 173, where it said (quoting itself in Iron and Steel, supra): "The mere existence of a disparity does not necessarily mean that the higher rate is 'detrimental to the commerce of the United States.' The Commission would still have the burden of proving that the rate has had a detrimental effect on the commerce; e.g., that tonnage is handicapped in moving because the rate is too high." This unjust burden-which amounts to a requirement that the accused prove innocence beyond a reasonable doubt—becomes literally impossible to bear when the carriers or their conferences are required to prove that a rate is "reasonable" without reference to any established criteria for such a determination. The proposal contained in Sec. 903(2)(a) that carrier or conference tariff filings be limited to twenty basic rates, unless otherwise permitted by the Commission upon good cause shown, is immeasureably more unreasonable than it would be to require Sears & Roebuck to assign any of twenty basic prices to every item in its catalog. This is not merely humorous comparison, for ocean carriers are called upon to move every conceivable item or commodity, including some not available by mail order, such as railroad locomotives, dried cattle sinews, human ashes, etc. It is beyond belief for any one to suggest seriously that an infinite variety of objects, having varying values, densities, compatibility of stowage with other articles, potential hazzard to the vessel and those aboard, competitive position in foreign markets, etc., can be forced into only twenty rates, rather than the hundreds of different rates now representing the culmination of many years of experience and negotiation between carriers and shippers. Each item in a given tariff is assigned a rate which must reflect, among other considerations, the special problems which its movement poses. To forbid such considerations and arbitrarily require every item to be assigned to one of twenty previously established "standard" categories would inevitably result in total chaos. The end result of such an imposition would defeat the very purpose of this measure. The carriers and their conferences are sensitive to desires on the part of shippers and the Commission to reduce the complexity of tariffs: we believe that it is in the interests of all segments of the maritime industry that this be done, but we urge that accomplishment of workable improvements be left with the industry, rather than the industry being required to force the goods of the world through a sieve of twenty holes. Sec. 904 of this bill evokes the same comment which we have made with regard to Secs. 902 and 903 regarding the insignificence of apparent disparities and the impossibility of judging whether they are "unreasonable” in the complete absence of any comparative standard of reasonableness. Standing alone, Sec. 904 is for these reasons considered by us to be the most objectionable single facet of this proposal. S. 2754's final proposed alteration of the Shipping Act is contained in Sec 905. Though not stated in the draft before us, we have assumed that Sec. 905 is intended to amend Sec. 18(b) (5) of the Shipping Act. So viewed, it appears to be the intent of Sec. 905 to rest the Maritime Commission with power to assess a fine ranging between one cent and one thousand dollars per day for any violation-whether it be a violation of the Shinning Act or of an order made after a hearing pursuant to the safeguards of procedure prescribed by the Administrative Procedure Act (Title 5, U.S. Code), but also of any rules or regulations which the Commission may promulgate without the stringent safeguards which govern the issuance of orders. The proposal further gives the Commission the power to remit or mitigate such a penalty "upon such terms as it considers proper"; this can only be an open invitation to the Commission to use the penalty power as an instrument of blatant coercion. We have surveyed the penalty provisions of the United States Code in respect of several other administrative agencies-the ICC, CAB, FCC, FDA, FPC, FTC, NASA, NLRD and SEC. We have supplied in an appendix hereto a list of references to the applicable statutory provisions. We observethat, of the four agencies (ICC, FCC, FPC and FTC) for violation of whose orders a civil penalty is prescribed, none may assess the penalty itself. Recovery of the penalties is by institution of a civil suit in a District Court of the United States. In other words, by the method which now is prescribed in Sec. 18(b) (6) of the Shipping Act. We are almost at a loss for words to describe the repugnance of this proposal. It seeks nothing less than to couple the very broad executive/legislative power which the Maritime Commission already possesses with the purely judicial (not quasi-judicial) authority to assess, remit or mitigate a substantial penalty for any violation. The Commission would thus be constituted an "absolute monarch", with the powers of dictator, policeman, prosecutor, judge and the jury--simultaneously. "Repugnant" is the only fitting description of this concept. The need for a system of independent review of orders of the Commission, long recognized in law, is certainly no less because the Commission is given the power to remit or mitigate a penalty which it has itself assessed We submit that the powers granted by the present Sec. 18(b) (6) of the Shipping Act, together with those granted in Sec. 17, fully enable the Commission to discharge its duties and responsibilities,and that the Courts, and not the Commission, should remain the adjudicators of disputes between the agency and the public. We appreciate the opportunity to submit our views on this Bill, which is of such obvious concern to the maritime industry. If our comments have been unusually lengthy, and/or unusually blunt, it is because of our conviction that such a radical proposal requires examination both in depth and in plain language. If there are to be hearings directed specifically to Title IX, we would like to furnish a witness who would be able to respond to any questions which our presentation might provoke. FAR EAST CONFERENCE. NORTH ATLANTIC BALTIC FREIGHT CONFERENCE. NORTH ATLANTIC CONTINENTAL FREIGHT CONFERENCE. Senator INOUYE. Our next witness is Mr. William Toohey, vie president of traffic of Australia/New Zealand Farrell Lines, Inc. H will be accompanied by Mr. Hamm, Mr. Marshall, Mr. Nash, M Reardon, and Mr. Van Emburgh, conference officials. We welcom you, gentlemen. STATEMENT OF WILLIAM F. TOOHEY, VICE PRESIDENT OF TRAF FIC, AUSTRALIA/NEW ZEALAND FARRELL LINES, INC.; ACCOM PANIED BY WILLIAM L. HAMM; CHARLES D. MARSHALL; JAME F. NASH, EDWARD F. REARDON, WILBUR VAN EMBURGH, JR CONFERENCE OFFICIALS; AND ELMER C. MADDY, LEGA COUNSEL Mr. Tooney. We appreciate very much this opportunity the con mittee has given us to appear to offer our views concerning S. 275 You have already been given the names of the gentlemen who ar |