[Federal Register Volume 62, Number 73 (Wednesday, April 16, 1997)]
[Rules and Regulations]
[Pages 18533-18535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9903]


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

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; delay of effective date, requirement for reporting, 
and request for comments.

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

SUMMARY: The Federal Maritime Commission is delaying the effective date 
of its final rule assessing fees on liner vessels operated by Japanese 
carriers, in light of recent commitments made by the Government of 
Japan addressing restrictive and unfavorable conditions for the use of 
Japanese ports.

DATES: Effective April 13, 1997, delay until September 4, 1997, the 
effective date of the rules published March 4, 1997 (62 FR 9696), as 
amended by the Commission April 11, 1997 in a rule to be published 
April 16, l997. Status reports and comments are due July 1, 1997, and 
August 5, 1997.

ADDRESSES: Filings and requests for publicly available information 
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: On March 4, 1997, the Commission 
published a final rule pursuant to section 19(1)(b) of the Merchant 
Marine Act, 1920, 46 U.S.C. app. 876(1)(b), to assess per-voyage 
fees on Japanese liner carriers, effective April 14, 1997, in 
response to restrictive and unfavorable requirements for the use of 
Japanese ports. An amendment to the final rule was issued by the 
Commission on April 11, 1997, providing that fees would not be 
assessed twice in a seven day period (or, for port calls in Hawaii, 
in a 40 day period). In light of commitments made by the Government 
of Japan in recent bilateral talks with the United States 
Government addressing the unfavorable conditions identified in the 
final rule, the Commission has decided to suspend the effective 
date of the rule.

    The Commission issued its final rule after a comprehensive inquiry 
into restrictions and requirements facing U.S. carriers and U.S. 
commerce in Japanese ports. The fees were deemed necessary in light of 
the Commission's identification of a number of conditions unfavorable 
to shipping warranting action under section 19:
    <bullet> 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'').
    <bullet> JHTA has absolute and unappealable discretion to withhold 
permission for proposed operational changes by refusing to accept such 
proposals for ``prior consultation,'' a mandatory process of 
negotiations and pre-approvals involving carriers, JHTA, and waterfront 
unions.
    <bullet> 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.
    <bullet> JHTA uses and has threatened to use its prior consultation 
authority to punish and disrupt the business operations of its 
detractors.
    <bullet> JHTA uses its authority over carrier operations through 
prior consultation as leverage to extract fees and impose operational 
restrictions, such as Sunday work limits.
    <bullet> JHTA uses its prior consultation authority to allocate 
work among its member companies, by barring carriers and consortia from 
freely choosing operators and by compelling shipping

[[Page 18534]]

