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Signals™ Headlines - June 6, 2002

Forwarders Association Asks FMC to Investigate Pacific Carriers:Petition P1-02

The National Customs Brokers and Forwarders Association of America, Inc. (NCBFAA) and the International Association of NVOCCs, Inc. (IANVOCC) have jointly petitioned the Federal Maritime Commission to open an investigation into activities of the Transpacific Stabilization Agreement (TSA). The Petition, designated P1-02 by FMC, alleges that the TSA Carriers have recently violated the Shipping Act through discriminatory service contracting practices. These are serious allegations, and the FMC has quickly moved to request comments from the Shipping Public, but it has not yet begun a formal docketed proceeding.

In their Petition the NCBFAA and IANNVOCC have asked the FMC to determine whether TSA’s 14 member carriers have violated the Shipping Act through intentionally discriminatory service contracting practices in the Eastbound Transpacific Trades. Section 10 (c) of the Shipping Act specifically prohibits conferences and agreements from engaging in any unjustly discriminatory service contracting practices against ocean transportation intermediaries (OTIs). The Petition also contends that TSA Carriers have failed to file their true agreements with the FMC, and are operating under an unfiled agreement in violation of the Shipping Act.

In support of their contentions, NCBFAA and IANVOCC (Petitioners) claim that TSA’s members have refused to negotiate with OTIs or shipper associations representing OTIs until negotiations and contracts between TSA members and proprietary shippers are completed. Petitioners also claim that TSA’s members have agreed to charge OTIs substantially higher rates than are being assessed against proprietary shippers for exactly the same services. Petitioners state that this is being done through a General Rate Increase and Peak Season Surcharge that are “mandatory” for OTI service contracts, but waived for contracts with beneficial cargo owners.

If an FMC investigation concludes that Shipping Act violations have occurred, the Petitioners urge the Commission to: (1) issue sanctions against TSA and its members; (2) require TSA members to pay reparations to OTIs who have been damaged; and (3) seek appropriate injunctive relief to enjoin further operation of TSA. These measures are provided for in the Shipping Act, but are far more severe than any the FMC has ever enforced. At this point, the FMC has not even reached the formal investigation stage in this matter.

The TSA has denied any wrongdoing by its member carriers in negotiations with OTIs. In comments filed with the FMC in response to this Petition the TSA denied allegations that its guidelines are anything but voluntary, and said there has not been any unified action by its member carriers on the enforcement of the General Rate Increases or Peak Season Surcharges. It also pointed out freight rates in the trade are depressed, and have continued their downward trend again this year. The TSA Member Carriers are: A.P. Moller-Maersk Sealand, American President Lines, Ltd., CMA CGM, S.A., COSCO Container Lines Company Limited, Evergreen Marine Corp. (Taiwan) Ltd., Hanjin Shipping Co., Ltd., Hapag-Lloyd Container Linie GmbH, Hyundai Merchant Marine Co., Ltd., Kawasaki Kisen Kaisha, Ltd., Mitsui O.S.K. Lines, Ltd., Nippon Yusen Kaisha, Orient Overseas Container Line Limited, P&O Nedlloyd B.V., and Yangming Marine Transport Corporation.

The Commission has invited interested persons to submit comments on Petition P01-02 to the FMC Secretary, e-mail to: Secretary@fmc.gov and to serve these on counsel for the Petitioners and the TSA.

Supreme Court Rejects FMC Appeal and Expands Rights of State Owned Ports

The US Supreme Court has rejected the appeal of the Federal Maritime Commission in the case of FMC v. South Carolina State Ports Authority. This decision is significant because it limits FMC’s jurisdiction over the activities of state owned marine terminals, and it is of wider interest because it expands the rights of US States at the expense of the Federal Government. In a 5-4 vote, the high court ruled that State sovereign immunity, as provided for the Eleventh Amendment to the US Constitution, bars the FMC from adjudicating a private party’ complaint again a non-consenting State, in this case, the State of South Carolina. It is expected this ruling will bar other federal agencies from similar actions against State owned entities.

