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Because of the variety of legal instruments which are used in granting rights to operate terminal facilities the language of the bill is not limited to leases but includes "licenses" and "assignments." • The bill would require prompt filing of all existing leases and would eliminate any excuse for not fling future agreements. In short, the bill forgives past violations of the Shipping Act and puts future regulation on a sounder footing.

FEDERAL MARITIME COMMISSION,

OFFICE OF THE CHAIRMAN,

Washington, D.C., January 22, 196 4. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.O.

DEAR MR. CHAIRMAN: You have requested the views of the Federal Maritime Commission with respect to H.R. 8926 and S. 2317, which would amend section 15 of the Shipping Act, 1916, so as to exempt from the penalty provisions of that section currently existing leases of terminals, provided they are filed with the Commission within 90 days from the date of enactment of the bills.

The need for legislation stems from the fact that until the former Federal Maritime Board's decision in Agreements Nos. 8225 and 82251, 5 F.M.B. 648 (1959) and the subsequent affirmation of the Board's decision by the U.S. Court of Appeals for the Fifth Circuit in Baton Rouge Port Commission v. United States, 287 F. 2d 86, certiorari denied 368 U.S. 985, neither the agency nor the industry were clear as to the full circumstances under which leases of terminal facilities fall within the coverage of section 15 of the Shipping Act.

Section 15 requires that all agreements between two persons subject to the Shipping Act which provide for the "fixing or regulating transportation rates or fares; giving or receiving special rates, accommodations, or other special privileges or advantages; controlling, regulating, preventing, or destroying competition * * * or in any manner providing for an exclusive, preferential, or cooperative working arrangement," must be filed with and approved by the Commission in order to be lawful. The penalty for carrying out such an agreement prior to Commission approval is up to $1,000 per day.

Leases of terminal facilities quite customarily contain, in addition to the usual grants of estates in land, covenants requiring that the lessee operate the terminal facility according to specified standards and in some instances grant future rights to the lessee. For example, the lease in the Baton Rouge case, above, required that the lessee charge rates "competitive with, and not greater than, rates for similar services and privileges charged at other gulf ports," and gave to the lessee the right of first refusal to lease any similar additional facility which the lessor might construct. The Maritime Board found that these and other covenants brought the lease within the purview of section 15, and the fifth circuit affirmed,

In due course the Maritime Board informed the Department of Justice of its findings in the Baton Rouge case and the Department brought suit against the lessee for civil penalties due under section 15. As other unapproved leases have been determined to be subject to section 15, the Maritime Board and now the Maritime Commission have informed the Attorney General in order that his Department might take such action as it thought warranted. Several additional suits for civil penalties have been filed.

Thus, lessees and lessors of terminal facilities have found themselves in the position of having entered into long-term leases some years ago which they believed not to be subject to section 15 of the Shipping Act, 1916, but which under the holding of the Baton Rouge case may be subject to that section. The practical choices open to such persons are to submit their leases to the Commission and seek approval knowing that they may be subject to a suit for penalties with enormous maximum limits, or not to file their agreements with the hope that they would not be discovered or that they could successfully distinguish between their lease and the Baton Rouge lease.

It is the Commission's position that, while a sound regulatory purpose is served in requiring that terminal leases which in any fashion limit or control competition be first submitted to the agency for approval, the needs of justice are not served by exacting penalties for past behavior under what amounts to a new or different construction of the law.

S. 2317 provides that the penalty provisions of section 15 shall not apply to leases, licenses, or assignments or other agreements of similar character entered into before the date of enactment of the bill or, if continued in effect beyond that date, they are submitted to the Commission for approval within 90 days after its enactment, unless disapproved, modified or canceled by the Commission and continued in effect without regard to the Commission's action thereon.

