[Federal Register Volume 62, Number 42 (Tuesday, March 4, 1997)]
[Rules and Regulations]
[Pages 9696-9704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5233]


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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.

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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.<SUP>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 pre-approvals for ocean carrier operational plans. In response to 
these conditions, the Commission proposed to levy a per-voyage 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.
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    \1\ Section 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).
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    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. 
(``Sea-Land''), 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 
economically-driven 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

[[Page 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 MOT-
chaired 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

[[Page 9698]]

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

[[Page 9699]]

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.<SUP>2
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    \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.
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    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 non-
interference 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.<SUP>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 non-U.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.
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    \3\ The Commission has determined to accept these comments into 
the record.
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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

[[Page 9700]]

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. 
<SUP>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 supply-demand 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.
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    \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.''
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    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 non-JHTA 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. <SUP>5
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    \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.
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    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. <SUP>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.
---------------------------------------------------------------------------

    \6\ As noted in the proposed rule, these include: changes in 
berth, route, or port calls; inauguration of new services or new 
vessels; calls by non-container 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.
---------------------------------------------------------------------------

    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

[[Page 9701]]

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 non-Japanese 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 day-to-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.<SUP>7
---------------------------------------------------------------------------

    \7\ The ``[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 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. Sec. 553(a)(1); see American Association of Exporters and 
Importers v. U.S., 751 F.2d 1239 (Fed. Cir. 1985).

---------------------------------------------------------------------------

[[Page 9702]]

    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-the-board 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 ``per-voyage'' 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. <SUP>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.
---------------------------------------------------------------------------

    \8\ For 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 Japan-U.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 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,

[[Page 9703]]

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 self-serving 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.<SUP>9
---------------------------------------------------------------------------

    \9\ Accordingly, the Motion to Withdraw Proposed Rule and 
Discontinue the Proceeding, filed February 12, 1997, by MOL, NYK, 
and K-Line, is denied.
---------------------------------------------------------------------------

    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:


Sec. 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

[[Page 9704]]

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