The FMC Bureau of Enforcement recently announced compromise agreements with ten organizations accused of violations of the Shipping Act of 1984. None of the parties named below admitted to any violations of the Shipping Act. A total of $641,000 was collected as a result of these agreements.

• International Transportation Network (ITN) – A compromise agreement of $5,000 was reached with this New Jersey based freight forwarder in the matter of alleged violations of FMC regulations prohibiting the payment of compensation to forwarders holding a beneficial interest in shipments.

• Pacific Shipping Limited – A compromise agreement of $12,500 was reached with this vessel operator over allegations it charged rates other than those published in its FMC tariff for shipments between the US West Coast and Japan.

• Alliance Shippers – A compromise agreement of $35,000 was negotiated with this New Jersey based intermodal marketing organization and NVOCC in connection with FMC allegations it charged rates other than those published in its FMC tariff on shipments from Australia to the USA.

• Hyundai Merchant Marine – A compromise agreement of $265,000 was negotiated with this major ocean carrier to settle allegations that it failed to adhere to FMC filed tariff rates and used “false or unfair devices” in its application of commodity rates.

• Inter-American Freight Conference – Compromise agreements were reached with members of this conference totaling $130,000 to settle allegations that service contract rates were applied on shipments that did not qualify for such rates.

• Phoenix International Freight Service – A compromise agreement of $85,000 was reached with this Wood Dale, IL based NVOCC in the matter of alleged violations involving commodity misdescriptions, deviation from FMC filed rates, and abuses in equipment substitution.

• Jetco Shipping Ltd., General Merchandise Consolidators, Inc. and Pactrans Marine Inc. – These three NVOCCs jointly reached a compromise agreement with the FMC to pay a total of $50,000 to settle allegations involving commodity misdescriptions, deviation from published rates, and abuses in equipment substitution.

• Speemark Consolidation Service Ltd. – A compromise agreement of $85,000 was reached with this Taiwan based NVOCC in the matter of alleged violations involving commodity misdescriptions, deviation from FMC filed rates, and abuses in equipment substitution.

This docketed proceeding calls for an FMC investigation and hearing to determine whether Topocean Consolidation Service Ltd., a Taiwan based NVOCC, Topocean Consolidation Service (Los Angeles) Inc. and Information obtained by the Commission indicates Topocean Taiwan appears to have acted as an NVOCC for shipments which occurred between September 1995 and May 1996, without a bond, proof of insurance or other such surety in violation of section 23(a) of the 1984 Act. Additionally, it appears that Topocean LA and Topocean NY, in concert with Topocean Taiwan, knowingly and willfully obtained or attempted to obtain ocean transportation for cargo at less than the applicable tariff by misdescription of commodities for shipments transported by ocean common carriers between Sept. 1995 and April 1997. Also during this time period, it appears that Topocean LA, in concert with Topocean Taiwan, knowingly and willfully obtained or attempted to obtain ocean transportation for property at less than the applicable rates by means of false cargo measurements on shipments involving equipment substitution. The Commission’s Bureau of Enforcement is designated a party to this proceeding along with the three Topocean companies. This proceeding also will determine whether civil penalties (fines) should be assessed, in what amount, and whether a cease and desist order should be issued. The initial decision of the FMC Administrative Law Judge shall be issued by May 29, 1998 and the final decision of the Commission shall be issued by September 28, 1998.

The FMC has opened a formal investigation to determine whether Pacon Express, Inc. violated the Shipping Act of 1984 and Commission regulations in connection with the payment of forwarding compensation to a related company in which it appears to hold beneficial ownership, and by obtaining ocean transportation at less than the applicable rates through the unjust or unfair device of collecting compensation for the shipments. This proceeding will determine whether civil penalties (fines) should be assessed, in what amount, and whether a cease and desist order should be issued. Pacon Express, Inc., Luis R. Hallon, and Sun Bong and the Commission’s Bureau of Enforcement were designated parties to this proceeding. The initial decision of the Administrative Law Judge shall be issued by June 22, 1998, and the final decision of the Commission shall be issued by October 20, 1998

On July 31, 1997 notice was published in the Federal Register that Intercargo Insurance Company, Inc. has filed a petition for declaratory order in this matter. In its petition, Intercargo has requested the FMC to terminate a controversy and remove any uncertainty that may exist with respect to the following issues:

1. Whether a non-vessel-operating common carrier (NVOCC) surety bond covers claims for unpaid freight charges on a shipment when the NVOCC principal to an NVOCC bond acts as a forwarding agent on behalf of a disclosed shipper, and not as a shipper or common carrier.
2. Whether a surety is entitled to review a default judgment–or any judgment not defended by the NVOCC or its surety–to determine whether a claim is within the scope of the bond.