The Commission believes that the language of this bill is preferable to the language of H.R. 8926 and various other bills which are pending before your committee on the same subject. In view of the variety of legal instruments which are used in granting rights to operate terminal facilities, S. 2317, as passed by the Senate, includes not only leases, licenses, assignments, but also other agreements of a similar character. Additionally, S. 2317 provides that only those agreements continued in effect need be submitted to the Federal Maritime Commission. There would appear to be no reason for submitting agreements which have terminated to the Commission. S. 2317 also would provide that, if agreements are continued in effect without regard to the Commission's action thereon, they would thereafter be subject to the penalty provisions of section 15 of the Shipping Act, 1916.

The Commission feels that any legislation dealing with this subject should provide that if after the Commission has taken an action the parties continue to operate without regard to such determination they should be subject to the penalty provisions of section 15.

The Commission recommends enactment of S. 2317.

The Bureau of the Budget has advised that, from the standpoint of the administration's program, there would be no objection to the submission of this letter to your committee. Sincerely yours,

(Signed) JOHN HARLLEE, Rear Admiral, U.S. Navy (Retired), Chairman.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, November 7, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives.

DEAB MR. CHAIRMAN: We refer to your letter of October 29, 1963, in which you ask for our views and recommendations on H.R. 8926.

H.R. 8926 would add to section 15 of the Shipping Act, 1916, as amended by section 2 of the act of October 3, 1961 (Public Law 87-346, 75 Stat. 762, 763, 46 U.S.C. 814), a new paragraph which would make the civil penalties in section 15 inapplicable to any lease, license, or assignment of ocean terminal facilities entered into before the date of the enactment of the new paragraph, and submitted to the Federal Maritime Commission for approval not later than 90 days after the date of the enactment of the new paragraph.

If enacted, H.R. 8926 would not affect the functions and operations of the General Accounting Office; we have no special knowledge of the need for or desirability of this proposal and have no recommendation to make concerning its enactment. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, December 2, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives.

DEAR MR. CHAIRMAN: We refer to your letter of November 21, 1963, in which you ask for our views and recommendations on H.R. 9153.

H.R. 9153 would amend section 15 of the Shipping Act, 1916 (46 U.S.C. 814), by adding a proviso which would make the civil penalties of section 15 inapplicable to any lease, license, or assignment of terminal facilities entered into before October 1, 1963, and submitted to the Federal Maritime Commission for approval prior to or within 90 days after enactment of the amendment. Any such lease, license, or assignment continued in operation after disapproval, modification, or cancellation by the Commission, in disregard of the Commission's action, would be subject to the civil penalties of the act.

The apparent purpose of the bill is to insure that inequities will not result from the consequences of the Federal Maritime Board's decision in agreements Nos. 8225 and 8225-1, 5 F.M.B. 648 (1959) and the subsequent affirmation of the Board's decision by the U.S. Court of Appeals for the Fifth Circuit in the case of Greater Baton Rouge Port Commission v. United States, 287 F. 2d 86, certiorari denied 368 U.S. 985. We understand there was some question prior to this decision whether agreements concerning marine terminal facilities were within the coverage of section 15.

If enacted, H.R. 9153 would not affect the functions and operations of the General Accounting Office; other than as stated above, we have no special knowl. edge of the need for or desirability of this proposal and have no recommendation to make concerning its enactment. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, January 2, 1964. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives.

DEAR MR. CHAIRMAN : We refer to your letter of December 18, 1963, in which you request our comments on S. 2317.

S. 2317 would add to section 15 of the Shipping Act, 1916, 46 U.S.C. 814, a new proviso which would make the civil penalties of section 15 inapplicable to any lease, license, or assignment of terminal facilities entered into before, and continuing in effect beyond, the date of the enactment of the act and submitted to the Federal Maritime Commission for approval not later than 90 days after the date of the enactment of the act. The Committee on Commerce, U.S. Senate, reported favorably on S. 2317, with an amendment in the nature of a substitute (S. Rept. No. 770, 88th Cong., 1st sess.), and the substitute bill passed the U.S. Senate on December 13, 1963.

