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FEDERAL MARITIME COMMISSION

DOCKET No 79 56

MCGIFFIN COMPANY INC V ELLER COMPANY INC

PETITION FOR A DECLARATORY ORDER

NOTICE OF WITHDRAWAL OF PETITION

July 5 1979

Notice is given that the petition for declaratory order initiating this proceed

ing has been withdrawn and accordingly the proceeding is hereby discontinued

5 FRANCIS C HURNEY

Secretary
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NOISSIWWOJ HWIlHIVW 1VlI3 GiH
RULES OF PRACTICE AND PROCEDURE 3

privilege authority use franchise license permit certificate registration or

similar thing of value or utility performed furnished provided granted pre

pared or issued by any Federal agency to or for any person shall be

self sustaining to the full extent possible In order to bring about the accom

plishment of this objective Title V authorizes the head of each agency to

prescribe by regulation such fees and charges as he shall determine to be

fair and equitable taking into consideration direct and indirect cost to the

government value to the recipient public policy or interest served and other

pertinent facts

This enabling legislation also provides that the fees and charges shall be as

uniform as practicable and subject to such policies as the President may

prescribe On September 23 1959 the Bureau of the Budget now the Office

of Management and Budget issued Circular No A 25 which sets forth

general policies for developing a fair equitable and uniform system of charges

for certain government services and property so as to implement the applicable

provisions ofTitle V Essentially Circular No A 25 requires that a reasonable

charge be made to each recipient for a measurable unit or amount of Federal

Government service from which he derives a benefit in order that the Govern

ment recover the full cost ofrendering that service The Circular further calls

for a periodical reassessment of costs with related adjustment of fees if

necessary and the establishment of new fees where none exists

Two comments were received in response to the Notice of Proposed Rule

making The National Capital Area Paralegal Association objects to the estab

lishment of a fee for processing applications of non attorneys to practice before

the Commission proposed 503 43 h Mr Wade S Hooker an attorney who

practices before the Commission has commented on the rise in the charge for

subscription to Commission issuances in formal proceedings proposed section

503 43 d 1

The Commission proposed to establish a fee of 10 for processing applica

tions of nonattorneys for admission to practice The Association argues that

such a fee discriminates against nonattorneys in favor of attorneys who need

only certify that they are a member in good standing ofa state or Federal bar

The Association further questions whether nonattorneys should be required to

apply for admission at all We disagree with the position expressed by the

Association An attorney in good standing has already been examined as to

professional ability and personal qualifications On the other hand a non

attorney applicant may be totally unknown to the Commission The Commis

sion has a duty to assure that persons appearing before it are qualified to

represent others Under the circumstances the requirement for application for

admittance is appropriate and the assessment of amodest fee for processing the

application is proper under Title V

Mr Hooker expresses surprise that the charge for the subscription list

should rise from 30 to 175 annually since the existing price was established

on February 25 1975 In point of fact the 30 fee was established in 1965

and costs associated with providing the service have escalated considerably

since then The most recent survey by the Commission shows the cost ofservice
4 FEDERAL MARITIME COMMISSION

to be slightly in excess of 200 We have set the revised fee at 175 i

acknowledgement of the public interest standard of Title V

In light of the foregoing we have determined to publish the final rules a

they were proposed

Therefore pursuant to the provisions of section 4 of the Administrativ

Procedure Act 5U S C 1553 and Title V ofthe Independent Offices Appro

priations Act of 1952 31 U S C 1483 a as implemented by Budget Cir

cular No A 25 dated September 23 19 9 and Rule 52 of the Commission 

Rules of Practice and Procedure 46 C F R 1502 52 Parts 502 and 503 o

Title 46 Code of Federal Regulations are amended as set forth hereinafter

I Subpart E ofPart 503 Title 46 ofthe Code ofFederal Regulations is revise

to read as follows

SUBPART E FEES

1503 41 Policy and ServicesAvailable

Pursuant to policies established by the Congress the Government s cost

for special services furnished to individuals or firms who request such service

are to be recovered by the payment of fees Act of August 31 1951

5 U S C 1140

a Upon request the following services are available upon the payment o

the fees hereinafter prescribed

I Copying records documents

2 Certification of copies of documents

3 Records search

b Fees shall also be assessed for the following services provided by the

Commission

I Subscriptions to Commission publications

2 Placing one s name as an interested party on the mailing list of a

docketed proceeding

3 Processing nonattorney applications to practice before the

Commission

150342 Payment of fees and charges

The fees charged for special services may be paid through the mail by check

draft or postal money order payable to the Federal Maritime Commission

except for charges for transcripts of hearings Transcripts of hearings testi

mony and oral argument are furnished by a nongovernmental contractor and

may be purchased directly from the reporting firm

1 503 43 Fees for services

The basic fees set forth below provide for documents to be mailed with

postage prepaid If copy is to be transmitted by registered certified air o

special delivery mail postage therefor will be added to this basic fee Also if

special handling or packaging is required costs thereof will be added to the

basic fee

AlIenttnce hubeen added to 1503 430 to clarify the latent of the propoIOd rule to chifive centl per papP UI cost o

1Crvk ewhen copyina ill perfonned by Commilalon penonnel
RULES OF PRACTICE AND PROCEDURE 5

a Photo copying of records and documents performed by requesting party

wil1 be available at the rate of five cents per page one side limited to

size 8 1 4 X 14 or smaller

b The certification and validation with Federal Maritime Commission

seal of documents filed with or issued by the Commission will be

available at 3 for each such certification

c To the extent that time can be made available records and information

search and or copying will be performed by Commission personnel for

reimbursement at the following rates Any such charges are in addition

to a five cent per page charge for copies provided

I By clerical personnel at a rate of S per person per hour

2 By professional personnel at an actual hourly cost basis to be

established prior to search

3 Minimum charge for record and information search S

4 Minimum charge for copying services performed by Commission

personnel 1

S Exceptions No charge for copying or searching wil1 be made for

providing a single copy of a tariff page on file with the Commission

d Annual subscriptions to Commission publications for which there are

regular mailing lists are available at the charges indicated below for

calendar year terms Subscriptions for periods ofless than a full calendar

year will be prorated on a quarterly basis No provision is made for

refund upon cancellation of subscription by a purchaser

I Orders notices rulings and decisions initial and final issued by

Administrative Law Judges and by the Commission in all formal

docketed proceedings before the Federal Maritime Commission are

available at an annual subscription rate of 17 S

2 Final decisions only issued by the Commission in all formal dock

eted proceedings before the Commission are available at an annual

subscription rate of SO

3 General Orders of the Commission are available at the following

rates I

initial set including all current General Orders for a fee of

12 S0 and 2 an annual subscription rate of 2 for all amendments

to existing General Orders and any new General Orders issued

4 Exceptions No charge wil1 be made by the Commission for notices

decisions orders etc required by law to be served on a party to any

proceeding or matter before the Commission No charge will be

made for single copies of the above Commission publications indi

vidually requested in person or by mail In addition a subscription

to Commission mailing lists will be entered without charge when

one of the following conditions is present

i The furnishing of the service without charge is an appropriate

courtesy to a foreign country or international organization

ii The recipient is another governmental agency Federal State

or local concerned with the domestic or foreign commerce by

water of the United States or having a legitimate interest in

the proceedings and activities of the Commission
6 FEDERAL MARITIME COMMISSION

iii The recipient is a college or university

iv The recipient does not fall into paragraphs d 4 iii o

ill of this section but is determined by the Commission to b

appropriate in the interest of its program

e To have one s name and address placed on the mailing list of 

specific docket as an interested party to receive all issuances pe

taining to that docket cost 53 per proceeding

f The Commission publication entitled Automobile Manufacturers

Measurements is available on a fiscal year subscription basis in

cluding any supplements issued during the fiscal year in whic

purchased for a fee of 55

g Looseleaf reprint of the Commission s complete current Rules o

Practice and Procedure for an initial fee of 52 50 Future amend

ments to the reprint are available at an annual subscription rate o

510

h Applications for admission to practice before the Commission fo

persons not attorneys at law must be accompanied by a fee of 51

pursuant to i

502 27 of this Chapter

iUpon a determination by the Commission that waiver or reductio

of the fees prescribed in this section is in the public interest becaus

the information furnished has been determined to be of primar

benefit to the general public such information shall be furnishe

without charge or at a reduced charge at the discretion of th

Commission

U Additional issuances publications and services of the Commissio

may be made available for fees to bedetermined by the Managin

Director which fees shall not exceedthe cost to the Commission fo

providing them

II The second sentence of 46 C FR i502 27 is amended to read as follows

Applications by persons not attorneys at law for admission to practic

before the Commission shall be made on the forms prescribed there

for which may be obtained from the Secretary of the Commission

shall be addressed to the Federal Maritime Commission Washington

D C 20573 and shall be accompanied by a fee as required by i 503 43 h

of this Chapter

By the Commission

1

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET No 79 5

LEONARD T BUTLER D B A MANUFACTURERS FORWARDING

INDEPENDENT OCEAN FREIGHT FORWARDER APPLICATION AND

INTERMODAL SALES INC

POSSIBLE VIOLATIONS OF SECTIONS IS AND 18 b 3

NOTICE

July 11 1979

Notice is given that no exceptions have been filed to the June S 1979 initial

decision in this proceeding and the time within which the Commission could

determine to review that decision has expired No such determination has been

made and accordingly that decision has become administratively final

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 79 5

LEONARD T BUTLER D B A MANUFACTURERS FORWARDlNG

INDEPENDENT OCEAN FREIOHT FORWARDER APPLICATION AND

INTERMODAL SALES INC POSSIBLE VIOLATIONS OF

SECTIONS 15 AND 18 b 3

Finalized July 11 979

Violations of sections 15 and 18 b 3 of Shipping Act 1916 found

Because of violations and lack of showing of mitigation to warrantgranting of license as indepen

dent ocean freight forwarder upon this record the application is denied

Thomas E Durkin

Jr

for respondent applicant

Joseph Slunt Deana E Rose and J Rabert Ewers Director of Commission s Bureau of Hearin

Counsel for Hearing Counsel

INITIAL DECISION I OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

This is a proceeding in which an independent ocean freight forwarder licens

is sought by Leonard T Butlerd b a International Sales Inc Investigation 

the application raised possible violations of sections IS and 18 b 3 of th

Shipping Act 1916

The Presiding Administrative Law Judge takes official notice that the orig

inal application dated November 22 1977 sought a license for Leonard 

Butler d b a Transmodal Forwarding Company The Commission began 

investigation

After mesne process an amended application dated May 15 1978 wasfile

and license was sought for Leonard T Butler d b a Manufacturers Forwar

ing to be established

Pursuant to section 510 8 of the Commission s General Order 4 46 C F R

5510 8 the Commission on October 30 1978 advised Leonard T Butl

d b a Manufacturers Forwarding of its intent to deny the application for t

I

This decllon will become the decision of the Commiasion in abtonoe of review thereof by the Commission Rule 227 Ru

of PraClioe nd Procedura 46 CF R 1502227
POSSIBLE VIOLATIONS OF SECTIONS 15 AND 18 b 3 9

reasons set out hereinafter In accordance with General Order 4 an appli

cant may within 20 days of receipt of such advice request a hearing on the

application

By letter dated November 6 1978 Leonard T Butler d b a Manufacturers

Forwarding requested the opportunity to show at a hearing that the denial of

the application is unwarranted

On January 24 1979 the Commission served the instant Order ofInvestiga

tion and Hearing published in the FederalRegister January 29 1979 Vol 44

No 20 pages 5713 5714 It indicates that during the course of the Commis

sion s

investigation of Leonard T Butler d b a Manufacturers Forwarding

information was received possibly indicating that

1 Intermodal Sales Inc of which Mr Butler is President and majority stock

holder under the trade name Intermodal Services Inc maintains with the

Commission an NVOCC tariff as required by section 18 Shipping Act

1916 Evidence deduced in the course of the investigation appeared to

demonstrate that Intermodal Services Inc violated section 18 b 3 Ship

ping Act 1916 46 VS C 817 on at least eleven of the nineteen ship

ments it handled during the period January 15 1978 through May 12 1978

in charging demanding or collecting a greater lesser or different compensa

tion for the transportation of property than the rates and charges specified

in its tariff on file with the Commission

2 Intermodal Sales Inc d b a Intermodal Services Inc appeared to violate

section 15 Shipping Act 1916 46 V S C 814 in that it and Seaway

Express Lines a vessel operating common carrier by water entered into an

exclusive non competitive cooperative working agreement subject to the

filing and approval requirements of the aforementioned section 15 imple

menting that agreement in carrying out its terms without the pre requisite

Commission sanction

In view of the above Leonard T Butler 52 owner and President of

Intermodal Sales Inc would appear to lack the fitness to properly carry on the

business of forwarding and to conform to the provisions of the Shipping Act

1916 and the requirements rules and regulations of the Commission issued

thereunder as required by section 44 and the Commission s Rules and Regula

tions issued pursuant to section 44 of the Shipping Act 1916

The Commission ordered that pursuant to sections 15 18 b 22 and 44

46 US C U814 817 821 and 841 b of the Shipping Act 1916 and

section 510 8 of the Commission s General Order 4 46 C F R 510 8 it be

determined

1 Whether lntermodal Sales Inc d b a Intermodal Services Inc has violated

section 15 Shipping Act 1916 by entering into an exclusive non competitive

cooperative working agreement with Seaway Express Lines without the

prerequisite Commission approval

2 Whether Intermodal Sales Inc d b a Intermodal Services Inc has vio

lated section 18 b 3 Shipping Act 1916 by transporting property at rates

and charges otherthan those specified in its tariffon filewith the Comission

and
10 FEDERAL MARITIME COMMISSION

3 Whether in light of the evidence adduced pursuant to the foregoing issue

together with any other evidence adduced Leonard T Butler d b 

Manufacturers Forwarding possesses the requisite fitness within the mea

ing of section 44 b Shipping Act 1916 to properly carry on the busine

of forwarding and to conform to the provisions of the Shipping Act 191

and the requirements rules and regulations of the Commission issue

thereunder

The named respondents herein are 1 Leonard T Butler d b a Manu

facturers Forwarding and 2 Intermodal Sales Inc

By notice served January 30 1979 a prehearing conference was schedule

for Thursday February 22 1979 Counsel for respondent telephoned the Pre

siding Administrative Law Judge on February 16 1979 pleading he waso

call for cases in his own jurisdiction and requested a postponement By notic

served the former date which was preceded by telephone notice to all partie

on February 16 1979 of the change the prehearing conference was re

scheduled and held on Monday February 26 1979 The official stenograph

transcript thereof consists of 12 pages Hearings began and concluded o

Monday March 12 1979 The transcript of the hearing consists of 50 page

The total pages of transcipt are 62 Two 2 exhibits were introduced an

received into evidence The briefing schedule developed was 1 opening brie

ofrespondent applicant to befiled onApril 9 1979 Tr ofHearing at 48 lin

25 change 1978 to 1979 2 Hearing Counsels reply briefto be filedonApr

23 1979 and 3 the closing brief of respondent applicant to be filed o

May 7 1979 Tr 49

The opening brief of respondent applicant was received in the Commissio

on Aprilll 1979 it had been mailed by Registered Mail No 854603 from

Newark New Jersey on April 6 1979 Hearing Counsels Reply Brief wa

received in the Commission onApril 23 1979 On May 10 1979 the Presidin

Administrative Law Judge received from counsel for the respondent applican

a letter dated May 8 1979 stating inter alia I

acknowledge receipt of th

Brief of Hearing Counsel and Iwould respectfully advise that Ido not see th

need for any further submissions

Hearing Counsel in its brief proposed 18 findings of fact Brief at 3 to 5

The respondent applicant s brief proposed no findings of fact Hearing Coun

sels

requests upon consideration are granted in substance or denied as show

in the following section entitled Facts

The transcript of testimony and exhibits together with all papers and re

quests filed in this proceeding constitutes the exclusive record for the findin

of facts and for decision Rule 169 46 C FR 5502 169

FACTS

1 Intermodal Sales Inc a sales agency and marketing arm for variou

carriers Tr 36 does business as Intermodal Services Inc It was founded in

1971 72 by Leonard T Butler Intermodal Services Inc has on file with thi

Commission NVOCC Freight TariffNo 1 the original effective date of th

tariff wasOctober 2 1976 between United States Atlantic Gulf and Pacifi
POSSIBLE VIOLATIONS OF SECTIONS 15 AND 18 b 3 11

Coasts Puerto Rico Hawaiian and Alaskan Ports The tariffis worldwide The

Issuing Officer of the tariff of Intermodal Sales Inc is Leonard T Butler

1st Revised Title Page effective November 21 1978

2 Intermodal Sales Inc a corporation of the State of New Jersey Exh I

Attachment A page I admitted it is stipulated all demands for admission of

Exh I are acknowledged in the affirmative Tr 4 its officers are

Leonard T Butler President and 52 shareholder of the company

Reuben Klein Executive Vice President and 48 shareholder of the

company

Marilyn T Butler Secretary and holder of no stock interest therein

3 Intermodal Services Inc issued the following bills oflading under which

shipments were carried at rates other than those in its NVOCC tariff

BIL No

10

II

18

19

20

21

Dated

1 15 78

15 78

2 26 78

2 28 78

2 28 78

3 08 78

22

24

26

27

28

2 28 78

3 24 78

4 23 78

5 12 78

5 12 78

Commodity

Construction Material

Copper Wire

Rigid Steel Galvanized

Stranded Cable Alpha

KV Single Phase Shielded Cable

Kitchen Laundry Other Equipment for Units of

Ministry of Health

Kitchen Laundry Other Equipment for Units of

Ministry of Health

Cabinet Sections

Conduit Pipes

Operation Rods for Disconnect Switches

Cast Iron Pipe Accessories of Piping Fittings

The filing of the tariffs and tariff changes pertaining to the rates assessed the

above shipments wasdelegated to a

company in that business Tr 13 and to

Reuben Klein Tr 37

4 Under date of September 24 1976 Intermodal Sales Inc entered into

aSales Agency Agreement with Klevan Associates Incorporated a

corporation

of the State of Pennsylvania Klevan is the owner and operator of a certain

container service more commonly known and referred to as Seaway Express

Lines a Panamanian Corporation Under the terms of the said agreement

Intermodal Sales Inc is to act as Seaway s exclusive sales and marketing

agent in the United States for those services rendered by Seaway in its con

tainer services between the United States Taiwan and Korea a noncompetitive

clause in the agreement provides that during the term thereof Intermodal will

not represent any carrier or carriers who offer similar container services

between the United States and Taiwan and Korea Exh I At I and Attach

ment A Tr 36 The term of the agreement was for a twoyear period and was

to renew itself for a period of two years The agreement was signed for

Intermodal Sales Inc by Leonard T Butler President Mr Butler testified the

relationship with Seaway was terminated in September of 1978 Tr 40

5 Intermodal Sales Inc operated under the terms and tenure of the said

Sales Agency Agreement with Klevan However Intermodal Sales Inc did
12 FEDERAL MARITIME COMMISSION

not file that agreement with this Commission Tr 36 for approval pursua

to section IS Shipping Act 1916

6 Applicant Leonard T Butler asked to outline his activities over the l

ten or fifteen years particularly within the ambit of the shipping indus

Tr 35 testified he held marketing and agent positions as follows

1964 to 1968 with Sea Land Tr 35

1968 to 1972 with Seatrain

1972 started his own business Intermodal Sales

After founding of his own business the agreements or associations a

between his company Intermodal Sales and others Tr 43

1973 to 1975 agent for Zim Container Services Tr 44

1974 to 1975 agent for Medspan Shipping

1976 to I977 agent for Mercantile Marine a vessel operating carrier Tr 4

1976 to 1977 agent for Iran Overland Tr 44

1976 to 1978 Sales Agency Agreement with Kleven Associates

1978 Sales Agency Agreement with Oceans International agent for Lign

Centre Africaine

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

Leonard T Butler testified that he did not file the September 24 197

Seaway and Intermodal agreement with the Commission Tr 36 Asked 

there a reason why you didn tso file if in fact you were required to file

answered

I had a

previous contract the contract that is mentioned here is subsequent to a previous contr

with Seaway as sales agent Because in the services I performed for Seaway sales I did not kn

that there was anything else required At the time I entered into that contract I did noteven ha

a tarill as an NVO

The applicant in his brief at page 3 argues that

ACknowledging fully that the responsibility to so file may not be necessarily excused by any su

claim the seriousness of such failure may be however ameliorated if such an explanation 

believed

Hearing Counsel in its Reply Brief at 2 states

By stipulation respondents affirmatively admitted all facts contained in Hearing Counsel s R

quest for Admissions Exhibit I

thereby admitting the facts pertinent to tbe sections 18 b 

and 15 issues

The circumstances of this case demand that the Presiding Administrati

Law Judge agree with Hearing Counsel that the respondent has admitted t

facts pertinent to the sections 18 b 3 and 15 issues Therefore hefinds a

concludes that Intermodal Sales Inc d b a Intermodal Services Inc h

violated section IS Shipping Act 1916 by entering into an exclusive no

competitive cooperative working agreement with Seaway Express Lines wit

out the prerequisite Commission approval and has violated section 18 b 

Shipping Act 1916 by transporting property at rates and charges other th

those specified in its tariff on file with the Commission
POSSIBLE VIOLATIONS OF SECTIONS 15 AND 18 b 3 13

It is to amelioration if any as to the violations of sections 15 and 18 b 3

of the Shipping Act 1916 that attention is directed The applicant as indi

cated above testified he was unaware of the filing requirements under section

15 to which Hearing Counsel counters Brief for Hearing Counsel at 7

ignorance of the law is no excuse nor is inadvertence citing Investigation of

Rates in theHongKong United States Atlantic and GulfTrade Docket No

1083 11 F MC 168 178 1967 The latter citation points to section 18 b 3

violations The Commission wrote

We have no authority under section 18 b 3 to dismiss a

charge simply because it may have been

an isolated violation or an honest mistake though we may couple our finding ofviolation with such

other factual determinations as may tend to mitigate the seriousness of the offense

InvestigationofRates in the HongKong United States At antic and GulfTrade IIF M C at 178

The parties do not dispute the facts as to allegations of violations of sec

tion 15 and section 18 b 3 as is evidenced by Exhibits I and 2

The only lawful rate which acarrier may charge is that rate appearing in the

carrier s filed tariff This rate must be charged and paid regardless ofseemingly

innocent justification for departure such as mistake inadvertence or contrary

intention of the parties United States v Pan American Mail Lines Inc

359 F Supp 728 733 S D N Y 1972

The applicant argues in his brief at page 5 that the involved tariff was filed

so as to become effective October 2 1976 He says Brief for Applicant at 6

that the tariff when effective concerning rates or charges contained only a

single factor cargo N O S not otherwise specified WM 295 that this rate

of course and as is usual was never intended to be utilized commerciaJly but

was in fact established so as to be in compliance with the requirements of a

tarifffiling However it is argued by the applicant Brief for Applicant at 7

speaking of the 11 Bills of Lading in Exhibit I Attachment B that no

potential shippers received any advantage nor were they disadvantaged by any

rate quoted to any of the involved shippers in the instances here illustrated

Then the applicant poses the question

Isn t this aspect of the Commission s case at very best extremely technical and ministerial and is

it not clearly distinguishable from the usual and ordinary tariff violation

Brief forApplicant at p 8

Hearing Counsel assert at page ten of his brief that the applicant argues

without record support that no shipper wasadvantaged or disadvantaged by the

admitted improper tariff assessments

The Presiding Administrative Law Judge is not persuaded by the questions

asked by the repondent applicant that mitigation is found in them because the

arguments and the law presented by Hearing Counsel is more persuasive that

the situation is proved by a preponderance of the evidence that the Presiding

Administrative Law Judge must and does find and conclude that violations of

sections IS and 18 b 3 have been committed by the respondent and that no

mitigating circumstances have been shown in these areas

Now as to whether Leonard T Butler d b a Manufacturers Forwarding

possesses the requisite fitness within the meaning of section 44 b Shipping
14 FEDERAL MARITIME COMMISSION

Act 1916 to properly carry on the business of forwarding and to conform t

those provisions of the Shipping Act 1916 and the requirements rules an

regulations of the Commission issued thereunder The applicant argues Brie

for Applicant at 2 that he individually must be deemed to be fit willing an

able to properly carry out the business and functions of a forwarder that 

must be accepted as irrefutable fact that there is no issue nor is there contr

versy as to the moral characteristics or reputation of the applicant ld H

concludes ld at 10 the applicant possesses all of these moral traits an

characteristics required and desired of an applicant

Hearing Counsel contends that Leonard T Butler d b a Manufacturer

Forwarding does not possess the requisite fitness to be licensed as an indepen

dent ocean freight forwarder Brief for Hearing Counsel at II Counsel cite

Harry Kaufman Independent Ocean Freight Forwarder Docket No 71 4

16 F M C 256 271 1973 for the Commission enunciated standard of con

duct required of an applicant seeking a license

It is crucial to his fitness that it appear that the applicant intends to and will in good faith adhe

to such high standard of conduct and that he intends to and will obey the Commission s rule

and policies for the conduct of licensed freight forwarders

The Hearing Counsel argues that the existence of past Shipping Act violation

by an applicant for a freight forwarder s license is highly pertinent to the issu

of whether the applicant intends to or willobey the Us shipping laws Bri

for Hearing Counsel at II Hearing Counsel points out that the Commissio

recently denied a freight forwarder application in Concordia Internation

Forwarding Corporation Independent Ocean Freight Forwarder Applicatio

and Possible Violation ofSection 44 Shipping Act 1916 Docket No 78 3

18 SRR 1364 1371 FMC 1978 exhorting that disregard of the shippin

statutes would not be tolerated The Commission said In determinin

whether an applicant possesses the requisitness fitness a past violation of th

Shipping Act militates against the issuance of a license Brief for Hearin

Counsel at 12 Hearing Counsel contends that the activities of Leonard 

Butler President of Intermodal Sales Inc d b a Intermodal Services do n

constitute the standard of conduct the law imposes upon those seeking to b

licensed as an ocean freight forwarder ld at IS thatthe applicant has faile

to meet his burden of demonstrating his character qualifications and fitness 

operate as a freight forwarder and to conform to the provisions of the Shippin

Act and that the Commission should deny his application

As has been indicated above the applicant made no reply to Hearing Cou

sel s Reply Brief other than to submit a letter repeated now I acknowled

receipt of the Brief of Hearing Counsel and Iwould respectfully advise that 

do not see the need for any further submissions

The parties do not dispute certain facts in this case The undisputed facts a

deemed by the Presiding Administrative Law Judge to support the position 

Hearing Counsel against the applicant The applicants attempt to show mi

gation of circumstances so as to warrant granting ofthe license as an indepe

dent ocean freight forwarder is unpersuasive and falls short of showing su

mitigation
POSSIBLE VIOLATIONS OF SECTIONS 15 AND 18 b 3 15

The Supreme Court has held that the only lawful rate which a carrier may

charge is that rate appearing in the carrier s filed tariff This rate must be

charged and paid regardless of seemingly innocent justification for departure

such as mistake inadvertence or contrary intention of the parties Louisville

Nashville Ry v Maxwell 237 U S 94 35 S Ct 494 59 LEd 853 1915

FINDINGS AND CONCLUSIONS

Upon consideration of all the aforesaid the Presiding Administrative Law

Judge finds and concludes in addition to the findings and conclusions here

inbefore stated

1 Applicant Leonard T Butler s Intermodal Services Inc violated section

18 b 3 Shipping Act 1916 on at least eleven of the nineteen shipments it

handled during the period January 15 1978 through May 12 1978 in charg

ing demanding or collecting a greater lesser or different compensation for the

transportation of property than the rates and charges specified in its tariff on

file with the Commission

2 Intermodal Sales Inc d b a Intermodal Services Inc violated sec

tion 15 Shipping Act 1916 in that it and Seaway Express Lines a vessel

operating common carrier by water entered into an exclusive noncompetitive

cooperative working agreement subject to the filing and approval requirements

of the aforementioned section 15 implementing that agreement in carrying out

its terms without the prerequisite Commission sanction

3 In view of the above Leonard T Butler 52 owner and President of

Intermodal Sales Inc is found to lack the fitness to properly carryon the

business of forwarding and to conform to the provisions of the Shipping Act

1916 and the requirements rules and regulations of the Commission issued

thereunder as required by section 44 and the Commission s Rules and Regu

lations issued pursuant to section 44 of the Shipping Act 1916

WHEREFORE IT IS ORDERED subject to review by the Commission

as provided in the Commission s Rules ofPractice and Procedure that

A Leonard T Butler d b a Intermodal Sales Inc is found to have vio

lated sections 15 and 18 b 3 of the Shipping Act 1916 as indicated herein

B The application ofLeonard T Butler d b aManufacturers Forwarding

for an independent ocean freight forwarder license be and hereby is denied

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

WASHINGTON D C

June 5 1979
FEDERAL MARITIME COMMISSION

DOCKET No 77 30

PUERTO RICO MARITIME SHIPPING AUTHORITY

GENERAL INCREASE IN RATES

NOTICE

July 11 1979

Notice is given that no appeal has been filed to the June I 1979 order of

discontinuance in this proceeding and the time within which the Commission

could determine to review that order has expired No such determination has

been made and accordingly that order has become administratively final

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 77 30

PUERTO RICO MARITIME SHIPPING AUTHORITY

GENERAL INCREASE IN RATES

DISCONTINUANCE OF PROCEEDING

Finalized July II 1979

The Commission instituted this proceeding in an Order of Investigation

served on July 7 1977 in order to investigate the reasonableness of a 104

general rate increase by the Puerto Rico Maritime Shipping Authority

PRMSA effective June 19 1977 The Commission specifically directed that

a hearing not be held until aCommission decision had been issued in a related

on going proceeding Docket No 75 38

On August 16 1978 Administrative Law Judge William Beasley Harris

issued his decision upon remand in Docket No 75 38 finding the increase

therein under investigation to bejust and reasonable No exceptions were filed

and on September 21 1978 the Commission determined not to review that

decision The period for requesting appellate review of the decision expired in

November 1978 with no review petitions having been filed

Subsequent to the above events concerning 75 38 a tentatively scheduled

prehearing conference for the instant proceeding waspostponed at the request

ofHearing Counsel to allow for informal review ofPRMSAs auditedfinancial

reports by staff experts working with Hearing Counsel That review has been

completed and Hearing Counsel now has no challenge to PRMSAs data or

conclusions relating to revenues rate ofreturn on rate base or the need for the

subject general rate increase See also summarized data set forth in PRMSAs

April 27 1979 Motion To Discontinue Proceeding at 3 4

PRMSA filed a Motion To Discontinue Proceeding on April 27 1979 to

which Hearing Counsel filed a

reply on May 11 1979 Hearing Counsels

Reply makes the point that merely because a given rate increase has been in

effect for an extended period of time and has been superseded by yet another

increase in rates does not in and of itself mandate a discontinuance of the

proceeding citing the Commission s decision in the Matson proceeding

F MC Docket 76 43 Dec 12 1978 18 SRR 1351 1352 However Hear

ing Counsel joins in the Motion ForDiscontinuance herein on the basis that the
18 FEDERAL MARITIME COMMISSION

financial data clearly show that PRMSA s 104 general rate increase is j

and reasonable indeed the Commission s Office of Economic Analysis 

expressed concern regarding the relatively low level of profitability 

PRMSAs operation Hearing Counsel agrees that no useful purpose would 

served by continuing this investigation I find that the financial summ

set forth by PRMSA in its Motion for Fiscal Year 1978 support th

conclusions

Accordingly the motion is granted and the proceeding is ordered to 

discontinued

S THOMAS W REILLY

Administrative Law Judg

June I 1979
FEDERAL MARITIME COMMISSION

DOCKET No 78 22

ICHARLES LUCIDI D B A

LUCIDI PACKING COMPANY

v

THE STOCKTON PORT DISTRICT

NOTICE

July 17 1979

Notice is given that no exceptions have been filed to the June 8 I979 initial

decision in this proceeding and the time within which the Commission could

determine to review that decision has expired No such determination has been

made and accordingly that decision has become administratively final

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 78 22

ICHARLES LUCIDI D B A LUCID PACKING COMPANY

v

THE STOCKTON PORT DISTRICT KILL PEST INC

DELK TERMINEX PEST CONTROL TERMINEX

INTERNATIONAL INC COOK INDUSTRIES INC

Finalized July 7 1979

Respondent Port of Stockton is not in violation of section 16 First in that It does not give 

undue or unreasonable preference or advantage to any particular person locality or des

tion of traffic

Respondent Port of Stockton is not in violation of section 16 First in that it des not sub

complainant to any undue or unreasonable prejudice or disadvantage

Respondent Port of Stockton is inviolation of section 17 in that Item 85 of Its Terminal T

No 4 constitutes an unjust or unreasonable regulation and practice related to or conne

with receiving handling storing or delivering property

C Richard Wallers for complainant ICharles Lucidi d b a Lucidl Packing Company

Edwin Mayall for respondent Stockton Port District

Frank Wagner for intervenor Port of Los Angeles California

John Robert Ewers Aaron W Reese and Bruce Love Hearing Counsel

INITIAL DECISION OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGE I

Charles Lucidi d b a Lucidi Packing Company Lucidi complain

herein filed a civil action in the Supreme Court of California against 

Stockton Port District Stockton or Port respondent herein seeking recov

for alleged damage to property of Lucidi while on the terminal facilities 

Stockton Itwasalleged that 25 710 bags of sesame seeds became infested w

rodent and bird droppings while being stored on Stockton s terminal faciliti

I ThiJ decillan will become the decillan oftho Commiuion intho abooof miow thof by tho Commilalon Rule 227 

of Practioe and Procoduro 46 CF R 1502227
I CHARLES LUCIDI V THE STOCKTON PORT DISTRICT 21

Stockton pleaded as an affirmative defense the provisions of item 85 of its

Terminal TariffNo 4 Item 85 provides

The Port of Stockton shall notbe responsible for any injury to freight on or inits facilities by fire

leakage evaporation natural shrinkage wastage decay animals rats mice otherrodents moths

weevils other insects weather conditions sweat moisture the elements ordischarge of water from

breakdown of plant machinery other equipmen collapse of building or structure insurrection

war or shortage of labor for delay loss or damage arising from riots strikes labor or other

disturbances of any persons or of any character beyond the control of the Port of Stockton

The California Court recognizing the Commission s primary jurisdiction

granted the port s motion to stay the trial of the civil action pending a deter

mination by the Commission as to the validity of Item 85

Thereupon in compliance with the order of the California Court this com

plaint was filed naming the Stockton Port District Kill Pest Inc Delk Termi

nex Pest Control Terminex International Inc and Cook Industries Inc

respondents The complaint does not identify any of the named respondents

other than Stockton nor does it make any allegations concerning them The

record contains nothing to show that the named respondents other than the

Stockton Port District are other persons subject to the Shipping Act and

therefore they are dismissed as parties in this proceeding

Complainant contends that Item 85 is unjust unreasonable and void on its

face as against public policy as it purports to exculpate the Port from the

consequences of its own fault or negligence Complainant further contends that

the tariff item is unlawfully discriminatory against complainant

The Port of Los Angeles California Los Angeles having shown an interest

in this proceeding was permitted to intervene

Discovery havmg been completed all counsel agreed that the documents

developed during discovery provide an adequate record for disposition of this

proceeding and that there remain no genuine issues of material fact which

require oral testimony and cross examination Accordingly seven documents

were admitted as exhibits in evidence and with the brief filed herein constitute

the complete record in this proceeding as follows

Ex 1 Respondents first set of answers to Hearing Counsels Interrogatories

Ex 2 Respondent s second set of answers to Hearing Counsel s

Interroga

tories

Ex 3 Respondent s answers to Complainant s

Interrogatories

Ex 4 Deposition of Walter H Meryman

Ex 5 Deposition of Owen E Block

Ex 6 Further Responses of Walter Meryman to Interrogatories and Deposi

tion Questions and

Ex 7 Central National Insurance Company policy insuring the Port ofStock

ton for the period December 9 1975 to December 9 1978

An opening brief was filed by Hearing Counsel and Lucidi adopted as its

own opening brief the opening brief of Hearing Counsel

Reply briefs were filed by Stockton and by Los Angeles
22 FEDERAL MARITIME COMMISSION

ISSUES

The issues to be resolved in this proceeding are whether the tariff prov

of the Port of Stockton which has been challenged by complainant I re

in undue or unreasonable preference oradvantage orin any undue or unrea

able prejudice or disadvantage in any respect whatsoever within the mea

ofsection 16 First 2or 2 constitutes an unjust orunreasonable regulation 

practice related to or connected with receiving l1andling storin or deliv

property within the meaning of section 17 Second Paragraph

FINDINGS OF FACT

1 Respondent the Stockton Port District was created pursuant to 

provisions of the Harbors and Navigation Code of the State of Califo

2 The Port is an operating port as distinguished from a non operatin

landlord port

3 The Port operates marine terminal facilities providing various term

services with its own employees The Port provides terminal services and 

ities to break bulk vessels bulkcarriers and a combination of break bulk 

container vessels The terminal services furnished by the Port include dock

wharfage free time wharfdemurrage terminal storage and cargo hand

As such the Port is a person subject to the Shipping Act 1916 as define

section I thereof

4 The Port has published and filed with the Commission a tariff effe

November I 1977 relating to its terminal services which is designated Te

nal Tariff No 4 The Port also publishes a tariff designated General T

No 1

S When outbound cargQ arrives at Port facilities the Port issues a 

receipt When inbound cargo is delivered to a place of rest on its facilitie

independent stevedoring companies the Port takes custody of the cargo 

it is delivered to trucks or rails cars

6 The Portparticipates in the activities ofthe CalifOrnia Association of

Authorities CAPA The Committee on Tariffs and Practices ofCAPA m

from time to time to discuss and agree upon rates and charges for wharf

dockage and related port services The Committee and the full Associ

Section 16 Fin 01 the ShlppinJ Act 1916 46 US c 8U docI 1t unl wfulro any common carrie by wale 0 

penon IUbject 10 the Act

To make orJive any undue orunreasonable preforence oradvantap toany particularpenoa locaUty ordelcription o

in any IelIpect whauoever orto lubjeet any panicular penon Iooa1lty ordelCrlpdon oftraffic to any undueorunreu

projudl e ordlllldvantap in any llpect whatlOlVOJ

Section 17 Seoond P asr ph 01 the Sh4Pinl Act 1916 46 USC 816 providoo

Every luch rrier and overy other penon subject to lbll act hall tablilh oblelw and onfonll jut and rea

Iul tlon nl pracllcaa latlnllo 0 neeled with the Ivln han llln torJna 0

dallverinl 01 properly 

tho Commluion ftndl that any IUCb reavlation orpracrtlgels unjUIt orURrAIOnabltlt may detennint prescribe an

enforced a just and reaaonablo nlavlation orpractico

The Commi lon In ordat 10 diach III noibllltiaa under oectn17 01 the Shlppinl Act adopted OeM IOn

46 C F R 1533 which requlrea CYClry terminal operator to flle with tho Commiaion a tariff mowina all U ratecharp

anl

lul tlon m lInllo orcon with the IYiq h nlIInI IIo nl or daU 01proparty tllllei 1 ra

Sea 46 CF R m6 d
I CHARLES LUCIDI Y THE STOCKTON PORT DISTRICT 23

discussed and agreed to wharfage increases which were adopted and placed

into effect by the Port in 1974 1975 1976 1977 and 1978

7 There has been no consideration of the provisions of Item 85 ofStockton s

tariff or of similar provisions in the tariffs of any other ports Ex 4

8 The Port does not solicit bids for its liability insurance nor are specifica

tions written for the procurement of insurance Liability insurance is obtained

through independent brokers who are given a

copy of existing policies and

instructed to obtain the same coverage as provided by the policies which are

expiring Ex 5

9 At the time of the alleged damage to complainant s property which was

the basis of the civil action filed in the Superior Court ofCalifornia May 14

1974 the Port has property damage insurance with total liability limits of

16 000 000 with a 1 000 deductible clause

10 The Ports

liability insurance is issued by the Central National Insur

ance Company ofOmaha Nebraska for a three year term commencing De

cember 9 1975 That policy covers the liability ofthe Port for physical loss or

damage to property of customers of the Port The policy does not inter alia

cover liability of the assured Port

a For property held as storage in transit under the terms of an applicable

bill of lading issued by the assured

b For loss or damage caused by or arising out of ordinary wear and tear

gradual deterioration dampness or atmosphere extremes of temperature

inherent vice or latent defect

c For damage sustained due to and resulting from any repairing restoration

or retouching process unless caused by fire

d For loss due to delay loss of use or loss of market

11 Lucidi s cargo of sesame seeds of some 25 710 bags was received at the

Ports Dock 9 unloading commenced on February 2 1974 and was concluded

by February 4 1974

12 Employees of the Federal Department ofAgriculture inspected the seed

in transit shed 9 where it had been deposited on or about May 2 3 4 and 6

1974 and Lucidi received notice of the contamination found by them on

May 14 1974

13 The sesame seed wasbeing held on the dock for instructions from Lucidi

because complainant did not have the facilities available at its Fresno plant to

process the seed at that time

14 There are thirteen wharves at the Port and only seven of them have

transit sheds on them The Port also has long term storage facilities When the

free time expires for ingoing cargo the shipper has his choice of whether it will

be placed on wharf demurrage or wharf storage Itmay be transferredfrom the

transit shed into the warehouses where it comes under the regulations of

General TariffNo 1

DISCUSSION

Complainant alleges that Item 85 of Stockton s Terminal Tariff No 4 is

unlawfullv discriminatory against complainant as applied under the circum
24 FEDERAL MARITIME COMMISSION

stances Complainant has not specifically alleged a violation of section 

First but the complaint in a shotgun allegation embraces several section

the Act by contending

Is unlawful and invalid as violative of the Shipping Act of 1916 Title 46 V S C iIl814 

The record contains nothing to indicate that respondent makes or gives 

undue or unreasonable preference or advantage to any particular person lo

ity or description or traffic The record is also lacking any evidence to sup

a finding that Item 85 of the Port s tariff subjects complainant to any un

or unreasonable prejudice or disadvantage To the contrary the record es

lishes that the Port invokes the exculpatory provision of Item 85 as to all u

of its facilities who suffer damage or loss from any of the causes set fo

therein

The record is clearly without any evidence to support a

finding ofa viola

of section 16 First

Accordingly we now consider whether the regulation or practice establis

by Item 85 is unjust and unreasonable within the meaning of section 

Second Paragraph

The Commission in Investigation of Free Time Practices Port of 

Diego 9 F MC 525 547 1966 stated that

As used in section 17 and as applied to terminal practices we think that just and reason

practice most appropriately means a practice otherwise lawful but notexcessive and which 

and appropriate to the end in view

The justness or reasonableness of a practice is not necessarily dependent upon the existenc

actual preference prejudice or discrimination It may causenoneofthese but still be unreason

Item 85 ofStockton s tariff proclaims that the Port will not be respons

for any injury to freight in or on its facilities resulting from various spec

causes

s

In addition to its Terminal Tariff No 4 Stockton also publishes a ta

entitled General TariffNo 1 a

copy of which is on filewith the Commiss

Section 2 ofthat tariffestablishes warehouse rules and regulations Item 114 

of its General Tariff No I contains an exculpatory clause similar to Item 

of Terminal TariffNo 4 except for the following language

unless such loss or damage be caused by failure of the warehousemen to exercise the ordinary 

and diligence required of them by law

Exculpatory clauses in the water transportation industry appears to h

been first considered by the U S Supreme Court in The Steamer Syracu

12 Wall 167 1870 where it was held that notwithstanding a contract

agreement that the canal boat wasbeing towed at her own risk the tow

boat must be visited with the consequences of its negligence 12 Wall at 1

The Supreme Court in United States v Atlantic Mutual Insurance Co 

al 343 U S 236 1952 stated that there is a controlling rule of law th

without Congressional authority common carriers cannot stipulate aga

their own negligence or that of their agents or servants

The Port ploadod thl provision 18 an affinnativedefense in acivil awon ordamagoa broupt by complainant which a

wubascd upon the aUcpd noalipncc of the Port
I CHARLES LUCIDI V THE STOCKTON PORT DISTRICT 25

In Bisso v Inland Waterways Corporation 349 U S 85 1955 the Court

said

For many years The Syracuse seems to have been generally accepted as either 1 construing a

contract to tow at own risk as not including an exemption from negligence or 2 holding invalid

as against public policy a contract which exempts atower from his negligence

349 US at 86 and at pages 90 91

This rule is merely a particular application to the towage business of a general rule long used by

courts and legislatures to prevent enforcement of releasefrom negligence contracts in many

relationships such as bailors and bailees employers and employees public service companies and

their customers Footnote omitted

In 1959 the Supreme Court modified the long established general rule that

exculpatory clauses were invalid as a matter of law in a case where such a

clause was contained in a tariff which had been filed with the Interstate

Commerce Commission The question beforethe Court in Southwestern Sugar

Molasses Co Inc v River Terminals Corp 360 U S 411 1959 was

W hether consideration of public policy which may be called upon by courts to strike down

private contractual arrangements between tug and tow are necessarily applicable to provisions of

a tariff filed with and subject to the pervasive regulatory authority of an expert administrative

body

360 U S at 417

The Court distinguished Bisso by noting that the excu patory clause there

was part of a contract over which the ICC had no control The Court said

In these circumstances we would be moving too fast were we automatically to extend the rule of

Bisso to govern the present case For all we know it may be that the rate specified in the relevant

tariff is computed on the understanding that the exculpatory clause shall apply to relieve the

towboat owner of the expense of insuring itself against liability for damage caused tows by the

negligence of its servants and is a reasonable rate so computed If that were so it might be hard

to say that public policy demands that the towshould at oncehave the benefit of a rateso computed

and be able to repudiate the correlative obligation of procuring its own insurance withknowledge

that the towboat may be required to respond in damages for any injury caused by its negligence

despite agreement to the contrary For so long as the towboat s

rates are at all times subject to

regulatory control prospectively and by way of reparation the possibility of an overreaching

whereby the towboat is at once able to exacthigh rates and deny the liabilities which transportation

at such rates might be found fairly to impose upon it can be aborted by the action of the LCe

The rule of Bisso however applicable where the towboat owner has the power to drive hard

bargains may well call for modification when that power is effectively controlled by a

pervasive

regulatory scheme Footnote omitted

360 US at 417 418

The Court concluded

We hold that the Court of Appeals correctly ruled that the exculpatory clause here at issue should

not be struck down as a matter of law and that the parties should be afforded a reasonable

opportunity to obtain from the Lee in an appropriate form of proceeding a determination as

to the particular circumstances of the tugboat industry which lend justification to this form of

clause if any there be or which militate toward a rule wholly invalidating such provisions

regardless of the fact that the carrier which seeks to invoke them is subject to prospective and

retrospective rate regulations Cases are notdecided nor the law appropriately understood apart

from an informed and particularized insight into the factual circumstanoes of the controversy

under litigation Federal Maritime Board v Isbrandsten Co 356 U S 481 498
26 FEDERAL MARITIME COMMISSION

360 U S at 421

In 1966 the Commission addressed the issue of an exculpatory clause in 

tariffof the New York Terminals Conference in Truck and Lighter Loa

and Unloading Practices at New York Harbor 9 F MC 505 The claus

that tariff provided

The Terminal Operator assumes no responsibility for delay to motor vehicles and no claim

such delay will be honored

The Commission found at page 515

It is neither just nor reasonable for respondent to disclaim liability for all delays and their att

to do so was invalid under section 17

The Commission did recognize that the terminal operators should be allo

to disclaim liability for causes ofdelay beyond their control The Commis

determined that failure of the terminals to establish a rule to compen

truckersfor unusual delay caused by or under control of the terminals co

tutes an unjust and unreasonable practice under section 17 ofthe Shipping 

This order ofthe Commission wasupheld by the Court of Appeals inAmer

Export Isbrandtsen Lines Inc v Federal Maritime Commission 389 F 

962 D C Cir 1968

The Port in its brief points out that edible goods such as sesame seed if 

on the dock or put in a transit shed are very difficult to protect from rod

and pigeons These transit sheds are just what the name implies goods 

coming from the ships and into the sheds and going out and goods are 

coming into the sheds for a short time before a ship docks to go out on T

means a

cargo is being moved in and out by forklifts and trucks through 

sheds during anytime that ships are docking for loading or unloading and 

keeps the facility so open that pigeons can fly in This is not true of 

permanent warehouse facilities where the storage of goods is not on suc

temporary basis and can be controlled as to type of goods in this location 

as to need for undisturbed area

6

To the extent that the nature of the cargo and the operation of the P

transit sheds is relevant to this proceeding it cannot be stated too strongly 

this initial decision does not presume to pass on the question of whether or 

the Port wasnegligent with respect to the Lucidi cargo The issue of neglige

is to be resolved in the suit in the California court The issues to which 

initial decision relates are whether the Port may by tariff excuse itself f

liability even if negligent

It is noteworthy that the warehouse aspect of the Port s question is regula

by a California statute which does not permit exculpatory agreements 

requires awarehouseman to comply with the standard of care set forth in 

California Commercial Code i

7204 1 reading as follows

57204 DUTY OF CARE CONTRACTUAL LIMITATION OF WAREHOUSEMA

LIABILITY I A warehouseman is liable for damages for loss of or injury to the goods ca

by his failure to exercise such care in regard to them as a reasonably careful man would exe

R ply Briof oIth Stockton Port Dillrict pp 4 5
I CHARLES LUCIDI V THE STOCKTON PORT DISTRICT 27

under like circumstances but unless otherwise agreed he is not liable fordamages which could not

have been avoided hy the exercise of such care

Slats 1963 c 819 i7204

The Port admits that under existing California Law Item 85 would not be

valid if the storage ofthe sesame seed had been removed to a warehouse rather

than remaining in the transit shed on the wharf

The Port argues that there is a significant difference between the exposure

to the Port for damage to cargo while on the wharf or in the transit sheds as

opposed to cargo placed in protected warehouses Therefore it contends that

the duty of providing insurance for such cargo should beplaced on the shipper

who has control of its location if he does not choose to or cannot at the time

of unloading immediately move his cargo away from the Port area It is the

Port s contention that if the shipper wants complete protection for the cargo

he can take advantage ofCalifornia law holding warehousemen to the standard

of care indicated by 7204 of the California Commercial Code

The arguments of the Port beg the question whether a tariff provision

exculpating the Port in the transit shed area from the standard of care similar

to that imposed in the warehouse area is ajust and reasonable tariffprovision

Absent such a tariff provision and assuming 7204 is not applicable to the

transit sheds then whether the Port should be liable for damage to the cargo

under the factual circumstances as they exist at the Port is for the California

court to determine

In support of the Port Los Angeles argues that absent Item 85 which

contemplates that each party bringing a particular cargo into the Port shall

bear the responsibility for protecting that particular cargo against loss the Port

must recover costs of potential liability from the users of the Port either

through increased tariffs or other methods ofraising revenue Increase in rates

means an increase in the cost of goods moving through Stockton Los Angeles

contends this means that the general public will be paying forthese costs rather

than the shipper and his customers

Los Angeles asserts that it is reasonable that the method utilizedby the Port

ofStockton and also by the Port of Los Angeles whichprovides that the Port

will not be responsible for the loss of the cargo informs the shippers thatif there

is going to be a loss even though that loss may becaused by the sole negligence

of the Port in order to protect themselves they should acquire their own

insurance This prevents the Port from having to spread the risks of the

particular cargo among if not all the users of tbe Port certainly all the users

of the Port that bring in that particular type of cargo Los Angeles also says

that requiring each shipper to be responsible for its own cargo has the added

benefit ofhaving the customer who uses thatcargo in its ultimate form pay the

actual charges for that cargo rather thanhaving those charges paid for by other

general users ofthe Port

It is difficult to understand how the general public rather than the shipper

and his customers would be paying the costs of increased tariffs at the Port In

any event the cost ofprotecting cargo against loss whether borne by the Port

7

Reply Brief of the Stockton Port District p

4
28 FEDERAL MARITIME COMMISSION

and passed on as a cost ofPort operation in the same manneror other cos

Port operation are passed on or whether borne by the shipper the cost ofc

protection ultimately is paid by the consumer

In order to determine the legality of Item 85 of Stockton s tariff 

necessary to ascertain whether the limitation or restriction of liability 

visions ofa terminal tariff are rules or regulations relating to or connected 

the receiving handling storing and or delivering ofproperty within the m

ing ofsection 17 of the Shipping Act and the Commission s General Orde

The purpose of General Order 15 is to enable the Commission to discha

its responsibilities under section 17 by keeping informed of practices and r

of terminal operators and by keeping the public informed 46 C F R S 53

Terminal operators clearly must include in tariffs all rates charges rules 

regulations in connection with and or related to the receiving handling s

ing or delivering of property However whether a rate charge rule or re

lation it must be just and reasonable

There is no evidence that the rates and charges contained in its tariff w

established on the understanding that they were related in any respect to 

exculpatory provision of Item 85 The record here is to the contrary Wa

Meryman the Port s Director of Marketing and Traffic testified as to 

ratemaking procedures of the Port 8The Port is a member of the Califo

Association of Port Authorities CAPA CAPA s Committee on Tariffs 

Practices meets usually every two months to discuss wharfage dockage 

related port services The Ports NOS wharfage rate was increased each y

from 1974 to and including 1978 Mr Meryman the Port s

representative 

CAPAsCommittee on Tariffs and Practices testified that these increasesw

discussed by and agreed to by the Committee

Following its usual procedure the Port adopted the rates as agreed to by 

Committee Further Mr Meryman testified that during the years he 

ticipated in CAPA rate discussions there was never a discussion ofStockto

TariffItem 85 or similar clauses in other port tariffs Accordingly the rec

contains nothing to support a finding that TariffItem 85 could be justi

under the theory suggested by the Supreme Court in the Southwestern Su

Molasses Co supra

CONCLUSIONS

Respondent Port ofStockton a person subject to regulation by the Shipp

Act 1916 among other things provides terminal services including term

storage and cargo handling

In the operation of its terminal the Port has published and filed a ta

relating to its terminal services which is designated Terminal Tariff No 

Included in Terminal TariffNo 4 is Item No 85 which provides in esse

that the Port shall not be responsible for injury to freight on or in its facil

resulting from a variety of causes including injury caused by animals r

mice other rodents moths weevils or other insects

I

Deposition or Walter H Mcryman Ex 4
I CHARLES LUClDI V THE STOCKTON PORT DISTRICT 29

To the extent that the provisions of Item 85 would relieve the Port from

damage for liability to property caused in whole or in part by fault of the Port

and without a quid pro quo of any kind such provisions are unjust and

unreasonable in violation of section 17 of the Act

There is no evidence and the Port does not contend that Item 85 was

promulgated in consideration of any benefits otherwise conferred on users of

the Port

The provisions of Item 85 are against public policy insofar as such policy

requires businesses affected with a public interest be precluded from taking

unfair advantage of those who by necessity must use the facilities of such

businesses To permit the Port to isolate itself from liability if such liability

accrued by reason of the Port s negligence by the mere publication of an ex

culpatory tariff provision is unjust and unreasonable in violation of section 17

of the Act

Item 85 of Terminal TariffNo 4 is an unjust and unreasonable regulation

and practice relating to orconnected with the receiving handling storing or de

livering ofproperty in violation ofsection 17 Second Paragraph Shipping Act

1916

Therefore respondent shall cease and desist from the aforementioned unjust

and unreasonable tariff provision by deleting Item 85 from Terminal Tariff

No 4 or in the alternative amend Item 85 as to clearly set forth that non

liability does not apply in the event that injury results from negligence by the

Port

S STANLEY M LEVY

Administrative Law Judge

WASHINGTON D C

June 4 1979
I

1

FEDERAL MARITIME COMMISSION

DOCKET No 73 51

PERRY S CRANE SERVICE

Y

PORT OF HOUSTON AUTHORITY

OF THE PORT OF HOUSTON TEXAS

NOTICE

July 27 1979

Notice is given that the time within which the Commission could determ

to review the June 21 1979 order of discontinuance ofthe Administrative L

Judge in this proceeding has expired No such determination has been ma

and accordingly that order has become administratively final

S FRANCIS C HURNEY

Secretary

1
FEDERAL MARITIME COMMISSION

No 78 22

ICHARLES LUCIDI D B A LUCID PACKING COMPANY

v

THE STOCKTON PORT DISTRICT KILL PEST INC

DELK TERMINEX PEST CONTROL TERMINEX

INTERNATIONAL INC COOK INDUSTRIES INC

Finalized July 7 1979

Respondent Port of Stockton is not in violation of section 16 First in that It does not give 

undue or unreasonable preference or advantage to any particular person locality or des

tion of traffic

Respondent Port of Stockton is not in violation of section 16 First in that it des not sub

complainant to any undue or unreasonable prejudice or disadvantage

Respondent Port of Stockton is inviolation of section 17 in that Item 85 of Its Terminal T

No 4 constitutes an unjust or unreasonable regulation and practice related to or conne

with receiving handling storing or delivering property

C Richard Wallers for complainant ICharles Lucidi d b a Lucidl Packing Company

Edwin Mayall for respondent Stockton Port District

Frank Wagner for intervenor Port of Los Angeles California

John Robert Ewers Aaron W Reese and Bruce Love Hearing Counsel

INITIAL DECISION OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGE I

Charles Lucidi d b a Lucidi Packing Company Lucidi complain

herein filed a civil action in the Supreme Court of California against 

Stockton Port District Stockton or Port respondent herein seeking recov

for alleged damage to property of Lucidi while on the terminal facilities 

Stockton Itwasalleged that 25 710 bags of sesame seeds became infested w

rodent and bird droppings while being stored on Stockton s terminal faciliti

I ThiJ decillan will become the decillan oftho Commiuion intho abooof miow thof by tho Commilalon Rule 227 

of Practioe and Procoduro 46 CF R 1502227
32 FEDERAL MARITIME COMMISSION

remanded the proceeding to the presiding officer to determine the amount 

reparation for monetary damages suffered by complainant In taking this lat

action the Commission recognized that complainant was entitled to so

degree of monetary restitution for losses occasioned by the unlawful practice

but that the extent of reparation could not be determined on the record wh

had been developed FMC Decision p 5

1 The Commission instructed 

parties to utilize the procedures set forth in Commission Rule 252 forme

Rule 15 b which required complainant to prepare a statement itemiz

damages which could form the basis for an award ofreparation or for furth

hearing

Following the Commission s decision a number of events occurred wh

impeded progress toward conclusion of this proceeding and resulted in cons

erable delay which was not the fault of either complainant and respondent 

brief although respondent cooperated in an effort to bring the question 

reparation to a prompt conclusion complainant s first counsel was unable 

conduct the necessary investigation of facts in a timely fashion and a

mentioned above even disappeared for a time Furthermore three other sim

complaints were filed 2

Finally after it appeared that complainanfs first co

sel was not able to develop the necessary information upon which settlem

discussions could be based despite numerous conferences rulings meetin

and the like complainants in all four cases retained new counsel This wasdo

sometime in April or May of 1978 Thereafter with new counsel steps we

taken to enable the parties to develop relevant evidence and to commen

negotiations leading toward settlement See Report ofSpecial Conference a

Rulings Made Therein May 30 1978 The process ofdeveloping this eviden

was time consuming and involved among other things checking of P

records and other records to determine bumping instances over a period 

time extending from November 17 1973 to March 23 1977 Counsel s wo

wasmade more difficult because of the uncertain measure ofdamages in cas

of this type and the extreme difficulty in determining instances when co

plainant had not obtained jobs because of the Port s first call preferent

practice Nevertheless after records had been checked negotiations seek

settlement resumed finally reaching a successful conclusion which has culm

nated in the filing of the subject motion

THE SElTLEMENT AND REASONS SUPPORTING ITS APPROVAL

As the motion states after all of the effort described above in which t

parties checked and cross checked records seeking to determine instances 

I Both the Commissionand I wished to puraue the qUClItion of reparation although complainant had failed to furnish reli

and probative cviden C at the hearing on this qUOItion dClpite having had several opportunitioaat tho hoaring to do 10 HOWG

furnishing proof of actual componaable damaplis Rot eay in this type of and asJ ocsmo apparent late part oftho prob

which complainant faced stemmed from the activities of hi fint COURsol who actually seem to havc disappeared for a perio

time during the remanded phaae of the proceedln For adescription of the problems in provinlflnanciallnjury whic1l complain

experienced at the hcarinl seemy InithdOecilion cited above 16 SRR at 1487 1490

1 These were Docket No 76 57 H HCranes Inc v Pori ojHoUlton Authority 19 SRR 47 1979 Docket No 77 

Houston Gulf Crane Inc IIaI v Port of HowtonAuthority and Docket No 77 42 P lI M CraneS rvICf Inc v Pon 

Houston Authority 19 SRR 997 1979 Docket No 77 41 has been terminated by the withdrawal of the complaint Docket 

76 57 isallO nearinl submiSllion of asettlement Docket No 77 42 has not been sottled and is proceedlnl toward hearinB
PERRY S CRANE SERVICE V PORT OF HOUSTON AUTHORITY 33

bumping the parties exchanged proposals for settlement As noted it was

recognized that even ifspecific instances of bumping could be verified to the

satisfaction of both parties an enormously difficult problem remained if the

parties were to determine those instances in which complainant never obtained

jobs because a particular Port crane had secured the job through the Ports

former preferential first call practices Under the Commission s decision com

plainant wasentitled to monetary restitution for injury caused by bumping

from jobs actually commenced but also from jobs never obtained because the

Port had required a stevedore to utilize a Port crane not equally suitable to one

of complainants Even if all of these facts could be determined easily and a

causal relationship established between the Port s practices and idleness of

complainants cranes the question of items of damages to be considered com

pensable under section 22 of the Act remained to be argued

In view of all of these difficulties of proof and expenses of continued liti

gation the parties determined that further costs of litigation would outweigh

any benefits that either party could derive from efforts to identify and prove

monetary damages more precisely Accordingly both parties desire to compro

mise and settlecomplainant s claim by agreeing upon the amount of 9 727 41

to be paid by respondent together with costs of the proceedings ifany as have

been assessed By this means the parties seek to bring this lengthy and exasper

ating litigation to an amicable close To that I

say amen Itonly remains for

meto determine under applicable principles of law whether there is any reason

why this compromise and settlement should not be approved and why this old

case should not be laid to rest I find no such reasons as I now explain

GOVERNING PRINCIPLES OF LAW

Ithas long been recognized by the Commission that the law strongly favors

settlements and that settlements will be treated with indulgence and with

presumptions that they are correct and fair Organic Chemicals v Atlanttrafik

Express Service 18 SRR 1536a 1539 1979 and cases cited therein There

are a few caveats which must be considered however As the Commission has

stated notwithstanding the strong policy favoring settlements a presiding

judge should not act as a rubber stamp and should be especially careful to

ensure that the settlement does no violence to any statutory scheme In a recent

order in Docket No 78 44 Pierpoint Management Company and Retia

Steamship Company v Holt Hauling and Warehousing Systems Inc

19 SRR 435 June 13 1979 the Commission stated as follows

The Commission is awareof and fully supports the policy which favors the settlement of disputes

but it is incumbent upon the decision maker to assure that the settlement proposed by litigants does

not violate the law As was stated in Inter Equip Inc v Hugo Zane i Co 17 SRR 1232 at

1234 I977

The fact that parties seek approval of their settlement does not mean that the presiding

officer or the Commission must blindly approve and has no useful function to perform Care

must be taken to insure that no violence is done to any statutory schemes involved especially

if there is a question concerning the applicability of Section 15 of the Act

The statutory scheme to which the Commission had reference in Pierpoint

involved a possible agreement that required filing and formal approval under
34 FEDERAL MARITIME COMMISSION

section 15 of the Act i e a certain type of anticompetitive agreement amo

carriers or other persons subject to the Act In such cases settlements may 

approved but they are subject to formal Commission processing und

section 15 See Pierpoint supra Massachusetts Port Authority v Contai

Marine Lines 11 SRR 37 40 1969 American Export Isbrandtsen Lin

Inc 14 F M C 82 89 1970 Another statutory scheme which requi

special attention when settlements are submitted involves section18 b 3 

the Act While permitting compromise and settlement in complaint ca

alleging that carriers have overcharged in violation ofthat law where the fa

are not readily ascertainable the Commission has been careful to ensure th

the settlement is a bona fide effort to terminate a controversy and not a dev

to circumvent the strict requirements of tarifflaw See Organic Checmicals 

Atlanttrafik Express Service supra 18 SRR at 1539 40

The present case does not involve the complications which occurred 

connection with the section 15 and section l8 b 3 cases described This c

involves simply a compromise and settlement in which the problem presen

was to fashion a reasonable measure of monetary damages arising out 

discontinued practices which had been found to be unduly prejudicial a

unreasonable within the meaning of sections 16 First and 17 ofthe Act Th

is no concern that the settlement itself which is not between two carriers 

other persons subject to the Act and which does not establish ongoing an

competitive conditions need undergo section 15 processing Moreover there 

no tariff policy which comes into play under section l8 b 3 The case m

therefore be evaluated under general principles favoring compromise and s

tlement in which amajor consideration is the factthat the parties after leng

negotiations have determined that whatever they could have achieved to v

dicate their respective positions by means of continued litigation would 

outweighed by the costs of such litigation and that the amount of settlem

to which both have agreed represents a satisfactory compromise and succe

in terminating a

seemingly interminable proceeding

3

Considering furthermo

the extreme difficulty of identifying every bumping instance and every l

job attributable to the Port over a period of more than three years as wel

establishing a formula by which each compensable item ofdamages could 

identified the merits of entering into a compromise and settlement beco

more obvious This case therefore falls into the customary pattern of 

typical settlement which the law encourages in order to terminate complicat

controversies and avoid wasteful litigation See e g Old Ben Coal Compa

v Sea Land Service Inc 18 SRR 1085 1091 1099 ID 1978 F M

adoption December 29 1978 for a full discussion of these principles a

relevant case citations

I

In fOIpoct 10 tho particular amount 0dam pI uponwhich the partiel have aareed the Commlllion hasrecopized tha

it matter for the part1el to datonnine ln Equlp lnc l HUfO ZQMIIt cI Co 8UpNl 17 SRR 1232 at 1234 1971 i

aled

Tho amount of the lettlclmont is a matter ror the pard to detormint and the Commiuion baa in tho palt MCQInized 

tradition Sco Lnatlno SOIII lne v Pnld tlll G LIM Inc 12 SRR 1079 1100 1102 I

D atftrmod in pertinent po

by the Commllllon 14 SRR 1301 1974
PERRY S CRANE SERVICE V PORT OF HOUSTON AUTHORITY 35

CONCLUSION

On the basis of relevant principles of law governing compromises and set

tlements and considering the nature of the settlement entered into by the

parties to this proceeding I

find as in Old Ben supra that the settlement

agreement which the parties have submitted for approval as a means to termi

nate this case is reasonable violates no law or policy and fully comports with

the Commission s policy which strongly encourages settlements Therefore

subject to Rule 227 c as amended 4

the settlement is approved and this

complaint case is discontinued

S NORMAN D KLINE

Administrative Law Judge

June 21 1979

Rule 227 cas amended states as follows

Whenever an administrative law judge orders dismissal of a

proceeding in whole or in part such order in the absence of appeal

shall become the ordcr ofthe Commission 30 days after date ofservice of such order and the Secretary shall so notify the parties

unless within such 3oday periexl the Commission decides to review such order on its own motion in which case notice of such

intention shall be served upon the parties 46 C FR 5502 227 c General Order 16 Arndt 26 served October 25 1978
FEDERAL MARITIME COMMISSION

DOCKET No 79 7

PUERTO RICO MARITIME SHIPPING AUTHORITY

v

SEATRAIN GITMO INC AND

TRAILER MARINE TRANSPORT CORPORATION

NOTICE

July 27 1979

Notice is given that the time within which the Commission could determ

to review the June 22 1979 order of discontinuance of the Administrative L

Judge in this proceeding has expired No such determination has been m

and accordingly that order has become administratively final

S FRANCIS C HURNEY

Secretary
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38 FEDERAL MARITIME COMMISSION

prevent PRM8A from filing a new complaint should a similar charter b

executed in the future

Accordingly in view of complainant s decision to withdraw its complain

this proceeding is discontinued

8 NORMAN D KLINE

Administrative Law Judge

June 22 1979

I

1
FEDERAL MARITIME COMMISSION

DOCKET No 77 27

TRAILER MARINE TRANSPORT CORPORATION

GENERAL INCREASE IN RATES

DOCKET No 77 28

GULF CARIBBEAN MARINE LINES INC

GENERAL INCREASE IN RATES

ORDER ADOPTING INITIAL DECISION ON REMAND

July 31 1979

On December 19 1978 the Commission remanded this proceeding to the

Office of Administrative Law Judges for further hearings after determining

that TMTs rate increases in Docket No 77 27 could not be found to be rea

sonable without some inquiry into TMTs debt equity structure and the effect

of its through movement rates on its port toport rates This proceeding is now

before the Commission upon its determination to review the Initial Decision on

Remand issued in this proceeding on April 18 1979 by Administrative Law

Judge Thomas W Reilly

On remand the Presiding Officer found that the record was sufficient to

allow a final determination as to the reasonableness of the subject rate in

creases in conformity with directives of the Commission Although he found

the rates to be reasonable sufficient evidence of such reasonableness was put

into the record only as a result of the salutary efforts of the Commission s

Bureau ofHearing Counsel In contrast the Presiding Officer specifically noted

that TMT had flatly refused to provide the information required by the Com

mission as part of a deliberate calculated strategy

Although the United States Court of Appeals for the District of Columbia

has found that the Commission does not have jurisdiction over joint through

rail waterrates to and from Puerto Rico the right of the Commission to obtain

any and all information concerning the operations ofregulated carriers reason

ably necessary to carry out its regulatory functions wasupheld TrailerMarine

Transportation Corporation v Federal Maritime Commission 602 F 2d 379
40 FEDERAL MARITIME COMMISSION

D C Cir 1979 In light of this decision the Presiding Officer s warning th

it is a perilous course for a regulated carrierto refuse to divulge the request

information is completely supported by the Commission Had an adequa

record for determination of the reasonableness of these rate increases not be

developed through the efforts of Hearing Counsel they could well have be

held to be unlawful due to the failure of TMT to sustain its burden ofpro

in this regard See Commonwealth ofPuerto Rico v Federal Maritime Co

mission 468 F 2d 872 D C Cir 1972

Because sufficient evidence supporting the ultimate disposition ofthis case 

recommended by the Presiding Officer is contained in the record his decisi

will not be disturbed In the future any carrier s refusal to comply w

Commission orders may cause adverse inferences to be drawn or result in t

imposition of appropriate legal sanctions

THEREFORE IT IS ORDERED That the Initial Decision issued in t

proceeding is adopted and

IT IS FURTHER ORDERED That this proceeding be discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
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42 FEDERAL MARITIME COMMISSION

served June 27 1978 the Commission reviewed sua sponte and conclud

that a finding of reasonableness could not be made on the then existing reco

Because Trailer Marine Transport Corporation Inc TMT began offer

through movement service during the test period involved in the original p

ceeding as evidenced by tariffs on file with the IC C ofwhich the Commissi

took official notice but failed to mention this in its direct case the Commiss

remanded for consideration ofthe relationship between TMTs through mo

ments and its port toport service

The second area remanded for further investigation was the methodolo

used to determine the reasonableness ofTMT s and GCML s GulfCaribbe

Marine Lines Inc new rates The Commission stated in its OFI that T

method used to determine whether the proposed rates of both TMT a

GCML are reasonable also appears to be incomplete No rate of return w

computed on the equity portion of the rate base ofeither carrier Only the ra

ofreturn on total capital were used in arriving at theconclusion thatthe retu

were not unreasonable in comparison with other U S businesses

After the issuance of the Commission s OFI the remanded proceedin

formally commenced with a Prehearing Conference in Washington D C 

January 9 1979 at which uchedule wasworked out later slightly revise

The parties ultimately agreed that no oral hearing would be necessary cons

tent with the Commission s directions in this regard The official record 

decision in this remanded proceeding consists of the following 2

1 Respondent s Direct Case filed January 30 1979

2 Hearing Counsels Interrogatories to Respondents January 12 1979

3 Respondent s Replies to Hearing Counsels

Interrogatories January 

1979

4 Depositions ofWilliamF Roush Craig A Wallace Donald C O Mall

February 1 1979

5 Testimony of Robert A Ellsworth February 16 1979

6 Affidavit of Robert A Ellsworth March 14 1979

The first five ofthe foregoing documents were submitted by Hearing Coun

on March 2 1979 in connection with a Motion To Admit Evidence wh

motion is hereby granted There was no opposition or reply to the motion 

any other party The sixth was separately submitted on Much 14 1979 a

with no opposition and likewise it is admitted in evidence In addition to 

evidence the parties filed the following briefs

a Respondent s Opening Brief March 2 1979

b Hearing Counsel s Opening Brief March 9 1979

c Respondents Reply Brief March 16 1979

d Hearing Counsel s letter of March 19 1979 disclaiming need for rep

I

PropooocI toItimoRY of Thomu L Farmtr daltd Fob 16 1979 wuIRitlally ubmltltd by Hoonna ColmIoi and 

withdrawn by explanatory Iottor ofMarch 9 1979 topthor with an aftldavit from Mr FanneroutllnlnJ tho ciraunlltanCGI 

withdrawal of his IoItimony It mould be Raced that Mr Farmer atao ubmitted earlier tcItimony In the 8m pbuc o

procecdinl January 1978 but I do not detm the IUblequont eventl to have impairwd in any way tho validity of bit e

tatimonv
GENERAL INCREASE IN RATES 43

DISCUSSION

IThe Effect OfTMTs Through Movement Rates On Its Port toPort Rates

The Commission in its OFI questioned TMTs allocation of 100 of its rate

base and expenses to port to port cargo in its G O II submissions which

comprised TMTs direct case in the original proceeding TMT began offering

through movement service during the test period but did not mention this fact

in its direct case

3

making no mention of any other cargo being carried on its

vessels nor offering any explanation why portions of its rate base and expenses

should not be allocated to the through movement cargo Thus the Commission

concluded that A finding that the all water rates are reasonable cannot be

made without reliableinformation as to the effect ofTMTs

through movement

rates on its port toport rates OFI 2 3 GCML does not participate in any

through movement rates thus only TMT is concerned with this portion of the

Commission s OFI4

Hearing Counsels proposed witness Thomas LFarmer made an on site re

view of the Respondents work papers at the corporate offices of the parent

corporation Crowley MaritimeCorporation Crowley in San Francisco how

ever Mr Farmer s

testimony has been withdrawn supra fn 2 so that his

testimony cannot and will not be relied upon or used in any way in thisdecision

In addressing this first issue the Respondents refused to supply any specific

commodity data or through rate division data ocean portion etc either on

their own as part of their direct case or support therefor or in response to

Hearing Counsel sInterrogatories This wasa part ofthe Respondents deliber

ate calculated strategy first explicitly announced at the January 9 1979 Pre

hearing Conference 5despite their acknowledgement that they had the burden

of proof in this proceeding The Commission expressly stated on pages 2

and 3 of the OFI that The rate divisions of the through rate received by the

ocean carrier are relevant to a determination as to the reasonableness ofTMT s

all water rates and Initially there must be an examination of the

comparative levels of the water division of the through rate of the port toport

rate In view of those statements it is a perilous course for aregulated carrier

l

Responding to the Commission sOFf criticism for ignoring TMTs

through movement cargo in its original direct case

Respondents now assert that it did not segregate revenues in the test year because at that time TMT did not know when oreven

if it would get ajoint rail water tariff adopted for filing at FMC orICe and even if it did Respondents believed that the initial

benefits of the tariffwould be minimal for at least a year until it gained general acceptance and use Resp DirCase at 3 TMT

further asserts that historical facts now prove that the omission was meaningless because the amount of revenue derived from

through movement cargo does not meet the criteria of Part SI2 6 c

4 Both in response to an Interrogatory of Hearing Counsel and in their Direct Case Respondents state thatGCML does not

offer through service

S See page 3 fn 2 of Hearing Counsel sOpening Brief also statementsof Mr Roush at Prehearing Conference tr4 and 6

lilt isour position that we wiD show that the through rated traffic represents a very small portion of the traffic in total

which represents so small aportion that the regulations do not provide that we have to segregate that portion of traffic tr4

wJe will not reveal any data that would give the Commission any insight as to what the ocean divisions are on the through

rates tr 6

See also TMTs argument on pages 2 4 ofRespondents Direct Case as towhy the Commission does not need nor its Regulations

require the production of such further data Also see Respondents refusal to answerHearing Counsels

Interrogatory 6 using

assertion This information isnot necessary to prove reasonableness ofrespondents rates Cf OFI at page 3 last full sentence

and fn 3
44 FEDERAL MARITIME COMMISSION

to refuse to divulge the requested information As pointed out in my Jan

ary 22 1979 Ruling On Motion For Clarification the fact that data request

by a

regulatory agency deals with partly regulated and partly unregulated a

tivity is no valid objection to that agency srequest for such data 6

Responden

reliance on whatthe Commission ordinarily requires in carrier s

regular repo

under Part 512 of the Commission s Regulations 46 C F R 5512 is equa

inappropriate having no relevance to what the Commission may require in 

general rate increase proceeding 7

Nevertheless Hearing Counsel did not pursue the issue of adamant refus

to turn over data in the form requested by Hearing CounselS and suggested 

the Commission in its OFI Hearing Counsel now joins with Respondents 

asserting that the material supplied should be sufficient for the Commission 

reach a decision in this limited remand proceeding Respondents point out 

their Direct Case that while Part 512 is not directly applicable here it do

constitute an indication that revenues from other sources which comprise le

than 5 of the revenues from the service over which the Commission has j

risdiction are not considered significant by the Commission with respect 

requiring regular financial reports for such service Resp Dir Case at 2 

Specifically Respondents point to 46 C P R 5 512 6 c as clearly dealing w

only gross revenue when referring to revenue from other cargo and ma

the argument that the most that is required by Part 512 is to segrega

revenue and expenses within the Service only ifthe gross revenue 

othercargo exceeds 5 ofthe gross revenue from the Service TMT in t

test year had port toport revenues of 53 332 000 compared to throug

movement revenue of 1 647 000 Thus TMTs other cargo produced on

3 0of the gross revenue of the servi e and therefore Respondents argu

there is no substantial reason to require a

segregation of revenue and expens

for such a

relatively insignificant amount of other cargo Respondents fu

ther showed using August 1978 as an example that through movement car

produced more revenue than expenses and thus could not be a burden 

port toport traffic 9

Hearing Counsel tested Respondent s conclusions through Interrogatorie

requests for production of documents and oral depositions of three compa

officials Based on this investigation Hearing Counsel concluded that they ha

no basis to argue that TMTs

through movement service places any financ

burden on its all water service The answers of Respondents officials to dep

sition questions on transcript pages 29 3810 add specific details of the natu

of the through movements how billings are recorded and determined a

Seo Ice Goodrl h Troru Co 124 u s 194 ZII 11 16 1911 cited and rpted al pase 3 01 the above J

ary 22 RuUna see allo dilcuuion on pa 2 6 of limo RuUna

1 See 110 Hoarina CouRlIel remarkl on 00 II appUcabUity and adamanee of Relpondentl in refu ins to produce 

opauificd by 1ha CommlJIIon Prohcarina Conleren 1l8ll1lCript 6 7

See f2 at 3 of Hearina CoUll101 Openlq Brief

Reapondcnta 01 CalC aI4

10 AU 3 depolitionl arc bound topther under cover titled Deposition of William F Roulh
GENERAL INCREASE IN RATES 45

where the figures that Respondents used in their Direct Case originated liOn

pages 8 9 Mr Roush explained the source for and calculations made in

determining the revenue produced for the through movement

II The Method Used To Determine Reasonableness Of Rates

In the Commission s OFI the Commission found that the parties use of rate

of return on total capital to determine reasonableness of rates was incom

plete As stated by the Commission

No rate of return was computed on the equity portion of the rate base of either carrier Only the

rates of return on total capital were used in arriving at the conclusion that the returns were not

unreasonable in comparison with other U S businesses The rate of return on equity was not

determined because the respondents complex corporate structure made this impossible

llf such a critical analysis can be avoided by carriers which happen to have a complex corporate

structure there exists the possibility that important aspects of their financial structure regarding

the effect of debt management on profitability may go unexamined When the financing structure

of a subsidiary is unusually complex an acceptable alternative may be the use of the debt equity

ratio and imbedded debt rate of the parent corporation in calculating the respective rates of return

OFI at 4 5

Once again as in responding to the first remanded issue the Respondents

declined to present the Commission with the analysis it requested arguing

instead that they should not be required to make such analysis This argument

is repeated in Respondents Direct Case at 5 8 Respondents argue that only

the G O II accounting methodology should be employed in determining the

rate of return unless the application of such rules and regulations create

unreasonable results citing 46 C F R 512 3 g Y Respondents cite the

decision in Sea Land Service Inc Gen Increase in Rates etc Docket

71 53 13 SRR 907 921 1973 as supporting their positionY However I

find nothing in that decision that in any way constricts or limits the Commis

sion in its discretion to choose the most appropriate accounting methodology

for use in a particular rate proceeding

Even though the Respondents did not present debt and equity data in their

Direct Case Hearing Counsel points out that they did provide sufficient infor

mation to the staff expert witness Dr Robert Ellsworth of the FMC Bureau

of Industry Economics so that he could make the analysis required by the

II In its Di Case Res Xlndents testify that through movement cargo cannot burden its all water cargo because tbe revenue

produced from the through ratc division exceeds the related fully distributed expenses For the most current 12 month period

available to TMT through Nov 30 1918 lotal expenses were 39 814099 During this same period TMT bandied 37 500

forty foot trailers That resulted in average expense per trailcrof 1 061 71 Using the August 1978 example the month chosen

by Hearing Counsel in its Request for Documents the revenue from the 347 through movement trailers was 405 615 an

average revenue of 1 168 91 per trailer Thus the through movement cargo produced a margin overexpenses of 107 20 per

forty foot trailer ergo no expense burden on the port toport traffic Resp Dir Case at 4 5

tl Respondents further contend that no unreasonable results occur by using G O 11 accounting methodology Respondents

should not be subject to the uncertainty ofsubmitting a

financial report based on GO II requirements and having it judged by

another accounting methodology The mathematical exercises sought to be engaged in by the Commission serve little practical

purpose as GO I makes provision for the inclusion in the rate base of the cost less depreciation of the assets used in the trade

Res Oir Case at 6

I

That decision though cited asa

statementofthe Commission in Respondent s Oirect Case wasactually a decision ofAdmin

istrative Law Judge Herbert K Greer in a proceeding that was ultimately discontinued by the Commission on March 18 1975

because twoother proceedings were expected todeal with key issues from the Docket 71 53 proceeding See 14 SRR 1569 1975
46 FEDERAL MARITIME COMMISSION

Commission His analysis is set forth in his testimonyl4 and is directed to 

following areas a rates of return on equity b fair maximum rate

return on equity c debt and equity ratios and d tax savings arising f

interest payments as a deductible expense Again as in the original proceed

the ultimate conclusion as to reasonableness of the new rates is based up

comparison with average rates of return for U S corporations includin

comparison with transportation industries as well as in all industries and 

includes consideration of risk factors for TMT and GCML

Dr Ellsworth disagrees with the Respondent s argument that the Com

sion should utilize the samehypothetical debt and equity ratio concept tha

CAB uses but beyond that his analysis leads him to conclude that the gen

rate increases of TMT and GCML are reasonable when viewed in the ligh

the carriers rates of return

Dr Ellsworth s analysis established embedded debt costs 8 32 T

8 57 GCML and then following the Commission s suggestion used the 

and equity structure ofthe parent corporation Crowley MaritimeCorpora

or CMC as an indicator of the debt and equity structures for TMT 

GCML From this the analysis proceeds to calculate rates ofreturn on eq

After including the post tax effect of the revenue TMT earned from its j

rail water service TMT yields a rate of return on equity of 12 34 a

10 04 return on rate base Dr Ellsworth calculates that GCML should 

realized a negative return on equity of 2 61 and a positive 3 75 retur

rate base The negative return on equity results from the cost of meeting 

imbedded debt being greater than the net income before interest

Dr Ellsworth then determined what the maximum fair rate of return w

be for the Respondents Before arriving at that conclusion he first de

several factors he considered Ellsworth 8 16 Dr Ellsworth calculates 

TMT andGCML would be entitled to amaximum fair rate of return of 

Therefore based on the documentation submitted and his analysis thereo

concludes that the Respondents new rates reftecting the new general 

increases are just and reasonable

CONCLUSION

Ifind that based upon the additional evidence submitted in this reman

proceeding including staff analysis thereof the Respondents new rates in

porating their new general rate increases are just and reasonable within 

meaning of 8l8 a of the Shipping Act 1916 46 U S C 8817 a

S THOMAS W REILLY

Administrative Law Judg

WASHINOTON D C

April 17 1979

14 See allo explanatoryaffldavit of Dr EllIworth dated March 14 1979
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 606

APPLICATION OF SEA LAND SERVICE INC FOR

THE BENEFIT OF NEPERA CHEMICAL INC

REPORT AND ORDER ADOPTING INITIAL DECISION

August 8 1979

BY THE COMMISSION RichardJ Daschbach Chairman Thomas

F Moakley Vice Chairman James V

Day and Leslie Kanuk Commissioners

Sea Land Service Inc filed an application pursuant to section 18 b 3 of

the Shipping Act 1916 46 U S c 817 requesting permission to waive

42 569 90 and refund 280 00 in freight charges to Nepera Chemical Inc in

order to give effect to a rate negotiated between the parties but not filed in the

appropriate tariff prior to shipment

Administrative Law Judge Norman D Kline rendered an Initial Decision

denying the application on the ground that Sea Land had failed to file a

corrected tariff rate which conformed to the negotiated rate Judge Kline based

his decision upon the Commission s holding in Munoz v Cabrero v Sea Land

Service Inc 17 S R R 1191 1977 that secton 18 b 3 absolutely requires

the carrier prior to applying for refund or waiver authority to file a new tariff

reflecting the intended tariffupon which a refund orwaiver is to be based Here

he found that the new tarifffiled by Sea Landwill result in a charge to Nepera

of 18 25 per container more than the negotiated rate

Sea Land filed Exceptions to the Initial Decision arguing that the difference

between the negotiated rate and the rate filed must be regarded as de minimis

and therefore not a jurisdictional defect Sea Land s Exceptions admit that

there is a variance between the negotiated rate and the rate filed but argue that

it results merely from the conversion from the rate negotiated in pounds to the

rate filed in tons and the load factor of the particular commodity
48 FEDERAL MARITIME COMMISSION

DISCUSSION AND CONCLUSION

The rate negotiated between Sea Land and Nepera and the rate filed 

Sea Land pursuant to its application are clearly at variance The rate f

would result in a charge to Nepera greater than the rate negotiated

The Commission held in Munoz supra at 1193 that

Section 18 b 3 requires that prior to applying for a

refund or awaiver the carrier file a new t

upon which such refund or waiver will be based When read inconjunction withthe statem

in the House and Senate reports it is clear that the new tariff is expected to reflect a

p

intended rate not a rate agreed upon after the shipment

T he authority granted by P L 90 298 to depart from the rigid requirements of Section 18 b 

of the Act and to make arate applicable retroactively is strictly limited and in our opinion w

not extend to approve a rate which was never agreed upon or intended to be filed

No argument has been advanced that would justify a modification of t

holding Munoz reflects Congress intention that the requirements of sec

18 b 3 special docket applications be strictly applied A strict applicat

does not allow even for a de minimis exception

THEREFORE IT IS ORDERED That the Exceptions to the Initial De

sion of Sea Land Service Inc are denied and

IT IS FURTHER ORDERED That the Initial Decision served April 

1979 is adopted and made a

part hereof and

IT IS FURTHER ORDERED That this proceeding is discontinued

5 FRANCIS C HURNEY

Secretar
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 606

APPLICATION OF SEA LAND SERVICE INC FOR

THE BENEFIT OF NEPERA CHEMICAL INC

Adopted August 8 1979

Application for permission to waive and refund portions of freight charges denied

Carrier applicant failed to publish specific commodity rate on a particular commodity after

cancelling and republishing its tariff although its solicitor had indicated to the shipper that

the specific rate would be carried over into the new tariff This situation may have resulted

in a tariff error of a clerical or administrative nature or constitute an inadvertence in failing

to file a new tariff However the application is fatally defective because the carrier in filing

the new conforming tariff prior to filing the application as required by law filed a rate

different from that quoted to the shipper and from the rate which had been published in the

previous tariff

Since the application was filed on the very last day permitted by law it was too late to reject the

application so that carrier could file a corrected conforming tariff and new application

INITIAL DECISIONl OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

This is a special docket application filed by Sea Land Service Inc Sea

Land seeking permission to waive a total of 42 569 90 and refund 280 00

in freight charges for the benefit of the shipper a

company known as Nepera

Chemical Inc located in Harriman New York Sea Land seeks this permis

sion in connection with two shipments of a

liquid chemical known as beta

picoline 2

carried in tank containers on the SEA LAND GALLOWAY which

sailed out ofPort Elizabeth New Jersey on June 10 1978 bound for the port

ofBarcelona Spain The first shipment consisted oftwo containers in which an

aggregate of 73 680 lbs of beta picoline were carried The second shipment

consisted of three containers in which an aggregate of 108 820 lbs of this

commodity were carried

I

This decision will become the decisionof the Commission in the absence of review thereofby the Commission Rule 227 Rules

of Practice and Procedure 46 CF R 1502 227

2 This commodity isreferred to as picaline in a Lands

tariffsbut as picoline in Sea Lands

shipping documents letters

tndapplication According toWebster sThird New International Dictionary at 1711 the correct spelling is picoline and beta

pi ine is a liquid used in making nicotinic acid Sea Land ought to correct the spelling in its tariff
50 FEDERAL MARITIME COMMISSION

The application wasmailed from Sea Land s headquarters in New Jerse

December 7 1978 exactly 180 days after the date of sailing and is u

consideration in accordance with the special docket provisions of se

18 b 3 of the Shipping Act 1916 the Act and the procedures establ

under Commission rule 92 a as amended The sworn application is 

documented with affidavits inter office memoranda letters bills of la

freight bills pertinent tariffpages and a calculation of freight charges asb

and collected from the shipper on each of the shipments All of this evid

appears to make out a case for the relief requested on the basis of tariff

of a clerical or administrative nature as well as inadvertence on the part o

carrier to file an intended rate prior to the time of the shipments in que

as described in greater detail below However because the new tariff w

Sea Land filed to correct its error does not conform to the prior intended 

and because the application was filed on the very last day permitted unde

applicable law and regulations so that a new filing is impossible the applic

must regrettably be denied

FACTUAL BACKGROUND

This case involves the failure ofSea Land when canceling a previous 

and republishing a new tariff to continue to publish in the lattertariff asp

commodity rate on beta picoline although Sea Land s sales represent

had indicated to the shipper that such rate would be continued in the 

tariff

The well documented materials which Sea Landhas appended to its app

tion tell the following story Prior to December 31 1977 Sea Land had 

lished commodity rates from US North Atlantic ports to ports in Spain 

Freight Tariff No 166 FMC 43 That tariff had contained a rate on 

lines refined mixed of 6 85 per hundredweight minimum 40 000 Ibs 

container Tariff No 166 Item 9140 On December 31 1977 Sea 

cancelled this tariff and published a new tariff for tank trailers namely T

No 232 FMC No 104 This new tarifffailed to publish a specific comm

rate for picalines Before the new tariff had been published howev

Sea Land sales representative Mr Karl Douglass had requested Sea La

Pricing Department to continue the old rate of 6 85 per hundredwe

minimum 40 000 Ibs in the new tariff and furthermore Mr Douglass 

notified the shipper Nepera Chemical Corp that this old rate wou

continued in the new tariff by letter dated December 6 1977 Some

however the Pricing Department which apparently did not know of 

representations made to the shipper did not cause a transfer of the old ra

the new tariff The result was that when the shipments of Beta Picoline 

carried on June 10 1978 there wasno specific rate for that commodity an

cargo N O S rate for liquid non hazardous a higher rate of 63125 pe

of 2240 Ibs minimum 40 000 Ibs per tank was considered by Sea Land

applicable TariffNo 232 Item 10 12th Rev page 5

Upon learning that the shipments were rated on the basis of the C

N O S rate Sea Land s Pricing Department requested the Tariff Publica
APPLICATION OF SEA LAND SERVICE INC 51

Department to publish a specific commodity rate for this item This was done

Effective June 21 1978 only 10 days after the sailing Sea Land by telex filing

publsihed a rate on Beta Picaline in tanks of 162 25 minimum 17 WTper

tank container TariffNo 232 6th Rev page 5 AAlthough the shipments

were rated on the higher Cargo N O S rate basis the shipper did not actually

pay the amount so rated On the first shipment of two containers the shipper

paid 280 50 more than the freight charge which would be payable under the

new rate of 162 25per WT minimum 17 WT On the second shipment ofthree

containers the shipper actually paid 25 less than the freight which would be

payable under the new rate Sea Land wishes to retain only the total amount

offreight calculated on the basis ofthe new 162 25 rate and ifthe application

is granted would in fact be refunding 280 25 to the shipper and would be

waiving any amount of freight over a total of 13 79125 which are the total

freight charges calculated on the basis of the new 162 25 per ton rate which

Sea Land wishes to apply retroactively to the shipments See Calculation of

Freight Charges on Shipments ofPicolines from Elizabeth N J Ex 7 The

amount of the waiver would be over 42 000

DISCUSSION AND CONCLUSIONS

As mentioned this is a special docket application filed under the provisions

of section 18 b 3 ofthe Act as amended by P L90 298 Ithas been recog

nized in numerous special docket decisions of the Commission that this law is

remedial and equitable in nature and is designed to relieve shippers of financial

harm which would fall on them because of carriererror in tariffpublishing and

filing See e g D F Young Inc v Cie Nationale Algerienne de Navigation

18 SRR 1645 1979 Ghiselli Bros v Micronesia Interocean Lines Inc

13 EM C 179 182 1970 Hermann Ludwig Inc v Waterman Steamship

Corporation 18 SRR 383 385 1978 Westinghouse Trading Co Division of

Westinghouse Electric Corp v American Export Lines Inc 18 SRR 570

572 574 1978 Nevertheless it is also well established that although the law

is based on equitable principles applications for relief must show that a bona

fide error of the type contemplated by the law occurred and that certain other

conditions have been met For example applications do not qualify for relief

even under this remedial statute if a zealous solicitor makes unauthorized

representations to a shipper which the carrier never intended him to make or

if a rating clerk misreads a tariffor misquotes a rate in a tariff and the carrier

never intended its tariffto conform to the unauthorized or mistaken quotation

See Farr Co v SeatrainLines 17 SRR 1463 1467 1469 ID 1977 18 SRR

369 F M C 1978 and the legislative history to P L 90 298 cited in 17 SRR

at 1467 n 6 Equitable though this law may be the advocates of the law made

clear to Congress that ifthe Commission obtained the authority to grant special

docket applications it would act carefully to guard against rebating and would

not treat these applications as matters to be rubber stamped See remarks of

Mr John Mahoney and Chairman Harllee to the House Subcommittee on

Merchant Marine and Fisheries cited in 17 SRR at 1467 n 6 These remarks

in the legislative history furthermore demonstrate the important fact that
52 FEDERAL MARITIME COMMISSION

carrier intent to file a conforming tariff prior to shipment was consi

necessary Mr Mahoney a spokesman for the bill even stated that i

Commission gets this power it must be made clear that carriers and sh

alike will have a

very heavy burden to show good cause for relief under 

conditions Hearings at 103 cited in 17 SRR at 1467 n 6 Chairman H

concurred with Mr Mahoney s sentiments Furthermore the Chairma

sured the Subcommittee that the proceeding would be carefully examine

anAdministrative Law Judge then called hearing examiner toensure th

applicant had established the factthat there has been a bona fide mistake 

colloquy between Chairman Harllee and Congressman Edwards Hearin

H R 9473 before the Subcommittee on Merchant Marine Fisheries 

Cong 1st Sess Sen No 90 11 1967 at 88

In addition to the above it is clear that there are certain jurisdic

prerequisites which cannot be waived and which every applicant must me

fore the Commission can grant the relief requested Among them are t

quirement that the application be filed no later than 180 days after d

shipment and that the new tariff showing the rate on which relief is bas

filed before the application is filed 3

In this case although not entirely free of doubt it appears that there w

error in Sea Land s new tariff published after December 31 1977 be

Sea Land forgot to continue publishing the commodity rate on pica

which had appeared in its previous tariff It also appears that Sea Land 

have inadvertently failed to publish this commodity rate in its later 

because ofa failure of communication between the solicitor who represen

the shipper that the old rate of 6 85 per hundredweight would be cont

in the new tariff and Sea Land personnel authorized to make good o

quotation Iqualify these findings because of the fact that it is not clea

Sea Land conceived the intent to continue the old rate in the new tariff 

to the time of the shipment since the official Mr Kenneth D Nenart 

apparently had authority to back up the sales representative and cause t

rate to be published in the new 1978 tariffwasunaware of the quotation 

to the shipper when publishing the new tariff and states that had he k

of the quotation made by K Douglass to Nepera Chemical he would 

published same in the applicable tariff to protect booking made Affida

Kenneth D Nenart Assistant Pricing and Conference Manager Mediterra

Service of Sea Land Service Inc

Although prior conceived intent by a carrier hasbeen found to be areq

element before the Commission could conclude that there was an inadv

failure to file a tariff had there been no jurisdictional defect otherwise 

application this application could have been granted perhaps by finding 

the later ratification by Mr Nenart of the original quotation demonstra

I Soction 18 b3 oftho Act utbarl the Commi ion to lrant lpOCial dooket applications but amon othor thinp 

that the common carrier bywater in foreip OJRllnerc c haa prior to applyinafor authority to mako refund filed a

with the Federal Maritime Commission which lOts forth the rateon which luch refund orwaiver would be bued and 

that application forrefvnd or waiver mUltbe filed with tho CommiuJon within one hundred and eiahty days from tb

shipment

See MUnDI I Cabrtro v Sea uNi Stn ct lnc 17 SRR 1191 1977 and the lcaudative history diacul1lCd In 

v S tllln UnI IUpra 17 SRR at 1467 n

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hoTnlCC JTATfATn rIIII TI T l IfT 71
RECOVERY OF CARRIERS INCREASED FUEL COSTS 153

Respondents further argue that the circumstances and events resulting in

increased fuel costs the Iranian revolution and accelerated OPECprice escala

tions could not have been reasonably foreseen by them as prudent business

men They note that the United States Government with its myriad agencies

which specialize in predicting the course ofpolitical and economic events was

apparently surprised by the Iranian revolution and the subsequent dramatic

rise in the cost of crude oil

Finally respondents have submitted affidavits which are intended to demon

strate that the emergency conditions are significantly impeding their oper

ations Among the impediments cited are the following I total unavailability

of fuel in certain areas 2 shortages at some ports causing delays last minute

alternative arrangements deviations and disruption of normal service patterns

3 the need to purchase supplemental fuel at extraordinary prices 4 reduc

tion in vessel speeds with a concomitant increase in transit time 5 severe

economic harm to the carriers 6 inability to carry out obligations under dual

rate contracts 7 removal of vessels from service 8 cancellation of plans to

introduce additional vessels into some trades and 9 fewer calls at certain

ports and in some cases complete elimination of service

Some parties further contend that bunker surcharges can and should be

imposed on less than 30 days notice or that such surcharges are not at all

subject to the Shipping Act provisions governing dual rate contracts II In

addition the contention has been raised that arbitration under the Uniform

Merchant s Contract is the proper or preferred forum for resolving any shipper

complaints engendered by the bunker surcharges and not an investigation by

the Commission

Hearing Counsel agrees with respondents that 1 The bunker surcharges

are the result ofextraordinary conditions 2 the extraordinary conditions have

impeded obstructed or delayed the obligations of these carriers 3 the ex

traordinary conditions were outside or beyond the carriers control and 4 the

carriers using a high degree of diligence and sound business judgment could

not have foreseen or anticipated the conditions upon which the surcharges are

based In addition Hearing Counsel points out that out of the tens ofthousands

of dual rate contract signatories not one has served notice of cancellation

requested arbitration or alleged any breach of the contract as a result of the

imposition of the surcharges

IWPA raises the only note of opposition to these bunker surcharges It

concedes that the increases in bunker fuel costs were beyond the control of the

carriers but nonetheless contends that these cost increases are not extraor

dinary conditions nor do they unduly impede obstruct or delay the confer

ences obligations under their dual rate contracts IWPA also argues that by

applying a high degree of diligence and sound business judgment the substan

tial increases in bunker fuel costs could have been anticipated without neces

sarily having had anticipated the specific cause of such increases Finally

II These arguments which have been previously raised were effectively disposed of in the Order See Order at 4
154 FEDERAL MARITIME COMMISSION

IWPA states that a bunker surcharge would increase trigger prices for

imported carbon steel wire rods contrary to its and the nation s interests 12

Sea Land submitted a memorandum in reply to IWP A

stating 1 that the

interest of the intervenor in the proceeding is impossible to ascertain and 2

that the argument concerning trigger prices is irrelevant and raises matters

beyond the Commission s authority

Section 14b of the Shipping Act requires dual rate contracts to

pI provides that whenever a tariff rate for the carriage of goods under the contract become

effective insofar as it is under the control of the carrier or conference of carriers it shall not be

increased before a reasonable period but in no case less than ninety days

The statute clearly contemplates circumstances in which rate increases could

become effective on less than ninety days notice if they are not under the

control of the carrier or conference In The Dual Rate Cases 8 F MC 16

1964 the Commission affirmed this position and also prescribed specific con

tract clauses which would permit rate increases on less than normal notice

under certain abnormal conditions These contract clauses are presently em

bodied in the Uniform Merchant s Contract as paragraphs 14 a 14 b and

14 c 46 C F R 538 l0 Theflrst two apply where war or other govern

mental actions e g embargoes or blockades interfere with a carriers service

and permit suspension of the contract Article 14 a or rate increases on no

less than 15 days notice to shippers Article 14 b The latter clause which

applies to the circumstances of this case provides

14 c In the event of any extraordinary conditions not enumerated in Article 14 a which

conditions may unduly impede obstruct or delay the obligations of the Carner or Carriers the

Carrier or Carriers may increase any rate or rates affected thereby in order to meet such con

ditions Provided however That nothing in this Article shall be construed to limitthe provision

of section I 8 b of the Shipping Act 19 I 6 as amended in regard to the notice provisions of rate

changes

The criteria necessary to invoke the extraordinary conditions clause of the

Uniform Merchant s Contract were set forth in Surcharg at US Atlantic and

GulfPorts 10 F M C 13 1966 1 the condition must be outside or beyond

the carrier s control 2 the condition must impede or delay the carrier s

service and 3 there must be an emergency an abnormal condition or an

extraordinary circumstance The nature of the condition ie whether it is

normal or abnormal or emergency or extraordinary is determined in large

part by its foreseeability whether the carriers by exercising a high degree

of diligence could have anticipated the condition

Based upon the complete record in this proceeding the Commission finds

that these bunker surcharges are the result of extraordinary conditions which

were beyond the carriers control and which were not foreseeable using a high

degree of diligence Certainly the Iranian situation the OPEC pricing deci

sions the dramatic rise in fuel oil prices and the severe reduction in supply are

U Steel wire rod are lubject to the triaacr price mechanism adopted by the Department of Treasury inconnection with ita

implementation of the Anti Dumpina Act of 1921 19 USC

11160 173 Thi ls Item tltablilhes triuer prices which are

bued on the full COItl of production and which are then Uled as a ba i for monitorin teol imports Into the United States the

trlacr price mccl1anlsm was upheld in Ihwis Walt Corp v Blumenthal 460 F Supp 283 DDC 1978

IlSection 18 b2 requires thirty days notice of rateincrcuc
S FRANCIS C HURNEY

Secretary

RECOVERY OF CARRIERS INCREASED FUEL COSTS 155

abnormal conditions which were not subject to any control by the carriers Nor

do these conditions appear to have been reasonably foreseeable by anyone

whether a governmental entity or a commercial carrier There is no evidence

that the carriers in this proceeding possessed sufficient information to enable

them to anticipate these conditions Moreover the price increases occurred

suddenly and not slowly and steadily over a significant portion of time as did

the increases in Atlantic and GulfWest Coast ofSouth America Conference

14 F M C 166 1970

The Commission also finds thatthese extraordinary conditions would unduly

impede obstruct or delay the obligations of these carriers The primary imped

iments which these carriers have experienced are severe financial losses delays

and disruption of service caused by cost and unavilability of bunker fuel These

occurrences would indeed impair the carriers ability to carry out their obli

gations under the Uniform Merchant s Contract particularly that of main

taining a steamship service which shall so far as concerns frequency ofsailings

and carrying capacity of vessels be adequate to meet the merchant s require

ments Article 2

For the foregoing reasons we find the bunker surcharges instituted by these

carriers and conferences of carriers to be lawful under section l4b of the

Shipping Act

THEREFORE IT IS ORDERED That the Petition of the Independent

Wire Producers Association for Leave to Intervene is granted to the extent

indicated above and

IT IS FURTHER ORDERED That the Motions to Dismiss filed by the

Bureau of Hearing Counsel and the Java New York Rate Agreement are

hereby granted and therefore the Mediterranean U S A Great Lakes West

bound Freight Conference the U S Great Lakes South East Mrica Rate

Agreement the India Pakistan Bangladesh Ceylon Burma Outward

Freight Conference and the Java New York Rate Agreement are dismissed

from this proceeding and

IT IS FURTHER ORDERED That no violations of the Shipping Act

having been found this proceeding is hereby discontinued
FEDERAL MARITIME COMMISSION

IoCKET OS 79 21 22 23 24 25 26 31 32

33 34 35 37 38 39 40 41

FAILURE TO INCLUDE PROVISIONS

FOR ADEQUATE SELF POLICING AS REQUIRED

BY GENERAL ORDER 7

Conference and rate making agreements which failed to incl lde provisions for adeq

policing as required by General Order 7 are found to be inadequately policed 

therefore disapproved

Charles F Warren and George A Quadrino for Deli New York Rate Agreement Str

York Conference Philippines North America Conference Java Pacific Rate Ag

Java New York Rate Agreement Deli Pacific Rate Agreement Japan Puerto 

Virgin Islands Freight Conference Atlantic Gulf Indonesia Conference Thail

Atlantic Gulf Indonesia Conference Atlantic Gulf Singapore Malaya 

Conference and Thailand Pacific Freight Conference

David C Nolan for Hawaii Europe Rate Agreement

Stanley O Sher for U S Atlantic Gulf Red Sea Gulf of Aden Rate Agreement

Huberr Burstein for International Movers Rate Agreement

Martin F MeAlwee Paul J Kaller and John Robert Ewers for Bureau of Hearing 

BY THE COMMISSIO RichardJ Daschbach Chairman T

F Moakley Vice Chairman James 

Day and Leslie Kanuk Commissio

REPORT A D ORDER1

October 17 1979

During April of 1979 the Commission issued sixteen Orders to Show 

in the abovereferenced proceedings 2

These Orders stated that beca

subject agreements failed to meet the minimum requirements for a

I These proceedings involve substantially the same issues and are accordingly consolidated for decision pursuant 

oftho Commission Rules of Practice and Procedure 46 CF R 1502 148

1

Respondents include the Collowing ratemaking sroups and their individual members

a

79 21 Agrcement No 1190 Deli New York Rate Agreement

b 79 22 Asrcement No 6010 Straits New York Conference

c

79 23 Agreement No 5600 Philippines North America Conference

d 79 24 Agreement No 191 Java Pacific Rate Agreement

e 79 2S Agreement No 90 Java New York Rate Agreement
DISCUSSION

FAILURE TO INCLUDE PROVISIONS FOR ADEQUATE SELF POLICING 157

self policing as set forth in General Order 7

3

they were presumed not to meet

the requirement of section 15 of the Shipping Act 1916 that obligations under

such agreements be adequately policed Respondents were thus ordered to

show cause why their agreements should not be disapproved for failure to be

adequately policed The proceedings were limited to the submission ofaffidavits

of fact and memoranda of law

Three Respondents failed to file any affidavits of fact or memoranda of law

or any other response to the Orders to Show Cause 5 One Respondent re

quested cancellation of its rate agreement

6

Another filed a Petition for Ex

emption from the Self Policing Provisions Set Forth in General Order 7 as its

sole response to the Order 7Finally a group of eleven Respondents all repre

sented by the same counsel filed identical Responses to the Order to Show

Cause s The Commission s Bureau of Hearing Counsel which had been made

a party to these proceedings filed reply memoranda in all dockets The eleven

Respondents filed identical responses to Hearing Counsels

replies

Background

Section 15 of the Shipping Act 1916 requires the disapproval of any agree

ment which must be filed with the Commission o n a finding of inadequate

policing of the obligations under it 9

To effectuate this provision the

Commission adopted rules governing self policing of Commission approved

agreements which prescribed minimum standards for judging the adequacy of

self policing activities 46 C F R 528 0 a Because prior self policing

systems had generally proven inadequate these rules impose as their central

requirement the establishment of an independent self policing body with broad

investigatory powers and detailed reporting requirements See 46 CF R

528 3 and 528 5

f 79 26 Agreement No 192 Deli Pacific Rate Agreement

g

79 JI Agrcement No 8190 Japan Puerto Rico Virgin Islands Freight Conference

h 79 32 Agreement No 8080 Atlantic Gulf Indonesia Conference

i 79 33 Agreement No 8100 Thailand US Atlantic Gulf Conference

j

79 34 Agreemcnt No 8240 Atlantic GulfjSingalXlre Malaya Thailand Conference

k 79 35 Agreement No 8410 Hawaii Europe Rate Agreement

I 79 37 Agreement No 8530 International Movers Rate Agreement

m 79 38 Agreement No 8595 Great Lakes Japan Rate Agreement

n

79 39 Agrcement No 8670 Japan Great Lakes Memorandum

o

79 40 Agrcement No 9474 Thailand Pacific Freight Conference and

p

79 41 Agreement No 10025 US Atlantic Gulf Red Sea Gulf of Aden Rate Agreement

J General Order 7 which contains self policing requirements for section 15 agreements was published as a

final rule on

September 14 1978 and became effective January I 1979 See 46 CFR Part 528 General Order 7 Docket No 73 64 Report

and Order dated April 26 1978 as amended by Order on Reconsideration served September 14 1978

46 VSC 814

SDocket Nos 79 38 39 41

6 Docket No 79 35

7 Docket No 79 37 In addition several companies which had been named as respondents in the Order to Show Cause

subsequently infonned the Secretary Federal Maritime Commission that they no longer were members of the International

Movers Rate Agreement

Oooket No 79 21 22 23 24 25 26 31 32 33 34 40

946 Vs C 8 4
158 FEDERAL MARITIME COMMISSION

The Commission s final order in thisrulemaking proceeding has been appeal

ed to the U S Court ofAppeals for the District ofColumbia Circuit 10 One of

the major issues raised is whether the final self policing rules exceed the

Commission s statutory authority Concurrently on December 8 1978 memo

bers of the Trans Pacific Freight Conference of Japan Korea and 26 other

agreements petitioned the Commission to stay the January I 1979 effective

date of these revised self policing regulations The Commission denied the

petition on February 16 1979 Subsequent to the issuance of the show cause

orders and over six months after the effective date of the rules Trans Pacific

et al filed an Application for Stay of the Commission s September 14 1979

Order with the Court ofAppeals In a per curium opinion filed July 16 1979

the court denied the application for stay

Proceedings

With respect to those respondents who failed to file any responses to the

Orders to Show Cause Docket Nos 79 38 39 41 Hearing Counsel recom

mends thateach agreement be disapproved and thatdisapproval become effec

tive 45days from the date ofthis Order The Commission would normally adopt

Hearing Counsels dispositional recommendation However events which oc

curred subsequent to the filing of Hearing Counsel s

reply dictate a different

result The Commission has recently received notice that the Japan Great

Lakes Memorandum Agreement Docket No 79 39 and the Great Lakes

Japan Rate Agreement Docket No 79 38 have been cancelled The Com

mission has also received notice that the Us Atlantic Gulf Red Sea

Gulf of Aden Rate Agreement Docket No 79 41 has been amended to

comply with the requirements ofGeneral Order 7 Under these circumstances

the Commission will dismiss the proceedings against these agreements

I I

The three members of the Hawaii Europe Rate Agreement Docket

No 79 35 have requested that their agreement be cancelled They have

further requested that individual lines be granted time to prepare their own

tariffs before that cancellation becomes effective Hearing Counsel concurs in

these requests The Commission will accordingly disapprove this agreement

effective 60 days from the date of this Order

In lieu of filing affidavits of fact or memoranda of law in response to the

Order to Show Cause the International Movers Rate Agreement Docket

No 79 37 submitted an affidavit petitioning for an exemption from the neu

tral body requirement of General Order 7 Hearing Counsel avers that the

representations made in the affidavit if true make a credible case for

deferring consideration of an order of disapproval until the Commission deter

mines the merits of the requested exemptions However this petition for ex

emption is non responsive to the Commission s Order to Show Cause and must

10 Trans Pacific Freight COIiferttWe ofJapanjKOrta et ai Federal MQIitiml Commisslon mutthe Untied Statesof America

DC Cir No 78 2172 Sea LandService Inc II FtderoJ Maritime Comml3sion and the United States of Artwrlca DCCir

No 79 1062

II The Motion to OismillProceedinaon the Ground of Mootncu filed by the US Atlantic Gulf Red Sea GulfofAden

Rate Aarcemcnt will allO be dismiued al moot
FAILURE TO INCLUDE PROVISIONS FOR ADEQUATE SELF POLICING 159

be denied though we will do so without prejudice 12 The Commission will

consequently disapprove Agreement No 8530 but will again defer the effective

date of disapproval for 60 days

In their responses to the Orders to Show Cause the eleven remaining re

spondents contend that they cannot possibly overcome the presumption of

inadequate policing raised by the Orders except by full and complete compli

ance with revised General Order 7 They also maintain that because the

question of the validity of these regulations is currently on appeal the Commis

sion should not engage in proceedings which collaterally interfere with the

judicial process Hearing Counsel notes that these agreements are not in fact

policed by a neutral body and are therefore presumed to be inadequately

policed Hearing Counsel also claims that respondents err in arguing that these

show cause proceedings constitute collateral interferencewith the judicial proc

ess In order to allow respondents to comply with General Order 7 or to permit

individual member lines to file tariffs Hearing Counsel recommends that

disapproval take effect 60 days from the Commission s final order

The Commission has recently received notice that two of these eleven agree

ments have complied with the requirements of General Order 7 The pro

ceedings against the Thailand U S Atlantic Gulf Conference Docket

No 79 33 and the Thailand Pacific Freight Conference Docket No 79 40

will therefore be dismissed

As to the remaining nine respondents they have offered little support for

their contention that the Commission should not resolve these proceedings

because the validity of the self policing rules is presently on appeal Their only

legal authority 28 U S c S 2342 is inapposite it merely states that the

Court ofAppeals has exclusive jurisdiction to determine the validity of final

agency orders IJ Moreover the Court of Appeals has denied the petitioners

application for a stay of the self policing rules These cases can therefore be

resolved without collaterally interfering with the judicial process

These respondents readily admit that they have submitted no affidavits of

fact or memoranda of law which would demonstrate that their agreements are

adequately policed under the requirements of General Order 7 and section 15

of the Shipping Act As a result the Commission has no choice but to proceed

to disapprove each of these agreements However the Commission will defer

the effective date ofdisapproval for 60 days from the date of thisOrder to allow

members of these agreements to file individual tariffs

THEREFORE IT IS ORDERED That the proceedings against Agree

ments Nos 8595 Great Lakes Japan Rate Agreement 8670 Japan Great

Lakes Memorandum 10025 U S Atlantic Gulf Red Sea Gulf ofAden

Rate Agreement 8100 Thailand U S Atlantic Gulf Conference and

9474 Thailand Pacific Freight Conference are dismissed and

11The Commission has determined that the filing of a petition for exemption does not relieve aconference or rate fixing body

from the independent neutral body requirements of section 528 3 b of General Order 7 during the pendency of the petition

Statement of Federal Maritime Commission released December 15 1978

IJBecause 28 USc f2349 b provides that t hc filingofthe petition to review does not ofitselfstay orsuspend the operation

of the order of the agency the rules would normally remain in effect during the process of appellate review
160 FEDERAL MARITIME COMMISSION

1

IT IS FURTHER ORDERED That the U S Atlantic and Gulf Red Se

Gulf of Aden Rate Agreement s Motion to Dismiss Proceedings on th

Ground of Mootness is dismissed and

IT IS FURTHER ORDERED That the Petition for Exemption from th

Self Policing Provisions set Forth in General Order 7 filed by the Internation

Movers Rate Agreement is denied without prejudice and

IT IS FURTHER ORDERED That Agreements Nos 7190 Deli Ne

York Rate Agreement 6010 Straits New York Conference 560

Philippines North America Conference 191 Java Pacific Rate Agre

ment 90 Java New York Rate Agreement 192 Deli Pacific Rate Agre

ment 8190 Japan Puerto Rico Virgin Islands Freight Conference 808

Atlantic Gulf Indonesia Conference 8240 Atlantic Gulf Singapor

Malaya Thailand Conference 8410 Hawaii Europe Rate Agreement

and 8530 International Movers Rate Agreement are hereby disapproved an

IT IS FURTHER ORDERED That disapproval of these agreements sha

become effective 60 days from the date of this Order and

IT IS FURTHER ORDERED That these proceedings are discontinue

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER A GENERAL PROVISIONS

GENERAL ORDER No 16 AMDT 31 DOCKET No 79 49

PART 502 RuLES OF PRACTICE AND PROCEDURE

October 17 1979

ACTION

SUMMARY

Final Rule

This amends the rule governing intervention in Commis

sion proceedings to I specify applicable standards for

intervention and 2 allow for limitation of intervenors

participation in Commission proceedings Rule 24 of the

Federal Rules of Civil Procedure has been used as a model

for the Commission rule

EFFECTIVE DATE October 23 1979

SUPPLEMENTAL INFORMATION

This proceeding was instituted by Notice ofProposed Rulemaking 44 Fed

Reg 28694 28696 to amend Rule 72 of the Commission s Rules of Practice

and Procedure 46 C F R 502 72 to conform to the intervention standards

in Rule 24 of the Federal Rules of Practice and Procedure to the extent

appropriate in Commission proceedings

As proposed to be amended Rule 72 would

I

incorporate the requirements contained in the existing Commission rule

as to the form and procedure for submitting petitions for intervention

Paragraph a

2 establish the standards under which petitions for intervention would be

considered This provision would require petitioners to indicate whether they

seek intervention as a matter of right or in the discretion of the Commission

and the extent ofparticipation sought Intervention as amatter ofright would

require a showing of either specific statutory authority or an interest relating

to the matter which is the subject of the proceeding and that the proceeding

may materially affect that interest and that such interest is not adequately

represented by existing parties to the proceeding
162 FEDERAL MARITIME COMMISSION

Permissive intervention requires a showing that the petitioner s interes

volves a common issue of law or fact with the matter being litigated 

intervention will not unduly broaden or delay the proceeding duplicate 

positions of or prejudice existing parties and its participation will contribut

the proceeding in some significant way The timeliness of the petition w

also be considered in determining whether intervention should be gran

Paragraph b

3 provide the mechanism for limited intervention i e the presentatio

evidence on specific factual issues and or the submission of amicus cu

briefs on selected legal issues and would allow for continuing control over 

participation Paragraph c

4 incorporate the existing Commission rule on the limitation of disco

right for later intervenors Paragraph d

5 provide that discovery may be limited in the same manner as petition

participation Paragraph e

6 allow for Commission review of intervention rulings made by the 

siding officer Paragraph f

Comments to the proposed rule were received from nine parties in 

submissions Commentators consist of six conferences one shipper one 

owners association and one government agency

The Pacific Westbound Conference the PacificStraits Conference and 

Pacific Indonesian Conference suggest that those seeking permissive in

vention be allowed to intervene even if their position may be duplicativ

another party It is allegedly difficult to have a common question oflaw or 

which is not duplicative of another party s These commentators further p

out that it may also not be possible to determine at the very early stages 

proceeding if a given party s position is in fact duplicative

The Council of European Japanese National Shipowners Associa

proposes three areas of clarification 1 that the rule expressly not be m

applicable to rulemaking proceedings 2 that it not preclude the interven

of trade associations and 3 that the prohibition against a permissive i

vention prejudicing the rights of an existing party be made applicable on

the adjudication of the rights of original parties

The Japan Korea Atlantic and Gulf Freight Conference and Trans Pa

Freight Conference of Japan Korea suggest that 1 either the require

that the petition be served on all parties or the requirement that the Com

sion be provided copies for distribution be deleted and 2 the rule be ame

to allow for replies to appeals to the Commission on intervention rulings

Outboard Marine Corporation is of the opinion that the participatio

Hearing Counsel as aparty representing the public interest should 

preclude the intervention of appropriate private interests even though 

intervention may arguably be duplicative To this end it is suggested tha

term party as used in the rule be defined to expressly exclude He

Counsel

Interamerican Freight Conference takes the position that I disco

procedures not be available to intervenors filing only amicus briefs and 

stricted to those factual issues to which the participation was limited 2 
RULES OF PRACTICE AND PROCEDURE 163

provision allowing for astatutory right of intervention be deleted as no such

statute exists 3 the requirement that an intervenor show that its interests will

not be adequately represented by existing parties be deleted as such a provision

would require adverse representations as to the abilities ofcounsel for existing

parties in situations where only legal issues are being argued and 4 the rule

be amended to make clear whether copies of the petition for intervention are

to be served on existing parties by the party seeking intervention or the Com

mission with the latter alternative being urged

The Department ofJustice 001 views the proposed revised rule as making

two fundamental changes to the existing rule I establishing categories of

intervenor petitions with different requisite showings and 2 limiting and

controlling the extent of intervenor participation No objection is made to the

establishment of categories but limitations on the extent of participation of

intervening parties is objected to as clearly inconsistent with court precedent

as well as practice in other regulatory agencies

Each of the specific proposals advanced by the commentators will now be

discussed

1 Duplication Of Positions By Permissive Intervenors Should Not Be

Prohibited

The requirement that the petitioner s position not be duplicative of another

party is not as stringent as it is apparently perceived Clearly one can have a

common issue of fact or law at stake but take a different position on that issue

Even if the position taken is similar this does not necessarily mean it is dupli

cative Moreover even when a position taken on a common issue is close to

being duplicative ofanother party ifthe petitioner can show that it will make

a significant contribution to the proceeding the Commission may in its dis

cretion nevertheless grant intervention No amendment to the rule appears to

be required under the circumstances

2 The Proposed Rule Should Not Apply To Rulemaking Proceedings

The proposed rule would apply to formal rulemaking proceedings 1 Such

proceedings involve hearings almost identical in nature to adjudicatory pro

ceedings Therefore the reasons for controlling intervention in adjudicatory

proceedings applies with equal force to formal rulemaking proceedings Ac

cordingly the rule will not be narrowed in scope as suggested by this proposal

3 Associations Should Be Allowed To Intervene

This proposal is already accommodated by the Commission s Rules ofPrac

tice and Procedure Rule 41 46 C F R 502 41 permits intervention by

146 cFR 502 53 Rule 53 governs participation in rulemaking and makes applicable the formal hearing requirements 10

rules required by statute 10 be made on the record after opportunity for ahearing As to those types of formal rulemakings Rule

53 expressly provides that n those proceedings in which respondents are named interested parties who wish to participate therein

shall file a petition to intervene in accordance with the provisions of section 502 72 Rule 72
164 FEDERAL MARITIME COMMISSION

associations 2 Whether the interest of an association is onewhich will in 

given proceeding warrant intervention in the discretion of the Commissio

amatter that can only be determined on an ad hoc basis and is not subjec

special treatment in the rule

4 Prejudice The Rights Of An Existing Party Should Be Changed 

Prejudice The Adjudication Of The Rights OfOriginal Parties InP

graph b 2 ii Of The Rule

Because there appears to be some uncertainty as to what rights ofexis

parties this provision was intended to protect the language of parag

b 2 iiwill be revised to more accurately reflect its true intent i e tha

ofprotecting the rights of existing parties to a fair and speedy adjudicatio

the controversy However the prohibition against prejudice should exten

the adjudicative rights of prior intervenors as well as those of original par

Accordingly paragraph b 2 ii willonly be modified by the insertion o

words the adjudication or after the word prejudice in parag

b 2 ii of the rule

5 The Commission Should Serve Copies ofPetitions To Intervene

While service copies of the petition for intervention required by the rule 

for the existing parties to the proceeding the 15 copies required to be filed 

the petition are for the internal use of the Commission The Commission 

not undertake to serve copies of petitions on existing parties Because 

language ofparagraph a I ofthe rule appears to be ambiguous on this p

it will be amended to make clear that a petitioner must I serve all 

existing parties to the proceeding with copies of its petition and 2 fil

additional 15 topies of the petition with the Commission Secretary

6 The Rule Should Provide For Replies To Appeals From Interven

Rulings

Replies to appeals to the Commission from intervention determination

the presiding officer are provided for by Rule 74 a 46 C F R 502 74 

No change in the rule is required in response to this comment

Furthermore while the Commission originally contemplated broadening 

scope of review of such determinations to allow non petitioner appeals and 

sponte Commission review upon reflection it has determined that such 

panded procedures may in fact result in delaying proceedings contrary to 

underlying purpose of the rule The existing appeal mechanism containe

Rule 227 46 C F R 502 227 appears to be adequate for purposes o

rule Accordingly paragraph fof the proposed rule will be deleted

2 Rule 41 definea the term party to specifically include 1111 alia an al8OCiation

Rule 74 providotin pertinent part aJoyparty may file a reply to any petition permitted under the rules in t

within fifteen OS daya afcer date of scrvic c

thereof
RULES OF PRACTICE AND PROCEDURE 165

7 Hearing Counsel Should Not Be Included In The Term Party

Irrespective ofHearing Counsels participation private interests with a gen

eral interest in a proceeding will not necessarily be precluded from intervening

Normally a general public interest position will not displace a specific private

interest As has been discussed a duplicative position should not be confused

with a similar position and in close cases a showing of a potential significant

contribution should militate in favor of the grant of intervention In complaint

proceedings Hearing Counsel should be treated as any other petitioner seeking

intervention Therefore under either situation Hearing Counsel should be

included within the meaning of the term party as used in the rule No change

in the language of the proposed rule is necessary in this regard

8 Discovery Should Be Restricted For Intervenors

This is amatter that can be addressed under paragraph c of the proposed

rule by the presiding officer In order to protect the due process rights of

intervenors the extent to which such discovery procedures will be available to

them is a matter best left to the sound discretion of the presiding officer under

the facts of the particular proceeding This is not a matter that can readily be

reduced to a rule of general applicability

9 A Statutory Right Of Intervention In FMC Proceedings Does Not Exist

And Should Be Deleted From The Rule

Astatutory right of intervention is provided for in the Federal Rule and was

therefore incorporated into the proposed rule However because the Commis

sion is itself not aware of any provision of law granting a right of intervention

in its proceedings nor has any such provision been cited by a commenting

party the phrase in the absence of an absolute statutory right of intervention

will be deleted from paragraph b I in the final rule

10 The Adequacy OfRepresentation Of A Petitioner s Interests By Existing

Parties Should Not Be An Issue

The critical issue under paragraph b I iii is whether the existing party

has such similar interest position perspective and resources that its par

ticipation in the proceeding will necessarily include anything that the petitioner

is able to offer The Commission will not presume that counsel for existing

parties in Commission proceedings are incompetent norwill it make rules based

on that presumption The requirement in paragraph b I iii is a funda

mental aspect of the rule and will be retained as proposed

II The Participation Of Intervenors May Not Be Limited

The objection to one of the fundamental aspects of the proposed rule that

of limiting the participation of intervenors in proceedings to the extent neces

sary to protect their interests is rejected The Commission however has no
166 FEDERAL MARITIME COMMISSION

intention ofdepriving any petitioner ofits due process rights Nor does the rule

prevent a petitioner from participating in a proceeding if it has something

worthwhile to offer

InPepsi Co Inc v F T C 472 F 2d 179 2d Cir 1972 cert den 414U S

876 1973 the court found the intervention standards of the Federal Rules of

Civil Procedure applicable to intervention in agency proceedings That decision

clearly contemplates limitations on the participation of intervenors in agency

proceedings beyond that normally utilized in formal court proceedings

472 F 2d at 184 The Commission finds no legal impediment to such proce

dures and will not reverse its policy determinations as to this fU1damental

aspect of the proposed rule

Therefore pursuant to section 4 of the Administrative Procedure Act

5 US c i553 and section 43 of the Shipping Act 1916 46 U S C

i

841 asection 502 72 of Title 46 Code of Federal Regulations is amended

as follows

Section 502 72 Petition for Intervention

a Apetition for leave to intervene may be filedin any proceeding and shall

be served on existing parties by the petitioner pursuant to section 502 114 An

additional fifteen 15 copies ofthe petition shall be filed with the Secretary for

the use of the Commission Upon request the Commission will furnish a service

list to any member of the public pursuant to Part 503 of these rules The

petition shall set forth the grounds for the proposed intervention and the

interest and position of the petitioner in the proceeding and shall comply with

the other applicable provisions of Subpart H of this part and if affirmative

relief is sought the basis for such relief Such petition shall also indicate the

nature and extent of the participation sought e g

the use of discovery

presentation of evidence and examination of witnesses

b 1 Petitions for intervention as a matter of right will only be granted

upon a clear and convincing showing that

i

the petitioner has a substantial interest relating to the matter

which is the subject of the proceeding warranting intervention

and

ii the proceeding may as a practical matter materially affect the

petitioner s interest and

Hi the interest is not adequately represented by existing parties to

the proceeding

2 Petitions for intervention as amatter of Commission discretion may

be granted only upon a showing that

i

a common issue of law or fact exists between the petitioner s

interests and the subject matter of the proceeding and

ii petitioner s intervention will not unduly delay or broaden the

scope ofthe proceeding prejudicethe adjudication ofthe rights

of or be duplicative ofpositions of any existing party and

Hi the petitioner s participation may reasonably be expected to

assist in the development of a sound record
RULES OF PRACTICE AND PROCEDURE 167

3 The timeliness ofthe petition will also be considered in determining

whether a petition will be granted under paragraphs b Ior 2

of this section Iffiled after hearings have been closed a petition will

not ordinarily be granted

c In the interests of I restricting irrelevant duplicative or repetitive

discovery evidence or arguments 2 having common interests represented by

a

spokesperson and 3retaining authority to determine priorities and control

the course of the proceeding the presiding officer in hisdiscretion may impose

reasonable limitations on an intervenor s participation eg

the filing ofamicus

curiae briefs presentation of evidence on selected factual issues or oral argu

ment on some or all of the issues

d Absent good cause shown any intervenor desiring to utilize the pro

cedures provided by Subpart Lmust commence doing so no later than 15 days

after its petition for leave to intervene has been granted Ifthe petition is filed

later than 30 days after the date of publication in the Federal Register of the

Commission s Order instituting the proceeding or notice of complaint filed

petitioner will be deemed to have waived its right to utilize such procedures

unless good cause is shown for the failure to file the petition within the 3D day

period The use ofSubpart L procedures by an intervenor whose petition was

filed beyond the 3D day period described above will in no event be allowed if

in the opinion of the presiding officer such use will result in delaying the

proceeding unduly

e Ifintervention is granted before or at a prehearing conference convened

for the purpose of considering matters relating to discovery the intervenor s

discovery matters may also be considered at that time and may be limited

under the provisions of paragraph c of this section

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 647

APPLICATION OF AMERICAN PRESIDENT LINES LTD

FOR THE BENEFIT OF BEVERLY COAT HANGER COMPANY

REPORT AND ORDER

PARTIALLY ADOPTING INITIAL DECISION

October 22 1979

BY THE COMMISSION Richard J Daschbach Chairman Thom

F Moakley Vice Chairman James 

Day Leslie L Kanuk Commissioners

This proceeding was initiated pursuant to section l8 b 3 of the Shipp

Act 1916 upon the application of American President Lines Ltd for perm

sion to refund a portion of freight charges to Beverly Coat Hanger Compa

The Initial Decision of the Presiding Officer conditioned approval of 

application upon the submission of evidence to the Commission showing 

applicable tariffrates and dates ofcertain shipments for which the refund 

requested

The Commission determined to review the Initial Decision in view ofthe 

that a complete evidentiary record was not developed The proper forum 

receiving evidence in this proceeding was the administrative hearing before 

Presiding Officer Evidence upon which findings of fact can be made on th

issues is indispensable to an ultimate decision on the application Altho

existing procedures do not authorize a presiding officer to direct the submis

of evidence to the Commission the Commission has determined to review 

supplemental evidence submitted in this case in order to avoid the unneces

delay that would result from a remand

The record establishes thatthe applicable tariff rate on filewith the Comm

sion on the dates ofthe shipments in question was 7100 per cubic meter 

the sailing dates to which this application applies were within 180 days o

date of the application as required under the statute of limitations imposed 

section l8 b 3 of the Shipping Act 1916

All other findings in the Initial Decision are correct and are herein ado

by the Commission
S FRANCIS C HURNEY

Secretary

proceeding July 16 1979 is adopted insofar as it finds that American President

Lines Ltd is granted permission to refund 1 355 58 to Beverly Coat Hanger

Company and

IT IS FURTHER ORDERED That American President Lines Ltd

publish immediatiy in the Hong Kong Taiwan Freight Tariff No 5 EM C

No 67 at page 110 the following notice

NOTICE OF REFUND AUTHORIZATION

Pursuant to authority granted by the Federal Maritime Commission inSpecial Docket No 647

the tariff rate for clothes hangers all kinds is 62 00 per cubic meter effective December 3 1978

and continuing through January 16 1979 inclusive
FEDERAL MARmME COMMISSION

SPECIAL DoCKET No 647

APPLICATION OF AMERICAN PRESIDENT LINES LTD

FOR THE BENEFIT OF BEVERLY COAT HANGER COMPANyl

Partially Adopted October 22 1979

Request granted for permission to refund 1 355 58 portion ofaggregate of 10 694 02 23

Destination Container Service Charges freight charges actually colIected provided 

supplies the Commission within 30 days with certain proofs Failure to supply proofs 

result in denial of this request for permission to refund

INITIAL DECISION2 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

The application in this special docket proceeding was received in the C

mission June I 1979 The commodity involved is Wooden Clothes Hang

The commodity was shipped in five 5 shipments under the following Am

can President Lines Ltd APL Bills of Lading from Kaohsuing via Kee

to San Francisco

Billof Billof Name ofVessel Sailing

Lading Number Lading Dale and Voyage No Dale Measurem

252925 12 3 78 Pres Pierce V 42 12 17 78 5132 M

253107 12 11 78 Pres Jefferson V 49 12 12 78 37 59 M

253108 12 11 78 Pres Jefferson V 49 12 12 78 15 87 M

253295 12 17 78 Pres Madison V 47 12 17 78 10 17 M

253424 12 25 78 Pres Johnson V 42 12 26 78 35 67 M

Total 150 62 M

I This caption moform to the revised format Under date of June 5 1979 the Secretary ofthe Commiuion entthe fo

letter to counsel for American PreaideDt Linea

Receipt isacknowJedaed of yourrecent apodal docket appUcation on behalfof American President Linea This applicatio

not follow tho reviled fonnat required by tho Commision lrecent amendment to itlRules ofPractice Inasmuch 81 the lim

period for filing has nearly puaed this application nanetheleu will be acccptcd for proc tslIin Forwarded herewith isa 

the Commiuion s roccnt rule revision PICllIC consult thia rule and supplomont your application aocordinaly to 888urc 

ncccuary information iI before the Commiuion

Proccllina of thil application is beinl done on lubmisaona to date

I This decision will become the dcciaon ofthe Commilaion in the absence of review thereof by the CommiuiOl1 Rule 227 

of Practice and Procedure 46 CF R 1502 227
APPLICATION OF AMERICAN PRESIDENT LINES LTD 171

The application is filed timely as to all shipments having been received

within 180 days of the sailing date of each Rule 92 a 3 of Commission s

Rules of Practice and Procedure 46 C F R 502 92 a 3

The Beverly Coat Hanger Company concurs in this application and certifies

that freight charges of 1 355 58 on the shipments involved herein were paid

and borne as such by Beverly Coat Hanger Co and no other It is the amount

of 1 355 58 that APL seeks permission to refund APL in the application

states it actually collected from Beverly Coat Hanger Company 10 694 02

238 36 Destination Container Service Charges a total of 10 932 38 that

the rate applicable at time ofshipment was 71 00 per cubic meter as per APL

Hong Kong Taiwan Freight Tariff No 5 FMC No 67 Item 3030 15th

Revised Page 161 effective December 27 1978 Wood Manufactures and

Woodenware NOS including Wooden Decorative Ceiling Boards and Beams

Wooden Figures Wooden Towel Holders Blocks for Trophy Stands Mahog

any Boards Wooden Weaving Looms Match Sticks Ramie Loose but exclud

ing Doors Furniture and Woodcarvings The aggregate measurements of the

shipments was 150 62 cubic meters 150 62 cubic meters X 71 10 694 02

238 36 Destination Container Service Charges 10 932 38

The rate sought to be applied is 62 00 per cubic meter as per American

President Lines Ltd Hong Kong Taiwan Freight Tariff No 5 FMC

No 67 Item No 0620 10th Revised Page 110 effective January 17 1979

Item 0620 was made effective December 27 1978 Clothes Hangers All

Kinds 150 62 cu meters X 62 00 9 338 44 238 36 Destination

Container Service Charges 9 576 80

10 932 38 9 576 80 1 355 58

In support of this application APL states inter alia

APL pursuant to the terms of FMC Agreement 10107 and with the concurrence of the

members of said agreement agreed to establish a local rate for Clothes Hangers all kinds in the

amount of 62 00 per cubic meter effective December 3 1978 A

copy of APL s letter to the

complainant is identified as Attachment D l Through clerical oversight the reduction was not

published until December 27 1978 Attachment C

Agreement 10107 referred to by APL is Trans Pacific Freight Conference

HK Independent Lines Rate Agreement of which APL is amember Trade

to U S Pacific Coast Ports from Hong Kong and Taiwan APL publishes its

own tariff

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

The information in this proceeding is that APL intended to establish a local

rate for Clothes Hangers all kinds in the amount of 62 00 per cubic meter in

its tariff effective December 3 1978 The sailing date of each shipment is as

J

In the letter dated November 27 1978 APL wrote to the Beverly Coat Hanger Company the following

This conllnns our previous telephone conversation concerning a new rate for clothes hangers from Hong Kong and Taiwan to

local West Coast portsin the United States

We are pleased to announce that effective December 3 1978 the rate for the above commodity will be 62 00percubic meter

ortbousand Kilos It is hoped that our new rate amendment will serve to strengthen yourposition in product quotation to your

buyers
172 FEDERAL MARITIME COMMISSION

shown above The 62 00 per cubic meter rate desired by APL to be appl

became effective December 27 1978 The application was filed June I 19

so that the Commission received an effective tariff setting forth the rate 

which refund would be based prior to the filing of the application 46 C F 

5502 92 A 2

What is not clear is the rate applicable at the time of shipment APL in 

application says the rate applicable at time of shipment was 7100 per cu

meter as per APL Hong Kong Taiwan Freight Tariff No 5 FMC No 

Item 3030 Attachment B Attachement B is a

copy of that Tariff s 1

Rev Page 161 effective December 27 1978 As is seen above the Bills 

Lading as well as the sailing dates of the shipments involved all prec

December 27 1978 True the application is under oath but the suppor

evidence as to the rate applicable at the time of shipment has not been m

clear Too the supporting evidence of the date of shipment has not b

supplied

The measurements of the individual shipments are shown on the bills 

lading and have been shown above and totalled

Upon consideration of all the aforesaid the Presiding Administrative L

Judgefinds and concludes in addition to the findings and conclusions h

inbefore stated

1 The application reCeived by the Secretary of the Commission on Jun

1979 waswithin 180 days of the sailing date of each shipment involved t

filed timely

2 There was filed with the Commission prior to this application 

effective tariff setting forth the rate on which the refund would be based

3 There wasan errorof a clerical or administrative nature which resu

in the necessity of a refund as requested in the application that comports w

the requirements under special docket applications Rule 92 of the Comm

sion s Rules of Practice and Procedure 46 C F R 5502 92 and sec

18 bX3 of the Shipping Act 1916 but supporting evidence as to the 

applicable at the time of shipment has not been made clear

4 The refund will not result in discrimination as between shippers

5 Permission to make the requested refundshould be granted provided 

applicant provides the information and or documents to make clear the 

applicable at the times of each shipment involved and the supporting evide

of the date of each shipment

Wherefore it is ordered that

A Permission be and hereby is granted to American President Lines 

to refund a 1 355 58 portion of 10 694 02 238 36 Destination Conta

Service Charges actually collected for the benefit of Beverly Coat Han

Company provided the said American President Lines Ltd provides to 

Commission within 30 days of the date of this initial Decision the evide

esatisfactory to the Commission to make clear the rate applicable at the tim

each shipment involved and supporting evidence of the date of each shipm

B Upon supplying the Commission with the evidence in A above 

providing the Commission is satisfied with what is submitted the refund s

be made and this proceeding discontinued Failure of APL to supply neces
WASHINGTON D C

July 8 1979

WILLIAM BEASLEY HARRIS

Administrative Law Judge

APPLICATION OF AMERICAN PRESIDENT LINES LTD 173

proofs shall cause the request for permission to refund to be denied and the

proceeding discontinued

C APL at the proper time shall publish in its tariff an appropriate notice

of this proceeding
FEDERAL MARITIME COMMISSION

DOCKET No 79 85

TRAILER MARINE TRANSPORT CORPORATION

PROPOSED REDUCED RATES ON SUGAR CANE

REFINED SUGAR N O S

DISCONTINUANCE OF PROCEEDING

October 25 1979

This proceeding was instituted to determine the lawfulness of reduced rat

on sugar cane and refined sugar N O S filed by Trailer Marine Transp

Corporation TMT

TMT has appealed from a denial of the Presiding Judge of its motion 

discontinue the investigation The basis of that motion is that the rates und

investigation herein have been cancelled

The Commission is of the opinion that no further regulatory purpose wo

be served by continued investigation of the now cancelled rates According

the appeal is granted and this proceeding is discontinued By the Commissio

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET No 7948

TRAILER MARINE TRANSPORT CORPORATION

PROPOSED GENERAL INCREASE IN RATES

Rate increase will notresult in an excessive return on equity in comparison to other industries

facing similar businessand financial risks and is consequently justand reasonable

