Home / Signals™ / Signals™ Headlines – October 3, 2003

Signals™ Headlines - October 3, 2003

TSA Carriers Agree to Settlement Agreement: $1,350,000 Paid to FMC

The Federal Maritime Commission has entered into a
settlement agreement
with the major ocean carrier agreements and their members who serve the inbound U.S.
trades with Asia,
including the Transpacific Stabilization Agreement (TSA), and two TSA-related bridging agreements. The
includes a payment of $1,350,000 in lieu of civil penalties. This investigation was prompted by
Petition P1-02 filed in May 2002
by the National Customs Brokers and Forwarders Association of America, Inc. (NCBFAA) and the International
Association of NVOCCs. These groups claimed that TSA members violated the Shipping Acts by engaging in a
concerted practice of discrimination against non-vessel operating common carriers (NVOCCs) and other illegal
practices. The settlement addresses carrier practices investigated in the Commission’s
Fact Finding Investigation No. 25,
which was headed by FMC Commissioner Joseph E. Brennan.

Under the terms of the settlement, the TSA carriers shall refrain from certain practices involving the discussion
and agreement on rates and negotiation of service contract terms particularly affecting NVOCCs. These include
practices alleged by the NCBFAA and IANVOCC of unequal timing of negotiations and unequal application of general
rate increases and surcharges. Accordingly, the TSA carriers will:

  • Not establish any committee whose purpose is to discuss or agree upon rates or terms to apply solely or
    separately to NVOCC cargo;
  • Not establish any voluntary guideline or otherwise reach any agreement pertaining to the timing of service
    contract negotiations with NVOCCs which differs from the timing of service contract negotiations with other
    shippers; and
  • Not establish any voluntary guideline or otherwise reach any agreement pertaining to the application of general
    rate increases or peak season surcharges that distinguishes between shippers based upon their status as NVOCCs or
    beneficial cargo owners.
  • According to FMC officials the settlement addresses issues broader than those raised by the original NVOCC
    petition. After reviewing a report earlier this year by the Investigative Officer in this matter, Commissioner
    Brennan, the Commission decided to also consider issues involving information sharing by TSA members, TSA’s exercise
    of formidable market power through its ability to agree on rates as well as capacity, and related agreements
    covering the trade from Indian subcontinent to the USA. The settlement secures important structural changes in TSA

  • Removing authority to discuss or agree on capacity rationalization, and providing that TSA members will refrain
    from filing any other agreement to discuss or agree upon capacity rationalization for three years;
  • Prohibiting the exchange of shipper-specific information relating to individual service contracts; and
  • Limiting discussions of rates or capacity to meetings for which minutes are filed with the Commission;
  • Removing the Indian subcontinent from TSA’s geographic scope and eliminating TSA’s bridging agreements with the
    Indamex carriers in that trade and with the Evergreen-related carriers.
  • In announcing the settlement FMC Chairman Steven Blust said it “resolves the concerns unearthed in that Fact
    Finding Investigation in an efficient manner with the greatest possible benefit to the trade.” The settlement
    also calls for semi-annual meetings between TSA and Commission representatives to review the activities of the TSA.

    FMC Extends Comment Period Again for UPS & NCBFAA Petitions

    The FMC has again extended the deadline for comments in reply to the petitions filed by United Parcel Service,
    and by the National Customs Brokers and Forwarders Association of America (NCBFAA) Comments on
    Petition P3-03 and
    Petition P5-03 are now due by October 10, 2003.
    Comments may be submitted to the FMC Secretary via email: secretary@fmc.gov
    and should also be sent to the attorneys representing the petitioners.

    In Petition P3-05 the NCBFAA has asked the FMC for exemption from the provisions of Section 8 and 10 of the
    Shipping Act of 1984, which require non-vessel ocean common carriers (NVOCCs) to establish, publish, maintain and
    enforce tariffs setting forth ocean freight rates. Granting this exemption would require the FMC to very liberally
    re-interpret the Shipping Act, and would significantly reduce its ability to protect the public from violations of
    Section 10 of the Act. Approximately 3,000 NVOCCs serving the USA are currently subject to the Sections 8 and 10 of
    the Shipping Act.

    In Petition P3-03 UPS has asked the Federal Maritime Commission, pursuant to Section 16 of the Shipping Act, for an
    exemption from the Shipping Act to permit it to negotiate, enter into and perform service contracts for ocean
    transportation of cargo. UPS is registered with the FMC as a Non-Vessel Operating Common Carrier (NVOCC), and as
    such it is not permitted to offer service contracts to its shipper clients. A similar petition has also been filed
    with the FMC by C.H. Robinson Worldwide, Inc. � Petition P9-03 Both these petitions ask the
    FMC to make individual exemptions, not rulemakings. Comments on the C.H. Robinson petition are also due on October
    10, 2003.

    Two NVOCCs Petition FMC for Rulemakings on Service Contract Authority

    Bax Global Inc.
    has petitioned the Federal Maritime Commission for a rulemaking to amend the Commission�s regulations to permit
    it and other similarly situated NVOCCs to enter into confidential service contracts as an “ocean common
    carriers” with their shipper-clients for the ocean transportation of cargo. Ocean World Lines, Inc. has
    petitioned for a rulemaking that would expand the definition and scope of the term “special contracts” to
    include NVOCCs in the same manner as currently applied to ocean freight forwarders. Both these petitions do not seek
    individual exemptions from the Shipping Act, instead, both ask the FMC to institute rule making proceedings.

    Bax Global is a large NVOCC based in Southern California. Its Petition P8-03 is similar to the UPS petition
    in that it requests service contract authority for an NVOCC, but it goes further; Bax Global proposes the FMC
    establish criteria for determining which entities should be authorized to enter confidential service contracts.
    Proposed entities should have:

  • A substantial U.S. related transportation presence with $100 million annual transportation related gross
  • Must be publicly-held (either directly or through a parent), or a third party logistics company (e.g., ocean
    freight forwarder, NVOCC) that is related to an ocean common carrier serving the U.S. trades; and, should
  • Hold itself out as a multi-modal logistics maritime transportation provider and historically compliant with U.S.
    regulations as administered by the FMC prior to applying to qualify for the right to offer service contracts.
  • Ocean World Lines Inc. is a large NVOCC based in New York. Its Petition P7-03 seeks to “provide NVOCCs
    with the ability to enter into rate agreements that are shielded from public view by their competitors without
    recourse to service contracts or a broad-ranging tariff exemption and to ameliorate the marketplace dysfunction
    caused by the transparent/opaque rate dichotomy that exists in the trade today.”

    Comments on both Petitions may be submitted to the FMC Secretary via email: secretary@fmc.gov and should also be sent to the attorneys representing the
    petitioners. Copies of these petitions are available from the FMC Secretary at the FMC web site www.fmc.gov The deadline for comments is October 10, 2003.

    to top

    Celebrating 45 Years of Navigating the Regulatory Seas

    Need help with U.S. Federal Maritime Commission compliance?

    Get in touch