The FMC has not yet scheduled hearings on this petition, but, by assigning it to a docketed proceeding, the Commission has is clearly giving the petition due consideration.

Slower than promised progress in the reform of Japan’s harbor services industry could cause the FMC to impose sanctions of $100,000 per voyage against the big three Japanese containership operators on September 4, 1997. After a long investigation in last year, the FMC proposed these countervailing sanctions in this docket in response to what it called “conditions unfavorable to shipping” created by the Government of Japan. On April 14, 1997, just hours before the sanctions were scheduled to take effect, the FMC Commissioners agreed to delay the sanctions for three months, and to review the matter again before this new deadline. An agreement signed by US and Japanese negotiators promising substantial reform of Japan’s harbor services industry persuaded the FMC to extend its deadline. In this agreement Japan’s Ministry of Transportation (MOT) promised immediate reforms in the licensing of terminal operators. MOT also pledged to use its maximum effort to reform the “prior consultation” system used at Japanese ports. The FMC believes the prior consultation system unfairly hampers carrier operations and increases terminal costs. US flag carriers say these reforms have not been forthcoming.

In recent weeks both FMC Chairman Hal Creel and DOT Secretary Rodney Slater have expressed their disappointment in the progress made in this matter. Secretary Slater said he was “greatly disappointed at what we would judge to be minimum progress.” FMC Chairman Creel said it appears the sanctions will likely take effect “barring a significant degree of progress in the next few weeks” leading up to Sept. 4.

US and Japanese flag containership operators were required to submit progress reports on the progress of reforms on July 1 and August 5. Reports submitted by American President Lines (APL) and Sea-Land Service said flatly “no progress has been made in reforming the prior consultation system.” The US flag carriers said they were preparing applications for licenses to operate terminals at Kobe and Yokohama, but had not yet completed the extensive application form requirements as required by MOT. The brevity of the response by the US carriers clearly showed their dissatisfaction with the situation.

In the view of the Japanese carriers, K-Line, Mitsui OSK Lines and NYK, who submitted their own joint reports to the FMC, the consultative process to reform the prior consultation system has yielded substantial results. In their July 1 report, they noted six meetings were held under the auspices of MOT. Since the signing of the interim agreement on reform of the prior consultation system in March 1997, the number of consultations has been reduced by more than 80%. In their August 5 report, the Japanese carriers said “MOT has played a very active role in helping to narrow the differences between the carrier side and JHTA (Japan Harbor Transport Association),” and a final agreement between the carriers and the JHTA is expected in the near future. The Japanese carriers are in the difficult position of facing potential FMC fines levied in response to a labor-management situation they do not control. By their estimates, the FMC fines will cost the Japanese carriers $4 million per month.

Resistance by Japanese dockworkers to changes in the prior consultation system has made it difficult for MOT to achieve promised reforms. In joint letter to FMC Chairman Hal Creel the leaders of Japan’s leading dockworkers and harbor transport workers unions said their organizations can not accept the Agreement reached between MOT and US negotiators in April. In the view of these union leaders, this Agreement “contravenes the ILO International Agreement, the Constitution of Japan and regulations under Labor Law,” and it is not binding on their organizations in any way. In the month prior to this agreement, a one-day strike by dockworkers shut down 50 Japanese ports and delayed over 200 vessels. A suspension of Sunday work by dockworkers earlier this year reduced productivity at Japanese ports. Reforms to the prior consultation system unilaterally imposed by MOT could cause additional strikes and job actions. The dockworkers called the system “one we had struggled to achieve, in order to protect our employment and working conditions from carriers’ one-side port operations and rationalization.”

