A leading Russian ocean carrier, Far Eastern Shipping Company PLC of Vladivostok, Russia, and its subsidiaries incorporated in the US: Ocean Management Incorporated, FESCO Intermodal, Inc. and FESCO Agencies N.A., Inc., have entered into an agreement with the Federal Maritime Commission (FMC) to compromise civil penalties resulting from alleged violations of the US Shipping Act. Under the terms of this agreement signed August 13, 1998 the Russian carrier paid the FMC $550,000.

According to FMC documents, Far Eastern Shipping Company PLC is alleged to have offered ocean common carrier service in the foreign commerce of the USA without a tariff on file with the FMC. Additionally, Far East Shipping Company PLC and Ocean Management Inc., as vessel operating common carriers, allegedly entered into an agreement not filed with the FMC, and operated under this agreement. Furthermore, Ocean Management Inc. and FESCO Intermodal are alleged to have attempted to obtain transportation at less than rates and charges otherwise applicable through the unlawful use of charter parties, and charged less than rates set forth in their tariffs and service contracts. They also are alleged to have failed to furnish surety bonds to the FMC for their operations as NVOCCs.

The compromise agreement allows the Carrier’s subsidiaries to maintain their operations in the US, and it bars the commencement or institution of any assessment proceeding by the FMC against the Carrier and its subsidiaries for the alleged acts. Far East Shipping Company PLC is required to file its tariff with the FMC, and also to file tariffs for its service known as “Russian Pacific Line-Reefer (RPL-R).” The Carrier is prohibited by the agreement from offering common carrier services until these tariffs are filed.

This FMC docket served August 12 includes an information demand order served by the FMC on US and Chinese flag carriers operating in the US-China trade, and a notice of inquiry seeking public comments about laws, rules and policies of the Government of the People’s Republic of China that appear to have an adverse impact on US shipping. The FMC is seeking information on specific Chinese practices and restrictions and their effects on US oceanborne trade. Interested parties, including shippers, transportation intermediaries, and vessel operators, are invited to comment on the following:

• Forwarding and NVOCC Operations:

it appears that wholly foreign owned NVOCCs face serious restrictions in obtaining the necessary licenses to do business in China. The FMC seeks comments on the types of services US firms are permitted to perform in China, what activities are prohibited, and what requirements or prerequisites are imposed. The FMC seeks to determine the effects on shippers of any such restrictions placed on transportation intermediaries.

• Port Access and Licensing of Liner Services:

despite the fact that a US-China bilateral agreement authorizes vessel calls on 24 hours’ notice for national flag vessels, it appears China’s Ministry of Communications (MOC) requires foreign carriers to wait up to 90 days to obtain licenses or pre-approvals to offer liner services at Chinese ports. The FMC has requested detailed information on licensing procedures from US flag carriers APL and Sea-Land, and Chinese carriers China Ocean Shipping Company (COSCO) and China National Foreign Trade Transportation Corp. (SINOTRANS). Other interested parties are also invited to comment.

• Carrier Branch Offices and Multimodal Transport Operations:

branch offices of non-Chinese carriers and multimodal transport operators appear to be limited by Chinese regulations to specific geographic areas. This limits both the areas served and the scope of services offered.

• Vessel Agency Services:

it appears China requires US carriers to deal with PENAVICO (a subsidiary of COSCO) or China Marine Service (a subsidiary of SINOTRANS). The FMC is attempting to determine what the legal bases are for the exclusion of US carriers from the vessel agency service business; what specific services are at issue; what the commercial impact of the restrictions may be; and whether Chinese carriers may perform similar services in the US.

The FMC states plainly in Docket 98-14 that it initiated this proceeding in order to compile a record on these matters in order to determine if further action, as authorized by the Merchant Marine Act of 1920 or the Foreign Shipping Practices Act of 1998, may be required. If the Commission determines the Chinese government or Chinese Carriers have created conditions unfavorable to the trade that adversely affect the operations of US carriers in the foreign commerce of the US, then it make take actions similar to those it enforced against Japanese container operators in 1997. The FMC has the authority to limit sailings, suspend tariffs, suspend agreements, and impose fines of up to $1,000,000 per voyage.

With the US Senate enjoying its summer holiday, there was no action taken on this proposed legislation in August. In order for the Ship Reform Act (S.414) to gain approval this year the Senate must vote in September to approve the amendment made by the House of Representatives in July. Even the bill’s supporters admit this is not a foregone conclusion, and a single Senator could block passage of the bill.

Meanwhile, the FMC continues to anticipate passage of the Ship Reform Act this year; work is in progress on drafts of new tariff publication regulations, and new licensing requirements for Ocean Transportation Intermediaries (Freight Forwarders and NVOCCs) as required by the bill. If it passes this year these regulations must be finalized by March 1, 1999, and will be implemented on May 1, 1999.

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SIGNALS™ the newsletter of Distribution-Publications, Inc. Vol. 2, No. 5, September 1, 1998