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Signals™ Headlines - August 3, 2011

Federal Maritime Commission Strengthens Cruise Line Passenger Protections

On July 14, 2011, the Federal Maritime Commission voted to initiate a rulemaking to strengthen protections for cruise line customer deposits and prepayments, and to reduce financial responsibility requirements for small cruise lines. Under the Commission’s regulations, cruise lines must file evidence of financial responsibility to ensure that passengers will be able to obtain refunds if their cruises are cancelled. In a 3-to-2 vote, the Commission decided to prepare a proposed rule that will increase the maximum coverage requirement from $15 million to $30 million. This responds to inflation and to the growth of the cruise industry; the current $15 million cap was set in 1990.

The Commission originally initiated proceedings to update passenger vessel financial responsibility almost 10 years ago with its Docket No. 02-15: Passenger Vessel Financial Responsibility. Early in 2002 the Commission discovered its bonding and insurance requirements for passenger vessel operators (PVOs) serving the USA were not meeting the needs of the cruising public. From September 2000 to 2002 seven cruise operators declared Chapter 11 bankruptcy or ceased operating. In 2003, Regal Cruises, Inc. abruptly ceased operations. Many cruise passengers contacted the FMC Office of Consumer Complaints to complain about trouble obtaining refunds. In December 2009, the Commission decided to renew its review of Docket 02-15, and, at the request of Commissioner Joseph E. Brennan and Chairman Lidinsky, directed staff to collect updated research.

Chairman Richard A. Lidinsky, Jr. stated: “I’m pleased that after twenty years of debate, we have taken this concrete step toward better protecting consumers while making our regulations fairer. No passenger who has a cruise cancelled should lose his or her deposit or prepayment. The Commission looks forward to input from the public and cruise industry as we shape these updates to our passenger protections.”

The majority vote directs FMC staff to prepare a notice of proposed rulemaking that would: 1) Double the maximum coverage requirement for larger cruise lines from $15 million to $30 million, with a phase-in period of two years; 2) In future years, adjust the maximum coverage requirement automatically to account for inflation; and 3) Give relief to smaller vessel operators by reducing their coverage requirements to account for alternative forms of financial protections available to their customers. The rulemaking process normally includes an opportunity for public comment, and consideration of these by the Commission. The final rule is not expected to be issued and effective until later in 2011.

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FMC Considers Port Issues and TSA/WTSA Carriers at July 13th Meeting

The Federal Maritime Commission (FMC) discussed a number of important issues at open and closed sessions of a Commission meeting held July 13, 2011. In the open session of the meeting, the Commission received an update from newly appointed Commissioner Mario Cordero on the Congress of Latin American Ports and Peru Discussions. The Commission also discussed options for updating their Passenger Vessel Financial Responsibility Requirements. In the closed session of the meeting, the Commissioners disused the Transpacific Stabilization Agreement and Westbound Transpacific Stabilization Agreement Transcript Filing Requirement, the Proposed PierPass Traffic Mitigation Fee Increase, and Docket No. 09-08: SSA Terminals, LLC and SSA Terminals (Oakland), LLC v. The City of Oakland. The Commissioners also held a staff briefing and discussion regarding the Reconstruction Proceedings and Chapter 15 Bankruptcy Petition of The Containership Company A/S. The Commission’s next meeting will be held in August 2011.

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Worldwide Logistics Co., Ltd. Pays $100k in Penalties for Alleged Shipping Act Violations

The Federal Maritime Commission announced it has reached a preliminary settlement agreement with Worldwide Logistics Co., Ltd. (Worldwide), a Shanghai based NVOCC. According to the agreement, Worldwide agreed to pay $100,000 in civil penalties for alleged Shipping Act violations. Worldwide registered with the FMC in September 2004; it is a part of the Worldwide Logistics Group, said to be one of the leading integrated logistics service providers in China.

This settlement agreement resolved allegations raised in FMC Docket 11-04 that Worldwide originated and substantially participated in an ongoing practice of misdescribing cargo to the transporting ocean common carrier since at least April 2008. With respect to those shipments apparently mis-described, documentation obtained by FMC, including commercial invoices and NVOCC house bills of lading, reflected that shipments declared to the vessel operator as “fabric” or “cotton fabric” actually were loaded with garments, or with other miscellaneous finished textile goods. Due to the difference between the rate Worldwide paid to ship the misdescribed goods, and the rate at which the cargo should have moved under the various service contracts used by Worldwide, the FMC alleged that Worldwide obtained lower than applicable rates for these shipments, in violation of section 10(a)(1) of the Shipping Act.

The FMC also reported that for these same shipments it appeared that Worldwide did not assess its NVOCC customers its published tariff rates. Worldwide is an NVOCC, and it issued its own NVOCC bill of lading for the shipments in question. However, as indicated by Worldwide’s debit notes, the freight rates assessed by Worldwide to its NVOCC customers appear to differ substantially from its published rates. Accordingly, the FMC alleged that Worldwide provided service that was not in accordance with its published tariff, in violation of section 10(b) (2) of the Shipping Act. In concluding this settlement agreement Worldwide did not admit to any violations of the Shipping Act. It remains a registered NVOCC under FMC No. 019194, with a valid bond and tariff, and it continues to operate in the US trades.

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TSA Carriers Increase Monthly BAF, Add Singapore Doc Fee, Postpone PSS Again

Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane announced BAF increases and a Singapore Documentation Fee. The group’s new Singapore Documentation Fee of S$ 80 per bill of lading takes effect September 1, 2011. The initial effective date of the Peak Season Surcharge (PSS) for 2011 has been postponed by most TSA Carrier members until August 15, 2011.

Bunker Adjustment Factors (BAF) calculated using TSA’s old monthly formula for August 2011 are set at US$ 1084 per 20ft ctr, US$ 1355 per 40ft ctr, US$ 1524 per 40ft hi-cube ctr, US$ 1715 per 45ft ctr, and US$ 30 per WM (LCL). However, most shipments are subject to the new formula BAF, which is updated on a quarterly basis; for the July-September US$ 568 per 40’ ctr to US West Coast Ports and US$ 1107 per 40’ ctr to US East and Gulf Coast Ports, with other sizes as per TSA’s BAF formula.

Most of the TSA Carriers continue to postpone the initial effective date of their Peak Season Surcharges (PSS) for 2011. According to the tariffs of the most of the TSA Carriers, the initially effective date of the PSS is now set for August 15, 2011. Further postponement until September 1 is possible, but once these surcharges take effect they will apply as follows: US$ 320 per 20’ ctr, US$ 400 per 40’ ctr, US$ 450 per 40’ hi-cube ctr, and US$ 505 per 45’ ctr.

The TSA’s 15 carrier members are American President Lines, CSCL, CMA-CGM, COSCO Container Lines, Evergreen Marine, Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, “K” Line, Maersk Line, Mediterranean Shipping, NYK Line, OOCL, Yang Ming Marine and Zim Integrated Shipping Services. The group’s web site at www.tsacarriers.org provides additional information.

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