9696 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

1Section 19 authorizes and directs the

Commission to ‘‘make rules and regulations

affecting shipping in the foreign trade not in

conflict with law in order to adjust or meet general

or special conditions unfavorable to shipping in the

foreign trade, whether in any particular trade or

upon any particular route or in commerce generally,

including . . . terminal operations . . . which arise

out of or result from foreign laws, rules, or

regulations or from competitive methods or

practices employed by owners, operators, agents, or

masters of vessels of a foreign country . . . .’’

The rules and regulations the Commission is

authorized to make include limitation of sailings,

suspension of carriers’ tariffs or rights to use

conference tariffs, suspension of carriers’ rights to

operate under FMC-filed terminal and other

agreements, fees of up to $1,000,000 per voyage, or

any other action deemed necessary and appropriate

to adjust or meet the unfavorable condition. 46

U.S.C. app. 876(9).

Source of flooding and location

# Depth in

feet above

ground.

*Elevation

in feet

(NGVD)

Maps are available for inspection at the City of Lincoln

Planning Department, 555

South Tenth Street, Lincoln,

Nebraska.

NEW MEXICO

Silver City (Town), Grant

County (FEMA Docket No.

7198)

San Vicente Arroyo:

Approximately 400 feet downstream of State Route 90 .... *5,822

At confluence with Silva and

Pinos Altos Creeks .............. *5,890

Pinos Altos Creek:

At confluence with San

Vicente Arroyo ..................... *5,890

At 32nd Street ......................... *6,035

Approximately 1,300 feet upstream of 32nd Street .......... *6,047

Tributary 7 to Pinos Altos Creek:

At confluence with Pinos Altos

Creek ................................... *5,951

Approximately 700 feet upstream of confluence with

Pinos Altos Creek ................ *5,961

Silva Creek:

At confluence with San

Vicente Arroyo ..................... *5,890

Approximately 2,500 feet upstream of U.S. Route 180 ... *5,939

Approximately 7,000 feet upstream of U.S. Route 180 ... *5,990

Maps are available for inspection at the Town of Silver City

Town Hall, Broadway Street,

Silver City, New Mexico.

(Catalog of Federal Domestic Assistance No.

83.100, ‘‘Flood Insurance.’’)

Dated: February 24, 1997.

Richard W. Krimm,

Executive Associate Director, Mitigation

Directorate.

[FR Doc. 97–5274 Filed 3–3–97; 8:45 am]

BILLING CODE 6718–04–P

FEDERAL MARITIME COMMISSION

46 CFR Part 586

[Docket No. 96–20]

Port Restrictions and Requirements in

the United States/Japan Trade

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

SUMMARY: The Federal Maritime

Commission, in response to unfavorable

conditions in the foreign oceanborne

trade between the United States and

Japan, is imposing $100,000 per-voyage

fees on liner vessels operated by

Japanese carriers calling at United States

ports. The unfavorable conditions

identified by the Commission involve

restrictions on and requirements for use

of Japanese ports. These conditions arise

out of or result from laws, rules, and

regulations of the Government of Japan.

DATES: Effective Date: April 14, 1997.

ADDRESSES: Requests for publicly

available information or additional

filings should be addressed to: Joseph C.

Polking, Secretary, Federal Maritime

Commission, 800 North Capitol Street,

N.W., Washington, D.C. 20573, (202)

523–5725.

FOR FURTHER INFORMATION CONTACT:

Thomas Panebianco, General Counsel,

Federal Maritime Commission, 800

North Capitol Street, N.W., Washington,

D.C. 20573, (202) 523–5740.

SUPPLEMENTARY INFORMATION:

Background

On November 6, 1996, the

Commission proposed a rule, pursuant

to section 19(1)(b) of the Merchant

Marine Act, 1920, 46 U.S.C. app.

876(1)(b) (‘‘Section 19’’) to assess fees

on Japanese liner operators in response

to requirements and restrictions on the

use of Japanese ports.1 In the Notice of

Proposed Rulemaking, 61 FR 58160,

Nov. 13, 1996, (‘‘Notice’’) the

Commission stated that the Government

of Japan appeared to discriminate

against U.S. carriers by not licensing

non-Japanese companies to perform

stevedoring or terminal operating

services. The Commission further found

that the Government of Japan, through

its licensing practices and other

support, appeared to protect the

dominant position of the Japan Harbor

Transportation Association (‘‘JHTA’’),

the trade organization that wields broad

control over the Japanese harbor

services industry. The Commission

explained that JHTA’s authority over

Japanese harbor services stemmed from

its administration of the prior

consultation system, a process of

mandatory discussions and preapprovals for ocean carrier operational

plans. In response to these conditions,

the Commission proposed to levy a pervoyage fee of $100,000 each time a liner

vessel owned or operated by one of the

three Japanese liner operators serving

U.S. trades (Kawasaki Kisen Kaisha,

Nippon Yusen Kaisha, and Mitsui

O.S.K. Lines) enters a U.S. port from

abroad.

The closing date for comments,

originally set for January 13, 1997, was

extended to January 20, 1997, to allow

parties to address the outcome of

maritime consultations held between

the United States Government and the

Government of Japan on January 6–7,

1997.

Comments

American President Lines and Sea-Land

Service

Joint comments strongly supporting

the proposed rule were filed by

American President Lines, Ltd. (‘‘APL’’),

and Sea-Land Service, Inc. (‘‘SeaLand’’), the two U.S. carriers operating

in the Japan trade. Those lines stated:

The premise on which [the proposed rule]

rests is indisputable, namely, that the

government of Japan has, through its

discriminatory licensing system in the harbor

services industry, created conditions

unfavorable to shipping in the U.S.-Japan

trade. As accurately recounted in the

Supplementary Information to the Notice, the

stevedoring and terminal services providers

in Japan are licensed by the Ministry of

Transport (‘‘MOT’’) in a largely discretionary

process and are exclusively Japanese entities.

Also, [JHTA] functions as a trade association

of such providers with the approval of MOT.

The activities of the JHTA, in which MOT

have long acquiesced, are characterized by

blatant anti-competitive practices including

those at issue in this and prior proceedings

of the Commission.

APL/Sea-Land Comments at 1–2.

The U.S. carriers explained that the

need for changes in Japanese port

practices is becoming more urgent:

In years past, when carriers performed

their individual vessel and terminal

operations, JHTA-imposed inefficiencies

were merely an unwelcome set of

phenomena. However, difficult market

conditions in the trans-Pacific trade in

general and in the U.S.-Japan trade in

particular have forced carriers to enter into

reciprocal slot charter and terminal

rationalization arrangements in order to

increase service competitiveness while

lowering costs. Thus, when an economicallydriven redeployment of the assets of several

carriers operating under a strategic alliance is

frustrated or delayed by the absolute control

and abuse of power of the JHTA in Japan over
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9697

every operational aspect of the alliance, the

need for reform becomes acute.

APL/Sea-Land Comments at 4.

APL and Sea-Land also pointed out

that other foreign carriers serving Japan

are being adversely affected as well.

They noted that the European

Commission, at the behest of European

carriers, has urged the Government of

Japan for years to secure the elimination

of port restrictions. It was also pointed

out that in October of last year, the

European Commission filed a formal

complaint with the World Trade

Organization regarding the prior

consultation process and JHTA’s ‘‘de

facto monopoly on stevedoring in

Japan.’’

