Mr. STUDDS. I begin to wonder even if we were successful in enacting legislation to extend our jurisdiction whether that would accomplish anything because we seem to hear on more than one occasion of the executive branch choosing for itself which laws or which parts of the laws it intends to enforce.

I would like to note that the bill which declared the lobster to be a creature of the shelf did not declare it to be a creature of 200 meters of the shelf.

What conceivable justification does the Department of State have for choosing to enforce only a part of that law even if you did it only for a little while?

Mr. MOORE. I defer to the Coast Guard on this.

Commander LYNN. Congressman Studds, there was only a procedural difference in any case. There were various reasons for giving some importance to the 200-meter line and for that reason we had our people reporting back by immediate precedence message so that we could bring the minds here to bear on the case.

We did not have the situation arise at any time during that period, and we have not had it at any time since.

Mr. STUDDS. But those initial instructions were not consistent with the law which the Congress mandated to be carried out by the Executive.

Commander LYNN. They were internal instructions that allowed us to carry out our enforcement, and we had given our commanding officers authority to board when they saw an intentional taking inside of 200 meters.

Mr. STUDDS. May I ask you whether or not the law which you are. enforcing refers either to 200 meters or intentional taking?

Mr. MOORE. Congressman, could I respond to that? One of the difficulties under a provision that refers to the creatures of the Continental Shelf and one of the reasons that we would like a comprehensive law of the sea agreement is that there is no agreement on the outer edge of the Continental Shelf.

The 1958 Continental Shelf Convention makes it very clear that there is legal jurisdiction in the coastal State at least to 200 meters. and beyond that to where the water depth permits exploitation so there is some problem or to the precise limit.

There is, then, some ambiguity as to where the outer edge of the Continental Shelf may be so, in fact, I think the initial approach to this was concerned with this question of what would happen if we were enforcing the claim against foreign nations in an area. which exceeded something that was within U.S. jurisdiction underthe Continental Shelf Convention.

It also, to the best of my knowledge, was something that did not say there would be no enforcement beyong 200 meters.

It was simply a precautionary measure that required a somewhat. greater control in situations beyond 200 meters.

Incidentally, I agree with your doubts that were we to unilaterally extend our jurisdiction we would necessarily solve these problems. Mr. STUDDS. Do you not agree with me that we would attempt to enforce the law?

Mr. MOORE. We would make every effort to enforce the law, as written, but as you have indicated to be effective this is largely something that would have to be done through agreements anyway.

So in the absence of others accepting the claim, as they will in the Law of the Sea Conference, we may well be back in the same old game

of bilateral agreements, except in the meantime they may well have said we are not going to respect any of these agreements we have entered into now because you are asserting a claim that may be fundamentally inconsistent with those agreements.

Mr. COHEN. Will you yield back?

Mr. STUDDS. Yes.

Mr. COHEN. Can I make this request of you? It seems we find ourselves in the position of finding out what the executive branch is doing about the laws we passed long after the fact.

Would it be a breach of your role, protocol, or procedure to request your Department to furnish copies of letters that you send to foreign governments or to enforce these particular laws that we pass?

We would like to be apprised of what you are actually doing to carry out the intent and mandate of Congress and if we could do that contemporaneously with the letters being sent we would not have to find out after the fact.

In May you sent out a letter that we are going to have full enforcement and then in September you say we are going to defer this to November.

In that way we would know where you would need a stronger expression from this committee.

Would that be possible for you to do that?

Mr. MOORE. We can make available these notes that you have requested and I think we would want to keep this committee apprised of any major change.

Mr. COHEN. Any matter that is not classified by the State Department.

I hesitate to suggest that qualification but anything that you would send out would pertain to the law which is passed, laws that are passed by this committee and this Congress, contemporaneous with other foreign nations as to what your notice is about.

Sometimes we feel like we are a part of the foreign nations.
I yield to Mr. Pritchard.

Mr. PRITCHARD. Mr. Chairman, maybe I was hearing things, but Ambassador Stevenson you said something to the effect of what Congress would do and what the Executive would agree to. Did I read a hint in there that you thought that the President might veto Mr. Studds' bill?

Ambassador STEVENSON. I think I was trying to make it clear that I was not passing judgment. Of course, the President is part of the legislative process and I think it is obviously up to him to decide.

Mr. PRITCHARD. Have you had any hint or had any indication of a course of action by the executive branch on this legislation?

Ambassador STEVENSON. You mean as far as a Presidential veto? Mr. PRITCHARD. Yes.

Ambassador STEVENSON. I have not.

Mr. PRITCHARD. Do you feel at this point that you would urge and recommend a veto?

Ambassador STEVENSON. That will have to be an executive branch decision. I will tell you frankly I hope he would.

Mr. PRITCHARD. You would urge that course then?

Ambassador STEVENSON. That is my personal view.

