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Signals™ Headlines - January 8, 2004

US Department of Transportation Signs Maritime Agreement With China

On December 8, 2003 the United States and China signed a new five-year bilateral U.S.-China maritime agreement during a ceremony in Washington, DC. The agreement signed by US Department of Transportation (DOT) Secretary Norman Mineta and China’s Minister of Communications, Zhang Chunxian, gives US registered shipping companies the legal flexibility to perform an extensive range of new business activities in China, including logistic operations, and providing services for their own vessels and alliance partnerships.

In a DOT press release Secretary Mineta said “This new agreement strengthens the U.S. shipping industry by opening new markets in China and enhancing efficiencies in overseas shipping by allowing direct market access.” He added, “It puts our shipping companies where the business is, closer to their markets and their customers.” The agreement offers American companies similar privileges to those that Chinese companies already enjoy in the United States. “Based on free market principles, it opens significant new business opportunities for US companies and their partners who do business in China,” Mineta concluded.

The containerized trade between China and the United States is the world’s largest, with over 3.2 million containers moving via ship between the two countries in 2002. US Maritime Administrator Captain William G. Schubert played a key role in negotiating this new agreement. It represents a long awaited culmination of discussions and negotiations that have taken place over the past five years between the United States and China. In response to this agreement, the Federal Maritime Commission (FMC) is expected to move forward on several pending issues involving Chinese ocean carriers.

FMC Commissioners to Review China Issues: January 21st Closed Meeting

The Federal Maritime Commission has scheduled a meeting for January 21, 2004, to consider Chinese carrier issues. The Commissioners will consider petitions filed by three Chinese carriers who are each classified as “controlled carriers” according to Section 9(c) of the US Shipping Act. Petition No. P3-99 filed by China Ocean Shipping Company seeks a partial exemption from the Controlled Carrier Act; COSCO was granted a partial exemption by the FMC previously. Petition No. P4-03 filed by China Shipping Container Lines Co., Ltd. and Petition No. P6-03 filed by SINOTRANS Container Lines Co., Ltd. request exemptions from the first sentence of Section 9(c) of the Shipping Act. According to Section 9(c) controlled carriers are publish all rates 30 days before their effective dates.

The Commission has also placed FMC Docket No. 98-14 on the meeting agenda. This proceeding was initiated in August 1998 in response to complaints by US flag carriers serving the Peoples Republic of China. In its initial investigation the FMC found serious restrictions on the ability of non-Chinese carriers to operate branches and subsidiaries in China. Additionally, the Chinese rules for licensing of liner and NVOCC services raised concerns at the FMC about non-Chinese carriers’ ability to compete in the China-USA trade. Many of these Chinese regulations have since been revised. China adopted a new Shipping Act in 2002 and has implemented many new shipping regulations. The recently signed bilateral trade agreement between the U.S. and China makes further changes. In many ways these harmonize the US and Chinese regulations of ocean transportation. The Chinese government is also expected to issue new rulings in order to comply with the new bi-lateral agreement. The FMC meeting on January 21st will be closed to the public.

Petition No. P10-03 Filed by NCBFAA: Seeks Rulemaking on NVOCC Bonding

The National Customs Brokers and Forwarders Association of America (NCBFAA) has filed a petition with the FMC seeking a rulemaking that would amend the FMC financial responsibility (bonding) requirements for NVOCCs. The recently signed bilateral trade agreements between the U.S. and China allow NVOCCs to utilize their FMC bonds to also comply with Chinese government requirements, but the FMC has not yet amended its regulations to recognize this.

During 2002 China implemented new licensing regulations for NVOCCs operating within its borders which have required NVOCCs to deposit a minimum of RMB 800,000, or approximately US$ 96,000, in a Chinese bank in order to provide evidence of their financial responsibility to pay claims or penalties for violations of Chinese law. The new five-year bilateral US-China maritime agreement liberalizes this requirement, and allows NVOCCs to use the single surety bond filed with the FMC to also satisfy the Chinese requirements, provided the amount of this bond is at least US$96,000.

FMC requires NVOCCs serving the US trades who operate outside the USA to submit bonds of US$150,000, but it requires bonds of only US$75,000 for NVOCCs operating in the USA. The NCBFAA’s Petition No. P10-03 asks the FMC to issue a rule that would allow sureties acting on behalf of NVOCCs to increase bond amounts by US $21,000 to reach the required US $96,000 – and to specifically make these bonds available for payment of possible fines imposed by Chinese authorities for violations of China’s maritime laws. The Commission will accept comments on this petition until January 12, 2004. Email comments to secretary@fmc.gov

Royal Olympia Cruise Line Cancels Cruises: Two Vessels Declare Bankruptcy

Owners of the cruise vessels Olympia Voyager and Olympia Explorer have filed for bankruptcy. Royal Olympia Cruise Lines, Ltd. canceled the December 22, 2003 sailing of Olympia Explorer. The December 18, 2003 sailing of Olympia Voyager, which was scheduled to cruise the Amazon, was terminated at St. Thomas, US Virgin Islands, before returning to Fort Lauderdale, Florida. The Olympia Voyager scheduled sailing of January 2, 2004 was also canceled. According to FMC regulations refunds must be issued for all U.S. voyages aborted or cancelled. Royal Olympia Cruise Lines has said it will reimburse customers for the part of payment that covered ocean transport for cancelled sailings.

The Federal Maritime Commission (FMC) is required by Public Law 89-777 to certify that owners and operators of
passenger vessels in U.S. trades have provided evidence of financial responsibility to satisfy liability incurred
for nonperformance of voyages, or for death or injury to passengers and other persons. The Olympia Explorer and
Olympia Voyager were recently re-certified by FMC. In the event ocean cruise passengers or ticket holders are not
reimbursed by the line, claims may be filed with the FMC. A
news release
issued by the Commission on January 16, 2004 advises more information can be obtained from the
FMC Office of Consumer Complaints and Licensing, Passenger Vessel Question Desk on tel: 202-523 -5818,
or fax 202-523-5830.

FMC Commissioners Entertain Additional Comments on UPS & NVOCC Petitions

The extended deadline for comments in reply to the petitions filed with the FMC by United Parcel Service,
(UPS, Petition P3-03), and by the National Customs Brokers and Forwarders Association of America
(NCBFAA, Petition P5-03) has prompted more comments. Additionally, the Commission also decided to permit
interested persons to make oral presentations in this proceeding. Representatives of both UPS and the NCBFAA
have met in person with several of the Commissioners to urge favorable consideration. Summaries of these
all oral presentations may be viewed at the FMC web site in the
Active Docket and Petition Logs
along with all written comments. The deadline for comments on Petitions P3-03, P5-03, P7-03, P8-03 and
P9-03 are now due by January 16, 2004. Comments must consist of an original, 15 printed copies, and an
email copy, and must be directed to the FMC Secretary, email:

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