The U.S. carriers opined that the

amount of the sanction proposed by the

Commission, $100,000 per voyage, is

reasonable under the present

circumstances. According to those lines,

the sanction ‘‘is an assessment which is

far less than the economic impact on the

U.S. Carriers of the cumulative adverse

effects of the prior consultation system,

that is, the abuse of unbridled market

power by the harbor services industry in

Japan.’’ APL/Sea-Land Comments at 3.

However, the U.S. carriers suggested

that, if JHTA were to retaliate against

U.S. carriers in response to the actions

taken by the Commission, either directly

or through labor disturbances, the

severity of sanctions should be

increased substantially. Similarly, they

urged that if the Government of Japan or

its instrumentalities take any retaliatory

action against the U.S. carriers in

response to actions taken by the

Commission, the severity of sanctions

should also be increased.

The sanctions should be continued

until U.S. carriers are licensed to

perform stevedoring and terminal

operating services co-extensive with

those performed by licensed entities in

Japan and by Japanese carriers and their

affiliates in U.S. ports, the U.S. carriers

recommended. Moreover, they argued

that they must be free to operate as, or

contract for the operation of, stevedores

and terminal operators independent of

JHTA’s system of prior consultation.

They also maintained that any

remaining conspiracy by the Japan

harbor services monopoly to injure or

eliminate competition from the new

licensees, or to deprive new licensees of

a supply of skilled labor, would merit

continuing sanctions.

APL and Sea-Land also reported on

consultations between the Government

of Japan and the United States in

Washington on January 6–7, 1997,

concerning prior consultation, licensing,

and other Japanese port practices.

According to the U.S. lines, the Japanese

delegation to these talks recited the

view that the practices in question were

purely commercial matters, and the

talks adjourned without an agreement of

any kind having been reached.

International Chamber of Commerce

Comments in support of the proposed

rule were submitted by the Commission

on Maritime Transport of the

International Chamber of Commerce

(‘‘ICC–CMT’’). The comments indicated

that the ICC–CMT is made up of

representatives of all segments of the

maritime sector, including carriers,

shippers, forwarders and port interests

from around the world.

The ICC–CMT raised the following

concerns: (1) Limited competition in

Japan’s harbor services creates port costs

which are arguably among the highest in

the world; (2) carriers are subjected to

a system of prior consultation with the

JHTA which makes it difficult to

effectively improve service or reduce

costs; and (3) shippers are forced to

absorb some of the very high costs

which result from these restrictions. The

comments expressed hope that the

Government of Japan will see to it that

port services are opened to competition,

and indicated support for all

governmental efforts to remove

restrictions and assure free and fair

trade in maritime transport services.

Japan Foreign Steamship Association

The Japan Foreign Steamship

Association (‘‘JFSA’’), the organization

of non-Japanese shipping lines in Japan,

submitted a copy of a position paper

urging specific and detailed changes in

Japanese port policies and practices.

JFSA represents the interests of the

foreign carriers (including the U.S.

lines) in prior consultation and other

dealings with JHTA. According to a

cover letter included in its submission,

JFSA’s position paper was provided to

the Director General of the Maritime

Transport Bureau, Ministry of Transport

(‘‘MOT’’), for consideration at a MOTchaired meeting between JFSA, the

Japanese Shipowners’ Association, and

JHTA, held January 29, 1997.

JFSA in its position paper proposed a

number of changes to the prior

consultation system. Under the JFSA

plan, shipping lines would be permitted

to consult or negotiate directly with

their stevedoring companies, rather than

be required to submit their operational

plans to JHTA for approval. Stevedore

companies would then consult (either

on their own or, if they choose, through

JHTA), with labor. JFSA also urged that

the requirement for prior consultation

be limited to ‘‘major issues,’’ defined as

arrangements for rationalization

requiring changes in ports, terminals, or

berths, that may seriously affect the

employment of port laborers, rather than

all operational changes, as is currently

the case.

In addition, JFSA requested a

commitment from MOT, JHTA and its

member companies that prior

consultations will not be used as a tool

for allocating business among member

companies, and that prior consultation

will never be required for individual

business transactions between carriers

and stevedoring companies. JFSA

proposed procedural rules for prior

consultation, including time limits and

requirements that decisions be

explained in writing. According to

JFSA, MOT should be responsible for

implementation and enforcement of the

revised process, and disputes over

operation of the process should be

referred to a standing arbitration body

nominated by all parties and supervised

by MOT.

JFSA urged that, within a reasonable

time period, carriers be allowed to freely

select stevedore and terminal service

companies, and be allowed to obtain

unrestricted general stevedore licenses

at any or all Japanese ports. The present

system of regulated rates, according to

JFSA, should be abolished to allow for

competitive bidding for port services. In

addition, JFSA proposed the

implementation of permanent Sunday

work, including terminal and gate

services, and 24-hour port operations.

According to JFSA, the proposed

changes would ‘‘insure fair and

equitable commercial operating

conditions comparable to those now

enjoyed in U.S. and European

international trades by Japanese

shipping companies.’’ The changes were

said to be necessary to secure fair and

reasonable business practices, protect

the significant investment of shipping

lines, ascertain a satisfactory service

environment for Japanese export and

import industry, and maintain and

assure sufficient work volume to satisfy

labor requirements.

American Association of Exporters and

Importers

The American Association of

Exporters and Importers (‘‘AAEI’’) stated

that ‘‘the port practices in question

supported by Japanese government

regulations are trade restrictive practices

working against the interests of U.S.

(and all other) shippers.’’ AAEI also

acknowledged that the practices in

question fall within the Commission’s

jurisdiction.

However, AAEI stated that it believes

the practices at issue place Japan in
9698 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

violation of World Trade Organization

(‘‘WTO’’) rules, and followed that ‘‘the

United States has both the obligation

and the long term need to settle its trade

disputes, in areas covered by WTO

rules, through WTO dispute settlement

channels.’’ Accordingly, AAEI proposed

a procedure whereby the Commission,

before taking any action, would join

with the Office of the United States

Trade Representative to ‘‘satisfy

themselves that these . . . port practices

. . . are in violation of WTO rules.’’ If

so satisfied, AAEI would have the

Commission take no action while the

U.S. sought to resolve these matters

through the WTO; otherwise, the

agencies would jointly issue an

explanation of why WTO rules did not

apply, ‘‘in order to justify’’ FMC action.

AAEI also asked that the Commission

perform an impact study of the costs to

the U.S. business community of cargo

diversion to Canadian ports which,

according to AAEI, might occur as a

result of the Commission’s action.

Port of Portland

The Port of Portland, located in

Portland, Oregon, raised three points

concerning the proposed rule. First, it

suggested that the Commission should

clarify whether the $100,000 fee would

be assessed on a ‘‘per port call’’ basis,

or on a ‘‘per voyage’’ basis. Second, it

suggested that the Commission consider

and publish additional steps the

Government of Japan might take to avert

the imposition of sanctions. Finally, the

Port of Portland expressed concern that

the proposed sanctions could lead to the

diversion of vessel calls to non-U.S.

ports in Mexico and Canada. The Port

of Portland urged the Commission to

consider and publish alternative

sanctions that would not create such a

risk.