Negotiations have been complicated by changes in senior personnel at MOT and at the Japan Harbor Transportation Association (JHTA). Mr. Satoshi Iwamura took his post as MOT Director General just weeks ago in June. The long time leader of the JHTA, Mr. Shiroo Takashima, passed away suddenly on May 29. Mr. Takashima was a powerful presence on the waterfront in Japan for 30 years. His management of the prior consultation system was considered by many Japanese observers to be the key to stability in the industry. But in the view of the Washington Post newspaper, and some US observers, Mr. Takashima was “a one-man trade barrier.” The new JHTA leader, Mr. Mutsumi Ozaki, is president of Kamigumi Co., Japan’s second largest port services company, and was JHTA Vice President. The JHTA member companies employ dockworkers in Japan, and JHTA negotiates directly with dockworkers labor unions, ocean carrier associations do not.

An intensive series of meetings in Tokyo in late July between representatives of MOT, JHTA, the Japan Shipowners Association (JSA), and the Japan Foreign Steamship Association (JFSA) failed to yield a consensus on reform. Consultations are now being held on the matter on an on-going basis. If MOT Director Iwamura and his staff can not persuade the parties to conclude an agreement by the end of August, and convince the US this agreement will result in substantial reforms, it appears the FMC Commissioners intend to let the sanctions take effect on 04Sep1997.

In late July separate House and Senate committees approved legislation authorizing fiscal year 1998 budgets for several federal transportation agencies, including the Federal Maritime Commission (FMC). By approving S.1022, the Senate awarded the FMC a budget of $14.3 million, which is identical to this year’s budget. The House set a budget for the FMC of only $13.5 million in its spending bill, H.R. 2267; however, this is expected to be revised to match the Senate figure when the House and Senate conference committees rationalize these spending bills budgets in September. Earlier this year, President Clinton proposed a budget of $14.3 million for the agency. The FMC is budgeted to employ 143 full time employees for fiscal year 1998, which begins on October 1, 1997.

On July 31st, in one of its last actions before the summer recess, the US Senate Committee on Commerce, Science and Transportation completed its report on Senate Bill No. S.414, the Ocean Shipping Reform Act of 1997. The filing of this 93 page report (SR061.105) enabled Committee Chairman Sen. John McCain (R-AZ) to place the bill on the Senate calendar, but without a date for a vote by the full Senate. The Ship Reform bill is one of 61 bills and resolutions listed on the Senate calendar for consideration by the full Senate when it reconvenes in September after its summer recess. Democratic Senators who oppose the bill are actively working to prevent the Senate from voting on this version of the bill.

Amendments to the bill reviewed in the June 1997 issue of SIGNALS ä are included in the bill as reported to the full Senate. The most significant of these amendments are the changes made to the bill’s provisions for service contracts, viz.:

• Multiple shippers could collectively enter into a service contract with a carrier or group of carriers.
• NVOCCs would be allowed to enter into service contracts as carriers.
• Agreements between ocean carriers, in addition to conferences, could enter into service contracts.
• Service contracts could be based on a percentage or portion of a shipper’s cargo volume.
• Carriers would file contracts with the FMC’s successor, the Intermodal Transportation Board, but would publish only four (4) essential terms of each contract, instead of the ten (10) terms currently required. The four terms are US port range, commodity, volume or portion, and contract duration.

Senate Committee report SR061.105 identifies and comments favorably on each of the changes to currently effective laws and regulations that would be made by the Ocean Shipping Reform Act of 1997. It includes cost estimates from the Congressional Budget Office. A brief history of US federal shipping legislation is also provided. Copies are available from Distribution-Publications, Inc.

The bill’s sponsors and supporters are cautiously optimistic about its chances for success this year, but prospects for Senate approval are questionable due to strong opposition by Senator John Breaux (D-LA), Sen. Barbara Boxer (D-CA), and Sen. Daniel Akana (D-HI). These Senators are sensitive to the concerns of ports, organized labor, and small shippers associations who oppose provisions of bill which will sharply reduce public access to information on service contracts. The influential Executive Director of the Port of New York & New Jersey, Lillian Barrone, recently expressed these concerns in a widely circulated letter to the bill’s chief sponsor, Sen. Kay Bailey Hutchison (R-TX).

The recent amendment to the bill that would allow NVOCCs to enter into service contracts as carriers has drawn stiff opposition from unionized labor, who fear it will lead to a loss of cargo handling work for members of the International Longshore and Warehouse Union (ILWU). According to press reports, Sens. Boxer and Akana responded to the concerns of organized labor by using Senate rules to place a “hold” on the bill. This procedural action could keep the bill on the Senate calendar without a scheduled date for consideration by the full Senate, and prevent the bill from ever reaching the Senate floor for a vote. Several controversial bills introduced by Sen. Jesse Helms (R-NC) have met a similar fate.