In its argument before the Supreme Court the SCSPA contended that the FMC did not have jurisdiction in this matter because as a state-owned agency it is immune from suits of this kind filed with federal agencies. The US Court of Appeals for the Fourth Circuit had already agreed with South Carolina; the FMC was seeking to reverse this decision. This case began with the filing of a complaint with FMC by South Carolina Maritime Services, Inc. in October 1999. Maritime Services asserted that the SPSCA violated the Shipping Act by unfairly refusing to give berthing space at Charleston to its vessel which permitted gambling activities in international waters. The FMC began an investigation and docketed proceeding in the matter, which SCSPA objected to.

In the brief it filed with the Supreme Court the FMC contended the Shipping Act gives it the authority to hear administrative complaints against ports, whether they are state-run marine terminals or privately run marine terminals. FMC Chairman Hal Creel called this “crucial to effective and evenhanded regulation under the Shipping Act.” FMC’s Attorney argued the “practical effect of the Court of Appeal’s decision…prevents the Commission from administering the Shipping Act as Congress designed it.” The Supreme Court did not agree. Complete details on Supreme Court Docket No. 01-46 are available at www.supremecourtus.gov. Several national publications, including the New York Times, have recently reviewed this case.

Transglobal Forwarding Co., Ltd. Ordered to Pay FMC $1,440,000:Docket 01-09

The Federal Maritime Commission has ordered Transglobal Logistic Forwarding Co., Ltd. (Transglobal) to pay a fine of $1,440,000 due to violations of the Shipping Acts documented FMC Docket 01-09. FMC’s Administrative Law Judge, Michael A. Rosas, recently issued the initial decision in this proceeding. In this decision, Judge Rosas reviewed violations of the Shipping Act by Transglobal, Taiwan based NVOCC, which were documented by the New York office of FMC’s Bureau of Enforcement. These included violations involving accessing service contracts through an illegal arrangement with Hudson Shipping (Hong Kong) Ltd. As a result of its improper access to these service contracts, Transglobal obtained ocean transportation from Hyundai Merchant Marine Co., Ltd. and from DSR-Senator Lines GmbH at more than $400,000 less than the rates that would otherwise have been applicable.

The fine of $1,440,000 is based on a civil penalty of $20,000 for each of the 72 violations, and the finding that the violations in this case were “willful and knowing.” Violations of this kind allow the FMC to assess a civil penalty of up to $27,500 per violation. Judge Rosas found Transglobal “knowingly and willfully participated in an organized scheme to assume the identity of another NVOCC in order to cheat the VOCC’s of their rightful compensation.” He noted that Transglobal paid Hudson Shipping $20 for each container shipped under Hudson’s service contracts, and pointed out that while Transglobal did not participate in the proceeding, the Commission has gathered evidence that Transglobal has substantial assets in Taiwan. Hudson Shipping (Hong Kong) Ltd. is the focus of an FMC investigation focused on misuse of service contracts; FMC Docket 02-06.

This FMC decision will become final unless it is reviewed, amended or reversed by the Commissioners. Once finalized, the FMC will set a deadline for payment of the penalty. According to Docket 01-09 there is no evidence that Transglobal has discontinued its NVOCC operations to the USA. While Transglobal has been ordered to ‘cease and desist’ from further violations of the Shipping Act, its FMC tariff and bond have not yet been cancelled.

FMC Chairman Speaks Out On New Chinese Shipping Regulations

FMC Chairman Hal Creel urged shippers, carriers and transportation intermediaries to submit comments and questions to the Commission, and to the Chinese Government on China’s new shipping law and regulations. The FMC recently issued a Notice of Inquiryseeking information and comments on the effects of a new law issued in December 2001 by the People’s Republic of China affecting the operations of shipping companies serving the US-China trade. This new law has not yet been fully implemented or enforced in China, but many of its requirements have created serious concern at the FMC. It appears the new Chinese law will create significant disadvantages for non-Chinese owned shipping companies unless it is amended before it is fully implemented.

While many aspects of the new Chinese law are similar to the US Shipping Acts, the law also includes requirements that are more restrictive than the Shipping Acts and FMC regulations. For example, new tariffs and new rates published in FMC tariffs may become effective on the same date they are published; the new Chinese law requires 30 days notice before a new tariff or rate is effective. NVOCCs operating in China must have corporate status in China, and must pay a deposit of RMB 800,000 to be used to discharge potential debts or penalties. An additional deposit of RMB 200,000 will be required for each branch office. There does not appear to be any provision for the filing of a surety bond instead of the deposit. NVOCC’s operating without corporate status in China, who issue bills of lading “As Agents,” are apparently in violation of the new law.