Mr. PRITCHARD. And I guess the last question would be, do you see any chance that the State Department or the Defense Department will change their opinion on this 200-mile extension?

Ambassador STEVENSON. On the fishing bill?

Mr. PRITCHARD. Well, I have a feeling that we have talked for 3 hours on fishing, and we should have talked 15 minutes on fishing and 2 hours 45 minutes on the defense. I think that is where the weight lies in this whole proposition.

It is my understanding that the Defense Department is very adamant in opposing this extension. Have you seen any evidence of a softening on their part?

Ambassador STEVENSON. I think I indicated to you why they are very important national security and defense interests here.

Perhaps Professor Moore who is chairman of that interagency committee could more accurately reflect on that for you.

Mr. PRITCHARD. I thought you might say it quicker. You sometimes get to the point a little quicker.

Well, that is all I have.

Ambassador STEVENSON. If you are asking me, I do not have any indication of a change.

Mr. CLARK. Mr. Studds?

Mr. STUDDS. Gentlemen, one final thing. One of the principal ones who bears the guilt for the length of the session today is perhaps myself. I think it should be said in all fairness that you are not the only folks who work slowly around here.

Last year both Houses of Congress passed a concurrent resolution, which you may remember, which said the Congress is fully prepared to act immediately to provide implementation measures to conserve overfished stocks and protect our domestic fishing industry.

I think we better look a little bit in our own house in this respect, literally and figuratively. We may be in contempt of ourselves as a result of this resolution, and I think one of the lessons that also has come from this is we have been negligent in our oversight responsibilities.

I know that you do not interpret any of the emotion and anger you have heard today as personal and I hope you will not interpret it as being directed solely at one institution of Government.

I think we can all use a little lubricant at this point. We do an awful lot of talking and I think it should be relatively easy to understand the anger of the fishermen at us.

I almost voted against this resolution at the time. I thought it was going to be just a bunch of words and here it is a year later we have done absolutely nothing in the long run, or the short run.

Mr. COHEN. With all deliberate speed.

Mr. STUDDS. I hope the Congress will give the President something he will be able to act on.

Just think what a strong position you will be in next year at Geneva if we had passed the bill, and he vetoed it, and we failed to override the veto by one vote.

You could say to the folks, this is the last time; we get an agreement, or else.

You might want to think about that.

Mr. CLARK. Thank you, very much. I thank all of you for your patience and we do appreciate your coming here and spending the afternoon.

The meeting is adjourned, subject to the call of the Chair.

[Whereupon, at 5:15 p.m., the committee adjourned, subject to the call of the Chair.]

So that we might be better able to enforce section 5(2) of the Act and to enable us to ascertain the actual beneficial ownership of stock in regulated carriers, the Commission has recommended to the Congress that section 20 of the Act be amended to require the recording of the beneficial or record ownership by those holding more than 1 percent of any class of stock of a railroad or other carrier having annual operating revenues in excess of $5,000,000 and $1,000,000, respectively. Other recommended amendments sent to the Congress by the Commission would authorize the Commission to prescribe accounts and reports of persons controlling, controlled by, and under common control with carriers, as well as those of the carriers themselves and would permit the inspection of records of such persons, as well as those of the carriers themselves. Corresponding amendments should also be made to other Parts of the Act to bring regulated carriers of other modes under similar regulation. On the subject of the additional information which should be made available to the Commission, reference should also be made to the responses to questions 15 and 16.

As a final statement here, it is imperative to emphasize that the Commissions' staff must be increased if we are to have available to us the best and most thorough information attainable, which is a sine qua non to the formulation of sound regulatory decisions.

Question. To what extent should the Commission be able to examine the cash flow and income forecasts of transportation companies?

Answer. The United States District Court of Appeals for the District of Columbia has determined in Interstate Commerce Commission v. Burlington Northern, Inc., 462 F. 2d 280 (D.C. Cir. 1972), cert. denied, 409 U.S. 891 (1972), that Section 20 (5) of the Interstate Commerce Act does not authorize the Commission to inspect cash flow and income forecasts of transportation companies if such forecasts relate to events which may or may not occur in the future, as distinguished from facts and past events recorded in the books and records of the carriers. Construing section 20 of the Act, the court stated:

"From the analysis of the history of section 20 we conclude that the Supreme Court's narrow construction of the purpose of the section is still controlling despite the 1920 and 1940 amendments. That purpose is to maintain a uniform accounting system and to permit the analysis and interpretation of records which are required to be kept by carriers. The Commission's access to memoranda and other materials in the possession of carriers must therefore be confined to circumstances in which the need for information relating to or explanatory of required accounting and bookkeeping entries is evident. The Commission's powers of inspection are focused upon facts and historical data as reflected in the records; they do not extend to projections or predictions of future events which have no apparent relevance to the understanding or evaluation of accounting and bookkeeping entries."

