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Signals™ Headlines - April 6, 2004

FMC Issues Final Rule for Optional NVOCC Bond Rider

The Federal Maritime Commission has issued a Final Rule to amend its financial responsibility (bonding) requirements for NVOCCs. This new rule, issued in FMC Docket 04-02, allows NVOCCs operating in the U.S. who also operate in China the option to increase their FMC bonds from $75,000 to $96,000 and use these bonds to satisfy part of the Chinese licensing requirements.

NVOCCs operating in China are required to hold licenses issued by China’s Ministry of Communications. Previously, China has required NVOCC license holders to submit a deposit of RMB 800,000 (US$ 96,000) in a Chinese bank as proof of financial responsibility. Allowing the FMC bonds to substitute for these deposits would seem to offer a significant cost savings to NVOCCs, however, the FMC bonds only cover shipments to/from the USA, and can not be used by NVOCCs who handle shipments between China and other countries.

This rulemaking will implement concessions made by the People’s Republic of China in a recently concluded bilateral Maritime Agreement between the United States and China. Shortly after this agreement was concluded in December 2003 The National Customs Brokers and Forwarders Association of America (NCBFAA) filed Petition No. P10-03 requesting this rulemaking. In response, the FMC issued its Docket 04-02: Optional Rider for Proof of Additional NVOCC Financial Responsibility after its January 21 meeting. The Commission received three comments in favor of the rulemaking, and none opposed. At its March 31 meeting the Commission agreed to issue the Final Rule, bypassing the usual 30-day waiting period for finalization. The Final Rulemaking will take effect April 6, 2004.

FedEx Files for Tariff Exemption & Contracting Authority

FedEx Trade Networks Transport & Brokerage, Inc. has petitioned the Federal Maritime
Commission to request an exemption from the tariff publication requirements of Section 8 of the US
Shipping Act, and to request the Commission to allow it to enter into confidential ocean transportation
service contracts with its customers.
Petition P4-04
was filed March 17, 2004. The FMC has now received a total of seven similar petitions
requesting relief from tariff publication and service contract authority for NVOCCs, but, other than
requesting public comments, it has not acted on any of these petitions.

Chairman Blust Appears Before the US House of Representatives

FMC Chairman Steven Blust appeared before the
US House of Representatives Committee on Transportation and Infrastructure
on March 4, 2004 to
review the FMC budget for fiscal year 2005. The Bush Administration has requested $19.5 million
for the Commission’s operation for FY2005. This is an increase of $1,134,000 from 2004.

In his comments,
Chairman Blust explained the budget increase will fund increased official travel to conduct informational
seminars for the shipping community, Homeland Security and employee salaries. He also spoke in brief about
recent FMC concerns, including as Chinese trade issues, and the petitions by NVOCCs for service contract
authority and relief from tariff publication. On the latter subject, Chairman Blust said the FMC is
considering the “substantial requests for relief” requested by the NVOCC petitioners, as
well as the “fundamental question of whether the Commission has the authority to grant the
types of relief requested.”

Commission Grants Exemptions to Chinese Controlled Carriers

The Federal Maritime Commission has granted the petitions of three Chinese controlled carriers. According to Section 9 ocean carriers that are owned or controlled by a foreign government (controlled carriers) are required to publish all rates in their FMC tariffs 30 days before their effective dates. China Ocean Shipping Company (COSCO) China Shipping Container Lines Co., Ltd., and SINOTRANS Container Lines Co., Ltd. are now exempt from this requirement.

COSCO and China Shipping, in Petition No. P3-99 and Petition No. P4-03, respectively, sought permanent exemptions from Section 9 of the Shipping Act. The Commission found the requests for permanent exemption to be inconsistent with the Shipping Act, however, it granted these exemptions effective April 1, 2004 without a time limit or expiration date. Petition No. P6-03 filed by SINOTRANS did not request a permanent exemption; it was also approved as of April 1.

These Chinese controlled carriers are now able to file new or reduced rates in their tariffs without waiting 30 days. Tariff amendments that increase costs to shippers will still require 30 days notice. Only after the signing of the new bilateral Maritime Agreement between the U.S. and China did the FMC finally deal with these long-standing petitions. Both the US Maritime Administration and the US Department of State urge the FMC to grant the petitions, citing commitments made by the USA within the bilateral agreement.

FMC Asks for Comments on Chinese Trade Issues

After nearly six years FMC Docket No. 98-14 Shipping Restrictions, Requirements and Practices of The People’s Republic of China is still very much alive. At their March 31 meeting the FMC Commissioners decided to issue a Notice of Inquiry requesting comments from interested parties in order to measure the actual effectiveness of the recently signed bilateral Maritime Agreement between the US and China.

Docket 98-14 was originally initiated on August 12, 1998. Three main concerns were addressed in this docket: 1) the prohibition of branch offices of non-Chinese vessel operators in locations other than port cities at which their vessels call – this prevented non-Chinese vessel operators from offering direct service to inland points in China; 2) the limitation of vessel agency operations to Chinese state-owned entities – which forced non-Chinese liner operators to employ vessel agent subsidiaries of their Chinese competitors; 3) adverse effects of the Chinese Regulation of International Maritime Transport issued December 25, 2002, including the requirement for non-Chinese NVOCCs to deposit the RMB 800,000 (US$ 96,000) in a Chinese bank as proof of financial responsibility.

As a result of the new bilateral Maritime Agreement, China has committed to allow non-Chinese vessel operators to operate branch offices anywhere and to no longer restrict the types of services non-Chinese carriers may provide. China has also agreed to accept surety bonds filed with the FMC in lieu of an actual monetary deposit by licensed NVOCCs. The FMC is seeking comments to determine if the Chinese Government is acting upon these commitments.  The deadline for comments is June 1, 2004. Comments must be directed to FMC Secretary Bryant L. VanBrakle: secretary@fmc.gov

FMC to Hold Seminar in Philadelphia, PA

The Federal Maritime Commission has announced it will conduct yet another seminar in April. The seminar
will take place in Philadelphia, PA on April
21 at the William J. Freen Federal Building. This seminar is part of a series of free informational seminars
conducted by FMC Area Representatives to provide information on the FMC’s functions and services, as well as
instruction regarding the regulatory obligations of providers and users of ocean liner shipping services it
regulates. Registration for the Philadelphia, PA seminar is required by April 14,2004. Contact
Jim Mingione, FMC New York Area Representative; tel: 718-553-2228, fax: 718-553-2229 email:

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