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FUNDING OF FREIGHT CHARGESr,t

HEARING

BEFORE THE

SUBCOMMITTEE ON

MERCHANT MARINE AND FISHERIES

OF THE

COMMITTEE ON COMMERCE

UNITED STATES SENATE

NINETIETH CONGRESS

FIRST SESSION

ON

S. 1905

A BILL TO AMEND PROVISIONS OF THE SHIPPING ACT,

1916, TO AUTHORIZE TFIE FEDERAL MARITIME COMMISSION TO PERMIT A CARRIER TO REFUND A PORTION OF

THE FREIGHT CHARGES

NOVEMBER 20, 1967

Serial No. 90-56

Printed for the use of the Committee on Commerce

U.S. GOVERNMENT PRINTING OFFICE

89-890 WASHINGTON : 1968
Z.-/14 Y:

r. rk

4•• • .,- 

1

•

COMMITTEE ON COMMERCE

WARREN G. MAGNUSON, Washington, Chairman

JOHN 0. PASTORE, Rhode Island

A. S. MIKE MON RONEY, Oklahoma

FRANK J. LAUSCHE, Ohio

E. L. BARTLETT, Alaska

VANCE HARTKE, Indiana

PHILIP A. HART, Michigan

HOWARD W. CANNON, Nevada

DANIEL B. BREWSTER, Maryland

RUSSELL B. LONG, Louisiana

FRANK E. MOSS, Utah

ERNEST F. HOLLINGS, South Carolina

FREDERICK J. LORDAN, Staff Director

JAMES J. BARRY, Assistant Staff Director

MICHAEL PERTSCHUK, General Counsel

RALPH W. HORTON, Assistant General Counsel

STANLEY H. BARER, Staff Counsel

NORRIS COTTON, New Hampshire

THRUSTON B. MORTON, Kentucky

HUGH SCOTT, Pennsylvania

WINSTON L. PROUTY, Vermont

JAMES B. PEARSON, Kansas

ROBERT P. GRIFFIN, Michigan

SUBCOMMITTEE ON MERCHANT MARINE AND FISHERIES

E. L; BARTLETT, Alaska, Chairman

WARREN G. MAGNITSON, Washington

JOHN 0. PASTORE, Rhode Island

PHILIP A. HART, Michigan

DANIEL B. BREWSTER, Maryland

RUSSELL B. LONG, Louisiana

ERNEST F. HOLLINGS, South Carolina

ROBERT P. GRIFFIN, Michigan

• WINSTON L. PROUTY, Vermont

NORRIS COTTON, New Hampshire

(u)
CONTENTS

Page

Opening statement by the chairman 2

Text of S. 1905 1

Agency comments 1

WITNESSES

Rear Adm. John Harllee, U.S. Navy (retired), Chairman, Federal Maritime

Commission; accompanied by Commissioner James V. Day, Samuel B.

Nemirow, Assistant to Chairman, and Edward Johnson, Legislative

Counsel_ 2

John R. Mahoney, attorney, on behalf of Steamship Conferences; accompanied by Charles D. Marshall, chairman, Associated American Freight

Conferences, and Richard Gage, chairman, North Atlantic United Kingdom Conference 10

ADDITIONAL INFORMATION

Text of bill recommended by Federal Maritime Commission 9

Text of H.R. 9473 20

Werner M. Stern, letter dated November 28, 1967 21

(m)
•
REFUNDING OF FREIGHT CHARGES

MONDAY, NOVEMBER 20, 1967

U.S. SENATE,

COMMITTEE ON COMMERCE,

SUBCOMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.C.

The subcommittee met at 10:08 a.m., in room 5110, New Senate

Office Building, Hon. E. L. Bartlett (chairman of the subcommittee)

presiding.

Senator BARTLETT. The committee will be in order.

Today we will hear testimony on S. 1905, a bill to amend provisions

of the Shipping Act, 1916, to authorize the Federal Maritime Commission to permit a carrier to refund a portion of the freight charges.

(S. 1905 and letter from the Comptroller General follow:)

[S. 1905, 90th Cong., first sess.]

A BILL To amend provisions of the Shipping Act, 1916, to authorize the Federal Maritime Commission

to permit a carrier 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. 817(b)), is amended by changing the period at the end of Slabsection

(3) thereof to a colon and adding the following proviso: "Provided, however, That

the Federal Maritime Commission may in its discretion and for good cause shown

permit a carrier to refund a portion of freight charges collected from a shipper or

waive the collection of a portion of its charges from a shipper; where it appears

that such refund or waiver will not result in discrimination among shippers:

Provided further, however, That the carrier 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: And provided

further, however, That the rate resulting from such refund or waiver when approved

shall be the effective and applicable rate for all other shipments of the same description of the carrier for the period commencing thirty days prior to the date of

the shipment or shipments involved, until thirty days subsequent to the date of

application for refund or waiver or until ninety days subsequent to the shipment

or shipments involved, whichever is later, and, where appropriate, additional

refunds or waivers shall likewise be made."

B-97278.

Hon. WARREN G. MAGNUSON,

Chairman, Committee on Commerce,

U.S. Senate.

DEAR MR. CHAIRMAN: Reference is made to your letter of June 12, 1967,

requesting our comments on S. 1905, which would amend section 18(b) (3) of the

Shipping Act, 1916, 46 U.S.C. 817(b) (3), by giving the Federal Maritime Commission discretionary authority for good cause shown to permit a carrier to

refund a portion of freight charges.

Professional staff member assigned to this hearing: Stanley H. Barer.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., July 18, 1967.

( 1 )
2

The need for such legislation apparently arises since the Federal Maritime

Commission as to common carriers by water in foreign commerce has no authority

to fix and enforce reasonable rates and such carriers by section 18(b) (3) of the

Shipping Act are directed to charge no different compensation than the rates and

charges in its tariffs filed with the Commission, no provision being made for relief

of the shipper in case of mistaken rate filing. Such situations are typified in the

case of Aarmo Bristle Processing & Brush Co. v. Zim Israel Navigation Co., Special

Docket No. 401, the holding on which is summarized in "Traffic World" for

June 10, 1967, where the Commission is reported to have denied an application

by the carrier to waive collection of $1,224.08 in freight charges computed at a

general cargo rate that was several times higher than a commodity rate which

was inadvertently omitted by the carrier in publishing its tariff, although both

shipper and carrier admitted the inadvertent error and were willing to adjust

the charges.