The apparent purpose of this act is similar to that of H.R. 9153 and H.R. 8926, both introduced in this session, and is to insure that inequities will not result from the consequences of the Federal Maritime Board's decision in agreements Nos. 8225 and 8225-1, 5 F.M.B. 648 (1959) and the subsequent affirmation of the Board's decision by the U.S. Court of Appeals for the Fifth Circuit in the case of Greater Baton Rouge Port Commission v. United States, 287 F. 2d 86, certiorari denied, 358 U.S. 985. We understand that there was some question prior to this decision whether agreements concerning marine terminal facilities were within the coverage of section 15.

If enacted, S. 2317 would not affect the functions and operations of the General Accounting Office; other than as stated above, we have no special knowledge of the need for or desirability of this proposal and have no recommendation to make concerning its enactment. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

U.S. DEPARTMENT OF JUSTICE,
OFFICE OF THE DEPUTY ATTORNEY GENERAL,

Washington, D.C., December 11, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C. · DEAR MR. CHAIRMAN : This is in response to your request for the views of the Department of Justice concerning the bill (H.R. 9153) to amend the provisions of section 15 of the Shipping Act, 1916, to provide for the exemption of certain terminal leases from penalties.

Section 15 of the Shipping Act, 1916 (46 U.S.C. 814), requires that agreements between persons subject to the act which fix or regulate transportation rates ; give or receive special rates, accommodations, or other special privileges or advantages; control, regulate, prevent, or destroy competition; or in any manner provide for an exclusive, preferential, or cooperative working arrangement, must be filed with and approved by the Federal Maritime Commission in order to be lawful. Operating under such agreements without approval subjects the operating parties to a civil penalty of up to $1,000 per day..

Until recently, leases of terminal facilities were not believed to be within the scope of section 15 and consequently were not filed with the Commission. However, the Commission has now held, and its decision has been affirmed by the Court of Appeals for the Fifth Circuit, that leases of terminal facilities (including grain elevators) which grant certain exclusive and preferential rights, provide for the regulation of rates, and insure the competitive position of lessors are within the purview of the section. Agreements Nos. 8225 and 8225-1, Between Greater Baton Rouge Port Commission and Cargill, Inc., 5 F.M.B. 648 (1959), aff'd, Greater Baton Rouge Port Commission v. United States, 287 F. 2d 86 (5th Cir. 1961), cert. denied, 368 U.S. 985 (1962). As a result of that decision many parties to such terminal leases who did not file them with the Commission in the belief that they were not subject to section 15 find themselves subject to large fines or penalties for failure to obtain Commission approval of such leases.

The bill would amend section 15 by adding at the end thereof a proviso that the penalty provisions of the section shall not apply to leases, licenses, or assignments of terminal facilities which were entered into before October 1, 1963, and submitted to the Federal Maritime Commission for approval prior to or within 90 days after enactment of the legislation, unless such leases, licenses, or assignments are disapproved, modified, or canceled by the Commision and are continued in operation without regard to the Commission's action thereon. Also, the bill would provide that the Commission shall promptly approve, disapprove, cancel, or modify each such agreement in accordance with the provisions of the section.

The effect of the legislation would be to give only prospective application to the decision of the Commission and to relieve from fines or penalties those who. failed in the past to file terminal leases or agreements, provided they file them within the time specified in the bill.

The Department of Justice would have no objection to the enactment of the legislation.

The Bureau of the Budget has advised that there is no objection to the submission of this report from the standpoint of the administration's program. Sincerely yours,

NICHOLAS DEB. KATZENBACH,

Deputy Attorney General.

U.S. DEPARTMENT OF JUSTICE,
OFFICE OF THE DEPUTY ATTORNEY GENERAL,

Washington, D.C., January 6, 1964.
Hon. HERBERT C. BONNER,
Chairman, Committee on Merchant Marine and Fisheries,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your request for the views of the Department of Justice concerning s. 2317, to amend the provisions of section 15 of the Shipping Act, 1916, to provide for the exemption of certain terminal leases from penalties.