The FMC has given notice in the Federal Register of the filing of the following agreements under the Shipping Act of 1984. Agreements approved by the FMC take effect 45 days after publication in the Federal Register, unless a shortened review period is granted. Interested parties who appear in person can retrieve copies of agreements from FMC’s public files. Distribution-Publications, Inc. (DPI) provides retrieval services for all information made public by the FMC, including agreements.

The Agreement permits FANAL, upon certain limitations, to charter space (up to the entire vessel) on FESCO’s vessels in the trade between the United States and Australia and New Zealand. The parties are also authorized to discuss and agree upon matters relating to the charters and whether or not FESCO will offer a competitive service in the Agreement trade.

On July 16, 1997 notice was given that the Federal Maritime Commission pursuant to section 6(d) of the Shipping Act of 1984 (46 U.S.C. app. 1701-1720) has requested additional information from the parties to the Agreement in order to complete the statutory review of the Agreement as required by the Act. This action extends the review periods as provided in section 6(c) of the Act.

The proposed Agreement would authorize the parties to discuss and agree upon rates, charges and practices relating to the inland portion of the carriage of cargo in intermodal equipment in the United States that is arriving from or destined to Central America, South America and the Caribbean Sea.

On July 24, 1997 notice was given that the Federal Maritime Commission has requested additional information from the parties to the Agreement in order to complete the statutory review of the Agreement. This action extends the review periods. Also note: in a published report, an FMC official called this proposed Agreement “potentially very anti-competitive.”

The proposed Agreement would permit DSEN to charter space to POL aboard its vessels in the trade between United States ports, and inland and coastal points via such ports, and ports in Europe in the Bayonne, France/North Cape, Norway Range (excluding Mediterranean and non-Baltic Russian ports), and inland points.

The proposed modification adds Japan to the geographic scope, establishes an additional service that will call at US West Coast ports (CAX-II) and renames the current US West Coast service (CAX-I). The modification also updates the number of container slots available to Sinotrans under CAX-I and specifies the maximum number of container slots available under CAX-II.

The proposed amendment would permit the parties to reach agreement with non-member lines on the terms and conditions of service contracts to be offered by each of them and to agree with the non-conference members of the West Coast of South America Discussion Agreement to aggregate the volume of cargo for purposes of service contracts separately published in the Agreement essential terms publication and the essential terms publications of non-member lines.

The proposed amendment would permit the parties to aggregate the volume of cargo for purposes of service contracts separately published in their respective essential terms publications.

Under the terms of the Agreement, the Port assigns to SSA a preferential right to manage, operate, and solicit cargo at the Port’s Charles B. Howard Terminal. The initial term of the Agreement will be from July 1, 1997, to June 30, 2007.

The proposed amendment would expand the scope of the Agreement to include Trinidad.

Synopsis:

The proposed Agreement permits the parties to discuss and agree on the deployment and redeployment of vessels operated by each of them, the charter of the vessels among the parties, port calls, rationalization of sailings, etc., and other matters necessary to carry out from an operational nature the purpose of the U.S./Latin America Agreement, FMC Agreement No. 203-011448, the U.S./Caribbean Agreement, FMC Agreement No. 203-011499, and the U.S./East Coast South America Agreement, FMC Agreement No. 203-011583. The geographic scope of the Agreement covers the trade between ports and points in the United States and ports and points in the Caribbean, and Central and South America.

The proposed Agreement would authorize the parties to consult and agree on the deployment and utilization of their vessels; charter vessels and vessel space between themselves; interchange containers and other equipment; and agree on rates, rules, or service items on a voluntary and non-binding basis in the trade between the United States and Brazil, Argentina, Uruguay, and Paraguay.

The proposed modification provides that Agreement parties are not precluded from sharing vessels with and or chartering space to or from vessel operating common carriers that are not Agreement parties, and that parties with related companies that offer non-vessel operating common carrier service in the trade pursuant to independent tariffs, shall not be obligated to ship only with Agreement parties. The modification also specifies that the parties are not authorized to coordinate sailing schedules, except when necessary for ad hoc, sporadic or emergency movements.

Index of all SIGNALS™ Issues

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SIGNALS™ the newsletter of Distribution-Publications, Inc. Vol. 1, No. 5, August 20, 1997