The enactment of S. 1905 would not directly affect the functions and operations

of our Office. However, the proposed legislation appears to have adequate provisions to preclude unjust discrimination and to be in the public interest and in

the Government's interest as a shipper and, therefore, we have no objection to

favorable consideration of S. 1905 by your Committee.

Sincerely yours,

FRANK H. WEITZEL,

Assistant Comptroller General

of the United States.

OPENING STATEMENT BY THE CHAIRMAN

Senator BARTLETT. This bill was introduced by Chairman Magnuson at the request of the Federal Maritime Commission and its companion measure in the House has already been the subject of hearings.

The bill would empower the Commission to authorize carriers to

make voluntary refunds to shippers and waive the collection of a

portion of their freight charges for good cause such as bona fide mistakes.

This amendment is urged because the Shipping Act, 1916, unlike

the Interstate Commerce Act, contains no statutory authority which

empowers the Commission to direct the enforcement of a reasonable

rate. Section 18(b) appears to prohibit the Commission from authorizing relief where, through a bona fide mistake on the part of the carrier, the shipper is charged more than he understood the rate to be.

For example, a carrier after advising a shipper that he intends to file

a reduced rate and thereafter fails to file the reduced rate with the

Federal Maritime Commission, must charge the shipper under the

aforementioned circumstances the higher rates.

The first witness this morning is Admiral Harllee, Chairman of

the Federal Maritime Commission. We would be very glad to hear

from you, Admiral.

STATEMENT OF REAR ADM. JOHN HARLLEE, U.S. NAVY (RETIRED), CHAIRMAN, FEDERAL MARITIME COMMISSION, WASHINGTON, D.C., ACCOMPANIED BY COMMISSIONER JAMES V.

DAY; SAMUEL B. NEMIROW, ASSISTANT TO CHAIRMAN; AND

EDWARD JOHNSON, LEGISLATIVE COUNSEL, FEDERAL MARITIME COMMISSION

Admiral HARLLEE. Good morning, Mr. Chairman. I have with me

today Commissioner James V. Day of Maine; my special assistant,

Mr. Samuel Nemirow; and our legislative counsel, Mr. Edward

Johnson.
3

It is a pleasure to be here today and offer our comments on S. 1905.

The bill would amend section 18(b) of the Shipping Act, 1916, to

authorize the Federal Maritime Commission to permit a carrier

either to refund, or to waive the collection of, a portion of the freight

charges. It is designed to permit the Commission to correct inequities

presently existing in instances where there has been an error of a

clerical nature in the filing of a tariff or where through inadvertence

there has been a failure to file a tariff reflecting the intended rate,

leaving the carrier no alternative but to charge a rate different from

the one intended to be charged.

Prior to 1965, the Federal Maritime Commission entertained "special

docket" applications both in the foreign and the domestic trades under

rule 6(b) of the Commission's rules of practice and procedure, which

provides that carriers or shippers "may file applications for the voluntary payment of reparation or for permission to waive collection of

undercharges." Between 1962 and 1965 the Commission allowed

carriers to make voluntary refunds or waive the collection of freight

charges in 30 cases, all but one of which arose in foreign commerce.

Relief was granted in those cases where the Commission found that

through bona fide error or inadvertence a carrier failed to file, or incorrectly filed a rate which it intended in good faith to make applicable to the shipments in question, and that no discrimination would

result to other shippers. The theory was that an innocent shipper

should not be made to bear the consequences of a carrier's neglect

or omission.

The Commission, however, on January 13, 1965, in a consolidated

decision—special docket No. 377, Ludwig Mueller Co. Inc. v. Peralta

Shipping Corp.

'

and special docket No. 378, Application of Lykes Bros.

Steamship Co. Inc.—reviewed its special docket procedure in cases

involving the foreign commerce of the United States. In a three-totwo decision

'

the Commission held that section 18(b) (3) of the Shipping Act, 1916, did not permit it to authorize deviations from filed

tariffs in the foreign trade, notwithstanding rule 6(b) of the Commission's rules of practice and procedure.

The Commission decided that only in those cases where it is empowered to fix a reasonable rate is the refund procedure applicable,

namely those cases relating to the Commission's domestic offshore

trades which are within the purview of section 18(a) of the Shipping

Act, 1916, and the Intercoastal Shipping Act, 1933. The absence

of such a authority in the Shipping Act, 1916, with regard to carriers

in the foreign trades prevents the Commission from granting equitable

relief in deserving situations.

The Interstate Commerce Act, which applies to domestic rail

carriers, motor carriers, and water carriers, specifically gives to the

Interstate Commerce Commission, as to each form of transportation,

authority to fix and enforce reasonable rates-49 U.S.C. 15(1), 49

U.S.C. 316(e), and 49 U.S.C. 907(b). Therefore, the Interstate Commerce Commission can prescribe and enforce a rate different from

the tariff rate when the agency makes a finding that the published

rate is "unreasonable."

Although section 18(b) (5) of the Shipping Act, 1916, gives to the

Commission authority to disapprove any rate "filed by a common

carrier by water in the foreign commerce of the United States," which

it finds to be "so unreasonably high" as to be detrimental to the com-
4

merce of the United States, nowhere in the Shipping Act is the Commission given the power to fix a "reasonable rate' in the foreign trade.

Since the Federal Maritime Commission has no direct authority

to fix "reasonable rates" in the foreign commerce of the United States,

it believes it necessary to obtain the statutory authority contained in

the proposed legislation if refunds and waivers are to be permitted.

My reference to the ratemaking authorities of the Interstate Commerce Commission and of the Federal Maritime Commission in cases

relating to the domestic offshore trades is merely to point out that the

absence of such statutory authority with respect to its responsibilities

in the foreign commerce of the United States leaves the Commission

without authority to permit refunds or waivers of undercharges even

where it is evident that such applications for refunds or waivers should

be granted. I think it clear that there is no language in S. 1905 which

would support the argument that the Commission by this reference to

existing ratemaking authority in domestic trades is seeking to expand

its authority over ratemaking activities in the foreign commerce of

the United States. This was one of the matters of major concern to the

industry in the House hearings and I wanted to clarify this beyond

any possible doubt. That is to say there was an apprehension on the

part of industry that we were seeking more power than we had, and

therefore I have added this unequivocal statement. The Commission

is in fact not seeking authority to set rates in foreign trades. Also

there were changes made in the legislation as reported out by the

House, H.R. 9473, which clarify, by listing clerical error or administrative inadvertence as reasons for correcting the rate which should

make it absolutely 'clear that we at this time are not seeking more

ratemaking authority in the foreign trade.

