[Congressional Record Volume 143, Number 102 (Thursday, July 17, 1997)]
[Senate]
[Pages S7705-S7707]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         OCEAN SHIPPING REFORM

  Mr. BROWNBACK. Mr. President, I rise today to bring attention to 
legislation that I believe could have a substantial positive impact on 
United States commerce. For several months now, my colleagues on the 
Commerce Committee have been working to forge an agreement that will 
deregulate ocean shipping and allow our exporters to compete on a more 
level playing field with our foreign competitors. S. 414, The Ocean 
Shipping Reform Act of 1997, would bring much-needed reform to the 
shipping industry by injecting a higher degree of competition into the 
current conference-dominated system of ocean shipping. It would also 
end federal government tariff filing with the Federal Maritime 
Commission and I believe that this is a significant step toward 
reducing red tape in this industry.
  First of all, I want to commend those Senators who have played an 
active role in writing and furthering this important legislation. 
Senators Hutchison, Gorton, Lott, and Breaux have worked diligently to 
achieve a consensus among the diverse interests in the shipping 
industry, and I know that is no small task. I also want to commend 
Senator McCain and his staff, who have endeavored to find common ground 
with all affected parties by working openly and holding numerous 
meetings. The result of this work is an important piece of legislation 
on which I hope the Senate will be able to focus its attention in the 
near future.
  I care about this legislation because it could have a tremendous 
impact on the agriculture industry which is, of course, vitally 
important to Kansas. Exporting is critical to the agriculture 
industry--overall, forty percent of what we grow in the U.S. is 
consumed overseas. Moreover, exports will play an increasingly 
important role in agriculture because any growth in the industry will 
primarily come from exports. As the incomes of people in many 
developing countries increase, they are able to afford a higher 
quality, more diversified diet--and the U.S. stands ready to provide 
it. And, the fastest growing category of agricultural commodities for 
export are high-value products, such as meat and vegetables, which are 
transported in ocean containers--the type of ocean transportation that 
is affected by this legislation.
  Transportation costs are a particularly important factor in achieving 
agricultural exports because transportation typically comprises a 
larger proportion of the final cost of the good than for other 
industries. In fact, transportation is often the single largest 
component of the delivered cost of the good, accounting for as much as 
50 percent of total landed cost. The U.S. Department of Agriculture 
estimates that the agriculture industry alone spends more than four 
billion dollars each year in containerized shipping, and that this 
price includes a premium attributable to conference market power which 
is 18 percent of the cost of transportation. In a business where sales 
are made or lost based on pennies per pound, this is the difference 
between the U.S. or our competitors making the sale. And, given that 
every $1 in agricultural exports generates an additional $1.50 in 
economic activity, the importance of S. 414 for not only the 
agriculture industry, but the U.S. economy as a whole, is clear.
  This bill has the support of many farm organizations; in fact, I have 
letters that I would like to submit for the record from the American 
Farm Bureau Federation, the National Pork Producers Council, the 
National Cattlemen's Beef Association, the National Grain and 
Feed Association, Farmland Industries, ConAgra, the National Broiler 
Council, and the American Frozen Food Institute. Additionally, many 
agricultural chemicals are exported via containerized ocean vessels 
would benefit from reduced regulatory restraints.

  However, while these organizations are united in their support for 
legislation to reform ocean shipping, they also share the concern I 
have regarding certain provisions of the bill in its current form. In 
its current form, this bill requires the reporting of essential 
contract terms with the Intermodel Transportation Board. I must 
register my belief that without contract confidentiality the basic 
premise of this legislation, to allow greater competition in the 
shipping industry, is severely undermined. What is gained by the 
ability to negotiate individual contracts if one's competitors have 
access to the essential terms of the contract?
  When I voted for this bill as it was passed out of the Commerce 
Committee on May 1 it was clear that outstanding concerns regarding 
confidential contracting would be addressed before the bill was to be 
considered on the Senate floor. It was with that understanding that I 
supported the bill. While I appreciate the sincere efforts that have 
been made to accommodate the interests of exporters since that time, my 
reservations remain because no agreement has been reached. I understand 
that the distinguished majority leader has promised to bring this bill 
to the floor in its current form during this Congress and that Senator 
Gorton has expressed his intention to address the contract reporting 
provisions through amendment. While I am disappointed that more reform 
will not be embraced in the bill that is brought to the floor, I 
respect our leader's view and look forward to the debate that will 
ensue.
  I want to support this legislation. I support its underlying goal to 
reduce burdensome regulation. I believe that reducing regulatory 
hurdles that hinder the efficiency of U.S. businesses is the right 
thing to do, and it is one of the primary reasons that I came to 
Washington. However, to the extent that the reforms in this bill are 
diminished, my support is eroded.
  Nevertheless, I continue to believe in the importance of this 
legislation. I hope that the Senate will take action soon so that the 
agriculture industry,

