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Signals™ Headlines - June 4, 2003

FMC Investigation of Transpacific Stabilization Agreement (TSA) Expanded

The Federal Maritime Commission has decided to expand and extend its formal Investigation into allegations that ocean carrier members of the Transpacific Stabilization Agreement (TSA) violated the Shipping Act during the spring 2002 service contracting season. On May 30th the FMC issued three significant new orders; first, the initial Investigation has been amended to include the 2003-2004 service contract season; second, another set of Section 15 Orders has been issued to the TSA Administrator and to each of its fourteen member carriers demanding detailed information and documents; third, the investigation has been expanded to include the trade from the Indian Subcontinent to the USA.

The initial investigation began in August 2002, and was headed by Commissioner Joseph E. Brennan. This investigation was prompted by Petition P1-02 filed in May 2002 by the National Customs Brokers and Forwarders Association of America, Inc. and the International Association of NVOCCs, Inc. These groups claimed that TSA members violated the Shipping Acts by engaging in a concerted practice of discrimination against NVOCCs. In September 2003 the Commission issued initial Section 15 Orders to each of the TSA carriers. These required each carrier to provide the FMC with detailed information on the negotiation of service contracts for the 2002-2003 season, and the implementation of general rate increases (GRI) and peak season surcharges (PSS). Commission Brennan held hearings at US West Coast Ports during November 2002 to take testimony under oath and receive documents in evidence.

Commissioner Brennan submitted a confidential report and recommendations on this Investigation to the Commission on April 10, 2003, and these were reviewed a closed meeting of the Commission on May 28, 2003. The report is confidential, but, based on the Commission’s Orders issued just two days after this meeting, it is obvious Commissioners have serious concerns about possible Shipping Act violations by the TSA and/or its members.

The Amended Order of Investigation extends the period of review to include the 2003-2004 service contract season. It also names the Director of the FMC’s Bureau of Enforcement as Investigative Officer. The investigation continues to focus on the impact of the GRI and PSS in the eastbound transpacific trades, and on possible violations of the Shipping Act by TSA members. According to the Amended Order, possible violations include unlawful disclosure of confidential service contract information and unjustly discriminatory practices in the matter of rates and charges assessed to NVOCCs.

The new Section 15 Orders issued to the TSA Administrator and to each of its fourteen member carriers demand detailed information and documents relating to a wide range of issues, especially with regard to meetings held by TSA since January 2000. The TSA ‘Tonnage Rationalization Committee’ and the removal of vessels from the trade is a key focus. The FMC is concerned about the degree of TSA’s market power, due to its ability to discuss and agree on matters relating to both pricing and vessel capacity in the trade. Confidentiality of service contracts is another focus; each TSA carrier is asked if the “confidentiality clauses in its service contracts apply generally or specifically to contracts, requests, offers, or other written exchanges which occur prior to contract execution.”

The expansion of the Investigation to the Indian Subcontinent/USA trades adds four more agreements and four more Carriers, viz: Hatsu Marine Ltd., Lloyd Triestino Di Navigazione, S.P.A., Contship Containerlines and the Shipping Company of India, Ltd. A total of fourteen ocean carriers are now under investigation. The deadline for responses to the latest round of Section 15 Orders is June 30, 2003. The next report by the Investigative Officers is due by December 2, 2003.

‘Navigating The Regulations’ FMC Seminar: June 20, 2003 at New York

The Federal Maritime Commission has announced it will conduct another two-hour seminar on its regulations. This seminar will be held from 10:00am to 12:00pm on Friday June 20, 2003 at 26 Federal Plaza, Conference Room ‘A’, 6th Floor, New York, NY 10278. The seminar will provide information about the FMC’s functions and services, and instruction regarding the regulatory obligations of providers and users of ocean liner shipping services it regulates. An opportunity for questions and answers will be provided. There is no charge to attend the seminar, but pre-registration by June 13, 2003 is required. To register contact Mr. Emmanuel (Jim) Mingione on tel: 718-553-2229 or fax: 718-553-2228 or email: emanuelm@fmc.gov

China Shipping Petitions FMC for Exemption from Tariff Regulations: Petition P1-03

The FMC Secretary has announced the filing of Petition P1-03 by China Shipping Container Lines Co., Ltd. for a limited exemption from the tariff publishing requirements of Section 9 of the Shipping Act. China Shipping seeks an exemption so that it can lawfully reduce tariff rates to meet or exceed the published rates of competing carriers on one day’s notice. China Shipping is a classified by the Shipping Act as a controlled carrier because its operating assets are government controlled. Section 9 of the Shipping Act subjects controlled carriers to more stringent tariff regulations, including a 30 day notice requirement for all changes to tariff rules or rates. This regulation does not apply to service contracts.

A similar petition filed by China Ocean Shipping Company (COSCO) was approved by the FMC in March 1998 for transportation between the USA and countries other than China. China Shipping wants the same exemption granted to COSCO. The petition will be evaluated by the FMC, and this evaluation will undoubtedly also involve Docket 98-14, the Commission’s on-going investigation into restrictions on the operations of non-Chinese carriers in China.

Port Canaveral Agrees to Pay FMC $750,000: Tug Monopoly at the Port to End

The Canaveral (Florida) Port Authority Board of Commissioners has agreed to pay a $750,000 fine to settle FMC Dockets 02-02 and 02-03, according to a report published in Florida Today. Port Canaveral has also agreed to open tug services to competition, ending the monopoly enjoyed by Seabulk International at the port for more than 40 years. The FMC has not yet formally approved this settlement.

In a decision issued February 24, 2003 the Federal Maritime Commission found the Canaveral Port Authority (CPA) in violation of Section 10(b)(10) of the Shipping Act due to its refusal to consider a the application by other tug operators to serve the port. The decision in Docket No. 02-02 directed the CPA and FMC’s Bureau of Enforcement to negotiate a settlement. It could have resulted in significant greater civil penalties than the proposed settlement calls for. During the proceeding the FMC Bureau of Enforcement maintained that the CPA was in violation of the Shipping Act for 600 to 800 days. Section 13 of the Shipping Act authorizes “civil penalties of $ 5,000 for each violation unless the violation was willfully and knowingly committed, in which case the amount of the civil penalty may not exceed $ 25,000 for each violation. Each day of a continuing violation constitutes a separate offense.” These penalty amounts were adjusted upward by 20% in August 2000 by the FMC due to the Federal Civil Penalties Inflation Adjustment Act.

In addition to the $750,000 fine, according to Florida Today the Canaveral Port Authority also incurred legal costs of nearly $500,000. The settlement prompted one Canaveral port commissioner to call for an investigation to see whether any staff members should be punished. CPA Commissioner Ralph Kennedy called for a board investigation into how Seabulk International, formerly named Hvide Marine, maintained a 45-year monopoly at the port.

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