FreightWaves Classics is sponsored by Old Dominion Freight Line — Helping the World Keep Promises. Learn more here.

FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.

In this week’s edition, from the July 1979 issue, FreightWaves looks at President Jimmy Carter’s signature on a bill that was long awaited by the Federal Maritime Commission but was considered a defeat for state and justice departments. 

President shifts position to sign anti-rebating bill

President Carter on June 19 gave the Federal Maritime Commission something it has been wanting for a long time — his signature on an anti-rebating bill.

The President’s action represents a major turn-about from last Fall when he pocket vetoed essentially the same legislation. The enactment of the new anti-rebating law, officially called the “Shipping Act Amendments of 1979,” also represents a major maritime policy defeat for both the State and Justice Departments whose opposition to the legislation is well known.

The Commission will now be armed with authority to deal with rebating and other malpractices in the U.S. foreign trades since the new law gives FMC power to suspend rates of ocean carriers who refuse to produce documents requested by the agency.

Daschbach Comments

FMC Chairman Richard J. Daschbach obviously was pleased by the President’s decision:

“I am very pleased and gratified by the action taken by President Carter and the Congress in enacting the new anti-rebating law,” the FMC chairman said. “I believe that this new law will prove invaluable in helping the Commission to restore stability and equity to U.S. ocean commerce, and that enactment of this law should help eliminate existing disparity in our ability to conduct anti-rebating investigations and when necessary, apply anti-rebating sanctions to U.S. and foreign flag carriers alike. The Commission will be developing rules promptly for the implementation of this valuable new law.”

Meanwhile, American Shipper has learned from a highly-reliable source that a group of American flag steamship lines have gathered evidence that hard cash rebating has been resumed by at least two foreign steamship lines. The group of U.S. carriers will turn this evidence over to FMC within one month for action under the new law.

Johnston’s role 

It is understood the President’s Interagency Maritime Task Force Chairman William B. Johnston and Seafarers’ International Union (SIU) President Paul Hall played a major role (at the White House level) in the successful outcome of the legislation.

Although the bill had solid votes in both the Senate and House, most observers were caught by surprise over the President’s signing of the bill. The bill passed both houses of Congress recently by a voice vote, which was essentially a repeat of last year, when the President vetoed the legislation upon the urging of the State and Justice Departments due to the fact that international discussions involving rebating were on the threshold at that time. (For coverage, see the December, 1978 issue of American Shipper, pages 12 and 13.)

Statute’s provisions

Essentially the bill gives the Commission tariff suspension authority over carriers refusing to comply with subpoena or discovery requests issued by FMC in connection with a rebating investigation; substantially hikes civil penalties for violations of the statute; and requires certifications from U.S. and foreign lines forwarders, plus shippers attesting to company policies and efforts to outlaw rebating.

The new law increases malpractice penalties from $5,000 per violation to $25,000 maximum, tariff transgression fines from $1,000 per day to $5,000 per day. For rebating violations, the fines have been increased from $1,000 per day to a maximum of $25,000 per shipment. Furthermore, the statute slaps a maximum $50,000 fine per shipment on carriers continuing to transport freight under a suspended tariff.

The President’s action also drew praise from House Merchant Marine and Fisheries Committee Chairman John M. Murphy (D-NY).

Murphy viewed the new law as “an essential timber in the framework of legislation which we must build if we are to solve the problem and deficiencies of the 1916 Shipping Act and develop a coherent national maritime policy.”

Continuing, Murphy said: “The practice of rebating, where carriers offer secret kick-backs to attract more cargo for their ships, has been virtually impossible to curb when the wrongdoers are operators of foreign flag vessels. Since rebating transactions generally take place overseas, it is essential that documents providing evidence of these practices be made available to the Federal Maritime Commission (FMC). Unfortunately, foreign governments have seen fit to block their nationals from releasing this information.

“For the first time, foreign flag ocean carriers will be required to comply with Commission subpoenas and discovery orders or face exclusion from our trades. We will see an end to the rank discrimination against U.S. flag carriers.”

FreightWaves Classics articles look at various aspects of the transportation industry’s history. Click here to subscribe to our newsletter!

Have a topic you want us to cover? Email bjaekel@www.freightwaves.com.