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Signals™ Headlines - September 5, 2001

Docket 96-20, Port Restrictions in US/Japan Trade: FMC Issues New Section 15 Orders

The Federal Maritime Commission (FMC) has served nine ocean carriers with Section 15 Orders, requesting detailed
information for the FMC’s on-going investigation into restrictions and requirements for the use of port and terminal
facilities in Japan Docket 96-20. These Orders expand an investigation
that was begun by the Commission in 1996. Since that time, the FMC has been concerned that restrictions on the use
of port and terminal facilities in Japan create conditions unfavorable to shipping in the U.S.-Japan trade.

In September 1997 the FMC briefly imposed fines of $100,000 per voyage fees on Japanese container carriers entering United States ports. These were suspended after comprehensive government-to-government and industry-government accords to substantially reform Japanese port practices were reached, and the Japanese carriers paid FMC a settlement of $1.5 million. Since that time, the FMC has collected information on a semi-annual basis from the Japanese carriers, Maersk-Sealand, and American President Lines. Based on these reports and other information it has collected, the FMC believes the pace of progress and reform in Japan’s port transportation sector has been too slow, and the promised reforms have not been realized. Consequently, U.S. carriers and U.S. trade are burdened with unreasonably high costs and inefficiencies.

The new Section 15 Orders have been served on Evergreen Marine Corporation, Hanjin Shipping Company, Ltd., Hyundai Merchant Marine Co., Ltd., COSCO Container Lines Company Limited, Orient Overseas Container Line, Yangming Marine Transport Corp., P&O Nedlloyd Limited, Westwood Shipping Lines, and Hapag-Lloyd Container Linie GMBH. These carriers are required to answer a series of detailed questions posed by the FMC about their terminal and port operations in Japan. Answers must be reported in writing and under oath by November 7 2001, and every 180 days afterwards. The FMC’s questions to these nine carriers focus on three key areas: (1) the licenses and permissions required by Japanese government agencies for terminal and port operations; (2) the “Prior Consultation System” of the Japan Harbor Trade Association (JHTA); (3) the impact of the amendments to the Harbor Transportation Business Law enacted by the Government of Japan in May, 2000.

It is not known what other actions the FMC might take in this matter. But these new developments clearly indicate it believes ocean common carriers in the U.S.-Japan trade continue to face conditions unfavorable to shipping that require increased monitoring and other possible actions by the Commission.

FMC Delays Action on China Issues: Petitions by Controlled Carriers Remain Pending

The closed door meeting of FMC Commissioners on August 15, 2001 resulted in no new action on Docket 98-14, the Commission’s on-going investigation into restrictions on the operations of non-Chinese carriers in China. The FMC also did not rule or comment on the Petitions filed by two Chinese flag carriers for partial exemption from the FMC’s controlled carrier regulations: China Ocean Shipping Company (COSCO) and China National Foreign Trade Transportation (Group) Corp. d/b/a SINOTRANS. As controlled carriers, both COSCO and SINOTRANS are subject to much more stringent FMC requirements than non-controlled carriers. COSCO already enjoys a limited exemption from the Section 9 of the Shipping Act, and has petitioned for exemptions from the Controlled Carrier Act. SINOTRANS seeks the same limited exemption from Section 9 of the Shipping Act already enjoyed by COSCO, which enables COSCO to publish rates with less than 30 days notice.

Docket 01-08: FMC Seeks Comments on Electronic Documents and Signatures

The Federal Maritime Commission (FMC) has issued Docket 01-08 to solicit information and comments concerning the impact of the Government Paperwork Elimination Act and the Electronic Signatures (E-Sign) in Global and National Commerce Act on all sectors of the ocean shipping industry. These comments will assist the Commission as it analyzes the use and acceptance of documents in electronic form, and finalizes plans to expand its use of electronic documents. Currently, the Commission requires the filing of service contracts in electronic format, and it requires ocean carriers and NVOCCs to publish tariffs in electronic systems. Docket 01-08 includes a request for comments on 17 forms that currently must be filed with the FMC in hard copy. These include forms required for filing of OTI Surety Bonds, OTI License Applications, Monitoring Reports for Agreements, and Service Contract Registration. Comments are due by September 17, 2001, and should be addressed to the FMC Secretary, Bryant L. VanBrakle, via e-mail: secretary@fmc.gov Additional information is available from the FMC Deputy Director, Ms. Florence A. Carr, tel: 202-523-5800 or e-mail: florence@fmc.gov.

Release of OSRA Impact Study Delayed: Mid-Summer 2001 Deadline Passes

The release of the FMC’s report on the impact of the Ocean Shipping Reform Act (OSRA) has been delayed. According to Ms. Florence Carr, FMC’s Deputy Executive Director, the Commissioners are expected to take up consideration of the draft OSRA study in mid to late September, and it should be released shortly thereafter. The report on this two-year study was scheduled for release this summer. The report will include the results of the 35-question survey the Commission asked shippers, carriers, ocean transportation intermediaries and others to complete earliest this year (Docket 01-01). In comments made earlier this year, FMC Chairman Hal Creel said he hoped the survey would obtain comprehensive information on OSRA’s impact, to determine whether the benefits envisioned have come about, and to determine whether any segment is being harmed under OSRA.

Docket 01-02: Transworld Shipping (USA), Inc. v. FMI Forwarding (San Francisco), Inc.

A formal complaint filed in March 2001 by Transworld Shipping (USA), Inc., a licensed OTI-NVOCC based in Long Beach, CA, has achieved results. Transworld’s complaint alleged violations of the Shipping Act by Union-Transport Corporation, an FMC licensed OTI-Ocean freight forwarder and NVOCC, and by FMI Forwarding (San Francisco), Inc., a/k/a Inter-Marine Forwarding Co., an ocean freight forwarder. According to FMC Docket 01-02, Transworld alleged these firms engaged in a pattern of deceit by booking cargo and misrepresenting that ocean freight charges would be paid, thereby inducing Transworld to provide transportation service when there was no intent to pay. Transworld sought to recover freight charges and attorneys fees.

In June 2001, Union Transport entered into a confidential settlement agreement that included a payment to Transworld. This was approved by the FMC, and Union Transport was dismissed from the proceeding. In a ruling issued August 3, 2001, the FMC ordered FMI San Francisco liable to Transworld for reparations of a total amount of $10,272.76 plus interest. The reparations equal the total of the freight payments actually received by FMI San Francisco, but not remitted to Transworld. Additionally, Transworld may be awarded attorney’s fees upon petition to be filed. As a result of this Order, the surety bond that FMI Forwarding had filed with the FMC may be used for the reparations and attorneys fees. FMI Forwarding was also found in violation of Section 10 of the Shipping Act and several FMC regulations, but it has not yet been penalized by FMC for these violations.

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