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Signals™ Headlines - July 10, 2000

OSRA Interim Status Report ReleasedFMC Report Provides Data, No Conclusions.

The Federal Maritime Commission has issued an interim status report that discusses the first year of operations
under the Ocean Shipping Reform Act of 1998 (“OSRA”). The purpose of the report is to explain how the industry has
been adapting to the statutory and regulatory changes brought about by OSRA. It generally describes recent trends in
liner shipping, with an emphasis on trade volumes in the major US container trades. It highlights OSRA’s most
prominent provisions, and furnishes information on service contracting, carrier agreements, tariff publishing, and
the activities of ocean transportation intermediaries (OTIs). The report draws few conclusions, but does provide
statistics that will prove useful in the future. Here are some of the notable statistics:

Agreements: As of May 2000 there were 271 carrier agreements on file at the FMC, including 140 vessel
sharing agreements and 22 conference agreements. In May 1999 there were 32 conferences on file.

Ocean Transportation Intermediaries (Freight Forwarders and NVOCCs) : while the OSRA regulations introduced
new licensing requirements for OTI-NVOCCs, the total number of NVOCCs on file with the FMC has remained almost
unchanged. As May 2000 the FMC records show 1750 Licensed OTI-Ocean Freight Forwarders, 1300 Licensed OTI-NVOCCs
(operating in the USA), 600 Unlicensed OTI-NVOCCs (operating outside the USA), and 525 Licensed OTI-NF (both Ocean
Freight Forwarder and NVOCC).

OTI Bonding: The increased financial responsibility (bonding) requirements for OTIs has certainly made an
impact on the industry. As of May 2000 “total consumer protection” provided by surety bonds on file with the FMC is
$378 million, vs. $215 million in May 1999. There are about 75 surety companies underwriting FMC bonds, however, the
top five sureties write about 75 percent of all bonds on file.

Service Contracts: In the first year of OSRA there were 46,035 new service contracts and 95,627 service
contract amendments filed with the FMC. This is an increase of more than 124% over the previous year. Most of the
discussion in the report is based on “snapshot” analysis of 408 contracts filed by 13 large carriers. The FMC found
the terms and conditions of most contracts it reviewed varied little from contracts filed prior to the
implementation of OSRA. Most of the contracts were between a single shipper and carrier, had a duration of 12 months
or less, a volume commitment of 100 TEUS or more, and were limited to a single trade lane. In a separate study, the
FMC examined a sampling of 550 service contracts and found the signatories were 75% cargo owners, 20% NVOCCs, 5%
Shippers Associations.

Tariffs: The OSRA report does not include statistical information on tariffs published in compliance with
FMC regulations. FMC audits of tariff systems are on going. The Commission recently began a rule making proceeding
(Docket No. 00-07) to obtain public comments to address the reasonableness of tariff access charges.

In announcing the report Commission Chairman Harold J. Creel, Jr., said: ” While our status report recognizes that
it is too early to draw definitive, long-term conclusions, it does provide preliminary views on the short-term
effects OSRA has had on U.S. ocean shipping.” The FMC is preparing a more comprehensive report, which will cover two
years’ experience under OSRA. That report will be issued in the summer of 2001. The 42 page OSRA Interim Status
Report can be viewed by visiting the Commission’s Internet website at

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