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Signals™ Headlines - January 4, 2001

Docket 00-12: FMC Begins Proceedings Against 81 OTI-Forwarders & NVOCCs

The Federal Maritime Commission (FMC) has issued a “Show
Cause” Order naming 81 ocean transportation intermediaries
(OTIs) who have failed to comply with the new licensing,
bonding, or tariff publication requirements implemented by
the FMC in May 1999. These 81 OTIs, which include ocean
freight forwarders and non-vessel operating common carriers
(NVOCCs), were named in FMC Docket 00-12. The complete
listing is available at FMC web page. Each of these organizations had registered with the Commission sometime prior to May 1999, but since that time they have not applied for the OTI license, or increased their surety bonds to the required amounts, or published tariffs, or otherwise fully complied with the new regulations.

The Show Cause Order is used by the FMC to begin formal proceedings against these non-compliant OTIs; it sets a deadline of January 12, 2001 for responses, which must be filed with the Commission as affidavits of fact and memorandums of law. This is the last chance for these OTIs to comply with licensing, bonding and tariff publication regulations before the FMC revokes their licenses, and/or orders each of them to cease and desist from operating as an ocean transportation intermediary in the foreign trade of the United States. Penalties for operating as an unlicensed OTI-NVOCC or OTI-Freight Forwarder can range up to US$ 30,000 per violation. A final decision in this proceeding is expected by August 2001.

Docket 00-13: FMC Issues Final Rule on Internal Agency Reorganization and Updates CFR

A final rule was recently issued by the Federal Maritime Commission to formalize the reorganization of several of its bureaus, and to reflect changes made by the Ocean Shipping Reform Act (OSRA) of 1998. The internal agency reorganization was actually implemented in February 2000. Docket 00-13 finalizes amendments to FMC regulations issued in the US Code of Federal Regulations, 46 CFR Parts 501 and 502, which document the organization, authority and responsibilities of each of the FMC bureaus, offices, boards and committees. The new rule was effective upon publication in the Federal Register on 19Dec2000; for full text of the rule please click here.

 MCA Agreement:     Carriers File FMC Agreement to Share Credit & Collection Information    

The FMC has been asked by a group of five ocean carriers and one shipping agency to approve an agreement that would allow the carriers and agent to share credit and collection information. The “MCA Agreement” was filed with the FMC during December 2000 by Crowley Liner Services, Inc., Inchcape Shipping Services, Inc., Linea Maritima Mexicana S.A. De C.V., Lykes Lines Limited, LLC, Tecmarine Lines, Inc., and Transportacion Maritima Grancolombiana, S.A. The proposed agreement authorizes the parties to discuss and share credit and collection information. The agreement does not permit the parties to act concertedly, or establish common credit rules, credit policy or terms, rates or agreements on conditions under which credit is granted or not granted. This is not the first agreement of its kind, but it is not the typical vessel sharing or slot charter agreement so commonly approved by the FMC. If the Commission has no objection to the MCA Agreement it will become effective 45 days after filing, during February 2001.

 FMC Outlook for 2001:     New Chairman Likely, But No Major Changes Expected   

While the Federal Maritime Commission (FMC) is not immune to the political winds of change in Washington, we look for another year of stability in 2001. We expect President Bush to appoint a new FMC Chairman, but the FMC staff is made up of civil servants and attorneys, including many that have enjoyed long careers with the agency. This does tend to insulate it from political change. Major events at the FMC in 2001 will include the release of the OSRA Impact Report in June. This report will assess how the industry and the Commission have adapted to OSRA in the two years since the regulations were adopted. Early indications are the report will re-affirm the agency’s current programs, and will not inspire any major new initiatives.

The Commission’s strategic plan for 2001 calls for a new program to help identify unlicensed OTIs, and improved analysis of service contracts filed by ocean carriers. The agency hopes to upgrade its information technology, and improve its modest web site. These goals will not be easy to achieve with the agency’s limited budget. The FMC’s Bureau of Enforcement is always capable of making headlines with news of settlement agreements. During 2000, the Bureau negotiated 32 settlement agreements with organizations alleged to have violated the Shipping Acts. These settlements resulted in the payment of a total of $2,040,000 to the FMC.

The Commission’s on-going investigation into Shipping Restrictions, Requirements, and Practices of the People’s Republic of China (Docket 98-14) could produce headlines in 2001. The Commission met in closed door sessions four times during 2000 to consider information gathered in response to the “Information Demand Orders” it has served on Chinese and US flag carriers. This information is being used by the FMC to determine the extent to which Chinese laws, rules or regulations lead to conditions unfavorable to shipping in the USA-China trade. While it is possible the FMC will not take any action in this matter, it does have the authority to impose countervailing sanctions against Chinese flag carriers of US$ 1.1 million per US port call. Similar sanctions were briefly imposed against Japanese flag carriers in September 1997 (Docket 96-20), but were later reduced under a negotiated settlement. Negotiations between representatives of the US and Chinese governments on Docket 98-14 and related maritime trade issues have been on-going for more than two years.

Three Democrats, Chairman Hal Creel, Joseph Brennan, and Delmond Won, and two Republicans, John Moran and Antony Merck, currently serve as Commissioners; all were appointed by President Clinton. Not more than three of the five Commissioners may represent one political party. The longest serving Commissioner’s, Chairman Creel and Delmond Won, were recently re-confirmed by the Senate for second terms. Chairman Creel has been widely praised for his effectiveness, but he is not likely to remain Chairman under a Bush Administration.

Of the current Commissioners, John Moran would appear to be the most likely new Chairman, due to his experience as counsel to Senator John Warner, R-VA, in the US Senate, and his experience with the American Waterways Operators. Should Chairman Creel leave the FMC, we would likely see a third Republican nominated to serve as Commissioner, but it might be a year or more before this appointment is made or confirmed. Since its creation in 1961, the FMC has managed to survive seven Presidents and two new Shipping Acts. The Ocean Shipping Act of 1998 reaffirmed the agency’s authority. In 2000, the Commissioners and staff did a remarkable job of writing and implementing the OSRA regulations. We look for the FMC to stay the course in 2001.

     Volume 5   Number 1      January 4, 2001    

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