The Federal Maritime Commission has announced eleven compromise agreements recovering civil penalties in an aggregate amount of $820,000. The agreements were reached with a vessel-operating common carrier, members of a carrier credit agreement, a passenger-vessel operator, and several ocean transportation intermediaries (OTIs). In concluding the these compromises, the settling parties did not admit any violations of the shipping statutes.

Seafreight Line, Ltd. This VOCC with headquarters in the Grand Cayman Islands was alleged to have sections 8(c) and 10(b)(12) of the Shipping Act by entering into and providing transportation pursuant to service contracts which were not in compliance with applicable law and regulation because they were entered into with NVOCCs who did not publish FMC tariffs, or contained improper shipper certifications, or contained indefinite terms as to duration. Pursuant to the compromise agreement, Seafreight paid the sum of $50,000.

The Water Transportation Credit Group Member Lines (WTCG). This Agreement, formerly an association of the New York Credit Group Service, Inc., consisted of various VOCCs, including: American President Lines, Ltd., A.P. Moller-Maersk Sealand, China Shipping Container Lines Co., Ltd., CMA CGM S.A., Lykes Lines Limited, LLC, Mitsui O.S.K. Lines, Ltd. and P&O Nedlloyd Ltd. It was alleged that former member lines of the WTCG were involved in the exchange of credit information under an agreement that was not filed as required with the Commission. Under the terms of the compromise, these WTCG member lines, collectively, paid the sum of $105,000.

West Travel Inc. (d/b/a Alaska Sightseeing/Cruise West). This Seattle, Washington based passenger vessel operator was alleged to have arranged, offered, and advertised passage aboard the Spirit of Oceanus, a vessel having berth accommodations for more than 50 passengers that was scheduled to embark passengers at a United States port, prior to obtaining a Certificate of Financial Responsibility for Indemnification of Passengers for Nonperformance of Transportation from the Commission in violation of section 3(a) of Public Law 89-777, 46 U.S.C. app. § 817(e). In compromise of this allegation, West Travel paid the sum of $45,000.

Hecny Shipping Ltd. and Bright Fortune Shipping Ltd. These Hong Kong based NVOCCs were alleged to have violated the Shipping Act by obtaining transportation of property at less than the applicable service contract rates and charges through a scheme by which Hecny Shipping permitted other NVOCCs, including Bright Fortune, to access its service contracts. It also was alleged that Hecny and Bright Fortune failed to charge the rates set forth in their respective tariffs. Under the terms of the compromise, these entities jointly paid the sum of $250,000.

Ledi Corporation. This Miami, Florida corporation was alleged to have violated the Shipping Act by obtaining transportation at less than the rates and charges otherwise applicable by entering into and shipping under a service contract, as an NVOCC without obtaining a license to act as an OTI, without furnishing a bond, proof of insurance, or other surety and without having a tariff on file. Under the terms of the compromise, Ledi paid the sum of $20,000.

LEO Transport Corporation Ltd. This NVOCC based in Bangkok, Thailand was alleged to have violated the Shipping Act by providing untariffed carriage as an NVOCC in the U.S. trades, by allowing another NVOCC to unlawfully access its service contract and by assessing rates and charges for its services at other than those contained in its tariff. Under the terms of the compromise, LEO paid the sum of $25,000.

Lilly & Associates International Freight Forwarders, Inc. This Miami, Florida based NVOCC was alleged to have violated section 10(a)(1) of the 1984 Act by knowingly and willfully obtaining transportation for property on behalf of others at less than the rates or charges that would otherwise be applicable by entering into exclusive sales agent agreements with unlicensed OTIs; by permitting unlawful access to its service contracts with ocean carriers; and by means of receiving unlawful substitutions of equipment. It was also alleged that Lilly allowed others to obtain transportation for property at less than the rates or charges established in its tariff by providing concessions of free pick up and delivery of cargo, and provided transportation of cargo at other than the rates or charges which were in effect in its applicable tariff at the time the shipments were tendered. Moreover, it was alleged that Lilly paid freight forwarder compensation to entities without first obtaining written certifications that these entities held a valid license and/or performed the services entitling them to compensation. It was further alleged that Lilly violated the Commission’s regulations, by preparing false documentation on behalf of its agents by mis-rating bills of lading with a higher rate than the actual charges applicable. In compromise of these allegations, Lilly paid the sum of $70,000.

