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Signals™ Headlines - July 6, 2001

FMC to Release Ocean Shipping Reform Act (OSRA) Impact Study

The Federal Maritime Commission will release its report on the impact of the Ocean Shipping Reform Act (OSRA) on or before its next scheduled public meeting, on August 15, 2001. The report will include the results of the 35-question survey the Commission asked shippers, carriers, ocean transportation intermediaries and others to complete earliest this year. In comments made earlier this year, FMC Commissioner Hal Creel said he hoped the survey would obtain comprehensive information on OSRA’s impact, to determine whether the benefits envisioned have come about, and to determine whether any segment is being harmed under OSRA.

The two year OSRA Impact Study focuses on key areas including (1) service contracting under OSRA, (2) the activities of carrier agreements, (3) the impact of OSRA on ocean transportation intermediaries (OTIs), shippers’ associations, and other affected parties, and (4) tariff accessibility and accuracy. An interim status report covering the first year under OSRA was released by the FMC in June 2000. That report, which is available on the Commission’s web-site provides details of the industry’s initial experiences with service contracts, carrier use of antitrust immunity, and tariff accessibility.

FMC Will Review China Issues in Closed Session on August 15, 2001

The Federal Maritime Commissioners will meet on August 15, 2001 in a session closed to the public to review the FMC’s three year investigation into Shipping Restrictions, Requirements and Practices in the Peoples Republic of China (Docket 98-14). Since August 1998 the FMC has been attempting to determine if the Chinese government or Chinese Carriers are responsible for conditions or restrictions unfavorable to the trade between China and USA. If the FMC finds this is the case, then it could take actions similar to those it enforced against Japanese container operators in 1997. The Merchant Marine Act of 1920 and the Foreign Shipping Practices Act of 1998 authorize the FMC to limit sailings, suspend tariffs, suspend agreements, and impose fines of up to $1,000,000 per voyage against carriers who violate these laws.

At its meeting the FMC will also review petitions filed by two Chinese flag carriers for partial exemption from the FMC’s controlled carrier regulations: China Ocean Shipping Company (COSCO) and China National Foreign Trade Transportation (Group) Corp. d/b/a SINOTRANS. As controlled carriers, both COSCO and SINOTRANS are subject to much more stringent FMC tariff publication requirements than non-controlled carriers. Section 9 of the Shipping Act requires controlled carriers to publish freight rates 30 days in advance of their effective dates

A petition filed by SINOTRANS in October 2000 seeks an exemption so that it can lawfully reduce rates to meet or exceed the published rates of competing ocean common carriers on one day’s notice. A similar petition filed by COSCO was approved in January 1998. On April 25, 2001 the FMC issued an Order amending its procedure for compliance with the exemption granted to COSCO. This order does not expand COSCO’s rights under the exemption, but reflects the change in tariff regulations from the FMC’s “ATFI” system to the private tariff systems mandated under the Ocean Shipping Reform Act of 1998 (OSRA). The FMC retains authority to revoke the exemption should it find any abuse of the process, predatory pricing practices by COSCO, or other adverse changes in the material facts on which the Order is based. The FMC monitors controlled carriers to ensure rates or charges published in their tariffs and service contracts are not below a level that is just and reasonable.

Docket 01-06: Exclusive Tug Franchies on the Lower Mississippi – 12 Show Cause Orders Issued

The Federal Maritime Commission (FMC) has taken further action in its investigation into exclusive tug franchises on the Lower Mississippi (Docket 01-06). On June 11th, the FMC served twelve (12) Marine Terminal Operators with Show Cause Orders that ask each of these companies why they should not be found in violation of the Shipping Acts. According to a Notice published in the Federal Register, the FMC has formally requested these terminal operators to show cause:

(1) Why their exclusive arrangements with certain tug companies are not unreasonable practices and/or result in undue or unreasonable preference or advantage or unreasonable prejudice or disadvantage in violation of Shipping Acts, and

(2) Why the Commission should not order them to cease and desist from operating under these exclusive tug assist service arrangements, including publication of any terminal tariff or schedule which attempts to enforce or implement any provision related to the provision of such tug services.

The following Marine Terminal Operators were named as Respondents: ADM/Growmark River Systems, Inc.,

Bunge Corporation, Cargill Incorporated, Cenex Harvest States Cooperatives, CGB Bouys, Gulf Elevator & Transfer Co., International Marine Terminals, L&L Fleeting, Inc., Ormet Primary Aluminum Corporation, Peavey Company, St. James Stevedoring Co., Inc., and Zen-Noh Grain Corporation.

The full text of the Order may be viewed on the Commission’s home page at

www.fmc.gov Initial affidavits of fact and memoranda of law filed by Respondents and any Intervenors in support of Respondents must be filed no later than July 18, 2001. The Commission’s final decision in this proceeding is expected by March 18, 2002.

 Docket 01-07:   Tignes, Inc. – Order of Investigation on OTI License Application

The FMC has ordered a formal investigation to determine if Tignes, Inc., a Miami, FL based applicant, is qualified by experience and character to hold the license to operate as an OTI-NVOCC. This investigation was ordered after the applicant was advised it will be denied the license, and requested a formal hearing to challenge this decision. Docket 01-07 is notable because it provides a definition of the necessary character for the license.

Every applicant for the license to operate as Ocean Transportation Intermediary (NVOCC or Freight Forwarder) must demonstrate to the FMC that it possesses the necessary experience and character. The experience requirement is fairly straight forward: an active officer of the applicant must have at least 3 years of employment with a licensed OTI. The character requirement is a bit mysterious; the Shipping Acts and FMC regulations do not define it. But in Docket 01-07 the FMC staff makes it clear that it does not believe the owner and proposed qualifying individual for Tignes, Inc., Mr. Sergio Lemme, possess the necessary character for the license. In July 2000, as President of GSTAAD, Inc., Mr. Lemme signed a Settlement Agreement in Docket 99-20 admitting knowing and willful violations of the Shipping Act. In addition to paying the FMC $150,000, GSTAAD agreed to surrender its OTI license and terminate all activities in ocean transportation. In Docket 01-07 the FMC alleges that GSTAAD continued to hold out as an NVOCC after the settlement was finalized. In addition, the FMC alleges that another company owned by Mr. Lemme, Southern Group, Inc., has provided services as an unlicensed OTI. These allegations will be reviewed at a hearing before an FMC Administrative Law Judge.

     Volume 5   Number 8      July 6, 2001    

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