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Signals™ Headlines - November 5, 2003

UPS Petition for Service Contract Authority Draws Over 200 Comments

The Federal Maritime Commission received over 200 comments in response to Petition P3-03, filed
in late July by United Parcel Service. UPS petitioned the FMC for an exemption
from the Shipping Act to permit it to negotiate, enter into and perform service
contracts for international ocean transportation.  As a non-vessel operating
common carrier (NVOCC), UPS is restricted by the Shipping Act to non-contract
carriage only, and is not permitted to offer service contracts. In Petition
P3-03 UPS argues the FMC has the power to liberally interpret the Shipping Act,
and to grant service contract authority to UPS.  The deadline for comments was
October 10, but there is no deadline for the FMC to act on the petition.

The FMC received comments from 182 members of the US House of Congress, 16 US Senators,
19 UPS customers, 6 NVOCCs, 3 trade associations and the US Department of
Justice in support of the UPS petition.  Most of the comments from shippers
mentioned how service contracts would help streamline global supply chains,
reduce their costs, and increase the speed of shipments.  Congressional support
for the UPS petition is significant, but it does not compel the FMC to take any
action.  In separate letters Congressman Bill Shuster (R-Pennsylvania) and Sen.
Mark Pryor (D-Arkansas) both said: due to the operational characteristics of
UPS and recent developments in the ocean shipping marketplace, the antiquated regulatory
scheme governing NVOCCs should be revised. 

Two trade associations, the National Industrial Transportation League (NITL) and
the Transportation Intermediaries Association (TIA), favor service contracting
authority for NVOCCs, but oppose Petition P3-03 because it would presumably
grant service contract authority only to UPS.  The TIA said granting a service
exemption only to the largest players in the industry would serve only to tilt
the playing field further against the small to medium size companies, who would
still have to disclose their rates in published tariffs, while the large,
vertically integrated companies enter into confidential rate agreements with
their customers.  The NITL suggested the FMC initiate a rule making proposal to
establish financial standards for a class exemption.

One shipper group submitted comments firmly in opposition to P3-03. The Fashion
Accessories Shippers Association, a New York based shipper association in
business since 1986, called the UPS petition an attempt by one of the largest
shippers in the world to dominate a large segment of the ocean cargo
transportation industry.  FASA urged the FMC to deny the UPS petition because
granting it would be highly detrimental to commerce and competition.

Ocean Carriers and longshore labor are united in opposition to the UPS petition. The
International Longshore & Warehouse Union (ILWU), International
Longshoremen’s Association (ILA), the American Maritime Congress, and the World
Shipping Council all urged the FMC to deny the petition.  These associations
each emphasize the FMC does not have the authority to allow the exemption
sought by UPS. The World Shipping Council, representing 40 leading ocean
carriers, submitted the most comprehensive comments.  It carefully explained
why the Commission must reject the petition.  The carriers and labor both point
out that during the US Senate’s debate on the 1998 Shipping Act the Gorton
Amendment, which would have allowed NVOCCs to enter service contracts, was
defeated by a 72-25 vote.

ILWU President James Spinosa commented if the UPS petition and other similar
petitions are approved by the FMC, it would serve as a disincentive to own and
operate ships, contrary to the express policy of the United States
government to foster a viable, healthy U.S.-flag ocean common carrier
industry.  ILA President John Bowers said let UPS take its approach through
the front door and make its arguments to Congress where they belong.

Deans Overseas Investigated for Possible Shipping Act Violations: FMC Docket No. 03-11

Deans Overseas Shippers, Inc., a New York based household goods mover, is the subject of an FMC
investigation into possible violations of the Shipping Act.  According to FMC
Docket No. 03-11
Deans Overseas has operated since October 2000 as an NVOCC
without a license, bond or tariff.  Deans Overseas is alleged to have held out
to provide NVOCC services from the United States to destinations in the Caribbean, including
advertising its services in newspapers and issuing its own NVOCC house bill of
lading to the actual shippers. The company is also believed to have
misrepresented itself as an actual cargo owner in order to enter into service
contracts with common ocean carriers’ and conceal the fact that it was not an
NVOCC. By certifying that Deans Overseas was the Cargo Owner the company was
able to obtain transportation at rates lower than those published in common
ocean carriers’ tariffs.

In April 2003, the owner of Deans Overseas, Ms. Sharon Deans, filed application with
the Commission seeking an ocean freight forwarder license on behalf of a
recently established company, Deans International Shipping Co., Ltd.   In July
2003, the FMC Bureau of Consumer Complaints and Licensing issued a letter of
intent to deny this application.   Having timely submitted a written request
for a hearing on the application, FMC Docket No. 03-11 provides for this
hearing before an FMC Administrative Law Judge.  This hearing will determine
whether Deans International will be granted the ocean forwarder license, and it
will also determine if Ms. Deans and her company violated the Shipping Act. If violations
are found, the Commission may impose civil penalties, and it may also issue an
order to cease and desist.

Seminars Scheduled by FMC at San Francisco & San Diego

The Federal Maritime Commission’s Bureau of Enforcement will visit San Francisco and
San Diego to conduct seminars on FMC regulations. These seminars provide information
about the FMC’s functions and services, and instruction regarding the
regulatory obligations of providers and users of ocean transportation services.
An opportunity for questions and answers is usually provided. There is no
charge to attend, but pre-registration is required; seminar details follow:

San Francisco: Friday, Nov. 21, 2003, 10am to 12 noon, at the World
Trade Club, Bayview Rooms 2 and 3, One Ferry Plaza, San Francisco, CA. To register contact Mike Moneck by Nov 14th, Tel:
206-553-0221, or Fax: 206-553-0222, or e-mail: michaelm@fmc.gov

San Diego: Wednesday, Dec. 3, 2003, 9:30 to 11:30am, at the Port of San Diego, Commissioners Board Room –
First Floor, 3165 Pacific Highway, San Diego, CA.  To register contact Oliver Clark by Nov. 26th, Tel:
310-514-4905, Fax: 310-514-3931, or e-mail: oliverc@fmc.gov

FMC Increases Reporting Requirements for License Applicants: FMC-18 Form Revised

The Federal Maritime Commission has revised the application for a license as an
Ocean Transportation Intermediary (OTI) and increased reporting requirements
significantly.  As of October 1st, all applicants are required to use
the revised application form: FMC-18.  This revised
form requires new or replacement Qualifying Individuals to report their social
security numbers and US citizenship status.  Additionally, all officers,
directors and shareholders of the applicant are required to report their social
security numbers. This information was not previously collected by the FMC.   The
basic requirements for the license have not changed.  Applicants are still
required to provide employment history and references for at least one
Qualifying Individual, who is carefully investigated by the FMC Office of OTIs
and by the FMC Bureau of Enforcement.  This person must be an officer of the applicant
company, and must have at least three years of work experience in the USA providing
ocean transportation intermediary services.   NVOCCs and ocean freight
forwarders operating in the USA are required to hold the FMC-OTI license.

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