Japanese Shipowners’ Association

The Japanese Shipowners’

Association (‘‘JSA’’) stated that it is an

association domiciled in Japan of 147

shipping companies doing business

both in the ocean worldwide trades and

in Japan’s domestic trades. The JSA

indicated that it is ‘‘curious to know

why our leading members are to be

penalized where they are not accused of

any misconduct and where the

allegations in the Notice are as vague as

they are groundless.’’ JSA went on to

state:

Our understanding is that the Japanese

Ministry of Transport has never received an

application from a U.S. carrier, that the

licensing law has not been administered to

discriminate against the nationality of an

applicant, that no MOT official was

authorized to advise any U.S. carriers not to

apply for a license and that, according to the

Association’s inquiry, no such advice was

ever given by a responsible MOT official.

Unilateral sanctions proposed against

entities having no responsibility could lead

to only confusion, as well as to a precedent

detrimental to the future of U.S./Japan trade

relationships.

Mitsui O.S.K. Lines, Kawasaki Kisen

Kaisha, and Nippon Yusen Kaisha

Opposition to Sanctions

Comments and a memorandum

opposing the proposed rule were jointly

filed by Mitsui O.S.K. Lines, Ltd.

(‘‘MOL’’), Kawasaki Kisen Kaisha, Ltd.

(‘‘K-Line’’), and Nippon Yusen Kaisha

(‘‘NYK’’), the three Japanese liner

carriers operating in the U.S. trades.

Those lines, as an initial matter, stated

that they are private companies, that

they are not in a position to direct or

control the policies and actions of the

Ministry of Transport, and that they

‘‘deplore a statutory application which

would punish us irrespective of the

lawful character of our carrier

operations in the Japan/U.S. oceanborne

trades.’’ MOL/K-Line/NYK Comments at

4.

The Japanese carriers indicated that

they will be severely injured by the

threatened sanctions. Based on 1996

vessel operations, during which sailings

were said to have averaged 34 per

month, imposition of the proposed

$100,000 fee reportedly would cost the

Japanese lines 3.5 to 4 million dollars

per month in 1997, approximately 42 to

45 million dollars per year.

Licensing

The Japanese carriers challenged the

Commission’s proposed finding that the

Ministry of Transport uses its licensing

authority to restrict entry and to shield

JHTA and its members from foreign

competition. They asserted that the

Government of Japan has never

discriminated against U.S. carriers with

regard to the issuance of licenses, and

that MOT has never advised U.S.

carriers on the matter of licensing or

received an application from a U.S.

carrier.

The Japanese carriers stated that there

is no ownership restriction in the Port

Transportation Business Law which

would bar a U.S. carrier applicant based

on nationality. According to MOL, NYK

and K-Line, the supply-demand

requirement in the law was enacted as

an internal measure to promote

tranquility at the waterfront; ‘‘while this

restriction inherently serves to place a

limit at some point on the number of

licenses the ministry can grant, it is a

limit when reached that would apply to

any applicant regardless of its

nationality.’’ MOL/K-Line/NYK

Memorandum at 2–3. They asserted that

MOT has offered written assurance that

a U.S. carrier’s application ‘‘would be

fairly and evenly adjudged under the

same standards as Japanese

applications. . . .’’ Id. at 2.

The Japanese carriers argued that the

‘‘basis’’ and ‘‘linchpin’’ of the

Commission’s proposed action is the

‘‘single undocumented assertion’’ that

U.S. carriers have been shut out of the

Japanese stevedoring market and

advised not to bother to apply, and

contended that no legal or factual

support is presented to substantiate

these findings. Id. at 2; MOL/K-Line/

NYK Comments at 5. They urged the

Commission to discontinue the

proceeding on the basis that ‘‘sanctions

under section 19 simply cannot be

applied absent a demonstration by

substantial evidence of discrimination

against U.S. carriers.’’ MOL/K-Line/

NYK Memorandum at 4. They further

asserted that the Commission violated

section 553(b)(3)(c) of the

Administrative Procedure Act, 5 U.S.C.

553(b)(3)(c), and contravened the

carriers’ protections of the Due Process

Clause of the Fifth Amendment, by

failing to disclose factual information

such as the timing and circumstances

under which inquiries regarding

licenses were made, the names of

relevant carrier and MOT officials, and

accounts of the exchanges. The Japanese

carriers urged the Commission to release

any such details and to allow an

opportunity for comment on them.

The Japanese carriers suggested that

the Government of Japan is taking steps

to address the licensing-related

concerns raised by the Commission.

They indicated that in December, 1996,

MOT announced a proposal to abolish

the licensing system over a three-to-five

year period. Attached to the comments

was a newspaper article outlining

MOT’s plan, indicating that prior to any

action the proposal would be

deliberated at the administrative reform

committee and studied at the Council

for Transport Policy. Furthermore, the

article stated that, as a precondition for

such a move, ‘‘measures for ensuring the

stable management of ports are

necessary.’’ MOL/K-Line/NYK

Comments, Attachment 3. However, the

Japanese lines pointed out that MOT’s

announcement was met with opposition

by waterfront labor unions, suggesting

need for a period of time before the

intended changes can be made.

Prior Consultation

The Japanese carriers read the Notice

to propose that only the Government of

Japan’s licensing practices, and not
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9699

2 ‘‘JSPC’’ refers to the Japanese Shipowners Ports

Council, the component of the Japanese

Shipowners’ Association that deals directly with

harbor service-related matters. JSPC often serves as

the voice of the Japanese lines in prior consultation

and other dealings with JHTA.

3The Commission has determined to accept these

comments into the record.

prior consultation, contravene the

standards set forth in section 19:

[T]he Commission’s Notice observes that it

is the Ministry of Transport’s discriminatory

and restrictive licensing which would

‘‘appear’’ to constitute conditions

unfavorable to shipping. Though critical of

the procedural aspects of the Prior

Consultation system and MOT’s alleged

exercise of authority as to permit JHTA to

wield ‘‘unchecked authority’’ through the

Prior Consultation process, we read the

Notice as not concluding that the system

itself is a condition which is unfavorable to

shipping.

MOL/K-Line/NYK Comments at 10.

Nevertheless, they maintained that the

Commission has inaccurately

characterized the prior consultation

system.

MOL, NYK and K-Line suggested that

the Commission failed to distinguish

between the system of prior

consultation itself, which they asserted

enjoys the support of both Japanese and

non-Japanese carriers, and the way it is

administered, which they conceded is

in need of reform. They reviewed the

procedures for prior consultation:

[M]atters related to innovated services

which affect port laborers are negotiated first

between the shipping company (or JSPC or

JFSA) and JHTA and then JHTA and the

harbor workers’ Unions. Under the

procedures followed since 1986, matters are

proposed for prior consultation through the

submission of a written application by the

shipping company. * * * The initiation of

this process is known as ‘‘pre-prior

consultation’’ under which the matter

proposed is considered at a meeting attended

by JHTA’s Chairman and some of its prior

consultation committee members and the

shipping company applicant.

Once a matter passes pre-prior consultation

and has been accepted by JHTA for Prior

Consultation, it is deliberated between JHTA

and the Unions, first, at the ‘‘Central’’ or

national level and then at the local level.

Under these procedures, therefore, there are

no direct negotiations between shipping

companies and the harbor worker unions,

thus reducing the prospect of labor conflicts

and confrontations.