Senator BARTLETT. And those amendments are satisfactory to you?

- Admiral HARLLEE. Yes, completely satisfactory. And Mr. Mahoney

of course will testify for the industry, but I believe he will say likewise.

Since its decision in special dockets 377 and 378, the Federal

Maritime Commission has not been able to afford relief in instances

in which equity might call for the granting of refunds or the waiver

of undercharges. Since January 1965, the Commission has denied,

on jurisdictional grounds, 116 applications alleging mistaken rate

filings in the foreign trade.

For example, a conference agreed to a $38.50 per ton rate on scrap

magnesium castings computed on a weight basis. Under the terms

of the conference agreement each carrier filed its own tariff. One

carrier neglected to show in its tariff on file that the freight was to

be assessed on a weight basis rather than weight or measurement

basis—a clerical error in failing to include the letter W after the figures

$38.50 to indicate that the commodity rate applied on a weight basis.

In accordance with the tariff rules, except where W was shown, the

rates were required to be applied on a weight or measurement basis2,240 pounds or 40 cubic feet—whichever produced the greater

revenue. As a result of this omission a shipper who booked 24,649

pounds-1,526 cubic feet—of magnesium castings, was assessed

and paid freight in the amount of $1,584 on the measurement basis

of 40 cubic ft. per ton, whereas the freight would have been only

$423 if computed on a weight basis: The carrier sought permission to

refund the $1,161 difference. In this situation under section 18(b)(3)

of the Shipping Act, 1916, the carrier could only charge the published
5

rate and the Commission could not permit an adjustment to the

intended rate since it did not have the statutory authority to do so.

In other words, a simple omission of the letter W on pieces of paper

which have thousands of letters and figures.

In another case, a carrier indicated to a shipper its intention to,

reduce the rate on orange concentrate from $4 per 100 pounds to.

$2.75 per 100 pounds. The carrier then sent a letter to the Federal

Maritime Commission to revise its tariff to conform with its agreement

but, through clerical error, the correction was not enclosed. Before

the carrier became aware of its oversight, 61,000 pounds of orange

concentrate had already been booked at the $2.75 rate. The carrier

filed an application requesting permission to waive collection of undercharges in the amount of $766.80. The Commission, under existing

statutory authority and consistent with its decision in special dockets.

Nos. 377 and 378, was compelled to deny the request.

Senator BARTLETT. Admiral, if this bill becomes law, would it

have a retroactive feature which would permit such cases to be taken

care of in the future?

Admiral HARLLEE. Not as written, as reported out by the House,

Mr. Chairman, it would not have. Of course it would be possible to

make it retroactive, but in our contacts with the industry, who can

speak for themselves this morning on that, we haven't had that

request.

Senator BARTLETT. What would you think of an amendment

which would make it retroactive back to 1965?

Admiral HARLLEE. I think offhand that such an amendment would

be undesirable, Mr. Chairman. The reason I think so is that although

this seems a ridiculous situation not to be able to handle clerical errors

or inadvertent failure to file tariffs, the total sum of money involved

from 1965 to date is not nearly as much as you might think. The total

amount of money involved is only $47,000. That is over a period of

3 years. Now during that period the integrity of the tariff system has

been upheld and there has been no danger or likelihood of discrimination or rebates. One problem that you would run into in making it

retroactive is making a determination on whether some other shippers

might have been discriminated against if they had wanted to ship at

the same tariff rate for which these adjustments were requested. I

would say I am not at the moment unalterably opposed to retroactivity, and it may be the industry will request it, but it would pose

a real problem as to whether somebody had been discriminated against

during that period of time.

Senator BARTLETT. I can understand that, but I am on the

Appropriations Committee where we deal with tens of millions of

dollars. Nevertheless, if I were a shipper and thought I was going to

pay $1,161 more, I would feel pretty much aggrieved.

Admiral HARLLEE. As I say, it would be quite a problem to really

determine in each case whether somebody had been discriminated

against or wanted to ship or who actually did ship. There would have

to be a searching of the records to determine whether somebody did

ship at the same time that the subjects of these requests shipped to

see whether they should get a lower rate also. And I think it would

be a major administrative problem that I am not sure whether the

industry would want to tackle as well as ourselves. In other words,

if someone has requested a lower rate on the basis of one of these

89-890-68-2
6,

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

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 whereby unethical carriers and/or shippers

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.
7

The third proviso as originally introduced would have required that

the re5ulting 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

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 speci fled 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.
8

A requirement that application be filed with the Commission within

180 days from the date of shipment appears in the final—fowth—

proviso 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

reaehed 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
' 9

,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.
10

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 HA RLLEE. 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.

Let me say I am not wedded 

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

-chairman of the Associated Latin American Freight Conferences.

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

-world is roughly, or his beat, I would say, is South-Central America
11

and the Caribbean, chairing conferences that are run from the Atlantic

coast and the gulf coast.

At my left is Richard Gage, who is chairman of the North AtlanticUnited Kingdom Conference. There again the name of the conference

I think speaks for itself. He is also based in New York City.

Now in this instance I appear on behalf of 24 steamship conferences

based either in New York or in San Francisco. They operate from the

Atlantic, the Gulf and the Pacific Coasts of the United States to most

of the important trading areas of the world. Appendix A, which I

referred to a minute ago, lists the various conferences and the 106

members, steamship carriers who are members of the one or more of

those conferences.

If you look at appendix A, I think it will speak for itself because

the names of the conferences show the geographical ranges. The subject

matter of S. 1905 is a legal matter on which all of the conferences and

their member lines have a common position. Since it is a legal memorandum, I request that all of my statement be incorporated in the

record. This will give your able staff the benefit of our legal argument,

much of which I propose to skim over. I am just going to annotate

it in the interest of time—I know we are working against the clock here,

Senator BARTLETT. That will be permissible. Your entire statement

will be printed in the record.

In addition, I should say now that Admiral Harllee had requested

permission to have the draft of the revised bill printed and that will

be done also.

