On October 15, 1998, after nearly four years of consideration by the US Congress, the Ocean Shipping Reform Act of 1998, (Senate Bill S.414) was signed into law by President Clinton. While the new Act will introduce some important changes to ocean transportation regulations in the US, we must emphasize it does not weaken or eliminate the US Federal Maritime Commission (FMC). In fact, the FMC will become stronger when the new Act takes effect May 1, 1999.

The Commission’s Chairman, Harold J. Creel, Jr., has just had his appointment renewed for a 5-year term. The FMC’s budget is slightly increased for fiscal year 1999. Agreements between carriers and service contracts are still required to be filed with FMC. Tariffs are still required to be published. NVOCC and Freight Forwarder bonds are still required. FMC filing fees have just been increased. FMC’s power to investigate, and its power to enforce fines and penalties, is increased under the new law. Any one who thinks FMC is weakened or eliminated by the new law is very much mistaken.

So what will change under the new law? Here are the four key changes as we see them, almost all other provisions of the Shipping Act of 1984 and FMC regulations remain unchanged:

• Service Contract terms and conditions will no longer be made fully available to the public for review and equal access (“me too”).

Service contracts must continue to be filed with FMC, and carriers must continue to publish Essential Terms Tariffs for each service contract, but these tariffs will not reveal service contract rates. This is the major change made by the new Act.

• Conferences and Rate Agreements will be required to allow member carriers more flexibility in pricing and contracting – so called Independent Action.

Some observers believe this will lead to conferences disbanding, and carriers will price and contract with shippers independently.

• FMC Licensing of Freight Forwarders and NVOCCs will be merged into a new license called “Ocean Transportation Intermediary (OTI).”

The application forms, documents required, bonding requirement and filing fees for the new OTI License have not yet been announced. Currently registered Forwarders and NVOCCs will be given time to obtain OTI Licenses during 1999.

• Tariff formats, which are currently exactly prescribed by FMC, will become more flexible.

Currently, all ocean common carriers (or tariff publishers acting on their behalf) must transmit (file) all tariffs to FMC’s “ATFI” computer system. As of May 1, 1999 ATFI filing will no longer be mandatory, but all carriers, including NVOCCs, will be required to publish accurate tariffs in on-line tariff publishing systems approved and monitored by FMC, and open to FMC at no charge. The new FMC regulations have not yet been issued, but we expect FMC will allow DPI and other tariff publishers to use new and more flexible software systems for tariff publication.

Here at DPI we will of course obtain the necessary FMC approval for our tariff publishing system, and for all tariffs published on behalf of our customers. We expect FMC will review the DPI tariff system every day. By law, FMC must prohibit the use of tariffs that do not comply with the Shipping Acts. The new FMC tariff publication regulations will most likely allow for more flexible tariff formats, but they will absolutely require timely publication of completely accurate and detailed tariff information.

Our main focus here at DPI is maintaining tariffs for our customers that comply in full with FMC regulations; this will continue in 1999 under the new regulations. We expect to begin publishing tariffs on CD-ROM and on the World Wide Web, additional to the traditional tariffs and filing confirmations currently used. Details on these options and the new FMC tariff regulations will be advised shortly. FMC Chairman Creel has indicated the Commission will begin the rule making process in December 1998

The Federal Maritime Commission (FMC) has retained its power to investigate shippers, carriers and forwarders alleged to have violated the Shipping Act. Section 10 of the Act continues to prohibit carriers from allowing any person to obtain transportation at less than the rates or charges established in their tariffs or service contracts. Additionally, it continues to prohibit carriers from providing transportation services not in accordance with their tariffs or service contracts. Section 13 of the Act continues to authorize the FMC to enforce penalties of up to $27,500 per shipment for violations. FMC’s authority to take action against carrier agreements is increased under Section 6(g) of new Act. Complete details of all prohibited acts, penalties and the full text of the new Act are available on request from DPI.

This New Zealand based NVOCC is alleged by FMC to have entered into and participated in arrangements with two vessel operating common carriers that were not filed with the FMC in tariffs or service contracts. In March 1994, Owens is alleged to have entered into an agreement with a common carrier, Ocean Management, Inc. (OMI), in which Owens obtained favorable rates and other considerations from OMI for the transportation of Owens’ cargo between the US and Australia. The terms of this arrangement were not filed with the FMC until March 1997, when Owens and OMI filed a service contract with the Commission. In November 1996, Owens is alleged to have entered into an agreement with South Seas Steamship Co., Ltd., in which Owens obtained rates and other considerations for the transportation of its cargo between the US and New Zealand. The terms of this arrangement were not filed with the FMC until August 1997, when they were filed in the tariff of South Seas Steamship.

The FMC has scheduled hearings to determine if Owens violated the Shipping Act, and, if so, to determine the amount of penalties to be assessed and if its tariff should be cancelled.

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SIGNALS™ the newsletter of Distribution-Publications, Inc. Vol. 2, No. 7, November 2, 1998