MOL/K-Line/NYK Comments at 11–12.2

The Japanese lines suggested that the

prior consultation system was

developed to resolve the conflicting

objectives of shipping companies and

shoreside laborers and to avoid the

debilitating confrontations of the past.

They asserted that they are aware of no

other system that offers a better prospect

for labor peace. Pointing to the 1986

boycott of YS Line vessels described in

the Notice, they claimed that waterfront

unions support prior consultation and

are willing to take whatever steps are

necessary to defend it.

MOL, NYK and K-Line stated that

over the past year parties began to

address the flaws in the current system.

They described negotiations between

shipping lines and JHTA regarding

transparency and simplification of

procedures, and pointed to an

agreement signed in August, 1996,

confirming the necessity of prior

consultation and establishing new

procedures and time limits to accelerate

the process.

The Japanese carriers also stated that

the Commission did not properly

characterize the role of MOT with

regard to the prior consultation system.

They contended that prior consultation

is a private sector business practice, and

that MOT has no interest in its

continuation, other than labor peace and

the smooth running of Japan’s ports.

According to the Japanese carriers,

MOT’s only involvement with the

system has come when carriers have

asked it to bring about the restoration,

continuance, and improvement of the

system. They maintained that MOT

treats prior consultation negotiations as

matters for the private sector, except

when they break down, at which point

MOT may become involved as a

catalyst. This is because, according to

MOL, NYK and K-Line, under Japanese

labor laws, there is a policy of noninterference in employer-union

bargaining.

The Japanese lines stated that the

1992 Ministerial View referred to in the

Notice was not an endorsement of

JHTA’s activities; rather, it ‘‘merely

called for respect for the existing system

regarding the operations of existing

container terminals which procedures

had been privately negotiated by the

parties.’’ MOL/K-Line/NYK Comments

at 19. The Japanese carriers also pointed

out that MOT has endeavored to arrange

meetings of interested carrier parties

and JHTA with the aim of improving the

prior consultation process.

Port and Terminal Interests

After the comment period closed, the

Commission received a number of

closely similar or identical comments

from various port and terminal interests,

including H&M International

Transportation, Inc.; the Port of Seattle;

the Port Authority of New York and

New Jersey; the Jacksonville Port

Authority; Cronos Containers Inc.; Ceres

Terminals Inc.; Georgia Ports Authority;

and the Port of Oakland.3 These

comments urged that the Commission

stay final action, or reduce or revise the

proposed sanctions. The commenters

raised the concerns that the Japanese

carriers would divert sailings to nonU.S. ports or ‘‘load center’’ operations at

a single U.S. port. Several of these

commenters suggested that it is unfair to

penalize Japanese carriers for Japanese

port conditions, when the carriers have

invested millions of dollars in U.S.

terminals, inland facilities, equipment,

and ships. Jacksonville Port Authority

expressed concerns that the rule would

negatively affect the Japanese-flag auto

carriers that call there.

Discussion

Licensing

The Japanese carriers appear to have

taken the position, first, that the sole

basis for the Commission’s proposed

finding of conditions unfavorable to

shipping is the Government of Japan’s

reportedly restrictive and

discriminatory licensing practices, and

second, that MOT has never actually

acted discriminatorily in issuing

licenses. Therefore, they concluded, the

proposed rule should be withdrawn.

However, both aspects of the Japanese

lines’ argument are without foundation

or merit.

It is clear from the Notice that the

administration of the restrictive

licensing requirement is not the sole

unfavorable condition at issue in this

proceeding. Rather, the Commission

listed in section 586.2(a)(1–4) of the

proposed rule, and explained in detail

in the Supplementary Information, an

extensive series of apparent unfavorable

conditions. These conditions included

MOT’s refusal to grant U.S. carriers

licenses, with the result that U.S.

carriers have no choice but to submit

their shoreside planning and operations

to JHTA control; however, several other

conditions were set forth as well,

including JHTA’s use of the prior

consultation system to control

competition in the harbor services

market, impose restrictions on carrier

operations, and force carriers to take on

unnecessary stevedoring companies.

There is also little apparent basis for

the Japanese carriers’ challenges to the

Commission’s proposed finding that the

Government of Japan’s licensing

processes are discriminatory and

restrictive. The Japanese lines asserted

that MOT, to their knowledge, never

advised U.S. carriers on the matter of

licensing or received an application

from a U.S. carrier, that there are no
9700 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

4 Section 19(12) of the Merchant Marine Act,

1920, states: ‘‘the Commission may consult with,

seek the cooperation of, or make recommendations

to other appropriate agencies prior to taking any

action under this section.’’

5 Moreover, we are skeptical that the Japanese

carriers, which in response to the Commission’s

1995 Information Demand Orders pled unawareness

of virtually all matters concerning MOT’s licensing

practices, can now credibly attest to the details of

MOT officials’ past conversations regarding

licensing.

6As noted in the proposed rule, these include:

changes in berth, route, or port calls; inauguration

of new services or new vessels; calls by noncontainer ships at container berths; changes in

vessel size or technology which affect stevedoring

or terminal operations; temporary assignment of

vessels as substitutes or the renaming of vessels;

rationalization agreements between carriers

involving vessel sharing or berthing changes; the

assignment of a stevedoring contractor or terminal

operator to a carrier and any subsequent change in

assignment; requests for Sunday work; changes in

mandatory weighing and measuring arrangements;

or any other changes which affect stevedoring or

terminal operations.

nationality-based restrictions in the Port

Transportation Business Law, and that

MOT would review any new application

without regard to nationality. However,

these arguments focus entirely on

purported procedures for obtaining a

license, ignoring the practical bars to

obtaining such a license that stem from

well-known official Japanese policies.

By emphasizing the form and substance

of the licensing system, the Japanese

lines disregard its discriminatory and

restrictive effects and results, which are

of primary concern to the Commission.

These official barriers to licensing

U.S. carriers and other potential

entrants to the stevedoring market, and

their practical effects, were confirmed

most recently in the U.S.-Japan

maritime consultations on January 6–7,

1997. During these meetings, officials

from the Departments of State and

Transportation reportedly inquired as to

how MOT would apply its supply and

demand test to a stevedoring application

filed by a large organization such as

APL or Sea-Land. 4 After reviewing

supply and demand factors to be

considered, the delegation of the

Government of Japan reportedly stated

that, in general, Japanese ports are either

balanced or supply is slightly larger

than demand, that there is already too

much competition, and that there are

too many service providers already. The

Japanese delegation was said then to

have suggested that U.S. carriers buy an

interest in an existing stevedore

company or form a joint venture with

such a company, so that the supplydemand balance could be maintained.

Given the mandatory nature of the

supply-demand test, the position

articulated by the Government of Japan

leads inescapably to the conclusion that

licenses will not be issued to U.S.

carriers. Under such circumstances, it

would seem futile for U.S. carriers to go

to the considerable time and expense of

preparing and submitting formal

applications, absent a clear shift in

policy by the Government of Japan.

Given these conditions, even if the

Government of Japan’s licensing

standard is administered in a

nationality-neutral manner, it is still

discriminatory and protectionist in

effect. By barring new entrants, the

licensing system protects existing

operators, all of whom are Japanese

firms, from competition from U.S. or

other foreign companies. It also shields

JHTA from competition from new nonJHTA entrants, thereby protecting that

group’s dominant position.