Mr. MAHONEY. Apropos of that, the second request granted to

Admiral Harllee, we have attached as appendix B to my statement

H.R. 9473, H. Rept 920, as it emerged from the House Committee on.

Merchant Marine and Fisheries. This is the bill which we are supporting, which is the same one which is being urged by Chairman

Harllee.

Senator BARTLETT. Do you happen to know when that bill was

reported over in the House?

Mr. MAHONEY. I think November 14, 1967, it was reported with

amendments, and I think—don't take my word as gospel on this—

but I believe it is going to be on the Day Calendar today.

Senator BARTLETT. On the Consent Calendar?

Mr. MAHONEY. Excuse me, that is right, the Consent Calendar in

the House I think is the first and third Monday of the month, so I

suspect it will go through the Consent Calendar today.

But this is only what I was told last week on information and

belief, Senator, so 1 am not sure.

Senator BARTLETT. And you never can tell when someone will pop

up and say "I object."

Mr. MAHONEY. No. As a matter of fact, you never can tell when

you are going to get a question that seems off the beaten path, like

the question you asked Admiral Harllee about retroactivity.

I must say I was as surprised as he was on it. I am glad you are

not wedded to any idea like that.

Before I answer that question, which I am really going to take up

first, I want to tell you that we are in 100-percent support of the

statement that was made to you by Admiral Harllee, and the questions

or dialog between you and the admiral. The only area I think of disagreement—and it is not really disagreement, because I think he
12

appreciated and showed in his answers to your questions a real appreciation of our problems. However, I would say that we are unalterably

oppoaed to such an amendment as you suggested. The reasons are

brief.

First, there isn't a single shipper in the 156, or however many there

have been, shippers, who have been involved in these special docket

situations for the last two and a half years, who has bothered (1) to

go to court on the matter, or (2) to come in here. This morning you

have a complete absence of any of the people who normally would be

looking out for the interest of the shippers, the National Industrial

Traffic League, the Commerce & Industry Association, or even a local

chamber of commerce or any of the 156 shippers involved.

Senator BARTLETT. Should we call for Betty Furness?

Mr. MAHONEY. I think we ought to as a matte'. of fact. She might

take up the cudgels. As a matter of fact, she might add a little glamour

too.

So I would stress what Admiral Harlee touched on. It would be a

monumental job to search our records back for a couple of years. The

fact is if you people can move quickly on this bill and get it passed in

this session in the next few weeks, there will be a 6-month retroactivity feature in there, because as you note at page 3 of appendix B

the final clause provides that applications for refunds must be filed

with the Commission within 180 days. So you will get a 6-month

retroactivity anyway, which would pick up a fair number of these.

The most important thing, I think Mr. Chairman, in this instance

is to stress to you the fact that every year based on the Commission's

own figures in its report in 1966 there were 500,000 separate rate filings

that were given to them. Out of these 500,000, to have only 156, if I

have the right figure, errors of inadvertence is really a miniscule

percentage.

Now we would hasten to say that we seek perfection, but as you

know, the fact is that gremlins creep in. Occasionally somebody will

slip and forget to put a weight or a measurement or do the kind of

things that the admiral talked about. I am not going to illustrate

those or go any further, other than to say considering the huge volume

of tariff changes that have been made, I think that these few corrections that are involved don't warrant our going back and searching

our records. A lot of them occurred abroad, and the cost is really

tremendous. We impressed that on the Commission in the discussions

we had with them.

I would say parenthetically that the progress of this bill is a good

example of Commission-industry cooperation. When we started out

I didn't think we had a chance to have a dialog with the Commission,

because Chairman Garmatz called the hearings over in the House on

about 6 days' notice. They didn't get their position solidified nor did

we until the hearing. One reason is because I have both east coast

and west coast clients, so I had trouble getting a common position

hammered out.

But subsequent to the House hearing we carried on a useful exchange. It seems to me that the Commission has been very receptive

and very understanding of the special problems that the industry

has. They recognize that at no time have we ever been anything but

in 100-percent agreement with the objectives of the legislation. What

we objected to, which is detailed in my statement, is the form that it

took first, particularly the rate freeze.
13

I am not going to go into those differences because it seems to me

they are past history. We are in agreement on them. The important

thing as I see it is that because of this dialog and because they have

appreciated our points of view, and realized that particularly we

have an unwarranted expense of going back to search through our

records in a case which is really pretty much de minimus, I agree that

$1,000 for a:person that is aggrieved may seem like a large amount, but

I think you have to take an overview of this and recognize that it is•

$1,000 out of millions and billions of dollars that are involved.

Now when H.R. 9473 was introduced and considered by the House

committee, it was in haec verba with S. 1905 which you have before

you.

During the intervening months H.R. 9473 was reported out of the

subcommittee in a revised form, which we suggested. I think that the

sugg'estions have all been incorporated in the text of our appendix B,

with a few changes.

I have really covered the material on page 2 and I just want to say

that to save time I am also going to skip the material which appears

on the rest of pages 3, 4, and 5. What it does is set forth in detail our

legal objections to the FMC's covering comments and the material

at lines 1 to 15 on- page 2 of appendix B; in other words, to the original

bill H.R. 9473, and the original bill S. 1905.

It seems to me this has become academic in the light of the Commission's changed position. However your staff, when it is considering;

this matter, may want possibly to have the reasons, we gave in capsulized form that I think persuaded the Commission to change its

position. Therefore I want to skip down to the bottom of page 5 and

talk first about urging your committee to concur in the changes which

have been made by the House of Representatives. I want to outline

briefly the areas in which the House bill differs from the original draft

before you, and bear down on the points that matter to us.

First, there is no longer any provision for a mandatory rate freeze,

retroactive for 30 days and prospective for 90 days. We are at the top

of page 6 of my Statement now. This requirement has been replaced

by the last proviso which states that if permission is granted by the

Commission, the carrier or conference will publish an appropriate

notice in its tariff, or take such other steps as the Commission may

require, to give notice of the rate change and will provide for additional refunds to other shippers who are similarly situated.

This language appears at lines 8 to 16 on page 3 of our appendix B.

The legislation in its present form protects the innocent shipper in

those rare cases where through a carrier's inadvertence a shipper has

paid a manifestly improper rate. The legislation empowers the Commission on good cause shown to grant to the carrier authority to

correct a clerical or administrative error and to refund the difference.