lines to hire additional, unneeded stevedore companies or contractors.
    <bullet> MOT administers a licensing standard which blocks new 
entrants from the stevedoring industry in Japan, protecting JHTA's 
dominant position, and ensuring that the stevedoring market remains 
entirely Japanese.
    <bullet> Because of the restrictive licensing requirement, U.S. 
carriers cannot perform stevedoring or terminal operating services for 
themselves or third parties in Japan, as Japanese carriers do in the 
United States.
    In the rule, the Commission observed that these conditions were 
matters of longstanding concern to the United States Government, and 
that repeated diplomatic efforts to resolve them had been unsuccessful. 
Since the rule was issued, the United States Government has undertaken 
a number of discussions, diplomatic approaches, and consultations to 
persuade the Government of Japan to remedy the conditions identified in 
the rule. The most recent and most intensive of these efforts was a 
series of consultations, commencing April 2, 1997, and concluding 
Friday, April 11, 1997. At that time, the two sides signed a Memorandum 
of Consultation containing a series of statements and agreements 
concerning Japanese port practices, licensing, and prior consultation.
    With regard to licensing, the Japanese side confirmed that license 
applications meeting the standards stipulated in the Port 
Transportation Business Law will be approved by MOT within 
approximately four months of receipt when such applications meet the 
following criteria:
    1. They are submitted by foreign carriers and their subsidiaries;
    2. They are for General Port Transportation Business Licenses as 
set forth in Article 3, Section 1 of the Port Transportation Business 
Law and/or Port Stevedoring Business Licenses as set forth in Section 2 
of the same article; and
    3. They are for operations to be conducted for the applicant's (or 
the applicant's parent's) own account and/or for its consortia partners 
and third parties at berths leased in a containership port by the 
applicant (or the applicant's parent).
    The Japanese side stated that MOT is knowledgeable regarding the 
operations of U.S. carriers and their consortia partners in Japan's 
ports and that, based on this knowledge, completed applications by 
these companies for operations at berths leased by the applicant (or 
the applicant's parent) would be in compliance with the law and, 
accordingly, will be approved.
    With regard to prior consultation, the Japanese Government 
explained that, under the leadership of MOT, concerned parties have 
endorsed an agreement that provides a framework for reforming the prior 
consultation system by July 31, 1997. MOT stated that it will continue 
to use its ``maximum effort,'' and clarified a number of other points, 
including: prior consultation will not be used to allocate work among 
operators; all carriers have freedom to contract with any operator; all 
requests for prior consultation will be considered; the so-called 
``pre-pre-prior consultation'' will not be required. The U.S. side 
stressed four important goals to be achieved by July 31, 1997, relating 
to the elimination of minor matter consultations, the process of major 
matter consultations, the definition of ``major'' and ``minor'' 
matters, and the implementation of a transparent appeals process under 
MOT direction.
    As was agreed in the talks, at the conclusion of the consultations 
a letter was sent by the head of the U.S. delegation, Maritime 
Administrator A.J. Herberger, to FMC Chairman Harold J. Creel, Jr., 
stating that the discussions were conducted in good faith and represent 
a reasonable basis for the Commission not to impose the proposed 
sanctions on April 14, 1997.
    In the wake of the signing of the Memorandum of Consultation, 
comments were submitted by the U.S. carriers, American President Lines, 
Ltd. and Sea-Land Service, Inc., and a response was filed by Japanese 
carriers Kawasaki Kisen Kaisha, Ltd., Mitsui O.S.K. Lines, Ltd., and 
Nippon Yusen Kaisha.
    The U.S. carriers call MOT's commitments on licensing 
``meaningful'' and ``excellent progress.'' With regard to the approach 
on prior consultation, the U.S. carriers state that, since the process 
has been dominated by JHTA, they see ``obvious risks.'' However, they 
state that MOT has shown new leadership in convening this process and 
has undertaken to use its best efforts to reach a conclusion 
satisfactory to all parties. Expressing the belief that MOT guidance is 
significant and holds promise for reform in the near term, the U.S. 
carriers state that it would be appropriate to give this process time 
to work without the distraction of imposed sanctions.
    The Commission agrees. The Government of Japan's commitments on 
licensing are highly laudable, and, once implemented, will go far 
toward providing the type of reciprocal treatment in Japan that 
Japanese carriers enjoy in this country. The approach agreed on will 
benefit not just the carriers involved, but also all oceanborne trade 
and commerce between the U.S. and Japan.
    The Commission remains concerned about the prior consultation 
system, and the attendant market power enjoyed by JHTA. However, in 
light of the fact that the approach described in the Memorandum of 
Consultation has been agreed to by the parties, we find that it would 
be appropriate to allow that process an opportunity to achieve results 
without the imposition of sanctions. MOT's recently demonstrated 
commitment to action and oversight in this area has renewed our 
optimism that the necessary reforms will be implemented in a timely 
manner.
    The U.S. carriers recommend deferring the effectiveness of the 
final rule until August 30, 1997. The Japanese carriers, however, 
suggest that the effectiveness of the final rule be suspended 
indefinitely. The Commission has elected to adopt the U.S. carriers' 
suggestion and defer the rule's effectiveness until a date certain. The 
Commission appreciates the commendable efforts made thus far by the 
Government of Japan, both in making the above-described commitments and 
clarifications in the consultations, and also in convening and leading 
the ongoing discussions in Japan. The Commission has accordingly 
determined that the imposition of fees is not warranted at this time. 
Moreover, the Commission has the highest respect for, and confidence 
in, MOT officials. However, the basis of the Commission's rule is the 
unfavorable conditions which exist in Japanese ports. Until such 
conditions are substantially remedied, in a concrete and identifiable 
way, the Commission cannot permanently suspend or withdraw the rule. 
Therefore, the effectiveness of the rule is suspended until September 
4, 1997.<SUP>1 The Commission has elected to require the carriers to 
file status reports describing developments relevant to this 
proceeding.<SUP>2 If warranted, the

[[Page 18535]]

Commission will reassess the suspension of the rule based on the 
information submitted.
---------------------------------------------------------------------------

    \1\ The date suggested by the U.S. carriers would meet our 
objectives of affording the parties an opportunity to conclude the 
consultative process and submit reports, and giving the Commission 
the opportunity to further evaluate the results. However, the 
proposed date falls during a holiday weekend.
    \2\ Section 19(6) of the Merchant Marine Act, 1920, 46 U.S.C. 
app. Sec. 876(6), states:
    (a) the Commission may, by order, require any person * * * to 
file with the Commission a report, answers to questions, documentary 
material, or other information which the Commission considers 
necessary or appropriate; (b) the Commission may require a report or 
answers to questions to be made under oath;
    * * * * *
    (d) a person who fails to file * * * information required to be 
filed under this paragraph shall be liable to the United States 
Government for a civil penalty of not more than $5000 for each day 
that the information is not provided.
---------------------------------------------------------------------------

    Therefore, it is ordered That the effective date of the rules 
published March 4, 1997 (62 FR 9696), as amended by the Commission 
April 11, 1997 (in a rule to be published April 16, 1997), amending 
Part 586 of Title 46 of the Code of Federal Regulations, is hereby 
suspended until September 4, 1997.
    It is further ordered, That the following parties are ordered to 
file reports with the Commission on July 1, 1997, and August 5, 1997: 
American President Lines, Ltd.; Sea-Land Service, Inc.; Kawasaki Kisen 
Kaisha, Ltd.; Mitsui O.S.K. Lines, Ltd.; and Nippon Yusen Kaisha. These 
reports should describe, in detail:
    <bullet> the status of the consultative process to reform the prior 
consultation system;
    <bullet> any planned or implemented changes to the prior 
consultation system, and the observed or expected effects of these 
changes;
    <bullet> the role of the Government of Japan in any future prior 
consultation system or related review or appeals process;
    <bullet> the extent to which carriers in Japan have freedom to 
contract with any port transportation business operator;
    <bullet> the status of any efforts by U.S. carriers to secure 
licenses to operate port transportation businesses or to establish such 
businesses;
    <bullet> any other information relevant to this proceeding that 
parties wish to bring to the attention of the Commission.
    It is further ordered, That any other persons with information 
relevant to this proceeding may submit comments for the Commission's 
consideration, due on July 1, 1997, and August 5, 1997.

    By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 97-9903 Filed 4-14-97; 1:15 pm]
BILLING CODE 6730-01-W