The Japanese carriers invite the

Commission to be sidetracked on an

evidentiary dispute regarding whether

MOT officials told U.S. carriers that

licenses would not be granted, or told

them not to apply, or whether involved

officials were properly authorized. Such

a diversion is unwarranted, however.

First, statements by MOT officials that

licenses would not be granted are

entirely consistent with the position

recently articulated by the Government

of Japan that supply currently balances

or exceeds demand in Japanese ports.

More importantly, however, the

Commission’s concerns regarding

licensing are based on the system’s

restrictive and protectionist effects,

rather than the timing or details of any

particular bureaucratic exchange. 5

MOT’s recently announced proposal

to abolish its current licensing system

does not warrant deferral of further

Commission action. MOT proposed that

the change be made in three to five

years, that it be subject to review and

consultation by a number of

governmental bodies, and that other

unspecified measures would be enacted

to ensure the ‘‘stable management’’ of

ports. While elimination of the licensing

requirement would address a number of

the Commission’s concerns, the

conditions attaching to the MOT

proposal and its over-the-horizon

timetable call into question whether,

and under what conditions, such

reforms might actually be made. If MOT

is indeed of the opinion that more

entrants and increased competition

would be appropriate in the port

services sector, its broad administrative

discretion could be used to issue new

stevedoring licenses to U.S. carriers and

other qualified applicants; any action or

plan substantially short of that would

appear to be an inadequate resolution of

these issues.

Prior Consultation

There is no support for the Japanese

carriers’ broad assertion that the

Commission ‘‘fails accurately to

describe or comprehend the prior

consultation system.’’ MOL/K-Line/

NYK Comments at 10. The Japanese

lines failed to identify any specific

factual errors in the Commission’s

account and, in fact, their description of

prior consultation is consistent with

that of the Notice, differing only in

focus and emphasis on historical

context. The U.S. carriers, in contrast,

ardently supported the proposed

findings in the Notice regarding prior

consultation.

As the Japanese carriers explained,

the prior consultation system involves

‘‘two party/two party’’ negotiations for

all planned changes in shipping line

operations involving Japanese ports.

The first ‘‘two party’’ negotiation is

between a shipping line and JHTA,

while the second is between JHTA and

the waterfront unions. As was described

in the Notice, virtually all carrier

operational changes must be submitted

for prior consultation. 6 If a carrier

wishes to make such a change and it is

deemed important by JHTA, a

representative of the line, often

accompanied by an official of the

stevedoring company it uses, must

explain its request to the JHTA

Chairman. At this stage (sometimes

referred to as ‘‘pre-pre-prior

consultation’’), the JHTA Chairman may

refuse to accept the request, or require

changes or impose conditions for

acceptance.

If the carrier’s request is acceptable to

the JHTA Chairman, it is taken up at a

formal ‘‘pre-prior consultation’’ meeting

between the carrier and its stevedore, on

the one hand, and JHTA on the other.

If the request is accepted at this stage,

the matter is deliberated at formal prior

consultation meetings between JHTA

and union officials, both in Tokyo and

at the local level. It appears that the

formal pre-prior consultation and prior

consultation meetings are merely

formalities; if a carrier’s request is

unacceptable to JHTA, it simply is not

accepted for consideration at the formal

prior consultation meetings. In contrast,

if a request is accepted at the initial

stage by the JHTA Chairman, it is almost

assured to be approved at the formal

meetings.

JHTA’s processes are characterized by

a total lack of transparency. There are

almost no written rules, either

substantive or procedural, nor are there

written reasons for decisions or an

appeal process. JHTA appears to have
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9701

7The ‘‘[n]otwithstanding any other law . . .’’

language in the statute undermines the Japanese

carriers’’ argument that full disclosure is required

by the Administrative Procedure Act. It would defy

logic and common tenets of statutory construction

to suggest that Congress added the non-disclosure

provision in 1990 with the intention that it be

Continued

absolute discretion over the terms and

conditions imposed in the prior

consultation process.

This arrangement, whereby JHTA can

arbitrarily permit or deny carriers access

to the prior consultation process, gives

JHTA extraordinary leverage. If JHTA

refuses to accept a proposed matter for

prior consultation, any attempt by the

carrier or its stevedore to implement the

plan is likely to be met with work

stoppages or other labor disruptions.

Carriers are left with no choice but to

acquiesce to any conditions imposed by

JHTA. In a recent conversation with a

U.S. Government official, the JHTA

Chairman gave a clue as to the extent of

his influence and discretion, reportedly

stating that he enjoys ‘‘absolute power’’

to influence harbor-related matters in

Japan.

It is uncontroverted that JHTA uses

this leverage (that is, its unchecked

authority to accept or reject carrier plans

for pre-prior consultation) to prevent

competition and maintain an agreed

upon allocation of work among JHTA

member companies. This conclusion is

well-established in the responses of

several lines to the Information Demand

Orders, and was further supported in

the U.S. lines’ comments. For example,

JHTA has prevented carriers and

consortia from freely switching

terminals or stevedores, and from

consolidating and rationalizing

operations. Also, it has refused to grant

prior consultation requests unless

carriers agreed to employ additional

unnecessary stevedoring companies or

contractors. Such practices prevent any

real competition and undermine

attempts to increase the efficiency of

port operations, with the result that

Japan has port costs that far exceed

those of its Asian neighbors and other

major trading nations.

The Japanese carriers raised several

arguments in defense of the prior

consultation system. First, they asserted

that the system itself enjoys universal

support among carriers. This, however,

is clearly incorrect, as JFSA and the U.S.

carriers advocate substantial revisions

in the current system. Their proposed

changes would go to the heart of the

Commission’s concerns, removing

JHTA’s free hand to approve or deny

carrier requests, restrict competition,

and allocate stevedoring work. The

improvements advanced by the nonJapanese lines would, among other

things, allow carriers to arrange their

operations normally with their chosen

stevedoring and terminal companies, as

is the case in other major maritime

nations. Under the JFSA proposal, JHTA

could still maintain a legitimate

collective bargaining role in

negotiations between employers and

labor unions, but would no longer be a

‘‘black box’’ issuing unappealable

directions as to how carriers’ shoreside

operations should be conducted.

The Japanese carriers stated that the

system was created to maintain labor

stability and avoid the need for face to

face confrontations between carriers and

unions over the inauguration of

‘‘innovated vessels.’’ They pointed out

that the inauguration of container

service, which occurred in the 1960’s

and 70’s, raised serious issues and led

to disruption in waterfront labor

relations in many maritime nations,

including the U.S. They suggested that

prior consultation is still necessary to

avoid the disruptions of the past, and

stated that they know of no other system

that would better guarantee labor

stability.

These reasons, however, do not justify

the anticompetitive practices currently

engaged in by JHTA. At no point has the

Commission ever questioned the

appropriateness of JHTA’s role as an

intermediary between employers and

unions, or the practice of collective

bargaining for waterfront labor, nor has

it challenged any employer’s right to

designate JHTA as its representative in

such negotiations. The Commission’s

concern lies with JHTA’s autocratic

control of carrier operations,

suppression of competition, allocation

of work among members, extraction of

fees and other concessions, and

retaliation against its detractors. None of

these factors is a necessary or logical

precondition to JHTA’s collective

bargaining or labor relations role, and

none merits a policy of labor-related

‘‘non-interference’’ by the Government

of Japan. Rather, these measures only

serve to consolidate JHTA’s power and

shield its member companies from

market forces.