[[Page S7706]]

as well as all other industries which utilize containerized ocean 
shipping, will be able to increase their competitive advantage in the 
global marketplace.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:
                                                     June 4, 1997.
     Hon. Sam Brownback,
     U.S. Senate, Hart Senate Office Building, Washington, DC.
       Dear Senator Brownback: We are asking your assistance in 
     assuring that S. 414 is enacted in a form that will enable 
     shippers to contract with ocean carriers in the same manner 
     that they now contract with motor carriers and railroads.
       Although we support the objective of S. 414, we are quite 
     concerned about some of the modifications that have been made 
     to the bill subsequent to introduction. We urge the 
     objectionable provisions be removed before the bill is sent 
     to the Senate floor.
       (1) We are concerned with the language added that would 
     require filing of service contracts with the Intermodal 
     Transportation Board and the publications of the essential 
     terms of those contracts. We believe that the disclosure 
     requirements that have recently been incorporated into the 
     bill would serve only to inhibit the ability of ocean 
     carriers and shippers to negotiate contracts that best serve 
     their mutual interests. This is because disclosure will 
     enable ratemaking conferences to continue to pressure 
     individual carriers to maintain parallel pricing of ocean 
     transportation services. Disclosure is not required to 
     protect any shipper interest. Our members have contracted for 
     transportation services with railroads and motor carriers for 
     many years and have found that confidentiality has encouraged 
     carriers to agree to creative and responsive terms designed 
     to meet each customer's distinct transportation needs.
       (2) We also believe that contracts should be excluded from 
     Section 10 which deals with discrimination and other 
     prohibited acts. Contracts of motor carriers and railroads 
     are not subject to such antidiscrimination provisions and 
     this has never presented any problems for shippers. Even the 
     present statute applicable to ocean carriers, which was 
     enacted in 1984, does not subject contracts to the prohibited 
     acts section of the statute. Therefore, including them would 
     represent a significant step backwards from where we are at 
     present. If there are concerns about potential abuses by 
     carrier conferences operating under antitrust immunity, we 
     would have no objection to making only those contracts to 
     which a conference itself is actually a party subject to such 
     provisions. An alternative would be to simply prohibit 
     conferences from entering into service contracts.
       It is our understanding that certain port and maritime 
     labor interests have expressed a need to have access to terms 
     of transportation contracts for planning purposes. Whatever 
     information may be useful for those purposes is readily 
     available from the individual carriers that serve a 
     particular port or that employ members of maritime unions. It 
     is neither necessary nor appropriate to subject carriers and 
     shippers to burdensome regulatory requirements in order to 
     provide an alternative source for that type of information.
       Again, we urge that the changes addressing our concerns be 
     made to S. 414 before it is sent to the Senate floor. If we 
     can provide you further information or otherwise be of 
     assistance to you with regard to this matter, please let us 
     know.
           Sincerely,
     American Farm Bureau Federation,
     National Cattlemen's Beef Association,
     National Pork Producers Council.
                                                                    ____