It is my opinion that the Commission's request for access to the records involved in the Burlington Northern case, supra, was justified and should have been granted.

While financial forecasts are efficient control devices, carriers are not required by law to develop and record such forecasts. To the extent that these reports are in existence, I personally believe that the Commission should have authority, which must be properly delimited, to examine such records when they are related to documents which carriers are required to keep by law and by regulations thereunder, to the extent that such information may be necessary for a complete analysis of a carrier's financial condition by the Commission. However, it is my belief that authority to scrutinize every piece of paper whether or not related to official records would cover priviledged information, and perhaps may even go beyond the Constitutional powers of the Congress.

If the Commission in the future is specifically authorized by amendment of the Interstate Commerce Act to inspect these forecasts, our authority to hold confidential such information, if its publication would unnecessarily aggravate a carrier's financial and operational problems and be contrary to the public interest, must be given complete recognition.

Finally, in my opinion it is imperative that we remember that carriers should be encouraged to engage actively in such forecasting and that this factor be considered in resolving the question which you have raised.

Question. There are presently bills before Congress which would extend the Security and Exchange Commission's jurisdiction over financial reporting and

41-630-75—7

disclosure for regulated carriers. These bills would leave with the ICC the primary task of regulating the issuance of carrier securities. In testimony before the Senate Commerce Committee, Chairman Stafford indicated that the Commission opposed the change in the Security's regulation structure despite the fact that such a transfer was favored by the Bureau of Accounts and would eliminate the need for duplicate ICC promulgation of existing SEC regulations. (a) How would you evaluate the adequacy of the Commission's financial oversight of regulated carriers?

(b) Would you favor imposing upon transportation companies the same disclosure and reporting requirements as are imposed upon most other industries? Why or why not?

(c) If yes, what agency do you feel should administer the disclosure of financial information by transportation carriers? Please explain your choice of agencies. Answer. (a) It is my opinion that the Commission's financial oversight program is the best attainable within our current budgetary limitations, and that additional personnel is required if the Commission is to perform its financial oversight of regulated carriers in a totally adequate manner.

On March 28, 1974, Chairman George M. Stafford testified before the Subcommittee on Transportation Appropriations of the House Committee on Appropriations. Included in his statement was a concise and scholarly analysis of the adequacy of the Commission's current financial oversight of regulated carriers. Attached hereto is a copy of the pertinent portion of his testimony, which here is offered in response to this question.

(b) This question is directly addressed by the Commission in Ex Parte No. 279, Securities Regulations-Public Offerings, 344 I.C.C. 168 (1973), a copy of which is attached hereto.1 In view of the fact that petitions for reconsideration have been filed in that proceeding and that these petitions are pending before the Commission, it would be improper for me to comment upon the question beyond summarizing the position which was taken in our 1973 report in Ex Parte No. 279, which position I voted to adopt.

In this report we found that for the purpose of insuring adequate disclosure of information to the public, in connection with public offerings issued by carriers pursuant to sections 20a and 214 of the Interstate Commerce Act, an offering circular or prospectus should be required except in certain specified cases, conforming to standards generally patterned after certain forms of the Securities and Exchange Commission.

(c) I believe that the ICC should administer the disclosure of financial information by transportation carriers. The ICC has developed a greater and broaderbased expertise than the SEC with regard to the overall picture of transportation, including the financial aspects of transportation companies which are subject to the Interstate Commerce Act. Transportation should be viewed as a total concept, and dealing with it on a piecemeal basis would result not only in wasteful duplication, affecting the carriers as well as all other taxpayers, but also would tend to produce an inferior end product. While the SEC is primarily concerned only with exacting full disclosure from transportation companies, the responsibilities and endeavors of the ICC are oriented toward a much more comprehensive goala transportation system which is totally responsive to the needs of our Country. Achievement of that goal necessarily is predicated upon the existence of financially and operationally sound transportation companies. In turn, the financial health of "public" transportation companies depends upon, among other things, the investor's confidence in the company and in its financial soundness. To take this sole element and place it within the jurisdiction of the SEC, in my opinion, would be akin to removing one leg from a horse and thereafter trying to make the horse pull a plow. As all the legs of a horse are part and parcel of its ability to plow or function, so are the public's confidence and the trust of the investor to the health of a "public" transportation company, and ultimately to the transportation emanating therefrom.

As note above, in our report in Ex Parte No. 279, we adopted a prospectus form which is similar to, and at least as comprehensive as, that required by the SEC. However, petitions for reconsideration are now pending in that proceeding. Additionally, in Ex Parte No. 275, Expanded Definition of Term "Securities”, 344 I.C.C. 114 (1973), we increased the scope of the financial obligations and securities subject to our scrutiny pursuant to section 20a and section 214 of the

1 Ex Parte No. 279 is in the archives.