Revisiting a pointed criticism of FMC leadership

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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 September 1978 issue, FreightWaves looks at a strong critique of new leadership at the FMC over communication and rebating.

Karl Bakke lashes out at successor

Former Federal Maritime Commission Chairman Karl E. Bakke, now an FMC Commissioner, blasted the present Chairman, Richard Daschbach, on August 15 for failing to communicate with his fellow agency colleagues since he succeeded Bakke to the post about one year ago.

“Over the past year, I can recall not one single instance where the Chairman has sought, formally or informally, to share, solicit, or even discuss views on any matter of policy or substance concerning Commission business,” Bakke said as he testified before the House Merchant Marine Subcommittee at “oversight” hearings on FMC’s regulatory functions.

“Indeed, communication of any nature at the Chairman’s initiative has been virtually nonexistent, even on informational matters of legitimate interest concerning Commission activity,” Bakke charged.

Stating that “it is difficult for a member (of the Commission) to function effectively in a vacuum,” Bakke said that he only heard of Daschbach’s priority list of FMC goals “for the first time this morning.”

“One might reasonably expect,” Bakke said, “that in preparation for an oversight hearing such as this, a Chairman, purporting to speak for the agency, would coordinate his presentation with other agency members and share with them statistical and factual information and proposed responses developed in anticipation of particular areas or lines of questioning. I was privy to none of this.”

The former FMC chief also revealed that his views “have never been solicited” by Daschbach concerning interagency meetings or discussions with the Legislative Branch of the government that have involved FMC policy matters.

“Nor have I ever been advised of the holding (of such meetings) or the subject matters dealt with in such sessions,” Bakke disclosed.

He said Daschbach’s assignment of FMC Commissioners to oversee internal study projects “is a commendable step in the direction of full utilization of all Commissioners, but realization of that objective will fall far short of its goal until the concept of the Commission as a full five-member body is incorporated into its administration.”

He warned that in order for FMC to function effectively, “open channels of communication between open minds” are needed, “not adversary relationships.”

“I trust that in time the ‘new team’ will come to share this view,” Bakke concluded.

Before the Bakke charges were made, Commissioner Leslie Kanuk told the Subcommittee of communication problems within the agency. She said there were “serious communication problems within the Commission … we do not talk together.”

Daschbach testimony

Daschbach told Subcommittee Counsel Peter N. Kyros he would make “all (the efforts) that are humanly possible” to correct the situation, adding that the “Government in Sunshine Act” might be an impediment to effective communication. (Under the rules of this statute, a notice must be published in the Federal Register any time three or more Commissioners want to meet to discuss anything pertaining to FMC business.)

The present FMC Chairman said that his Managing Director, Arthur Pankopf, and the Maritime Administration’s Deputy Assistant Secretary for Maritime Affairs, Samuel Nemirow, are taking steps to implement the anti-rebating certification requirement contained in MarAd’s appropriations authorization.

He said the Commission will provide an annual statement to MarAd listing carriers that cooperate or refuse to cooperate with FMC in its anti-rebating investigation. (American companies listed as not cooperating stand the chance of losing government subsidies.)

Daschbach and Robert Ellsworth, of FMC’s Bureau of Industry Economics, played down the importance and accuracy of a recent study done for the Department of Transportation by Booz, Allen & Hamilton, which claimed that U.S. exporters pay an average of 32.2% higher freight rates per long ton of cargo than their foreign competitors. Ellsworth said that in the North Atlantic trade “when you look at specific rates and commodities, the disparities vanish.”

The FMC Chairman said “paper disparities frequently turn up, which are meaningless … Our programs now relate to specific shipper complaints.” (On August 10, Daschbach told the same Subcommittee that he had not bothered to read the rate disparity report because FMC staff members felt it was made on a “shaky” basis and filled with “errors.”)

DoJ/FMC rivalry

Concerning the escalating rivalry between FMC and the U.S. Department of Justice, Daschbach. DoJ Lawyers’ Perspective said DoJ lawyers “feel the Sherman and Clayton antitrust acts are overriding policies,” adding that “they haven’t been able to see that Section 15 exemptions override those economic policies. He further contended that DoJ “has never accepted Section 15 (of the 1916 Shipping Act) as an appropriate act of Congress.

FMC Anti-Rebating Campaign: In his August 10 testimony, Daschbach indicated that FMC’s anti-rebating campaign was picking up steam. He said the agency settled claims with 24 shippers and carriers, 12 of these occurring since May 1. The FMC Chairman said his Commission collected fines amounting to $5,272,000 with claims filed against shippers and carriers totaling another $5,147,000.

He told the Subcommittee that if the outstanding claims are concluded, the Commission’s enforcement program will yield over $10.4 million to the U.S. Treasury since January of last year. Daschbach said that amount “exceeds our total agency budget by nearly $1 million.”

“As the snowball effect of shipper and carrier disclosures becomes increasingly evident, the Commission expects substantial increases in the violators uncovered and penalized,” Daschbach said. “We are also confident that mounting disclosures will soon produce a substantial impact upon the illegal activities of foreign flag carriers in our ocean commerce.”

He said FMC’s current anti-rebating program “is just the spearhead” of a broader campaign to obtain adherence to U.S. laws “in all aspects of our ocean commerce, and to ensure the acceptance and credibility of our regulatory powers among those who seek to participate in the carriage of our foreign trade.”

McCloskey not convinced

However, the pace of the Commission’s rebating investigation did not sit well with Rep. Paul N. McCloskey (R-Calif.). Noting that seven subsidized shipping companies are still being investigated since FMC was given stronger authority to deal with rebates 15 months ago, McCloskey said, “I would certainly question the competence of any Commission.” The California republican said that if the U.S. operators are really cooperating, the FMC investigation should have been concluded within 30 days. He said that either the lines are not cooperating “or FMC is not acting.”

McCloskey raised the possibility of the Subcommittee’s staff attorneys examining FMC files to determine if the U.S. operators are being cooperative.

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