The registration requirements for Vessel Operating Carriers serving China under the new law are far more restrictive than FMC’s. A highly detailed application must be filed 15 days in advance with the Ministry of Communications before carrier may commence service to China or adjust its scheduled service. For service contracts, the FMC is concerned that the Chinese filing requirements will not provide adequate confidentiality.

For the past four years the FMC has expressed concern over serious restrictions imposed by the Chinese government affecting the ability of US carriers and transportation intermediaries to do business in China. The new Chinese shipping law increases these concerns. Comments the FMC should be submitted to: Bryant L. VanBrakle, Secretary, Federal Maritime Commission, 800 North Capitol Street, NW, Washington, DC, USA 20573-0001Tel: (202) 523-5725 E-mail: secretary@fmc.gov On request the FMC Secretary will also provide an English translation of the new Chinese shipping law. The deadline for comments is June 27, 2002.

The full text of the law in its original Chinese is available at www.chineseshipping.com.cn. Chinese text support and Macromedia’s Flash Player are required to view this web site. In remarks to a seminar sponsored by the National Industrial Transportation League, FMC Chairman Creel announced that Dr. Zhang Guofa (Deputy Director-General of the Dept. of Water Transport at the Ministry of Communications) is the official Chinese contact for all questions from the public on the new law and the forthcoming regulations. Interested parties may contact Dr. Zhang via e-mail at MOCZGF@263.net.

The FMC’s inquiry is being assisted by the Maritime Administration (MARAD) of the US Department of Transportation. Maritime Administrator William G. Schubert led a delegation of US officials on a visit to China in March for bi-lateral discussions. During April, a delegation from China traveled to Washington, DC to study FMC regulations. This visit included three days of meetings with FMC staff. FMC Chairman Creel said, “we hope they go back and work hard on some good implementing rules that will address our concerns.”

Senate Committee Holds Hearings on Nomination of New FMC Chairman

The Commerce, Science, and Transportation Committee of the US Senate held a short hearing on Wednesday, Jun. 5, 2002 on the nomination of Steven Robert Blust, of Florida, to be a Federal Maritime Commissioner. Mr. Blust testified before the Committee and was questioned by several Senators, including John Breaux, Democrat from Louisiana. President Bush has nominated of Mr. Blust to serve as Commissioner and Designate Chairman. Mr. Blust is expected to be confirmed and sworn in as Chairman shortly. The current FMC Chairman, Hal Creel, has recently indicated he intends to remain as a Commissioner “at least for now.”

FMC Terminates Licenses of OTI-Freight Forwarders and NVOCCs

The FMC has recently terminated the licenses of the following Ocean Transportation Intermediaries (OTIs). Licenses were terminated due to failure to maintain valid surety bonds, or surrendered voluntarily. FMC license numbers ending with the letter “F” are issued to OTI-Freight Forwarders; license numbers ending with “N” are for OTI-NVOCCs. These are all US based OTIs.


Legal Name and Trade Name (if any)


Date Revoked











*Surrendered license voluntarily




























MAI GLOBAL TRANSPORT, INC. *Surrendered license voluntarily















The following Ocean Transportation Intermediary licenses were recently re-issued by the FMC. These licenses had been terminated due to failure to maintain valid surety bonds, but these entities have now filed valid bonds and regained their licenses.









DPI Web Pages and SIGNALS Newsletter In Spanish

Work is nearly complete on our Spanish language web site and newsletter! Very soon all visitors to http://www.dpiusa.com will find an * En Español * button on the left frame of our home page. This will provide access to Spanish versions of all the web pages written by DPI staff to explain the FMC regulations and our services. New issues of our SIGNALSÔ
newsletter will also be translated.

El trabajo está casi completo sobre nuestro sitio web en español y boletín de noticias! Muy pronto todos los visitantes a http://www.dpiusa.com encontrarán un botón * En Español * sobre el marco izquierdo de nuestra página inicial. Esto proporcionará acceso a las versiones en español de todas las páginas de web escritas por el personal de DPI para explicar las regulaciones FMC y nuestros servicios. Las nuevas publicaciones de nuestro boletín de noticias SEÑALESÔ
también serán traducidas.

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