The reasonableness of the revenue and tonnage projections was not specifically raised as an issue

by the Order of Investigation and they must therefore be accepted for the purposes of this

proceeding

MichaelJoseph forTrailerMarineTransport Corporation

Wllllam L Blum for Governmentofthe Virgin Islands

C Douglass Mllkr Chorna J Swedarslcy and Joho Robert Ewers for Bureau of Hearing

Counsel

REPORT AND ORDER PARTIALLY ADOPTING

INITIAL DECISION

October26 1979

BY THE COMMISSION RichardJ Daschbach Chairman Thomas

F Moaldey Vice Chairman James V Day

andLeslie Kanuk Commissioners

This proceeding was initiated on May 2 1979 by OrderofInvestigation and

Hearing Order to determine the lawfulness of a 5 percent general rate

increase filed by Trailer Marine Transport Corp TMT to apply in the trade

between U S Atlantic and Gulf Coast ports and ports in Puerto Rico and the

Virgin Islands Because of recent amendments to the Intercoastal Shipping

Act 1933 1

the proceeding was specifically limited to an investigation of

t

P L 95475 92Stat 1494 1978 imposes thefollowing limitationson the Commission

I

The Commission shall not order a hearing pursuBnt to this subsection on its own motion orupon protest unless the Com

mission publishes in the federal Register the reasons in detail why it considers such a hearing to be necessary andthe specific

issues to beresolved by such hearing 46U S C U45 a

2 TheCommission shallcomplete such hearing within sixty days and shall issue afinal decision tlereOn withinone

hundred and eightydays 46U S C A84S b

l11tough PRMA protested TMT sgeneral rate increase itdid notparticipate furtherin theproceeding
176 FEDERAL MARITIME COMMISSION

I Whether or not TMT s return on equity is excessive in comparison to 

industriesfacing similar business andfinancial risks and

2 The allocation ofline haul expenses and division of assets between TM

Gulf Caribbean Marine Lines both subsidiaries ofCrowley Maritime 

poration CMC for tandem barge towing services between U S Gulf 

ports andPuertoRico

This Order was subsequently clarified and amended to include the add

question of

3 Why is there a projected increase in revenue for the trade despite a de

ing volume ofcargo carried for TMT s projected period of April I 19

March 31 1980 as compared to TMT s actual period of December I 

toNovember30 1978 Orderserved July 5 1979

TMT was named Respondent and the Government ofthe Virgin Islands 

and the Puerto Rico Manufacturers Association PRMA were named P

tants 2

Expedited hearings were conducted on June 28 and 29 1979 b

Administrative Law Judge Seymour Glanzer 3

resulting in a record cons

ofa296 page transcript andten exhibits

On August 21 1979 Administrative Law Judge Stanley M Levy issu

Initial Decision in which he concluded that TMT did not reasonably est

the volumes and revenues which may be anticipated by its rate increas

that therefore TMT had not met its burden ofshowing that its rates ar

and reasonable He thus found the rates in Supplement No Ito Tariff F

No 5 to be unlawful Exceptions were filed by TMT Sea Land Service 

Puerto Rico Maritime Shipping Authority PRMSA and GVI 4

The 

mission s Bureau of Hearing Counsel and GVI filed replies to exceptio

addition Hearing Counsel filed a Petition to Strike portions of PRM

argument which GVI supports and to which TMT and PRMSA rep

TMT s

request for oralargument wasdenied

DISCUSSION

TMTclaimsthattheInitial Decisionemin concludingthat

I TMT had theburden ofproving thatits rates are just and reasonable by 

ing that its forecastyearrevenue andtonnageprojections are reasonable

2 TMT s rates are unlawful without considering the fact that they are i

calto those ofits competitors

3 TMT s rates are unlawful without considering its historical financial re

and

Judge oianzer conducted the hearings because Judge Levy was hospitalized recovering from an operation Howev

Levyconducted theprehearingconference and prepared the Initital Decision

4

Sea Land and PRMSA filed concurnmt petitions for leave to intorvene 10 which TMT filed supporting replies and 

an opposlllon The Commission s ndes of practice and procedure state thaI petitions to intervene which are filed after 

ofhearings will not ordinarily be granted 46 C F R 02 72 The petitions offer no compelling MIlSOn fordeviatina from 

andwlll therefore bedcnied

5In light of the disposition of PRMSA s

petition for leave to intervene Hearing Counselspetition ismoot and will ac

bedismissed
PROPOSED GENERAL INCREASE IN RATES 177

4 it cannot be determined why there is a projected increase in revenue despite

aprojected decreasein volume for theforecastyear

6

TMT does not except to the conclusions conceming the tandem tow issue

and in fact asserts that if the cargo cube allocation method is employed its

projected rate of return on equity decreases from 16 15 percent to 14 29

percent

GVI agrees with all the conclusions in the Initial Decision but notes that the

Commission must enter a further order to effectuate those conclusions It

suggests that an order directing a refund ofthe full amount ofthe rate increase

plus arollback oftherates to areasonable level wouldbe appropriate

Inreply to TMT s Exceptions Hearing Counsel contends that

1 TMT had the burden ofproof on all issues including the ultimate issue of

thejustness andreasonableness ofits rates

2 TMT had ample notice that its projected revenue and tonnage figures were

contested

3 TMT s offer ofproof concerning its budgeted revenue figure would not cure

all thedeficiencies inTMT s direct case

4 The rates ofothercarriers werenot made anissue by theOrder

5 TMT should not be allowed to change its test period to look at its historical

ratesofreturnon ratebase fora six yearperiod and

6 TMT s corrections oftwo ofitsexhibits are untimely andshouldberejected 7

Hearing Counsel further suggests that if the Commission finds TMT s general

rate increase to be unjust and unreasonable it must order the rate increase

rolled backandarefundofall revenuescollectedas aresult oftheincrease

The Commission has reviewed the entire record in this proceeding and

concludes that certain findings and conclusions set forth in the Initial Decision

are not warranted and must therefore be modified or clarified by the following

discussion In all other respects however the Initial Decision is correct and

shall be adoptedby theCommission as its own

The Presiding Officer concluded that if TMT s revenue projections are

accepted a return on equity to TMT in the zone of 15 8 to 16 15 percent would

not be excessive and its rate increase would not therefore be unlawful Initial

Decision at 6 However the Presiding Officer further concluded that whether

or not TMT s projected return on equity would exceed this zone of reason

ableness could not be determined on the record because TMT failed to estab

lish a reliable projection ofits net revenues Initial Decision at 21 22 The

Commission finds that the Presiding Officer incorrectly based his decision on

the reasonableness vel non of TMT s revenue and tonnage projections and

concludes that for the purposes ofthis proceeding these projections were not

in issue and must be accepted

6

TMT also asserts that the Presiding Officer s

criticism of its correcting certain errors in its submissions isunwarranted The

Commission finds nothing prejudicial in these remarks particularly in view of the decision reached herein but does endorse the

proposition thatP L 95475 fpJlaces ahigh degree of responsibility on the carrier seeking a

rate increase to supply the informa

tion necessary to permitexpeditious consideration Initial Decisionat39

7

Gvrs reply to exceptions raises several ofthe same points and is therefore subsumed in any discussion of Hearing Counsel s

oosition
178 FEDERAL MARITIME COMMISSION

The amended Intercoastal Shipping Act reflects a clear Congressiona

isfaction with the lengths of time necessary to complete general rate ca

Rep No 951240 95th Cong 2d Sess 9 10 1978 Itprescribes str

limits applicable to everyone involved in such rate proceedings carriers 

testants administrative law judges and the Commission To enable th

mission to issue its final decision within 180 days of a rate increase 

effect the formerly open ended hearing process has been severely cu

Hearings on rate increases will not now be conducted unless the Com

details why a hearing is necessary and specifies the issues to be resolved 

suchhearing 846 U S C A845 a

In compliance with P L 95475 s strictures the Commission s O

Investigation and Hearing limited the hearing to only two issues 

excessiveness ofTMT s return on equity and 2 the allocation ofexpen

assets for the tandem barge towing service This Order expressly noted 

its protest to TMT s rate increase GVI had requested that several ad

issuesbeinvestigated among them

Whether TMT s projection of the Ievenue that is designed to be procIuccd by the prop

isIeuonable

But the Commission declined GVI s

request At a subsequent preheari

ference GVI requested discovery concerning TMT s revenue projectio

Presiding Officer denied this discovery requestby stating

We will take for the purpose of this proceeding the Ievcnue projections as setfo

submission to the Commisison and we will base the determination hcrcaftcr as to whe

Ievenues assuntinlthose Ievenues lIIe obtained what lIIethe consequences

And that s ineffect what Item Iofthe Commission s Order ofinvcstilationasks

Prchcsring Transcript at 23

GVI then filed a Petition for Clarification or Reconsideration 

Commission s Order in which it requested that the Commission state 

intent was that the issue ofrevenue projections or any other element o

of return on equity not be excluded from the investigation if such 

disputed The Commission denied GVI s

request by statingthat

b ecausc this was not and is not the Commission s intent a clarification of this 

inappropriate

Order served July S 1979 at 2

The Commission did however amend its Order to include a third iss

is there a projected increase in revenue despite a decreasing volume 

for theforecast year

In light ofthis chronology the reasonableness ofTMT stonnage a

nueprojections was not properly an issue in this proceeding It was 

expressly delineated nor implicit in the scope of the first or third issue

ings under P L 95475 must remain limited by only those issues w

Commission orders investigated In appropriate cases the Commiss

well order an investigation into the methodology employed by a c

projectingits revenues andvolumes This is not suchacase however

RopIdIoH of tile tlc In on of Invellipllon tile I

In ony lftICIOdi In 

1 1

1

I t

I nd1 8UtllUlhle oI6U SC 11817andM Cb
PROPOSED GENERAL INCREASE IN RATES 179

As mentioned earlier the amended Order of Investigation and Hearing

raised as thethirdissue

Why is there a projected increase in revenue forthe trade despite a decreasing volume of cargo

carried for TMT s projected period of April I 1979 to March 31 1980 as compared to TMT s

actual period of December I 1977 to November 30 1978

Because he concluded that the record failed to establish projected volumes and

revenues the Presiding Officer further concluded that this third issue cannot

be determined Initial Decision at 40 The Presiding Officer also stated that

the main reasons offered by TMT to explain the decrease in tonnage a shift

to thm tariffs and increased competition were not supported by the record

Initial Decision at 34 The Commission disagrees with these conclusions and

findsthat TMThas adequately responded to andexplained the thirdissue

Within the context of TMT s operating revenue forecast Schedule V of

Exhibits 2 and 7 there are only two categories in which projected revenue tons

decrease while projected revenues increase automobiles and other Regard

less of the reasonableness of the underlying projections the record does contain

sufficient facts to explain the relationsip between tonnage and revenue for

these two categories The volume reduction for automobiles is predicated on

manufacturers automobile size reductions However this decrease in volume

is more than offset by the general rate increase resulting in an overall projected

net increase in revenue The other category is expected to decrease in volume

by approximately 20 percent due primarily to a shift to other TMT tariffs

This decrease will be offset by an increase in volumes of highly rated tank and

refrigerated cargoeswhich will again result in anet increase in revenues

For the foregoing reasons the Commission finds TMT s general increase in

ratesjust andreasonable and not otherwiseunlawful

THEREFORE IT IS ORDERED That the Initial Decision in this pro

ceeding as modified and clarified by the above discussion is adopted by the

Commission and

IT IS FURTHER ORDERED That the Exceptions of Trailer Marine

Transport Corporation are granted to the extent indicated above and the

Exceptions of theGovernment of theVirgin Islands aredenied and

IT IS FURTHER ORDERED That the Petitions for Leave to Intervene

filed by Sea Land Service Inc and the Puerto Rico Maritime Shipping Au

thority are denied and the Petition to Strike filed by the Bureau of Hearing

Counsel is dismissed and

ITIS FURTHERORDERED That this proceeding is discontinued

By theCommission

S FRANCISC HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 79 48

TRAILER MARINE TRANSPORT CoRPORATION

PROPOSED GENERAL INCREASE IN RATES

Adopted October 26 1979

The evidence fails to establish that the rate increale will notresult in an eXOCIlIlIive feturn 

to TMT in comparison to otherindllllrios facing similar risks

The carso cube allocation of eXpoDte8 and division of 18 for the tandem barse towi

is the appropriate method of allocation

The evidence falls to establish any reasonably accurate basis for determining volumes o

which may be anticipated by reason of the rate increase

The evidence falls to establish any reasonably accurate basis for determining volumOl o

which maybe anticipated bY reason of the ra inc

The evidence being insufficient to permit a determination of volumo and revenues it 

determined why there is a projected increate in revenue for the trade despite a 

volume of cargo to be carried

MichaelJoseph for respondent Trailer Marine Transport Corporation

William L Blum for protestant Government of the Virgin Island

John Robert Ewers C Douglass Miller and Chama J Swedarsky Hearing Counle

INITIAL DECISION OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGE I

On January 31 1979 Trailer Marine Transport Corporation TM

Supplement No I to its Tariff FMC F No Sproposinga S percent 

increase in rates effoctive April I 1979 Under authority of Com

Special Permission No 6317 TMT filed Supplement No 2 to i

FMC F No S postponing the April I 1979 eftctive date to May I 

TMTTariff FMC FNo S establishes local joint and proportional c

ity rates between United States Atlantic and Gulf Coastpom and po

Commonwealth ofPuerto Rico and the Virgin Is1and via direct and tr

ment service at Puerto Rico The proposed S percent general increas

apply to all ocean freight commodity rates to and from U S Atlantic 

Coast ports and Puerto Rico to the minimum ocean freight cha

shipment under one bill of lading between terminals in Puerto Rico 

This decision will become tho dcciIion oftho Commillionin tho ablenoe ofroviow thereof by the Commillion R

or Practice and Procodu 46 CF R 1502 227
PROPOSED GENERAL INCREASE IN RATES 181

Atlantic and Gulf Coast ports TMT Freight Tariff No 7 FMC F No 5

Rule 5 at 29 and to rates which apply Per Trailer i e except as otherwise

indicated in individual tariff items rates on shipments loaded in trailers by the

shipper unloaded by the consignee andhave specified minimum and maximum

interior capacities TMT Freight TariffNo 7 FMC F No 5 Rule 15 at 36

Supporting data as required by Commission General Order No 11 G O 11

was submitted by TMT at the time of filing of the proposed increase

Protests were received from the Puerto Rico Manufacturers Association

PRMA and the Government of the Virgin Islands GVI

In its protest GVI contended that TMT on the basis of its G O 11 report

failed to provide sufficientjustification that its proposed rates werejust reason

able and lawful under section 18 a of the Shipping Act 1916 and under

sections 3 and 4 of the Intercoastal Shipping Act 1933 as amended The GVI

alleged TMT s data was insufficient to determine l

that part of the em

bedded debt cost of Crowley Maritime Corporation CMC TMTs parent

corporation which should be allocated to TMT 2 the debt and equity ratio

ofCMC and 3 the rate ofreturn on equity thatshould be attributed to TMT

Further the GVI believed additional information was required of TMT to

explain the revenue projections that are contained in its G O 11 for the

forecasted year The GVI requested that the Commission enter into a hearing

and investigation and include at least the following issues

1 Whether the proposed rates are unjust and unreasonable in that they will

provide TMT and or CMC with an excessive return as measured by

accepted analytical methods

2 Whether TMTs projection of the revenue that is designed to be produced

by the proposed rates is reasonable

3 What is a

just and reasonable allocation of assets and expenses from CMC

to TMT

4 Whether the proposed rates are unjust and unreasonable in that their

negative effect on the Virgin Islands economy outweighs the carrier s need

if any for increased revenues

DespiteGVls protest the Commission permitted the subject rate increase to

go into effect without suspension in view ofit being subject to section 3 c lB

of the Intercoastal Shipping Act 1933 as amended whichprovides in part that

the Commission may not suspend a n increase or decrease of 5 percentum or

less and filed as part of a general increase in rates or a general decrease in

rates However the Commission wasof the opinion that TMTs proposed

5 percent increase as proposed in Supplement No 1 to TariffFMC F No 5

should be made the subject of a limited public hearing to determine whether

or not TMTs return on equity is excessive in comparison to other industries

facing similar business and financial risks Moreover the Commission reviewed

data submitted by TMT regarding the tandem barge towing service with Gulf

Caribbean Marine Lines GCML also a subsidiary ofCMC between U S

Gulf Coast ports and Puerto Rico This data showed that costs are divided

equally between the two companies for the joint tow portion of a

voyage The

Commission was of the opinion that an equal division of these expenses does
182 FEDERAL MARITIME COMMISSION

not follow abenefits received allocationprinciple Therefore itdetennined 

this proceeding should also determine the allocation of line haul expense

the division of assets between TMT and GCML for tandem barge to

between U S Gulf Coast ports and Puerto Rico

Thereupon the Commission ordered that an expedited investigation be 

tuted into the lawfulness of the tariff matters contained in Supplement N

to TMTs Tariff FMC F No 5 for the purpose ofmaking such findings a

facts and circumstances warrant and further ordered that this proceedin

limited to an investigation of

1 Whether ot not TMTs return on equity is excessive in comparison to 

industries facing similar business and financial risks and

2 The allocation ofline haul expel1lleS and division ofassets between TMT 

GulfCaribbean Marine Lines both subsidiaries ofCMC for tandem 

towing services between U S Gulf Coast ports and Puerto Rico

Thereafter GVI filed a Petition for Clarification or Reconsideration 

Commission s Order GVI requested that the Commission clarify its Ord

stating that it had been the Commission s intent that the issue of rev

projections or any other element of the rate of return on equity n

excluded from the investigation if such issue is disputed

In its Order of Investigation and Hearing served May 2 1979 the Com

sion ordered that this proceeding shall be completed within sixty 60 da

this order Sixty days thereafter being July I 1979 the hearingwas conc

on Friday June 29 1979 58 days from the issuance of the Commission s 

and 59 days from the day the rate increase became effective On July 5 

the Commission issued an order with regard to GVIs petition for clarifica

The Commission declined to state in accordance with GVIs

request t

had been the Commissions intent that the issue ofrevenue projections o

other element of the rate of return on equity not be excluded from 

investigation Rather it stated that Because this was not and is no

Commission s intent a clarification of this nature is inappropriate and 

request must therefore be denied

GVI requested alternative relief however as follows

That the Commission reconsider its Order of Invca isation and Hcaring and amend it to 

the following issue Why docs TMT project a decrease of 16 in the number of reven

carried between the historical and projected years

With respect to the alternative relief the Commission was of the 

however that the question posed for hearing by GVI was within the or

scope ofthe Order of Investigation and Hearing and that a clarification t

effect therefore was appropriate Thereupon it ordered the Commission sO

of Investigation and Hearing of May 2 1979 be clarified and amend

include the following question

Why is there a projcacd increase in revenue for the trade dcapite a decreasing volume o

carried for TMTs projected period of April I 1979 to March 31 1980 as compared to 

actual period of December I 1977 to November 30 1978

Although the Commission clarification order was not served until aft

hearing was completed the parties wereaware that pursuant to GVIs pe
PROPOSED GENERAL INCREASE IN RATES 183

the matter of Commission intent wasunder consideration by the Commission

Administrative Law Judge Glanzer at the start of the hearing2 stated

I have been told that in the very near future maybe not for a

day or two the Commission will

issue an order a written order granting the petition for clarification as suggested by hearing

counsel

Will tbat create any problems for anyone in this proceeding I think Mr Joseph informed me

earlier tbat he was quite prepared to go ahead with any decision that the Commission may have

made in connection with the granting of that petition for clarification

Mr JOSEPH That is correct

Hearings were held in this proceeding on June 28 and 29 1979

4

There are

295 pages of transcript and 10 exhibits 5

Without specific prior knowledge of how the Commission would treat the

issue of revenue projections or any other element of the rate of return on

equity considerable evidence was introduced at the hearing relating to TMTs

revenue projections The conclusion to be reached from such evidence is that

as set forth hereafter in detail TMTs revenue projections cannot be relied

upon to determine whether TMTs return on equity is excessive and conse

quently whether the rate increase is or is not just and reasonable and otherwise

lawful

Arithmetically if one accepts the accuracy of the revenue projections the

return to TMTs equity is within the zone of reasonableness and as such the

rate increase cannot be said to be unlawful

Upon consideration of the evidence ofrecord there is set forth the following

FINDINGS OF FACf

I

Issue Whether or not TMTs return on equity is excessive in comparison to

other industries facing similar business and financial risks

I Based upon statisticspublished by Citibank the following rates ofreturn

on equity have been earned by non financial enterprises in general and by that

category of the transportation industry which includes shipping Le Misc

Transportation for the periods shown

Non financial

Misc Transportation

969 73

114

116

974 78

13 8

17 0

969 78

12 8

15 0

978

14 8

16 7

2 For the years 1975 1978 TMT cannot be considered dominant in the

overall Puerto Rican trade although it has increased its market penetration

during the last four years a trend which is likely to continue

Tr 3

Counsel for TMT

4 Atthe time ofthe hearing the undersigned was hospitalized and recovering from spinal surgery on June 27 1979 Administra

tive Law Judge Seymour Glanzer presided over the presentation oftestimony and introduction of evidence Theparties interposed

no objections tothe undersigned issuing an Initial Decision on the record adduced Tr 3

S Also an Offer of Proof
184 FEDERAL MARITIME COMMISSION

3 TMT leases many of the assets employed in the Puerto Rican T

from related companies consequently the debt obligations ofthese assets d

appear on TMTs books

4 For rate of return purposes the appropriate capital structure f

spondent is that of its parent corporation Crowley Maritime Corpor

which consists of 57 68 percent debt and 42 32 percent equity

5 The objective measure of financial risk is determined by looking 

capital structure ofthe firm and hypothesizing that the more and expensiv

debt the company has the more volatile will be its return on equity The e

investor is therefore subject to more risk in a highly leveraged firm

6 The median debt equity ratio for all industries surveyed by Forbe

the latest 12 months was 04 the surface transportation industry h

debt equity ratio of 06 the air transportation industry 09 and the 

utility industry a ratio of 10

7 The CMC debt equity ratio as of December 31 1978 was 

computed on the basis of Forbes

8 CMC has substantially more long term debt to equity than the av

firm and it therefore can be concluded that CMC is more leveraged tha

average firm

9 Due to CMC s more leveraged position than other companies bas

median debt equity ratios TMT should be given a financial risk premi

05 percent

10 Using a variation in earnings test based on TMTs five years of 

ings including financial data for the years December I 1977 Novemb

1978 and January I 1978 December 31 1978 TMT appears to have 

business risk

11 As the purpose of assessing a carrier a risk premium is to allow a 

capable ofattracting needed capital on the basis that TMT is subjected 

above average business risk CMC should be allowed a business risk pre

of 10 percent

12 The total appropriate adjustment to the ten year average rate of 

on equity for non financial corporations for business and financial risk 

be 15 percent for TMT

13 Based on the high cost of attracting capital a 15 percent adjus

should be attached to the ten year average return on equity to bring that 

up to a reasonable level which will account for current financial trends

14 Given all of the above average risk conditions TMT or CMC 

be entitled to a rate of return on equity which is 3 0percent higher th

ten year average for non financial U S corporations of 12 8 percent

1 S The reasonable return on equity thatTMT should be allowed to e

the projected year March 1 979 April 1980 is 15 8 percent

II

Issue The allocation of line haul expenses and division of assets b

TMT and Gulf Caribbean Marine Lines both subsidiaries of CMC f

dem barge towing services between U S Gulf Coast ports and Puerto 
PROPOSED GENERAL INCREASE IN RATES 185

16 TMTs forecasts include an allocation of certain expenses and division

of assets relating to tugs to be used to tow in tandem both a TMT barge and

a barge of Gulf Caribbean Marine Lines GCML an affiliate ofTMT The

barges are thus towed in tandem between Lake Charles Louisiana and San

Juan Puerto Rico

17 One round voyage between Lake Charles and San Juan for TMT con

sumes twenty one days ofwhich approximately sixteen days are actual steam

ing time during which a single tug is towing both barges During the remaining

approximately five days the tug remains with the TMT barge alone as the

GCML barge utilizes a separate tug while calling at various additional ports

in both the continental United States and Puerto Rico

18 While both TMT s and GCMLs barges carry significant amounts of

cargo southbound TMT whose trailers are compatible with the carriage of

manufactured goods also carried significant amounts northbound GCML on

the other hand rarely carries any cargo from Puerto Rico to the continental

United States

19 TMTs forecast assumes the utilization of three tugs for the entire year

in the tandem towing service described above and allocates the related ex

penses and assets 60 percent to TMT and 40 percent to GCML TMT arrives

at this 60 40 ratio by allocating 50 percent of the round voyage tandem

steaming time approximately eight days each to TMT and GCML and 100

percent of the remaining approximately five days to TMT Thirteen of the

twenty one days or approximately 60 percent of the expenses and assets

respecting the three tugs are thus allocated to TMT and the same percentage

is applied on an annual basis

20 TMT originally allocated 4942 610 to TMT and 2 965 607 to

GCML for the assets and expenses of the tandem barge towing services

producing a 625 375 percent time allocation

21 TMT subsequently supplied a new total line haul expense figure of

4 942 610 and an allocation of 2 965 607 to TMT and 1 977 003 to GCML

which produced a 60 40 percent time allocation

22 At the hearing TMT stated that the 4 942 610 figure appearing in staff

witness Coleman s

testimony which Mr Coleman identified as line haul

expense actually included expenses for a greater period than that involved in

the actual tandem tow Thereafter TMT submitted a revised total allocation

of 4 078 966 of tug expense for the tandem barge towing service

23 With few exceptions G O II prescribes the allocation of expense and

division of assets on a volume basis

24 G O II prescribes a vessel day allocation for cargo vessels employed in

The Service for less than the entire reporting period The General Order states

in relevant part that

For such vessels the Adjusted Cost shall be allocated betweenVoyages in The Service and Voyages

in Other Services on the basis of the relationship the number of days in each bears to the total of

both

This provision is inapplicable to the tandem barge towing service
186 FEDERAL MARITIME COMMISSION

25 Under the requirements of G O II direct vessel expenses are acc

lated for the service and allocated on a revenue ton mile relationship wh

volume affected

26 Acargo cube allocation isbased on the tonnage of cargo carried on 

carrier s

respective barge Cargo cube is a volume allocation

27 During the period when there is no tandem barge towing but on

towing of aTMT barge or lay up time assets and expenses are allocated 

revenue ton mile relationship

28 Cargo cube method of allocation for assets and expenses of the ta

barge towing services produces an allocation of 63 7 percent for TMT and 

percent for GCML

29 The amount of cargo that each carrier carries on a round trip voya

the tandem tow is not reflected in a time formula allocation

III

Issue Why is there a projected increase in revenue for the trade despite 

creasing volume of cargo carried for TMTs projected period of April I 

to March 31 1980 as compared to TMTs actual periodof December I 

to November 30 19781

30 Donald C O Malley Jr Director of Tariff and Regulatory Affai

the Caribbean Division of Crowley Maritime Corporation prepared the 

jected revenue and tonnage estimates shown on Schedule V Exhibits 2 a

31 Mr OMalley is primarily responsible for preparation ofSchedule 

Exhibits 2 and 7 the forecast ofrevenues on a commodity bycommodity 

subject to the supervision of Mr Roush

32 Neither ofTMTs witnesses Mr Roush nor Mr O Malley are inv

in preparing the budget

33 Indeveloping Schedule V ofExhibit 2 Mr O Malleybegan with th

revenue figure of 48792 000 which came from TMTs annual forec

budget Mr O Malley had nothing to do with the figures which were us

arrive at the 48 792 000 The 48 792 000figure wasfirst giventoMr O M

at the time he was instructed to file for a rate increase

34 The revenue and tonnage forecast as prepared by Mr O Malley f

fifteen leading commodities and shown on Schedule V of Exhibit 2 was

existence at the time the forecasted budget figure of 48 792 000 was cr

The budget figure became the revenue forecast and tonnage figures we

justed to conform to the budget previously mandated

35 Operating Revenue and tonnage for the historical year are as sho

Schedule V of Exhibit I these figures are taken from TMTs compute

reflect actual experience

36 The percentage adjustments in projected cargo tonnage shown o

hibit 5 werenot used by TMT in making the original tonnage estimates 

on Schedule V Exhibit 2 They were an after thofact calculation

37 Mr O Malley does not remember how he calculated the tonnag

jections for the fifteen leading commodities shown on Schedule V Exh
PROPOSED GENERAL INCREASE IN RATES 187

38 The forecast revenue amount figures for each of the fifteen leading

commodities as shown on Schedule V ofExhibits 2 and 7 were derived from

the respective historical revenue amount figures shown on Schedule V of

Exhibit 1

39 A certain amount of cargo previously moving pursuant to the rates

under investigation are now moving under through rate tariffs

40 Mr O Malley adjusted the revenue figures for each ofthe fifteen leading

commodities taking into account shifts in cargo to through rate tariffs com

petition and the proposed 5 percent increase Mr O Malley could not recall

the actual dollar amounts of the adjustments he made

41 The record does not reveal the details of any calculations or analysis

which may have formed the basis for the derivation of the forecast revenue

amounts from the historical revenue amounts and Mr O Malley could not

recall how he calculated the projections for the fifteen leading commodities

However rather than any separate analysis and calculation for each com

modity the revenue ton forecast on Schedule V of Exhibits 2 and 7 are

susceptible of being derived mathematically from the figure in the revenue

amount column as follows

T R divided by 105 X R fT

where T is the projected revenue tonnage figure

R is the projected revenue amount figure

T is the historical revenue tonnage figure and

R is the historical revenue amount figure

The 1 05 factor represents the 5 rate increase

42 The other category represents all commodities carried by TMT in

addition to the fifteen individual commodities producing the highest revenues

43 Mr O Malley calculated the revenue figure for Other cargo Sched

ule V Exhibit 2 by subtracting the 27 580 588 total revenue of the fifteen

leading commodities from the budget figure of 48 792 000 Mr O Malley

does not remember how he calculated the 689 363 revenue tons for Other

cargo as shown on Schedule V Exhibit 2

44 TMTs total projected revenue is higher than its total actual revenue for

the actual twelve months ended November 30 1978 despite the fact that its

total projected cargo volume is lower than its total actual cargo volume for said

twelve months

45 Of the sixteen commodities categories in TMTs projection only two

vehicles and other involve both a projected increase in revenue and a

projected decrease in cargo volume

46 The reason for the projected revenue increase despite a projected volume

decrease for vehicles is that while TMT projects a slight decrease in the cubic

volume ofvehicles as a result of manufacturers automobile size reductions the

corresponding decrease in revenues is more than offset by the subject 5 percent

rate increase Although TMTs estimate of a 5 5 percent growth in number of

vehicles carried would have resulted in an increase in both the projected

revenue and the projected cargo volume over the actual 1978 results the
188 FEDERAL MARITIME COMMISSION

vehicle size reductions estimated atapproximately 6 percent brought a

a decrease of both instead While this resulted in a projected net decrea

8 percent in volume application of the 5 percent rate increase tothe red

revenue left a projected net increase in revenue for vehicles

47 Although TMT calculated the revenue shown for Other carg

Schedule V Exhibit 2 by simply subtracting the revenue estimates fo

fifteen leading commodities from the forecasted budget figure TMT pre

that about 20 percent ofthe 1978 revenueand corresponding volumewill 

under otherTMT tariffs not in the Trade but that partially offsetting 

decrease will be an increase in revenue and volume in relativ ely high 

cargoes carried in tank and refriprated trailers

48 With the exceptions of refrigerated cargo and tank trailers sep

analysis and calculations were not performedto derive the revenue foreca

any commodities other than those within the topftfteen rather a pe

reductionfor all other cargo wasestimated not to exceed the revenue f

previously fixed

49 TMTs market share in the U S Mainland Puerto Rico trade ha

creased each year from 1975 through 1978 and TMT expects that its m

share will continue to increase

50 On the basis ofthe routine analysis of Schedule V TMTs G O 11 

witness Coleman calculated that the total revenue per ton increased 

TMTs actual yearto the projected year by 23 percent and that in the O

cargo category alone revenueper ton increased approximately 49 percent

51 On threeseparate occasions Mr Coleman requested Mr Craig Wa

of CMC to explain why revenue per ton on individual line items on T

projected Schedule V increased from TMTs actual Schedule Von the av

of about 5 percent whereas the Other cargo category produced a 49 pe

increase resulting in an overall increase of 23 percent

52 In responseto a telephonetinquiry of February 9 1979 by Mr Col

as to why revenue tons increased 23 percent Mr Wallace responded that 

wouldbe carrying higher rated liquidtank cargo which is a low tonnage c

53 In response to a telephone inquiry of March 2 1979 by Mr Col

as to whether TMT included the general rate increase in its projec

Mr Wallace responded yes and further that the 5 94 percent increa

revenue is the result of the compounding effect of applying the 5 pe

general increase a 23 percent increase in revenue per ton offset by a 

decrease in revenue tons carried The increase in revenue per ton is princ

affected by Other cargowhioh consists of liquid or tank cargo which 

in tonnage and carried ata higher rate

54 In response to Mr Newton Frank Supervisory Accountant Fe

Maritime Commission on May 22 1979 regarding IMTsdecrease in 

jected revenue tons and increase in revenue Mr Wallace responded tha

nage was down due to the fact that morecargo was being carried unde

tariffs Mr Wallace further responded that the revenue in Other 

increased 48 percent 38 percent of which is due to more reefer and s

cargo which is high rated and low in tons The remaining 10 percent is d

the projected mix in quantities
PROPOSED GENERAL INCREASE IN RATES 189

55 On May 22 1979 Mr Coleman called Mr Wallace regarding the

conflicting information given Mr Frank as compared to previous conversations

regarding the increase in revenue per ton and decrease in revenue tons

Mr Wallace stated that the 48 percent increase in revenue referred to wasthe

revenue per ton increase of the total of Other cargo and that in addition to

the increase in tank cargo there is a projected increase in reefer cargo which

he may have forgotten to mention earlier

DISCUSSION

I

Whether or not TMTs return on equity is excessive in comparison to other

industries facing similar business and financial risks

In a prior general rate increase proceeding Docket No 77 27 the Commis

sion suggested using the capital structure of the parent company CMC and or

related companies as a better indication of the true debt equity structure of

TMT This suggestion has been carried through although updated in this dock

eted proceeding The capital structure of CMC as computed by the company

consists of 57 68 percent debt and 42 32 percent equity as of December 31

1978

In the case of TMT a wholly owned subsidiary of CMC any attempt to

directly measure the cost of equity capital is highly speculative because of the

diverse nature ofCMC which is the stock issuing entity in the corporate chain

Although the capital structure of CMC has been used in this proceeding as a

surrogate for TMT some measure of the cost of equity capital for TMT is

required

In lieu of a direct cost of equity study a comparable earnings test is a

reasonable alternative in determining TMTs fair rate ofreturn The compara

ble earnings test entails the determination of rates of return being earned by

firms similar to TMT Generally the analysis is centered around determining

average rates ofreturn being earnedby various firms and thereafter attaching

a risk factor according to prevailing trends for the business and financial risk

TMT faces vis a vis these other firms

To determine a reasonable rate of return on equity a long run average of

industry earnings is preferable The use of a time series analysis smooths our

variations in earnings which may fluctuate widely from year to year avoids the

possibility of allowing a carrier an inadequate return if current earnings are

abnormally low or conversely permitting a carrier unjustifiably high profits if

a temporary surge in earnings has occurred In addition a time series provides

a better idea of the trend in earnings Therefore the initial determination of a

fair rate of return for a carrier experiencing average risk should be based on

the average rate of return on equity earned during the past ten years by

non financial US corporations Hearing Counsel s witness Mr Stilling FMC

Staff Economist presented numerous schedules to that effect For purposes of

this proceeding Mr Stilling s initial determination of a fair rate of return for
190 FEDERAL MARITIME COMMISSION

a

regulated firm experiencing average risk was based on rates of retu

stockholder s equity earned during the past ten years by non financial 

corporations as reported by Citibank6

For the ten year period 1969 to 1 78 non financial corporations ave

12 8 percent return on equity and in 1978 the companies averaged 

percent indicating that returns are currently higher than over the past de

Although during the past ten years there has been a trend ofincreasing re

on equity between 1974 and 1975 average returns on equity droppedfrom 

percent to 11 7 percent On amoving average basis the fiveyear median r

on equity for U S industries has increased from 116 percent during the p

1970 1974 to 13 9 percent in the 1974 1978 period Such higher no

earnings reflect both a real component and an inflation component As infl

rises earnings and rates of return rise in large measure due to higher p

It is therefore more reasonable to look at a ten year period of time to d

mine trends in returns On this basis an appropriate starting point from w

a determination can be made as to a reasonable rate of return on equit

TMT is the ten year 12 8 percent average rate of return on equity o

composite non financial U S corporations

TMTswitness Mr Roush calculated the fair rate of return on equity fo

projected year based on the 1978 Fortune 500 average with a 2 6 pe

adjustment which Dr Robert Ellsworth FMC Staff Economist used in a 

vious case Although Mr Roush selected the 1978 Fortune 500 average a

basis for his calculation he stated that such an average could not be us

an indicator of business conditions in 1979 or 1980 and he did not review 

alternate sources of business data Nor did Mr Roush explain why Dr 

worth s 2 6 percent adjustment should be applied to the 1978 Fortune 

average

Adjustment to the ten year average rate ofreturn on equity to accou

current trends in returns on equity cost of money financial and business 

should be reflected in the return that any regulated firm would be permitt

earn if it was in a similar risk category as an average firm

The objective measure of financial risk is determined by looking a

capital structure ofthe firm and hypothesizing that the more debt and the 

expensive the debt the company has the more volatile will be its retu

equity The equity investor is therefore subject to more risk in a h

leveraged firm

To determine whether TMThad more financial risk leverage tha

average U S corporation schedules were prepared by staft witness Mr St

which show the debt equity ratios for those industries surveyed by Forbe

the latest twelve months This data was then compared by Mr Stilling t

debt equity ratio of TMT to determine whether it is more or less leve

than the average firm

Mr Stilling s data show that the median debt equity ratio for all the i

tries surveyed by Forbes for the last twelve months was 04 the su

Non financial corporations include all industries survoycd by Citibank among them transportation exQClpt linancial ins

commercial banks investment funds sales linance which returns may not be accurately reflected
PROPOSED GENERAL INCREASE IN RATES 191

transportation industry had a debt equity ratio of 0 6 the air transportation

industry 0 9 and the public utility industry a ratio of 10 From data provided

by the carrier as of December 31 1978 Mr Stilling calculated the CMC

debt equity ratio to be 11

On the basis of a comparison of the above debt equity ratios Mr Stilling

concludes that CMC has substantially more long term debt to equity than the

average firm and therefore CMC is more leveraged than the average firm

Because ofCMC s more leverage position than other companies based on the

median debt equity ratios Mr Stilling judged that TMT should be given a

financial risk premium of05 percent

The measure of business risk is a test of stability of earnings of a firm and

is measured in terms of fluctuations in rates of return Higher variations are

viewed as symptomatic of higher levels of risk

In order to determine business risk Mr Stilling applied a variations in

earnings test Using the variations in earnings test based on TMTs five years

of earnings including the period December 1 1977 November 30 1978 and

January 1 1978 December 31 1978 Mr Stilling concluded that TMT ap

peared to have a high business risk Mr Stilling compared the financial data

for TMT to the variations in rates of return for thirty industries surveyed by

Forbes for the five year period 1974 1978 The data according to Mr Stilling

indicates that TMT is in a high risk position as compared to the industries

surveyed

However in determining levels ofrisk consideration must also be given to

the subjective measuresof risk A less precise alternative to the variations in

earnings test to estimate business risk is to analyze market shares The larger

the market share of the firm the more dominant its position Adominant firm

with large market shares will normally be subjected to less risk because its

position permits the firm to experience various economies of scale and thereby

withstand the rigors of competition

Based on an analysis ofTMTs market share in the Puerto Rican Trade for

the years 1975 1978 Mr Stilling found that TMT cannot be considered

dominant in the overall Puerto Rican Trade with a meaningful market share

somewhat higher than 17 percent However TMTs profits have always been

positive and its market penetration during the last four years has increased a

trend which Mr Stilling believes is likely to continue

The above factors indicate that TMT is subjected to more than average

business risk although TMTs profits have always been positive and the com

pany has had little trouble in attracting new investment On this basis as the

purpose of assessing a carrier a risk premium is to allow a return capable of

attracting needed capital Mr Stilling allowed CMC a business risk premium

of 10 percent Therefore based on Mr Stilling s analysis Hearing Counsel

take the position that the total appropriate adjustment to the ten year average

rate ofreturn on equity for non financial corporations for business and financial

risk should be 15 percent for TMT

Another factor to be considered when determining the appropriateness ofthe

ten year average return on equity as an indicator of a fair return is the trend

in money costs during the period Information on the current and historical cost
192 FEDERAL MARITIME COMMISSION

of money indicatea whether the ten year average return on equity is too co

vative forthe average firm which must compete in the money market for eq

funds Adjustments to the ten year average return on equity to accoun

current trends and cost of money should therefore be reflected in the re

that any regulated firm such as TMT would be permitted to earn if it w

a similar risk category as an average firm

Mr Stilling s analysis of current trends and the cost of money showed 

a time series analysis underestimates the cost of capital and therefore 

upwards adjustment to the average rate of return is necessary Mr St

found that currently money costs are significantly higher than they have 

during the most recent ten year period Mr Stilling s conclusions are base

the fact that current returns on equity are 2 percent higher than the ten 

average average 1978 corporate bond yields were 076 percent above 

ten year average and the average 1978 discount rate was15

percent abov

ten year average

To the extent that the use of average earnings data for historical perio

underestimated and based on the above analysis of the high cost of attra

capital Mr Stilling concluded that a 15 percent adjustment should b

tached to the ten year average rate of return on equity to bring TMTs re

up to a reasonable level which will account for current financial trends

Given all of the above average risk conditions Mr Stilling concluded 

TMT or CMC should be entitled to a rate of return on equity whi

30 percent higher than the ten year average for non financial U S cor

tions of 12 8 percent On that basis the reasonable return on equity that T

should be allowed to earn for the projected year March 1979 Apri119

15 8 percent A 15 8 percent return on equity will give TMT the opport

to earn a rate of return which is higher than that actually earned by n

70 percent ofthose U S industries analyzed by Standard Poors for 197

TMTs projected rate of return on equity forthe forecast year is 16 15 

cent Considering the degree ofjudgment necessarily involved in both atte

ing to predict future business results and in determining whatis within the 

ofreasonableness it believes it cannot fairly be concluded that a rate of r

is excessive which is barely threetenths ofa

percentage point higher tha

expert s judgment of what is fair

While TMTbelieves a higher rate of return would indeed be reasonab

does not believe itwould be productive here to continue that theoretical co

versy particularly since the forecast results are themselves based upo

similarly inexact science of predicting the future Accordingly TMT 

cedes to the staff s conclusion that 15 8 percent would be areasonably a

able rate of return on equity for TMT

In consideration of the foregoing it is concluded that the record h

establishes that a return on equity to TMT in the zone of 15 8 165 pe

would not be excessive in comparison to other industries facing similar bus

and financial risk

It is further concluded that the record herein establishes that ifTMT

revenue projections are accepted the return on equity to TMT woul

exceed the zone of reasonableness and would not be excessive
PROPOSED GENERAL INCREASE IN RATES 193

It is further concluded that it cannot be determined on this record whether

or not the return on equity to TMT would exceed the zone of reasonableness

because TMT has not met its burden of proof on this issue and no reliable

projection ofTMTs net revenues can be made 7

II

We now proceed to a consideration of the allocation of line haul expenses and

division of assets between TMT and Gulf Caribbean Marine Lines GCML

both subsidiaries ofCrowley Maritime Corporation CMC for tandem barge

towing services between Us Gulf Coast ports and Puerto Rico

In the US Gulf Coast Puerto Rican trade between Lake Charles Louisi

ana and San Juan PuertoRico tugs are used by TMT to tandem tow aTMT

barge and a GCML barge an affiliate ofTMT and both subsidiaries ofCMC

The TMT barge sails only from Lake Charles to San Juan whereas the GCML

barge calls at other ports on the Gulf Coast and Puerto Rico and includes some

foreign destinations However GCML employs its own tugs while loading and

discharging cargo to move its barges among the various other ports it serves

For the projected year s March I979 April 1980 allocation ofexpense and

division of assets for the tugs used in the tandem towing service between Lake

Charles and San Juan TMT employed an allocation based on a time formula

for a round trip voyage TMTs method allocated 50 percent of the actual

steaming time in a round trip voyage to each respective carrierand 100 percent

of the remaining time not under tandem tow to TMT On this basis TMT

asserts that this results in a 60 40 allocation ratio to be applied on an annual

basis to TMT and GCML respectively 8It is TMTs position that this time

formula is based on benefits received and is a reasonable method of allocation

for expenses and assets in the tandem tow service

Hearing Counsel disagree with the use of a time formula allocation for the

tandem tow expenses and assets They contend that a volume method of

allocation should be employed and that such method is required by G O II

The principles set out in G O II prescribe allocation of expense and division

of assets on a volume basis Under the requirements of G O II direct vessel

expenses are accumulated for all voyages in the Service and where allocation

is necessary allocated to the Trade on a revenue ton mile relationship which

reflects volume 46 C F R 512 7 cX2 The volume principle of allocation is

carried through G O II and in particular to the Vessel Operating Expense

VOE summary which provides operating results and allocations to the Trade

based on a revenueton mile relationship where there is simultaneous carriage

of other cargo 46 C F R 512 7 c 3 A vessel day allocation is prescribed

by G O IIonly in those cases of cargo vessels employed in the Service for less

1

See discussion infra for full development of issue of revenue projections

TMTbased its time formula on It twenty one day round tripvoyage between Lake Charles and San Juan during which sixteen

days eight days each direction lutlactual steaming time During the remaining five days the tugstayswith only the TMT barge

Thirteen of the twenty one days are allocated to TMT and eight days are aUocatcd toGCML thus producing TMTs 60 40ratio
194 FEDERAL MARITIME COMMISSION

than the entire reporting period and this provision argues Hearing Couns

inapplicable to the tandem barge towing service

Mr Coleman FMC staff Financial Analyst using the volume form

principle of G O II employed acargo cube allocation for line haul expe

and division of assets for the tandem tow portion of a round trip vo

between Lake Charles and San Juan Mr Coleman s cargo cube allocatio

based on the tonnage of cargo carried on TMTs and GCML s

respe

barges during the tandem tow portion of a round trip voyage During 

period when the barges were not in tandem tow and only a TMT barg

towed or during lay uptime expenses and assets are allocated on a revenue 

mile relationship Calculation of this allocation by Mr Coleman produc

ratio of 63 7 percent for TMT and 36 3 percent for GCML

The Commission has upheld the use of avolume allocation over a daily 

allocation for vessel expenses InAlcoa Steamship Co Inc General Incr

in Rates in the Atlantic Gulf Puerto Rico Trade 9 F MC 220 1966 

principal issue wasa determination of a reasonable allocation ofvessel expe

to the Puerto Rican common carrier service of Alcoa Steamship Co 

Alcoa In general Alcoa allocated vessel expenses between its southbo

common carrierservice and its northbound contractservice on the basis of

operated in each service The Commission found that the ton mile me

more closely approximated the assignable costs ofAlcoa to its regulated se

and should be employed as the proper method of computing vessel expe

The Commission stated in pertinent part that

The vessel cfay basis although superficially appealing suffers from many built in faults

The benefit derived from a

transportation service is that cargo tonnage is transported 

distance miles to its receiver As stated in a recent and definitive study The product whic

transportation industry sells is the ton mile in freight service This has often been recog

by this Commission and its predecessors As we noted in Allamlc Gulf Puerlo Rico Ge

Increase 7 F M C 87 98 1962 The basic factors contributing to vessel operating exp

are the tonnage and distance carried

The ton milemethod is proper because we believe it fairly allocates expenses which s

be borne by users in proportion to amount of theirtonnage carried

9 F M C at 231 233

The Commission further held that in those instances of unemployed leg

a

voyage where no cargo is carried the same volume method of alloca

should be used The Commission stated

Ballast leg and positioning leg days also should be allocated on the ton mile basis An allem

allocate such days on a vessel day basis shows another basic flaw in that method the 

possibility for arbitrariness an sicl inconsistent positions

9 F M C at 232

TMT argues that the concept of benefits received should not be restr

to cargo carried It believes that a carrier receives a benefit when its barg

towed from point topoint irrespective of the amount of cargo carried It 

tends that the GCML barge which rarely carries any cargo northbo

would under Hearing Counsels method receive the benefit of towage ba

Lake Charles and bear none of the expenses of that towage TMT say
PROPOSED GENERAL INCREASE IN RATES 195

method which is directly related to the time the barges are under tandem tow

does not permit such an inequitable result and finds direct support in section

512 7 b I i b ofG O II TMT claims that from the standpoint of the real

world it is highly unlikely that a prudent carrier would enter into a business

arrangement with a second independent carrier to share the expenses ofa joint

tow based upon respective cargo volume for the poorer the fortunes of the

second carrier the greater would be the first carrier s expenses which he would

thus be powerless to control The result should be no different where the

carriers happen to be affiliated

Section 512 3 g of G O II permits other methods of allocation of expenses

in the G O II statement in those instances where a volume method would

produce unreasonable results In this case however the cargo cube allocation

method fairly reflects the expenses and assets of the tandem barge towing

service and will not therefore create unreasonable results Following what

Hearing Counsel characterized as a benefits received principle in the case of

the tandem barge towing service it is more reasonable to conclude that the

company which carries the greater amount of cargo receives the greater

benefit This benefit is reflected in Mr Coleman s cargo cube allocation as it

is based on volume Absent the volume principle underlying G O II TMTs

time formula allocation could be regarded as based on benefits received But

as between what must be regarded as a cornerstone principle of G O II and

another principle of allocation the volume oriented allocation underlying

G O II must be utilized in preference to a timeoriented allocation

Forthe foregoing reasons it is concluded and found that the volume formula

set forth by witness Coleman should be adopted for purposes ofdetermining the

allocation of expenses and division ofassets between TMT and GCML for the

tandem barge towing service

III

Why is there a projected increase in revenue for the trade despite a decreasing

volume of cargo carried for TMTs projected period of April I 1979 to

March 31 1980 as compared to TMTs actual period of December I 1977

to November 30 1978

The ultimate issue which must bedetermined by the Commission is whether

the rate increase is just and reasonable One cannot predict with exactitude the

amount of revenue that a particular set ofrates will produce However based

on known facts and reasoned projections it is possible to set rates which can

be expected to produce sufficient revenues to equal the cost of service 9

After ascertaining what rate of return is reasonable Commission Issue

No I it is necessary to determine whether the rates to be charged will achieve

that return That determination in turn can only be reached by ascertaining

what revenues can be anticipated And revenue anticipation in its turn re

Thecost of service is defined to equal the sum of operating expenses depreciation expense taxes and areasonable return on

the net valuation of property Garfield and W Lovejoy Public Utility Economics 1964 at 44
196 FEDERAL MARITIME COMMISSION

quires a knowledge of rates to be charged times the volume 10 Qf cargo to 

carried Commission Issue No 3

The record establishes that a return of 15 8 16 1 percent on equity 

resonable return to TMT The question then remaining is wi1ltherate incre

result in such return

TMTs original revenue and revenue ton projections for the test year 

found on Schedule V Exhibit 2 The Schedule was originally prepared 

Donald C O Malley Jr Director of Tariff and Regulation Affairs for 

Caribbean Division ofCrowley Maritime Corporation sometime after mana

ment decided to seek a general rate increase

There is no evidence as to how CMC originally determined a forecas

revenue of 48 792 000 for TMT which in turn it contends results from 

imposition ofa 5 percent general rate increase No witness appearing on be

ofTMT could testify as to the basis or rationale by which the 48 792 000 

first arrived at

The record establishes that Mr O Malley was given a projected total r

nue figure of 48 792 000 from the forecasted budget which he underst

would be the bottom line revenue figure on Schedule V However nei

Mr O Malley nor Mr Roush TMT s other witness took any part in 

preparation of the forecast budget for TMT Thus no witness could exp

how the management of TMT arrived at the revenue figure of 48 792 

which it is claimed will result from TMTs general rate increase of 5 perc

After obtaining the total revenue figure Mr O Malley went to wor

establish the rest of the figures shown on Schedule V Exhibit 2 Fro

computer run he obtained the historic revenue for the fifteen leading c

modities He then adjusted the revenue figures to account for shifts in ca

increased competition and the rate increase Mr O Malley could not remem

how hedetermined or arrived at the actual amount of the adjustments he m

and thus the reasonableness of those adjustments are unknown After arriv

at a total revenue figure for the fifteen leading commodities Mr O Malley 

simply subtracted this figure from the 48 792 000 total in order to obta

revenue figure for Other cargo

After setting forth the adjusted revenue figures Mr O Malley then ca

lated the revenue tons ofeach ofthe fifteen commodity breakdowns Again 

with his revenue adjustments Mr O Malley could not remember how he 

it Arithmetic calculations seem to suggest that he divided historic ave

revenue per ton for each of the fifteen leading commodities adjusted for 

increase into the total projected revenue for each commodity 1

Although the method by which TMT actually calculated the revenue 

shown on Schedule V Exhibit 2 is unclear the record establishes that 

10 In fate desiln carlO mix is an intolral 81pect orvolume

II A formula which eonrorms to the O Malley raults i as follows

T R divided by 105 X R r

where T ilthe projected revenue toonale ftJUI C

R it the projected revenue amount fiaurc

ris the historical revenue tonnage ftJUI C

and

R is tho historical reyenue amount ftJUI C

The 1 05 factor represents the 5 rate increase
PROPOSED GENERAL INCREASE IN RATES 197

management of TMT does not make forecasts of future volumes of cargo in

terms of tonnage Rather it forecasts in terms of revenue Whether or not last

year s average rate per ton for a given commodity will approximate this year s

depends in part on whether shippers tender the same size shipments To

complicate matters carriers regularly change the minimum quantity require

ments for a given trade Rate adjustments may also affect the size of shipments

tendered Thus the historic average revenue per ton for a given commodity

during a past year may not be necessarily related to the average revenue per

ton for a future year The problems in using historic average revenue per ton

increase in the case ofthe calculation for Other cargo There many com

modities make up the average and the mix of commodities may change from

year to year based on shifts in cargo competition and rate increases In short

the commodity mix for Other cargo is affected by all of the factors which

Mr O Malley considered in adjusting the revenue figures for the fifteen leading

commodities and compounded by the larger number of commodities involved

Hence TMTs correction to the revenue tons attributable to Other cargo

based on historic average revenue ton cannot be relied on

The consequences ofTMTs method of calculating projected revenue tons is

of crucial importance in this proceeding because allocations in the Exhibits

which form so great a part of the record are based on TMTs projection of

revenue tons 1 2

Dueto the weakness inherent in TMTs method ofcalculating revenue tons

Hearing Counsel and GVI contend that these Exhibits are not reliable indi

cators of TMT s projected financial condition and cannot form the basis of a

Commission decision Because of the inherent flaws in these Exhibits they say

the Commission does not have a record before it from which it can conclude

that the rates ofTMT are just and reasonable

TMT disputes that its revenue forecasts or information in support thereof is

deficient or that it in any way has failed to furnish information timely

TMT asserts that the commodity forecast set forth in Schedule V is not

prepared by TMT for any business purpose other than to comply with the

requirements of G O 11 In connection with the preparation of the original

forecast J3 those who prepared it were given a marketing department budget of

48 792 000 revenue for the twelve months ended March 31 1980 14They then

proceeded to determine because TMT says it was required by G O 11 their

best estimate of how much of that 48 792 000 would be derived from each of

the fifteen leading commodities carried and how many revenue tons of each

would be carried Starting with historical data showing the actual revenue and

tonnage for each of the fifteen those data were adjusted to reflect their view

after further consultation with marketing personnel of the future prospects as

llt Exhibit 2 Forecast April I 1979 through March 31 1980

2 Exhibit 5 Analysis of Schedule V TMT Projected Year April I 1919 through March 31 1980

3 Exhibit 7 Forecast April I 1979 through March 31 1980

4 Exhibit 8 Revised Computation of Return on Equity

5 Exhibit 10 Schedule I Testimony of Thomas J Stilling Revised Computation of Return on Equity

6 Exhibit 11 Offer of Proof

HEx 2

14TMT Brief at 9 10 This revenue forecast made prior to any tonnage analysis is the basis for Hcaring Counsel and GVI

contention of unreliability
198 FEDERAL MARITIME COMMISSION

to each commodity Exhibit 5 shows in general what factors entered into 

adjustments resulting in theditrerences between the actual dollar and tonn

figures on Schedule V ofExhibit I and the forecast dol1ar and tonnage figu

on Schedule V of Exhibit 2 for each of the fifteen leading commodities

TMT proceeded as fol1ows to determine the remaining other dol1ar 

tonnage figures The revenue adjustments for the fifteen leading commod

resulted in an aggregate of 27 580 588 projected revenue for those c

modities which when subtracted from the total marketing department bud

of 48 792 000 left a remainder of 21 211 412 revenue which by defini

wouldcome from al1 other commodities carried Having al10cated 21 211 

to othercommodities TMTthen computed the corresponding tonnagefig

necessary to realize the dol1ars The method employed is set forth on page 

Exhibit 5 Marketing personnel predicted an increase of 41 607 tons 

corresponding revenue of 3 371 270 from increased carryings of liquid 

refrigerated cargo They also predicted a general shift decrease of abou

percent of the 1978 other revenue to TMTs through tariff and other ta

Since the total other forecast revenue had been computed at 21 211 412 

which 1 010 067 would result from the 5 percent rate increase and 3 371 

by reason of increased revenue from liquid and reefer cargo there rema

16 830 075 to account for This sum was4016 997 less than and abou

percent of the 1978 actual other revenue It was then accounted for 

assuming that the shift to other tariffs would reduce the prior year s oth

revenue by 4 016997 Since the actual 1978 average revenue per ton 

other cargo was 2053 on the assumption that the cargo mix and o

factors would not change this figure wasdivided into the 4016997 in o

to arrive at the corresponding volume reduction of 195 655 revenue t

Subtraction of 195 655 from the 1978 actual other tonnage and additio

the expected increase of 41 607 tons of reefer and liquid cargo left a 

tonnage figure of 861 213 5

Hearing Counsel and GVI dispute TMTs rationaleand contend that T

was required to adduce additional evidence as to the details underlying TM

marketing department s budget and predictions TMT argues that the C

mission never ordered an investigation into the reasonableness of TM

projections If it had done so TMT claims it would have been prepare

present more detailed evidence relating to the marketing department s basis 

its budget and predictions It never considered doing so however in view o

order of investigation

One thing isclear from the record Schedule V was not used tocalculate 

potential revenue figure because the schedule was not even in existence at 

time the potential revenue budget was determined 16 The evidence in 

proceeding establishes that TMT built its rate design and cargo estimates t

and justify a predetermined revenue figure 17

I

The change to thil861 2tJ fiaure hedule V to Exhibit 7 from 689 363 hedulo V to Exhibit 2 isthe only cor

which TMT has made to its opcratins revenue foreaul

Tr 95 91

17Neither Mr O Malley nor TMTsother witnMr Roush were involved inproparina the budpt thus tho record 

show how the budsetcd figure was determiHd
PROPOSED GENERAL INCREASE IN RATES

The testimony of record reveals that once the total projected revenue figure

was given to Mr O Malley by the accounting department he went back to

historical revenue dollar and tonnage figures for each of the fifteen leading

commodities as shown on TMTs computer From the historical revenue dollar

figures he proceeded to derive on a commodity by commodity basis the

projected revenue dollar figures While Mr O Malley did not remember and

did not testify how these individual projections were calculated TMT argues

that it probably was an evaluation of competitive factors a shift to through

tariffs and the 5 percent rate increase which accounted for many of the

adjustments between historical and projected years

The revenue amount figure for the other cargo category wasthen backed

into Le it is a residual figure calculated by subtracting from the total budg

eted figure 48 792 000 the subtotal of the revenue amounts for the top

fifteen individual commodities 27 580 588 to arrive at 21 21142 for

other cargo

Having projected revenues Mr O Malley then calculated the projected

tonnagefigures for the fifteen leading commodities 18 While he did not remem

ber how this calculation wasperformed it appears from analysis of the figures

that he used a mathematical formula based on the revenue per ton for each

commodity 19 Mr Roush used a similar revenueper ton calculation to derive

other revenue tons 20

TMT contends at least with regard to the fifteen individual commodities

that revenue amount projections were predicated on historical figures adjusted

for purported shifts to thru tariffs and competitive factors The record estab

lishes that in any event the projection of other cargo and thus the total

revenue ton figure have no basis in analysis Mr O Malley admitted it was

necessary to forecast for each commodity not just the top fifteen the effect

that shifts to thru tariffs andcompetition will have on projected cargo because

these factors affect each commodity differently but he did not make individual

forecasts 21 rather a flat percentage wasapplied to the other cargo category

and even the details ofthis calculation are not revealed in the record Thus at

least with regard to the other category and the total revenue tons the cargo

projections can be traced directly back to the predetermined budgeted total

revenue amount figure which itself had no basis on volume but was forecast

before volumes were ever considered Hence it is concluded that from the

residual nature of the other revenue amount figure and the subsequent

calculation of the other revenue ton figure that marketing information and

known facts were not the basis for establishing the cargo projection

To support its revenue dollar projection and ultimate rate of return TMT

should have analyzed each commodity individually in terms ofcargo shifts and

the competitive situation This analysis should have been used to arrive at

projected tons

I See Schedule v of Exhibits 2 and 7

I

Fn 11 supra

20 See Exhibits 5 and 7 Schedule V

11 Refrigerated cargo and tank trailers were apparently the only exception Exhibit 5 at 2 nole 2 Tr 49 50 83 138

199
200 FEDERAL MARITIME COMMISSION

Ifthis had been done tariffrates could then have been applied to the tonn

figure for the respective commodities to determine projected revenue for ev

commodity Then the sum of the individual revenue figures would have p

duced a reasoned supportable total figure for revenue Rather TMT p

ceeded as outlined above and then produced Exhibit 5 as an after the

justification of the result

Assuming that with the rate increase total revenues would not exc

S48 792 OOO because of lower cargo volume and thus that the return to T

would not begreater thanthe 15 8 16 15 percent deemed proper TMT has

burden of establishing by competent evidence those factors which it claim

would cause tonnage decreases

A prime factor that TMT cites22 as the basis for decreased tonn

projections is a shift to the socalled thru tariffs and other tariffs However 

O Malley who prepared the forecast never was aware of the percentage 

cargo in the subject trade which moved on the thru tariffs nor did he ut

any historical data or any kind of data whatsoever to forecast the purpo

shifts of cargo to these tariffs The following quotation from the recor

illustrative

Q Mr OMalley how did you determine the percentage shift to the through tar1ftand the 

tariffs if you were unaware of the amount of traffic going to those tarlfts

A This is a forecast and I was theoretically forecasting how much I thought would be sh

in the forecast year I have no idea what additional cargo will be added to those new tarlfts in 

year

Q Was there any data upon which you baaed that forecast

A No

It is concluded that TMTs assertion that part of the alleged decreas

volume was due to a shift to thru tariffs and other tariffs is not based 

historical data nor does it have any other factual support in the record 

should also be noted that the other major factor asserted by TMT as 

tributing to decreased tonnage namely competition also is not supported 

the record by any specific figures or calculations To the contrary altho

TMT contends that its cargo volume will decrease in the projected year

24 

record indicates that its volume and thus its revenue may well incre

TMTs market share in the Mainland Puerto Rico trade has increased e

year since it entered the trade from 10 4 percent in 1975 to 17 7 percen

1978 23 and Mr Roush expects that its market share will be increased 26Un

there is a decrease in overall traffic volume by all carriers to Puerto R

TMTs total cargo will probably increase rather than iecrease There i

evidence that the Puerto Rican trade will decrease in volume 27

21Tr 101 119 Exhibit 5

llTr 124 125

2

Primarily by rClllOl l of carlO shifting to thruterift1See ditcuuion IUpra

2l Exhibit 10 at II

16Tr 175

n

Mr Roush tcIliftcd IIto TMT belief in the potential of that Iervice and implied total volume would if not incre

decrease Tr 175
PROPOSED GENERAL INCREASE IN RATES 201

In addition to the unreliability of the projected revenue as determined by

TMTs methodology another matter must be mentioned as further com

pounding the difficulty and dilemma of the Commission28 in attempting to

determine whether the rate increase is just and reasonable

Although TMT submitted anumber ofeleventh hour corrections Hearing

Counsel claim two stand out as being particularly unfair to the other parties

These are the revenue tonnage recalculation for Other cargo appearing

on page 2 of Exhibit 7 and the figure for line haul expense appearing in Ex

hibit II

By a telephone conversation of June 5 1979 between Mr Roush and

Mr Coleman and letter dated June 6 1979 correcting TMTs direct case

Mr Roush supplied a new total line haul expense figure of 4 942 610 and an

allocation of 2 965 607 to TMT and 1 977 003 to GCML which produced

a 60 40 percent time allocation Mr Coleman used the total of 4 942 610 in

his testimony which he identified as line haul expense Although Mr Cole

man s

testimony was served on June 12 1979 TMT waited until the hearing

before announcing that the 4 942610 figure was not the line haul expense

but included other expenses as well Ifthere wasa misunderstanding over the

4942 610 it should have been resolved as soon as TMT received Mr Cole

man s testimony TMT hardly needed to cross examine Mr Coleman on the

4942 61O it was supplied by TMT in the first place

The projected revenue tons for Other cargo provides another example of

an eleventh hour correction which could and should have been made weeks

before the hearing

Mr Coleman as part of hisregular function in connection with the 5 percent

general rate increase performed a complete analysis ofthe datain TMTsG O

II statements both actual and forecasted In the process of this analysis he

calculated the average revenue per ton for all commodity line items includ

ing Other cargo on Schedule V of TMTs projected G O II statement

Mr Coleman calculated that the total revenue per ton increased from TMTs

actual year Exhibit Ito the projected year Exhibit 2 by 23 percent and that

in the Other cargo category alone revenue per ton increased approximately

49 percent

On three separate occasions Mr Coleman requested Mr Craig Wallace of

CMC to explain why revenue per ton on individual line items on TMTs

projected Schedule V Exhibit 2 increased from TMTs actual Schedule V

Exhibit I on the average of about 5 percent whereas the Other cargo

category produced a 49 percent increase resulting in an overall increase of

23 percent

In response to a telephone inquiry of February 9 1979 by Mr Coleman as

to why revenue tons increased 23 percent Mr Wallace responded that TMT

would be carrying higher rated liquid tank cargo whichis a low tonnage cargo

In response to a telephone inquiry of March 2 1979 by Mr Coleman as to

whether TMT included the general rate increase in its projections Mr Wal

lace responded yes and further that the 5 94 percent increase in revenue is the

result of the compounding effect of applying the 5 percent general increase a

l Viewed in the light of the lime constraints imposed by P L 95 475
202 FEDERAL MARITIME COMMISSION

23 percent increase in revenue per ton offset by a 13 88 decrease in reven

tons carried The increase in revenue per ton is principally affected by Othe

cargo whichconsists of liquid ortank cargo which is low in tonnage and carr

at a higher rate

In response to Mr Newton Frank Supervisory Accountant Federal M

itime Commission on May 22 1979 regarding TMTs decrease in projec

revenue tons and increase in revenue Mr Wallace responded that tonnage w

down due to the factthat more cargo wasbeing carried under ICC tariffs M

Wallace further responded that the revenue in Other cargo increas

48 percent 38 percent ofwhich wasdue to more reefer and special cargo wh

is high rated and low in tons and the remaining 10 percent due to the project

mix in quantities

On May 22 1979 Mr Coleman called Mr Wallace regarding the c

flicting information given Mr Frank as compared to previous conversatio

regarding the increase in revenue per ton and decrease in revenue to

Mr Wallace stated that the 48 percent increase in revenue referred to was 

revenue per ton increase of the total of Other cargo and that in addition 

the increase in tank cargo there is a projected increase in reefer cargo wh

he may have forgotten to mention earlier

The record amply demonstrates thatstatf inquiries regarding the increas

revenue despite decreasing tonnage specifically focused on Other car

Mr Wallace understood staff interest by explaining that the apparent anom

wasdue to the increase in reefer and liquid or tank cargo which comports w

the reason which appears in connection with Other cargo on TMTs Exh

5 There is no evidence that Mr Wallace was not talking about Other ca

when he made the observation Indeed the only commodity in the fifte

leading commodities which showed a drop in tonnage coupled with IIn increa

in revenue wasautomobiles Itis concluded that thestatf repeatedly question

the projected revenue tonnage for Other cargo and that TMT wasaware 

staff s concern

Despite repeated questions TMT did not recalculate the figure until th

or four days before the hearing Apart from the merits of the recalculati

timing of the correction is critical to the Commission s ability to consider 

lawfulness of the rate increase

The Commission in supporting enactment of Public Law 95 475 was 

tremely concerned about the time elements inherent in the development o

rate case The testimony of Vice Chairman Moakley to the Senate Subco

mitteeon Merchant Marine and Tourism focused on this issue In outlining

changes to the Commission s procedure that would be required in order 

comply with the legislation he made the following statement

First the financial data which the carrier is required to file simultaneously with the filing o

general rate change will have to be essentially the evidence it will rely upon throughout 

expedited proceeding This means at the very least there can be no change in the test year u

by the carrier in support of the rate increase Otherwise the parties will not have a pro

oppartunlty to test the carrlers evidence 29 Emphasis added

To AWWM 1M Inlef COG JGIShipping Act 933 and For Oth Purpoul Hearings onHR6503Before Ihe Subcomm 

MtrchiUll MarIVand Tourism ofIhe SeMI CcmmlllH 011 Co m Science and rranspor lJtlon 95th Cong 2d Sea

l97S
PROPOSED GENERAL INCREASE IN RATES 203

This apparently provoked the following exchange

SENATOR INOUYE What makes you believe that you can cut a

6 yearhearing period down to 180

days as H R 6503 would require

Mr MOAKLEY I

think I might take a

quick look at what took place on the longest one which

was the Matson case on which test years were changed the tinancial information was changed

the whole basis of the case was constantly changed

Now we have clearly detined that at the time you apply for the rate increase you must submit the

tinancial information which will be used to determine whether the rate is reasonable or unreason

able That will not change Therefore the opponent to it will have theirfinaneial information in

the beginning and be able to analyze 3

Emphasis added

Vice Chairman Moakley wasnot alone in this view Chairman Daschbach

addressed a letter dated October 3 1978 to Senator Inouye in whichhe stated

inter alia

Fourth carriers have often made major changes to their evidence after a rate case has begun

including the changing of test years The legislative history of H R 6503 makes it clear that the

carrier must henceforth use the evidence submitted with its rate increase tilling sic to justify its

increase and cannot make major changes or additions to that evidence which would require further

analyses cross examination and possibly rebuttal

The Committee Report S Rep No 1240 95th Cong 2d Sess 9 1978

lends support to the views expressed by the Chairman and Vice Chairman

This is one of the very first rate proceedings to be conducted within the time

constraints of P L 95 475 and despite ample time in which to furnish the

information which would enable the Commission to properly consider the

reasonableness of the increase we find the carrier shifting and changing data

at the last moment making it virtually impossible for staff and protestants to

evaluate the new information or prepare for cross examination let alone draw

rational conclusions relating thereto The statute places a high degree of re

sponsibility on the carrier seeking a rate increase to supply the information

necessary to permit expeditious consideration

Review and consideration of the record in this proceeding leads to the

conclusion that the volume factor is not reasonably accurately ascertainable on

this record Not knowing the volume it is impossible to know whatthe revenues

will be and hence whether such revenues will yield a return which will be a

reasonable 15 8 16 1 percent or whether it will be something else

CONCLUSIONS

Section 3 b of the Intercoastal Shipping Act 1933 46 US C 845 b as

amended states that at any hearing the burden of proof to show that the

rate is just and reasonable shall be upon the carrier

The evidence in this proceeding fails of proof that the rate increase will not

result in an excessive return on equity to TMT in comparison to other indus

tries facing similar risks

lOld at 18 19

II Id at 26
204 FEDERAL MARITIME COMMISSION

The evidence in this proceeding establishes that the cargo cube allocatio

expensesand division of assets between TMT and GCML for the tandem ba

towing service is appropriate and in accordance with G O II

The evidence in this proceeding fails to establish any reasonably accu

basis for determining volumes or revenues which may be anticipated by rea

of the rate increase

Inasmuch as the record does not reasonably establish volumes and reven

which may be anticipated by the rate increase it cannot be determined 

there is a projected increase in revenueforthe trade despite a projected decr

ing volume of cargo to be carried for TMTs projected periodof April I 1

to March 31 1980 as compared to TMTs actual period of December I 1

to November 30 1978

Because the evidence does not reasonably reflect anticipated volume

revenues or rate of return respondent TMT has failed its burden of proo

showingthat the rates in Supplement No Ito tariffFMC F No S are just 

reasonable and otherwise lawful

Because respondent TMT has failed to establish that the rates in Sup

ment No I to tariff FMC F No S are just and reasonable they are foun

be not lawful

S STANLEY M LEVY

Administrative Law Judg

WASHINGTON D C

August 20 1979
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

DOCKET No 79 81

MARINE EXPRESS LINE S A

V

SEATRAIN INTERNATIONAL S A

NOTICE

October 3 979

Notice is given that no exceptions have been filedto the September 26 1979

dismissal in this proceeding and the time within which the Commission could

determine to review has expired No such determination has been made and

accordingly that dismissal has become administratively final
FEDERAL MARITIME COMMISSION

No 79 81

MARINE EXPRESS LINE S A

v

SEATRAIN INTERNATIONAL S A

DISMISSAL OF COMPLAINT

Finalized October 31 1979

By a Notice of Dismissal complainant Marine Express Lines has 

drawn its complaint in this proceeding Accordingly the proceeding is he

dismissed

5 JOHN E COGRAVE

Administrative Law Jud

September 26 1979
v

FEDERAL MARITIME COMMISSION

DOCKET No 78 24

PACIFIC FREIGHT AUDIT INC

SEA LAND SERVICE INC

DOCKET No 78 25

PACIFIC FREIGHT AUDIT INC

v

AMERICAN PRESIDENT LINES LTD

ORDER PARTIALLY ADOPTING INITIAL DECISION

October 31 1979

These proceedings were initiated by separate complaints filed by Pacific

Freight Audit Inc PFA against Sea Land Service Inc and American Pres

ident Lines Ltd APL alleging violations of sections 14 16 and 18 b 3 of

the Shipping Act 1916 46 VS C 812 815 817 b 3 The proceedings

were subsequently consolidated due to the similarity of the issues presented

The Trans Pacific Freight Conference of Japan Korea and the Commission s

Bureau of Hearing Counsel intervened

The gravamen of the complaints is that Sea Land and APL improperly

refused to honor claims for refunds of ocean freight charges on shipments

which were allegedly delivered to OCP destinations Respondents interposed

the defenses that the claims were to a large extent duplicative and fraudulent

and in any event were not tendered with proper documentation or other proof

of OCP movements

Full evidentiary hearings were held and Administrative Law Judge William

Beasley Harrisissued an Initial Decision finding that I Complainant had not

sustained its burden ofproof as to its allegations of violations of the Shipping

Act and 2 Respondents were justified in refusing to pay the OCP claims
208 FEDERAL MARITIME COMMISSION

However the Presiding Officer granted Complainant 60 additional days w

which to submit sufficient proof of these OCP movements to the Respond

Exceptions to the Presiding Officer s decision were filed by Respondents 

Hearing Counsel There were no replies to Exceptions

DISCUSSION

Sea Land argues that the Presiding Officer s decision is deficient i

findings of fact necessary to support the conclusion that the Complainan

failed to sustain its burden of proof and asks the Commission to find ce

specific facts I

It also opposes allowing Complainant an additional 60 da

substantiate its claims on the grounds that the claims have already 

adjudicated insufficient and this finding should in all fairness now be 

final

In addition to citing certain alleged drafting errors in the Initial Decis

APL objects to the 6Odayextension afforded Complainant on the grounds 

the Administrative Procedure Act requires decisions to make final determ

tions of the issues presented and that the ruling of the Presiding Officer w

require the Respondents to violate the terms of their tariffs 3

Hearing Counsel agrees with the Presiding Officer and Respondents 

Complainant has failed to sustain the validity oUts claims but objects t

6Odayextension afforded Complainant on the ground that the Commi

should not as a matter of policy allow this proceeding to continue with

final determination

After reviewing the fullrecord in these proceedings the Commission a

with the ultimate conclusion of the Presiding Officer that Complainant 

to sustain its burden of proof as to the validity of the subject OCP claim

finds that the Initial Decision is sufficient to support that conclusion Mu

not all of the factual findings sought by Sea Land are expressly incorpo

in the Presiding Officer s decision and those not so incorporated are neces

included in the Initial Decision s more general findings 4

I Spcciftcally Sea Land urges tbat the Commluion find that a

the shipmentlln qUelItion moved undertho proper po

tariff rates b such movements can be lublcqucntly rorated under an OCP rateupon fulftllin the necell8ry tarift roq

c Sea Land tarilf aUowl proofof an OCP movement by mOlnlof anyone or lix typea of documontl but In any e

includeproof or the name orthc VCSIOI the port oforilin the ocean carriersbill oflacUR number lIle vtIICl voyap nu

finalOCPand thedate ofthe actosl OCP n d PfA claim co a1ated IOlaly of ocean carrla bill of ladin wit

inlandcarrier bill but no inland bill contain any ortbc relevent and lICC08Iary inform8tloni e cortaln documents u 

to IUpport its clalml wcre duplicative fcommordally accepted Inventory controll ltem dlfforent than that used 

conlisnCCl wouki facilitatecompliance with the ltatod tariffrequirements and the lubjecrt tariffroquroments were no

with inthat no direct correlation between aparticular OQClan carrier movement arid a sublcqucnt inland ITlOYcrnent wase

and that in faet nearly one in four claims included documents uaed In menthan one claim

2 APLnotel that a Mr James Mitchcl Presidont of PFA is characterized at one point intho Initial Decision as aco

when in fact he is not a party to the procoedina b two claims 792 and 1097 wcro omitted intho liltof claims aa

in which duplications were found c

the word contact in the quote of IClCtIon 14 Fourth of the Shlppin Act lh

contract d the reference to section 16 tint Initial Parqraph should be to the aeccmd Initial Paraaraph and lICCtio

These excoptions point out valid albeit minor erroll in the Initial DcciIlon and will be adapted

l APL ItatOl that ita tarifflrequire that OCP refund claims must be lubmitted within 90 days from the date the 

the bill of lading is forwarded

4Soe footROtc 2 Sea Land s proposed finding a is contained in lines 13 15 of pap II of tho Initial DcciIion 

contained in par8lraph numbered lion page 7 c Is contained In peralraph numbered 22 onPIle 10 d isco

paralraph numbered 17 on pag0l8 and9 e iacontaincd In paraarapha numbered 13 and 140nplp7 and 8 fis

by implication in the third complete paralraph on pap 19 and 8

ill oontained in tho last parallaph on page 14 

last paragraph on page 18
S FRANCIS C HURNEY

Secretary

PACIFIC FREIGHT AUDIT INC V SEA LAND SERVICE INC 209

However the Commission agrees with Respondent that the Presiding Officer

erred in according Complainant an additional 60day period within which to

submit to the Respondents further proof in support of its claims Complainant

has had every opportunity to prove the validity of its assertions and has simply

failed to do so There is no reason equitable or otherwise to allow Complainant

any further opportunity to prove its case Respondents have already been

subjected to lengthy proceedings and fairness dictates that these proceedings

now become final Accordingly that part of the Initial Decision granting

Complainant an additional 60 days to submit proof in support ofthe subject

OCP claims will be reversed

One final matter needs be addressed In his Initial Decision the Presiding

Officer advised that the Complainant in these cases bore heavy burden of

proof While this statement is not necessarily inaccurate it does require some

clarification particularly in light of the Commission s recent decision in Pan

American Health Organization v Moore McCormack Lines Inc Informal

Docket No 387 1 Report on Remand served September 12 1979 19 SRR

762 There the Commission explained that references in earlier decisions to an

overcharge claimant s heavy burden related to the difficulty in obtaining the

necessary evidence rather than to the weight to be given such evidence The

applicable standard here is that the validity of the claims be established by a

preponderance of the evidence From the Commission s review of the record

it does not appear that the Presiding Officer imposed upon the Complainant in

these proceedings any burden other than to prove its allegations by such a

preponderance

THEREFORE IT IS ORDERED That the Exceptions of Sea Land Ser

vice Inc American President Lines Ltd and the Commission s Bureau of

Hearing Counsel are granted to the extent indicated in this Order and are in

all other respects denied and

IT IS FURTHER ORDERED That the Initial Decision issued in these

proceedings is except to the extent modified by this Order adopted by the

Commission and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission
FEDERAL MARITIME COMMISSION

No 78 24

PACIFIC FREIGHT AUDIT INC

v

SEA LAND SERVICES INC

No 78 25

PACIFIC FREIGHT AUDIT INC

v

AMERICAN PRESIDENT LINES LTD

Partially Adopted October 31 1979

Although the complainant has failed to meet the heavy burden of proof necessary to sustain 

and relief is denied the complainant is given 60 days from the date hereof within w

offer to respondents back up documents and affidavits that will warrant payment 

refunds

This consolidated proceeding and each docket No 78 24 and 78 25 be and hereby are resp

discontinued

William H Carler of Carter Monkman and Thomas W McLaughlin for complainan

Freight Audit Inc

J Donald Kenny of Kenny Finan for respondent American President Lines Ltd

John M Ridlon General Attorney Slephan T Lanelol Associate Counsel F A F

Registered Practitioner and Gary Ferrulll Director Traffic and Regulatory Serv

respondent Sea Land Service Inc

CharnaSwedarsky John Robert Ewers and Paul J Koller Director and Deputy Director 

tively of the Commission s Bureau of Hearing Counsel for intervenor Hearing Cou

Charles F Warren and George A Quadrlno of Warren Associates P C for in

Trans Pacific Freight Conference of Japan Korea and its Member Lines
PACIFIC FREIGHT AUDIT INC V SEA LAND SERVICE INC 211

INITIAL DECISIONI

OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Complaint against respondent Sea Land Service Inc Sea Land in FMC

Docket No 78 24 was served June 19 1978 Complaint against respondent

American President Lines Ltd APL in FMC Docket No 78 25 was served

June 20 1978 In each proceeding complaint is made ofrespondents alleged

violations ofsection 18 b 3 as well as sections 14 and 16 oftheShipping Act

1916 Because they involve substantially thesame issues an order consolidating

the two dockets was served June 22 1978 pursuant to Rule 148 of the

Commission s Rules of Practice and Procedure 46 C F R 502 148

On July 5 1978 an Order was served granting enlargement of time re

quested by respondent Sea Landto July 24 1978 for parties to reply to the com

plaints herein Respondent APL served its Answer to the complaint July 10

1978 and a First Amended Answer on July 11 1978 Respondent Sea Land

served its reply to the complaint July 21 1978

Intervention herein wasgranted to 1 The Trans Pacific Freight Conference

of Japan Korea TPFCJ K and 2 Hearing Counsel

By order served August 15 1978 pursuant to Rule 94 ofthe Commission s

Rules ofPractice and Procedure 46 C F R 502 94 a prehearing conference

Was set for Tuesday August 29 1978 At the request of the complainant for

a postponement an order was served August 24 1978 granting postponement

of the prehearing conference to September 26 1978 At the September 26

1978 prehearing conference the official stenographic transcript of which com

prised 52 pages hearings were set to commence December 12 1978 in Los

Angeles California The commencement of hearing was rescheduled Decem

ber 1 1978 to commence Wednesday January 10 1979 Hearings began in

Los Angeles California on the latter date continued on January 11 and 12

1979 concluding on January 12 1979

At the hearings the following briefing schedule was developed

1 Opening brief by complainants to be mailed on or before Tuesday Febru

ary 20 1979 Tr 464 467 471

2 Reply briefs by respondents to be mailed on or before Tuesday March 20

1979 Id

3 Closing briefby the complainant to be mailed on or before Friday April 20

1979 Tr 464 468 471

Complainant s opening brief served February 20 1979 was received Febru

ary 27 1979 Respondent APL s

reply brief served March 27 1979 was re

ceived March 28 1979 Respondent Sea Land s

reply brief served March 27

1979 was received March 29 1979 Intervenor Hearing Counsels reply brief

was served and received March 27 1979 Intervenor TPFCJ K and its mem

ber lines reply brief served and received March 27 1979 Complainant s

closing brief served April 26 1979 was received April 30 1979

I

Thisdecision will become the decision ofthe Commission in the absence ofreview thereofby the Commission Rule 227 Rules

of Practice and Procedure 46 CF R 1502 227
212 FEDERAL MARITIME COMMISSION

The complainant proposed seven findings offact and fourconclusions o

opening brief Respondent APL proposed twenty findings offact Interv

Hearing Counsel proposed ninety four findings of fact and four conclusio

law Respondent Sea Land proposed fifty findings of fact and six conclu

of law and Intervenor TPFCJ Kproposed twenty four findings of fact T

total 195 proposed findings of fact and fourteen conclusions of law Al

posas andrequests have been considered carefully and granted granted in 

stance or denied as evidenced herein by the facts found and decisions ma

The official stenographic transcript ofthe hearing consists of three volu

totaling 475 pages Thus the transcript of the preheating conference 

hearing total 527 pages Forty four 44 exhibits were identified of whic

were withdrawn Exhibits for identification Nos 10 and 42 one wa

offered No 36 All the rest were received in evidence Itis from the tran

of testimony and exhibits together with all papers and requests filed i

proceeding that the Presiding Administrative Law Judge finds the facts h

after and constitutes the exclusive record for this decision

FACTS

I During November of 1976 while in the employment of responden

Land as a sales representative complainant James Mitchell began filing c

against Sea Landfor others for OCP refunds Tr 42 The said James M

ell hadcome in contact with OCP claims onseveral occasions where Sea 

customers he wascalling on for Sea Land were filing or were attempting 

with Sea Landclaims for OCP recovery and he assisted them in doing tha

83 84 Sea Land upon discovering that James Mitchell represented o

PFA terminated his services with Sea Land about November I 1977 T

and stopped payments to PFA Tr 321

2 Witness James Mitchell testified that PFA is a California corpo

that was incorporated December IS 1977 also that PFA wasoperating 

to incorporation under that trade name Tr 23 thatit is a family bu

Tr 18 of which he is the president his father Eli T Mitchell is the 

president his mother Marion Mitchell is the treasurer and his brother 

Mitchell is secretary of the corporation PFA he stated is engaged 

business of performing freight audits for customers anf filing claims wit

riers for recovery offreight charges for customers Tr 17 18 PFA aside 

family members in 1977 and 1978 employed about five other persons T

3 In early November 1976 the first claims of PFA were made to 

Tr 43 APL stopped paying OCP claims about the same time as Sea L

4 The tariffs involved in this proceeding are

A Trans Pacific Freight Conference of Japan Korea Tariff No 35 

No 6 Exh No 26 Agreement No ISO APL and Sea Land bo

members TPFCJ K publishes a port toport tariff in the East

Japan Korea U S Pacific Coast Trades including both local and 

land common point OCP rates
PACIFIC FREIGHT AUDIT INC V SEA LAND SERVICE INC 213

B Sea Land Service Inc TariffNo 245 A FMC No 138 Exh No 27

from Ports in Hong Kong and Taiwan to United States Pacific Coast

Ports named in Item 320 and Overland Common Points

C American President Lines Ltd Hong Kong Taiwan Freight TariffNo 5

FMC No 67 Exh No 28 from Hong Kong and Taiwan to Honolulu

Hawaii and Pacific Coast Ports of the U S A

D Philippines North America American Conference Tariff FMC No 11

Agreement No 5600 APL and Sea Land both are members Each car

rier herein has on file an independent tariffunder the aegis ofAgreement

No 10107 covering the Eastbound Hong Kong Taiwan Us Pacific

Coast Trade

5 Clients represented by PFAin this proceeding and the date of contract or

agreement between them are

a Kennington contract dated 2 2 77 Exh No 1

b Silton Brothers contract dated 11 76 Exh No 7 5 31 78 and

7 10 78 Exh No 6

c Sportsclothes Ltd Inc contract dated 6 1 78 and 7 14 78 Exh

No 4

d American Pants World Trading Co contract dated 9 1 78 Exh

No 5

e K W International contract dated 3 3 77 by PFA and 3 16 77 by

K W Exh No 9 contract dated 5 31 78 Exh No 8

f

International Set contract dated 11 11 76 Does not now represent

them Tr 19

g California Prime Inc contract dated 3 3 77 Exh No 3 Ceased to

operate on or about end of 1978 Tr 241

6 Exhibit No 25 is stipulated to contain the copies and are the claims made

by PFA to APL which are listed in the complaint Tr 73 74

7 Sea Land in its answer to the complaint admitted its address is 2150

Valdez Suite 1901 Oakland California 94666 that it is a corporation and

common carrier by water engaged in the transportation ofcargoes for hire from

various ports in the Far East including Manila Hong Kong Busan Keelung

and Kaohsuing to Long Beach California and as such is subject to the

provisions of the Shipping Act 1916 as amended and the applicable tariff

Sea Land describes itself as aU S flag common carrier by water in the foreign

commerce of the United States having its principal offices at Edison New

Jersey

8 Sea Land also admitted in its answer to the complaint that it has

promptly processed and paid claims submitted by other freight audit compa

nies for adjustment of ocean freight charges from local to OCP within 30 to

60 days of their submission and alleges that it also has processed and paid

promptly proper claims submitted by complainant within the same time frame

stated

9 APL in its answer to the complaint admits its address is 1950 Franklin

Street Oakland California 94612 that APL is a corporation organized and

existing under the laws of the State of Delaware APL is a common carrier by
214 FEDERAL MARITIME COMMISSION

water subject to the Shipping Act 1916 as amended providing ocean 

portation services between various ports in the FarEast and ports in the U

States

10 APL in its answer admits that during the period set forth in the 

plaint it received claims from the complainantrequesting adjustment off

charges from local freight rates to Overland Common Point OCP f

rates pursuant to applicable tariffs APL in its answer further admits that 

refused to refund freight charges to the complainant where insufficeint o

documentation has been presented to APL by claimant as support for a

justment in freight charges

II Generally cargo which is destined to OCP territories in conformit

the rules published in each conference or carrier tariff is entitled to the 

OCP rates OCP territory is defined in applicable tariff as all points in 

Dakota South Dakota Nebraska Colorado New Mexico and state

thereof Exh 25 p

20 Official notice is taken that the Commission ha

O CP territory which territory may be described roughly as that part 

United States east of the Rocky Mountains Investigation of Over an

OCP Rates and Absorptions Docket No 65 31 12 F MC 184 187 19

12 PFA s compensation from clients for recovery of OCP funds is 

solely on the amount ofthe refunds PFA is able to collect from ocean c

on behalf of its customers PFA retains 50 percent of all such refunds a

mits the remainder to the shipper or consignee Ifthe claim isdenied or i

decides not to submit a particular claim after review PFA receives no co

sation from any source regardless ofthe time orexpense incurred Tr 22

13 It was stipulated between complainant and APL that the followi

of paid claim files were in fact paid by APL PFA Claim Nos 375 368 

376 370 401 786 400 382 402 399 974 405 403 379 378 381 958 

369 951 950 949 947 862 and 952 a total of 26 files Tr 350 351 

361 363 Exh 37

14 There are 31 34 3 more added Tr 213 PFA claim numbers con

in the documents in Exhibit 25 duplicationbetween submission to APL is 

by a green tab Tr 194which complainant and APL stipulated c

duplications of supporting documents Tr 196 The PFA claim numb

which one or more duplications have been found are 1021 1109 1110 

1128 1130 1020 1019 789 790 791 793 1002 1003 1004 1005 

1043 1044 1048 1049 1066 1079 1098 1099 1100 1359 1047 1033 

1508 1507 Tr 194 195

15 The claims for OCP refunds filed by PFA with Sea Land on be

six consignees were allocated among the consignees in the following am

American Pants Co

International Set Inc

Kennington Ltd

K W International

Sitton Bros Inc

Sportclothes Ltd Inc

27 claims

42

295

43

32

11 II

5

81 
American Pants Co

California Prime Inc

Kennington Ltd

K W International

Silton Bros Inc

Sportclothes Ltd

1 claim

1

16 claims

79

II

9

2

47 62

103 41

3 089 20

15 663 79

2 299 03

39662

21 599 67

PACIFIC FREIGHT AUDIT INC V SEA LAND SERVICE INC 215

The total number ofclaims submitted by PFA to Sea Land master file listing

1 123 claims of which 450 are the subject of this action Tr 418

16 The claims for OCP refunds filed by PFA with APL on behalf of six

consignees are allocated in the following amounts

17 The documents submitted by PFAto the ocean carriers in support ofthe

claims the subject of this proceeding are a copy of the ocean bill of lading

copies of allegedly relevant domestic bills of lading of freight bills together

with the information which had to be affixed to each of the domestic bills of

lading and PFAs cover sheets Tr 39 PFAdoes not keep copies ofthe claims

submitted with the exception ofPFA s cover sheet Tr 40 which has vessel

voyage number ocean bill oflading number and the pounds PFA has a stamp

which places information as to the vessel the voyage number the ocean bill of

lading number and the port oforigin on the domestic bills oflading whichPFA

says the tariff requires Tr 122

18 PFA claims for OCP refunds were for refunds of 100 95 or 90 of

the ocean lading quantity Tr 380 For example 16 claims were filed against

APL as to Kennington Ltd 12 of the 16 claims were for 100 percent moves

to OCP of the remaining 4 none were below 90 Tr 352 Too in every

claim as to Kennington Ltd all of the inland bills of lading for each claim

would have been time barred but for one inland bill of lading which waswithin

the time frame permitted under the tariff Tr 353

19 A representative of a claim submitted to Sea Land by PFA is Exhibit

No IIThe same documents would be submitted to APL Tr 58 The doc

uments comprise the claim and would ordinarily consist of cover sheet pre

pared by PFA ocean bill of lading domestic bills of lading referenced to the

ocean bill of lading Tr 56

20 As in the caseof American Pants Tr 59 OCP rates can apply either

initially or after the fact This importer brings goods in at the OCP rate and

is in the position of having to provide proof of OCP movement to the carrier

to retain that rate The same proof is required in either instance Tr 59 60

21 Custom and practice ofPFA as to OCP refunds

I meet with and work with people represented to obtain the necessary

documents and information specifically ocean bills of lading or copies of same

and domestic bills of lading or freight bills for cargo which they subsequently

ship to OCP destinations

2 segregate the bills of lading into date order and destination whether OCP

or non OCP destination

3 matching commodities pounds of cargo moved cartons etc
216 FEDERAL MARITIME COMMISSION

On that basis PFA submits claims to the carrier within the confines o

tariff rule ofthe amount of time that can elapse that cargo can be wareho

before movement to OCP destination

Aclaim PFA sends the carriers would consist of an oceanbill of lading 

two or three domestic bills oflading to maybe a hundred ormore in some 

evidencing the OCP movement of imported cargo

On the domestic bills of lading PFA has to place information abou

vessel that imported the goods the bill of lading number the voyage nu

of the vessel and the port of origin of the cargo

Claims are basically tiled by weight Tr 33 34

22 Sea Land would require that the vessel and voyage number be ide

on the inland bill as well as the ocean bill if they were not the claim w

be rejected APL also would require customer s proof invoices or inland 

stating the necessary facts such as vessel voyage weights and where it 

from etc or the claim would be denied Tr 319 332

23 Witness Mitchell stated that with each claim for an OCP refund 

PFA submitted a PFAcover sheet the ocean bill of lading and domestic 

of lading This information where it appears in the inland carrier s b

lading is a result of its being stamped on these bills by a stamp fabricat

PFA which stamp attaches to these bills a vessel name voyage number 

of origin and ocean bill of lading number

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

Hearing Counsel sees the big issue in this proceeding as whether the 

plainant on behalf of certain consignees has established pursuant t

applicable tariff rules proof of movement to OCP territory of cargoe

ported in an ocean common carrier so as to qualify for refund of moni

ready adjustment of local freight rates to OCP rate It is Hearing Cou

position that PFA has failed to introduce any evidence to sustain its burd

proof as required by law and to establish with reasonable certainty the va

of its claim for OCP refunds

Intervenor TPFCJ Kargues that the history and development ofOCP 

from their origin more than a hundred years ago has been thoroughly 

mented by the Commission in Investigation of Over and OCP Rates an

sorptions Docket No 65 31 12 F MC 184 1969 TPFCJ Ksays tha

of the claims in this proceeding involved cargo transferred directly to an 

carrier in all claims PFA is seeking a refund of the difference betwee

local rates originally paid by its customers and lower OCP rates Befo

OCP refund can be paid the consignees or his agent must demonstrate th

goods in question actually moved to a destination within the OCP territ

accordance with all applicable tariff rules

TPFCJ K contends Brief at 17 that the documentation submitted by 

plainant allegedly to demonstrate OCP entitlement proves one and on

fact Cargo described as wearing apparel was carried from warehouses in 

fornia to destinations in the OCP territories Complainant s documen

according to TPCFJ K does not establish that the cargo moving to QCP
PACIFIC FREIGHT AUDIT INC V SEA LAND SERVICE INC 217

had originally been carried 1 by any particular ocean carrier 2 under any

particular ocean bill of lading 3 in any particular vessel 4 at any particular

time or 5 from any particular origin Yet all of this information is essential

if OCP rates are properly to be applied

Respondent Sea Land Brief at 16 also contends that the complainant has

failed to adduce any evidence appropriate to proving complainants case

Respondent APL contends Brief at 16 the complainant not only has failed

to sustain the heavy burden of proof placed upon it but also has failed to

sustain the burden of proof under any measure whatsoever

APL argues that the PFAcase can be summarized as a group of ocean bills

of lading and domestic bills of lading which do nothing to support the com

plainant s case and the testimony of Mr Mitchell which indicates a total lack

of effort on the part ofPFA to properly support its claims

The complainant Closing Brief at 9 submits that it has established the

validity of each and every claim for OCP refunds initially submitted to re

spondents under applicable tariffs and has satisfied the heavy burden ofproof

test set forth in Western Publishing Co v Hapag Lloyd Docket No 283 1

13 SRR 16 17 May 4 1972 and Johnson Johnson v Prudential Grace

Lines Informal Docket Nos 303 F and 304 F 18 FMC 244 1975

The Presiding Administrative Law Judge in dealing with this issue of bur

den ofproof first lookedto the complaint in each docket The allegations in the

complaint in Docket No 78 24 as to respondent Sea Land and those in Docket

No 78 25 as to APL save for amounts are similar It is alleged that the

respondents Sea Land in Docket No 78 24 and APL in Docket No 78 25

conduct in refusing to pay complainant the difference between local and OCP

rates on the claims submitted to respondents is unlawful and constitutes a

violation of the Shipping Act 1916 as amended section 18 b 3 and the

applicable tariff rules with regard to adjustment of freight rates from local to

OCP that complainants assignors have been subjected to the payment of rates

for transportation of cargoes from ports in the Far East to Long Beach which

rates areunjustly discriminatory prejudicial and unreasonable all in violation

of section 18 b 3 of the Shipping Act 1916 as amended and the applicable

tariff Complainant alleges he is entitled to recover of Sea Land 81 352 88

and ofAPL 21 599 67 in freight charges presently due complainant under the

applicable tariff Further it is alleged complainants business has and will

continue to suffer loss ofgoodwill and has been damaged as to Sea Landin the

amount of 50 000 as to APL 25 000 by reason of respondents dilatory

conduct and unjustified and unreasonable refusal to refund freight adjustment

from local and OCP rates as mandated by applicable tariffs

Also complainant alleges that respondents have established over the year

last past a pattern ofunjustified unreasonable and unwarranted discrimination

against complainant in violation of the Shipping Act 1916 as amended

sections 14 and 16 for which complainant claims entitlement to receive from

respondent damages to complainant s business and loss of goodwill as to Sea

Land in the amount of 50 000 and as to APL in the amount of 25 000

The complainant seeks an order directing respondents to cease and desist

from the alleged violations of said act and tariffs and also pay to said com
218 FEDERAL MARITIME COMMISSION

plainant by way of freight adjustment from local to OCP rates the amoun

out above

The complainant in support of its case called the following witnesses

I James Mitchell the president PFA and an employee ofSea Land 

it wasdiscovered that while in Sea Land s employ he represented othe

claims against Sea Land for OCP refunds This began in November 

Sea Land terminated his service there in November 1977 PFA kept no c

of claims submitted Tr 39 but asserts a

copy of the ocean bill of la

copies ofrelevant domestic bills of lading or freight bills together with i

mation which had to be affixed to each domestic bill of lading along w

PFA cover sheet was submitted He testified as to linkage necessary in 

refund claims Tr 173 ifit is not possible to reestablish the link betwee

OCP the importation of the OCP movement PFA would have no alt

tive but to decline an attempt to collect on either the original or the dupli

2 Arthur Ting employed as a manager by Daddy s Fashions 

Tr 25I

3 Perry Spanos employed as importex manager by Wallace B

Inc a dealer in toys and novelties Tr 262

4 Earl Wayne Cox employed as an import clerk by Sanyo Electric 

Tr 269

5 Phillip C Levin comptroller and secretary treasurer of Bardon In

importer of mens clothing Tr 277

6 Donald G Hermansen West Coast Pricing Manager Pacific Div

ofSea Land Tr 312

7 Robert Bertagna corporate credit manager of APL Tr 329

The complainant then rested its case Tr 369

APL in presenting its defense called the fol1owing witnesses

I Kenneth E Sivilich corporate control1er of Kennington Ltd Inc

2 Walter Weitzmann vice president of Silton Brothers Tr 399

3 Richard J Cohen Tr 41 I vice president of operations for K 

International Tr 412 who distributes a basical1y ful1line ofjunior and m

ladies sportswear

Sea Land called the following witnesses

I Donald G Hermansen Sea Land s West Coast Purchasing Man

Pacific Division Tr 379

APL and Sea Land then rested as to each Tr 451

None ofthe above gave any testimony whatsoever as to PFA s claim fo

of goodwill and damages therefrom None of the witnesses including 

Mitchel1 reestablished the link between the importation and the OCP m

ment And as Mr Mitchel1 testified ifit is not possible to do this PFA w

have no alternative but to decline an attempt to col1ect Could less be exp

from the trier of fact The Presiding Administrative Law Judge as the 

of fact herein finds and concludes that the complainant had a heavy b

ofproof in this proceeding espocial1y in view of the fact the goods had le

carrier but has failed to meet that burden of proof The complainant ke

copies of the proofs submitted for claims made for OCP refunds Furthe

president of PFA for example testifying as to Silton Claim 1013 was 
PACIFIC FREIGHT AUDIT INC V SEA LAND SERVICE INC 219

to show rr 148 the method whereby PFA would take the ocean bill oflading

and identify inland bills of lading as referring to the same cargo that came in

on the vessel SS President Madison from Hong Kong This wasa shipment of

100 percent moving OCP and the entire shipment stayed in Silton s warehouse

for approximately eleven months before any of it was sent out

Mr Mitchell replied Tr 148 149

The best answer I could give you lacking a recollection of this claim having been put together is

that this national motor freight classification number that you see that they used to describe their

cargo is the motor freight classification for wearing apparel which agrees in description with the

ocean bill of lading commodity description of men s nylon parkas

Clothing in and clothing out tells it does not amount to a conflict in my mind and if there was

a question at the time that claim was prepared wewould have verified the fact that it is in fact

the same stuff

The Presiding Administrative Law Judge asked Tr 150

Actually your answer is as to this particular claim which is Silton s claim 1Ol3 you are unable

now looking at it to answer how a claim could be made that it had come in a particular vessel

Is that correct

The witness Tr 150

I

am unable to recall that claim out of a couple of thousand that we have prepared as to

JUDGE HARRIS Well I will put my question again From looking at this particular document that

is before you dealing with Silton claim 1013 you are unable simply by looking at this document

to tell how it was ascertained that the goods came in on the particular vessel Is that correct

THE WITNESS I can tell you that the method employed would have put us in touch with the

importer who could have given us the answer

JUDGE HARRIS Yes but looking at these documents really your answer is that you don t know

at this point by looking at these documents how it wasdetermined that a particular vessel brought

these goods in and that then they went to an OCP point You can ttell us now by looking at those

documents

THE WITNESS I can t tell you no sir

JUDGE HARRIS But what you can tell is that the method that your company uses that you will

ask someone in Silton and they will tell you something about it and you put it together and you

say we can make an OCP claim on this basis

THE WITNESS Yes sir

JUDGE HARRIS That makes it clear to me Ijust wanted clear in the record how this is arrived

at Mr Kenny I hope I didn t interfere too much with your cross

MR KENNY No I appreciate the clarification

Every claim PFA would submit would have the cover sheet the ocean bill

of lading and domestic or inland bill of lading Tr 57 Exh No 11 is a typical

claim folder And PFA stated Tr 176 PFA s system of identifying inland

bills of lading to shipments is not error free

As has been indicated above this record is void of any proof as to loss of

goodwill by the complainant as well as to any proof of damages therefor Any

recovery by PFA against any respondent herein therefore is denied

The complainant alleges violation of the Act for failure to make adjustment

and settlement of claims Under section 14 Fourth c of the Shipping Act

1916 it is provided
220 FEDERAL MARITIME COMMISSION

Sec 14 That no common carrier by water shall directly or indirectly in respeclto the 

portation by water of passengers or property between a port of a State Territory Dist

posseasion of the United States and any other such port or a port of aforeign country

Fourth Make any unfair or unjustly discriminatory contractwithany shipper baaed on the v

of freight offered or unfairly treat or unjustly discriminate against any shipper in the ma

a

cargo space accommodations or otherfacilities due reqard being had for the proper l

of the vessel and the available tonnage b the loading and landing of freight inproper con

or c the adjustment and settlement of claims

The adjustment and settlement of claims was envisioned early on in 

proceedings The respondents at the prehearing conference promised 

receipt ofback updocuments on the claims herein and their satisfactory 

of those claims payment of the claims would start immediately Prehe

Transcript at 24 This unfortunately did not happen Under the circumsta

of this case the Presiding Administrative Law Judgefinds and conclude

respondents were justified in withholding payment of OCP refund reque

view of the discovery of an employee of Sea Land processing OCP r

claims against Sea Land and the matter of compliance with the tariff 

eligibility for the OCP refund and the aforesaid lack of back up ma

showing compliance with the tariff for OCP refund

The complainant in its closing brief contends p

7 thatto have Mr Mit

prepared with back up documents and testimony on each and every claim 

bill of lading would have been an impossible task straining the resour

PFA to financial ruin and aggravating to the fullest extent possible aU 

clients especiaUy where aU claims and supporting bills of lading are so c

within the spirit as weU as precise wording of each tariff involved In the 

breath PFAcontends it has established the validity ofeach and every cla

OCP refund initially submitted to respondents under applicable tariff 

Presiding Administrative Law Judge is not persuaded that the complaina

done so or that it has met the heavy burden of proof necessary in 

circumstances

The Presiding Administrative Law Judge cannot find and conclude 

the facts and circumstances of this proceeding that the complainant hase

lished the bona fides of the claims nor that the matter of duplication is n

impeaching factor The complainant in its closing brief p

2 submit

comparably minor amount ofduplication in terms ofnumber ofdocument

actual dollar amount represented by duplicate documents should not and 

not impeach the validity of all ofPFAs claims To rule otherwise argues 

would be to aUow PFAs errors to deny innocent consignees from rec

substantial amounts of OCP refunds on bona fide claims

Thebona fides of the claims amatter at issue in this proceeding is an

important yet the complainant did not present the consignees nor satisfa

documentation to prove such bona fides

The Shipping Act 1916 provides in

Sec 16 That it shall be unlawful for any shipper consignor consignee forwarder broker o

person or any officer agent or employee thereof knowingly and willfully directly or ind

by means of false billing false classification false weighing false report of weight or by an
PACIFIC FREIGHT AUDIT INC V SEA LAND SERVICE INC 221

unjust or unfair device or means to obtain or attempt to obtain transportation by waterfor property

at less than the rates or charges which would otherwise be applicable

Under the circumstances of this proceeding the complainant has failed to

prove that the respondents have violated this section ofthe Act or the following

section of the Act

Sec l8 b 3 Nocommon carrier by water in foreign commerce or conference of such carriers

shall charge or demand or collect or receive a greater or less or different compensation for the

transportaion of property or for any service in connection therewith than the rates and charges

which are specified in its tariffs on file with the Commission and duly published and in effect at

thetime nor shall any such carrier rebate refund or remit in any manner or by any device any

portion of the rates or charges so specified nor extend or deny to any person any privilege or

facility except in accordance with such tariffs

The complainant argues that only 24 04 of the total claims submitted to

respondent Sea Land 21 352 88 have some duplicates whichdollar amount

of these claims containing some duplicates equals 19 557 23 And of the

19 557 23 only 14 96 would be actual duplicate proof which amount equals

6 837 21 The complainant argues that using a percentage approach

74 515 69 of the claims submitted to the respondent Sea Land do not suffer

from duplication that if one assumes that the duplicates were only submitted

twice as is the casein the majority ofthe claims see Exhs 41 and 44 onehalf

of the amount ofduplication would bevalid leaving only onehalf of 6 837 21

to wit 3 418 61 as invalid

As has been indicated above the Presiding Administrative Law Judge is

unpersuaded by this argument

Unfortunately early on efforts failed to have the complainant present satis

factory and adequate proof that would require payment of OCP refunds

Similarly efforts to shorten the proceedings by the rise of representative sam

plings of claims made for OCP refundonly served to prove that proof is needed

to be presented as to every claim made herein especially in the absence of

agreement between the parties that such representative samples as were

presented and the proofs thereofprovided as answer that warrants payment of

OCP refunds

This casehas been in process over a

year and in that time resolution between

the parties has not been achieved totally The matters brought to light as shown

in this decision have eliminated some considerations and better focused others

Further the complainant s argument referred to above that to have Mr

Mitchell PFA prepared with back up documents and testimony on each and

every claim and bill of lading would have been an impossible task straining the

resourcesofPFAto financial ruin and aggravating to the fullest extent possible

all PFA clients is lacking any proof in this record Litigation herein un

doubtedly has been costly to all despite the efforts herein to try to resolve this

matter in the least time possible and at the least cost possible

This is all leading up to granting the complainant 60 days to do that which

they have not been able to do that is within 60 days to present to the re

spondents any and all claims in this proceeding with back up documents and

affidavits that the respondents upon review and checking are satisfied to pay

forthwith The Commission is to be kept fully informed ofany and all progress
222 FEDERAL MARITIME COMMISSION

and payments At the end of this 6Oday period this proceeding will s

discontinued

Upon consideration of aU the aforesaid the Presiding Administrative 

Judge finds and concludes in addition to the findings and conclusions 

inbefore stated

1 The complainant has failed to meet the heavy burden ofproof nece

to sustain its case

2 Reliefshould be denied and the complaints should be dismissed bu

complainant as noted above is given 60 days from the date ofthis decis

submit back up documents and affidavits to prove any and aU claims it 

3 This proceeding should be discontinued at the end of the 6Oday pe

Wherefore it is ordered that

A Relief is denied except within the 6Oday period back up documen

to any claims may be submitted to respondents for payment and if satisfac

be paid by respondents

B The complaints in Docket No 78 24 and Docket No 78 25 be 

hereby within 60 days of the date hereof are dismissed

C This consolidated proceeding and each Docket No 78 24 and 

78 25 be and hereby within 60 days of the date hereof are respec

discontinued

1

8 WILLIAM BEASLEY HARRIS

Administrative Law Jud

WASHINGTON D C

July 9 1979
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 607 I

IDEAL Toy CORPORATION

v

ATLANTIC CONTAINER LINE

ORDER REMANDING PROCEEDING

October 3 1979

Ideal Toy Corporation filed this complaint alleging that Atlantic Container

Line charged it rates in excess of the applicable tariffon file with the Commis

sion On July 16 1979 Settlement Officer James F Carey issued a decision

dismissing Ideal Toy Corporation s complaint on the ground that the com

plainant had failed to meet its burden of proof The Commission determined

to review the Settlement Officer s decision

The record in this proceeding does not disclose the commodity description of

the tariff item applied nor does it reveal the description of the commodities

actually shipped In order to assure a correct disposition of the complaint this

proceeding is being remanded to the Settlement Officer for further evidence

Specifically the Settlement Officer is directed to receive evidence showing the

commodity description of the tariff item applied to the shipments at issue and

the description of commodities actually shipped

THEREFORE IT IS ORDERED That this proceeding is remanded to the

Settlement Officer for the taking of additional evidence and the issuance of a

supplemental decision thereon and

IT IS FURTHER ORDERED That such supplemental decision be ren

dered within 60 days of the date of this Order

By the Commission

By consent ofthe parties the proceeding was conducted under the Commission s

informal docketprocedures 46 CF R 502 301

et seq
FEDERAL MARITIME COMMISSION

I

SPECIAL DocKET No 668

APPLICATION OF MAERSK LINE AGENCY FOR

THE BENEFIT OF MITSUI AND CoMPANY

ORDER ON REMAND

November 1 1979

This proceeding was instituted upon the application of Maersk Line Age

for permission to refund a portion of certain freight charges to Mitsui 

Company pursuant to section 18 b 3 of the Shipping Act 1916

The Administrative Law Judge rendered his Initial Decision on Augus

1979 conditioning ultimate approval of the application upon the submissio

evidence to the Commission establishing the date ofthe shipments in ques

Although no exceptions were filed the Commission on its own mo

determined to review the Initial Decision

Among that which must be submitted to support arequest for refun

waiver under section 18 b 3 of the Shipping Act 1916 is evidence estab

ing the dates of the shipments for which such authority is requested Wit

the dates of the subject shipments it cannot be determined whethe the a

cant has satisfied the 180 day statute of limitation imposed under se

18 b 3 of the Act

Itis the Presiding Officer s duty to marshall the evidence necessary to m

a decision whether to grant or deny an application Should an applicant fa

provide satisfactory evidence to sustain its burden of proof then the Pres

Officer can require the submission of additional evidence before renderin

Initial Decision Ifit is inappropriate to receive additional evidence and 

applicant has not met its burden of proof then the Presiding Officer sh

render an initial decision denying the application It is inappropriate fo

Presiding Officer to render an Initial Decision conditioning approval o

application upon the submission of evidence to the Commission
APPLICATION OF MAERSK LINE AGENCY 225

THEREFORE IT IS ORDERED That this proceeding is remanded to the

Presiding Officer for the receipt of evidence establishing the date of the ship

ments upon which the application is based and the issuance of a supplemental

Initial Decision

By the Commission

S FRANCIS C HURNEY

Secretary
i

j

I

FEDERAL MARITIME COMMISSION

i

SPECIAL DocKET No 660

APPLICATION OF SEA LAND SERVICE INC FOR THE

BENEFIT OF BDP INTERNATIONAL INC AS AOENT FOR

CHAMPION INTERNATIONAL EXPORT CORPORATION

ORDER ADOPTING INITIAL DECISION

November 2 1979

This proceeding was instituted upon the application of Sea Land Ser

Inc to refund a portion of certain freight charges collected from BDP In

national Inc and independent ocean freight forwarder asagent for Cham

International Export Corporation

Administrative Law Judge William Beasley Harris served his Initial D

sion on August 10 1979 granting Sea Lands application No exceptions 

filed but the Commission on its own motion determined to review the In

Decision

The findings and conclusions of the Initial Decision are well founded 

correct and are herein adopted However when as here authority is gra

to a carrier to refund freight charges to a freight forwarder acting as the a

for a shipper the Commission must receive adequate assurances that 

refund is paid over to the shipper IThe Commission is therefore requiring 

submission of an affidavit from the agent certifying that it has remitted 

refund to the shipper or if the remittance cannot or has not been made 

affidavit setting forth the reason or reasons therefor

The Commission will also require the freightforwarder to adjust the am

of brokerage compensation it has received from the applicant Therefore 

temporaneous with its affidavit certifying that the refund has been paid to 

shipper BDP Internationa Inc shall certify that it has refunded to the a

cant the excess brokerage compensation it has received by virtue of the 

justed freight charges

THEREFORE IT IS ORDERED That the Initial Decision issued in 

proceeding is adopted and made a part hereof and

1 Set Special Docket No537 538 539 Salentlne Co

Inc t al v Europe CQlUlaa LakerUM 20 FM C 542 

Special Docket No 5 19 Buckley cf Fors aJl Inc v Gulf European FRightAuocIa onJor Camhi LIM 20 F M C 343 
APPLICATION OF SEA LAND SERVICE INC 227

IT IS FURTHER ORDERED That BDP International Inc certify to the

Commission by filing an affidavit within 45 days of this Order either that it has

forwarded to Champion International Export Corporation the sum of

2 065 40 or explaining why such remittance has not been made

IT IS FURTHER ORDERED That BDP International Inc certify to the

Commission in detail that it has refunded a proportionate percentage of

brokerage compensation it has received for these shipments which was based

on a percentage of the total freight charges and

IT IS FURTHER ORDERED That Applicant promptly publish in its

appropriate tariff the following notice

Notice is given as required by the decision of the Federal Maritime Commission in Special

Docket No 660 that effective December 14 1978 and continuing through April I 1979 inclusive

the rate on waxed paper to Guatemala and Honduras under Item 1090 Tariff No 283 F M C

No 161 trailerload rate is 82 00 per ton of 2 000 Ibs minimum of 37 000 Ibs

By the commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DocKET No 660

ApPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF BDP INTERNATIONAL INC

AS AOENT FOR CHAMPION INTERNATIONAL EXPORT CoRP

Adopted November 2 1979

Permission granted to refund 2065 40 portion of aggregate freight charges of 6 6

collected

INITIAL DECISION OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

This is a special docket application by Sea Land Service Inc Sea La

acommon carrierby water in foreign commerce whichpublishes its own t

No 283 FMC No 161 on rates for transportation of freight from U S N

Atlantic Ports to Ports in Central America BDP Internationa Inc a fr

forwarder FMC 1127 paid aggregate freight charges of 6 666 60 to 

Land for transportation to two shipments of Paper Viz Waxed for sh

Chemical International Export Corp from Baltimore to Puerto Cortes 

nation en route changed to Tegucigalpa and from Baltimore to Honduras 

commodity wasdescribed in one Bill of Lading as Wrapping Paper and i

other as Wax Paper

In this application it is certified by applicant Sea Land that this applic

wasmailed to the Secretary of this Commission on July 5 1979 Thus th

the date of filing of this application Rule 92 a 3 Rules of Practice 

Procedure 46 C F R i

502 92 a 3 Theinvolved shipments dates of sa

according to applicant respectively are January 10 1979 as to 

No 956744391 and March 10 1979 as to B L No 956747400 A sp

docket application must be filed within 180 days of the sailing date o

involved shipment The instant application was and thus is filed timely

The commodity is Paper on the two 2 shipments involved herein

Shipment No 1 In Sea Lands Bill of Lading bearing no 

No 956744391 Exh No 5 Page 3 of 22 attached to application the g

are described as 35 Container STC 28 skids of 28 Rolls Wrapping Pa

I This dClCiaion will become the decision ofthe Commission in the absence of reviewthereof by the Commission Rule 2

of Practice and Procedure 46 CP R 1501 227
APPLICATION OF SEA LAND SERVICE INC

Shipment No 2 In Sea Land s Bill of Lading bearing no date

No 956747400 Exh No 5 Page 16 of 22 attached to application the goods

are described as 25 Pallets STC 71 Rolls Wax Paper

The applicant states that the goods were properly described as waxpaper in

Shipment No 2

Upon receipt of the bill of lading as to Shipment No I the shipper Cham

pion International Export Corp filed with Sea Land an overcharge claim on

the basis the commodity was actually Waxed Paper and not Wrapping Paper

Exh No 5 page 12 of 22 attached to application On the basis of the sample

submitted by the Shipper a refund wasauthorized by Sea Lands Rate Audit

Department in the amount of 230 80 Jd at 15 of 22 This amount reflected

the applicable Class 7 rate of 100 00 on Wrapping Paper and the 92 00 LTL

rate published on Waxed Paper in Item 1090

Thus it is agreed that the commodity transported in each shipment is Waxed

Paper

Shipment No I B L No 956744391 bears no date was loaded at Bal

timore on Sea Land s vessel Tampa no voyage number given on B L for

Puerto Cortes No freight charges are shown on the B LWeight is shown as

41 880 lbs Sea Land s Home Office Accounting Copy Microfilm 6081558

shows the cubic measure 1154 weight 41880 rated as 2885 Rate 100 TM

charge of 2 885 Port Dues rated as 2094 TN MI 26 18 Total charge of

2 911 18 The application states the voyage number for Shipment No I

is

267S and that shipment wasmade January 10 1979 and the sailing date for

it is January 10 1979 Exhibit No 4at I of 2 attached to application shows

vessel Tampa voyage 267 sailed Baltimore Md on January 10 1979 at

1512 hours

While Shipment No I was en route the forwarder notified Sea Land that

the destination was to be changed from Puerto Cortes to Tegucigalpa which is

an inland point Supplemental freight bill No 956 743392 Exh No 5 at 9 of

22 in the amount of 489 96 was issued to reflect the additional charges Both

the original and supplemental freight bills were paid in full

Shipment No 2 B LNo 956747400 sailed March 10 1979 on the vessel

Tampa voyage No 271S The second shipment which wasproperly described

as Wax Paper was billed at the 92 00 LTL rate assessed the applicable

inland charges to Tegucigalpa and paid in full by the forwarder Attached as

Exhibit No 5 is Calculation of Freight Charges which shows the charges

originally billed including the supplemental charges after refund authorized

charges based on the proposed rate charges paid and the amount ofrefund if

the application is granted The bills of lading freight bills overcharge letter

from the shipper and the tariff authority for the accessorial charges are made

part of that exhibit

The above information was derived from the instant application Further

information supplied by the applicant in support ofthe application is as follows

Sea Land publishes various commodity rates on Paper in Item 1090 to its

TariffNo 283 FMC No 161 which apply from U S North Atlantic ports

to Central America Prior to December 14 1978 a trailerload rate of 82 00

per ton of 2 000 Ibs minimum of 37 000 Ibs for Waxed Paper waspublished

229
230 FEDERAL MARITIME COMMISSION

to Guatemala and Honduras Central America 12th Revised Page 1

effective November 27 1978 Exhibit No 1 Effective December 14 19

Item 1090 was amended to add a new rate on Wrapping Kraft to apply 

Guatemala and in the process of revising the tariffpage the 82 00trailerlo

rate on Waxed Paper to Honduras was inadvertently deleted see Exh

No 2 Attached is Affidavit of John Brennan certifying that due to a cler

error the rate was omitted from the tariff The error wasdiscovered after 

involved shipments moved and the omission was corrected by publication 

15th Revised Page 154 effective April 2 1979 see Exhibit No 3

ItwasSea land s intention to amend Item 1090 in its Tariff No 283 to 

a new commodity rate and to bring forward the Waxed Paper rates with

change However due to a clerical error a trailerload rate on Waxed Pa

wasdeleted

It is Sea land s position that the clerical error in inadvertently deleting 

trailerload rate in Item 1090 is of the type within the scope of section 18 b 

of the Act and section 502 92 of the Commission s Rules of Practice 

Procedure

DISCUSSION

Upon consideration of the above the Presiding Administrative law Ju

finds and concludes that he agrees with the applicant that a proper case 

been made out by the applicant in accordance with section 18 b 3 of 

Shipping Act 1916 and Rule 92 of the Rules of Practice and Proced

46 C F R 1502 92 Therefore the application for permission to refund a 

tion of the freight charges should be granted

For the reasons given in the application and upon consideration of all o

above the Presiding Administrative law Judge finds and concludes in a

tion to the findings and conclusions hereinbefore stated

1 The application was filed timely

2 There was filed with the Commission prior to this application 

effective tariff setting forth the rate on which the refund would be based

3 There wasan errorof a clerical or administrative nature which resu

in the necessity for refund

4 The refund permission requested will not result in discriminatio

between shippers

5 The application for penpission to refund should be granted

Wherefore it is ordered that

A The application be and hereby is granted

B Sea Land Service Inc is granted permission to refund a 2 06

portion of aggregate freight charge of 6 666 60 collected to BDP In

national freight forwarder FMC 1127 as agent for Champion Internati

Export Corp

C Appropriate notice shall be published in the applicable tariffs

D This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judg

WASHINGTON D C
v

FEDERAL MARITIME COMMISSION

DOCKET No 78 28

INTERNATIONAL TRADE DEVELOPMENT INC

AND ROBERT H WALL INC

SENTINEL LINE AND ANCHOR SHIPPING CORPORATION

ORDER ADOPTING INITIAL DECISION

November 2 1979

On September 26 1979 the Commission determined to review the Initial

Decision issued August 21 1979 in the above captioned complaint proceeding

In that decision the Presiding Officer denied a complaint alleging violations of

sections 16 First 17 and 18 b of the Shipping Act 1916 46 U S c 815

First 816 and 817 b arising out of a common carriers failure to honor a

cargo booking contract

Upon examination of the record the Commission shares the Presiding

Officer s conclusion that the complainants failed to prove their case Further

comment is offered only to avoid any wrong impression which might result

from the discussion of section 16 First at page 6 of the Initial Decision

Page 6 contains citations from portions of the Commission s North Ameri

can Freight Conference decision which refer to the need for a competitive

relationship between a prejudiced and apreferred shipper in order to establish

a violation of section 16 First Although correct as far as it goes reliance solely

upon the North American decision fails to reflect other rulings which have held

that section 16 First can be violated without the presence of a competitive

commercial relationship between shippers E g Volkswagenwerk A G v Fed

eral Maritime Commission 390 U S 261 278 280 1968 New York For

eign Freight Forwarders Brokers Assn v Federal Martime Commission

337 F 2d 289 299 2d Cir 1964 cert den 380 US 910 1965 Freight

Forwarder Bids on Government Shipments 19 F MC 619 1977 Proposed

ILA Rules on Containers 18 S R R 553 1978 General Mills Inc v State

ofHawaii 17 F MC I 1973 Valley Evaporating CQ v Grace Line Inc

II f M C202 209 1967
232 FEDERAL MARITIME COMMISSION

14 F MC 16 1970 Free Time Practices PortofSan Diego 9 F MC 

1966

These cases establish that a competitive relationship is not required when 

facts reveal a clear comparative disadvantage or othertype of special inju

to the complaining shipper or locality which 1 goes beyond the sim

payment of a higher rate and 2 cannot reasonably be justified on the b

of traditional transportation factors Because the complainants did not 

establish that a particular shipper or shippers were unduly preferred 

Commission need not reach the question of whether a carrier s duty to h

cargo bookings is the type of conduct which would violate section 16 Fir

the absence of a competitive relationship

THEREFORE IT IS ORDERED That except as supplemented by 

above discussion of section 16 First of the Shipping Act 1916 the Augus

1979 Initial Decision in Docket No 78 28 is adopted by the Commission 

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secreta
v

FEDERAL MARITIME COMMISSION

No 78 28

INTERNATIONAL TRADE DEVELOPMENT INC

AND ROBERT H WALL INC

SENTINEL LINE AND ANCHOR SHIPPING CORPORATION

Adopted November 2 979

Complainants have failed to establish a violation of any provision of the Shipping Act upon which

reparation can be granted

Robert S Hope for complainants

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE1

By a complaint filed under section 22 of the Shipping Act 1916 Inter

national Trade Development Inc and Robert H Wall Inc seek reparation

of at least 22 976 09 for Sentinel Line s non performance of its obligation

as a common carrier

Anchor Shipping Corporation originally named as corespondent in the

complaint moved for dismissal as to it on the ground that since Anchor was

neither a common carrier by water nor an other person as defined in the

Shipping Act the Commission waswithout jurisdiction over it2

Anchor wasa

general agent and broker and as such wasnot a common carrier orother person

against whom a complaint would lie

Judge Reillygranted the motion and dismissed the complaint as to Anchor 3

See Order ofOctober 30 1978 On the same day as the dismissal ofAnchor

Judge Reilly issued an Order to Show Cause Why Proceeding Should Not be

I

This decision will become the decision of the Commission in the absence ofreview thereof by the Commissioo Rule 227 Rules

of Pntctice and Procedure 46 CF R 5502 227

2 Section 22 permits persons to file complaints only against common carriers and other persons

J Section of the Shipping Act defines other person as someone other than a common carrier carrying on the business of

forwarding orfurnishing wharfage dock warehouse orother terminal facilities in connection with a common carrier by water

Clearly Anchor was not an other person
234 FEDERAL MARITIME COMMISSION

Decided Without Oral Hearing In that order Judge Reilly noted that 

tinel had not answered the complaint norhad itresponded to any of the va

motions but nevertheless sought to give Sentinel one more opportunit

defend itself in the case Sentinel wasgiven IS days to respond to the ord

show cause On November 17 1978 Judge Reilly in noting that Sentinel 

not responded to the order to show cause dispensed with oral hearing 

ordered complainant to submit such documentary evidence as it had i

possession which would support its claim of reparation against Anchor L

Complainant filed its exhibits on December 20 1978 In a covering le

complainant stated

Although the complaint as to respondent Shipping Corporation was dismissed upon the 

sentation of its counsel that it was acting only as General Agent for Sentinel it is the inform

and belief of complainants that Sentinel and Anchor are one and the same entity owne

controlled by the samepersons and should both be held responsible for payment of the repar

as set forth in the attached Affidavit plus reasonable attorney s fees and costs of at 

56 000 00

On the next day December 21 1978 the Commission in a notice annou

that the time within which the Commission could determine to review 

dismissal of Anchor had expired and that no review would be undertaken 

January 18 1978 Judge Reilly wrote counsel for complainant posing ce

questions and directing counsel to fileamemoradum of law The memoran

was filed on July 26 1979 s

FACTS

International Trade Development Inc isengaged in the export ofva

commodities in the foreign commerce of the United States Robert H W

an agent and broker of shipments in U S foreign commerce Sentinel L

or was a common carrier by water subject to the Shipping Act 1916

On February 7 1977 International completed negotiations for the sa

2 000short tons of bagged rice to the Government of Haiti at a price of 

a bag CIF Port Au Prince Haiti On the same day Food Corporation I

national Ltd of Houston confirmed to Robert H Wall the sale of 40000 

hundred pound bags of rice to International at a price of 11 40 a bag 

Government of Haiti on February 8 1977 opened a letter of credit at R

National Bank in Washington D C The letter was for 538 000 and w

favor of International On the same day that the letter of credit was op

Transchartering Inc of New York made a firm booking by telephone fo

Sentinel vessel MV Omiria The cargo wasbooked at 37 65 full berth te

the Omiria to be available for loading February 17 28 1977 The telep

booking was confirmed by a booking contract dated February 8 1977

Wall is a subscriber to the Transportation News Ticker and 

February IS 1977 International learned from that service that the Omiria 

been booked to carry 1834 metric tons of blended food to Kingston Jam

Complainant have not at least IIfarI thl record howl evcrformally attempt to have Anchorrestored 81 area

The delay infilinl the memorandum was due to iIIn of counsel In the Interim Judge Reilly left the Commission 

became unavailable lo render a decision In this calC
ROBERT H WALL INC V SENTINEL LINE ANCHOR SHIPPING CORP 235

March 1 10 berth terms at a rate of 46 76 per short ton The physical

limitations of the Omiris and the scheduling made it impossible for the Omiris

to satisfy both bookings

Upon finding out about the Jamaica booking Wall contacted Trans

chartering and wasassured that a substitute vessel would be furnished to meet

Internationals

loading dates On February 14 Wall learned the Omiris had

been arrested in the Dominican Republic Transchartering however told Wall

that the lien on the Omiris was to be lifted and the vessel would be at a U S

Gulf port on February 28 1978 As a precaution International had the letter

of credit extended to change thecancelling date of March 5 1977 Several days

later Transchartering told Wall that the loading date for the Omiris would be

March 8 1977 The Government of Haiti agreed to a final extension of the

letter of credit with the condition that the on board bills of lading be dated no

later than March 10 1977 Finally on March 7 1977 after repeated requests

for assurances that the Omiris would meet the March 8th loading date

Transchartering advised that the ship would not be able to perform the

booking

International despite repeated efforts could not find a vessel in a position to

meet the loading date and the Government of Haiti cancelled the purchase

contract and the letter of credit expired by its terms

It is asserted that because of Sentinels failure to perform its booking con

tract International suffered out of pocket expensesof 22 976 09 composed of

I

Loss of profit from sale of rice 13 665 25

2 Charges and interest levied 8 000 00

3 Charges by Riggs National Bank 1 310 84

Complainants request for reparation is grounded on the allegation that

Sentinel has not only breached its obligation as a common carrier but has violated Section 16 of

the Act by giving undue or unreasonable preference or advantage to other shippers particularly

the shipper of blended food in packages to Jamaica which acts resulted in undue or unreasonable

prejudice or disadvantage to Wall and LT D International Likewise upon information and

belief Sentinel and Anchor probably violated other provisions of the Act including Sections 17 and

18 thereof

Complaint for International Trade Development at 6

DISCUSSION AND CONCLUSION

Complainants entire argument on the merits of the case is

I Common Carriers cannot convert themselves to Contract Carriers by

entering into preferential and exclusivecontracts for one banana shipperfor

a forward period while carrying common carriage cargoes on the balance

of a particular ship or ships Hence the result was a violation of Sections

14 Fourth and 16 First of the Shipping Act 1916

2 Here despite the firm booking to Complainants of the M V Omiris on Full

Berth Terms or by a substitute vessel the respondent did not perform This

booking was confirmed both orally and in writing as to the Omiris then as

to a substitute vessel Respondents failed to perform with any vessel and did
236 FEDERAL MARITIME COMMISSION

1 not advise Complainants until it was too late to carry the bagged ric

Haiti

3 The same cases mentioned above established that the Commission as 

Agency with the expertise has the responsibility ofdetermining the amo

ofreparations Both the Court ofAppeals and the Supreme Court found 

Commission used the proper standards ofmeasuring the damages tha

as Chief Judge Bazelon stated

The Shipper s lost profits are the nonnal measureof damages in cases involving a refusal to c

and the Supreme Court affirmed this principle in its rejection of ourprior conclusion rega

equity of giving Consolo his lost profits in the circumstances of this case

Whatever the measure ofreparation may be none can be awarded unle

violation ofa specific provision of the statute isfound In its complaint Sen

mentions sections 16 17 and 18 of the Shipping Act In mentioning t

sections the only specific allegation madCois that Sentinel violated section 1

giving undue or unreasonable preference or advantage to other ship

particularly the shipper of blended food in packages to Jamaica 

difficulty with this allegation is that no where in the record is there any evid

that the Omirls was released from the custody of the Government of S

Domingo in time to carrythe Jamaican shipment or that the shipment was

carried by Sentinel

As if this were not enough the Commission has on any number of occas

spelled out the criteria for establishing a violation of section 16

This prohibition against under or unreasonable preference orprejudice is designed to deal wit

or more competing shippers or localities receivingdift nt treatment which is not justifie

differences in competitive or transportation conditions The classic case would be wher

shippers at A B are competitive in a common market at C and the same comp

intluences apply

North American Freight Conference 11 F M C 202 at 209 1967 and cases cited therei

Complainants as shippers of rice were not competitive with the shipp

packaged blended foods and thus the two shippers were not similarly situa

Nor were the cargoes destined for a common market Thericewas destine

Haiti and the blended food wasdestined for Jamaica Under the facts o

case no violation of section 16 can be found Nor will the record susta

violation of section 17 6

D iscrimination arises when two shippers of like traffic shipping on the same line betwee

same points under substantially similar circumstances and conditions are charged different 

II F M C at 212

For obvious reasons the facts of this case do not establish a violatio

section 17

AU of this is not to say that complainants have no forum Sentinel app

to have breached the contract of carriage and the remedy for that lies in 

courts not the Commission

In mentioning section 17 it is presumed that complainants are concerned withdilCrimination singe the receiving ha

storing ordelivering or property is not involved here

For equally obvious reasons no violation orsection 18 b or theActhaa been established Since there as no actual c

none of the provisions of 18 b can be brought to bear
S JOHN E COGRAVE

Administrative Law Judge

ROBERT H WALL INC V SENTINEL LINE ANCHOR SHIPPING CORP 237

Since complainants have failed to establish a violation upon which reparation

can be granted the case is dismissed

WASHINGTON D C

August 10 1979
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER A GENERAL PROVISIONS

GENERAL ORDERS Nos 2S AND 30 REVISED DoCKET No 79 66

PART S04 COLLECTlON COMPROMISE AND TERMINATION

OF ENFORMCEMENT CLAIMS

PART SOS CoMPROMISE AssESSEMENT SETTLEMENT AND COLLECTI

OF CIVIL PENALTIES UNDER THE SHIPPING ACT

1916 AND THE INTERCOASTAL SHIPPING ACT

1933 AMENDED

November 19 1979

ACTION

SUMMARY

Final Rule

This repeals obsolete regulations Part S04 and am

and finalizes interim regulations Part SOS which ar

acted to implement recent amendments to the Shi

Act 1916 which authorize the Federal Maritime Com

sion to assess or compromise all civil penalties provid

the act

EFFECTIVE DATE November 27 1979

SUPPLEMENTAL INFORMATION

This proceeding was instituted by publication of Interim Regulations 

immediately effective on July S 1979 44 Fed Reg 39176 to amen

C F R Part SOS General Order 30 which as amended implements 

assessment of civil penalty authorization provisions of Pub L96 2S

Comments to the Interim Regulations were invited and were received 

eleven parties in four submissions Commentators consist of one attorney 

steamship company and nine conferences agreements
COLLECTION COMPROMISE AND TERMINATION 239