                                                National Grain and


                                             Feed Association,

                                                   April 29, 1997.
     Hon. John McCain,
     Chairman, Committee on Commerce, Science, and Transportation, 
         U.S. Senate, Washington, DC.
     Re: S. 414, The Ocean Shipping Reform Act of 1997.
       Dear Chairman McCain: We are writing in response to last 
     week's staff draft of S. 414, which is scheduled for mark-up 
     by the Committee on May 1. We are extremely concerned about 
     several provisions of last week's draft, and urge the 
     Committee to reject S. 414 in its present form.
       Further, the NGFA offers the following comments as the 
     Committee prepares to address the bill and any amendments:
       1. The Federal Maritime Commission should not be merged 
     with the Surface Transportation Board. The NGFA has long 
     advocated the elimination of the Federal Maritime Commission 
     as an unnecessary entity. Additionally, the STB is already in 
     danger of becoming an ineffective agency because of 
     inadequate funding. Indeed, the Clinton Administration's 
     fiscal 1998 budget proposal would fund the agency entirely 
     from user fees. The Administration's proposal would ensure 
     that filling fees charged to rail users and others would rise 
     so high as to, as a practical matter, preclude recourse 
     before the agency. The NGFA has recommended that the STB be 
     eliminated and the Interstate Commerce Act repealed should 
     Congress choose not to adequately fund the agency. Combining 
     the FMC and the STB would simply compound the STB's existing 
     problems.
       2. Users of ocean vessels and consumers would be better 
     served by eliminating the special antitrust protection 
     granted to liner vessel operators. Enforcement of U.S. 
     antitrust laws would be a more effective deterrent to 
     discriminatory treatment than the existing or proposed 
     regulatory scheme. Economic regulation of transportation 
     carriers can too easily be turned into a carrier shield to 
     block marketplace competition and enforcement of laws, such 
     as U.S. antitrust laws, that apply to shippers and other 
     businesses.
       3. The bill fails to make needed changes to the Jones Act 
     and other cabotage laws. The Jones Act, in particular, 
     creates significant barriers and added costs for those 
     wishing to use self-propelled bulk vessels for shipments 
     between domestic deepwater ports. An ``ocean shipping reform 
     bill'' which fails to achieve reforms in our nation's 
     antiquated and market-distorting cabotage laws should not 
     move forward.
       The NGFA is the national nonprofit trade association of 
     about 1,000 grain, feed and processing firms comprising 5,000 
     facilities that store, handle, merchandise, mill, process and 
     export more than two-thirds of all U.S. grains and oilseeds 
     utilized in domestic and export markets. Founded in 1896, the 
     NGFA's members include country, terminal, and export 
     elevators; feed mills; cash grain and feed merchandisers; 
     commodity futures brokers and commission merchants; 
     processors; millers; and allied industries. The NGFA also 
     consists of 37 affiliated state and regional grain and feed 
     associations whose members include more than 10,000 grain and 
     feed companies nationwide.
       As always, please contact me or David Barrett at the NGFA 
     if you have any questions.
           Sincerely,
                                                 Kendell W. Keith,
     President.
                                                                    ____

                                        Farmland Industries, Inc.,


                                              Kansas City, MO,

                                                     June 4, 1997.
     Hon. Sam Brownback,
     U.S. Senate, Washngton, DC.
       Dear Senator Brownback: I would first like to thank you for 
     your support of S. 414, The Ocean Shipping Reform Act of 
     1997. In my responsibilities with Farmland Industries, Inc., 
     I know first hand the need for changes in the archaic ocean 
     shipping laws which prevent U.S. companies from being 
     competitive in the world marketplace. S. 414, as approved by 
     the Commerce, Science and Transportation Committee, went a 
     long way toward improving this inequity. However, there are 
     two areas which must be addressed if we are to have 
     legislation which truly meets this nation's future 
     international trade needs.
       Confidential Contracts.--The amendment offered by Senator 
     Slade Gorton would aggregate contract information rather than 
     publicly disclosing data in contracts between ocean carriers 
     and their customers. We believe this excellent compromise 
     deserves your support since it would eliminate the current 
     bill's economic disadvantage of disclosing individual 
     contract information to our overseas competitors. This 
     approach, supported by Chairman John McCain in a Journal of 
     Commerce interview, provides the U.S. ports and labor the 
     information they say they need in determining cargo flows and 
     long term strategic planning and at the same time shields the 
     specific terms of ocean transportation contracts.
       Eliminate Restrictions on Contracting.--S. 414, as 
     currently drafted, would apply broad antidiscrimination 
     provisions to all types of service contracts. If these were 
     to be put into effect, it would be extremely difficult for 
     carriers to know which contract terms and prices would be 
     discriminatory. We believe an easy solution to this problem 
     would be to apply these provisions only to contracts that 
     maintain antitrust immunity and by limiting the parties who 
     may bring an action under the provisions to ports and ocean 
     transportation intermediaries. These changes would ensure 
     that individual contracts may be entered into in a normal 
     business fashion and that adequate oversight is provided to 
     agreement contracts.
       We ask your support for these changes to S. 414 and 
     ultimately for passage of legislation which would encourage 
     U.S. exports and greater international trade. Thank you for 
     your serious consideration of our position and proposals.
           Yours very truly,
                                                  Fred E. Schrodt,
                                                   Vice President.
                                                    ConAgra, Inc.,