While JHTA itself is an organization

of harbor service providers, its abuses

are not purely private sector matters. As

explained in detail in the Notice and

Information Demand Orders, in

accordance with Japanese laws and

regulations, JHTA operates with the

permission of, and under the

supervision of, MOT, which can annul

JHTA’s incorporation if it acts contrary

to the public interest. MOT is

authorized to give oversight or guidance

relating to the prior consultation system,

and has in fact intervened repeatedly, as

confirmed by the Japanese carriers, to

bring about the ‘‘restoration,

improvement, and continuance’’ of the

system. Moreover, MOT is vested with

broad regulatory authority over JHTA

member companies, including licensing

authority and the right to review and

disapprove rates and business plans.

The Japanese lines’ protestations that

MOT generally takes no role in the dayto-day operations of prior consultation,

and that it has no vested interest in its

continuation, are immaterial. Given the

Government of Japan’s regulatory and

oversight authority, JHTA and its

member firms could not continue to

operate in the current manner without

the Government of Japan’s ongoing

support and approval.

The Japanese lines suggested that

recent changes in prior consultation

have eliminated the U.S. carriers’

concerns. While any improvements are

praiseworthy, these recent changes have

been aimed only at adding transparency

and speed to the process. They have

done nothing to address the core

problems of the system, such as JHTA’s

absolute authority to block carrier plans

at the pre-pre-prior consultation stage,

and its use of this authority to eliminate

competition and extract other

concessions.

Procedural Issues

The Japanese carriers argued that this

proceeding is procedurally defective,

and that their due process rights have

been violated, because they have not

had an opportunity to review the

responses submitted by other carriers to

the Commission’s 1995 Information

Demand Orders. They asserted that it

was improper for the Commission to

rely on these materials to reach the

proposed findings set forth in the Notice

without making them available to the

Japanese carriers.

These procedural challenges are

without basis. Confidentiality of

submissions is explicitly provided for in

the statute; section 19(8) states:

‘‘Notwithstanding any other law, the

Commission may refuse to disclose to

the public a response or other

information provided under the terms of

this section.’’ The confidentiality

provided by this section is necessary to

ensure that the Commission receives the

most complete and accurate information

possible. Disclosure in some cases could

lead to retribution against respondents,

seriously discouraging candid

submissions. These points apparently

were not lost on the Japanese carriers,

as they requested confidential treatment

for their entire Information Demand

Order submissions.7
9702 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

vitiated by the general provisions of the pre-existing

APA. In addition, we would point out that the

section cited by the Japanese lines includes an

exception ‘‘to the extent there is involved . . . [a]

foreign affairs function of the United States.’’ 46

U.S.C. § 553(a)(1); see American Association of

Exporters and Importers v. U.S., 751 F.2d 1239

(Fed. Cir. 1985).

8For example, for an average-sized vessel in the

Asia-U.S. trades (i.e., a vessel with 3000 20-foot

container capacity operating three-quarters full) the

FMC fee would cost a carrier about $45 per

container. In contrast, a carrier collects freight

charges averaging $1,836 per container in the JapanU.S. trades, and $2,250 from the China, Hong Kong,

and Taiwan regions, according to FMC rate indices.

A carrier will collect freight of over $4 million for

one sailing of one average-sized vessel from Japan

to the U.S., and over $5 million from the China

range to the U.S., not including revenues from the

return or onward voyage.

The Japanese carriers’ assertion that

their due process rights have been

violated also lacks merit. In American

Association of Exporters and Importers

v. U.S., the Court of Appeals for the

Federal Circuit rejected statutory and

constitutional challenges raised by an

importers’’ and exporters’’ group to

actions of the Committee for the

Implementation of Trade Agreements, a

federal agency, regulating and imposing

quotas on trade in textiles. The court

found no merit in appellant’s claim that

the agency violated importers’ due

process rights by denying them the

opportunity to be heard prior to the

imposition of quotas. In reasoning

applicable to this proceeding, the court

held that ‘‘a prerequisite for due process

protection is some interest worthy of

protecting; ‘We must look to see if the

interest is within the [Constitution’s]

protection of liberty and property.’ ’’ 751

F.2d at 1250, quoting Board of Regents

v. Roth, 408 U.S. 564, 571 (1972). The

court reasoned that a protectable

interest must be more than a unilateral

expectation; rather, those seeking

constitutional protection under the due

process clause must point to a

‘‘legitimate claim of entitlement’’ prior

to any consideration of the

government’s constitutional obligations.

The court held that the mere subjective

expectation of a future business

transaction does not rise to the level of

an interest worthy of protection, and

that ‘‘[n]o one has a protectable interest

in international trade.’’ Id., citing Arnett

v. Kennedy, 416 U.S. 134, 167 (1974);

Perry v. Sinderman, 408 U.S. 593, 603

(1972); Norwegian Nitrogen Co. v.

United States, 288 U.S. 294 (1933).

The Japanese carriers’ expectation to

be permitted, in the future, to operate in

the U.S. foreign trades free of fees or

charges therefore does not rise to the

level of an interest in property worthy

of constitutional protection.

Accordingly, there can be no finding

that the Japanese carriers’ due process

rights were violated.

There also is no merit to the Japanese

carriers’ argument that the instant

proceeding is an ‘‘adjudication’’ and

that as such they are entitled to

additional procedural protections. The

Commission’s notice did not propose

findings of unlawful conduct on the part

of these three individual companies.

Rather, it proposed findings that there

exist conditions unfavorable to shipping

in the U.S.-Japan trade, arising out of

Japanese laws, rules, and regulations. In

response, it proposed an across-theboard fee of $100,000, prospectively

establishing the terms and conditions by

which all Japanese carriers may operate

liner vessels in the U.S. trades. The

character of the proceeding is not

transformed by the fact that the

Commission, drawing on its trade

monitoring resources, preliminarily

identified in the Notice those carriers

that appeared to fall into the subject

class. Indeed, should it come to the

Commission’s attention that other

Japanese carriers are operating liner

services in the U.S. trades, the final rule

will be amended to include them. See

Docket No. 91–24, Actions to Adjust or

Meet Conditions Unfavorable to

Shipping in the United States/Korea

Trade—Amendment to Final Rule, 58

FR 7988 (1993) (adding a Korean carrier

that had newly entered the trade to a list

of lines subject to sanctions).

Port and Terminal Concerns

The Port of Portland asked that the

Commission clarify whether the

$100,000 fee would be levied ‘‘pervoyage’’ or ‘‘per-port call.’’ As set forth

in the proposed rule, the fee would be

assessed on a per-voyage basis; that is,

after a line first calls in the U.S. from

abroad and is assessed the $100,000 fee,

it would not be subject to additional

fees for each successive U.S. port call on

that voyage. This treatment would seem

to eliminate the concern that the fee

could lead to Japanese lines dropping or

consolidating port calls in the U.S. Also,

in response to Jacksonville Port

Authority’s concerns, we would point

out that the rule applies only to

container-carrying liner vessels, not

dedicated car-carriers.