1 Alton Boyer Esquire Boyer suggests clarification that both the finding

of violations and assessment of penalties therefor be encompassed in a single

proceeding and clarification of the role of Hearing Counsel the difference

between compromise and settlement if any exists who makes the deter

mination that a violation may have occurred and the opportunity for judicial

review Boyer further raises questions concerning due process the desirability

of maximizing opportunity for settlement the necessity for approval of set

tlement at three levels too much formality in the compromise procedure the

desirability of using confess judgment notes and the public availability of

internal settlement guidelines Finally Boyer suggests that the rules make clear

thatthey are not intended to impose a harsher outcome thanthe previous rules

Lykes Brothers Steamship Co Inc supports the interim regulations in toto

and urges expedited approval

Agreements 10107 and 10108 Japan Korea Atlantic and Gulf Freight

Conference Philippines North America Conference Straits New York Con

ference Thailand Pacific Freight Conference Thailand U S Atlantic and

Gulf Conference and Trans Pacific Freight Conference of Japan Korea Con

ferences suggest clarification of the presiding officer s authority to modify a

settlement in an assessment proceeding insist that compromise procedures be

available to all on an equal basis and agree that obsolete 46 C F R Part 504

General Order 25 need not be retained

Inter American Freight Conference IAFC suggests changes to clarify the

role of Hearing Counsel and two other minor sections

Each of the Specific proposals advanced by the comments will now be

discussed

1 Repeal ofGeneral Order 25 as Obsolete

In the preamble of the Interim Regulations the Commission indicated that

it perceives no probable regulatory need for the retention of General

Order 25 46 C F R Part 504 Collection Compromise and Termination of

Enforcement Claims which implemented the Federal Claims Collection Act of

1966 The need to retain such General Order will be considered by the Com

mission in connection with comments invited to these interim regulations The

only comment received on this point was from the Conferences which agree

that General Order 25 need not be retained Accordingly 46 C F R Part 504

will be revoked

2 Finding ofViolations andAssessment ofPenalties in the Same Proceeding

As raised by Boyer it is contemplated that both the issue of whether vio

lations have been committed as well as the assessment of penalties for such

violations may be encompassed in a single proceeding Such a specific pro

vision however is not necessary in view of the Commission s need for flexibility

in structuring proceedings under section 22 of the Shipping Act and the

Administrative Procedure Act
240 FEDERAL MARITIME COMMISSION

3 The Role ofHearing Counsel

IAFC suggests there is no need todefine the roleofHearing Counsel bec

the dutiesof this Bureau are already defined in 46 C F R 5502 Boyer o

other hand refers to the newly assigned role of prosecutor and the see

inconsistency with the duty of Hearing Counsel to act as he deems is req

by the public interest under 46 C F R 5502 42

The pertinent part of 46 C F R 5502 42 reads Hearing Counsel 

actively participate to the extent required in the public interest

Whatever this may mean in other types ofproceedings Hearing Counsel 

always been the staff attorney in Commission instituted cases to esta

violations The prosecutorial role was always there the only newl

signed role under P L 96 25 is the ability to request assessment of 

penalties in such a proceeding

In an assessment proceeding as in violations cases before the enactme

P L96 25 Hearing Counsel are subject to the direction of the Commi

only as set forth in the order s instituting the case and are otherwise 

subject to the separation offunctions as in all other adjudicatory proceed

Also as in previous violations cases it is clear that Hearing Counsel hav

burden of proof to establish such violations

To clarify this provision somewhat we will delete the phrase shall 

ticipate as attorney for the Commission and related language in section 5

The remaining language will be retained to specifically provide that all 

tiations for settlement will bewith Hearing Counsel in assessment proceed

and not with General Counsel as in compromise cases where no formal 

ceeding has been instituted

4 Settlement Procedures in Formal Proceedings

The difference between compromise and settlement wasquestione

Boyer Of course in addition to the traditional legal connotation a

co

mise proceeding as defined in section 505 2 c is the informal process 

the assessment proceeding is a formal docket See section 505 2 a 

tlements can be reached in either process with General Counselor He

Counsel as the case may be

Boyer suggests that it is desirable to maximize opportunity for settle

compromise in a formal proceeding but the rules seem to tend i

opposite direction He questions the necessity of having such settlem

approved by three levels of officials ie Hearing Counsel the Adm

trative Law Judge where referred and the Commission itself

The Commission intends no extraordinary impediment to settlements 

ing in mind that most formal proceedings will be the result of unsucc

compromise efforts with the General Counsel Hearing Counsel as a pa

the stipulation or settlement will not be approving agreements but rathe

be joining with respondents in submitting agreements for approval The 

sion of the settlement agreement in the Initial Decision and final de
COLLECTION COMPROMISE AND TERMINATION 241

replaces findings ofviolations and assessment ofpenalties and the Commission

deems such limited formality necessary to its regulatory responsibilities

The Conferences submit that the rules do not specify whether the presiding

officer can amend modify or simply reject a settlement Such powers are

implied in the requirement that the presiding officer approve such a settlement

Accordingly no other changes to section 505 3 are necessary

5 Compromise Procedures Institution and Notice

Section 505 4 provides for institution of compromise procedures in certain

instances whenever the Commission has reason to believe that there has

occurred a violation Boyer questions the participation by the Commission

in this determination as compromising its integrity as a quasi judicial body It

is well settled however that an administrative agency s participation in the

institution of a proceeding does not disqualify it from making an informed

decision on the record as to whether violations are established

On the other hand the Conferences would urge the absolute right of any

respondent to first utilize the compromise procedures before or instead of

going to a formal proceeding with the only possible exception being the case

where the statute of limitations period is about to run While such a procedure

is intended to be used in the normal case we do not interpret P L96 25 or its

legislative history as establishing it as a right and no such amendment will be

added See section 505 5

IAFCsuggests thatthe first demand letter inform respondents ofthe identity

of the attorney in General Counsel who will negotiate the compromise This is

neither practical nor necessary

Boyer suggests that the language making a final determination with re

spect to that stage when the compromise procedure is terminated may be too

formalistic The language is not intended to imply a determination similar to

a final order of the Commission but rather to specifically set a reasonable

cut off date beyond which the compromise procedures cannot continue Since

we can think of no more palliative language with the necessary import no

change will be made

6 Mutual Exclusiveness ofProceedings

IAFC suggests clarification of section 505 6 b to remove ambiguity Ac

cordingly we will insert the words under section 505 4 to accomplish this

clarification

7 Confession ofJudgment Note Provisions

Boyer questions the desirability of requiring a confession ofjudgment pro

vision in a promissory note in section 505 7 b and in Appendix B Where

circumstances allow a promissory note instead of immediate payment of the

penalty in the first place such a provision is necessary to protect the govern

ment from delays in collection ofdebts and is common practice Itwasprovided
242 FEDERAL MARITIME COMMISSION

for in both the original General Order 30 and General Order 25 which is 

repealed

8 Opportunity for Judicial Review

Boyer suggests the rules should provide for judicial review and for prot

during that review from assessment proceedings or collection efforts W

a final Commission order has been issued however the Hobbs Act 28 U

i

2341 et seq provides for judicial review and the Courts ofAppeals ha

power to stay further agency action with respect to such orders Since a

ment proceedings will ordinarily result in a final order on boththe existe

violations and the amount of penalties and since compromise procedure

voluntary we cannot understand the basis forBoyer s suggestion and do n

the need for any amendment

9 Guidelines for Compromise and Settlement

Boyer suggests that guidelines for compromise and settlement be pub

Such an endeavor however if feasible after further experience belong

policy statement rather than in the procedural regulations involved her

10 Protection Against aHarsher Outcome

Boyer urges that the Commission should make it clear that nothing in 

rules or in the Commission s administration of Public Law No 96 

intended to or will be permitted to impose a harsher outcome with resp

penalties for violations or alleged violations occurring prior to the adop

P L No 96 25 and these rules than would have been the case withou

adoption Again we have difficulty in understanding this suggestio

pecially since the new statute substantially increased the penalties in se

16 and 18 and provides for new penalties for operating under a suspended 

Thus without some further definition of harsher outcome if such is 

ble no such amendment to these procedural rules appears feasible

Therefore pursuant to the provisions of Pub L 96 25 93 Sta

section 4ofthe Administrative Procedure Act 5 U S C i553 and sectio

and 43 ofthe Shipping Act 1916 46 U S C U831 and 841a Title 46 

Part 504 is hereby revoked and the interim revision of 46 CPR Par

published at 44 Fed Reg 39176 is amended by the revision of sections 

and 505 6 is adopted as final and shall read as follows

PART 50S COMPROMISE ASSESSMENT SETTLEMENT

AND COLLEcrION OF CIVIL PENALTIES UNDER THE

SHIPPING ACT 1916 AND THE INTERCOASTAL

SHIPPING Acr 1933

Sec

505 1 Purpose and Scope

505 2 Definitions
COLLECTION COMPROMISE AND TERMINATION 243

505 3 Assessment

505 4 Compromise Procedures

505 Assessment Procedures

505 6 Mutual Exclusiveness of Procedures

505 7 Method of Payment ofPenalty

AUTHORITY Sec 3 86 Stat 653 Sec lO e 93 Stat 71 and Sees 32 and

43 of the Shipping Act 1916 46 US C 83l and 84la

505 1 Purpose and Scope

The purpose of this part is to implement the statutory provIsions of

section 3 ofPublic Law 92 416 86 Stat 653 and section 100e ofPublic Law

96 25 93 Stat 71 by establishing rules and regulations governing the com

promise assessment settlement and collection of civil penalties arising under

certain designated provisions of the Shipping Act 1916 the Intercoastal Ship

ping Act 1933 and or any order rule or regulation except for procedural

rules and regulations contained in part 502 of this chapter issued or made by

the Commission in the exercise of its powers duties and functions under those

statutes Also for the purpose of this part the criteria for compromise set

tlement or assessment may include but need not be limited to those which are

set forth in 4 CFR Part 101 105

505 2 Definitions

For the purposes of this part

a Assessment means the imposition of a civil penalty by Order of the

Commission

b Commission means the Federal Maritime Commission

c Compromise means the process whereby a civil penalty for a violation

is agreed upon by the respondent and the Commission s General Counsel

d Person includes individuals corporations partnerships associations

and other legal entities

e Violation includes any violation of sections 14b through 21 except 16

first and third and section 44 of the Shipping Act 1916 section 2 of the

Intercoastal Shipping Act 1933 and or any order rule or regulation except

for procedural rules and regulations contained in part 502 of this chapter

issued or made by the Commission in the exercise of its powers duties and

functions under the Shipping Act 1916 and the Intercoastal Shipping Act

1933

f Respondent includes any person charged with a violation

505 3 Assessment

Assessment of civil penalties may be made only in a formal proceeding

instituted by the Commission under section 22 of the Shipping Act 1916 for

the purpose of such assessment Such proceeding shall be governed by the

Commission s Rules of Practice and Procedure 46 CFR 502 In such a pro
244 FEDERAL MARITIME COMMISSION

ceeding the Commission s Bureau ofHearing Counsel shall have fu

to enter into stipulations and settlements Any such proposed set

penalties for violations whichare the subject ofa pending proceeding 

section must be negotiated with Hearing Counsel shall be submi

presiding officer for approval and the full text of every such settle

be included in the final Order of the Commission in the proceedin

505 4 Compromise Procedures

a Institution and Notice

Except in pending assessment proceedings as provided for in se

above whenever the Commission has reason to believe that there ha

a violation for which a civil penalty is authorized and it isappropriat

the procedures looking toward compromise of the statutory pen

General Counsel s Office will send a

registered letter to the respon

ming him of the nature of the violation the statutory and factual b

penalty the amount of the penalty and the availability of Commiss

nel for discussion of the penalty claim should the respondent so d

written demands at 3Oday intervals will normally be made unless 

to the first demand indicates that further demand would be futile 

contrary action is indicated by the circumstances

b Request for Compromise

1 Whenever a person is advised in writing that the Commission 

to believe that he has committed a violation such person may subm

or written answer to the notification letter explaining mitigatin

extenuating circumstances or where there has been no formal pro

the merits denying the violation Material or information so prese

considered in making a final determination as to whether to ter

compromise procedure or whether to compromise the penalty an

amount for which it will be compromised

2 All correspondence petitions forms or other instruments re

collection compromise or termination of any penalty under this sec

be addressed to the General Counsel Federal Maritime Commissi

Street N W Washington D C 20573

c Disposition of Claims in Compromise Procedures

I When the penalty is compromised such compromise will be 

ditional upon the full payment ofthe compromise within 30 days or 

period and upon such terms and conditions as may be allowed by t

Counsel

2 When a statutory penalty is compromised and the responde

settle for that amount a

compromise agreement shall be executed 

of settlement agreement is set forth in Appendix A This agree

reciting the nature of the claim will include a statement evidenc

spondent s agreement to the settlement of the Commission s penal

the amount set forth in the agreement and will also embody an a
S FRANCIS C HURNEY

Secretary

COLLECTION COMPROMISE AND TERMINATION 245

acceptance provision which is to be signed by the General Counsel Upon

settlement of the penalty in the agreed amount a

copy of the executed agree

ment shall be furnished to the respondent

3 Any offer of compromise submitted by the respondent pursuant to

505 4 b shall be deemed to have been furnished by the respondent without

prejudice and shall not be used against the respondent in any proceeding

d Delegation ofCompromise Authority

The compromise authority set forth above is delegated to the General

Counsel

505 Assessment Procedures

In addition to its discretion to institute an assessment proceeding or civil

penalty action without need to resort to the compromise procedures the Com

mission may after initiation of compromise procedures institute an assessment

proceeding or civil penalty action when

a The respondent within the prescribed time does not explain the violation

petition for compromise or otherwise respond to letters or inquiries or

b The respondent having responded to such letters or inquiries fails or

refuses to pay the statutory or the compromised penalty

505 6 Mutual Exclusiveness ofProcedures

a No assessment of penalties for violations shall be made by Order of the

Commission nor shall any assessment proceeding be instituted after a set

tlement agreement for the same violations under the compromise procedures

has become effective

b No compromise procedure for penalties under section 505 4 for vio

lations shall be initiated after institution of a Commission assessment pro

ceeding for the purpose of assessing penalties for the same violations

505 7 Method ofPayment ofPenalty

Payment of penalties by the respondent shall be made by

a Abank cashier s check or other instrument acceptable to the Commission

b Regular installments by check after the execution of a promissory note

containing a confess judgment agreement Appendix B

c A combination of the above alternatives

All checks or other instruments submitted in payment of claims shall be

made payable to the Federal Maritime Commission

Effective date The provisions of this part 505 will become effective upon

publication in the Federal Register

By the Commission
APPENDIX A

ONE EXAMPLE OF

COMPROMISE AOREEMENT

USED BY

AND THE FEDERAL MARITIME COMMISSION

This Agreement is entered into between 1 the Federal Maritime C

sion and 2 hereinafter referred to as respondent

WHEREAS the Commission is considering the institution ofan ass

proceeding against respondent for the recovery ofcivil penalties provide

the Act for violations of Section

WHEREAS this course of action is the result of practices believe

Commission to have been engaged in by respondent to wit

WHEREAS the parties are desirous of expeditiously settling the 

according to the conditions and terms of this Agreement and wish to a

delays and expense which would accompany agency litigation concerni

penalty claims and

WHEREAS Public Laws 92 416 and 96 25 authorize the Commi

collect and compromise certain designated civil penalties arising un

Shipping Act 1916 including the civil penalties which arise from the v

set forth and described above

WHEREAS the respondent has terminated the practices which 

basis of the violations set forth herein and has instituted and indic

willingness to maintain measuresdesigned to eliminate discourage 

vent these practices by respondent or its officers employees and agen

NOW THEREFORE in consideration of the premises herein and 

promise of all civil penalties under the Act arising from violations set fo

described herein that may have occurred between

and the undersigned respondent herewith te

the Federal Maritime Commission the sum of

Payment will be made in one or a combination of the fo

methods a A banks cashier s check or other instrument acceptabl

Commission b Regular installments by check after the execution of 

isoory note acopy of which will be attached to this agreement and 

rated herein Upon the following stipulations and terms of settleme

1 Upon acceptanceof this agreement of settlement in writing by the 

Counsel ofthe Federal Maritime Commission this instrument sha

bar the commencementor institution of any assessment proceeding 
247

claims for recovery of civil penalties from respondent arising from the

alleged violations set forth and described herein that have been dis

closed by respondent to the Commission and that occurred between

and

2 The undersigned voluntarily signs this instrument and states that no prom

ises or representations have been made to the respondent other than the

agreements and consideration herein expressed

3 It is expressly understood and agreed that this Agreement is not to be

construed as an admission ofguilt by undersigned respondent to the alleged

violations set forth above

NAME OF COMPANY

By

Date

APPROVAL AND ACCEPTANCE

The Above Terms and Conditions and Amount of Consideration are hereby

Approved and Accepted

By the Federal Maritime Commission

General Counsel

Date
APPENDIX B

PROMISSORY NOTE CONTAINING

AGREEMENT FOR JUOOMENT

For value received promises 

the Federal Maritime Commission the Commission the princip

Dollars 

paid at the offices of the Commission in Washington D C by ban

or certified check in the following installments

In addition to the principal amount payable hereunder intere

unpaid balance thereofshall be paid with each installment Such int

accrue from the date of this Promissory Note and be computed at 

percent per annum

Ifany payment of principal or interest shall remain unpaid for a 

10 days after becoming due and payable the entire unpaid princip

ofthis Promissory Note together with interest thereon shall becom

ately due and payable at the option of the Commission without d

notice being hereby expressly waived

If a default shall occur in the payment of principal or interest 

Promissory Note does hereby authorize and empower any U 

ney any of his assistants or any attorney of any court of record 

State to appear for it and to enter and confess judgment against for 

unpaid principal amount ofthis Promissory Note together with inter

court ofrecord Federal or State to waive the issuance and service 

upon in any suit on this PromissQry Note to waive any venu

ment in such suit to release all errors which may intervene in enterin

judgment or in issuing any execution hereon and to consent to 

execution on said judgment hereby ratifies and confirms a

attorney may do by virtue hereof

This Promissory Note may be prepaid in whole or in part by 

cashier s or certified check at any time provided that accrued inter

principal amount prepaid shall be paid at the time of the prepaym

NAME OF COMPANY

By

Date
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 649

APPLICATION OF MAERSK LINE AGENCY

FOR THE BENEFIT OF NOMURA AMERICA CORPORATION

SPECIAL DoCKET No 652

APPLICATION OF MAERSK LINE AGENCY

FOR THE BENEFIT OF WESPAC CORPORATION

REPORT AND ORDER ADOPTING INITIAL DECISIONS

November 20 1979

These proceedings involve applications filed on June II 1979 by the Pacific

Westbound Conference PWC and one of its members Maersk Line repre

sented by the Maersk Line Agency seeking permission to refund portions of

freight charged on various shipments which moved under PWC tariffs By

Initial Decisions served August 21 and 22 1979 Administrative Law Judge

Norman D Kline denied both applications Exceptions to the Initial Decisions

were filed by PWc

In Special Docket No 649 PWC prior to January I 1979 had published a

rate on Butyl Motor TubeScrap in the amount of 64 per weight ton of I

kilograms PWC revised and republished this tariffeffective January I 1979

2

In the process the rate on Butyl Motor Tube Scrap was unintentionally

deleted 3As a result any shipment of this commodity became subject to the

commodity classification Synthetic rubber including the following

Butyl 4

which carried a rate of 96 per weight ton Some time thereafter

PWC restored a rate on Butyl Motor TubeScrap effective March 28 1979

The rate which waspublished however was not the previous rate of 64 but

rather a rate of 70 per weight ton 5 On February 5 1979 during the time in

Because of the similarity of parties and issues these proceedings have been consolidated for decision

1

Local and Overland Freight Tariff No ll F M C19

l Affidavit of Donald P Griffith Executive Assistant to the PWC June II 1979

Local and Overland Freight Tariff No l1 F M C 19

PWC Tariff No I I F M C 19 3rd rev page 742 effective March 28 1979
250 FEDERAL MARITIME COMMISSION

which the unintended rate of 96 per weight ton was in effect the No

America Corporation shipped used butyl motor tubes Because at the 

the shipment was made Nomura expected to be charged the 64 ra

requested that this rate be reinstated and applied 6

In Special Docket No 652 PWC in republishing its tariff to be

effective January 1 1979 inadvertently deleted the 104 W1M comm

rate for Mineral Insulating Material N O S Consequently any shipm

this material became subject to a rate of 201 W1M under the comm

description Non Metallic Minerals and Products Except Ceramic Pro

and Glass and Glass Products N O S PWC filed a corrective ra

April 25 1979 of 114 W1M rather than 104 W1M This highe

included a general rate increase which raised the rate from 104 to 114 

April 1 1979 During the time the 201 rate was in effect and befo

general rate increase was to be instituted Wespac Corporation sent ins

materials to the carrier s terminal to be shipped This shipment left po

April 6 1979 The shipper wasnot awareofthe 10rate increase and req

that the 104 rather than 114 rate be applied

The Presiding Officer denied both applications on the ground that PW

Maersk had prior to filing the applications failed to file tariffs upon wh

refund could be based He found that in each case PWC had filed 

different from those the shipper had either been quoted or expected 

charged prior to the time of shipment 8

The Presiding Officer cites five recent cases to support his decision incl

Munoz y Cabrero v Sea Land Service Inc 17 S RR 1191 1193 1

where the Commission held

Section 18 b 3 requires that prior to applying for a refund or a waiver the carrier file a ne

upon which such refund or waiver will be based When read in conjunction with the stat

in the House and Senate reports it is clear that the new tariff is expected to reftect 

intended rate not a rate agreed upon after the shipment

In its Exceptions PWC explains that with respect to the rates at is

Special Docket No 649 it considered it more prudent to incorporat

general rate increase of 10 on March 28 1979 than have a 64 wt r

effect for only four days which would have increased to 70 wt on Ap

1979

The situation which gave rise to the application in Special Docket No 

is allegedly somewhat different As to that application PWC explains 

when the oversight wasdiscovered in April 1979 the general rate increas

already been instituted Therefore the Conference allegedly reinstate

omitted commodity at the preApril 1 general rate level and then incorpo

the 10 increase that was in effect as of April 1 1979

In the alternative if both of the above explanations are found not to j

granting the applications as submitted PWC requests permission to pub

6

Letter or H KilllOShita Assistant Socretary Nomura Corporation addrcaaed to pwe Chairman Donovan 

February 28 1979

1PWC Tariff No II F M C 19 3rd rev page 489 declive January I 1979

As late 8i June 25 1979 the Presidina Officcr advised pwe of the pouible juriedictional deficiency and sugest

publish an appropriate corrective willand file anew application Set lelter ofAdministrative Law Judao Norman Kline 

to pwe Executive Assistant Donald Griffith June 1S 1979
APPLICATION OF MAERSK LINE AGENCY 251

its tariffnotice that effective January 1

through March 31 1979 for purposes

ofrefunds or waiver of freight charges the rates of 64 for Butyl Motor Tube

Scrap and 104 for Mineral Insulating Material N O S subject to all

rules regulations terms and conditions of these tariffs would be applicable

PWC cites Application ofPacific Westbound Conference for the Benefit of

M C International 19 S RR 333 1979 in which it claims that an applica

tion wasgranted under similar circumstances

DISCUSSION AND CONCLUSION

Aspecial docket application seeking a refund or a waiver must meet certain

requirements set forth in section 18 b 3 ofthe Shipping Act 1916 46 U S C

S817 b 3 and section 502 92 a of the Commission s Rules 46 C F R

S 502 92 a Included among these are the requirements that the errorbe bona

fide and of a type contemplated by the statute that applicant prior to submit

ting the application have filed a corrective tariffsetting forth the rate on which

the refund would be based that the application be filed within 180 days of

shipment and that no discrimination among shippers result from the granting

of the application

We are concerned here with the condition that is set forth in the second

proviso of section 18 b 3 to wit

Provided further That the common carrier by water in foreign commerceor conference of such

carriers has prior to applying for authority to make refund filed a new tariff with the Federal

Maritime Commission which sets forth the rate on which such refund or waiver would be

based Emphasis added

The rates negotiated between PWC and the shippers involved in these pro

ceedings and the corrective rates filed by PWC pursuant to its applications are

clearly at variance Consequently PWC has failed to comply with the require

ment of section 18 b 3 as cited above This finding is consistent with the

Commission s holding in Munoz supra where it was explained that

Prior to applying for a refund or waiver the carrier must file a new tariffto reflect a prior intended

rate The Commission does not have authority to approve a rate which was never agreed upon or

intended to be filed

17 S R R at 1192

PWC does not dispute the holding in Munaz but contends that an applica

tion wasgranted under the same circumstancesexisting here In the case relied

upon Application ofPacific Westbound Conference for the Benefit of M C

International supra the Presiding Officer s decision became administratively

final upon the passage of time allowed for exceptions or Commission review

Under the circumstances the result in the Pacific Westbound Conference case

is of questionable precedential value In any event however to the extent that

decision is inconsistent with the holding reached here it is expressly overruled

THEREFORE IT IS ORDERED That the Exceptions to the Initial Deci

sions of PWC are denied and

ITIS FURTHER ORDERED That the Initial Decisions served August 21

1979 and August 22 1979 are adopted and made a part hereof and
252 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That these proceedings are discontin

By the Commission

S FRANCIS C HURNEY

Secreta
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 649

APPLICATION OF MAERSK LINE AGENCY FOR THE

BENEFIT OF NOMURA AMERICA CORPORATION

Adopted November 20 1979

Application for permission to refund portion of freight charges denied

Conference and carrier applicants unintentionally deleted a specific commodity rate on a com

modity known as Butyl Motor Tube Scrap in the amount of 64 per weight ton when

republishing their tariffwith the result that a shipper of this commodity was required to pay

additional freight costs However prior to filing this application the conference filed a new

corrective tariffwhich published a rate of 70 for the commodity involved rather than the rate

which had been deleted Because this new tariff does not conform to the earlier rate

the application is jurisdictionally defective for failure to satisfy the second proviso of

section 18 h 3 of the Shipping Act 1916

If a new application preceded by a correct conforming tariff is filed by these applicants withinthe

180day time period prescribed by law the application can be given favorable consideration

Donald P Griffith for applicant Pacific Westbound Conference

Bryce J Herbst for applicant Maersk Line

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

This is a special docket application filed on June 11 1979 by the Pacific

Westbound Conference PWC and one of its members Maersk Line repre

sented by the Maersk Line Agency seeking permission to refund a portion of

freight charged on a shipment of motor tube scrap which had moved under a

PWC tariffwhich had undergone revision and republication Itis one of a series

of five special docket applications which were all filed on the same date Three

of these applications Special Docket Nos 648 650 651 Application of

Maersk Line Agency for the Benefit of CPC International Trading Corp

Firestone Tire Rubber Co and Kimberly Clark Corporation 19 SRR 541

1979 were found to have fully qualified for relief under the applicable

provisions of section 18 b 3 ofthe Shipping Act 1916 the Act as amended

r

This decision will become the decision ofthe Commission in the absence of review thereof by the Commission Rule 227 Rules

of Practice and Procedure 46 CF R S 502 227
254 FEDERAL MARITIME COMMISSION

by P L 90 298 See Initial Decision July 10 1979 Another applic

Special Docket No 652 Application ofMaersk LineAgency for the B

of Wespac Corparation is not yet ripe for decision because of the la

certain critical information which Iamseeking to obtain from PWc Dec

in the present case has been delayed pending receipt of further informatio

more fully described below Now that this information has been rec

however Ifind that the application cannot be granted because ofthe failu

the applicants to satisfy one of the essential conditions set forth in that po

of section 18 b 3 which governs this type ofproceeding namely the c

tion that a carrier or conference applicant must publish and file a new 

rective tariffrate prior to the time offiling its application which new rate 

conform to the earlier rate which had been unintentionally deleted or ha

been filed through inadvertence As more fully discussed below wheneve

failure to meet this particular condition oflaw hasbeen found applications 

consistently been denied at least since thedecision ofthe Commission in M

y Cabrero v Sea Land Service Inc 17 SRR 1191 1977

Because of the apparent failure of the applicants to satisfy this require

Iadvised Mr Donald P Griffith Executive Assistant of the PWC wh

filed the application that Idid not believe that Icould grant the applic

because of the decision in Munoz y Cabrero supra and other decisions w

have consistently followed and have confirmed the principle involved Iad

Mr Griffith that applicants could continue to seek favorable action of 

application before the Commission notwithstanding Munoz y Cabrero bu

Iwould have to issue an initial decision denying the application Alternat

Iadvised that the PWC could cure the defect in the application by filin

correct conforming tariff See my letter to Mr Griffith dated June 25 

PWC has responded by letterdated July 9 1979 and chooses to seek favo

action on the application on the basis of additional assertions and conten

See letter addressed to me from Mr Griffith dated as mentioned H

considered these additional assertions and contentions however Ifind tha

application cannot be granted because PWC has still failed to satisf

essential condition set forth in law and confirmed by Munoz y Cabrero a

least four other decisions which continue to confirm the validity of that 

sion However I

repeat what Iindicated in my letter to Mr Griffith na

that if applicants would be willing to correct the jurisdictional defect rega

the failure to file a correct conforming tariff this application if refiled ti

could be granted

FACTUAL BACKGROUND

The errorwhichgave rise to this application related to the fact thatthe 

completely revised and overhauled one of its tariffs and in so doing 

tentionally deleted a special rate on a commodity known as Butyl Motor 

Scrap Prior to January I 1979 the pertinent PWC tariff Local and 

land Freight TariffNo 5 F MC 13 had published a special rate on 

Motor TubeScrap in the amount of 64 per weight ton of 1 000 kilog

See tariffcited 16th rev page 267 effective September 20 1978 PWC re
APPLICATION OF MAERSK LINE AGENCY 255

and republished this tariff effective January I 1979 by publishing a new tariff

Local and Overland Freight Tariff No II F MC 19 This tariff was a

substantial overhaul of the previous tariff in which both commodity descrip

tions and item numbers underwent revision In the process the special rate on

Butyl Motor TubeScrap was unintentionally deleted See Affidavit of Don

ald P Griffith Executive Assistant to the PWC June II 1979 The result of

this action was that any shipment of this commodity would be assessed under

a new commodity item described as Synthetic rubber including the fol

lowing Butyl The special rate for this item was 96 per weight ton a

substantial increase 50 over the previous rate of 64 This error was called

to the PWCs attention by the shipper Nomura America Corporation by

letter dated February 28 1979 Some time thereafter PWC restored a special

rate on Butyl Motor Tube Scrap effective March 28 1979 The special rate

which waspublished however was not the previous rate of 64 but rather 70

per weight ton See PWC Tariff No II F M C 19 3rd rev page 742

effective March 28 1979 During the time in whichthe unintended rate of 96

per weight ton was in effect the Nomura America Corporation shipped two

containers laden with used butyl motor tubes which weighed 43 572 kilograms

The shipment sailed on February 25 1979 from Long Beach California

destined for Osaka Japan The shipper paid 5 344 54 in freight rated under

the 96 rate including terminal receiving and currency adjustment charges

PWC and Maersk now seek to refund 1 370 77 in freight on the shipment

in question Iftheir application is granted this would mean that Maersk would

retain only that amount of freight including the incidental charges based

upon a rate of 70 per weight ton not upon the 64 rate which had been

published before PWC changed its tariff on January I 1979 This 64 rate

furthermore was the rate which the shipper Nomura America Corporation

specifically requested to be applied retroactively to January I 1979 to eradi

cate the tariff error See letter to H Kinoshita Assistant Secretary Nomura

America Corporation addressed to Mr D D Day Jr Chairman PWC

February 28 1979 attached to the application

DISCUSSION AND CONCLUSIONS

This special docket application is filed under the remedial provisions of

section 18 b 3 of the Act and the pertinent Commission regulation Rule

92 a 46 C F R 502 92 a It is true that since this law is equitable and

remedial in nature and is designed to relieve shippers offinancial burden which

would fall on them because of carrier error in tariff publishing and filing the

law has been construed liberally in order to carry out its purposes See eg

D F Young Inc v Cie Nationa eA gerienne de Navigation 18 SRR 1645

1979 Ghise iBros v Micronesia Interocean Lines Inc 13 F MC 179

182 1970 Westinghouse Trading Co v American Export Lines Inc 18

SRR 570 572 574 1978 However it is also true that this law is an exception

to the equally strong principle that tariffs have the force and effect of law and

that any application seeking relief must show that it complies with the various

conditions set forth in the law ie that the error wasbona fide and of a type
256 FEDERAL MARITIME COMMISSION

contemplated by the statute that applicant has tiled a timely corrective 

has met the 18O day period of limitation and that there will be no disc

nation among shippers should the application be granted See e g

Farr 

Seatrain Lines 17 SRR 1463 1467 1469 I

D 1977 18 SRR 369 F

1978 and the legislative history to P L 90 298 cited in 17 SRR at 

n 6 Hearings on H R 9473 Before the Subcommittee on Merchant M

and Fisheries 90th Cong 1st Seas Sen No 90 11 1967 at 88 ne

ensure that applicant establishes that a bona fide mistake has occurred 

Staley Mfg Co v Mamenic Line 18 SRR 433 1978 need to show tha

jurisdictional condition regarding actual tiling of a new tariffprior to ap

tion has been satisfied Level Export Sales Corp v Sea Land Service In

SRR 1084 1978 need to tile application within 180 days after da

shipment

Itis important to bear in mind the factthat although denial of specia

docke

applications does indeed result in an additional financial burden for a sh

caused not by the fault of the shipper but by the fault of the carrier d

did occur in the cases cited above Furthermore it isimportant tokeep in 

the factthat when the Congress gave the Commission authority to depart 

the prevailing tariff law in the exeptional circumstances occurring in 

types of cases Congress did so on the understanding that the Commi

would exercise that authority with care i e that each application would n

merely rubberstamped but would be carefully scrutini7Ald by qualified ju

officers For example in response to a concern expressed by Congres

Edwards that the new legislation authorizing waivers and refunds from o

wise applicable tariffs would lead to rebating or other abuses and that 

applications might merely mean a shipowner writing out a check t

shipper the then Chairman of the Commission reassured the congres

that in addition to other conditionund controls to be written into the bil

case would appearbefore the hearing examiner now administrative law ju

but under a

very shortened procedure which we call special docket proce

in which there would have to be establishment of the fact that this isa 

fide mistake Hearings cited above at 88

One of the conditions which must be satisfied under the law in quest

that set forth as the second proviso in the remedial portion of section 18 b 

as amended by P L90 298 This condition is stated as follows

Provided further That the common carrier by water in foreign commerce or conference 

carriers has prior to applying for authority to make refund filed a new tariftwiththe F

Maritime Commission which sets forth the rate on which such refund or waiver wo

based

Itisthis condition which iscritical to the application because ofthe fac

the Conference in tiling the new tariff which sets forth the rate on w

such refund or waiver would be based has tiled a rate different from 

which the shipper involved in this application had either been quoted o

pected to be charged prior to the time of the shipment and which the sh

had specifically requested to be applied to the shipment by way of retroa

relief There are now at least five decisions of the Commission or its adm

trative law judges which have become administratively final in whic
APPLICATION OF MAERSK LINE AGENCY 257

principle has been clearly established that the new tariff filed to correct the

error in the tariff applicable at the time of shipment must conform to the rate

which had been quoted to the shipper or which the carrier or conference had

deleted by mistake when publishing its tariff At least one of these cases

furthermore involved the PWC itself

The first of these cases is Munoz y Cabrero v Sea Land Service Inc 17

SRR 1191 1977 In that case the carrier had negotiated a rate of 44 W1M

for a shipment ofglassware but inadvertently failed to file that rate prior to the

time of shipment When aware of the error Sea Land filed a corrective tariff

and a special docket application but instead of filing the 44 rate it filed a rate

of 40 The Commission after considering the legislative history of P L

90 298 and in full realization that denial of the application would mean that

the carrier s errors caused the shipper to incur greater cost nevertheless denied

the application stating

Section 18 b 3 requires that prior to applying for a refund or a waiver the carrier file a new tariff

upon which such refund or waiver will be based When read in conjunction with the statements

in the House and Senate reports it is clear that the new tariff is expected to reflect a prior

intended rate not a rate agreed upon after the shipment

17 SSR at 1193

In every case since Munoz y Cabrero in which the fact that the carrier had

filed a rate other than the prior intended rate was noted the application has

been denied Thus in Henry L Daty Inc v Pacific Westbound Conference 17

SRR 1439 1978 the PWC inadvertently increased a rate on ground clay

when republishing a portion of its tariff raising the rate from 56 W to

98 W thereby causing the shipper to bear a greater cost To correct this error

the PWC filed a special docket application but prior thereto filed the new

tariff in which the rate was not shown as 56 W but as 56 W subject to a

minimum weight for 20foot containers of 40 000 pounds The shipment in

volved could not meet this minimum weight with the result that the new

corrective tariff not only did not correspond to the earlier flat 56 W rate but

the freight also differed The application was therefore denied for failure to

meet the second condition set forth in the statute

In Owens Jinois Co v Trans Freight Lines Inc 19 SRR 170 Initial

Decision F M C Notice of finality May 9 1979 the carrier had agreed to

file a lump sum rate of 1 800 per container for expansion tanks but failed to

do so in time for the shipment But before filing its application the carrier filed

a new corrective tariff in the amount of 36 WM minimum 2200 ft per

container instead of the quoted 1 800 rate The application was denied

InApplication ofNeptune Orient Linefor the Benefit ofStauffer Chemical

Co 19 SRR 451 Initial Decision F MC Notice of finality July 23 1979

the carrier filed a new tariff rate of 62 W on lactose instead of a rate of 58

per 1000 kilos which had been quoted to the shipper This was one of the

reasons for the denial of the application 2

The other reason for denial related to the fact that the carrier was a controlled carrier under the Ocean Shipping Actof

1978 and the facts showed that because the carrier realized certain restrictions on its ability to file reduced rates it oould not show

that there was an inadvertent failure to file an intended rate
258 FEDERAL MARITIME COMMISSION

Most recently in Application of Sea Land Service Inc for the Bene

Nepera Chemical Inc 19 SRR 235 Initial Decision April 20 1979 w

decision has been adopted by the Commission according to a Commis

press release dated June 27 1979 3

the carrier failed to conform its new t

filed prior to the special application to the earlier rate which it had quoted 

had intended to file prior to the shipment in question The earlier rate had 

6 85 per hundredweight minimum 40 ooolbs However the new corre

tariffpublished a rate of 162 25 per weight ton of 2240 lbs minimum 17 

On exceptions to the Commission Sea Land explained that this new rate 

really only slightly different from the previous rate considering Sea La

stowage factors and that relief should not be denied because of such a s

variance Nevertheless the Commission announced that it has adopted 

initial decision By this action Sea Land will be required to recover 

42 000 in additional freight from the shipper In that case furtherm

Sea Land had waited until the very last day of the ISO day period to fil

application so that there wasno time for it to file a proper corrective tarif

another application

In view of these cases which consistently deny applications when the car

failed to conform their corrective tariffs with the previously quoted or inte

rates it is clear that these two applications must also be denied The 

remains that PWC did not file a 64 rate on butyl motor tube scrap which 

been intended but which PWC had inadvertently deleted but filed a 70 

instead As mentioned above Icalled this problem to PWC s attention by l

of June 25 1979 to afford PWC an opportunity to pursue the application 

seek to overturn the doctrine followed in the cases cited or in the alterna

to file a proper corrective tariff and a new application PWC has chosento 

approval ofthe application notwithstanding the case law and has called se

matters to my attention

PWC points out that it had given approximately six months notice to 

pers that a rate increase would occur on April 1 1979 This means tha

shipper in this application wasput on actual or constructive notice that the 

would increase from 64 to 70 on that date PWC argues that had it 

committed an error in republishing its tariff on January 1 1979 the qu

rate wouldhave been published as 64 subject to the April 1 1979 general 

increase which brought the rate up to 70 All that PWC did was to adv

the increase on the 64 rate to 70 effective March 2S 1979 PWC exp

that the reason why it advanced the rate increase on the 64 rate 

April 1 1979 to March 2S 1979 was that the Conference considered it m

prudent to incorporate the general rate increase on March 28 for 

771 1440 20 rather than have a 64 Wt rate in effect subject to Supple

No 2 which would have increased this rate to 70 00 Wt on April I 

letter of D P Griffith PWC Executive Assistant July 9 1979

Alternatively PWC suggests that the applications should be granted 

allowing the 64 rate to apply from January 1 through March 27 1

lSee NR 79 68 Actions Taken Ilt June 27 1979 Commission Meeting agenda item No 8 at 2 The Commission 

has been served on August 8 1979
APPLICATION OF MAERSK LINE AGENCY 259

Finally PWC cites another special docket Special Docket No 631 in which

it claims that the application was granted under similar circumstances

Regrettably Ido not believe that this application can be granted on any of

the grounds advanced by PWC and adhere to my earlier belief that the only

proper way in which PWC could obtain favorable action would be to file a

correct new tariffshowing the 64 rate quoted to the shipper prior to the filing

of a new application Even now there is time to do this since the ISO day period

does not expire until August 24 1979 ISO days after date of sailing which was

February 25 1979

Itis impossible to grant relief based upon the 64 rate on a retroactive basis

asPWC suggests in one alternative because of the fact that the 64 rate is not

on filewith the Commission Section IS b 3 requires in pertinent portion that

prior to filing the application the applicant must file a new tariff with the

Federal Maritime Commission which sets forth the rate on which such refund

or waiver would be based Failure to meet this requirement is ajurisdictional

defect which cannot be waived See A E Staley Mfg Co v Mamenic Lines

17 SRR 1522 l97S Louis Furth Inc v Sea Land Service Inc 17 SRR

1171 1977 In both of the cited cases applications had to be denied because

there wasno filing ofthe actual rate on which relief was requested prior to the

time of filing the application

PWC s reference to Special Docket No 631 is not sufficient to justify

granting its application In Special Docket No 631 Application ofPacific

Westbound Conference for the Benefit of M C International 19 SRR 333

Initial Decision May 14 1979 F MC Notice of no review and adminis

trative finality June 2S 1979 the PWC inadvertently deleted a specific

commoidity rate on playing cards when republishing its tariff on January I

1979 Upon receiving a letterfrom the shipper complaining of this mistake the

PWC reinstated the specific commodity rate on playing cards but as in SD

No 649 filed the new corrective tariffeffective March 2S 1979 and advanced

the general rate increase which was scheduled to become effective on April I

1979 for playing cards as compared to the previous rate which had been

deleted The facts seem to be the same as those in SD No 649 However

neither the initial decision nor the Commission s notice which merely an

nounced that no review had been undertaken by the Commission made any

reference to the Munoz y Cabrero problem Had there been any reference to

this problem there might have been a different result or a decision that the

Munoz y Cabrero doctrine should no longer be followed With no reference to

the problem by either the Commission or the presiding judge however I

cannot conclude that this casemeans that the Munoz y Cabrero doctrine is no

longer to be followed in the face of the fact that in at least five cases cited

above where the problem has been specifically identified Munoz y

Cabrero

has been expressly followed and where in the last of these cases Application

ofSea Land Service Inc for the Benefit ofNepera Chemical Inc 19 SRR

235 supra the Commission s final decision which will undoubtedly be issued

in the near future will come later than the notice of administrative fmality

issued on June 2S 1979 in Docket No 631
260 FEDERAL MARITIME COMMISSION

PWC s argument that all it did in this case was advance the general 

increase to 70 by a few days may seem appealing Also the fact that 

shipper would be happy to accept a 70 rate rather than the higher 96 

in effect at the time of the shipment is no doubt a truism However th

arguments still miss the point namely that all that PWC had to do to ob

favorable action was to refile a correct tariff rate with a new application s

to eliminate the Munoz y Cabrero problem The excuse that the Confere

considered it more prudent not to publish the 64 rate but to accelerate 

increase to 70 is obviously not prudent at least in terms of seeking spe

docket relief if it means a hopeless collision course with the Munoz y Cab

doctrine PWC s standing to argue an exception to the Munoz y Cab

doctrine is weakened moreover by several considerations First in the o

three special docket applications to which Ireferred above SO Nos 648 

and 651 all involving mistaken deletions or typographical errors in PW

republished tariffs PWC showed itself perfectly capable of filing the 

corrective tariffs to conform exactly to the rates previously deleted or intend

Secondly in one of these cases SO No 648 for the benefit of CPC In

national Trading Corp PWC correctly published a new conforming tari

the very same tariff involved in the two applications under considerat

namely Tariff No 1I FMC 19 effective January 17 1979 Appare

the reason why PWC did not include the April I general rate increase in 

new tariff rate filed in SO No 648 was that January 17 is not nearly so c

to April I as is March 28 the effective date of the new tariff rate in 

No 649 in which PWC did include the general rate increase in the new ta

Thirdly PWC is fully aware of the Munoz y Cabrero doctrine having b

denied relief in the case of Henry IDaty Inc v Pacific Westbound Con

ence supra 17 SRR 1439 only last year in which case PWC made the s

errorof changing the new corrective tariff so that it did not conform to 

earlier rate which had been inadvertently deleted from the PWC tariff

Nevertheless PWC despite the fact that it is aware ofthe Munoz y Cab

doctrine and has been specifically advised in this application by my lette

June 25 1979 that its application fails to satisfy the principle enunciate

Munoz y

Cabrero and additional cases following that principle chooses no

refile a correct new tariff with a new application Perhaps the reason for 

reluctance isthe fact that ifthe new tariffwere to be filed correctly with a 

of 64 as the shipper expected and requested this rate would have to rem

unchanged for 90 days in the tariff because of the 9 day notice requirem

of section 14b2 of the Act governing dual rate contracts since the r

concerned are contract rates PWC has already manifested a desire to incr

its ratesgenerally in its Tariff No IIeffective onApril I 1979 and appare

is not inclined to favor the commodity involved in this application by gran

it a rate reduction from 70 to 64 which would remain unchanged until s

time in the autumn when the 9oday notice period would expire That 

decision which PWC is entitled to make and indeed the entire special docket

statute does not require a carrier or conference to seek relief for shippers a

which action at least PWC has initiated However if PWC believes it t

unwise to make the correction suggested so as to conform to prevailing 
APPLICATION OF MAERSK LINE AGENCY 261

there is nothing Ican do to authorize permission to make a refund Accord

ingly notwithstanding the fact that PWCs tariff errors will result in the

shipper s having to bear an additional 1 370 77 in freight this application

under the present circumstances cannot be granted

ULTIMATE CoNCLUSIONS

This special docket application cannot be granted under the present circum

stances Although there did occur an error in the PWC tariff of a clerical or

administrative nature because of unintentional deletion of a specific commodity

rate and the shipper concerned was unable to enjoy the rate which it had

believed would be applicable when booking the shipment PWC and Maersk

have failed to comply with an essential condition set forth in section IS b 3

of the Act namely the requirement that the new corrective tarifffiled prior

to filing of the application set forth the identical rate which conforms to the

earlier intention of the conference and carrier Instead PWC filed a new tariff

which publishes a rate different from the unintentionally deleted rate which

PWC had earlier intended to remain at 64 during the period January I 1979

through March 31 1979 not 70 which was supposed to become effective on

April I 1979 not earlier Consequently the subsequent idea to apply the

increased rate retroactive to this earlier period of time does not conform to the

earlier intent

The application must therefore be denied but it is still not too late for it to

receive favorable consideration if PWC and Maersk would promptly file a

correct conforming tariff and a new application so that the essential jurisdic

tional condition regarding the conformance of the new tariff rate to the prior

intended rate would be satisfied IfPWC also meets the ISOday time period

ending on August 24 1979 and is willing to retain the correct conforming

rate in its tariffincreasing it to the 70 level on 90 days notice it would appear

that the jurisdictional defect in its present application would be cured

8 NORMAN D KLINE

Administrative Law Judge

WASHINGTON D C

August 8 1979

410 every case in which a

special docket application has to be denied ofcourse the result isthat the shipper hasto bear additional

freight costs although not at fault This has been recognized in the cases cited but cannot be helped See eg Munoz y

Cabrero

v Sea LandService Inc supra 17 SRR 1191 at p 1193 In Application ofSea LandService Inc for he Benefit ofNepera

Chemical Co supro 19 SRR 235 notethat the denial meant that Sea Land must seek an additional 42 000 in freight from

the shipper At least in the present application the amount of additional freight is relatively small by comparison something over

51 000 and the shippers havealready paid this amount so that there will be no need for applicants to billthemfor additional sums
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 652

ApPLlCAT ON OF MAERSK L NE AOENCY

FOR THE BENEF T OF WESPAC CORPORATION

Adopted November 20 1979

Application for permission to refund portion of freight charges denied

Conference and carrier applicants unintentionally deleted specific commodity rate of 

insulating materials when republishing their tariff with the result that the ship

cerned was required to bear additional freight cost However prior to filing this 

docketapplication the conference filed a new corrective tariff which published a 

114 rather than the rate which had been deleted in order to incorporate a gene

increase into the new rate Because this new tariff does not conform to the ear

which had been quoted to the shipper but deleted in republishing the applic

jurisdictionallydefective for failure to satisfy the second proviso of section 8 b 

Shipping Act 1916

If a new application is filed preceded by a correct conforming tarifffiling which reinst

04 rate and the application is filed within the 80 day time period prescribed 

which still has considerable time to run the application can be given fa

consideration

Donald P Griffith for applicant Pacific Westbound Conference

Bryce J Herbst for applicant Maersk Line

INITIAL DECISIONIOF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

This is the last of a series of five special docket applications all f

June 11 1979 by the Pacific Westbound Conference PWC and on

members Maersk Line represented by the Maersk Line Agency s

permission to refund portions of freight charged on various shipments 

moved under PWC tariffs which had undergone revision and republicat

all five of these cases the PWC had made errors of a clerical or adminis

nature by deleting commodity rates or descriptions or by otherwise pub

erroneous matters in the tariffs with the result that various shipper

This decision will become the decision ofthe Commi881on in the absence of review thereofby Ihe Commiuion Rule 

of Practice and Procedure 46 CF R 5502 227
APPLICATION OF MAERSK LINE AGENCY 263

adversely affected Three of these applications were found to have qualified

fully for relief under the applicable provisions of section 18 b 3 of the Ship

ping Act 1916 the Act as amended by P L90 298 See Special Docket Nos

648 650 651 Application ofMaersk Line Agency for the Benefit of CPC

International Trading Corp Firestone Tire Rubber Co and Kimberly

Clark Corporation Initial Decision served July 10 1979 19 SRR 541 An

other application was found not to have qualified because of a jurisdictional

defect relating to the fact that the PWC failed to file a correct conforming

tariff rate prior to the filing of the application in contravention of the require

ments of the second proviso of section 18 b 3 and the doctrine enuciated by

the Commission in Munoz y Cabrero v Sea Land Service Inc 17 SRR 1191

1977 and at least four cases which follow the Munoz doctrine See Special

Docket No 649 Application of MaerskAgency for the Benefit ofNomura

America Corporation Initial decision served August 21 1979 19 SRR 689

In both Special Docket No 649 and the instant case Iadvised the PWC of

thejurisdictional defect and gave PWC the option to continue to seek favorable

consideration of the applications notwithstanding the Munoz y Cabrero doc

trine or to filea new application preceded by a correct conforming tariffwhich

would reinstate the earlier deleted rates exactly as they had been quoted and

published in the earlier tariffs See letter which Iaddressed to Mr Donald P

Griffith PWC Executive Assistant dated June 25 1979 PWC responded and

chose to continue to seek favorable consideration of both applications on the

basis of certain statements and arguments See letter dated July 9 1979 from

Mr Griffith to myself Ihave considered the matters discussed by Mr Griffith

in his letter and remain of the opinion that this application as well as that in

Special Docket No 649 cannot be granted because the jurisdictional defect

has not been corrected However as in No 649 Ireiterate that favorable

consideration to the instant application could be given ifPWC were to elimi

nate the defect by filing a correct conforming tariff and a new application

FACTUAL BACKGROUND

The facts in this case are relatively simple It appears that PWC had

published a tariffin 1978 for the carriage of cargo between Pacific Coast ports

and ports in various Far East countries This wasPWC Local and Overland

Freight TariffNo 5 F M C 13 EffectiveJanuary I 1979 PWC overhauled

and republished this tariff changing commodity descriptions and item num

bers In the present case PWC had published a special rate for Mineral

Insulating Material N O S in its previous tariffin the amount of 1 04 W1M

for local movements to Bangkok Thailand See tariff No 5 cited IIth revised

page 392 effective September I 1978 In republishing the tariff however

PWC inadvertently deleted this special commodity rate Consequently any

shipment of the type ofmineral insulating material in question became subject

to a rate of 201 W1M moving to Bangkok Thailand under an N O S

commodity description published as Non Metallic Minerals and Products

Except Ceramic Products and Glass and Glass Products N O S See PWC

TariffNo ll F MC 19 3rd rev page 489 effective January I 1979 PWC
264 FEDERAL MARITIME COMMISSION

was notified of this tariff error by a shipper Wespac Corporation who h

shipped this commodity while the 201 W1M rate wasapplicable Wespac 

letter dated April 10 1979 requested that the PWC file a special doc

application to restore the 104 rate which the shipper had been quoted 

Maersk in November 1978 and requested that the 104 rate be made re

active to March 1979 See letter addressed to the PWC by Mr John 

Carambat dated April 10 1978 The PWC responded to the request 

publishing and filing a new special rate on the commodity in question effect

April 25 1979 and after receiving a second letter from the shipper by fil

this special docket application However as noted the new special rate wh

PWC filed wasnot the 104 rate which the shipper requested but rather a r

of 114 The reason why the PWC published this latter rate rather than 

lower rate requested was the fact that on April I 1979 there occurred 

general rate increase which raised 104 to 114

During the time in which the 201 rate was in effect the shipper shipp

13 726 cubic meters of insulating material on a Maersk vessel which sa

from Oakland California on April 6 1979 The shipment was destined 

Bangkok Thailand The shipment as rated under the 201 rate was asses

2 758 93 in freight exclusive of incidental charges The PWC and Mae

wish to refund the amount of 1 1947 which would result in Maers

retaining freight charges calculated on the basis ofthe 114 rate not the 

rate which the shipper had been quoted and which the shipper had reques

to be made applicable to the shipment

DISCUSSION AND CONCLUSIONS

The principles of law which govern this case are precisely the same as th

discussed in my initial decision in Special Docket No 649 Application 

Maersk Line Agency for the Benefit of Nomura America Corporati

supra Very briefly this application like the other cannot be granted beca

of the failure of the PWC to satisfy the second proviso of section 18 b 3 

the Act and the principles of law enunciated in the five cases cited in t

decision beginning with Munoz y Cabrero v Sea Land Service Inc T

proviso has to do with the requirement that applicants must file a new c

forming tariff prior to the time of filing their applications which new ta

publishes the same rate which had been unintentionally deleted This princ

and the relevant cases are discussed in more detail in the other decision 

need not be repeated here The only distinction between the two cases lies 

the fact that in this case the PWC filed the new tariffafter the effective d

of the general rate increase which as Imentioned wasApril I 1979 wher

in the othercase the PWC filed the new tariff a few days prior to the effec

date ofthe increase In bothcases the PWC urges that Inot follow the Mu

y Cabrero doctrine and argues that the shippers had notice of the Apr

increase approximately six months before that date so that retroactive appl

tion of the increased rates rather than the originally quoted rates should 

permitted Ihave discussed these arguments in my initial decision in Spe

DocketNo 649 to which the reader is referred and see no need to repeat th
APPUCAnON OF MAERSK LINE AGENCY 265

here In short none ofthe PWC s assertions corrects the fact that the PWC has

simply not filed the proper conforming new rate and chooses not to refile its

application with a corrected new rate Under the circumstances there is no way in which I can find that the application can be granted notwithstanding the

fact that the shipper will not be entitled to receive a refund for additional

freight charges which were caused by carrier not shipper error So long as the

PWC has filed only the 114 rate rather than originally quoted 104 the only

rate on which a refund could be based would be 114 since the statute requires

the carrier or conference to file a new tariff which sets forth the rate on which

such refund or waiver would be based The only conceivable way in which it

could be argued that the shipper would be entitled to a refund on the basis of

the 114 rather than the 104 rate would be the fact that the shipper was

aware of the rate increase which was to take effect on April I 1979 and

shipped on or after that date when the 114 rate would apply However these

facts cannot be established On the contrary the shipper in two letters re

quests that the 104 rate be applied and that it be made retroactive to March

1979 Furthermore evidence which the PWC has furnished at my request quite

honestly reveals that the shipper sent the shipment to the terminal prior to

April I 1979

2

Under the PWC tariffs effective date of rate change rule a

shipment received at the carrier s terminal prior to April I to be loaded on a

vessel sailing within 10 days ofthat date would be rated under the previous

unincreased rate See Rule 3 12 PWC Tariff No II 3rd rev page 53

Therefore the shipment would have qualified for the 104 rate had it been

published in the PWC tariff Had the shipment been received on or after

April I 1979 it could be argued that the proper rate was 114 and that since

this rate has been filed with the Commission by the PWC the refund can be

granted on the basis ofthe higher rate Ican understand that the PWC when

filing the new tariff of April 25 1979 filed the rate subject to the April I

increase therefore inserting a rate of 114 into the tariff rather than 104

However this business decision while conforming to the longstanding intention

ofthe PWC to increase its rates onApril I 1979 does not conform to its earlier

intention that a rate of 104 should apply from January 1 to March 31 1979

That is so because the PWC is aware that if it wishes to apply the 104 rate

to the period January I

through March 31 1979 by means of this special

docket application the statute and case law require that it file the 104 rate

3

2

Although the only way in which I believed it might be possible to grant this lppIication with only the 114 rate on file would

be if the shipment wureceived by the carrier IIhe terminal on or after April I under the pertinent cffeetivedale of rate change

rule Mr GriffIth at my ueat fumilhed me with evidence thai tbe sbipment arrived Itthe terminal on Mareh 27 1979 See

Port of San Pnncisco Fright ConaoIidltion SlMion meipt No 13212 Mr Oriffith has coopenrcd in an effort to give me afull

and complete record even when the evidence does not help his position and buconscientiously striven to persuade me Ibat the

appIicItion should be grudIed However I

cannot qree with hi IrgUments and believe that under lppIicabIe principles of law his

onlymouncistopersuade thePWC to file thecorrect conformina tariffrate

I AII mentioned in my inidal decision in Special Docket No 649 the PWC wuinvolved in one of tbe MIUIOZ y Cabnro type

cues in which its lII PIk lltion had to be denied forfailure to file the correct conformina tariffrate 1bc cuewas Henry I Daly

lite v Pacific We rrbowld Cottferenu 17 SRR 1439 1978 MOftlOVCI in my letterand telephonic conversations with Mr Griffith

of the PWC I advised him of tbcsc QIC8 and the need in my opinion for PWC to file the SUMrate if it wisbcd 10 have the

wUcuion granted In faimeu to Mr Griffith I should 8dd that he has the right to urge the Conumuion to ftlvene ormodify

the MIIlfOZ yCabrero doctrine and be bu cited another special docket cue SD No 631 in which IppIiCllion WI8 gnnted

aItbougb the new tariff bad alto incorponlled aeneral rue increue into the ItCned thereby cbangilll it from the pmriouIl IIC

wbkh bad been deleted As I mentioned in my inidal decilion in Special Docket No 649 however it does not appear that the

MIIIIOZ YCabnro problem was noted in the deci ion in SD No 631 Moreover if appIicanta ue allowed to dlaoge their ntcs
266 FEDERAL MARITIME COMMISSION

ULTIMATE CONCLUSIONS

Theapplication in this case as in a companion case Special Docket No 

cannot begranted because ofa jurisdictional defect relating to thefact tha

PWC has not filed a new corrective tariff which publishes a rate w

conforms to the rate which had been quoted to the shipper and had 

unintentionally deleted from the PWC s republished tariff This defect is 

because the second proviso ofsection 18 b 3 and a least five decisions o

Commission and its administrative law judges emphasize that the new 

must conform to the earlier quoted or deleted rate Unless the PWC is wi

to file the quoted and deleted rate of 104 together with a new applica

there simply is no way in which the shipper can begiven a refund The fact 

the shipper will receive no refund thoughthe PWC erred in publishing its t

may be unfortunate but the remedy is for the PWC to refile a correct 

forming tariff with a new application Any alternative solution would req

the Commission to disregard the second proviso of section 18 b 3 and 

decisions arising thereunder so that special docket applications can be ope

to abuse and unsavory pressures

Since the shipment sailed on April 6 the PWC can still refile its applica

preceded by a correct conforming tariff at any time up till October 3 1

180 days after April 6 1979 in which event its application can be g

favorable consideration if no further errors or defects appear

The application must therefore be denied

WASHINGTON D C

August 13 1979

8 NORMAN D KLINE

Administrative Law Judg

from those quoted orpublished earlier on which shippers relied the special docket procedure oould be open toabuse for 

if shippers could insist that carrien file even lower rates than those quoted earlier for retroactive application and refu

special docket cases
v

FEDERAL MARITIME COMMISSION

DOCKET No 79 15

WESTINGHOUSE ELECTRIC CORPORATION

SEA LAND SERVICE INC

ORDER

November 20 1979

This proceeding is before the Commission upon its determination to review

the Order issued by Administrative Law Judge William Beasley Harris ap

proving the settlement agreement and discontinuing the proceeding The pro

ceeding was initiated by a complaint filed March 12 1979 by Westinghouse

Electric Corporation alleging that Sea Land Service Inc assessed an unrea

sonably high rate for a shipment of fluorescent bulbs in violation of section

18 b 5 of the Shipping Act 1916 46 U S c 817

On March 7 1977 Westinghouse delivered to Sea Land in New York City

1875 cartons of fluorescent bulbs weighing 14 628 kilograms and measuring

4000cubic feet to be shipped from New York to Bilbao Spain The applicable

tariffwas TariffNo 166 FMC 43 Us North Atlantic Ports to Ports in

Spain and the rate was 27 per 40 cubic feet for a total charge of 2 700

On March 18 1977 Westinghouse delivered to Sea Landin Houston Texas

1791 cases of fluorescent bulbs weighing 13 973 kilograms and measuring 3940

cubic feet to be shipped from Houston to Bilboa Spain The applicable tariff

wasTariffNo 233 FMC 105 U S GulfPorts to Ports in Spain and the

rate was 3 70 per cubic footI

Westinghouse alleged that the rate charged for this latter shipment was

unreasonably high and violative ofsection 18 b 5 of the Act noting that the

shipments were nearly identical the latter shipment in fact was slightly

smaller and that the longer distance from Houston did not justify the Gulf

rate exceeding by five times the Atlantic rate Sea Land denied that the rate

was so unreasonably high as to be detrimental to the commerce of the United

States in violation of section 18 b 5 By Agreement ofSettlement aldMu

lOr 148 per 40 cubic feet
268 FEDERAL MARITIME COMMISSION

tual Release filed June II 1979 the parties agreed to settle the dispute 

Sea Lands payment to Westinghouse of 4 000 and Sea Land s modific

of the Gulf Coast Spain tariff item as deemed by Sea Land to be com

cially sound 2

The Presiding Officer concluded that the settlement agreement

does not constitute rebating or the use of unjust or unfair devices which would allow the 

plainant to obtain transportation at rates below those published in the tariffs In other wor

8Cttlement itself is proper and does not violate any provision of law

He noted in addtion that settlements are encouraged by the Commiss

Rules of Practice and Procedure and the Administrative Procedure Act 

Presiding Officer granted the parties Motion for Approval of the Agree

of Settlement and Mutual Release and discontinued the proceeding

DISCUSSION AND CONCLUSIONS

Section 18 b 5 does not by its terms forbid any specific activity it is p

prospective in nature3

In Federal Maritime Commission v Caragher 

F 2nd 709 717 2nd Cir 1966 the court stated that a carrier could be l

for penalties under section 18 b 5 only ifit continued to charge unreaso

rates after the Commission determined they were unreasonable The Cara

rationale has been applied to awards of reparation as well as to assessme

penalties Only after the Commission has determined a particular rate 

unreasonable under section 18 b 5 may a carrier s continued assessme

that rate be considered a violation ofsection 18 b 5 for which reparation 

be awarded 4In the instant situation no such determination of a violation 

heretofore been made

The Commission is then presented with the question whether it may app

the settlement of a proceeding in which no apparent relief is warranted 

clear that no reparations may be awarded in this proceeding Noris disapp

of the challenged rates appropriate the tariff item has been cancelle

Sea Land The only justification offered for the 4000 payment by Sea 

is the avoidance of litigation Under the circumstances present here the C

mission concludes that the avoidance of such litigation is insufficient to ju

a cash settlement particularly where as here no effective relief is availab

the Complainant As no other justification has been offered the settleme

therefore disapproved and the proceeding remanded to the Presiding Of

THEREFORE IT IS ORDERED That the Agreement of Settlement 

Mutual Release of Westinghouse Electric Corporation and Sea Land Se

Inc is disapproved and

1 The Isrilf item has been canceJJod

Scclion 18 b3 dB

The Commission shall disapprove any rateorchirp filed by acommon carrier by waterin the forei n commerce of the 

States orconference of carriers which after hearing it finds to be10 unreasonably high orlow as tobe detrimental to the eo

of Ihe United States

Pacific We r bound Corlftrenct Inwstlgallon of Rates Pertaining to Wasrepaper 19 S R R 19 29 1979 Com

Oedll Corp v AmericanExport Isbrandtse Lines Inc I F M C171 191 1972 Valley Evaporating Co v GrQct L

14 F M C 16 26 27 970
8 FRANCIS C HURNEY

Secretary

WESTINGHOUSE ELECTRIC CORPORATION V SEA LAND SERVICE 269

IT IS FURTHER ORDERED That this proceeding is remanded to the

Presiding Officer

By the Commission
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 666

ApPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF NEW ERA SHIPPING

AS AGENT FOR CENTRAL NATIONAL CORPORATION

ORDER ON REMAND

November 21 1979

This proceeding was instituted pursuant to section 18 bX3 of the Sh

Act 1916 46 U S C 817 b 3 upon the application of Sea Land S

Inc for permission to refund and waive a portion of certain freight cha

Central National Corporation through New EraShipping Co Inc a l

independent ocean freight forwarder as agent for Central Nationa

poration Administrative Law Judge Stanley M Levy served an Initia

sion on September 5 1979 granting Sea Land s application Althou

exceptions werefiled the Commission on its own motion determined to 

the Intial Decison

In this case the evidence presented satisfactorily shows that Sea La

tended to charge a special rate of 69 00 W for the shipments in ques

higher rate was inadvertently put into effect when on January I 19

Pacific Westbound Conference PWC of which Sea Land is a m

republished its tariffs for the exclusive purpose of converting commod

numbers to conform to the 1978 edition of Statistical Classification of D

tic and Foreign Commodities Exported from the United States Becau

clerical error the 69 00 special rate was deleted from the republishe

resulting in a higher than intended rate on the commodity in question

On March 29 1979 the PWC filed a corrective tariffreinstating the 

special rate effective March 30 1979 Based upon this record th

statement appears to conform to the intended rate level However t

rective tariff also adds a provision which is not explained in the recO

new provision canceled the special rate on the day after it became e

It is well settled that a corrective tariff must conform to the tariffor

intended Munoz y Cabrera v Sea Land Service Inc 20 F MC 152 

Here there is no evidence that the PWC intended to cancel the 69 00 

rate on April 1 1979 when effective January I 1979 it republished i
APPLICATION OF SEA LAND SERVICE INC 271

Exhibit No 2 If on January I 1979 the PWCdid not intend to cancel the

69 00 special rate on April 1 1979 then the corrective tariff Exhibit No 3

fails to conform to the PWC s intent and the application must be denied

Therefore this proceeding is remanded for additional evidence regarding the

corrective tariff filed by Sea Land as Exhibit No 3

Consistent with Commission policy should Sea Land s application ulti

mately be approved New Era should also be required to certify that it has

remitted to the shipper the refund granted or explain why such remittance has

not been made New Era should simultaneously certify that it has refunded a

proportionate percentage of brokerage compensation it has received for these

shipments

One final point raised in the Initial Decision needs to be addressed The

Presiding Officer stated at page 3 of his decision The requested refund and

waiver will apply only to the ocean portion of the through charge Although

not incorrect in the context of this refund and waiver this statement is poten

tially misleading The important fact in all special docket applications involving

intermodal rates is that the refund or waiver not affect the land portion of the

through rate

THEREFORE IT IS ORDERED That this proceeding is remanded to the

Presiding Officer for the receipt of evidence regarding the conformity of the

corrective tariff and the issuance of a supplemental Initial Decision consistent

with the directions of this Order

By the Commission

S FRANCIS C HURNEY

Secretary

Application of Sea Land Service 1tU For The Benefit Of BDP International Inc As Agent For Champion International

Export Corporation F M C Special Docket No 660 November 2 1979
FEDERAL MARITIME COMMISSION

SPECIAL DocKET No 675

ApPLICATION OF SEA LAND SERVICE INC

PACIFIC WESTBOUND CONFERENCE FOR THE

BENEFIT OF CHURCH WORLD SERVICE

NOTICE OF ADOPTION OF INITIAL DECISION

November 21 1979

The Commission by notice served October 30 1979 determined to 

the initial decision ofthe Administrative Law Judge in this proceeding 

review the Commission has determined to adopt that decision with the 

ing minor clarifications

The headnote on page 1 and ordering paragraph B on pages 4and 5 

initial decision are clarifed to indicate that the authorized waiver is 

10 186 37 portion of the 20 655 23 total otherwise applicable to th

ments The 10468 86 figure represents the total charge to be assessed 

the rate authorized by this decision

Applicant shall promptly publish in its appropriate tariff the fo

notice

Notice is given as required by the decision of the Federal Maritime Commission in 

Docket 675 that effective January I 1979and continuins throush May 29 1979 inclusive 

on Wheat Flour vi Durum Flour and Semolina in bass donated for relief or charity is 

Wto Manila and 112 00W to Busan for purpo8CS of refund or waiver of freisht charses 

to all other applicable rules regulations terms and conditions of said rate and this tari

Applicant shall waive charges within 30 days and furnish to the Se

within five days thereafter evidence of such waiver along with a

copy 

above described notice

By the Commission

S FRANCIS C HURNEY

Secre
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 675

ApPLICATION OFSEA LAND SERVICE INC

PACIFIC WESTBOUND CONFERENCE FOR THE

BENEFIT OF CHURCH WORLD SERVICE

Adopted November 21 1979

Application granted to waive a 10 186 37 portion of aggregate freight charges of 10468 86

sought to be applied due to administrative error

INITIAL DECISION 1 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

This is a proceeding under section 18 b 3 of the Shipping Act 1916 and

Rule 92 special docket applications of the Commission s Rules of Practice

and Procedure 46 CF R 502 92

The applicant conference Pacific Westbound Conference who joined in this

application with the carrier applicant Sea Land Service Inc certifies that the

instant application was mailed at San Francisco California August 24 1979

to the Secretary of this Commission It was received in the Office of the

Secretary August 27 1979 Under Rule 92 a 3 and suchcircumstances said

mailing date is the filing date of this proceeding

The commodity shipped is given in the application as Wheat Flour viz

Durum Flour and Semolina in bags donated for relief or charity In the

application the date of sailing of the two shipments involved is given as Febru

ary 25 1979 which is within 180 days of the filing of this application Thus

the application is filed timely

On Sea Land Service Inc Sea Land the applicant carrier s bills oflading

for each shipment is found

I

B L No 992 735034 dated February 22 1979 988 Bags All Purpose

Bread Flour 100 lb bags For Charitable Purposes Only by Church

World Service of New York shipped from Seattle on the vessel McLean

voyage lO8W to Inchon The gross weight was99 541Ibs 45 517 Kgs meas

urements 2568 8 cu ft 72 70 cbm Charges of 72 70 M3 at 133 per cbm

I

Thisdecision will become the decision of the Commission in the absence of review thereof by the Commission Rule 227 Rules

of Prdctice and Procedure 46 CF R 5502 227
274 FEDERAL MARITIME COMMISSION

9 669 10 AB 72 70 W at 6 00cbm 436 20 CY 72 70 M

3

at 6 50 per 

472 55 Total charges 10 577 85

2 B L No 992 735030 dated February 22 1979 996 Bags All Pu

Bread Flour 100 Ibs bags For Charitable Purposes Only shippe

Church World Service from Seattle to Manila on vessel Mclean 108W 

weight loo 347Ibs 45 517 Kgs measurements 2589 6 cu ft 73 29 cbm 

73 29 M3 at 13100 per cbm 9 600 99 CY 73 29 W at 6 50 per cb

476 39 Total SlO 07738

The total charges for the two were S20 655 23 B L992 735030 charg

SIO 07738 and B L992 735034 charge was SIO 577 85

Both shipments one destined to Manila and other destined to Inchon K

via Busan sailed in the vessel Mclean Voyage 108Won February 25 

The rate applicable at the time of shipment according to the application 

to Inchon Korea S133 oo per cubic meter and to Manila 13100 per 

meter plus outport rate ofS6 oo per ton as freighted The bills of lading 

rated on the basis of Cereal Grains per Item 001 0700 00 in Pacific W

bound Conference Local and Overland Freight Tariff No 11 FMC 19 

Revised Page 214 effective January I 1979 Exh No 7 page I of 2 atta

to application

Sea Land is amember of the Pacific Westbound Conference PWC 

published rates to Far East destination on Wheat Flour except Mea

Groats in Bags Donated for Relief orCharity in Item 046 0110 03 o

Revised Page 218 of its Local and Overland Freight Tariff No 5 FMC 

effective November 29 1978 Exhibit No I attached to application Th

to Manila was 100 00 per ton w and the rate to Busan Korean wasS1

per ton w Effective January I 1979 thePWC republished its Tariff 

as Tariff No 11 FMC 19 This is the rate sought to be applied in 

proceeding ie Sloo oo per 1 000 kilos as to B L No 992 73503

112 00 per 1 000 kilos plus outport rate of 6 00 per 1 000 kilos as to 

No 992 735034 The charges then wouldbe as to B L992 735030 4 8

and as to B L992 735034 5 62130 a total ofSI0 468 86 which subtr

from the total charges of S20 655 23 would leave aggregate charg

10 186 37 to be waived

In its republishing of its Tariff No 5 as to Tariff No II FMC 19 

PWC s intention to reissue its Local and Overland tariffto conform to th

1978 Edition of Schedule B Commodity Classification and at the same 

eliminate those commodities having very low movement Due to an ad

trative oversight the rates for large movements of Wheat Flour viz D

Flour and Semolina donated for relief or charity were not carried forwa

did not become effective until after the shipments had been made 

discovery of the error the PWC issued 3rd Revised Page 219A eff

May 30 1979 to correct the omission by publishing a new commodity 

131 4010 04 R Wheat Flour viz Durum Flour and Semolina in Bags 

rate levels of Sloo ooW to Manila and S112 ooW to Busan which ha

viously been in effect
APPLICATION OF SEA LAND SERVICE INC 275

DISCUSSION AND CONCLUSIONS

In addition to the above information in support ofthis application for waiver

the applicants also asserted there are no other special docket applications or

decided or pending formal proceedings involving the same rate situation It is

also asserted that there are no other shipments of other shippers of the same

or similar commodity which a moved via applicants during the period oftime

beginning on the day the bills of lading were issued and ending on the day

before the effective date of the conforming tariffand b moved on the same

voyage of the vessel carrying the shipments decided above

The administrative error on the part of the Pacific Westbound Conference

which resulted in a delay in publication of an existing rate into a new tariff was

corrected

In view of the applicants explanation and information supplied herein and

section 18 b 3 of the Shipping Act 1916 and Rule 92 of the Commission s

Rules of Practice and Procedure 46 C F R 502 92 the Presiding Adminis

trative Law Judgefinds and concludes there wasan errorofan administrative

nature that the requested waiver will not result in discrimination among

shippers that the circumstances herein comport with the special docket re

quirements and that the application should be granted

Upon consideration of the above and for the reasons given the Presiding

Administrative Law Judgefinds and concludes in addition to the findings and

conclusions hereinbefore stated

1 The application was filed timely

2 There was filed with the Commission prior to this application an

effective tariff setting forth the rate on which the waiver would be based

3 There was an error of an administrative nature which resulted in the

necessity for waiver

4 The waiver requested will not result in discrimination as between

shippers

5 The application for waiver should be granted

Wherefore it is ordered that

A The application be and hereby is granted

B Sea Land Service Inc and Pacific Westbound Conference are granted

permission to waive a 10 186 37 portion of aggregate freight charges of

10 468 86 sought to be applied for the benefit of Church World Service the

shipper herein of Wheat Flour viz Durum Flour and Semolina in Bags

Donated for Relief or Charity

C Appropriate noticeof this proceeding shall be published in the appropri

ate tariffs

WASHINGTON D C

September 21 1979

WILLIAM BEASLEY HARRIS

S Administrative Law Judge
FEDERAL MARITIME COMMISSION

DOCKET No 79 55

MATSON NAVIGATION COMPANY PROPOSED BUNKER

SURCHARGE IN THE HAWAII TRADE

REPORT AND ORDER ADOPTING INITIAL DECISIO

This proceeding was instituted by an Order of Investigation and He

the Commission served May 25 1979 to determine the lawfulness of 

bunker surcharge filed by Matson Navigation Company The surcha

came effective May 30 1979 and although scheduled to expire in 120 d

superseded by a 5 90surcharge effectiveAugust 25 1979 which w

the subject of a separate Commission investigation in Docket No 79 

fuel surcharge applied to all of Matson s tariff commoditieswith the e

of bulk sugar and molasses from Hawaii to the continental United 

which move under specially negotiated rates It is this difference in tr

of fuel costs that prompted the Commission to institute this inves

Specifically the Commission put at issue

1 The proper method of allocating Matson s increased fuel costs to th

affected by the proposed bunker surcharge and

2 Whether the proposed bunker surcharge is unjust unreasonable o

wise unlawful in that it will provide Matson with an amount in exce

increased fuel costs

Matson was named Respondent in this proceeding and two of M

shippers Oscar Mayer Co Inc and George A Hormel Co wer

Protestants The Commission s Bureau of Hearing Counsel was also 

party The State of Hawaii intervened Documentary submissions 

ceived by Administrative Law Judge Norman D Kline and an ev

hearing was held on July 23 1979 Further written submissions were 

and made a part of the record and an Initial Decision was issued 

Presiding Officer onSeptember 21 1979 Exceptions to thatdecision w

by Respondent Protestants and Hawaii Replies to the Exceptions w

by Matson and Hearing Counsel

The Initial Decision found the surcharge unreasonable to the exte

ceeded 4 24 In reaching this finding the Presiding Officer reje

methodology utilized by Matson in computing the instant surcha
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 277

adopted that advanced by the Commission s staff as being the most reason

able The Presiding Officer also rejected Protestants split voyage accounting

methodolgies as having been disposed of in prior Commission proceedings as

well as by Commission General Order 11 G O 11 Hawaii s revenue pro

jection methodology wasdismissed as unreliable and its actual experience data

was largely rejected save for the data regarding base fuel costs Finally the

Presiding Officer held that Matson s collection of excess revenues derived from

the levying of the 43 surcharge could be adequately remedied by applying

such excess past recoveries against current fuel costs in any future surcharge

Commission Form FMC 274 2

Hawaii sonly exception to the Initial Decision is procedural and concerns the

modification of initial projections of the carrier with subsequent data of actual

experience It alleges that the Presiding Officer should have based his decision

on the submissions of current operational data compiled as of the date of the

evidentiary hearing and in any event should have relied on the data available

at the time the direct exhibits of all parties were submitted

Oscar Mayer s exception advances three arguments 1 vessel operating

expenses must be allocated to segments of a

voyage ie split voyage account

ing 3

2 interpreting G O 11 to require round trip accounting is contrary to

the requirements of section 16 of the Shipping Act 1916 because an unfair

portion of expenses would be allocated to headhaul cargo and 3 such an

interpretation is also contrary to the public interest in that it allows carriers to

set commodity rates without regard to the costs of service

Matson s exceptions reargue its position that the allocation of fuel costs in

the Hawaii trade is fair and reasonable and should not be disallowed in favor

of the arbitrary allocation methodology advocated by the Commission s staff

Matson contends that it is not seeking an excess recovery of fuel costs and

advises that if the Initial Decision is adopted it will renegotiate the sugar and

molasses carriage contracts to remove the fuel escalation clauses and apply

Domestic Circular Letter 1 79 procedure to these commodities This will

allegedly result in these commodities paying less fuel costs and the balance of

general cargo paying more

Hormel excepts to the finding that the procedure prescribed in Domestic

Circular Letter 1 79 will automatically adjust the overrecovery of fuel costs in

future bunker surcharges It is argued that Matson will attempt to levy the

revenue deficits on general cargo shippers and that the Commission should

order Matson to recover this shortfall from the sugar and molasses shippers

who have heretofore enjoyed a preferential and prejudicial allocation of fuel

I Malson calculated the cost of unanticipated fuel price increases from which it subtracted the amount ofrecovery under the

sugar and molasses fuel escalation clauses and assessed the remainder to general cargo on apercentage ofrevenue collected basis

The Commission s staff on the other hand allocated the increased fuel costs between bulk sugar and molasses and general cargo

on ameasurement ton basis and charged general cargo its share ofthese costs on arevenue oollected basis leaving the remaining

fuel costs to be either recouped by the sugar and molasses fuel escalation clauses orabsorbed by Matson

1

The filing date of this surcharge April 30 1979 preceded the effective date of Domestic Circular Letter 1 79 June 6 1979

However this surcharge was filed pursuant toSpecial Permission Nos 6312and 6313which closely parallel the Circular Letter

Also all subsequent Matson surcharges will be subject to the requirements of the Circular Letter and not the Special Permission

S Alcoa Steamship Co Inc General Increase in Rates in the Atlantic Gul Puerto Rico Trade 9 EM C 220 1966 iscited

in support of this proposition
278 FEDERAL MARITIME COMMISSION

costs resulting from the contractual fuel escalation clauses negotiated 

Matson

In its reply to exceptions Matson contends that 1 Hormels exceptio

beyond the scope of this proceeding 2 Matson is precluded by Commi

regulation from utilizing split voyage accounting and 3 Matson s or

data should be utilized in determining the reasonableness of its surchar

In its reply to exceptions Hearing Counsel takes the position that I 

son s reasonable results argument and its stated intended treatment o

sugar and molasses should the Initial Decision be adopted do not just

unreasonable methodology 2 Hawaii s procedural suggestions are 

workable 3 Hormels refund request is beyond Commission author

though a section 22 complaint would lie and 4 Oscar Mayer s views on 

voyage accounting and the percentage of revenue methodology ofthe Dom

Circular Letter are contrary to the Commission sregulations

DISCUSSION

1 Data Submission

Reliance on the submission of current operational data collected af

investigation is ordered as suggested by Hawaii although theoretically a

ing fails to take into consideration the time limitation imposed by P L9

on proceedings under section 3 of the Intercoastal Shipping Act Ther

allegation of a denial of due process with the procedure followed i

proceeding The procedural methodology in this case was fair reasonab

fully complied with the intent of Congress in enacting PL 95 475 Mor

it follows Commission policy established prior to the implementation o

95 475 See MatsonNavigation Company Rate Increases 18 S R R 

1444 1978 TMT Corp Genera Increase in Rates 18 S R R 1374 

n 4 1978

2 Split Voyage Accounting

The arguments advanced by Protestants in favor of split voyage acco

and the allocation of expenses on that basis are not convincing The Pre

Officer was correct in his interpretations of A coa supra the Commis

G O II and the fundamentaltransportation economic principles applied 

proceeding In an imbalanced trade such as is the case with the Hawaii 

a significant portion ofthe backhaulleg expensesmust be allocated to he

cargo Splitting the voyage expenses would impose transportation co

backhaul cargo directly related only to the headhaul movement Moreov

approach would have an adverse effect on the economic viability of not o

carrier and the backhaul shippers but also on the economy of the S

Hawaii generally

Oscar Mayer s exceptions however do raise albeit indirectly a sign

issue regarding Matson s overall rate structure The pricing system 

Hawaii trade does appear to differentiate in favor of backhaul cargo 
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 279

upon value of service principles at the expense of headhaul cargo See i e

Matson Navigation Company Increased Rates 18 S R R 649 657 1978

However such rate differentiation has been held to be lawful by the Commis

sion based upon traditional transportation economic theory Id But in any

event these considerations are beyond the scope of this proceeding as defined

in the Order of Investigation

3 Fuel Cost Allocation

The Initial Decision correctly finds that the most fair and reasonable method

of allocating increased fuel costs between general cargo subject to a bunker

surcharge and cargo subject to a specific fuel cost escalation clause is on the

basis ofrespective measurement tons carried under the tariffprovisions Under

this methodology the two types of cargo bear their fair share of the fuel costs

as determined by sound cost of service principles

Matson advises however that if the staffs methodology is adopted by the

Commission it will cancel the fuel escalation clauses applicable to bulk sugar

and molasses andapply a surcharge as constructed in Domestic Circular Letter

1 79 This will result in those cargoes bearing an even smaller proportion of the

total fuel costs than was required by the escalation clauses and impose an even

greater burden on general cargo

While the Initial Decision is equitable and reasonable based upon the

primacy of cost of service principles in fuel surcharges unless the surcharge

assessment mechanism contained in Domestic Circular Letter 1 79 is modified

to reflect these principles the intended result ofthis methodology can easily be

frustrated in the future The Domestic Circular Letter waspromulgated on an

emergency basis under crisisconditions Under the circumstances the Commis

sion could not reasonably anticipate all the potential operational difficulties

that might arise with the application ofthe requirements ofthe Circular Letter

It is not surprising therefore that the application of the Circular Letter has

shown a need for some revisions Accordingly while the Initial Decision in this

case will be adopted the Commission will undertake a review of the Domestic

Circular Letter to determine what revisions may be necessary to bring the

surcharge assessment procedures established in that Circular Letterin line with

the principles enunciated in this decision

4 Remedies

The Initial Decision relies completely on the mechanism provided in Domes

tic Circular 1 79 to adjust the excess recovery of fuel costs from com

modities subject to this bunker surcharge This will require Matson to absorb

42 860 in fuel costs by applying these funds to future fuel costs and propor

tionally reducing the level of subsequent surcharges As discussed above the

assessment mechanism for such surcharges will have to be modified to some

extent to ensure the effectuation of this intended result

While Hormels concern that Matson will attempt to evade the effects of this

decision by imposing these costs on general cargo shippers is well founded in
280 FEDERAL MARITIME COMMISSION

light of its exception the Commission can only deal with the specific a

actually presented in this caseand cannot order any further remedies sole

the basis of such vague concerns of anticipated actions

In any event Hormels suggestion that Matson be required to asses

misallocation of fuel costs against the bulk sugar and molasses shippers 

be rejected asbeyond the Commission s

statutory authority Similarly be

the excess fuel cost recovery in this case will be absorbed by Mats

succeeding surcharges these funds could not thereafter be awarded in a s

22 complaint case as suggested by Hearing Counsel

THEREFORE IT IS ORDERED That the Initial DeCision issued i

proceeding is adopted and

IT IS FURTHER ORDERED That the Exceptions to the Initial De

of Matson Navigation Company Oscar Mayer Co Inc George A H

Co and the State of Hawaii are denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secre

CommlHioner Ieelie Kanuk will iauo a

separate opinion
FEDERAL MARITIME COMMISSION

DOCKET No 79 55

MATSON NAVIGATION COMPANY PROPOSED BUNKER

SURCHARGE IN THE HAWAII TRADE

Adopted November 23 1979

Respondent Matson Navigation Company filed a 43 percent fuel surcharge effective May 30

1979 later canceled by a 5 90 percent surcharge on August 25 Matson s original evidence

as adjusted to extract foreign cargo supports 4 39 percent as reasonable Hearing Counsel s

evidence shows 4 32 percent while the State of Hawaii shows 3 87 percent Itis held that

I Hearing Counsel s data with a

slight adjustment arethe most reasonable approximation

of costs being based upon accounting methodologies supported by law and General Order I 1

2 Matson s allocation methodology using special sugar and molasses contracts is not shown

to be reliable or valid

3 The State s position that any evidence showing later data should be introduced at any

time to decide these expedited rate cases would frustrate the purposes ofP L 95 475 Matson

is entitled to rely upon its original evidence subject to reasonable corrections to eliminate

errorsin methodology errors caused by oversight or to incorporate obviously more reliable

evidence

4 The State s later evidence presented as an attachment to its posthearing brief is untested

unexplained relies on different time periods and cannot therefore be found to be reliable in

this proceeding

5 Any errors in forecasting or in data can be compensated by later adjustments according

to the Commission s Form FMC 274

6 Protestants two meat shippers advocate totally different and unsound split voyage ac

counting methodologies fail to appreciate that G O IIcorrects any unfair allocation of costs

among domestic shippers and fail to establish that the percentage per revenue form of

surcharge is unreasonable

7 Hearing Counsel s and the staffs evidence as adjusted to utilize more reliable evidence

of base fuel cost shows that the allowable surcharge was 4 24 percent This later evidence

comports with FMC Form 274 and is admittedly more reliable

David P Anderson and Peter P Wilson for respondent Matson Navigation Company

Wayne Minami lAnce Inouye Barry M Utsumi and R Dennis Chong for intervener State of

Hawaii

John D Kratochvil for protestant Oscar Mayer Co

Harold M Finch for protestant George A Horme Co

John Robert Ewers C Douglass Miller and Charles C Hunter as Hearing Counsel
282 FEDERAL MARITIME COMMISSION

INITIAL DECISION IOF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

This is an investigation begun by the Commission by its Order s

May 25 1979 to determine the lawfulness of a 443 percent bunker surc

which was filed by respondent Matson Navigation Company Matso

April 30 1979 as amendments to several of its tariffs The surcharge be

effective on May 30 1979 and was supposed to expire in 120 days How

the surcharge expired effective August 25 1979 with the filing of an

surcharge in the amount of 5 90 percent which is under investigatio

another proceeding Docket 79 84 Matson Navigation Company Prop

590 Percent Bunker Surcharge Increase in Tariffs FMC F Nos 164 

166 and 167 Order of Investigation August 24 1979 The situation g

rise to this proceeding is described in greater detail as follows

BACKGROUND To THB PROCBEDING

The subject 4 43 bunker surcharge was filed as amendments to fo

Matson s tariffs FMC Nos 164 165 166 and 167 These tariffs name 

modity rates on non containerizable and containerizable cargoes movin

tween Pacific Coast ports and the State of Hawaii and for forest product

related articles from Portland Oregon and Seattle Washington to po

Hawaii Since the 43 percent surcharge cancelled a previous surcharge 

amount of 3 54 percent which had been in effect since May 7 1979 the 

of the new surcharge was to increase rates in the amount of 89 percent 

less 3 54 The significance of this fact is that the Commission is not tre

the subject surcharge as a socalled general rate increase as that te

defined in the amendments to the Intercoastal Shipping Act 1933 enact

P L95 475 and the pertinent Commission regulations General Order 

C F R 1512 and Rule 67 46 C F R IS02 67 Accordingly among other t

the proceeding is conducted under procedures governing non general incr

in rates with different consequences such as the fact that the Comm

cannot order refunds to shippers with interest as now provided in sectio

the 1933 Act ifit finds the surcharge to be unreasonable and excessive an

carrier was not required to file the increase on 6lk1ays notice

Although the surcharge applied to most of Matson s commodity rates 

not apply to two of Matson s tariffs No FMC F No 168 and FMC 

169 These two tariffs name rates for the carriage of raw sugar in bulk 

Hawaii Ports to Crockett California and for molasses ill bulk from Haw

Pacific Coast Ports The reason why the across theboard percentage surc

did not apply to these two tariffs is the fact that they contain escalator c

which increase or decrease rates published therein by a certain amount o

per ton for each percentage increase in fuel cost This particularized trea

ofsugar and molasses under the escalator clauses is the product of negoti

between Matson and sugar and molasses shippers and has created one 

I

This decision will become the decilion ofthe Commi ion In the abloncc of review thereofby the Commiuion Rule 2

of Practice and Procedure 46 CF R 1502227
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 283

major issues in this case as Idiscuss below The 43 percent surcharge

furthermore is the third of five surcharges which Matson has effectuated this

year The first surcharge in the amount of 168 percent became effective on

April 4 1979 the second 3 54 percent became effective on May 7 1979 the

subject surcharge 43 percent became effective on May 30 1979 the fourth

5 90 percent became effective on August 25 1979 This surcharge as well as

the previous 43 percent one is under investigation in Docket No 79 84 as

mentioned Finally a fifth surcharge in the amount of 6 66 percent has been

filed to become effective on October I 1979

The subject surcharge was filed on April 30 1979 with supporting data

provided by Matson The filing triggered two protests which were filed by two

shippers of meat and meat products Oscar Mayer Co Inc and George A

Hormel Co These protestants claimed that the 43 percent surcharge was

unjustified unreasonable and inflationary among other things and should be

ordered cancelled or at least suspended and investigated The filing also pro

voked a reaction from the Commission s staff which took exception to Matson s

methodology in respect to its treatment of sugar and molasses when calculating

the amount ofsurcharge thatshould be assessed shippers ofother commodities

The staff advocated the use of a measurement ton allocation methodology

which it believed to be authorized by the Commission s General Order 11 46

C FR S512 amethodology whichMatson did not employ The need to resolve

this conflict in methodology wasapparently a major factor in persuading the

Commission to begin this formal investigation

As a result of the protests and the methodological dispute between Matson

and the Commission s staff the Commission launched this proceeding on

May 25 1979 stating that it believed a hearing to be necessary in order to

resolve the issues specified in the second ordering paragraph below in order to

determine whether the general rate increase sic is unjust unreasonable or

otherwise unlawful under section 18 a of the Shipping Act 1916 and sections

3 and 4 of the Intercoastal Shipping Act 1933 See Order at 2 The Commis

sion further narrowed the issues by stating that the proceeding was to be

limited to the following areas

1 The proper method of allocating Matson s increased fuel costs to the

tariffs affected by the proposed bunker surcharge and

2 Whether the proposed bunker surcharge is unjust unreasonable or other

wise unlawful in that it will provide Matson with an amount in excess of

its increased fuel costs

As is usually the case these two ultimate issues have generated a number of

subsidiary issues For example the effect of the Commission s Domestic Circu

lar Letter No 1 79 effective June 6 1979 44 Fed Reg 32369 19 SRR 406

i e after the filing of the subject surcharge which establishes certain pro

cedures and reporting forms FMC 274 and 275 has been the subject of

dispute among the parties More particularly there is disagreement as to

whether the provision for overrecovery by a carrier makes the methodology

issue unnecessary to resolve Furthermore there is also disagreement as to the

propriety of using certain means and dates to calculate increased fuel costs

which would reduce the 43 percent surcharge because of the fact that these
I 284 FEDERAL MARITIME COMMISSION

I

means and dates were first enunciated in Domestic Circular Letter 1 79 

Form FMC 274 both of which werenot in effect at the time Matson prep

its calculations and justifications for the surcharge Another dispute inv

the use of later data prepared by the State of Hawaii whose petition 

intervention dated June 12 1979 wasgranted by my order on June 21 

The use of such data would serve to reduce the allowable surcharge 

443 percent to 3 87 percent if accepted However both Matson and he

Counselbelieve that the use oflater dataor methodologies which Matson c

not beexpected to utilize orto anticipate leads to inequities Finally protes

Oscar Mayer and George Hormel raise novel issues of methodology invo

a totally different means of apportioning fuel costs between the westboun

of the Hawaiian trade and the eastbound leg as well as contending tha

different treatment afforded sugar and molasses shippers under the negot

contracts and escalator clauses is unjustly preferential and discrimina

These issues will be described in greater detail below

PROCEDURAL DEVELOPMENTS

Since the investigation is governed by Rule 67 46 C F R 1502 67 u

the provisions relating to non general rate increases the parties wereinstru

to exchange their written cases with underlying workpapers no later tha

days after May 30 1979 the effective date of the subject surcharge 

hearing was to close no later than July 29 60 days after the effective da

the surcharge and my initial decision was ordered to be served 60 

thereafter September 27 1979 Aslight delay ensued as a result of the 

of a motion to dismiss by Matson Matson filed its motion on June 7 19

the belief that this proceeding wouldbecome moot because of its filing of 

surcharge and its willingness to utilize the methodology advocated b

Commission s staff and Hearing Counsel in order to effectuate a settle

When the filing of the new surcharge on June 5 1979 scheduled to be

effective in early July was rejected for technical reasons and Hearing Co

as well as other protestants opposed dismissal Matson withdrew the mo

See Notice of Withdrawal of Motion to Discontinue June 21 1979 Un

revised procedural schedule which was necessitated by the pendency o

motion and possibility of settlement the parties exchanged their cas

June 27 prehearing statements and supplemental exhibits on July 6 

prehearing followed by a hearing occurred on July 23 1979 Further evi

necessary tocomplete the record was furnished by Matson and Hearing C

sel in response to my instructions lInd requests ofthe State of Hawaii by 

August See Admission oflatefiled Exhibits August 8 1979 The parties 

their opening briefs on August 3 and reply briefs on August IS 1979 

Notice of Post Hearing Briefing Schedule July 25 1979

FINDINGS OF FACT

Because the facts in thiscase are so interwoven with the issues and discu

ofapplicable law it is more appropriate to set them forth in the discussio
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 285

resolution of the issues However for a good general summary of critical facts

those proposed by Hearing Counsel in their Opening Brief with some

modifications should be consulted 2However since the issues are somewhat

technical and complex the basic facts can perhaps be better appreciated after

discussion and resolution of the issues

DISCUSSION AND CONCLUSIONS

The Methodology Issue

The two ultimate issues as framed in the Commission s Order are

1 What is the proper methodology to be used in allocating Matson s

increased fuel costs to shippers utilizing the four non sugar and molasses tariffs

cited above and

2 Will the subject surcharge provide Matson with an amount of revenue

in excess of its increased fuel costs and thereby be unjust unreasonable or

otherwise unlawful

These two issues as I have indicated lead to a number of subsidiary issues

dividing the parties Because of the time constraints imposed by the amend

ments to the Intercoastal Act 1933 as effectuated by P L95 475 and the

pertinent regulations it is necessary to decide these complex issues expedi

tiously and it is impossible to consider and explore their many complexities and

nuances at a more leisurely pace In order to expedite the process and get

directly to the essence of these issues Ibelieve the tables set forth below in this

decision will be helpful since they will graphically illustrate the differences

among the parties and facilitate an understanding of the issues

As Matson has stated in its reply brief at page one no party opposes in its

entirety the imposition of the 43 percent surcharge under investigation No

party has disputed the fact that Matson has endured continual increases in

costs of fuel for which its normal rate structure is not designed and that Matson

has consequently been forced to resort to periodic rate adjustments in the form

of surcharges in an effort to recover these uncontrollable costs The objective

of all the parties is not to deny Matson a fairand reasonable means ofrecovery

but to determine what is a fair and reasonable means of recovery and how is

it to be determined On the means to devise a recovery and on the estimated

results of the recovery the parties divide Thus Matson calculates that it

needed 4 39 percent after making adjustments to exclude foreign cargo a

concession from 4 43 which it originally advocated Hearing Counsel and

perhaps George A Hormel and the Commission s staff believe that Matson

only needed a 4 32 percent surcharge The State of Hawaii believes only

3 87 percent wasnecessary Oscar Mayer believes Matson has failed to justify

anything near 43 percent because of its failure to assess eastbound shippers

more equally in relation to westbound shippers

In a nutshell Matson Hearing Counsel and the state utilize the same simple

ultimate formula to determine the permissible level of surcharge Very simply

1 As will be apparent however I do not agree with Hearing Counsel sposition that base unit cost of fuel should be 10 48 as

proposed by Matson
286 FEDERAL MARITIME COMMISSION

they estimate the amount of additional fuel costs which Matson is entitle

recover by a surcharge Then they estimate the revenuewhich Matson sh

derive during that period of time which the surcharge was tobe in effect 

first figure estimated costs divided by the second estimated revenue give

the percentage for the surcharge In calculating these basic figures these t

parties began with Matson s estimate of 2 928 1 S6 as additional fuel cost

the four month period May 30 through September 30 1979 Then eac

the parties reduced that estimated figure by using different methodologies 

applied the reduced figures representing their estimates of fuel costs aga

their own calculations of estimated revenue In large measure Hearing C

sel and Matson agree on basic figures but disagree on one area of alloca

methodology The State departs from both Hearing Counsel and Ma

substantially by using different data as well as its own methodologies 

following table shows the basic figures and will aid in understanding the na

of the dispute

BASIC FIGURES USED To DERIVE THE PARTIES

RECOMMENDED SURCHARGE PERCENTAGES

2 928 IS6 Matson s original estimated additional fuel costs reduce

follows

MaISon Hearing Counsel

2 792 984 2 749 538

Estimated revenue bllBC

63 617 200 63 617 200

Resulting surcharge by dividing reduced rates by revenue bllBC

4 39 4 32

Haw

2 55

66 00

3 87

The key to understanding the nature oftlte disputes among the three pa

whose figures are shown in the above tables is a more detailed explana

showing how they each reduced Matson s originally proffered figures 

mating additional fuel costs and how they changed the estimated reve

actually only the State disputes Matson s estimated revenue figure T

changes are the result of different methodologies used to allocate the po

of fuel costs that should be borne by non sugar and molasses shippers Ma

and the State choose to deduct revenue derived from sugar molasses 

foreign cargo from the original figure and use the remaining net figure a

numerator in their formula 3

Hearing Counsel and the Commission s staf

the measurement ton ratio to deduct that portion ofthe gross figure represe

by the measurementtons ofsugar molasses and foreign cargo The State 
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 287

In addition to the issues regarding the use ofthe contractual recovery for

sugar and molasses rather than the measurement ton ratio advocated by Hear

ing Counsel and the Commission s staff there is a fundamental issue arising

out ofthe fact that the State has introduced data submitted in connection with

later increases and later methods of calculation which were not made manda

tory by the Commission at the time Matson prepared its written justification

for filing on April 30 1979 Both Matson and Hearing Counsel believe that it

would be inequitable to impose upon Matson changes resulting from later data

and methods when Matson had followed staff directions consistently and had

relied upon them in filing not only the subject 43 percent surcharge but two

previous surcharges this year which were not investigated The State however

argues that Iand the Commission can rely upon methodological refinements

and facts which were not available when Matson submitted its justification on

April 30 and that we should consider all relevant and properly noticeable facts

available prior to decision Furthermore the State argues that in calculating

base unit fuel cost we are free to use the methodology enunciated in the

Commission s Domestic Circular Letter 1 79 because it is more reasonable

than Matson s calculation regardless of the date of issuance of that Letter

Of the three calculations of additional fuel costs estimated revenue and

recommended permissible levels of surcharge Ifind that the most reasonable

approximation is that ofHearing Counsel and the Commission s staff Hear

ing Counsels calculations are not only based upon reliable evidence for the

most part but they correct a basic flaw which affects both Matson s and the

State s calculations namely the device of allocating the burden of surcharge

to non sugar and molasses shippers by the use of the escalator clauses in the

special sugar and molasses contracts

The first ultimate issue in this case and indeed perhaps the major reason for

the case is the question whether Matson s and now the State s allocation

methodology is proper rather than that advocated by Hearing Counsel and the

staff For a number of reasons I

find that the staffs methodology is indeed

more proper It is firmly rooted in long standing procedures established by the

Commission s General Order 11 46 C F R 512 It recognizes that the addi

tional fuel costs are joint costs which must be shared by all shippers on the same

vessel in an across theboard fashion It recognizes the relationship between

tons carried and additional costs offuel Itavoids the pitfalls ofutilizing special

types of recovery for particular cargoes which appear to be discriminatory or

preferential and were based upon negotiations which establish no such clear

relationship between fuel costs and rate increase It avoids argument over how

much recovery should be calculated under the sugar and molasses escalator

clauses which the State s calculations create by inflating Matson s

figures for

such recovery Finally it corrects the effect of the use of the special sugar and

molasses contracts by ensuring that all shippers will bear an even share of

additional fuel costs based upon number of tons carried rather than relying

upon the guesses of Matson and the sugar molasses shippers as to how much

additional revenue they should contribute in case of sudden increases in fuel

41 do however make one adjustment to Hearing Counsels

calculations relating to Matson s base unit cost of fuel as I discuss

later
288 FEDERAL MARITIME COMMISSION

costs based upon a formula in special contracts whose derivation is unkno

Ironically although the State s calculations use the Matson methodolog

subtracting additional sugar and molasses revenue under the contracts to de

net additional fuel costs allocated to other shippers even the State in its b

supports Hearing Counsel and the staff s method stating

The State of Hawaii agrees with Hearing Counsel that measurement ton basis for allocating 

costs is preferable to the use of contract fuel escalation provisions The use of the measure

ton as a neutral variable removes an unnecessary and unwarranted challenge to the equita

of the allocation

Hawaii Opening Brief at 16

Moreover evenMatson as well as the State have swung over to the m

surement ton allocation method when removing foreign Marshall Isla

cargo from the calculations to determine the portion of costs to be allocate

domestic shippers

The entire allocation issue between sugar molasses and general cargo s

pers should have been unnecessary asHearing Counsel notein their reply b

It would have been far more simple and proper for all Matson s dom

shippers to bear the additional fuel costs evenly according to the volume of 

they shipped and allocation should only have been necessary to break ou

minuscule portion of cargo which Matson carries to the Marshall Isla

which amounts to only 78 percent of all measurement tons carried by Ma

from June through September 1979 Matson Reply Brief at 3 Howeve

Matson itself acknowledged in its opening brief

Ilfthere were no fuel oil cost escalation provisions in Matson s molasses and sugar fr

agreements and they were subject instead to the samebunker surcharges as all other commo

there would be no allocation issue

It is my opinion that any evidence or methodology presented by any p

which is based upon reason precedent or some other test ofreliability sh

be accepted unless those parties advocating a different system methodolog

evidence show that they are more reasonable and more reliable Mere

present an alternative system does not mean that the first system or evid

should be discarded The alternative must be superior and should be show

be with reasonable certainty

In this instance Matson is presenting an alternative system to that presc

by the Commission s General Order II namely an allocation method b

not upon tonnage ratios but upon an arbitrary division among cargoes b

upon specially negotiated contracts with certain shippers Very simply H

ing Counsel have determined that general cargo carried by Matson in 

Hawaiian trade consists of 93 90 percent of all cargo in measurement 

carried in Matson s combination vessels ie vessels carrying general dom

cargo sugar and molasses and cargo to the Marshall Islands SeeAttachm

1 to Hearing Counsel s Opening Brief Therefore according to Hearing C

sel and staff shippers of general cargo in the Hawaiian trade should 

93 90 percent of the additional fuel costs Matson and curiously the Sta

its calculations but not in its argument on brief as Ihave noted above u

different ratio Thus Matson would allocate to general cargo ship
Less Marshall Islands

Allocated Costs on

MT Basis 22 840

PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 289

95 38 percent of the additional fuel costs not 93 90 percent This percentage is not derived by determining the volume of tons carried for general cargo

shippers as was Hearing Counsels and the staff s Rather the percentage is

derived by determining how much cost is left for general cargo shippers after

deducting estimated increases in revenue to be gained by the sugar and mo

lasses escalator clauses Thus a ratio is derived which is not based on tons but

merely on use of revenue recovery underspecial contracts But even so Matson

and the State are not consistent because they throw in a measurement ton

allocation together with the escalation revenue clause to arrive at their per

centages The following table illustrates graphically how Matson s allocation

percentage differs from Hearing Counsels

DoMESTIC GENERAL CARGO

ALLOCATION PERCENTAGES How DERIVED

Hearing Counsel

Total MTs 3 352 583

Matson

Total fuel costs 2928 156

Less MTs of

sugar molasses

and foreign cargo

178 271

26 316

Less sugar molasses

escalated revnue 112 332

Domestic General

Cargo MTs 3 147 996

3 147 996

3 352 583

93 90

Domestic Cargo

Costs Remaining 2 792 984

2 792 984

2 928 156

Ratio of Domestic

MTs to Total

Ratio of Domestic

Costs of Total Costs

Percentage Percentage 95 38

Notice two significant features from the above table First Matson has

determined what portion of total costs should be allocated to domestic general

cargo shippers merely by deducting revenue recoveries under sugar molasses

contracts and other recoveries from Marshall Islands cargo But the validity of

such a method depends upon the validity of the formula used in the

sugar molasses contracts which as Imention below merely determines that

rates will increase by a certain number of cents per ton when fuel increases by

a certain percentage Hearing Counsels method on the other hand corrects

the special treatment afforded to sugar molasses shippers in effect by putting

everyone on a measurement ton basis In other words the general cargo

shippers are allocated a portion of costs in relation to the volume of mea

surement tons they carry

The second curious defect in the Matson system is that even Matson aban

dons the revenuerecovery under escalation clauses system in respect to the

Marshall Islands cargo Note that the figure which Matson has derived for

such cargo 22 840 is derived by applying the measurement ton ratio to total
290 FEDERAL MARITIME COMMISSION

fuel costs 78 percent times 2 928 156 Matson thus uses Hearing Coun

methodology But in so doing it derives a cost figure not a revenue fig

which it throws in with a revenue figure derived from the escalation clause

the sugar molasses contracts 112 332 and uses both to subtract from t

fuel costs So Matson not only uses Hearing Counsel s methodology itself 

respect to Marshall Islands cargo butmixes it with the sugar molasses reve

recovery under the escalation clauses Since the State also uses the metho

subtracting escalated revenue under the sugar molasses contracts and 

inflates the amount of recovery from 112 332 estimated by Matso

270 863 it also uses a defective methodology although as Ihave said 

brief it argues that the measurement ton ratio is more reasonable and 

Even without further discussion illustrating the weaknesses and pitfall

Matson s and the State s use of the escalation clause revenue recoveries 

above curiosities should alone convince anyone that Matson s and the St

method ofapportioning fuel costs to domestic general cargo shippers is at 

strange and at worst unreasonable unwarranted and dangerously disc

natory However as Imentioned above there are other reasons which de

strate that the Matson methodology ought to be discarded and that 

measurement ton method is far more reasonable

If it is necessary to allocate expenses between one group of shippers 

another then joint expenses should be allocated by the tonnage ratio me

This principle has long been established with the Commission In 1966 it 

emphatically held in A coa Steamship Co Inc Genera Increase in Rat

the At antic GulfPuerto Rico Trade 9 F MC 220 that joint costs shou

allocated on a ton mile ratio basis The carrier in that case had advoca

split leg day basis combined with a revenue basis which method was reje

by the Commission The ton mile basis has been the prevailing metho

allocation before the Commission before and after the A coa case More

it is codified by the Commission s General Order 11 46 C F R S 512 Se

512 7

c 2 i

of that General Order states

Vessel expense shall be allocated where an allocation is necessary to The Trade in the R

Ton Mile Relationship This procedure will be required for all Voyages in the Service Shou

of the elements of Vessel Expense be directly allocable to specific cargo such direct allocatio

be made and explained

General Order II recognizes that some expenses may be assigned dir

as the above quotation demonstrates However if a direct assignment is m

there must be a justification or explanation which shows that the ex

directly relates to the service or revenueproducing activity and is not a 

cost to be shared by all ratepayers Hearing Counsel provides two examp

expenses that canbe directly assigned namely advertising and port costs 

Opening Brief at 8 9 For example if Matson served two trades Hawaiia

Guam its advertising pertaining solely to the Guam trade could be di

assigned to that trade to beborne exclusively by Guam shippers Or if M

carried cargo destined to the Marshall Islands port costs incurred by ca

the Islands could be directly assigned to that cargo As General Orde

A coa supra and Hearing Counsel s staff expert witnesses Mr Walk
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 291

confirm fuel costs on vessels carrying a

variety of cargo namely sugar mo

lasses general Marshall Islands are joint costs which are shared by all of the

cargo moving on the vessel Under such circumstances the proportionate ex

pense for fuel and other vessel operating expenses that should be borne by any

one group of cargo varies according to the volume of cargo carried In Mat

son s case the measurement ton ratio has been utilized with the approval ofthe

staff in lieu of revenue tons since January 7 1976 Ex 5 at 3 H C Opening

Brief at II n 1 Clearly it is settled that there is a correlation between vessel

expense and volume of tonnage handled But Matson wishes to substitute a

different method of direct assignment of fuel cost to its sugar and molasses

cargo even when carried on the same vessels as other types of cargo

There is nothing in the record to persuade methat either in principle or in

actual fact this alternative method is reliable The tonnage ratio method has

survived the test oftime and is accepted by Matson itself elsewherein Matson s

General Order II filings and as noted in the Marshall Islands allocation

Furthermore Matson s alternative method which is based upon negotiated

contractswhich establish that rates will increase by a fixed amount ofcents per

ton when fuel costs increase by a fixed percentage shows no evidence of

correlation between fuel costs and rate increases The record does not explain

how the fixed escalation clause figures were derived nor what principles ofcosts

accounting were followed But we do not need to rely merely upon lack of

explanation or justification for the alternative methodology to determine that

it must be rejected There are positive fallacies attached to it as Hearing

Counsel have noted H C Opening Brief at 9 10

The fixed escalation clauses in the sugar and molasses contracts show no

evidence of considering changes in total volume of cargo carried changes in

vessel speed or alterations in vessel scheduling By merely stating thatrates will

increase by so many cents when fuel increases by so much of a percentage

there is no accounting for increased fuel costs which shippers would have to

bear if volume of cargo diminished but the number of sailings remained the

same Similarly if the vessels increased speed or triangulated vessel routing

thereby consuming more fuel the fixed escalator clauses would not reflect the

increases in fuel costs stemming from these factors But these factors i e

changes in volume of cargo vessel speed and itineraries were considered by

Matson when determining the level of surcharge whichnon sugar and molasses

shippers would be assessed Tr 96 Kane This discussion suggests that there

may bedangers inherent in the different treatment afforded one type ofshipper

sugar and molasses and the other type domestic general cargo The danger

is not merely theoretical i e that the recovery under the fixed clause may be

too low with consequent additional burden thrust upon general cargo shippers

The record quantifies this concept by application of the tonnage allocation

methodology It shows that domestic general cargo shippers are asked to

shoulder an additional 42 860

Matson s main witness Mr Christopher A Kane Manager Pricing op

posed Hearing Counsels and the staffs position which he believed would

tamper with Matson s dual system of recovery under the escalator clauses by

cents per ton and recovery from general cargo shippers by percentage of rates
292 FEDERAL MARITIME COMMISSION

He believes that Matson was bound by its contracts with the sugar 

molasses shippers Tr 94 However no one is telling Matson that it m

breach its contracts for the period during which they were or are in effec

Matson wishes to recover only a limited amount of additional fuel costs f

these sugar molasses shippers as calculated under the contracts tha

Matson s business and indeed this is a contractual obligation But as Hea

Counsel assert and Ibelieve correctly Matson s adherence to its contrac

obligations should not result in extra burdens being thrust upon dome

general cargo shippers Matson and the contract shippers have estimate

some fashion how much more money these shippers should pay in the eve

fuel increases If their estimates are too low as they are shown to be by 

tonnage allocation methodology why burden the other rate payers by cas

the deficit upon them If Matson wishes to guarantee sugar and mola

shippers a fixed escalation limitthere may be no harm discriminatory tho

the practice may be sprovided that general cargo shippers do not pick up 

tab in case of low recovery Itherefore agree with Hearing Counsel and 

staff that the additional 42 860 which general cargo shippers were b

called upon to pay should be absorbed by Matson This is the price w

Matson must pay for deciding to rely upon a specially negotiated arrangem

with particular types ofshippers 6

Ifit tires ofabsorbing costs because of w

estimatesor formulas in its contracts Matson can renegotiate the contracts 

place sugar and molasses shippers under the same type of recovery as all o

domestic general cargo shippers Mr Kane testified that these contracts 

periodically renegotiated If so all shippers could pay on a percentage 

charge basis rather than some paying by percentage and others by cents 

ton as under Matson s present system thus removing the apparent disc

natory treatment among different shippers

I do not reach the basic qucation whether Matson s system of ncaotiating escalator clauaea in special susar and m

contracts is an unreasonable practice per Ie PcrhaJIIlt is only unwise rather than illegal althouah the ronnula rea

negotiation seemsunrelated to somany factorslnftucnQina costs of fuel Ifthe other shippers are not called upon to pick up

resulting from these negotiations the only harm would be to Matlon which would have to abaorb the deficits itself How

I discuss in the body of the decision Matson canalways renc otlato the contracts and place lugar molauoBshippers on t

percentage surcharse basil by using form FMC 274 10 as to avoid fuluro problems of underrccovery orovcrrccovery

Theprice is really arather small one to pay IfMatson absorbs541860 ralherlhan palCl8il on lo tho domeslic sener

shippcrs ilabsorbsthis amount oul of an estimaled 563 617 200 revenue forlhe four monlh perlod June through Septemb

In other words the absorption isonly aeven hundrcdltll of one percent orrevenue 07 perccnl 542 860 divided by 563 6

7 Matson has auempted to justify illrecovery under lhe contractual claUIeI by conlendina lhat the actual recovery on 

per ton basis translalC8 to a percenlage increase of 7 54 and 5 67 for sUlar and molU1C8 respcclively and that the s

molasses rates arc FIO free in and out respectively FIO rates mean that the hlppen pay for loadins and 

stevedoring costs and the carrier pays for vessel cosll andather COill associated with linehaul transportation lhan eargo h

Matson claims that FIO rates arc moreassociated with fuel COlts 0

thaI the hiaher percentap incl CBlClls understand

in fact shows that susar and molasses shippers may be payina more than aproper share inother worda they may be 

degree subsidizing scneral cargo Exhibit I at 5 6 Kane Finally Matson claims that Hearlnl CounlCll smethodoJoa

require Matson to convert its bunker surcharge aS8C88ment to amcaaurcmontlon bait None ofthese oontentionsjustifies 

use of ill special contracts 10 as to burden general cargo shippen with an additional 42 860 The fact that recovery u

special contracllcan be converted to a

7 57 and 5 67 percentale ofrates rather than 4 43 forpneralcarJO shippers 

necessarily mean that susar and molasses shlppcrs are payin more than they should Even Matson arau that they a

may merely mean that the FIOsUlar and molalSCS rates like FIOrate8 generally are lowerthan roplar rates becaUIlOthe 

pay cargo handling Indeed they appear to be only 9 11 and 406 per ton accordina to Exhibit I Exhibit 2 T

additional recovery isdivided by asmaller base rate Morc importantly however the measurement ton methodology which

uses everywhere cillO in Its 00 II filings shOWl that sugar and RJo1asaes arc underpaying by 41860 Finally as Hca rilll 

correctly state H C Openin Brief at 13 use ofthe G O II mcthodolCJSY does not require Malson to convert to a mea

ton basis in assessins sugar and molaSSCll shippers It only determines how much pneral cargo shippers should be require

on a pcrcentage of ratcs surcharge basil In other words if Matson insists onoonunuin to useescalation claU8C8 in sp

cialsu

and molasses contracts the 0 0 II methodology will ensure that Seneral eargo shippers arc assesacd only theirproper 

will not otherwise affect the special contracts
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 293

The Issue of the Proper Level of Surcharge

The preceding discussion involved a dispute primarily between Matson and

Hearing Counsel and the Commission s staff on allocation methodology To

the extent that the State relied upon Matson s escalation clause recovery

method the State would therefore also be in error The remaining discussion

centers upon the question as to whether the subject 43 percent surcharge was

unreasonable because it was excessive and overrecovered costs Because of

Matson s and the State s departure from use of the G O 11 allocation meth

odology this question has to some extent already been answered As shown in

the previous tables after correction of Matson s data favoring the 43 percent

surcharge by application ofG O 11 methodology as adjusted by removal of

Marshall Islands cargo the proper level of surcharge would be432 percent In

virtually every other respect Matson and Hearing Counsel agree on figures and

on the general methods now codified in FMC 274 by which percentage of

surcharges are to be determined However the State disagrees with both

Matson and Hearing Counsel in several significant ways and believes that the

proper level of surcharge should only be 3 87 percent I have examined the

State s contentions and find them to be less persuasive than those of Matson

and Hearing Counsel with one exception

The State s Position Analyzed

As seen from the tables previously set forth in this decision the State departs

from Matson s supporting data to a much larger extent than did Hearing

Counsel Thus the state reduced the amount ofrecoverable additional fuel cost

from 2 928 156 as originally proffered by Matson to only 2 557 493 almost

200 000 lower than Hearing Counsels and the staffs final calculation of

allowable recovery Furthermore although Matson and Hearing Cousel agree

on the estimated four months revenue base against which the above 2 million

cost is to be applied to derive a reasonable percentage of surcharge the State

contends that the revenue base is significantly larger specifically 66 000000

rather than 63 617 200 the figure which both Matson and Hearing Counsel

support Therefore contends the State the allowable surcharge should have

been only 3 87 percent not 43 percent or 432 percent 2 557 493 divided

by 66 00000 The State calculates these figures by using its own meth

odologies If as I

find for the most part these methodologies have not been

shown to be more reliable than Hearing Counsels then the State s ultimate

figures cannot be accepted Inow examine these methodologies

The State reduces the figure for allowable additional cost from that proffered

by Matson by employing Matson s system of deducting recovery as calculated

under the escalation clauses in the sugar and molasses contracts modifying

Matson s

figures showing unit increases in fuel cost and adjusting for Marshall

Islands cargo I have already explained why the method of deducting the

recovery under the contracts is unreliable and need not repeat my discussion

Inote however that the State has inflated the amount of recoveryunder those

contracts from 112 332 which Matson shows to 270 863 This alone iIIus
294 FEDERAL MARITIME COMMISSION

I

trates one of the problems in utilizing the Matson method namely the ad

tional arguments which it creates because one has to estimate the amoun

recovery under these contracts before arriving at allowable recovery alloca

to non sugar and molasses shippers Since under G O II methodology 

amount of recovery under sugar and molasses escalation clauses is irrelev

the dispute between the State and Matson is likewise irrelevant s Howev

even if relevant as Matson contends the State may have inflated the orig

figure by employing figures supplied by Matson for a later period and a la

surcharge Matson Reply Brief at 10 11 And as Hearing Counsel note 

State rilay have included revenue from the Matson vessel Kopaa incorrec

H C Reply Brief at 7 Again this illustrates the problem with Matson s 

the State s methodology since there isadditional uncertainty or dispute over

amount of recovery under the special contracts which must be resolved if 

methodology is to be used

The State also reduces the amount of additional fuel recovery by chang

Matson s figures showing the additional unit cost of fuel per barrel of 56 04 

barrel as shown by Matson and accepted by Hearing Counsel and the C

mission s staff to only 488 pet barrel The State does this by raising the b

unit cost from 510 48 per barrel to 1059 and lowering the present unit 

from 6 52 to 516 47 Italso changes estimated fuel consumption by remo

Marshall Islands cargo by means of the measurement ton allocation m

odology The following table shows how the State restated Matson s data

fuEL SURCHARGE JUSTIfiCATION AS RESTATED BY THE STATE

Line No

I

eserpl on

2

Malson

3

Reslaled

4

1 Baso Unit Colt of Fuel 10 48 10 

2 PresontUnit Colt Fuel 16 52 16 

3 Fuel Colt Differential 6 04 5 

4 Estimated Consumption

for Next Four Months 484 794 481 0

5 Recoverabl Fuel Colts 2 928 156 2 828 3

6 Recovery from Suaar and

Mola88C8 Contract on

Combination Vessels 112 332 270 8

7 Unrecovered Fuel Costs 2 815 824 2 557 4

8 Revenue Base for Calcu

latina and Surcharac 63 617 200 66 0000

9 Surcharae PerccntaJC 4 43 3 87

Hawaii Service allocation 99 22 of 484 794 bark fuel con umption ref MallOlllataftlcd eMlbl Exhibit 

Ihave no problem with the State s adjustment for removal of fuel 

allocable to Marshall Islands cargo This wasdone by the State and indee

Hearing Counsel and Matson by applying the measurement ton ratio for 

foreign cargo only 78 percent as noted previously As Iexplain later I

I

Theonly val oin determinina recovery undor the IIICIladon clau11 to determine how much afaD underreoovcry lOIultl 

how much additional OOIt wUl be Q8lIt onto pneral carao thlppors Thia amount iI 541860 Illbawn byomparina recove

the claUlCll wilh tho meuUI enlClOl ton calculation
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 295

little problem accepting the State s figure for base unit cost of fuel 10 59 per

barrel which relies upon later and more reliable evidence accords with the

Commission s subsequent formula established by Domestic Letter 1 79 and

FMC 274 and is opposed by Matson and Hearing Counsel mainly upon

equitable grounds not because it is unreliable However the State s re

statement of present fuel cost 1647 per barrel Ihave trouble accepting

The State reduces the present or effective cost of fuel by five cents from

16 52 to 1647 per barrel because it believes that Matson s and Hearing

Counsels

figure reflects only a quoted cost on May 16 1979 and previous

study shows that quoted costs run about five cents higher than actual costs The

problem with this approach is that the present or effective cost of 16 52

does not in reality appear to be a figure merely quoted on that one day and

secondly the study upon which the State relies which the State believes to

show that the present quoted rates are higher than actual costs is a study going

back to December and January of 1978 1979

Matson s original filing on April 30 1979 with the staff also shows a figure

ofI 652 per barrel for present unit cost offuel The supporting papers show

however that this figure wasa weighted average cost between San Francisco

and Los Angeles and reflected a series of continual increases in fuel and

barging costs occurring between December 1978 and May 1979 Ex I notes

to Exhibit A Even the State s witness Mr Simat states that this cost is

reasonable ifadjusted for the small differences noted between quoted rates and

the recorded costs of purchasing Ex 4 at 8 Then Mr Simat reduces the

present unit cost by five cents d These small differences noted are shown

in Hawaii s Exhibit No 4 attached to Exhibit 4 This exhibit does show that

on four days in late December and early January of 1979 December 27 28

29 January 2 quoted effective prices were higher than what Matson

apparently actually paid at that time Ido not know however whether this

situation continued to prevail beyond early January 1979 Furthermore even

during the four dates shown on the exhibit the amount by which the quoted

socalled effective price exceeded apparent actual price varied widely from

as low as lcent on December 29 1978 to 7 3 cents on December 28 1979

Icannot therefore find that the State s evidence based on those four days is so

reliable and indicative of a consistent trend that I can accept Mr Simats

decision to reduce Matson s and Hearing Counsels current figure of

1652 per barrel by five cents and reject that figure which Hearing Counsel

and the Commission s staff had accepted apparently on the basis ofthe original

submission on April 30 1979 with its supporting data Inote furthermore that

since we are dealing with an ongoing series of surcharges the subject sur

charge which has already been superseded being only the third of a series of

five this year any error favoring Matson at this time is subject to correction

because ofline 7 ofFMC 274 In other words if it does in fact develop that

Matson and Hearing Counsel were wrong in estimating present unit cost of

fuel at 16 52 per barrel later submissions will show what the actual cost was

and if 1652 was too high an estimate and Matson consequently over

recovered a subsequent adjustment had to be made when filing the later
296 FEDERAL MARITIME COMMISSION

surcharges with a reducing effect on later surcharges While not a per

solution to the problem if it is a problem line 7 is a partial remedy

As Idiscuss below however the base unitcost which the State changed f

1648 to 10 59 per barrel is a change which Ifind acceptable because 

clearly more reliable This will result in a slight adjustment toHearing Co

sels exhibits which I otherwise find to be reasonable and reliable w

adjustment Iwill discuss later

The final significant change which the State would make to Matson s 

Hearing Counselsexhibits relates to the revenue base TheState estimates 

Matson would derive 66 000 000 in revenue during the four month pe

June through September 1979 whereas Matson and Hearing Counsel estim

63 617 200 If the State s estimate ismore reliable obviously Matson s us

a 43 percent surcharge would result in significant overrecovery since Mat

stood to derive approximately 2 4 million in extra revenue against which 

surcharge could be applied

The State originally inftated Matson s estimated revenue to 67 155 

This wasbased upon Matson s original data showing an estimated increas

fuel consumption of 10 68 percent over the equivalent period in 1978 From 

the State assumed that additional revenue wouldftow Ex 4 at 10 Tr 

There is no persuasive evidence in the record which would establish 

revenue must necessarily increase if fuelconsumption does Orif there is s

correlation there is no showing as to how much revenue should increas

proportion to an increase in fuelconsumption As Hearing Counsel note 

Opening Brief at 19 the theory assumes no change in efficiency However 

number of factors could cause an increase in fuel consumption wit

affecting revenue to a corresponding degree For example additional voy

could be scheduled vessel itineraries or speed could be altered but with 

additional cargo Ifso revenues might rise slightly but not in proportio

increases in fuel consumption Mr Simat stheory of revenue projection b

upon fuel consumption may have merit but it is too incompletely develop

recommend it in this proceeding More importantly however it is irrele

because Matson revised its estimated fuel consumption to reveal that 

number of barrels to be consumed would be virtually identical 35 

barrels to those consumed during the equivalent period in 1978 Ex 2 

hibit 3 Therefore the State stopped applying this theory and accepted 

son s estimated number of barrels consumed 484 794 as adjusted to rem

Marshall Islands cargo although expressing some doubt about the figu

being not consonant with other indicationsofan increasing volume of cap

and service Hawaii Opening Brief at 15 Nevertheless the State revise

original revenue projection downward to 66 million

Having discontinued use of the fuel consumptiontheory to project fu

revenue the State relies upon other factors in revising Matson s and He

Counsels revenue base For example it contends that Matson increase

rates three times to aggregate 6 75 percent over the equivalent 1978 

month period Then it contends that Matson s actual revenues are us
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 297

shown to be higher than Matson s forecasts judging from later Matson sub

missions in other cases The State does not believe that these factors hllVe been

adequately considered by Matson

As in the case of the allocation theory issue discussed earlier if a party

suggests that one theory or fact is less reliable than another then such party

ought to show that the second theory or factis superior or more reliable before

expecting the first one to be rejected assuming the first theory or fact is based

upon reason precedent or reliable evidence In this case the bases for Matson s

and Hearing Counsels estimate of 63 617 000 were explained by witnesses

Miggins for Matson and Walker for Hearing Counsel See Exhibit 9 Miggins

exhibit 10 Walker Itis true that these exhibits came into the record after the

hearing and at my request See Order to Supplement the Reocrd July 27

1979 This situation may have occurred because the Commission s staff took no

issue with Matson on its revenue projection and therefore made no request on

Matson to submit formal explanations in testimonial form for the record and

for cross examination However the State does challenge Matson s projection

and consequently Iinstructed both Matson and Hearing Counsel to fill in the

record so that it would show the bases for those projections Ideally this

evidence should have been presented before the close of the hearing so that

cross examination could have been utilized However the press of time under

the newly mandated rapid procedures makes it difficult to develop every facet

ofthe record as thoroughly as wasthe custom under the previous more leisurely

procedures In any event no party objected to the admission of the post hearing

exhibits of Messrs Miggins and Walker and they have provided the necessary

explanations

Without going into the details which are contained in exhibit 9 Matson s

method is essentially a forecast of cargo volume based largely upon customer

contacts conducted by its regional sales offices See Ex 10 Preliminary fore

casts from these offices are transmitted to Matson s main offices in San Fran

cisco where they are combined to arrive at projected cargo volume Matson

applies historic revenue figures for different classes of cargo and multiplies

those figures by the forecasted cargo volume for each class of cargo The

regional sales managers moreover in submitting their volume forecasts to San

Francisco not only make customer contacts but evaluate the competitive situ

ation analyze economic trends and review past customer performances and

historical trends Ex 9 In addition to considering volume forecasts applied to

historic revenue figures for classes of cargo Matson also adjusts revenue

forecasts to reflect relevant rate increases

This method of forecasting revenue has been used by atsOli slnceapprox

imately 1973 The method has been used in several Commission proceedings

namely Docket Nos 73 22 75 57 and 76 43 and has been relied upon by

the Commission in its decisions in those cases The method has furthermore

been used in forecasting numerous rate increases filed in 1977 1978 and 1979

which werenot formally investigated by the Commission Matson also uses this

method for internal planning purposes Mr Walker of the Commission s staff

states that hehas reviewed numerous rate increases filedby Matson which have

used this method of forecasting and has found that the projected revenue
298 FEDERAL MARlTIME COMMISSION

figures submitted by Matson have been reasonably accurate Ex 10 at 2 

Hearing Counsel point out furthermore in Docket No 76 43 Matson N

gation Company Proposed Rate Increasesin the United States Pa

Coast Hawaii Domestic Offshore Trade 18 SRR 701 1918 the pres

judge found that Matson s revenue forecast for Constructive Y

1976 was very close to the mark and in fact noted that Matson s fore

exceed ed the actual 1916 revenue of 141 129 OOO by 266 000 am

gin of error of approximately 2 percent 18 SRR at 713 14 quote

Hearing Counsels Opening Brief at 18

Matson s revenue forecast of 63 617 200 amounts to an increase 

revenue during the equivalent four month period of 1978 which 

56 838 000 in the amount of 1193 percent Matson contends that conside

two rate increases of 2 5 and 2 9 percent occurring in August 26 1978 

February 1979 respectively this leaves room for cargo growth in exces

6 percent Matson Opening Brief at 12 Matson argues that there is no 

dentiary basis for accepting an alternative figure to that supported both 

Matson and Hearing Counsel Matson Reply Brief at 12 Hearing Counsel 

the staff also accept Matson s

figures and believe that the State is improp

using later data which Matson wasnot required toutilize when submittin

justification RC Opening Brief at 16 18 H C Reply Brief at 5 7

The State questions the reliability of Matson s forecast It believes 

certain factors such as the historic revenue factor used by Matson are 

articulated or fully explained and states that the State s own examinatio

Matson s forecasts compared to actual revenue show that the forecasts 

been too low State Opening Brief at 13 14 Also the State believes that 

increases alone will account for 6 75 percent increase in revenue while ano

8 75 percent will result from increase in traffic volume State Opening Bri

14 15 These assertions and contentions are contested by both Hearing Co

sel and the State and what emerges is some confusion as to what was fact

into the revenue forecasts or what should have been factored into the reve

forecasts by all parties However although Matson s and Hearing Coun

explanation for the 63 617 200 forecast are not perfect I am not persua

that the method of forecasting employed by Matson and accepted so m

times by the Commission and its staff must now be modified by more reli

evidence proffered by the State

The State s criticisms of Matson s use of historic revenue factors seem

have some appeal However it is rather late to raise these questions on b

rather than at the hearing or at the time the State examined Matson s 

missions Or even after the hearing the State could have raisedthe point so 

perhaps further questions could have been asked None of this was d

Moreover since Matson has consistently used this method in so many 

ceedings in which the State has participated and the State has had so m

opportunities to explore and test Matson s method of forecasting it is har

believe that the State is so puzzled as to how Matson s

forecasting met

works or how the historical revenue figure is derived The State after all is 

a novice in Matson rate cases and has been exposed to Matson rate increa

and its methods of forecasting revenue for many years in many cases
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 299

The State furthermore injects into its arguments data from later Matson

submissions and uses percentage figures for the first time in its brief without

fully explaining what they are where they come from and why they should be

relied upon In effect the State claims that Matson underestimates revenue

because Matson s submissions relating to other rate increases shows that Mat

son s actual revenue exceeded its forecasts But the evidence which the State

cites is an attachment to its brief Attachment 2 and Hearing Counsel

contend that the State may have improperly used data affected by other rate

changes in deriving actual and constructed revenue But the State com

pares the two revenue figures For example in Attachment 2 to the State s

Brief actual revenue is compiled from submissions in connection with a

Matson filing of June I 1979 relating to a later bunker surcharge and with a

filing submitted in connection with a general rate increase on August 15

1979 This illustrates a point made by Hearing Counsel that to a large extent

because of the extremely tight time schedule mandated by the new law and

Commission regulations Rule 67 it is not feasible to keep inserting into the

record later data and that in large measure a carrier is entitled to rely upon

its case as originally submitted in this case on April 30 1979 provided that

obvious errors in methodology or obviously unreliable data can be corrected

and corrected in timely fashion Otherwise the procedural requirements cannot

be met See H C Opening Brief at 16 17 and citations to the legislative

history ofP L 45 475

In this instance Icannot determine whether the State has used irrelevant or

distorted data in its figures purportedly showing actual or constructed

revenue in its Attachment 2 It is suggested by Hearing Counsel that they

may have Attachment 2 was compiled by the State after the hearing and

placed in its brief leaving the parties not time to analyze and test itThe data

does indeed seem to relate to other periods of time and to rate changes other

than the surcharge under investigation in this proceeding Hearing Counsel are

also troubled and apparently puzzled by this Attachment 2 They suggest

that some of the data may improperly include the effects of later rate changes

which should be filtered out to remove their effects in accordance with the

decision in Docket No 76 43 Matson Navigation Co etc 18 SRR 707

10 affirmed 18 SRR 1351 1978 Itappears that Hearing Counsel cannot

remove the mysteries from this Attachment 2 and bereft of proper expla

nation and analysis neither can IThere simply are too many unanswered

questions about the data comparison of different time periods method of

compilation how figures were interpolated as the document mentions in one

instance etc for meto accept its substantially different conclusions from those

put forth by witnesses Miggins and Walker regarding the reliability of Mat

son s revenue forecasts

I cannot therefore find that the State s contention that Matson s revenue

forecasts are too low compared to actual results is based upon reliable relevant

evidence which has been submitted in timely fashion so that opportunity for

testing has been afforded It would appear that the proper place to test the

reliability of the later data would be a proceeding for which the data were
300 FEDERAL MARITIME COMMISSION

submitted given the strict time constraints imposed by P L 95 475 Rule 

and the Commission s Order 9

In the last analysis the State arrives at its 66 million revenueprojection 

applying a factor of 3 7 percent to Matson s and Hearing Counsels forecas

63 617 200 Hawaii Opening Brief at 15 16 Butthis factor comes out o

previously discussed Attachment 2 which is of doubtful relevance and 

liability for the reasons noted Furthermore the 3 7 percent figure appea

stem from a comparison of one threemonth period March 31 1979 thro

August 31 1979 See Attachment 2 The underlying revenue data w

purportedly are actual as Ihave mentioned are derived from later Ma

submissions in connection with subsequent rate changes which mayor may 

be actual which relate to different time periods and have been thrown 

this caseat a late hour on brief Iamtotally without benefit ofany examina

of this data or Attachment 2 and have no way of determining its reliab

at this stage of the proceeding Icannot therefore accept it in lieu of Mats

and Hearing Counsels revenue forecasts

Ido not mean to say that Matson s and Hearing Counsel s forecasts 

perfect or without defects In rate cases exactitude is impossible anyway 

only a reasonable approximation is expected See e g Sea Land Ser

Inc Increases in Rates in the US Pacific Coast Puerto Rico Tr

15 F MC 4 10 1971 TMT Corp Rates 19 SRR 177 187 188 

1979 F MC May 16 1979 and cases cited therein at 187 188 For exam

the State claims that Matson and Hearing Counsel have not considered 

fact that three general rate increases occurred in August 1978 February 1

and July 15 1979 aggregating 6 75 percent on a weighted average 

making allowance for the time each rate level was effective during 

through September 1978 and June through September 1979 the rele

projection period for the subjectsurcharge The record shows that Matso

include at least two of these rate increases in its projection but prob

omitted the July 15 1979 increase as even Hearing Counsel concede Tr 

H C Opening Brief at 18 Hearing Counsels witness Mr Walker fur

more explained the Matson forecasting method by asserting that the effe

relevant rate increases is taken into account Ex 10 at 1

Ido not understand why the effects ofthe July 15 1979 rate increase w

occurred during the middle of the period for which the subject surcharge 

supposed to be in effect could not have been used to make an approp

adjustment to the revenue forecast for the period Hearing Counsel s answ

that Matson is entitled to rely upon its origjnal submissions in order tha

expedited procedures under the new law can work H C Opening Briefa

I am not certain when Matson knew that it would be filing a rate inc

effective July 15 1979 so that it could insert the effects of such increase 

91 allO note that P L 95415 now mluiRlS the Commiaaion to apecU yissues more parrowl when laURelling iovtlidp