The legislation also provides that relief will be afforded in those

few cases where through inadvertence a carrier or conference fails

to file a specific rate promised to a shipper.

I would stress here parenthetically that these are very few cases

and we are not talking about any kind of constantly occurring situation. They come up infrequently. When they do come up, we in the

industry want to correct them as much as anybody else, and we want

to be sure that anybody else similarly situated gets a similar refund.
14

Now in the second instance, we appreciate the possibility that the

question as to whether relief should be granted hinges on the question

of the intent of the particular carrier and shipper applying for relief.

In such a case, the carrier and shipper alike must bear the heavy

burden of showing good cause for relief under these exceptional

circumstances.

We think that the revised third proviso adequately protects the

rights of similarly situated shippers against discrimination.

In our presentation to the House committee, we pointed up the

practical problems involved in giving notice to such similarly situated

shippers. This is what I was stressing to your earlier on the retroactivity problem. If you think it is difficult, and we think it is extraordinarily difficult and so persuaded the Commission, to roll back our

records over a 6-month period and search through hundreds, thousands

of bills of ladings. As a matter of fact, if you talked about retroactivity, we would be talking about tens of thousands of manifests.

Maybe I am exaggerating if I say millions, but I'm sure hundreds of

thousands of bills of lading are involved. Am I exaggerating this,

Mr. Marshall?

Mr. MARSHALL. No, I think that is a fair statement.

Mr. MAHONEY. This retroactivity thing would cost us an enormous

amount of money, all for a very few dollars. It would cost us hundreds

of thousands of dollars, to refund, probably just about $10,000 on the

other wide.

Well, we emphasized it was unfair to thrust on the carriers and the

conferences the burden of searching through these bills of lading for

the sailings at or about the time in question, and suggested that the

Commission might give notice through the Federal Register of a

synopsis of the rate mistake and an invitation for any similarly

situated shipper to come forward.

Some of the members of the House committee were concerned with

whether or not the Federal Register was an adequate vehicle for

notice. They were afraid it might get cluttered up with these rate

synopses. I think we persuaded them that they come up so infrequently

that it didn't matter really and it wouldn't be an inhibiting factor and

the subcommittee in the House agreed to that.

However, in talking with the Commission further, we felt if the

carrier or conference published a tariff correction notice showing the

proper rate of classification that this correction notice would be

sufficient for any other alert shipper to claim his rights by a timely

application.

Well, the Commission staff didn't share our view as to the efficacy

of the Federal Register as an effective method of notice. Maybe we

are biased in this regard because we have to comb through it every

day to see if there is any action by any one of the Federal agencies

that is inimical to the best interests of our clients. But since the

Commission entertains reasonable doubts as to its efficacy, our

clients are willing to go one step further. This is what was described

to you by Admiral Harllee.

Most of the conferences employ a contract rate system under which

the shipper who agrees to confine all of his shipments to conference

lines receives a discount up to 15 percent. All contract conferences

must maintain current lists of all contract shippers. In those conferences where contracts are offered, better than 99 percent of the
15

shippers in the trade avail themselves of the contract. Therefore, the

most effective way to publicize any rate action in such a conference is

by a notice to the contract list. Our clients are prepared to circularize

their contract list with an erratum notice if the Commission grants a

special application. This will provide actual notice to practically

everyone who might be affected.

It is an expensive way of correcting an error, but we are confident

the number of instances where this will be necessary is so limited that

we can shoulder the burden.

Now in those few instances where our clients don't have a dual rate

contract, they still maintain a complete shipper list. If an error

happens in such a conference, the conference would undertake to,

circularize the shipper list, thereby giving actual notice to any shipper

similarly situated.

The third possibility would arise in the case of an individual line

not a member of a conference, if such line made an application for a

refund. In this case the line wouldn't have a contract list and it might

not have a shipper list. Under those circumstances the Commission

might well condition its approval of the refund on the carrier's undertaking to search its manifests and bills of lading to uncover any other

shipper similarly situated.

The final proviso also requires that an application for refund or

waiver must be filed with the Commission within 180 days. We approve

of this because it will eliminate or minimize stale claims.

Again I can't emphasize too strongly, the fact that we are in a

dynamic industry. It is one that is moving fast all of the time with

huge amounts of paperwork, and it is difficult enough to go back 180

days to search records if you have to, but to go back for 2 years would

be a colossal task and one that I believe is way beyond what should

be required.

We are confident that after the full exchange of views we have had,

the Commission understands the various possibilities and will use the

remedy best suited to the circumstances. Therefore we believe the

revised legislation set forth in appendix B, which is the same as the

Commission is urging, will do the following:

First, it will provide an effective way to cure the evil that S. 1905

seeks to cure, and second, it will satisfactorily protect the rights of

similarly situated shippers and give the Commission sufficient flexibility to condition its relief upon the circumstances involved.

Therefore, we respectfully urge you to substitute the revised language embodied in appendix B for that which is before you in S. 1905.

Thank you for your attention. I will endeavor to answer any questions that you might have.

(The complete prepared statement with appendixes follows:)

STATEMENT OF JOHN R. MAHONEY ON BEHALF OF 24 CONFERENCES AND THE 106

COMMON CARRIER MEMBERS OF ONE OR MORE THEREOF

I am John Mahoney of Casey, Lane & Mittendorf, 26 Broadway, New York

City. I appear here on behalf of 24 steamship conferences based either in New

York or San Francisco which operate from the Atlantic, Gulf and Pacific Coasts

of the United States to most of the important trading areas of the world. Appendix

A which is attached lists the Conferences and the names of the 106 steamship

carriers, members of one or more of these Conferences. If you will take a quick

look at Appendix A, you will see that the Conference names themselves indicatethe geographical ranges served.
16

The subject matter of S. 1905, Permission to Refund a Portion of Freight

Charges, is a legal matter on which all of the Conferences and their member lines

have a common position.

To avoid duplication, they have employed common counsel. I testified on

behalf of the same Conferences and carriers before the Subcommittee on Merchant

Marine of the House Merchant Marine and Fisheries Committee on August 16

of this year in connection with the House companion bill, H.R. 9473. At the

time H.R. 9473 was introduced and considered by that Subcommittee, it was

in haec verba with S. 1905. During the intervening months, H.R. 9473 was reported out of the Subcommittee in a revised form which we suggested.