A number of commenters requested

that the Commission address the

possibility that Japanese carriers will

cancel sailings or shift services to

Canadian or Mexican ports in response

to the fee. Such actions would appear

improbable, and have not, in any event,

been suggested by the Japanese carriers

thus far in this proceeding. The

$100,000 fee represents only a small

percentage of the Japanese carriers’

gross per-voyage revenues in the U.S.

trades. 8 Given carriers’ high fixed costs,

it is unlikely that they would cancel

services, foregoing multi-million dollar

revenues, in order to avoid paying the

fee. Similarly, it does not appear that

the level of the fee would justify the

high costs of shifting vessel calls to

foreign ports. Such moves would

require lines to make costly changes in

contracts and arrangements for, among

other things, terminal facilities,

stevedoring, warehousing and storage,

inland transportation, sailing schedules,

and foreign and U.S. customs clearance.

Nevertheless, the Commission will

closely monitor and evaluate cost,

revenue, and service level data to guard

against adverse effects on U.S. ports,

terminals, and shippers.

The Commission is not swayed by the

argument, raised by a number of port

commenters, that it would be unfair to

impose fees on Japanese carriers when

they are not responsible for Japanese

port conditions and have invested

millions of dollars in U.S. port facilities.

Indeed, this argument highlights the

inequity in treatment afforded U.S. lines

in Japan versus that afforded Japanese

carriers in this country, as U.S. carriers

have had no opportunity to make

similar investments in owning and

operating Japanese terminal facilities.

Japanese carriers have enjoyed

continued success in the American

market, enjoying high revenues and

substantial growth in liner services and

terminal operations, in large part due to

the favorable and open business climate

created by the laws, rules, and

regulations of the United States.

However, Japanese firms cannot expect

to continue to reap the benefits of

favorable U.S. transportation policies if

such treatment is not reciprocated by

the Government of Japan.

Recent Developments

As noted in the comments, a meeting

reportedly was held on January 29,

1997, involving JHTA, non-Japanese

carriers (represented by JFSA), and

Japanese carriers (represented by JSPC).

The meeting was arranged and chaired

by MOT for the purpose of discussing

possible reforms to the prior

consultation system. Apparently, at the

meeting JFSA presented a proposal

based on the position paper submitted

to the Commission. No proposals were

submitted by JSPC or JHTA. MOT did

not take a position on the JFSA

proposal. We understand that another

such meeting was held February 18,
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9703

9Accordingly, the Motion to Withdraw Proposed

Rule and Discontinue the Proceeding, filed

February 12, 1997, by MOL, NYK, and K-Line, is

denied.

1997; however, by all accounts, no

progress was made.

It appears that the Government of

Japan has modified its stance somewhat

with regard to JHTA and prior

consultation. Rather than insisting that

these are purely private matters outside

of its control, it now appears to be

acknowledging that the system has

serious problems and indicating that it

will endeavor to bring about a solution.

However, thus far MOT’s only action

has been to arrange meetings, in the

hopes that JHTA and the carriers will

find a solution among themselves. The

Government of Japan has suggested to

U.S. officials that more time to reach a

solution is needed.

MOT, however, has had ample time to

address the restrictive conditions that

exist in its ports. The instant

controversy did not begin with the

issuance of the Commission’s

Information Demand Orders or

proposed rule. The U.S. Government

and other major trading nations have

been informing the Government of Japan

repeatedly and strenuously for several

years that its port policies and practices

are unacceptable. In October of 1995,

the Commission clearly indicated that

these problems may be serious enough

to warrant sanctions under Section 19.

However, the Government of Japan

simply maintained that the disputed

practices were a matter for the private

sector. While it is encouraging that the

Government of Japan has finally begun

acknowledging the seriousness of these

matters, and meeting with involved

parties, these steps do not go far enough

now to warrant a stay of Commission

action.

It appears unlikely, moreover, that a

resolution to the current problems

involving prior consultation will be

reached through commercial

negotiations limited to carriers and

JHTA. At issue in this proceeding are,

among other things, JHTA’s dominance

of the stevedoring industry, its control

of the prior consultation system, and its

use of that system to force changes and

extract concessions from carriers. It

appears, in sum, that JHTA has

boundless negotiating leverage, and the

carriers, especially foreign carriers, have

none. Under such conditions, it is

improbable that JHTA will simply

volunteer to relinquish its overarching

control over port services. Rather, it

appears that only decisive measures by

the Government of Japan can bring

about meaningful reforms.

Demonstrating this point, JHTA

recently threatened U.S. Government

officials with massive retaliation against

U.S. carriers if the Commission does not

withdraw its proposed rule. Earlier this

month, the JHTA Chairman reportedly

told U.S. officials that, unless the threat

of FMC sanctions against Japanese

carriers is removed, he ‘‘will not let any

U.S. ships come into Japanese ports.’’

Stating that it would be impossible to

resolve issues with sanctions looming,

he announced that he intends to

suspend prior consultations for U.S.

shipping firms, and possibly European

firms as well, if the proposed rule is not

withdrawn. Such threats were

reportedly repeated at the February 18,

1997, meeting between JHTA and the

carrier groups.

The JHTA Chairman’s threats confirm

and validate the need for immediate

action in this area. That JHTA could

recklessly threaten to disrupt the U.S.-

Japan oceanborne trade, causing severe

commercial harm to U.S. carriers,

shippers, and international commerce,

and that it has the apparent will and

means to carry out such threats, strongly

supports and justifies a finding of

conditions unfavorable to shipping.

These are clearly not private sector

matters; the responsibility lies with the

Government of Japan to eliminate the

conditions which have left international

trade so vulnerable to JHTA’s selfserving caprice.

Final Rule

Based on the foregoing, the

Commission concludes that a finding of

conditions unfavorable to shipping in

the U.S.-Japan trade is warranted.

Accordingly, the Commission is issuing

a final rule levying a fee of $100,000

each time a container-carrying liner

vessel owned or operated by a Japanese

carrier enters a U.S. port from abroad,

assessed in the manner set forth in the

proposed rule. This final rule will

become effective April 14, 1997.9

The Commission is authorized to

assess a per-voyage fee of up to one

million dollars to adjust or meet

conditions unfavorable to shipping in

the foreign trade. At this time, a

$100,000 fee is an appropriate and

measured response to the conditions

identified herein. However, if these

issues are not addressed in a timely

fashion, the level of this fee will be

increased.

In addition, the Commission is

gravely concerned about the possibility

of retaliation against U.S. carriers for the

actions and positions taken by the

Commission and the United States

Government. The validity of these

concerns, voiced as well by the U.S.

carriers in their comments, was

confirmed by the repeated threats of

JHTA officials. Therefore, as indicated

in the final rule, the Commission has

determined that the level of the fee will

be increased upon a finding that the

Government of Japan, JHTA, or related

bodies have retaliated against U.S.

carriers. Such a finding may be made

expeditiously upon review by the

Commission of information collected

from carriers, U.S. Government

agencies, or other sources, without the

need for additional notice and

comment. The level of the fee increase

will be commensurate with the

economic harm to U.S. carriers as a

result of the retaliation. Similarly,

should a finding of retaliation be made

prior to the effective date of the final

rule, the rule will be amended to

become effective immediately.

List of Subjects in 46 CFR Part 586

Cargo vessels, Exports, Foreign

relations, Imports, Maritime carriers,

Penalties, Rates and fares, Tariffs.