88 to enlure the timely completion of manapableC8IllI Injectionordata from latercases at anytimeby 81 intervenor wh

to particular isauea such u

revenue projection not apeculOClln the Commilsion Order may be incomPatible with the 

pouibly even the loltor of the new Iaw l donothowever moan 10 imply that pardea are Comer precludocl from raising 

issUCI which arise out of another party s

evidentiary submission 1 only mean that aonte rule orI088On must befollowed 

rapid rate C8I08 become haotic and amorphous
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 301

its original justification submitted on April 30 1979 or in later exhibits

presented in this case However if Matson should have accounted for this

increase no matter how minor the effect on its 63 million revenue projection

it would appear that it should also be allowed to account for increases in fuel

costs which also occurred during the period certainly after May 16 1979 the

last date used to determine current fuel costs It is no secret that fuel costs

continue to escalate far more rapidly than once every four months judging

from the five surcharges already filed by Matson this year not to mention the

two or three surcharges that were rejected for technical reasons after this case

began

Perhaps Hearing Counsels position that constant tinkering with originally

submitted data makes the new rate procedures impossible to follow is valid

Also perhaps an answer to the problem has already been furnished by the

Commission when it adopted Domestic Letter 1 79 and Form FMC 274 As

noted before line 7 of that form serves in large measure to correct erroneous

estimates of costs or revenues by requiring a subsequent accounting for over

recovery in later surcharge submissions Hearing Counsel suggest this also

applies to the dispute over the revenue projections H C Reply Brief at 7

Again although the line 7 solution is not perfect it is a substantial safeguard

and given the practical difficulties of litigating the merits of constantly

changing surcharges under strict time constraints perhaps there is no better

solution 10

To conclude therefore Ifind that Icannot reject or revise the Matson and

Hearing Counsel revenue forecasts which are based upon methodologies pre

viously used and accepted by the Commission and its staff and found to have

been reasonably accurate and that the alternative forecast presented by the

State is based upon later data prepared for a later proceeding which dataIam

unable to find to be reliable and relevant in this proceeding

Necessary Adjustments to Hearing Counsels Exhibit

As Ihave indicated previously Ifind that Hearing Counsels and the staffs

exhibits calculating the estimated recoverable fuel costs and estimated revenue

to be the most reliable and the most reasonable approximation of Matson s

costs and revenue justifying Matson s bunker surcharge among the various

exhibits submitted In only one respect however do Idiffer with Hearing

Counsel and that is in regard to the staffs willingness to accept Matson s figure

of 1048 as the base unit cost of fuel from which Matson and the staff

estimated a unit increase of 6 04 per barrel This figure when multiplied by

estimated number ofbarrels 484794 to be consumed during the four month

10The State also asserts that Matson understated its projections for increases in traffic volume The State claims that traffic

volume should increase by 8 75 percent after revisions made by the State ratherthan the 7 percent which it claims tbat Matson

forecasts orthe 4 85 percent which it claims is implicit in the Matson revenueprojection Hawaii Opening Brief at 14 15 But

this analysis stems from Attachment 2 data which the State claims to show that current rates of trafficgrowth are running at

a

rate of about 10 percent annually d However a

look at Attachment 2 shows that the 10 percent figure derives from a

fivemonth period March 31 1979 through August 31 1979 and comesfrom the same data submitted by Matson in connection

with later surcharges and rate changes which I have discussed above Again Attachment 2 is untested unexamined by the

parties relates to a different proceeding and 1 am unable to verify its reliability
302 FEDERAL MARITIME COMMISSION

period June through September 1979 leads ultimately to overall estim

recoverable fuel costs The State has argued that the amount of recove

fuel has been overstated for several reasons One reason is as the State as

that the base unit cost is too low as seen by superior evidence submitte

Matson itself under the format approved by the Commission in Dom

Letter 1 79 and Form FMC 274 Matson has submitted its 1048 per b

figure which the staff is willing to accept as the weihted average fuel 

for December I 1978 See Ex I Exhibit A and Notesattached The S

expert witness Mr Simat states that tIhe base period used in Mats

April 28 justification is confined to fuel purchased only on December I 

without disclosing the location at which the fuel was purchased or the qua

purchased The base cost ofSI 048 per barrel is therefore less reliableand 

valid than the restated cost of S10 59 taken from Matson s laterjustificat

Ex 4 at 8

Matson s later base cost figures were submitted in connection with a 

surcharge under the format required by Form FMC 274 ie the averag

units purchased between December 25 1978 and January 5 1979 The S

is not crazyabout this methodology either because it is not sure that it cap

a

representative average base unit cost from the later information submitte

Matson However as the State says tIhe prescribed methdology isobvio

superior to Matson s reliance on the quoted fuel oil cost per unit for one 

in time and an arbitrary weighting of the Los Angeles and Oakland 

prices Hawaii Opening Brief at 9 10

Neither Matson nor Hearing Counsel dispute the fact that the revised 

figure SIO 59 is more reliable Indeed they could hardly fight it sin

conforms to the Commission s own format and comes from Matson s own 

Rather both parties urge meto reject the revised base figure and stick to 

original figure of SIO 48 per barrel for December I 1978 purchases for 

table reasons Matson argues that it would be a gross inequity to ret

tively apply the base period set forth in Form FMC 274 to Matson s detrim

when Matson acted in reliance on prevailing staff practice at the time it 

mitpted its justification on April 30 1979 Matson cites Mediterranean P

Investigation 9 FMC 264 304 1966 in support ofits argument Ma

also explains that the 1048 figure was derived from weighing purchase

San Francisco and Los Angeles during the month of December 1978 citin

Exhibit 8 C Matson Reply Brief at 8

Hearing Counsel agree with Matson and state that equitable considera

argue for the use of Matson s figure because at the time of Matson s submis

ofjustification the staff had believed that the December I 1978 unit 

figure was the better figure H C Reply Brief at 5 However Hearing Cou

admit that from the present perspective the State s base unit cost ma

preferable Id

Ican well understand these equitable arguments Certainly Hearing Co

sel speaking for the staff and maybe personally Ido not know feels tha

honorable thing to do is to accept Matson s original figures which were 

nished to the staff in the manner which the staff itself had recommended 

now that we know that a betterfigure is available and unlike other data w
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 303

the State urges that I accept relates to an actual past period not a projected

period and conforms to the Commission s own Form FMC 274 is it entirely

fair and reasonable for the Commission to ignore the superior figures Ifthat

is done the rate payers in principle are bearing some additional cost burden

so that the staff and Hearing Counsel can do what they believe to be honorable

and they are asking the Commission to be bound as well

Iam aware ofthe equitable doctrines of law and thecases which frown upon

retroactive changes in policy which adversely affect parties who acted in re

liance on previous policy Such is Mediterranean Pools Investigation supra In

that case the Commission refused to penalize parties who had relied upon

previous precedent and in that one case were willing to grant retroactive

approval to a section 15 agreement 9 F MC at 304 The Commission likened

the situation to that involved inN LRB v Guy F Atkinson Co 195 F 2d 141

9th Cir 1952 wherein the court refused to allow a company to be punished

when the N LR B suddenly changed its policy regarding jurisdiction over the

company Id There are of course other cases in which some type of change

in existing law coupled with an attempt to apply it retroactively has disturbed

a court s conscience and sense of equity Cf eg Arizona Grocery v Atchison

Ry 284 U S 370 389 1932 Wainwright v National Dairy Products Corp

304 F Supp 567 573 N D Ga 1969 However there are times when courts

have permitted policy or rule changes to apply retroactively especially if the

new rule or policy appears to be reasonable See e g

General Tel Co ofthe

S w v us 449 F 2d 846 863 5th Cir 1971 People of the State of

California v Simon 504 F 2d 430 438 439 TECA 1974 South Terminal

Corporation v E P A 504 F 2d 646 678 1st Cir 1974 Davis Administra

tive Law of the Seventies 5 08

At one time it was believed that the Government could never be estopped

Le that regardless of staff or agency advice to a person thatperson could later

be found to be in violation of law if he followed the advice See Davis op cit

17 01 et seq More recently however the courts have become concerned over

equities so that even the government can be estopped if necessary to prevent a

grave injustice for example to prevent a person from being deported or from

losing valuable property Davis op dt 17 03 However the courts also

consider whether estopping the government will result in great cost to the

public Davis op cit at 406 Union Oil Co ofCalif v Morton 512 F 2d 743

748 749 9th Cir 1975 Also bear in mind that the advice to submit a

December I 1978 figure was given by the Commission s staff not by any

decision of the Commission or because of G O 11 Sometimes the Commis

sion indicates that it will not follow the staff s decisions and even reverses

them affecting outside parties See Rejection ofTariffFillings ofSea Land

13 F MC 200 1970

In the instant case we clearly have better more reliable evidence as to the

base unit cost of fuel back in late December and early January 1979 This

evidence has been submitted by Matson itself in accordinace withthe Commis

sion s own prescribed form Instead of a base unit fuel cost confined to one day

December 1 1978 the revised figure encompasses a broader period of time

December 25 1978 through January 5 1979 This formula is established in

line I of Form FMC 274 The use of the improved formula shows that the
304 FEDERAL MARITIME COMMISSION

average unit cost of fuel during the specified period was 1059 as compa

to only 1048 pertaining to one day in December of 1978 As Ishow be

the use of the better figure results in a lowering of added fuel costs to be b

by domestic general cargo shippers by 50 075 This is a minuscule amou

money compared to Matson s estimated revenue of 63 617 200 only e

hundredths of one percent 50 075 divided by 63 617 200 times 100 eq

08 percent

The requirement in principle that Matson absorb this minuscule amo

rather than pass it on to the domestic general cargo shippers is hardly the 

of penalty or hardship which the courts prevent in the equitableestoppel c

In other words in weighing the adverse effects on Matson with the p

interest that the most reasonable evidence be used to ensure that co

allocation of costs is made the public interest should take precedence i

private harm is so microscopic We are not here talking about deporti

person revoking a license taking away valuable land and such other dr

results which courts will prevent under modem concepts of equitable esto

Iam not undermining the principle that these expedited rate cases shou

decided on the basis oforiginal data submitted by Matson subject to reason

modification to eliminate obvious errorsin methodology or errors resulting 

oversight to the largest extent possible so that the purposes of the new law 

be effectuated Iam holding however that when there is obviously ava

more reliabledata which the carrier and staff concede to be superior it s

not be ignored when the equities arguing against using thatdata are not s

in effect In other words if the use of the later figure based upon the s

revised thinking and the Commission s Form FMC 274 were to have se

adverse effects on Matson then perhaps principles ofequity would dictate 

the original figure be used and that the later figure be employed only in 

cases dealing with later surcharges But here as noted and as shown b

application ofthe revised figure has amicroscopic impact on Matson and 

there one in principle only if as Matson contends its subsequent filings 

thatit has underrecovered using the 443 percent surcharge and it is alread

plying a 5 90 percent surcharge as of August 25 which will become 6 66 

cent on October I 1979 in order to make upfor its alleged deficits In co

to the above situation what might be inequitable would be a finding 

Matson had violated the law by overrecovering substantial amounts ma

million dollars although Matson followed Form FMC 274 and method

recommended by the staff because of a radical and sudden change in 

methodology with retroactive application Ido not believe that the slight 

fication resillting from changing from use ofa oneday base periodto one

uses a periodof almost two weeks an obviously more reliable test is such

stantial shift of policy that it invokes principles ofequitable estoppel espe

when the retroactive impact is so tiny and may well be completely acade

II In balancing equities ocl un other facts benefttins MalllOn should ROt be overlooked For instance Matson has be

the fact that the Commission itrealina Matson s bunker lurcharp not as goneral incretllCll in ratcl altboush they app

the board to domestic pneral carlO shippen apparently because each incremental increale insurcharge is lessthan 3 pe

means that tho Commission cannot order refunds with interest if it finds tho lurcharae to bave been unlawful See aeeti

of the Intcrooastal Shipping Act 1933 81 amended by PL 95 475 AllOt the Commll8ion has not suspended any 

surchal Je which it could have done since they are not treated as aencrallncrea8C8 in rates Section 3

c I B as 

Moreover although the surcharges now aareaatc 5 90 percent to increase to 666 percent on October lof this year 

nevcrthelC88 nol being treated as general increalle8 in ratesTherefore they can be and haw been filed ononly 3odays 

there has been no limitatton imposed on the number of surcharges dlat can be ftlcd in anyone year
10 59

PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 305

The following table restates Hearing Counsels exhibit by employing the more

reliable base fuel cost figure

RESTATEMENT OF HEARING COUNSEL S CALCULATIONS

Hearing Counsel

1 Average fuel

cost per unit

purchased

Dec I 1978 1048

2 May 16 1979

unit fuel cost

3 Difference

line 2 less

line I

4 Estimated con

sumption of

fuel barrels

5 Estimated con

sumption times

difference in

unit cost line

4 times line 3

6 Measurement

ton ratio

domestic

general cargo

divided by all

cargo on com

bination vessels

7 Fuel cost allo

cated to domestic

general cargo

line 6 times

line 5

8 Estimated four

months revenue

9 Percentage sur

charge needed

line 7 divided

by line 8

16 52

Restatement

1 Average fuel

cost per unit

purchased be

tween 12 25 78

and 1 5 79

2 May 16 1979

unit fuel cost

3 Difference

line 2 less

line I

4 Estimated con

sumption of

fuel barrels

5 Estimated con

sumption times

revised difference

in unit costs

1652

5 93

484 794

2 874 828

93 90

2 699 463

63 617 200

4 24

As can be seen from the above table the necessary percentage surcharge as

revised amounts to 424 percent rather than 4 32 percent recommended by

Hearing Counsel or a difference ofonly eight hundredths of one percent In

principle as Ihave found above this means that the amount of fuel cost which

Matson should not have allocated to domestic general cargo shippers amounts

to only 50 075 2 749 538 less 2 699 463 line 7 in the table

6 04

484 794

2 928 156

93 90

6 Measurement

ton ratio

domestic

general cargo

divided by all

cargo on com

bination vessels

7 Fuel cost

revised

line 6 times

line 5

2 749 538

63 617 200

8 Estimated four

months revenue

4 32

9 Revised percent

age surcharge

needed line 7

divided by

line 8
306 FEDERAL MARITIME COMMISSION

I cOnclude therefore on the basis of the most reliable evidence use

forecast the four month period for which the surcharge was to have be

effect that the subject 443 percent surcharge was excessive to the exte

exceeded 4 24 percent Ifwe are to follow the traditional principles in rate 

that carriers are held to reasonable forecasts and estimates in determ

whether their decisions to increase rates were just and reasonable the

decision to increase the previous surcharge to 4 43 percent wasunreasona

that it should have provided Matson with more revenue than needed tore

additional fuel costs Subsequent evidence showing actual results t

otherwise or evidence submitted in later surcharge cases showing actual u

recovery does not change the finding thatthe carrierhad made an unreaso

decision under these traditional principles See e g

the situation describ

Alaska S S Co v FMC 334 F 2d 810 9th Cir 1965 and 

Commission s Order Denying Petition of ResPondents in Alaska Steam

Co Seasonal Rates 6 SRR 325 1965 In that case the Commission 

made its findings concerning the unreasonableness of the carrier s rates o

basis of evidence of estimated projections for the year 1962 The ca

however asked the Commission to reopen the record to take later eviden

actual experience beyondthe year 1962 and asked the Court ofAppeals to

the Commission to do this The Court refused however leaving tile matt

to the Commission The Commission following traditional principles gove

rate cases adhered to the earlier evidence of record and advised the carr

file new rate increases if it wished to rely upon later evidence showing a

experience The Commission believed that the integrity of the ratema

process was at stake since these cases were to be decided expeditiously 

therefore could not be reopened to take additional actual evidence indefin

The Commission noted that the introduction of later data would requir

tended proceedings for the purpose of proper cross examination and tha

requirements of expedition in rate cases would not permit such an exe

Therefore the Commission stated

The proper procedure for Alaska Steam to follow is to file new rate increases with the Comm

if in its opinion such increases are warranted These rates can then be adjudicated in a ne

proceeding in which Alaska Steam will be free to introduce any evidence of past operating 

and future projections The ratemaking process does not envision that respcndents be allOW

indefinitely prolong pending cases for the purpose of continually bringing the record up to 

If our suggestion is followed the best interests of the carrier and the ratepaying public w

protected

6 SRR at 328

Ifthe Commission took that position because of the need to conclude 

cases expeditiously then it is all the more critical to adhere to such pos

under the new law which concerned the Commission in Alaska Steam 

should be noted furthermore that this principle of relying upon best estim

and projections in rate cases not waiting for later experience is still follo

In the three most recent Matson rate cases Docket No 73 22 75 57 

76 43 the Commission decided each one on the basis of the evidence 

projections in each case rather than on later evidence introduced in the 

sequent cases Finally the later evidence which the State wishes to u
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 307

support ofits position can betested in the subsequent surcharge cases or if not

line 7 of Form FMC 274 permits evidence of actual experience to be used to

cause an adjustment so that future surcharges will be held down

Ifthe bunker surcharge problem however were being treated by the Com

mission not under traditional rate case principles but only as a type ofreporting

to ensure that actual increases in fuel costs are being and have been passed

through to shippers under proper accounting methodologies then the question

ofreasonableness of Matson s decision to implement the 43 percent surcharge

would be decided on the basis of actual results shown in Matson s later evi

dentiary submissions If so then Matson s current decisions would be found

lawful or unlawful on the basis of facts to be developed later from actual

experience regardless of what principles of forecasting Matson employed when

making decisions to file surcharges or how reasonable they appeared to be at

the time the decisions were made This would seem to be inequitable On the

other hand if the Commission decided that to avoid this inequity Matson

should not be found to have acted unlawfully on the basis oflater facts showing

what actually happened under the surcharges there would be less protection to

shippers because Matson would be free to select surcharge levels without too

much care subject only to reductions in subsequent surcharges in case of

overrecovery However shippers paying such surcharges might not be around

to enjoy future reductions and in any event would be overpaying while they

were shipping In the last analysis therefore apparently the Commission has

decided that the best protection for shippers paying surcharges at any particu

lar time is the guarantee that Matson has been required to follow reasonable

forecasting techniques failing which Matson would be liable to reparation

cases and that in the event ofoverrecovery there will be future reducing effects

on subsequent surcharges This discussion does not answer the question

whether the present procedures allowing continual increases on as little as

30day s notice and treating them as non general rate increases are the best

procedures that can be devised to deal with the continual surcharge problem

cOnsidering the fact that the carrier is allowed to project additional costs four

months into the future to protect itself from falling behind in its attempts to

have its revenues keep up with costs

J2

Analysis ofPositions ofGeorge A Hormel Co and Oscar Mayer Co

As I mentioned earlier the two protestants George A Hormel Co and

Oscar Mayer contended that the subject surcharge wasunjustified unreason

12 TheState attached five orders orthe Civil Aeronautics Board dealing with many general rate increases filed by air carriers

during the period June 1976 through November 1917 These orders are very revealing They show that up to September 1977

the CA B had never allowed cost projections which they called anticipatory costs This Commission has allowed projections

in rate cases for many years However the CAB was forced to reconsider this policy because it caused carriers to file rate

increases repeatedly in order to try to keep up with cost increases since they were not allowed to publish rate increases to cover

future costs This policy was changed See September 22 1977 Order of the CA B TheCAB now allows cost projections for

three months beyond the effective date of the rate change but in return holds the carriers to only tworate increases ayear i e

it freezes rates forsix month periods The cAB felt that this mandatory freeze would encourage carriers to operate more

efficiently since they would have to live with their projections forlonger periods oftime TheCA B also stated that

they wanted

current data not old data when current statistics will soon be available CAB Order of Nov I 1977 at 2 However the

current data itself related to past periods not projected periods and unlike the F M Cprocedures there will apparently be no

other CAB casesduring the six month period in which laterdata canbe tested TheCA B operating under different statutes

apparently treats the air carrier s

barrage of rate increases as general rateincreases and has no adjustment provision like line 7

of FMC Form FMC 274 A main advantage of the CAB methlXl is to hold down the number of rate increases per year
308 FEDERAL MARITIME COMMISSION

able and inflationary and should be canceled or at least suspended an

vestigated Intheirtestimony Exhibits 6 and 7 the very sincere witnesse

Hormel Mr Finch and for Oscar Mayer Mr Gillings and Mr Krato

on brief elaborated upon these contentions

Protestant Oscar Mayer is a substantial shipper of meat and food pro

from the West Coastto Hawaii Itships an averageof over 5 3 million p

of its product a year in 193 containers Itpays significant amounts of fr

and feels the impact of the 443 percent surcharge to be excessive Acco

to the written testimony of Mr Gillings TrafllcManager Rates and T

Ex 7 the application of the surcharge by Matson is unfairbccause i

disproportionately on westbound shippers prefers sugar andmolasses shi

and exceeds increasesin fuelcosts so that the previous 3 54 percent would 

been sufficient In its opening briefOscar Mayerrecommended that 47 pe

of the additional fuel costs should be allocated to eastbound shipper

53 percent towestbound In its reply brief Oscar Mayer suggests alterna

that the allocation ratio be 34 percent to eastbound shippers and 66 perc

westbound

Like Oscar Mayer George AHormel s witness Mr Finch vigorous

gued that Matson s allocation method preferred sugar and molasses sh

and consequently burdened westbound shippers unfairly He calculated th

company s products would bcar an additional 3 02 per ton whereas suga

molasses would bear only 69 and 23 per ton respectively Ex 6 H

calculated how many barrels of fuelwere used westbound to arrive at the 

cost on his shipments per ton He concluded from his studies that th

previous surcharges imposed by Matson have recovered more than enou

recover increased fuel costs with 21 411 left over Healso concludes t

a westbound leg extra revenue derived from the surcharge is woll over c

the westbound leg and indeed wellover SO percentofthe eastbound fuel 

Mr Finch contends therefore that westbound shippers are paying a disp

tionately high amount whereas eastbound shippers are not paying the

share

In his opening brief Mr Finch emphasizes that Matson s witness w

experienced in the sugar and molasses business to establish that 47 perc

the allocation of fuel costs to shippers of those commodities would be u

harmful to them and he questions whether negotiations between Matso

its corporate relatives shipping sUlar and molasses are really conduc

arm s

length Mr Finch also questions whythesugar and molasses shipp

assessed under a different method cents per ton than other shippers w

a percentage surcharge on rates when fuelcosts increase and how the Co

sion s G O II can permit such a thing

In his final brief submitted for George A Hormel Co Mr Finc

tinues questioning the different treatment of the sugar and molasses sh

and contends that such treatment is incompatible with the Commission 

mestic Circular Letter 1 79 forms and regulations He again questio

good faith negotiations between Matson and related sugar and molasse

panies and questions Matson s witnesses s opinion that these shippers co

bear 47 percent of the fuel cost increases Mr Finch concludes th
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 309

Commission should order Matson to recover all cargo in the voyage on

measurement ton flow basis Hormel Brief August 31 1979 at 7

Both Hearing Counsel and Matson disagree with protestants However it

appears that some of the dispute between Hearing Counsel and protestants

may be based upon their misunderstanding of the manner in which Hearing

Counsel and the staff have removed any undue burden which would have been

cast upon domestic general cargo shippers as a result of the special sugar and

molasses contracts 13 Both Hearing Counsel and Matson oppose protestants

different method of allocation which is based upon splitting legs of round

voyages by assigning percentages of fuel costs to eastbound and westbound

shippers using fuel consumed per leg orby applying measurement tons perleg

I

find upon examination of protestants contentions that notwithstanding the

sincerity with which they are argued they proceed on a radically different and

unsound basis of steamship accounting fail to understand that Hearing Coun

sel and the staff have eliminated the preference given to sugar and molasses

shippers and otherwise lack support

The idea espoused by OscarMayer and to some extent suggested by Hormel

inMr Finch s

testimony thatMatson s voyages should bebroken downinto west

bound and eastbound legs and that allocations ofthe costs offuel should some

how be made to westbound and eastbound shippers after the splitting of the

voyage marks a total departure from Commission case law and the G O II

methodology as Hearing Counsel and Matson point out

In Alcoa Steamship Co Inc General Increase in Rates in the Atlantic

GulfPuerto Rico Trade 9 F MC 220 232 1966 the carrier had attempted

to allocate expenses by splitting its round voyages into legs and then applying

a revenue ratio This idea was emphatically rejected by the Commission in

favor of the ton mile ratio method applied against the total round voyage The

Commission stated

The nature of ocean transportation is furthermore such that these costs of operating vessels

between points are mainly joint costs or costs which should be borne proportionately by the users

of the services in both directions

The Commission s General Order II codifies the above statement by

defining voyage as follows

Voyage normally means a completed round voyage from port of origin and return to port of

origin In no case shall a Voyage be split to reflect outward and inward services separately

46 C F R l512 6 K

Both Mr Walker Hearing Counsels staff expert witness and Mr Kane

Matson s chief witness testified in essence that round voyage accounting is the

U For example in Mr Finch s Honnel s opening brief he makes the statement as follows Witness Walker presented Ex

hibit S which confirmed the Matson methodology of ob8crving the restrictive measurement ton escalation clause of sugar and

molasses and allocating the remainder of the bunkerin fuel cost increase to the other cargo Emphasis added He then cites

biJ questions to Mr Walker in which he asked Mr Walker w hy do you agree that the recognition of the present contractual

escalation claulC onsugar is proper inthis instance Honnet OpeningBrief at S But witness Walker did not confirm the sugar

contract in the sense of approving it or agree that it was proper He tried to explain as I have done earlier and repeat below in

the docision that he and Hearing Counsel removed any harm resulting from the sugar and molasses contract by applying the

measurement ton allocation methodology Also later in his brief Mr Finch seemed to believe that Mr Walker and Hearing

Counsel were endorsing twosimultaneow different methods of recovery of the fuel cost increases used by Matson namely the

pcral surcharge and the special sugar and molasses method They did nol however do this Again as I have explained they

corrected any harm whichmay have befallen general cargo shippers stemming from thisdual method byapplying the measurement

ton allocation methodology
310 FEDERAL MARITIME COMMISSION

accepted and customary method of steamship accounting Mr Walker in

explicitly testified that expenses may not be allocated to legs of a vo

Tr 147

The problem with splitting voyages as Matson s witness Mr Kane de

strated and Matson showed on brief is that it leads to absurd and u

results In the Hawaiian trade for example westbound shippers who sh

majority of the containers expect to have them returned to the West Coa

that they can be filled again for more shipments eastbound Howeve

voyages terminating in March 1979 as Mr Kane testified Ex 1 at 9 9 

containers were carried westbound but only 2 305 were carried full eastbo

Although the westbound shippers have an obvious interest in the ship s re

ing to the West Coast with available containers allocation by dividing num

ofcontainers into costs for each leg split evenly between legs would mean 

westbound shippers would pay much less in vessel costs per container Fur

more the far fewer eastbound shippers would be paying for the return o

emptycontainers which were only shipped to Hawaii because of the westb

shippers 14 But under round voyage accounting the westbound shippers 

use the greater amount of Matson s services must necessarily pay a share o

cost of the back hauL See also Matson Navigation Co Genera Increa

Rates 16 F MC 96 1973 Back haul eastbound shippers are not giv

free ride but pay a share ofjoint vessel costs under the rates they are cha

Ex 1 Exhibit 1 at 4 Therefore any allocation based upon splitting 

round voyage such as by applying 53 percent to westbound and 47 perce

eastbound legs on a fuel consumed basis as first suggested by Oscar Maye

alternatively by 66 percent westbound and 34 percent eastbound on a m

urement ton flow basis Oscar Mayer Reply Brief last page is concep

defective because of the refusal to recognize that voyages are joint ven

from beginning to completion having joint costs which all shippers must 

regardless of legs

Protestants fear that sugar and molasses shippers are being preferr

unwarranted onceHearing Counsels and the staffs remedial application o

measurement ton methodology is accomplished As Iexplained earlier in 

decision the disproportionate burden which would be cast upon dom

general cargo shippers if we permitted Matson to calculate the level o

charge by its own methodology based upon recovery under the sugar and 

lasses contracts is relieved by means of the measurement ton methodolog

discussed application of the methodology shows that an unfair burden i

amount of 42 860 would have been cast upon domestic general cargo shi

and that this amount must be absorbed by Matson if it wishes to adheret

sugar and molasses escalation clauses in its sugar and molasses contracts T

the entire argument about the relationship between Matson and sugar 

molasses shippers and whether their negotiations were conducted at a

I As an example ofwhat absurd resultsthe split voYllSC method could load toconsidor an unbalanced trade inwhich99 

shipped westbound and only one shipper shipped outbound Ifvirtually the IllfflO fuel CJlIt applies in both Jep and aurne 

5500000 on each lea the 99shippers would share the 500 000 burden while the poor alnslo shipper cllltbound would 

to coulh up the 5500 000 for his lei aU by himBOlf AllllOlIt equally absurd multi would occur if we employ a tonnaac 

split I For example if the C8IItbound shippen only Ihippcd 10000 tons butthc wcatbound shippers shipped 100 000 

CBstbound shippers would be responsible forten times as much in fUClI costs 88 thc eastbound on a pertonnage basis alth

entire voyaBc overwhelminllly benefits the WCltbound shippers
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 311

length is immaterial If Matson really tried to prefer those shippers and there

is no evidence that this is so only Matson would suffer because it would be

forced to absorb any deficits because of underrecovery resulting from preferen

tial contracts ie Matson could not pass the deficit onto other shippers

Similarly the fact that sugar and molasses shippers pay so many cents per ton

under the escalation clauses rather than by flat percentage of rates has no

practical significance as far as domestic general cargo shippers are concerned

because any deficits under the contracts are not borne by those other shippers

as a result of the corrective effects ofHearing Counsel s and the staffs meas

urement ton methodology This leads to the final arguments of Oscar Mayer

regarding their beliefthat westbound shippers will be burdened with 80 percent

of fuel costs whereas eastbound shippers will carry only 20 percent of the

burden their confusion over the application of General Order II by the staff

and their beliefthat use of the two different methods ofrecovery cents per ton

for sugar and molasses shippers percentage of revenue for domestic general

cargo shippers is not justified or lawful under governing regulations

Oscar Mayer believes that there is an unfair burden on westbound shippers

because they will have to bear 80 percent of the additional fuel costs The short

answer to this argument is that the shippers who use the bulk of Matson s

service i e who ship 80 percent of total tons between Hawaii and the West

Coast would naturally be the greatest contributors to Matson s expenses on an

overall basis just as they would be paying the bulk ofMatson s overall revenue

The Commission recognized furthermore in Alcoa supra that there is a

relationship between expenses and the quantum of service purchased In the

shipping industry this was taken to mean that the more tons carried and miles

involved in the service purchased ie the quantum of the transportation

service the more expenses would be correspondingly involved That is the basis

for the ton mile allocation methodology in which vessel expenses which are

jointly shared on vessels moving in domestic and foreign trades are allocated

between shippers in the domestic trade and shippers in the foreign trade The

alternative method whichOscar Mayer urges however is to split the domestic

trade between two legs of the voyage and assign expenses and apparently to

assign expenses on each leg independently of the other leg as ifshippers should

have no concern over the leg ofthe voyage in which their commodities are not

moving As mentioned however this is a fundamentally unsound concept in

steamship accounting which G O II has long forbidden

What Oscar Mayer and Hormel apparently do not appreciate is that after

application of the G O II allocation methodology which wasmade necessary

to remove the harmful effects of the special recovery clauses under the sugar

and molasses contracts all domestic general cargo shippers are placed on an

even basis paying the same percentage increase on an across the board basis

so that the full fuel increase in fuel cost can be recovered Ifthe percentage

I

The contention that Matson prefers sugar or molassesorpineapple shippers in negotiating rates has arisena number of times

in pdst casesand never seemsto stand up to analysis See eg

Genera Increase in Rates 7 F M C260 273 279 281 1962

in which the Commis ion found good faith negotiations notwithstanding Matson s corporate connections with the shippers involved

and also found the sugar contracts to be lawful 7 FM Cat279 281 Furthermore Matson introduced Exhibit 3 aconsent decree

in US v Alexander Baldwin Ltd et al U S District Court Hawaii Civil Action No 2235 August 17 1964 which places

restrictions among Matson and its corporate family members to facilitate arm slength transactlons among them
312 FEDERAL MARITIME COMMISSION

increase had been varied among general cargo shippers perhaps Oscar M

or Hormel might have cause to complain unless such discrimination cou

justified But being evenly applied their only complaint is that they a

westbound shippers end up paying the largest share of the fuel costs 

aggregate basis But this is because they are all purchasing the vast b

Matson s services in an unbalanced trade where westbound tonnages 

exceed eastbound

Both Oscar Mayer and Hormel question the propriety of permitting a 

system of recovery under G O II Domestic Circular Letter 1 79 and 

nent Commission regulations Either or both protestants believe that the 

mission s staff has made an internal decision which should have been do

means ofpublic rulemaking so that an alternative form ofsurcharge could 

been approved by the Commission

Itis true that Form FMC 274 contemplates apercentage of revenue m

for fixing bunker surcharges See line 12 of the Form There is how

nothing shocking about this Ocean carriers have long used either fla

centage surcharges or dollarsper ton as the methods of imposing emer

rate increases Each method has its proponents and good and bad poin

both have been permitted See eg

the discussion in Surcharge on Ca

Manila 8 F M C 395 397 399 400 1965 where dollarsper ton was 

selected and Surcharge at U S Atlantic GulfPorts 10 F MC 13 1

where the flat percentage ofrates method wasused See also F MC Dom

Circular Letter No 74 1 January 8 1974 in which the percentage o

method was prescribed The present Form FMC 274 permitting the 

centage method therefore is no sudden change in policy or departure 

precedent which requires a

rulemaking proceeding as amatter of law Fu

more it is well known that rules can be enunciated in adjudicatory procee

as well as in rulemaking proceedings Unless there is convincing evidenc

a dollars per ton surcharge method is more reasonable or that th

percentageper rates method is unjustly discriminatory which evidence 

not seen the percentage of rates method presently embodied in 

FMC 274 can be found to be proper in this proceeding This assumes m

incorrectly that the issue is open As Hearing Counsel note the Comm

has indicated in its Order of Investigation in Docket No 79 84 the 

tigation of the subsequent 5 90 Matson bunker surcharge that an inve

tion is not the proper forum for discussion ofthe merits of Circular Letter 

Form FMC 274 and General Order 11 Order served August 24 197

Hearing Counsel again note if protestants are unhappy with current 

odology they can ask the Commission to reassess its position in a proce

devoted to the problem It is important to recall that the recent amend

to the Intercoastal Act 1933 under P L 95475 require the Commiss

detail the specific issues to be resolved when commencing a formal pro

ing under Sec 3 a ofthe 1933 Act so thatproceedings can be concluded 

ditiouslyand unnecessarily lengthy and complex proceedings can be av

See Senate Report 95 1240 95th Cong 2d Sess September 26 1978 

The issue of one form of recovery dollars per ton visa vis another fla

centage was not specified by the Commission in its Order commencin
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 313

case and may therefore be outside the scope of the proceeding

Ibelieve however to conclude the above discussion that the important point

which is being missed by protestants is that Matson s dual use of the flat

percentage across theboard method for domestic general cargo shippers as

well as the cents per ton method for sugar and molasses shippers while on its

face questionable in fact is harmless since application of the G O II meas

urement ton ratio methodology prevents Matson from allocating to those gen

eral cargo shippers cost burdens which they should not bear

Icannot therefore conclude that protestants are being unfairly burdened

because of preferences given to sugar and molasses shippers or because of

Matson s duel system of recovery or that G O 11 methodologies are being

misapplied or misinterpreted by the Commission s staff or that Matson s

voyages should be split into legs so that eastbound and westbound shippers can

be separately evaluated to determine which portion of additional fuel costs

should fall on each of them or that there is anything intrinsically wrong with

the percentage of revenue method of assessing a surcharge

ULTIMATE CONCLUSIONS

Matson filedasurcharge in theamount of4 43 percent effective May 30 1979

which although supposed to run until September 30 expired on August 25

1979 with the publication of another surcharge amounting to 5 90 percent

Matson s original data supporting the subject surcharge as revised by Matson

to exclude a tiny portion of foreign cargo supports 4 39 percent as the permis

sible level of surcharge necessary to recover additional fuel costs which have

been escalating very rapidly Hearing Counsels and the Commission s staff s

data shows that the level should be 432 percent while the State of Hawaii

calculates 3 87 percent Protestants Oscar Mayer and George A Hormel do

not believe Matson to have justified the 43 percent figure and believe that an

entirely new method of accounting should be employed to determine the neces

sary level

Hearing Counsel s and the staffsfigure of 4 32 percent is the most reason

able approximation ofwhat Matson needed compared to the other two calcula

tions and as adjusted slightly to account for more reliable evidence of base

unit cost the permissible level should have been 4 25 percent Hearing Coun

sels

figure is based upon the use of approved and established methodology

which had to be employed to offeset the additional burden on domestic general

cargo shippers 42 860 which would result from application of Matson s

allocation methodology based upon escalator clauses in Matson s special sugar

and molasses contracts The Matson method has not been shown to be more

reliable than Hearing Counsels methodology which is based upon the Com

mission s General Order 11 and previous case law Indeed there is no showing

that Matson s formula devised for its sugar and molasses contracts shows a

proper correlation between fuel costs and increased revenue needs Further

more even Matson employs the G O II methodology in extracting foreign

cargo from its calculations The State also uses the erroneous Matson meth

odology in calculating its figure
314 FEDERAL MARITIME COMMISSION

The State takes the position that all available evidence showing later 

should be introduced into the record in this kind ofproceeding before dec

what a reasonable maximum surcharge should be Hearing Counsel the 

and Matson believe that evidence and data originally submitted shou

relied upon to the fullest extent possible and that constant introductio

changing data will make it impossible to comply with the new rigid 

constraints imposed on rate cases by P L95 475 Ifind that Hearing Cou

and Matson s position is sound but allow for some flexibility in the even

errors are uncovered in the original calculations whether because of inco

accounting methodology or oversight or if obviously more reliable evid

becomes available which does not require testing by cross examinatio

rebuttal evidence Thus in one respect only Ihave modified Hearing Cou

calculations to allow for the use of evidence submitted by Matson for an

surcharge which Hearing Counsel acknowledged may be preferable bu

honor bound not to use against Matson under principles of equitable est

Ido not find that the Commission should be estopped from using the 

which complies with the Commission s own Form FMC 274 after bala

all the interests and in any event the adjustments resulting from use o

more reliable data are minimal and perhaps somewhat academic since M

has already filed two subsequent surcharges allegedly showing underrec

under the 443 percent and previous surcharges Icannot however find 

can rely upon the State s data which it proffers as an attachment to its 

hearing brief This data was never introduced into evidence so that the p

could have the opportunity of testing it by cross examination or rebutt

with contrary evidence ifnecessary The data shown in the attachment w

make substantial changes in Matson s and Hearing Counsel s rev

projections but it relies upon underlying data submitted by Matson in co

tion with other rate changes compares different periods of time interpo

certain figures and reaches significant conclusions without explanation 

how the attachment was constructed Ifthese conclusions are reliable 

should be tested together with the underlying data in the proper manne

examination in the later proceedings Without adequate examination in 

proceeding I

find it virtually impossible to understand the bases for its co

sions or to evaluate its reliability Moreover if Matson s and Hearing Cou

revenue projections are incorrect line 7 of Form FMC 274 will provide 

measure of compensation

By using the later more reliable data pertaining to a broader base perio

unit cost of fuel as now prescribed by Form FMC 274 and as urged b

State Ihave adjusted Hearing Counsels calculations to show that the 

mum surcharge should have been 4 24 percent rather than 4 32 percent w

Hearing Counsel support or a difference of 08 of one percent This am

to 50 075 in revenue which Matson theoretically should not have cast 

domestic general cargo shippers and should have absorbed This figure 

pares with 63 617 200 in revenue for the four months period for whic

surcharge had been projected

Protestants George A Hormel and Oscar Mayer but especially the l

believe that entirely new methodologies should be employed to ensure 
S NORMAN D KLINE

Administrative Law Judge

PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 315

westbound shippers are not unfairly burdened with the additional fuel costs as

compared to eastbound shippers However these new methodologies would

split round voyages into eastbound and westbound legs an unsound method of

accounting which the Commission has rejected in a previous case and which

G O 11 forbids When the G O 11 allocation methodology is applied further

more any excess burden which domestic general cargo shippers might have

had to bear will be eliminated and all domestic general cargo shippers will bear

a proportionate share of costs of the round voyage depending upon the volume

of cargo they ship in measurement tons Protestants belief furthermore that

there is something harmful about the fact that Matson uses one basis for

recovery ofextra fuel costs on sugar and molasses shippers cents per ton while

using another basis for domestic general cargo shippers percentage of rates

is unwarranted since both bases have been used by carriers in the past and

accepted by the Commission and application ofthe G O 11 allocation method

ology ensures that domestic general cargo shippers are not bealing costs which

should be allocated to sugar and molasses shippers

The procedures which the Commission now follows to deal with continual

filings of bunker surcharges provides for adjustment of overrecovery or under

recovery under line 7 of Form FMC 274 This adjustment does to some extent

protect shippers against mistaken forecasts by Matson since if Matson over

recovers it will be required to reduce subsequent surcharges although the

procedure is not perfect and to some extent seems inconsistent with accepted

principles of law in ratemaking cases followedby the Commission which decide

whether a carrier s rates are just and reasonable by use of forecasts and

estimates not by retrospective historicalexperience However the merits ofthe

present procedures are beyond the scope of this case The new law P L 95

475 requres the Commission to specify issues so that rate cases can be decided

expeditiously and the merits ofthe Commission s procedures shown in Domes

tic Circular Letter 1 79 Form FMC 274 or G O 11 have not been specified

for determination For the Commission s information however the Civil Aero

nautics Board deals with continual rate increases in a somewhat different

manner allowing threemonth cost forecasts but holding carriers to their rates

for six months and treating the many rate increases as general increases in

rates at least so it appears from various orders of the CA B issued during

1976 and 1977

WASHINGTON D C

September 20 1979
I

FEDERAL MARITIME COMMISSION

46 C F R 1547 DocKET No 79 12

IMPROVEMENTS IN PREHEARING AND DISCOVERY PROCEDURES

ACTION

SUMMARY

DATES

November 27 1979

Discontinuance of Proceeding

The Commission has determined that this proc

which was initiated by Advance Notice of Pr

Rulemaldng of March 13 1979 44 Fed Reg 

should be discontinued because the comments r

demonstrate that there is no consensus that the C

sion s discovery rules need amendment Howev

Commission will consider whether certain com

justify the institution of a

rulemaking proceeding 

providing appropriate explanations to eliminate p

lar misunderstandings about some of the rules

Effective November 30 1979

SUPPLEMENTARY INFORMATION

The Commission initiated this proceeding by Advance Notice of P

Rulemaldng which was published in the Federal Register on March 1

44 Fed Reg 14582 The purpose of the proceeding was to eocit co

to determine if there is a need to amend the Commission s rules rela

preheating inspection and discovery in order to improve efficiency and 

nate undue delay in the conduct of formal proceedings The Commiss

aware that special committees of both the American Bar Association 

Judicial Conference of the United States had conducted studies and 

mended that certain amendments be made to the federal rules of di

followed by the United States district courts to which the Commissio

covery rules in large measure conform

The comments generally demonstrate that there is no consensus that 

amendments to the Commission s rules are necessary at this time F

more we note that the special committee of the Judicial Conferen

withdrawn most of the recommendations relating to discovery and t

remaining recommendations are still subject to further consideration 
IMPROVEMENTS IN PREHEARING AND DISCOVERY PROCEDURES 317

they may be presented to the Supreme Court Consequently it appears that

there is no compelling reason to revise our discovery rules at this time However

the Commission is interested in exploring any idea which may improve the

discovery process and reduce delay in its proceedings Some of the comments

relating to the need for earlier rulings and elimination of unnecessary plead

ings in our opinion deserve further consideration as does one of the remaining

recommendations of the special committee of the Judicial Conference concern

ing early discovery conferences Furthermore because certain comments ex

pressed concern about the operations and effects ofcertain ofthe Commission s

rules which comments were apparently based upon misunderstandings of the

particular rules involved the Commission believes that explanatory or clarify

ing remarks would be helpful

One particular area ofconcernwhichappeared in the comments relates to the

possibility that thepresent prehearing inspection and discovery rules might inter

fere with the expedited schedules mandated by Public Law 95 475 92 Stat

1494 1978 which amended the Intercoastal Shipping Act 1933 Matson

Navigation Company which commented on this problem recommends that we

amend our rules to provide that discovery procedures be available in pro

ceedings arising under Section 3 of the Intercoastal Shipping Act 1933 only

to the extent authorized by the Presiding Administrative Law Judge in his

discretion The Commission agrees with Matson that care must be taken to

ensure that discovery procedures are not misused so as to create delay and

prevent the prompt conclusion of the hearing and other phases of rate cases set

forth in the law and pertinent Commission regulation Rule 67 46 CF R

502 67 However the regulations of the Commission already embody the

controls which Matson wishes to have inserted by way of amendment For

example Rule 67 g

46 C F R 502 67 g

states that the Administrative

Law Judge may employ any other provision of the Commission s Rules of

Practice and Procedure not inconsistent with this section in order to meet this

objective Le to complete a hearing within sixty days after the proposed ef

fective date of the tariffchanges and submit an initial decision within one hun

dred twenty days after that date The Commission s rules contain numerous

provisions eleswhere which authorizethe presiding judge to curtail unnecessary

discovery See e g Rules 201 b 2 201 b 3 204 b 206 b Moreover if

necessary to ensure that the proceeding progresses expeditiously the presiding

judge is authorized to waiveany discovery rule See Rule 10 46 C F R 502 10

Another problem area which appears to be based upon a misunderstanding

of the Commission s rules relates to the requirement in Rules 206 a and

207 c that a party filing a motion seeking an order compelling answers to

interrogatories or requests for production of documents submit an affidavit

certifying that counsel have conferred in a good faith effort to resolve their dif

ferences The Committee on Practice and Procedure of the MaritimeAdmin

istrative Bar Association MABA states that conferences among counsel are

seldom successful and most often waste time and suggest furthermore that if

See Revised Preliminary Draftof Proposed Amendments to the Federal Rules of Civil Procedure Committee on Rules of

Practice and Procedure of the Judicial Conference of the United States February 1979 Vol 461 No 2 Federal Supplement
318 FEDERAL MARITIME COMMISSION

I

I

j

suchconferences are to be held they should take place prior to the time of

motions whenthere is still some likelihood of agreement among coun lC1 T

comments misconceive the purpose of the requirement and the procedure 

followed

The requirement that counsel meet in an effort to resolve di1fere ces

to seeking a formal order is also imposed in several district court and 

salutary purposes It recognizes that counsel have a duty to coope ate 

effort to fulfill the purposes ofall discovery rules namely to seek naItow

issues avoidance of unnecessary trial type hearings and the elim natio

surprise Considering the broad scope and salutary purposes of d very 

Commission does not believe that discussions among counsel conducted 

good faith effort to achieve the above purposes should be a waste ofltime 

a number ofoccasions in formal proceedings furthermore counsel ave 

able to reach agreement in discovery matters without taking up the time o

Commission or presiding judge with formal motions and replies Th req

ment that counsel certify that they have sought agreement informally and 

they filean affidavit not later than the date set for replies to motions co

answers does not mean as MABA seems to believe that such inf rma

cussions among counsel can only take place after the motions are fiI O

contrary the rules are intended to encourage these discussions wi ea

possible Affidavits certifying that further discussions will be futile an t

fore be filed at any time that such a fact becomes apparent e g at the 

counsel files amotion to compel answers so long as they are not fileq afte

date set for the filing of replies to the motion

The commentators have given careful thought to other possibl pro

areas which the Commission identified e g the broad scope ofdiscPvery 

need for written justification for discovery broader use ofdepositio s li

tion on number ofinterrogatories However as noted above there is Io co

sus that there really are problems in these areas and if some comlnent

believe that problems do exist there is no agreement as to the reme iy M

over if appears that the Commission s rules are exceedingly flexible so 

solutions to many if not all of the problems discussed can be d vise

presiding judges and the parties as these problems arise

Accordingly the Commission is discontinuing this proceeding but wil

further consideration to particular comments and ifwe believe that ey 

merit will institute an appropriate rulemaking proceeding

1

8 FRANCIS C HURN Y

S reta
FEDERAL MARITIME COMMISSION

DOCKET No 77 60

NEW YORK FREIGHT BUREAU INTERMODAL AGREEMENT

AGREEMENT No 5700 26

Agreement proposing unrestricted intermodal ratemaking authority in Far East Us Atlantic and

Gulf trade found not justified under the Svenska doctrine and disapproved

Charles F Warren George A Quadrino and John E Ormond Jr for the New York Freight

Bureau and its member lines

John Robert Ewers Martin F MeA wee and John w Angus III for the Bureau of Hearing

Counsel

REPORT AND ORDER

BY THE COMMISSION

November 27 1979

Richard J Daschbach Chairman Thomas

F Moakley Vice Chairman James V Day

and Leslie Kanuk Commissioners

By Order served December 12 1977 the Commission instituted an investi

gation into the approvability ofAgreement No 5700 26 an amendmentto the

conference agreement of the four ocean common carriers comprising the New

York Freight Bureau NYFB IAmendment No 26 proposes an indefinite

extension of NYFB s authority to set rates for through intermodal transporta

tion via US Atlantic and GulfCoast ports to inland points located anywhere

in the United States The Commission conditionally disapproved the Agree

ment on May 18 1977 Thereafter NYFB requested a further hearing limited

to the exchange of memoranda and affidavits on the question of whether the

Agreement s anticompetitive features are necessary to achieve transportation

needs public benefits or other objectives of the Shipping Act 1916 2

Now

I

TheNYFBcarriers coosist of Japan Line Ltd Mitsui O SK Lines Ltd Nippon Yusen Kaisha andYamasl1itaShinnihon

Steamship Co Ltd and serve the import trade from Hong Kong Macao and Taiwanto United States Atlantic and Gulf Coast

ports

SteFederal Maritime Commission v Akliebolagel Svenska Amerika Linen 390 U S 238 240 1968 Agreement No

5100 26 isa

price fixing arrangement and as such isviolative orthe Sherman Antitrust Act 15 USc

fi I and unapprovable

unless justified
320 FEDERAL MARITIME COMMISSION

before the Commission are the memorandum and affidavit of NYFB and 

Reply Memorandum of the Bureau of Hearing Counsel 3

The Commission first approved an amendment authorizing NYFB to es

lish intermodal rates on January 23 19734 After three short term extens

this authority lapsed on April 21 1977 without NYFB having carried 

intermodal cargo or even filing an intermodal tariff Since December 18 1

the NYFB carriers have had the right to operate independently as interm

carriers until such time as the conference commenced a comparable ser

None of them has availed itselfof this opportunity In fact no carrier in 

trade offers through intermodal service viaAtlantic and Gulf ports Any in

modal competition faced by NYFB is by carriers providing minilandbr

service through Pacific Coast ports of entry The NYFB carriers themse

provide such a minilandbridge service 5

POSITION OF THB PARTIES

NYFB asserts that it has always intended to publish an intermodal tarif

has taken specific steps towards that end 6

It further alleges that arrangin

joint interior point service with inland carriers is especially difficult and 

few conferences or carriers have successfully done so During January 1

NYFB adopted a resolution to file promptly its draft intermodal tariffse

four interiorpoints in the event the Agreement is approved The through 

in this proposed tariff are essentially combinations of the separate rates 

ently charged by the participating rail and water carriers rather than 

divisions specially negotiated to attract cargo to the through route

7

Proponents further contend that approval is warranted because the A

ment will

1 Institute a new intermodal service to Chicago Cleveland Louisville 

East St Louis via U S Atlantic and Gulf ports

2 Allow NYFB carriers to compete more effectively with the interm

services of carriers using Pacific Coast ports and preserve the all w

route from Hong Kong to U S Atlantic and Gulf ports

8

NYFBl1lbmlltod 13 Mamorandwn In Support 01Approval and 120 atlIdavll lrom lb NYFB 

chairman to which II ar hod I

9 Illor datod Juno 10 1975 lromNYFB caunaall1lpporlin an oorUor Int

amoncIm2 Fo I tern tIonal T r1l1 oll arlni jolnllblOuah rvIca to lour 1 rIor poI 11 0011 ollho M

River Ilul Sl Louil Chlcqo CIovoIandand LoulovUlo and 3 lahl iUuIl lin lbarlntannodal oarrIon rvin

lulllada have blbhod varylq charpa lor anol1lary aclIvllloI oonnoctod wllb uch aervIca rail lrolah

dolontlon and lroa limo bIU 01 ladlnl

Tho Intormodal upooII 01Apeamenl No 570014 wm approved lor 10

Tho lour no oarrtan pi Show Uno Ltd priJo lb Trampadflo FroIahl eonr Honl onl an

Intonnodal torIlr undor lb 01 thaI cOol

NYFB thal holwoon Januory 1973 and AprI 1977 IIhaI I orplIi2Id an Intormodal dycommi 2 

coftlultanllto work wUh tho IntonnodaI oomml 3 lIIod an I h larllr to IaolIltalotho In han oIc araolrom 

carrtan to raU oarrIon nd 4 drafted mocIoIlntormodal torIlr

NYFB lal thaI III propaaod Intormodal torIlr II modolocl cIotoly aItor tho J pllll Ko AlIanllc and Gulf 

JKAO torIlr In 011001 bol 1977 and 1979 punuo lto FMCAjroemonl No 3103 64 AfIIcIavll01 D DIck 14 5 A

membon aiIo bolonl to tho Iarpr JKAO

NYFBIlIo thallho rapid pwlh 01mlnUandbrldp lhrouah FaclIIc eoa portahy lOehuB 

andSoolraln Intern tIonal S A Ih ill aU WIller IOrvtoo AmarIcan Proaidonl Uno huaiIo lIIod larllr oftarinB 

Inlorlor poInll via PaclIIc Coul por1l NYFB to lhillntormodal compatlllo before II too entr

NYFB aiIo tIon 1norooM aU water compollllon toAdanllo and Gullportahy onconl oarrIon uch uB 

Sooltalo hul laU to lalo lbll compollllco to lho 1 Apoomont
DISCUSSION

NEW YORK FREIGHT BUREAU INTERMODAL AGREEMENT 321

3 Ensure uniform development of interior point intermodal service in the

NYFB trade Without a single conference tariff there could be a widely

varying and confusing array ofancillary charges e g

free time and demur

rage charges connected with intermodal shipments

4 Subject any intermodal service which NYFB carriers provide to the

conference s self policing system

Finally NYFB contends that the Agreement is similar to other permanent

intermodal oroverland OCP authority amendments approved by the Commis

sion E g Pacific Westbound Conference Interrrwdal Agreement 16 S R R

159 1975 West Coast USjlndia Conference ofJapan Korea Agreement

No 15054 unpublished 1972

NYFB also opposes any modifications in the Agreement which would allow

member lines to take independent action whenever they disagreed with the

majority s rate decisions 9

Atlantic Gulf West Coast of South America

Conference 13 F M C 121 1969 is cited in support of this position

Hearing Counsel believes NYFB will promptly initiate a commercially ac

cepted intermodal service but would still condition approval of the Agreement

upon NYFB s submission of the following amendments

1 that the Agreement expire in 18 months

2 that the socalled independent action clause contain the broader com

parable rates terms or conditions of carriage language found in Agree

ment No 5700 25

3 that the independent action clause further require the conference to

employ the same inland mode of transport as its member lines

4 that NYFB submit quarterly reports describing its intermodal discussions

planning activities services and cargoes carried

NYFB may well file a draft intermodal tariff but the publication of an

implementing tariffcannot alone justify intermodal ratemaking authority See

Seatrain International S A v Federal Maritime Commission 584 F 2d 546

549 15 S R R 445 448 D C Cir 1978 Seatrain International SA v

Federal Maritime Commission 598 F 2nd 289 15 S R R 597 D C Cir

1979 The underlying activity itself must be justified

In this instance it has not been demonstrated that the intermodal service

NYFB has devised after four years ofstudy will fill a legitimate transportation

need The practice of combining existing rail and water rates and of selecting

interior service points 400 to 800 miles from NYFB ports practically assures

that NYFB s proposal will be unattractive to potential intermodal shippers

Articles 6B lInd C of the Agreement would allow member lines to operate independent intermodal services upon 120 days

notice to the conference but only unless and until the conference files a preemptive tariffcovering the same origins destinations

and commodities These provisions do nol create atrue right ofindependent action They simplyspecify the conditions uponwhich

the conference may publish its initial intermodal tariffwhen member lines have already begun intennodal services of their own

Articles 6 0 and C are better described as a supercedence clause than an independent action clause NYFO s previous

intermodal amendments eg Agreement No 5700 25 allowed member lines to operate their own intermodal services until the

conference filed a tariffwith comparable rates terms and conditions of carriage
322 FEDERAL MARITIME COMMISSION

Indeed experience with the JKAG tariff upon which NYFB s draft tar

patterned has proved this marketing approach to be an ineffective mean

attracting cargo from either intermodal Pacific Coast competitors or all w

Atlantic and Gulf Coast competitors Conditional Disapproval ofAgreem

No 3O3 7 served December 8 1978 at 5 The JKAG tariff was in e

for over a

year without inducing any cargo to move over a through interm

routing

Chicago East St Louis Louisville and Cleveland are within the traditi

overland territory of the Pacific Coast carriers 1O Shippers located in t

midwestern locations may find it convenient to receive port toport shipm

from the Far East at Atlantic and Gulf Coast ports or at Pacific Coast 

depending on their prevailing needs and interests yet the economic benefi

through intermodal transport are most obvious for shipments moving ove

appreciably shorter Pacific Coast route The potentially unrealistic geogra

scope of the proposed Agreement readily distinguishes it from the confer

agreements in trades with naturally developing intermodal traffic which 

received unrestricted intermodal authority

The Agreement wouldauthorize NYFB to establish rates for Far East c

destined to Seattle Washington via the Port ofNew York Service inefficie

ofthis magnitude have not been proposed by NYFB of course but the abs

ofa proposal to commence interroodal service to more geographically favo

areas like Dallas Birmingham Atlanta Charlotte Harrisburg or Hart

suggests that the NYFB lines may not be seriously interested in offering 

shippers viable intermodal alternatives to minilandbridge service I I

NYFB has the burden ofjustifying the Agreement s anticompetitive as

under the Svenska doctrine Under the circumstances an adequate justi

tion should include substantial evidence that the ratemaking authority it s

will not be employed to insulate NYFB from competition via alternative i

modal routes but to assist NYFB achieve a fair stable and commerc

viable intermodal service of its own Evidence that significant quantitie

NYFB s present containerized carryings are destined to the four inland p

listed in its proposed tariff that a significant number ofshippers have reque

a NYFB intermodal service to these points or that NYFB faces signif

intermodal competition from other carriers serving the designated points 

Atlantic and Gulf ports would be most useful to NYFB s cause The re

contains no such evidence

NYFB s contention that approval of the Agreement is warranted becau

would subject any intermodal traffic carried under it to self policing is n

sufficient justification for approval Self policing is an automatic adjun

concerted ratemaking amandatory duty prescribed by Shipping Act sectio

10 MOlt carrion acrvina tho Far But via PacificCollt ports otter reduced Overland OCP ratcl for carao oriJinatin

ordeatlnod to point eat of the Continontal Dlvkfe Th rates tend to oqualizo the COlt of uaina Atlantic and Gulf Co

Pacific CoIIt carriers

II In SHINl IIII matlolulJ II IUprtJ 98 F 2d at 296 t5 S IlR at 604 tho court indicated that overlappina mem

in compotina intermodal QOnforonces WIIa matter requirillJ particular jUlt l1lcation and Hated that

Th 12 iKAQ momboll with IlCCOII to tho TPF Intormodol tariff m

y heve had limited InconUvOl to reto on ad

intormodal rvlce andthereby compete with lbemllllv Tho pOIIlbUlty emerpa withoutrefutation bytho FMC that the 

of the Conference members wanted no JKAO intermodal tar1ft at aU
NEW YORK FREIGHT BUREAU INTERMODAL AGREEMENT 323

and section 528 of the Commission s Rules NYFB does not and could not

claim that the inclusion of intermodal shipments within its ratemaking author

ity would eliminate existing malpractices associated with intermodal ship

ments because there is presently no intermodal cargo moving in the NYFB

trade

NYFBs argument that the Agreement is necessary to prevent the destruc

tion of the all water route between Hong Kong and U S Atlantic and Gulf

ports is also unsubstantiated 2

Even if cargo losses were documented and con

vincingly related to gains made by Pacific Coast intermodal carriers there is

no basis for concluding that these losses would be prevented by approval of the

instant Agreement That conclusion would require the existence of a sizeable

market for NYFB s proposed interior point service to Chicago East St Louis

Louisville and Cleveland

The Commission has found intermodal ratemaking by existing all watercon

ferences to bejustified only when such further section 15 authority would have

the probable effect of minimizing commercial disruptions incident to the em

ployment of new technology and the development of new trade patterns associ

ated with intermodalism When such benefits to United States commerce were

not demonstrated intermodal amendments have been disapproved See Far

East Conference lntermodal Amendment Agreement No 17 34 18 S R R

1685 1979 The present record fails to establish that unlimited intermodal

authority is necessary to secure transportation needs public benefits or regula

tory purposes in the NYFB trade

THEREFORE IT IS ORDERED That Agreement No 5700 26 is disap

proved and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary

NYFBalso claims that approval may induce the nine non conference lines which have entered into a rate agreement with

NYFB FMC Agreement No 10108 10 join the conference Like self policing the enlargement of conference membership isnot

i felf ajustification for ratemaking authority
FEDERAL MARITIME COMMISSION

DOCKET No 78 44

PIERPOINT MANAGEMENT CoMPANY AND

RETLA STEAMSHIP CoMPANY

v

HOLT HAULING WAREHOUSING SYSTEM INC

DISCONTINUANCE OF PROCEEDING

November 27 1979

The Commission by order of June 13 1979 in this proceeding requir

parties to submit a revised settlement agreement for determination as to s

IS Shipping Act 1916 applicability and if necessary approvability The p

complied with this order and the agreement wasprocessed pursuant to s

IS procedures

The Commission has now approved the agreement in question which 

the complaint in this proceeding Accordingly no further proceedings 

matter are contemplated and the complaint is dismissed

By the Commission

S FRANCIS C HURNEY

Secre
ORDER

FEDERAL MARITIME COMMISSION

DOCKET No 78 44

PIERPOINT MANAGEMENT COMPANY AND RETLA

STEAMSHIP COMPANY V HOLT HAULING

AND WAREHOUSING SYSTEMS INC

June 13 1979

This proceeding is before the Commission upon its determination to review

the Order of Discontinuance of Administrative Law Judge William Beasley

Harris Presiding Officer

On October 30 1978 Pierpoint Management Company and Retia Steam

ship Company jointly filed a complaint with the Commission against Holt

Hauling Warehousing System Inc pursuant to section 22 of the Shipping

Act 1916 46 U S C S821 in which it was alleged that Holt violated sections

15 16 and 17 of the Shipping Act 1916 46 U S C SS814 815 and 816 The

Commission s Bureau of Hearing Counsel intervened in the proceeding

Central to the resolution of this dispute is Agreement No T 3323 Agree

ment to which Pierpoint Retia and Holt are signatories The Agreement is

a terminal lease arrangement by which Holt leased toPierpoint the Pier Seven

facility at Gloucester City New Jersey 2According to the terms of the Agree

ment Pierpoint as the tenant manages and operates the Pier Seven terminal

facility paying annual base rental in monthly installments to Holt The Agree

ment provides a formula for adjustment in the event the annual tonnage cal

culated in the base rental 150 000 tons at 2 00 per ton is less than 150 000

tons The base rental applies only to wood and steel products carried or con

trolled by Retia Ifan annual short fallof tonnage for wood and steel products

occurs the rental formula allows Retia to elect to treat other commodities as

base cargo under the base rental formula The tonnage allowable for election

is determined by calculating the difference between 150000 tons and the tons

of base cargo actually carried during the lease year The Agreement was

approved by the Commission on August 26 1976

I Rule 221 of the Commission s Rules of Practice and Procedure permits Commission review ofinitial decisions on its initiative

46 CFR 502 227

1

The Agreement designates Retia a common carrier by water as the user of Pier Seven under a

special rental arrangement
326 FEDERAL MARITIME COMMISSION

In their complaint Pierpoint and Retla allege that Holt assigned itS inte

in Agreement No T 3323 to the New Jersey Economic Development Autho

without prior approval by the Commission orPierpoint in derogation ofsec

15 changed competitive circumstances3 have made the Agreement unju

discriminatory detrimental to thecommerce ofthe United States and cont

to the public interest in violation of section IS Holt has violated sections 

and 17 by providing terminal services to Korean vessels carrying wood prod

at a terminal tariff rate substantially lower than Retla is required to pay 

result of its reduced carryings

Complainants and Respondent advised the Presiding Officer at a Janu

1979 prehearing conference held in conjunction with this proceeding that 

were negotiating a settlement agreement disposing of the complaint Su

quently on March 7 1979 they submitted to the Presiding Officer a settlem

agreement and a motion for its approval and discontinuance of the proceed

The settlement agreement requires the Complainant Retla to pay the sum 

5500 000 00 to the Respondent Holt and cancels Agreement No T 3

Hearing Counsel advised the Presiding Officer that it had no objection to 

settlement agreement

The Presiding Officer approved the settlement agreement on the basis 

Agreement No T 3323 grants the tenant a unilateral right of terminatio

the lease on 60 days notice and that the law favors compromise and se

ment He than discontinued the proceeding

The Commission is aware of and fully supports the policy which favors 

settlement of disputes but it is incumbent upon the decision maker to as

that the settlement proposedby litigants does not violate the law As was st

in InterEquip Inc v Hugo Zanelli Co 17 S RR 1232 at 1234 1977

The fact that parties seek approval of their settlement does noi mean that the presiding o

or the Commission must blindly approve and has no useful function to perform Care mu

taken to insure that no violence is done to any statutory schemes involved especially if ther

question concerning the applicability of Section I S of the Act

Here the proposed setttement appears to modify the termination claus

the Agreement Italso appears to modify the payment terms ofthe Agreem

Ifthe proposed settlement represents a modification of either of these 

visions of the Agreement or any other of the Agreement s provisions the

must be filed for Commission approval pursuant to section 15 However 

proposed settlement is too vague in regardto these essential clauses to allow 

a definitive determination on the status of the settlement agreement u

section 15 Before it can be considered for approval the settlement agreem

must be clarified in orderthat its applicability to section IS may bedetermi

If applicable the Commission must then determine whether or not the 

posed settlement can be approved Inter Equip Inc v Hugo Zanelli 

supra accord American Export Isbrandtsen Lines Inc Orderto Show Ca

14 F MC 82 89 1970

The changed competitive circumstances referred to in the complaint were allegedly caused by cargo restrictions imp

the KoreanGovernment and the entryof a Korean carrier into the trade cllrryina plywood previously carried by Retia u

terms and conditions of Agreement T 3323 The complaint also alleges that Holt may have enter tinto an unfiled se

agreement in connection with its perfonnance of tenninal services for Korean controlled cargo
PIERPOINT AND RELTA V HOLT 327

Neither the settlement agreement nor the record in this proceeding provides

any indication as to what the proposed SOO OOO payment by the Complainant

RetIa represents The Commission must know in detail what preexisting obli

gation of the Complainant ifany will be satisfied by this payment Ifthe obli

gation is a liquidated sum eg

a rental arrearage then the Commission must

know whether the proposed settlement fully satisfies that obligation or whether

it compromises any portion thereof Ifit represents a compromise the Commis

sion must know the amount identity of the obligation and the accrual date of

the obligation proposed to be compromised In short the settlement agreement

should make clear what is the quid pro quo for the SOO OOO payment

Accordingly any settlement agreement reached in this proceeding must be

filed with the Commission for a determination as to its section IS applicability

and if necessary approvability Such agreement must be complete and incor

porate all ofthe terms and conditions of settlement Ifdetermined to be subject

to section IS the agreement will be processed pursuant to the Commission s

usual procedures

This proceeding will be held in abeyance for a period of 30 days to allow the

submission of a revised settlement agreement If no settlement agreement is

submitted within that time the Commission will by further order direct the

Presiding Officer to resume proceedings on the complaint

THEREFORE IT IS ORDERED That the Presiding Officer s Order of

Discontinuance approving the proposed settlement agreement is vacated and

IT IS FURTHER ORDERED That this proceeding be held in abeyance

for a period of 30 days from the date of this Order to permit the submission

of a revised settlement agreement

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DocKET No 76 22

LAKES AND RIVERS TRANSFER CORPORATION

v

THE INDIANA PORT COMMISSION

1

i

NOTICE

November 28 1979

Notice is given that no appeal has been taken to the October 24 

dismissalof the complaint in this proceeding and that the time within wh

Commission could determine to review has expired No suchdeterminati

been made and accordingly the dismissal has become administratively f

8 FRANCIS C HURNEY

Secre
v

FEDERAL MARITIME COMMISSION

No 76 59

AGREEMENTS Nos T 331O AND T 331l

No 76 22

LAKES AND RIVERS TRANSFER CORPORATION

THE INDIANA PORT COMMISSION

I TERMINATION OF NO 76 22

2 ENLARGEMENT OF TIME FOR REPLY BRIEF IN NO 76 59

Finalized November 28 1979

I By its order served August 28 1979 the Commission approved a settle

ment agreement and six lease agreements Nos T 3762 T 3763 T 3764

T 3765 T 3766 T 3767 and T 3768 between the IndianaPort Commission

on the one hand and on the other the two principal stevedores Ceres Marine

Terminals Inc and Lakes and Rivers Transfer Corporation at Burns Water

way Harbor

Docket No 76 22 is a complaint proceeding which has been consolidated

with Docket No 76 59 an investigation instituted by the Commission

Lakes and Rivers agreed to withdraw its complaint in No 76 22 as part of

the settlement agreement above

Accordingly it is appropriate now that the settlement agreement T 3762

has been approved to note that the complaint in No 76 22 has been with

drawn and that proceeding No 76 22 has been terminated As a caveat it

should also be noted that the entire record in both proceedings remains the

record for any factual determinations as to the remaining issues in No 76 59

2 By motion filed October 12 1979 at 4 37 p

m Ceres Inc asks for an

enlargement of the time within which to file its reply brief in No 76 59 as to

the remaining issues in that proceeding Reply briefs were due on October 12

and Ceres request is tardy However since this proceeding has been underway

a long time during which the parties have resolved many of the issues and
greatly at a large dollar cost the additional ten days for Ceres to file its re

brief does not seem excessive Accordingly the request of Ceres is gran

without waiting the IS days allowed in the rules for replies to such a mot

and with no objection having been received to date When the reply brie

Ceres has been received and all matters have been duly considered an in

decision on the remaining issues in No 76 59 will be entered

8 CHARLES E MORGAN

Administrative Law Judg

October24 1979
BY THE COMMISSION RichardJ Daschbach Chairman Thomas

F Moakley Vice Chairman James V

Day and Leslie Kanuk Commissioners

FEDERAL MARITIME COMMISSION

DOCKET No 79 53

JOHN C GRANDON D B A CONSULSPEED SERVICES

INDEPENDENT OcEAN FREIGHT FORWARDER LICENSE No 2011

Respondent s freight forwarder license revoked for failure to comply with the Shipping Act 19 I6

and the Commission s Freight Forwarder Regulations

John Robert Ewers Joseph B Slunt and Alan J Jacobson for the Commission s Bureau of

Hearing CounseL

REPORT

November 30 1979

By Order served May 18 1979 John C Grandon d b a Consulspeed

Services Consu1speed a Commission licensed ocean freight forwarder was

directed to show cause why its forwarder license should not be revoked or

suspended for permitting Air Wings International Inc Air Wings an air

freight forwarder to perform ocean freight forwarding services under Consul

speed s name and license number in violation of section 44 e of the Shipping

Act 1916 46 U S c 843 e and sections 51O 23 a and 510 24 e of the

Commission s Rules 1 The hearing in this proceeding was limited to affidavits

of fact and memoranda of law

46 CF R fi510 23 areads in part

a No licensee shall permit his license ornameto be used by any person not employed by him for the performance orany freight

forwarding service No licensee may provide freight forwarding services through an unlicensed branch office or other separate

establishment without written approval orthe Federal Maritime Commission

46 CFR fi51O 24 e requires the licensee to certify on the ocean bill of lading before receiving compensation from a common

Cdrrier that it is operating under a

license i1Sued by the Commission and

h as performed in addition to the solicitation and securing ofthe cargo for the ship orthe booking of orotherwise arranging for

space for such cargo twoorrnGre orthe following services

I Thecoordination of the movement of the cargo to shipside

2 The preparation and p ing ofthe ocean bill of lading

3 Thepreparation and processing of dock receipts ordelivery orders

4 The preparation and processing of consular documents or export declarations

5 The payment of the ocean freight charges on the cargo
332 FEDERAL MARITIME COMMISSION

Consulspeed applied for and was granted by the Commission indep

ocean freight forwarder license No 2011 effective November 23 1977 

time Consulspeed wasgiven writtennotice ofthe requirement that itmu

duct its forwarding activities in accordance with the Shipping Act 19

the Commission s Freight Forwarder Regulations 46 C FR Part 51

Aroutine compliance check begun on August 2 1978 by Commission 

tigators revealed a close business relationship between Air Wings an air 

forwarder and Consulspeed 3The compliance check further disclose

between March 18 1978 and August 24 1978 Consulspeed had collecte

twelve ocean carriers 9 607 69 in brokerage fees The fees involved a

mately 229 shipments for which ocean freight forwarding services we

formed not by Consulspeed but by Air Wings under Consulspeed s na

license number 4While AirWings billed the shippers for the services re

Consulspeed collected compensation from the carriers on these same sh

even though it had not performed the services required by section 44 e 

Shipping Act and section 51O 24 e of the Commission s Rules s

Although Consulspeed did not deny the charges it contends that it 

willfully violate the Commission s rules and argues that revocation ofits 

freight forwarding license would be too harsh a sanction

The Commission s Bureau of Hearing Counsel submits thlt the num

shipments involved the amount of money collected and the duration 

violations together warrant a revocation of Consulspeed s license

DISCUSSION

The uncontroverted facts are that between March 18 1978 and Aug

1978 Consulspeed permitted Air Wings to use Consulspeed s name and 

number in the performance of ocean freight forwarding services on a

mately 229 shipments of Air Wings clients Consulspeed also collecte

kerage fees on these shipments even though it had not performed 

forwarding services required by the Shipping Act and the commission s 

Prior to and at the time ofthe il8ullrK eof the cen the Commission Offlco of f

reiht Forwardm JeI t Consuls

of tion 1 nd 44 of tho Shippina AcI 1916 46 US C 1I801 ncI843 nd of 46 C fR Pan 510

1

In hi affidllvit William L Ausderan 8Commfaion invatipcor 119 Chat Conlul pood whOllS only omployoo 

Mr Grandon occupies one room in Air Winofflcea for whieh Air Win pl l

the rent and that Air W

Consul pecd s records of fm ht compensation received and fees collected

The President of Air Winp IhUed when interviewod by Mr Ausdoran that with reSlrd to thQle shipments AirW

the carao prep8rcd Clport docUIMmalion pTO Iided drayqe to dockside arranged forpacklJinl and ratlnl

t

freight monicsand invoiocd the shlppors In return forthe offic espaoc it occupied Consullpeed was expected butap

not provide meucnpr and bankinlscrvica

Section 44e

provides in relevant part

0 A commoncarrier by water may compensate apetIOlIatrryjna on tho busln offorwardln to the extentofthe va

such carrier in connection with any shipment dispatthedonbehalf ofothenwhen and only when suhpenon illiconsc

uoo has performed with respect to suh shipment the solicitation and securing of the ClfIO forthe ship or the bo

otherwille arranalns for space for such carlo and at 1e8lt twoof the following MrVicec

I ThCl Ordination of the movement of the carJO to shiplido

2 The preparation and processing of the ocean biD of lacUna

3 The preparation and procclIl1Iina of dock receipts ordelivery orders

4 Thepreparation and proceuln of fOOIUl r mentJ ore rt declarations

5 The payment of the ocean freight charges on such shipments
S FRANCIS C HURNEY

Secretary

INDEPENDENT OCEAN FREIGHT FORWARDERS LICENSE NO 2011 333

Consulspeed s argument that the violations were not willful is not con

vincing 6

The principle is well established that an act is willful ifit is intentional

or if committed with careless disregard of statutory requirements 7

Consul

speed does not contend that allowing the use of its name and license number

or its own collection of brokerage fees were unintentional Moreover Consul

speed signorance of the Commission s rules appears to be due to its admitted

failure to take the time to read them Consulspeed s actions must beconsidered

therefore as willful

Consulspeed is therefore found to have willfully failed to comply with the

Shipping Act 1916 and the rules and regulations of the Commission pro

mulgated thereunder In view of the number and nature of these violations

EM C License No 2011 issued to John C Grandon d b a Consulspeed

Services is hereby revoked

It is so ordered

By the Commission

Shipping Act section 44d provides in relevant part

fA licensee s license may be suspended orrevoked for willful failure to comply with any provision of this Act orwith

any lawful order rule or regutation of the Commissioo promulgated thereunder Emphasis dded

1 Vs v

III Central

Ry

303 U S 239 242 243 1938 George Steinberg Son Inc v Butz 491 F 2d 988 994 2d Cir

1914 cerlden 419 US 830 l914 MisrlassifiCalion of Tissue Paper as Newsprint Paper 4 F M B 483 486 I

954
FEDERAL MARITIME COMMISSION

DOCKET No 77 42

P M CRANE SERVICE INC

v

PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY TEXAS

NOTICE

November 30 1979

Notice is given that no appeal has been taken to the October 29 1979 

continuance of this proceeding and that the time within which the Commis

could determine to review has expired Nosuch determination has been m

and accordingly the discontinuance has become administratively final

8 FRANCIS C HURNEY

Secreta
v

FEDERAL MARITIME COMMISSION

No 77 42

P M CRANE SERVICE INC

PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY TEXAS

MOTION FOR APPROVAL OF SETTLEMENT GRANTED

PROCEEDING DISCONTINUED

Finalized November 3D 1979

Complainant and respondent have filed a joint motion seeking approval of a

settlement which they have reached and ask for discontinuance of this proceed

ing This settlement if approved would bring to a conclusion at long last a

series of cases arising out of practices long since discontinued by respondent as

a result ofthe Commission s decision in Docket No 75 51 Perry sCrane Serv

ice Inc v Port of Houston Authority ofHarris County Texas 19 EM C 548

1977 That case as well as another similar complaint was settled with my

approval and my rulings of approval became administratively final by sub

sequent notice of the Commission See Docket No 75 51 cited Motion for

Approval ofSettlement granted June 21 1979 Commission Notice July 27

1979 Docket No 76 57 H H Cranes Inc v Port ofHouston Authority

ofHarris County Texas Motion for Approval ofSettlement granted July 10

1979 F MC Notice August 16 1979 19 SRR 547

As in the two previous settlements the present settlement represents a

successful effort on the part of both sides to avoid time consuming and costly

litigation which in all probability would benefit neither side economically re

gardless of who might have prevailed on the merits As was thesituation in the

two previous settlements the issue to be litigated here is that concerning the

amount of reparation which should be awarded to complainant because of

previous episodes in which he allegedly lost jobs and was displaced from jobs

already commenced As set forth in the Commission s decision in Docket No

75 51 the measure of damages depends upon a determination of financial

injury caused by bumping of complainant s cranes from jobs already com

menced as well as loss of jobs because of respondent s previous preferential

practices Counsel for both sides have spent considerable time attempting to
336 FEDERAL MARITIME COMMISSION

identify bumping episodes and attempting to formulate ameans to qu

the lost jobs aspect ofthe formula for damages This has proved to be a siz

task and should the matter have proceeded to a trial type hearing the 

factual disputes and the need for subsequent pleadings initial decision e

tions commission decision etc made it apparent that a settlement wou

far the wiser course of action Thus complainant has determined that a

ing a payment of 12 800 with costs as compensation for his injury wou

more prudent than to pursue the uncertainties of prolonged litigation

As I

explained in greater detail in the two previous rulings approving 

ments in Docket Nos 75 51 and 76 57 the Commission and courts 

settlements and exert every effort tofind them reasonable because of the s

policy discouraging needlessly expensive litigation Again as Iexplain

those previous rulings a settlement such as the present one does not rais

questions under other provisions of the Shipping Act 1916 i

e it doe

constitute an agreement subject to approval under section 15 of the Act 

does not involve tariff matters under section 18 b3 In short all it d

attempt to settle an issue ofdamages arising out of respondent s discon

practices which werefound to be unlawful under sections 16 and 17 ofthe 

With approval of this settlement the long history of litigation be

various private crane operators and the Port of Houston which began in 

will come to an end and will do so amicably The parties are commende

their sincere efforts to terminate these long controversies and in my o

have acted in the best traditions ofAmerican law in so doing According

Ifound in the two previous cases which were settled for similar reason

settlement which the parties have submitted for approval is reasonable v

no law or policy and fully comports with the Commission s policy whic

courages settlements Therefore subject to rule 227 c as amended ie 

ject to Commission review the settlement is approved and this complain

is discontinued

S NORMAN D KLINE

Administrative Law Ju

October29 1979
FEDERAL MARITIME COMMISSION

45 C FR PART 510 DOCKET No 78 53

INDEPENDENT OCEAN FREIGHT FORWARDER BIDS ON GoVERNMENT

SHIPMENTS AT UNITED STATES PORTS

December 5 1979

ACTION

SUMMARY

Discontinuance of proposed rulemaking

On December 12 1978 the Federal Maritime Commis

sion published a notice of proposed rulemaking 43 Fed

Reg 58098 with respect to practices of independent

ocean freight forwarders who submit bids to United

States Government agencies Afterfull consideration of

the issues and comments from interested parties the

Commission has decided that the adoption of a new rule

at this time is unnecessary

SUPPLEMENTAL INFORMATION

On March 18 1977 the Commission issued a decisionin Docket No 74 101

holding that fees assessed the General Services Administration GSA for

ocean freight forwarding services were in certain instances so low2

as to be in

violation of section 16 First of the Shipping Act 1916 46 U S C 815 and

the Commission s General Order 4 46 C F R 510

Section 16 First ofthe Shipping Act 1916 inter alia makes it unlawful for

a forwarder

To make or give undue or unreasonable preference or advantage to any particular person locality

or description of traffic in any respect whatsoever or to subject any particular person locality or

description of traffic to any undue or unreasonable prejudice or disadvantage in any respect

whatsoever

Rule 51 O 24b of General Order 4 provides

No Forwarder shall render or offer to render any forwarding service free of charge or at a

reduced forwarding fee in consideration of receiving compensation from an oceangoing com

mon carrier on the shipment

However in its decision in Docket 74 10 the Commission stated

I

Freight Forwarder Bids on Government Shipmems at Uniled States Ports Possible Violations ofthe Shipping Act 1916

and General Order 4 9 EM C619 1977

Fees as low as four and one half cents were being bid on GSA shipments
338 FEDERAL MARITIME COMMISSION

We are reluctant to establish binding rules of universal application governing the level of 

forwarder fees on the basis of the existing limited record The important matter of what o

standards if any should be adopted to judge the acceptability of forwarding OSA bids un

Shipping Act 1916 and the Commission s regulations is onethat requires considerably mo

and analysis We do not intend to take any precipitous action no matter how well motivate

might result in the establishment of requirements which could prove impossible of applica

unduly or unnecessarily disruptive of the freight forwarder industry Whatever standards ar

adopted must be well reasoned economically sound and consistent with responsible reg

policy We will therefore hold under advisement pending further study and review th

raised in ourOrder instituting this proceeding of whether the Commission s General O

should be amended to include a rule governing the practices of forwarders bidding o

contracts and providing services thereunder

After the above mentioned further study and review of the issu

concluded it appeared that a new rule might be the most effective meth

preventing the type ofunlawful practice found in Docket 74 10 3 The Com

sion therefore published a notice of proposed rulemaking 43 Fed Reg 5

instituting the instant proceeding Docket No 78 53 on December 12 

After consideration of all the comments submitted and carefully we

the advantages and disadvantages of the proposed rule the Commissio

determined that the benefits to be derived from a new rule do not cur

justify the burdens which would be imposed on the forwarding industry 

cordingly this proposed rulemaking proceeding will be discontinued

The Commission now gives notice that it intends to monitor the le

forwarder bids submitted to GSA and take whatever action it deems app

ate on a caseby case basis Appropriate action includes civil penaltie

license suspension or revocation

THEREFORE IT ISORDERED That Docket No 78 53 is discont

and

IT IS FURTHER ORDERED That notice of this Order be publish

the Federal Register

By the Commission

FRANCIS C HURNEY

Secret

Despite the findings in Docket 74 10 GSA 5nellt request ror bids produced hid as low as one cenl
FEDERAL MARITIME COMMISSION

46 cFR S508 DocKET No 78 33

AcrIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE

TO SHIPPING IN THE UNITED STATES EcUADOR TRADE

December 11 1979

ACTION

SUMMARY

Discontinuance ofProposed Rule

The proposed rule in this proceeding was designed to

counteract apparent unfavorable conditions to shipping

in the U S Ecuador trade An Ecuadorian Government

decree appeared to preclude a Norwegian registered ves

sel M V Lionheart from competing on the same basis

as other vessels Temporary relief was afforded through

U S Coast Guard waivers giving the vessel American

registry status These waivers are likely to continue until

a

replacement vessel is available and therefore no imme

diate need exists for continuing this proceeding

DATES Effective December 14 1979

SUPPLEMENTARY INFORMATION

This proceeding was instituted by notice ofproposed rule published Septem

ber 28 1978 43 Fed Reg 44554 The proposed rule could have suspended

tariffs ofTransportes Navieros Ecuatarianos in the trade between the U S and

Ecuador The proposal wasdesigned to counteract apparent unfavorable condi

tions to shipping created by the Ecuadorian Government in implementing its

Decree 7 78 in such a way as to preclude a Norwegian registered vessel in that

trade the M V Lionheart from competing on the same basis as othervessels

Ecuadorian law appeared to favor carriage by Ecuadorian and U S flag vessels

in this trade Issuance of a final rule wasdeferred when the US Coast Guard

granted a temporary waiver of survey inspection and measurement require

ments for the vessel in question in order to admit the vessel to American

registry thereby qualifying it for more favorable treatment underDecree 7 78

The U S Coast Guard on October 22 1979 has extended the waiver for the

M V Lionheart through September 30 1980 or until a

replacement vessel is

placed in operation whichever occurs first The Coast Guard also indicates that

a

replacement barge may be available as soon as March I 1980 Another new
340 FEDERAL MARITIME COMMISSION

vessel Ro Ro to be built in WestGermany has been contracted for del

scheduled for September I 1980

The proposed rule wasdesigned simply to afford the M V Lionheart 

from Decree 7 78 in regard to its U S Ecuador operations Coast G

waivers have provided effective relief It appears likely that such waivers 

continue until such time as a U S registered permanent replacement ves

available Ifit turns outthat this does not occur the Commission could re

a proposed rule for further comment No purpose is served by continuing 

proceeding and it is hereby ordered to be discontinued

By the Commission

FRANCIS C HURNEY

Secret
FEDERAL MARITIME COMMISSION

DOCKET No 79 6

PUERTO RICO MARITIME SHIPPING AUTHORITY AND

TRAILER MARINE TRANSPORT CORPORATION

PROPOSED REDUCED RATES

ORDER ON APPEAL FROM DENIAL OF

MOTION TO DISCONTINUE

December 11 1979

This proceeding is before the Commission upon the appeal ofTrailer Marine

Transport Corporation TMT from the ruling ofAdministrative Law Judge

Stanley M Levy denying TMTs motion to discontinue the proceeding

PROCEEDINGS

On December 22 1978 and January 5 1979 Puerto Rico Maritime Ship

ping Authority PRMSA filed revisions to PRMSA Tariff No 6 FMC F

No 7 which in effect imposed upon Charleston South Carolina the same rate

structure applicable to the Jacksonville and Miami Florida Puerto Rico

Trade TMT protested PRMSAs tariff filings and in addition reduced its

trailer load rates on Bakery Goods and Furniture N O S moving between

Jacksonville and Miami Florida and Puerto Rico PRMSAprotested TMTs

rate reductions after proposing to reduce its trailerload rates on Bakery Goods

and Furniture N O S in the Charleston South Carolina Jacksonville and

Miami Florida Puerto Rico trade

By Order of Investigation and Hearing served February 2 1979 the Com

mission instituted this proceeding to determine the lawfulness of the various

tariff revisions submitted by TMT and PRMSA Specifically that Order put

at issue I the validity of the rationale of Rates From Jacksonville Florida

to Puerto Rico to F MC 376 1967 cited by both TMT and PRMSA as

controlling authority in this case in light of changed circumstances since that

case was decided 2 the applicability of the Commission s decision in Rates

From Jacksonville to the factual situation in this proceeding and 3 the

compensatory level of PRMSAs reduced Charleston rates

Subsequently on February 28 1979 TMTwithdrew its protest to PRMSA s

tariffrevisions and filed a motion to discontinue the proceedings on grounds of
342 FEDERAL MARITIME COMMISSION

mootness which motion wasopposed by both PRMSA and the Commiss

Bureau of Hearing Counsel On the same date TMT filedrate increasesw

restored the prior level of rates on bakery goods and furniture moving i

South Atlantic Puerto Rico Trade PRMSA on March 12 1979 filed s

rate increases on bakery goods and furniture moving in the S

Atlantic PuertoRico Trade The Presiding Officer by Order served Marc

1979 denied TMT s Motion to Discontinue

TMT subsequently requested the Presiding Officer to reconsider his d

of TMTs Motion to Discontinue This request was opposed by PRMSA 

Hearing Counsel and denied by the Presiding Officer on April 9 1979 

matter is now before the Commission on appeal

THE PRESIDING OFFICER S DECISION AND POSITION OF THE PARTI

From the filing of TMTs Motion to Discontinue to the present there 

been no less thanfourteen 14 substantivefilinls in this matter Rather th

tempt to trace the development of the arguments and rulings through th

ord a

summary of the positions ofthe parties and the findings of the Pre

Officer should serve to fairly present the issues now before the Commiss

disposition

The basis of the Presiding Officer s refusal to discontinue this proceed

that TMT has since the institution ofthe proceeding filed new intermod

water rates on shipments of furniture and dry goods originating at 20 

tional inland points which affect the matter under investigation He exp

that while he could not on the basis of the record determine whether TM

in fact revivedthe rate differential it purported to have cancelled he wou

proceed further in this regard until the Commission advises whether it i

to assertjurisdiction overintermodal rates in this proceeding in view ofth

that this matterwasnot raised in the Commission s Order ofInvestigatio

Presiding Officer found that any inquiry into the efficacy of the Rates 

Jacksonville precedent would be purely theoretical at this point and st

alone would not warrant continuation of this matter He reached no de

however on the issue ofthe compensatory nature ofPRMSA s reduced

TMT has maintained that this proceeding is moot as there is no 

regulatory purpose to be served by its continuance TMT notes that 

cancelled its port taport rate reductions and withdrawn its protest a

PRMSAs rate reductions restoring rate parity on the port toport ra

contends that its intermodal rates should not be made an issue in this pr

ing because I these rates are not below its port topori rates precludin

possibility of cross subsidization of services 2 the Commission has no 

diction over its intermodal rates not only as to filing such rates but als

being entitled to any information concerning them and 3 PRMSA s i

tion of reduced through rates from the same inland points as TMTs sh

focus of this proceeding to an issue concerning only through rate comp

a matter over which the Commission has no jurisdiction Although T

willing to allow rate parity at this time it reserves its right under Rates 

Jacksonville to a rate differential in the future TMT concludes that 
PROPOSED REDUCED RATES 343

event no material issues of any practical effect allegedly remain to be decided

in this proceeding

PRMSA on the other hand urges the Commission not only to continue the

present proceeding but to broaden it to a general inquiry into TMTs overall

rate structure and the relationship between TMTs port toport rates and its

through rates PRMSA maintains that the cancellation ofTMTs reduction of

its port toport rates is a subterfuge and in fact TMT has revived the rate

differentials by red ctions in its through rates PRMSAalleges that TMT has

intentionally misled the Commission and that the reduced through rates seri

ously undercut PRMSAs port toport rates

PRMSAfurther asserts that the Commission has jurisdiction overthe water

portion ofTMTs intermodal rates l

and that the Commission does not need

jurisdiction over the through rates to prevent the cross subsidization of those

rates by the port to port rates PRMSA maintains that TMT continues to

enjoy a rate differential under Rates From Jacksonville to which it is not en

titled is engaging in unlawful destructiveprice competition and discrimination

and is attempting to evade the Commission s

regulation ofits port toport rates

through the use of intermodal rates It further argues that even without juris

diction over intermodal rates the Commission has an obligation to regulate

port toport rates and has the right to obtain information necessary to perform

this function This proceeding is allegedly sufficiently broad in scope to permit

an inquiry into the effect ofTMTs intermodal rates on the port to port rates

PRMSAbelieves that the Rates From Jacksonville issue is viable and that the

Commission can in fact order TMT to establish a rate differential in PRMSAs

favor

Hearing Counsel opposes a discontinuance of this proceeding but does not

agree with PRMSA that its scope should be expanded It argues that this

proceeding should not be discontinued until the principles established in Rates

From Jacksonville are thoroughly reexamined Hearing Counsel points out

that while TMT has withdrawn the rate actions at issue in this proceeding it

nevertheless asserts continuing rights underthat case Hence a valid regulatory

purpose exists in pursuing this matter to a final conclusion

As to the effect ofTMTs intermodal rate reductions on its port to port rates

and the competitive effect of such action on PRMSA Hearing Counsel is of

the opinion that while there may be validity to PRMSAs contentions in this

regard these matters could not be addressed without a

restructuring of this

proceeding or the institution of a new proceeding Hearing Counsel suggest

that if the Commission is inclined to address this matter further it should

consider the impact of the court s stay order in Trailer Marine Transport

Corporation v Federal Maritime Commission 602 F 2d 379 D C Cir

1979 2

I PRMSA cites In Fe Trailer Marine Transport Corporation Joint Single Factor RaIl S Puerto Rico Trade 20 F M C 24

1978

Further argument was advanced by Hearing Counsel regarding the impact and effect of the courts stay in that proceeding

However in light of the court s intervening decision on the merits in the case discussed infra further discussion on this point is

unnecessary
j

344 FEDERAL MARITIME COMMISSION

Finally Hearing Counsel notes that even if it is assumed that TMTs 

toport rates are subsidizing the intermodal rates the only available rem

would be a reduction in TMTs port toport rates an action which w

reestablish the rate differentials challenged in this proceeding

DISCUSSION

Intermodal Rates

This case does not involve a question of whether the local rates at issu

unreasonably high in relation to through rates but whether they are sta

alone unreasonably low The reasonableness of any rate differential bet

TMTs

through rates and its port toport rates is amatter beyond the sco

this investigation Therefore the reduced rates of TMT having been canc

and its protest against PRMSA s rates having been withdrawn the Com

sion perceives no valid regulatory purpose in continuing this proceeding o

issue

However even ifthe Order of Investigation in this proceeding had inc

an examination of TMT s

through rates it would still be affected by the r

decision of the United States Court of Appeals for the District of Colu

Circuit in Trailer Marine Transport Corporation v Federal Maritime 

mission supra reversing in part and remanding in part the Commiss

order in In re Trailer Marine Transport Corporation Joint Single F

Rates Puerto Rico Trade supra The court held that the Federal Mar

Commission lacks jurisdiction overjoint through rail water rates in the P

Rican domestic offshore trades beginning or ending at an inland U S poin

cannot require a carrierto file such rates with it The court also determined 

any demand by the Commission for information concerning interm

through rates must articulate a basis therefor sufficient to allow a revie

court to determine that the Commission has given reasoned considerat

all the material facts and issues and pertinent factors at stake in the age

order This court decision clearly imitsthe Commission s authority to e

ine TMTs

through rates in this or in any other proceeding

The question remains however as tothe mannerand extent the Commi

may examine and consider through rates in its investigations of port to

rates such as the subject proceeding Local rates set at unnecessarily 

levels merely to facilitate the movement of cargo under through rates 

inland points could be prejudicial to cargo originating at ocean ports 

would present a situation that the Commission can and should regulate

Considered in the context of this proceeding however the only app

remedy available to the Commission to prevent cross subsidization would

order TMT to lower its local rates an actionwhich would restore the ver

differential protested in this matter Without the authority to directly reg

through rates the Commission s ability to prevent unreasonable 

subsidization ofrates becomes somewhat tenuous In any event this proce

is not the proper vehicle for the Commission to deal with the matter o
PROPOSED REDUCED RATES 345

cross subsidization of rates in a comprehensive and effective manner Legis

lative action may be required to resolve this matter completely

Application ofRates From Jacksonville

The cancellation of the rate differential put at issue in this proceeding

obviates the need for any further hearing on the applicability of Rates From

Jacksonville PRMSAs contention that the cancelled differential has been

revived in the form of through rates is somewhat undermined by its own action

in instituting reduced through rates in the South Atlantic Puerto Rico Trade

In terms ofcarrier competition which was the primary concern ofRates From

Jacksonville through rates generally compete with through rates and local

rates generally compete with local rates It is only in terms of the internal

revenue needs of carriers and the potential discriminatory effect of their rate

structures that the through rate tolocal rate relationship and the overall rate

structure of the carrier become relevant Therefore even if it is assumed that

TMT has instituted through rates substantially lower than PRMSAs local

rates this does not necessarily put Rates From Jacksonville at issue Moreover

it is clear that the Commission may not order TMT to increase its through

rates to prevent such a differential PRMSAs suggestion that the Commission

order TMT to increase its local rates is without merit in terms ofremedying

a through rate differential Furthermore such a remedy could only be ordered

by a finding that PRMSA rather than TMT is entitled to a favorable rate

differential under Rates From Jacksonville an inquiry not contemplated by

the Order instituting this proceeding

The applicability of the principle established in Rates From Jacksonville is

based to a large extent upon the factualcircumstances presented in that case

3

It does not stand for the proposition that TMT has a right to a discretionary

rate differential Clearly TMT has not and in view of its motion to discon

tinue will not allege facts in this case to bring it under the rationale of that

precedent We agree with the Presiding Officer that a continuation of this

proceeding is not warranted solely for the purpose of further examining this

theoretical legal issue

PRMSAa Reduced Rates

There remains the matter of the legality of PRMSAs reduced rates from

Charleston South Carolina Because these rates are now in effect Commission

action on these rates could still have a practical consequence However these

rates were investigated to determine the validity of TMTs allegations in its

protest against them Although the withdrawal ofTMTs protest does not of

itself moot the issue it does remove the principal motivation for the inquiry into

J

In Roles From JacksonviJJe the Commission ordered a

rate differential under circumstances where I a

servicehandicapped

carrier had reduced its rates to a compensatory minimum 2 the carrier had beenput into receivership and might havebeen forced

to discontinue service and 3 the service of that carrier was deemed to be essential to the public interest The general principle

involved in that case hat the Commission may regulate rales SOas to preserve and falter meaningful yet stable carrier competition

can not seriously be questioned However difference in quality of service alone in any case isnot sufficient to justify the pre

scription of a

rate differential Reduced Rates Atlantic Coast Pons to Puerto Rico 9 EM C 147 1965
346 FEDERAL MARITIME COMMISSION

the rates Moreover the matter does not appear to be of immediat

significant concern to either TMT or Hearing Counsel Under the circ

stances pursuing this matter would not appear to serve any valid regula

purpose or warrant the expenditure of resources that such further procee

would entail These considerations warrant the discontinuance of the 

vestigation ofPRMSA s reduced rates

THEREFORE IT IS ORDERED That the Presiding Officer s rulin

April 9 1979 denying TMTs Motion to Discontinue this proceeding is 

cated and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secreta
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 671

ApPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF ALIMENTA USA INC

ORDER ON REMAND

December 11 1979

This proceeding was instituted pursuant to section 18 bX3 of the Shipping

Act 1916 46 U S C 817 b 3 upon the application of Sea Land Service

Inc for permission to waive a portion of certain freight charges to Alimenta

USA Inc Administrative Law Judge Joseph N Ingolia served an Initial

Decision on August 29 1979 granting Sea Land s application Although no

exceptions were filed the Commission on its own motion determined to review

the Initial Decision

It appears from the Initial Decision that the shipment at issue may have

predated the negotiation of amodified rate Ifso the waiver requested must be

denied The purpose of the proviso clauses in section 18 b 3 is to allow the

ocean carrier to correct tarifffiling errors which result in freight charges other

than those intended I

Clearly this section requires that the carrier be legally

able to file the rate negotiated in the first instance If for example a shipment

has already commenced before a lower rate is negotiated the tariff rate

charged is not only not being assessed as a result of an error but the carrier

cannot publish post hoc a tariff rate which would apply to that shipment

2

In

this example the carrier would be charging and the shipper would be paying

exactly the tariff rate understood to be applicable Ifsuch is the case in the

proceeding here under consideration then the relief requested ie waiver of

the difference in freight charges cannot be granted

House Report No 920 November 14 1967 to accompany H R 9473 90thCongress 1st Sess 1967 which amended section

18 b 10 grant waiver and refund authority states

Section 18 b

appears 10 prohibit the Commission from authorizing relief where through bona fide mistake on the part of the

carrier the shipper ischarged morethan he understood the rate to be For example a

carrier after advising ashipper that he intends

to lilea reduced rate and thereufter fails to file the reduced rate with the Federal Maritime Commission must charge the shipper

under the aforementioned circumstances the higher rates

In Munoz y

Cabrera If Sea LandService

Inc

20 F M C 152 153 1977 the Commission said

I t is clear that the new tariff isexpected to reflect a prior intended rate not arate agreed upon after shipment
348 FEDERAL MARITIME COMMISSION

Here the tariff rate assessed wasa joint intermodal rate for a through 

ocean movement The shipment in question was being loaded in Jackson

Florida to begin the oceanleg of the through movement on February 21 1

six days after a new tariff rate had been negotiated between Sea Land 

Alimenta The record does not show thedate of shipment ofthe land leg o

through movement from Panama City Florida to Jacksonville Therefor

order for the Commission to adequately determine whether this shipment 

for the purposes of section 18 bX3 applicability already begun when the 

rate was negotiated additional facts are necessary

A final point requires discussion The Presiding Officer found that 

waiver only applies to the ocean portion of the through charge Howeve

rate applicable to the shipment in question absent awaiver and the rate so

to be applied are through intermodal rates Nowhere in the decision is th

discussion ofthe portion of this rate which accrues to the ocean carrier an

are ofthe opinion that it is unnecessary to focus on the ocean portion Rec

in its Order on Remand in Special Docket 666 App ication of Sea 

Services Inc for the Benefit of New Era Shipping as Agent for Ce

National Corporation served November 21 1979 the Commission po

out that similar language was potentially misleading advising that The 

portant fact in all special docket applications involving intermodal rates is 

the refund or waiver not affect the land portion of the through rate 

statement which applies equally here is intended to make clear tha

division accruing to the land carrier participating in the intermodal move

overwhich the Commission has no regulatory jurisdiction can in no w

altered by the grant of an application for waiver or refund

THEREFORE IT IS ORDERED That this proceeding is remanded 

Presiding Officer for the receipt ofevidence regarding the date onwhich the

ment in question was tendered to the first participating carrier and accept

that carrier for commencement of the through movement and the issuan

a supplemental Initial Decision consistent with the directions of this Orde

By the Commission

S FRANCIS C HURNEY

Secret
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

DOCKET No 79 80

SALOU TRADING CORPORATION

v

SEA LAND SERVICE INC

NOTICE

December 14 1979

Notice is given that no appeal has been taken to the November 9 1979

dismissal of thecomplaint in this proceeding and thatthe time within whichthe

Commission could determine to review has expired No such determination has

been made and accordingly thedismissal has become administratively final
FEDERAL MARITIME COMMISSION

No 79 80

SALOU TRADING CORPORATION

v

SEA LAND SERVICE INC

MOTION TO DISMISS GRANTED

Finalized December 14 1979

On July 27 1979 the complainant Salou Trading Corporation filed a c

for overpayment of freight against the respondent Sea Land Service Inc 

the amount of 5S 370 70 under section 18 a Shipping Act 1916 46 V

S 817 It alleged that the respondent had charged the incorrect rate fo

transportation of feathermeal in bulk in containers

The parties agreed to the shortened procedure set forth in Subpart K o

Commission s Rules of Practice and Procedure and an amended complain

filed On October 16 1979 prior to the filing of a response the compla

moved to dismiss his complaint He states

Since the time of this shipment petitioner is informed and believes that the tariff has 

amended and the amendments have corrected many of the problems which gave rise 

misapplication of the tariff as alleged in this action As a result of these changes petitioner be

continuation of the present proceeding would not be in its best interests It therefore respe

requests that the action be dismiased with each party to bear its own costs if any

Wherefore since the complainants motion to dismiss is unopposed b

respondent and since the issue is a narrow one involving no other partie

intervenors it is

Ordered that the motion to dismiss is granted and the proceedin

discontinued

S JOSEPH N INGOLlA

Administrative Law Jud

November 9 1979
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER A GENERAL PROVISIONS

DOCKET No 79 52 GENERAL ORDER 16 AMDT 33

PART 502 RuLES OF PRACTICE AND PROCEDURE

FILING OF PETITIONS FOR RECONSIDERATION AND STAY

December 21 1979

Final Rule

Rule 261 is revised to limit the grounds upon which peti

tionsfor reconsideration offinal decisions or ordersof the

Commission may be sought andto restrict the filing ofpe

titions for stayofCommission orders Apetition for recon

sideration will be subject to summary rejection unless it

specifies that 1 there has been a changelin material fact

or applicable law which has occurred after issuance of

the decision or order 2 such decision or order contains

a substantive error in material fact or 3 it addresses a

matter on which the party had not previously had the

opportunity to be heard Apetition for stay of aCommis

sion order directing the discontinuance of a statutory

violation will not be received

EFFECTIVE DATE February 8 1980

SUPPLEMENTARY INFORMATION

This proceeding was instituted by a Notice of Proposed Rulemaking pub

lished in the Federal Register on May 23 1979 44 Fed Reg 29936 37 The

Commission proposed to limit the grounds upon which petitions for reconsid

eration and stay would be entertained In response to the notice comments

were received from Matson Navigation Company Military Sealift Command

Maritime Administrative Bar Association Sea LandService Inc the law firm

ACTION

SUMMARY
352 FEDERAL MARITIME COMMISSION

of Coles and Goertner Cummins Engine Company Inc and four co

ences in a joint comment

Matson would add language to the proposed rule which wouldpermit re

sideration of a finding or conclusion which was not addressed in the brie

arguments of the parties or to which reply was not afforded MABA tak

similar position and suggests specifically that the Commission s proposal sh

not apply to conditional approvals of section 15 agreements where the pa

have not had the opportunity to address the conditions imposed by the C

mission and to final rules which contain provisions upon which the public 

not had the opportunity to comment We agree that petitions for reconsid

tion may be appropriate in such instances and as the parties indicate 

avoid costly court litigation of issues which the Commission should first 

sider We have therefore modified the rule to provide for such petition

instances where the Commission s order contains a finding conclusion or o

provisions upon which the parties have not previously had the opportuni

comment or which wasnot addressed in the briefs or arguments of any part

MSC s three recommendations can be considered together They wou

strict our proposal even further limiting reconsideration to matters which c

not be raised in a petition to reopen Concurrently with this they would c

a new right to file a supplementary memorandum of law and clarify th

motion to reopen can be based only on a change in law These proposal

unnecessary Asupplementary memorandum can be made under existing 

to the Presiding Judge or the Commission MSC s interpretation of the 

for reopening a proceeding is erroneous the Commission s Rule 230 a m

clear that reopening can be made solely upon a change in fact or law M

proposed revision is therefore more restrictive thanour proposal and isreje

In addition to the comments addressed above MABA also wants to pre

the right of petition for reconsideration in the event the Commission 

official notice of matter in its decision This concern is adequately covere

Rule 226

The conferences primary recommendation is that counsel submit a c

cate that the petition for reconsideration or stay is submitted in good 

While the Commission s rules on discovery require such a certificate in ce

instances it is based on the fact of negotiations between counsel for va

parties A certificate based on any attorney s subjective judgment is qu

different matter and would not necessarily eliminate repetitious argument 

conferences recommendation is therefore rejected

Sea Land seeks to expandthe rule to provide for reconsideration where

is a substantive errorof law or fact in the Commission decision or orde

adopt Sea Land s suggestion in full would frustrate the intent of this pro

to prevent the filing of petitions containing repetitive arguments overdive

legal interpretations However Sea Lands proposal has some merit insof

it would base a petition on a substantive errorof fact Accordingly the 

rule will incorporate this provision

Far East Conference Inter American Freisht Conference Atlantic and Gulf Indonesia Conforence and Atlantic a

Singapore Malaya and Thailand Conference
RULES OF PRACTICE AND PROCEDURE 353

Coles proposes three bases for a petition for reconsideration The first is

new matter which is described a new matters or new issues It is difficult

to see how this differs from the language of the proposed rule which provides

for consideration of a petition for reconsideration upon a change in material

fact or applicable law We perceive no difference between new and

changed matter The other two comments by Coles deal with petitions based

on errors in fact and the use ofofficial notice subjects which have already been

dealt with in the discussions of the comments filed by Sea Land and MABA

respectively

A further Coles comment relates to the proposal that petitions for stay will

not be entertained if a violation of the shipping statutes has been found Coles

points our that such a finding can involve a close question of fact or law The

firm also points out that at least some Federal courts require that a petition for

stay be made to the agency beforeit can be filedwith thecourt Insofar as court

practice is concerned it is doubtful that a court would require a party to file

a petition for stay when the filing of such a petition is expressly precluded by

agency rule We remain unpersuaded by the basic thrust of Coles argument

As we stated in the Notice of Proposed Rulemaking the public interest re

quires that practices violative of the law should not be permitted to continue

We have reworded the final rule to specify that the rule applies in proceedings

where the Commission has directed the discontinuance of conduct found to be

violative of the law

Wehave also eliminated reference to orders and decisions ofthe Administra

tive LawJudges this ruleis not applicable to those ordersanddecisions

Cummins would retain the right ofpetition for reconsideration in informal

dockets Upon reflection we agree that petitions for reconsideration in informal

dockets should be governed by the general rule and have modified our proposal

accordingly

Therefore pursuant to section 4 of the Administrative Procedure Act

5 U S c 553 and sections 22 and 43 ofthe Shipping Act 1916 46 U S c

82l and 84l a section 261 of Part 502 is revised to read as follows

502 261 Petitions for Reconsideration and Stay

a Within 30 days after issuance of afinal decision ororder by the Commission any party may

tile a petition for reconsideration Such petition shall be served in conformity with the requirements

of Subpart H of this Chapter A petition will be subject to summary rejection unless it I specifies

that there has been a change in material fact or in applicable law which change has occurred after

issuance of the decision or order 2 identifies a substantive error in material fact contained in the

decision or order or 3 addresses a finding conclusion or other matter upon which the party has

not previously had the opportunity to comment or which was not addressed in the briefs or

arguments of any party Petitions which merely elaborate upon or repeat arguments made prior

to the decision or order will not be received A petition shall be verified if verification of original

pleading is required and shall not operate as a stay of any rule or order of the Commission

b A petition for stay of a Commission order which directs the discontinuance of statutory

violations will not be received Rule 261

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 664

APPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF HAYNES fuRNITURE CO INC ET AL

REPORT AND ORDER ADOPTING INITIAL DECISIO

December 27 1979

This proceeding was instituted pursuant to section 18 b3 ofthe 

Act 1916 46 V S C 5817 upon the applicationof Sea LandService 

permission to waive 1 257 24 of the applicable freight charges on 

ments of furniture parts and components shipped between January 

and March 3 1979 from Taipei and Kaohsuing Taiwan via ocean 

Oakland and Long Beach California then via rail carrier to the Port

York Philadelphia Norfolk and Savannah

Administrative Law Judge Charles E Morgan served his Initial De

October 22 1979 granting Sea Land sapplication Noexceptions were

the Commission on its own motion determined to review the Initial 

The findings and conclusions ofthe InitialDecision are well founde

and are adopted However amplification is needed concerning a point 

the Initial Decision The Presiding Officer found that The requeste

will apply only to the ocean portion of the through charge Howeve

applicable to the shipment in question absent a waiver and the rate 

be applied are through intermodal rates Nowhere in the decision 

discussion of the portion of this rate which accrues to the ocean carri

are of the opinion that it is unnecessary to focus on that portion Re

its Order on Remand in Special Docket 666 Appltcation ofSea La

ice Inc for the Benefit ofNew Era Shipping as Agent for Central 

Corporation served November 21 1979 19 SRR 1088 the Co

pointed out that similar language was potentially misleading advi

The important fact in all special docket applications involving in

rates is that the refund or waiver not affect the land portion of the 

rate This statement which applies equally here is intended to m

that the division accruing to the land carrier participating in the in

movement over which the Commission has no regulatory jurisdictio

noway be alteredby thegrant ofanapplicationfor waiver orrefund
APPLICATION OF SEA LAND SERVICE INC 355

THEREFORE IT IS ORDERED That the Initial Decision issued in this

proceeding as clarified by the above discussion is adopted and

IT IS FURTHER ORDERED That applicant shall publish promptly in its

appropriate tariff the following notice

Notice is hereby given as required by the decision of the Federal Maritime Commission inSpecial

Docket 664 that effective January 31 1979 for purposes of refund or waiver of freight charges

on any shipments which have been shipped during the period from January 31 1979 through

March 16 1979 the rate from Taiwan on furniture parts and components is 67M subject to all

rules regulations terms and conditions of said rate and this tariff

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 664

ApPLICATION OFSEA LAND SERVICE INC

FOR THE BENEFIT OF HAYNES FURNITURE CO INC ET AL

Adopted December 27 1979

Application for permission to waive 1 257 24 of the applicable freight charges granted

INITIAL DECISION 1 OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

By application timely mailedon July 27 1979 pursuant to Rule 92 a 

Commission s Rules of Practice and Procedure 46 C F R 502 92 

section 18 b 3 of the Shipping Act 1916 the Act the applicant Se

Service Inc seeks permission to waive a total of 1 257 24 of the app

freight charges on ten shipments of furniture parts and components 

from Taipei portof10ading Keelung and from Kaohsiung portofloa

Kaohsiung Taiwan via ocean carrier to the Ports of Oakland and 

Beach California thence via rail carrier to the Ports of New York P

phia Norfolk and Savannah bills of lading dated January 30 1979 an

latest bill oflading dated March 2 1979 and sailing dates January 31 

and later latest sailing date March 3 1979

The application is for the benefit of the consignees the Haynes Fu

Co Inc Norfolk Virginia one shipment L B Products Corp 

New York one shipment Manow International Corporation New 

New York one shipment Marlon Creations Inc Long Island Cit

York one shipment Rachlin Furniture Inc Philadelphia Pennsylvan

shipment and Universal Furniture Industries Inc North Brunswic

Jersey and Atlanta Georgia five shipments

The consignees listed above paid total freight charges on the ten sh

of 22 262 93 except that Rachlin Furniture Inc did not pay and 

freight charges on its shipment were prepaid by the shipper Jardine Ent

Ltd in the amount of 2 583 16 bill of lading No 970 190051

I

This decision will become the decision of the Commission in the absence of review thereof by the Commission Rule 

of Practice and Procedure 46 CF R 502 227
APPLICATION OF SEA LAND SERVICE INC 357

The requested waiver will apply only to the ocean portions of the through

charges on the ten shipments

At the time of movement of the shipments the applicable basic freight rate

was 71 per ton of one cubic meter M or 88 per ton of 1 000 kilos W

whichever produces the greater revenue Generally measurement tons were

over three times as great as the weight tons of the ten shipments and in all

cases the 71 M ton rate was applicable item No 0990 75 of the pertinent

tariff of Sea Land

The rate sought to be applied on these shipments is 67 M intended to be

effective January 25 1979 This rate was intendedto match the all water 67 M

rate of the New York Freight Bureau HK Independent Lines Rate Agree

ment FMC Agreement No 10108 Sea Land is a member of Agreement

No 10108 but Agreement No 10108 lacks intermodal ocean rail authority

Prior to March I 1979 Sea Land published its own all water tariff but with

the filing of a common tariff for all members of Agreement No 10108

Sea Land s all water tariff was canceled effective March I 1979

A telegraphic message wastransmittedon January 22 1979 from Sea Land s

Hong Kong office to its TariffPublications office in Menlo Park New Jersey

requesting publication of various rates to match No 10108 including the pub

lication in item 0990 75 of a special rate of 67 Mon furniture parts and com

ponents to bepublished in boththe all water and minibridge ocean rail tariffs

ofSea Land However because of clerical error only the all water tariff was

amended

The clerical error of non publication of the 67 M rate in the minibridge

tariff was discovered and subsequently corrected effective March 16 1979

14th revised page 120 Sea Land Freight Tariff No 325 F MC No 148

This wasafter the subject shipments had moved and before the subject applica

tion was filed Also effective July 26 1979 22nd revised page 120 ofthe mini

bridge tariffdeleted an expiration date for the 67 Mrate and its geographical

restriction to Taiwan thus making item 0990 75 the same geographically as

it was before the shipments moved and when they moved

In the application as originally filed Sea Land stated that it was conducting

an internal audit to determine if additional shipments of the same commodity

herein were made during the period in issue By letter dated August 30 1979

from Mr Frank A Fleischer Sea Land states that only the ten shipments

listed in this application were affected by the delayed filing of the 67 M re

duced rate

In addition to the ocean rail freight charges one shipment was subjected to

a container handling charge at the origin port which was prepaid by the

shipper and four shipments were subjected to a container service charge at

destination points paid by the consignees These charges are not in issue herein
358 FEDERAL MARITIME COMMISSION

The furniture parts and components measured as follows

Original Billoflading No

980 143923

970 189158

970 186309

970 188202

970 190051

980 141958

980 141959

980 143581

980 144632

980 144677

Cubic Meiers

32 81

32 99

29 08

0 79

14 44

40 50

40 77

35 50

43 22

44 21

Total 314 31

Notc On two bills oflading there were other commodities lilted which are

not affected by this decision Their measurements totalled 25 56 cubic meters

The total cubic meters above of 314 31 times the 4

per ton M differe

in the applicable rate of 71 and sought rate of 67 results in 1 257 24 

total waiver sought

The statutory requirements have been met It is concluded and found 

there were errors of administrative or clerical nature in that the Sea L

intended rate of 67 meant to match the Agreement No 10108 rate of 

was not published in Sea Land s intermodal ocean rail tariff prior to 

movements of the ten shipments in issue that the intended rate was m

effective after the ten shipments moved and prior to this application that 

application was timely filed and that the authorized waiver herein will 

result in discrimination among shippers

The applicant is authorized to waive a total of 1 257 24 of the applic

freight charges Charges on the sought basis have been collected An appro

ate notice of this matter and of the rate on which the waiver is based sha

published in the pertinent tariff

WASHINGTON D C

October 17 1979

8 CHARLES E MORGAN

Administrative Law Judg
FEDERAL MARITIME COMMISSION

SPECIAL DocKET No 655

ApPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF TRADE WINDS IMPORTING CO

Adopted December 27 1979

Application for permission to waive 708 29 of the applicable freight charges granted

INITIAL DECISION OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

By application mailed on June 29 1979 and timely filed on Monday July 2

1979 pursuant to Rule 92 a of the Commission s Rules of Practice and

Prcedure 46 C F R S502 92 a and section 18 b 3 of the Shipping Act

1916 the Act the applicant Sea Land Service Inc seeks permission to

waive 708 29 of the applicable freight charges on two shipments of footwear

all kinds from Singapore via ocean carrier to Oakland California thence via

rail carrier to Norfolk Virginia bills of lading dated January 2 1979 and

sailing date the same

The application is for the benefit of the consignee the Trade Winds Im

porting Co of Lynchburg Virginia which paid freight charges on the two

shipments in the aggregate amount of 4 654 25

The requested waiver will apply only to the ocean portion of the through

charge

At the time of movement of the two shipments the applicable basic rate on

the footwear was 81 M per cubic meter subject to containerservice charges

to cover handling at the destination ports In addition one shipment was

assessed a container handling charge at the port of Singapore which charge

was prepaid by the shipper Ace Rubber MFY PTE LTD and this charge

is not in issue herein The issues relate to the ocean freight charges and

destination charges paid by the consignee Trade Winds Importing Co

One of the two shipments measured 14 39 cubic meters Basic applicable

charges on this shipment at the 81 M rate are 1 165 59 The destination

container service charge of 5 per revenue ton applied on cargo delivered ex

I

Thisdecision will become the decision of the Commission in the absence of review theroof bythe Commission Rule 227 Rules

of Practice and Procedure 46 CF R 502 227
360 APPLICATION OF SEA LAND SERVICE INC

THEREFORE IT IS ORDERED That the Initial Decision issued in 

proceeding as clarified by the above discussion is adopted and made a 

hereof and

IT IS FURTHER ORDERED That applicant shall publish promptly 

appropriate tariff the following notice

Notice is hereby given as required by the decision of the Federal MaritimeCommission in S

Docket 655 that effective January 2 1979 for purposes of refund or waiver of freight charg

any shipments which have been shipped during the period from January 2 1979 through Janua

1979 the rate from Singapore on footwear all kinds is 70W subject to all rules regula

tenus and conditions of said rate and this tariff

S FRANCIS C HURNEY

Secreta

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission
FEDERAL MARITIME COMMISSION

SPECIAL DocKET No 655

APPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF TRADE WINDS IMPORTING CO

Adopted December 27 1979

Application for permission to waive 708 29 of the applicable freight charges granted

INITIAL DECISION OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

By application mailed on June 29 1979 and timely filed on Monday July 2

1979 pursuant to Rule 92 a of the Commission s Rules of Practice and

Prcedure 46 C F R 502 92 a and section 18 b 3 of the Shipping Act

1916 the Act the applicant Sea Land Service Inc seeks permission to

waive 708 29 of the applicable freight charges on two shipments offootwear

aU kinds from Singapore via ocean carrier to Oakland California thence via

rail carrier to Norfolk Virginia bills of lading dated January 2 1979 and

sailing date the same

The application is for the benefit of the consignee the Trade Winds Im

porting Co of Lynchburg Virginia which paid freight charges on the two

shipments in the aggregate amount of 4654 25

The requested waiver will apply only to the ocean portion of the through

charge

At the time of movement of the two shipments the applicable basic rate on

the footwear was 81 M per cubic meter subject to container service charges

to cover handling at the destination ports In addition one shipment was

assessed a container handling charge at the port of Singapore which charge

was prepaid by the shipper Ace Rubber MFY PTE LTD and this charge

is not in issue herein The issues relate to the ocean freight charges and

destination charges paid by the consignee Trade Winds Importing Co

One of the two shipments measured 14 39 cubic meters Basic applicable

charges on this shipment at the 81 M rate are 1 165 59 The destination

container service charge of 5 per revenue ton applied on cargo delivered ex

I

This decision will become the decision of the Commission in the absence of review thereof by the Commission Rule 227 Rules

of Practice and Procedure 46 CER 502 227
362 FEDERAL MARITIME COMMISSION

containers at carrier s

freight station This charge amounts to 7195 ma

total applicable charges payable by the consignee on this shipmen

1 237 54

The second of the two shipments measured 50 cubic meters and 

applicable charges at the 81 M rate were 4050 The destination conta

service charge of 1 50 per revenue ton applied on cargo delivered in con

ers at carrier s yard This charge amounts to 75 making total applic

charges payable by the consignee on this shipment of 4 125

Aggregate applicable charges payable by the consignee on the two shipm

herein are 5 362 54 The consignee paid total charges on the basis so

herein of 4654 25 Thus the application seeks waiver ofthe difference w

is 708 29

The basic rate sought to be applied is 70 W per cubic meter and cha

on this basis plus applicable destinations charges result in the total so

charges on the two shipments of 4654 25

Sea Land Service is a member of the Straits New York Confer

SNYCON FMC Agreement No 6010 which governs the all water 

from the Republic of Singapore and WestMalaysia to U S Atlantic and 

Ports SNYCON lacks intermodal ocean rail authority Consequently 

modal ocean rail shipments such as the two shipments herein move u

Sea Land s own tariff This tariff generally reflects the same level of rat

published by the all water conference SNYCON

During December 1978 SNYCON published a reduced rate on footw

all kinds of 70 M effective January I 1979 Reacting to this action 

Lands Hong Kong office requested Sea Land s MenloPark New Jersey 

to match the SNYCON rate effective January I 1979 Telex message ac

ingly was sent on December 21 1978 and received the same date in 

Jersey and was forwarded the same day via interoffice mailto the Tariff 

lications office of Sea Land

Normally the Tariff Publications office received telex proposals betwee

and four hours after theirreceipt in the telex room But in the present ca

telex proposal was stamped in the Tariff Publications office one week lat

December 28 1978

Even then there was time to meet the requested effective date for th

rate of January I 1979 but there was a second delay or second error in 

the proposed rate wasassigned an effective date of January 12 1979

Applicant states that there are no other shipments of the same or s

commodity which moved on its line during the same period of time as th

shipments in issue

The statutory requirements have been met It is concluded and found 

there were errors of administrative or clerical nature in that the rate in 

was not made effective prior to the movement ofthe two shipments tha

intended rate was made effective after the two shipments moved and pr

this application that the application was filed timely and that the au

ization of a waiver herein will not result in discrimination among hip
APPLICATION OF SEA LAND SERVICE INC 363

The applicant is authorized to waive 708 29 of the applicable freight

charges An appropriate notice of this matter and of the rate on which this

waiver is based shall be published in the pertinent tariff

WASHINGTON D C

October 979

S CHARLES E MORGAN

Administrative Law Judge
I

FEDERAL MARmME COMMISSION

DocKET No 79 11

DEL MONTE CoRPORATION

v

MATSON NAVIGATION CoMPANY

NOTICE

December 27 1979

Notice is given that no appeal has been taken to the November 20 

dismissal ofthe complaint in this proceeding and that the time withinwhic

Commission could determine to review has expired No such determinatio

been made and accordingly the dismissal has become administratively 

8 FRANCIS C HURNEY

Secreta
v

FEDERAL MARITIME COMMISSION

No 79 11

DEL MONTE CORPORATION

MATSON NAVIGATION COMPANY

SETTLEMENT APPROVED COMPLAINT DISMISSED

Finalized December 27 1979

On February 23 1979 Del Monte Corporation a shipper and the com

plainant initiated this proceeding by filing a complaint against Matson Navi

gation Company a common carrier by water between California Guam and

the Philippine Islands and the respondent alleging violations of section 14

Fourth c of the Shipping Act 1916 46 US C S812 The cited section ofthe

Shipping Act proscribes unfair treatment of or unjust discrimination against a

shipper by a common carrier in adjusting or settling claims Matson s answer

denied the alleged violations and set up eight affirmative defenses

Thereafter Del Monte and Matson filed a joint motion on November 9

1979 seeking approval of an agreement settling all of Del Monte s claims

against Matson and asking further that the complaint be dismissed with

prejudice Hearing Counsel an intervenor interposed no objection to the

motion

As explained in the discussion which follows in my view the motion should

be granted

FAClS

Abrief statement of Del Monte s version of the facts as reconstructed from

various filings which comprise an already considerable administrative record

will be helpfu1

In early 1976 Matson carried a number of Del Monte s pineapple product

shipments from Bugo Philippine Islands to Apra Harbor Guam and thence

I

The Cacts recited in the textshould not be construed as findings offact Matson does dispute some of the facts The purpose

of the statement of facts isto place the proplSllls of the parties in proper perspective
366 FEDERAL MARITIME COMMISSION

to Los Angeles and Alameda California The shipments werereceived at 

in good order and condition but were delivered at destination short de

crushed wet and otherwise damaged The reason for the deteriorated c

tion ofthecargo at destination wasSuper Typhoon Pamela which struck G

with devastating force in May 1976

Apparently Matson refused to honor Del Monte s claims for damage o

grant further time extensions on those claims whereupon Del Monte f

complaint against Matson in the United States District Court for the Nor

District ofCalifornia In that lawsuit Civil Action No C77 2069 RFP 

September IS 1977 Del Monte asked for damages in the amou

320 527 87

During the course of discovery andinspection in the court action Del M

learned that at various times between July 27 1976 and June IS 1977 Ma

paid 13 other shippers for cargo allegedly discharged damaged or short be

of Pamela 2It is alleged that one of those shippers wasCastle Cooke F

one of Del Monte s principal competitors Castle Cooke was purpo

paid 25 354 41 for damage to the same type of pineapple cargo carried 

same time and in the same vessels and damaged in the same storm as wa

Monte s cargo

When it learned of these other payments Del Monte sought to amen

complaint in the court action by adding a claim based upon sectio

Fourth c However Judge Becks who is presiding over the court a

agreed with Matson that because of primary jurisdiction consideration

section 14 Fourth c issue be referred to the Federal Maritime Commis

The instant proceeding thus ensued

It should be noted that at or before the commencement of this proce

control overthe litigation passed from the hands ofthe named complainan

respondent to their insurance carriers As is evident from the names o

signatories to the Receipt and Release with Warranty 3

Fireman s 

Insurance Company became subrogated to Del Monte s interest Mat

interest is represented by St Paul Fire and Marine Insurance

The Settlement Agreement is a two part document The first attach

Appendix A hereto releases Matson and among others its Underwriters 

any claims arising from the pineapple shipments including any claims as

in this proceeding without any admission of liability on the part of Ma

The second attached as Appendix B hereto is designed to accomplis

same result in the court action also without any admission of liability o

part of Matson Although the existence of two releases make it appea

Matson and or its insurance carrier is paying 200 000 for each the 

consideration for both releases is 200 000 4

2 Some of tho damqe occurred OR land and some at 101 Matson VCIIOl HtlWQlia LAgls atorI arrived at Apr Har

Voy8JC 213 on May II 1976 to pklk up Del Monte carao and the carao of a number of other shippen Thevcasel w

to oompletc loadin prior 10 tbe onset of Pamelaand was forced to aopanty loaded out to to avoid tho Btonn Aftert

the vessel returned to port to complete loading

That is the title of the document referred to in the motion the Settlement Aareement

4 See p

2 of thejoint motion which also statea that the parties were able to Itipulate damap inthe courtaction at 
THE MOTION

DEL MONTE CORPORATION V MATSON NAVIGATION COMPANY 367

The joint motion makes the following statements pertinent to the settlement

The parties to this proceeding submit that it would be in the public interest for their Settlement

Agreement to be accepted and approved This would undoubtedly be an expensive proceeding to

litigate to a conclusion the costs of which would far exceed the settlement payment agreed upon

by the parties No violation of the Shipping Act would result from this settlement

This prooeeding has already involved extensive discovery including numerous depositions and

time consuming and expensive interrogatories document production and motion practice Further

discovery including several more depositions as well as an evidentiary hearing would be required

should the settlement be disapproved The parties have estimated the hearing as likely to take two

weeks

Furthermore in view of the unique and precedent setting nature of these proceedings an appeal

by the losing party may be anticipated to the full and beyond Footnotes omitted

The central statutory standard in this proceeding section 14 Fourth c 46 U S c 812

Fourth c has to our knowledge never been definitively construed The parties submit that in view

of the novel legal aspects of this proceeding and of the udoubted need for an evidentiary hearing

should this matter proceed the settlement represents a realistic estimate of the costs of litigation

and the risks and uncertainties inherent in the court and administrative proceedings

In connection with the actual payment of the settlement funds Del Monte s insurer has satisfied

Del Montes claim and now proceeds under a subrogation agreement AU the monies to be paid

by Matson under the proposed settlement would be received and retained by Del Monte s sub

rogated insurer

The parties are aware of no other claims arising out of Voyage 213 of the HAWAIIAN

LEGISLATOR Eastbound and the limitation periods for purposes of the Carriage of Goods by

Sea Act 46 Us C H 1300 el seq as well as for the purposes of Section 22 of the Shipping Act

1916 46 U S c 821 have expired j

DISCUSSION AND CONCLUSIONS

It is well settled that legislative judicial and Commission policy foster the

settlement of administrative proceedings

The right to seek settlement of administrative proceedings is expressly man

dated by section 5 b lof the Administrative Procedure Act S US C

S554 cl

which provides

The agency shall give all interested parties opportunity for

I

the submission and consideration of facts arguments offers of settlement or proposals of

adjustment when time the nature of the proceedings and the public interest permit

The United States Court of Appeals for the District of Columbia Circuit

views this provision and its legislative history as being of the greatest im

Section 22 provides in pertinent part The Commission if the complaint is filed within twoyears after the cause of action

accrued may direct the payment on or before a day named of full reparation to the complainant forthe injury caused by such

violation The limitation in section 22 is a non waivable jurisdictional prerequisite for the filing of a complaint seeking

reparation Celanese Corporation etc v ThePrudential Steamship Company 18 SRR 747 1978 FMC Docket No 78 14

Ruling on Motion forPartial Summary Judgment Deferred etc Served August I 1978 at 2 3 and casescited therein For some

causes of action such as those alleging a

violation of section 18 bXJ of the Shipping Act 1916 46 US c 1811 bJ eg

overcharges the cause of action accrues upon payment orfreight charges Id Because of the novelty of a

section 14 Fourth c

proceeding it cannot be said with certainty when a cause of action under that section accrues However I

cannot perceive any

jurisdictional obstacle in the instantproceeding Fairness alone would seem to require that at the earliest the statute would begin

to run on June 15 1977 when the last of the 13 other claims was paid Given the nature of the violation perhaps it would be more

equitable to hold that the cause of action accrues when a shipper learnsorthe unfairtreatmentor discrimination In any event

I am satisfied that section 22 poses no problem insofar as a

settlement is concerned But for the reasons expressed in this note

I

cannot agree with the implied statement made in the motion that no other claims of this type can presently qualify under

section 22
368 FEDERAL MARITIME COMMISSION

portance to the functioning of the administrative process

6

Pennsylvania 

Water Co v Federal Power Commission 463 F 2d 1242 1247 D C 

1972 The court emphasized that the whole purpose of the informa

tlement provision is to eliminate the need for often costly and lengthy fo

hearings in those cases where the parties are able to reach a result oftheir 

which the appropriate agency finds compatible with the public interest Id

The Commission has implemented its mandate by rule and reinforced 

rule with the policy statement that The law ofcourse encourages settlem

and every presumption is indulged in which favors their fairness correc

and validity generally Merck Sharp Dohme v Atlantic Lines 17 F 

244 247 1973

In furtherance of this policy the Commission has authorized settlemen

administrative proceedings on the basis ofa full or adjusted payment a

admissions or findings ofviolations ofthe Shipping Act Foss Alaska Line 

Proposed General Rate Increase Between Seattle Washington and Poin

Western Alaska 19 SRR 613 1979 FMC Docket No 79 54 Off

Settlement Approved etc Served August 1 1979 Notice of Administr

Finality Served September 5 1979 partial refund and rollback in investig

of a carriers domestic offshore general revenue increase Terjloth 

Kennedy Ltd v American President Line

Ltd

19 SRR 581 1979 F

Docket No 78 20 Settlement Approved etc Served July 24 1979 Not

Administrative Finality Served August 30 1979 less than full amou

claims for alleged violations of46 U S C U814 815 First and 816 by a c

and 46 U S C 841b c and 46 C F R 510 23 by a freight forwar

Com Co Paper Stock Corporation v Pacific Coast Australasian Tarif

reau 18 SRR 619 1978 FMC Docket No 71 83 Approval of Settlem

etc Served June 29 1978 Notice of Determination Not to Review S

July 27 1978 less than full amount of claims for alleged violation

46 U S C U812 814 815 First and 816 by a conference and its memb

Robinson Lumber Co Inc v Delta Steamship Lines Inc 18 SRR 

1978 FMC Docket No 75 22 Settlement Approved etc Served Jul

1978 Notice of Determination Not to Review Served August 8 1978 

than full amount of claims for alleged violations of46 U S C U814 815 

816 by a carrier and settlement of companion court action Old Ben Coa

6 Senate Judiciary Comm Administrative Procedure Act Legislative History S Doc No 248 79th Cong 2nd S

1945 In considering the settlement provision in S 7 79th Cong 1st SeIs 1945 which ultimately became section S

the Adminiltrative Procedure Act sce note S 3UPro the Senate Judiciary Committee stated

Subsection b now Section 554c ofthe Administrative Procedure Act provides that even where formal ring and 

procedures are available to parties the agencies and the parties are authorized to undertake the informalsettlcmcnt of 

whole orin part before undcrtakins the morefonnal beann procedure Even courts through pretrialproceedings dispose 

of their bWlinCII in that fahion There is much morereason to do 10 in the administrative procell for informal pr

constitute the vast bulk or administrative adjudication and arc truly the lifeblood ofthe Administrative prOCCll The

reognition of such informal mcthods should both strengthen the administrative arm and serve to advise private parties 

may legitimately attempt to dispose of casesat least in part through conferences agreements orstipulations It should 

that the precise nature of informal procedures is left to development by the aaeneia themselves

S Doc No 248 suIll at 24

1 Rulc 91 of the Commission s Rulcs of Practioc and Procedure 46 C PR 1502 91 providcsln pertinent part Whe

the nature of the proceeding and the public interest permit all iltercslod partics shaD havc the opportunity forthe su

and consideration of factsargument offers ofsettlement orproposal of adjUlltmenl
DEL MONTE CORPORATION V MATSON NAVIGATION COMPANY 369

v Sea Land Service Inc 18 SRR 1085 1978 FMC Docket No 78 13

Initial Decision served October 11 1979 Notice of Determination Not to

Review Served November 29 1979 full amount of claims for alleged viola

tions of 46 V S C 816 by a carrier Organic Chemicals v Atlanttrafik

Express Service and Organic Chemicals v FarrellLines Inc 18 SRR 1536a

1979 FMC Docket Nos 78 2 and 78 3 Order on Appeal Served Janu

ary 25 1979 Organic Chemicals v Farrell Lines Inc 18 SRR 1536a 1979

FMC Docket No 78 3 Settlement and Dismissal of Complaint Served

March 14 1979 full amount of claims for alleged violations of 46 VS c

817 b 3 by a carrier Perry s Crane Service v PortofHouston Authority

ofthe PortofHouston Texas 19 SRR 517 1979 FMC Docket No 75 51

Motion For Approval ofSettlement Granted etc Served June 21 1979 No

tice ofAdministrative Finality Served July 27 1979 less than full amount of

claims for alleged violations of 46 VS C 815 First and 816 by a terminal

operator H HCranes Inc v PortofHouston Authority ofHarris County

Texas 19 SRR 547 1979 FMC Docket No 76 57 Motion For Approval of

Settlement Granted etc Served July 10 1979 Notice of Administrative

Finality Served August 16 1979 less than full amount of claims for alleged

violations of 46 VS C 815 First and 816 by a terminal operator

As implied by the foregoing references to the statements contained in the

motion I

agree with the analysis of the benefits to be obtained by approval of

the settlement I

find that the settlement is a bona fide and realistic means of

resolving the dispute between the parties and that the settlement will not result

in any violation of the Shipping Act nor does it appear to do violence to the

regulatory scheme Accordingly Ifind that the settlement is well within the

public interest and merits approval

The order of approval and dismissal will be conditioned upon the following

consideration While it is not entirely clear whether Judge Beeks instructions

for the institution of a complaint proceeding before this Commission were

tantamount to a mandatory reference Iwill require the parties to obtain

assurance from the district court in the form of an order or other writing that

the Commission is under no further obligation to the court in Civil Action

No C77 2069 RFP 8 The assurance shall be filed not later than the time fixed

by Rule 227 d of the Commission s Rules of Practice and Procedure

46 C F R 502 227 d for review of an order of dismissal upon the Commis

sion s own initiative 9

Therefore it is ordered that the Settlement Agreement be approved and

that the complaint be dismissed with prejudice

S SEYMOUR GLANZER

November20 1979 Administrative Law Judge

See Clipper Carload g Company v

Trans Pacific Freight Conference of Japan et aJ FMC Docket No 72 20 Order of

Dismissal served July 21 1975

9 Subsequent to the preparation of this order I received aletter from counsel for Del Monte towhich was attached aproposed

Order forDismissal with Prejudice in Civil Action No C77 2069 RFP The proposed order contains the assurancereferred to

in the text The letter advises that the proposed order will be presented for Judge Beeks signature on Dc cember 7 1979 Should

he approve and sign the proposed order thc parties should havcno difficulty in complying with the schedule established in thc tcxt
APPENDIX A

RECEIPT AND RELEASE WITH WARRANTY

The undersigned hereby acknowledge receipt from Matson Navig

Company of the sum of Two Hundred Thousand Dollars 200 000 

satisfaction ofany claims they now have ever had or ever shall have on ac

of damage to or loss of cargo shipped on the vessels TRANSONTA

V 14 and 15 HAWAIIAN LEGISLATOR V 213 and TR

CHAMPLAIN v 19 in or about the year of 1976 from Bugo Phil

Islands and Apra Harbor Guam to Los Angeles and Alameda Cal

under bills of lading Nos BO I and 2 TRANSONTARIO V 14 

through 8 TRANSONTARlO V 15 E 17240 through E I7247 E 1

E 174SS E 17487 E 17499 through E 17505 E17240 D E 172

E 17242 F E 17247 1 all HAWAIIAN LEGISLATOR V 

E 17118 A E 17119 B E 17123 C E I7245 H E 17244 0 TR

CHAMPLAIN V 19 and hereby fully release and forever discharg

vessels their owners charterers operators agents underwriters maste

crew and said Matson Navigation Company its employees and agents 

from any and all such claim or claims damages suits or causes of 

whatsoever now known or unknown in connection with or arising out o

aforesaid shipments including but not limited to all claims asserted i

certain proceeding Docket No 79 11 in the Federal Maritime Comm

which the undersigned agree to cause to be dismissed concurrently wi

execution hereof without any admission of liability on the part of MAT

NAVIGATION COMPANY

In executing these presents the undersigned represent and warrant tha

are duly authorized and empowered to give a full and valid release and a

tance in respect to all of the aforesaid matters and claims and agree to i

nify the aforesaid parties for any breach of said warranty

Dated October 22 1979

DEL MONTE CORPORATIO

By

Its

Dated 10 2379

FIREMAN S FUND INSURA

COMPANY

By

Its
APPENDIX B

RECEIPT AND RELEASE WITH WARRANTY

The undersigned hereby acknowledge receipt from Matson Navigation

Company of the sum of Two Hundred Thousand Dollars 200 000 in full

satisfaction of any cliams they now have ever hador ever shall have on account

of damage to or loss of cargo shipped on the vessels TRANSONTARIO

V 14 and 15 HAWAIIAN LEGISLATOR V 213 and TRANS

CHAMPLAIN v 19 in or about the year of 1976 from Bugo Philippine

Islands and Apra Harbor Guam to Los Angeles and Alameda California

under bills of lading Nos BG 1 and 2 TRANSONTARIO V 14 BG 1

through 8 TRANSONTARIO V 15 E I7240through E I7247 E 17454

E 17455 E 17487 E 17499 through E 17505 E 17240 D E 17241 E

E 17242 F E 17247 I all HAWAIIAN LEGISLATOR V 213

E 17118 A E 17119 B E 17123 C E 17245 H E l7244 G TRANS

CHAMPLAIN V 19 and hereby fully release and forever discharge said

vessels their owners charterers operators agents underwriters master and

crew and said Matson Navigation Company its employees and agents of and

from any and all such claim or claims damages suits or causes of action

whatsoever now known or unknown in connection with or arising out of said

aforesaid shipments including but not limited to all claims asserted in that

certain Action No C 77 2069 RFP in the Northern District of California

which the undersigned agree to cause to be dismissed concurrently with the

execution hereof without any admission of liability on the part of MATSON

NAVIGATION COMPANY

In executing these presents the undersigned represent and warrant that they

are duly authorized and empowered to give a full and valid release and acquit

tance in respect to all of the aforesaid matters and claims and agree to indem

nify the aforesaid parties for any breach of said warranty

Dated October 22 1979

DEL MONTE CORPORATION

By

Its

Dated 10 23 79

FIREMAN S FUND INSURANCE

COMPANY

By

Its
FEDERAL MARITIME COMMISSION

DocKIlT No 76 3

LH FIlDIlR D B A PIONIlIlR

INSTITUTIONAL TRADING COMPANY

v

ELDIlR DIlMPSTIlR LINIlS LTD

NOTICE

December 27 1979

Notice is given that no appeal has been taken to the November 20 

dismissal ofthe complaintin this proceeding and that the time within wh

Commission could determine to review has expired No suchdeterminat

been made and accordingly the dismissal hasbecome administratively f

8 FRANCIS C HURNIlY

Secre
v

FEDERAL MARITIME COMMISSION

No 76 3

L H FEDER D B A PIONEER

INSTITUTIONAL TRADING COMPANY

ELDER DEMPSTER LINES LTD

ORDER I WITHDRAWING COMPLAINT ON DECISION

OF COMPLAINANT 2 DISMISSING COMPLAINT

WITH PREJUDICE 3 DISCONTINUING PROCEDING

Finalized December 27 1979

The complaint in this proceeding was served January 29 1976 The answer

to the complaint after an extension of time within which to answer was served

March I 1976 By notice served March 9 1976 prehearing conference was set

for Tuesday March 30 1976 subsequently by notice served April 6 1976

prehearing conference was reset for Tuesday April 20 1976 further resched

uling was made as to prehearing conference by notice served April 16 1976

setting date for same on May 25 1976 The prehearing conference finally was

held on the latterdate By order served May 26 1976 this proceeding wasstayed

pending disposition of caseNo 75 Civ 4248 between the parties in the United

States Court for the Southern District of New York in which the respondent

in this Commission proceeding is the plaintiff through Atlantic Overseas

Corporation its general agent through whom it conducts business in New

York in the U S District Court pursued the matter of its indemnity claim to

recover sum paid Ivory Coast Customs authorities in settlement of fine imposed

upon vessel for under declaration of weight with respect to cargo of used

clothing The District Court Bonsai J held that carrier which established

thatshipper breached its warranty as to accuracy ofweight ofcargo that shipper

had no defenses against indemnity claims and that settlement of fines with

Customs was reasonable wasentitled to indemnity against shipper for amount

which carrier paid in settlement of fine imposed by Customs There wasjudg

ment for the plaintiff carrier in the sum of 65 520 At antic Overseas Corpo

ration v Feder 452 F Supp 347 1978 On appeal to the 2nd Circuit United

States Court ofAppeals the lower Court wasaffirmed Petition for Certiorari
374 FEDERAL MARITIME COMMISSION

to the United States Supreme Court Pet No 78 1647 wasdenied Octo

1979 L H Feder Corp v Atlantic Overseas Corp cert den 444 U S 

1979

By order served October 10 1979 the Presiding Administrative Law 

directed the parties withinten 10 days of that date to file a status rep

regards these ptoceedingsnowthat certiorari has been denied

On behalf of the respondents a letter dated October 19 1979 rec

October 22 1979 stated

In accordance with Your Honor s order of October 10 1979 we wish to advise that as 

oftMSupreme Court s decision on October 3 1979 to deny L H Feder s Petltlonfor Ce

we have been advised by counsel for the Petitioner that it win withdraw the captioned action 

the Federal Maritime Commission in the very near future Respondent consents to a with

made with prejudice

On behalf of the complainants a letter dated October 19 1979 rec

October 23 1979 stated

Further to your Order of October 10 1979 requesting the parties to the captioned procee

file another status report we hereby confirm that as stated in your order the United 