Chairman Garmatz called hearings of the Subcommittee on very short notice.

Since I represented Conferences and carriers on both coasts, there wasn't time

for us to get together with and exchange views with the proponent of this legislation, the Federal Maritime Commission, before the hearing on August 15th.

However, after the Subcommittee hearing, there was a subsequent exchange of

ideas with the Commission in the form of letters to the Committee which supplemented the record. After the Subcommittee had reported out the bill in the form

we suggested, we had a further opportunity to consider the matter in some depth

with the senior staff at the Maritime Commission. Out of those meetings came

some further suggestions which were embodied in the second substitute which

was reported out by the full House Merchant Marine Committee a few weeks

ago. A copy of the bill as reported is attached as Appendix B.

The bill as reported to the House meets all of our serious questions about,

and objections to, H.R. 9473 and S. 1905 as originally drafted. We have always

endorsed the purpose of this bill, which would permit refunds of freight when a

typographical error in a tariff, or carrier inadvertence in failing to file agreed

changes to a tariff, results in shippers being charged at excessive rates. However,

the comments that accompanied the Commission's original bill and some of the

language in the original bill troubled us.

We were particularly concerned about the suggestion, contained in the following

quotation from the Commission's comments, that the Commission was seeking

indirectly the power to regulate rates, a power which Congress has consistently

denied it in the past. The comment that caused concern reads:

"This amendment is necessary because the Shipping Act, 1916, unlike the

Interstate Commerce Act, contains no statutory authority which empowers

the Commission to direct the enforcement of a reasonable rate . . . . Since no

reasonable rate fixing authority is contained in the Shipping Act applicable to

ocean carriers engaged in foreign commerce, the Commission feels it necessary to

obtain the statutory authority contained in this proposed legislation."

After we voiced our concern, Chairman Harllee emphatically stated that the

Commission was not seeking any rate making authority. While we welcomed the

Chairman's forthright statement and recognized that the legislative history would

make it difficult to interpret the proposed legislation as a grant of rate-making

authority, we also were fearful that Commission personnel and others who were

not particularly familiar with the legislative history would argue in the future

that limited rate-making authority had, in fact, been granted. To avoid future

problems of interpretation, we urged that the legislation enacted should not

contain any ambiguous language that could be the basis of a future claim of ratemaking authority.

We were particularly concerned with the third proviso which would freeze

rates retroactively for 30 days and prospectively for 90 days. The power to freeze

rates for a limited period because of a mistake could lead to attempts to postpone

intentional rate changes of which the Commission disapproved. The Commission

proposed these rate-freezing provisions to make doubly and triply certain that

this bill could never be used by a carrier, intent upon wrongdoing, to discriminate

among shippers by obtaining a refund for one shipper and then immediately

raising the rates paid by others. However, such a provision was unnecessary

because the Shipping Act, 1916, already contains provisions requiring advance

notice of rate increases. In addition, every application for permission to refund

freight moneys would be subject to Commission scrutiny. Carriers intent upon

discriminating certainly would find some other means to discriminate that did

not involve examination by the Commission.

In addition to being unnecessary, the rate-freezing proviso was objectionable

because it introduced an unwarranted element of inflexibility into rate-making.

This courd be particularly damaging if a carrier wished to reduce rates without

advance notice, as permitted by the Shipping Act, 1916, in order to enable American shippers to compete with foreign competitors. Accordingly, we considered
17

the rate-freezing provision objectionable in itself, aside from any possible use

that might be made of it to support rate fixing by the Commission.

We also opposed the Commission's original requirement that the carrier notify

all similarly situated shippers. As originally drafted, this provision would in each.

instance have imposed upon the carrier, or all the carrier members of a conference, the heavy burden of searching innumerable shipping documents to insure

that every shipper entitled to even a purely nominal refund was notified. Since

the close of the hearings in the House, we have engaged in a series of discussions

with Commission personnel in order to find an effective means of giving notice

to shippers without imposing an impossible burden on the carriers.

Today, I'd urge your Committee to concur in the changes which have been

by the House of Representatives. Let me outline briefly the areas in which the

House bill differs from the original draft before you: First, there is no longer any

provision for a mandatory rate freeze retroactive for thirty days and prospective

for ninety days. This requirement has been replaced by the last proviso which

-states that if permission is granted by the Commission, the carrier or conference

will publish an appropriate notice in its tariff, or take such other steps as the

Commission may require, to give notice of the rate change and will provide for

,additional refunds to other shippers who are similarly situated.

The legislation in its present form protects the innocent shipper in those rare

•cases when, through a carrier's inadvertence, a shipper has paid a manifestly

improper rate. The legislation empowers the Commission upon good cause shown

to grant to the carrier authority to correct a clerical or administrative error and

•to refund the difference. The legislation also provides that relief will be afforded

in those few cases where through inadvertence a carrier or conference fails to file

:a specific rate promised to a shipper. In the second instance, we appreciate the

possibility that the question as to whether relief should be granted hinges on the

question of the intent of the particular carrier and shipper applying for relief. In

.such a case, carrier and shipper alike must bear the heavy burden of showing

"good cause" for relief under these exceptional circumstances.

We believe that the revised third proviso adequately protects the rights of

:similarly situated shippers against discrimination. In our presentation to the

House Committee, we pointed up the practical problems involved in giving notice

to such similarly situated shippers. We emphasized that it was unfair to thrust

,on the carriers and the conferences the burden of searching hundreds and perhaps

thousands of bills of lading for the sailings at or about the time in question and

suggested that the Commission could give notice to the shipping public by publication in the Federal Register of a synopsis of the rate mistake and an invitation

for any other shipper similarly situated to come forward within a reasonable

period. Some of the members of the House committee were concerned with

whether or not the Federal Register would be cluttered with such notices, but

it was our considered judgment that these incidents happen so infrequently that

this would not be an inhibiting factor. We felt that if the carrier or conference

published a tariff correction notice showing the proper rate or classification that

this correction notice would be sufficient for any other alert shipper to claim his

rights by a timely application.

