also closely tied to intermodal development. As indi- 
cated in the previous section, containerization and 
other unitized cargo handling techniques have placed 
strong pressures on the traditional Federal port pol- 
icy of non-discrimination. These pressures have 
found clearest expression in the regulatory process 
where Federal decisions with respect to intermodal 
operations can significantly affect port prospects. A 
number of intermodal operations are now being chal- 
lenged before both FMC and ICC by ports that are 
losing traditional cargoes to these new services. 
Rate absorption is a fundamental issue in many of 
these port-related cases. In the past FMC has gener- 
ally allowed ocean carriers to offer a through-single- 
rate service and absorb the cost of overland transpor- 
tation from the port of call to another port region 
only in cases where adequate service was not available 
at the second port or in certain other very limited 
situations, such as emergencies. However, FMC policy 
in this area is still evolving as the Commission attempts 
to balance the advantages of expanded intermodalism 
against the potential damage to specific ports and to 
the traditional concept of non-discrimination. Ports 
damaged by new intermodal services can be expected 
to continue to argue to the FMC that they are being 
discriminated against unfairly by the diversion of 
naturally tributary cargoes to other ports. 
The port position is also being pursued before ICC, 
which has authority to disallow domestic rates that 
are noncompensatory. Because a through rate has a 
domestic portion that is subject to ICC jurisdiction, 
damaged ports have sought ICC disallowance of 
through rates on the grounds that the domestic por- 
tion is illegally low. It seems likely that balancing port 
considerations against the benefits of expanded inter- 
modal carriage will be complicated by the involve- 
ment of two Federal regulatory authorities. This is 
another manifestation of the growing jurisdictional 
problem which has accompanied the growth of inter- 
modal transportation. 
In addition to the issues associated with regulatory 
jurisdiction and intermodalism, even more funda- 
mental concerns are likely to emerge in the next few 
years regarding the overall appropriateness and ade- 
quacy of the present U.S. ocean shipping regulatory 
system. As indicated, the Justice Department has 
frequently criticized the granting of antitrust immu- 
nity to regulated shipping conferences and has re- 
cently released a major study that is highly critical of 
the present system. Basically the study concludes that 
conference abuses have not been effectively controlled 
by either market forces or Government regulation and 
that major changes should be made to‘current ship- 
ping legislation with the aim of increasing competition 
in the shipping industry.** 
The Justice Department allegation that the U.S. 
42U.S. Department of Justice, op. cit. note 36, p. 237. 
regulatory system has not been effective in controlling 
illegal practices gained considerable credibility with 
the recent agreement by Sea-Land Services, Inc., to 
pay a $4 million fine to FMC for extensive rebating 
activities between 1971 and 1975. Although investiga- 
tions are still continuing, there are indications that 
such rebating has been widespread in the U.S. trades 
in recent years despite its prohibition. 
Supporters of the existing U.S. regulatory system, 
seeing major problems in any attempt to extend USS. 
antitrust laws to foreign-flag carriers, have urged a 
basic strengthening of the present regulatory system 
to provide FMC with expanded authority to deal 
more effectively with illegal rebating practices—par- 
ticularly with respect to foreign-flag vessels. While 
FMC authority over U.S. carriers is clear, its powers 
to investigate foreign-flag operations have proven 
more difficult to exercise. By simply refusing to sup- 
ply subpoenaed records and information (frequently 
in compliance with laws at home) foreign-flag car- 
riers have often been able to thwart FMC rebating 
investigations without fear of U.S. Government re- 
prisal. This situation has prompted tie Congress to 
consider amendments to U.S. shipping laws which 
would impose new penalties on foreign carriers who 
refuse to comply with FMC investigations. One sug- 
gested approach would prohibit such uncooperative 
foreign lines from entering U.S. ports. Further con- 
sideration of how best to deal with the rebating prob- 
lem in the months ahead is likely to raise a variety of 
issues relating to the fundamental nature of the pres- 
ent U.S. shipping regulatory system. 
Interest in reassessing Federal liner regulation has 
also been expressed by the Maritime Administration, 
which recently signed a major contract with the con- 
sulting firm Harbridge House for a |-year study of 
the outlook for the U.S. liner fleet, assuming three 
alternative future regulatory environments. This 
study will first assess the economic outlook for 
the U.S. fleet if the current regulated “open” con- 
ference system is retained. Second, the impact of a 
more competitive environment, such as the one urged 
by the Justice Department, will be analyzed. And 
finally, an assessment of the U.S. liner outlook will 
be made assuming a less competitive environment in 
which “closed” conferences are authorized in U.S. 
commerce. The Chairman of the House Merchant 
Marine and Fisheries Committee has recently indi- 
cated that his committee will soon consider legislation 
to authorize some form of “closed” conference sys- 
tem. Hearings on such a measure are also likely to 
spawn a fundamental and thorough-going Congres- 
sional reassessment of U.S. shipping regulation. As 
_ has been the case in the past, U.S. fleet promotional 
considerations are likely to figure prominently in 
these deliberations and the findings of the Harbridge 
House study will, no doubt, be carefully considered 
during such Congressional hearings. 
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