Supreme Court denied L H Feder Corp s Petitonfor Certiorari to the Second Circui

of Appeals on October 3 1979

We have arranaed a meeting withourclient early next weekat whicMime a decision will b

as to whether we should proceed forward or diaccntinue this p ing In view of th

respectfully request an extension of time until Friday of next week October 26 1979 

which to respond to your order to tile a status rejlort

In a letter dated October 31 1979 received November 5 1979 the 

plainants stated

Further to yeur order of October 10 1979 requesting a status report on the captioned proc

and our letter ofOctober 19 1979 requesting in extenaion to reply to said Order this is to 

that the complainant hasdecided to discontinue this proceeding We have already advised 

for respondent on this decision and coullsel for both parties shan jointly submit to you a stip

of discontinuance

DISCUSSION

Since the October 31 1979 letter from complainant received Novem

1979 nothing further has been heard or received from the parties t

proceeding Thecomp1ainant has givenits decision to discontinue this pro

ing and communicated the same to all concerned The respondent wou

such withdrawal to be with prejudice Thereis no need for ajoint stipu

ofdiscontinuance Under the ctrcumatances of the case there seems to 

regulatory purpose which would be served in awaiting further for a stipu

ofdiscontinuance or delaying discontinuance of this complaint case whic

served January 29 1976

Whereupon upon consideration of the above and cognizance of the 

plainant s decision to withdraw the complaint herein it is deemed that 

drawal of the complaint Ihould be honored There is no reason present i

proceeding why thewithdrawai of tho complaint should be questioned o

missal ofthe complaint and discontinuance ofthis proceeding furtherdela
8 WILLIAM BEASLEY HARRIS

Administrative Law Judge

LH FEDER V ELDER DEMPSTER LINES LTD 375

Wherefore it is ordered

A The complaint is withdrawn on the decision of the complainants

B Having been withdrawn the complaint is dismissed with prejudice

C This proceeding be and hereby is discontinued

November 20 1979
FEDERAL MARITIME COMMISSION

I

j

INFORMAL DocKET No 487 1

POIRETTE CoRSETS INC

v

CONSOLIDATED EXPRESS INC

REPORT AND ORDER

December 28 1979

BY THE COMMISSION RichardJ Daschbach Chairm

F Moakley Vice Chairman 

Day and Leslie Kanuk Com

I

This proceeding was instituted upon the complaint of Poirette C

filed December 27 1977 alleging that Consolidated Express Inc 

rates in excess of the applicable tariff on file with the Commissio

tember 25 1979 Settlement Officer John L Sheppard issued 

awarding Poirette 4668 62 in reparations On October I 1979 

ment Officer issued a supplemental decision awarding Poirette i

the date of the complaint The Commission determined to review 

ment Officer s decisions

The Settlement Officer found that the evidence submitted by P

not standing alone sustain its allegation that it wasovercharged o

of knock down cartons The Settlement Officer went on howe

official notice of the Puerto Rico Virgin Islands Trade Study 2

wh

density ranges expressed in cubic feet per short ton for particular 

including cardboard boxes After comparing the volumes conta

carrier waybills here in evidence with the density ranges set forth 

the Settlement Officer determined that 15 of the carrierwaybills s

outside the ranges contained in the study The Settlement Office

this disparity indicates that the volumes contained in the bills o

I

By conlCRt of the parties the pl ClQOOCfins wuconducted under tho Commillion l inronnal docket p

1502 301 Hq

2Pu rtoRlco Vlrgirt lands Trod Stlldy A RIp alorySlqff AnaIYII rO P O Waahinaton DC 19
POIRETTE CORSETS INC V CONSOLIDATED EXPRESS INC 377

incorrect On this basis the Settlement Officer concluded as a matter of con

struction that the measurements alleged in Poirette s complaint are correct

Upon review the Commission concludes thatthe Puerto Rico Virgin Islands

Trade Study upon which the Settlement Officer s decision heavily relies does

not have sufficient probative value to establish the actual cubic measurement

of the commodity here in question Assuming arguendo that the density

ranges set forth in the trade study are sufficiently precise to rely upon in

concluding that the cubes shown in the carrier s waybills are incorrect it does

not necessarily follow that the complainants allegations are true Here the

Settlement Officer has confused a question offact with a question of construc

tion by accepting as fact the allegations of the complainant solely upon the

finding that the respondent s calculations were incorrect A finding that one

calculation is wrong does not afortiori make another calculation correct

Here the complainant has not satisfied its burden ofproving the facts essential

to an award of reparations ie the actual measurements of the commodity

shipped

THEREFORE IT IS ORDERED That the decision of the Settlement

Officer is reversed and the complaint of Poirette Corsets Inc is denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET No 76 11

IN RE AGREEMENT Nos 150 DR 7 AND 3103 DR 7

The Federal Maritime Commission may authorize ocean carriers to employ dual ra

pertaining to through intermodal transportation as well as to port toport tran

Dual rate contracts pertaining to through intermodal transportation may allow a dis

lated on the entire through rate paid by the shipPer provided that the entire am

discount is absorbed by the ocean carrier from its revenue share

Proponents of dual rate agreements have the burden of justifying such agreemen

Svenska doctrine but this burden can ordinarily be met by a lesser showing of 

or purpose than would be required for the use of anticompetitive arrangements 

not expressly contemplated by statute

A conference which lacks authority to establish intermodal rates may not employ a

dual rate contract

A conference which does possess authority to establish intermodal rates which regu

intermodal transportation services and which is faced with existing intermoda

has justified the use of a dual rate contract for intermodal shipments

The use of a single dual rate contract applicable to all both port toport and inter

ments of the TransPacific Freight Conference of Japan Korea is unjustified

A dual rate contract covering intermodal shipments may not purport to bind sh

different inland modes of transportation than those offered by the conference

Charles F Warren George A Quadrlno and John E Ormond Jr for TransPa

Conference of Japan Korea and Japan Korea Atlantic Gulf Freight Conferenc

member lines

Neal M Mayer Charles L Haslup III Paul D Coleman and Robin T Waxmoll 

International SA

Elkan Turk

Jrfor the Far East Conference and its member lines

Howard A Levy for ten North Atlantic trade steamship conferences and their m

excluding Seatrain International S A

Stanley O Sher and David C Shonka for the Iberian US North Atlantic Westbo

Conference Marseilles North Atlantic U S A Freight Conference U S 

Gulf Australia New Zealand Conferences and their member lines

David C Nolan for the Pacific Coast European Conference and its member lines

DanaldL Flexner EliOil MSelden Stanley MGorlnsoll Paul A Mapes and Jani

for the United States Department of Justice

John Robert Ewers Marlin F McAlwee C Dauglass Miller and Chama Jaye Sw

the Bureau of Hearing Counsel
REPORT AND ORDER

December 31 1979

IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 379

BY THE COMMISSION

The Commission instituted this proceeding to investigate the approvability of

amendments to the respective dual rate or merchant s contracts currently

utilized by ocean carriers belonging to the Trans Pacific Freight Conference of

Japan Korea TPFC and the Japan Korea Atlantic and Gulf Freight Con

ference JKAGThe subject agreements 150 DR 7 and 3103 DR 7 would

addintermodalshipments toU S inlandpoints to the port toportshipments cur

rently covered by both conferences merchants contracts

2

Agreement No 150

DR 7 would establish a single TPFC contract covering all shipments entering

the United States viaWest Coast portsand Agreement No 3103 DR 7 would

establish a single conference contract covering all shipments entering the

United States via Atlantic and Gulf Coast ports Each Agreement would

permit a 9 5 percent discount from the intermodal through rate to be granted

to shippers which agree to commit their business exclusively to the conference

Provision of this discount would be the sole responsibility of the participating

ocean carriers

Seatrain International S A a nonconference carrier in the subject trades

the U S Department of Justice and the Commission s Bureau of Hearing

Counsel oppose approval of the Agreements 3

Carriers from several steamship

conferences intervened in support of the Agreements

Administrative Law Judge Charles E Morgan conducted evidentiary pro

ceedings and issued an Initial Decision on October 30 1978 The decision held

that the Agreements were properly subject to the Commission s

jurisdiction

under section 14b of the Shipping Act 1916 46 U S C S813a and that the

anticompetitive aspects of both Agreements had been sufficiently justified to

warrant approval

Separate Exceptions to the Initial Decision were filed by Seatrain DOJ and

Hearing Counsel Proponents and two ofthe four groups of intervenors submit

ted replies in which they fully supported the Initial Decision 5 Oral argument

washeld before the Commission on February 27 1979

I

The proposed amendments to the respective dual rate contracts are hereafter referred to as the Agreements The member

lines of TPFC and JKAG are referred to as the Proponents

1

TheJKAG Agreement also includes shipments from inland points in Japan and Korea

J Sealrain Hearing Counsel and ooJ are coUectively referred to as Protestants Several shippers originaUy filing protests to

the Agreements were designated as parties to this prooceding but were laterdismissed when they failed to participate OOJ was

granted spcciaIleave to intervene on December 15 1978 after the issuance of the Initial Decision

4

The intervenors include the members of Ithe Far East Conference 2 nine North Atlantic Europe conferences 3 the

Iberian US North Atlantic Westbound Freight Conference Marseilles North Atlantic USA Freight Conference and US

Atlantic Gulf Australia New Zealand Conference and 4 the Pacific Coast European Conference The lattennost group of

carriers and the Department ofJustice were granted leave tointervene for the limited purpose of arguing the jurisdictional issues

raised by the Initial Decision

S The carriers belonging to the Iberian US North Atlantic Marseilles North Atlantic USA andUS Atlantic and Gulf

Australia New Zeland conferences did not file a reply to exceptions
380 FEDERAL MARITIME COMMISSION

POSITION OF THE PARTIES

Protestants

Protestants argue that the Initial Decision is erroneous for the follo

reasons

I A merchant s contractdiscount which applies to through intermodal t

is unapprovable undersection 14b as amatter oflaw because the Com

sion s

jurisdiction is limited to port toport transportation

2 Dual rate contract systems approved by the Commission are immune 

antitrust law prosecution and any exemptions from the antitrust 

should be narrowly construed

3 Joint through intermodal transportation is an indivisible undertakin

both inland and ocean carriers not an offering of the water carrier a

The Commission lacks authority to approve amerchant s contractdis

which is computed as a percentage of the through rate because s

practice would improperly subject the inland portion of the rate to sub

tive regulation under the Shipping Act

4 Section 14b requires thatamerchant s contractdiscount applicable to 

through intermodal transportation be absorbed entirely from the 

carrier s division and that the amount of the discount should not e

15 percent of that division

5 The Agreements are inconsistent with the Commission s tariff filing 

dual rate contract regulations because maintenance of a constan

percent discount from the ordinary through rate requires the perce

discount absorbed from the ocean carrier s share to vary from comm

to commodity and even from shipment to shipment depending o

exact amount received by the inland carrier 6

6 The Agreements violate policies of the Interstate Commerce Commi

by permitting railroads to tie shippers to a particular inland ro

Section 33 ofthe Shipping Act prohibits the Commission from autho

conduct which the ICC has disapproved

7 The Presiding Officer erroneously concluded that the Agreements are 

viewed as supplementing Proponents existing ratemaking authority 

dual rate contract system and that the Agreement could therefo

justified by a lesser degree of proof than would otherwise be the 

8 The evidence offered by Proponents is insufficient to justify the A

ments This is particularly true of the JKAG Agreement which the 

siding Officer failed to analyze separately from the TPFC Agreemen

additional details concerning the implementation and practical effe

both Agreements are necessary

9 The Presiding Officer made findings of fact relating to competitive c

tions which were either erroneous or unsupported by the record a

Inland carrier sham may vary with tho inland routlnl cholon to reach a Jivon interior point Moreover the Co

acxcptl intermodal tariffs which atate the inland divilion on aper oontainer bail lubject to annual volume dilco

therefore prevent exact calculation of the ocoan division until cargo huactually been tranlpOrted 8H Rfport In D

72 9 40 Fd R g 47770 47775 6 1975 Rlpon on Rontld TO lon of lkxu No 72 9 42 Fd RIg 5926

1977
7The factual matters in question and the Commission sdisposition ofeach are set forth as an Appendix

IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 381

also failed to make findings of fact which were clearly established by

Protestants 7

10 The Initial Decision reveals an unsupportable bias in favor of intermodal

transportation by conference rather than independent carriers

11 The Presiding Officer failed to delineate the specific evidence used to

support each conference s Agreement and did not make a rational con

nection between the facts found and his ultimate decision

12 The Presiding Officer improperly allowed Proponents to modify the Agree

ments during the proceeding The modifications should have been pub

lished in the Federal Register

Proponents and Intervening Conferences

The Replies to Exceptions raise the following arguments in opposition to

the various positions taken by Protestants

1 Section l4b applies to all rates paid by shippers The statute contains no

explicit exclusions and there is nothing in the legislative history of the

Shipping Act which requires a narrow construction The Commission may

properly exercise jurisdiction over a ratemaking practice without exercis

ing substantive authority over all aspects ofthe transportation reflected by

the rate in question

2 Section l4b does not forbid ocean carriers from applying a dual rate

discount to the entire joint through rate This provision does not conflict

with the Commission s regulations because the same amount is paid and

the same discount is received by all similarly situated shippers using Pro

ponents service

3 The Agreements would not authorize ICC carriers to tie shippers to their

services but would merely establish an arrangement whereby ICC carriers

may concur in rates established by ocean carriers The proposed dual rate

contracts are between the shipper and the ocean carrier only

4 The Svenska doctrine requires that anticompetitive arrangements be

justified by legitimate transportation objectives which Proponents have

accomplished by demonstrating that the Agreements will add a useful

element of stability to their trades

5 Details regarding the commodities and localities to be affected by Pro

ponents intermodal service are irrelevant in light of Proponents state

ments thatshippers will not be bound until a particular service begins The

level ofProponents intermodal rates is also irrelevant only the reason

ableness of the proposed 9 5 percent spread is in issue

6 The Presiding Officer properly gave minimal weight to the testimony of the

nine shippers which opposed the Agreements Their testimony simply re

flects dissatisfaction with Shipping Act policy reflected in section l4b

7 There is no reliable evidence that the Agreements will deprive Seatrain or

any other nonconference carriers of a demonstrable portion of their present

intermodal cargo carryings
382 FEDERAL MARITIME COMMISSION

8 Asingle contract for both port toport and intermodal cargo is cons

with the findings in Pacific WestboundConference 18 F MC 308 1

whichholds that OCP cargo and local cargo moving in the same geog

ical trade may be subject to a single dual rate contract once a ne

extending the dual rate system toOCP cargo is established

9 The Presiding Officers statement concerning the burden of proo

merely dictum the full measure of justification was provide

proponents

10 The disputed amendments to the Agreements were prompted by P

tants objections to the natural routing clause originally subm

These amendments raised no new issues and were introduced int

proceeding in amannerwhich afforded all parties an adequateoppor

to be heard

II Itis unnecessary for an Initial Decision to substantiate every finding o

with references to the record It issufficient that there be a record ba

each finding and that there be a rational connection between the fin

made and the ultimate conclusions reached

The ues presented can be placed into three categories jurisdic

matters sufficiency of justification and procedural matters each of whic

be discussed in turn

DISCUSSION

Jurisdictional Matters

Joint through intermodal transportation in foreign commerce is a r

commercial development primarily attributable to the containerized 

technology which has grown to dominate ocean liner shipping since the 

1960 s

8

Because this type of transportation involves both FMC and 

regulated carriers operating under a

single through bill of lading it 

susceptible to the application oftraditional regulatory labels 9

Participat

intermodal transportation is an activity closely and naturally related t

performance of ocean common carriage and the Federal Maritime Com

sion s authority to regulate activities reasonably ancillary to ocean 

portation service is clear 10

I

Through transportation arrangements involving oocan and Inlandcarriers have existed ror many years seeHouse C

onMmhanl Marinoand FiBhorica lnvu on ofShipping Ccmbllllltl 63d Cong 2d Soso 1941 a1419 bUljoin

rate tariffs and ocean inland bills of lading wore not developed until early in 1972 when Scatrain a Protestant in th

pro oodIlIll filed Iho finl intcrmodal tariff with tho FMC

Thisprobtcm W8I rcoognizcd by the CourtofAppoall in C0mm01fW ll1h ofPelUUylvanlll v

lmlrSlale CommerceCom

561 F 2d 278 DC elr 1977 when it affinned the ICC slntcrnational through route tariffreplations and stated t

Petitionen ate unduly concerned with the labels employed Tho UK ofthe word division does not mea

inland diviaion of a joint international rate means dlo aamo thing orprodUODI the same Ieaal conquenCll8 as a di

a

purely inland joint rate

561 F 2d al 292

The arrangement affirmed by tho Court rcoosnizcs that neither tho FMC nor ICC has exclusive authority ove

intonnodal transportation and calls for each agency to regulate thOlO aapecta of tho throuah movement which appropr

within its Cltablilhed juriadk 1ion

IQ Thia authority does not extend ofoourae to situations wherea particular Commillion acrtion would conllict with othe

Itatutcsuch 81 the Intcntatc Commerce Actorthe National Labor Relations Act See generally Pacific Maritime As

v Federal MfUltlme Commission 435U S 40 1978
IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 383

Conduct which is not itself a matter for Shipping Act regulation may

legitimately come within the Commission s jurisdiction when performed by a

party to whom the statute does directly apply II It has been established for

many years that the Commission may order ocean carriers to adjust their

practices with regard to the payment or absorption of shippers inland trans

portation costs even though the transportation in question is fully subject to

ICC regulation Eg Pacific FarEast Line 1m v United States 246 F2d 711

D C Cir 1957 Sea LandService 1m v S Atlantic Caribbean Line Im

9 F MC 338 1966 The regulatory scope of sections 14b and 15 of the

Shipping Act 46 US C SS813a and 814 is no less broad than other provi

sions of that statute except where specific limitations are explicitly stated Two

or more ocean carriers must therefore obtain Commission approval if they

concertedly agree to anyone of a broad range of activities in connection with

ocean transportation which is directly regulated under the Shipping Act

Although sections 14b and 15 operate to exempt certain concerted activities

from the antitrust laws the Shipping Act also requires the Commission to

consider the antitrust implications of these activities Any policy favoring

narrow construction of antitrust exemptions provides no blanket basis for

blunting the intended remedial objectives of the Shipping Act Volks

wagenwerk A G v Federal Maritime Commission 390 U S 261 273 274

1968

The one occasion when the Supreme Court did adhere to the narrow

construction of antitrust exemptions policy in construing section 15 is clearly

distinguishable from Protestants present allegations relating to intermodal

traffic InFederalMaritime Commission v Seatrain Lines Im 411 US 726

733 1973 the Court held that agreements to merge or acquire specific assets

were not among the types of agreements enumerated in section 15 and cited

several indicia of a legislative intention to limit section 15 to matters requiring

ongoing Commission supervision By contrast there is no indication Congress

wished to preclude Commission regulation ofongoing agreements which relate

to participation in through transportation

In terms ofFMC jurisdiction an agreement by oceancarriers to set rates or

adhere to a dual rate system for all water transportation is not substantively

different from an agreement to perform the same activities with regard to

intermodal transportation Both directly relate to the terms and conditions

under which steamship lines will perform ocean transportation services

Carrier s use of this simplified technique for marketing their through trans

portation movements does not improperly extend the Commission s jurisdic

tion to inland carriage or exclude the intermodal pricing activities of ocean

carriers from Shipping Act regulation Atlantic and Gulf West Coast ofSouth

America Confereme Agreement No 2744 30 13 F MC 121 129 131

II SeePacijre Far East liM nc v Federal Maritime Commission 410 F 2d 257 DC Cir 1969 where an oceancarrier was

prohibited from awarding profitable bunker fuel oontracls to adairy products shipper not otherwise in the oil business
384 FEDERAL MARITIME COMMISSION

1969 Itis therefore concluded that section 14b like section 15 is applic

to through intermodal transportation 12

The novel question presented by the instant case is whether the Com

sion s

jurisdiction over international ocean rail transportation is broad en

to permit Proponents to publish merchant s contractrates containing disc

expressed in terms of a

percentage of the through rate paid by the sh

rather than the ocean carrier s division it is argued that such a pra

wouldconftict with the Ices

regulation ofinland carriers and exceed ex

limitations in the scope of section 14b

The first contention has little merit Although the proposed 91h pe

spread is calculated on the thro gh rate this amount would be absorbed 

from the ocean carrier s division The ICC regulated division wou

main constant and unaffected by this method of computation Inland ca

would neither be parties to the exclusive patronage contract signed by 

modalShippers nor would they be subject toFMC re ation by virtue of

association with ocean carriers using such contracts

3

The Federal Mar

Commission s approval of an intermodal dual rate contract system i

intended to preclude appropriate regulation by the ICC

Inland carriers negotiate the terms of their participation in interm

through ratemaking established by ocean conference carriers in the 

manner they negotiate with nonconference carriers such as Seatrain 

process would not be altered by the Agreements

Because the Commission has disavowed Shipping Act authority ove

entirety ofjoint intermodal transportation PrQtestants olaim the term ra

as it appears in section 14b7 inust be construed as the amounts receive

ocean carriers for port wport segments of through intermodal transport

and cannot include the through rates paid by shippers 14 However a d

mination of whether section 14bwas intended to preclude an ocean c

from absorbing more than 15 percent of the revenues it receives for partic

ing in intermodal through transportation requires consideration of more 

the parties extended arguments regarding whether the ocean carrier s sh

12OYer the put ten tin the Commiuion huappnwed two dual nte lystorriI and owr50 eeotion 15 qreemontl p

to th In IItrolllportation 1 AHIm 10 11 DR4 MIlOctobot 31 1972AHI No 1 96 

159 l975 AfmnwIII No 1 109 Mah 16 1978 The COlIN ha lmpllcidy Ized FMC j

t portatloo by both FMC and ICC rria1 SftINln 1 1IOM SA v FIIi ra 

CommIulon 114 F 2d 46 548 DC C1r 1978 1 11 1100 of OvIrllUId od OCP R II 12FM C 1114 215 21

qfd INb lrII tof NIW yotkAUlhorily v F Marlll CommIulon 429F 2d 663 6678 5th Clr 1970 

401 us 109 1971

IntermGdlltranlpOltatloo ia not anlndJYialblojolnt kln from apraotl aor comnIaIvIowpolnt 

of the tarlfI rormat employod the ahlppor deal primarily with the Cllrriar and the n rrler vlow the Inland 

diviaion uan explft The specially ltated Inland carrier diviaiona employed ill D10It minl landbrid tarUfa n0t0

are funher evidenee of tbis fact

I Section 14b 7 pnwidea in pertinent part that

The Ipread between ordinary rates andratel charpd contractshippen Ihall in no mmt bemorethan 15 per cent

ordinary ratel

Tho Commillion tarift repllaUol llltato that tho ocean carrier dJivWon rateorcharp Itoll hiITfQtld lUaproport

aobjac t

tothe pIOvaIona ofthe Shlppi Act 1916 46 CF R 1536 8 adoptod IIAmondment No 4 to Part 536 35 

6397 1970 EmphaaIJ a

pp1iod Acronl eomIlh of hmuylva upro at 292
IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 385

an intermodal through rate is best categorized as a division or a

propor

tional rate

Section 14b predates the technological advances associated with containeriz

ation that made joint intermodal transportation economically practical 15 Con

gress failure to address the applicability of dual rate systems to intermodal

traffic simply reflects the fact that intermodal traffic had not yet developed in

1961 It does not represent a deliberate exclusion of intermodal movements

Although the legislative history of the Dual Rate Law is silent concerning

intermodal transportation section 14b waswritten to apply to any arrangement

in which shippers commit all or any fixed portion of their patronage to a

conference The use of the word all is sufficient to include joint through

shipments as well as local shipments within a dual rate system particularly

since the other provisions of the Dual Rate Law expressly provided for the

regulation of joint through rates 16

Joint through rates may be established between ocean carriers alone or

between ocean carriers and inland carriers Commonwealth ofPennsylvania

supra Neither the statute nor the Commission s rules address the question of

whether two ocean carriers participating in a joint through movement must

absorb from their individual revenue shares the same percentage discount that

is offered to the dual rate shipper 17 Unequal absorptions are not prohibited IS

There is no reason to treat intermodal transportation differently Most confer

ence shippers readily become dual rate contract signatories Conferences use

the dual rate percent discount as a tying device to ensure stability but rarely

find it necessary to use it as a competitive device against other carriers

Congress unquestionably intended to prescribe amaximum rate spread of

15 percent

IO but did not give any indication that divisions received under

joint through arrangements are also subject to this limitation Thus the dual

rate spread may be greater than 15 percent of one carrier s portion of the

through rate under suchan arrangement Because the statute and its legislative

history focus on the uniformity and fairness of the contract rates offered to

shippers it is concluded that a merchant s contract discount based upon a

percentage of the through rate paid by the shipper is consistent with the

purposes of section 14b

ISSection 14b was enacted as section I ofthe Dual Rate Law Amendments to the Shipping Act PL 87 346 75 Stat 762

adopted October 3 1961 referred to hereafter as the Dual Rate law

16 Section 4ofthe Dual Rate Law contained the tarifffiling requirements for foreign commerce carriers now found at46 USc

f817 b These simultaneously enacted provisions call for the filing of aU rates

f

ortransportation to and from United States ports and foreign portsbetween all pointson fa carrier s

routeandon any through

Toute which has been established Emphasis supplied

Sections of the same statute are construed consistently with each other whenever possible Clark v Ubersee Finanz Korporation

332 Us 480 1947 see Erlenbaugh v United States 409 US 239 243 244 l972

lJ I e when shippers are offered athrough rate discountof 15 percent there is no requirement thatparticipating ocean carriers

achieve this discount by uniformly absorbing 15 percent from each carrier s

noncontract division

See generally Part 524 ofthe Commission s Rules which authorizes nonexclusive transshipment agreements withoutrequiring

aguarantee of proportional reductions when the through rate issubject to adual rate discount 46 CF R 524

19 See Index at 20 21 1962 which chronicles the rejection of a proposal authorizing the Commission tofix areasonable rate

spread on a case bycase basis
386 FEDERAL MARITIME COMMISSION

Sufficiency of Justification

Dual rate contract systems have traditionally been employed by steam

conferences When a 1958 decision of the Supreme Court rendered the 

fulness of dual rate contracts doubtful under the Shipping Act as writte

that time 20 Congress promptly took protective steps to permit continuatio

a system it found essential to a stable foreign commerce culminating in 

adoption of section 14b in 196121

However under section 14b conferences and individual carriers may 

use dual rate contract systems which meet specified conditions and are 

found to be otherwise unlawful or contrary to the public interest 22 Beca

this public interest standard requires consideration of U S antitrust po

and because concerted methods of tying shippers to common carriers by m

of discriminatory pricing devices is a per ae violation of the antitrust l

conference dual rate systems cannot be approved unless appropriately just

under the Svenska doctrine 23

Underthis doctrine an anticompetitive agreement willbe disapproved un

its proponents produce evidence revealing its probableimpact upon compet

and demonstrating that any practical anticompetitive effects will be 

weighed by positive public interest factors Agreement No 10116 1 Exten

ofPooling Aangement 19 S RR 1 2 1979 The public interest fac

recognized by the Commission are described as transportation needs pu

benefits and regulatory purposes The nature and extent of the offse

need benefit or purpose sufficient toobtain approval of a given agreement 

vary from case to case Because dual rate systems have been found pres

tively acceptable by Congress a less stringent justification is required to se

their approval 24

N Fd oI Mlllm Board v lbrtmdIRn Co 356 us 481 I9S8

21 The Oual Rate Law replaced the Moratorium Act of 1958 PL 8 626 72 Stat574 81 amended The leaillative 

of the bill which became the Dual Rate Law reveals that Conalll acted inroaponIO to tho foUawtna ftndlnp

I COIif nrw netd tift right 10 W duo fYlt COIllrtlCt8 If0lUIQOmmon carrion and coaferoncol are to sorve tho 

Statcs foreigncommerce on a

rcsular dependable and nondiscriminatory bail thoy mUllbe 81they are throua1

reat of the maritime world to enter into dual rata ciontracts with shippen and QOnaipoes Othorwise the economb o

shippinl will orceeompetina linea Into ratewanthat miaht result inthe destruction of ocun ommoo carriqe Ifthat h

the hilh cost us nag linea will be the hardoR hiL

2 Primarypartlell Inlmll strongly awN le allfGtlon ofduDl ral contrael The areat majority of United States im

and exportCrB who usoocean tommoncarrien all United Statelnaa ocean common carriers all foreian ftas eonferencc 

intel C8ed forclan govemments and the US Departments of State and Commerce favor Ioplization ofdual rate cont

3 A j fMl Cfn dV rlnce In rtltu II air and rtQIOIIIJbl A oontra tnonc ontract spread o ISperoont win IIIUro a 

of cargo for establilhod carriers without imposing a

penalty on ordilcriminatlna aaainst the nonsiper

See Index at 119 209 210

2Z Among the conditions orapproval of a menhant IlOOtract underRCtion 14b are the availabilityoftht contract to 

on equal terms and eonditions and the maintenance of a

spread between ordinary r

tee and contract rates that doas no

15 percent of the noncontract rate

JJSu Federal Maritime Comml3slon I Aktl boIagtt Svemka Amtrika Unen 390 US 238 1968 Agrumenl No 

12 F M C 149 160 19q6d lub nom LollnAmerltXl Pacl lCoast S hlp Co Ifrence vFed ws1 MlJritlmeCOrn

46S F 2d S42 DCClr 1972 em d n409US 967 1972

24 The Senate Committee Report on HR 6775 states that

Your Ommittee believes that if the eisht specific requirement or ion 14b are metby a

propoeed contract It s

entitled to Commission approval unlCllS theCommlukn

ftnda that the contra twould be detrimental tothe commerce ohhe 

States orcontrary tothe publicinterest orunjuRly ditcriminatoryorunfair We beUcve that any contract which contains 

sa eguards expreuly required by the amended bill makes out a

prima acIe ClIO that the contract is not detrimenta

commerce orcontrary to our public interest orunjUltly discriminatory orunfair Index at 222
IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 387

Because of the Congressional intent underscoring the public benefits of dual

rate contract systems it is usually sufficient for a conference to demonstrate

that it is actually offering the service to whichthe proposed merchant s contract

will apply and that significant nonconference competition exists with regard to

that service 25 An important distinction is recognized however between the

application of a dual rate system to a particular service and the inclusion of

different services under a single merchant s contract Agreement No 8660

supra at note 9 14 F MC 172 179 180 184 185 1970 When shipments

to different geographic or economic trades are to be included under a single

contract the burden of justification on the carrier is increased 26

Application ofthese standardsto the present case quickly reveals that JKAG

would be unable to meet its burden of justification in this instance That

conference s authority to set intermodal rates expired 011 November 24 1978

without any of its member lines ever having carried an intermodal shipment27

Although JKAG did publish an intermodal tariffin late 1977 this tariffoffered

service to four inland points at rates which combined existing local railroad and

steamship rates These rates did not achieve commercial acceptance The

unavailability of a commercially reasonable JKAG intermodal service in itself

prevents the approval ofan intermodal merchant s contract for thatconference

as amatter oflaw andAgreement No 3130 DR 7 will therefore bedismissed

as moot Even if JKAG were actively engaged in the provision of intermodal

service it is not faced with existing intermodal competition through Atlantic

and Gulf Coast ports

The TPFC Agreement presents a considerably different situation That Con

ference has a well established mini Iandbridge service to U S East and Gulf

Coast port cities and is faced with vigorous intermodal competition from sev

eral of the nonconference container cargo carriers serving the trade including

Seatrain the Far East Shipping Company FESCO and Evergreen Marine

Corporation Eg

Ex I Apps 16 17 Ex 22 Ex 30 Ex 33 App 2 Ex 48

Seatrain claims the TPFC Agreement will negatively affect competition by

channeling substantial quantities of intermodal cargo away from independent

carriers and by tying shippers to an indefinite overly broad range ofconference

services

The availability of an intermodal dual rate contract has been portrayed as

a critical factor in TPFC s ability to participate effectively in the trade gener

ally and the intermodal cargo market in particular Seatrain claims that the

non availability of such a contract is an equally critical factor in its own

nThe first version of PL 87 346 was H R 4299 This bill authorized dual rates upon a finding that the contract is not

intended and will not be reasonably likely to cause the exclusion of otber carriers from the trade The same provisions were

contained in the clean biD passed by the House H R 6775 The Senate CommerceCommittee deleted this languagefrom the

billfollowing statements by Senator Engle favoring the conference system snatural tendency to reduce competition See Index

219 222 399 400 The Commission may nonetheless disapprove adual ratesystem if opposing parties establish that the intent

and likely effect orthe proposed contract is to directly and unreasonably eliminate competition

26

Eg PacificWestbound Conference AgreefMnt No 57DR 4 supra at 319 323 where the proponent carriers suooessfully

justified a proposal to place OCPand local cargoes under a single merchant s

contract

2J JKAG first received intermodal ratemaking authority on January 18 1973 On December 8 1978 the Commission issued

an Order advising JKAG that its fifth request to extend this authority Agreement No 3103 67 could not be approved without

a hearing JKAG subsequently requested that a hearing be held An earlier Commission Order extending JKA j s intermodal

authority on an interim basis was reversed by fhe Court of Appeals in Seatlain International SA v Federal Maritime

Commission 598 F 2d 289 DCCir 1979 a deCision wl1ich stressedthat the conference s intennodal offerings to date had not

been viable oarticularlv in comoarlson with the rates of TPFC
388 FEDERAL MARITIME COMMISSION

effective participation Both parties allege that the Commission s decisio

this matter will have amajor impact on the degree oftheir commercial succ

The evidence does not support these allegations

Seatrain and the TPFC carriers both operate modem containerships 

high levels of container space utillzation 28 Over halfofSeatrain s carryings 

mini 1andbridge cargoes A majority of TPFC s carryings ultimately mov

inland destinations and are subject to carriage under intermodal rates 29 S

it commenced intermodal operations in mid 1974 TPFC s OCP carryi

which are subject to its present part toport dual rate contract have dec

but its mini Iandbridge carryingshave increased Several shippers testified 

they had abandoned or curtailed their use of conference merchant s rate s

ices to obtain the more favorable rates offered by nonconference interm

carriers yet overall TPFC carryings increased between 1974 and 1976

Seatrain commenced the first Far East mini 1andbridge service in 1972 

has since become the major intermodal carrier in the trade Seatrain withd

from TPFC in 1974 and doubled its intermoda1 carryings between 1974 

1975 even though 1975 wasa depressed year for ocean shipping During 1

Seatrain introduced a fourth vessel into the TPFC trade and made o

modifications in its Far East operations which effectively doubled its 

container capacity Ex 40 Tr at 636 Seatrain s port wport carryings 

increased significantly since 1974 Ex 22 despite TPFC s

implementatio

a port taport merchant s contract in August 1973 which attracted over 6 

signatories by 1976 Ex 1 at 45 During 1975 TPFC stotal revenue ton

decreased by 23 percent while Seatrain s increased by 100 percent Ex IA

27 see also Ex 30 at 7 8

These facts indicate that the independent and conference carriers alike 

established strong commercial positions in the trade Neither Seatrain 

TPFC has demonstrated that the availability of an intermodal dual rate 

tractwould have a critical impact on their respective commercial operatio

as they have alleged or would undermine their relatively strong position in 

trade There is however sufficient unused container capacity to conclude 

the trade is somewhat overtonnaged subject to vigorous nonconference c

petition and vulnerable to malpractices prejudicial to shippers and car

alike 31 A TPFC intermodal dual rate contract would therefore diminish 

trade s potential for rate instability

JI Approximately 85 percent of TPFC and JKAO oombinod container capacity wuenaapd In 1977 Separate fia

TPPC won not provided but becaUlO TPPC II tho conf ofterInJ the widerranp oIrvoc Ita lipere unlike

lower than tho combined rcIults Set Ex I App 12 and 15 Seatraln huenjoyed OWlr 95 percent container caqo utiliz

recent years Ex 30 at II

MiniIandbridp cars rep n1ed about 22 poroonlofTPPC cany lpln 1975 and apprQXimately 25 poroont In 197

carlO carried under peoial proponional ralell to dOltinadon HIt of the Rocky Mountains repmontJ another 25 por

addition muah 01 TPPC IoaI IlIOYtI beyoad port lerminalEx I at Appo 7 10 13 14 Ex 30 App 1

JO The number of TPFC aignatorica rGlular1y Ihippina with Soatrain the revonues derived from thoir bUllnan

intentions as to lipinl TPFC propolCd intormodal contract is not n The hlpper leItlmony presented 00not sup

lOnclUlkm that Soatrain willlOBC any particular number or typo of accounts

1The lalpcapital outlays and hlah fixed COlli aIIOCiated willi containenhip operations canNultin uprofttablo voya

with utUizatlon level in OXCOll of 80 pc nt Ex 33 at 1 40 at 12 13 TheJS percentOXCCII QlPKity reported by T

therefore a matterof Iolltimato competitive concom In recent years th Commlsaion hufrequently had oocuion to recoll

preacncc or unstablo and unlawful aHtdltiont In the Fir EaR trado E AJ1WnNn No 100161 Il4fWi4 and l8 SR

1978
IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 389

Seatrain vigorously opposes the proposition that TPFC should be allowed to

use an intermodal merchant s contract simply to assure itself a stable cargo

base Seatrain alleges that public policy favoring competition requires that

nonconference carriers begiven a preference when it comes to the development

ofa stable cargo base This notion is contrary to the purpose of section 14b

The unsubstantiated possibility that TPFC s use of an intermodal dual rate

contract may adversely affect Seatrain s operations is not a sufficient basis for

disapproving the Agreement Congress wasaware that dual rate contracts tend

to exclude independent carriers and by adopting section 14b determined

nonetheless that conferences should be free to employ conforming contracts

except when amore specific detriment to the public interest is shown Further

more it cannot be assumed that merchant s contracts invariably weaken the

competitive posture of nonconference carriers since independent carriers have

equal rights under section 14b to employ loyalty devices

Seatrain s objections concerning the indefinite scope of TPFCs proposed

contract and its potential for tying shippers to inefficient or even nonexistent

services are less readily dismissed

TPFC has stated that it does not intend to bind shippers unless the confer

ence offers an intermodal service covering a particular intermodal movement 32

and the Agreement as orally amended expressly allows signatories to use

services involving vessel calls at U S Atlantic or Gulf Coast ports However

Article 6 fails to indicate that shippers may select alternate inland routes or

transportation modes between ports ofentry and points ofdestination whenever

such a route or mode is not provided by the conference In fact Article 6 fails

to mention service to inland pOints at all

TPFC does not presently serve interior points although it is authorized by

the Commission to do SO

33 Intermodal shippers located at places such as

Chicago or St Louis should therefore not be bound by the Agreement Other

wise the conference could refuse to serve an interior area and by using a

unitary port toport and intermodal dual rate contract effectively preclude

competitors from establishing a foothold in that area as well The conference s

market power overport toport shipments could thereby be employed to stifle

transportation innovations and efficiencies a result contrary to the public

interest and detrimental to the commerce of the United States A similar

anticompetitive effect could be achieved ifTPFC were to offer an interior point

service at rates too high to achieve commercial acceptance TPFC has not yet

devised a rate structure for interior point services Ex 37 at 5 7 Tr 878 80

and shippers testified that the conference should be required to offer separate

intermodal and port toport dual rate contracts Exs 16 19 Tr 468

Mini landbridge service attracts cargo whicheither did or could have moved

via Us Atlantic and Gulf ports and is therefore most appropriately viewed as

service to a new TPFC trade area rather than an integral part of the same

J1 Exceptions at 46

JJ1 PFC s mini Iandbridge service isa true intermodal service from ports in Japan and Korea to polms on the US East and

Gulf Coasts As used hen the word interior describes those inland points not served by mini Iandbridge
390 FEDERAL MARITIME COMMISSION

trade 34 This East Coast cargo should not be tied to West Coast car

in the absence of a clear showing of transportation need public benef

regulatory purpose

Agreement No ISO DR 7 will therefore be disapproved unless it is mod

to allow shippers the choice of signing either an intermodal contract 

port toport contract or both and to release shippers employing diffe

inland modes oftransportation or different inland routes than those offere

TPFC 35 Article 6 of the intermoda1 merchant s contract must also be form

amended to refer to the term points and to exclude carriage viaU S Atla

or Gulf ports

36

Procedural Matters

Seatrain claimsthe Presiding Officer should not have acceptedinto evid

the January 31 1977 direct testimony ofTPFC s Conference Chairman w

states that Article 6 ofAgreement No ISODR 7 has been modified to exc

transportation via Atlantic and Gulf Coast ports from TPFC s proposed 

chant s contract It is argued that an administrative law judge lacks auth

to modify agreements which are under investigation unless the modificatio

question has been published in the Federal Register

The recommendations of an administrative law judge regarding the 

provability of agreements are not binding upon the Commission and 

Commission s decision in Agreement No 601014 11 S R R 617 737 19

cited by Seatrain merely confirms this fact In most instances agree

modifications must be consolidated with a pending investigation of the 

agreement

37

Federal Register notice of an amended agreement isa separate matter 

the consideration of proposed modifications in an investigatory procee

Provision of suchnotice is amatter within the sound discretion ofthe Com

sion not the administrative law judge When a proposed modification p

tically and substantively affects a pending agreement it is noticed to as

J4Somc 16 percent ofTPPC sOCPC8l JOwasdestinedforAUantieand Gulf Coat points prior to the introduction 

landbridge ervice andTPFC nowGltimatca that it earn DO such OCPcarao Ex I at 12 and App 9 Yet a larger pe

of minl landbridgc C81 JO W88 previously carried by JKAO all water aervice Ex I App 8 Tr 123

J5 Inland transportation mode refen broadly to transportation aeoomplilbed byeither rai motor waterorair and n

rviceI of anyparticular inland carrieroporaq within one ofth belie inadeI TheCommiuion has held that confcren

intcrmodal ratemakin authority may not pqcludo member linea from takinl independont action with IIpoct to ICrvic

different mode ofinland tranapon AflWm 1U No JJOJ 64 Order or Conditional AppivaJ 1IOI VOd May 18 1977 and O

Rcmand lOI YCdNovember 24 1978 rtVlrud onOl tgrountb Seatraln InMrNllIoMJ SAv Federal MaritiCnm

sUpnl note 27

36Protestantl arauc thatArticle S of Aarecment No 1 SO DR 7 mUltbe amended to allow shlppon tochOOlO tho inlan

they wilh to employ andto rcIcasc lhippcn from the contnctwhenover tho inland carrier 1ected does not have lpace a

Bccauac the aldppcr oonlractl only with the water carrier it is lInllOCClll l that Articla S rc10ue the dlipperif areqUOltc

carrier is not provided It isIUllIcicnt thaI nonporfonnanoeof qreocIupon IIIn IlablUty under tho throuah bill o

Adifferent aituation is preIlClI1ted however when the ocean carrier Iuu MIIOII to know at the timo carJO is lendtrcd to 

cannot perform tho throuah tratllportation held out in ita tarift in timely fultion because a particular iQland rolltina 

1 lUtiol orolmilar criticalolemonlof tho tIuoolh lrIoVomonl iI unovollablo In uch Anlolo 5 II1tIIIbe conltnlOd 1

the shipper when tho oooan carrier is aware that timely perfonnance of any aspect of the throup movement ClMot be a

juat as ilcool when hip poco iI uno ilabl s 46 U8C 181301

17 8ft rally the Commission February 3 1978 order entitled ModUlcation of Order of Investiption and Hea

Docket No 774 reconI1deration denied June 19 1978 where propoeed amendmenll 10 a

joint IICt Vioo apccment were 

ratoe 1010 0 pondin8 ovIdontiary procoodi1 8
IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 391

that any additional interested parties are furnished an appropriate opportunity

to express their views When as in the instant case the amendment offered is

plainly of aclarifying or technical nature supplemental Federal Register

notice is unnecessary Further notice was required by the Commission in

Agreement No 6010 14 supra because an investigatory proceeding had been

resolved by private settlement negotiations the terms of which had not been

included in the public record or the hearing process

38

The amendment to Article 6 however was introduced early in the present

proceeding as a clarifying measure and was offered in direct response to

arguments raised by Seatrain concerning the allowable scope ofthat provision

All parties were provided ample opportunity to raise arguments concerning the

amendment and its effect The Presiding Officer s acceptanceand consideration

of evidence concerning the Article 6 amendment is fair and reasonable It is

also analogous to the procedures affirmed by the United States Court of

Appeals in States Marine Lines Inc v Federal Maritime Commission 376

F2d 230 234 note 6 D C Cir 1967 39

Finally Seatrain contends thatthe Initial Decision must be reversed because

the Presiding Officer failed to accompany his findings of fact with specific

citationsto the record including citationsto conflicting facts 4O This argument

appears intended more for the purpose of emphasizing objections to particular

findings than to express a bona fide belief that existing Commission practices

are invalid in this regard 41

The Commission s regulations echo the Administrative Procedure Act by

requiring that all decisions include a statement of findings and conlcusions

and the reasons or basis therefor on all material issues of fact law or dis

cretion presented on the record 46 C FR S 502 225 5 U S C S 557 c This

provision has not been interpreted as mandating a recitation of all conflicting

evidence regarding material questions of fact accompanied by a statement

explaining which evidence was found to be probative and which was not It is

sufficient that the decision reveal all factors considered by the agency in making

its choice and that there be articulated a rational basis between the facts found

and the result reached The Commission believes the instant Report achieves

these accepted standards and would not thwart meaningful judicial review

within the meaning of United States Lines Inc v Federal Maritime Commis

sion 584 F 2d 519 D C Cir 1978

See also Pierpoint MOflflgement Co and Retia Steamship Co v Holt Haulingand Warehousing Systems Inc 19 S RR

435 1979

19 Although the Presiding Officers

consideration of Proponents testimony that Article 6 had been modified was proper

Agreement No 150 DR 7 can only be amended by submitting a signed agreement to the Commission It would bave therefore

been more appropriate for the Initial Decision to have recommended that the Agreement be approved on the condition that

Proponents submit an amendment clarifying Article 6 ThePresiding Officer couldalso have conditioned his acceptance ofevidence

concerning Article 6 upon Proponents submitting a

fonna amendment to theirAgreement

Exceptions at 4 note I

l Section 502 221 of the Commission s Rules requires parties to include record citations with their proposed findings of fact

but does not impose the same obligation on the Presiding Officer Factual errors in an Initial Decision may be addressed by the

persons most familiar with the record in the fonnof ex ptions filed pursuant to section 502 227 a which also requires record

citations
392 FEDERAL MARITIME COMMISSION

In any event by not adopting the Initial Decision and by variously gran

or denying Seatrain s exceptions to the findings of the Presiding Officer 

Commission has effectively provided Seatrainwith the relief it sought

THEREFORE IT IS ORDERED That the Exceptions ofthe Departm

of Justice are denied and

IT IS FURTHER ORDERED That the Exceptions of the Burea

Hearing Counsel and Seatrain Internadonal S A are granted to the ex

indicated above and denied in all other respects and

IT IS FURTHER ORDERED That Agreement No 3103 DR 7 is 

missed as moot and

IT IS FURTHER ORDERED That Agreement No ISO DR 7 is d

proved pursuant to section 14b of the Shipping Act 1916 effe

unless the Commission receives at its offices in W

ington D C on or before a modified version of 

Agreement complete in all respects signed by all parties thereto and appro

ately modified to

I Clearly allow shippers the choice of binding only their porttoport 

ments or only theirjoint through intermodal shipments to the conference 

2 Amend Article 6 of the TPFC intermodal merchant s contractto rea

follows

6 This Aareoment does not require the Merchant to divert shipments of goods from n

transportation routesnot served by the Conference where direct carrlap is available Pro

however that where the Carrien provide service between porta or point within the scope o

contract which constitute a natural transportation roul4l between the origin and destinat

such shipment the Merchant shall be ebUsated tose1ect the Carrier s service A n

transportation route is a traftlc path nably warranted by economic criteria su

time avaDable facilities the nature of the shipment and any other eccnomic criteria appro

inthe circumstances Whenever Merchant Intends to assert its rights under this Article 

a carrier which is not a party hereto and the port or point through which Merchant In

to ship or receive his goods is not within the scope of this Aireement Merchant shaU f

notify the Conference In accordance with the provisions of Article S hereof Providedfu

howBver that notwithstandlna any Jansuaaeherein to the contrary this contract wiD n

violated if the Merchant I ships to destinations within the scope of this Aareoment via 

Atlantic or Gulf Coast porta or 2 ships via a through intermodaJ route or utUizea a 

inland transportation mode

Lerail motor water orair notoffered by the Conferenc

notification to the Conference of such shipments shall be required

IT IS FURTHER ORDEREP That upon full and timely compliance 

the conditions set forth ill the above ordering clause Agreement No ISO D

shall be approved

By Order of the Commission

8 FR NCIS C HURNEY

Secreta
APPENDIX

DISPOSITION OF SEATRAIN S EXCEPTIONS RELATING

TO FINDINGS OF THE PRESIDING OFFICER

1 The Presiding Officer erroneously found that the port toport services of

independent carriers have flourished in the TPFC trade since 1973 despite

the presence of a TPFC dual rate contract

Granted in part There is no evidence that nonconference carrier port to

port services have flourished in an economic sense and no evidence

measuring the exact competitive impact ofTPFCs present dual rate con

tract on these services The record does clearly show however that over

ten independent container carriers compete in the trade and several of

them have increased their capacity since 1973 Moreover there is no basis

for finding that these independent container services have persisted only

because TPFC s merchant s contract is inapplicable to intermodal cargo

Although this fact may have been beneficial to Seatrain only a minority

of the nonconference containeroperators in the TPFC trade presently offer

intermodal service

2 The Presiding Officer erroneously found that a division is not usually

found in a tariff

Denied The Presiding Officer clearly stated that present joint through

intermodal tariffs separate the ocean and inland carriers revenue shares

and the discussion ofInterstate Commerce Act divisions found in Com

manwealth of Pennsylvania v Interstate Commerce Commission supra

at 281 282 and 291 292 supports his statements concerning usual ie

nonintermodaI joint through rate procedures

3 The Presiding Officer erroneously found that the ocean carrier collecting

the freight charges from the merchant will arrange to pay a fee or divjsion

to the railroad or railroads utilized for inland movement

Denied The Presiding Officer accurately described the procedures ordi

narily followed although an agent ofthe inland carrier may alsocollect the

through freight and distribute the divisions Seatrain claimsthis practice

is inconsistent with the theory thatjoint rates are an indivisible offering of

more than one carrier As explained in this Report joint through inter

modal transportation is more realistically viewed as an offering of the

ocean carrierdespite the tarifffiling procedures employed by the FMC and

ICC to accommodate their enabling statutes

4 The Presiding Officer erroneously found that a division is not a charge

to the merchant

Denied As is the case with Item 3 above Seatrain disagrees with the

theoretical framework of the statement and not with the accuracy of the

facts recited Shippers are billed only for the through rate and receive no

separate invoice or breakout of intermodal transportation division al

though such a breakout is published in the carriers tariff
394 FEDERAL MARITIME COMMISSION

5 The Presiding Officer erroneously found that the shipper is prima

interested in the through rate or cost

Dented Although the record does not contain shipper testimony on 

general topic of joint through rates the challenged statement does a

rately express the philosophy upon which joint through rate pricing 

historically been based and reflects the opinion of Seatrains princ

witness Ex 40 at 9 10 Tr 655 660661

6 The Presiding Officer erroneously found that the Commission regul

conference authority over joint through rate arrangements with in

carriers under section 15

Granted in part To the extent the statement implies that steam

conferences concertedly establish rates with inland carriers it is incor

TheCommission approvesintermodal rate agreements which allow co

encemember lines to concertedly set through rates and the ocean port

of those rates Each member line then negotiates its own inland carr

arrangements with ICC carriers This fact is correctly noted elsewhe

the Initial Decision at 44

7 The Presiding Officer erroneously found that the Commission has e

cised jurisdiction over conference intermodal rates under sections 16 

17 of the Shipping Act

Dented Section 16 and 17 complaints based on intermodal service 

been adjudicated by the Commission eg Docket Nos 73 38 73 

77 50 The reasonableness ofsuch services cannot bedetermined wit

reference to the rates charged The Commission therefore exercises j

diction over through intermodal rates in this Report and Order See 

adaPackers Ltd v Atchison TSF Ry 385U S 182 1966 Porte

v Central Vermont R Co 366 U S 272 1961

8 The Presiding Officer failed to recognize that Agreement No 150 D

would injure Lykes Bros because Lykes competes with TPFC albe

Atlantic and Gulf ports as well as with JKAG

Dented Lykes Bros did not establish that it would be directly or imm

ately harmed by competition from TPFC carriers expecially since 

Agreement as conditionally approved does not bind shippers using A

tic and Gulf Coast ports Moreover Lykes Bros is now a memb

TPFC

9 The Presiding Officer erroneously found that Proponents are pressing 

applications to include intermodal cargo in their dual rate contracts

Granted in port TPFC is clearly pressing its instant application 

approval ofAgreement No 150 DR 7 However Proponents have no

applied for similar authority from the Japanese Fair Trade Commis

10 The Presiding Officer erroneously found that ifTPFC institutes an int

point intermodal service further cargo subject to the conference s pre

contract will move outside the contract

Dented The statement is correct because the present TPFC contract 

not apply to intermodal carriage ofany kind The Presiding Officer di
395

find that interior point cargo would necessarily move on nonconference

earners

II The Presiding Officer erroneously found that there is no reason to believe

merchant shippers and consignees will be harmed by the Agreements

Granted in part Several shippers testified that they did not wish to be

jfJied with the choice of signing a single TPFC merchant s contract for

port to port and intermodal service and that they believed they would pay

higher intermodal cargo rates if they did sign such a contract A loss of

flexibility does not in itself constitute injury especially in light of the

legislative history ofsection 14b Seatrain did not establish that particular

shippers would be unfairly compelled to sign an expanded TPFC contract

or that such signatories would necessarily be charged higher intermodal

rates or otherwise be injured ifthey did Shippers which did not favordual

rate contracts need not sign them e g

Associated Merchandising Cor

poration The instant decision only approves TPFC s use of separate

port toport and intermodal dual rate contracts

12 The Presiding Officer erroneously found that Evergreen Marine Line does

not feel threatened by potential conference intermodal competition

Granted in part There is no evidence as to whether Evergreen s manage

ment does or does not feel threatened by the proposed Agreements The

record does show that Evergreen has expanded its operations in the TPFC

trade since 1973

13 The Presiding Officer failed to make complete findings concerning the

status of conference and nonconference carriers in the trade

Granted in part Although the nonconference carriers were listed the

Presiding Officer did not list the members ofTPFC There are currently

twenty conference members

14 The Presiding Officer erroneously concluded that approval ofAgreement

No 150 DR 7 would foster competition between ocean carriers

Granted The instant proceeding does not compel a finding that approval

of Agreement No 150 DR 7 would foster short run competition be

tween ocean carriers and the record was not developed to permit such a

finding since it is not essential to the determination at hand The Presiding

Officer s statement correctly reflects the Congressional policy that the

employment of reasonable dual rate systems by conferences will best

preserve competition in the long run in the ocean shipping industry
FEDERAL MARITIME COMMISSION

DocKET No 78 27

MERCK SHARP DaHMS INTERNATIONAL

v

KAWASAKI KISEN KAISHA LTD A K A K LINE

DocKET No 79 42

MERCK SHARP DaHME INTERNATIONAL

v

MITSUI O S K LINES LTD

DocKET No 79 43

MERCK SHARP DaHME INTERNATIONAL

v

JAPAN LINE LTD

Shipments of feed supplements wereprQperly rated as pharmaceuticals rather than as anim

Reparation denied

William LevelLfteln for Menk Sharp Dohme International

F Conger Fawcett and Charles Lagrange Coleman III for Kawasaki Kisen Kaisha Ltd

K Alzaki and Charles Lagrange Coleman III for Mitsui OS K Lines Ltd

David Snow and Charles Lagrange Coleman III for Japan Line Ltd
BY THE COMMISSION Richard J Daschbach Chairman Thomas

F Moakley Vice Chairman James V

Day and Leslie Kanuk Commissioners

MERCK SHARP DOHME INT L V KAWASAKI KISEN KAISHA 397

REPORT AND ORDER

December 31 1979

These proceedings were instituted by complaints filed by Merck Sharp

Dohme International against three carriers Kawasaki Kisen Kaisha K

Line Mitsui O S KLines and Japan Line all of whom assessed charges for

various shipments of Nicrazin 25 and orVitamin BI2 Mixture under rates

for medicinal pharmaceuticals or chemicals Complainant alleges that the

carriers violated section 18 b 3 ofthe Shipping Act 1916 46 U S c 817

in that the shipments should have been charged under the lower rates for

Animal Feed Prepared In his Initial Decisions Administrative Law Judge

John E Cograve awarded reparation in all threeproceedings The proceedings

are now before the Commission on the carriers Joint Exceptions to the Initial

Decisions I

BACKGROUND

Docket No 78 27 involves Complainant s shipments of Nicrazin 25 and

Vitamin BI2 Mixture which moved by K Line from Oakland California to

Kobe Japan The shipment was rated under the Medicinal and Pharma

ceutical Preparations Compounds or Mixtures of two or more products Bulk

Form N O S classification in Pacific Westbound Conference Overland

Freight TariffNo 6 F M C No 13 2

In Docket No 79 42 another shipment of Complainant s Nicrazin 25

moved from Oakland to Kobe on Mitsui O S K Lines pursuant to a bill of

lading dated April 21 1977 This shipment wasrated underPacific Westbound

Conference Local and Overland Freight Tariff No 5 EM C No 13 as

Synthetic Organic Medicinal Chemicals In Bulk Form N O S

In Docket No 79 43 a third shipment of Nicrazin 25 moved from Oak

land to Kobe and Osaka Japan on Japan Line pursuant to a bill of lading

dated January 20 1978 This shipment was rated under Pacific Westbound

Conference Local and Overland Freight Tariff No 5 EM C No 13 as

Chemicals N O S

INITIAL DECISIONS AND POSITIONS OF THE PARTIES

In his Initial Decision in Docket No 78 27 served July 20 1979 the

Presiding Officer found that K Line had improperly classified both Nicrazin

25 and Vitamin BI2 Mixture He statedthat the classification Animal Feed

Prepared is broad enough to include almost any preparation which is feed

1 Because all three proceedings involve the same Complainant and identical issuC8 the proceedings are consolidated

I All three carriers are members of the Pacific Westbound Conference
398 FEDERAL MARITIME COMMISSION

sic to animals and concluded that because the commodities could be 

sified under two tariffitems Complainant was entitled to the tariff item 

the lowerrate Accordingly reparation in the amountof8 304 5Iwasawar

The Initial Decisions in Docket Nos 79 42 and 79 43 served July 25 and 

1979 respectively cited the Initial Decision in Docket No 78 27 as prece

and awarded reparations in those cases as well in the amount of 9 

from Mitsui 0 8KLines and 8 66125 from Japan Line

In their Joint Exceptions to the Initial Decision the carriers argue tha

commodities were properly classified as pharmaceuticals or chemicals T

claim support for their position from Complainant s sales literature w

identifies Nicrazin 25 and Vitamin B12 Mixture as feed additives and 

supplements The carriers point out that an additive or supplement to an

feed is distinct from feed itself They note that the purpose of the commod

as indicated by the literature is not to feed or provide nutrients to animals 

rather to prevent the disease coccidiosis in chickens in the case of Nicr

25 and to aid in fast healthy growth and reproduction ofpoultry and 

in the case of Vitamin B12 MiXture The carriers also point out tha

literature identifies Nicrazin 25 as a drug and medication and 

Nicrazin 25 and Vitamin B12 Mixture are to be administered only 

being mixed into animal feed in very small ratios 3

Purchasers are als

structed not to administer Nicrazin 25 to laying birds or to birds w

four days of marketing for human consumption

The Joint Exceptions raise these specific points

1 The value ofthe commodities in issue is considerably allegedly 10 

times higher than that of animal feed

2 Complainant s literature refers to the commodities as a drug not an

feed and gives instructions for dosage dilution and discontinuation of 

3 The purpose of the commodities is to control disease not to 

animals

4 The recipient indicated on each of the bills oflading waseither ano

affiliate of Complainant s or a pharmaceutical company not a feed and g

dealer or consumer

5 Complainant s Export Declarations classify the goods as chemica

pharmaceuticals under the Department of Commerce Schedule 

classification system

6 The Pacific Westbound Conference tariff states that the Departme

Commerce SChedule B numerical classification system is the basis fo

tariff classification

7 The bills of lading classify the goods as chemicals or pharmaceut

not as animal feed

8 Complainant bears the heavy burden ofproof

9 These products have never been classified as animal feed by a com

carrier and Complainant has twice previously been unsuccessful inCommis

proceedings in obtaining lower commodity rates for its chemical product

J Themaximum recommended ratioof Nlcrazin 2 911 to hickcn feed is 1 6pounds ofNicrazm 25 to OMl ton of feed 

B 12 Mixture is to be combined inamounts of 7 6

arams for chickens to 45 S aramB forbaby pip per one mUllon sram
MERCK SHARP DOHME INTL V KAWASAKI KISEN KAISHA 399

In its Reply to Exceptions Complainant states that the tariff description

Animal Feed Prepared applies to any preparation fed to animals including

feed additives and supplements and that therefore it is broad enough to cover

the commodities in question Complainant emphasizes that Nicrazin 25 con

tains its active ingredient the drug nicarbazin at only a 25 intensity level

and that the product contains wheat middlings and soybean oil as well Simi

larly Complainant notes the literature indicates that Vitamin Bl2 Mixture

contains ground rice hulls and soybean oil The presence of these added mate

rialsin the products Complainant argues establishes that the products are not

medicines or pharmaceuticals as they might be werethey in an undiluted state

Complainant argues that the ambiguity created by the breadth of the tariff

description should be resolved in Complainants favor Complainant challenges

the carriers emphasis on the value of the articles shipped by noting that the

tariff contains no value restrictions It also argues that arguments regarding

Schedule B are inappropriate because Schedule B is not a tariffand is not

at issue

DISCUSSION AND CONCLUSION

Where a tariff is ambiguous or doubtful it should be construed against the

carrier who prepared it United States v Hellenic Lines Ltd 14 F MC 255

260 1971 In the instant proceeding the question ofambiguity in the tariffs

turns on whether the category Animal Feed Prepared is so broad as to

include medications not in a 100active ingredient form Ifso there would be

more than one reasonably applicable tariffdescription and the resulting ambi

guity should be resolved by application of the tariffdescription with the lowest

rates The Presiding Officer s awards ofreparations were based on his findings

that the commodities at issue could reasonably be described as Animal Feed

Prepared as well as by the tariff descriptions applied by the carriers We

conclude that these findings are contrary to the weight of the record evidence

The parties appear to agree that shipments ofnicarbazin and ofVitamin

B12 undiluted would properly beconsidered pharmaceuticals and could not

reasonably be classified as Animal Feed Prepared Complainant contends

however that the addition of soybean oil wheat middlings and ground rice

hulls to those products converts them to mere animal feed The record does not

support Complainant s argument The sales literature for Nicrazin 25 de

scribes it as for use in poultry feeds as an aid in prevention of coccidiosis

Emphasis added Itgoes on to explain that the purpose of its being supplied

as a premix that is the nicarbazin is already mixed with soybean oil and wheat

middlings is for convenience in handling and uniform incorporation in feed

The soybean oil and wheat middlings are described as the carrier and or

diluent for the nicarbazin the active ingredient in Nicrazin 25 Both Nic

razin 25 and Vitamin Bl2 Mixture are to beadministered to poultry and pigs

only after being mixed into extremely larger quantities of animal feed

Moreover the sales literature describes the products as feed supplement

feed additive drug and medication They are never referred to as feed the

term feed is used exclusively as that into which the products are to be mixed
400 FEDERAL MARITIME COMMISSION

The literature makes it clear that Nicrazin 25 s purpose is not to pr

nutrients to animals but to prevent a particular disease Vitamin B12 Mi

is to improve weight gains feed conversion carcass yield egg production 

hatchability growth rates and to increase number of pigs per litter 

warnings not to administer Nicrazin 25 00 laying birds or tobirds within 

days ofmarketing for human consumption further indicate the pharmace

nature of the products and belie Complainant s contention that they ca

considered animal feed In short Complainant s

interpretation ofthe tariff 

Animal Feed Prepared to include the products at issue requires a str

and unnatural construction of the tariff language which will not suppo

award of reparations See Thomas G Crowe v Southern Steamship 

1 U S S B 145 147 1929

It is further concluded that the appropriate tariff description for the 

modities at issue is Medicinal and Pharmaceutical Preparations Comp

or Mixtures of two or more products Bulk Form N O S

4 This is the 

modity description applied by K Line in Docket No 78 27 Althoug

applied by Mitsui O S K Lines and by Japan Line in the other two 

ceedings the Medicinal and Pharmaceutical commodtty descriptio

also appropriatefor those shipments S As the rates for Medicinal and Ph

ceutical were hisher than the rates actually charged Complainant f

two latter shipments reparations in all three proceedings are denied

THEREFORE IT IS ORDERED That the Complaints of Merck 

Dohme International in Docket Nos 78 27 7942 and 79 43 ar

missed and

IT IS FURTHER ORDERED That these proceedings are discont

S FRANCIS C HURNEY

Secre

4

Complainant lUJUOI that the word products in this oommocUty doIcription ret to mecUciftCI or 

Iudeo lIOlbea oll wheal mlddllnp and nd rico hvlb The Comm rejocta thiJ IUlricdvl Inlorpnlal

mldily deoeripdao anjuap

Pacllle WOIlbeund ConC oriand TarilfNo 6P M C 13 1 which tho Medlclnal nd Ph n

deoeriplion lllho limo of tho ohl 1 in Dockol No 78 27 wu UocI on JanllUI 1977 Thai limo c

pdao Ippoarod In P c1ftc Wealbeund eonr Loao1 and Ovorland Prolihl Tarift No S P M C 3lllho 

ouboeqllOlll hipmin Dockol NOlo 7942 and 7943 however
v

FEDERAL MARITIME COMMISSION

DOCKET No 77 56

WEST GULF MARITIME AssOCIATION

CITY OF GALVESTON BOARD OF TRUSTEES

OF THE GALVESTON WHARVES

ORDER ON RECONSIDERATION

January 8 1980

The City of Galveston the Port has filed aPetition for Reconsideration of

the Commission s September 14 1979 Order 19 S RR 779 finding unlawful

certain of the Port s terminal tariffprovisions J For the reasons set forth below

the Petition is denied

The Port challenges the Commission s conclusion regarding one tariff item

Item No 98 1 which the Commission found unreasonable The Port contends

that the portion ofItem No 98 1 requiring waiver of insuredclaims and waiver

of subrogation is reasonable 2

Specifically it alleges error in the Commision s

finding that

T he indemnity requirement and the waiver of claims and subrogation provisions of the Port s

tariff are unreasonable for precisely the reasons enunciated in Bisso Truck and Lighter and

Lwidi and conclude that Item No 98 1 is violative of section 17

The Port cites two cases from the Fifth Circuit Court ofAppeals and a district

court in that Circuit in which Bisso wasnot applied to waiver of subrogation

clauses It argues that consequently the Commission s citation of Bisso

invalidates its finding that the waiver of subrogation and insured claims pro

visions violate the Shipping Act

I

ornine tariftitems alleged to violatethe Shipping Act 1916 the Commission found three and portions oftwoothers violative

of section 17

2

ThePetition relates only to the second sentence of item No 98 1 which reads

Each User of the facilities of the Board of Trustees ofthe Galveston Wharves waives all claims such User may have against the

Board ofTustees of the Galveston Wharves and orTheCity of Galveston forloss ordamage covered by anyinsurance policy or

policies oovering in whole orin part such User sdoing businesson or in connection with the facilities of the Galveston Wharves

and each such User shaU cause its insurance carrier orcarriers towaive any right of subrogation with respect thereto and to so

notify the Board of Trustees of the Galveston Wharves of such waiver

l

Thecasescited are Bisso vIn andWaterways Corp 349US 85 1955 Truck and lighterLoadingand Unloading Prartices

at New York Harbor 9 F M C505 1966 and Lucidi v Stockton Port District 19 S R R 441 1979

The Courtin Bisso invalidated a towing contract provision which would have released atowboat from liability for its own

negligence
402 FEDERAL MARITIME COMMISSION

Bisso is not ofcourse controlling as to the lawfulness of the waiver of c

and subrogation provisions under the Shipping Act However aregu

agency may look to court decisions regarding common or judicial law 

thoughthose decisions are not controlling on the issues before the agenc

this end the Commission cited Bisso and applied its rationale to bo

indemnification and waiver issues 6The Commission concluded that the 

provisions are unreasonable under section 17 of the Act in that they im

restrictions on and require expenses of users irrespective ofthose users 

culpability for an occurance and benefit a potentially negliacnt port Als

requirements on the users are unilateral and are not imposed upon the 

itself 7

The Commission is not barred from applying the Bisso rationale 

consideration ofShipping Act issues simply because ofthe Fifth Circuit 

ofAppeals interpretation ofBisso Moreover the Commission s ruling 

waiver issues is consistent with its decisions in Trucker and Lighte

Lucidi neither of which is commented upon in the Port s Petition

Furthermore the two Court of APPeals decisions cited by the Po

distinguishable from the instant proceeding In Fluor Western Inc v G 

Offshore Towing Co 447 F 2d 35 5thCir 1971 the cargo owner d

waive its right to proceed against awrongdoer in the event the cargo o

insurance underwriters had failed for whatever reason to reimburse it fo

loss caused by the wrongdoer The Ports Item No 98 1 would require aw

of any claim covered by insurance regardleSs of whether the insured ac

received payment No rights were actually waived in the towage contr

Fluor Western the court emphasized that rights were waived only by 

sequent independent agreement between the cargo owner and its underw

447 F 2d 39 40 The Port s Item No 98 1 states Each User waiv

claims such User may have for losses covered in its insurance policy

In Twenty Grand Offshore Inc v Weat India Carriera Inc 492 F2

5th Cir 1974 the waiver of subrogation requirement was areciproca

in which both tug and tow were required to obtain waiver of subro

clauses in their respective insutancepolicies and to designate each other 

additional insumd This mutuality is not present in Item No 98 1

THEREFORE IT IS ORDERED That the Petition for Reconside

filed by the City of Galveston is denied and

IT IS FURTHER ORDERED That the Commission s Report and 

is affirmed in all respects

By the Commission

S FRANCIS C HURNEY

Secre

Su Klickv NonhArllnu nc 563 F 2d 1310 1313 9th Clr 1977 in which 1he rtdted a 81 lin

nm dl ly applicable In 1he ca ortariff In areaulated IndUllry but approved or an a areferral to 

he landard or abUlly omplOl dby 1he 111

The Court In BII60 ltated

Th two main forth tlon and appIloa lon of the rule lnvalldadna contraoll ra1eaaina towen frum liabilit

own Uhave boon Ito dloc ou 1180 by maldnl wronadom pay de and 2 to prolOClthooa 

good or rvIces from beina bed by mhowho kave power to drive hard bafaalna 349 U s a 91

Theoa conalderadoru a

u 1 with roprd to he lennlnallarlff In thta In

7Suthe Commiuion comments in till proceOdlDJ roprdln onMided requirements and obllptiona in termina

IOClDD lU
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME CARRIERS

AND RELATED ACTIVITIES

ACTION

SUMMARY

GENERAL ORDER 42 DocKET No 78 46

PART 514 FINANCIAL ExHIBITS AND ScHEDULES

NON VESSEL OPERATING COMMON CARRIERS

IN THE DoMESTIC OFFSHORE TRADES

January 14 1980

Final Rules

The Federal Maritime Commission hereby adds a new

Part 514 ofTitle 46 Codeof Federal Regulations in order

to publish substantive guidelines for determining what con

stitutes a just and reasonable rate of return or profit for

non vessel operating common carriers in the domestic

offshore trades and to provide for the orderly acquisition of

data in the event the Commission institutes a formal inves

tigation and hearing The annual reporting requirement

has been eliminated as have the reports which are submit

ted concurrently with every general rate change The

methodology adopted by the Commission as reflected in

the final rules includes the utilization of operating ratio as

the comparative test of reasonableness Normalized tax

accounting cargo cube allocation using outside dimen

sions ofcontainers and other substantive methods of data

reporting have alsobeen adopted to conform with the Com

mission s

regulations concerning financial reports by vessel

operating common carriers in the domestic offshore trades

Part 512 ofTitle 46 issued concurrently with these final

rules
404 FEDERAL MARITIME COMMISSION

EFFECTIVE DATE

March 28 1980

SUPPLEMENTARY INFORMATION

In November 1978 the Federal Maritime Commission s regulatory res

sibilities in the domestic offshore trades weresubstantially altered by the e

ment of Public Law 95 475 The amendments to the Intercoastal Ship

Act 1933 impose strict time limits on Commission investigations of 

changes The Commission is required by P L 95 475 to

Wlithin one year after the effective date of thiB sentence by regulation prescribe guidelin

the determination of what constitutes a

just and reasonable rate of return orprofit for co

carriers by water in intercoastal commerce

On November 15 1978 the Federal Maritime Commission serve

Advance NoticeofProposed Rulemaking which sought comments from go

mental bodies shippers and carriers regarding the nature scope and feas

ofsubstantive guidelines for dete mining just and reasonable rates of retu

profits for common carriers by water in the domestic offshore trades In 

tion to this request for written comments the Commission convened a ser

informal hearings at various cities throughout the country Commenting 

ties were requested to address fourteen specific issues as well as any addit

matters considered to be relevant

Proposed rules governing financial requirements and standards for eva

ing proposedrate changes by non vesseloperating common carriers NVO 

the domestic offshore commerce were published for comment on Novemb

1979

The proposed rules a

require NVOs subject to the Intercoastal Shi

Act 1933 to submit standard format financial data and b establish 

cedures by which the Commission will evaluate proposed rate changes 

annual report has been eliminated as has the justification which is subm

concurrently with every general rate change General rate changes file

NVO s

rarely become the subject of a docketed proceeding Compe

among NVO s and competition with vessel operating common carriers off

a less than containerload service tend toplace a ceiling on the rates ofan N

The freight all kinds rate of the underlying carrier generally provides a 

It is feltthat the current reporting reqUirements are too burdensome in vi

these market constraints on the NVOs ability to raise or lower rates at w

The proposed rules would only require an NVO to submit standard 

financial data in the eventthe Commission instituted a formal investigation 

hearing In such proceedings the burden of proof is on the NVO to esta

that its proposed general rate change isjust and reasonable The exhibits 

schedules required by the proposed rules would be an essential element o

NVO s

justification in support of the general rate change In determ

whether or not the NVO had met its burden of proof the Commission w

give great weight to the material submitted in compliance with the prop

rule

The proposed iUles adopt the operating ratio as the primary method 

used in evaluating NVO rate changes This approach is consistent with 
FINANCIAL EXHIBITS AND SCHEDULES 405

practice and reflects the Commission s view that the nature ofNVO operations

is in many ways distinct from the operations of vessel operators

Comments to the proposed NVO rules were submitted by the following

parties

Dependable Trucking

Guam Freight Forwarders and Consolidators

Hawaiian Distribution System

Pacific Coast Tariff Bureau

PRF Express Corporation

Additionally all FMC Bureaus were requested to submit comments to the

Secretary and such comments were received from the Commission s Pacific

District and Puerto Rico District Offices as well as the Office of General

Counsel These documents have been made a part of the official record of this

rulemaking proceeding

All comments received from private parties except for the comment of

Guam Freight Forwarders and Consolidators generally supported the rule as

proposed and especially supported the reduced level of reporting proposed in

the rule Guam Freight Forwarders and Consolidators opposed the reduced

reporting requirements on the basis that the annual reports had the tendency

to weedout some ofthe moremarginal operators that have given the badreputa

tion to the NVOCC industry The Commission rejects thisreason asajustifica

tion to retain the burdensome and unnecessary annual reporting requirements

for NVOCCs Free market competition is viewed by the Commission as the

proper mechanism to eliminate marginal operators from the industry

PRF Express Corp also submitted supplementary comments asking that

NVO s be allowed to file a company balance sheet as of a date not more than

three months prior to the date of filing proposed rates as opposed to the

proposed two month requirement of section 514 2 bXI or alternatively that

the rule provide a procedure for awaiver ofstrict compliance withthe reporting

requirements as exists in the VOCC rule This suggestion is intended to accom

modate NVO s who prepare balance sheets on a quarterly basis and the

Commission agrees that such a change would further reduce the regulatory

burden on the NVO industry Accordingly section 514 2 b l

has been

changed to incorporate PRF s suggestion

In considering the VOCC rule in this proceeding the Commission made

certain policy determinations which altered some substantive reporting require

ments in that rule and has decided to make similar changes to the NVO rule

to the extent these policy determinations affect the NVO industry Accord

ingly substantive conforming amendments have been made to sections 514 3

514 4b 514 4d 514 e 514 6 c 2 514 6 c 9 514 6 c 1l and

514 6 d 2 The bases for these changes are fully explained in the supple

mentary information accompanying the VOCC rule and need not be repeated

herein Any other changes from the proposed rule are stylistic

The Commission recognizes that from time to time an NVO may submit

schedules and exhibits which deviate in minor respects from the requirements

ofthese rules While we will require compliance with these rules in all material
406 FEDERAL MARITIME COMMISSION

respects we have no intention of penalizing NVOs for minor deviations w

are not material Section 514 2 d has been amended accordingly

Pursuant to section 4ofthe Administrative Procedure Act 5 D S C 5

sections 18 21 and 43 ofthe Shipping Act 1916 46 D S C 51817 820 

841 a and sections 1 2 3 a 3 b 4 and 7 ofthe Intercoastal Shipping 

1933 the Federal Maritime Commission amends Title 46 C FR by de

Subpart B ofPart 512 and by adding a new Part 514 Financial Exhibits 

Schedules Non Vessel Operating Common Carriers In The Dom

Offshore Trades as follows

PART 514 FINANCIAL EXHIBITS AND SCHEDULES

NON VI1SSEL OPERATING COMMON CARRIERS

IN THE DoMESTIC OFFSHORE TRADES

Sec

514 1 Purpose

514 2 General requirements

514 3 Certification

514 4 Access to and audit ofrecords

514 5 Definitions

514 6 Forms

AUTHORITY Sections 514 1 to 514 6 issued pursuant to sections 1

and 43 of the Shipping Act 1916 46 D S C 817 820 

841 a and sections I 2 3 a 3 b 4 and 7 of the I

coastal Shipping Act 1933 46 D S C 843 844 

845 a and 847

514 Purpose

The purpose ofthis Part is a to establish the methodology that the Fe

Maritime Commission Commission intends to follow in evaluating pro

rate changes in the domestic offshore trades submitted by non vessel ope

common carriers NVO s subject to the provisions ofthe Intercoastal 

ping Act 1933 and b to provide for the orderly acquisition of the 

required for the methodology so established The Commission will emplo

operating ratio methodology when evaluating proposed rate change

NVO s except in any instance where in its opinion the application o

operating ratio creates an unreasonable result

5 4 2 General requirements

a The rules contained herein are those issued by the Commission to 

the specific requirements of the Intercoastal Shipping Act 1933 as ame

and will be used to evaluate proposed rate changes in the domestic off

trades However the Commission reserves to itself the right to employ 

bases for allocation and calculation in any instances where in its opinion 

application of the rules and regulations prescribed herein create unreaso

results
FINANCIAL EXHIBITS AND SCHEDULES 407

b Whenever the Commission institutes an investigation and hearing to

determine whether or not an increase or decrease in rates which would affect

not less than 50 percent of the tariffitems ofthat NVO in a particular Trade

or which would result in an increase or decrease of not less than 3 percent in

its gross revenues in that particular Trade is just and reasonable the NVO

shall file in duplicate within 30 days ofthe publication in the Federal Register

of the order instituting the investigation and hearing the following

I An actual company wide balance sheet Exhibit A a as of a date not

more than three months prior to the date of filing the proposed rates

2 An actual statement of income Exhibit B a and supporting schedules

covering a 12 month period ending the same date as the balance sheet required

in subparagraph 1 above

3 A projected statement of income Exhibit B p

and supporting sched

ules for the 12 month period commencing on the first day of the month follow

ing the date on whichthe changed rates are proposed to become effective taking

into account the effect ofthe proposed rate changes and

4 Actual and projected operating ratios described in section 514 6 d

coinciding with the time periods covered by the statement of income required

in subparagraphs 2 and 3 above

5 A

supplementary dataexhibit Exhibit C described in section 514 6 e

corresponding to the date of the balance sheet furnished in response to section

5142 b 1

6 The work papers described in section 514 4 b

c Revenue except Other Revenue and costs shall be assigned directly

whenever possible otherwiseallocation shall be made in the mannerprescribed

in section 514 6 of this part However if the gross revenue from Other Oper

ations does not exceed 5 percent of the total company gross revenue no

segregation of revenue and expenses between Other Operations and the Trade

see definitions sections 514 5 b and c is required by this part

d All NVO s subject to these requirements must comply in all material

respects with the instructions outlined herein both as to the submission of the

specified exhibits and schedules and as to compliance with the methods pre

scribed for their preparation Ifan NVO has nothing to report on a

required

schedule it must submit the schedule with the word NONE printed across

its face

e All percentage calculations required by allocations herein shall be car

ried to two places beyond the decimal point e g

97 54 percent

95143 Certification

The data required by this part shall be accompanied by a certification by the

corporate officer responsible for the maintenance and accuracy of the books

accounts and financial records of the NVO stating that

a The books and accounts have been maintained in accordance with an

appropriate system ofaccounts

b The exhibits and schedules have been prepared from the regularly main

tained books and records of the NVO
408 FEDERAL MARITIME COMMISSION

c The records somaintained conform to are reconciled to or repres

actual financial data subject to the annual independent financial audit

d The allocations have been made in accordance with the rules 

mulgated in this part and

e The financial and statistical data used are supported by an appro

information gathering system having proper internal controls which have 

tested for accuracy

U5J4 4 Access to and audit ofrecords

a Every NVO shall maintain its records and books of account 

orderly and systematic manner These records must be kept in such man

to permit the timely preparation of the exhibits and schedules descri

section 514 6 a As a minimum requirement every NVO shall retain 

records necessary to prepare the documents described in section 5l4 6 

a period of 3 years

b Exhibits and schedules submitted as part of this requirement 

include 1 all work papers properly crossreferenced and indexed which 

prepared in support ofthe exhibits and schedules and 2 a detailed desc

of the methods employed in projecting revenues

c In addition the books and records of the NVO and those ofany r

company whose financial data is included in any of the exhibits or sch

shall be made available upon request for examination by appropriate Co

sion personnel Commission personnel shall be permitted to make cop

these records to the extent they deem necessary

d All exhibits and schedules submitted as part of the filing require

are to include the work paper reference numbers so that amounts show

be readily traced to the appropriate work paper

U5J4 5 Definitions

For the purpose of this part the following terms are expressly limited 

definitions listed below

a The Service All activities and operations of the NVO including 

regulated by the Commission

b Other Operations That part ofthe Service not subject to the Co

sion s

jurisdiction under 46 CFR 531 such as cargoes moving in the fo

commerce of the United States or those regulated by the Interstate Com

Commission

c The Trade That part ofthe Service subject to the Commission s

diction under 46 CFR 531 and as defined under Domestic Offshore T

below

d Domestic Offshore Trade The transportation and handling of 

mon carrier cargo under the terms of a tariffs on file with and regulat

the Commission between any one of the five areas of the Continental U

States listed in subparagraph 1 and one non contiguous area of the U

States listed in subparagraph 2 or between two non contiguous areas 

United States Where service is offered to or from two or more areas 
FINANCIAL EXHIBITS AND SCHEDULES 409

same rates e g Atlantic Coast to Puerto Rico and the Virgin Islands and

listed as such in a single tariff the carriage of cargo to or from those two or

more areas may be treated as one domestic offshore trade for the purposes of

this part

1 The five areas of the Continental United States are

i

North Atlantic Maine to butnot including Hatteras North Carolina

ii South Atlantic Hatteras North Carolina to but not including Key

West Florida

ill Gulf Key West Florida to and including Brownsville Texas

iv West Coast and

v Great Lakes

2 The non contiguous areas of the United States including but not

limited to those to which service is offered under the terms of tariffs on file

with the Commission as of December 31 1979 are

i

American Samoa

ii Commonwealth of the Northern Marianas

ill Guam

iv Johnston Island

v Midway Island

vi Puerto Rico

vii State ofAlaska

viii State of Hawaii

ix U S Virgin Islands and

x Wake Island

e Cargo Cube The product of the outside dimensions of a unit ofcargo

expressed in cubic feet In computing cargo cube for containerized cargo the

outside dimensions of the container trailer or other equipment shall be used

The height of equipment moving on wheels shall be measured from the ground

to the highest point on the equipment Empty equipment such as containers

shall be included in the computation of cargo cube only if they are revenue

producing units of cargo Where a NVO finds it more convenient to accumu

late such data in terms of twenty foot equivalent units TEU s or metric

quantities these units may be used instead of cargo cube in all instances where

cargo cube is cited in this part Where any of these options are exercised the

NVO shall modify the headings on the prescribed reporting forms to indicate

the units in which the data is being reported For purposes of this part NVOs

are not required to tape measure each unit e g

container trailer box carton

However the computation of cargo cube must be developed after careful

consideration of all evidence available to the NVO including loading docu

ments the opinions of experienced operating personnel and sample mea

surements In calculating the cube of containers trailers or other similar

equipment the NVO may assign a standard length width and height to a given

class of equipment provided that the actual dimensions of each piece of

equipment in the class vary no more than a foot from the standard dimensions

f Measurement Ton Equals forty 40 cubic feet

g Metric Measurement Ton Equals 35 31 cubic feet or I cubic meter
410 FEDERAL MARITIME COMMISSION

h Twenty foot Equivalent Unit TEU EquaIs 1 280 cubic fee

on the standard 20 X 8 X 8 container

iCargo Cube Relationship The ratio of total cargo cube for a

carried in the Trade to total cargo cube for all cargo carried in the 

j

Line Haul Transportatlan All transportation of freight on lan

than pickup and delivery and local terminal operations An example 

wouldbe substituted service i

e

chargingthe water rate but moving th

part ofthe way by land

k Pickup and Dellvery The service provided by the NYO or i

of picking up and delivering cargo from or to a shipper s or consignee 

of business or other location designated by the shipper or consignee 

to the NYO s tarift s on file with the Commission and not subject 

lation by any other regulatory body

I Related Company Companies or persons that directly or in

through one or more intermediaries control or are controlled by or a

common control with the reporting NVO The term control shall 

actual as well as legal control whether maintained orexercised throug

reason of the circumstances surrounding organizational struaure or op

through or by common directors officers stockholders avoting tru

holding or investment company or companies or through or by an

direl tor indirel tmeans including the power to exercise control

m Total Trade OperatingExpenses The total amount allocate

Trade for the following expenses Ocean Transportation LineHau

portation Pickup and Delivery and Terminal

n Total Company Operating Expenses The company wide tota

following expenses Ocean Transportation LineHaul Transportation 

and Delivery and Terminal

0 Operating Expense RelationshipThe ratio of total Trade o

expenses to total Company operating expenses

9514 6 Forms

a General

1 The information required by this part shall be submitted in 

scribed format and shall include

Exhibit A Balance Sheet

ExhibitB Statement of Income and Supporting Schedules

Exhibit C Supplementary Data

2 The required exhibits and schedules are described in sections S

c d and e

b Balance Sheet Exhibit A

The balance sheet shall be prepared from the NYO s books and re

accordance with generally accePted accounting principles and shall be 

panied by the appropriate footnotes

c Statement ofIncome Exhibit 9

1 A statement of income shall be prepared showing operating re

the Total Company Other Operations and the Trade
FINANCIAL EXHIBITS AND SCHEDULES 411

2 Operating Revenue Schedule B 1

i

Revenue allocated to the Trade shall only be revenue earned from the

common carriage ofcargo in the domestic offshore trade during the period and

other revenue as shown on Schedule B1 except that minor amounts of other

cargo may be considered Trade cargo in accordance with section 5l4 2 c

Revenue figures shall be reported in total for the Trade and separately for each

of the 15 inbound commodities listed by tariff descriptions producing the

highest revenues for the inbound portion of the Trade and for each of the 15

outbound portion of the Trade Where fewer than 15 commodities account for

at least 90 percent of the total revenue for either the inbound or outbound

portion of the Trade only those commodities need be separately reported

Where the same commodity is carried under several tariffdesignations having

different rates eg potatoes refrigerated potatoes non refrigerated potatoes

in bags potatoes in containers each of these tariff designations shall be

considered as an individual commodity

ii Where the applicable tariff establishes a single freight all kinds FAK

rate for containers that may hold more than one commodity individual com

modity designations shall be disregarded in considering that tariff item for

purposes of subparagraph i

above

3 Ocean Transportation Expenses Schedule B II

This schedule shall set forth the number of containers cubic feet of cargo

shipped and amounts paid or owed to each underlying ocean carrier for ocean

transportation purchased for the carriage of cargo in Total for Other Oper

ations and for the Trade

4 Line Haul Transportation Expenses Schedule B lll

This schedule shall set forth the number of cubic feet of cargo carried and

amounts paid or owed to motor carriers railroads or otherland carriers for the

linehaul transportation of cargo in Total for Other Operations and for the

Trade

5 Pickup and Delivery Expenses Schedule B W

This schedule shall set forth expenses incurred in the pickup and delivery of

cargo in Total for Other Operations and for the Trade Assignments to the

Trade shall be direct where possible otherwise on the cargo cube relationship

by location This schedule shall also set forth the basis under which pickup and

delivery charges are assessed for the Trade e g

included in base rate or

separate charge and the amount ofany charges paid to a related company for

pickup and delivery services

6 Terminal Expenses Schedule B V

This schedule shall set forth in detail all expenses incurred in terminal

operations for the loading and unloading of containers the switching and

transfer of cargo within the terminal area and any local trucking operations not

included in linehaul or pickup and delivery expenses e gbetween underlying

carrier s terminal and the NYO s terminal in Total for Other Operations and

for the Trade Assignments to the Trade shall be direct where possible other

wise on the cargo cube relationship by location
412 FEDERAL MARITIME COMMISSION

7 Administrative and General Expenses Schedule B Vl

This schedule shall set forth all administrative and general expenses in

ing advertising and miscellaneous taxes Depreciation of equipment and 

tization of leasehold improvements not assignable to pickup and delive

terminal expenses shall be included in this schedule Expenses not di

assigned to the Trade or Other Operations shall be allocated to the Tra

the operating expense relationship Charitable contributions shall not be 

cated to the Trade

8 Other Income or Expense Schedule B VII

Any other elements of income or expense shall be fully explained 

supported by schedule Schedule BVII Other Income or Expense A

ments to the Trade shall be direct where possible otherwise on the ope

expense relationship Should this type ofassignment appear to be inequ

to either the Trade or Other Operations a more equitable method sh

employed and the reasons fully explained

9 Provisions for Income Taxes

Federal State and other income taxes shall be listed separately 

company is organized outside the United States it shall indicate the en

which it pays income taxes and the rate oftax applicable to its taXable in

for the subject year Federal State and other income taxes shall be calcu

at the statutory rate

10 Extraordinary Items

Income or losses of an extraordinary nature shall be set forth and des

in an appropriate schedule which is reconcilable to the statement of in

Classification as an extraordinary item shall be in accordance with gen

accepted accounting principles In general these amounts shall not be ass

or allocated to the Trade

11 Related Company Transactions Schedule B VIII

The net income loss after Federal income taxes from transactions 

Service with related companies shall beallocated to the Trade Such alloca

shall be made on the same basis as the specific expense was allocated 

Trade Income taxes should be assigned torelated company transactions 

on the statutory tax rate The methods employed shall be fully explain

Schedule B VIII Related Company Transactions

d Operating Ratio

1 The operating ratio will be computed by dividing total Trade exp

adjusted for related company transactions by total Trade revenue

2 The reasonableness of an NVO s operating ratio will bedetermin

comparing it to the operating ratios of other regulated and non reg

companies adjusted for relative risk In conjunction with the operating 

the staff may also consider other financial ratios such as 1 curren

leverage and 3 turnover TheNVO s stability in earnings as compared t

of other firms will also be considered
FINANCIAL EXHIBITS AND SCHEDULES 413

e Supplementary Data Exhibit C

The supplementary data shcedule shall set forth information concerning the

identity of and services offered by the NYO Specific details are set forth in

Exhibit D

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DocKET No 79 90

ERNEST R LEVINE D B A GERALD ExPORT IMPORT CoM

v

HAPAGLLOYD AG

ORDER

January 18 1980

On November 7 1979 Administrative Law Judge Charles E 

dismissed the complaint of Ernest R Levine d b a Gerald Export 

Company Levine against Hapag Lloyd AG Noappeals were ta

this action but the Commission determined to review the matter o

motion

Levine is a

shipper of carpets located in Chicago Illinois Th

complaint arose out of a legal action by Hapag Lloyd a common 

water in the foreign commerce of the United States to collect freigh

from Mr Levine Hapag Uoyd AG v Levine 473 F Supp 991 

1979 In that proceeding Levine alleged that the freight charges owi

were based upon rates unlawful under the Shipping Act 1916 46 U S 

et seq The United States District Court entered immediate judg

Hapag Lloyd on its freight collection claim on June 14 1979 The co

that Levine s counterclaim raised separable matters within the prim

diction of the Federal Maritime Commission which would be defe

Levine s allegations could be considered by the Commission

Levine subsequently filed a Shipping Act complaint alleging vio

sections IS 16 and l8 b of the Shipping Act by Hapag Lloyd and 

coonspirators based upon discriminatory pricing and failure to 

published tariffs Although the complaint wasunclear as to the exac

alleged to be discriminatory the complained of activities were not n

limited to the use of a Commission approved dual rate merchant s 

The complaint also include references to rebating and failure to 

published tariffs

Upon receiving Levine s complaint Hapag Lloyd filed a Motio

miss stressing the lawfulness of the dual rate system employed by i
ERNEST R LEVINE v HAPAG LLOYD 415

North Atlantic United Kingdom Freight Conference to which it belongs

Levine did not respond to this motion Under such circumstances it was not

improper for the Presiding Officer to construe the complaint against Levineand

dismiss it for failing to adequately state a cause of action The November 7

1979 Order of Dismissal is essentially a default judgment in favor of the

respondent from which no appeal has been taken

THEREFORE IT IS ORDERED That consistent with the above dis

cussion of the Complainant s failure to prosecute its claim the November 7

1979 Order of Dismissal is adopted by the Commission and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

46 C F R CHAPTER IV DocKET No 79 36

SELF POLICING OF INDEPENDENT LINER OPERATORS

January 21 1980

ACTION

SUMMARY

Discontinuance ofProceeding

This proceeding was instituted by advance notic

posed rulemaking published April 16 1979 44 F

22487 Public comment was requested on w

adopt rules requiring independent ocean carrier

ticipate in self policing programs and if so the ap

nature scope and feasibility of a policing req

Upon consideration of comments received we ha

mined not to promulgate a proposed rule at t

Accordingly proceedings in this matter are 

discontinued

SUPPLEMENTARY INFORMATION None

By the Commission

S FRANCIS C HURNE

Sec
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

DOCKET No 79 15

WESTINGHOUSE ELECTRIC CORPORATION

v

SEA LAND SERVICE INC

NOTICE

January 23 1980

Notice is given that no appeal has been taken to the December 10 1979

dismissalof the complaint in this proceeding and that the time within which the

Commission could determine to review has expired No suchdetermination has

been made and accordingly the dismissal has become administratively final
FEDERAL MARITIME COMMISSION

No 79 15

WFSTlNGHOUSE ELECTRIC CoRPORATION

v

SEA LAND SERVICFS INC

NOTICE OF 1 DISMISSAL OF COMPLAINT

2 DISCONTINUANCE OF PROCEEDING

Finalized January 23 1980

By notice served November 21 1979 the parties in this proceedin

directed to submit on or before Monday December 3 1979 a pre

statement pursuant to Rule 95 of the Commission s Rules of Pract

Procedure 46 C F R fi 502 95 To the date ofthis notice no party has s

ted the requested preheating statement nor has the Presiding Adminis

Law Judge granted waiver of the filing thereof Consequently under 

cumstances the failure to file is deemed a failure of prosecution of th

plaint as well as a dismissal of the parties to the proceeding pursuant 

Rule 95

Whereupon upon consideration of the above it is ordered that

A The complaint is dismissed

B The parties are dismissed from this proceeding

C The proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law J

December 10 1979
S FRANCIS C HURNEYSprrptnrlJ

FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 693 1

DORF INTERNATIONAL LIMITED

v

FWTA MERCANTE GRANCOWMBIANA S A

ORDER ON RECONSIDERATION

January 24 1980

This proceeding is before the Commission on petition from Respondent Flota

Mercante Grancolombiana requesting that the Commission reconsider its de

termination not to review the decision of the Settlement Officer granting

reparation to Complainant Dorf International Limited for alleged freight over

charges on a shipment of cardboard paper carried by Respondent from New

York New York to Cristobal Panama

The Commission decided to grant the Petition for Reconsideration in this

instance because ofthe clearly erroneous allegation in the Settlement Officer s

decision that the Respondent had not disputed the merits of the claim

The complaint alleges that Respondent assessed freight on a measurement

basis of 337 cft whereas according to the shipper s packing list the 43 cartons

of cardboard measured 13138 cft The Settlement Officer found that the

evidence supported Complainant s claim and on that basis awarded reparation

It appears however that the Settlement Officer overlooked the fact that the

43 cartons which measured 131 38 cft when delivered to Complainant were

subsequently placed in five pallets for delivery to the terminal and the carrier

As shown by the dock receipt and the bill of lading the five pallets measured

377 cft The applicable tariff provided that freight must be assessed on the

over all measurement of each package Consequently by assessing freight on

the measurement basis of 377 eft Respondent properly rated the shipment

Therefore the decision of the Settlement Officer must be and is hereby

reversed reparation denied and the complaint dismissed

It is so ordered

By the Commission
FEDERAL MARITIME COMMISSION

DOCKET No 74 15

WEST GULF MARITIME AsSOCIATION

v

PORT OF HOUSTON AUTHORITY ET AL

ORDER ADOPTING INITIAL DECISION

January 28 1980

This proceeding was initiated upon the complaint of West Gulf Mar

Association WGMA lfiled April IS 1974 alleging that several term

tariff provisions published by Respondents seven ports on the Texas 

Coast 2violated sections IS and 17 of the Shipping Act 1916 46 U 

15814 816 The Port of New Orleans the California Association of 

Authorities the Virginia Port Authority the Maryland Port Administra

and the Commission s Bureau of Hearing Counsel intervened Administr

Law Judge Seymour Glanzer issued an Initial Decision 3served Septembe

1979 which is before the Commission on WGMA s Exceptions Respon

filed a Joint Reply to Exceptions and Hearing Counsel also replied

TARIFF PROVISIONS

The text of the tariff provisions in issue is attached as Appendix A t

Initial Decision The tariffprovisions are largely duplicative with many o

ports tariffs using identica1language Although approximately 35 tariff 

visions are challenged in this proceeding they may be categorized into 

major groups

I Each of Respondents tariffs provides that use constitutes consent t

terms and conditions of the tariffs and that vessel agents are users o

I WOMA isa trade aaaociation composed of lteamahip llJDOtl and ownersandstevedore companies un port fadUt

the Gulf of Mexico

2 Respondents are the Port of Houston Authority the City of Galveston tho Port of Beaumont the Port of Port Ar

Port of Corpus Christi the Brownavillc Navigation District of Cameron County and the Oranac County Navlaation 

District

19 S R R859 1979
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 421

ports facilities The ports bill the vessel agents and hold them liable for

dockage wharfage and outbound cargo demurrage charges

2 Atariff provision published only by Galveston provides that when cargo

cannot be removed from piers or transit sheds because of strike interference

cargo already in penalty or compensatory demurrage status will be subject to

compensatory rates

3 Six ofthe Respondent ports publish tariffprovisions stating that the ports

are the interpreter sole interpreter or sole judge ofthe tariffs

4 Three portspublish tariffitems requiring stevedores who rent port owned

cranes to assume liability for the negligent actions of the port provided crane

operators while under the control and supervision of the stevedores

DISCUSSION AND CONCLUSIONS

The Presiding Officer found that the provisions stating that the ports were

the sole interpreter of the tariffs were unjust and unreasonable under section

17 No exceptions to this finding were filed The Commission concludes that

this finding of the Presiding Officer is correct and it is therefore adopted

The Presiding Officer also found that the remaining tariff provisions com

plained of by WGMA were lawful and reasonable To these findings WGMA

filed 59 exceptions 54 of which were unaccompanied by references to the

record as required by the Commission s Rules of Practice and Procedure

46 C FR section 502 227 a WGMA s Exceptions consist of a list of general

disagreements with the findings of fact and conclusions of law made by the

Presiding Officer For the reasons stated below the Commission finds that the

exceptions are without merit and thatthe findings and conclusions of the Initial

Decision are proper and well founded Accordingly the Commission adopts the

Initial Decision as its own

The use equals consent provisions merely inform users of their responsibi

lities and impose no disadvantage or unreasonable practice upon them The

Commission has previously found that consent language adds no indepen

dent validity to provisions imposing liability West GulfMaritime Association

v Port ofHouston Authority 18 S R R 783 789 1978 4

ajfd mem sub

nom West Gulf Maritime Association v Federal Maritime Commission

No 78 2021 D C Cir Dec 31 1979 That finding applies to the instant

tariff provisions as well

Similarly the issue whether vessel agents can be held responsible for various

port charges wasalready decided in the affirmative in WGMA v PHA Addi

tionally in West Gulf Maritime Association v City ofGalveston 19 S R R

779 1979 the Commission found that tariff provisions defining users to

include steamship agents were reasonable and lawful Accordingly the Com

mission concurs with the Presiding Officer s conclusion that the port charges

for which the vessel agents are made liable are reasonably related to the vessel

interests use of the ports and are therefore reasonably borne by the vessel

agents

5

4 Hereinafter cited as WGMA v PHA

s

T e mm ion also concurs with the finding in the Initial Decision that the statute of frauds issue raised by WGMA is

v

FEDERAL MARITIME COMMISSION

No 74 15

WEST GULF MARITIME AsSOCIATION

PORT OF HOUSTON AUTHORITY ET AL

Adopted January 28 1980

Tariffprovisions which charge vessels agents withliability for payment of vessel charges including

wharfage dockage wharf demurrage and strike demurrage do notviolate sections 15 16 First

or 17 of the Shipping Act 1916 Galveston Wharves strike demurrage tariff provision does

not unduly or unreasonably prefer or discriminate against types of cargo shippers carriers

or their agents in violation of sections 16 First or 17 of the Shipping Act 1916

Tariff provisions which purport to allow the ports to interpret provisions of their tariffs areunjust

and unreasonable practices relating to or connected with the receiving handling storing or

delivering of property in violation of section 17 of the Shipping Act 1916

Tariffprovisions which make crane operators the borrowed servant of the crane userand make the

crane userliable for the negligence of the crane operator while under the supervision direction

and control of the user are notunjust and unreasonable and do not violate sections 15 or 17

of the Shipping Act 1916

Robert Eikel and J T Davey for complainant West Gulf Maritime Association

F William Colburn for respondent Port of Houston Authority

Benjamin R Powel for respondent City of Galveston Galveston Wharves

M Harvey Weil for respondents Nueces County Navigation District No I Port of Corpus

Christi and Brownsville Navigation District

Tom Moore Featherston for respondent Port of Port Arthur Navigation District of Jefferson

County

Malcolm M Dorman for respondent Orange County Navigation District and Port

Administration

Dan Rentfro for respondent Port of Brownsville

Dayle G Owens for respondent Port of Beaumont

Burt Pines Jack L Wells and Frank Wagner for intervenor California Association of Port

Authorities

Edward Schmeltzer Edward J Sheppard and George Weiner for intervenor The Board of

Commissioners of the Port of New Orleans

J Robert Bray and Arthur W Jacocks for intervenor Virginia Ports Authority

Gary Koecheler for intervenor Maryland Port Administration

John Robert Ewers Lizann Malleson Longstreet and Aaron W Reese as Hearing Counsel

Sam H Lloyd for Georgia Ports Authority appearing specially

Milton A Mowat and Robert LHenry for intervenors Port of Portland and Northwest Marine

Terminals Association Inc
424 FEDERAL MARITIME COMMISSION

INITIAL DECISIONI

OF SEYMOUR GLANZER

ADMINISTRATIVE LAW JUDGE

This is a complaint proceeding filed April 15 1974 pursuant to th

visions of section 22 of the Shipping Act 1916

2

by West Gulf Ma

Association WGMA complainant alleging violations of sections 15 a

ofthe Shipping Act 1916 3

by Port of Houston Authority PHA the C

Galveston Galveston Wharves PortofBeaumont Texas Beaumont 

Port Arthur Texas Port Arthur Port of Corpus Christi Nueces C

Navigation District No 1 Corpus Christi Brownsville Navigation D

of Cameron County Texas Brownsville and the Orange County Navi

and Port District Texas Orange respondents and requesting that sp

tariff matter published by the respondents 4

be declared unjust unreaso

discriminatory and unlawful and further requesting that the tariff ma

ordered null and void and that the respondents be ordered to cease and 

from acting in accordance with and from seeking to enforce the tariff 

against complainants members and requesting still further the issuance o

orders as may be necessary to secure compliance with the law by respon

Reparation is not requested

The answers ofall respondents allege that the tariffmatterappearing 

of their tariffs is just and reasonable and not discriminatory and not vi

of any provisions of law

WGMA is a trade association composed of I almost all the stea

agents representing operators of deep sea cargo vessels using the ports 

Gulfof Mexico from Lake Charles Louisiana toBrownsville Texas inc

2 the owners of some of those vessels and 3 stevedoring firms 

employees load and unload those vessels

All respondents operate port and terminal facilities in the State of 

pursuant to provisions of the Constitution and other laws of the State 

respondent except Galveston Wharves does so as a navigation district 

is a government agency body politic and political subdivision of the 

Galveston Wharves derives its authority from the charter of the City o

veston a home rule city which conducts the business of Galveston W

through a

separate Board of Trustees

I

This dccilion will becometho decision of the Commillion inthe absence of review thorcofby tho Commission Rule 

of Practk c and Procodurc 46 CP R IlO2 227

46 USC

1821

46 USC 1I814 and 816

Arter post bearin brier were IICrvcd andfiled it became apparent that thoro wuaneed to clarify which ofthe tari

placed in iuuc by the complainant by way of the complaint orby way 01 evidence introduced at the hearing remai

and under attack by tho complainant at the closeof the hearin Therefo at apost hurin conference on Septemb

I distributed copiCllI of a

compilation then entitled Appendix OOtainina tho identification and textof thoso tar1ft provis

preliminarily seemed to fall in that cateaory The parties were directed to advlac me on the correctness of the Ap

complainant and aU respondents except Beaumont lOlIponded Generally the respondentl statod that the Append

rcftectod theirundcntandinl oftho tarift proviakmI in iaue at the close of the hearina but sevoral advised that some ta

occurrinl either prior to ordurina the hearing orsubeoquent to the clo eof the record should be noted However by 

September 12 1978 die complainant adopted the Appendix as acorrect stalement of thOlO tarift provisions which 

violate the Shippinl Act 1916 advisina The tarift provisions lOt forth In the Appendix preented at the conference 

ber 12 it Is agreed by complainant arc thOle at issue

n

WOMAs viewI of what is under attack will be accepted for t

of thisdccision

TheAppendix has been incorporated in the initial decision as Appendix A Pertinent respondent comments appear 

to the text ofAppendix A
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 425

Under appropriate provisions of Texas law i e the Texas Water Code

special statutes creating some of the navigation districts or the City of Gal

veston s charter and applicable statutes the respondents are authorized

among other things to acquire and own land and purchase construct enlarge

extend repair maintain operate and develop wharves docks and other facili

ties or aids incidental to or useful in the operation or development of ports or

waterways or in aid of navigation and commerce in the ports and waterways

In addition the respondents are empowered to prescribe fees and charges to be

collected for use of theirland improvements and facilities The fees and charges

must be reasonable equitable and sufficient to produce revenue adequate to

payexpenses

s

Several persons intervened They are the Port of New Orleans New Or

leans an agency of the State of Louisiana created for the purpose of regu

lating and promoting the commerce and traffic at that port and administering

and maintaining its public wharves and other terminal facilities California

Association of Port Authorities California Virginia Port Authority Vir

ginia Maryland Port Administration Maryland and Hearing Counse1 6

The

Georgia Ports Authority appeared specially but did not participate in the

proceeding All parties except those who withdrew participated in the pro

ceeding and submitted briefs 7

There were 13 days ofhearing in the proceeding The record consists of 1962

pages of transcript and 65 numbered exhibits

CoNTENTIONS OF THE PARTIES

The text of the points of arguments made by WGMA and respondents

appears as Appendix B of this decision WGMA focuses on three distinct

categories of provisions published in respondents tariffs together with the port

practices which implement those provisions as being violative of the Shipping

Act 1916

The first category is comprised usually ofa single tariffprovision containing

two components and providing a that use of the port s facilities shall consti

tute consent to and agreement to comply with the regulations and provisions

contained in the port s tariff 8b that vessel agents are users of the port s

facilities 9

Flowing from those provisions is the practice of each of the re

spondents ofbilling the vessel agent for certain tariffcharges acknowledged by

WGMA to be proper charges against the vessel dockage shed and pier use

charges and other tariff charges wharfage and outbound cargo demurrage

SSee eg Texas Water Code Ch 60 101 ad 60103 and Art 1I8 f V T e S

6

Twointervenors Port of Portlandand Northwest Marine Terminals Association Inc withdrew before the conclusion of the

hearing

1

In accordance with my request a single joint briefwas submitted on behalfof the seven respondents

The consent provisions are as foUows PHA Item 2 Galveston Wharves Item 30 Beaumont Item 165 Port Arthur

Hem 175 Corpus Christi Item 1552 BrownsvilJe Itcm 105 Orange Item 195

The userprovisions arc generally the same as those in n8 supra except that there is adefinition of user in PHA s tariff

which does not appear in Appendix A and there is no user provision in the portions of Brownsvil1e stariff appearing in Appen

dixA
426 FEDERAL MARITIME COMMISSION

which WGMA claims are not proper charges against the vessel but 

gations of the cargo interests

Also in this first category is a tariff provision published only by G

Wharves It is Item 187 Interference Due to Strikes It deals w

demurrage and provides in effect that when cargo cannot be remo

piers or transit sheds because of strikes 1 any cargo within the 

period will remain on free time i e no demurrage charges will accru

the strike and 2 any cargo already in a

compensatory or penalty de

status will remain in demurrage status but at compensatory rates 

penalty demurrage rates Itis Galveston Wharves practice tocharge 

vessel interest owner or agent if the owner is not physically locate

veston for outbound demurrage of the second lcind

In the second category are tariff provisions published by si

respondents 10 containing terms which in substance state that the p

interpreter or sole interpreter of the meaning of the terms and con

the tariff

The third category is concerned with tariff provisions published 

Galveston Wharves and Corpus Christi involving the rental of cra

rental includes the services of a crane operator employed by the po

rental charges include the crane operator s salary In addition the ta

vide that the stevedore renting the crane from the port assumes resp

and liability for the negligent acts of the operator The practice of tra

liability for employee negligence from the employer to the user of t

ment is known in the law as the borrowed servantdoctrine See Ro

City of Galveston 471 S W 2d 789 Tex 1971 8 SRR 20 713

Respondents of course urge that neither their tarifts nor their pra

violative of law

Intervenor New Orleans argues that the tariff provisions at iss

proceeding are necessary for efficient port operation and that the

contraryto State or Federal Law includingthe ShippingAct 1916 G

the other intervenors Hearing Counsel California Maryland and 

take the same position as New Orleans

THE POST HEARING CONFERENCE

Earlier the post hearing conference of September 12 1978 

tioned 11 Its primary purpose was to ascertain whether there was any 

reopen the record for the talcing of additional evidence or to subm

mental briefs in the light of the Commission s Report and Order 

Initial Decision in Docket No 75 21 West GulfMaritimeAssociat

of Houston Authority of the Port of Houston Texas 12

10 WOMA haa not cited any Galvellon WharveI Tarift provilion pernio Interpretation of ita tariff

llN 4 lupnI

The Report and 0nI0r waa A t 16 1978 The Inidal Dooioion wa rved Aprtll2 1978 Subaaq

hearin eonfcRlnce WOMA GUsht judicial review of tho Commluion declalon The euo isnow pendinl inth

Court of Appoals or tho Dillm of Columbia Circuit undor title of W Gulf AlGritl MIOtlGtlon I F 

Comm 4lon and Uollld Slo of AIINri oNo 78 202The Initial DocIIion II publl hacI at 18 SRR 291 Th

docllion II publilhacla 18 SRR 783 Horaafle tha will be Idontiftad aa WGMA v PHA
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 427

A further purpose was to rectify certain deficiencies in the post hearing briefs

Under the Commission s Rules of Practice and Procedure post hearing

briefs are required to have a separately captioned section containing proposed

findings of fact in serially numbered paragraphs with reference to exhibit

numbers and pages of transcript Rule 221 46 C FR fi 502 22113

For the most part initial briefs contained sections entitled proposed findings

of fact Yet the proffered material was as much conclusionary as factual but

evenwhen factual there was little or no reference to the portions ofthe record

relied on In view ofthe sizeable record and the breadth ofthe arguments these

omissions presented palpable drawbacks to informed decision making and to

the best interests of the litigants

To remedy the problem a two round procedural schedule was developed It

wasmade applicable to the primary litigants but wasoptional for intervenors

The first round called for simultaneous submissions ofproposed findings offact

in accordance with Rule 221 by WGMA and by respondents jointly In the

second round the parties were instructed to indicate whether and how they

differed with the other side s proposed findings 14

In their first and second round submissions the respondents complied with

the directions given In tlte second round they also observed generally that

many of complainant s first round proposed findings were not cited to the

record The complainant did not file any second round comments s

n

Rule 221 provk les in pertinent part

Briefs requests for findings

1bc presiding officershall fix the timeand manner of filing briefs and any enlargement of timeThe period oftimcallowed shall

be the same for all parties unless the presiding officer for good cause shown directs othcrwi Briefs shall be served upon all parties

pursuant toSubpart Hof this part In inVestigations instituted on the Commission s own motions the presiding otIk ermay

require Hearing Counsel to file arequest forfindings of fact and conclusions within a reasonable time prior tothe filing of briefs

Service of the request shall be in accordance with the provisions of Subpart Hof this part Rule 8 Unless otherwise ordered by

the presiding officer opening or initial briefs shall contain the following matters in separately captioned sections introductory

section describing the nature and background ofthe case proposed tindinp offact in serially numbered paragraphs with reference

to exhibit numbers and pagesof the transcript argument bued upln principlesof law with appropriate citations ofthe authorities

relied upon and conclusions ThePresiding Officer may limit the number of pages to be contained in abrief AU briefs shallcontain

a

subject index or table of contents with page referenQ 8and a

list of authorities cited

I

For a summaryof the procedural schedule llCC Notice ofOrdcr Fixing Timefor Certain Filings served September 14 1978

Most intervenors stood on theiropening briefs New Orleans opted to tile in the opening round Hcaring Counsel participated

in both rounds generally concurring with respondents in the tirst but it added some other proposals On the second Hearing

Counsel limited its response to taking issue with certain of complainants s

proposals relating to the Port of Houston s wharfage

practices on the grounds that those practices were found lawful in WGMA v PHA supra

IJ By letter of December 18 1978 complainanl wrote

Thecomplainants do not feel it necessary to tile a

rejoinder to the Respondents Reply to the Complainants Requested Findings

f Facts because many of the separate replies where in disagreement with the complainants requests are argumentative in

character and nogood purpose would be served in replying argumentatively

Taken literally this cryptic passage would appear to mean thai complainant declined an opportunity forathird round submission

However I understand it differently I read it to mean that complainant would not be participating in the second round I reach

this conclusion because of atelephone conversation with complainant s counsel after the time to tile the second round exWed I

inquired if perhaps complainant s second round might have gone astray inasmuch as I could not locate it in the official docket

I was informed that complainant did not regard my ruling to mandatorily require asecond round comment I asked forwritten

confinnation of that remark The only writing which followed was the letter of December 18th
428 FEDERAL MARITIME COMMISSION

FACTS

Preliminarily it is noted that the burden ofproof is on the party p

to halt existing tariff practices 16 Here then the burden lies with 

For convenience the findings will generally follow the sequence sugg

WGMA s proposed findings of fact

AGENT LIABILITY FOR DocKAGE SHED

AND PIER WHARF USE CHARGES

ICertain things are undisputed by WGMA Respondent s tarif

dockafe shed hire and pier or wharf use hire as charges ag

vessel Ithese are appropriate charges against the vessel or vessel 

insofar as vessel interests mean vessel owner or operator In some 

addition to the user and consent provisions previously mentioned 

those vessel interest charges are specifically albeit redundantly m

responsibility ofthe vessel agent19 The complaint in part concerns the 

ofmaking steamship agents responsible for payment of these admitted

vessel charges

Although the complaint alleges and WGMA argues in brief that 

provisions and port practices which make the vessel agent liable 

admittedly proper vessel charges are unjust unreasonable and unfair 

is not shared by all WGMA members Of those WGMA membe

representatives testified three speaking as steamship agents Lyk

Steamship Company 20 E S Binnings21 and Kerr Steamship Comp

not consider it to be unjust unreasonable or unfair for agents to be h

for these charges

16 WGMA v PHA supra 18 SRR at 787 788

17 Wharf use and wharfsac

chargcs arc separate eharscs GeneraU as its name implies the fonner is baaed o

facility forloading orunloadins and assembly ordistribution ofcargo Thelatteris measured by the cargo pass

overthe whal VC8

IIPHA Tariff No 8 at 7 9 Galveston WharvesTariff No 4 Dat 4 5 Beaumont Tariff No 4Hat S 24 Po

No II A at 4 31 Corpus Christi Tariff No J J at 3Ai BrownsviUe Tariff No 2 at 503 Orange Tariff No 

19 See eg Galveston Wharves Tariff supra at 4 Brownsville Tariff supra at 22 Respondents object tothe 

relating to the definitions ofdockage shedand whlUf

usehire inWGMA proposed findings of fact bccauac those 

not included in Appendix A Whatever technical meritmay attachto the objection it simply isnot welltaken becau

assails all vessel charges for which the asent is made liable

20 Lykes position Walstated by asenior vioeprc aident who distinguiaMd between charps eonccdcd to be tho

i e dockage and what he considered to be carlO charses i

e wharfaae His view was emphatic and W

adhered to despite SUSlestions from WGMAs couRICI that the witness was confused AU of this occurred betore 

Transcript TR 416 45761 466 468 Af tcr the receu the witneu recanted indicatina he wasconfused inhis e

after all Tr 475 482 However as noted in the record I commented at the time onthe witness demeanor Tr 

upon his testimony and my observations durinS the entire time the witness was on the stand scant credence ca

disclaimer

lITr 151

uTr 356 357 Kerr however limits its position to th08C circumstances in which it has socured an advance or

in fundsby the vessel interests Curiously even though it is Kerr which dccidca whether ornot to seek advanc

the ports should share with the agent the risk of nonpayment
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 429

2 Under their tariffs the respondent ports bill the agents and insist upon

payment from the agent for the vessels port charges 23 This is a common

practice throughout the ports of the United States 24

Agents playa vital role in water transportation Vessel owners and operators

must be represented at local ports for obviously they cannot accompany their

vessels throughout each voyage Among other things owners and operators rely

upon the agent s experience and expertise in dealing with local businessmen

and ports to attend to the vessel s needs Precisely because agents are local the

ports rely upon the agents and the agents credit for payment ofvessel charges

Under their tariffs and in accordance with custom ports deal with the agents

as principals in assigning berths and cargo space and providing service for it is

essential to good port operations that a well accepted local agent be present to

assume financial responsibility for payment of port charges 25

Agents recognize their value to vessel owners and operators Although agents

solicit as much representation as they can handle or is prudent they do so

selectively One of the criteria for choosing to represent a particular principal

is that principal s creditworthiness As put by one agent A steamship com

pany s creditworthiness fluctuates violently with the charter market and cargo

market 26 The principal s creditworthiness is important to agents not only

because they are liable for port charges but because their agency fees are also

dependent upon the principal s ability to pay

Unless assured by the principal s financial strength and often times even

then agents seek to be put in funds by their principals This is accomplished

by written or oral agreement as circumstances warrant or permit and most

frequently takes the form ofadvances or authorization to make disbursements

from freight revenues

27

An agent explained that for the most part it is not necessary to obtain

advances from liners because of their frequent port calls but some liners might

have a bad reputation in which cases advances are required from tramps

advances are essential 28 However advances are not sought when the agent

collects freight revenues on behalf of its principals usually liners and has

authorization to deduct disbursements for vessel expenses before remitting the

revenues to the principals 29

In particular WGMA singles out PHA for the pressures it applies to

collect vessel expensesfrom agents PHA does not preferthat characterization

but it does admit it has engaged in certain practices to insure the integrity of

its tariff but it denies it has engaged in others The details follow

It is the general practice in all Texas ports for agents to make advance

arrangements with the port for vessel facilities and services eg

berth space

lJIt should be borne in mind that wharfage istreated as a vessel sport charge by ports whose tariffprovisions makewharfage

a liability of the vessel

N

Ex 65 Tr 1386 1640 1690

l Exs so 58 62

26Tr 59

llSce eg Tr 65 130 317 413 414 606 682 770

lITr 13O

29Tr 318 4134
430 FEDERAL MARITIME COMMISSION

shed hire water and other port services 30 From time to time in ac

with its tariffs and practices PHA refused to assign berths to some a

inbound vessels until they the agents paid their delinquent ac

accounts which were more than 30 days overdue pursuant to Item 

PHA s tariff some agents have been threatened with berth denial u

accounts were paidbut no vessel wasever denied a berth 31 occasiona

placed or threatened to place some agents on a cash basis and required 

against anticipated port charges from agents who failed and refused 

pay port charges

All agents active at Texas ports are aware of the tariffs cus

practices which make them liable as principals for vessel expenses T

that the ports rely on their credit and not that of the vessel when 

arrangements are made and port services are furnished Consequ

agent may be subject to some or all of the foregoing admitted pract

to the extent of possible denial of berth space to the agent for a 

vessel because the agent s PHA account is overdue for a different v

But as seen no vessel wasever denied aberth for the reason that th

account wasoverdue for a differentvesset Moreover WGMA has ne

nor placed in issue any provision of PHA s tariffwhich conceivably wo

or result in allowing PHA to apply an agents payment of the de

principal to the account ofanother Rather it has been established t

aggressively sought payment ofdelinquent accounts In pursuing that 

pursuant to Item 3 a of its tariff PHA did require that a delinquen

tive user of a berth for a second vessel in advance to guarantee pa

make arrangements for a cash payment of the second vessel s por

There is here no evidence that PHA reserved the right under a tariff

to apply any payment received IIgainst the oldest bills rendered again

their owners and or agents or other users of the facilities a

type 

provision found to be in violation of section 17 West GulfMaritim

ation v The City ofGalveston Board of Trustees ofthe Galveston 

19 SRR779 Report and Order ofthe Commission served September 

at 13

There is no reliable evidence to support WGMA s proposed fin

PHA ever rendered an unfavorable credit report concerning an age

WGMA proposes a finding that One agent Fowler McVitie 

point blank to acknowledge personal liability for vessel port charges 

forced outofbusiness as an agent for cargo vessels by PHA for such 

It is true that Fowler McVitie refused to accept liability for po

of vessels and continues in that refusal It is not a fact that Fowler 

wasforced outofbusiness or as implied that it no longer functions as 

Tr 618 851 973 1088

J1 d One apRt Fowler McVid Inc was denied berth 8pICCI becluse it refuIed to pay veuel exponees 

incurml in 1966 Thil still to be hold roopol1liblofor a I port ch Moon Fowler Mu

in tho IIIro

nOnCI OIHXII11ination by WOMA coul1lll aPHA witl l wuliked ifho overinformod Dun Bradltreot

were not truatwonhy with reapout to tJna of urodiL Tho wI reapondod intho noptlve On funh

witMllladded that he dkl anawcr8

spoeific queation poedby DAB concernin apm of accountl but that noop

tho aplll was given Tr 1605 1606
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 431

The record shows this unequivocally This appears at Tr 517 on WGMA s

direct examination ofits own Fowler McVitie witness

Q So insubstance the pori Srefusal has driven you out of the agency business for trampvessels

A It haso t driven me out because there areother ways of doing these things

The other ways consist of arranging for berthing of vessels at PHA

through another agent acting as Fowler McVitie s sub agent

3l Because

Fowler McVitie is the only agent which persists in its refusal to accept

liability there is no dearth of subagents These other ways are really a

charade because Fowler McVitie insists that the subagents and PHA

recognize that the vessels are Fowler McVitie s

PHA is generally familiar with the identity of the owners or operators of

liner vessels that call at that port but PHA is not knowledgeable about

ownership or operation of tramp vessels There is no reliable evidence to show

the extent to which other ports know the identity of liners frequenting their

ports Normally agents do not inform the ports of the identity of the vessel

interest when making berth arrangements

34 As a result ports are generally

unaware of such matters 35 Moreover agents sometimes act for undisclosed

principles 36

or encounter difficulty in determining who the responsible vessel

interest might be Yet at least at PHA the port could readily ascertain

ownership identity information by asking it of the agent arranging the berth

provided the agent had accurate information to impart Thus even though

learning the vessel owner s or operator s

identity is not without its problems

PHA s billing practices were not predicated on ignorance of ownership 37 As

found the billing practices are based upon the tariff provisions which in turn

have their foundation in the ports need to rely upon the credit of a locally

responsible entity to pay the fees for port facilities and services

3 In addition the foregoing findings demonstrate that agents have many

means available to them whether by agreement advances freight revenues or

merely by determining creditworthiness ofthe vessel interest to ensure that

they have sufficient funds available timely to pay the port s tariffcharges or to

be reimbursed for such timely payments without undue or unfair burden on

them 38 Nevertheless they are often required to pay port charges out of their

own funds when vessel operators delay in approval of accounts or delay in

putting agents in funds 39 Aside from some instances of vessel or principal

default or disallowance of invoices for inadequate documentation 40 there is

little if anything to indicate that the agents failed to recoup those outlays

J

Tr 529 553 557

tTr 163 261

J Tr 260210

J6Tr 356 351 cr WGMA v PHA supra 18 SRR at 308 309

JfTr 345 346

I

This should not be construed to mean that agents are never inconvenienced ornever suffer losses Agents are not always able

to secure sufficient advances Tr 153 323 602 605 69 692 769 sometimes there are losses ofunspecified amounts because the

vessel interest defaults Tr 974 914A For one agentthere werelosses of 16 OOOdue toa rash of5 defaults from late 1972 through

early 1974 But this same agent had no defaults from 1962 through 1972 Tr 108 Another agent lost 3 500 due to default in

1915 Tr 1086

J

Ex 14 38 Tr 23 30 576 772

lTr 573 577
432 FEDERAL MARITIME COMMISSION

4 Corpus Christi agrees that its practice of holding agents accou

the vessels port charges is the same as that of PHA In fact to re

doubt about its position in regard to agent liability tothe port Corpu

amended its tariffto provide that its port charges must be paid reg

when the agents are reimbursed 41

Certain events seem to have triggered that tariffamendment Short

Dix Shipping Company of Corpus Christi an agent at that port lo

due to the default of several of its vessel accounts even though 

obtained advances or other assurances including a guarantee of 

Some advances were insufficient another was paid by hot check 

result Dix sent out letters to all its vendors and the port instructing 

make out their invoices to the vessel and not Dix and indicatingthat D

not be responsible for vessel expenses

Dix s letter prompted action from Corpus Christi which both w

telephoned Dix asking the agent to withdraw its letter insofar as it c

the port Initially Dix did withdraw the first letter by a second letter 

teeing vessels port charges Itlater withdrew the second letter and se

containing language provided by its counsel which said Dix agr

liable for debts incurred by the vessels under our agency to the exte

liability under presently existing law Consequently Corpus Christ

other letter advising Dix that unless itagreed to be responsible for fac

services provided by the port to vessels represented by Dix the 

expect someone else to make credit arrangements with the port prio

vessel s use ofthe port s facilities or services 43The tariffamendment 

Although it changed none of the existing tariff provisions or the 

thereunder it made the port s position unmistakeable

AGENT LIABILITY FOR WHARFAGE AND WHARF DEMURRAGE CH

5 Essentially wharfage is a

charge whioh maybe levied against t

orvessel interests The charge ismeasured by the cargo crossing overa

Wharf demurrage is a charge imposed when cargo remains in or on 

facilities after the expiration of free time Free time for outbound carg

that there is a period of time when cargo may remain on the wharf 

incurring expense the theory being that The vessel is required as pa

obligation of carriage to provide terminal facilities for the receipt ofo

cargo and to afford a reasonable free time period for the shipper to 

the cargo prior to loading aboard ship 4S

I

41 Corpus Christi Tariff supra Firat Revised Pap 4 Item IS cflective May 10 1974

41 Under Texas law a hot check is one DOt honored bcQauae of Insufficiont fund

U

Exs I 2 Tr 78 80 Item ISor the Corpus Christi Tar1ft expreuly provides ror credit arrana nontl

401

The Commission s Reptatians or FiJinl of Tariffs by Terminal Operators doftne Wharfaae 81 follow

IS336 d2

A

charge IUIscucd alalost the car o orvessel on all carlO pusing orconveyed over on orundor wharvca orb

to orfrom barge lighter orwater when berthed al wharf orwhen moored inBUp adjacent tow6a rr WharfqeIIso

for useof wharf and docs not include charses for any other sorvioc

4J

WGMA v PHA supra 18 SRR at 304
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 433

It is a common practice at ports in the United States to place responsibility

for payment ofwharfage and outbound wharf demurrage charges on the vessel

interests and thereby the agent under the user consent or other tariff pro

visions designed to achieve that result 46

Although the common practice gener

ally prevails at respondents ports it does vary Thus on some cargoes or in

some circumstances the responsibility for payment may be imposed on the

cargo interest47

In general and in particular WGMA assails the practices and tariffs which

make steamship agents responsible for wharfage and wharf demurrage

charges The attack is general in the sense that WGMA opposes any tariff

provision or port practice which makes those charges the liability of the vessel

interests It is particular in that WGMA disputes the tariffs and practices

which make the vessel interests liable for payment of those charges if there is

present in tariffs terminology which WGMA opts to construe to mean that the

cargo interest is liable for payment Its specific complaint lies against the

respondents practices and tariff provisions which impose upon steamship

agents the responsibility for collecting and paying to the respondent ports

charges which under their tariffs are liabilities of cargo interests shippers

consignees and owners of cargo

48

First WGMA turns its attention to the particular The tariffs of Galveston

Wharves Corpus Christi and Orange define wharfage as a charge assessed

against the cargo or vessel 49 However it is other provisions of those tariffs

which delineate responsibility for payment WGMA asks for an overall finding

as to these three ports that but by otherof their tariffprovisions the wharfage

charge is one imposed on cargo interests alone rather than on vessels with the

exception ofCorpus Christi As to Orange WGMA asks for an additional

finding that in the face of the tariff language making wharfage a charge

against cargo the tariffs of some of the respondents50 impose responsibility for

payment of this cargo charge on the vessel and its agent

a Orange It is correct to say that at this port wharfage charges are made

the liability of the cargo owner or cargo agent

51 However Ifind no support for

the statement that in the face ofthat kind oftariffprovision Orange imposes li

ability for this cargo charge on the vessel and its agent Orange TariffItem 120

cited by WGMA for support does not convert liability from cargo interest to

vessel interest Itdeals with payment of charges by the person billed and does

not attempt to change liability or responsibility for payment of wharfage

charges 52

46 Ex 65 Tr 1386 1640 1690

41 Ex 65 Tr 1397 179 1794

WGMAs proposed finding No 5

Each of those ports utilizes the 46 CF R S533 6 d 2 definition of wharfage supra verbatim Thedefinition of wharfage

in Galveston Wharves Tariff supra Item5 1 at 5 and Corpus Christi Tariff supra paragraph 3 at 3A appear in Appendix A

hereto The definition in Orange Tariff supra Item 10 at 4 does not appear in Appendix A

WGMA includes Beaumont and Port Arthurin this statement

1

Orange Tariff supra Item 130 at 4

1

The proposed findings submitted by WGMA do not cite any portion of the record as proof that Orange doesin fact seek

payment of wharfage from vessel interests under Item 120 The same charge is made by WGMA in its opening brief but here
434 FEDERAL MARITIME COMMISSION

b Corpus Christi At this port although wharfage is due from 

interests the vessel interests including agents guarantee and are 

pay those charges whether or not collected by the vessel interests 

cargo interests These tariff provisions reftect a long standing cu

practice by which steamship agonts assure the portthat they will be r

for charges for port facilities and services furnished to vessels they 

c Galveston Wharves The meaning to be attributed toWGMA

finding that at this port the wharfage charge is one imposed on carg

alone rather thanon vessels does notring clear 53 Ifthe inference to 

is that all wharfage charges are made the liability of the cargo interes

the port somehow converts the attachment of liability to the vessel int

is not a rational view of the evidence Neither would it be a correct 

if it meant that some wharfage charges are made the liability of 

interest but are then converted into the liability of the vessel intere

Briefty with regard to wharfage at Galveston Wharves these are 

From at least 1911 until 1974 the payment ofwharfage on all carg

responsibility of the vessel interests 5

Until 1969 the railroads serving the port absorbed wharfage c

accordance with its tariff the portbilled the steamship agents for wh

turn the agents collected the wharfage from the railroads and remit

port This procedure proved satisfactory untilthe railroads cancelled 

absorption unlawfully in 1969 the lawfully effective May I 

ficulties and delays in thecoll ion of wharfage by steamship ag

cargo interests and by the port from the a ents resulted from the te

of wharfage absorption by the railroads 5

Aseries ofmeetings were held in 1973 and 1974 between represe

Galveston Wharves steamship agents freight forwarders and cu

brokers The purpose of these meetings wasto develop amore worka

for the collection of wharfage 56

The meetings between the Galveston port interests resulted in th

of a new procedure for collection ofwharfage which became effectiv

ber 15 1974 by an amendment to the Galveston Wharves tariff 57 T

ment reads

Vessel owners and their agents whose vessels receive or discharge cargo while moo

dock or wharf thereby contrac tto pay the applicable wharfage charges thereo

provided in Notes A B and C

58

100 WOMArail tocite the portion 01 the record it relies on If infact Ora docs hold vcsscl agents liable fo

Item 120 the evidence adduced by WOMA would m insufficient to havc warranted a dcfenlOwhich might h

matters 81 CUltom and practice orother tariff provJlionl butwhich under tho circumstances of the proof proff

Oranae chose not to offer

J WGMA cites Ex 62 andTr 1760 as support ro rthe statement Ex 62isthe direct tcstimony of the Deputy E

of Galvmon Wharvcs AtTr 1760 that wltneu was being CfClBl examined by WGMA Ounlle Neither oftho

nor any other evidence of record supports the proposed ftnding in its entirety

s Ex 42 Tr 1157 1158

Ex 62

6

d

57 Ex 43 Local Tariff No 27 E Item 170c at Ninth Revised p 12

sa Eu 43 and 43a Both NoteS A and Brelate to special situations not here involved Note A dealt with Pie

and w8Ilater canceled Note Bdeals with transahipped cargo only
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 435

Note C reads

Outbound wharfage on cargo otherthan cotton and cargo in containers will be invoiced to shipper

or ownerof cargo or his agent and are due and payable by that party responsible for forwarding

of cargo through this port

The procedure adopted in 1974 took into consideration the fact that the port

booked and unloaded the majority of outbound cargo except cotton and con

tainerized cargo The longstanding practice of holding vessel interests includ

ing agents liable for outbound cotton and containerized cargo as well as all

inbound cargo was continued 59

d Beaumont and Port Arthur Earlier in n 50 supra Ipointed out that

WGMA charged Beaumont and Port Arthur as well as Orange as portswhich

make vessel agents liable for payment of wharfage in the face of tariff lan

guage making wharfage a charge against cargo

At Beaumont Wharfage is a charge on cargo passing over under or

through a wharf 60 The definition at Port Arthur is substantially the

same Wharfage is a charge on cargo passing over a wharf or discharged

into water over shipside while vessel occupies berth at wharf 61

Thus WGMA is correct in saying that these tariffs like so many of those

previously examined make wharfage a charge assessed on or against cargo

However WGMA is definitely not on the right track in implying or saying that

there is a conflict or contradiction in terminology or result if a charge against

cargo is made the economic responsibility of the vessel interests 62 It is well

settled law that no such conflict exists and that no ambiguity exists in a tariff

which by one tariff provision defines a terminal facility or service charge as a

charge assessed against cargo and which by another tariffprovision makes that

charge the liability of the vessel agent In a case in which one of the issues was

whether the steamship agent could be held liable under a consent provision in

the tarifffor pier demurrage which wasdefined as a charge assessed against the

cargo but which charge was made the liability of the vessel interests under

another tariff privision the court held The City ofGalveston v Kerr Steam

ship Co Inc 362 F Supp 289 293 294 S D Tex 1973 alId 503 F 2d

1401 5th Cir 1974 cert denied 420 Us 975 1975

Defendants refer to the Item 5 definition of pier demurrage as a charge assessed against cargo

remaining in oron the terminal facilities after the expiration of free time unless arrangements have

been made for storage Defendants also point to other charges which are cbarged against the

vessel Defendants conclude that these definitions preclude plaintiff from charging vessels or vessel

agents with pier demurrage

j9 Ex 62 As users steamship agents consent to the wharfage provisions of the tariffs and agree to pay all charges specified in

the tariffs as vessel interest charges See notes 8 and 9

supra Similar oridentical consent provisions arc common atUnited States

ports cr tariffsof Brunswick Georgia Wilmington NorthCarolina Jacksonville Miami Palm Beach Port Everglades Tampa

Panama City and Pensacola Florida Mobile Alabama Pascagoula Mississippi New Orleans andBaton Rouge Louisiana Bay

City and Port Lavaca Texas Boston Massachusetts Anchorage andKodiak Alaska San Diego RedwoodCity and Sacramento

California Astoria Bandon and Portland Oregon Anacortes Kalama Longview Olympia Port Angeles Seattle Tacoma

Vancouver Bellingham and Everett Washington Ex 41

60 Beaumont Tariff supra Item IS A at 5 not shown in Appendix A

61 Port ArthurTariff supra Item IS at 4 not shown in Appendix A

6lAtBeaumont wharfage charges are payable by the steamship agents under Item IISoC at 1 of Beaumont s

Tariff supra At

Port Arthur with certain exceptions wharfage on inbound cargo is the liability of the steamship agents and on outbound cargo

it is the liability of the cargo interests under Item 120 at 1 8 of Port Arthurs Tariff supra
436 FEDERAL MARITIME COMMISSION

The definitions only deal with the manner in which charges are accrued They d

to estabUah which parties areliable for thecharge Uability for the various charges is 

30 of the Tariff quoted in Finding of Fact 1 Items 5 and 30 are neither c

ambiguous

e Brownsville The definition ofwharfage atBrownsville is the s

definition at Port Arthur Therefore it is a charge on cargo Howeve

provision defining wharfage does not appear in AppendixA Conseq

not cOnsidered as having been placed in issue by WGMA Theref

premise that Brownsville was not being called upon to defend its 

tariff provisions or practices no findings concerning liability for w

wharfage payment practices at that port should be made 63

6 Next WGMA singles out PHA for proposed findings conc

port s wharfage practices It asks that there be findings that at PHA 

is clearly the liability of the cargo interests and that while PHA s b

tices varied over the years prior to July I 1975 the port billed w

cargo agents

64 WGMA also asks for some specific findings concern

gree of difficulty and delay encountered by PHA in billing the carg

WGMA s purpose in requesting those findings is not clear beca

no means certain whether WGMAintends the specific findings 

circumstances before July 1 1975 or afterwards Also neither is 

precise as to the time period envisioned by WGMA

Nevertheless it would be inappropriate to make any findings 

ceeding concerning wharfa e at PHA for two reasons One it wa

in issue by the complaint6

Two PHA Tariff Amendments effec

1975 which made collection and payment ofwharfage charges the 

vessel interests including agents were the subject of a separate 

proceeding brought by WGMA alleging that the amendments v

tions IS and 17 of the Shipping Act It was decided in that ca

amendment did not violate sections IS 16 First or 17 WGMA v P

7 Conceding that the evidence of wharfage billing practices a

ports is less detailed than the testimony about those practices at PH

proposes no such findings for Beaumont Brownsville or Orange 

sketchy findings for Corpus Christi Galveston Wharves and Port 

a Corpus Christi Based upon testimony of the Dix witness 

proposes a finding that the port bills agents for wharfage and se

them liable Tr 28 even though it knows the representative ofcar

at the port know their principals and therefore have the ability to 

cargo charges whereas the steamship agents do not have such kn

6

AU thatWOMAlays In It proJDId ftndinp on liability is that Item 110 at 100 of Brownaville Tariffila

then citcll the IsoplJC it believet to be amblpous The lanauaae cited howev r doeI not refer to veuel 

interoat chargca Moreover neither in briefnor in propoeod ftndinp does WOMA eiteany portion of the reco

BrownlYiUe aupayment for wharfaac from the veuel apnll

M

On outbound Ihlpmenta the carao reprelOnlative it Ulually a freight forwarder aperson licensed by tho Co

to acction 44 of tho Shipping Act 1916 46 Usc184lb On inbound shlpmonta tho repmentatlve II usuall

who is not subject to regulation bytho Commilaion Liowcd froiaht forwarden may under specifted 

by vCIIOI and carlO intelClta both for the I8meshipment See unnumbered lCCtion preceding on 2 of the

46 USc

1801 and ion 440

The PHA tariff provisions placed in i11110 appear at Appendix Aat i iii Wharfl1JC provisions arc not i

f16Thc nix witRCII was on the stand from Tr 20 throuJh Tr 119
61Tr 92

Testimony by the Dix witness that Corpus Christi solicits the cargo was ordered stricken Tr 92