Section 15 of the Shipping Act, 1916 (46 U.S.C. 814), requires that agreements between persons subject to the act which fix or regulate transportation rates; gire or receive special rates, accommodations, or other special privileges or advantages; control, regulate, prevent, or destroy competition; or in any manner. provide for an exclusive, preferential, or cooperative working arrangement, must be filed with and approved by the Federal Maritime Commission in order to be lawful. Operating under such agreements without approval subjects the operating parties to civil penalty of up to $1,000 per day.

l'ntil recently, leases of terminal facilities were not believed to be within the scope of section 15 and consequently were not filed with the Commission. However, the Commission has now held, and its decision has been affirmed by the Court of Appeals for the Fifth Circuit, that leases of terminal facilities (in-. cluding grain elevators) which grant certain exclusive and preferential rights,

provide for the regulation of rates, and insure the competitive position of lessors are within the purview of the section. Agreements Nos. 8225 and 8225–1, between Greater Baton Rouge Port Commission, and Cargill, Inc., 5 F.M.B. 648 (1959), affirmed, Greater Baton Rouge Port Commission v. United States, 287 F. 2d 86 (5th Cir. 1961), cert. denied, 368 U.S. 985 (1962). As a result of that decision, many parties to such terminal leases who did not file them with the Commission in the belief that they were not subject to section 15 find themselves subject to large fines or penalties for failure to obtain Commission approval of such leases.

S. 2317 would amend section 15 by adding at the end thereof a proviso that the penalty provisions of the section shall not apply to leases, licenses, assignments, or other agreements of similar character for the use of terminal property or facilities which were entered into before the date of enactment of the measure, and, if continued in effect beyond said date, submitted to the Federal Maritime Commission for approval prior to or within 90 days after enactment of the legislation, unless such leases, licenses, assignments, or other agreement are disapproved, modified, or canceled by the Commission and are continued in operation without regard to the Commission's action thereon. Also, the bill would provide that the Commission shall promptly approve, disapprove, cancel, or modify each such agreement in accordance with the provisions of the section,

The effect of the legislation would be to give only prospective application to the decision of the Commission and to relieve from fines or penalties those who failed in the past to file terminal leases or arrangements, provided they file them within the time specified in the bill.

The Department of Justice woud have no objection to the enactment of the legislation.

The Bureau of the Budget has advised that there is no objection to the submission of this report from the standpoint of the administration's program. Sincerely yours,

NICHOLAS DEB. KATZENBACH,

Deputy Attorney General. The CHAIRMAN. The first witness is Rear Admiral Harllee, Chairman, Federal Maritime Commission.

STATEMENT OF REAR ADM. JOHN HARLLEE, CHAIRMAN, FEDERAL

MARITIME COMMISSION; ACCOMPANIED BY JAMES L. PIMPER, GENERAL COUNSEL; AND EDWARD SCHMELTZER, DIRECTOR, BUREAU OF DOMESTIC REGULATION

Rear Admiral HARLLEE. Good morning. The bill upon which I will comment is House Resolution 8926. I will later comment on 9315. They are practically the same.

You have requested the views of the Federal Maritime Commission with respect to H.R. 8926 and S. 2317, which would amend section 15 of the Shipping Act, 1916, so as to exempt from the penalty provisions of that section currently existing leases of terminals, provided they are filed with the Commission within 90 days from the date of enactment of the bills.

The need for legislation stems from the fact that until the former Federal Maritime Board's decision in agreements Nos. 8225 and 8225–1, 5 F.M.B. 648 (1959), and the subsequent affirmation of the Board's decision by the U.S. Court of Appeals for the Fifth Circuit in Baton Rouge Port Commission v. United States, 287 F. 2d 86, cert. denied 368 U.S. 985, neither the agency nor the industry were clear as to the full circumstances under which leases of terminal facilities fall within the coverage of section 15 of the Shipping Act.

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