The Commission staff doesn't share our view as to the efficacy of the Federal

Register as an effective method of notice to the shipping public. Perhaps we are

biased in this regard because we must comb through it daily for actions by various

federal agencies which may be inimical to our clients' interests. Since the Commission entertains reasonable doubts as to its efficacy, our clients are willing to

go one step further. Most of the conferences employ a contract rate system under

which the shipper who agrees to confine all of his shipments to conference lines

receives a discount up to 15%. All contract conferences must maintain current

lists of all contract shippers. In those conferences where contracts are offered,

better than 99% of the shippers in the trade avail themselves of the contract.

Therefore, the most effective way to publicize any rate action in such a conference

is by a notice to the contract list. Our clients are prepared to circularize their

contract list with an erratum notice if the Commission grants a special application. This will provide actual notice to practically everyone who might possibly

be affected. It is an expensive way of correcting an error but we are confident

that the number of instances where this will be necessary is so limited we can

shoulder the burden.

In those few instances where our clients don't have a dual rate contract, they

still maintain a complete shipper list which is comparable to the contract list. If

an error happens in such a conference, the conference would undertake to circularize its shipper list, thereby giving actual notice to any shipper similarly

situated.
18

The third possibility would arise in case an individual line not a member of a

conference made an application for a refund. In this case, the steamship line

would not have a contract list and may not have a shipper list. Under those

circumstances, the Commission well might condition its approval of the refund

on the carrier's undertaking to search its manifests and bills of lading to uncover

any other shipper similarly situated.

The final proviso also requires that an application for refund or waiver must

be filed with the Commission within 180 days. We approve of this proviso because

it will eliminate or minimize stale claims.

We are confident after the full exchange of views which we've had that the

Commission understands the various possibilities and will use the remedy best

suited to the circumstances.

We believe that the revised legislation set forth in Appendix B will do the

following:

(1) It will provide an effective way to cure the evil which S. 1905 seeks

to cure;

(2) It will satisfactorily protect the rights of similarly situated shippers

and give the Commission sufficient flexibility to condition the relief upon the.

circumstances involved.

Therefore, we respectfully urge you to substitute the revised language embodied

in Appendix B for that which is before you in S. 1905.

APPENDIX A.—LIST OF CONFERENCES, AND CARRIER MEMBERS OF ONE OR

MORE THEREOF, REPRESENTED IN THE TESTIMONY OF JOHN MAHONEY ON

S. 1905

American West African Freight Conference

Atlantic & Gulf/Indonesia Conference

Atlantic & Gulf/Panama Canal Zone, Colon & Panama City Conference

Atlantic & Gulf/Singapore, Malaya and Thailand Conference

Atlantic & Gulf/West Coast of Central America & Mexico Conference

Atlantic & Gulf/West Coast of South America Conference

East Coast Colombia Conference

Far East Conference

Havana Northbound Rate Agreement

Havana Steamship Conference

Latin America/Pacific Coast Steamship Conference

Leeward & Windward Islands & Guianas Conference

North Atlantic Mediterranean Freight Conference

North Atlantic United Kingdom Freight Conference

Pacific Coast European Conference

Pacific Coast River Plate Brazil Conference

River Plate and Brazil Conferences

Santiago de Cuba Conference

United States Atlantic & Gulf/Australia New Zealand Conference

United States Atlantic & Gulf-Haiti Conference

United States Atlantic & Gulf-Jamaica Conference

United States Atlantic & Gulf-Santo Domingo Conference

U.S. Atlantic & Gulf-Venezuela and Netherlands Antilles Confer,

West Coast South America Northbound Conference

MEMBER CARRIERS

Alcoa Steamship Company, Inc.

American-Australian Steamship Line—Joint Service

American Export Isbrandtsen Lines, Inc.

American President Lines, Ltd.

Anchor Line, Ltd.

Anglo Canadian Line—Joint Service

A. P. Moller Maersk Line

Atlantic Container Line

Atlantic Lines, Ltd.

Atlanttrafik Express Service

Azta Shipping Co.

Bank Line Limited
19

Barber-West African Line—Joint Service

Belgian Line—Joint Service

Black Star Line, Ltd.

Blue Sea Line—Joint Service

Blue Star Line, Limited

Booth-Lamport—Joint Service

Booth Steamship Company, Ltd.

Bristol City Line of Steamships, Ltd.

Canadian Transport Co., Ltd.

Chilean Line (Compania Sud Americana de Vapores)

Coldemar Line (Compania Colombiana de Navegacion Maritima, Ltda.)

Columbus Line (Hamburg-Suedamerikanische Dampfschiff-fahrts-Gesellschaft

Eggert & Amsinck.)

Compagnie Maritime des Chargeurs Reunis

Companhia Colonial de Navegacao

Companhia de Navegacio Lloyd Brasileiro (Lloyd Brasileiro)

Companhia Nacional de Navegacao

Concordia Line—Joint Service

Constellation Line (Van Nievelt, Goudriaan & Co. Stoomvaart Maatschappij)

Cunard Steam-Ship Company, Limited, The

D'Amica Societa di Navigazione per Azioni

Delta Steamship Lines, Inc.

Dominican Steamship Line (Flota Mercante Dominicana, C. por A.)

East Asiatic Company, Ltd., The

Elder Dempster Lines, Ltd.

Empresa Lineas Maritimas Argentinas (ELMA)

Fabre Line

Farrell Lines Incorporated

Fern-Ville Line—Joint Service

French Line (Compagnie Generale Transatlantique)

Fresco Line—Joint Service

Furness Warren Line

Gdynia American Line

Grace Line Inc.

Grancolombiana (Flota Mercante Grancolombiana S.A.)

Gulf & South American Steamship Co., Inc.

Hamburg-American Line (Hamburg-Amerika Linie)

Hansa Line

Hanseatic-Vaasa Line •

Hellenic Lines, Ltd.

Hoegh Lines—Joint Service

Holland-America Line (N.Y. Nederlandsche Amerikaansche Stoomvaart Maatschappij)

Holland Pan-American Line (Van Nievelt, Goudriaan & Co. Stoomvaart Maatschappij)

Interocean Line

Irish Shipping Limited

Isthmian Lines, Inc.

Italian Line (Italia Societa per Azioni de Navigazione)

Italpacific Line, Inc.

Ivaran Lines (Aktieselskapet Ivarans Rederi)

Japan Line, Ltd.

Johnson Line

Johnson-Warren Lines, Ltd.

Kawasaki Kisen Kaisha, Ltd.

Lamport & Holt Line, Ltd.