Tr 52 93

10Tr 67 69 cr WGMA v PHA supra 18 SRR 304 n 19

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 437

access Tr 28 29 While the meaning and implication of that part of the

sentence after Tr 28 is somewhat obscure opinion testimony of the Dix

witness suggests that it means that ports are in a better position than vessel

agents to know the forwarders and brokers 67

Itis not disputed that Corpus Christi bills steamship agents and seeks to hold

them liable for wharfage but the port objects to the rest of the sentence in part

because it is unsupported by the record and in other part for inaccuracy

There is no reliable evidence to support a finding that the port knows what

the cargo interests know but even if it were assumed to be a fact the pre

sumption would not lead to a finding that ports are better positioned than

steamship agents to know the cargo representative for a particular shipment at

Corpus Christi68 On the other hand there is evidence that Dix books cargo for

its vessels with the cargo representatives 69 and of course Dix also collects

freight revenues for a liner principal from cargo interests However the over

riding fact according to WGMA s own witness is that it is the contractual

arrangement between the cargo and the ship which is the determining factor

in the assessment of wharfage charges and there is no evidence that this

contract which even the agent must obtain from one of the two contracting

parties 1O is ever made available to the port

b Galveston Wharves After again noting that the practice ofbilling for

wharfage at this port has varied WGMA seeks a finding that the port has on

occasion sued steamship agents for wharfage as well as suing cargo interests

and railroads emphasis supplied without further explanation of the time

or circumstances involved

Itis difficultto understand the relevance or materiality of this proposed find

ing unless WGMA means that an inference be drawn that despite tariff pro

visions making the steamshjip agent liable for wharfage Galveston Wharves

indiscriminately sought to collect from the cargo interests as well In any event

neither on its face nor by way of inference is the italicized portion a correct

reflection of the record

WGMA cites the following portions of the record to support the finding

Tr 1762 1763 1858 Exs 36 and 62

The matter of the suits was introduced first by Ex 36 the prepared direct

testimony of an officer ofStrachan Shipping Company a steamship agent and

WGMA member In the exhibit are references to two court actions brought by

Galveston Wharves for unpaid outbound wharfage which at thetime were the

responsibility of the vessel interests The exhibit stresses that it was Strachan

which was sued as vessel agent and that Strachan later impleaded others

Exhibit 62 confirms this fact Itis reconfirmed at Tr 1762 1763 1958 on cross

examination by WGMA of the Galveston Wharves official who sponsored

Exhibit 62 Thus there is no validity to the statement that the port sued cargo

interests and railroads
438 FEDERAL MARITIME COMMISSION

c Port Arthur This port has experienced no difficulty in collecti

age from cargo interests on outbound cargo It will be recalled tha

vessel interests are liable for inbound wharfage and the cargo int

liable for outbound wharfage see n 62 supra

8 In this and the next numbered paragraph of its proposed 

WGMA moves on to the matter of wharf demurrage tariff provi

billing practices In this paragraph WGMA addresses the tariff pro

all portsexcept Brownsville In paragraph number 9 WGMA refers o

ports of PHA Galveston Wharves and Corpus Christi

WGMA has no quarrel with the definitions of wharf demurra

respondents tariffs They are virtually identical and incorporate the a

regulatory definition which provides 46 C F R 5533 6 d 4

71

Wharf demurrage A charge assessed against cargo remaining in or on terminal fa

the expiration of free time unless arrangements have been made for storage

As with the definition of wharfage the definition of wharfdemur

only with the manner in which charges are accrued It does not 

establish which parties are liable for the charge The CityofGalvest

Steamship Co Inc supra

However the proposed findings do not cite or quote from any o

provisions of the respondents which place responsibility on the vesse

for payment of wharf demurrage except to quote a

part of a tarif

published by PHA72 The provision quoted relates to outbound wha

rage

7l As pertinent it provides portion in italics wasomitted from 

proposal

Outbound Cargo Wharf Demurraae Charges will be assessed to the cargo own

rized agent except oncargo cutback or held on the wharves for convenience of vess

agent the charges will be assessed to the vessel or its agent

WGMA states it has no complaint against this type of tariffprovis

holds vessel interests liable for wharfdemurrage accruing by reason 

ofthe vessels such as where cargoes could not be lifted when booked 

ofthe failureofvessels to meet their schedules Its complaint is limite

ing steamship agents liable and here WGMA s combined position 

and proposed finding becomes somewhat obfuscated for collection 

ment of these charges owed by cargo which should be billed to and 

by the cargo representatives i e

freight forwarders and custom hou

if not collected directly from shippers and cargo consignees themse

Taken literally this means that WGMA is not pursuing a claim 

Shipping Act is violated by aport which holds vessel agents respo

payment ofwharfdemurrage charges incurred by acts oftheir princip

11 Only the Galveston Wharves Tariff provision Item S kX 1 at 4

appean in Appendix A In thoir ICl8pcctiVCl 

respondents wharfdemurrage definitions appear at PH at 4 Corpus Christi No S at JA Beaumont Item20 a

Item20 at 4 Oranac item 20 at 4

JJThis provi sion docs not appear in Appendix A In its openina brief WGMA also cited Item 18S cat 16 

WharvesTariff supra

1

PHA s tariff provision dealing with inbound demurrage appean at Item 3 c4 at 14 It provides Inboun

Demurrage Charges wiD be all8C8SCd to the owner of the cargo or his authorized alcnt towhom the invoice w
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 439

the position statement appears to mean that WGMA is assailing wharf demur

rage charges imposed by tariffs on the steamship agent where the tariff places

liability for payment on the cargo interest However WGMA neither quotes

nor cites any tariffs of the latter kind In fact the only wharf demurrage

liability provision referred to in this praragraph and appearing in Appendix A

and therefore in issue is that of Galveston Wharves in Item 185 c at 16 A

At Galveston Wharves wharf demurrage on inbound cargo is the responsi

bility of the cargo interests On outbound cargo it is the responsibility of the

vessel interests without regard to fault of vessel or cargo The difference in

responsibility between inbound and outbound cargo is based upon the re

spective legal responsibilities for removal of cargo from the terminal On

inbound cargo the responsibility for removal after the expiration of free time

is on the cargo interests On outbound the responsibility for removal after

expiration of free time is on the vessel even though the fault may lie with the

shipper interests The circumstances of delay are usually matters known only

to the cargo and vessel interests and the ports are not privy to those facts 74

These responsibilities are derived from the vessels basic obligation to provide

wharfage space for shippers to assemble outbound cargo and to pick up in

bound cargo an obligation acknowledged by a WGMA witness Tr 915

Even ifthe combined position statement and proposed finding werenot taken

literally WGMA s cause is not advanced Should WGMA s position beconsid

ered an assault on tariff provisions which make wharf demurrage the liability

of steamship agents no findings can be made with respect to the ports ofPort

Arthur Orange or Beaumont Brownsville was specifically excepted by

WGMA because theirwharf demurrage liability tariffprovisions wereneither

quoted nor cited nor do they appear in Appendix A To make findings as to

those ports would deprive them of notice and opportunity to be heard

Corpus Christi presents a somewhat different situation Although WGMA

does not refer to this port s tariff provision concerning wharf demurrage

directly Item 15 ofCorpus Christi s tariffdoes appear in Appendix A Itseems

to make all wharf demurrage including inbound the responsibility ofthe vessel

interests Ifthis were the fact there would arise a question of the propriety of

a tariff provision making vessel interests liable for what is undisputably not a

vessel responsibility at law However there is nothing to indicate that WGMA

made inbound wharf demurrage an issue in this proceeding and of course

Corpus Christi wasneither placed on notice nor given an opportunity to defend

against that kind of allegation Consequently Corpus Christi must be treated

as occupying the same position as Port Arthur Orange and Beaumont insofar

as inbound wharf demurrage is concerned

9 Generally the relevance materiality or other significance of WGMA s

J posed findings about wharf demurrage billing practices at PHA Corpus

u

Tr 454A 455 949 952 1203 1205 Ex 62 Thefact that PHA s

tariffmade outbound wharfdemurrage occasioned by fault

ofthcshipper the liability of the cargo interests does not neocssarily raisequestions concerning the IegalliabiHty theory for whether

the port collects from veacl orcargo interests Thecharge wiD be borne by the ultimate beneficiary of the services Cargill JI1

v FMC 530 F 2d 1062 1068 1069 DC Cle 1976 Moreover none orllle ports werecalk d upon to defend against charges

hat there might be a violation ofthe Shipping Act because they made outboundwharfdemurrage the liability ofthe cargo interests

1berefore it is not known whether other acceptable tariffconsiderations might have led to provisions such as those in the PHA

tariff
440 FEDERAL MARITIME COMMISSION

Christi and Galveston Wharves is obscure Although the purpose 

these findings made is difficult to fathom it might be conjectured tha

means to have it appear that it would be as convenient to hold agents 

interests liable for outbound wharfdemurrage as it is to make agents 

interests liable for those charges Ifthis be so it would seem to be a

but contradictory element of WGMA s

theory that agents canno

liable for obligations of their principals that somehow agents for ca

as immune from liability under terminal tariffs as are agents for 

addition to these general defects the accuracy of some of the propose

is questionable

a PHA An additional problem with the proposed findings for th

that WGMA does not make it clear whether it is seeking findings 

or post July I 1975 period

These findings can be made Itis not disputed thatbefore July 1 1

billed freight forwarders and customs brokers for wharf demurrag

wasable to do so because in the case of freight forwarders their 

peared on the copy of a document from which the port prepare

document permitting the cargo to be brought to the dock It is undis

that on inbound cargoes PHA obtained the information needed to i

demurrage bills from ship s manifests and statements of cargo fu

steamship agents or similar documents examined by PHA s clerk

agents offices The reason for the office examination was the agent 

in furnishing the necessary documents to PHA PHA billed the vess

for wharf demurrage for cargo cutback by act of the vessel It wou

cargo interests if the cutback was for the convenience of the sh

because it was rarely advised by the vessel interests why the cutback 

PHA perceived it to have been caused by the vessel and billed a

Ex 55

WGMA asks that it also be found that delays in receiving wharf 

billings on cargo perceived to be in a demurrage status because of 

the vessel interests were oftenvery great so that it wasimpossible for 

demurrage to be collected presumably by the agents from vess

operators or charterers While the testimony is more or less evenly 

concerning the cause of delayed demurrage billing by PHA som

fault of the agent and other times the fault of the port there is n

whatsoever for a

finding that it was impossible for the wharf dem

be collected by vessel agents

76

b Corpus Christi WGMA proposes findings virtually the sam

discussed and rejected at finding number 7 a

relating to the practic

agents for wharfage The reasons for rejecting those proposals her

Freight forwarden on outbound and customs broken on inbound

16 Thoevidence relied on by WGMA is Ex 33 Tr 912 914 Ex 33 it tho prepared dirUtcltimony of an Hel

the tranlCript refcrcnCOl an to additional directtestimony of this witnelll AtPHAt Hellenic Linea II an opora

not an agent Tr 914915 MOf CCMr it I very difllcult to accept thll witneu view thatdelay In bUlin by PHA 

of wharfdemurrage Impouible ainoe it is Hellenic Unea recordsalone which form the bailfor wharfdemurrq

words Hellenic knew before PHA oould ftnd outthat wharf demurrap had anod but apparently falled 

atall to collect the demurrage from the calJO int ta Tho blamofor thil carrier administrative inofllclenc

laid on PHA
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 441

stronger because the Dix witness whose testimony is again relied upon by

WGMA to support wharf demurrage findings did not testify to wharf demur

rage practices at all at the record references furnished by WGMA

c Galveston Wharves Essentially WGMA proposes findings that at this

port the billing practices follow the tariff provisions The findings made at

paragraph 8 are sufficient and are incorporated herein by reference

CRANE RENTAL STEVEDORE S LIABILITY FOR OPERATOR S NEGLIGENCE

10 This paragraph concerns crane rental tariff provisions for port furnished

cranes at PHA Galveston Wharves and Corpus Christj17 and the effect of

those provisions on stevedore members ofWGMA which use those cranes The

tariff provisions at the three ports are not identical but they do contain essen

tially similar terms and conditions Not all of the terms and conditions are

under attack only those which make the suing stevedore liable for the negli

gence of the crane operator a person furnished by the port and usually a port

employee

Generally the tariffs78 provide that cranes rented from the ports will include

a crane operator paid by the port although the port will charge the user for the

operator s services that in engaging the operator and paying for his services

the port acts as agent for the user that when using the port s crane the

operator will be under the direction and control of the user that the operator

is considered the servant of the user that the port makes no warranties regard

ing competency of the operator and that the user must satisfy himself in this

respect and that if the crane is negligently operated under the control and

direction of the user the user assumes full responsibility for the negligent

operation including the operator s negligence

The need to rent shore based cranes arises ifthe ship s gear is inadequate to

load or unload the vessel and ifthe particular stevedoring entity does not itself

own suitable equipment Cranes may be rented from the ports or from private

sources subject only to a first call privilege which requires stevedores to

select a port crane only if that crane is suitable for the job in the judgment

of the stevedore in terms of size and expense as any available crane

79 As a

practical matter however at Galveston Wharves the port s cranes ordinarily

are rented because local private rental cranes are too small and the cost of

renting and transporting larger cranes from more distant locations is more

expensive than renting from Galveston Wharves

n

Portions of WGMAsproposed findingsconcerning crane renlals at Port Arthur Brownsville Beaumont and Orange wiD not

be considered because those ports tariffprovisions treating with crane rentals were not mentioned in the complaint nor were they

otherwise placed in issue on the question of the crane operatorsnegligence Ex 49 at 36 of Port Arthurs

tariff was received in

evidence Item605 Aon that page refers to privately owned cranes used at that port but contains no references to port cranes

71 PHA tariff supra ItemNo 15 at 22 Galveston Wharves tariff supra ItemNo 105 at9 Corpus Christi tariff supra Item

Nos 125 130 135 at II Corpus Christi s

tariffprovisions do not appear in Appendix A but no objection was raised because of

their absence therefrom These tariffprovisions are contained in Ex 51

19111ere isevidence of record showing that PHA imposed limitations on rental of cranes from private sources stricter than the

first call privilege when PHA s cranes were available These preferential practices at PHA were the subject of a separate

complaint proceeding and were there found unlawful under the tirst call test enunciated by the Commission in that proceeding

PHA was ordered to cease and desist from those practices and to file appropriate tariff amendments to reflectthe Commission s

decision Perry s Crarw Service v Pori of HouslonAUlhorlty of HarrisCounty Texas 16 SRR 1459 1976 Initial Decision

SRR 1977 not published Commission Decision partially adopting Initial Decision
442 FEDERAL MARITIME COMMISSION

WGMA proposes a finding that in contrast to the negligence provi

the ports tariffs where cranes with operators are rented from private c

there is no agreement that the renting stevedore will be liable for th

operator s negligence citing the testimony of aWGMA member oper

a stevedore at PHA and Galveston Wharves 8o

The WGMA witness related that his firm rents cranes from some 

concerns as well as from the ports but that there is no agreement betw

firm and particular private rental companies regarding operator neg

when an operator is furnished This does not mean that the private 

companies have agreed to be liable for their employees negligence 

real point of the testimony is that there is no meeting of the minds 

subject of responsibility for negligence In thlwitness own words 

unspoken agreement I

guess

81

There is other and more convincing evidence to show whether priva

cerns rent cranes with operators under the same terms and conditions a

ports They do Exhibit 63 contains 19 sample crane rental and lease 

ments obtained from private concerns listed in the Houston Yellow 

Specimen agreements ofthose firms which furnish operators with cran

tain provisions similar in effect to the language contained in the ports 

relating to the transfer of liability for operator negligence

Both WGMA and the respondents agree to many facts concernin

rentals They agree that itis a common practice for all crane equipment 

to lease them with operators because the equipment is very expensive 

complex and technical and requires skilled operators for the protectio

equipment and safety to others and sometimes because of labor agreem

They agree that if a crane were to be rented without an operator it w

difficult for the crane owner to be certain that the operator unknown 

would be skilled and competent

83 Significantly they agree too that 

crane is rented the using stevedore has supervision and control ofthe cr

its operator and directs the operation ofbothbecause the craneoperator 

see into the hold of a ship and must rely upon directions given by a st

employee when operating the crane

84 At least one WGMA witness a

edges that even without a lease provision requiring it he would accept 

sibility for damage caused because the gangway man a stevedore em

gave bad or erroneous signals to the operator

Last WGMA asks for findings that stevedores have had to pay larg

when the crane operators furnished by the port ave themselve

negligent And liability for the crane operators actions increases th

dore s insurance costs

II1lWGMA cites Tr 1034 1035 1063 064 10741015 The witness stated that all rentals from private concernsw

orally and that a search of his records showed no written lcasa

IITr 1035 It was suasealcd to the wltnc uthat perhaps there was a eustom and tradition of the trade which m

Hisanswer was another guess Id

Tr 90 733 980 WGMA Tr 1486 1862 Rndcnts

lTr 227 WGMA Tr 1481 Ex 53 Respondents

Tr 96 227 230 100S WGMA Tr 1331 1480 1743 Ex S3 Raapondcnts
Tr 1025

Tr 1028

7 WGMA cites Tr 738 and Ex 16 as authority for the proposed finding

U

Texports Stevedoring Company an affiliate isthe stevedore

9 Ex 14

9JTr 731 737 see also Appendix to Respondents Joint Brief Appendix D

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 443

For the proposition that stevedores have had to pay large sums of money

because of operator negligence WGMA relies on the testimony of one steve

dore witness who on direct testimony offered the opinion thaton two occasions

he paid for cargo damage because of the operator s negligence 85 He thought

that the two claims totaled in the neighborhood of 5 500 86 On cross exam

ination he stated that one of the two accidents occurred because the brakes

failed but he also admitted hehad no wayofknowing what caused the accident

Another example ofthe payment ofmoney wasfurnished by another stevedore

who testified An instance in which such a tariff provision has been highly

detrimental to my company is Rorie v City ofGalveston supra in whichthe

court held that where the Galveston Wharves tariff provided that the hoist

operator was to be under the direction of the lessee and was to be considered

as agent or servant of the lessee the hoist operator was the borrowed servant

of the stevedore at the time of the accident The amount of damage paid by

this witness employee was not furnished

For the proposed finding that the tariff provision increases the stevedore s

insurance costs WGMA relies solely upon the testimony of and evidence

introduced through K S Trostmann 87

Comptroller of Texas Transport and

Terminal Company an agent and stevedore 88 The proposed finding is di

ametrically opposed to the evidence

In prepared direct testimony Mr Trostmann said thathis firm rented cranes

with operators on numerous occasions from PHA The lease was subject to the

negligence provisions of the tariff Heconcluded In myopinion such arrange

ment is both unfair and illegal in that it enables the Port to evade liability for

its own employee s negligence and substantially adds to our cost of doing

business 89 The witness meant by this that his firm s

liability insurance pre

mium is greater when cranes are rented with operators than when rented

without operators furnished by the port

However skillful cross examination of this witness demolished the conclu

sions expressed on direct examination and firmly established that the steve

dore s overall insurance costs were reduced rather than increased by such

arrangement

90

Answers to questions on cross examination demonstrated that even though

the liability premium was higher for cranes with operators than for cranes

without operators there was an overall insurance savings to Texports because

thestevedore incurred noexpense for workmens compensation insurance which

has amuch higher rate and total premium thanthe rate and premium for liabil

ity insurance for cranes with operators Moreover the stevedore is not liable for

social security payments for operators who are furnished with cranes but who

remain on the ports payroll Thus on this record there is nothing to warrant
444 FEDERAL MARITIME COMMISSION

a

finding that a stevedore s overall insurance costs or costs of doing 

for that matter are increased because ofthe ports crane rental tariff

On the other handthere is clear and convincing evidence that there are 

tial savings to stevedores cost ofdoing business in spite of indeed be

the operator becoming the borrowed servant of the using stevedo

One other factor should not be overlooked in this arrangement 

of the expense of crane rentals stevedores do not like to keep the c

during an operator s time off Usually then an extra operator is pr

the request of the stevedore by the port thereby further increasing 

dore s savings on insurance and social security

INTERPRETATION OF TARIFF

II For the next proposed finding of fact WGMA assails pro

respondents tariffs which reserve to themselves or give to themselves 

to interpret their tariffs and which state that Use ofthe port facilities 

consent to be bound by all of the tariff provisions the two sets of 

when taken together being allegedly oppressive unfair and unreaso

therefore unlawful since by use of the facilities the agents or their p

would subject themselves to whatever interpretation of the tariffs 

might make

The language of the use or consent provisions may differ slig

tariff to tariff but in effect each respondent says the same thing t

the port facilities constitutes consent to all the terms and conditio

tariff The consent provisions were identified at n 8

supra

9

The interpretation provisions of the respondents tariffs are n

same Galveston Wharves does not have that kind of provision in th

of its tariffappearing in AppendixA nor wasany suchtariffprovisio

to in the record

Of the remaining ports all except PHA have tariff provisions m

port the sole interpreter or judge of its own tariff92 PHA merely re

right to interpret the provisions ofthis tariff 93 The ptovisions of B

and Port Arthur s tariffs go even further than the others They bo

that The PortAuthority is not a common carrier and is sole interpr

tariff mles and regulations

WGMA seeks no finding and refers to no part of tbe record to 

that any port has used the combination of the consent or use a

pretation provisions of its tariffunfairly against any agent or princi

ever this finding does not mean that any port s tariff which sta

susceptible of being understood to mean that the port is the arb

unclear or ambiguous tariffprovision is fair

WOMA spropolCd fiodin rails to cite Corpus Christi s consont tariff provisions Ita alllncluaivc con

Item52 AIIlOfC limited consent applicable 81 here pertinent to wharfaac and wharf demurral appears a

9

BeluntOnt tariff IUpID Item 100 at 7 Port Arthur tariff prtI Item 105 at 6 CorpUI Christi tariff 

BrownlviDe tariff IUpra Item liS at 100 Oraole tarlfl lUp1Q Item liS at 9

J

PHA larifl IUpro Item2 at 12
DISCUSSION AND CONCLUSIONS

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 445

12 For its last finding against a

respondent WGMA repeats its contention

concerning the Galveston Wharves tariff provision assessing pier demurrage

during strikes according to the free time status of cargo when strike inter

ference commences ie if cargo has free time remaining the strike interfer

ence time will not count against free time if cargo has used its free time and

penalty demurrage time is running penalty time will continue to run but at a

different rate the complainants contending that since all cargoes are in exactly

the same status on the docks where handling is prevented by a strike they

should be treated in the same fashion

I

find that WGMA has stated the substance of Galveston Wharves strike

demurrage tariff provision Item 187 Interference Due to Strikes supra and

further find that WGMA has stated its contention concerning that tariff

provision as a proposed finding of fact

WGMA also asks for a finding that Maryland has a tariff provision which

grants or extends free time to all cargo during a strike period 94 The re

spondents seek to distinguish the Maryland tariff provision by stating that it

merely extends free time because of strikes of its own labor Maryland Port

Administration did not respond to this proposed finding No useful purpose is

served by deciding which side is correct It is sufficient to find that the two

tariffs are different 95

13 WGMA also requests that certain findings be made in connection with

intervenors New Orleans California and Maryland Except to the extent that

certain findings are made herein concerning those intervenors the proposed

findings are rejected because they serve no useful purpose in determining

whether the respondents tariff provisions and practices in issue in this pro

ceeding are lawful

Category 1 Vessel Agents Liability for Payments ofVessel Charges

A General

As explained before a post hearing conference was held for the express

purpose of determining whether any party wished the opportunity to have the

record reopened for additional evidence or to submit supplemental briefs This

approach was appropriate because the Commission s decision in WGMA

v PHA had recently been served WGMA v PHA wasperceived to have had

a strong influence on some of the issues in this proceeding particularly those

in Category I because the decision upheld the validity of tariff provisions

making wharfage charges the liability ofthe vessel and tariffprovisions making

vessels agents as users liable for payment of vessel charges No request to

reopen or to submit additional briefs was made

Maryland Port Administration Terminal Services Tariff No 2 FMC T No 3 Section IV 4 at 10 Ex 61

9S WGMA calls tbe Maryland tariffprovision noteworthy It is merely different
446 FEDERAL MARITIME COMMISSION

B Application of WGMA v PHA to This Proceeding

In WGMA v PHA as here the complainant charged that parti

tariff provisions and practices impLementing those proYisions violate

15 and 17 96 WGMA fOCU8ed On the respondent s newly published 

visions which sought to hold vessels agents liable for wharfage cha

new tariffprovisions contained the following pertinent passage

Wharfage Charges areliabilities ofthe ownerofthe cargo however thec

payment of same to the Port Authority must be guarlllteed by the vessel her owners 

and the use of Port Authority facilities by the veslel her owners and agents shall b

acceptance and acknowledgement of this guarantee

In WGMA v PHA WGMA made essentially the same argument

ing the liability of vessel interests for wharfage charges as those 

advances here concerning the liability of vessel interests for wha

wharf demurrage charges AlSQ in the cited case WGMA asserted 

contentions concerning the liability of vesseL agents for paymen

charges as those made here with respect to wharfage wharf demu

dockage charges 97

Among other things the Commission rejected WGMA s theorie

that terminal tariffs are not agreements within the meaning of ieetio

tariff provisions making the payment of wharfage charges the liab

vessel interests were neither unjust nor unreasonable and therefore 

in violation ofsection 17 because toe carrier s obligation tothe shipp

it to provide terminal wharf facilities and that tariffprovisions ma

agents liable for payment of charges deemedto be proper vessel cha

were not unjust and unreasonable because the vessel agents as us

port s facilities had separately agreed to be liable for the wharfag

The conclusions in WGMA v PHA subsume that the word as

used in definitions contained in the Commission s terminal tariff re

46 C F R 5533 et seq deal80nly with the manner in which c

accrued that the word assessed does not purport to establish wh

are liable for the charges and that whether charges are assessed aga

or vessel if the charge is a proper charge against the vessel it may p

made the vessel agent s

liability for payment

98

Patently the texts of the tariff provisions assailed in the proceedin

varying degrees from counterpart provisions held to be laWful i

v PHA But there is no realistic substantive distinction between th

Forexample an examination of some tariffs provisions relating to

charges shows this

a Corpus Christi s tariffprovisions placingliability for payment o

charges on vessels agents Item No 15 are worded somewhat differe

96 Thecomplaint in WGMA v PHA did not allqo a violation ofsecdon 16 First butWGMA spost hoarinl b

issUC8 in Catesory I Vcael Agcntll LiabUity for Payments or V I Charsca the idelltiCal cirtumltanocs p

tion 16 Fint are pratent here

91 There isone major distinction In WGMA v PHA WOMA arJUed that making vesael agonta liable for a 

charge wharfage onltituted dUnJ 88under Texllllaw WOMAloci not make that argument here In ita plalWC

a T Statute of Frauds il8uc which it did not do in WGMA v PHA

flSea previous text references to tbese pauapI from The City of Galwlton v Kerr Steamship Co Inc cite

in WGMA v PHA supra 18 SRR at 315
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 447

but are nearly the same as those encountered in WGMA v PHA even to the

extent that they make vessels agents guarantors of payment of charges due

from the cargo interests

b Galveston Wharves tariff provisions make wharfage a charge assessed

against the cargo or vessel Item No 5 I t but also specify that vessels

agents using the wharf thereby contract to pay the applicable wharfage

charges Item No l70c see n 57 58 supra and related text

c Other respondents tariffs use variations of the user and consent

provisions demonstrated in Galveston Wharves tariff

Thus all the wharfage tariff provisions under attack here convey the same

unequivocal message that wharfage charges are the liability of vessel interests

and that vessels agents as users of the ports facilities will be held accountable

for payment of those charges WGMA has failed to show by a preponderance

of the evidence or by force of logic why wharfage charges in this proceeding

should be regarded differently by the Commission in this proceeding than they

were in WGMA v PHA

Insofar as dockage shed hire or wharf use hire charges are concerned all

of respondents tariffs provide for assessment of dockage charges against the

vessels and make the agents liable for payment No one questions the propriety

of treating dockage etc as a vessel charge The argument made by WGMA

is that dockage etc cannot be made the liability ofthe vessels agents WGMA

centers its argument on the definition ofdockage in the Commission s terminal

tariff regulations which provide that dockage is the charge assessed against

a vessel for berthing at a wharf 46 C F R 533 6 d lConsequently

says WGMA if dockage is defined as a charge assessed against the vessel

it cannot be made the liability of the agent WGMA ignores the teaching of

WGMA v PHA and the many cases cited therein which uphold tariff pro

visions making agents liable as users for charges assessed against the inter

ests they serve

oo

Turning again to outbound wharf demurrage charges as stated in the

findings of fact only the outbound wharf demurrage tariff provisions and

practices at Galveston Wharves is squarely in issue although WGMA more

remotely raises questions concerning the tariffofCorpus Christi and practices

ofPHA

WGMAs arguments are the same it made in respect to wharfage in WGMA

v PHA and those it makes concerning wharfage charges here The only real

issue to be determined then is whether outbound wharf demurrage is a proper

vessel charge As necessarily explained in the findings of facts because of the

way WGMA framed its proposed findings outbound wharf demurrage is a

proper charge against the vessel because of the vessels undertaking to provide

wharfage space to shippers for the assembly ofoutbound cargo and for removal

Consent provisions are probably superfluous State aflsrael v Metropolitan Dade County Florida 431 F 2d 925 927

5th Cir 1970 See also enr Salvesen Company Ltd v West Michigan Dock Market Corporation 12 F M C135 136

141 1968 upholding the principlethat useof a

port facility constitutes acceptance ofthe tenns of respondent s

tariff See also

WGMA v PHA passim to the same effect

I J

True WGMAs brief was submitted before WGMA v PHA came down However as shown WGMA declined the

opportunity to submit supplemental briefs when offered after WGMA v PHA was decided
448 FEDERAL MARITIME COMMISSION

of cargo from the terminal It is therefore a charge reasonably rela

vessel interests use ofthe facility and it a reasonable charge to be 

the vessels agents See The City of Galveston v Kerr Steam8hip 

supra 362 F Supp at 293 294 WGMA v PHA supra 18 SR

Neither the tariffs of Galveston Wharves or Corpus Christi 101

nor 

tices of those ports or PHA with respect to outbound wharf demu

significantly different than equivalent tarift provisions and praetices 

spect towharfage insofar as the reltWant issues are involved

Thus it can be seen that any differences between the tariff provi

practices placing liability for payment of vessel charges on vessels 

WGMA v PHA and the tariff provisions and practices placing lia

payment of vessel charges on vessels agents in this proceeding a

substantive nor substantial Underlying the tariffs and practices one f

out in both WGMA v PHA and here The ports look to the agents fo

of the wharfage dockage and outbound wharf demurrage charges 

ports rely upon the agents credit not the creditof the absenteevesse

In short WGMA has failed to show that any of the tariff provi

practices imposing liability for vessel charges on vessels agents are un

are excessive or are not reasonlbly related fit and appropriate to th

view WGMA v PHA supra 18SRR at 790 On the other hand re

have affirmatively demonstrated that vessels agents are in fact the us

services and facilities for which they are charged and that the t

practices arejust fair and reasonable and not in violation ofsections 

or 17 Ajust and reasonable alloeation ofcharges is one which res

user of a particular service bearing at least the cost to the terminal of

the service WGMA v PHA supra 18 SRR at 790

C The Statute ofFrauds

The Statute of Frauds argument made by WGMA is simple 

Texas lawlOJ which declares unenforceable promises of one person 

for the debts of another unless the promise is in writing and sign

person sought to be charged The essential weakness of this argume

the Statute of Frauds is never brought into play These tariffs wh

agents liablefor payment ofvessel charges impose that liability direc

agents as users

104 and having used the facilities provided by the 

101 Akhoqh not ref to inWOMA propooecl findin on o tbo nd wh rf dem Corpus Christi ta

this repro Item No 15 arc in 118Qe

102 Thecomment made in WGMA v PHA nlJH CI 18 SRR at 314 n 341 equally appropriate hero

As Itltedoarlier SectionJ6 Fint waanotput In l8iue In tho procacclina Neverthe1C11 WOMA rp that tho 

arc violative of III proyilion as an undue preftranee becaUIO the tarift ahiftl tho burden of payment and lOIlection 

charps to vessellntol eltl from carao IntOlelt payment and PHA oollection In ClIIOnot it is the tame ar

WGMA in regard to Section 17 Neilher section hal been violated

100 WOMA citellleclion 26 01 of the Texaa Bualneu and Commerce Code

104 TheCommlllion terminal tariff Iulationl require that the oftnitiont of lerminal amiCCllappcarina in4

be litforth In tarilf lUed bythe ports Akho p h I tion 11ow for deport it is not diftloult to 

of the tariff writer In composing adefinition dlftorent than proICribcd Ea how doeI one JO about rophraaiRJ 

as theone for wharfaaewhich II set fonh in thedisjunctive carlO orVClIIel to make wharfqetheliability ofth

AppafCntly larlff writers have opted to achieve the result by relaininllhe definition and by addin other pr

oonllOOl uaor or guarantor claulClS 10 make the malter of liability clear
IOS

At no point in this proceeding were the levels of rates in Item No 187 placed in issue

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 449

agents accept the terms of the tariff See n 99 supra Thus none ofthe tariff

provisions call for vessels agents to answer for the debt of another The debt

they pay is their own

Moreover the Commission has held that while tenets of state and common

law may be evidence ofreasonableness and of local business practices they are

not alone dispositive of Shipping Act issues absent a showing that these

principles directly apply to Shipping Act considerations WGMA v PHA

supra 18 SRR at 791 WGMA has made no such showing here

D Galveston Wharves Strike Demurrage

Complainant has taken a rather curious stance in regard to the strike demur

rage provision in Galveston Wharves tariff Item No 187 105 At the outset

in describing the contentions of the parties Iexpressed the view that this tariff

provision and the practices thereunder were assailed because the vessels agents

were held liable for and were being billed for strike demurrage chargeable to

the vessel This is the only reasonable conclusion which may be reached from

a reading of the complaint which alleges that this particular provision violates

sections 15 and 17 of the Shipping Act

Nevertheless in its post hearing opening brief complainant seems to have

abandoned the allegations of the complaint because it makes no reference to

the practice of holding vessels agents liable for strike demurrage charges

instead complainant directs its fire against those provisions of Item No 187

which differentiate between cargo in free time and cargo in penalty time

complainant asserts sections 16 and 17 were violated because Item No 187

discriminates between types of cargo

In attempting to make its belated point complainant relies upon events

which occurred in 1968 1969 the identical events which led to the court

action in The City of Galveston v Kerr Steamship Co Inc supra The

defendants in the Kerr case were vessel agents and members ofWGMA 362

F Supp at 290 Complainant states

As a concrete example during the 1968 1969 18Qay strike no demurrage during the strike

period was charged cargo on free time when the strike commenced All cargo whose free time had

at that time run out was charged demurrage for each day of the 18O day period Yet both kinds

of cargo were in exactly the same situation Neither could be moved all wereoccupying space on

the wharves and whatever protective services were afforded by the port were afforded to both kinds

of cargo

Complainant may be correct in its appraisal of the situation but the

factors it relies upon to describe the situation are not really relevant What is

important is that the cargoes did not have the same status when the strike

began one was in free time and the other in demurrage

This was the distinction recognized by Judge Noel of the United States

District Court for the Southern District of Texas and formed the basis for his

Memorandum and Order awarding judgment to Galveston Wharves against
450 FEDERAL MARITIME COMMISSION

the defendants for strike demurrage charges for cotton shipments in 

rage situation in The City of Galveston v Kerr Steamship Co I

Apparently Item No 187 was written into Galveston Wharves t

direct consequence of the strike in 1968 1969 and the courtproceedin

ensued Before during and after the strike many bales of cotton la

bilized on the wharves Under Item No 185 ofits then currenttariff G

Wharves allowed 15 days free time during which no charge would 

afterwards there would be a demurrage charge at the rate of 2 cents 

per day for the first 5 days and 5 cents penalty per bale for 

thereafter until removed

Unilaterally Galveston Wharves took action to eliminate the penal

of the demurrage rate for the period of the strike and thereafter bille

rage charges as follows

I Cargo on free time when the strike began remained at free tim

the strike

2 Cotton in demurrage status was charged 2 cents during the 

3 Cotton in penalty demurrage status wasbilled at 2 cents d

strike

Judge Noel found the tariff provisions and practices and the 

Galveston Wharves rational reasonable and nondiscriminatory Item 

generally reflects what Galveston Wharves did in 1968 1969 Th

evidence to show that any subsequent strike occurred since 1961 whi

have caused Galveston Wharves to invoke the strike demurrage prov

its tariff But the passage oftime has not made Galveston Wharves ac

practices any less reasonable rational or nondiscriminatory

Moreover Galveston Wharves has conducted itself in a manner c

with this Commission s policy Since 1948 the Commission has not a

view that during a strike penalty demurrage may not be charged 

compensatorydemurrage shall becharged Free TimeandDemu ageC

New York 3 U S MC 89 1948 In that case the Commission em

2 U S MC at 107

The carrier is entitled however to fair compensation for sheltering and protecting a 

properly during the period of involuntary bailment and after expiration of free time

Itwouldbe unreasonable to hold that the port is entitled to less for 

same thing for property in a demurrage status In fact WGMA does 

that Galveston Wharves is not entitled to compensatory demurrage T

the only conclusion tobe reached isthat WGMA isurging that cargo 

in free time when the strike began should be charged at compensator

rage rates But WGMA has failed to explain and indeed leaves 

imagination why this should be done except by implying that th

somehow avoid discrimination in the same situation

Last for the same reasons that wharf demurrage charges may pr

made the liability ofvessels agents so too may strike demurrage charg

are really just another variety of wharf demurrage be considered th

of vessels agents
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 451

E Conclusion

I

find that WGMA has failed to prove that any of the ports tariffs or

practices thereunder involving the charging of vessels agents with liability for

payment of vessel charges including wharfage wharf demurrage dockage

etc and strikedemurrage is in violationofsections 15 16 or 17 ofthe Shipping

Act 1916 I further find that Galveston Wharves strike demurrage tariff

provision tariff Item No 187 and the practices thereunder do not unduly or

unreasonably prefer or discriminate against types of cargo shippers carriers

vessels or their agents in violation ofsections 16 First or 17 ofthe Shipping Act

1916

Category II TariffInterpretation Provisions

The issue here is quite simple Should tariffs be permitted to state explicitly

or imply that only the port issuing the tariff may interpret its provisions

The answer does not lie in the fact that there is no proof that any port has

abused this provision or eventhat there is no evidence that any port has everex

ercised the rights arrogated unto itself Neither does the answer lie in the sem

antic argumentmade by respondents that interpret does not mean construe

and that the ports were careful not to say that they reserved the right to ju

dicially construe the tariffs to the exclusion of the courts or the Commission

The answer does appear in the manifest infirmity of the provision itself A

need to interpret a tariffprovision can exist only in the case of lack of clarity

or ambiguity But tariffs are required to be clear and unambiguous and if they

do not meet that standard the tariffs must be construed against the issuer an

event hardly likely to occur if the issuer is the interpreter In his initial decision

in Matson Navigation Company v Port Authority of Guam 18 SRR 45

1978 adopted March 15 1978 Chief Administrative Law Judge John E

Cograve explained 18 SRR at 52

When dealing with the proper application of the definition of wharfage in a terminal tariff the

Commission in Sacramento Yolo Port nist v Fred V Noonan Co

Inc

9 F M C 551 1966

laid down the following general principles

It is a basic principle in the law of tariff construction that tariffs must be clear and

unambiguous to avoid possible discrimination among usersof tariff services When a tariff is

clear on its face no extrinsic evidence may be used to vary its plain meaning Tariffs are

moreover drawn unilaterally and must therefore be construed in the case of ambiguity

against the one making and issuing the tariff and it is the meaning of express language

employed in the tariff and not the unexpressed intention which controls Aleutian

Homes Inc v Coastwise Line 5 FMB 602 608 9 F MC at 558 oJ

o

Although Ihave not found a case which specifically states that thesame principles of construc

tion apply to terminal tariffs as well as carrier tariffs the Sacramento case supra and others

make it clear that they do

Conclusion

Ifind that the respondent ports

106which publish tariff provisions purporting

to allow the port to interpret provisions of the ports tariffs are engaging in

106 As found above Galveston Wharves does nol publish a

tariff provision of the kind found to be offensive
452 FEDERAL MARITIME COMMISSION

unjust and unreasonable practices relating to or connected with the rec

handling storing or delivering of property in violation of section 17 

Shipping Act The violation may be cured and reasonable practices resto

deleting the offending provision from the tariffs

Category III Crane Rental Liability ofStevedoresforOperators Negli

The narrow issue presented is whether it is an unjust and unreas

practice for ports

107 to rent cranes together with crane operators in the e

of and paid by the port to stevedores under tariffterms and conditions 

require the stevedores to control and supervise the operators and to a

responsibility and liability for the negligent acts of the operators wh

operators are under the stevedores supervision As explained previous

practice of transferring liability for employee negligence from the emplo

the user of the equipment is known in the law as the borrowed s

doctrine The doctrine has survived at leasttwo tests in Texas one in the 

courts Rorie v The City ofGalveston supra the other in the Federal c

Southern SS Co v Meyners 110 F 2d 376 5th Cir 1940 cer

denied 311 U S 674 1940 Both cases involved craneoperators empl 

ports and borrowed by a stevedore Rorie or equivalent Meyners l

WGMA argues that the tariffprovisions are unconstitutional and void 

State law and are invalid under Federal law

In making its argument onState law WGMAwholly ignores the Rori

in its post hearing briefs 109 One gets the impression thatWGMA is usi

forum to retry the principle of Rorie as if the Rorie case never existe

There were two major issues in Rorie The first involved section 15 

second concerned the borrowed servant doctrine On the section 15 iss

stevedore defended on the theory that the tariff was void as it had no

approved by this Commission pursuant to section 15 On this iseue the 

accepted the opinion expressed in the Commission s Memorandum A

Curiae that terminal tariffs as such do not need section 15 approva

valid and enforceable Nothing has been offered by WGMA which 

warrant disturbing the principle espoused by the Commission and adop

the Court in Rorie

With respect to the borrowed servant doctrine the Court found that 

the tariffprovisions for crane rental there involved the instant tariffprov

are substantially the same there was an effective transfer of control 

crane operator from the port to the stevedore The Court explained the 

ale 8 SRR at 20 715

It is settled of course that a general employee of onepenon may become the special or b

employee of another employer As we pointed out in Produeers Chemical Co v McKa

Sup 366 S W 2d 220

Whether general employees of one employer have in a given situation become s

borrowed employees of another employer is often a difficult question particular

107 Only throe ports poi tBpracticce are Involved PHA GaIYelton Wharvea and Corpus ChNt

101 Southern 8 SCo used the dock racilities ofPHAs

predecessor undor the predeceuor tariff to load and unload 

110 F 2d at 377

III l Strachan Shippina Company was the borrowln stevedore in the Rorit cue
employees are furnished with machinery by their general employer to accomplish part of a

project or contract undertaken by another Solution of the question rests in right of control

of the manner in which the employees perform the services necessary to the accomplishment

of their ultimate obligation If the general employees of oneemployer are placed under control

of another employer in the manner of performing their services they become his special or

borrowed employees Ifthe employees remain under control of their general employer in the

manner of performing their services they remain employees of the general employer and he

is liable for the consequences of their negligence

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 453

When a contract written or oral between two employers expressly provides that oneor the

other shall have right of control solution of the question is relatively simple

To the extent argued by the parties in Rorie the court determined that the

borrowed servant doctrine did not offend Texas law This then is not the

proper forum to retry the issue of the validity ofthe borrowed servant doctrine

under the Texas constitution or Texas law

The question to be decided here is whether the tariff provisions embodying

the borrowed servant doctrine are just and reasonable under Shipping Act

provisions In this respect WGMA makes amore interesting argument hinted

at in its opening brief and fleshed out in its reply brief It points to a general

rule of law that common carriers or public service companies ltO cannot stipu

late for immunity from their own or their agents negligence United States v

Atlantic Mutual Insurance Company 343 US 236 239 1952 WGMA

invokes Bisso v Inland Waterways Corporation 349 U S 85 90 91 1955

for the rationale that

This rule is merely a particular application to the towage tusiness of a

general rule long used by

courts and legislatures to prevent enforcement of release from negligence contracts in many

relationships such as bailors and bailees employers and employees public service companies and

their customers The two main reasons for the creation and application of the rule have been I

to discourage negligence by making wrongdoers pay damages and 2 to protect those in need of

goods or services from being overreached by others who have power to drive hard bargains

Footnotes omitted

However I do not find the rule in Bisso to be apposite to the facts of this

case Finding No 10 supra clearly shows no overreaching by those who have

power to drive hard bargains III The ports practices are the same as those

whichexist in the crane rental industry at leastin the Houston Galveston area

Under the pervasive regulatory scheme see Perry s Crane Service v Port of

Houston Authority ofHarris County Texas supra stevedores are free to and

do shop elsewhere than at the ports for cranes Stevedores obtain direct

financial benefits among other things lower insurance costs from renting

ports cranes with operators which the stevedores could not get ifthey directly

employed crane operators

Moreover the arrangement under the tariffis not illusory and is not imposed

for the purpose of escaping liability for one s own negligence The crane

operators do in fact come under the supervision and control of the stevedore

and they operate the cranes only underthe directionsof a supervisory stevedore

O

Because terminals are ofvital importance to transportation they may be deemed public utilities for purposes of regulation

by this Commission WGMA v PHA supra 18 SRR at 309

IIISee n 79 supra
454 FEDERAL MARITIME COMMISSION

employee In this respect there is avast difference between the facts in th

at bar and those in Bisso supra where the employment wasa pure fictio

Supreme Court explained the basis for its rationale in Bisso this way 34

at 95

The rule against contractual exemption of a towboat from responsibility for its own ne

cannot be defeated by the simple expedient of providing in a contract that all employ

towboat shall be employees of the towed vessel when the latter employment is purely a 

Moreover it is well established law that the rule of Bisso is not 

matically dispositive ofall exculpatory clauses ofcommon carriers South

ern Sugar Molasses Co Inc v River Terminals Corp 360 U S 41

1959 Bisso found an exculpatory provision in private contractual ar

ments between tug and tow to offend public policy Those consideration

not necessarily applicable to provisions ofa tarifffi1ed with and subjec

pervasive regulatory authority of an expert administrative body 36

at 416 417

Thus the reasonableness ofthe tariffprovision does not turn on respon

mere status as public utilities It does turn on the facts and circums

peculiar to the terminal industry Cases are not decided nor the law 

priately understood apart from an informed and particularized insight in

factual circumstances of the controversy under litigation Federal Ma

Board v Isbrandtsen Co 356 U S 481 498 360 U S at 421

Here the ports hold themselves out to provide cranes to stevedores 

have a pool of crane operators available to operate those cranes under 

rection control and supervision ofthe stevedores Stevedores need not acc

operator offered by the port but are free to choose from any qualified op

in the pool It is not part of the ports undertaking to operate cran

stevedores or to retain any operationS control over the cranes during the 

period The tariff provision comports with terms of crane rental agree

offered by competing private crane rental companies The use of bo

servants is demonstrably more advantageous economically to stevedore

carrying crane operators as employees on their own payroll

In the final analysis WGMA has failed to prove that the tariff pr

exculpates the wrongdoer from its negligent acts or that the stevedores 

the mercy of the portswho are driving hard bargains from positions of 

Indeed the tariffprovisions place liability for negligence on the party exe

direction control and supervisionover the negligent employee and are ac

by the party who is now free to choose between the respondents renta

and a private rental crane Even in those circumstances where the ste

may be required to choose a port s crane there is no evidence that th

retains any operational control over the crane operator

Under the foregoing circumstances Ifind the application of the bo

servant doctrine to be a reasonable practice by the respondent ports

Conclusion

Accordingly Ifind that the tariff provisions and practices at PHA 

veston Wharves and Corpus Christi which make crane operators the bo
S SEYMOUR GLANZER

Administrative Law Judge

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 455

servant of the crane user and make the crane user liable for the negligence of

the crane operatorwhile under the supervision direction and control of the user

are not unjust and unreasonable and do not violate section 17 112 Ifurther find

that section 15 approval of the tariff provision is not required

Order

Itis ordered that within 30 days after this decision becomes administratively

final that the respondents Port of Houston Authority Port of Beaumont

Texas Port of Port Arthur Texas Port of Corpus Christi Nueces County

Navigation District No I Brownsville Navigation District of Cameron

County Texas and the Orange County Navigation and Port District Texas

cease and desist and thereafter refrain from publishing tariffprovisions which

state or imply that those ports or anyone of them may act as the interpretor

or sole interpretor of the meaning of the terms and conditions of the tariffs

published by those respondents or anyone of them

It is further ordered that in all other respects the complaint of West Gulf

Maritime Association is denied

It is further ordered that this proceeding be discontinued

WASHINGTON D C

September 21 1979

112 There is no showing that section 16 was violated

When cranes derricks hoists conveyors lift trucks tractors and other equipment used in the moving orlifting of cargoes

are rented hereinafter called leasedEquipment orleased to others it isexpressly understood that such Leased Equipment

will be operated under the direction and control of the Iessee and the Lessee shall be responsible for the operation thereof

and assume all risks for injuries or damages which may arise from orgrow out of the use oroperation of said Leased

Equipment

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 457

and subject to the following conditions and charges the renting or use of which shall constitute

an agreement with the Navigation District to pay such charges and be bound by such conditions

c Responsibilityfor Damages

Charge for operators of its freight handling machinery will be made by Navigation District but

it is expressly stipulated that Navigation District acts solely as agent of User in engaging operators

and paying them for their services

Navigation District freight handling machinery as well as the operator thereof is turned over to

User is under User s supervision direction and control and User assumes sole responsibility and

liability for injury to or death of any person whomsoever ordamage to ordestruction of property

of any such person including employees or property of Navigation District incident to arising out

of or connected with User s possession use or operation of such machinery and shall protect

indemnify and save harmless the Navigation District from and against any and all liability for or

in respect of the same or any part thereof

d Use ofPrivately Owned Machinery and Equipment

The use of privately owned freight handling machinery or equipment otherthan tractors dollies

lift trucks or the like of stevedores regularly operating on Navigation District property on

Navigation District property shall not be permitted except by special permission of the General

Manager who will regulate its use and establish the conditions and charges which shall be imposed

by the Navigation District for the use of its tracks wharves or property

B GALVESTON

IPortions of Item No 5 Application Definitions

I PIER DEMURRAGE OR WHARF DEMURRAGE A charge assessed against cargo re

maining in or on terminal facilities after the expiration of free time unless arrangements have been

made for storage

p USAGE The use of terminal facility by any railcarrier lighter operator trucker shipper or

consignee their agents servants and or employees when they perform their own car lighter or

truck loading or unloading or the use of said facilities for any other gainful purpose for wpich a

charge is not otherwise specified

t WHARFAGE A charge assessed against the cargo or vessel on all cargo passing or conveyed

over onto or under wharves or between vessels to or from barge lighter orwater when berthed

at wharf or when moored in slip adjacent to wharf Wharfage is solely the charge for use of wharf

and does not include charges for any other service

2 Portions of Item No 30 Application Responsibility for Charges etc

The use of waterways and facilities under jurisdiction of the Board of Trustees of the Galveston

Wharves shall constitute consent to the terms and conditions of this tariff and evidences an

agreement on the part of all vessels their owners and agents and other users of such waterways

and facilities to pay all charges specified including any and all damages to property as provided

in Item 75 or reissues and to be governed by all rules and regulations contained in this tariff

3 Portions of Item No 105 Application Lessee Responsibility 2

When cranes derricks hoists conveyors lift trucks trucks tractors etc are rented or leased

to others it is expressly understood that the unit will be operated under the direction and control

2 Effective April 7 1975 before the close ofthe record the following changes were made in Item 105 per Galveston Wharves

letterof October 31 1978 Some aspects of this tariffprovision are the subject of another Commission proceeding in Docket No

77 56 West Gulf Maritime Association v The City of Galveston Board of Trustees of the Galveston Wharves 19 SRR 779

1979
458 FEDERAL MARITIME COMMISSION

of the lessee and the lessee shall be responsible for the operation thereof and the lessee 

all risks for injuries ordamages which may arise or grow out of the use or operation of s

It is hereby understood and agreed that in the event lessee uses the operator of s

employed by the Galveston Wharves such operator shall be under the direction of the le

the operator shall be considered as the agent or servant of the lessee and lessee shall be res

for the acts of such operator during the time of rental or lease It is incumbent upon the 

make a

thorough inspection and satisfy himself to the physical condition and capacity of 

as well as the competency of the operator there being no representation or warrant

reference to such matters

4 Portions of Item No 185 Section 2 Pier Demurrage Rules and C

c PIER DEMURRAGE RULES

Inbound or outbound cargo remaining on the property of the Galveston Wharves 

expiration of free time will be subject to the following rules

I Pier demurrage charges on outbound cargo will be considered as for the account 

sponsibility of the vessel their owners or their agents individually or collectively

2 Pier demurrage charges on inbound cargo will be considered as for the account 

sponsibility of the ownerof the cargo the shipper the receiver ortheir agents indivi

collectively

5 Portions of Item 187 Section 2 Interference Due to Strikes 3

When it is impossible to remove cargo from Galveston Wharves piers or transit sheds 

of strike interference cargo on piers or in transit sheds within the free time period will be 

additional free time equal to period of such interference

Cargo on piers or in Iransii sheds on which free time period has expired at beginning 

interference will be assessed pier demurrage during period of interference at rate of 5 pe

day except cotton and cotton linters which will be assessed 211 per bale per day

The first and last day on which any strike interference occurred such day will be inc

the above special provisions

C BEAUMONT

1 Portions ofRules and Regulations as follows

Item 100 Not Common Carrier

The Port Authority is not a common carrier and is sole interpreter of its tariff ru

regulations

Item lOS Payment of Charges

All bills rendered by the Port Authority for service claims or for any cauSC8 whatso

due and payable upon presentation and any agents owners persons firms or corpora

ceiving such bills and failing to make full payment within len days after presentation 

placed upon a Delinquent List conditions of which are hereinafter defined

The Port Authority does notrecognize the numerous shippers or consignees and cannot 

to collect or assist in collecting any port invoices or bills which may be passed on to ship

Lessee by acceptance of luch Leased Equipment aifCCls 10 fully protect indemnify reimburse and save ha

Galveston Wharvesagainst any and BIlIoss ordamaae caullOd to orcauacd by said Leased Equipment and should s

Equipment be damqed ordestroyed while 80 leased IAsco shall pay for aU n ry repairs or replaceme

damaged shall pay rental for such damaged Leased Equipment until same is r turncd to Galveston Wharves In 

condition as received

It is hereby understood and agreed that in the event lessee UIIC8 the operator of said unit employed by the 

Wharves such operator shall be underthe direction of the Lcsaco and the operator shall be considered as the agen

ofthc lcatceand Lessee shaJl be responsible for the aelll ofsuch opcl 8torduring time of rental orlease It isincum

the Lessee to malu a thorough inspection and sati fy himself to tho physical condition and capacity of the unit 

the competency of the operator thore being no reproscntation of warrantiCll with reference to such matters

l Effective October 23 1978 after theclose ofthe record Item 187waa amended Galveston Wharves letter ofOctobe
D PORT ARTHUR 4

WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 459

consignees by the vessel its owner and agent Such bills are due when presented and must be paid

regardless of when the vessel its owner and agents are reimbursed

Bills must be paid when presented and errors if any will be rectified by the Port Authority

Claims in excess of 10 00 will require specific approval of the Port Authority before refund is

made

The Port Authority reserves the right to estimate and collect in advance all charges which may

accrue against vessels their owners and agents or against cargo loaded or discharged by such

vessels or from other users of the facilities of the Port Authority whose credit has not been

properly established with the Port Authority or who are habitually on theDelinquent List Useof

such facilities may be denied until such advance payments or deposits are made

The Port Authority reserves the right to apply any payment received against the oldest bills

rendered against vessels their owners and agents or other users of the facilities

Item 115 c Wharfage Rules

A Wharfage charges earned on cargo placed on Port Facilities must be paid by vessel owners

operators or their agents or owner or forwarder of the cargo and placing of such cargo on Port

Facilities shall be deemed an acceptance and acknowledgment of this responsibility Vessel owners

operators or their agents shall furnish Port Authority manifests on inbound and outbound cargo

as the case may be loaded to or from Port Facilities

EXCEPTION Where provisions are made with owner or agent of cargo wharfage charges

must be collected direct from owner or agent of the cargo

Item 165 Consent to Terms of Tariff

The use of the facilities under the jurisdiction of The Port Authority shall constitute a consent

to the terms and conditions of this tariff and evidences an agreement on the part of all vessels their

owners and agents and other users of such facilities to all such charges specified in this tariff and

be governed by all rules and regulations herein contained

1 Portions as follows 5

Item 105 Not Common Carrier

The Port Authority is not a common carrier and is sole interpreter of its tariff rules and

regulations

Item II00A Payment of Charges

All bills rendered by the Port Authority for service claims or for any causes whatsoever are due

and payable upon presentation and any Agents Owners person firmsor corporations receiving

such bills and failing to make full payment within ten days after presentation shall be placed upon

A Delinquent List conditions of which are hereinafter defined

The Port Authority does not recognize the numerous shippers or consignees and cannot attempt

to collect or assist in collecting any port invoices or bills which may be passed on to shippers and

consignees by the vessel its Owner and orAgent Such bills aredue when presented and must be

paid regardless of wben the vessel its Owner and or Agents are reimbursed

Bills must be paid when presented and errors if any will be rectified by the Port Authority

Claims in excess of 10 00 will require specific approval of the Port Authority before refund is

made

The Port Authority reserves the right to estimate and collect in advance all charges which may

accrue against vessels their Owners and or Agents oragainst cargo loaded or discharged by such

vessels or from other users of the facilities of the Port Authority whose credit has not been

properly established with the Port Authority or who are habitually on the Delinquent List Use of

such facilities may be denied until such advance payments or deposits are made

Complainant introduced Ex 49 containing Item 605 A of Port Arthurs

tariffdealing with useof privately owned cranes See

Port Arthur letterof November 16 1978

I

The portions appeared in Tariff No I A Tariff No I B isnow in effect Although the provisions have been renumbered the

language remains the same See Port Arthurletter or October 13 1978
460 FEDERAL MARITIME COMMISSION

The Port Authority reserves the right to apply any payment received against the 

rendered asainst vessels their Owners and or Agents or other users of the facilitie

Item 120 Wharfage Rules

A Wharfage charges earned on import cargo placed on Port Facilities must be p

owners operators or theirAgents andplacinS of such cargoes on Port Facilities sha

an acceptance and acknowledgment of this responsibility Vessel Owners Operato

Agents shall furnish Port Authority manifests on import and outbound cargo as the 

loaded to or from Port Facilities See Exception 1

EXCEPTION I Where specific arransements are made with owner or agent of 

guaranteeing payment of import wharfage charges such charses will be collected dire

owner or agent of the cargo

B Wharfage charges earned on export Coastwise Intracoastal or local cargo m

by owner or agent of cargo and placing of such cargo on Port Facilities shall be 

acceptance and acknowledgment of these responsibilities See Exception 2

EXCEPTION 2 Where specific arrangements are made with owners or agen

Coastwise Intracoastal or local cargo guaranteeing payment to Port Authority 

charges earned on export Coastwise Intracoastal or local cargo by a railroad truck 

party such charges will be collected from such railroad truck line orother party as 

be

Item 175 Consent to Terms of Tariff

The use of the facilities under the jurisdiction of the Port Authority shall constitu

to the terms and conditions of this tariff and evidences an agreement on the part of all 

Owners and or Agents and other usersof such facilities to all such charges specified 

and to be governed by all rules and regulations herein contained

E CORPUS CHRISTI6

1 Portions ofTariff definitions as follows

3 Wharfage A charge assessed asainst the cargo or vessel on all cargopassing or c

onto or under wharves or between vessels to or from barge lighter or water w

at wharf or when moored in slip adjacent to wharf Wharfage is solely the char

wharf and does not include charges for any other service

9 Usage The use of terminal facility by any rail carrier lighter operator trucke

consignee their agents servants and or employees when they perform their ow

or truck loading or unloading or the use of said facilities for any othergainful purp

a charge is not otherwise specified

2 Portions of Rules and Regulations as follows

Item IS Payment of Charges and Responsibility Therefor Extensions of Cred

Wharfage wharf demurrage car loading and unloading when not absorbed 

carriers are due from the owner sbipper or consijnee of the cargo and shall be coll

on behalf of the Navigation District by the vessel discharging or 10adinS the cargo 

the cargo was received through the vessel s owner agent or other person duly author

and such vessel and its owner and agent jointly and severally shall guarantee and 

the payment of such charges to the Navigation District whether or not collected by 

its owner or agent The use of thewharf or otherterminal facllity by the vessel orits o

shall constitute acceptance and admowledgment of this agency guaranty and liab

All bills rendered by the Navigation District for wharfage dockap wharf dem

and or wharf use hire charges for providinS water and electricity charges for equi

charges for cleaning wharves and sheds charges for terminal storage special s

services and claims or for any causes whatsoever aredue and payable in cash upon 

Complainant allO introduced Bu 47 and 51 containlnl ptovislonl dealina with crane rental See Corpus 

November 15 1978
WEST GULF MARITIME ASS N V PORT OF HOUSTON AUTHORITY 461

unless arrangements forextension of credit aremade When credit arrangements havebeen made

any agents owners persons firmsor corporations receiving bills and failing to make full payment

after presentation within the time permitted under the credit arrangements may be placed upon

a cash basis

The Navigation District does not recognize the numerous shippers or consignees and cannot

attempt to collect or assist in collecting any port invoices or bills which may be passed on to

shippers and consignees by the vessel its owner and agent Such bills must be paid regardless of

when the vessel its owner and agents are reimbursed Any errors in bills will be recitifed by the

Navigation District

The Navigation District reserves the right to estimate and collect in advance all charges which

may accrue against vessels their owners and agents or against cargo loaded or discharged by such

vessels or from other users of the facilities of the Navigation District whose credit has not been

properly established with the Navigation District Use of such facilities may be denied until such

advance payments or deposits are made

The Navigation District at its option and subject to tennination at its election may at any time

and from time to time extend credit to any user or other person conducting business with the

Navigation District under the provisions of this tariff or amendments or reissues thereof by such

useror other person establishing and maintaining financial responsibility acceptable to the Navi

gation District orby posting and maintaining a single transaction or aperiod or an annual surety

bond in form and content and with corporate surety acceptable to the Navigation District in

amount equal to 125 of maximum liability on a single transaction orequal to an estimated period

orestimated annual maximum liability Further extension of credit may be suspended or termi

nated by the Navigation District subject to the establishment of added or extended credit accept

able to the Navigation District

The Navigation District reserves the right to apply any payment received against the oldest bills

rendered against vessels their owners and agents or other users of the facilities

Presentation of bills to owners and agents of vessels or to stevedores is done as a matter of

accommodation and convenience and shall not constitute a waiver of the liens for charges furnished

avessel for which the maritime law gives the lien

Item 35 Responsibility for Loss or Damage

Users of its facilities agree to indemnify and save harmless the Navigation District from and

against all losses claims demands and suits for damages including death and personal injury and

including court costs and attorneys fees incident to or resulting from their operations on the

property of the Navigation District

Item 52 Application and Interpretation of Tariff

The use of the waterways and facilities under jurisdiction of the Navigation District shall

constitute aconsent to the terms and conditions of this tariff and evidences an agreement on the

part of all vessels their owners and agents and other users of such waterways and facilities to pay

all charges specified and be governed by all rules and regulations herein contained

The Navigation District shall be the sole judge as to the interpretation of this tariff

F BROWNSVILLE

1 Portions ofSection One General Rules and Regulations as follows

Item 105 Consent to Terms

Use of the public wharves and related facilities shall constitute consent to the terms and

conditions of this tariff including the payment of all applicable charges specified herein

Item 110 Collection of Charges

The District may at its discretion extend customary trade credit or require the posting of bond

or prepayment of charges Vessel charges as set out hereinafter shall constitute a lien against the

vessel and or her agents Cargo charges as set out hereinafter shall constitute a lien against the

merchandise or commodity and or the custodian at the port thereof Service charges shall be

payable by the party requesting such service
462 FEDERAL MARITIME COMMISSION

Item III Service Charge on Past Due Accounts

On all invoices except lease rentals A service charge will be assessed on all accoun

days old at a monthly rate of I h on the first S5oo and 1 on amounts over S5O

minimum monthly charge of SO 50 Exception Brownsville steamship agencies and s

companies will be assessed on all accounts over 60 days old at the same rates as sho

Item 115 Interpretation of Tariff

The District further reserves the right to be the sole judge in the interpretation of th

any supplements thereto

G ORANGE

I Portions of Application as follows

Item 85 Responsibility for Wharfage

On shipments inward and outward bound handled over the wharves or piers or on 

handled direct between barges or vessels and vessels that are berthed at wharves or 

shipper will be held responsible for wharfage charges and will not be permitted to 

property from the wharves or piers or from barges or vessels ontoa vessel without prep

the wharfage charges or until satisfactory provisions have been made for the payme

2 Portions of Rules and Regulations as follows

Item 115 Interpretation of Tariff

The Port District shall be the sole judge as to the interpretation of its Tariffrules and r

Item 120 Payment of Charges

All bills rendered by the Port District for service claims or for any causes whatsoev

and payable upon presentation and any owners agents companies or persons receiving 

and failing to make full payment within ten days after presentation shall be placed 

delinquent list conditions of which are hereinafter defined

The Port District does not recognize the numerous shippers or consignees and cann

to collect or assist in collecting storage and similar bills which may be passed on to sh

consignees by the vessel its ownersand agents Such bills aredue when presented and m

regardless of when the vessel its owners and agents are reimbursed

Bills must be paid when presented and errors if any will be rectified by the Po

Claims in excess of SIO oowill require specific approval of the Port District before refun

The Port District reserves the right to estimate and collect in advance all charges w

accrue against vessels their owners and agents or against cargo loaded or discharge

vessels or from other users of the facilities of the Port District whose credit has not bee

established with the Port District or who are habitually on the delinquent list Use of fac

be denied until such advance payments or deposits are made

The Port District reserves the right to apply any payment received against the o

rendered against vessels their owners and agents or other users of facilities

Item 130 Wharfage

Al Wharfage charges must be paid by owner or agent of cargo and placing of said 

Port facilities shall be deemed an acceptance and acknowledgment of this responsibil

Item 195 Consent to terms of Tariff

The use of the facilities under the jurisdiction of the Port District shall constitute a 

the terms and conditions of this Tariff and evidences and agreement on the part of all ve

owners and agents and other users of such facilities to pay all charges specified in this 

be governed by all rules and regulations herein contained
APPENDIX B

Contentions ofComplainant and Respondents

1 Points in WGMA s Opening Brief

Point One Each of the tariffs here complained of provides that use of the

Port s facilities constitutes consent to be bound by all of the tariff provisions

Such language is a nullity because lawful tariff provisions do not rest on

consent but as a matter of law are binding upon all persons subject to them

Therefore use cannot lawfully be the equivalent ofagreement These provisions

should therefore be ordered stricken and given no consideration in the deter

mination of this complaint

Point Two Interpretation of a ports tariffs is a matter within the jurisdic

tion of the Federal Maritime Commission and the courts and the statements

in respondents tariffs that they are to be interpreters of their tariffs are void

as a matter of law as attempts to oust such jurisdiction

Point Three The ports tariff provisions and billing practices that make

agents for vessels using port facilities personally liable for their principals port

charges are unlawful because the charges are obligations of third persons not

agreed in writing to be borne by the agent and therefore unenforceable under

the Texas Statute of Frauds and contrary also to the Law ofPrincipal and

Agent and violate sections 16 and 17 of the Shipping Act of 1916 46 Us CA

815 816 in subjecting vessels agents to an unreasonable disadvantage and

to unjust and unreasonable regulations and practices

Point Four The ports tariff provisions and billing practices which subject

vessels agents to responsibility for collecting and personal liability for wharf

age and pier demurrage which are liabilitiesofcargo are unenforceable under

the Texas Statute of Frauds and they violate sections 16 and 17 of the

Shipping Act of 1916 46 U S CA 815 816 because they subject agents

to unreasonable disadvantages and are unjust and unreasonable

Point Five Requiring renters of cranes and other heavy equipment from

the ports ipso facto to become liable for the negligence of the operators of that

equipment who are employees of the Port is violative of section 16 of the

Shipping Act of 1916 46 U S cA 815 in subjecting stevedores to undue

and unreasonable disadvantages and unjust and unreasonable and hence un

lawful under section 17 of that Act and

PointSix The Galveston Wharves tariff provision assessing strike penalty

pier demurrage rates according to the status of cargo at the commencement of

the strike is patently discrminatory and unlawful under sections 16 and 17 of

the Shipping Act of 1916 46 US CA 815 816 because all of the strike

bound cargoes are in an identical position during a strikeand assessing different

charges on cargoes in an identical position is plainly unjust and unreasonable

2 Points in Respondents Answering Brief

Counterpoint One Complainant has wholly failed to sustain its burden of

proof by reliable probative evidence that respondents tariffs or their practices
464 FEDERAL MARITIME COMMISSION

thereunder make or give any undue or unreasonable preference or a

section 16 or that the complained of tariffs and practices thereu

unjust and unreasonable section 17

Reply Point One germane to WGMAs Point One Tariff provis

the use of the port facilities constitutes consent to be bound by the t

merely a statementof the law clearly informing users ofthe applicabi

tariffs and their responsibilities thereunder Complainant claimsthat s

provisions are unlawful but fails to offer any evidence that such lan

port practices thereunder constitute an unreasonable preference or a

or that such provision is unjust and unreasonable

Reply Point Two germane to WGMAs Point Two Provision in 

respondents tariffs that the issuer of the tariff shall be the interprete

tariffs does not cannot and is not intended to oust jurisdiction of the 

Maritime Commission and the courts The interpretation provision d

a useful purpose in non litigious inquiries and situations particularly 

complex and technical interpretation of language terms common to 

and relating to customs of the port

Reply Point Three germane to WGMA s Points Three and Four 

tariff provisions and billing practices assessing responsibility for char

vessels their owners and agents and other users of the facilities are 

lawful but essential to insure collection of port charges and the c

economic viability of public ports Such tariff provisions rather than 

in agents being held responsible for debts of others impose a direct o

upon the agents for collection of port charges

Reply Point Four germane to WCMA s Point Five Ports ta

sions concerning the responsibility of lessees of cranes and other su

equipment providing thatanyleased operator ofthe portshall beunder 

tion of the lessee and shall be considered as lessee s employee are re

requirements uniform in the port industry and non discriminatory

Reply PointFive germaneto WGMA sPoint Six The Galveston 

tariffprovision eliminating penalty portion ofdemurrage rate and mak

tional free time allowance during strike period is most reasonable 

gives no undue or unreasonable preference or advantage and is consis

Commission rulings

3 Points in WGMA s Reply Brief

First Reply Point The tariff provisions here stating that use of p

ities constitutes a consent to the terms and conditions of this tariff 

statement of the law Use of a public utility s facilities constitutes con

to be bound by lawful tariff provisions The tariff language is u

unreasonable and therefore violative ofSection 17 of the Shipping Ac

and lawfully should be disregarded

Second Reply Point The provision in the tariffs that the port is 

solejudge or sole interpreter of the tariffs meaning is unlawful 

unjust within Section 17 of the Shipping Act of 1916
465

Third Reply Point As Texas municipal corporations respondents are sub

ject to the laws of the State of Texas As instruments of interstate and foreign

commerce they are subject to applicable laws of the United States Re

spondents tariff provisions making vessels agents responsible for vessels and

cargo owners port charges are violative of both bodies of law and cannot

lawfully be upheld as just and reasonable under Section 17 ofthe Shipping Act

of 1916

Fourth Reply Point Respondents have reasonable alternatives for collec

tion of their charges to holding steamship agents liable for collection and

payment of port charges It is unjust and unreasonable for respondents to

impose such liability of steamship agents since it is done simply for respondents

convenience

Fifth Reply Point Respondents monopolistic position with respect to use

on their premises of their rented heavy lift equipment makes their tariff pro

visions exculpating themselves from liability for the negligence of theiremploy

ees unlawful under well established legal principles and hence these tariff

provisions should be found unjust and unreasonable and hence unlawful also

under Section 17 of the Shipping Act of 1916

Sixth Reply Point The Galveston strike demurrage charge is plainly dis

criminatory and not based on compensation for services rendered and there

fore unlawful under Sections 16 and 17 of the Shipping Act of 1916
FEDERAL MARITIME COMMISSION

DOCKET No 79 86

JAPAN KoREA ATLANTIC AND GULF FREIGHT CONFERENCE

RULES PERTAINING TO CHASSIS AVAILABILITY AND DEMURRAG

CHARGES THAT RESULT WHEN CHASSIS ARE NOT MADE AVAILA

Conference tariff rule allowing carrier members to provide chassis for containers to 

available found permissive and consequently in violation of section 18 b Iof the 

Act 1916

Conference tariff rule permitting the assessment of demurrage on containers at amoun

than compensatory during periods of general unavailability of chassis in port a

unjust and unreasonable in violation of section 17 of the Shipping Act 1916

Charles F Warren and George A Quadrlnn for Japan Korea Atlantic and Gulf Freigh

ence and its member lines

Joseph S Fontana for John Sexton Company

Lawrerue G Cohen for Mitsubishi Corporation

Arthur S Schmauder for Sumitomo Corporation of America

Gerald H Ullman for National Customs Brokers Forwarders Association of Ame

Fraruls J Gorman for Baltimore Customhouse Brokers and Forwarders Association

William D Welswasser C Douglass Miller and John Robert Ewers for Bureau o

Counsel

REPORT AND ORDER

BY THE COMMISSION

February 7 1980

RichardJ Daschbach Chairman 

F Moakley Vice Chairman Ja

Day and Leslie Kanuk Commissi

This proceeding was initiated on August 31 1979 by an Order direc

Japan Korea Atlantic and Gulf Freight Conference J KAG to sho

why the Commission should not find certain of its tariff rules concer

availability ofchassis equipment and the assessment ofdemurrage I

in the assessment of varying rates and charges which are unjustly 

natory and constitute an unreasonable practice or regulation in vio

section 17 of the Shipping Act 1916 46 V S C S 816 and 2 be pe
BACKGROUND

JAPAN KOREA ATLANTIC GULF FREIGHT CONFERENCE RULES 467

in nature and indefinite in application in violation of section 18 b of the

Shipping Act 1916 46 U S c 817 b

1

J KAG and its member lines were named Respondents The National Cus

toms Brokers Forwarders Association ofAmerica Inc Baltimore Custom

house Brokers and Forwarders Association Mitsubishi Corporation Sumitomo

Corporation ofAmerica and John Sexton Company subsequently intervened

Affidavits and or memoranda of law have been submitted by J KAG John

Sexton Baltimore Customhouse Brokers and the Commission s Bureau of

Hearing Counsel In addition both Baltimore Customhouse Brokers and Hear

ing Counsel have requested an evidentiary hearing which is opposed by

J KAG Also J KAG has moved I

to strike a notice of deposition which

was filedby Baltimore Customhouse Brokers and 2 for leave to file a rebutta1

affidavit and memorandum to which Hearing Counsel has filed in opposition

The National Customs Brokers have requested oral argument

2

J KAG operates pursuant to agreement No 3103 and serves the trades from

Japan and Korea to United States Atlantic and Gulf Ports It consists of 13

ocean carriers which during 1978 carried 378 772 TEU s3 of container space

in this trade The Conference trade has become substantially containerized in

the past five and a half years

Though J KAG members serve numerous discharge ports on the Atlantic

and Gulfcoasts the Order to Show Cause and the responses of the parties have

focused exclusively on the situation at the Port of Baltimore Prior to 1978

there had been occasions when chassis were in short supply at Baltimore

However during the early months of 1978 an extreme chassis shortage devel

oped which wasexacerbated by a dock strike and severe winter weather Some

J KAG members were consequently unable to provide chassis within the five

days free time permitted by J KAG tariff In previous situations individual

J KAG members had on occasion failed to assess demurrage after the expira

tion of this free time although required to do so by tariffrules similar to those

under review Following an investigation by the Conference sindependent

neutral body all J KAG members began to assess demurrage after the expira

tion of the free time period regardless of whether the member had provided a

chassis for the container As a result many consignees incurred demurrage

charges when chassis were unavailable

I

Though the Order fails to cile specific tariffrules the parties agree that Rules 106 and 114 ofTariff No 36 FMC 7 are the

relevant rules

Rule 106 provides that

tJo the extent available carriers are pennitted to provide chassis atdischarge JOrts at a

rental charge of 6 00 for each

twenty four hours

Rule 114 states thai all containers held with cargo at a carrier s discharge port container yard after the carrying vessel has

completed discharge whether the carrier has provided achassis thereforpursuant toRule 106 ornot will be subject to demurrage

after 5 days free time

The National Custom Brokers haveoffered no compelling reason for granting oral argument and theirrequest therefor will

be denied

Twenty footequivalent unit a unit of measurefor cargo space suitable for containerson aliner vessel Containers are generally

twenty or forty feet in length
468 FEDERAL MARITIME COMMISSION

Once unloaded at its discharge port a container of cargo is virtually 

bile Ifthe container is to proceed further inland by way of motor c

must first be placed upon a chassis compatible with its size Generally 

carriers have provided such chassis to consignees on a rental basis to f

the removal of containers from their terminals and container yards C

obtain chassis either from their own stock or from chassis leasing com

which are situated in port areljs

At least two major chassis leasing companies serve the Port of Balti

Unitlex and XTRA They lease chassis toJ KAG members but do not 

their services solely to ocean carriers When consignees utilize chassis s

by J KAG members they are charged a per diem rate which cov

carriers leasing costs

Terminal and container storage space is in short supply at Baltimo

result Conference members desire to clear cargo from their yards 

earliest possible time particularly since Conference members provide a

service in the trade Limiting the time within which to remove loaded 

ers to five days is intended to accommodate this service and minimize 

tion at the port However the J KAG tariff does allow the Confer

permit additional free time and or waive demurrage during periods 

tie up when a consignee is prevented by factors beyond its contr

removing a container from the container yard

POSITIONS OF THE PARTIES

Respondent

J KAG states that the ocean common carriers obligation is to tr

cargo to the port of destination discharge it from the vessel and tend

delivery with notice to the consignee or its agent It defines chassis 

integral part ofamotor vehicle and argues that because the ocean carri

required to provide a motor vehicle for hauling away goods neith

required to provide any part of the vehicle such as the chassis

J KAG claims that it has not established a historic practice of p

chassis to all consignees The Conference maintains that it provides 

which it leases at Baltimore only to the extent that such chassis are a

Under this arrangement chassis are allocated on a first come first serv

with no discrimination or favoritism

Respondent explains that there are two reasons for assessing dem

I to recompense the ocean carrier for the extended use ofits equipm

facilities and 2 to minimize port congestion It maintains that th

pUrPOse is especially compelling at Baltimore due to the lack of s

container storage areas J KAG concludes that any problem which m

concerning chassis availability at Baltimore will be resolved by norma

forces and that any alteration of its existing tariff rules will impose obl

upon its members which as common carriers they are not required to 
JAPAN KOREA ATLANTIC GULF FREIGHT CONFERENCE RULES 469

Intervenors

Intervenors agree that an ocean common carrier does not have an obligation

to deliver goods to a consignee rather it must only tender them for delivery

They argue however that a proper tender occurs only when a container is

mounted on a chassis for it is only then that the cargo is reasonably accessible

They also contend that the fact that common carriers by water including

J KAG members have historically tendered containers mounted on chassis

implicitly supports their view

Intervenors argue that because demurrage charges are in effect penalties to

induce the removal of containers from the carriers container yard the assess

ment of demurrage when chassis are not available at the port is unreasonable

and therefore unlawful under section 17 They maintain that where both the

carrier and the consignee are jointly affected by conditions beyond their con

trol neither should profit from the others disability

The National Customs Brokers claim that if a member line provides chassis

to some consignees it must do so for all consignees It further suggests that

J KAG tariff rules should be amended to extend free time whenever chassis

are unavailable

Sumitomo contends that the subject tariff rules are ambiguous Itclaims for

instance that Rule 106 provides no guidance as to when chassis will be avail

able nor does it indicate the order in which chassis will be allocated during

shortages The danger perceived is that a variety of different interpretations

may be given by various conference members Sumitomo therefore concludes

that these rules violate the principle of commercial certainty which tariffs are

required to meet

Hearing Counsel

Hearing Counsel generally agrees with the arguments raised by Intervenors

It does not allege however that J KAG members have a common carrier

obligation to provide chassis to consignees and concludes therefore that they

could refuse to provide such service Hearing Counsel adds however that once

they elect to offer the service they must meet certain requirements under the

Shipping Act 1916 i e I

the tariffmust be certain and clearly identify the

carrier s undertaking and 2 shippers and consignees must be provided with

actual notice of the service the carrier will provide In addition Hearing

Counsel questions why in situations of chassis shortage consignees could be

any more successful than ocean carriers in leasing chassis Hearing Counsel

also contends that in such situations the provisions of Tariff Rule 114 which

relate to the extension of free time or limiting demurrage would apply

The arguments raised by the Intervenors are similar and will therefore be discussed together unless reference to a specific

Intervenor is warranted
470 FEDERAL MARITIME COMMISSION

DISCUSSION

Procedural Matters

A Evidentiary Hearing

The Baltimore Customhouse Brokers and Hearing Counsel have r

an evidentiary hearing Hearing Counsel asserts that a significant qu

fact exists concerning what notice consignees would need in order to 

chassis for themselves on the spot market if such chassis are a

However no effort is made by Hearing Counsel to explain why such 

tion if indeed relevant could not be submitted through affidavit 

Hearing Counsel fails to state how and by whom such evidence w

adduced

The Baltimore Brokers claim that J KAGs affidavit contains cert

curacies which are correctly described in their own affidavit They t

several questions which are raised by J KAG s affidavit and conclude 

Commission should explore in an evidentiary hearing whether I J 

historical and existing freight rates cover the cost of providing 

2 truckers normally offer to provide chassis to shippers and consign

3 it isimpractical to expect importers and consignees to lease contain

being informed that the ocean carrier will not provide chassis They 

that these matters have not been adequately presented by affidavit 

Hearing Counsel fail to explain why such proof cannot be submitted 

affidavit or what evidence they would adduce

In limiting this proceeding to the submission of affidavits of fact an

randa of law the Commission s Order to Show Cause provided that a

considering an evidentiary hearing necessary must accompany its 

wlith a statementsetting forth in detail the facts to be proven theirrelevance to the iss

proceeding a description of the evidence which would be adduced to prove these fact

such proof cannot be submitted through affidavit

Neither Hearing Counsel nor Baltimore Brokers has strictly comp

this requirement Moreover neither party has indicated why the limite

raised by the Order to Show Cause cannot be resolved on the presen

Consequently the Commission will deny these requests for evidentiary 

B Deposition

J KAG has moved to strike a notice ofdeposition served by the B

Customhouse Brokers The taking of the deposition originally sched

January 8 1980 has been postponed pending this decision Becaus

Commission s

ruling above denying evidentiary hearing in this pro

J KAG s motion will be granted The proceeding waslimited to the su

of affidavits of fact and memoranda of law with no provision for disc

light of the nature and limited extent ofthe issues presented and the su

of the affidavits submitted there is no reason to deviate from this pr
JAPAN KOREA ATLANTIC GULF FREIGHT CONFERENCE RULES 471

C Rebuttal

J KAG has also moved for leave to file a rebuttal affidavit and memo

randum which it attached to its request The Conference notes that the peti

tions to intervene were not granted until after it submitted its primafacie case

and that it has not therefore been presented with an opportunity to respond

to or rebut allegations contained in Intervenors submissions It argues that

administrative due process and fundamental fairness require that it be given

an opportunity to respond Hearing Counsel opposes this motion primarily on

the ground that J KAG has failed to cite any support therefor contrary to the

express requirement of Rule 73 of the Commission s Rules of Practice and

Procedure 46 CF R 502 73 Hearing Counsel also submits that the rebut

tal affidavit is argumentative and without cross examination would further

confuse the proceeding

The Order to Show Cause did not provide the Respondent with a right of

rebuttal nor was it required Under the circumstances of this case however

the Commission will grant Respondent s motion and accept the filing of the

rebuttal affidavit and memorandum In light of the ultimate decision in this

proceeding the Commission does not perceive that any party will be aggrieved

by this ruling To the extent that the affidavit of fact is argumentative or

non responsive to the issues it will be ignored

Substantive Matters

The Order raised the issue of whether the subject tariff rules are permissive

in nature and indefinite in application in violation of section l8 b A review

of TariffRule 1 06 clearly indicates that on its face it is permissive in nature

The rule states that to the extent available carriers are permitted to provide

chassis at discharge ports at a rental charge of 6 00 for each twenty four 24

hours Carriers are permitted to provide chassis to the extent avail

able but are clearly not holding themselves out as required to do so Such a

provision is contrary to established principles of tariffcertainty In one of the

earliest reported cases the United States Shipping Board stated

principle of tariff construction is that tariffs should be specific and plain The board s

tariff reg

ulations throughout direct the carriers to this end and provide that tariffs filed and kept open to

public inspection in compliance with section 18 of the statute shall be explicit

The Gelfand Manufacturing Co v Bull Steamship Line Inc 1 U S S B 169 170 1930

A tariff should fully and clearly state the conditions under which a service

will be accorded Puerto Rican Rates 2 U S MC 117 129 1939

Section l8 b 1 requires that shippers be fully apprised of the services

carriers are providing and the rates which will be charged The Commission s

tariffrules also specifically require that tariffs contain a clear statement of

all the services provided to the shipper and included in the transportation rates

set forth therein 46 C FR 536 d 2 TariffRule 106 however does not

inform the shipper at the time of shipment of the exact service the carrier will

perform and is therefore violative of the Commission s rules and section
472 FEDERAL MARITIME COMMISSION

18 b 1 of the Shipping Act 1916 46 US C 817 b I Rule 1

consequently be modified

The Order also raised as an issue whether the tariff rules resu

assessment ofvarying rates and charges which are unjustly discriminat

constitute an unreasonable practice or regulation in violation of sect

There is no evidence in the record that the tariff rules under considera

actually applied in an unjustly discriminatory manner There have 

allegations of unequal treatment of shippers consignees in the alloc

chassis during periods ofshortages The Commission concludes therefo

the J KAG chassis allocation process does not constitute an unrea

practice in violation of section 17 The Conference s demurrage pract

another matter however

Tariff Rule l14 states that all containers whether the carrier has p

a chassis therefor pursuant to Rule 106 or not are subje tto stated f

and demurrage egfive days free time excluding Saturdays Sund

holidays Thereafter demurrage is assessed in three periodic and in

increments The Commission finds the assessment of such demurrage 

periods of chassis unavailability throughout the port area to be an un

unreasonable regulation and practice relating to or connected with the 

of property and violative of section 17 5The Commission recognizes 

composition of demurrage charges I compensation for the storage 

erty or use of equipment and 2 a penalty to induce its removal and 

the public interest ofminimizing port congestion Free Time and De

Charges at New York 3 U S MC 89 107 1948 However in s

where there is a port wide lack of chassis the punitive element of de

is inappropriate As was noted in Free Time and Demurrage Charges 

York supra

w here carriers and consignees are jointly affected by conditions beyond their contro

should be subjected to an avoidable penalty and neither should be pennitted to profi

other s disability

3 U S M C at 107

This does not mean that a carrier should be precluded from asses

demurrage under such circumstances Rather that portion of the 

charges which is compensation for the carrier s storage and protectio

consignee s property during the period involved after the expiration 

time or for the use ofthe carrier s equipment or facilities is properly as

See Midland Metals Corporation v Mitsui OSK Line et al 15 F M

1972 and Free Time and Demurrage Charges at Neiv York supra 

In this case suchcompensation is obviously reflected by the first period 

rage charges Anything more would appear to be an unwarranted an

tified penalty

There is no need for the Commission to prescribe a rule of general 

bility at the Port of Baltimore The problem concerning chassis unav

and consequent demurrage charges has not been shown to affect othe

I

To the extent that there is any ambiguity in the phrase to the extent available in Tariff Rule 106 the CommiSl

it 10 refer to availability from normal sources of chassis supply within the port area
or conferences The Commission will therefore order only J KAG to modify

its relevant tariff rules 106 and 114 to comport with this decision

THEREFORE IT IS ORDERED That the Requests for Evidentiary

Hearing submitted by the Baltimore Customhouse Brokers and Forwarders

Association and the Bureau of Hearing Counsel are denied and

IT IS FURTHER ORDERED That the Motion to Strike Unauthorized

Notice ofDeposition and the Motion for Leave to File Rebuttal Affidavit and

Memorandum submitted by the Japan Korea Atlantic Gulf Freight Con

ference are granted and

IT IS FURTHER ORDERED That the request for oral argument of the

National Customs Brokers Forwarders Association of America Inc is

denied and

IT IS FURTHER ORDERED That the Japan Korea Atlantic Gulf

Freight conference modify its TariffNo 36 FMC 7 consistent with the above

discussion and file its amended tariff with the Commission within 30 days of

the date of this Order and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET No 79 89

HANOVER BRANDS INC

v

SEA LAND SERVICE INC

NOTICE

February ll 1980

Notice is given that no appeal has been taken to the December 

dismissal ofthe complaint in this proceeding and thatthe time within 

Commission could determine to review has expired No such determi

been made and accordingly the dismissal has become administrati

S FRANCIS C HURN

Se
v

FEDERAL MARITIME COMMISSION

No 79 89

HANOVER BRANDS INC

SEA LAND SERVICE INC

NOTICE ON COMPLAINANTS REQUEST

FOR DISMISSAL OF COMPLAINT

Finalized February JJ 1980

As requested in the Presiding Administrative Law Judge s December 6

1979 notice parties herein filed additional information The parties each sent

a letter The Complainant s letter dated December 13 1979 received in the

Commission December 18 1979 stated

Pursuant to your notification for parties to file additional information dated December 6 1979

please be advised that our company will make payment in the amount of 5 840 47 within the

specified time period delineated and approved by your office Of course payment will be made by

Complainant assuming that this case will be considered closed

The Respondent s letterdated December 19 1979 received in the Commission

December 26 1979 stated

I have been advised by counsel for Hanover Brands Inc that Complainant acknowledges the

propriety of the outstanding charges of 5 840 47 and will pay those charges to Sea Land Service

Inc as billed Additionally I received on December 16 1979 a copy of a letter from counsel for

Hanover Brands Inc to you specifying that the Complainant will in fact pay these outstanding

charges

At such time as Complainant within the time period set pays these outstandingcharges Sea Land

Service will provide you with appropriate verification of payment as ordered by your Notice issued

December 6 1979 If Sea Land Service Inc may provide further assistance in this matter please

advise the undersigned

DISCUSSION

The Complainant on November 30 1979 served received December 3

1979 its request for withdrawal and dismissal of its complaint in this proceed

ing The Complainant indicates that the proper and correct rate applicable to

shipment on September 23 1978 of frozen vegetables weighing 35 950 lbs and
476 FEDERAL MARITIME COMMISSION

measuring 1 395 cubic feet from Baltimore Maryland to Santo Tomas 

tillawas 231 00 per 40cubic feet underSea LandService Inc TariffN

FMC No 161 effective date August 28 1978 Item No 1250 for a c

8 566 46 Sea Land Service Inc applied a rate of 73 00 per 40 cu

under its TariffNo 283 FMC No 161 effective date August 28 197

No 1250 and on the basis of that rate assessed a charge to claim

2 725 59 which charge was duly paid on October 24 1978 Claim

refused to pay thedifference between the 2 725 59 and the charge as p

of 8 566 46 or 5 840 47 because it believed such charge to beso unrea

high as to be detrimental to the commerce of the United States C

requested waiver of the 4 840 47

In Complainant s

request for withdrawal and dismissal of the co

herein and Sea Land s submission of a

copy of its 15th Revised Pa

amending rate for frozen foods Item No 1250 to 130 00 W effect

vember 30 1979 no mention is made by either party of the dispositi

the 5 840 47 for which waiver was sought

Ordinarily the request for withdrawal and dismissal of the complain

bly would not entailsuch information but having been brought to the C

sion s attention the Commission should and possibly must have in this 

such information Therefore so the Presiding Administrative Law Jud

the Commission could act knowledgeably upon the Complainant s

re

withdraw and dismiss the complaint in this proceeding the parties w

rected to file information and evidentiary proof as to the disposition a

5 840 47 The responses were the letters quoted above

There were previous letters in the proceeding from the parties eac

dated November 29 1979 was received in the Commission on Dece

1979 The Complainants letter contained a

copy of the instant requ

dismissal of the complaint which letter stated

I That since the time of shipment by Respondent Sea Land Service Inc which is at 

titioner has been informed and is of the belief that Sea Land Tariff No 483 FMC 1

August 28 1978 has been changed by the 15th revised page 159 effective Nove

1979 Said change would provide for imports from Guatemala to Baltimore for food

N O S in straight or mixed shipments trailers minimum 40 000 pounds at th

130 00 W As a result of said proposed change and a reliance thereon Petitioner 

it is not in its best interest to continue with this action and thereby respectfully requ

the Complaint in this matter be withdrawn and this case be dismissed witb both pa

ing their own costs

The Respondent s letter stated inter alia that it had been notified o

plainant s determination to withdraw the complaint or to request dism

the proceeding that in conformance with request ofComplainant Resp

was supplying a

copy of 15th Revised Page 159 of Sea Land Service 

No 283 FMC No 161

From the above it can be seen that the additional information reque

the Presiding Administrative Law Judge and supplied by the parties in

that there will be no ignoring of the Shipping Act 1916

Upon consideration of the above and the record herein the Presiding A

istrative Law Judge finds and concludes the Complainant s

request t

draw the instant complaint and discontinue this proceeding should be g
ppp

cation of payment ofthe outstanding freight charges concerned in this proceed

ing be accepted

Wherefore it is ordered

A Request of Complainant to withdraw the complaint herein be and

hereby is granted

B Sea Land will provide the Commission with appropriate verification of

the payment of the outstanding freight charges in this proceeding

C This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

December 28 1979
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 704 1

Dow CORNING CORPORATION

v

UNITED STATES NAVIGATION INC

1

NOTICE

February 14 1980

Upon consideration the Commission has determined not to further 

the decision of the Settlement Officer in this proceeding served Octob

1979 Accordingly the decision is administratively final

By the Commission

S FRANCIS C HURNEY

Secreta
v

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 704 1

Dow CORNING CORPORATION

UNITED STATES NAVIGATION INC

DISMISSAL OF COMPLAINT

Finalized February 14 1980

DECISION OF TONY P KOMINOTH

SETTLEMENT OFFICER

Dow Corning Corporation complainant a

company engaged in the manu

facture and distribution of synthetic resin silicon rubber compounds and vari

ous chemicals filed a complaint through its agent Traffic Service Bureau Inc

against U S Navigation Inc respondent for an alleged overcharge on a

shipment of Chemicals NOS Catalyst from New York New York to

Antwerp Belgium Complainant seeks 347 35 in reparation plus 6 interest

U S Navigation Inc in its answer noted that the complaint was im

properly served U S Navigation acts as agent for a number ofwater carriers

including Hapag Lloyd A G the actual carrier of the shipment in question

The improper service was not raised as a defense to the complaint in fact

U S Navigation Inc identified itself as agent for Hapag Lloyd AG on this

shipment and has consented to the informal procedures under Subpart S

The basic authority for the filing of complaints can be found in section 22

of the Shipping Act 1916 which provides in part

That any person may file with the Commission a sworn complaint setting forth any violation of

the Act by a common carrier by water orother person subjet to the Act and asking reparation

for the injury if any caused thereby emphasis added

In this instance the complaint was filed against U S Navigation Inc which

is not a common carrier by water or other person subject to the Shipping Act

1916 Complainant s failure to identify a common carrier by water in the

complaint is fatal to their cause of action and deprives the Commission of

jurisdiction to determine the controversy Caterpillar Overseas SA v South

African Marine Corp N Y 19 F MC 316 1976 Further the naming of
480 FEDERAL MARITIME COMMISSION

an agent ofsuch common carrier does not confer Commission jurisdictio

this matter Trane Company v South African Marine Corp N Y 19 F 

374 1976

Irealize that dismissal of the complaint at this date may preclude th

of a new complaint in this matter since the two year statute oflimitatio

apparently run However the latitude extended by the Commission in 

ing an amendment to a complaint in order to preserve its viability with

two year limitation period does not extend to a situation where there ha

a failureto name a

jurisdictionally indispensable party Trane v South A

Marine supra at 383 85 Cf Kam Koon Wan v E E Black Li

75 F Supp 553 D Hawaii 1948 affirmed 188 F 2d 558 cert den 34

826 1951

Accordingly the subject complaint is hereby dismissed

S TONY P KOMINOTH

Settlement Of

October 29 1979

ThebillorJading isdated September 30 1977 andthe shipment moved on a Freight Prepaid basis however there is

tion when the actual freight charges were paid Thecomplaint was filed with the Federal Maritime Commission on Ju
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 684

APPLICATION OF SEA LAND SERVICE INC FOR THE

BENEFIT OF SOLTEX POLYMERS CORPORATION

ORDER ADOPTING INITIAL DECISION

February 19 1980

This proceeding was instituted pursuant to section 18 b 3 of the Shipping

Act 1916 46 U S C 817 b 3 upon the application of Sea Land Service

Inc for permission to waive 10 675 74 ofthe applicable freight charges owed

by Soltex Polymers Corporation on a shipment ofSynthetic Resin N Os that

was transported from Houston Texas to Moss Norway via Bremerhaven Ger

many and Gothenburg Sweden

Administrative Law Judge Stanley M Levy issued an Initial Decision grant

ing Sea Land s application No exceptions were filed but the Commission on

its own motion determined to review the Initial Decision

Although the findings and conclusions ofthe Initial Decision arewell founded

and correct one further matter raised by the Commission s grant ofthe subject

application must be addressed Because of the Commission s decision here the

carrier is permitted to collect less in freight charges than the amount that

would have been due under the rate on file and in effect at the time of the

shipment in question To the extent forwarder compensation may have been

based upon the total amount from which awaiver has been granted the parties

are reminded that Sea Lands tariff and section 18 b 3 of the Shipping Act

require that such forwarder compensation be adjusted to reflect the freight rate

actually paid

THEREFORE IT IS ORDERED That the Initial Decision issued in this

proceeding is adopted and

IT IS FURTHER ORDERED That Sea Land shall promptly publish in its

appropriate tariff the following notice

Notice is hereby given as required by the dedsion of the FederalMaritime Commission inSpecial

Docket 684 that effective January I 1979 for purposes of refund or waiver of freight charges on

any shipments which have been shipped during the period from January I 1979 through May 10

979 the rate from Singapore on Synthetic Resin NO S is 10150 W subject to all rules

regulations terms and conditions of said rate and this tariff
IT IS FURTHER ORDERED That this proceeding is discontinue

By the Commission

S FRANCIS C HURNEY

Secre
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 684

ApPLICATION OF SEA LAND SERVICE INC FOR

THE BENEFIT OF SOLTEX POLYMERS CORPORATION

Adopted February 19 1980

Application for permission to waive a portion of the freight charges granted

INITIAL DECISION I OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGE

This special docket application 2 mailed to the Secretary of the Commission

on October 19 1979 seeks a waiver of freight charges of 10 675 74 arising

out of a shipment of synthetic resin NOS sailing April 30 1979 from Hous

ton Texas to Moss Norway via Bremerhaven Germany and Gothenburg

Sweden on Sea Land vessel Venture voyage 108E 3

The pertinent facts giving rise to the relief requested are as follows

Prior to January 1 1979 the applicable all water rates via Sea Land Serv

ice Inc Sea Land from United States Gulf ports to Baltic ports were

published in Sea Land s Freight Tariff No 162 A FMC 137 This tariff

contained an Item 4320 applying on Rosin or Resin Viz Synthetic NOS

packed with applicable rates applying on aweight basis The item contained a

circle reference 3 which indicated that the rate also applies in Sea Bulk Liner

Bags Sea Bulk is a registe name for a polyethylene liner that permits the

conversion of a standard dry container for the contamination free moisture

free transportaion of dry bulk commodities

During November 1978 the Gulf European Freight Association GEFA of

which Sea Land is a member held meetings in order to establish a uniform

FMC Agreement 10270 Tariff to apply via its member lines from the Gulf

ports to ports in Scandinavia and the Baltic At one of these meetings Sea

Land s duly authorized Conference Manager James Stevens instructed the

GEFA Chairman to overlay portions of Sea Land s TariffNo 162A for trans

I

Thisdecision will become the decision ofthe Commission in the absence ofreview thereof by the Commission Rule 227 Rules

of Practice and Procedure 46 CF R 502 227

Pursuant to section 18 bX3 of the Shipping Act 1916 46 U C 817 as amended

lOne Hundred Seventy Two days elapsed time from date ofsailing until date of mailing of application
484 FEDERAL MARITIME COMMISSION

fer into the new 10270 Agreement Tariff The new tariff GEFA Agre

No 10270 Scandinavia Baltic Tariff No I FMC 5 became effectiv

uary I 1979 On that same date Sea Land Tariff No 162 A FMC 1

cancelled

The applicable rates ofSl01 5 W minimum 15 241 kgs on Rosinor 

viz Synthetic N O S were published in the new Tariff No 1 on Pag

However as a result of a clerical error in the overlay of the Sea Land 

No 162 A no reference wasmade in the GEFA tariff to these rates a

on shipments in bulk in liner bags for the account of Sea Land Wh

omission was detected Mr Stevens notified the GEFA secretariat a

clause was added to 3rd Revised Page 176 effective May 10 1979

On April 30 1979 one shipment consisting of three 3 containers 

thetic Resin in bulk moved via Sea Land from the port of Houston 

destined to Moss Norway In the absence of specific tariff provision f

shipments the bill of lading was rated on the basis of General Cargo 

at the rate of 265 50 W M In addition to the ocean freight a C

Adjustment Factor of 8 on the ocean freight an Energy Surcharge o

per ton as freighted and a Houston wharfage charge of 10 per 

2000 Ibs was assessed Charges thus billed totalled 17 567 01 The s

agent Stone Forwarding has paid the ocean freight and Currency Adju

on the basis of Synthetic Resin N O S at the rate of 10150W m

15 241 kgs plus the Energy Surcharge and Wharfage in full for a 

6 891 27

It was the intention of GEFA to publish a uniform tariff for its m

carrier lines The new publication was to include portions of the ap

Sea Land publication including the provisions for bulk shipments ofSy

Resin However through a clerical error in the transfer from one t

another the bulk shipment provisions applying for the account ofSea L

not become effective until after the shipment had been made

The applicants have certified that there are no other pending appl

involving the same rate situation and that to the best oftheir knowledg

are no other shipments of other shippers of the same or similar com

which moved during the period of time beginning on the day the bill o

was issued and ending on the day before the effective date of the con

tariff and moved on the same voyage of the vessel carrying the s

involved in this application

Section 18 b 3 of the Shipping Act 1916 46 VS C 5817 as ame

Public Law 90 298 and Rule 92 a Special Docket Applications R

Practice and Procedure 46 C P R 5502 92 a set forth the applicable 

regulation The pertinent portion if section 18 b 3 provides that

The Commission may in its discretion and for good causeshown permit a common 

water in foreign commerce to refund a portion of freight charges collected from a s

waive the collection of a portion of the charges from a shipper where it appears that t

error in a tariffof a clerical or administrative nature or an error due to inadvertence in 

file a new tariff and that such refund or waiver will not result in discrimination among 

Providedfurther That the common carrier has prior to applying for a refund f

tariff with the Commission which sets forth the rates on which such refund or wai
APPLICATION OF SEA LAND SERVICE INC 485

be based and Application for refund or waiver must be filed with the Commission within

I80 days from the date of shipment

The error in filing the new tariff as recited in the application is of the type

within the intended scope ofcoverage ofsection 18 b 3 of the Act and section

502 92 of the Commission s Rules of Practice and Procedure

Therefore upon consideration of the documents presented by the Applicant

it is found that

I There was an error due to an inadvertent failure to file a new tariff

transferring the rates from one tariff to another as intended

2 Such a waiver of a portion of the freight charges will not result in

discrimination among shippers

3 Prior to applying for authority to waive a portion of the freight charges

the conference filed a new tariff which set forth the rate upon which such

waiver would be based

4 The application was filed within 180 days from the date of the subject

shipment

Accordingly permission is granted for Sea Land to waive a portion of the

freight charges in the amount of 10 675 744

An appropriate notice will be published in the conference tariff

WASHINGTON D C

November 16 1979

S STANLEY M LEVY

Administrative Law Judge

4

Charges originally billed 17 567 01 charges paid 6 891 27
FEDERAL MARITIME COMMISSION

DOCKET No 79 55

MATSON NAVIGATION COMPANy PROPOSED BUNKER

SURCHARGE IN THE HAWAII TRADE

ORDER OF CLARIFICATION

February 19 1980

The Commission s Bureau ofHearing Counsel has filed a petition requ

clarification of that portion of the Commission s Report and Order Ad

Initial Decision served November 23 1979 which addresses the remedy 

applied to the overrecoveries of fuel costs collected by Matson Navi

Company

In its Report and Order the Commission found that the Presiding O

relied on the mechanism provided in Domestic Circular Letter No 1 

adjust the overrecovery of fuel costs ie Line 7 of Form FMC 274 

Petition for Clarification Hearing Counsel asserts that the Presiding O

did not rely exclusively on the remedies incorporated in the Circular Let

also held that claims for reparations under section 22 ofthe Shipping Ac

46 VS C 1821 may lie Insupport ofthis contention Hearing Counse

to the following language at page 46 of the Initial Decision

In the last analysis therefore apparently the Commission has decided that the best prote

shippers paying surcharges at any particular time is the guarantee that Matson has been 

to follow reasonable forecasting techniques failing which Matson would be liable to re

cases and that in the event of overrecovery there will be future reducing effects on sub

surcharges emphasis added

Hearing Counsel concludes from the above quoted language that 

FMC 274 was to be used to adjust only those overrecoveries that resu

discrepancies between acarrier s reasonable forecasts offuel costs and con

tion and thatwhich subsequently actually occurs with any other overrec

resulting from either unreasonable forecasts or erroneous methodologie

remedied by section 22 complaints

Total reliance on the remedy allowed by the Domestic Circular Lette

allegedly result in carriers avoiding their responsibility to establish ju

reasonable rates open avenues to avoid repaying overrecoveries render 

seauential the Commission s function in determining the reasonablen
PROPOSED BUNKER SURCHARGE IN THE HAWAII TRADE 487

such surcharges fail to compensate those who paid the excess charges provide

a windfall to carriers and possibly render carriers liable to double recoveries

On the basis ofthe foregoing Hearing Counsel specifically requests that the

Commission clarify its November 23 Order to expressly permit the filing of

section 22 reparation claims to lie for the recovery of excess revenues collected

by Matson

In its Reply to Hearing Counsels Petition Matson takes the position that

a the Commission s Report and Order is not ambiguous b its findings have

already been incorporated into Matson s January 14 1980 bunker surcharge

and c allowing an alternative remedy in this case would result in a needless

multiplicity of litigation

DISCUSSION

The portion of the Intitial Decision relied upon by Hearing Counsel in and

of itself does not support the full extent of the relief requested First that

language does not refer specifically to the overrecovery at issue in this case

Moreover in other passages the Initial Decision suggests that the remedy for

overrecoveries is limited to the reduction of future surcharges through oper

ation of the Domestic Circular Letter JD at 35 45 46 59 60 For example

at page 35 the Presiding Officer advises

Again although the Line 7 solution is not perfect it is a substantial safeguard and given the

practical difficulties of litigating the merits of constantly changing surcharges under strict time

constraints perhaps there is no beller solution Emphasis added

However because the Initial Decision does not clearly address the appropri

ate remedy in this case and because of the uncertainty expressed in Hearing

Counsels petition the Commission is of the opinion that some clarification of

the remedy issue is warranted

The consideration that is perhaps most important with regard to remedies is

whether a given approach will most effectively make whole the injured shippers

without unduly penalizing the carrier Docket No 76 43 Matson Navigation

Company Proposed Rate Increases etc Order on Reconsideration 19 S R R

263 269 1979 It was the Commission s intention that the Line 7 procedure

provide the primary remedial device to be applied to the overrecoveries of fuel

costs by carriers filing bunker surcharges I This however is not intended to

preclude the Commission from giving favorable consideration to shipper repa

ration claims under section 22 of the Act where the Line 7 remedy does not

provide adequate relief

Carriers should not realize awindfall from a proper application of Line 7 of

Form FMC 274 Under a Line 7 theory any excess surcharge will have to be

accounted for in future surcharges and it appears that bunker surcharges will

continue to be filed While a problem would be presented if no subsequent

I

In fact the applicationof the line 7 procedure would particularly in this case appear to provide amorerealistic remedy than

reparations The potential section 22 recovery here isa very small portion of the total freight an average rate payer remits The

theoretical maximum amount of money in question had the surcharge been in effect a full 120 days is 542 860 which represents

only 07 of the 63 617 200 gross projected revenue during this period I D at 19 n 7 Under such circumstances it ishighly

unlikely that the recognition of a shipper s theoretical right of reparation in this case will result in the filing of any section 22

complaints and primary reliance upon such a remedial procedure would result in the carrier enjoying a windfall
488 FEDERAL MARITIME COMMISSION

surcharges were imposed by a carrier in this case Matson has in fact ac

edfor the excess recovery offuel costs determined in this casein a subseq

filed surcharge

Similarly the application of current overrecoveries to future fuel cost 

does afford at least some of the overcharged ratepayers a benefit unde

circumstances 2 While not all of Matson s shippers remain the same due 

seasonal nature of some commodity movements the majority of them 

be the same from one four month period to the next These should inclu

large volume shippers such as the intervenors in this case

There was no ambiguity about the possibility of double recovery 

Commission s Report and Orderin this case Reparations are discretiona

if in any particular case the Commission is of the opinion that Line 

effectively returned any excess surcharge revenue to the complainant 

would not appear to be an abuse of discretion to refuse to order repa

under section 22 to the extent a shipper was actually compensated by 

procedure However as indicated above this should not be construed s

prevent shippers from seeking reparations in those circumstances whe

Line 7 remedy proves inadequate

Finally the Commission emphasizes the fact that the use ofLine 7 o

FMC 274 does not relieve carriers of their legal obligation to file reas

rates Regardless of the available statutory remedies carriers still have 

obligation to charge and establish reasonable rates In this regard the Co

sion will exert every effort to devise and utilize whatever meaningful and 

remedial actions are warranted in any particular case

THEREFORE IT IS ORDERED That the Petition for Clarificatio

by Hearing Counsel is granted to the extent indicated above and is de

all other respects

By the Commission

S FRANCIS C HURNEY

Secr

2 As was noted inthe Initial Decision the subject 43 surcharge should have been set at 4 24 ID at 59 Th

to 11 per barrel of bunKerfuel allocable to general cargo and consumed in the fourmonth test period In this case 

42 Ifit can be assumed that Matson s fuel consumption will remain reasonably constant in the near future the Line 7 

of the CllCCSS recovery should dampen the following four months per barrel fuel cost by a figure of similar magnitu
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV

SUBCHAPTER B REGULATIONS AFFECTING

MARITIME CARRIERS AND ACTIVITIES

GENERAL ORDER 13 AMDT 2 AND GENERAL ORDER 43

DOCKET No 79 65

PART 536 FILING OF TARIFFS BY COMMON CARRIERS IN THE FOREIGN

COMMERCE OF THE UNITED STATES

PART 552 CERTIFICATION OF COMPANY POLICIES AND EFFORTS TO

COMBAT REBATING IN THE FOREIGN COMMERCE OF THE UNITED STATES

Feburary 20 1980

ACTION

SUMMARY

Final Rule

These final rules implement provisions ofPublic Law 96

25 93 Stat 71 which mandates that the Commission re

quire the Chief Executive Officer of every vessel operating

common carrier by water in the foreign commerce of the

United States to file periodic certification attesting to com

pany policies and efforts to combatrebating Discretionary

authority is given to the Commission to require similar

certification from any shipper consignor consignee for

warder broker other carrier or other person subject to the

Shipping Act 1916

EFFECTIVE DATE February 27 1980

SUPPLEMENTAL INFORMATION

The Commission previously gave notice 44 Fed Reg 39232 33 that it

proposed to amend 46 C F R 536 and to add a new Part 552 to enable the

Commission to implement the provisions of Public Law 96 25 93 Stat 71

which nandates that the Commission require the Chief Executive Officer of

every vessel operating common carrierby water in the foreign commerce of the

United States to file periodic certification attesting to company policies and
490 FEDERAL MARITIME COMMISSION

efforts to combat rebating Further Public Law 96 25 gives the Comm

discretionary authority to require similar certification from a shippe

signor consignee forwarder broker other carrier or other person sub

the Shipping Act 1916 Comments from the public were invited with r

to the proposed rules and a total of 15 comments were filed on behal

representative commentators Ofthe 15 separate comments 8 comments 

sented the opinion of 21 conferences 3 comments represented the views o

flag carriers Farrell Lines Lykes Brothers Steamship Co and Sea 

Service 2 comments were received from 2 shippers City Products 

poration and NCR Corp 1 comment was submitted by the Cou

European and Japanese National Shipowners Associations CENSA a

Department of State forwarded anAide Memoire from the Consultative 

ping Group CSG

POSITIONS OF THE COMMENTATORS

Many of the commentators viewed portions of the proposed rules as e

ing the authority prescribed by Public Law 96 25 One commentator 

total agreement with the rules as proposed while another totally rejec

rules in the proposed form The majority of comments however sug

specific changes in the proposed rules

The CENSA group urged that the rules as proposed be rejected beca

certification would 1 exceed the statutory mandate under section 4 

Public Law 96 25 and 2 do violence to established principles ofintern

law and comity

Three commentators urged that the certification requirements be b

upon nonvessel operating common carriers NVO s as well as vessel op

common carriers VOC s for the reasons that I NVO s would not 

the Commission with an identification problem since they are required 

tariffswith the Commission and 2 that VOC s are sometimes in comp

with NVO s and NVO s would gain an unfair advantage by not being 

to the certification requirements One ofthese commentators also urged 

addition to NVO s

freight forwarders and major shippers consigne

consignors be bound by the certification requirements

One commentator suggested that the ChiefExecutive Officer be def

the most senior officer within the company as designated by the Bo

Directors This commentatoralso suggested that if the ChiefExecutive 

is domiciled in a

country other than the United States the top ranking 

domiciled in the United States also be required to make such certifica

order to avoid any legal impediments in the country wherethe Chief Ex

Officer resides

One commentator wanted to make the certification subject to nation

and or the express permission of its government

One commentator urged clarification of section 552 2 a in order t

that this section applies to the company generally as well as officers em

or agents of that company The same commentator also stated that the 

promulgation required under paragraph b of this section is neither f
FILING TARIFFS BY COMMON CARRIERS IN FOREIGN COMMERCE 491

nor reasonable for persons other than vessel operating common carriers since

such person particularly shippers have many employees and agents who are

in no wayconnected or associated with the company s oceanshipping practices

and to require promulgation to such persons is an unnecessary and undue

burden

One commentator states that the language of paragraph 552 2 c could be

interpreted as requiring the filing company to establish an intra corporate

program to prevent malpractices while the statute only appears to call for

disclosure ofthe measures ifany which have been taken by the filing company

to prevent or correct the illegal rebating Two commentators urge the deletion

of and any subsidiaries affiliated companies oragents from this paragraph

stating that compliance is impossible in the current world of interrelated com

panies and submitted that the Commission does not have jurisdiction to so

extend the clear terms of the statute

Nine commentators favored deletion of the last sentence of paragraph d of

section 552 2 which states that full cooperation shall include disclosure of all

relevant documents and information Commentators felt that this requirement

exceeded the statutory authority under section 4 b of Public Law 96 25

because regardless of any privilege statutory requirement or other ground for

exception from such disclosure the Commission has introduced a substantive

change in the certification requirement that wasneither considered nor contem

plated by Congress Another commentator suggests that at the very least if not

deleted such affirmation for disclosure ofrelevantdocuments or information be

required only as otherwise required by law Another commentator stated

that the Commission has the authority to implement the certification require

ments only with respect to the frequency form and specific content of the

certification

Six commentators all representing conferences rate agreements strongly

opposed the tariff notification requirement of section 552 3 as applicable to

conferences and rate agreements These commentators argue that this require

ment would serve no useful function that the Commission offered no justifica

tion for this requirement in the Notice of Proposed Rulemaking and that

conferences and rate agreements have neither statutory responsibility nor any

means of knowing whether member lines have implemented such policies

Their concern is that the carrier would be subject to additional sanction for the

violation of the tariff notation required by the proposals and that such a re

quirement does not in any way enhance enforcement ofthe anti rebating laws

Two commentators urged that section 552 4 Change of Chief Executive

Officer be deleted since it is the commitment of the carrier and not the Chief

Executive Officer that is the goal of the certification process and there is no

reason to believe that a company would change its policy with a change of its

executive officer

Regarding the reporting requirement of section 552 one commentator

suggested that a period of every three years would fully satisfy the statutory

purpose and would significantly reduce the administrative burden ofthe certifi

cations to the carrier Another commentator suggested that all certifications be

required to be filed within a specified period of time in each calendar year so
492 FEDERAL MARITIME COMMISSION

as to avoid inadvertent default because the carrier failed to recall the d

its initial submission to the Commission

Regarding paragraph b ofthe reporting requirement section one com

tator questioned whether annual certifications for persons other than c

should be required unless the Commission has good cause

All comments submitted with respect to the proposed rules were give

consideration The following is a section by section analysis of the ch

made as a result of the comments received

552 1 Scope

Two conference commentators and one carrier suggested that NVO 

bound by the proposed rules One of these commentators also recomm

that major shippers consignees consignors and all freight forwardersbe 

by the rules proposed

It waspointed out that since NVO s are already required to file tariff

the Commission and freight forwarders are required to obtain license

the Commission the identification problem would be manageable and 

administrative burden to the Commission Further commentators argu

VOC s are sometimes in competition with NVO s and to require NVO 

cation wouldtend to eliminate the opportunity for the NVO s to gain an 

advantage through not being subject to the anti rebating principles ofth

ute In order to implement the certification requirement of Public Law 

expeditiously the final rule has not been changed to bind NVO s to the 

certification requirement as vessel operators However the Commissio

consider the issuance of a separate notice of proposed rulemaking propos

amend this rule to bind NVO s and other entities to the annual certif

requirement

Freight forwarders shippers consignees and consignors do repres

enormous number of potential ocean carrier users for which a certif

requirement cannot feasibly be administered by the Commission The 

tionary authority prescribed in the statue for such certifications on a ca

case basis has however not been changed

552 2 Form of Certification

The first paragraph of this section has been changed to include a def

of Chief Executive Officer Paragraph a 1 hasbeen qlarified to sho

rebates by the company as well as by any officer employee or age

prohibited

Paragraph b oftheproposed rules which is now paragraph a 2 ha

changed to require that the company policy be promulgated to each co

owner officer employee and agent who is directly or indirectly connecte

commercial ocean shipping import or export sales or purchasing

Proposed paragraph c which is now paragraph b has been chan

conform more closely with the statutory language The reference t

sidiaries affiliated companies or agents has been deleted in order to as
FILING TARIFFS BY COMMON CARRIERS IN FOREIGN COMMERCE 493

the specific efforts made within the company or otherwise to prevent illegal

rebating

Proposed paragraph d which is now paragraph c has also been changed

to conform more closely with the statutory language The Commission deems

it unnecessary to elaborate on the question of what constitutes full cooperation

since this rule will not and cannot affect the obligation of carriers to produce

documents and information in response to subpoenas or discovery in rebating

investigations and the statutory sanctions for failure to produce such docu

ments and information

The changes in section 552 2 have been incorporated in the certification

form

With regard to the one comment suggesting that the Commission also

require certification from the top ranking official of a foreign company who is

domiciled in the United States the Commission has determined that such a

requirement is not necessary at this time

552 3 TariffNotification

The justification for this requirement evolves from the basic definition and

purpose of a tariff ie a publication containing the actual rates charges clas

sifications rules regulations and practices of a carrier or conference of carri

ers for transportation by water 46 C F R 536 2 m The term practice

refers to usages customs or modes of operation which in anyway affect

determine or change the transportation rates charges or services provided by

a carrier The unlawful practice of rebating or charging any rate lower than

those in published tariffs has been singled out by Congress to be eliminated

from the U S ocean commerce

To require that a practice or policy against illegal rebating be published in

a carrier s tariff is consistent with the purpose of the tariff filing requirements

and the purpose of Public Law 96 25 The Commission believes that such

publication will inform the shipping public of the carrier s prohibition against

rebates

Although the Commission agrees with several conference commentators that

conference rate agreements have neither the responsibility nor the means of

knowing whether such policies of the member lines have been implemented it

believes that conference rate agreements do have the duty to publish the

anti rebating practices or policies of their members

Therefore section 552 3 has been revised to provide that when the carrier s

tariff is a conference rate agreement tariff the carrier shall ensure that the

conference publish the carrier s tariff provision in the conference or rate agree

ment tariff

552 4 Change ofChief Executive Officer

Two commentators urged that this section be deleted since it is the commit

ment of the carrier and not its chief executive that is the objective ofthe certi

fication process and that there is no reason to believe that a company policy in
494 FEDERAL MARITIME COMMISSION

favor of adhering to United States laws would change because of a cha

the Chief Executive Officer

While the Commission agrees that company policy may not change 

new Chief Executive Officer the statute mandates that the Commissio

have such certification from the Chief Executive Officer and the pr

paragraph assures that such certification will be kept up to date regard

company personnel changes

Therefore no change in this requirement has been made

552 5 Reporting Requirements

This section has been revised to require written certification from 

operating common carriers on or before March 31 of each year The pr

referring to every person otherthan a vessel operating common carrierre

to submit such certification has been changed to delete the annual certi

requirement

The Commission has considered all filed comments and arguments 

ably related to this rulemaking proceeding

Accordingly pursuant to the provisions of section 4 of the Adminis

Procedure Act 5 U S C 1553 sections 21 and 43 of the Shipping Ac

46 V S C 11820 and 841a the Federal Maritime Commission 

amends 46 C F R 5536 and enacts 46 C F R 1552 as follows The re

requirements contained in 46 C F R 1552 sections 2 3 4 and 5 a hav

approved by the U S General Accounting Office under number 8 

R0663

PART 536

Section 536 5 c 2 is amended to add the following language

Every vessel operating common carrier shall publish a tariffprovisio

effective upon filing which shall read substantially as follows

Name of Company has a policy against the payment of any rebate directly or indirect

company orby any officer employee oragent which payment wouldbe unlawful under th

States Shipping Act 1916 Such policy has been certified to the Federal Maritime Co

in accordance with the Shipping Act Amendments of 1979 Public Law 96 25 93 Sta

the regulations of the Commission set forth in 46 CFR 552

When the carrier s tariff is a conference rate agreement tariff the 

shall ensure that the conference or rate agreement publish the carrier 

provision in the conference rate agreement tariff

PART 552

552 1 Scope

The requirements set forth in this part are binding upon every vessel 

ing common carrierby water in theforeign commerce oftheUnited Sta
FILING TARIFFS BY COMMON CARRIERS IN FOREIGN COMMERCE 495

at the descretion of the Commission will be applicable to any shipper con

signor consignee forwarder broker other carrier or other person subject to

the Shipping Act 1916

552 2 Form of Certification

The Chief Executive Officer defined as the most senior officer within the

company designated by the board ofdirectors owners stockholders or control

ling body as responsible for the direction and management of the company of

every vessel operating common carrier by water in the foreign commerce of the

United Statesand when required at thediscretionof theCommission the Chief

Executive Officer ofany shipper consignor consignee forwarder broker other

carrier or other person subject to the Shipping Act 1916 shall file a written

certification under oath as set forth in the format in Appendix Aattesting to

the following

a I

That it is the stated policy of the filing company that the payment

solicitation or receipt of any rebate directly or indirectly by the com

pany or by any officer employee or agent which is unlawful under the

provisions of the Shipping Act 1916 is prohibited and

2 That such company policy was promulgated together with the date of

such promulgation to each company owner officer employee and

agent who is directly or indirectly connected with commercial ocean

shipping import or export sales or purchasing and

b The details of measures instituted within the filing company or other

wise to eliminate orprevent the payment of illegal rebates in the foreign

commerce of the United States and

c That the filing company will fully cooperate with the Commission in

any investigation of illegal rebating or refunds in United States foreign

trades and with the Commission s efforts to end such illegal practices

552 3 TariffNotification

Within 90 days after the effective date of this Part each vessel operating

common carrier by water in the foreign commerce of the United States shall

file a provision in each ofits tariffs that shall read substantially as follows

Name of Company has a policy against the payment of any rebate directly or indirectly by the

company or by any officer employee oragent which payment would be unlawful under the United

States Shipping Act 1916 Such policy has been certified to the Federal Maritime Commission

in accordance with the Shipping Act Amendments of 1979 Public Law 96 25 93 Stat 71 and

the regulations of the Commission set forth in 46 CFR 552

When the carrier s tariff is a conference rate agreement tariff the carrier

shall ensure that the conference or rate agreement publishes the carrier s tariff

provision in the conference rate agreement tariff This provision shall be effec

tive upon filing
552 4 Change of Chief Executive Officer

Every vessel operating common carrier by water and any other 

required by the Commission to file a certification in accordance with 

552 2 shall notify the Secretary Federal Maritime Commission ofthe i

of any new Chief Executive Officer within thirty 30 days of such a

ment Each new Chief Executive Officer shall file a certification as requ

section 552 2 of this Part within thirty 30 days of appointment

552 5 Reporting Requirements

a Every vessel operating common carrier by water in the foreign com

of the United States required by this Part to submit a written certif

to the Secretary Federal Maritime Commission shall submit suc

fication on or before March 31 of each year

b Every person other than a vessel operating common carrier by wate

foreign commerce of the United States who is required by the Comm

to submit a written certification under section 552 2 of this Pa

submit the initial certification to the Secretary Federal Maritime 

mission on the date designated by the Commission and thereafter 

Commission may direct

By the Commission

8 FRANCIS C HURNEY

Secr
Subscribed and sworn before me this day of

19

APPENDIX A

NAME OF FILING COMPANY

Certification ofCompany Policies and Efforts to Combat

Rebating in the Foreign Commerce ofthe United States

Pursuant to the requirements of section 21b of the Shipping Act 1916

46 U S c 820 and Federal Maritime Commission regulations promulgated

pursuant thereto 46 C F R 552 I Chief Executive

Officer of name of company state under oath that

IIt is the policy of name of company that the payment solicitation or

receipt of any rebate directly or indirectly by the company or any officer

employee or agent ofsuch company which is unlawful under the provisions

of the Shipping Act 1916 is prohibited

2 On or before 19 suchcompany policy waspromulgated

to each owner officer employee and agent of name of company who is

directly or indirectly connected with commercial ocean shipping import or

export sales or purchasing

3 Set forth the details of measures instituted by the filing company or other

wise to eliminate or prevent the payment of illegal rebates in the foreign

commerce of the United States

4 name ofcompany affirms it will fully cooperate with the Federal Maritime

Commisison in any investigation of illegal rebating or refunds in United

States foreign trades and with the Commission s efforts to end such illegal

practices

Signature

Notary Public
FEDERAL MARITIME COMMISSION

DOCKET No 79 73

DRAYAGE SERVICE UNDER AGREEMENT No 2846

REPORT AND ORDER

February 21 1980

A steamship conference with section 15 authority to perform delivery service relating 

toport shipments may deliver cargo to inland points located within a reasonable 

from tbe ocean terminals used by conference vessels provided that such transpo

geographically limited to motor carrier exempt zones established under 4

f10526 b and is in any event exempt from ICC economic regulation

BY THE COMMISSION RichardJ Daschbach Chairman T

F Moakley Vice Chairman Ja

Day and Leslie LKanuk Commiss

The Commission has before it the Petition for Declaratory Order 

the 17 ocean carriers which comprise the West Coast of Italy Sicili

Adriatic Ports North Atlantic Range Conference WINAC and th

comments submitted by eight interested parties Intervenors I

WINAC serves the US inbound trade pursuant to FMC Agr

No 2846 Among their other activities WINAC lines offer an inte

drayage service between ocean terminals at various locations within t

of New York and New Jersey and the Conrail Portside railroad t

located in Port Elizabeth New Jersey Conrail Drayage for contai

cargoes ultimately destined to interior points

2

WINAC spetition does n

whether Conrail Drayage is furnished for cargo moving inland on throu

I

The other Intervenors are Seatrain International S A a member of WINAC the Port Authority of New Yo

Jersey New York Terminal Conference Virginia Port Authority Maryland Port Administration Delaware River Po

Port of Philadelphia Marine Terminal Association and the Commission s Bureau of Hearing Counsel

Conrail Drayage is performed by motor carriers WINAC did not provide the exact location of the Conrail ter

ocean terminals used by its member lines but the Commission has taken official notice orthe locations specified in the 

York New Jersey Port Directory This directory indicates that about hair the WINAC lines use terminals on the 

the Hudson River Port Elizabeth Wcehauken Port Jersey Newark and hair useterminals in Brooklyn sixmiles 

Port Elizabeth WINAC Tariff No FMC 3 3rd Revised Page 58 Item 9 states that the charge ror Conrail Draya

liubject 10 a

555 00 minimum amount Three member lines with terminals in Brooklyn publish 575 00 open rates 

provision Theterminal tariffor Sea LandService Inc FMC T No 3 13th Revised Page 128 ItemNo 5 160 provide

Drayage at 521 00 per container except ror WINAC shipments WINAC shipments are assessed the 555 00 minim

inlheWINACtarilT
DRAYAGE SERVICE UNDER AGREEMENT NO 2846 499

of lading or on separate bills of lading but WINACs tariffs do not include

rates for intermodal transportation under through bills of lading to interior

points within the United States WINAC does publish through intermodal

rates from interior points in Italy and Yugoslavia WINAC member lines do

not offer through intermodal service to interior U S points under separately

published tariffs

WINACs organic conference agreement Agreement No 2846 has been

approved by the Commission pursuant to section 15 ofthe Shipping Act 1916

46 U S c 814 The preamble to Agreement No 2846 contains two para

graphs which provide in pertinent part as follows

The parties hereby associate themselves to establish reasonable rates charges and prac

tices for the transportation of merchandise in the trade from Italian ports including Islands

points in Italy including Islands Yugoslavia ports and points to the extent such cargo moves

through ports of Italy and Yugoslavia to North Atlantic ports of the United States Hampton

Roads Portland Range whether moving on a through Bill of Lading or otherwise

This Agreement shan also extend to arrangements or agreements among the parties 1 with

other modes of transportation for the movement of cargo to and or from inland points moving

from loading to discharge ports covered by this Agreement whether moving under through bills

of lading orotherwise 2 concerning intermodal shipments inland rates rules changes classifica

tions practices liability Billof Lading conditions perdiem freetime detention onCarrier provided

containers chassis and related equipment position of equipment interchange with connecting

carriers terminal and shoreside loading operations including wharfage free time and demurrage

receipt handling storage and delivery ofcargo consolidation container yards depots and freight

stations insofar as the foregoing concern cargo moving from loading to discharging ports covered

by this Agreement whether any of the foregoing related to through Bill of Lading movementsor

otherwise and 3 such other maUers as may be ancilary to the transportation ofsaid intermodal

shipments whether moving on a through BillofLading or otherwise it being the intention of the

parties to include within the scope of this Agreement to the maximum extent as may from time

to time be permitted by applicable law rates charges and practices relating to movementsfrom

and orto inland points oforigin or destination whether or not moving under a through Billof

Lading Emphasis supplied

WINAC requests a

ruling that the preamble to Agreement No 2846 and

particularly the portions underscored above permit it to concertedly

e stablish maintain modify or eliminate charges including drayage charges for the trans

portation of intermodal shipments from the members ocean terminals at U S NorthAtlantic ports

to inland points of destination Petition at paragraph 5

The term intermodal shipment was not defined and no particular attention

wasgiven to it by the petitioners The context ofWINACs petition indicates

however that the conference interprets the term broadly and would prefer to

perform Conrail Drayage for through bill shipments from European origins to

U S inlandpoints as well as for shipments rated only to US ports

In addition to the preamble s expansive language pertaining to intermodal

shipments WINAC states that Conrail Drayage should be considered an

integral part of its port toport transportation service It is contended that

Conrail Drayage is simply a manifestation of an ocean carrier s traditional

responsibility to deliver cargo to a safe and convenient place of rest and
500 FEDERAL MARITIME COMMISSION

WINAC finds support for this argument in an informal opinion from 

rector of the Commission s Bureau of Compliance l

Most of the Intervenors oppose aconstruction of Agreement No 284

would permit WINAC to establish rates for inland drayage or delivery 

for any type of cargo over distances as extensive as those involved in 

Drayage 4

There are however significant differences in the viewpo

pressed by the eight Intervenors

Seatrain International is only concerned that Agreement No 284

construed to include through intermodal transportation to U S points 

vices ancillary to such transportation The New York port interests 

concerned with the possibility that WINAC s Conrail Drayage practic

discourage cargo movements through the Port of New York The rep

tives ofPhiladelphia Baltimore and Norfolk port interests are only co

with the possibility that WINAC s Conrail Drayage practices could 

favor the Port of New York at the expense of other WINAC ports 

Counsel believes that Agreement No 2846 encompasses drayage serv

cillary to port toport or point toport shipments

The specific arguments raised by the Intervenors are

I

The instant petition represents an attempt by WINAC to avoid 

section 15 procedures and the need to justify the application of a

petitive practices pricefixing to inland drayage activitieswhich hav

oped subsequent to the Commission s approval ofAgreement No 

on December 12 1975

2 The ancillary authority langUage in Agreement No 2846 i

broad highly ambiguous and should not be extended to Conrail 

unless further details are provided Among the allegedly critic

omitted from WINAC s petition are the types of shipments to be 

port toport or house tohouse the persons who will actually per

drayage and the arrangements under which they will operate the 

WINACs inland drayage charges at each U S port it serves and 

authority to eliminate inland drayage charges would authorize W

to absorb such charges at any or all the ports it serves

3 AnyWINAC tariff coveringConrail Drayage should allow the sh

option of performing such services for itself

4 WINAC would apparently assess an inland drayage charge only 

York The 55 00 minimum rate now employed is higher than 

charged by some WINAC member lines for the same service e 

Land and could therefore cause cargo to be diverted from Ne

J

The July 27 1978 staffopinion concerned the performance ofConrail Drayaae by lOVen North Atlantic Europ

with qrocn1cnta similar to Aareoment No 2846 To the extent that opinion equated acarrier s

duty to deliver carJ

of rest with a Jocal delivery service covering several milell it was erroncoUl Place ofreal I ordinarily a protected 

to ship s tackle Theconcept doea not involve delivery to tho hipper orthe shipper s

agent at location beyond the o

terminal

41t is 811easl IS hiahway miles rom the New York PonAuthority sBrooklyn piers to Port Elizabeth according 

Rand McNally RoadAtla The highway dialancc between the varioul New Jersey ocean terminals and the Co

tenninal may allO be appreciable in any given case
DISCUSSION

DRAYAGE SERVICE UNDER AGREEMENT NO 2846 501

5 IfWINAC did not establish inland drayage charges at all its U S ports

at rates which approximate the prevalent rates at each such port there

could be unlawful discrimination between shippers and ports Unless New

York bears the fair weight of the higher operating costs which prevail at

its port in particular the high cost ofmoving containers from Long Island

piers to New Jersey rail yards cargo will be diverted from Norfolk

Baltimore and Philadelphia

6 Any difference in WINAC s charges for inland drayage services per

formed at adjacent ports would violate section 205 of the Merchant Ma

rine Act 1936 46 U S C 1115 See Associated Latin AmericanFreight

Coriference 15 F M C 151 1972 requiring uniform assessment of con

ference wharfage charges

7 Practices concerning the placement of loaded and unloaded containers at

rail ramp locations both within and without recognized port areas

should be uniform for a conferences with intermodal authority and b

conferences without such authority

The question posed by the instant petition is whether WINAC now possesses

section 15 authority to establish rates and practices for Conrail Drayage not

whether such authority is or could be implemented in a fashion which violates

the Shipping or Merchant Marine Acts The conclusions reached concerning

the section 15 issue do not preclude subsequent consideration of the lawfulness

of specific WINAC rates and practices for inland drayage services in New

York or other United States ports

A conference may not lawfully set rates for ancillary services applicable to

basic transportation movements which it lacks section 15 authority to provide

The first paragraph of the Agreement s preamble limitsWINAC s activities to

transportation terminating at U S ports

5

Through intermodal transportation

is only available from points in Italy and Yugoslavia and may be extended to

U S inland points only by an express amendment6

Language in the preamble s

second paragraph referring to such matters as through bills of lading in

land points inland rates and agreement with other modes of transport

is limited to intermodal traffic originating at European points and cannot be

viewed as authorizing a United States intermodal service inconsistent with the

geographic scope provisions of the preamble s first paragraph 7

Consequently

no delivery drayage or other ancillary services applicable to through inter

modal carriage to U s

points may be established by WINAC pursuant to

Agreement No 2846 That Agreement can cover Conrail Drayage only if the

drayage is performed for cargo moving under a separate U S inland bill of

lading

This limitation does not of course prohibit WINAC from carrying cargo which moves inland from USports via non WINAC

means It only limits WINACsauthority to itself undertake such inland transportation

WINACsauthority to serve inland points in other European countries via Italian and Yugoslavian ports first approved on

December 19 1974 Agreement No 2846 24 expired on October 15 1975

1

Ambiguous agreements are narrowly construed against theirproponents AmericanWest African Freight Conference Agree

ment No 7680 36 18 S RR 339 342 1978
502 FEDERAL MARITIME COMMISSION

Shipments carried by more than one mode of transport under separ

of lading are not considered intermodal shipments from a section 15 

view 8Such shipments are treated like other types of port toport sh

even ifcarried at special proportional rates See Investigation of Overl

OCP Rates 12 F MC 184 208 1969 afJd sub nom PortofNe

Authority v Federal Maritime Commission 429 F 2d 663 5th Cir 

The performance of inland transportation beyond a carriers im

terminal area pier wharf and cargo storage facilities is not a matte

lary to a basic conference port toportservice Neither is the concerte

sionoftransportation asextensive asthat involved inConrail Drayage au

by section 15 language pertaining only to drayage or ancillary serv

more precise description is necessary Such adescription is found in Ag

No 2846 however which expressly permits the delivery of cargo as a 

ancillary to WINACs port to port shipments

A conference with authority to perform delivery services for por

shipments may haul cargo to facilities of the shipper consignee or it

nated agent which are situated a reasonable distance from the oceante

used by conference members In the instant case the inland carrier C

is the shipper s agent for purpose of the local delivery provision and 

to the Conrail terminal is equivalent to delivery at the shipper s ow

Moreover because the Conrail terminal is less than thirty highway mil

the furthest WINAC pier and is located within the New York New 

commercial zone exempt from Interstate Commerce Commission 

carrier regulation under 49 VS C 510526 d

9

it is concluded that 

Drayage does not exceed a reasonable distance when undertaken from 

the New Jersey or the Brooklyn piers used by WINAC members

The exact geographic scope of a local pick up and delivery service 

details of its availability are matters within the discretion of the confe

the first instance These details need only be described with particularit

conference tariff It is necessary however for conference agreemen

taining to the pick up or delivery of port toport cargo to clearly sta

agreement may be reached concerning cargo pick up or delivery t

receiving facilities designated by the shipper consignee and that an

services shall notinclude activities subject to economic regulation un

Interstate Commerce Act IO

The exclusion of ICC regulated delivery activities is required beca

FMC and ICC are prohibited from regulating a service performed by th

Conferences may nol perform intcrmodal services absent approval of aspecific section 15 agreement delineating 

involved intcnnodal authority of any type will not be implied Lykfs Brot St lmshlp Compatl l

Inc v Far Ell3

19 F M C 589 593 1977 8caulC WINAC may not prCllClnUy serve U S inland points the use of the term 

shipments in Asrccment No 2846 is ambiguous and misleading To remedy this situation a

clarifying amendme

iubmittcd by WINAC which indicates that ancillary services may be performed only with respect to ahlpmenu with

of the preamble s first paragraph Such an amendment could imply delete the phrase intennodal hipmenu from 

the second paragraph and replace it with the phl 8BC shipments within the seopc of this aarcement in item 3 of tha

9 Port Elizabeth is in Elizabeth New Jemy a

contiguous municipality relative to the ocean terminals used 

WINAC member lines See 49 CF R If 1048 100 and 1048 101

IIILocal pick up and deli ry service by motorcarrion is exempt from Interstate Commerce Act reaulatlon other 

standards when perfonned within local commercial zoncs established under 49 USc

II0526 b Although l

services need not be performed by motor carrier any alternative method chosen by the ocean carrier must also allow 

Act regulation of the service provided
S FRANCIS C HURNEY

Secretary

DRAYAGE SERVICE UNDER AGREEMENT NO 2846 503

persons at the same time 46 V S C 832 To avoid confusion and possible

regulatory overlap local cargo delivery which does involve ICC regulated

transportation must take the form ofjoint through intermodal rates filed pur

suant to section 536 8 of the Commission s Rules 46 C FR 536 8

11 Such

rates may be offered only by conferences with express intermodal authority

under section 15 of the Shipping Act to serve appropriate interior points within

the Vnited States

Because Agreement No 2846 does not plainly state its applicability to the

delivery of port toport cargoes to local facilities designated by the shipper

consignee and does not restrict this ancillary activity to areas exempt from

ICC motor carrier regulation WINAC should submit an appropriate clarify

ing amendment at its earliest convenience 12 In the future agreements involving

pick up and delivery services will not be approved unless they describe the

services upon which the proponents may agree in a manner consistent with this

decision

THEREFORE IT IS ORDERED That the Petition for Declaratory

Order of the West Coast of Italy Sicilian and Adriatic Ports North Atlantic

Range Conference member lines is granted to the extent indicated above and

denied in all other respects

By Order of the Commission

II Section 536 8 is not restricted tojoint through transportation It also applies to the through route offerings of asingle carrier

which involve inland transportation extending beyond ocean terminal areas An ocean carrier therefore has some flexibility in

deciding whether to offer a through rate door todoor service or a porttoport service with separate pick up and delivery In all

situations inland transportation services must be separately identified and appropriately rated in an ocean carrier s tariff