                                               Washington, DC,

                                                   April 29, 1997.
     Hon. Sam Brownback,
     U.S. Senate, Washington, DC.
     Attention: Tim McGivern
     Subject: S. 414, The Ocean Shipping Reform Act of 1997
       Dear Senator: We have previously written to you to express 
     our strong support for S. 414. Because we spend more than 
     $200,000,000,00 each year on maritime transportation we are 
     vitally interested in elimination of artificial, outdated 
     regulatory constraints that handicap our ability to compete 
     in the global marketplace.
       S. 414 is now scheduled for mark-up by the Committee on 
     Commerce, Science and

[[Page S7707]]

     Transportation on May 1, 1997. We are extremely concerned 
     about proposed amendments which surfaced over the weekend and 
     would, if incorporated into the bill, represent a giant step 
     backwards.
       The key feature of S. 414 is the language that authorizes 
     individual ocean carriers to enter into confidential 
     transportation contracts. Similar provisions have been in 
     effect for years for virtually all other forms of 
     transportation including truckers, railroads, barge lines and 
     air carriers. They have proven to be tremendously effective 
     in promoting efficiency and thereby lowering transportation 
     costs to the benefit of both carriers and shippers. There is 
     nothing unique about maritime transportation that would cause 
     confidential contracts to be any less beneficial.
       Amendments that are being promoted by foreign flag carriers 
     and their ratemaking cartels would eviscerate the 
     transportation contract provisions of the bill. Under the 
     misleading banner of antidiscrimination, the proposed 
     amendments would:
       (1) require the filing of individual carrier contracts with 
     the Intermodal Transportation Board;
       (2) require disclosure of the essential terms of each 
     contract;
       (3) establish substantive standards of ``prejudice and 
     disadvantage'' that would effectively preclude carriers from 
     entering into service contracts that are tailored to meet the 
     distinct needs of shippers and to allow them to maximize the 
     efficiency of their operations; and
       (4) create a regulatory scheme that would allow specious 
     challenges to service contracts as a pretext for obtaining 
     access to their terms.
       Although such provisions are supposedly designed to benefit 
     shippers, the shipper community overwhelmingly opposes them. 
     Instead of removing unnecessary regulatory burdens, these 
     provisions would add new ones.
       We urge you to oppose these amendments and allow S. 414 to 
     go forward in a form that would allow shippers to enter into 
     transportation contracts with individual ocean carriers in 
     the same manner as they have done with all other modes for 
     many years, with great economic benefit to both carriers and 
     shippers.
       If you would like further detail about our concerns, we 
     will be happy to provide it.
           Best wishes,
                                                   Paul A. Korody,
     Vice President.
                                                                    ____