Middle East Shipping Co., Inc. This ocean freight forwarder based in Pasadena, Texas was alleged to have violated FMC regulations by knowingly and willfully receiving freight forwarder compensation from common carriers for shipments in which it had a beneficial interest. In compromise of these allegations, Middle East paid the sum of $30,000.

Target Intermodal Inc. Target is a licensed and bonded NVOCC based in El Segundo, CA. It was alleged that Target violated the Shipping Act by obtaining transportation of property at less than the applicable rates by improperly accessing the service contract of another NVOCC and by failing to charge those rates set forth in its tariff. Under the terms of the compromise, Target paid the sum of $35,000.

Translink Shipping Inc. This Seattle, Washington based NVOCC was alleged to have violated the Shipping Act by allowing other persons to obtain transportation of property at less than the applicable tariff rates and charges by the device or means of rebating or refunding a portion of the freight charges to shippers or shippers’ employees. In compromise of these allegations, Translink paid the sum of $115,000.

TSC Container Freight. This licensed OTI/NVOCC, headquartered in St. Paul, MN, is a business unit of the Scoular Company. It was alleged that TSC violated sections the Shipping Act and FMC regulations by obtaining transportation at less than applicable rates by mis-describing commodities transported under service contracts with VOCCs. In compromise of these allegations, TSC paid the sum of $75,000.

The FMC Bureau of Enforcement (BOE) and Empire Lines Co., Inc. (Empire) have reached agreement to settle Docket 02-11 with the payment of $40,000 to FMC. In August 2002, the Commission issued an Order of Investigation to determine whether Empire, a licensed OTI-NVOCC based in Brooklyn, New York, violated the Shipping Act by receiving unlawful rebates through its collection of unwarranted freight forwarder compensation from other OTIs. Empire was also alleged to have assessed its shipper customers freight rates and charges that were not filed in its tariff. Additionally, Docket 02-11 alleged that Empire violated Commission regulations by knowingly and willfully providing false information to several ocean common carriers in connection with its shipments.

In its presentation to FMC Administrative Law Judge Michael Rosas the Bureau of Enforcement contended that the evidence would show that Empire violated the Shipping Act by knowingly and willfully providing false information about the freight forwarder on numerous shipments made between April 1997 and October 1999. This enabled the freight forwarders to collect unwarranted compensation from several ocean common carriers. BOE further contended that on at least twenty-one occasions Empire collected a portion of the unwarranted compensation from the freight forwarder through invoices for various alleged services and products.

Under the terms of the settlement agreement, Empire did not admit to any violation of the Shipping Act. Empire has terminated the practices which led to this proceeding, and has instituted measures to prevent any reoccurrence. Moreover, Empire cooperated with the BOE in carrying out its investigative and enforcement activities, and agreed to make a monetary payment to the Commission in the amount of $40,000 to settle the allegations and close this proceeding.

The imposition of Port Congestion Surcharges by ocean carriers serving US West Coast ports has prompted the Federal Maritime Commission to issue a special advisory notice on its web site at www.fmc.gov This notice reminds all parties concerned that Section 8(d) of the Shipping Act, and the Commission’s rules on tariffs generally prohibit any “change in an existing rate that results in an increased cost to the shipper from becoming effective earlier than 30 calendar days after publication.” The Commission’s rules on tariffs state that the “rates, charges, and rules applicable to any given shipment shall be those in effect on the date the cargo is received by the common carrier or its agent including originating carriers in the case of rates for through transportation.”