II

An appropriate amendment to Agreement No 2846 would authorize the conference to furnish

kKal pick up or delivery to or from shipper designated locations including inland carrier terminals within the Interstate Com

merce Commission commercial lone set forth in 49 CF R Part 1048 for each port served Provided that any pick upordelivery

service offered shall not be subject to economic regulation under the Interstate Commerce Act
FEDERAL MARITIME COMMISSION

DOCKET No 79 84

MATSON NAVIGATION COMPANY PROPOSED 5 90 PERCENT

BUNKER SURCHARGE INCREASE IN TARIFFS

FMC F Nos 164 165 166 AND 167

ORDER ADOPTING INITIAL DECISION

February 21 1980

This proceeding was instituted by Order of Investigation served Aug

1979 to determine the lawfulness of a 5 9 bunker surcharge filed by 

Navigation Company The surcharge became effective August 25 1

though scheduled to expire in 120 days was superceded by a 6 66 su

which has also been made the subject of aCommission investigation I 

prior bunker surcharges filed by Matson all commodities except bu

and molasses which move under specially negotiated rates that include 

escalator clauses were made subject to the surcharge 2 While this diffe

treatment was the subject of the Commission decision in Docket No 

it was also included as an issue in this investigation to allow applic

whatever findings were made in that proceeding

Three additional matters were put at issue in this proceeding to w

a Should an allocation be made between trade and non trade cargo 

between the West Coast and Hawaii

b Should the fuel cost of the vessel KOPAA be excluded from th

lation of expense while tonnage carried aboard the KOPAA is include

trade tonnage figure and

c Is it proper to allocate fuel costs for the months of April and M

percentage which is based on a four month period that included Febru

March

Matson was named Respondent in this proceeding and two of M

shippers Oscar Mayer Co Inc and George A Hormel Co wer

I Docket No 19 92 Malson Navigation Company Propoltd 666 Bunker Surchafgf Ordor of Investig

October Il 1979

lMatson s tarifts FMC F Nos 164 16 166 and 167 include the IUrcharaeat illuc while tariffs FMC F Nos 

applicable to rawBUlar and bulk molallCl ineludo nsotiated fuel adjustment clauaea

l Docket No 79 SS MatlOn Navigation Compony Propoltd Bunker Surchar In the Hawaii Tl ade Rcpo

Adopting Initial Decilion 19 S R R 1065 1979
INITIAL DECISION AND POSITION OF THE PARTIES

MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 505

Protestants along with the State of Hawaii The Commission s Bureau of

Hearing Counsel also participated Administrative Law Judge Joseph N In

golia held aprehearing conference wherein it was determined that in light of

the Commission s decision in Docket No 79 55 and Matson s admission that

its position as to Issues b and c above was in error the only issue left to be

resolved was the question of the treatment of non trade cargo It was agreed

that no oral testimony was necessary and that the hearing would be limited to

written submissions An Initial Decision was issued by the Presiding Officer on

December 21 1979 Exceptions to this decision were filed by Respondent

Protestants and Hearing Counsel

The Initial Decision essentially rejects the methodology utilized by Matson

in computing the instant surcharge and adopts that advanced by the Commis

sion s staff as the most reasonable The staff methodology relies on the finding

of Docket No 79 55 that the increased fuel costs must be allocated between

general cargo subject to the surcharge and bulk sugar and molasses subject to

fuel escalation clauses on a measurement ton basis Matson did not so allocate

in computing the instant surcharge but merely subtracted the escalation clause

recovery from the total increased fuel costs for the entire service This differ

encein methodology which was the only difference that was found to affect the

level of the surcharge resulted in a

finding by the Presiding Officer that the

amount of the surcharge should have been 5 73 rather than the 5 90

charged by Matson

The Presiding Officer found that resolution of the remaining issues stated in

the Order of Investigation Issues a b and c above would not affect the

level of the surcharge regardless of how they were resolved Early in the

proceeding the parties had agreed that the inclusion of February and March

in the four month period used to allocate fuel costs for the months ofApril and

May did not change the amount of the surcharge and therefore the percentage

allocation used was proper

The inclusion of the tonnage carried on the vessel KOPAA in the surcharge

tonnage while an admitted error on the part of Matson was also determined

to have no effect on the final level of the surcharge and supplemental sub

missions by Matson appear to bear this out

While Oscar Mayer expressed concern that the revenue deficiency for the

KOPAA resulting from the fuel escalation clauses applicable to the bulksugar

carried on the vessel might be borne by general cargo in calculating the

carriers overall rate of return the Presiding Officer held that this was not a

matter at issue in this proceeding

Whether an allocation should be made between trade and non trade cargo

carried in Matson s Hawaiian service was characterized by the Presiding

Officer as the only real issue remaining in this proceeding However in the

final analysis the exclusion of non trade cargo was also found not to make any

difference in the level of the surcharge Although both Matson and Hearing

Counsel nevertheless urged a

ruling on the issue of whether as a general matter
506 FEDERAL MARITIME COMMISSION

a trade non trade allocation should be made the Presiding Officer h

the record on this point was inadequate and as a result it would be u

decide the issue particularly since it was unnecessary to resolve it in t

ticular proceeding The matter was left to be resolved in an appropri

ceeding or by rulemaking

Finally although there is some discussion regarding the use of L

Form FMC 274 to adjust for any overrecovery of fuel costs and the 

merits of such a procedure no finding is made with respect to the reme

in the Initial Decision

Oscar Mayer excepts to the Initial Decision on three grounds F

KOPAA tonnage that was deducted from the surcharge tonnage a

must be recomputed and converted into measurement tons as the 

exhibit allegedly stated it in terms of tons only and the Presiding Off

incorrect in assuming this to mean measurement tons as opposed to 

tons Second it is argued that the methodology prescribed in Docket No 

must be retroactively applied to all prior Matson bunker surcharges 

resulting overrecoveries applied to revenue needs of Matson in this pro

Third Oscar Mayer submits that the matter of what remedy is ava

shippers that have been overcharged as a result of this and prior Matson

surcharges found excessive by the Commission must be resolved

In its exceptions to the Initial Decision Hormel seeks Commission a

to how the alleged prejudicial allocation of fuel costs by Matson that 

in a surcharge that averaged 5 50 per ton on general cargo and only 

ton on bulk sugar and molasses will be remedied so as to compensa

shippers that have been paying the unreasonable surcharges It argues 

Presiding Officer s suggestion that the Line 7

remedy may be inadequa

not resolve the matter

Matson excepts to that portion of the Initial Decision which finds 

allocation of trade and non trade cargo issue need not be resolved 

proceeding It argues that although such a determination is not strictly 

sary in thiscase it will have an immediate impact on several pending su

investigations and therefore a resolution of the allocation issue serves 

regulatory interest especially in light of the strict decisional time lim

posed On the merits of the issue Matson submits that the consid

underlying the 5 non trade cargo allocation exemption in Commissio

eral Order No II G O II apply here with equal validity and that 

ingly the Commission should adopt that standard

Matson also takes the position that J the evidentiary exhibit as 

tonnage carried on the KOPM shows it to be in measurement to

2 it has followed the requirements of Form FMC 274 in includin

underrecoveries in its computation ofthe instant surcharge and has redu

level of subsequent surcharges to provide for past overrecoveries as dete

in Docket No 79 55

Hearing Counsel also excepts to the failure of the Presiding Of

dispose of the trade non trade allocation issue but disagrees with Ma

to the application of theG O IIexemption to bunker surcharges It is 

that unlike aG O IIgeneral revenue filing a bunker surcharge is a pur
MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 507

pass through filing and therefore all non tradecargo must be allocated out of

the surcharge tonnage regardless of the effect of such methodology in any

particular case

Hearing Counsel also asserts that l

because Oscar Mayer did not raise the

issue of retroactive application of methodology during the proceeding and

because this issue wasnot specified in the Commission s Order ofInvestigation

the Commission should defer consideration ofthat issue pending a decision in

Docket No 80 4 where that issue is expressly raised and 2 Hormels attack

on the percentage of revenue assessment mechanism is beyond the scope ofthis

proceeding

DISCUSSION AND CONCLUSIONS

The foregoing arguments and contentions of the parties raise the following

matters for consideration by the Commission I whether non trade cargo

must in all cases be allocated outof the surcharge calculations orwhether some

level of exemption in this regard is appropriate 2 whether the findings in

Docket No 79 55 must be retroactively applied to all prior Matson surcharges

in order to compute the proper level of surcharge in this case 3 what

remedies are available to shippers in light of the finding that the Matson

surcharge wasexcessive 4 whether the Presiding Officer correctly computed

the KOPAA tonnage and 5 whether the per ton surcharge rate must be

equalized among all types of cargo

After a full consideration of the positions of the parties the Commission is

of the opinion that the findings and conclusions of the Presiding Officer are

substantially correct and accordingly the Initial Decision served in this pro

ceeding is adopted The specific issues raised by the parties on exception and

enumerated above are discussed seriatim below

Allocation ofTrade and Non Trade Cargo

Whether the 5 non trade cargo allocation exemption contained in G O II

is applicable here is a question that as the Presiding Officer accurately found

cannot be adequately and properly resolved on the basis of the existing record

The testimony in the case did not address the point at which non trade cargo

would significantly affect thelevel ofbunker surcharges either as to Matson spar

ticularoperations orin thedomestic offshoretrades generally While itdoes appear

that there is justification for some level ofexemption there is sufficient differ

encebewteen G O II statistics and Form FMC 274 statistics to render a blind

application of the G O II 5 exemption to Form FMC 274 inadvisable

In light ofthe foregoing it appears thatsuch methodology matters of general

application are more properly addressed in a rulemaking proceeding where a

comprehensive treatment of the subject can be undertaken with input from all

affected interests Until such time as a rule of general applicability is estab

lished the matter of trade non trade allocation will be left to ad hoc deter

minations in particular cases Accordingly Matson s and Hearing Counsels

exceptions in this regard are denied
508 FEDERAL MARITIME COMMISSION

Retroactive Application of MethOdology

Because this issue wasnot included in the Order of Investigation and 

fully litigated the Commission is of the opinion that final disposition 

matter should be left for decision in Docket No 80 4

Remedies

The question ofwhat is the appropriate shipper remedy for excessive

surcharges was recently addressed in the Commission s Order of Clari

in Docket No 79 55 served February 19 1980 It wasdetermined th

the Line 7 procedure will be the primary remedy except in those case

it may prove inadequate 4

This holding applies here and should serve to 

any uncertainty that may have existed

The KOPAA Tonnage Calculation

The Presiding Officer s finding that the tonnage figure of the KOP

ferred to in the submission ofMatson is in measurement tons is proper a

founded All other data in the relevant exhibit is expressed in terms o

urement tons Sand Matson itself has indicated that the tonnage isindeed 

in terms of measurement tons Accordingly there appears to be no re

disturb the Presiding Officer s findings in this regard and Oscar Mayer 

tion to the contrary is denied

The Per Ton Surcharge Rate

The merits of the percentage of revenue method of surcharge assess

Form FMC 274 were not made an issue in this proceeding nor wereth

litigated This matter will be left for resolution in a more appropria

ceeding Accordingly Hormels suggestion that the Commission addre

matter here is rejected

THEREFORE IT IS ORDERED That the Exceptions of Matson N

tion Company Oscar Mayer Co Inc George A Hormel Co 

Commission s Bureau of Hearing Counsel are denied and

IT IS FURTHER ORDERED That the Initial Decision issued 

pr ing is adopted and made a part hereof and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secret

4

Although not computed by the Presiding Officer the excess recovery in this caBO would appear to be 29 739 24 T

isarrived at bymultiplying theestimated revenuesubject to the surcharac 58 312 232 by the implemented surchar

this product 3 440421 69 subtracting the product of the CItlmated revenue multiplied by the reasonab

3 341 290 89 and multiplying the remainder 99 130 80 which repRllIOnuthe total ovorrccovery had the lurchar

in effect the full t 2Oday period by the prorata portion or the overcharae applicable to the 36 days the lurcharge 

99 13080 X

36120 29 739 24 This calculation canbe verified by multiplyinS the estimated revenue by t

between the implemented and reasonable lurcharsoa 17 and applying the effective period ratioto the product 

X 0017 X 36 120 529 739 237

S Direct Testimony orVladimir Hrabeta Exhibit A Line 4 Comments Attachment 2
No 79 84

FEDERAL MARITIME COMMISSION

MATSON NAVIGATION COMPANY PROPOSED 5 90 PERCENT

BUNKER SURCHARGE INCREASE IN TARIFFS

FMC F Nos 164 165 166 AND 167

Adopted February 21 1980

It is held that

I The correct amount of the allowable bunker surcharge is 5 73 percent

2 Where the inclusion or exclusion of non trade cargo in computing the bunker surcharge does

notaffect the amount of the surcharge a decision as to the propriety of including or excluding

it is unnecessary Further where the Commission has stated it intends to review and perhaps

modify its treatment of bunker surcharge applications it would be inappropriate and unwise

to limt its alternative by a holding based on the record of this proceeding

3 Using a specific recovery of added fuel costs per escalation clauses contained in sugar and

molasses contracts to compute a bunker surcharge is improper and the allocation to sugar and

molasses must be on the basis of measurement tons

4 Where the fuel cost of a vessel was excluded from the calculation of expense for purposes of

computing a bunker surcharge the tonnage carried by the vessel should also have been ex

cluded Here its inclusion orexclusion did not affect the amount of the bunker surcharge and

it was improper to consider other questions regarding general rate increases where the Com

mission s Order of Investigation specifically limited thejusticiable issue to consideration of the

bunker surcharge

David F Anderson and Peter P Wison for Matson Navigation Company

Dale N Gillings for Oscar Mayer Co Inc

Harold M Finch for George A Hormel Co

Suzanne E Barth and R Dennis Chong for The State of Hawaii

J Robert Ewers C Douglass Miller and Charles C Hunter as Hearing Counsel

INITIAL DECISIONI OF JOSEPH N INGOLlA

ADMINISTRATIVE LAW JUDGE

FINDINGS OF FACT

IOn July 24 1979 Matson Navigation Company Matson filed supple

ments to Matson Freight Tariff Nos 1 T 30 A 15 C and 14 F FMC F

I

This decision will become the decision of the Commission in the absence of review thereof bythe Commission Rule 227 Rules

of Practice and Procedure 46 CF R 502 227
510 FEDERAL MARITIME COMMISSION

Nos 164 165 166 and 167 respectively which tariffs are the basic 

under which Matson provides service in the Pacific Coast Hawaii trad

2 The supplements provided for a bunker surcharge of 5 90 per

become effective on August 25 1979

3 The 5 90 percent surcharge canceled a previouslyfiledsurchargeof 

cent so that the surcharge in issue here increased the surcharge in the 

Coast Hawaii trade by 147 percent

4 Subsequent to the 5 90 percent filing effective October I 1979 

increase to 6 66 percent was filed Itis under investigation in another p

ing MatsonNavigation Company Proposed 666 Percent Bunker Su

Increase in Tariffs FMC F Nos 164 165 166 and 167 Docket No 

Order of Investigation served October IS 1979

5 On June 6 1979 the Federal Maritime Commission Commissio

lished Domestic Circular Letter 1 79 It states in pertinent part

Vessel Operating Common Carriers VOCC and Non Vessel Operating Common 

NVOCC in the Domestic Offshore Trades are hereby granted continuing outstandin

permission toestablish and amend a bunker surcharge in theirtariffpublications on 30 da

to the Commission The purpose of the special permission is I to allow the filing of bu

charges that fall within the definition of a general increase in rates contained in P L 95 

30 days notice rather than 60 days notice and 2 to suspend 46 CF R Part 531 GO 

the extent necessary to permit the filing of consecutively numbered supplements containin

increases for VOCCs and water transportation cost pass thru for NVOCCs when acco

by specified financial justification

Applicable provisions of Part 512 Part 531 and Section 502 67 46 C F R 512 

502 67 of Commission regulations are hereby suspended to the extent necessary to carr

specific purpose of this outstanding special permission This authority Is expressly co

upon the simultaneous receipt ofthe Information requested on FMC Form No FMC 

VOCCs and FMCFormNo FMC 276for NVOCCs In the Domestic Offshore Commer

United States

6 The Commission issued Form FMC 274 Fuel Surcharge Justifi

with Domestic Circular Letter 1 79 In filing forthe bunker surcharge in

to 5 90 percent Matson submitted a completed Form FMC 274 as f

VESSEL OPERATING COMMON CARRIERS IN THE

DoMESTIC OFFSHORE CoMMERCE OF THE UNTIED STATES

Carrier Matson Navigation C

Date July 25 1979

FuelSurcharge Justification

Tariffs FMC F No 164 165 166 167

I Weighted average fuel cost per unit for units

purchased between 12 25 78 and 1 5 79

or for the 10 days preceding the filing of the

last general rate increase whichever is later

2 Present per unit fuel cost

10 59

1751

l

Documentation forthe RIenl fuel 008l is required such 81 copy of paid invoicca notice ofprice chanac s forth

etc When the present fuel cost lslUpported bycopy ofpaid invoicca theaveragc for aconICCUtlve tcn day period the e

precedes the filing dateofthc surcharge by not morethan ten days lhall be used When fuel ispurchased at morethan o

the wcishtecl averap shall be used In thOlO inltancca where the prcent fuel cost issupponecl byanotice of price cha

the purveyor the wcishtcd average for aU locations where fuol is purchased shall be used Tho carrier has the 

demonstrating that tlUsper unit fuel cost is truly repftlllOntative of the fuel oost to be incurred wlUlo tho surcharge is in 
MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 511

3 Difference Line t subtracted from Line 2 6 92

4 Estimated consumption for next 4months com

mencing with effective date of surcharge 470 816

a Last year s consumption for the identical

period 480 365

b Explain variations of 10 or more on

attached sheets

5 Fuel consumption and cost for the 4 months

period ending no earlier than 30 days prior Fuel Cost

to the filing date 483 489 5 829 901

6 Estimated 4 months consumption times differ

ence in fuel cost Line 3 times Line 4 3 116 927

7 Under or over recovery of increased fuel

costs from surcharges in effect since 1 1 79

Fuel Surcharge Recovery Line 17 460 602

8 Estimated 4 months cost adjusted for over or

under Recovery Line 6 plus under Re

covery of Line 6 minus over Recovery 3 577 529

9 Revenue for the same period used in Item 5 58 766 000

10 Estimated revenue for the 4 month period

utilized in Line 4 exclusive of proposed

surcharge 60 656 669

11 Last year s revenue for identical period as

shown in Line 10 explain difference 55425 000

12 Percentage increase in revenue required to

offset fuel costs as shown in Line 6 above

Line 8 divided by Line 10 5 90

13 Attach an Income Statement applicable to

the subject Tariff s for the latest available

12 month period which ends not more than

60 days prior to the filing date of the

increase

FuelSurcharge Recoveries

14 Total fuel surcharge charges included in cus

tomer billings from effective date of first

surcharge since I I 79 to ending date of

Line 5 of this Fuel Surcharge Justification 439 310

15 Total fuel costs for same period as Line 14

Barrels 254 919 3 599 504

16 Total costs for barrels shown on Line 15

based on Line I cost of this fuel surcharge

justification

16a Line 15 Barrels 254 919

16b Line I Cost 10 59

160 16a X 16b 2 699 592

17 Over or under recovery of increased fuel

costs from surcharge in effect since 1 I 79

Subtract Line 160 from Line 15 then

subtract that figure from Line 14 Place

that figure on Line 17 and carry back to

Line 7

460 602

7 After Matson filed for the 5 90 percent bunker surcharge protests were

filed by Oscar Mayer Co Oscar Mayer George A Hormel Co

Hormel and the State of Hawaii Hawaii
512 FEDERAL MARITIME COMMISSION

8 On August 24 1979 the Commission issued its Order of Invest

Itindicates that the Commission elected to accept Matson s financial ju

tion despite the fact that Matson did not use the correct four month peri

cified in Form FMC 274 Further after reviewing the arguments advan

the parties the Commission found that aninvestigation isnot the prope

for discussion of the merits of Circular Letter 1 79 Form FMC 2

General Order 11 It ordered the instant proceeding to be limited to 

vestigation of the following areas

I Should fuel costs be allocated between general cargo and sugar mola

the basis of measurement tons carried

2 Should an allocation be made between trade and non trade cargo 

between the West Coast and Hawaii

3 Should the fuel cost of the vessel KOPAA be excluded from the calc

of expense while tonnage carried aboard the KOPAA is included 

trade tonnage figure and

4 Is it proper to allocate fuel costs for the months of April and Ma

percentage which is based on a four month period that included Fe

and March

The Commission provided that the hearing would be completed withi

60 days of the effective date of the tariff and that the initial decision 

be submitted within one hundred and twenty days 120 of the effectiv

9 On September 20 1979 a prehearing conference was held The 

agreed that oral testimony need not be taken and that to the extent the 

presented in this proceeding were the same as those presented in the prio

for the bunker surcharge increase to 43 percent Matson Navigation 

pany Propased Bunker Surcharge in the Hawaii Trade Docket No 

19 SRR 7931979 the Commission s decision in the prior case would 

trolling The parties also agreed that if Issues No 3 and 4 as set forth 

Commission s Order of Investigation were technical in nature and d

change the ultimate amount of the bunker surcharge they would 

considered as issues in this proceeding 3

10 On September 21 1979 the Initial Decision in Docket No 79 

served As to the issue common to the instant case the Administrativ

Judge4 held that

IMatson s allocation methodology using special sugar and molasses contracts is not 

be reliable or valid I conclude therefore that Matson s use of the direct assignmen

to sugar and molasses shippers under its peculiar fixed formula is unreasonable and un

because by abandoning the GO II tonnage allocation methodology Matson relies upon 

unarticulated bases for direct assignment of costs and casts an additional cost burden on n

and molasses shippers

11 By order served on November 23 1979 the Commission adop

Initial Decision

12 The parties agree that in filing for the increased bunker surc

Matson excluded the fuel cost of the vessel KOPAA from the calcula

lOscar Mayer reacrved the rilht to further argue this illucon other grounds

4

Administrative Law JudSC Norman D Kline
MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 513

expense but included the tonnage carried by the KOPAA in the trade tonnage

figure utilized for allocating fuel consumption between the Hawaii and Mar

shall Islands Services This wasan error which has no effect on the amount of

the bunker surcharge in this proceeding and which has been corrected in the

filing for the subsequent 6 66 percent increase

13 In filing for the increased bunker surcharge Matson in allocating fuel

costs for the months ofApril and May relied on a percentage based on a four

month period that included February and March as well Whetheror not Febru

ary and March wasused to allocate fuel costs in this proceeding the amount

of the bunker surcharge would be the same Matson has used the four month

period specified by the Commission in the subsequent filing for the 6 66 percent

increase

14 The Hawaii Trade encompasses the carriage by Matson of cargo in the

Domestic Offshore Trade between the United States Pacific Coast and Hawaii

under the terms of tariffs applicable to that movement

15 Matson transports cargo bound for the Marshall Islands in conjunction

with tradecargo in vessels serving the Hawaii Trade This cargo is transshipped

in Honolulu to a Matson barge for carriage to its ultimate destination

16 Cargo bound for the Marshall Islands does not move in the Domestic

OffshoreTrade of the United States This cargo is transported from the United

States to a foreign country

17 Matson has admitted that in order to ascertain the amount of revenue

that should be recovered by its proposed bunker surcharge increased fuel cost

must be allocated to foreign cargo carried in conjunction with trade cargo in

vessels serving the Hawaii Trade

18 Matson transports mail and cargomoving pursuant to tariffs on file with

the Interstate Commerce Commission ICC cargo in conjunction with Trade

cargo in vessels serving the Hawaii Trade

19 The United States Pacific Coast Hawaii Service Hawaii Service in

cludes all voyages undertaken by Matson vessels between the United States

PacificCoast and Hawaii inwhichcargo moving in the Hawaii Trade is carried

20 Included in the category of non trade cargo moving in the Hawaii

Service are foreign cargo mail and ICC cargo

21 Matson has allocated increased fuel cost to foreign cargo transported in

the Hawaii Service but has failed to make a like allocation to the other non

trade cargo moving in that Service

22 Hearing Counsel and Matson have both submitted adjusted calculations

wherein Matson amends its filing for bunker surcharge from 5 90 percent to

5 88 Hearing Counsel arrives at abunker surcharge of 5 73 percent They have

stipulated that I they reached different conclusions based solely on their

different treatment of sugar and molasses and that 2 neither computation is

affected by whether non trade cargoes mail and ICC cargo are allocated out

from the Service before the surcharge is calculated A comparison of their

calculations using the information required by Form FMC 274 is as follows
514 FEDERAL MARITIME COMMISSION

MATSON NAVIGATION COMPANY

CALCULATION OF BUNKER FUEL SURCHARGE

ON MEASUREMENT TON BASIS

1 Average fuel cost per barrel purchased be

tween December 25 1978 and January 5

1979

2 Present per barrel fuel cost

3 Difference line 2 less line I

4 Estimated consumption for next 4 months

September December 1979 barrels

5 Estimated increase in fuel cost line 4 times

line 3

6 Estimated measurement tons for the service

September December

7 Estimated measurement tons of cargo not

subject to surcharge or specific recoveries

Marshall Islands

Sugar and molasses

Mail and ICC

8 Estimated measurement tons subject to sur

charge or its own recovery formula line6

less line 8

9 Measurement ton relationship line 8

divided by line 6

10 Fuel cost to be recovered by surcharge or

specific formulas line 9 times line 5

Special recovery under sugar and mo

lasses agreements

Balance to be recovered by surcharge

11 Revenue collected under fuel surcharges in

April and May

Revenue collected under specific tariff

formulas

Total revenue collected to offset added

fuel cost

12 Service fuel cost April and May

Hearing

Counsel

A

M

10 59 

17 51 

6 92 

475 044 47

3 287 304 3 28

2 944 372 2 94

26 234

183 340

101 462

311 036

2

12

2 633 336 2 81

8944 

2 940 165 3 14

2 940 165 3 00

442 004 44

3

442 004 47

3 672 000 3 67

Matson does not concede that Marshall Islands cargo isincluded in the Hawaii Service Column Bincludes that cargo 

cargo so that Columns A and B canbe stated on a

comparable basis
13 Service measurement tons April and May

MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 515

1 530 087

14 Measurement tons not subject to surcharge

or specific recoveries

Marshall Islands

Sugar and molasses

Mail and ICC

15 Measurement tons subject to surcharge or

specific recoveries line 13 less line 14

16 Measurement ton relationship line 15

divided by line 13

17 Fuel cost applicable to cargo subject to sur

charge or its own recovery formulas line

12 times line 16

18 Fuel consumption for the Service April and

May barrels

19 Fuel consumption applicable to cargo sub

ject to surcharge or specific recovery for

mula line 18 times line 16 barrels

20 Fuel cost applicable to cargo subject to sur

charge or specific recoveries at base cost

line 19 times line I

21 Difference between base cost and cost in

curred line 17 less line 20

22 Unrecovered fuel cost line 21 less line 11

23 Total fuel cost recoverable by surcharge

line 22 plus line 10

24 Estimated revenue subject to surcharge

September December

25 Allowablesurcharge line 23 divided by line

24

1 530 087

15 050

98 233

53 361

166 644

1 363 443

8911

3 272 119

257 598

229 546

2 430 892

841 227

399 223

3 339 388

58 312 232

5 73

15 050

53 361

68 411

1 461 676

95529

3 507 825

257 598

246 081

2 605 998

901 827

425 516

3 429 130

58 312 232

5 88

A Hearing Counsel s computation allocating added fuel cost to sugar and molasses and

non trade cargo on measurement ton relationship

B Computation along the same lines as in A but using aspecific recovery of added fuel cost

per sugar and molasses tariffs as a credit

ULTIMATE FINDINGS OF FACT

23 It is improper to compute the bunker surcharge by using a specific

recovery of added fuel costs per escalation clauses in sugar and molasses
516 FEDERAL MARITIME COMMISSION

contracts The allocation to sugar and molasses must be on the basis of 

urement tons

24 Allocation out of non trade cargo in calculating the surcharge do

affect the amount of the surcharge in this case and it is neither necessa

desirable to decide the question as to whether or not it must be allocat

at this time

25 Matson s exclusion of the fuel cost of the KOPAA from its calcu

of expense while at the same time including the tonnage carried aboa

KOPAA when calculating the surcharge does not affect the amount 

surcharge

26 Matson s allocation of fuel costs for the months of April and Ma

arrived at by relying on a percentage based on the four month period 

included February and March as well asApril and May The use of Fe

and March did not affect the amount ofthe surcharge and the validity 

percentage used is no longer an issue in this case

27 The correct amount of the allowable bunker surcharge is 5 73 p

DISCUSSION AND CONCLUSIONS

The issues presented in this case are basically factual in nature To the 

that the Findings of Fact are not discussed in this portion of the decision 

are incorporated by reference

In its Order of Investigation the Commission listed four issues Th

treated separately in the following discussion

Issue No J Should fuel costs be allocated between general carg

sugar molasses on the basis of measurement tons carried

We have already found as a fact that in deciding Docket No 79 55 

Judge Norman D Kline answered the above question in the affirmativ

the Commission has adopted Judge Kline s Initial Decision and th

parties have all agreed to abide by the Commission s decision Conseq

we will not undertake to repeat all that is contained in that decision ex

say that it rejected Matson s methodology of using the escalation clau

sugar and molasses contracts to arrive at increases in the bunker surcha

the Hawaiian trade However it should be noted that in resolving the u

issue the Initial Decision rejected the argument that Matson s applica

the bunker surcharge was unfair because it falls disproportionately on 

bound shippers and that therefore the allocation ought to be made on 

basis other than round voyage accounting Itheld that any allocation w

based upon splitting legs of round voyages by assigning percentages 

costs to eastbound and westbound shippers using fuel consumed by leg 

applying measurement tons per leg is improper because it marks 

departure from Commission case law and G O 11 methodology 6

In ad

Malson Nay gallon Company ProposedBunbr Surchal pIn h HQwallTrtule Docket No 79 55 supra pa

Initial Decision citing Alcoa Steamship Co Inc Gnwrallncrease In Ratti In theAllanlle Gulf PUerlO Rico Trade 

220 1966
MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 517

the holding the Commission noted that there is a significant issue regarding

Matson s overall rate structure which in the Hawaii trade appears to

differentiate in favor of backhaul cargo based upon value of service principles

at the expense of headhaul cargo As in this proceeding the Commission noted

that such considerations were beyond the scope of the proceeding as defined in

the Order of Investigation

Issue No 2 Shou d an alocation be made between trade and non trade

cargo carried between the West Coast and Hawaii

This issue is the only real issue remaining in this proceeding Matson s

filing

failed to make an allocation between trade and non trade cargo carried be

tween the West Coast and Hawaii It argues that it need not do so because

GeneralOrder II does not require such allocation when othercargo does not

exceed 5 percent of the gross revenue derived from the Service 46 CF R

5512 6

c

Further it states that in recent years the Commission has made

findings in general rate increase proceedings where Matson did not allocate

between tradeand non trade cargo citing Matson Navigation Company Pro

posed Rate Increases in the United States Pacific Coast Hawaii Domestic Off

shoreTrade Docket No 75 57 servedDecember 12 1978 18SRR 1441 1978

Order on Reconsideration served April 27 1979 and Matson Navigation

Company Proposed Rate Increases in the United States Pacific Coast

Hawaii Domestic Offshore Trade Docket No 76 43 served December 12

1978 18 SRR 1351 1978 Order on Reconsideration served April 27 1979

Itpoints out thatfrom September through December 1979 non trade revenues

will be 3 865 percent of Service revenues well below 5 percent

Hearing Counsel argues that while Matson has admitted the necessity of

allocating increased fuel costs between trade cargo and foreign cargo Matson

surprisingly takes the position that it is not required to allocate increased fuel

cost between tradecargo and mailICC cargo Hearing Counsel states thatgiven

that mail ICC cargo and foreign cargo are categorized by General Order II

as non trade or other cargo Matson s differing treatment of these cargoes in

its calculation of the amount of revenue that should be recovered by its pro

posed bunker surcharge cannot be justified

As to Matson s argumentthat it should not be required to allocate increased

fuel costs to mail and ICC cargo because of the 5 percent of gross revenue

exception contained in General Order 11 8

Hearing Counsel asserts Matson

misunderstands the Commission s rules and regulations He points to perti

nent portions of Domestic Circular Letter 1 799 as conflicting with General

Order II which has to do with general rate increases and alleges they super

71n its initial filing Matson had misstated the percentage as 218 percent

Provided however That if gross revenuederived from the carriage of Other Cargo does not exceed 5 percent ofthe gross

revenuederived from The Service no segregation of revenueand expenses within TheService is required by this part 46 CF R

512 6 and d

9

The reporting requirements otherwise applicable to general increases inrates are suspended to the extentthey apply to bunker

surcharges and Ihe reduced reporting requirements of the Circular Letter shall be filed in lieu thereof 19 SRR at 407

MThe modified reporting requirements set forth in the Circular Letter are intended to ensure that bunker surcharges are set

at levels which will recover only the increased costs of fuel and not result in windfall revenues to the carriers 19 SRR at407
518 FEDERAL MARITIME COMMISSION

sede it Hearing Counsel states that the intent of the Commission in 

tioning the use of bunker surcharges was to provide carriers with a me

passing through to shippers the increased fuel cost incurred in the carria

their trade cargo

Finally Hearing Counsel avers that it is wrong for Matson to argue th

issue is moot because in this particular case even if an allocation were 

to non trade cargo it would not have any effect on the amount of the b

surcharge He states that the reason this proposed bunker surcha

unaffected by the allocation of increased fuel cost to non trade cargo i

Matson filed bunker surcharges with the Interstate Commerce Commiss

similar amounts and at appropriate times and that there is no assuranc

Matson or any other carrier would file such surcharges in every case

Oscar Mayer agrees with Hearing Counsel that Matson should ma

allocation between trade and non trade cargo Itargues that unless this is 

Matson will be collecting twice for the increased cost of a portion of the 

fuel The State of Hawaii also agrees with Hearing Counsel

Matson replies to the above arguments by taking issue with the fact t

six previous surcharge filings Hearing Counsel never requested a trade 

tradeallocation Itexpressed surprise that Hearing Counsel argues for th

time that Marshall Islands cargoes should beconsidered Service cargo 

the holdings in Doclcet Nos 75 57 and 76 43 supra It argues that H

Counsel cannot now reasonably suggest that Matson s allocation out of 

shall Island cargoes should form a basis for concluding that Matson has a

that non trade cargoes should also be allocated out It reiterates its view 

a miniscule portion of the Service is non trade cargo and that the int

the Commission in publishing Domestic Circular Letter 1 79 was to 

carriers to quickly file rate adjustments imposing bunker surcharges in o

recover rapidly escalating fuel oil costs It states that to require Mats

make the trade non trade allocations would delay such filings and se

useful purpose

Itis clear that in promulgating Domestic Circular Letter 1 79 the Co

sion intended that increased fuel costs be passed through respecting 

which is transported under those tariffs which are being amended to refle

assessment of the surcharge It is equally clear that if the non trade carg

meaningful in any particular situation as Hearing Counsel suggests it 

thwart the purpose of the Circular Letter if it was not allocated out

The real question involved here is whether or not the Commission 

adopt the 5 percent qualifying provision in General Order II in consi

bunker surcharge applications To doso wouldbe to accept Matson sarg

that the amount is miniscule and that it would removeobstacles in th

ofcarriers recovering extremeincreasesin fuelcost and to reject Hearing 

sels argument that the issue transcends this particular case and might 

applied similarly by other carriers or even by Matson in other circumst

It has already been found as a fact that whether or not the non trade 

is allocated out in this particular case the amount of the bunker surc

increase will remain the same While the question may not be moot as H

Counsel suggests given the ambiguity of this record and the Commis
MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 519

Report and Order Adopting Initial Decision in Docket No 79 55 supra it is

unnecessary and unwise to decide the matter or establish any precedent in this

case In its Report and Order the Commission stated

The Domestic Circular Letter was promulgated on an emergency basis under crisis conditions

Under the circumstances the Commission could not reasonably anticipate all the potential oper

ational difficulties that might arise with the application of the requirements of the CircularLetter

It is not surprising therefore that the application of the Circular Letter has shown a need for some

revisions Accordingly while the Initial Decision in this case will be adopted the Commission will

undertake a

review of the Domestic Circular Letter to determine what revisions may be necessary

to bring the surcharge assessment procedures established in that Circular Letter in line with the

principles enunciated in this decision

In light ofthe above language and the posture of this proceeding the Commis

sion s alternatives should not be limited by an unnecessary holding in this case

Itmay wish to require an allocation between trade and non tradecargo in every

case or it may wish to reconsider changes in the Domestic Circular Letter or

it may wish to rulemake These alternatives as well as any other the Commis

sion wishes to consider ought to be left open until the factsof a particular case

demand otherwise In this case they do not

Issue No 3 Should thefuel cost ofthe vessel KOPAA beexcludedfrom the

calculation of expense while tonnage carried aboard the KOPAA is included

in the trade tonnage figure

In its original submission Matson included tonnage carried by the KOPAA

in calculating the allocation percentage on a measurement ton basis but

excluded its fuel cost from the calculation of expense Since the measurement

tons carried on the KOPAA were originally unavailable it was not possible to

determine the exact allocation or surcharge percentage Matson conceded that

it had made the error in requesting the 5 90 bunker surcharge but noted that

when corrected on Form FMC 274 the reference figure on line 5 would be

changed from 4839 barrels to 483 245 barrels an errorofonly 244 barrels

All the parties have agreed that the error does not affect the amount of the

bunker surcharge In addition in its revised computation in which it arrived at

the 5 88 percent bunker surcharge Matson exclude the KOPAA tonnage from

the trade tonnage

Matson s supplemental filing satisfied all other parties except that Oscar

Mayer believes that even though the KOPAA has been completely excluded

from the surcharge computation the sugar contract escalator charge for the

KOPAA will be short of projected increased cost by 46 700 for the period

September through December 1979 It is concerned that the shortfall will

become part of Matson s overall profit or loss figure and thereby a factor in

determining their return on common equity or return on rate base Matson

answers by noting that the reasonableness of Matson s rate structure is not at

issue in this proceeding and that the use of the KOPAA has no effect whatso

ever on the computation of the bunker surcharge at issue here Itstresses that

the scope ofthe Commission s order does not reach consideration of any future

rate increase
520 FEDERAL MARITIME COMMISSION

The arguments advanced by Matson are correct Here we are onl

cerned with the bunker surcharge and the Commission s order carefully f

an issue regarding the KOPAA which is limited to its effect on conside

of the surcharge itself Having once determined that the KOPAA ough

excluded entirely from the surcharge computation and that its exclusio

not alter the amount ofthe surcharge nothing more remains for conside

in this proceeding

Issue No 4 Is it proper to allocate fuel costs for the months ofApr

May on apercentage which is based on a four month period that inc

February and March

Ithas alreadybeen stipulated by all parties that if the inclusion of Fe

and March in calculating the percentage involved did not make any diffe

in the amount of the bunker surcharge then this question would no lon

an issue in the proceeding The evidence of record establishes and all 

have agreed thatthe use ofFebruary and March has no bearing on the a

of the surcharge and therefore it is held that the percentage used wasp

CoNCLUSION

Afterconsideration oftheissues set forth in the Commission sOrder ofI

gation what remains is to determine the correct allowable bunker surc

As the Findings of Fact indicate Matson revised its original 5 90 p

submission down to 5 88 and Hearing Counsel came to a figure of 5 73 p

The only difference in their calculations was their treatment of the sug

molasses cargo Since they have made their computations Docket No 

supra which supports Hearing Counsel s position has been promu

Therefore it is held that in this proceeding the allowable bunker surch

5 73 percent

In so holding note is taken of the computation submitted by Oscar 

in its reply brief where it arrives at a bunker surcharge of 486 percent 

one analyzes the computation and makes necessary corrections it is id

with the 5 73 percent figure reached by Hearing Counsel and Matson 

Mayer began by converting the tonnage carried by the KOPAA to me

ment tons 94 000 X 95 24 Actually the 94 000 already represe

measurement tons carried by the KOPAA Then the remaining measu

tonsof sugar and molasses should total 183 340 not 187 814 As to addin

the 101 462 measurement tons ofmailand ICC cargo that is incorrect b

the original figure of 3 012 138 already included it After making 

adjustments throughout Oscar Mayer s computation and allowing for 

recoveryof 399 223 the total revenue on Hawaii Trade Cargo is 58 3

not 60 656 669 so the bunker surcharge is 5 73 percent 2 947 5

58 312 232 exactly the figure Hearing Counsel and Matson have com

Before concluding there are some related matters which have been 

which should be addressed In its initial protest and at various stages 
MATSON NAVIGATION COMPANY PROPOSED BUNKER SURCHARGE 521

proceeding Oscar Mayer has taken the position that the Commission should

institute a

rulemaking proceeding even though the Commission s Order of

Investigation states an investigation is not the proper forum for discussion of

the merits of Circular Letter 1 79 Form 274 and General Order lJ Oscar

Mayer specifically request the Commission begin such a proceeding and hold

in abeyance the determination of this investigation until the conclusion of such

a proceeding

Itis clear that given the Commission sOrder of Investigation and the narrow

parameters ofthe issues described in it this decision cannot consider Oscar

Mayer s

arguments respecting rulemaking In adopting the Initial Decision in

Docket No 79 55 supra however the Commission noted that the Domestic

Circular Letter was promulgated on an emergency basis under crises condi

tions and that the Commission will undertake a review of the Domestic

Circular Letter In its reconsideration of the Letter the Commission may if

it so desires initiate a

rulemaking proceeding In any event Oscar Mayer or

any other person for that matter may petition for the issuance of a rule under

the Commission s Rules ofPractice and Procedure 46 C F R 5021 et seq

Finally it should be noted that in the argument of this case as well as in

Docket No 79 55 supra the parties have referred to the meaning and import

of Form FMC 274 line 7 which provides for adjustment ofunderrecovery or

overrecovery of the bunker surcharge On the one hand the view is expressed

that if a mistake is made it can be adjusted in a subsequent filing On the

other there is concern that the adjustment provision will be misunderstood and

used improperly to foster bunker surcharge filings which contain information

that is not the best information then available or which is ambiguous and

incomplete

It is clear that the Commission s intent in allowing for an adjustment in

bunker surcharge filings was to provide a practical mechanism to make an

adjustment where the best information available in the first instance proves to

be incorrect or unsatisfactory It thereby prevents the carrier from being un

justly enriched or under compensated and recognizes that the ultimate purpose

ofthe bunker surcharge procedure is to arrive at the increase in the cost offuel

and to allow it to be properly passed through to the shipper Itis not meant to

be an exploratory filing which if discovered to be incorrect can be adjusted

Such an adjustment may ultimately provide the proper relief for the carrier

but it may ignore the rights of the shipper who cannot recover for the over

charge that wasapplicable to the period during which he shipped his goods It

also is unfair to the Commission in that it wastes staff resources encourages

litigation and delays the prompt disposition ofthe bunker surcharge application

In view of the above when the Commission reconsiders the Domestic Circu

lar Letter it may wish to clarify the import and use of the adjustment mech

anism so that there will be no question regarding it in future bunker surcharge

filings

S JOSEPH N INGOLIA

Administrative Law Judge

WASHINGTON D C

nprpmlwr 71 1070
FEDERAL MARITIME COMMISSION

DOCKET No 79 61

RENE LoPEZ AND DAVID ROMANO D B A

UNITED DISPATCH SERVICES INDEPENDENT OcEAN

FREIGHT FORWARDER LICENSE No 1381

Independent ocean freight forwarder license suspended for six months for violations of 

51O 24e of General Order 4 and section 44 e of the Shipping Act 1916

Car os Rodriquez for Rene Lopez and David Romano d b a United Dispatch rvice

John Robert Ewers Joseph B Stunt and Martin F MeA wee for Bureau of Hearing 

REPORT AND ORDER

February 25 1980

BY THE COMMISSION RichardJ Daschbach Chairman T

F Moakley Vice Chairman Jam

Day and Leslie Kanuk Commissio

This proceeding was initiated by Order of Investigation and Hearing 

June 8 1979 to determine whether Rene Lopez and David Romano 

United Dispatch Services Respondent violated General Order 4 an

tion 44 e ofthe Shipping Act 1916 and whether its independent ocean 

forwarder license should be revoked or suspended IThe Commission s B

ofHearing Counsel wasmade a party to the proceeding In his Initial De

served October 19 1979 Administrative Law Judge William Beasley 

found the violations to have oCcurred and revoked Respondent s licens

I Specifically the Order allepd that Respondent received 52 360 47 in compenaation for8S Ihipments handled by an u

forwarder and let forth the followlna luues for dotennlnation

I Whether Rene Lopez and David Romano d b aUnited Dispatch Services huviohitcd ICKltion 510 23 a

of Gen

4 by permluin it name and license number to beUMd by aperlOn not employed by it for the performanee of ooc

forwardina llCrvieos

2 Whether Ren Lopez and David Romano d b a Unltocl Diapatcb SorvIcea baa violatocl section 44 oftho Shi

1916 and IOCtion 510 240of General Order 4 by falsely certifyins to ocean carriers that it had perfonncd f

services necessary to rcceive ocean carrier compensation and acceptins oooan carrier compensation on such ship

which it did not provide freight forwardinllOrvlcea and

3 Whether Rene Lopez and David Romano d b aUnited Dispatch Services independent ocoan freight forward

shoukl be revoked or suspended pursuant to section 44d of the Shippins Act 1916 and section 5109 of Ocne

forfailureto comply with anylawful ruleregulations ororders ofthe Commi ion and for conduct which renderst

unfit to carryon the bwine88 of forwarding
INITIAL DECISION AND POSITION OF THE PARTIES

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE NO 1381 523

proceeding is now before the Commission on Exceptions of Respondent to

which Hearing Counsel replied For the reasons set forth below the Commis

sion has decided to suspend Respondents license for six months

BACKGROUND

Hearing Counsel alleges and Respondent admits that Respondent allowed

Angel Romero and Foreign Freight Forwarders Inc FFF to use Respond

ent s name and license number in connection with FFFs

forwarding activities

pursuant to an oral agreement between Messrs Lopez Romano and Romero

Respondent admits collecting approximately 2 000 in freight compensation

for 82 shipments handled by FFFunderRespondents nameand licensenumber

Hearing Counsel argued for revocation ofRespondent s license Respondent

through David Romano initially responded that it wished to plead no contest

on the charges brought against us and argued by way of mitigation of the

sentence that it was a first offense that Respondent was ignorant of the law

that Respondent did not intend to violate the law and that suspension or

revocation would cause undue hardship on Respondent and its nine employees

At a hearing held September 7 1979 Respondent Lopez admitted all the

violations and the factual bases for the allegations as set forth in the affidavit

ofCommission Investigator Miguel Tello Mr Lopez reiterated his request that

Respondents license not be revoked or suspended citing the financial hardship

severe sanctions would cause and promised not to violate the law again He

also alleged that Respondent s violations were prompted by friendship with

Mr Romero and not for monetary gain

In his Initial Decision the Presiding Officer found that Respondent had

committed each ofthe violations alleged in the Order of Investigation and

revoked Respondents license

In its Exceptions to Initial Decision Respondent again admits its wrong

doing although again offering mitigating facts to establish the mental

posture as far as intent or willfulness is concerned 2

Respondent argues

that the Presiding Officer erred in imposing punitive rather than remedial

sanctions by failing to consider less severe sanctions which would nevertheless

redress the violations and by basing his decision to revoke Respondent s license

on its financial difficulties Respondent also argues thatthe Presiding Officer

acted arbitrarily and capriciously by departing excessively from previously

applied less severe sanctions

Hearing Counsels Reply to Exceptions emphasizes the seriousness of the

violations and makes the point that revocation was a

proper remedy not a

punitive sanction Hearing Counsel notes that Respondent has had eight years

experience in the freight forwarder business and is therefore appropriately

2

Specifically Respondent notes that its intent was only to help a

friend that the violations were based on ignorance and that

it will not do it again
524 FEDERAL MARITIME COMMISSION

charged with knowledge of the law Hearing Counsel also denies th

Presiding Officer s comments on the financial difficulties of Responden

a basis for the determination to revoke its license Itargues thatexact un

ity in the application of sanctions is unnecessary and that mere unevenn

sanctions is not arbitrary and capricious unless excessive

DISCUSSION

The Commission concludes upon careful and thorough review ofthe r

that Respondent s violations can be redressed by a six month suspension 

freight forwarder license In view of Respondent s six year violation fre

tory the Commission is satisfied that a six month suspension will s

remedial public interest pUrpose 3 and that a more severe sanction is un

sary to achieve this end in this particular case On the other hand no 

sanction would ensure that similar violations will not occur Responden

lations were willful and numerous and its claims ofignorance of law an

of intent are of little mitigating effect 4

Hearing Counsel has cited the Commission s revocation of a freig

warder license in John C Grandon d b a Consulspeed Independent 

Freight Forwarder License No 201 I 19 SRR 1080 1979 as support 

position that Respondent s license should be revoked Although Consu

also involved unauthorized use of a license the number of violations in

in that case and the fact that Consulspeed was in effect a sham op

prompted the Commission to revoke its license to ensure a remedy 

situation

THEREFORE IT IS ORDERED That the Exceptions ofRene Lop

David Romano d b a United Dispatch Services are granted to the 

indicated above and denied in all other respects and

IT IS FURTHER ORDERED That Independent Ocean Freight For

License No 1381 of Rene Lopez and David Romano d b aUnited D

Services is suspended for six months effective February 27 1980 and

IT IS FURTHER ORDERED That this proceeding is discontinue

S FRANCIS C HURNEY

Secre

1 S lUi petukll OuQIIFreight Forward UCflUe EL Mobley Inc 19 SRR 39 41 1979

Akhoulb rodudnJ the nction impolOd by the Preaidina Officer the Commiuion it not endorsina Respondent 

that rcYOCBtion of alicentOfor thistypeofviolation ia noceuarUy improper punitive orunprecedented Rovocatlon is no

in tbis particular prococdillJ however Sanction under leCtion 44 mu t be tailored to the facti of each Individual c
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

DOCKET No 79 70

E IDu PONT DE NEMOURS AND COMPANY

v

SEA LAND SERVICE INC

NOTICE

February 26 1980

Notice is given that no exceptions have been filed to the January 18 1980

initial decision in this proceeding and the time within which the Commission

could determine to review that decision has expired No such determination has

been made and accordingly that decision has become administratively final
FEDERAL MARITIME COMMISSION

No 79 70

E IDu PONT DE NEMOURS AND COMPANY

v

SEA LAND SERVICE INC

I Finalized February 26 1980

Du Pont a shipper of chemical products tendered four shipments of herbicidal and 

products which werecarried by rClpondent Sea Land Service Inc from Houston 

Bangkok Thailand during July through September 1977 Du Pont claims that 

charged for the bulk of these shipments 134 WM should be declared void and in

because of the fact that there had been a filing in May of 1977 which attempted to 

the previous rates on these items on less than the 30days notice period required b

18 b 2 of the Shipping Act 1916 Du Pont seeks an award of 17 782 70 inrepa

the difference between the rate charged and two previous rates which had been in 

prior to the filing of May 1977 claiming an overcharge and a violation of section 

It is held that

I There is no basis in law fact or equity in this case on which to find that the ra

was on file and charged by Sea Land should now be declared void and ineffective

2 Principles of tariff law hold that a tariff must be given force and effect at the 

shipment and that filed rates do not become void until after rejection by the Com

under section 18 b 4 of the Act

3 If a rate has been filed on short notice contrary to section 18 b 2 of the Act 

not rejected by the Commission the better view is that the defective filing curesit

the 3Oday period established by that law runsout however in this case the rate und

is not even the same rate which had allegedly been filed on inadequate notice

4 Declaring a rate on file void ab Inlllo because of an old defect in tariff filing wou

the validity of the filed rates uncertain and could open the door to multiple suits 

overcharges even when shippers had suffered no real harm

S Granting reparation in this case might indirectly contravene the special docke

forth in section 18 b 3 since a special docket application had been filed for Du Po

had to be rejected because it did not meet the 180day requirement of that law

Don A Boyd William R Rubbert and Raymond Michael Ripple for complainant

John M Ridlon for respondent
INITIAL DECISIOW OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

E DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 527

This proceeding commenced with the filing of a complaint by E IDuPont

de Nemours and Company a

company which manufactures andexports chem

icals and related products In its complaint which was filed on July 13 1979

DuPont alleges that respondent Sea Land Service Inc a common carrier by

water operating in the foreign commerce ofthe United States transported four

shipments of herbicidal preparations insecticides and fungicides during the

period July through September 1977 under an intermodal tarifffrom Houston

Texas to Bangkok Thialand and overcharged DuPont by assessing improper

tariff rates for the commodities in question Du Pont further alleges that the

reason for the overcharge was the fact that Sea Land as a member of the

Pacific Westbound Conference and a party to that Conference s intermodal

tariff committed an error in May 1977 by publishing increased rates on these

commodities without giving 30days notice as required by section 18 b 2 of

the Shipping Act 1916 Therefore as complainant later explained it is alleging

that Sea Land violated both sections 18 b 2 and section 18 b 3 of the

Shipping Act 1916 the Act which require carriers to provide 30days notice

of rate increases in their tariffs and to charge only the rates specified

Du Pont claims that it was entitled to rates of 134 W and 145 50 W for

the herbicides fungicides and insecticides for each of the four shipments which

moved under bills of lading dated July 16 August ll August 20 and Sep

tember 9 1977 These rates were the lasteffective rates which could be applied

to the commodities prior to certain rate changes which took place in May 1977

when the rates increased to 146 W for Sea Land initially and later to

134 WM on June 19 1977 Sea Land rated the commodities in question

under the 134 WM rate because the shipments took place after June 19

1977 when that rate went into effect The essence of the dispute therefore is

the question whether these items should have been rated at 134 Wand

145 50 W or at 134 WM Since the commodities produced more mea

surement tons than weight tons per shipment the latter rate results in higher

freight A determination of which rate should have applied furthermore de

pends upon an interesting and perhaps unprecedented question of tariff law

namely if a carrier publishes a rate increase on less than statutory notice and

also increases the rate on proper notice can either the first increased rate or the

second increased rate be applied lawfully to subsequent shipments In other

words if a rate is filed with the Commission upon less than statutory notice

but the rate is not rejected under section 18 b 4 of tpe Act under what

circumstances can the rate be charged and the shipper required to pay the full

amount of freight with no right to future freight refunds

In its answer Sea Land admits the essential facts concerning the four ship

ments and concedes that in May of 1977 there had been a short notice rate

increase applicable to the commodities in question Sea Land denies that it

assessed rates other than those lawfully in effect at the time of the shipments

I

This decision will become the decision ofthe Commission in the absence of review thereof by the Commission Rule 227 Rules

of Practice and Procedure 46 CF R 502 227
528 FEDERAL MARITIME COMMISSION

however Nevertheless Sea Land states in its Reply to Complaint 

acquiesces in a Federal Maritime Commission determination that w

for reasons of tariff publication error alleged by Complainant or beca

effectuation of an increased cost to the shipper on less than the notice re

by statute Complainant has been overcharged as claimed Rep

page paragraph XX

Notwithstanding Sea Lands apparent willingness to acquiesce in a 

ment against it which would have required it to pay DuPont over 17 

reparation it was apparent that the record was insufficiently develo

enable meto determine whether there was any basis in fact or law fo

action to be taken AB originally submitted the complaint was supporte

evidence other than relevant bills of lading and packing lists whic

attached Despite the fact that the complaint relied upon several critic

changes and alleged tarifffiling errors no tariff pages were furnished 

over the complaint did not specify which provisions of section 18 of t

were allegedly violated It referred merely to 46 VS C 5817 as 

which allegedly had been violated without specifying which of the 

paragraphs of section 18 of the Act which corresponds to 46 V S C 

were involved Furthermore the complaint referred to a rate incre

141 W supposedly effective on July I 1977 and sought reparation ca

on that rate as the base although there was no evidence that such 

increase ever took place affecting the trade route to Bangkok Mo

although seeking 17 330 38 in reparation DuPont furnished no exhi

its complaint showing how th t sum was calculated The complaint 

ferred to several tariff item numbers without adequate explanation a

commodity descriptions to which they applied did not mention the da

the freight waspaid and referred to amisdescription in part ofthe bill o

dated September 9 1979 the significance of which was unclear Fina

complaint was rather confusing on the theory ofthe case ie whether 

upon short notice tariff filing a bill of lading misdescription and overch

a reliance on a tariff rate which had been erroneously deleted from th

Thus it could not be determined whether section 18 b 2 or 18 b 3 

Act wasallegedly violated or even whether this case should have been 

under the special docket provisions of section 18 b 3 on the groun

there wasan error in tariff filing which caused the shipper to suffer ad

costs The latter possibility could not be dismissed in view of the fact 

Commission s Secretary s files show that a special docket application 

deed filed by the Conference on behalf of this shipper but had to be 

because it wastime barred See letter dated March 29 1978 from Mr 

to Mr Edmund P Webber of the Pacific Westbound Conference 

present complaint constituted an attempt to circumvent the 18O day pr

governing the special docket law the complaint would be subject to d

Icalled the parties attention to the various problems described ab

instructed them to furnish mewith appropriate explanations See my 

Messrs Boyd and Ridlon dated September 6 1979 In response to th

both DuPont and Sea Land furnished detailed affidavits and all pertine

pages See letter from Mr Ripple representing Du Pont dated Oc
FACfUAL BACKGROUND

E l DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 529

1979 and letter from Mr Ridlon representing Sea Land dated October 5

1979 These affidavits and attached tariffpages were ultimately admitted into

evidence together with supplementary testimony and a further exhibit at a

hearing held on November 14 1979 The latter exhibit showed Du Ponts

revised calculation of alleged overcharges

The factual submissions made on October 5 1979 explained many of the

discrepancies and ambiguities in the complaint However a number of prob

lems remained Therefore a prehearing conference and a hearing were held on

November 14 1979 in order to provide a full and clear factual record See

Notice of Prehearing Conference and Hearing October 30 1979 Notice of

Rescheduling of Hearing November 5 1979 At the hearing the positions of

the parties were clarified and DuPont explained that it wasbasing its caseupon

the theory that a short notice tariff filing had occurred in May of 1977 in

violation of section 18 b 2 of the Act which means that Du Pont was

consequently overcharged a violation of section 18 b 3 of the Act Re

spondent Sea Land understood the nature of these allegations and con

sequently did not contend that it had not been provided with sufficient notice

and opportunity to defend itself

As the evidentiary submissions testimony and argument made clear the

essential facts in this case are not disputed and the issue to be determined is one

of law relating to the effect of an admittedly short notice tariff filing which

occurred in May of 1977 To determine that issue it is necessary to have a

thorough understanding of the rather complicated facts surrounding the rele

vant tariffchanges occurring prior to thetime ofthe shipments These facts are

as follows

At one time Sea Land published its own intermodal tariffcovering the ports

involved in this proceeding namely Houston Texas and Bangkok Thailand

In that tariff Sea Land had published a special rate to Bangkok on Weed

Killer amounting to 121 50 per 2 000 Ibs as Item 931 See Sea Land Joint

Container Freight Tariff 201 A However on or about February I 1977

Sea Landjoined the Pacific Westbound Conference s tariffand this weed killer

rate was brought forward in the conference tariff as Item 599 2080 00 under

the description Herbicidal Preparations in the amount of 139 50 per

1 000 kgs This rate however had been incorrectly converted from the impe

rial to the metric system and wasadjusted to the proper metric equivalent of

134 W ie per 1 000 kgs effective April I 1977 See PWC tariff 4th rev

page 518 The Conference tariff also published a rate on fungicidal prepara

tions as Item 599 2075 20 to Bangkok in the amount of 145 50 per

1 000 kgs See tariff 5th rev page 518 The Conference had still another rate

on agricultural chemical preparations as Item 599 2090 00 in the amount of

160 50 per 1 000 kgs Id All of these rates had been published during April

and for most of May 1977

On May 17 1977 the Conference issued two critical tariff notices in two

different pages which changed the situation on these items On one page the
530 FEDERAL MARITIME COMMISSION

Conference deleted the three items 599 2075 20 599 20080 0

599 2090 00 described above and replaced them with a sing

599 2000 00 which had already been published elsewhere in the tar

change was to become effective on May 23 1977 ie on six days not

tariff 6th rev page 518 Item 599 2000 00 was described in the t

Insecticides Fungicides Disinfectants Similar Products N O S 

tariff 8th rev page 516 The effect of this first tariff notice as far 

Land s rates were concerned was to increase the rates on the comm

covered by the previous items 599 2075 20 and 599 2080 00 from 14

and 134 W respectively to 146 W on only six days notice 2

The 

notice issued by the Conference on May 17 1977 announced further c

By this notice those shippers who had been informed that the three p

items were now lumped into Item 599 2000 00 effective May 23 19

also informed on a separate tariffpage on which that Item waspublish

the special rate of 146 W applicable to Sea Land and certain other 

wasgoing to be deleted on June 19 1977 See Tariff 8th rev page 5

additional notice did provide at least 3Odays notice that the rates 

increase from 146 W to 134 WM as of June 19 1977 as far as Se

was concerned because cancellation of the special rate of 146 W 

reversion to the general Conference rate of 134 WM As noted ab

change was an increase because the relevant cargo was a measurem

cargo rather than weight forrating purposes This last increase wasco

by the Conference which publisheda subsequent tariff page on which 

on Item 599 2000 00 was published showing only the 134 WM rate 

Conference members carrying the item to Group 6 destination po

Bangkok Thailand See Tariff 9th rev page 516 issued June 23 

effective June 24 1977 The rate on Item 599 2000 00 Inse

Fungicides Disinfectants Similar Products N O S rema

134 WM until it was reduced to 146 Won September 7 1977 See 

10th rev page 516

To summarize the picture was as follows Any shipper such as D

shipping herbicidal preparations and fungicidal preparations via Se

under previous Items 599 2080 00 and 599 2075 20 respectively we

notice on May 17 1977 that in six days the rate for these product

increase from 134 Wand 145 50 W to 146 W and also that in 33 

rate would be 134 WM In other words on May 17 1977 shippe

notified that as of June 19 1977 the rate would be 134 WM but th

also told that on May 23 1977 there would be an interim rate inc

146 W

As of June 19 1977 therefore the applicable rate was 134 WM 

fore when the four shipments were tendered and carried by Sea Land 

July and September 1977 insofar as the fungicide and herbicide rat

applicable to the commodities shipped Sea Land rated them at 13

The first shipment moved under a bill of lading dated July 16 1977 

shown on the bill of lading as Herbicidal Preparations The second s

Thetarift 1n eftect at ha time oIlhaMay 17 notioalhowa that a numhar01 U aIIocharpd aopecIal ra

but that the pneral ConfCRRCe rale wu 134woiaht or meuure Sft Tarift 8th rev P8ae 16
EI DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 531

moved under a bill of lading dated August 11 1977 and was shown as

Fungicides N O S and Herbicides N O S The third shipment moved

undera bill oflading dated August 20 1977 and wasdescribed as Insecticide

Dry N O S with further indication that the product was a poison The

fourth shipment moved under a bill of lading dated September 9 1977 and

was described as Fungicides and Weed Killers Du Pont furnished evi

dence showing that the weed killers were in fact herbicidal preparations 3

However that portion of the shipment described as Fungicides on the bill of

lading according to evidence furnished by Du Pont consisted of a particular

type of fungicide a product known as Tersan 75 which consists of Dith

iocarbamic acid fungicidal preparations except household and industria

This portion of the fourth shipment was rated by Sea Land under Item

599 2065 00 of the tariff Dithiocarbamic Acid Fungicidal Preparations

Except Household and Industrial which published a rate of 145 WM See

Tariff 11th rev page 517 Du Pont does not contest the rating of this portion

of the shipment See Affidavit of Mr Frank E Baldwin Supervisor Liner

Rates and Services Ex I at 4

Except for that portion of the fourth shipment which consisted of Ter

san 75 where there is no dispute between the parties Sea Land rated the

herbicides fungicides and insecticides which comprised the bulk of the ship

ments under Item 599 2000 00 Insecticides Fungicides Infectants Simi

lar Products N O S at 134 WM and they were rated on the M

measurement basis In each instance Du Pont claims that the correct rates

should have been the rates applicable before the notices ofincreases wereissued

on May 17 1977 These rates were 134 W for herbicidal preparations

Item 590 2080 0 and 145 50 W for fungicidal preparations Item

599 2075 20 which items as noted were deleted and consolidated into Item

599 2000 00 In a special exhibit DuPont shows that it paid Sea Land addi

tional freight in the amount 17 782 70 under the 134 WM rate as compared

to what it would have paid under the earlier rates Ex 3

4

Therefore Du Pont seeks an award of reparation in that amount and

according to its original complaint interest and or suchother sumsas in view

of the evidence the Commission shall determine that Complainant is entitled

to receive Complaint at 4

DISCUSSION AND CONCLUSIONS

As noted earlier the issue for determination concerns the effect of the two

tariff notices of rate increases issued on May 17 1977 on the application of

rates for shipments occurring during July through September 9 1977 In other

J

See Exhibit I Affidavit of Frank E Baldwin Du Pont s Supervisor Liner Rates and Services at 4 5 Sea Land does not

dispute the fact that the commooity was a herbicidal preparation Tr 29 30

4 Exhibit 3 shows that Du Pont has revised its earlier claim for reparation which was 517 330 38 as shown in the complaint

and now seeks 517 782 70 The reason forthe revision relates to Du Pont s earlier failureto rate a portion of the second shipment

under previous Item599 2075 20 Fungicidal Preparations whose rate was 145 50 W rather than 134 W which Du Pont

is seeking to have applied for the remainder of the shipments except for that portion of the fourth shipment containing Tersan

75 as discussed above Moreover Du Pont had to recalculate its original claim which had been based mainly upon a rateof

SI41 W which Du Pont mistakenly believed would have been the applicable rate after a July I 1971 general rate increase

Tr 10 18 No such increase affected these rates for the destination ports involved however Tr 12
I

I

532 FEDERAL MARITIME COMMISSION

words does the fact that on May 17 1977 the Conference and Se

gave short notice six days of a rate increase when deleting Items 599 

and 599 2075 20 and incorporating them into Item 599 2000 00 an

same time gave notice that the rate on Item 599 2000 00 would 

effective June 19 1977 to 134 WM make it unlawful for Sea Land 

that 134 WM rate on later shipments

As clarified at the hearing it appears that Du Pont is claiming 

proper rates that should be applied to the four shipments except 

portion of the fourth shipment consisting of Tersan 75 should be 

applicable to Items 599 2080 00 Herbicidal preparations and 599 

Fungicidal preparations which had been deleted by the first tariff

May 17 effective May 23 1977 DuPont believes that the short notice 

of these items makes application of the 134 WM rate for Item 599 

which had gone into effect on June 19 1977 unlawful This is bec

DuPont views the matter the two items were deleted on only six ay

not on 30 days as required by section 18 b 2 of the Act sIn ma

argument Du Pont made clear at the hearing that it was relying solel

question of tarifflaw and wasnot claiming that it had relied on the ear

or any representations to DuPont prior to shipment that the earlier rate

be charged on the shipments In other words Du Pont is not making 

for equitable relief under the special ocket provisions of section 18 b 

is not claiming that it had been quoted the earlier rates on which it h

or that it had believed the earlier rates would apply before booking 

ment Tr 40 On the contrary counsel for Du Pont stated that the 

overcharge wasuncovered through normal auditing procedures some ti

the shipments took place and that no one at DuPont who booked the s

had a daily familiarity with the tariff rates Tr 39 40 Counsel for 

made clear that Du Pont paid the rate filed at the time of the s

134 WM as it believes it was required to do but believes that it 

the right to sue for recovery of the allegedly unlawful charges unde

22 of the Act as a matter of law Tr 4041 In short Du Pont is co

that it was overcharged unlawfully because of Sea Land s deletion 

earlier rates on Items 599 2080 00 and 500 2075 20 on short n

May 17 1977 effective May 23 1977 and that it is now entitled to 

the overcharge in effect returning the rate to those rates in effect 

May 23 1977 DuPont concedes that it has been unable to find much 

in support of its position Tr 35 36 but does rely upon one case 

Chicago M St P P R Co v Alouette Peat Products 253 F 

9th Cir 1957 and another more recent IC C case which cited 

Peat namely Shobe Inc v Bowman Transportation Inc 350 IC 

1975 Du Pont contends that in Alouette Peat the Court allowed sh

Although not clearly articulated by Du Pont at the hearing one could conceivably araue that the charJinB of ar

134 W which Du Pont believes to be the only ratelawfuUy applicable to the four lhipmentl violated lOClion 18 

because Sea Land charged a rateother than that lawfully applicable This arJUmcnt is lOm whattheoretical B88u

that the only ratea properly specified in the tariff were the earlier ratoa of 134 Wand 145 50 W and that any d

them by charains 134 WM was an act ofcharsins arateareater than that speciftcd inthe tariff Sinoothis conten

rests upon a determination of the effect of the short notice filins In May on the effectivenosa of tariff ratcl in 

September the critical issue remains whether the earlier shortnotice has any effect on the later iatca i e whethe

section 18 bX2 which requires JOdays notice of rateincreases requires that the later rate be held void
EI DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 533

recover overcharges because rail carriers had published increased rates on less

than required statutory notice as well as exceeding permissible rate levels and

that the recovery was allowed although the shipments took place some time

after the short notice increases had gone into effect Tr 33 38 In Shobe

DuPont contends that the IC C asserted that a statutory violation in filing

tariffs would form the basis of relief for shippers See letter from Raymond

Michael Ripple attorney for DuPont dated November 21 1979 addressed to

me Although the rate on file might have been legal and therefore had to be

paid by DuPont DuPont claims that it wasnot lawful because ofthe defective

filing in May and therefore that Du Pont is now entitled to recovery

Tr 45 46

At the hearing counsel for Sea Land rebutted DuPont s arguments on the

law Tr 46 51 Counsel conceded that there was indeed a lack of case law on

the particular point However he argued that Alouette Peat case did not

merely involve a carrier s filing rate increases on short notice but rather filing

rate increases at unlawfully high levels as well as on short notice in violation

of a specific order of the IC c which had fixed a permissible level of rate

increases as well as the particular notice period to be followed by the carriers

By violating the order of the IC C according to counsel the carriers had

committed an act that was void and unlawful and the increased rates were in

effect already rejected by the IC C In the present case however the carrier

rate filings were not rejected by the Commission under section 18 b 4 of the

Act which authorizes rejection under certain circumstances Therefore ac

cording to Sea Lands counsel the filing was not void at the outset although

filed on short notice and although the statutory violation cannot be excused

once the statutory notice period has run the filed rates may become legal and

lawful Tr 516Counsel stated furthermore that States Steamship Company

FarEastjUSA Household Goods TariffNo 2FMC 9 19 FMC 793 1977

a casewhich Icited to both counsel and requested their views is more pertinent

than Alouette Peat as establishing that an unrejected tariffis not void even if

filed defectively

After considering arguments of counsel and consulting case law I

find that

Du Pont s contentions are not tenable either in fact or in law and that Sea

Land s views as to the correct legal conclusions to be drawn in this case are

more reasonable Although the Conference and Sea Land did in fact file a

defective tariff notice in May 1977 not only was this filing never rejected by

the Commission but it had long since expired and receded into history by the

time of the four shipments in question To hold that a short notice filing in

May 1977 should render rates applicable to shipments in July through Sep

tember ineffective would introduce adangerous and unsound concept into tariff

law something akin to corruption of blood i e a permanent taint running

through the tariff many months after the 30day notice period required by law

had expired Such a doctrine could expose a carrier to claims for many years

after a short notice filing had been made even if there were absolutely no

I

In counsels

exact words In my view conceivably passage of time alone and the expiration of the 30 day statutory

requirements would be adequate to accomplish that purpose Tr 51
534 FEDERAL MARITIME COMMISSION

equities on the side of the shipper i

e even if the shipper had no idea 

not carewhatthe rate had beenwhcn it booked the shipment and conse

suftered no loss in profits because of payment of the applicable tarif

Moreover to give shippers awards of money for short notice tarif

occurring months before their shipments would in effect be giving the

greater protection than the statute which limited the notice period to 3

intended Finally this is not even a case in which the assailed rate wh

been applied by the carrierto the shipments wasthe same rate which h

filed on short notice sinCe the rate filed on short notice was 146 W 

rate which wasapplied was 134 WM Had Sea Land attempted to cha

146 W rate to shipments occurring within the first 30 days of the M

tariff filing Du Pont might well claim the protection of the 3Oday 

established in section 18 b 2 of the Act In this case howover I

grounds for extending such protection well beyond the 3Oday period 

voiding another rate which had been filed on statutory notice

Principles of Tariff Law

DuPont does not dispute the legal principle that a tariffrate which 

and not rejected is legally applicable and must be paid by the shipper 

a correct statement of applicable tarifflaw DuPont is also correct in a

that a shipper after paying the legal rate on file may sue thereafter 

recovery of damages where there is a violation of law The Commiss

acknowledged these principles Thus in States Steamship Compa

EastUSA Household Goods TariffNo 2 FMC 9

supra the Com

was called upon to render a doclaratory judgment regarding the effec

allegedly defective tariff cancellation notice In that case the carrier 

Steamship Co had at one time been a party to a mutual transh

agreement with another carrier Lykes Bros Steamship Co Inc by wh

two carried military household goods from Far Eastern ports to U S 

Coast and Gulf ports The agreement was canceled on January 10 19

the implementing tariff FMC 9 was inadvertently not canceled by t

ties States finally noticed the failureto cancel the tariffand sent a tele

Commission on May 21 1976 announcing the cancellation of TariffF

Under the Commission regulations then in effect 46CF R 1536 6 

States wassupposed to follow tile telexwith a permanent tariffpap in 

This wasnotdone The permanent pagewaanot filed until July 29 

The shipper Military Traffic Managoment Command of the Departm

Defense MTMC argued among other things that the May 21 tar

was a nullity because it caused an in in rates on less than 

notice and because States violated the Commission s regulation requir

followuppermanent page Altetnatively MTMCargued that the tariff

legally canceled until August 29 1976 The Commission however fou

the May 21 filing effectively canceled the tariff notwithstanding the fa

file the permanent page within the time required by the regulation Mo

the Commission found that the May 21 notice did not result in an incr

cost to the shipper but rather a cancellation of a service The Com
E DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 535

rejected the nullity or void ab initio theory as to the May 21 filing The

Commission followed the general rule that once accepted for filing a tariffrate

becomes the legal rate which must be applied by the carrier notwithstanding

defects in the filing and that this situation prevails until the Commission

cancels the tariff after an appropriate proceeding in which event the tariff is

void thereafter Relief for shippers injured by defective tarifffilings are deter

mined in section 22 proceedings after the tariff has been applied not by

declaring the tariffvoid retroactively In pertinent part the Commission stated

A tariff has one major purpose to prevent rebates and other types of unjust discrimination by

publicly stating the rates to be charged all eligible shippers Tariff filings areneither adjudicatory

matters norfinally determinative of individual rights or privileges Once accepted by the Commis

sion a tariff must be adhered to by publishing carrier and shipper alike Citation omitted

Damage actions for illegal tariff provisions arise after the fact and are resolved by means of

section 22 proceedings Footnote omitted To retroactively declare a duly accepted tariff void for

noncompliance with section 536 6

c 5 would contravene the regulatory scheme established by

most Federal common carrier statutes including the Shipping Act Once accepted a tariffmay

be canceled only after the Commission has after appropriate proceedings found it to be inconsis

tent with some other provision of the Shipping Act or the Commission s Rules Once the

temporary filing was accepted by the Commission Footnote omitted it became legally binding

upon States Line Lykes and any shippers of military household goods employing the service

described therein

19 EM C at 797 798

To emphasize that the Commission did not accept MTMCs argument that

a defective tariff filing is void ab initio the Commission explained that some

times the Commission is unable to reject a tariff as soon as it is filed because

of lack ofopportunity to take immediate action for example when the tariff

telex is received after hours as happened in States But when the Commission

finally rejects the tariff this does not mean that the tariff was void ab initio

Rather it means that the tariff was never accepted 7

The principle that filed rates are legally applicable and must be applied at

the time of shipment notwithstanding defective filings or inherent unlawfulness

of the rates subject to possible claims for recovery of damages in appropriate

proceedings is well established in the law See the discussion of the Court in

A ouette Peat 253 F 2d at 455 n 5 citing Louisville N R Co v Maxwell

237 U S 94 97 1915 and Davis v Portland Seed Co 264 U S 403 425

1924 In short the rate on file must be observed even if it does not conform

to all requirements of substantive law until the finding ofunlawfulness is made

because whatever its defects it is the only legal rate See also Valley Evapo

rating Co v Grace Line Inc 14 F MC 16 19 20 1970 a rate may be

legal in the sense that it is the regularly published rate and yet be unlawful if

it violates other provisions of the act Docket Nos 73 17 74 40 Sea Land

Service Inc Rule on Containers 18 SRR 553 556 1978 Cincinnati

J

Thus the Commission explained

It is generally assumed that a

tariffwhich is not rejected bytheclosc ofbusiness on its statedeffcctivcdate has been accepted

fOf filing Difficulties arise in the case of after hours telex lilings such as Stale Line sMay 21 1916 cancellation notice In

such situations the Commission must have a reasonable opportunity to review the filing and a

rule of reason has been

applied If the tariffsubmission is in proper ronn it is accepted relTOOCtive y If significant errorsexist then the tariff is

rejected as expeditiously aspossible on the theory that it was never accepted andnot on the theory that it was void Dbinitio

19 r M c at 798 n

15
536 FEDERAL MARITIME COMMISSION

NO O T P Ry Co v CIIesapeake O Ry Co 441 F 2d 48

4th Cir 1971 e ven if the Commission later determines that the 

not mandatory the tariff so long as it is in effect must be treated as 

it hasthe force oflaw 13Corpus Juris Secundum Carriers S 302 at 69

The principle that a rate on 6le is the only legally applicable rate at 

shipment and that rejection of the tariffby the Commission renders us

rate unlawful for the future but does not make it void ab initio is su

by other authorities Section 18 b 4 ofthe Act for example which is 

to provisions in the Interstate Commerce Act states

The Commission shall by regulations prescribe the form and mannerin which the tariffs 

by this section shall be published and flIed and the Commission is authori2ed to reject 

filed with it which is notin conformity withthis section Upon rejection by the Com

a

tariffshall be void and Its lISe unlawful Emphasis added

It has been held therefore der similarly drafted statutes that t

tariffrates are applicable and do not become unlawful ifnot rejected T

Phillips Petroleum Co v Akron C Y R Co 308 IC C 257 195

Interstate Commerce Commission dismissed a complaintfiled by a ship

alleged that railroads had increased rates on less than statutory not

sought a refund of alleged overcharges in an amount approximating 

plus interest The rate filing had been done pursuant to a court or

nevertheless had the effect of increasing costs on short notice The IC 

not reject thefiling even though the court s order did not require the ra

to file the increases on less than statutory notice The IC C noted 

rejection authority under former section 6 6 ofthe Interstate Comme

which is similar to section 18 bX4 ofthe Shipping Act is not mandato

that the Commission was not required to reject defective tariffs but 

tariffs were rejected they become void prospectively not retroactively 

estingly the IC C refused to follow the decision in Alouette Peat upo

DuPont in this case relies and theshipper in that case had relied in atte

to return to the previously filed lower rates finding that the carriers in A

Peat had not merely filed rates on less than statutory notice but h

violated the Commission s order imposing a maximum rate level so t

Court had refused to give effect to the rate increases which were not f

have been changed legally 308 I C C at 259 In commenting upon 

cretionary rejection authority the IC C stated

Under section 6 6 the Commission is authorized to reject a schedule which does not co

the provisions of section 6 or the regulations prescribed thereunder and section 6 9 pro

the Commission may reject and refuse to file any schedule that is tendered for filing w

notprovide and give lawful notice of its effective date Both ofthese paragraphs pro

any schedule so rejected by the Comm ion shall be void and its use shall be unlawful 

be noted that the Commifsion is notrequired to reject any schedule and that a schedule 

void and Its use unlawful only upon Its rejection by the Commission Emphasis adde

308 LCC at 260

The IC C went on to say that since the tariffrates were not rejected 

Commission they had to be applied and were valid even if they v

section 6 or regulations prescribed thereunder 308 IC C at 260 Th

Commission stated that the assailed rates could not be found inapplica
E DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 537

unjust and unreasonable solely because they were filed on less than statutory

notice without the prior consent ofthe Commission Id Finally the Commis

sion noted that there was no evidence that the assailed rates were inherently

unjust or unreasonable orotherwise unlawful and dismissed the complaint Id

In Shobe Inc v Bowman Transportation Inc 350 LC C 664 1975 a

case which Du Pont furnished and claims to support its position the IC C

similarly dismissed a complaint in which a shipper had alleged that the carrier

had improperly charged rates which had been increased without utilizing the

proper tariffsymbol required by pertinent regulations The ICC reversed the

initial decision of the Administrative Law Judge who had recommended that

the shipper be awarded reparation plus interest in reliance upon Alouette Peat

The LC C however reiterated that a tariff is not void automatically even if

it was filed defectively but only void when rejected by the Commission under

former section 217 a of the Interstate Commerce Act comparable to former

section 6 6 of the Act 350 LC C at 670 Furthermore the LCC again

refused to follow Alouette Peat in deciding the complaint case before it in

Shobe Itstated that the court in Alouette Peat had found that the rates filed

in the tariffhad to be collected by the carrier and did not hold that the tariff

was void but rather that the rates were unlawful because not made effective

in the proper manner Id The LC C also distinguished Alouette Peat and the

complaint case which involved a violation of IC C regulations rather than

statutory notice provisions by stating that there wasno specific administrative

remedy for the statutory violationin Alouette Peat whereas in Shobe there was

an exclusive remedy for violation of the LCC s

regulations namely rejection

by the Commission and the voiding of the tariff Id Again as in Phillips

Petroleum the IC C found no reason for a

reparation award and found that

the assailed rates had not been shown to be unjust unreasonable or otherwise

unlawful Id

In other cases the ICC has dismissed complaints alleging tarifffiling errors

and adhered to the principle that the tariffrates unless otherwise unreasonable

or unlawful should be charged and become void only after the Commission

actually rejects the tariffs under the appropriate statutory provisions cited

above See e g Heavy and Spec Carriers TariffBur v U SA C Transport

302 IC C 487 1957 and cases cited therein Cf also Aaacon Auto Trans

portv State Farm Mut Auto Ins 537 F 2d 648 656 2d Cir 1976 cert den

429 U S 1042 1977 and Aluminum Products Dist v Aaacon Auto Trans

port 549 F 2d 1381 1385 10th Cir 1977 indicating the courts views that

tariffs are void after rejection by the IC C

Notwithstanding this case law whichdemonstrates that reparation awards in

cases involving old defects in tariff filing are virtually non existent Du Pont

relies upon the aforementioned Alouette Peat case in support of its claim As

already mentioned that case has consistently been distinguished by the IC C

itself and in this case as counsel for Sea Land has contended the distinctions

must be considered In Chicago M St P PR Co v Alouette Peat

Products supra 253 F2d 449 the Court of Appeals for the Ninth Circuit

affirmed a lower court decision directing the IC C to award recovery of

overcharges which had been collected by railroads under rates which had been
538 FEDERAL MARITIME COMMISSION

increased by the railroads on shortnotice in violation ofan IC C order l

the level of the rates The court was impressed with the fact that the ra

had exceeded the maximum rate levels which the IC C had twice foun

reasonable and had therefore exacted a greater increase than the Com

had found they were entitled to 253 F2d at 457 It found that t

was one of overcharges because shippers had been required to pay c

of pocket that should not have been required of them and the Court 

that it would be unthinkable if they could not recover 253 

457 The Court however went beyond the fact that the rates had ex

maximum permissible levels and agreed with the District Court that the 

ery should be based on the last rate in effect prior to the rate increases 

the Court felt had been instituted illegally and which therefore could b

no effect 253 F 2d at 453 456 As counsel for Sea Land views this si

the Court in effect rejected the tariff filing because of its violations 

IC Cs orders regarding notice and the proper rate level although the 

itself had not rejected the tariff Tr 48 In other words the Court b

the filing should have been rejected at the outset and took steps to ensu

shippers would be treated just as if the tariff had been rejected and th

made void ab initio

As far as the parties are aware Alouette Peat is the only case whic

so far as to invalidate filed rates from the moment of their filing wh

agency did not reject such rates and to award recovery on the basis of 

rates which had been filed properly As noted the prevailing view is th

rates are applicable until rejected and recovery under filed rates is lim

cases in which there is something unreasonable discriminatory or ot

inherently unlawful with the rates Certainly on the basis of the stat

made by the Commission in States supra this Commission as wel

IC C does not hold to the view that a tarifffiled with some defect tha

justify rejection is void ab initio and that shippers are entitled to file 

against the filed rate seeking reparation awards during the time the ra

on file without showing that there was something unreasonable or u

about the rate itself Analysis of the void ab Initio theory which Du P

effect seems to advocate and which the Court in Alouette Peat seems 

followed reveals great dangers and potentials for abuse 8

The Problems With the Void Ab Initio Theory

The problem with the theory that a defective tariff filing can never b

with passage of time and can never be given effect is that carriers tar

become uncertain and the carriers may be exposed to liability and innum

I

Oocasionally courtswillfind aftled tarifl 10 bei ftoctivt orvoid even retroactiVCIly butin CBHI inwhich there I afa

oflaw that cannot be cured by the mere pllll8p of time For example a carrier rates may be increuod by a tari

association which failed to obtainthe camer conHntrequired by law ora tarift provlllon may restrict liablUty o

unlawfully orthe carrier may nothave the requisite operatina authority undorlaw See e Axnn SOIU Lbr Co 

IslaM R Co 466 F Supp 993 E DNY 1978 auociadon ftled tariff without carrier oonlOnt BOlton Ma

v Piper 246 U S 439 44 1918 unlawrullimkatlon or hdbilky provlaion In tarU llw J DiIIr Tralll l 

214 F Supp 941 W D Pa 1962tarllfftled oullidopo or carrier cortllleate or authority So Pac Co v U

44S 1962 tarifflllod contrary to statuto srantlnl Ooyornmont poolal dilCOuntl The pracnt calC howevor con

filing on Iou than JOdays notice rather than IOme typlJ or dcrocl that timo cannIMr cure
EI DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 539

claimsfor refunds ofovercharges with notime limitation For example suppose

a carrier in January 1960 inadvertently publishes a rate change on widgets

which no one notices results in an increase and suppose the increase takes

effect in one week but the tariff is not rejected Ten years later the rate on

widgets may have been increased ten or more times to keep pace with inflation

and each rate increase may have been filed on proper 30 lliys notice Never

theless some enterprising shipper notices that there had been a short notice

filing ten years ago and argues that the tariff rate on widgets has been cor

rupted by the ancient defective filing Therefore the shipper seeks reparation

measuring his damages as the difference between the 1970 rate say 150 per

ton and the 1959 rate before the short notice increase of say 50 per ton

Such a claim is obviously absurd Ortake another example Let us suppose that

the increased rate on widgets was filed on short notice in January 1969 and

never increased since that time In late 1970 the enterprising shipper notices

that almost two years ago there was a short notice increase which was never

rejected Can he therefore argue that the defective filing was never cured by the

passage of time In other words is it reasonable to permit him to claim an

overcharge and seek to return to the 1968 rate level on the grounds thatthe rate

was void ab initio Should carriers be exposed to multiple suits and claims by

shippers whenever they pay the freight because of an error occurring long

before they booked the shipment and which caused them no loss of profits or

other special financial harm What doctrine of law holds that shippers are

entitled to that much protection against tariff filing errors Section 18 b 2

upon which Du Pont relies limits protection to 30days notice only and

furthermore states that rate increases shall become effective not earlier than

thirty days after the date of publication and filing thereof with the Commis

sion As counsel for Sea Land argued it is reasonable to conclude that a

short notice rate increase cannot be given effect within the first 30 days but

once that statutory period has expired there is no reason to deny the validity

of the rate 9After all the 3Oday period is all the notice that shippers are

entitled to have by law Hence there is no compelling reason in law or logic to

invalidate a rate which had been filed on short notice months or years ago and

to award refunds offreight to shippers on the basis of a previous lowerrate filed

long ago Such action would not only afford far greater protection to shippers

than the law intended but would even award shippers refunds in cases such as

this one where the shippers do not claim any special financial injury caused by

amistaken impression that an earlier lower rate was still in effect Such action

by the Commission might also invite an industry of rate filing auditors who

would search old tariff pages looking for defective filings so that they could

recommend that shippers file complaints seeking recovery of alleged over

charges although shippers had felt no injury at the time of shipment

lO

The idea that a

rate increase filed on less than 3Odays notice may become valid after the 30 days have expired but should

not be given effect within the first 30 days in other words that the defect cures itself with the passage of time finds support in

States supra In that case the Commission held that a

tarilfcancellation notice filed on May 21 1976 effective immediately was

valid However in its decision the Commission commented that had the tariffnotice resulted in a rate increase it could not have

taken effect until June 20 1976 See 19 F M Cat 797

10Since payment of an alleged overcharge can constitute the beginning of acause of action a shipper could conceivably pay

an alleged overcharge years after the defective filing ofa

rate increase and file acomplaint within twoyears after payment under

2 1 UliQn IncIv

eoat s

t

L

M

oo I 5 LI 0 mean to imply that Du Pont
540 FEDERAL MARITIME COMMISSION

In the Present Case the Rate Under Attack

Was Not the Rate Filed onShort Notice

The previous discussion demonstrates that rates which had been incre

one time in the past by defective notice should nevertheless be held app

to shipments occurring many months in the future and as Ihave sug

applicable to shipments occurring more than 30 days after the origi

fective filing Thediscussion assUmed that the rates which were applied 

shipments and which were attacked were the same rates which had bee

defectively in the past In the present case however as the factual dis

showed the rate which wasapplied to the shipment and which is under 

134 WM is not the same rl te which had been published on shor

146 W Under DuPont s

theory then not only should the Commissio

a rate to be ineffective or void ab initio which had been defective

months before butit should also hold a subsequent rate invalid as well C

to its logical conclusion this could mean that any present rate co

invalidated if it waspart of a chain of increases in which the first rate i

had been filed on less than 3Odays notice

It will be remembered that prior to May 23 1977 the rates for he

and fungicidal preparations were 134 W and 145 50 W respectively 

ever on May 17 1977 two tariff notices were published and filed 

Conference One canceled the two previous rates and referred ship

another commodity item The other announced that Sea Land s special 

that item which was 146 W would expire on June 19 1977 in favo

Conference s general rate of 134 WM This latter notice was publis

more than 3Odays notice The first notice however attempted to effec

rate increase on only six days notice Clearly under the doctrines di

above no effect could be given to the first notice as regards a rate incr

146 W and no one is attem ing to apply such a rate in any event 

second notice announced an increase on Item 599 2000 00 on full s

notice resulting in the rate of 134 WM which was applied to Du 

shipments from July through September Nevertheless Du Pont seeks 

this 134 WM rate declared void and ineffective for purposes of th

Since the 134 WM rate had been filed on full statutory notice 

146 W rate had not been it ms clear that

it is the 146 W rate 

should be declared ineffective and void not the 134 WM rate In other 

shippers like Du Pont had aright to consider the special 146 W rat

defectively filedand subject to paration action ifSea Land had attem

charge it Moreover since that special rate was announced as expi

June 19 1977 there is no way in which that rate could have been give

30 days after publication underthe theory that a short notice filing can 

itself with the passage of time However the second notice gave shippe

than 3Odays notice that on July 19 1977 the rate on their commoditie

II In all faimeas to Du Pont I ahould mention that Du Pont dOlI not HOrn to be urain IUch an oxtromc prinoip

8upponinl the idea of indefinite exposure of carrien to claim bocIUH of old tariff fiUrII errorsCounsel for Du Po

at the bearina in IOIponsc to my commentl onsuch doctrinca that his contontion was much narrowerand up

provisiOfll of lClClion 18 b 2 and the doctrine enundated inAlou PIal Moreovor hOlpociftcaUy asked tbat the cu

to the facts involved heMin 80 that Du Pont could be awanled nlparation and he did not to Clltabliah o

en

liabilitv See dlscullion at SI 54 of the hoarinltranlKlrlDt
E DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 541

increase to 134 WM and there is no basis to hold that this rate should not

be held applicable because ofthe other filing especially since the shipments did

not even commence until July 16 1977 Whatever the merits ofAloueUe Peat

at least the rates which were assailed and held ineffective by the Court were

the same rates which had been published on inadequate notice and which had

violated a specific order of the IC c In short Ifind no basis in law by which

I can find that the 134 WM rate under attack here should be held to be

ineffective or void ab initio

A Grant ofDu Pont s Claim in This Case May

Indirectly Contravene the Special Docket Law

There is another reason why acceptance ofDuPont s contentions in this case

may lead to possible abuse in addition to the problem of creating uncertainty

about the validity of carriers filed rates for an indefinite period of time when

ever there had once been a defective tariff filing This relates to the fact that

there had been a special docket application filed on behalf of Du Pont by the

Conference which had to be rejected because it was filed beyond the 180day

period permitted by section 18 b 3 as amended by P L90 298 If in fact

there was a tariff filing error in May and Sea Land would have preferred to

assess a rate other than 134 WM to the commodities shipped during July

through September had the error been detected prior to the time of the

shipments the law did provide a special equitable remedy However that

special docket application could not be considered because of its untimeliness

and the Commission should be careful not to circumvent the jurisdictional

requirements which the application failed to meet by granting the same claim

under a strained theory of law Such a result is also unwarranted when the

shipper such as Du Pont here makes clear that it is not basing its claim on

reliance on a lower quoted rate or carriers misrepresentation but rather on a

strict construction of tariff law 12

Iconclude therefore that there is no basis in law for meto find that the rate

which Du Pont paid for the four shipments during July through September

namely 134 WM should be declared ineffective invalid or void ab initio

because of certain tariff filings in May of 1977 Ialso find that the subject rate

was filed on full statutory notice and that the rate which wasnot applied and

could not have been given effect wasthe special rate of 146 W which expired

on June 19 1977 Moreover Ifind that there is no basis in equity and no

showing of unlawfulness or unreasonableness in connection with the 134 WM

rate which could support a finding that Du Pont suffered financial injury for

which it now deserves reparation under section 22 of the Act

Il

As I mentioned above a special docket application was rejected by the Commission s Secretary because it was filed beyond

the pennissible time limit as prescribed by law Counsel for Du Pont at the hearing expressed no knowledge ofthe facts contained

in the application and deemed them 10 be irrelevant because his case was based upon principles of tarifffiling law not upon

equitable doctrines found in the special docket cases Tr 38 41
542 FEDERAL MARITIME COMMISSION

ULTIMATE CoNCLUSIONS

DuPont is seeking to have the Commission declare a rate on file duri

through September 1977 to be ineffective and void as regards four sh

made during that period of time It bases its claim on a theory of la

because there had been a short notice filing of one rate 146 W t

sequent rate which was charged and which was filed on adequate s

notice 134 WM wasalso ineffective and void Theoverwhelmingview 

authorities in tarifflaw is that a tariffrate on file is the only legal and e

rate that can be charged by the carrier and that it remains so un

rejection by the agency concerned under the rejection authority confe

law Furthermore if any shipper has suffered harm because of the ra

shipper cannot merely claim that the rate had once been filed on shor

and should now be declared ineffective or void ab initio Rather the 

must show that there is something inherently unreasonable or unlawfu

the rate and that the shipper suffered injury as a

consequence Othe

refunds of freight are awarded in complaint cases merely because 

defective filings carriers tariffrates become uncertainand subject toat

an indefinite period of time even when shippers have not suffered any 

injury and had not been misled prior to shipment regarding the fact t

rate charged was filed and in effect Theonly exceptionto this rule ofta

is the special docket procedure authorized by section l8 b 3 of the 

which shippers have been injured when relying on a tariff which cont

error This is not that case

Du Pont relies upon one court case A ouette Peat supra in suppo

claim However in that case the court invalidated a rate increase wh

violated not only the notice provisions of law but also a

specific orde

IC C as to rate levels Moreover in that case the rates under at

the shippers werethe same rates which had been filed improperly In t

the rate attacked by Du Pont is not the same rate which had been affe

a short notice filing in violation of section 18 b 2 of the Act Even if t

were the same however the more reasonable rule would seem to be 

short notice filing corrects itself after 30 days i e that the rate can b

no effect for the first thirty day period but becomes effective therea

declare filed rates void retroactive to the date of filing would not only 

great uncertainty as to the validity of carriers filed rates but might we

an industry of ratefiling auditors seeking to locate old defects in tariff

caused no harm to any shipper at the time ofshipment but could now 

the basis for complaints alleging overcharges

A final cautionary word is warranted in this case because of the fa

relief for Du Pont had once been sought in the form of a 

application which had been filed by the Conference but had to be 

because it was filedbeyond the 18O day period permitted by the 

provisions of section 18 b 3 of the Act Should Du Pont s argum

accepted and it be granted the same reliefthat was sought in the 

application the Commission may be circumventing the requirements 
WASHINGTON D C

January 18 1980

5 NORMAN D KLINE

Administrative Law Judge

E IDU PONT DE NEMOURS AND co V SEA LAND SERVICE INC 543

special docket law on the basis of a strained theory of law in a case in which

Du Pont does not even claim relief on equitable grounds

Iconclude therefore that there is no basis in law fact or equity for me to

find that the rate which DuPont paid for the four shipments should be declared

ineffective invalid or void ab initio and no showing that Du Pont suffered

financial injury for which it now deserves reparation under sections l8 b 2

and 22 of the Act
FEDERAL MARITIME COMMISSION

DOCKET No 79 64

FIAT ALLIS FRANCE MATERIELS

DE TRAVAUX PUBLICS 8A

v

ATLANTIC CONTAINER LINE

NOTICE

February 26 1980

Notice is given that no exceptions have been filed to the January 2

initial decision in this proceeding and the time within which the Comm

could determine to review that decision has expired Nosuchdeterminat

been made and accordingly that decision has become administrativel

8 FRANCIS C HURNEY

Secr
v

FEDERAL MARITIME COMMISSION

No 79 64

FIAT ALLIS FRANCE MATERIELS

DE TRAVAUX PUBLICS SA

ATLANTIC CONTAINER LINE

Finalized February 26 1980

Complaint was not filed within the twoyear period required by section 22 of the Shipping Act

1916 and is therefore dismissed

J Ethan Jacobs for complainant

John A McFarlane for respondent

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGEI

Complainant Fiat Allis France Materiels De Travaux Publics S A Fiat

France charges Atlantic Container Line ACL with violations of section

18 b 3 on a shipment of wheelloaders from New York to Le Havre

France Generally the complainant alleges that on various dates in 1976

Fiat Allis Construction Machinery Inc Fiat Illinois a manufacturer

shipped wheelloaders via ACL from New York to Le Havre Through

clerical error the shipper declared the full cube of each wheelloader as if

shipped with tires and buckets at 2958 CU FT Since tires and buckets

were not shipped on the machines the correct cube of each wheelloader was

2547 CU FT Overcharges are claimed in the amount of 8 00400

In a letter dated July 11 1979 ACL submitted a sworn statement as its

answer to the complaint In its statement ACL says that but for a conference

tariff rule it would have settled this claim when first presented based on the

corrected dimensions as substantiated by documents from claimant 2

Aside

I

Thisdecision will become the decision ofthe Commission in the absence of review thereof by the Commission Rule 227 Rules

of Practice and Procedure 46 CF R 1502 227

1

The tariff rule referred to provides claims for adjustment of freight charges if based on alleged errors in weight or

measurement will NOT be considered unless presented to the member line in writing before the shipment involved leaves the

custody of the member line All other claims foradjUlltment of freight charges must be presented to the Member Line within

six 6 months after the date of shipment North Atlantic French Atlantic Freight Conference Tariff No 3 FMC 4
546 FEDERAL MARITIME COMMISSION

from some mathematical errors which would reduce the amount of the 

to 7 999 00 ACL does not now dispute the claim Further ACLexpress

hope that its response is sufficient so that a hearing and oral testimony w

be required

Initial consideration of the complaint and answer brought to the fo

need for the actual dates of payment ofthe freight charges since the com

stated that All payments were made by claimant within two years 

original date of filing of these proceedings

Itelephoned counsel for complainant on July 31 1979 and requeste

he supply the dates of payment for each shipment He said he would 

them as soon as possible Ireceived no response from counsel and on 

ber II 1979 Iwrote counsel a letter reminding him ofthe telephone ca

giving him until October 30 1979 to submit

t he actual payment dates on the shipments in question These should be supported b

documentary evidence

On October 12 1979 Ireceived aletter from Fiat Allis ofIllinois 3

statin

the dates of payment were coming from France On November 9 1

received the dates of payment

4

After receipt of the payment date a complete analysis of the com

revealed the very definite possibility that the complaint was barred b

2 year statute of limitations set out in section 22 of the Act The a

showed that the complaint was first filed on February 26 1979 an

amended on June 21 1979 that the shipments weremade on various 

in 1976 and that the complaint was intended to be a continuation o

ceedings originally filed as informal proceedings filed in February 3 

Further there was the statement already noted that claimant had 

the freight charges within two years of the original date of filing o

proceedings

By order of November 7 1979 I required complainant to subm

following

1 An explanation of the statement in paragraph Iof the complaint tha

a continuation of proceedings originally filed as informal proceedin

February 3 1978 This explanation should be accompanied by cop

the informal filing and any other evidence supporting the assertio

2 An explanation ofthe statement that All payments were made by C

ant within two years of the original date of the filing of these procee

i e to what date does the statement refer

3 A memorandum showing why the return ofthe complaint by the Ass

Secretary on June 4 1979 and the reflling of the complaint on Ju

1979 does not establish the latter as the filingdate forthe purpose of

the statute of limitations

The submission of counsel for complainant in response to the order sho

following sequence of events

The letter was obviously in the mails when I wrote counsel ror complainant

Contrary to my apccific reqUClt no documontary evidence was submitted in IUPport of tho dates afvcn in the let
EI DU PONT DE NEMOURS AND CO V SEA LAND SERVICE INC 547

On February 3 1978 Inter Maritime Forwarding Co IMF wrote a letter

to the Secretary of the Commission IMF said that Fiat Allis of Illinois had

made a mistake in the cube of the wheelloaders and had asked IMF to obtain

a refund on the ocean freight The letter went on to set out IMFs inability to

recover from ACL because of the tariff rule cited above and concluded

However it is our understanding that you have the authority to review such a case on a special

docket and within the time limit of two years Consequently we hereby request of you a special

docket in this matter and for which we will be presenting to you within a few days complete

documentation to these errors

Trusting this request will receive a favorable reply and that our claim will become effective as

of today we remain

By letter dated February 7 1978 IMF submitted I

a letter from Fiat Allis

explaining their error and outlining the exact cube 2 the original manifest

giving the incorrect measurements 3 a corrected manifest showing meas

urements without bucket and tires and 4 ten sets of documents comprising

freight bills bills of lading and shipping manifests In the letter IMF said that

documents from its file 07 22867 would be sent later because the file had been

temporarily misplaced IMF concludes

We sincerely hope that we have supplied you withsufficient information to clearly indicate the

error made by the shipper on his original manifest and wesincerely hope that you shall be able

very quickly to authorize Atlantic Container Line to amend their manifest to clearly assess the

freight on 2 542 cubic feet per unit so that in turn they will advise their Le Havre office of this

change and accomplish the necessary refund to

SETI INTERNATIONAL

79 81 Rue duo Fg Poisenniere

Paris 9 e France

who paid the ocean freight for the consignee and for which they have notbeen reimbursed for the

overpayment since the consignee has refused to pay same due to the wrong cube on which the

freight was originally assessed

Finally by letterdated February 9 1979 IMF submitted the documents from

its file 97 22867 and concluded

You now have the complete file and we look forward to your early reply and to settlement of

this claim regarding wrong assessment of freight based on an incorrect cube

Now in possession ofthe complete file the Secretary on February 17 1978

wrote IMF explaining that it was correct in its basic understanding that the

Commission could review a claim for overcharges and order a carrier to make

a refund However the Secretary pointed out that the Commission had estab

lished specific procedures for obtaining review none ofwhich had been met by

IMF The Secretary went on to explain the various ways in which such a claim

could be put before the Commission and cited the specific Commission rules

governing them The Secretary returned the letters and documents and sent

copies of the pertinent rules to IMF

Sometme between February 17 1978 and November 8 1978 ACL appar

ently filed some special docket applications Counsel for Fiat France alludes to

them in his memorandum but does not attach them to it They are evidenced

by a letter dated November 8 1979 from the Secretary to a John A McFar

lane Manager Conferences Ocean Pricing Atlantic Container Line In
548 FEDERAL MARITIME COMMISSION

the letter the Secretary returned severiU recently submitted special d

application because they were timebarred The Secretary went on to 

out that it appeared that what ACL was really seeking was authorization 

the Commission to refund overcharges resulting from misdeclaration of 

urement and if this was so the proper procedure was to file a complaint 

formal or informal depending on the amount of the claim

Finally on February 26 1979 the original complaint was filed As a

noted thatcomplaint contained no allegation of a violation ofthe Shippin

and on June 4 1979 the Assistant Secretary wrote counsel for complaina

following letter

Returned herewith is a formal complaint which you filed in February of this year Upon 

of this complaint I

telephonically advised you that it could not be processed beCause it f

allege a violation of a specific section of the Shipping Act as required by 47 CFR 502 6

indicated that you would submit a supplement to correct this defect I subsequently calle

to remind you that we had not received sucb a

sUlplement

In view of the amount of time that has passed since out last conversation I am now re

your complaint for whatever further action you choose to take in this matter You are re

that a twoyear statute of limitations applies to complaints seeking reparation

On June 21 1979 the Commission again received the original com

only this time it had attached to it a cover page which stated

Section VII of the Complaint attached hereto which was submitted and received by the 

Maritime Commission February 26 1979 is amended to replace original Section VII as 

VII The section of the Shipping Act 1916 as amended alleged to be violated is 46 

817 b 3 inasmuch as the carriercharged or received a greater compensation than t

in its tariffs on file with the Commission

DISCUSSION AND CoNCLUSIONS

Beforethe merits of this claim can be considered it must first bedeter

that the complaint is not timebarred Section 22 provides in relevan

The Commission if the complaint is filed within two years after the cause of action accru

direct the payment of full reparation to the complainant for the injury caused 

violation

The crucial question iswhether the filing ofthe informal proceedin

February 3 1978 constitutes the filing of a complaint within the m

of section 22 Complainant s entire argument on this issue consists 

following

tIhe filing with the Commission on February 3 1978 of a request fora Special Docke

matter was the first application made to the Commission on behalf of Fiat Allis an

fically requested ilt page 2 that the claim with the Commission would be effective as of th

thereby tolling the limitation period The original claim was supplemented by letters of F

7 1978 and February 9 1978 A response was received from the Secretary 

Commission The continued contact between Flat Allis and the Commission ultima

sulted in the filing of the formal complaint with the Commission which as amended is t

of the claim herein

Counsel cites no authority and other than the suggestion that the le

IMF and the formal complaint are all of a piece no reasoning or argum

offered to support what is obviously counsels theory i e that the IMF 
FIAT ALLIS FRANCE V ATLANTIC CONTAINER LINE 549

of February 3 1978 constituted the filing of a complaint which tolled the

statute of limitations and all the other pleadings filed in the proceeding are but

amendments or supplements to that complaint Counsel is wrong on a num

ber of counts which are fatal to his theory

First it is claimed that the February 3rd letter of IMF was the first

application made to the Commission on behalf of Fiat Allis This is

simply not correct The only mention ofFiat Allis anywhere in the letter is to

Fiat Allis Construction Machinery Inc and the only specific reference to it is

as the perpetrator of the error which led to the alleged overcharge However

Fiat Allis Construction Machinery Inc is not the complainant here It is the

letter ofFebruary 7 1978 which clearly indicates on whose behalf the appli

cation was made In that letter IMF expresses its sincere hope that

I

the Commission shall be able very quickly to authorize Atlantic Container Line to amend their

manifest to clearly assess the freight on 2 542 cubic feet per unit so that they in turn will advise

their Le Havre office of this change and accomplish the necessary refund to

Seti International

Paris France

who paid the ocean freight on behalf of the consignee since the consignee has refused to pay same

due to the wrong cube on which the freight was assessed

Thus the application wasnot on behalf ofFiat France the complainant here

and indeed it could not have been In order to seek reparation in an 18 b 3

overcharge case complainant must either show tht he has paid the freight

charges or has a valid assignment of the claim from the person who did Trane

Co v South African Marine Corp 16 SRR 1497 1501 1976 Ocean

Freight Consultants lnc v Bank Line Ltd 9 F MC 211 212 213 1966

Oakland Motor Car Co v Great Lakes Transit Corp I US S B 308 311

1934 Here not only was there not a valid assignment on behalf of Fiat

France it could not have obtained one since Fiat France had no claim to

assign it had refused to pay the freight charges Ifthe claim could be said to

beon behalf ofanyone it could only beon behalfofSeti Intemational whoever

they may be However it could Isuppose be argued that the claim was not

for an 18 b 3 overcharge but for special docket relief To do so would only

reach the same result In special docket cases refunds may be granted only to

the person who has actually paid the freight charges Additionally even if the

letter were considered an application for a special docket the application itself

was timebarred under the provisions of section 18 b 3 which requires that

the application be filed within 180 days of the date of shipment Thus whether

the IMF letter of February 3 1978 was considered a complaint or an applica

tion for special docket relief it was fatally defective and in neither case could

the defect be cured by amendment See Carton Print v Austasia Container

Express 20 F M C 30 39 41 1977 5

The problem of the real party in interest orthe person who actually paid the

freight charges raises yet another question or rather puzzle concerning the

allegations of the formal complaint filed on February 26 1979 It will be

This says nothing about the other deficiencies if the letterwere considered a

complaint Aside from not naming the realparty

in interest it was not sworn to Reliam eMotor Ca Co v Great Lakes Transit COIpI US M C794 1938 and it did not

allege a

violation of the Act as required by Rule 62 of the Commission s Rules of Practice and Procedure
550 FEDERAL MARITIME COMMISSION

recalled that the complaint states that All payments were made by the c

ant within two years of the opal date If filing of these proceed

Although somewhat inscrutable the sentence is meaningful only if it in

to assert that no payment of the freight charges wasmade earlier tha

years prior to the February 3rd letter of IMF This is borne out by the 

of payment submitted pursuant to my request The earliest date wasMa

1976 and the latest was said to be made December 21 1977 Thus a

payments would have been made within 2

years of what complainan

the original date of filing of these proceedilgs It is asserted howeve

the payments weremade by claimant By even the most charitable con

tion claimant can only be IMP or FiatFrance the complainant 

Yet it is patently clear that neither IMF nor complainant made any pay

to ACL for freight charges on the dates submitted IMFs lett

February 7 1978 clearly shows that it was Seti International which ha

the freight charges on the shipments in question and that complainant h

far refused to pay the charges

7

There is even now nothing in this rec

show that complainant has as yet paid the freight on the shipments in qu

and even has the right to brilg

the action However since the act

timebarred there is no need to determine whether complainant has the 

right to bring this action for reparation

Complainant points out that ACL has at no time raised the stat

limitations and states in fact it is agreed among all concerned with this 

that ACL has no defense to the claim and the refund is currently 

Fiat Allis It is a uniformly accepted principle says complainant th

essential to plead the statute oflimitations in order to render it available 

defense While it is true that there are some cases where it is neces

plead the statute of limitations it is not so incases arising under the Sh

Act Under that Act the statute of limitations is jurisdictional The 

to file a

complaint within the twoyearperiod of limitation extinguishes n

the right of a complainant which could perhaps be revived by the 

escence ofrcspondent but it also extinguishes the Commission s

jurisd

Reltance Motor Car Co v Great Lakes Transit Corp 1 U S MC 

1938 Aleutian Homes Inc v Coastwise Line 5 FMB 602 1959 

spondents failure to plead the statute of limitations in section 22 is irre

to the Commission s power to award reparations if the complaint is 

barred Failure to comply with section 22 leaves the Commission witho

power to order a

respondent to pay reparations However complainant 

that the question ofwhether the action is timebarred cannot bcsettled 

present record

Complainant s argument is that section 22 of the Act starts the limit

period running from the time atwhich the cause ofaction aeorues bu

Fiat Allis has not been requested to provide any information as to wh

cause of action accrued this is a factual question not yet considered 

is especially true says complainant in the light of the fact that the m

Claimant could pcoaIbIy r to IMPwhich fIIed lhl lint application to tho CommiHlon behalf 01 PlatAlIl

1

Eitber counlll forcomplainant i U110MCl by his client orhit UIO orthe word claimant it far too inexact
FIAT ALLIS FRANCE Y ATLANTIC CONTAINER LINE 551

which gives rise to this cause of action was not capable of discovery by Fiat

Allis until significant time had elapsed after shipment ofthe equipment

Counsel for complainant is incorrect when he says that the evidentiary

question of when the cause of action accrues cannot be resolved on this record

It can be However there seems to be some confusion as to just what trans

action or element in the total act oftransportation starts the twoyear period

running

InSun Company v Lykes Bros 20 F MC 67 1977 it is said in footnote

7 at 69

By judicial decision and Commission rulings the twoyear period starts either upon delivery of the

cargo to the carrier or upon poyment of the freight charges whichever is later Southern Pacific

v Darnell Taenzer Lumber Co 245 U S 531 534 1918 Commercial Solvents Corp v

Moore McCormack Lines

Inc16 SRR 1631 1632 fn 3 Jan 4 1977

In Commercial Solvents supra footnote 7 of the Commission s Order on

Remand read

It is well settled that a cause of action accrues at the time of shipment or upon payment of the

freight charges whichever is later Aleutian Homes Inc v Coastwise Line 5 F M B 602 611

1959 United States v Hellenic Lines Ltd 14 F MC 254 260 1971 US ex reiLouisville

Cement Co vIee 246 U S 638 1918

In the 1971 Hellenic case cited in the Order on Remand the Commission

adopted the initial decision of Judge Levy in which he said

Whether the claim is barred by the statute of limitations is dependent upon whether the cause of

action accrued at the time the shipment was received or delivered by the carrier at the time

of billing or at the time when the freight charges were paid Ifit accrued at the time the

shipment was tendered or delivered or at the time of billing the claim is barred by the 2 year

period within which the statute requires claims to be filed If it occurred at the time when the

freight charges were paid then the claim is not barred The rule of law is that the cause of

action of the shipper shall be held not to have ocrued sic until payment is made of the

unreasonable charges U S ex reiLouisville Cement Co v Iee 246 U S 638 644 1918

See also Aleutian Homes Inc v Coastwise Line 5 F MB 602 611 1959

In Aleutian Homes supra and the Order of Remand the Commission s

predecessor the Federal Maritime Board said

Coastwise s contention that the cause of action accrued at the time of delivery of the shipments

is untenable In Oakland Motor Car Co v Greal Lakes Transit Corp I US S B 308 310 311

1934 ourpredecessor said

Complainantl was injured the moment he paid the charges His claim accrued at

once Emphasis supplied

From the foregoing it seems clear that originally a cause of action accrued

under section 22 only upon the payment of the freight charges See Oakland

Aleutian and Hellenic supra However since at least the 1977 Order on

Remand in Commercial Solvents supra the cause of action can accrue at the

time of shipment or the time of payment of the freight charges whichever is

later And finally since Sun Company v Lykes Bros 20 F MC 67 1979 the

cause of action can accrue at the time of delivery of the cargo to the carrier

I

The rull sentence quoted here read Hisclaim accrued at once and the law administered by the Department does not inquire

into later events Southern Pacific CO v Darnell Taenzer Lumber Co elal 245 US SJI
552 FEDERAL MARITIME COMMISSION

the time of shipment or the time of payment of the freight charges whic

is later

Insuits brought under section 22 to recover reparation or damages for 

caused by a violation of the Act the rationale behind the time of paym

the freight charges is easily understood the shipper has not been injured 

he has paid the unlawful charges See US ex rei Louisville Cemen

v lee 296 U S 638 1917 In the admittedly limited research 

conducted Ihave been unable to find the rationale behind the time ofde

to the carrier or the time of shipment Fortunately the selection of one 

three possible events would make no difference to the outcome of this 

Even ifthe complaint filed on February 26 1979 is taken as valid all 

claims contained in it are barred by the statute of limitations Paragrap

the complaint states that the shipments in question weremade on various 

in 1976 Thus even if the last shipment was made on December 31 1

would be barred That delivery to the carrier had to precede the ti

shipment seems inescapable However even if complainant would define 

of shipment as date of delivery to the carrier this could have happen

later than December 31 1976 by its own admission Finally it is obvious 

the record here that the last event in the total transaction was the paym

the freight charges Since the last date of payment on a shipment inc

in the complaint was October 19 1976 the complaint is clearly barr

section 22 of the Act 9

Finally complainant would point out that for the Commission to hol

these claims are timebarred would be to work a

great injustice to the p

all of whom recognize their obligations and merely await the authorizat

the Commission to rectify the mistake which is the basis for the claim he

It may be that a great injustice will be done to the parties 1O howeve

Commission is without the power and authority to authorize the refund s

here Reliance Motor Car Co v Great Lakes Transit Corp I U S MC 

1938 Aleutian Homes Inc v Coastwise Line 5 F M B 602 1959 

Carton Print v Austasia Express 20 F MC 30 1977

The complaint is timebarred and the case is dismissed

S JOHN E COORAVE

Administrative Law Ju

January 21 1980

Curiously it would seem that orisinally arefund was sought on 14 shipments See IMP letterof February 3 1918 

the complaint claims reCunds on only 10 Finally when the request for dates of payment wasanswered the number w

to 14 It istoo late now of course for Fiat France to file a

complaint on the 4 omitted shipments

ID

For an clthaustive discull5ion of statutes of limitations their purpoec and ellcct see Ctuton him v Awtasio 

Express supra at 39 41
v

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 653 1

J T BAKER CHEMICAL COMPANY

YAMASHITA SHiNNIHON LINE

REPORT AND ORDER

March 3 1980

BY THE COMMISSION Richard J Daschbach Chainnan Thomas

F MoakIey Vice Chairman James V

Day and Leslie Kanuk Commissioners

This proceeding was instituted by complaint filed February 23 1979 by

J T Baker Chemical Company seeking reparation from Yamashita

Shinnihon Line for an alleged overcharge in the amount of 609 63 on a

shipment of lead dioxide transported from Houston Texas to Yokohama

Japan The parties agreed to the Commission s informal procedure for resolu

tion of the complaint2

Settlement Officer Deana E Rose served an Initial Decision on Decem

ber 6 1979 awarding Complainant reparation in the amount requested

without interest The proceeding is now before the Commission upon its deter

mination to review the Initial Decision

The issue in this proceeding is which of two of Respondent s tariff

classifications should apply to the commodity shipped Respondent assessed

freight charges under its Metallic Oxides N O S Label Cargo

classification Complainant arguing that lead dioxide and lead oxide are syn

onymous sought application of Respondents lower rated Lead Oxide

N Os classification The Settlement Officer accepted Complainants argu

ment and granted reparation The Settlement Officer based her conclusions

upon the principle that where two tariff classifications are applicable and one

is more specifically descriptive than the other the more specific will be applied

I

Traffic Bureau Service Inc represented J T Baker Chemical Company in this proceeding

146CF R 502 301 el seq
554 FEDERAL MARITIME COMMISSION

While the Settlement Officer applied the correct standard the Comm

disagrees with the result reached The Commission finds that the 

classification applie4 by Respondent is the more specific

It is undisputed that the commodity shipped was lead dioxide The 

densed Chemical Dictionary reveals that lead dioxide is synonymouswit

oxide brown and that both are yellow labe13 However that dictionar

reveals that there are four other types of lead oxide viz lead oxide blac

oxide hydrated lead oxide red and lead oxide yellow none of which 

dioxide or yellow label cargo The Lead Oxide N O S rate would ap

any of these types of lead oxides without regard to labelling status 

Metallic Oxides N O S Label Cargo rate includes lead dioxide 

more specifically than the Lead Oxide N O S tariff rate expressly a

to label cargo

THEREFORE IT IS ORDERED That the InitialDecision served D

ber 6 1979 is reversed and

IT IS FURTHER ORDERED That the complaint ofJ T Baker Ch

Company is denied and

IT IS FURTHER ORDERED That this proceeding is discontinue

S FRANCIS C HURNEY

Secre

J Yellow label cargo II Cll JO which prc IOtIta a danproua ftre rlak requirina special handlin and ltowqe and 

ordinarily is allCllCld ahlaher shippin ratethan nonlabcl carloSee the raquiremoRulmpoecd forthe carriaacofhaza

by ocean VGIIOlIln the Depllrtment of TnmlportatiOll s Rules and Reaulatton 49 C F R

1176 1 et seq
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

SPECIAL DocKET No 690

APPLICATION OF MAERSK LINE AGENCY FOR THE BENEFIT OF

LIBERTY GoLD FRUIT COMPANY

NOTICE OF ADOPTION OF INITIAL DECISION

March 12 1980

Notice is given that upon completion ofreview the Commission has deter

mined to adopt the initial decision in this proceeding served January 4 1980

By the Commission
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 690

APPLICATION OF MAERSK LINE AOENCY FOR THE BENEFIT OF

LIBERTY GoLD FRUIT COMPANY

Adopted March 12 1980

Application for permission to refund a portion of freigbt cbarges in tbe amount of 

granted

Applicant conference of wbicb Maersk Line is a member found to bave publisbed a ta

containing an errorof a clerical or administrative nature wben tbe conference uninte

deleted a weigbt symbol next to tbe rate on onions This mistake caused an increase i

cost to tbe sbipper and is the type of error wbicb qualifies for relief under tbe 

provisions of section I8 b 3 of tbe Sbipping Act 1916

Bryce J Herbst for applicant Maersk Line

Harold R Rollins for applicant Pacific Straits Conference

INITIAL DECISION I OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

This is an application filed November 13 1979 by Maersk LineAgen

by the Pacific Straits Conference of which Maersk Line the Agency 

cipal is a member 2Applicants seek permission to refund a portion of 

charges in the amount of 3 455 91 in connection with a shipment o

onions in bags whichwere carried on the vessel ARILD MAERSK sai

of Oakland California on September 8 1979 bound for Singapo

applicants state that the Conference unintentionally deleted a wr 

next to the rate on onions when it republished its tariff on January I 197

the result that the rate on fresh onions moving in ventilated stowage 

subject to a weight or measurement basis in effect a rate increase F

more this error continued in the tariff when all rates were subject

general rate increase on April I 1979 and wasnot noticed until after 

1

This decision will become the decision ofthe Commision in the absence of review thereofby the Commission Rul

of Practice and Procedure 46 CF R 1502227

2

The application 88 originally filed contained only the name of Maersk Line Agency the Pacific Straits Confc

neglected to complete the portion of the fann which provides for conference participation I contacted Mr Harold R 

Conference Chairman who had furnished an affidavit in supportof Maersk to advilC him of this oversisht Mr Roll

his notarized sisnature to the form thereby addins the Conference as a party See letter from Mr Rollins t

December 20 1979
APPLICATION OF MAERSK LINE AGENCY 557

shipment of onions occurred in September When the shipper Liberty Gold

Fruit Company Inc wasbilled at the rate calculated on a higher measurement

rather than weight basis the shipper notified Maersk of the apparent tariff

error Maersk subsequently arranged to have the Conference tariffcorrected to

restore the WT symbol andfiled this application to relieve the shipper of the

additional freight which the shipper paid because of the mistake

The application was filed under the remedial provisions of section 18 b 3

of the Shipping Act 1916 the Act as amended by P L 90 298 and in

conformance with the governing Commission regulation Rule 92 a 46

C F R S 502 92 a It is supported by a number of documents confirming the

sworn statement of facts contained in the application itself such a letter from

the shipper the bill of lading tariff pages and an affidavit from Mr Harold

R Rollins Chairman of the Pacific Straits Conference This evidence reveals

the following facts

FACfUAL BACKGROUND

On January I 1979 the Conference republished its tariffto conform to the

requirements of the Commission s General Order 13 as amended In addition

the Conference published new commodity descriptions and item numbers in its

tariff The new tariff Pacific Straits Conference Local and Overland Freight

TariffNo 12 FMC 8 changed the commodity description and item number

for onions moving in ventilated stowage from that which had been published

in the previous tariff No 11 FMC 7 In the previous tariffthe Conference

had published a rate for onions ventilated stowage in the amount of 174

calculated on a WT weight basis See TariffNo 11 7th rev page 120 In

the new tariff effective January 1 1979 the commodity was redescribed as

VEGETABLES Fresh viz Onions except Onion Sets in Ventilated Stow

age In publishing this new tariff however the Conference forgot to insert the

WT symbol in the column marked Rate Basis See TariffNo 12 original

page 144 As provided in the tariff this omission meant that the commodity

would be rated on either a weight or measurement basis whichever produced

the greater revenue Since the shipment in question would produce greater

revenue ifrated on the measurement basis the omission ofthe symbol resulted

in a rate increase albeit unintended

Since the movement of onions is seasonal the Conference lines carried no

onions under this item at all apparently until September 1979 Consequently

no one noticed the error in publication On April 1 1979 the rate on the item

wasincreased pursuant to ageneral rate increase effectuated by the Conference

on appropriate statutory notice The new rat became 186 but since no one

detected the fact that the WT symbol had been unintentionally deleted the

tariff continued to publish the new rate on a weight or measurement basis

Finally Liberty Gold Fruit Company Inc a shipper ofonions booked a

shipment of onions weighing 1947 kilo tons and measuring 36 125 cubic

meters for the ARILD MAERSK which sailed out of Oakland on Septem

ber 8 1979 Liberty Gold had checked to determine the rate and wasinformed
558 FEDERAL MARITIME COMMISSION

that the rate wouldbe 186 weight 3

However to its surprise Liberty Go

billed on the measurement basis This caused an unexpected increase in f

costs which was almost double the cost had the shipment been rated o

weight basis 7 495 94 compared to 4040 03 4

In its request to Maersk for a refund of the excess freight Liberty 

pointed out that the rate on onions had always been calculated on a w

basis and onions were 80 rated by every Conference in which Liberty 

shipped Maersk and the Conference agreed that an error had occurre

took steps to correct it Thus the Conference telexed a correction 

Commission on October 10 1979 restoring the weight basis to the tarif

and followed the telex with a permanent tariff page See Tariff No 1

revised page 144 Thereafter this application was filed

DISCUSSION AND CONCLUSIONS

The special docket provisions of section 18 b 3 of the Act are equ

and remedial They were enacted by Congress in P L 90 298 in or

relieve shippers of financial harm which would fall on them because of c

error in tariff publishing and filing See e g Westinghouse Trading 

American Export Lines Inc 20 F M C 874 878 1978 Farr Co v Se

Lines 20 F MC 411 414 1978 D F Young Inc v Cie Nationale 

rienne de Navigation 18 SRR 1645 1979 Thetype of error which oc

in this case namely the error in the Conference s republished tariff in 

a critical symbol had been deleted unintentionally with resulting incre

cost to shippers was one of the types of errorwhich the law wasenac

remedy See Farr Co v Seatrain Lines supra 20 F MC at 415 

Report No 920 90th Cong 1st Seas at 4 Senate Report No 1078 

Cong 2d Scss at 4

Ifind therefore that there was an error in the Conference s tari

clerical or administrative nature within the meaning of the remedial pro

of section 18 b 3 of the Act with resulting financial harm falling 

shipper Liberty Gold It now remains to determine whether the other re

ments of the law are satisfied regarding prevention of discrimination 

shippers ifthe application is granted the filing of the new corrective tar

the time of filing the application Ifind that these conditions have als

met Thus

1 The application states that there were no other shipments of 

carried by Maersk during the relevant period of time with which the a

tion deals According to Conference statistics and other evidence the 

ment of onions is seasonal and no shipments of onions were carried 

Conference line from January 1 1979 at least through the month of Ju

as Liberty Gold stated onions had traditionally been rated under the 

JScc letterdated October 19 1979 from Mr Franklin M Bathat Vice PRlIidcnt of Liberty Gold to Mr Ed Mu

Maersk Lines AlcDey attached to the a

tion

4

The calculationof frcijht dtargea under the higher mouurement rateand lower woiaht rate is caaUy dono Tho

lodina ShoWI that a shipment meuurina 36 125 wbic meton rated at 186 por cubic meter plul atcnninal ftlCClivin

6 SO and bunker adjultment of 15 per cubic meter total 1 495 94 When recalculated by using 19 47 kilotons app

186 6 SO ond 15 pcr lOn lh freiahllclaJs404003
559

weight basis one would have expected that any other shipper of onions would

have complained had such other shipper in fact existed In any event the tariff

notice which the Conference will be required to publish will eliminate discrim

ination among shippers because it will ensure that any shipper who might have

shipped after June besides Liberty Gold will be afforded the same rate on the

weight basis

2 The new corrective tariff which reinstated the weight basis symbol was

tiled effective October 10 1979 as previously noted This date is prior to the

time oftiling the application November 13 1979 and therefore complies with

the requirement set forth in the second proviso to section 18 b 3 as amended

by P L90 298 This new tariff furthermore conforms in all respects to the

rate which the shipper had been quoted and expected to be charged namely

186 WT Ittherefore complies with theconformity doctrine enunciated by the

Commission in Munoz y

Cabrero v Sea Land Service Inc 20 F MC 152

1977 and the many similar cases cited in Special Docket No 649 Applica

tion of Maersk Line Agency for the Benefit of Nomura America Cor

poration I

D August 21 1979 at 7 9 FMC November 20 1979 19

SRR 689 1979 19 SRR 1058 1979

3 The application was received by the Commission s Secretary on Novem

ber 13 1979 5The date of shipment which under Rule 92 a is defined as date

of sailing was September 8 1979 This is well within the 180day period

between date ofshipment and date of tiling ofthe application required by law

It is therefore ordered that the applicaiton for permission to refund the sum

of 3 455 91 for the benefit of the shipper Liberty Gold Fruit Company Inc

in connection with the shipment of onions discussed above is granted provided

that applicants comply with the following conditions

1 Applicants shall publish the following notice in an appropriate place in

their tariff

Notice is hereby given as required by the decision of the Federal Maritime Commission in Special

Docket No 690 that effective April 1 1979 and continuing through October 9 1979 inclusive

the 10ClI1 and overland contract rate on VEGETABLES Fresh viz Onions except Onion Sets in

Ventilated Stowage Item No 1354500 30 is 186 WT This Notice is effective for purposes of

refund orwaiver of freight charges on any shipments of the goods described which may have been

shipped during the specified period of time

2 Refund of the portion of freight charge in the amount specified above

shall beeffectuated within 30 days ofdate ofservice ofthe Commission s notice

rendering this initial decision administratively final and applicants shall within

5 days thereafter notify the Commission ofthe date and mannerofeffectuating

the refund

WASHINGTON D C

December 27 1979

8 NORMAN D KLINE

Administrative Law Judge

The application as originally filed did not show when the application was mailed It does bear a stamp showing receipt by

lhe Commission sSecretary on November 13 1979 Rule 92 a 3 permits applicants to use date of mailing as date of filing or

alternatively the date when the application is received by the Commission sSecretary
FEDERAL MARITIME COMMISSION

DOCKET No 74 15

WEST GULF MARITIME AssocIATION

v

PORT OF HOUSTON AUTHORITY ET At

REJECTION OF PETITION

March 12 1980

Counsel for complainant in this proceeding has filed a petition for r

sideration of the Commission s Janull1 Y 28 1980 Order Adopting 

Decision

The Commission s recent amendment to Rule 261 of the Rules ofPra

states that a petition for reconsideration will be subject to summary reje

unless it I specifies that there has been a change in material fact 

applicable law which change has occurred after issuance ofthe decisi

order 2 identifies a substantive error in material fact contained in the 

sion or order or 3 addresses a finding conclusion orother mattet upon 

the party has not previously had the opportunity to comment or which w

addressed in the briefs or arguments of any party

Complainant s petition satisfies none of the three requirements It m

alleges the Commission erred in reaching its conclusions Accordingl

petition for reconsideration is summarily rejected pursuant to Rule 261

By the Commission

S FRANCIS C HURNEY

Secret

Com miuioncr Kanuk is oppoeed 0 lummary rcjcd1on of be patition but would deny it on the merits
FEDERAL MARITIME COMMISSION

DOCKET No 79 102

SEA LAND SERVICE INC PROPOSED TwENTY FIVE

PERCENT GENERAL RATE INCREASES IN THE

PUERTO RICO VIRGIN ISLANDS TRADES

ORDER APPROVING OFFER OF SETILEMENT

March 17 1980

On March 3 1980 Administrative Law Judge Seymour Glanzer issued a

Decision and Order in this proceeding approving an offer of settlement ten

dered by Respondent Sea Land Service Inc and agreed to by all other parties

to the proceeding except Puerto Rican Manufacturers Association Also be

fore the Commission at this time is a Joint Motion For Expedited Consid

eration ofSettlement and Issuance of Order filed by Sea Land Service Inc

the Government of the Virgin Islands Military Sealift Command and the

Commission s Bureau of Hearing Counsel

In the interest of expediting final disposition of this matter the Commission

on March 6 1980 served a Notice on all parties to the proceeding requesting

that they indicate by March 11 1980 whether they intended to file exceptions

to the settlement offer as approved by the Presiding Officer The Notice also

provided that failure to respond would be considered a waiver of the right to

except to the Order No notice of intent to file exceptions has been received by

the Commission

After examination of the entire record of this proceeding the Commission

has determined that the proposed settlement is in the public interest and that

good cause exists warranting its approval subject to the following discussion

and clarification

The Presiding Officer s Order contains a provision which precludes the

Commission from suspending or investigating the individual tariff item rate

changes made pursuant to the settlement agreement The Commission accepts

this provision to the extent it relates to the general revenue needs of the carrier

but does not construe this provision as otherwise precluding suspension and or

investigation of such individual rate changes under section 16 First of the

Puerto Rico Manufacturers Association did not endorse or approve the settlement offer but did not object orfile a notice of

intent to tUe exceptions to it
Shipping 

ct 96 6 U 

1815 sect

o

Shipping

46 U S C 1817 and section 3 a ofthe Intercoastal Shipping Act 1

amended 46 U S c 1845 Similarly the Commission construes th

tlement as not affecting its authority under section 18 a of the Shippin

1916 or section 4 of the Intercoastal Shipping Act as amended 46 

1845a to prescribe just and reasQnable rates

THEREFORE IT IS ORDERED That the Order of Adminis

Law Judge Seymour Glanzer issued March 3 1980 is adopted by the 

mission as clarified herein and

IT IS FURTHER ORDERED That the suspension portion of the 

of Investigation is dissolved upon the filing of new individual rate it

accordance with the offer of settlement and

IT IS FURTHER ORDERED That Sea Land Service Inc is pe

to raise its individual rates in the Puerto Rico trade tariffs FMC F N

36 37 40 41 and 53 to a point not to exceed 21 percent over the De

31 1979 base rates through June 30 1980 without further requirem

justifying those rates in terms of its general revenue needs and th

increases shall not be subject to suspension or investigation on the i

whether they are for general revenue purposes unreasonably or unjust

provided however that in approving the settlement the Commission in a

respects retains the right to investigate and suspend any such incre

21 percent or less on any individual rate item under section 16 First 1

the Shipping Act 1916 and section 3 a ofthe Intercoastal Shipping Ac

and

IT IS FURTHER ORDERED That Sea Land Service Inc is g

Special Permission to reduce its base rates as ofJanuary 1 1980 in the 

Islands Tariff FMC F No 27 on 5 days notice within 3 work days 

issuance of this Order to a level not to exceed 21 percent over the bas

which were in effect in December 31 1979 and

IT IS FURTHER ORDERED That the motion to terminate th

ceeding is granted and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secreta
FEDERAL MARITIME COMMISSION

No 79 102

SEA LAND SERVICE INC PROPOSED TwENTY FIVE

PERCENT GENERAL RATE INCREASES IN THE

U S MAINLAND PUERTO RICO VIRGIN ISLANDS TRADES

OFFER OF SETILEMENT APPROVED

UPON FINAL APPROVAL OF THIS ORDER SEA LAND S

25 PERCENT GENERAL RATE INCREASE SHALL

IN EFFECT BE REDUCED TO 21 PERCENT PROCEEDING

TERMINATED INVESTIGATION DISCONTINUED

Approved March 17 1980

Pursuant to agreements reached at the hearing held on February 25 1980

on February 26 1980 Sea LandService Inc respondent submitted awritten

offer of settlement for the purpose of terminating the Commission s in

vestigation of general rate increases in Sea Land s trades between United

States East and GulfCoast Ports PuertoRico and Virgin Islands Ports There

after on February 26 1980 and February 27 1980 the other parties to the

proceeding who appeared at the hearing submitted written responses to Sea

Lands offer urging that it be approved Together with Sea Land those parties

also filed a joint motion requesting expedited consideration of the offer and

issuance of an order of approval

One party to the proceeding Puerto Rico Manufacturing Association

PRMA an intervenor does not endorse the settlement but it is fair to say

that neither does it oppose the settlement I

I PRMA was unable to appear at the hearing due to previous engagements but it was kept informed of developments as they

occurred oras soon thereafter as possible at the informal conferences and at the hearing by Hearing Counsel in accordance with

PRMAs

request PRMA s first reaction to the offer was to oppose it and PRMA so advised Hearing Counsel by telex on

February 26 1980 However PRMA s telex proffered no reasons forits position During subsequent telephone conversations with

me PRMA eXplained why it could not endorse the settlement but upon further reRection PRMA recognized that its reasonsdid

not address substantiveissues in the proceeding Thereafter on February 29 1980 PRMA sent Hearing Counsel asubstitute telex

explicating why PRMA could not endorse the offer Thesubstitute telex contains no wordsor opposition Rather it acknowledges

that PRMA s concerns are general to all rate casesbut are not legally related to the issues in this docket PRMA advises that it

will deal with those important general concerns in a

separate letterto the Commission Certainly it isimplicit ir not explicit that

PRMA no longer wishes to be counted as opposed to the offer or settlement PRMAssecond telex appears as Appendix C
564 FEDERAL MARITIME COMMISSION

In my judgment the offer of settlement should be accepted the pro

should be discontinued and the outstanding suspension order sh

dissolved

I BACKGROUND AND THE

OFFER OF SETTLEMENT

There is no real dispute concerning the facts

A The TariffFiling

On November I 1979 Sea Land filed a 25 percent general rate inc

various trades between United States East and Gulf Coast Ports Pue

and Virgin Islands Ports to become effective on January I 1980

B The Orders

1 By Order of Investigation and Suspension OIS served Decem

1979 the Commission instituted an expedited investigation pursuan

tions 18 a and 22 ofthe Shipping Act 1916 as amended 46 U S C 5

and 821 and sections 3 and 4 of the Intercoastal Shipping Act 

amended 46 U S C 55845 and 845 a into the justness and reason

of the general rate increases in the Puerto Rico Trades but not the 

Islands Trade 2

The OIS also suspended those portions ofthe general rate increase

under investigation which exceeded IS percent and directed that the us

be deferred to and including June 28 1980 unless otherwise ordere

Commission

Defining the ultimate issue to bedetermined in the proceeding to be 

or not the general rate increase results in an excessive rate of retu

OIS limited the investigation to the following specified issues bearin

ultimate issue

1 Is the methodology used by respondent in making cargo 

projections appropriate

2 Are respondent s cargo volume projections adequate

3 Has respondent properly calculated Account 940 Management 

CommissionsAffiliates

J Placed under investilation were the rollowlng Sea Land tariffs

1 FMC F No 34 Supplement No 15 bot oon US Atlantic porta and po In PuertoRico

2 FMC P No 36 Supplement No 12 trom US South Atlantic porta to portl in Puerto Rico

3 FMC F No 37 Supplement No 12 Irom po In PuertoRico to US South Atlantic po

4 FMC F No 40 Supplement No II Irom U s Oullport to po In Puerto Rico

5 FMC F No 41 Supplement No II 110m po in Puerto Rico to U S Oull porta

6 FMC P No 53 specified reviled pa 25 throulh 52 fnctuRYCI and orlalnal pap46 A between San Jua

and Canadian porta with Inten hanae at Ntw JClIOy Intormodal Tariff

Not Included intho Invcatiaation was the noral rate increuo hown n FMC F No 27 Supplement 12 between 

Atlantic and Gulf Ports and Virgin Islands Port ViaTranuhipment Serviga
PROPOSED TWENTY FIVE PERCENT GENERAL RATE INCREASES 565

4 Is respondent s rate of return on rate base in the North Atlantic South

Atlantic Gulf Puerto Rico Trades excluding Virgin Islands excessive 3

As pertinent the OIS further ordered that Sea Land be named the re

spondent that Military Sealift Command MSC be named a protestant and

that pursuant to Rule 42 of the Commission s Rules ofPractice and Pro

cedure 46 C F R 502 42 that Hearing Counsel be a party in the proceeding

2 By Order on Reconsideration of Order of Investigation and Suspension

served February 13 1980 the Commission amended the OIS Among other

things as pertinent the Commission placed the Virgin Islands Trade Tariff

matter under investigation and eliminated the parenthetical phrase excluding

Virgin Islands from specified IssueNo 4 Because the rates had already gone

into effect there could be no suspension

C The Parties

At a prehearing conference held January 22 1980 Administrative Law

Judge William Beasley Harris granted leave to intervene to the Government of

the Virgin Islands GVI4and PRMA As intervenors they join Sea Land

respondent MSC protestant and Hearing Counsel as parties to the

proceeding

0 The Offer ofSettlement

By Notice For Parties etc served February 20 1980 Judge Harrisdirected

the parties to accelerate theirannounced efforts to stipulate facts bearing on the

proposed issues and to file proposed findings of fact on or before February 29

1980 5Consistent with those instructions the parties who were geographically

proximate to the Commission s offices sought out Judge Harris advice and

assistance in meeting the terms of hisorder Because Judge Harriswasnot then

available and wasexpected to be away from the office for several days Chief

Administrative Law Judge John E Cograve requested that I act in Judge

Harris behalf 6

During an informal conference commenced on February 21 1980 and

concluded on February 22 1980 it became apparent that the scheduling of an

J During the coune of the proceeding some suggestions were made to the effect that Issue No 4 allowed the introduction of

evidence concerning all factors bearing on ratc base I ruledto the contrary In my judgment Issue No 4 ismerely a restatement

of the ultimate issue to be decided in the prooceding Thestatutory test of lawfulness of ageneral rate increase iswhether the

increased rates arejust and reasonable see46 USc 817 8and 845 Sea LandService Inc Sea Land Proposed Five Percent