Lykes Bros. Steamship Co., Inc.

Mamenic Line (Marina Mercante Nicaraguense, S.A.)

Manchester Liners, Ltd.

Maritime Company of the Philippines, Inc.

Mitsui-O.S.K. Lines, Ltd.

Montemar Line, S.A., Commercial y Maritima,

Moore-McCormack Lines, Inc.

National Hellenic American Line, S.A.

Nigerian National Shipping Line, Ltd.

Nippon Yusen Kaisha, Ltd.

Nopal West Africa Line

North German Lloyd (Norddeutscher Lloyd)
20

The Northern Pan-American Line, A/S (NOPAL Line)

Norton Line—Joint Service

Olsen Line, Fred (Fred Olsen Sr Co.) .

Orient Mid-East Lines

Peruvian State Line (Corporacion Peruana de Vapores)

Port Line Limited

P.N. Djarkata Lloyd

Prudential Lines Inc.

Royal Netherlands Steamship Company (Koninklijke Nederlandsche Stoomboot

Maatschappij N.V.)

Royal Mail Lines, Ltd.

Seaboard Shipping Co., Ltd.

Sea-Land Service, Inc.

Sea-Land Joint Service

States Marine Lines—Joint Service

Thai Mercantile Marine Limited

Torm Lines (Dampskibsselskabet Torm A/S)

Ulster Steamship Company, Ltd. (Head Line and Lord Line)

United Fruit Company

United Philippine Lines, Inc.

United States Lines, Inc.

'United Yugoslav Lines

Venezuelan Line (Compania Anonima Venezolana de Navegacion)

West Coast Line S.A.

Westfal-Larsen Line

Westwind Africa Line

Weyerhauser Line

Wilhelmsen Lines—Joint Service

Yamashita-Shinnihon Steamship Co., Ltd.

Zim Israel Navigation Co., Ltd.

APPENDIX B

[H.R. 9473, 90th Cong., first sess.]

A BILL To amend provisions of the Shipping Act, 1916, to authorize the Federal Maritime Commission to

permit a carrier 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 13(b) of the Shipping Act, 1916

(46 U.S.C. 817(b)), is amended by changing the period at the end of subsection

(3) thereof to a colon and adding the following proviso: "Provided, however, That

the Federal Maritime Commission may in its discretion and for good cause shown

permit a carrier to refund a portion of freight charges collected from a shipper or

waive the collection of a portion of its charges from a shipper; where it appears

that such refund or waiver will not result in .discrimination among shippers:

Provided further, however, That the carrier 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: And provided further,

however, That the rate resulting from such refund or waiver when approved shall

be the effective and applicable rate for all other shipments of the same description

of the carrier for the period commencing thirty days prior to the date of the shipment or shipments involved, until thirty days subsequent to the date of application for refund or waiver or until ninety days subsequent to the shipment or

shipments involved, whichever is later, and where appropriate, additional refunds

or waivers shall likewise be made."] That section 18(b) of the Shipping Act, 1916

(46 U.S.C. 817(b)), is amended by changing the period at the end of subsection (8)

thereof to a colon and adding the following proviso: "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
21

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 one hundred and eighty days from the date

of shipment."

Amend the title so as to read "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 or conference of such carriers to refund a portion of

the freight charges."

Senator BARTLETT. Thank you, Mr • Mahoney. I only have one or

two questions.

Did you say that the language to be found in H.R. 9473, appearing

as your appendix B, is identical with that of the draft submitted by

Admiral liarllee?

Mr. MAHONEY. I so understand, yes, sir.

Senator BARTLETT. I have no further questions. Thank you,

gentlemen.

Admiral?

Admiral HARLLEE. Mr. Chairman, I would like to add one thing on

that retroactivity business, and this ties in with what Mr. Mahoney

said.

I gave you the figure of $47,000 as having been denied in terms of

these special docket applications since January 1965. But actually of

that figure $36,253 were waivers of undercharges, which would mean

they would redound to the benefit of his clients. So in terms of the

shippers—and this is a rather interesting figure—in terms of the

shippers' refunds, money going to them, there is only $10,956. So the

shippers would be losing, if it was not retroactive over this 3-year

period, only the $10,956.

I thought this might be helpful to you in outlining the magnitude

of the problem. There are 10 different shippers that were involved.

Senator BARTLETT. Well, the amount of money wasn't -large to

start with, and this diminishes it considerably, of course.

Admiral HARLLEE. We can still, however, if you like, submit a

statement after checking.

Senator BARTLETT. No, I don't think it will be necessary.

Admiral HARLLEE. I was hoping you would say that, because of

the possible delay in getting action on it.

Senator BARTLETT. No, we will leave it at that.

Thank you, gentlemen. The committee will be in recess subject to

the call of the Chair.

(Thereupon, at 11 a.m., the hearing was concluded.)

(The following letter was subsequently received for the record:)

FOREIGN TRADE DIVISION,

NATIONAL ASSOCIATION OF

SECONDARY MATERIAL INDUSTRIES, INC.,

New York, N.Y., November 28, 1967.

Senator WARREN G. MAGNUSON,

Senate Commerce Committee, Senate Office Building,

Washington, D.C.

DEAR SENATOR MAGNUSON: At a recent meeting of our Ocean Freight COM^

mittee, which represents the majority of exporters of nonferrous scrap metals in

the United States, the hearings which you are now holding were discussed.
22

We have been working with revised Maritime Law for several years and have

found that there are certain points which still require revision. While they may

have been written with the best intention, they are unworkable under our competitive business system.

We respectfully request that your Committee approve the amendments relating

to freight rate refunds which are now rejected due to a stringent interpretation of

Section 18(B)3 and Section(B)5 of the law.

We refer specifically to errors in printing and omission in the Tariff Book. These

situations have caused our members, as well as other companies in allied fields,

hundreds of thousands of dollars which the Steamship companies would have

gladly refunded had the FMC allowed them to do so. In no instance was there

any attempt or intent to discriminate in these refunds as the same refunds would

have been afforded any shipper affected by the error.

Should you require further information regarding these cases, we will be ready

to make available to you copies of briefs filed with FMC.

We request favorable consideration on this amendment as it is vital that the

law protect the shipper as well as the steamship companies.

Respectfully yours,

WERNER M. STERN,

Chairman, Ocean Freight Committee,

Foreign Trade Division.