With respect to service contracts, the shipping public is reminded that the specific terms of individual service contracts generally govern the rates and service obligations of the parties. Any variance from specific terms must be authorized otherwise, either by the terms of the contract itself, or by reference therein to other applicable authority, such as carrier rules tariffs which would normally be subject to the 30-day notice requirement. Of course, service contract terms always may be varied by mutual agreement of the parties, however this must be reflected in an amendment duly filed with the Commission, and otherwise consistent with applicable regulations and statutes.

The Commission cautions the industry and the shipping public that these general rules remain in effect and that any actions inconsistent with these rules would be permissible only if they are authorized by other lawful provisions. Specifically, any surcharges published in tariffs that are designed to address the consequences of continuing congestion at U.S. West Coast ports generally should not be instituted without the required 30-day notice, and may be applied only in conformance with the applicable “effective date” rule, cited above. Any questions relating to this Advisory or other aspects of common carriers’ service in the present situation may be directed to Vern W. Hill, Director, FMC Bureau of Enforcement, at (202) 523-5783 or by electronic mail at vernh@fmc.gov

The South Florida NVOCC-NAOCC Association has petitioned the FMC to request an investigation of allegedly unlawful activities by the members of the Caribbean Shipping Owners Association (CSA). The Florida NVOCCs have formally asked the FMC to determine whether CSA’s members have violated the Shipping Act through discriminatory service contracting and rating practices in the Caribbean trades that intentionally discriminate against NVOCCs. Petition P2-02 contends that these practices reduce competition in the Caribbean trades, and produce unreasonable reductions in transportation service and unreasonable increases in transportation cost to OTIs, their shippers and the shipping public. The FMC has been formally asked to consider allegations that CSA and its members may be in violation of the Shipping Act by either adopting mandatory agreements relating to OTI rates and services, or failing to file true copies of their voluntary guidelines thereon with the Commission.

In support of these contentions, the Florida NVOCCs claim that on or about July 1, 2002, CSA members announced a selective rate increase plan targeting service contract and tariff rates for the commodity descriptions almost exclusively used by NVOs for consolidated containers of less than container load cargo: Freight All Kinds (FAK) and General Department Store Merchandise (GDSM). These rate increases were substantial (from 10% to 40%); however, CSA purportedly did not take across-the-board increases for any other commodities or categories of shippers. Petition P2-02 asserts that CSA’s members’ service contract offers to NVOCCs have eliminated all commodity rates other than FAK and GDSM, thereby depriving them of a rate basis on which to compete for full container load single commodity shipments.

Petition P2-02 also alleges that a wholly-owned NVO subsidiary of CSA member Tropical Shipping and Construction Co., Ltd. (Tropical) has reduced its LCL rates, and this is evidence of the CSA members’ “obviously coordinated series of actions” which have severely and unfairly injured the ability of other NVOCCs to compete. Finally, Petition P2-02 states that it has been advised that the CSA’s goal and purpose in adopting the selective rate increase plan is to “destroy non-conference competition” and “diminish the influence of the NVOCCs” in the trade.

In response to this petition the Commission has invited interested parties to submit their comments. The comment period has been extended until November 8, 2002. Comments must be submitted to the FMC Secretary, Bryant L. VanBrakle e-mail: Secretary@fmc.gov; and be served on Petitioner’s counsel and the CSA (contact info available from FMC).

The FMC has recently terminated the licenses of several Ocean Transportation Intermediaries (OTIs). Licenses that were surrendered voluntarily are noted. License numbers ending with the letter “F” are Freight Forwarders; those ending with “N” are NVOCCs. Most of these terminations were due to failure to maintain required surety bonds. Some licenses were surrendered voluntarily by OTI’s that have stopped operating. Once a license is terminated the OTI is prohibited from operating, and tariffs published on behalf of OTI-NVOCCs must be cancelled. Commission regulations provide that persons operating without the proper license may be subject to civil penalties. Ocean Carriers may also be subject to penalties if they knowingly transport cargo for unlicensed OTIs.