Therefore, pursuant to section 19(1)(b)

of the Merchant Marine Act, 1920, 46

U.S.C. app. 876(1)(b), as amended,

Reorganization Plan No. 7 of 1961, 75

Stat. 840, and 46 CFR Part 585, Part 586

of Title 46 of the Code of Federal

Regulations is amended as follows:

1. The authority section for Part 586

continues to read as follows:

Authority: 46 U.S.C. app. 876(1)(b); 46

U.S.C. app. 876(5) through (12); 46 CFR Part

585; Reorganization Plan No. 7 of 1961, 26

FR 7315 (August 12, 1961).

2. Section 586.2 is added to read as

follows:

§ 586.2 Conditions unfavorable to

shipping in the United States/Japan trade.

(a) Conditions unfavorable to

shipping in the trade. The Federal

Maritime Commission (‘‘Commission’’)

has identified the following conditions

unfavorable to shipping in the U.S.-

Japan trade, arising out of or resulting

from laws, rules, or regulations of the

Government of Japan:

(1) Shipping lines in the Japan-U.S.

trades are not allowed to make

operational changes, major or minor,

without the permission of the Japan

Harbor Transportation Association

(‘‘JHTA’’), an association of Japanese

waterfront employers operating with the

permission of, and under the regulatory

authority and ministerial guidance of,

the Japan Ministry of Transport

(‘‘MOT’’).

(2) JHTA has absolute and

unappealable discretion to withhold

permission for proposed operational

changes by refusing to accept such
9704 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

proposals for ‘‘prior consultation,’’ a

mandatory process of negotiations and

pre-approvals involving carriers, JHTA,

and waterfront unions.

(3) There are no written criteria for

JHTA’s decisions whether to permit or

disallow carrier requests for operational

changes, nor are there written

explanations given for the decisions.

(4) JHTA uses and has threatened to

use its prior consultation authority to

punish and disrupt the business

operations of its detractors.

(5) JHTA uses its authority over

carrier operations through prior

consultation as leverage to extract fees

and impose operational restrictions,

such as Sunday work limits.

(6) JHTA uses its prior consultation

authority to allocate work among its

member companies (whose rates and

business plans are subject to MOT

approval), by barring carriers and

consortia from freely choosing or

switching operators and by compelling

shipping lines to hire additional,

unneeded stevedore companies or

contractors.

(7) The Government of Japan

administers a restrictive licensing

standard which blocks new entrants

from entering into the stevedoring

industry in Japan. Given that all

currently licensed stevedores are

Japanese companies, and all are JHTA

members, this blocking of new entrants

by the Government of Japan shields

existing operators from competition,

protects JHTA’s dominant position, and

ensures that the stevedoring market

remains entirely Japanese.

(8) Because of the restrictive licensing

requirement, U.S. carriers cannot

perform stevedoring or terminal

operating services for themselves or

third parties in Japan. In contrast,

Japanese carriers (or their related

companies or subsidiaries) currently

perform stevedoring and terminal

operating services in Japan and the

United States.

(b) Definitions—(1) Japanese carrier

means Kawasaki Kisen Kaisha, Ltd.,

Mitsui O.S.K. Lines, Ltd, and Nippon

Yusen Kaisha.

(2) Designated vessel means any

container-carrying liner vessel owned or

operated by a Japanese carrier (or any

subsidiary, related company, or parent

company thereof).

(c) Assessment of fees. A fee of one

hundred thousand dollars is assessed

each time a designated vessel is entered

in any port of the United States from

any foreign port or place.

(d) Report and payment. Each

Japanese carrier, on the fifteenth day of

each month, shall file with the Secretary

of the Federal Maritime Commission a

report listing each vessel for which fees

were assessed under paragraph (c)

during the preceding calendar month,

and the date of each vessel’s entry. Each

report shall be accompanied by a

cashier’s check or certified check,

payable to the Federal Maritime

Commission, for the full amount of the

fees owed for the month covered by the

report. Each report shall be sworn to be

true and complete, under oath, by the

carrier official responsible for its

execution.

(e) Refusal of clearance by the

collector of customs. If any Japanese

carrier subject to this section shall fail

to pay any fee or to file any report

required by paragraph (d) of this section

within the prescribed period, the

Commission may request the Chief,

Carrier Rulings Branch of the U.S.

Customs Service to direct the collectors

of customs at U.S. ports to refuse the

clearance required by 46 U.S.C. app. 91

to any designated vessel owned or

operated by that carrier.

(f) Denial of entry to or detention at

United States ports by the Secretary of

Transportation. If any Japanese carrier

subject to this section shall fail to pay

any fee or to file any report required by

paragraph (d) of this section within the

prescribed period, the Commission may

request the Secretary of Transportation

to direct the Coast Guard to:

(1) Deny entry for purpose of

oceanborne trade, of any designated

vessel owned or operated by that carrier

to any port or place in the United States

or the navigable waters of the United

States; or

(2) Detain that vessel at the port or

place in the United States from which

it is about to depart for another port or

place in the United States.

(g) Adjustment in fees to meet

retaliatory measures. Upon a finding by

the Commission that U.S. carriers have

been subject to discriminatory fees,

restrictions, service disruptions, or other

retaliatory measures by JHTA, the

Government of Japan, or any agency,

organization, or person under the

authority or control thereof, the level of

the fee set forth in paragraph (c) shall be

increased. The level of the increase shall

be equal to the economic harm to U.S.

carriers on a per-voyage basis as a result

of such retaliatory actions, provided that

the total fee assessed under this section

shall not exceed one million dollars per

voyage.

By the Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 97–5233 Filed 3–3–97; 8:45 am]

BILLING CODE 6730–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 59

[CC Docket 96–237, FCC 97–36]

Implementation of Infrastructure

Sharing Provisions in the

Telecommunications Act of 1996

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: On February 7, 1996, the

Commission released Implementation of

Infrastructure Sharing Provisions in the

Telecommunications Act of 1996,

Report and Order, CC Docket 96–237,

FCC 97–36, to implement new section

259 of the Communications Act of 1934,

as added by the Telecommunications

Act of 1996. Section 259 generally

requires incumbent local exchange

carriers (incumbent LECs) to make

available ‘‘public switched network

infrastructure, technology, information,

and telecommunications facilities and

functions’’ to ‘‘qualifying carriers’’ that

are eligible to receive federal universal

service support but that lack economies

of scale or scope. Wherever possible, the

Commission adopts general rules that

restate the statutory language. This

approach, which relies in large part on

private negotiations among parties to

satisfy their unique requirements in

each case, will help ensure that certain

carriers who agree to fulfill universal

service obligations pursuant to section

214(e) can implement evolving levels of

technology to continue to fulfill those

obligations.

EFFECTIVE DATE: The requirements and

regulations established in this decision

shall become effective upon approval by

the Office of Management and Budget

(OMB) of the new information

collection requirements adopted herein,

but no sooner than April 3, 1997. The

Commission will publish a document in

the Federal Register announcing the

effective date of these regulations

following OMB’s approval of the

information collections in this decision.

FOR FURTHER INFORMATION CONTACT:

Thomas J. Beers, Deputy Chief, Industry

Analysis Division, Common Carrier

Bureau, at (202) 418–0952, or Scott

Bergmann, Industry Analysis Division,

Common Carrier Bureau, at (202) 418–

7102. For additional information

concerning the information collections

in the Report and Order contact Dorothy

Conway, at (202) 418–0217, or via the

Internet to dconway@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Report