The US Supreme Court will review a case involving Federal Maritime Commission’s jurisdiction over the activities of state owned ports. The Court has agreed to review the decision of the U.S. Court of Appeals for the Fourth Circuit in South Carolina State Ports Authority v. Federal Maritime Commission and United States of America, 243 F.2d 165. That Fourth Circuit decision overturned the FMC’s ruling in South Carolina Maritime Services, Inc. v. South Carolina State Ports Authority in which the FMC found that the Eleventh Amendment and principles of state sovereign immunity from suit do not bar privately-initiated administrative adjudications against state-run marine terminal operators. The South Carolina State Ports Authority (SCSPA) successfully appealed that ruling to the Fourth Circuit Court.

FMC Chairman Hal Creel was pleased by the Supreme Court’s determination to review the Fourth Circuit’s decision. “The Commission has believed throughout this proceeding that the agency’s authority to hear administrative complaints against ports, whether they are state-run marine terminals or privately-run marine terminals, is crucial to effective and evenhanded regulation under the Shipping Act of 1984. I am glad that the Supreme Court has agreed that the issue is important.” The case is entitled Federal Maritime Commission v. South Carolina State Ports Authority, Supreme Court Docket No. 01-46.

This case began with the filing of a complaint by South Carolina Maritime Services, Inc. (Maritime Services) in October 1999 (FMC Docket 99-21). Maritime Services asserted that the South Caroline States Ports Authority (SCSPA) refused to give berthing space at Charleston, South Carolina, to its vessel, the M/V TROPIC SEA, which permits gambling activities on board when the vessel is in international waters. The denial of berthing space was due to SCSPA’s purported policy of refusing to berth ships whose primary purpose is gambling. Maritime Services averred that SCSPA did provide berthing to another cruise operator, Carnival Cruise Lines, who allegedly provided gambling services. Because of this apparently disparate treatment, Maritime Services claimed that SCSPA violated the Shipping Act of 1984 by unreasonably refusing to deal, and by unduly and unreasonably preferring Carnival, and unduly and unreasonably prejudicing or disadvantaging Maritime Services. This proceeding is still pending before the FMC, pending the outcome of the Supreme Court’s decision.

The FMC’s investigation into exclusive arrangements for tug services at Florida ports are now focused on Port Canaveral. This investigation, which began in June 2001, has already helped create new competition for tug services at Port Everglades. On October 31 and November 1, 2001, FMC Commissioner Antony Merck held private hearings at Port Canaveral. Like Port Everglades, Port Canaveral has been served by a served by a single tug company for more than forty years, Hvide Marine, and its subsidiary Seabulk International, Inc. In its Order of Investigation, the FMC noted the Canaveral Port denied the application of Petchem, Inc., a competing tug operator, to begin serving commercial vessels at the Port. Petchem serves US military vessels at the port. In this investigation Commissioner Merck has been assigned to develop a record on possible harm caused by the tug monopolies, and the factors which may be offered as justification for the port’s actions in preventing competition for tug services. The Canaveral Port District Board of Commissioners is a marine terminal operator (MTO), and as such is subject to the Shipping Acts of 1984 and 1998 and FMC regulations.

The Federal Maritime Commission (FMC) has ordered Stallion Cargo, Inc., a Miami, FL based non-vessel-operating common carrier (NVOCC) to pay a civil penalty of $1,340,000 and to cease and desist from operating in the United States as an ocean transportation intermediary. This decision overturns an earlier FMC Order that imposed a penalty of only $50,000 and allowed Stallion Cargo to keep its license. According to Docket 99-18, Stallion Cargo was found to have willfully and knowingly obtained transportation at less than the rates and charges otherwise applicable through the means of misdescription of the commodities actually shipped. Additionally, Stallion did not comply with FMC tariff publication regulations; it invoiced rates and charges that were not on file in its NVOCC tariff. A total of 167 violations were committed during a three-year period.

In its Order of Investigation on Docket 99-18 the FMC described several shipments made by Stallion Cargo with King Ocean Service de Venezuela, S.A. (King Ocean) and SeaFreight Line, Ltd. (SeaFreight). Stallion was a regular shipper in the trade from Port Everglades, Florida to the port of Oranjestad, Aruba, Netherlands Antilles.

On these shipments Stallion declared only one type of commodity to King Ocean and SeaFreight, who subsequently rated the commodities in accordance with the inaccurate description. Stallion’s house bills of lading, however, describe the specific commodities being shipped, and indicate that Stallion was fully cognizant that the shipments actually consisted of commodities different from those listed on King Ocean’s and SeaFreight’s bills of lading. Stallion also failed to charge the rates on file in its NVOCC tariff. At one point during the FMC’s investigation the only commodity rate published in Stallion’s tariff was for Cargo, N.O.S. Comparing the filed Cargo, N.O.S. rate applicable under Stallion’s tariff with the ocean freight assessed by Stallion, the FMC found Stallion did not assess the rate filed in its tariff, and undercharged its shippers on eighty (80) shipments.

In the Initial Decision in this case, issued on March 15, 2001, FMC’s Administrative Law Judge (ALJ) Norman D. Kline found Stallion committed violations knowingly and willfully, and continued a number of them for a time even after warning by the FMC. However, in view of mitigating factors presented by attorneys representing Stallion, Judge Kline did not suspend Stallion’s OTI license and NVOCC tariff. These factors included Stallion’s small size, its weak financial situation, its corrections to its tariff, albeit belated, lack of evidence of continuing violations, and its expressed willingness to reform.

In their recent decision in this case, the FMC overturned Judge Kline’s more generous rulings. The Commission emphasized that willful and knowing violations of the Shipping Acts will result in severe penalties. See Stallion Cargo, Inc., Docket No. 99-18 for full details.

The Federal Maritime Commission (FMC) has set new deadlines in its investigation into exclusive tug franchises on the Lower Mississippi (Docket 01-06). Earlier this year 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 due to the exclusive tug assist service arrangements required at their marine terminals. The initial deadline for responses by the terminal operators was July 18, 2001; however, the Commission has received many petitions and requests that have delayed the proceedings. The terminal operators are not acting in concert, and each is anxious to review the information submitted to the FMC by the other terminals and by carriers and agents who were compelled by the FMC to provide information on these matters.

The proceeding has now been assigned in its entirety for expedited hearing before an FMC Administrative Law Judge,
who will dispose of outstanding motions currently before the Commission as necessary. A new procedural schedule has
been set for petitions and rulings on these. The discovery portion of the proceeding will recommence on November 5,
2001, and an initial decision is due by July 1, 2002. The full text of the FMC’s recent Order in this matter may be
viewed on the Commission’s home page at www.fmc.gov The Commission’s
Active Docket Logs provide a summary of actions taken
by the FMC and requests and petitions received.