                                     National Broiler Council,

                                                     June 3, 1997.
     Re S. 414 Ocean Shipping Reform Act of 1997.
     Hon. Sam Brownback,
     U.S. Senate,
     Washington, DC.
       Dear Senator Brownback: The National Broiler Council 
     strongly supports the objective of S. 414 to allow ocean 
     transportation to be more competitive by eliminating 
     unnecessary regulatory burdens. Because members of the 
     Broiler Council produce poultry that is sold for export, we 
     have a keen interest in enactment of S. 414.
       Although we support the objective of S. 414, we are quite 
     concerned about some of the modifications that have been made 
     to the bill since it was originally introduced. We would urge 
     that two amendments be made before the bill is sent to the 
     Senate floor in order to enable the shipping public to 
     realize the full benefits in the original bill.
       We are concerned with language that has been inserted in 
     the bill that would require filing of service contracts with 
     the Intermodal Transportation Board and the publication of 
     essential terms of those contracts. Our members have 
     contracted for transportation services with railroads and 
     motor carriers for many years and have found that filing of 
     contracts with a regulatory agency is unnecessary and 
     needlessly burdensome. We believe that the disclosure 
     requirements that have crept into the bill would serve only 
     to inhibit the ability of individual ocean carriers and 
     shippers to negotiate contracts that best serve their mutual 
     interests. The filing and processing of those contracts would 
     also require perpetuation of an unnecessary bureaucracy, 
     since virtually no other transportation mode is required to 
     file its contracts with any regulatory agency. If there are 
     concerns about potential abuses by carrier conferences 
     operating under antitrust immunity, we would have no 
     objection to contracts to which a conference itself is 
     actually a party being subject to such provisions. An 
     alternative would be to simply prohibit conferences from 
     entering into contracts. However, individual ocean carriers 
     should be able to negotiate and enter into contracts in the 
     same manner that has worked so well for motor carriers and 
     railroads.
       As a related matter, we believe that contracts should be 
     excluded from Section 10 of S. 414 which deals with 
     discrimination and other prohibited acts. Contracts of motor 
     carriers and railroads are not subject to such 
     antidiscrimination provisions and this has never presented 
     any problem to shippers. In fact, under the terms of the 
     present statute, which was enacted in 1984, service contracts 
     of ocean carriers are not subject to the prohibited acts 
     section of the statute.
       Therefore, including them would represent a significant 
     step backwards from where we are at present.
       We understand that certain port and maritime labor 
     interests have expressed a need to have access to terms of 
     transportation contracts for planning purposes. Whatever 
     information may be needed for those purposes is readily 
     available from the individual carriers that serve a 
     particular port or that employ members of maritime unions. It 
     is neither necessary nor appropriate to subject carriers and 
     shippers to burdensome regulatory requirements in order to 
     provide an alternative source of such information.
       We urge that the foregoing changes be made before the bill 
     is sent to the Senate floor. If we can provide you any 
     further information or otherwise be of any assistance to you 
     with regard to this matter, please let us know.
           Sincerely,
                                                     George Watts,
     President.
                                                                    ____



                               American Frozen Food Institute,

                                        McLean, VA, June 18, 1997.
     Hon. John McCain,
     Chairman, Commerce, Science and Transportation Committee, 
         U.S. Senate, Washington, DC.
       Dear Senator McCain: On behalf of the members of the 
     American Frozen Institute (AFFI), this letter is to urge your 
     continued support for expedient final passage of S. 414, The 
     Ocean Shipping Reform Act of 1977.
       As S. 414 advances for consideration by the full Senate, 
     AFFI urges you and your colleagues on the Commerce, Science 
     and Transportation Committee to support efforts to modify the 
     bill as reported by the Committee to maximize confidentiality 
     in ocean shipping contracting. The Institute also urges your 
     support for efforts to ensure that the broad 
     antidiscrimination provisions included in the reported bill 
     will not create a disincentive for firms to enter into 
     individual contract negotiations.
       The American Frozen Food Institute is the national trade 
     association that has represented the interests of frozen food 
     manufacturers, processors, marketers and suppliers for more 
     than 50 years. The Institute's 550 member companies account 
     for over 90 percent of the total annual production of frozen 
     food in the United States, valued at approximately $60 
     billion.
       Meaningful reform of U.S. ocean shipping laws is critical 
     to foster international trade in an increasingly global 
     marketplace. The refinements to S. 414 recommended above 
     would further this goal by promoting more competitive pricing 
     and contracting for products which are imported from and 
     exported to overseas markets by frozen food processors and 
     other U.S. shippers.
       Thank you again for the leadership you and your Committee 
     have demonstrated on maritime reform. If AFFI may be of 
     assistance to you or your staff in accomplishing this shared 
     objective, please feel free to give me a call.
           Sincerely,
                                               Steven C. Anderson,
     President and Chief Executive Officer.

                          ____________________