GeMI OI Rate Increase in Six Puerto Rico aNI Virgin Islands Trades FMC Docket No 79 47 Initial Decision served August 16

1979 19 SRR 669 NoIice of administrative finality served September 19 1979 I construe the proceeding as structured by the

Commission swords of limitation to mean that the only alterations toSea Land sdirect case presentation ofrate of return onrate

base projections to be allowed arc those which may flow from the resolution of the first three numbered issues Any oIher

construction of Issue No 4 would make the words of limitation meaningless

It may be assumed that because GVI had al ybecome aparty to thisproceeding by Judge Harris order it wasnol necessary

for the Commission in its Order on Reconsideration to nameGVI as a protestant

The date was critical Undersection 3b of the IntercoastalShipping Act the hearing is required to be completed within 60

days from and including the day on which the tariff rates would have gone ordKl go into effect Here the tatifl rates under

investigation went intoeflect on January I 1980 andthe suspended portion would have become effective that day Starting the

count on January I 1980 makes February 29 1980 the 60th day

Timeconstraints surrounding the OfferofSettlement caused afonnal reassignment of the proceeding to me on February 28

1980
566 FEDERAL MARITIME COMMISSION

oral hearing was necessary Present at the conference were Sea Land 

and Hearing Counsel They were given oral notice that a hearing would 

at 10 a m on Monday February 25 1980 GVI was orally notif

telephone PRMA could not be reached by telephone and was notifie

graphically on February 22 1980

The parties who were present at the informalconference discussed the 

which would be addressed at the hearing Sea Land and Hearing Couns

already filed their direct cases and both desired to supplement their 

either by direct or rebuttal testimony MSC wanted to proceed by way o

examination only Itwasduring that conference that Imade the ruling re

to in n 3 supra

Iruled that testimony relating to Sea Land s rate of return on 

replacement costs and return on investment as computed by including i

payments as an expense item and by making an adjustment for the tax 

of those payments was immaterial to the issues delineated by the Comm

and would not be received in evidence Any other approach would ha

counter to the Commission s statutory duty to explain the reasons und

the need for the hearing and to designate the specific issues to be re

The ruling significantly restricted the anticipated scope of the hea

envisaged by the litigant conferees at the outset of the conference Un

terms each was required to forego particular desired areas of inqui

proof Each objected to that portion of the ruling adversely affecting a 

ular interest but all agreed nevertheless to conduct further discussions 

its framework Thus the offer of settlement and the replies filed by 

Hearing Counsel and GVI subsume the validity of the ruling Howeve

preserving the right of any aggrieved party to seek leave to appeal sho

offer ofsettlement ultimately fail to meet the Commission s approval

The offer of settlement is essentially quite simple It calls for a 21 p

general rate increase overthe base rates which were in effect on Decem

1979 All parties supporting the offer are agreed that under my ruling co

ing the permissible scope of the hearing the 21 percent general rate in

would result in a rate of return on rate base after taxes within a

considered by the Commission s staff to be just and reasonable The 

testimony of Thomas J Stilling a staff economist concludes that Sea 

should be permitted to earn in the range of 13 2 to 13 7 percent ret

investment A 21 percent general rate increase would result in a rate of 

of 13 2 percent at the low level of the range

s

1 At the hearing GVI accepted the rulingon the same basis as the conferees

See Appendix Afor calculations showing that a 21 percent general ratoincrcaac would result ina 132 percent rat

Moreover Hearing Counsel notes that if certain corrected entries were pennittcd to be placed in evidence a21 perce

rate increase would result in a rateof return even lowerthan 13 2 percent Hearing Counsel states

TheCommission s staff also used an alternative approach to determine if a twenty one percent scneral rate inc

be acceptable Thil method used 8S a

starting point the ratebase and revenue fiplC8 that were not part of Sea La

case but were the figures used by the Commiaaion to compute tho 19 48 percent projected rate of return in the P

Trades inits Order ofDecember 26 1979 The fiSUrcs used by tho Commission differed from those fisul 08 in Sea La

case in that Sea Landerroneously ullCd net vCllCloperating oxpenH as opposed to IIrou vessel opcratinl expense in 

its workins capital Thestaff corrected tho error before computing tho rateof return Sea Land had projected to 

a twenty flve percent general rateincrease and it was these figures which wore later used In the Commission sOrder 

because of the ruling of the PresidinS Offiocr that Sea Land sdirect case could only be amended by filures su

response to the first three issues the Commission s staff utilized the second calculation as found in the Offer of 
PROPOSED TWENTY FIVE PERCENT GENERAL RATE INCREASES 567

The remaining features of the offer of settlement deal with the mechanics of

accomplishing the result First The Commission would need to dissolve the

suspension portion ofthe OIS to permit Sea Land to raise its individual rates

in the Puerto Rican Trades to a point not to exceed 21 percent of the Decem

ber 31 1979 base rate Bunker fuel surcharges are not affected by this

determination Second Sea Land would be permitted to file those necessary

individual rate increases without any further requirement for justification This

would also mean that thOSe rates would not be subject to suspension or in

vestigation The basis for this forbearance of course is that the record relied

on in this proceeding shows that a 21 percent increase is just and reasonable

Third the Commission would grant Special Permission to Sea Land to

reduce its base rates as of January 1 1980 in TariffFMC F No 27 to a level

not to exceed 21 percent over the base rates which were in effect on Decem

ber 31 1979 For practical reasons including manpower and equipment allo

cations and distribution lead time to avoid inadvertent mistakes the Special

Permission should permit Sea Land to filethose reductions on five days notice

Sea Land undertakes to file those reductions on five days notice within three

working days ofreceipt of the final order approving the offer of settlement and

granting the Special Permission provided that Sea Land shall not be required

to make such filing before March 10 1980

E The Record

The record upon which the settlement was offered and agreed to by MSC

GVI and Hearing Counsel consists of the following

1 The Direct Testimony of Nicholas J Zito

Appendix A Historic Year

Appendix B Projected Year

2 Testimony ofRoger A Haas

3 Supplemental Appendix A limited to Item No I Schedule VII

Adjustment to eliminate all FMC Account 940 expense not of an overhead

nature

4 Supplemental Appendix B limited to Item No 2 Schedule VII 9

5 Direct Testimony of John C Coor as amended 1O

6 Direct Testimony of Thomas J Stilling as amended 1O

7 Stipulation signed by all parties dealing with Issues no 1 and 2

as its primary method for determining the effect ofa twenty one percent general rate increase As a secondary method it used

the corrected figures computed the projected revenue and expense figures if Sea Land were granted a twenty one percent

general rateincrease applied tbe effective tax rateand determined that the resultingrate of returnwas below the 132 percent

rate of return the staffs eoonomist had determined was reasonable

9

Hearing Counsel does not agree as to the accuracy ofthis Schedule but concedes that this lack of agreement will not affect

the settlement MSCdoes not agree thatSupplemental Appendix Bshould be a part ofthe record but MSCalso recognizes that

it effects no significant change in the financial results

10 Limited to ex c1ude any testimony or data dealing with debt equity ratio orinterest

II See Appendix B
568 FEDERAL MARITIME COMMISSION

F Issues Nos 1 2 and 3

Except as noted all parties are agreed that upon further analys

resolution of Issues Nos I 2 and 3 would not significantly affect any 

calculations upon which the offer of settlement is based Those parties 

to the stipulation concerning Issues Nos 1 and 2 New ngures furnis

Sea Land conerning Issue No 3 decrease expenses by 79 043 a

re

small amount in terms of the overall rate base and income figures 

decrease would have only slight if any effect on the rate of return

G Positions ofthe Parties

While none ofthose parties is entirely satisfied with all of the rulings 

proceeding all agree upon the result embodied in the offer of settleme

example Sea Land maintains its position that the 25 percent gene

increase is just and reasonable but it also recognizes that it should sti

a profit after taxes on a 21 percent general rate increase

GVI believes the evidence of record is sufficient to justify the o

settlement and that the settlement itself is in the public interest MS

agrees that the record shows that an increase of 21 percent is just and 

able Hearing Counsel also considers the settlement tobe in the public 

and in particular regard to Issues Nos I 2 and 3 states as follows

Therefore Hearing Counsel requet acceptance of Sea Land s ofter of settlem

resolution of issues one two and three would not aftect the agreement of the parties wi

to issue four It wOlld be fruitless and costly for the parties to engage in liliatiou of is

would have an insignificant eftect on the ultimate rate of return which the parties hav

Sea Land may obtain The public interest would not have benefitted by such an effort a

result would not have significantly changed

Finally as noted earlier the agreeing parties have joined in a mot

expedited consideration of approval of the settlement and issuance of a

of approval because all parties regard delay as a postponement of the 

to be obtained under the settlement

II DISCUSSION AND CONCLUSION

The Commission has the authority to accept the proposed settlemen

proceeding The Administrative Procedure Act 5 U SC i

554 0 dire

Commission to give all interested parties opportunity for the sub

and consideration of offers of settlement The courts have appro

actions of other agencies which have permitted settlement of r

vestigations Pennsylvania Gas and Water Co v Federal Power Com

463 F 2d 1242 D C Cir 1972 Cities ofLexington etc Kentucky v 

Power Commission 295 F 2d 109 4th Cir 1961 The Commission 

permitted parties to settle their differences in a rate investigation 

Alaska Line Inc Proposed General Rate Increase Between Seattle W

ton and Points in Western Alaska 19 SRR 613 1979 Notice of A

trative Finality served September 5 1979 The settlement in this proce
PROPOSED TWENTY FIVE PERCENT GENERAL RATE INCREASES 569

somewhat different than the settlement in the Foss case In this case irrecon

cilable differences remained but thecost oflitigation ofthose issues would have

been greater than the monetary amount involved Therefore the public interest

was best served by settlement In this case all parties except PRMA to the

extent noted accept the reasonableness ofthe twenty one percent general rate

increase and therefore a difference of opinion on this issue does not exist

Thus the record in this proceeding presents an even more compelling case for

approval than the record in Foss

A difference of opinion does exist on Issues Nos I 2 and 3 although the

public interest would not be served by the litigation of these issues

While PRMA has not endorsed Sea Land s offer of settlement it has not

opposed it Nevertheless the Commission is able to approve an offer of set

tlement even though all parties do not agree to it In Pennsylvania Gas and

Water Co v Federal Power Commission 463 F 2d 1242 1248 D C Cir

1972 the Court noted that as long as the settlement was in the public interest

an agency could approve it without unanimous consent The offer ofsettlement

is in the public interest which is the Commission s primary concern The

Commission s staff has determined that the settlement offer meets the guide

lines for determining the acceptability of a rate increase as determined by the

Commission s Order and my rulings in this proceeding as well as by Commis

sion precedent PRMA has had an opportunity to participate in this proceeding

but has not taken or was unable to take an active role and has not set forth

any substantive objections to the settlement for consideration In Pennsylvania

Gas supra at 1251 the Court found that the agency hadmet its responsibility

to the party opposing the settlement as long as that party had ample oppor

tunity to be heard and its objections were considered 12

The Commission also has the authority to grant Sea Land s

request for

special permission to roll back the rates in the Virgin Islands Trade without 30

days notice as part of the settlement of this proceeding in lieu of requiring

Sea Land to file a special permission application pursuant to 46 C FR

15318 The Commission s rules require a carrier filing a special permission

application to serve copies of the application upon competing carriers 46

CF R S531 18 e 2 The reason for this provision is to put those competing

carriers on notice Competitors of Sea Land were on notice of this proceeding

and were on notice that it could result in a roll back ofSea Land s rates in the

Virgin Islands Trade Therefore to require Sea Land to file a separate special

permission application to effectuate notice is not necessary and would only

lengthen the amount of time which would pass before a roll back could become

effective

Moreover settlement of rate proceedings is consistent with the policy of the

Administrative Conference of the United States which by its Assembly action

adopted June 7 8 1978 recommended 13

11 In Pe1Ul Jylwmia Gas the courtupheld the right ofa

regulatory agency to approve aproposed settlement ofa rateproceeding

with less than unanimous consent including opposition ofthc agency sstaff Reasoning further the courtstatedthat the particular

agencyco mcd camwlrefuse to consider a

proposal which appears on its face at least consistent with its duty of protecting

the ultimate oolL lumer 463 F 2d at 1247 1252

IJ 1978 Report Administrative Conference of the United States at 36
570 FEDERAL MARITIME COMMISSION

Agencies charged with ratemaking responsibility should encourage the parties to controve

cases to settle them by agreement

With the foregoing principles in mind Ifind that the offer of settlem

in the public interest and merits approval 14

III ORDER

It is ordered that

1 Upon final approval of this order the offer of settlement be ap

2 Upon final approval of this order the suspension portion of the O

Investigation and Suspension be dissolved

3 Upon final approval of this order Sea Land be permitted to r

individual rates in the Puerto Rico Trade Tariffs to a point not to 

21 percent of the December 31 1979 base rates through June 30 

without any further requirement for justifying those rates Those in

shall not be subject to suspension or investigation

4 Upon final approval of this order Sea Land be granted Special P

sion to reduce its base rates as of January I 1980 in the Virgin 

Trades Tariff to a level not to exceed21 percent overthe base rates whic

in effect on December 31 1979 Sea Landshall file those reductions on 

notice within 3 working days of the issuance of a final order approving i

of settlement and granting Special Permission provided that Sea Lan

not be required to make such filing prior to March 10 1980

S Upon final approval of this order the motion to terminate this proc

is granted

6 Upon final approval of this order the proceeding is discontinued

S SEYMOUR GLANZER

Administrative Law J

March 3 1980

14No Noticeof Intent to make anenvironmental UIeIII1lent inthis pfOQCOd1na waa islued by the Commiaaion Thu

there are noenvironmental iauca praont in this proceedinl
Calculation Showing that a 21 Percent Increase Will

Result in a Rate of Return on Rate Base Not

in Excess of 13 2 Percent

1 Sea Land Rate Base is 9 039 251 Zito App B Ex A

2 A25 GRI would result in Gross Revenues of 21481 428 Zito App B

Ex B

3 With no increase ie at the December 31 rate levels Sea Land would have

received Gross Revenues of 17 185 142 21481 428 125

4 The 25 General Rate Increase GRI results in added revenues of

4296 286 Line 2 minus Line 3

5 A 1 increase of revenue 171 851 4296 286 25

6 A 21 increase of revenue would result in added revenue of 3 608 871

171 851 X 21

7 A 21 GRI results in Gross Revenue of 20 794 013

8 A 21 GRI is needed to yield a 13 2 percent rate of return on rate base

3 608 871 20 794 013 21
572

APPENDIX B

Before the Federal Maritime Commission

DOCKET No 79 102

SEA LAND SERVICE INC PROPOSED

TWENTY FIVE PERCENT GENERAL RATE

INCREASE IN THE U S MAINLAND PUERTO

RiCO VIRGIN ISLANDS TRADES

STIPULATION OF HEARING COUNSEL

AND SEA LAND SERVICE INC

It is hereby stipulated and agreed for purposes of this investigation o

and between Sea Land Service Inc Sea Land through its counse

Hearing Counsel that the matters set forth below are undisputed and tru

that this stipulation may be offered to verify such matters

1 In the Order of Investigation and Suspension by which it institute

present investigation the Commission noted the following

Container miles in the historical period were 91 114 356 for a total of 64 968 load

Puerto Rican Service In the projected period container miles become 83 877 860 b

60426 loads In the Puerto Rican Service Therefore there is a decrease of 4 S421o

7 238 496 container milesinthe service The average miles per load decrease is 1 5

7 238 496 divided by 4 542 The average miles per container load inthe historica

is 1 402 and is 1 388 in the projected period This represents an average increase of 

imately 200 miles per container and causes a much larger decrease in the Service tha

result from either historical orprojected average The lower Service container mileag

proportionately more vessel expense to be allocated to the trade Vessel expense in 

the basis of other expense allocations These questions with respect to 

container miles are unanswerable without indepth analysis of container mile cal

2 The data relied upon by the Commission in the language cited a

aggregate data drawn from the Puerto Rico Service As such th

reftects the carriage of container loads of cargo moving in the C

U S North Atlantic U S South Atlantic and U S Gulf Puert

Trades and the U S Atlantic and Gulf Virgin Islands Trade aswel

carriage of Other Cargo

3 Areview ofthe aggregate data drawnfrom the PuertoRico Service 

an apparently large discrepancy between the average decrease in a

miles per container carried in the Service and the average mil

container carried during the historical year and to be carried dur

projected year in the Service

4 In each of the individual Puerto Rico Trades and tile Virgin 

Trade the average miles per container carried have remained co

from the historical to the projected year
8 CHARLES C HUNTER

Hearing Counsel

PROPOSED TWENTY FIVE PERCENT GENERAL RATE INCREASES 573

5 The decrease in average miles per container carried in the Puerto Rico

Service between the historical and the projected year is occasioned by

changes in the numbers of container loads of cargo embarking at the

various ports ofloading and disembarking at the various portsof call in the

Service and the differing mileages between these various ports of loading

and ports of call

6 The apparently large discrepancy referred to in section three 3 above is

solely a function of a review ofthe aggregate data drawn from the Puerto

Rico Service as opposed to an analysis of data reflecting the individual

trades encompassed therein

7 As indicated in section four 4 and five 5 above an analysis ofthe data

drawn from the individual Puerto Rico Trades and the Virgin Islands

Trade establishes that the apparent discrepancy is a non issue in the

present investigation Data relating to average miles per container carried

in the Puerto Rico Service conforms to cargo projections filed in this

investigation

Respectfully submitted

8 DONALD J BRUNNER

Attorney for Sea Land Service Inc

8 JOHN ROBERT EWERS

Director Bureau ofHearing Counsel

8 C DoUGLASS MILLER

Hearing Counsel

8 POLLY HAIGHT FRAWLEY

Hearing Counsel

February 25 1980
248324 FMCW UR

ZCZC YWB6338 POY547 30009 FL

URWN CO PTSJ 190

SANJUANPR 190 186 29 951AM

MRS POLLY HAIGHT FRAWLEY

HEARING COUNSEL FEDERAL MARITIME COMMISSION

lloo L STREET N W WASHINGTON DC

THISREAFFIRMS OUR POSITION THAT SINCE WE WERE NOT ABLE TO BE PR

AT THE HEARING HELD ON FEB 25TH 1980 ON DOCKET NUM 79 102 D

PREVIOUS ENGAGEMENTS IN PUERTO RICO AS YOU WERE PREVIOUSLY AD

AND SINCE DUE TO ALLEGED STATUTES TIME LIMITATION WE WERE NO

VIDED WITH THE SUPPORTING PAPERS AND OTHER DATA PERTINENT T

AGREEMENT REACHED BY OTHER PARTIES ON THE MENTIONED DOCKET W

NOT IN A POSITION TO ENDORSE OR APPROVE SUCH AN AGREEMENT 

21 PERCENT INCREASE IN RATE IN A SEPARATE LETTER WE PLAN TO BR

THE ATTENTION OF THE COMMISSION MATTERS THAT WE CONSIDER O

UTMOST IMPORTANCE TO THESE AND FUTURE CASES THAT ALTHOUGH M

NOT LEGALLY RELATED TO THE ISSUED INVOLVED IN THE CURRENT D

ARE PERTINENT AND OF INTEREST TO THE FUNCTION OF THE COMMISSIO

TO FAIR APPLICATION AND MANAGEMENT OF THE LAWS THE COMM

ADMINISTERS THIS CABLE SUBSTITUTES THE PREVIOUS ONE IN THE 

DOCKET

HECTOR JIMENEZ JUARBE

EXECUTIVE VICE PRESIDENT PUERTO RICO

MANUFACTURERS ASSOCIATION

COLL 1100 L 25TH 198079 102 21 PCT
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME CARRIERS

AND RELATED ACTIVITIES

DOCKET No 79 63 GENERAL ORDER No 13 AMDT 3

PART 536 PUBLISHING AND FILING TARIFFS BY COMMON

CARRIERS IN THE FOREIGN COMMERCE OF THE UNITED STATES

EXEMPTIONS AND EXCLUSIONS

MARCH 17 1980

ACTION

SUMMARY

Final Rule

This rule provides for exemption ofall common carriers by

water from tarifffiling requirements of section 18 b of the

Shipping Act 1916 as to the carriage of Canadian or

United States origin cargo moving in bulkwithout mark or

count in rail cars on a local port toport basis between ports

in British Columbia Canada and United States ports on

Puget Sound

EFFECTIVE DATE March 25 1980

SUPPLEMENTARY INFORMATION

This proceeding was initiated by a Notice of Proposed Rulemaking pub

lished in the Federal Register on July 3 1979 44 Fed Reg 38913 in

response to an application from Foss Launch Tug Co for waiver of tariff

filing requirements provided in section l8 b Shipping Act 1916 Foss re

quested an extension of the present exemption set forth in 46 CF R

536 l aX5 applicable to intermodal cargo in rail cars moving under joint

through rates between British Columbia Canada and ports on Puget Sound

in order to include in the exemption the movement of rail cars containing

bulk cargo loaded into such cars without mark or count carried on a local
port toport basis between North Vancouver British Columbia Canad

Seattle Tacoma Washington

The proposed amendment to the above rule drafted to accommoda

Foss application drew comments from Sea Land Service Inc This pa

leged the exemption as contained in the proposed language would 

tentionally include general cargowhich could be moving on a port tlrport 

in the British Columbia Canada Alaskan trade Recognizing this pot

the Commission has now determined that in lieu of amending the ex

exemption in the manner proposedin this proceeding it would bepreferab

the sake of clarity to allow section 536 1 a 5 to continue in its present 

as it relates to exempting cargo moving on through joint rates and to add 

subparagraph 6 to provide for the exemption ofcargo moving in bulk w

mark or count in rail cars on a

port tlrport rate basis

This further exemption will not substantially impair effective regulat

the Commission be unjustly discriminatory or be detrimental to comm

NOW THEREFORE IT IS ORDERED Pursuant to section 4 

Administrative Procedure Act S U S C 1533 sections 18 b 35 an

Shipping Act 1916 46 U S C U817 b 833 a and 841a that T

C F R Part 536 1 Exemptions and exclusions is amended effective 

publication in the Federal Register by the addition of a new subpara

a 6 reading as follows

5536 1 Exemptions and exclusions

a

0 00

6 Transportation by water of cargo moving in bulk without mark or 

in rail cars on a local port toport rate basis between ports in British Col

Canada and United States ports on Puget Sound provided that the 

charged for any particular bulk type commodity on anyone sailing w

identical for all shippers and provided that this exemption shall not ap

cargoes originating in or destined to foreign countries other than Canad

further provided that the carrier will remain subject to all other provis

the Shipping Act 1916

By the Commission

S FRANCIS C HURNEY

Secre
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHARTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING

MARITIME CARRIERS AND RELATED ACTIVITIES

General Order No 38 Amendment No 2 Docket No 79 1

PART 53 I REGULATIONS GOVERNING THE PUBLISHING FILING AND

POSTING OF TARIFFS IN DOMESTIC OFFSHORE COMMERCE

March 18 1980

Final Rules

Part 531 ofTitle 46 CFR which contains the regulations

governing the form and mannerof filing tariffs by common

carriers by water in the domestic commerce ofthe United

States has been revised The changes are necessary in order

to incorporate the provisions of Public Law 95 475 an

amendment to the Intercoastal Shipping Act 1933

EFFECTIVE DATE March 24 1980

SUPPLEMENTAL INFORMATION

This proceeding was initiated by a Notice of Proposed Rulemaking pub

lished in the FederalRegister on January 5 1979 44 Fed Reg 1418 19 The

Federal Maritime Commission proposed to revise its Regulations Governing

the Publishing Filing and Posting of Tariffs in Domestic Offshore Commerce

in order to enable it to comply with the requirements of P L95 475 92 Stat

1494 1978 which amends the Intercoastal Shipping Act 1933 46 U S c

S 843 et seq and to correct a clerical error in the existing rules

Comments received from the Government of the Virgin Islands GVI have

been carefully reviewed and considered The GVIs comments which are dis

cussed below were confined to suggested changes to be made to the Commis

sion s proposed amendment ofsection 531 10

The GVI would include the requirement that the Attorney General or other

designated officials of every State Commonwealth Possession or Territory

ACTION

SUMMARY
578 FEDERAL MARITIME COMMISSION

which is affected by a general rate increase or decrease must receive the 

exhibits workpapers statements of direct testimony and underlying fin

data that are required to accompany the tariff amendments effectuating 

increase or decrease

The GVI also requested that the proposed rules be amended to specif

the Commission shall receive within 15 days ofthe filing of a general in

or decrease in rates proof that the exhibits workpapers statements of 

testimony and underlying financial data have been served upon each 

designated officials Said proof to consist of copies of Vnited States 

Service Return Receipts or a subscribed and verified statement containi

name and address of the official or officials served the date served a

manner of service

The Commission has determined that these are matters which come 

the purview of the Commission s Rules of Practice and Procedure 46 C 

502 67 Rather than attempt to incorporate these provisions into s

531 10 the proposed rules have been modified to direct the tariff users 

applicable requirements

The Commission has amended section 531 31 to incorporate the 

suggestion that failure by the carrier to comply with the applicable re

ments 46 C F R 502 67 and or 46 C F R 512 may result in the re

of the tariff matter

Therefore pursuant to section 4 of the Administrative Procedur

5 V S C 553 section 43 of the Shipping Act 1916 46 VS C 84

and section 2 of the Intercoastal Shipping Act 1933 46 VS C 844 

531 of Title 46 Code of Federal Regulations is amended as set forth 

inafter

Section 531 2 is amended by incorporating the following definitions 

designated 53120 and 5312 k

j

General Decrease any change in rates fares or charges which will I result in a d

in not less than 50 percent of the total rate fare or charge items in the tariffs per trade 

carrier and 2 directly result in a decrease in gross revenues of said carrierfor the particu

of not less than 3 percent

k General Increase any change in rates fares or charges which willIresult in an 

in not less than 50 percent of the total rate fare or charge items in the tariffs per trade 

carrier and 2 directly result in an increase in gross revenues of said carrier for the pa

trade of not less than 3 percent

The definitions in section 5312 presently designated as paragrap

through x inclusive are redesignated paragraphs I through z inc

The reference in section 5312 which reads see section 5312

amended to read see section 5312 w

Section 531 31 is amended by inserting after the first sentence

Tariff matter may be rejected for failure of the filing carrier to comply with the prov

Rule 67 of the Commission s Rules of Practice and Procedure 46 CFR 502 67 and or P

of Title 46 Code of Federal Regulations

The reference in section 5316

m

1 which reads Section 531 1 

amended to read section 5312 q
Section 531 10 is amended by

1 Revising the introductory sentence of paragraph b to read as follows

b Amendments establishing new or initial rates or changing rates fares charges rules or other

tariff provisions which do not constitute a general increase ordecrease in rates shall be posted and

filed together with any supporting material required by 46 CFR 512 at least 30 days prior to their

effective dates

2 Inserting the following new paragraph c

c Amendments changing rates fares charges rules or other tariff provisions which constitute

a general increase or decrease in rates shall be posted and filed together with any supporting ma

terial required by 46 CFR 512 and 46 CFR 502 67 at least 60 days prior to their effective date

3 Redesignating paragraphs c d e and fas paragraphs d e

f and g

Section 531 1I g3 is amended to read as follows

3 Publish in the upper right hand corner an effective date which conforms with section

531 10 b and 531 10 c of this Part

Section 531 13 a is amended to read as follows

U

a The Commission may suspend from use any rate fare charge classification regulation or

practice for a period of up to 180 days beyond the time it would otherwise have 1 wfully taken

effect

The reference in section 531 13 c 1 which reads see sectiQllS 531 10 c

and 531 11 h iii is amended to read see sections 531 10 d and

531 11 g2 iii and iv

By the Commission

S FRANCIS C HURNEY

Secretary
i

I

FEDERAL MARITIME COMMISSION

46 C F R 537 5 Docket No 79 60

The Filing With the Commission of Cargo Statistics Compiled

by Various Conferences of and Rate Agreements Between

Common Carriers by Water in the Foreign Commerce

March 18 1980

Discontinuance of Proceeding

The Commission instituted this proceeding by not

proposed rulemaking published June 13 1979 44 

Reg 33913 and invited pubUc comment whethe

Commission would require the filing annually of 

statistics by conferences and rate agreements compos

common carriers by water engaged in the foreign 

merce of the United States In light of the commen

ceived and because the Commission considers the pro

to increase the burden of regulationto conferences an

agreements as well as the Commission itself w

sufficient corresponding regulatory benefit the Co

sion has determined not to adopt a final rule at this 

Accordingly this proceeding is hereby discontinued

SUPPLEMENTARY INFORMATION None

By the Commission

ACTION

SUMMARY

I

j

S FRANCIS C HURNEY

Secre
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

DOCKET No 79 96

AMSTAR CORPORATION

v

SEA LAND SERVICE INC

NOTICE

March 19 1980

Notice is given that no appeal has been filedto the February 12 1980 notice

of termination of this proceeding and the time within which the Commission

could determine to review has expired No such determination has been made

and accordingly review will not be undertaken
FEDERAL MARITIME COMMISSION

No 79 96

AMSTAR CORPORATION

v

SEA LAND SERVICE INC

WITHDRAWAL OF COMPLAINT

Finalized March 19 1980

The complainant respectfully asked in its complaint served Novemb

1979 that the rate on a shipment of sugar from San Juan Puerto R

Curacao Netherlands Antilles be found in violation of section 18 b 5 

Shipping Act 1916 and asked for hearing in New York N Y Itappeare

the dispute concerned a differenpe between charges based on rates of 

105 50 per ton or a difference in charges of 2 903 66

By noticeto the parties dated December 17 1979 and served Decem

1979 the matter was set out in some detail and it was stated in part 

is doubtful that the relief sought by the complainant is within the autho

the Commission to grant Also it was suggested that should the comp

wish to provide further legal argument etc that the Shortened Proc

might be appropriate

Both parties agreed to the Shortened Procedure and dates were 

memoranda of facts and argument

By letter dated February 8 1980 the complainant Amstar Corpo

states that in view of the opinion stated in the notice to the parties on D

ber 17 1979 and in view of the complainant s further review of th

complainant has decided to withdraw its complairit and consents to the 

nation of this proceeding

Accordingly the request to withdraw the complaint is granted a

proceeding hereby is terminated

S CHARLES E MORGAN

Administrative Law Ju

February 12 1980
FEDERAL MARITIME COMMISSION

DOCKET No 79 16

E ALLEN BROWN INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE No 1246

ORDER PARTIALLY ADOPTING INITIAL DECISION

March 24 1980

This proceeding was instituted by Order of Investigation and Hearing to

determine whether E Allen Brown a Commission licensed independent ocean

freight forwarder violated section 51O 23 f of the Commission s rules and

regulations by failing to pay over to ocean common carriers monies advanced

by shipper principals for freight and transportation2 and if so whether his

license should be revoked or suspended 3

Administrative Law Judge Norman D Kline issued an Initial Decision

finding that I

E Allen Brown violated the pay over rule on over 100

occasions some of which had not been paid over to ocean carriers at the time

of the hearing and 2 E Allen Brown failed to fully respond to a lawful

Commission inquiry However because the Presiding Officer determined that

Mr Brown is now attempting to satisfy the debts arising from these violations

he concluded that neither revocation nor suspension would serve the remedial

purposes of the Shipping Act In lieu of suspension or revocation the Presid

ing Officer recommends a probationary period ending upon satisfaction of

Mr Brown s debts and the establishment of positive equity in his business

The Commission s Bureau ofHearing Counsel filed Exceptions to the Initial

Decision arguing that the issue of revocation or suspension of Mr Brown s

license would be mooted by the then impending cancellation of his freight

forwarder surety bond which was to become effective on December 23 1979 4

146 CF R SSIO 23f

2

The rule requires these monies to be paid overwithin seven working days ofreceipt or within five working days after departure

of the vessel whichever is later

JTheOrder also directed that a finding be made as towhether Mr Brown slicense should be revoked orsuspended for failure

to respond to lawful Commission inquires regarding these pay over violations 46 CFR gSIO 9 b and because of changed

circumstances which would render Mr Brown unqualified to hold a license 46 CF R 551O 9 d

4 Section 5109 e

of the Commission s Rules provides fOT automatic revocation of a freight forwarder s

license for failing to

maintain avalid surely bond 46 CF R 51O 9
Hearing Counsel requested however that the Commission adopt the fin

of fact of the Initial Decision

DISCUSSION

E Allen Brown s freight forwarder surety bond was in fact can

effective December 23 1979 Therefore the Commission will herein v

that portion of the Initial Decision which imposes sanctions

The findings of fact contained in the Initial Decision are well founde

no exception to any portion thereof has been filed Therefore the findin

fact are adopted

THEREFORE IT IS ORDERED That the Exceptions of He

Counsel are Itranted to the extent indicated in this Order and

IT IS FURnIER ORDERED That the Initial Decision issued i

proceeding is except to the extent modified by this Order adopted b

Commission and

IT IS FURTHER ORDERED That this proceeding is discontinue

By the Commission

S FRANCIS C HURNEY

Secre
No 79 16

FEDERAL MARITIME COMMISSION

E ALLEN BROWN INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE No 1246

Partially Adopted March 24 1980

Respondent E Allen Brown has operated a

freight forwarding business in Jacksonville Florida

under alicense issued by the Commission over ten years ago A compliance check conducted

in early 1978 showed over 100 instances in which Mr Brown failed to pay over freight money

to ocean carriers within the seven day period prescribed by the Commission s General

Order 4 Further evidence showed additional failures to pay over on time as well as indebt

edness to certain carriers and shippers In addition to the foregoing practices Mr Brown did

not furnish all of the financial information requested by the Commission s staff However he

did cease to handle shippers money as instructed by the staff Hearing Counsel urge that he

be found to be unfit and that his license be revoked for these past willful violations of the

Commission s

regulation Mr Brown appearing without an attorney admitted his past

shortcomings and asked for achance to continue in business so that he could payoff his debts

It is held that

I Although Mr Brown did commit violations of the regulation willfully as that term is under

stood in administrative law the extreme sanction of revocation of his license would destroy

his business and deprive him of the chance to make his business financially sound and pay his

debts as he is doing and wishes to do

2 Case law and previous Commission decisions show that the Commission considers theFreight

Forwarder Law to be remedial not punitive in nature and that the Commission will fashion

reasonable remedies to fit particular facts after considering evidence of mitigation

3 The remedy which the Commission has previously fashioned in this type of case is to require

Mr Brown to submit financial reports periodically showing current financial status and

compliance with regulations In addition he will be ordered to continue desisting from

handling shippers money Failure to meet these conditions or evidence of new violations will

result in automatic revocation of his license This remedy willenable Mr Brown to make good

on his promises to pay his debts and restore his business to financial soundness Revocation

on the other hand will only result in stranding his creditors with unpaid debts as well as

adding to the ranks of the unemployed

E Allen Brown for himself

John Robert Ewers and Joseph B Slunt as Hearing Counsel
586 FEDERAL MARITIME COMMISSION

INITIAL DECISION I OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

This is a proceeding instituted by Commission Orderserved March 14 

to determine whether the license of Mr E Allen Brown who operates 

independent ocean freight forwarder should be revoked or suspended be

Mr Brown appeared to have engaged in certain conduct which violated p

ular provisions of the Commission s General Order 4 46 C F R 510 e

which conduct also brought into question the fitness of Mr Brown to co

operating as a forwarder

As the Order states Mr E Allen Brown was issued his license on Ma

1969 under section 44 b of the Shipping Act 1916 46 VS C 841

General Order 4 During a compliance check of the licensee conducted 

Commission investigator in early 1978 information wasdeveloped which 

cated that Mr Brown had apparently violated section 510 23 f of G

Order4on 107 separate occasions by failing to pay overto oceancarriers 

of money given to Mr Brown by shippers for the payment of transpor

charges within the time periods prescribed by that regulation seven day

receipt from shipper or five days after sailing of vessel whichever is 

By certified letter dated July 31 1978 Mr Brown was advised b

Commission s Office of Freight Forwarders of the payover requireme

section 51O 23 fand instructed to furnish monthly statements relating 

outstanding accounts with ocean carriers and his financial condition H

advised ofthe possible adverse consequences to hislicense if hefailed to c

with these instructions or continued to violate the payovet rule Hewas fu

more directed to discontinue handling shippers moneys for payment of 

freight charges until the matters uncovered could be resolved and to sub

affidavit of his understanding of these instruCtions Mr Brown submitt

affidavit and some of the requested information by letter and telex 

August 18 1978 but failed to provide the financial statement or to foll

with monthly information as instructed

In view of the above situation the Commission began this investiga

determine whether Mr Brown did indeed violate the payover rule s

51O 23 f and whether his license should be suspended or revoked beca

his failure to respond to lawful inquiries comply with lawful rules regul

or orders or because ofchange ofcircumstances which demonstrate tha

longer qualifies as an independent ocean freight forwarder or beca

engaged in such conduct that the Commission should find him unfit or 

to carry on the business of forwarding Section 510 9 of General O

provides for suspension or revocation of licenses if the preceding eve

found to have occurred 46 C F R U 510 9 b 5109 d 510 9 e

The Commission s Order established aprocedure whereby the Commi

Bureau ofHearing Counsel would submit amemorandum of law and af

of facts on April 18 1979 Respondent was instructed to submit his 

randum of law and affidavits on May 18 1979 Thereafter the parties w

I This decision will become the decision of the Commission in the absence of review thereofby the Commission Rule 

of Practice and Procedure 46 CF R 5502 227
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 587

submit statements identifying unresolved issues offact and recommend appro

priate procedures to resolve them

From the inception of this proceeding it appears that Mr Brown has not

fully comprehended the procedural requirements despite the efforts ofHearing

Counsel and myself to provide guidance Furthermore he has been unable to

retain legal counsel and has continued to represent himself throughout the

proceeding Therefore although Hearing Counsel submitted his memorandum

and affidavits on April 18 as instructed Mr Brown merely sent a letter dated

May 15 1979 in lieu of memoranda or affidavits in which he furnished two

financial statements stated that he was attempting to resolve hisfinancial and

other difficulties and requested further instructions as to what more was

required

Because of Mr Brown s failure to furnish the materials as instructed Hear

ing Counsel after speaking with Mr Brown suggested that he be given more

time to obtain counsel and thereafter to submit his procedural recommen

dations Imyself had written Mr Brown on May 22 1979 to advise him of

the nature of the case against him and to recommend either retention of

counselor presentation of a defense if he wished to retain his license Because

of these events and the fact that Mr Brown still maintained that he was

attempting to obtain legal counsel Igranted additional time for him to do so

and fixed a date for him or his counsel to furnish procedural recommendations

See Order to Submit Further Procedural Recommendations and Related Rul

ings June 6 1979

Following the above rulings Mr Brown contacted meand requested that a

prehearing conference be held although he was still unable to obtain legal

counsel In order to assist Mr Brown in understanding his rights Iheld an

informal prehearing discussion by telephone with Mr Brown and Hearing

Counsel It wasexplained to Mr Brown that he could present facts in his own

defense and present his own witnesses to support his position Mr Brown

indicated that he wished to do so and considering the fact that knowledgeable

persons would be located in the Jacksonville Florida area I scheduled a

hearing in Jacksonville Florida which washeld on July 18 1979 See Report

ofTelephonic Conference and Notice of Hearing June 26 1979 and Notice

of Hearing Location June 29 1979 However Mr Brown appeared at the

hearing without counsel and with no witnesses to testify in his behalf besides

himself Furthermore Mr Brown has filed no post hearing brief or other

pleading although given the right to do so by my last ruling See Notice of

Post Hearing Briefing Schedule July 23 1979

FINDINGS OF FACT

Mr E Allen Brown was issued a freight forwarding license on May 26

1969 He wasand is the sole proprietor of the business and is the qualifying

officer under the Commission s

regulation responsible for the supervision of

the operations of the forwarding business

On January 23 1978 Mr George B Harry a Commission investigator

employed in the Commission s Savannah Georgia office visited Mr Brown s
588 FEDERAL MARITIME COMMISSION

premises in Jacksonville Florida for the purpose of checking Mr B

operations to determine ifhe was complying with his obligations as a l

in accordance with the Commission s General Order 4 46 C F R S 510 

Prior to that date Mr Harry had received information from aformer em

of Mr Brown who apparently indicated that Mr Browns business was

financial condition

Before Mr Harry visited Mr Brown he requested Mr Brown by te

and letter dated January 16 1978 that Mr Brown prepare a financia

ment which would show the financial condition of the business as of D

ber 31 1977 The statement WaS furnished

Mr Brown was advised that the compliance check of his business 

center around the timeliness with which Mr Brown had paid ocean 

money over to ocean carriers after receiving such money from s

Mr Brown indicated thatthe company s bookkeeper Mr John Go

handled the function of payment of ocean freight as well as company f

and would be the person who could furnish information as to these m

Mr Goldstick joined Mr Brown and Mr Harry at the complianQC 

meeting at the request of Mr Brown and was asked to provide an a

description of the firm s payment record to carriers Mr Goldstick 

minded of the requirement in the CommIsSion s General Order 4that 

be paid over to carriers within a five to seven day time period H

Mr Goldstick indicated that hehad been unaware ofthese requiremen

that time Instead Mr Goldstick believed that a 3oday period was a 

and standard business practice for credit and that in most cases ocean 

money wasturned overto carriers within 30 days after receipt from the 

Upon Mr Harry srequest Mr Brown and Mr Goldstick pe

Mr Harry to examine all freight forwardinll files maintained by t

during the calendar year 1977 and Mr Goldstick provided explanato

mation relating to the firm s bookkeeping system Mr Harry made 

based upon a random sampling ofshipments which moved in export co

during 1977 The following table illustrates the number ofworking day

the Brown firm held shippers money before paying overto the carriers 

shipments

Study Showing Time Shippers

Money Held Before Payover

7 days or less 34

8 30 days 61

31 60 days 36

61 days or over 7

Total

The number of days in the above table runs from the time the Bro

received the money from the shippers to the time it turned the money 

the carriers In each instance the freight waspaid over wellbeyond the 
Updated Study Showing Time Shippers Money

Held Before Payover as ofFebruary 0 1978

7 days or less 7

8 30 days 17

31 60 days 11

Over 61 days 7

Total

E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 589

the bill of lading and presumably beyond the date of sailing 2

The above table

shows that the Brown firm exceeded the permissible seven day limit and

presumably the five day limit after date of sailing prescribed by General

Order 4on 101 shipments out of 138 selected Mr Harry stated that he had

no acceptable explanation for these apparent violations ofG O 4 except for five

of the seven shipments in which shippers money washeld for 61 days or more

for which payment wasdeliberately held up because of a rate dispute with the

carrier

As regards Mr Brown s financial condition at the time of the compliance

check Mr Brown was advised that the financial statement revealed a deficit

in working capital However Mr Brown indicated that he was in the process

of liquidating certain personal assets the proceeds of which would be put into

the business Therefore Mr Harry requested an update of his financial state

ment by a subsequent letter dated February 1 1978

The following table updates the earlier table and shows the status of

Mr Browns accounts payable on 42 outstanding bills of lading as of Febru

ary 10 1978 The total ocean freight due at that time was 185 898 12 The

table overlaps the preceding table

As the table shows some 35 out of 42 shipments involved apparent violations

of the Commission s regillation governing payover

Mr Brown also furnished an updated financial statement on March 22

1978 which Iwill discuss later

As a result of a review of the information compiled by Mr Harry the

Commission s Office of Freight Forwarders through its Chief Mr Charles

Clow sent a letter dated July 31 1978 Mr Clowadvised Mr Brown that the

compliance check had found at least 107 violations of the payover regulation

section 51O 23 f and that adverse action affecting his license could follow if

the same practices continued Mr Clow then instructed Mr Brown to furnish

the following information every month I the amount ofmoney currently due

and payable by the firm to carriers and or carriers agents for ocean freight

together with an itemization of the amount of time showing when the money

was received and the length of time it was due 2 a balance sheet prepared

by a certified public accountant Mr Clow also instructed Mr Brown that

1

General Order 4 permits a

forwarder to pay freight money to the carrier within 5 days after the vessel sails if that time islatcr

than 1 days after the forwarderreceived the money from the shipper However the custom apparently isfor the forwarderto bill

and receive freight money from the shipper only after the vessel sails Therefore in the table and other tables the time shown

which runs from forwarders receipt of freight money until payment to carrier began to run after the vessel sailed Any money

held over1 days by the forwarder would thus also have run beyond 5 days after the vessel sailed See Tr 51 52
590 FEDERAL MARITIME COMMISSION

Mr Brown discontinue handling shippers money by instructing them 

the carriers directly until the problems uncovered could be resolved 

furnish an affidavit showing that Mr Brown understood the vario

structions contained in the letter

By letter and telex dated August 18 1978 Mr Brown submitte

affidavit in which he stated that he has read the mentioned letter from 

and will make every effort to conscientiously and fully comply with its re

ments and suggestions to remedy the deficiencies noted Mr Brown 

furthermore that he will have all shippers for whom he acts as forward

to the ocean carriers directly until the matters involved in the mentioned 

from FMC are resolved However Mr Brown did not submit the fin

statement He stated that a scheduling problem prevented his certified 

accountant from completing a balance sheet but that the accountant a

him that he would complete it as promptly as possible and forward it d

to Mr Clow

The information furnished in regard to outstanding freight charges re

from shippers and payable to oceancarriers as of August 18 1978 show

Mr Brown still owed 83 008 in freight charges to the carriers of 

19 150 was held for over 30 days The following table shows how lo

money was being held by Mr Brown

Time Shippers Money Held by

Mr Brown as ofAugust 18 1978

7 days or less 4

8 30 days 35

Over 30 days 12

Total sf

Thus on 47 out of 51 shipments Mr Brown s firm waswithholding sh

money from the carrier for a period oftime beyond that permitted by G

Order 4

Mr Brown furnished nofurther information in response to the July 31 

letter from Mr Clow As noted the Commission began this proceed

Order served March 14 1979 By letter dated May 15 1979 Mr Brow

mebalance sheets unaudited and without an opinion of the accounta

December 31 1978 and April 30 1979 In that letter Mr Brown also 

that his certified public accountant had been hospitalized and thereaft

too busy during the income tax period to prepare the statements b

Mr Brown had furnished himwith the necessary monthly information 

stated in his letter that his business did suffer some financial difficulty 

1978 however since that time we have turned it around lIdare very opt

with the current trend He represented that every effort is being expe

resolve this very difficult situation and Ican assure you that Iwill cont

do so and requested that if his letter and the balance sheets did not 

your requirements that a listing of the specific requirements of the Co

sion be forwarded to me and that a period of 30 days be granted in w
The Firm s Financial Condition

E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 591

satisfy these requirements Letter to Norman D Kline Administrative Law

Judge from E Allen Brown dated May 15 1979

The only additional information which Mr Brown has furnished regarding

his firm s financial condition was furnished at the hearing held in Jacksonville

Florida on July 18 1979 At that time Mr Brown submitted for the record

drafts of balance sheets dated May 31 and June 30 1979 and a profit and loss

statement as ofJune 30 1979 Both were unaudited At the hearing Mr Brown

also offered to submit all information which he was still obliged to furnish

under the July 31 1978 letter but had not furnished

Mr Harry the Commission s

investigator testified that at the time of the

compliance check on January 23 1978 Mr Browns financial statement re

vealed a deficit in working capital A statement was submitted to Mr Harry

dated February 28 1978 in the form of a balance sheet It showed that

Mr Brown had an equity in his forwarding business in the amount of 22 143

This wasderived by subtracting liabilities from assets totaling 359 675 Ac

cording to balance sheets dated December 31 1978 and April 30 1979

however Mr Browns liabilities exceeded his assets so that the previous equity

became a deficit of 27495 and 21 009 for the two dates respectively The last

balance sheets submitted at the hearing prepared by Mr Browns bookkkeeper

in draft form for May 31 1979 and June 30 1979 continued to show a deficit

in his equity in the amount of 11 77178 and 8 882 38 for the two dates

respectively However it should be noted that the size of the firm s liabilities

has shrunken considerably from 337 532 as of February 28 1978 to

67 671 59 as of June 30 1979 and that the deficit in equity has been dimin

ishing

The Status of Certain Unpaid Debts

According to Mr Harry at least two ocean carriers have had to recover

freight money from one of Mr Browns shipper clients the Glidden Co which

had given the money to Mr Brown On or about April 13 1979 Mr Brown s

accounts with United States Lines were delinquent in the approximate amount

of 8 000 Unable to recover from Mr Brown United States Lines requested

Glidden to pay Glidden honored the request for payment and remitted the full

amount although advising United States Lines that a substantial portion of the

8 000 had already been paid to E Allen Brown

At some time before April 1979 another carrier Sea Land Service Inc

having become concerned overBrown s indebtedness to it 3

arranged with the

J

According to Mr Harry as of January 9 1978 Mr Brown owed Sea Land 256 000 in freight Of this amount Sea Land

considered 151 000 current i e less than 30days owed 557 000 was 30 to 60 daysold 546 000 was 60to 90 days old 5928

wasover90 days old Tr 110 This represented money which shippers owed the carrier and which they mayor may not have paid

Mr Brown Tr 112 Therefore the figures do not show violations ofthe payover rule They dogive us an idea of how much money

a

forwardersuch as Mr Brown may handle between shippers and one large carrier Tr III They also indicate that at least one

carrier seemsto follow a relaxed credit policy with shippers The 256 000 amount may be unusually large because it included

a heavy December 1977 movement and post strike shipments Tr 114 Also the figure was reduced considerably in later months

Tr 114
592 FEDERAL MARITIME COMMISSION

shipper Glidden Co for Glidden to pay Sea Land 20 000 of the mone

to Sea Land which Glidden had already paid Brown Glidden did in f

Sea Land 20 000 Sea Land also came to an agreement with Mr 

under which Mr Brown would pay Sea Land at least 1 000 monthly u

debt wasdischarged As of March 21 1979 the balance due toSea La

23 99360 As of July 16 1979 this was reduced to 19 989 45 all 

to the Glidden account Tr 109

Ittherefore appears thaton or about March 1979 Mr Brown had f

pay at least 52 000 in freight charges to the two carriers named altho

had received this money from the shipper Glidden who intended that the 

go to the carriers in payment Furthermore the shipper Glidden had 

about 28000 of this amount a second time

Mr Brown indicated by a letter dated March 21 1979 addressed 

Land that he would continue to honor the agreement with Sea L

making monthly payments in an effort to resolve the matter as prom

possible At the hearing Mr Brown testified that he was continuing t

this obligation to Sea Land and that he would work out an arrangeme

Glidden He indicated his desire to make good on these accounts but a

edged that it sa terrific load on me it sa tremendous load Tr 29 M

confirmed the fact that Mr Brown has been paying Sea Land regula

month Tr 109

Mr Brown s Testimony and Defenses at the Hearing

Since Mr Brown had no attorney representing him he made his ca

hearing Essentially Mr Brown did not dispute the fact that he h

shippers money when he had failed to comply with the Commission s 

regulation and frankly admitted that financial difficulties motivated 

make use of shippers money to pay business and personal expenses H

he pleaded that these events took place in the past and that he was tr

some time now to make amends and to turn his business around H

that other forwarders had left the Jacksonville area there now bein

seven eight or nine left with consequent disruption and some d

hardship on terminal operators but he asserted that hedid not wish to 

on his debts and leave people holding the bag Indeed he testified 

believed that if he had not violated the payover requirements of G 

would have had to go out of business Tr 42 43

Mr Brown testified about his financial difficulties Apparently he h

expanded his business had too many employees and a Savannah office 

to cut down the scale of his operations From 12 or so employees he 

three devoted to the freight forwarding business and one to his custo

broker business He testified that his problems intensified j1S a res

longshoremen strike during October to December 1977 whenhe neede

to pay overhead and employees wages and wasalso strugglingto rerou

and keep his business going He claimed that the violations found 

Commission s investigator only represented 2 3 percent of histotal bill

that he was under much pressure because of two or three IRS audit
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 593

as disgruntled former employees who he believes might have had something

to do with the present investigation of his business He states that the later

tables ofoutstanding freight accounts merely show carry overs from the earlier

period since he had not handled shippers money since some time after

Mr Clow s letter of July 31 1978 and that the primary reason for a showing

of delinquent accounts is the carry over from the Sea Land account which he

is still paying off He admits he still owes Sea Land and Glidden but maintains

that he wishes to pay them both off and will do something about the Glidden

account after he finishes with Sea Land

Mr Brown acknowledged that he did not send the monthly statements

requested by Mr Clow but explained that this failure was largely caused by

illness and unavailability of his first accountant during tax time and mis

understandings as to who wasto send what to Washington Mr Brown testified

that he sent information to his accountant for preparation of the requested

statements but found out later that the accountant had not been doing the job

As for the other requirement imposed by the July 31 1978 letter from

Mr Clow namely that Mr Brown no longer handle shippers money until this

matter could be resolved Mr Brown has apparently complied

On cross examination Mr Browns frank answers served to reduce the

impact of his direct testimony For example he recognized that although the

violations of the payover rule shown by Mr Harry might have amounted to

only 2 3 percent of his total billings he recognized that this was merely a

random sampling taken from all his billings It is possible therefore that had

every shipment been tabulated other violations might have been uncovered

His trouble with the accountants which extended over many months according

to Mr Brown might possibly reflect an honest misunderstanding but he con

ceded that as far as a statement ofoutstanding freight accounts wasconcerned

which he was also supposed to submit every month to the Commission s staff

this statement could be prepared right in his own office and indeed the last

statement submitted for August 18 1978 was prepared in his office

Although Mr Brown related many of his problems to the strike in late 1977

his later statement ofAugust 18 1978 showing continued delinquent accounts

shows shipments which were unrelated to that strike and carriers other than

Sea Land which he claims accounted for most of the carry overof delinquent

accounts because of the Glidden shipments He also didn texplain clearly why

hewasunable to pass on extra costs stemming from the strike iftherewasextra

work merely indicating that he made price quotations and apparently had to

stick to them Also he indicated that during the strike there really wasn tall

that much extra work although it was farther away and it was more

expensive Tr 67

Mr Brown acknowledged that he had run into problems with Sea Land in

the past Some time in 1972 or 1973 apparently he owedSea Land maybe 20

or 25 thousand and had to pay it off over a period of some three months He

agreed to the requirement that he stop handling shippers money but also

testified that shippers had already begun to pay carriers directly for the ship

pers own convenience even before Mr Clow instructed him Mr Brown be

lieves that many shippers prefer paying carriers directly anyway and has not
594 FBPERAL MARITIMB COMMISSION

l06t any business beclause he is no longer allowed to handle shippers 

Mr Brown acknowledged that he wasaware of the requirements o

and even testified that the seven day payover rule is not beyond the ca

small forwarders to meet Tr 90 But he maintained that 30 day

accepted period for credit His belief that his business was turning ar

based upon the fact that he has been gradually reducing the negativ

account on his balance sheet which at last count however still showed 

of over 8 000 Tr 35

Mr Brown had the vague feelingthat he was the victim of an effort 

by competitors or former employees to harm his business and feels t

can be left alone he will put his business on the right path and pay ofth

Perhaps the best way to summarize Mr Browns poeition and plea to 

in business is to quote his exact words at the hearing On pages 40 a

the hearing transcript Mr Brown stated

Well the only thing I would like to say is that I would like to have the opportunity to 

situation out Now the circumstances that surrounded us are all behind us The ex

everybody has are in most cases you know they re correct and there were problem

problems But I didn t quit And I want to meet Illy obliptions and I would like t

opportunity to satisfy my people and 1 11I wnling and able to do it I bave a wife and f

tbe expenses that I

ve incurred Hving expenses for the last almost two yea lI have b

almost solely by mywife So what expenses have been out ofhere have beenobHgatlon

accumulated over many years My personal draw throuah the thirtieth of June was 

that s for insurance prellliums and that sort of thing So there s no tendency on my p

away with anything or rape the busincas withfrills and that sort of thing Ive spent a 

trying to turn this thing around and you know Ijust want to he able to finish it I 

to run away I don t have any place to go first of all and I couldn t aftord to get the

try to

So said Mr Brown who appeared at the hearing without an attor

without clients or other personsto testify in his behalf besides himse

DISCUSSION AND CoNCLUSIONS

As discussed earlier the ultimate issue for determination is 

Mr Brown s license should be suspended Or revoked because of his f

observe certain standards established by law and Commission regulatio

precise the Commission s Order required me to determine

1 Whether E Allen Brown has violated section 510 23 fof Genera

by failing to promptly pay over to the oceangoing common carri

agent within seven days after receipt thereof or within five work

after departure of the vesselfrom the port of loading whichever is 

sums advanced the licensee by its principal for freight and trans

charges

2 Whether E Allen Browns independent ocean freight forwarde

should be revoked or suspended pursuant to

a section 510 9 b of General Order4for failureto comply with a

inquiries or to comply with any lawful rules regulations or orde

Commission
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 595

b section 510 9 d of General Order 4 for change of circumstances

whereby the licensee no longer qualifies as an independent ocean freight

forwarder

c section 51O 9 e of General Order 4 for conduct which renders the

licensee unfit to carry on the business of forwarding

Hearing Counsel urge that Mr Brown s license be revoked Hearing Counsel

contend that Mr Brown did willfully violate section 51O 23 f

of General

Order 4 the payover rule on at least 151 occasions and furthermore contends

that these violations occurred after warnings and ample opportunity had been

given to Mr Brown to bring his operations into compliance with General

Order 4 Moreover Hearing Counsel assert that Mr Brown failed to comply

with a lawful inquiry by the Commission H C Memorandum of Law

April 18 1979 at 9 Therefore Hearing Counsel believe that Mr Brown no

longer qualifies as an independent ocean freight forwarder Id at 9

In support of their recommendation for the most drastic sanction possible

Hearing Counsel cite not only the violations of the payover rule but the in

ability of Mr Brown to bring his business into compliance even after warnings

regarding the payover rule Thus hisviolations ofthe Commission s regulations

were willful within the meaning of administrative law 4Section 44 d of the

Shipping Act 1916 of course provides that a license may be

s

luspended or revoked for willful failure to comply withany provision of this chapter or withany

lawful order rule or regulation of the Commission promulgated thereunder

46 us c f84Ib d

Hearing Counsel furthermore refer to previous Commission decisions which

make clear that a licensed freight forwarder is a fiduciary that is he

occupies a position of trust with respect to his shipper and carrier clients that

he is expected to know understand and follow scrupulously the requirements

established by law and the Commission regulations and to have sufficient

financial standing to secure a fidelity bond See Harry Kaufman Independent

Ocean Freight Forwarder 16 F M C 256 271 1973 Independent Ocean

Freight Forwarder License Application James J Boyle Co 10 EM C

121 127 1966 Independent Ocean Freight Forwarder Application Lesco

4Tbe meaning of willfulness in administrative statutes has been interpreted in many cases AsHearing Counsel state HC

Memorandum at 5 violations have been held to be willful if the acts were intentional regardless of evil motives orif they were

done with careless disregard of statutory requirements In Equality Plastics Inc et aJ 17 F M C 217 226 1973 the

Commission explained the meaning of the words knowingly and willfully appearing in section 16 First of the Act The

Commission cited an earlier case Misclassification of Tlssue Paper as Newsprint Paper 4 F M B 483 486 1954 which had

stated

T he phrase knowingly and willfully means purposely or obstinately oris designed to descn be acarrier who intentionally

disregards the statute or isplainly indifferent to its requirements We agree that a persistent failure to inform or even to

attempt to infonn himself by means of normal business resources might mean that a shipper or forwarder was acting

knowingly and willfully in violation of the Act Emphasis added by the Commission

The Commission further explained the meaning of the term plainly indifferent by stating that it means something more than

casual indifference and equates with a wanton disregard from which an inference can be drawn that the conduct was in fact

purposeful a standard somewhat analagous to the tort concept of gross negligence 17 EM C at 226

Another way of stating the standard is that an action is willful if either I it was committed intentionally without any regard

tomotive or 2 it was done in disregard of lawful requirements Footnote citation omitted However it has been held that gross

neglect ofaknown duty wiU aim constitute willfulness 5 Mennes Stein and Gruff Administrative Law at 41 58 and 41 59

citing Goodman v Benson 286 F 2d 896 7thGr 1961 and United Slalesv Ill OnJralRy 303 US 239 242 243 1938

See also George Steinberg Son Inc v

Butz 491 F ld 988 994 ld Cir 1974 cert denied 419 US 830 1974
596 FEDERAL MARITIME COMMISSION

Packing Co Inc 19 F M C 132 136 137 1976 Aetna Forward

Inc Revocation of License 8 F MC 545 550 551 1965

Mr Brown on the other hand as Ihave mentioned earlier had no 

and made his defense at the hearing by frank admission of his short

and difficulties but asked that he be allowed to pay oft his debts and 

business around Healso attempted to explain the reasons why he fell 

predicamentregarding failure to pay over freight in the time prescribed 

ofshippers money inability to furnish requested information on time 

unhealthy financial condition ofhis forwarding business He also demo

that he was indeed paying back his major debt to Sea Land and inte

make some arrangement with his other major creditor Glidden 

discharged his indebtedness to Sea Land

The most difficult problem in this case is not to make the findin

Mr Brown violated the payover rule and used shippers money for 

business orto findthat he did not make monthly reports to the Officeo

Forwarders as instructed in the letter of Mr Clow Itis clear that he 

is delinquent in accounts with some carriers and shippers and that his 

has had financial troubles Rather the problem is what should be 

Mr Brown s license Should his forwarding business bedestroyed by re

of his license as Hearing Counsel urge or should he be allowed to 

under supervision by the Commission s staff so that he can pay back h

and maintain his forwarding business as he requests Ihave consid

cases cited by Hearing Counsel evidence ofrecord as well as other c

pertinent principles of law Ihave also weighed in the balance such 

erations as possible harm to the public if Mr Brown continues to op

forwarding business harm tothe public if he is forced to close down a

considered less drastic remedies thantotal destruction by revocation I

that on balance revocation would produce more harm than good an

reasonable alternative remedy is available which is consistent with Com

precedent and is neither punitive nor arbitrary Iconclude that the Com

ought to give Mr Brown the chance to pay his debts and restore 

soundness to his business as he wishes to do and to continue to serve his 

clients under the same conditions he presently observes by directio

Commission s staff namely without handling their freight money In 

he should furnish monthly financial reports requested by the staft and 

ment of his plan to pay the Glidden debt on or before the date he 

paying the Sea Land debt These reporting requirements should rem

he pays his debts and establishes a positive equity in his business F

meet these conditions will result in automatic revocation Inow exp

Governing Principles ofLaw

I start from the basic principle that Mr Brown has held a licens

years that the law and the Commission recognize that personsholding 

are entitled to certain considerations that section 44 of the Act is a 

not a punitive statute and that any regulatory agency ought to ex
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 597

discretionary powers in a fair and consistent manner and fashion appropriate

remedies to fit particular circumstances

Since Mr Brown has held his license for ten years and has operated his

forwarding business during that time both the Administrative Procedure Act

APA and the Commission have recognized that such persons are entitled to

special oonsideration bothbecause of the reliance on the licenseby the fOlwarder

and his clients and because of a person s right to make a living The APAshows

this special concern by providing that except in cases of willful violation or

public health interest or safety no agency may revoke a license without first

giving the licensee a second chance to achieve compliance with all lawful

regulations 5 VS C S 558 c These provisions of law have been held to apply

to agencies and to complement agency statutes See Pan Atlantic Steamship

Co v Atlantic Coastline RR 353 V S 436 440 1957 Shuck v SEc

264 F 2d 358 360 D C Cir 1958 5

It is true that in this case Mr Brown s conduct was willful in the ad

ministrative law sense i e done with careless disregard of his obligations

Consequently the special second chance provisions of the APA would not

literally protect him However my point is thatthe law does recognize acertain

property right in licenses and is careful not to revoke them prematurely because

of the harm that revocation might create because of the destruction of an

ongoing business Furthermore the Commission has often taken care not to

destroy businesses by revoking or denying licenses and has recognized that

persons livelihoods depend upon such businesses See Application for Freight

Forwarding License Del Mar Shipping Corporation 8 F MC 493 497

1965 License Application Guy G Sorrentino 15 F MC 127 1 9 1972

Dixie Forwarding Co et al Application for License 8 EM C 167 168

1964 York Forwarding Corp J B Wood Shipping Co 15 F MC 114

123 1972 Iwill return to these cases in greater detail later Consequently

when considering the proper remedy or sanction to be applied to Mr Brown

Ibelieve that Ishould bear in mind that the law generally and the Commission

specifically refrain from revoking or denying licenses prematurely if the li

censee can mend his or her affairs in recognition ofthe fact that we are dealing

with an ongoing business on which the licensee as well as his customers and

employees rely

The next area of the law with which Imust consider relates to the nature of

the Freight Forwarding Law section 44 of the Shipping Act 1916 and the

manner in which the Commission ought to apply sanctions or fashion remedies

under that law

In a recent decision the Commission reiterated basic principles that section

44 is a remedial not a punitive statute that sanctions to be employed must

serve remedial not punitive purposes and that they shouldbe imposed carefully

Although General Order 4 does not provide for application of the second chance doctrine to persons holding licenses in

practice the staff seems to be carrying out the spirit of that doctrine In this case for example the Chief ofthe Office of Freight

Forwarders warned Mr Brown of his apparent violations advised him of possible adverse consequences and attempted to obtain

monthly reports of his accounts and financial condition rather than recommend revocation of his license to the Commission

prematurely Even if Mr Brown were notentitledto asecondchance by operation of law because he committed willful violations

he was given a chance by the staff to demonstrate that he was bringing his business into compliance with the Commission s

regulation
598 FEDERAL MARITIME COMMISSION

after considering evidence of mitigation In Independent Ocean Freig

warder License E L Mobley Inc 19 SRR 39 1979 the Com

decided to suspend one qualifying officer of the forwarding corporation 

months because of one incident of forgery and numerous violations 

payover rule In fashioning this remedy the Commission explained

Administrative sanctions should not however be blindly or automatically imposed an

cases where the violation is clear evidence of mitigation will be considered intailoring the 

to the facts of the specific case Footnote case citation omitted Section 44 and its regul

based on an underlying remedial public interest purpose Footnote citation omitted 

sanctions imposed must serve such a purpose and not be punitive in character Footnot

omitted

19 SRR at 41

In making the above statements the Commission was following soun

dent Thus thecourts aswell as the Commission have recognized that e

ofmitigation should be considered when determining whether a licens

cant should be found to be fit although implicated in violations of the 

the past See License Application Guy S Sorrentino 15 F MC 1

1972 Furthermore in previous cases the Commission has expressed i

that the Freight Forwarder Law PL 87 254 was enacted as a r

statute in order to correct abuses in the forwarding industry See Dix

warding Co Inc Application for License 8 F MC 109 117 118 

Hugo Zanelli d b a Hugo Zanelli Co 18 F MC 60 73 74 1974 

sub nom Zanelli v Federal Maritime Commission 24 F 2d 1000 

1975

The principle that the Commission should not rush to extreme s

without considering all factors of mitigation in an effort to fashion a j

reasonable remedy is well supported by the courts Although agencies 

required to impose sanctions in a perfectly even manner because of t

latitude they are given by the courts as the expert bodies most s

devising means to carry out specific legislative pUrposes

6

the agen

nevertheless expected to consider less drastic alternative remedies and 

whatever remedy they select on facts and reasonable interpretations 

In Gilbertville Trucking Co v United States 371 U S 115 1962 

cited by the Commission in theMobley decision the Supreme Court re

a caseto the I C C which had employed the most extreme sanction po

correct a violation of section 5 4 of the Interstate Commerce Act 49 

fi 5 4 The IC C in order to correct violations ofthat law resulting fro

activities of two common carriers had ordered an owner of one of the 

to divest himself of his stock in that carrier The Court however fo

discussion orconsideration by the IC C ofless drastic remedies althou

Consistency inadministrative rutinLe uliR tho same sanction ror the aamo lituations II a vaUd objocttve 

adeparture rrom ICCOInizcd standard orsanctions may lead toUrt findlnp that the aleney abUlOll ita dilCretion 

apunitive manner See NotlOfl4I LaborR alil U IloGrd v MaJ Tool Co 119 F 2d 700 702 7th Clr 1941 How

case law hold that uniformity or cvenllOll in application of sanction il not MOOIIarily required NevorthelOll a

explain their departure from previoul norms and if tboy doparltoo far from previously employed sanction they m

have acted arbitrarily orcapriciously See AtchLron Toptka cI Sanla F Ry Co v Wlchlla Bd o Trad 412 U

1973 CfWl v Unlt dSlat cited below 512 F 2d at 1217 1218 n 8 5 Mezlnel Stein and Gruff Admlnlstr

42 7 and 42 8 Of course if the sanction appears 10 be too hal 8h and far out of proportion 10 the violation involve

may llnd it completely inappropriate and throw it out See Power v Unt St4118 531 F 2d SOS CL CI 1976 Alb

571 F ld 1063 91h CI 1977
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 599

wasevidence of mitigating circumstances The Court held that tnere was no

doubt that divestiture was a lawful sanction under the particular statute in

volved However the Court recognized that the IC Cs power was corrective

not punitive and that the justification for the remedy is the removal of the

violation 371 U S at 129 130 The Court proceeded to discuss the means in

which the powers to expunge violations should be exercised stating

The use of equitable powers to expunge a statutory violation has been fully developed in the context

of the antitrust laws and is in many respects applicable to 5 7 The most drastic but most

effective of these remedies is divestiture And ilf the Court concludes that other measureswill

not be effective to redress a violation and that complete divestiture is a necessary element of

effective relief the Government cannot be denied the latter remedy because economic hardship

however severe may result Our duty is to give complete and efficacious effect to the

prohibitions of the statute with as little injury as possible to the interests of private parties or

the general public As these cases indicate the choice ofremedy is os important a decision

OS the initial construction ofthe statute andfinding ofa violation The court oragency charged

with this choice hos a heavy responsibility to tailor the remedy to theparticularfactsofeach case

so os to best effectuate the remedial objects just described Emphasis added

371 U S at 130

The Court went on to advise that its role was to ascertain whether the

Commission made an allowable judgment in its choice of the remedy and

emphasized that it wished to see evidence that a

judgment as to remedies was

made based upon proper standards and that mitigating evidence was consid

ered 371 U S at 130 131

The courts continually follow the doctrine that agencies should be careful in

fashioning remedies which are reasonably related to the unlawful practices

found to exist and state that they will not interfere if care is taken and if the

particular remedy isjustified by the facts and warranted in law See e g

Jacob

Siegel Co v F T C 327 U S 608 611 613 1946 a case remanded to the

Federal Trade Commission which had employed the most drastic sanction

possible expunging the name of a product to prevent deceptive advertising

without explaining why less drastic remedies such as qualifying statements in

the advertising would not have sufficed See also Cross v United States 512

F 2d 1212 at 1217 et seq 4th Cir 1975 enbane where in a long explanation

the Court began by stating

Due process on the issue of sanction requires that the punishment follow rationally from the facts

be authorized by the statute and regulations and aim toward fulfillment of the Act s purposes

Footnotes omitted

The Court summarized the standard of reviewing administrative sanctions

by stating that the Court would affirm them unless they were arbitrary and

capricious which the Court interpreted to mean that the sanction was un

warranted in law or without justification in fact The Court stated that it

would therefore not interfere with the administrative sanction employed unless

the agency had abused its discretion by acting arbitrarily or capriciously See

also cases collected in 5 Mezines Stein and Gruff Administrative Law at

42 5 and 42 6 and cases cited in Butz v Glover Livestock Commission Co
600 FEDERAL MARITIME COMMISSION

411 U S 182 185 186 1973 See also Shuck v S E C 264 F 2d 358 

Cir 1958 in which the Court stated

But this is notto say that the Commission can revoke inevery case where an injunction is p

We think its action must be fair and justunder all the circumstances and lacking in any 

of an arbitrary or capricious nature as well as being in the public interest

264 F 2d at 362

What Remedy Would Follow Rationally From the Facts be Autho

by Law and Aim Toward Fulfillment of the Purposes of the

Freight Forwarder Act

Having discussed applicable principles of law it now becomes neces

select a

remedy which will be justified by the facts be warranted in la

will give effect to the statute with as little injury as possible to the in

of private parties or the general public Gilbertville Trucking Co v 

States supra 371 U S at 130

There is no doubt on the evidence of record that Mr Brown has com

violations of General Order 4 Reduced to their essence however Mr 

did two things 1 he failed to pay over shippers money to carriers on 

ous occasions within the seven day period prescribed by the General Ord

in certain instances has still not paid over money owed although in the 

of doing so and 2 he did not comply fully with the instructions conta

a letter from the staff However he did cease handling shippers mo

response to the letter and did furnish some of the financial stateme

quested For these transgressions Hearing Counsel urge that he be 

unfit and that his license be stripped in effect destroying his forw

business The immediateproblem Ihave with this extreme sanction is w

it makes sense and serves some purpose Here is a man who owes Se

substantial sums of money as well as the shipper Glidden in an amo

covered by his bond and who is attempting to payoff his debts How th

Sea Land and eventually Glidden be reimbursed if Mr Browns forw

business is terminated Furthermore since Mr Brown as far as this 

shows has not been handling shippers money since some time in Au

1978 how can shippers doing business with him possibly suffer harm c

ing his use of shippers money Revocation of his license therefore res

the old practice in nineteenth century England of casting debtors into 

where they had no chance of repaying their debts even if they wished to 

Mr Brown testified that he did not close up shop and leave the port 

other people would beleftholding the bag as have one or two other forw

in Jacksonville but he chose to stay and fight it out IfHearing Co

sanction is adopted the Commission will ensure that he quit the busine

leave others to hold the bag and will help add people to the ranks 

unemployed since Mr Brown employs three persons in hisforwarding b

The cases which Hearing Counsel cite to support this position are 

ening In none ofthem did the Commission destroy an ongoing busines

had been functioning for some time with a license properly issued and 
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 601

the licensee wished to continue operating himself nordid any of these cases

involve revocation merely because of violations of the payover rule and failure

to answer questions fully from the Commission s staff Harry Kauf

man d b a International Shippers Co of N Y Inde ndent ean Freight

Forwarder 16 F M C 256 1973 Mr Kaufman s nse wasre ked mainly

because he had transferred hislicense to another per without approval ofthe

Commission and had in effect sold his business to that person who operated the

business without a license But Mr Kaufman did this because he wanted to

retire and he did not actively participate in the business after he sold it to the

unlicensed person 16 F MC at 266 272 273

In Independent Ocean Freight Forwarder License Application James J

Boyle Co 10 F MC 121 1966 the Commission denied an application for

a license to a person who had operated a forwarding business between July

1964 and July 31 1965 without a license but had discontinued the business

and had furthermore operated through the use of guile and deception

10 F MC at 126

In Independent Ocean Freight Forwarder Application Lesco Packing Co

Inc 19 F MC 132 1976 the Commission denied a license to the applicant

because its sole stockholder and chiefexecutive officer had been guilty ofa long

history of violations of various laws including the Bills of Lading Act as well

as section 44 of the Shipping Act

In Independent Ocean Freight Forwarder License Cleto Hernandez R

db a Pan Inter 19 F MC 104 1976 the license of Mr Hernandez was

revoked for a number ofreasons namely lack of independence from a shipper

failure to pay money given him by a consignee to a shipper and failure to pay

a carrier freight money The facts showed that Mr Hernandez was in reality

an employee of a shipper and only a part time freight forwarder and employed

no one in his forwarding business 19 F MC at 106

In Aetna Forwarding Co Inc Revocation of License 8 F MC 545

1965 also cited by Hearing Counsel the forwarder s license was indeed

revoked and part ofthe reason for revocation wasthe forwarder s failure to pay

over freight money in substantial amounts However this forwarder had in fact

ceased operating the business of forwarding and furthermore had no fidelity

bond 8 F MC at 552 The lack of a bond or other security alone would

automatically result in the loss of a license 8 F M C at 551

To repeat in none of the above cases was the Commission dealing with a

forwarder like Mr Brown ie one operating a business with a license for 10

years who was guilty solely of violations of the payover rule and of failing to

furnish all the information requested by the Commission s staff but one who

very much wished to continue in business in order to payoff his debts which

he had already begun to do Perhaps the differences between Mr Brown and

the other forwarders discussed in the above cases is only amatter ofdegree and

one could argue that Mr Brown is really financially unstable and unfit to

continue as a forwarder However these differences in degree and his will

ingness to make good are the type of facts which the Commission is supposed

to consider when tailoring a just and reasonable remedy which will effectuate
602 FEDERAL MARITIME COMMISSION

the purposes of the freight Forwarder Law with as little injury as pos

private parties or the general public

A survey of other cases in which forwarders had violated the payov

and other regulations demonstrates that the Commission has been ad

fashioning remedies more useful than revocation In these cases furthe

the Commission has shown great concern not to destroy an ongoing b

and in one case despite numerous serious violations which initially cau

Commission to find the forwarder unfit the Commission nevertheless 

the license upon the forwarder s

representation that denial of a license 

destroy a well established business built up over a number of years 

Forwarding Co et al Applicationfor License 8 F MC 167 1964 

sidering 8 FMC 109 1964

In Application for Freight Forwarder License Del Mar Shippin

poration 8 F MC 493 1965 the Commission adopted the Initial D

which had recommended that the application begranted to an ongoing b

provided that an exporter divest himself of his interest in the forw

business This remedy was employed rather than absolute denial w

comment

Such divestiture presumably could result in the granting of Del Mar s application and th

of the jobs of its nine employees thereby preserving afreight forwarding firm that has 

existence for a number of years prior to enactment of the present law

8 F M C at 497

In License Application Guy G Sorrentino 15 FMC 127 197

Commission adopted another Initial Decision which had recommended 

license be granted to an applicant who had participated to some ex

violations of section 16 First of the Shipping Act for which the corpora

which he waspresident had been convicted in a federal court Neverthe

Commission considered the fact that applicant had no other professio

been engagedin the forwarding business for a long time and had suffere

enough because of his transgressions The Commission adopted this lan

However on balance the applicant s connection with the sixteen instances of misclas

herein pleaded does not appear to have been so culpable as forever to bar him whe

circumstances are considered from pursuing the trade which has occupied all of his m

and which as a real matter is probably his only means of gaining a livelihood App

a

long history of useful and profitable service in the shipping industry and is technic

qualified to serve shippers carriers and the public This long fruitful history of creditab

in hisprofession coupled with his frank admission of his fault in addition to the fact th

suffered substantial economic and professional loss by his voluntary self exclusion from th

forwarding profession for II months tends to mitigate the effects of his culpability Ap

cautioned however that the violations of law which he at least has condoned were se

involved the essence of the high responsibility which he must assume as a licensed fr

warder Any future violations by applicant of the Act orthe Commission s applicable 

regulations such as those involved herein would warrant action to revoke applicant s 

IS F M C at 138 139

In previous cases involving violations ofthe payover rule the Commiss

shown its adeptness in fashioning remedies to fit the particular caseand 

two of these cases which involved a number of other violations and pr

did the Commission feel the need to exercise its most drastic sancti
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 603

revocation of the license In these cases it is rare if ever that violations involve

the payover rule alone Invariably they involve payover violations plus such

things as shipper connection lack of a surety bond failure to pay shippers as

well as carriers forgery etc In none of them were the payover violations

coupled only with the failure to answer staff letters fully as with Mr Brown

Cases Involving Violation of Payover Rule and Commission Flexibility in

Fashioning Appropriate Sanctions

In Aetna Forwarding Co Inc Revocation of License 8 F MC 545

1965 and in Independent Ocean Freight Forwarder License Cleto Her

nandez R db aPan Inter 19 F MC 104 1976 the Commission revoked the

license However inAetna as noted the forwarder had in addition to violating

the payover rule canceled its surety bond and ceased operating his business

while owing shippers some 40 000 In Hernandez d b a Pan Inter as men

tioned earlier Mr Hernandez was in reality only a part time forwarder being

employed most ofthe day by a shipper in addition to violating the payover rule

and failing to pay a shipper as well as carriers He also had no employees in

the forwarding business 19 F MC at 107 Neither of these cases involved

viable ongoing independent businesses

In Florida Panama Forwarders Inc 14 SRR 551 1974 the only case of

which I am aware involving nothing but a refusal to pay over freight to a

carrier the Commission discontinued the proceeding upon proof that the for

warder had made the payment The case involved a

peculiar set of facts in

which the forwarder waswithholding only 1 623 63 in freight in an effort to

obtain payment by a

company related to the carrieron a debt owed to another

company in which the forwarder had an interest No one recommended re

vocation of the license under these peculiar facts Hearing Counsel had

specifically stated that no purpose would be served by revocation See Initial

Decision 13 SRR 655 at 658

In Independent Ocean Freight ForwarderLicense E LMobley Inc supra

19 SRR 39 the Commission earlier this year found that the forwarder s

qualifying officer had violated the payover rule and in addition had committed

an act of forgery in one instance under pressing circumstances However the

Commission did not revoke the license of the business Instead after another

person had become a qualifying officer it merely suspended the guilty person

for six months and required the forwarding business to submit monthly

financial accounting as to its full compliance with the payover rule for a period

of one year 19 SRR at 42 As mentioned before the Commission expressly

stated that it would fashion suitable remedies would consider evidence of

mitigation and believed the freight forwarder law to be remedial not punitive

in character The Commission fashioned this reasonable remedy although it

found that the act of forgery is an act of moral turpitude and an egregious

violation of the Commission s

regulations which directly reflects upon a li

censee s fitness to conduct such business 19 SRR at 41 Note that the

forwarder respondent in the Mobley casewasa corporation unlike Mr Brown

and that another member ofthe Mobley family became a qualifying officer so
604 FEDERAL MARITIME COMMISSION

that the forwarding business could continue operations even while Mr M

was suspended for six months Note also that in the Mobley case H

Counsel did not urge revocation but merely suspension because of mit

factors among which was the fact that there are others who depend up

license of E LMobley Inc for their livelihood Initial Decision 18 S

1161 Should Mr Brown upon whose license at least three employees d

not to mention his shipper accounts be treated more severely merely b

he did not choose to become a corporation or because he did not have 

membersready to become qualifying officers in the event he slipped up 

rules and regulations

Perhaps the outstanding example of Commission flexibility to adapt 

facts of any particular case is the caseof DixieForwarding Co et al A

tion orLicense supra 8 FMC 109 and on reconsideration 8 F M

and relied upon by the Commission in Mobley In that case the Comm

granted a license to an applicant who committed payover violations 

Mr Brown but who did much more Thus the applicant failed to pa

funds to carriers because it wrote chCllks which bounced applicant d

ately provided dishonest financial statements to a Commission inves

applicant falsely certified to carriers that it was licensed by the Commis

order to collectbrokerage and applicant operated its husinesswithout a 

even during the hearing This conduct seemed to constitute such con

evidence of unfitness that the Commission refused to grant the licens

Commission stated its feelings as follows

The record in this proceeding clearly shows that the attitude of negligent indifference char

virtually every facet of Grave s forwarding operations

8 FM C at 113

Hlis actions as spread acrossthis record establish an attitude of at best complete indiffere

at wont willful negligence regarding the duties and responsibilities imposed upon him 

8 FM C at 115

The Commission proceeded to describe the nature of a forwarde

fession as that of a fiduciary holding shippers money and having ac

shippers confidential business secrets 8 F MC at 115 The Com

described the economic power which a forwarder has with respect to 

and narrated the history of the freight forwarder law P L87 254 wh

designed to correct malpractices in the forwarding industry 8 F M

115 118 Then the Commission concluded by stating

The business integrity of one who occupies the position of freight forwarder should 

reproach and he should clearly demonstrate a complete awareness of and a willingness 

the responsibilities that the preferred position imposes Graves has shown an almost tota

both Thus the philosophy of section 44 is such tbat the shipping public should be e

rely upon the responsibility and integrity as well as the technicalability of a

freisht forwa

record here however demonstrates that the members of the shipping public who do busi

Graves do 80 at their own risk We cannot conscientiously license such an applicant an

suggest to the shipping community that we baveprobed his conduct and found h

competent and qualified to act in a fiduciary capacity

8 F M C at 118

Note that applicant in the Dixie case did not merely fail to pay 

respond to a Commission investigator Applicant wrote bad 1hecks an
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 605

erately misrepresented his financial statements when furnishing them to the

investigator among otherdeliberate actions 8 F MC at 110 115 Mr Brown

on the other hand failed to comply with the payover rule and failed to furnish

all the financial statements requested by the staff He did indeed misuse

shippers money in order to meet his own expenses But he did not sign bad

checks and never submitted a dishonest financial statement to the Commis

sion s investigator much less operate without a license or falsely certify to

carriers that he was licensed as did Dixie Yet the Commission upon recon

sideration granted the license to Dixie notwithstanding the strong language

condemning Dixie s past practices and requiring the highest standards of be

havior for forwarders 8 F MC 167 The only reason the Commission ad

vanced for its change of heart furthermore was the fact that the applicants

there were actually two applications filed by one person

IeImphasize that their continued business activity depends almost entirely on their being licensed

to engage in freight forwarding and that the denial of such licenses would destroy a well

established business built up over a number of years

8 F M C at 167 168

However the Commission acknowledged that applicants had promised to

cooperate fully with the Commission and adhere scrupulously to the require

ments of law and certain conditions imposed by the Commission namely that

they would submit a certified audit oftheir financial status every six months for

a period of two years 8 F MC at 168

Having explored previous cases demonstrating the Commission s belief that

the freight forwarder law is not punitive in nature and that it should be ad

ministered with reason and flexibility to fit the particular facts ofany case I

now consider the facts of this case and what a reasonable remedy would be

Fashioning a Reasonable Sanction to FitMr Brown

As discussed above Mr Brown did indeed violate the payover rule and

misuse shippers money He also failed to furnish all the information requested

by the Commission s staff Furthermore his failure to comply with the payover

rule and to furnish all the information in a timely fashion was willful in the

administrative law sense Le it wasdone with careless disregard or wasgrossly

negligent On the other hand the reasons for Mr Brown s delinquency were

honestly stated and his shortcomings admitted by him His misuse of shippers

money relates to pressing financial difficulties in running his business during a

strike period and thereafter but also relates to his own decision to expand the

business His failure to furnish all the information requested by the staff on

time was careless but relates partially to a misunderstanding with his account

ant These are mitigating circumstances which lessen the degree of his cul

pability He also has been paying back his major debt to Sea Land and states

that he will make a similar arrangement with a major shipper Glidden after

finishing with Sea Land He did furnish financial statements at the hearing and

before and offered to make up for all the previous statements not furnished to

the staff As far as the record shows furthermore hedid comply with the staffs

instructions to discontinue handling shippers money Finally he asked that he
606 FEDERAL MARITIME COMMISSION

be allowed to run his business and pay oft his debts and stated tbat h

refused to close his business and leave others tohold the bag as apparen

one forwarder who recently closed down in Jacksonville accord

Mr Brown

Does Mr Brown then deserve to have his license revoked and his b

destroyed Cannot the Commission fashion some less drastic remedy th

enable Mr Brown to pay oft his debts without harming any shipp

members of the public Ithink the Commission has shown itself mor

willing and able to devise amore reasonable solution than a death sente

the cases discussed above well illustrate Furthermore if the Comm

revokes hislicense and terminates hisforwilrding business how will Mr 

be able to pay oft his debts and will not the Commission be ensurin

contraryto his wishes Mr Brown will be forced toclose down and leave 

holding the bag His 30 000 surety bond does not cover all of his de

Mr Brown has not committed an act of forgery which involves 

turpitude as did Mr Mobley and he certainly has not deliberately sub

false information to the Commission or the staff or deliberately writt

checks and misrepresented that he held a license all of which things Dix

Yet both the Mobley and Dixie companies were allowed to continue i

ness albeit Mr Mobley was personally suspended for six months an

companies had to furnish periodic financial reports

Since Mr Brown has not handled shippers money for over a

yea

shippers need not fear that he might misuse their money Furthermore 

no reason why the remediesemployed in the Dixie and Mobley cases reg

reporting requirements cannot be employed in this case especially sin

reports concerning his outstanding freight accounts should not showany 

quencies beyond those which arose when he was still handling shippers 

over a

year ago Periodic reporting as to his financial condition in the f

balance sheets should reveal whether he is really turning around his b

by reducing the deficit in his equity account Moreover reports concern

status ofhis outstanding debtto Sea Landand at some future date a c

ment to pay oft the debt to Glidden should enable the Commission to m

Mr Browns good faith Failure to furnish these reports in timely fas

indications in the reports that he is somehow again violating the payove

other rule will be grounds for revocation without further hearing 

Commission has stated that such a

reporting requirement constitute

reasonable and previously recognized response to such circumstances

Independent Ocean Freight Forwarder License E L Mobley Inc 

19 SRR at 42 I would therefore ratify the staff s action in inst

Mr Brown not to handle shippers money and tofilemonthly tiriancial 

balance sheets and freight accounts with shippers in affidavit form F

more Iwould require Mr Brown on or before the date he finishe pay

Sea Land debt to submit his plan for paying the Glidden debt If Mr 

fails to file these reports in timely fashion or if they reveal new viola

Soo YOJk F rdln Corp

J B Wood Shlppi Co tIC

I P M C 114 126 1972 In which th Commiulon 

failure of the forwarder to fumilh Ihe fuU report on the manner in which it complied with various condidona wo

revocation of tho Ii without further procoodinp
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 607

any rule or regulation the staff should notify the Commission which would

then issue an appropriate order revoking Mr Brown s license

The Question ofMr Browns Financial Stability

A word should be said about the question of Mr Brown s financial situation

as it affects his fitness as a forwarder Hearing Counsel refer to his negative

working capital together with other facts in arguing that he is no longer fit or

able to continue the business of forwarding Hearing Counsels Memorandum

of Law 8

The record shows that Mr Brown who once had a positive equity account

on his balance sheet has a negative account which he has been steadily

reducing As of June 30 1979 he had apparently reduced it to 8 882 38 The

conversion of his earlier positive equity into a deficit may have been attrib

utable to the sudden liabilities arising out of the debt to Sea Land However

hedoes show a positive net income for the end ofMay and June 1979 the last

months ofrecord for which there is any such evidence

The financial soundness of a business is important to consider because ifthe

business were shaky there would be an incentive for the forwarder to misuse

shippers money to aid the business as happened in this case with Mr Brown

However as noted Mr Brown has complied with the staff s instructions not to

handle shippers money since some time in August of 1978 However there are

other reasons why Ido not believe that Mr Brown s financial situation justifies

the drastic sanction of revocation of his license

First I note that no one has claimed that Mr Brown has been unable to

procure a surety bond Apparently the insurance company is not worried about

his financial condition Hearing Counsel cite Independent Ocean Freight For

warder License Application James J Boyle Co 10 F MC 121 127

1966 in which the Commission referred to the financial standing of a for

warder But in that case the Commission related financial standing to the abil

ity to provide a fidelity bond limiting access to the profession to those fit

willing and able and of sufficient financial standing to be able to provide a

fidelity bond 10 F MC at 127

Next in Dixie supra after refusing to accept Dixie s estimates of financial

soundness and denying its license initially 8 F MC at 114 115 the Commis

sion as seen granted the license on reconsideration notwithstanding lack of

reliable evidence of financial responsibility Dixie had failed to submit re

quested current balance sheets and had even furnished a balance sheet falsely

updated Here Mr Brown has submitted balance sheets at the hearing and

before although not every month as the staff requested and noone has claimed

that these balance sheets are phony

Finally how fair is it to revoke a license for failure to be financially sound

or responsible when neither General Order 4 nor case law defines these

terms All that the General Order requires is that the forwarder obtain

a surety bond in the amount of 30 000 46 C F R 51O 5 g Failure to file

a valid surety bond with the Commission results in automatic revocation of a

license 46 C F R 510 9 proviso paragraph There is no mention of positive
608 FEDERAL MARITIME COMMISSION

equity account or negative equity account or how the balance sheet should 

as between debt and equity This is in contrast to regulations ofother age

such as the Securities and Exchange Commission which imposed specif

capital and aggregate indebtedness requirements and limitations on 

brokers See Shuck v SEC 264 F2d 358 359 D C Cir 1958 Mr B

wishes to pay offhis debts and is in fact doing so with respect to Sea Lan

also no longer handles shippers money and is trying to restorea positive e

account to his business which heis gradually achieving Therefore why s

he be found to be financially irresponsible or unsound so that his license s

be revoked especially when these terms are nowhere defined and when h

obtained the requisite surety bond

Afinal case should be discussed because it illustrates the differences bet

Mr Brown and a forwarder who is truly unfit and financially irrespon

This is the recent case of Fast International Forwarding Corporati

Independent Ocean Freight Forwarder Corporation and Possible Violatio

Section 44 Shipping Act 1916 19 SRR 339 ID 1979 F MC No

June II 1979 In that casean application for a

forwarding license wasd

because the applicant was found to be unfit and undeserving ofa license 

the recordshowed in addition to payover violations awhole series ofviola

of law eg operating without a license writing bad checks to carriers bo

ing another forwarder s license lending a license which applicant did not 

have and misrepresenting facts to the Commission s staff Most of 

practices occurred after warnings from the staff No one appeared a

hearing in support of applicant not even the applicant and there wa

evidence that applicant was contrite and would reform She was clearly 

and because ofher history ofwriting bad checks as well as failure to pay 

freight money demonstrated financial irresponsibility

But contrast the above forwarder with Mr Brown who has not written 

checks nor misrepresented facts to the Commission s staff nor lenthis lic

illegally and has admitted his past errors regarding payover and failu

furnish the staff all the information requested But he has acknowledge

mistakes and wishes to redeem himself Is it then fair to put Mr Brown i

same category as Fast International by finding him unfit and finan

irresponsible and revoking his license

ULTIMATE CONCLUSIONS

Mr E Allen Brown has been a

freight forwarder in Jacksonville Flo

under a license issued by the Commission over ten years ago In a compli

check conducted in early 1978 it wasdiscovered that he had failed to pay 

freight money to ocean carriers within the time period prescribed by Ge

Order 4 over 100 times in 1977 Subsequent data which he submitted t

Commission s staff showed further instances of failure to pay over as req

and also revealed that as a result of his misuse of certain shippers mone

had incurred debts and obligations to at least two carriers and one m

shipper In addition to this failure to observe the requirements of the pay

rule Mr Brown also failed to furnish all ofthe financial information whic
E ALLEN BROWN INDEPENDENT OCEAN FREIGHT FORWARDER 609

Commission s staff requested of him although he did furnish some of the

information and he did voluntarily comply with the staffs instructions that he

no longer handle shippers money These failures were the result of careless

disregard ofthe requirements imposed upon him by law and the Commission s

regulation and were therefore willful as that term is understood in adminis

trative law

As a result of these practices the Commission instituted this proceeding to

determine whether Mr Brown s licenseshould be suspended or revoked Hear

ing Counsel urge that he be found to be unfit to continue as a freight forwarder

and that his license be revoked because of these willful violations Mr Brown

appearing in his own defense without benefit of attorneys admitted his past

shortcomings and asked for a chance to payoff his debts and restore his

business to a sound financial footing The record shows thathe is paying offone

of his major debts and he stated that he would deal with the other when he

could finish with the first one It also shows that he is gradually reducing a

negative equity account in the business Noshippers or other clients appeared

at the hearing either in his behalf or to complain about his past conduct or

present indebtedness

In determining what sanctions should be applied case law and Commission

decisions hold that Mr Brown s status as a licensee with an ongoing business

should becarefully considered that section 44 ofthe Act the Freight Forward

er Law is remedial not punitive in nature and that the Commission ought to

consider mitigating circumstances and fashion aremedy suitable to the partic

ular facts if possible one that is less drastic than total extermination of his

business by revocation of the license In previous cases the Commission has

shown itself particularly adept at devising just and reasonable remedies short

of revocation In those cases furthermore the forwarders involved committed

more serious violations of law than mere violations of the payover rule and

failure to furnish all information requested by the Commission s staff

Based upon these principles of law and Commission precedent and consid

ering evidence ofmitigation Ifind that Hearing Counsels recommendation for

termination of Mr Brown s forwarding business by revocation of his license to

be too drastic Furthermore such a sanction would deprive Mr Brown of the

chance to payoff his debts as he is attempting to do and would ensure that

other people would be left holding the bag The situation calls for application

of a more reasonable remedy which has been used by the Commission several

times in the past most recently this year namely reporting and monitoring by

the staff and the Commission to ensure that Mr Brown is carrying out his

stated intentions to make good

Consequently Mr Brown should be placed in an indefinite period of proba

tion until such time as he paysoff his debts and establishes a positive equity in

his business He should be required to furnish financial statements balance

sheets and statement of freight money accounts with shippers every month in

affidavit form to continue to desist from handling shippers freight money and

to submit a plan to pay his remaining debtto Glidden on or before the date he

finishes paying his debt to Sea Land If he fails to do these things or if the

information submitted shows new violations of law or the Commission sregu
eocatoos cese

Since he is no longer handling shippers freight money there is no dan

that they wil1 suffer harm from misuse of their funds Moreover Mr Br

will be given a fair chance to demonstrate that he will carryout his statem

made at the hearing that he would turn his business around and ultima

payoff his debts if he were only allowed to do so

S NORMAN D KLINE

Administrative Law Judg

WASHINGTON D C

October 17 1979
FEDERAL MARITIME COMMISSION

DOCKET No 79 57

RUFFIN INC

v

COSTA ARMATORIA S p A AND

ITALIA DI NAVIGAZIONE

NOTICE

March 25 1980

Notice is given that no appeal has been filed to the February IS 1980 initial

decision in this proceeding and the time within which the Commission could

determine to review has expired No such determination has been made and

accordingly review will not be undertaken

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 79 57

RUFFIN INC

v

COSTA ARMATORIA S p A AND

ITALlA DI NAVIGAZIONE

Finalized March 25 1980

Shipment of fertilizer improperly classified as Soil Compacting Chemicals and Soil Stab

in violation of the Shipping Act 1916

Reparation awarded

Abraham A Diamond and Margaret Muller Wilson for complainant

Michael D Martocci for respondents

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE I

In November of 1977 complainant Ruffin Inc tendered to respond

Costa Armatoria S pA and Italla Di Navigazione a shipment describe

the bill of lading as

Rayplex Iron Zinc Manganese and Magnesium Powder Soil Conditioners Rayp1ex 

Mineral Soil Micronutrients

At the time of the shipment respondents were operating as common ca

by water in ajoint venture under the name of Italla Costa Line Joint Se

Complainant wasassessed freight charges of 14 739 00 based on a mea

ment of 3 866 cubic feet The rate of 52 50 W Mwasbased on Italia Co

Freight Tariff No I using the commodity description Soil Compa

Chemicalsand Soil Stabilizers 3

Complainant paid the 14739 00 In Ju

I

Thisdecision will become the decision of the Commission in the absence of review thereof by the Commission Rule 2

of Prdcticc and Procedure 46 CP R 1502227

l The shipment was madeup offour Rayplex products Rayplcx Zinc Rayplcx Iron Rayplex Mang8ne8C and 

Magnesium

JThe rate was increased by 1000 effective October 18 1977 because of a

general increase announced by a

letter 

to shippers Theactual tariffpage shows a

rate of 142 50
FEDERAL MARITIME COMMISSION 613

1976 complainant filed a corrected export declaration reclassifying the ship

ment as Fertilizer N O S which Ruffin argues is the correct classification and

the one which respondent should have applied to the shipment The Fertilizer

N Os was I32 99 per 2240 Ibs andat 83 0855 Ibs the freight charge would

have been 4 896 08 Complainant asks reparation of 9 472 13 plus costs and

interest

DISCUSSION AND CONCLUSION

The issue presented is whether Ruffin s shipment should have been classified

and freighted as Fertilizer N O S rather than Soil Compacting Chemicals and

Soil Stabilizers Certain defenses raised by respondent can be disposed of

before reaching the merits of the controversy

First ltalia Costa contends that Ruffin as an expert sophisticated shipper

is bound by its initial description of the cargo The Commission has long held

that what was actually shipped and not the description on the bill oflading

determines the proper rate to be charged Union Carbide Inter America v

Norton Line 14 F MC 263 1971 Respondents also contend that Ruffin s

failure to file a claim with them within the six month period prescribed in their

tariff bars Ruffin s complaint here This argument was finally laid to rest in

Kraft Foods v Moore McCormack Lines 19 F MC 407 1976 A tariff

prescribed time limitation cannot in any way alter or diminish the twoyear

statute of limitations set forth in section 22 ofthe Act There remains only the

question of whether Ruffin has sustained the heavy burden of proof necessary

to establish its claim

Ruffin relies on two affidavits and some advertising literature to show that

Rayplex is a fertilizer compound

The advertising material submitted by Ruffin describes one product Rayplex

magnesium as a water soluble polyflavanoid magnesium PFMG fertilizer

compound which is recommended for correction ofmagnesium deficiencies in

alkaline soils having a pH of 7 8 or higher It is said to be effective on certain

field crops and on deciduous fruit trees

5

James M Davron is the export manager of Ruffin and has had 10 years

experience in marketing Ruffin s micronutrient fertilizers throughout the

world outside the United States Mr Davron states that the bill of lading

description was wrong insofar as it described the shipment as soil condi

tioners The rest of the description was correct Mr Davron describes the

product as follows

Rayplex products are chelated micronutrient fertilizers As the word micronutrient

implies these products add minerals such as iron zinc manganese and magnesium either

directly to plants through foliar spraying spraying of the leaves or are combined with other

4

This material isadmitted into evidence The affidavit of Albin D Lengyel is designated Exhibit t the affidavitof James M

DavTon is designated Exhibit 2 and the advertising material is designated Exhibit 3 The bill of lading and tariff pages etc

attached to the complaint are already in the record The bill of lading and tariffpages attached to reSpondents memorandum Gf

Jaw isadmitted into evidence as Exhibit No 4 the corrected declaration isadmitted as Exhibit 5 and the affidavit of Leonard J

Maltese is admilted as Exhibit 6

Alsoincluded is literature on Rayplex Zinc Rayplex iron and Rayplex manganese all ofwhich are described as fertilizers

with VQnnw ifiM J1ltrihute
614 FEDERAL MARITIME COMMISSION

i

fertilizers and applied to tbe soil to provide metal salts to depleted plants and 

Rayplex is available in powder and in granular forms Its sole function is to p

micronutrient metals in a form tbat cin be taken up by plants

Albin D Lengyel is the owner of Lengyel s Agricultural Consulting Se

which provides agricultural consultation tofarmers in sixteen 16 states 

about six 6 foreign countries 6In his business Mr Lengyel provicies co

tation and plant analysis and specializes in the use of soil nutrients prov

recommendations on the use offertilizers Mr Lengyel concludes that Ray

is a fertilizer in his view the sole use of the Rayplex ingredient is 

fertilizer or ferti1izer material Lengyel begins with the Association of A

ican Plant Food Control Officials definition of ferti1izer

Any substance containing one or more recognized plant nutrients wbicb is used for its 

nutrient content and wbicb is designed for use or determined to bave value in promoting 

growtb

The AssOciation defines fertilizer material as

Any substance ormixture of substances Intended to be used for promoting or stimulatin

growtb of plants increasing tbe productiveness improving tho quality ofcrops orproducin

cbemical orpbysical change in the soil

Without going into unnecessary detail Mr Lengyels argument proc

generally as follows R yplex iron zinc manganese and magnesium ca

designated collectively as pIant nutrients These are known in the agricul

asLiguin Chelated micronutrients or minerals These nutrients are spray d

to make powders which then may beapplied either directly to the soil or w

dissolved in water to the foliage The Rayplex products are most efficient w

used by foliar application and when Mr Lengyel recommends Rayplex p

ucts he prescribes foliar applicatiOn in about 94 of the cases Rayplex p

ucts have a number of uses and solve a variety of problems e g Rayplex 

is used where the soil is deficient in zinc which is essential to normal nitr

metabolism and consequent good vegetative growth Rayplex Iron and Ray

Manganese supply these essential nutrients to plants such as milo g

sorghum azalea and pyracantha which will die if there isan iron ormanga

deficiency Finally Rayplex magnesium is used to prevent a magnesium im

ance which can result in death at the seedling stage and in stunted grow

a later stage It is Mr Lengyels position that these examples amply illus

that the Rayplex nutrients clearly come within the definition offerti1izer 

fertilizer material

Mr Lengyel also disagrees with respondents argument that the Ray

products can be considered Soil Compacting Chemicals and Soil Stabiliz

He points out that while the Association does not define these terms they 

generally understood by agronomists as referring to a substance which is

to make soil firm stable set unalterable impermeable etc An example 

Soil Compacting Chemical is Attopulgite Clay which is used for sealing p

so that the water will not leak through the dirt Anydrous Ammonia 

Mr Lenpol 1Ian 81td oxportoneon o B S In SoB Ind Plant Chomlotry It Horticulture PurdUn

GrndStudlla In plant nutrition plant blocomlJtry and plant patholosy It thoUnlvenlty of Mlryl81td FenlUzor C

Swift It Co 1954 8 ChlofChomilt bAponombt forAjroohomloal Corp 19 8 64 n

trltlonlllsrfculturoJ 

IMm and hlo bllli ln 1967
RUFFIN INC V COSTA ARMATORIA S pA ITALIA DI NAVIGAZIONE 615

Calcium Carbonate can under various circumstances cause soil compaction

Mr Lengyel goes on to point out that iron manganese magnesium and zinc

the Rayplex nutrients would have the exact opposite effect These mineral

sulfates would make the soil more airable more permeable to air and water and

subject to the consequent loss of water Rayplex is water soluble where as the

most important characteristics of soil stabilizers and soil compacting chemicals

is that they are not water soluble Mr Lengyel is unaware of any reference

at any place in the literature under AAFPCO classification or any other text

where Rayplex nutrients are referred to or classified as either soil compacting

chemicals or as a soil stablizer

Respondents have offered the affidavit of Leonard J Maltese Director of

Stillwell Gladding a testing and consulting firm located in New York City

Mr Maltese has a Master s Degree in Chemicals and has worked with chem

icals including fertilizers since 1951 It is Mr Maltese s opinion that he is

qualified to offer advice to shipowners surveyors underwriters etc with

respect to the classification and handling of cargoes of a chemical nature

Because Ido not wish to misinterpret or wrongly summarize Mr Maltese s

affidavit Ihave set forth the substantive provisions in the entirety

2 We all know the definition of a fertilizer and many substances are today used in these

formulations With the exception of organic waste products some constituents of fertilizers in

concentrated forms can be hazardous materials to ship for example ammonia gas We cannot

expect a ship to carry ammonia gas or nitrates or phosphoric acid and allow them to be labelled

as fertilizers Urea gibberellic acid auxins and others cannot be labelled fertilizers in pure

form Neither can chelates of metals be classified as fertilizers for chelates have many other

uses in industry even in medicine for removing undesirable substances from the blood and

urine for example

3 Only waste products or formulated plant food products applied inabundance should be

classified as fertilizers The bags should state in large lellers Plant Food or Fertilizer for

Coast Guard identification if necessary Any substance which will later be incorporated into

or diluted into a plant nutrient comes under the category of chemicals with a secondary

description regarding flammability toxicity incompatibility explosiveness etc The Rayplex

complexes advertise that Elemental Sulfur is converted which could mean to people reading

that circular that these substances are oxidizing agents and that this should be explored further

for safety purposes in shipping Ifit is an oxidizing agent precautions for storage and handling

should appear on the containers

4 I consider the Rayplex chelates in concentrated form not to be classified as fertilizers but

as chemicals belonging to the organometallic groups

On the basis of this record it is clear that the proper classification for the

shipment in question was Fertilizer N O S The whole text of the classification

reads

Fertilizers Viz

Crushed Mineral Rock with less than 2 Apply Clay Ground Magnesium Ammonium

Phosphate Magamp Non Hazardous

NOS Not Ammonium Nitrate which takes Dangerous Cargo Rate Caution

The classification used by respondents reads simply Soil Compacting Chem

icals and Soil Stabilizers with no further language of example or explanation

Based on the record before meIconclude that complainant has sustained its

burden ofproof and has established that the shipment in question was manu

factured as fertilizer sold as fertilizer was intended for use as fertilizer and
616 RUFFIN INC V COSTA ARMATORIA S p

A ITALIA DI NAVIOAZ

should have been classified as fertilizer Respondent has violated se

l8 b 3 of the Shipping Act 46 U S C 1818 3

Respondent is awarded reparation in the amount of 9472 13

S JOHN E COORAVE

Administrative Law Jud

WASHINGTON D C

February 12 1980

I
FEDERAL MARITIME COMMISSION

S FRANCIS C HURNEY

Secretary

DOCKET No 79 100

UNITED AERO MARINE SERVICE INC

v

PACIFIC WESTBOUND CONFERENCE ET AL

NOTICE

March 25 1980

Notice is given that no appeal has been filed to the February 14 1980

dismissal of complaint in this proceeding and the time within which the

Commission could determine to review has expired No suchdetermination has

been made and accordingly review will not be undertaken
FEDERAL MARITIME COMMISSION

No 79 100

UNITED AERO MARINE SERVICES INC

v

PACIFIC WESTBOUND CONFERENCE ET AL

DISMISSAL OF COMPLAINT

Finalized March 25 1980

Respondents have moved to dismiss this prooeeding because ofcomplai

failure to allege a cause of action upon which relief can be granted 

respondents put it the complainant s failure toallege any facts upon whic

Commission could conclude that therehas been a violation ofthe ShiPPin

1916 The complaint with quotation marks omitted is set forth below

Complainant UNITED AERO MARINE SERVICES INC f

formal complaint alleges as follows

I The complainant is a corporation organized and existing under the 

ofthe State of New York engaged in the business of forwarding freigh

having a principal place of business at 160 Broadway New York New 

2 On information and belief respondent PACIFIC WESTBOUND C

FERENCE is a conference havingaprincipal place ofbusiness at 320 C

nia Avenue San Francisco California and is duly existing pursuant 

terms of 46 U S C 1814 and as such is subject to the provisions o

Shipping Act of 1916 as amended

3 On information and belief each of the remaining respondents is a c

who is a participant ofthe PACIFIC WESTBOUND CONFERENCE 

as such is subject to the provisions of the Shipping Act of 1916 as ame

4 In or about February through May 1978 complainant shipped c

construction materia including Steel Shapes Fabricated in Bundles 

Shapes destined to the Hsieh HoPower Station United No 3 ofthe T

Power Company which shipments were subject to tariffrates set by respo

Conference

S In or about February 1978 the respondent Conference at the requ

the complainant herein caused to be published special project rates fo

In QIl 4lVl1l OO SAid item beinll known as Steel Shaocs The s
UAMS INC V PACIFIC WESTBOUND CONFERENCE ET AL 619

project rates for Item No 982 4008 00 were published in Pacific Westbound

Intermodal Freight Tariff No 8 FMC 15 FMC Said Tariff specifically

relates to the shipments referred to in Paragraph 4

supra

6 Steel Shapes however were inadvertently eliminated from the special

project rate during the period March 20 1978 to May 3 1978 although

immediately after the respondent PACIFIC WESTBOUND CONFER

ENCE received a complaint from the complainant herein they were restored

after May 3 1978

7 That the Pacific Westbound Conference has been attempting to enforce

the higher tariff for the period March 20 1978 to May 3 1978 That the

complainant has refused the pay the higher tariff for this period on the grounds

that the omission of Item No 982 4008 00 for the period Match 20 1978 to

May 3 1978 was a clerical erroron the part of the Pacific Westbound Confer

ence

8 By reason of the factsstated in the foregoing paragraphs complainant has

been subjected to the payment of rates for transportation which were when

exacted and still are I unduly or unreasonably preferential prejudicial or

disadvantageous in violation of 42 U S C S816 and 3 unjust and unreason

able in violation of46 U S C 817 or

9 The agreement modification or canceIlation is unjustly discriminatory or

unfair as between carriers etc contrary to the provisions of 46 US C S814

WHEREFORE complainant prays that respondents be required to answer

the charges herein that after due hearing and investigation an order be made

commanding said respondents to cease and desist from the aforesaid violations

of said act as amended and establish and put in force and apply in the future

such other rates as the Commission may determine to be lawful and that such

other and further order or orders be made as the Commission determines to be

proper

There is no construction ofthis complaint no matter how liberalwhich would

produce a set of circumstances upon which the Commission could grant the

complainant the relief it has requested Complainant s cause is actually

grounded upon what it sees as the foIlowing facts

In February of 1978 complainant requested the conference to set a special

rate on Steel Shapes to be used in the construction of a power station

inTaiwan The conference granted the request and the special rate was pub

lished in its Tariff No IS The rate was omitted from the tariff during the

period March 20 1978 to May 3 1978 but was reinstated when the omission

was caIled to the attention of the conference Again granting the complaint its

most liberal construction the actions by the conference are said to violate

sections 15 16 and 18 of the Shipping Act

The conference s tariff on file with the Commission of which official notice

is taken reveals what actually happened in this case

In March of 1977 the conference established project rates for the Taiwan

Power Company The project for which the rates were established was the

construction of Units I and 2 for the Hsieh Ho Steam Power Station in

Keelung See Exhibit Aattached to Motion to Dismiss Effective February 10
620 FEDERAL MARITIME COMMISSION

1978 the company amended the project rates to include United No 3

February 16 the conference published and filed a revision of the rate on 

Shapes which specifically stated that the rates would expire March 10 

See Exhibit C attached to motion At the request of the complainan

conference reinstated the rate effective May 3 1978

On the basis of the pleadings before me it would appear that durin

period in question respondent charged complainant those rates which 

published and filed with the Commission as complainant was required 

by the law United States v Seatrain Lines Inc 370 F Supp 483 S D 

1973 2 Thus unless the rates charged are discriminatory prejudicial or 

wise unlawful under the Act there has been no violation and no ground 

which to sustain the complaint

The complaint alleges that the rates exacted were and still are und

unreasonably preferential prejudicial or disadvantageous in violation of s

16 of the Act 46 C F R 1815 However an allegation essential to sust

a violation of that section is not anywhere in the complaint There 

allegation that any other shipper enjoyed the rates which were denied 

plainant or that any other shipper was preferred or enjoyed an adva

because of the omission from the tariffof the rates in question In short 

is no allegation of the competitive relationship necessary to the establis

of a violation of section 16 where the allegation is that ocean freight rat

the reason for the violation Mediterranean Freight Conference Rat

Household Goods 11 F MC 202 1967 3

The complaint alleges that the rates charged are unjust and unreason

violation of 46 U S C 1817 While the citation to the U S Code is 

entire section 18 of the Shipping Act subsection 18 a does not ap

shipments in foreign commerce Subsection b 5 ofsection 18 condemn

rates which are so unreasonably high or low as to be detrimental 

commerce of the United States The difference in language ofthe two se

is crucial in that it distinguishes the differences in the degree of regulati

Commission exercises over the offshore domestic trades as compared 

foreign trades But nowhere in the complaint is there even a suggestion o

the rates exacted were detrimental to the commerce of the United Sta

fact the complaint does not even state what rates were assessed durin

period March 20 1978 to May 3 1978 Thecomplaint simply does not c

enough to sustain the allegation that respondent has somehow violated s

18 b 5

I Respondents say the amendment was at the request of tho complainant This docs not appur in the tariff

2 There is no aUcgalton in the complaint that a ratecharsed by oomplainant was not proJ erly published and Ne

Commisaion

Tho llriftp which lain theopeolalllle bear tho requlmnont that the IItea a avallablc only tho bill of 

clalllld lollows All matoria included In tho bUl of ladinl forthe OOlIIlrUClinc Ion and orinatallal10n of

Power Company Haieh Ho Steam Power Station UnhNo I 2 3 Kleluna ThUltharoasonabla proaumpl1on iltha

no otltor hlppm of ateaJ ahapco fortho Taiwan Powar Company Projoot And tltoy WIIO it diftlcult to w

competition would haw exilWd between them which could have been effected by tho action of respondent as lOt 

oomplalnL
UAMS INC V PACIFIC WESTBOUND CONFERENCE ET AL 621

Respondents take the assertion that the omission was inadvertent and due

to clerical error as an attempt to transform the complaint into a

special

docket application for relief under section 18 b 3 However as respondents

point out as an application for special docket relief the action is time barred

The shipments in question if any had to be made during the period March 20

1978 to May 3 1978 since by the complaint itself this was the period when the

special rate was not in effect The complaint was not filed until November 19

1979 clearly beyond the 180 day period specified in section 18 b 3

Finally the relief requested is either not compatible with the allegations of

the complaint or makes no sense The complainant would have the Commission

order respondent to cease and desist from the aforesaid violations The com

plaint itself states that the special rates were reinstated on May 3 1978 and

has been in effect since then so that the violation cannot be the continued

assessment of the rate which was in effect during the period in issue Much the

same is true of the request that the Commission put in force and apply in the

future such other rates as the Commission may determine to be lawful Just

what rates these could possibly be defies the imagination The rates which

complainant sought to have reinstated are still in effect so that it could not be

those rates which the complainant would have the Commission supplant with

lawful rates for the future Indeed there is not a single allegation in the

complaint that even hints that the current rates are in any way improper or

even undesirable If the cease and desist portion of the prayer for relief is

directed at what would appear to be the continued attempts by the conference

to collect the rates in effect during the period in question then the complaint

offers not the slightest ground that would support even a limited presumption

that the rates assessed were unlawful First the complaint does not even state

what those rates were second there is no assertion that the rates were not

properly published and filed and third ifthe prayeris directed to the allegation

that the rates were prejudicial the essential allegation of the preferred shipper

is absent 4

The motion ofrespondent should be granted unless there is some reason for

allowing complainant an opportunity to amend its complaint Here there is

none Complainant did not avail itself ofthe opportunity afforded it to reply to

the motion to dismiss and there is no reason to think that it would or could cure

the deficiencies in the complaint by a motion to amend it

An earlier motion to dismiss the proceeding as to it on the ground that during

the period in question Waterman I did not participate in the establishing and

filing of PWC rates and 2 did not carry any cargo in the U S West

Coast Far East Trade Since Waterman did not participate in the trade the

proceeding should be dismissed as to it However in view of the foregoing it is

unnecessary to rule individually on the Waterman motion

The motion to dismiss the proceeding is granted

S JOHN E COGRAVE

Administrative Law Judge

February 14 1980

4

Theplea that such other and further order ororders be made as the Commission determines to be proper is all example of

pleading boilerplate so dear to lawyers andlaymen who useform books and forthe purposes ofthis motion isirrelevant I include

laymen becausei is not apparent orclearfrom the CQmplaint that it was drawnby an attorney Indeed the signature isan iUegible

liCrawl and carries beneath it no indicationof the maker of the scrawl
FEDERAL MARITIME COMMISSION

DOCKET No 79 99

H K INTERNATIONAL FORWARDING INC

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE ApPLICATIO

NOTICE

March 27 1980

Notice isgiven that no appeal has been filed to the February 21 1980 

approving settlement in this proceeding and the time within which the 

mission could determine to review has expired No suchdetermination hllJ

made and accordingly review will not be undertaken

5 FRANCIS C HURNEY

Secret
FEDERAL MARITIME COMMISSION

No 79 99

H K INTERNATIONAL FORWARDING INC

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE APPLICATION

ORDER APPROVING SETTLEMENT

Finalized March 27 1980

H K International Forwarding Inc has filed with the Commission an

application for a license as an independent ocean freight forwarder During the

course of the Commission s

investigation of the applicant it appeared that the

firm had engaged in ocean freight forwarding activities without holding a

license issued by the Commission although a warning from the Commission

about unlicensed forwarding activities had previously been sent to the

applicant

Section 44 b of the Shipping Act 1916 requires that applicants be found

fit willing and able properly to carry on the business of forwarding and to

conform to the provisions of this Act and the requirements rules and regu lations of the Commission issued thereunder otherwise such application shall be denied

Inasmuch as the applicant s conduct appeared to reflect adversely upon its

qualifications to be licensed the Commission notified H K International

Forwarding Inc of its intent to deny the application unless the applicant

requested a hearing on the grounds that such a denial wasunwarranted In a

letter dated September 24 1979 legal counsel for the applicant requested that

the firm be given an opportunity to show at a hearing that such a denial was

unwarranted

Thereupon the Commission by order served December 7 1979 instituted

this proceeding to determine

1 Whether H KInternational Forwarding Inc has violated section 44 a

Shipping Act 1916 by engaging in unlicensed forwarding activities

2 Whether civil penalties should be assessed against H K International

Forwarding Inc pursuant to 46 USc 831 e for violations of the

Shipping Act 1916 and ifso the amount ofany such penalty which should

be imposed taking into consideration factors in possible mitigation of such

a penalty
624 FEDERAL MARITIME COMMISSION

j

I

3 Whether in light of the evidence adduced pursuant to the foregoing 

together with any other evidence adduced H KInternational Forwa

Inc and its corporate officers possess the requisite fitness within the m

ing of section 44 b Shipping Act 1916 to be licensed as an indepe

ocean freight forwarder

Section 10 of the Shipping Act Amendments of 1979 Public Law 9

enacted June 19 1979 provides as pertinent

Section 32 of the Shipping Act 1916 is amended by inserting at the end thereof the followi

subsections

d

e Notwithstanding any otber provision of law the Commission shall have authority to as

compromise all civil penalties provided in this Act 46 U S C 1821

To implement the provisions ofP L 96 25 the Commission on July 5 

published interim revisions to General Order 30 In explaining the revision

Commission stated

New 1505 3 reflects Pub L 96 25 s provision for assesliment of penalties decided after a 

hearing under section 22 which is instituted for the purpose of assessing such penalties

This section also requires Hearing Counsel in assessment proceedings as contemplated 

legislative history ofPub L 96 25 to exercise prosecution responsibilities inCluding the p

negotiate settlements and enter into stipulations in formal hearings

Further it is contemplated that any proposed settlement in a formal Commission hearing 

ing agreed topenalties shall be submitteil to the presiding officer for approval at any stage 

proceedings and must be embodied in a final Commission order before it can beccome ef

In publishing its final rule revising General Order 30 on Novemb

1979 the Commission noted

lilt is contemplated that both the issue of whether violations have been committed as wel

assessment of penalties for such violations may be encompassed in a single proceeding

a compromise proceeding as defined in 1505 2 c is the informal process while the 

ment proceeding is a formal docket See 1505 2 a Settlements can be reached in either 

with General Counselor Hearing Counsel as the case may be

The Commission intends no extraordinary impediment to settlements Hearing Cou

party to the stipulation or settlement win notbe approving agreements but rather will be 

with respondents in submitting agreements for approval

t he rules do not specify whether the presiding officer can amend modify or simply r

settlemont Such powers are implied in the requirement that the presiding officer approve 

settlement 44 Federal Regls er pp 67660 and 67661

Pursuant to these newly published procedures respondent s counsel an

Bureau ofHearing Counsel have negotiated the settlement Inow before m

approval

As a condition of and pursuant to the settlement submitted the respo

will not contest that the conduct which the Commission s order describ

page 1 thereofconstitutes unauthorized freight forwarding by acting to 

in and arrange for the dispatch and documentation of a number of ship

by ocean common carrier on behalf of shippers and or forwarders 

conjunction with licensed freight forwarde but without respondent 

I

Appendix A
H K INTERNATIONAL FORWARDING INC 625

having been issued a freight forwarding license nevertheless in not contesting

the allegations and by the submission of the settlement the tenns of which are

set out below it is expressly understood and agreed that this submission is not

to be construed as an admission ofguilt by respondent its officers directors or

employees to the alleged violations set forth in the Commission s order

Accordingly in settlement of all civil penalties under the Act arising from

violations set forth in the Commission s order that may have occurred between

August 1 1978 and December 7 1979 the respondent has tendered to the

Federal Maritime Commission the sum of ten thousand dollars 10 00000

payment of said amount to be made in regular installments after the execution

of a promissory note a

copy of which is attached as Appendix B to this order

and incorporated herein

And as a further condition ofthe settlement the respondent agrees to with

draw its application for a license as an independent ocean freight forwarder

now pending before the Commission and agrees not to submit an application

for a license as an independent ocean freight forwarder within six monthsfrom

the date of the acceptance of the settlement by the Commission

And approval of the tenns and conditions set forth herein by the Presiding

Administrative Law Judge and the Commission shaH constitute a stipulated

settlement of the violations and civil penalty issues in this proceeding and shall

forever bar the commencement or institution of any assessment proceeding or

other claims for the recovery ofcivil penalties from respondent arising from the

alleged violations set forth and described herein that occurred between Au

gust I 1978 and December 7 1979

As stated in revised General Order 30 46 C F R i505 1 44 Federal

Register 67661 November 27 1979

t he criteria for compromise settlement or assessment may include but need not be limited to

those which are set forth in 4 CFR Part 101 105

As pertinent to this settlement and the administrative process involved the

concepts embodied in those criteria warrant the approval of the instant set

tlement giving due consideration to

a The probabilities of prevailing upon the legal questions involving and the

litigation costs involved 4 C F R i

103 3

and

b whether the settlement adequately serves the agency s enforcement policy

in tenns of deterrence and securing compliance both present and future

4 C F R i

103 5

Hearing Counsel in recommending this settlement have asserted the foHow

ing facts

1 In January of 1978 and July of 1978 representatives of H K Inter

national Forwarding Inc HKIF contacted the Gulf District Office of the

FMC to request infonnation and forms for applying for an independent ocean

freight forwarder s license Statham Affidavit paras 2 and 3

46 CF R 505 Appendix A
626 FEDERAL MARITIME COMMISSION

2 On bothoccasions the forms sent to HKIF were accompanied by a

Exhibit GO warning that the company not carry on the businese of forw

ing before receiving a licensefrom the Commission The letteralso warne

forwarding without a license risked both penalties and prejudiceto the iss

of a license Statham A1tidavit para 4

3 Mr John L Walker Assistant Vice President of HKIF admitte

the company carried on the businese of forwarding amonth after receivin

warning letter Kellogg Affidavit paras 3 4 d 6

4 Documents given by Mr Walker to Commission Investigator Ke

show that HKIF carried on the business of forwarding relative to at le

ocean shipments between August 1978 and April 1979 Kellogg A1t

paras 4 10 12 14

5 The documents provided by Mr Walker to Investigator Kellogg 

that HKIF performed a fulll aJlC of forwarder services including m

arrangements with ocean commCncarriers and that HKIF also invoiced 

pers in its own name Kellogg A1tidavit paras 7 9 10 12 14

6 On April 4 1979 Investigator Kellogg warned Mr Walker ofHK

to carry on the business of forwarding before receiving a license an

penalties could be assessed for violation Kellogg A1tidavit para 15

7 On April 17 1979 the Commission s Office of Freight Forwarder

HKIF a letter Exhibit HH acknowledging receipt of its application 

license and warning that section 44 Shipping Act 1916 prohibited the 

ing on of the business of forwarding without a license It further warne

forwarding without a license risked penalties and prejudice to the issua

a license Klapouchy Affidavit para 4

8 Between April 1979 and October 1979 HKIF continued to pe

freight forwarder services Kellogg A1tidavit paras 4 8 Ausderan A1

para 4

Review of the documents compiled by Hearing Counsel reveals th

spondent did prior to receiptofthe October 10 1978 form letter warnin

the Commission assist three of its air freight clients to forward 5 

shipments and collected a handling charge of 50 00 on each of t

shipments 3

As recited in the affidavit of Investigator Kellogg respon

VicePresident Mr John Walker in April of 1979 producedthe docume

these 5 shipments and none of these five showed any FMC license n

whatever Investigator Kellogg also relates Mr Walker s prior mistaken 

that such assistance could be rendered as long as brokerage was not co

from the ocean carrier

The actions of HKIF relate to 16 shipments on which repondent w

quested by a licensed freight forwarder in California to tin routin

shipments through Houston The need for this assistance arose becaus

Houston PortAuthority system which prohibits the transport of lading 

shipment moving through Houston s public facilities without a guarant

facility charges will be paid and the shipment not abandoned in trans

spondent had qualified its packing and crating operation to satisfy th

Authority requirement The California forwarder did not have a Houst

HcarinaCounael ElL C D E f and G
H K INTERNATIONAL FORWARDING INC 627

account Respondent did invoice the Californiaforwarder for handling charges

on these 16 shipments A charge of 1750 was collected from the forwarder

on 13 shipments 4a charge of 43 50 on one shipment 5

and a charge of 25 00

on 2 shipments

6

It should be noted that in none of these instances was respondent in direct

contact with or holding itself out to the shipper as a freight forwarder Re

spondent received its instructions from the licensed California forwarder re

questing the assistance and invoiced for that assistance back to that licensed

forwarder

As summarized on Hearing Counsel s Exhibit B the individual Bills of

Lading on these shipments clearly showed the responsible forwarder asCIS of

California with HKIF purporting to act only as port agent for that licensed

forwarder

The eight remaining shipments under investigation occurred between Jan

uary 28 1979 and April 10 1979 7

Respondent referred these shipments

originated by 5 of its air freight customers to licensed forwarders in Houston

and did assist those licensed forwarders on these 8 shipments For this assis

tance respondent recovered 25 00 on two of these shipments nothing on one

shipment and 50 00 on 5 shipments

The amount of handling charges collected by respondent for all 29 of the

challenged shipments totalled 1 02100 primarily representing out of pocket

expenses

In determining the appropriateness ofthe settlement the following factors in

mitigation have been taken into consideration

I Respondent s officers fully cooperated with the FMC field investigation of

the application

2 After receipt of the October 10 1978 form letter warning respondent

engaged in activities only as agent for or on behalf of licensed ocean

freight forwarders

3 Respondent has agreed to terminate the activity under investigation with

out requring further litigation

4 There are no allegations that respondent failed to discharge any position of

trust or responsibility with respect to the shipments under investigation

5 There are no allegations of fraud deceit financial misappropriations or

other conduct which might constitute moral turpitude

In the final analysis the issue is whether the settlement adequately serves the

Commission s enforcement policy in terms ofdeterrence and recurring compli

ance both present and future

The Commission has stated that

Section 44 and its regulations are based on an underlying remedial public interest purpose and the

sanctions imposed must serve such a purpose and not be punitive in character Footnotes

omitted

IndependentOcean Freight Forwarder License E LMobley Inc FMC Dkt

Hearing Counsel EXj J K LM N O P Q K S T V and W

j

Hearing Counsel Ex U

Hearing Counsel Exs Hand 1
628 FEDERAL MARITIME COMMISSION

I

I

77 26 Commission Order March 12 1979 19 SRR 39 at 41

Hearing Counsel state that their principal reason for agreeing to th

posed settlement is their conviction that the monetary value is fittin

appropriate to the conduct alleged in light of past Commission practic

October 31 1979 the Commission accepted 10000 in settlementofclai

violations alleged in Docket No 78 34 Concordia International Forw

Corporation Independent Ocean Freight Forwarder Application and 

ble Violations ofSection 44 ShippingAct 1916 18 SRR 1364 1978 

the settlement was treated outside of the proceeding as it preceded the 

of assessment authority to the Commission by P L 96 25 The 1000

tlement wasfound acceptable and appropriateto the allegation of 93 or 

violations of section 44 of the ShippingAct The instant proceeding involv

allegation of 29 violations ofsection 44 Given that respondent here is c

with fewer than one third as many violations as were involved in D

No 78 34 the proposed settlement of 10000 is not inappropriately low 

same conclusion may be reached by reference to respondent s fees f

subject shipments Those fees totlilled 1 021 00 Thus the proposed sett

more than deprives respondent of any profit it may have made 

sufficiently punitive to be a deterrent

The activities of HKIF also are unlike the situation in Harry Ka

Independent Ocean Freight Forwa der 16 F M C 256 1973 We a

dealing with allegations of deliberate and willful misrepresentations 

applicant or the undisclosed tralsfer ofaforwarding license to the con

an individual whose own license had been revoked after federal prosecut

violations of the Bills of Lading Act

Similarly Lesco Packing Co Inc 19 FM C 132 1976 poses no i

iment to approval of the settlement in this case Lesco was a sequel 

Harry Kaufman case involving the same individual whose license had 

revoked after criminal prosecution for violations of the Bills of Ladin

NKIFs activities are far less reprehensible than in Independent 

Freight Forwarde Application Guy G Sorrentino 15 F M C 127 1

where Sorrento Shipping Inc was convicted of 16 counts of violatin

tion 15 of the Shipping Act by false cargo descriptions over atwo yearp

No such activity is involved herein

Accordingly in consideration of the nature of the activities engaged 

respondent the mitigating factors relating thereto and the belief th

settlement adequately serves the Commission s enforcement policy in te

deterrence and the sanctions thereby imposed serve a remedial public in

the settlement offer is accepted and approved

So ordered

One other matter remains to beconsidered One ofthe issues set forth 

Commission s order ofDecember 7 1979 was whether the applicant sho

licensed By the terms of the settlement offer HKIF has withdrawn its ap

tion for a license Hence the respondent s fitness to be licensed is no

before the Commission Accordingly a determination offitness is not no

propriate and none is made

Jn n

IOJU

S STANLEY M LEVY

Admini trntilJl TnwT 
629

APPENDIX A

FEDERAL MARITIME COMMISSION

FMC DocKET 79 99

H K INTERNATIONAL FORWARDING INC

INDEPENDENT OcEAN FREIGHT FORWARDER

LICENSE APPLICATION INVESTIGATION

Stipulation and Proposed Settlement

of Civil Penalties

This stipulation and proposed settlement is entered into between the Bureau

of Hearing Counsel and H K International Forwarding Inc hereinafter re

ferred to as Respondent the only parties The Parties to this proceeding

This stipulation and settlement is submitted to the Presiding Officer for ap

proval under 46 CF R S S 502 162 and 505 3 to be included in the Final Order

in this proceeding if approved

Whereas by Order dated December 7 1979 the Commission has instituted

an investigation ofRespondent s pending application for a license as an inde

pendent ocean freight forwarder to include a determination of whether civil

penalties should be assessed for possible violations of Section 44 of the Act

Whereas the Order ofInvestigation recites that the Respondent had appar

ently engaged in ocean freight forwarding activities without holding a license

issued by the Commission although a warning from the Commission about

unlicensed forwarding activities had previously been sent to the Respondent

Whereas the Respondent will not contest that the conduct which the De

cember 7 1979 Order describes on page I thereof constitutes unauthorized

freight forwarding by acting to assist in and arrange for the dispatch and

documentation of a number of shipments by ocean common carrier on behalf

of shippers and or forwarders or in conjunction with licensed freight forward

ers but without Respondent itself having been issued a freight forwarding

license

Whereas the parties are desirous ofexpeditiously settling the matter accord

ing to the terms and conditionsof this agreement and wish to avoid the delays

and expense which would accompany further agency litigation concerning

these claims

Whereas Pub L 92 416 and 96 25 authorize the Commission to assess

collect compromise and settle certain designated civil penalties arising under

the Shipping Act 1916 including the civil penalties which could arise from the

conduct set forth and described above

Whereas the Respondent has terminated the practices which are described

above and has instituted and indicated its willingness and commitment to
630 FEDERAL MARITIME COMMISSION

maintain measures designed to eliminate discourage and prevent these 

tices by Respondent or its officers employees and agents unless and 

Respondent shall have been granted a freight forwarding license

Whereas Respondent will withdraw its pending application without 

dice to a new application being submitted by Respondent corporation 

undersigned qualifying officer not less than six months after the approval 

Commission ofthis stipulation

Now Therefore in consideration of the premises herein and in settl

of all civil penalties under the Act arising from violations set forth an

scribed herein that may have between August I 1978 and De

ber 7 1979 the undersigned Respondent herewith tenders to the Fe

Maritime Commission the sum of Ten Thousand dollars 1000000 

ment of said amount to be made in regular installments after the execut

a promissory note a

copy of which is attached to this agreement and inc

rated herein Upon the following stipulation and terms of settlement

1 Upon the approval of the terms and conditions set forth herein b

Presiding Administrative Law Judge and the Commission this instru

shall constitute a stipulated settlement ofthe violations and civil penalty 

in this proceeding and shall forever bar the commencement or institution 

assessment proceeding or other claims for the recovery of civil penalties 

Respondent arising from the alleged violations set forth and described h

that occurred between August I 1978 and December 7 1979

2 The undersigned voluntarily signs this instrument and states th

promises or representations have been made tothe Respondent other tha

agreements and consideration herein expressed

3 It is expressly understood and agreed that this Agreement is not 

construed as an admission of guilt by Respondent its officers directo

employees to the alleged violations set forth above

H KInternational Forwarding 

Dated 2 12 80

8 JOHN L WALKER

Assistant Vice President

Federal Maritime Commission

Bureau of Hearing Counsel

Dated 2 15 80

8 J ROBERT EWERS EsQ

Director
631

APPENDIX B

PROMISSORY NOTE CoNTAINING

AGREEMENT FOR JUDGMENT

For value received H K INTERNATIONAL FORWARDING INC of

Houston Texas promises to pay to the Federal Maritime Commission the

Commission the principal sum of Ten Thousand Dollars 10000 00 to be

paid at the offices ofthe Commission in Washington D C by bank cashier s

or certified check in the following installments

semi annual payments of 1 428 00 each with the first payment due on or

before March 31 1980 and subsequent installments on the principal amount

due at six month intervals thereafter to wit

September 30 1980

March 31 1981

September 30 1981

March 31 1982

September 30 1982

March 31 1983

In addition to the principal amount payable hereunder interest on the

unpaid balance thereof shall be paid with each installment Such interest shall

accrue from the date of this Promissory Note and be computed at the rate of

twelve percent l2 per annum

If any payment of principal or interest shall remain unpaid for a period of

10 days after becoming due and payable the entire unpaid principal amount

ofthe Promissory Note together with interest thereon shall become immedi

ately due and payable at the option of the Commission without demand or

notice being hereby expressly waived

If a default shall occur in the payment of principal or interest under this

Promissory Note H K INTERNATIONAL FORWARDING INC does

hereby authorize and empower any U S Attorney any ofhis assistants or any

attorney ofany court ofrecord Federal or State to appear forit andto enter

and confess judgment against for the entire unpaid principal amount of this

Promissory Note together with interest in any Ourt of record Federal or

State to waive the issuance and service of process upon H K INTER

NATIONAL FORWARDING INC in any suit on thisPromissory Note to

waive any venue requirement in such suit to release all errors which may

intervene in entering upon such judgment or in issuing any execution thereon

and to consent to immediate execution on said judgment H K INTER

NATIONAL FORWARDING INC hereby ratifies and confirms all that

said attorney may do by virtue hereof
NATIONAL FORWARDING INC by bank cashier s or certified ch

any time provided that accrued interest on the principal amount prepai

be paid at the time of the prepayment

H K INTERNATIONAL FORWARDING 

2000 South Post Oak Road

Suite 1870

Houston Texas 77056

S JOHN LWALKER

Assistant Vice President
FEDERAL MARITIME COMMISSION

DOCKET No 79 91

PAN OCEAN BULK CARRIERS LTD INVESTIGATION OF RATES ON

NEoBuLK COMMODITIES IN THE TRADE BETWEEN THE UNITED STATES AND

SOUTH KOREA

NOTICE

March 27 1980

Notice is given that no appeal has been filed to the February 21 1980

discontinuance of this proceeding and the time within which the Commission

could determine to review has expired No such determination has been made

and accordingly review will not be undertaken

The recommendation of Hearing Counsel that the Commission examine

Respondents new rates for the carriage of neobulk commodities in the United

States South Korea trade will be handled as a separate matter

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 79 91

PAN OcEAN BULK CARRIERS LTD INVESTIGATION OF RATfS O

NooBuLK CoMMODlTIBS IN THe TRADE BETWEEN THE UNITED STATf

SoUTH KOREA

MOTION FOR DISCONTINUANCE OF PROCEEDING GRA

Flnollzed March 27 1980

Respondent Pan Ocean BulkCarrier Ltd has filed amotion requestin

this prooeeding bediscontinued Pan Ocean states that the two parties in

in the oontroversywhich ultimately ledtothe oommencement ofthe proc

by the Commission have entered into a settlement agreement that th

gation before the Court which referred a portion of the oontroversy 

Commission has terminated that the Court has withdrawn its request 

assistance of the Commission and that oontinuation of the prooeeding 

involve oonsiderable time and expense all of which would serve no 

purpose

Theonly other party tothe proceeding the Commission s Bureau of H

Counsel a party to every Commission investigation under the Commis

rules 46 C F R 150242 have filed a

reply which while not op

discontinuance requests that Irefer to the Commission Hearing Co

recommendation that the Commission instruct its staff to examine Pan O

current rates for the carriage of the oommodities involved in the proc

regardless of the termination of the 0000 action I find that Pan Ocea

shown good reason for discontinuance ofthis proceeding and am granti

motion As for Hearing Counsels recommendations I will oontine myse

few remarks below

As Hearing Counsel accurately state in their detailed history ofthis cas

proceeding was begun by the Commission which served its Order 

vestigation on October 9 1979 This Order was served at the requestofU

States District Judge Harry Pregerson before whom Retia Steamship 

pany a carrier formerly oompeting with Pan Ocean in the Korean trad

filed a oomplaint alleging that Pan Ocean had attempted to monopol

carriage of socalled neobulk oommodities between the United Stat

South Korea and had engaged in various other unlawful activities in re
INVESTIGATION OF RATES ON NEO BULK COMMODITIES 635

oftrade resulting in Retia s departure from the trade all of which activities

were allegedly violative of the Shennan and Clayton Acts for which Retia

sought injunctive relief and treble damages Included in Retia s allegations

were the assertions that Pan Ocean had maintained non compensatory rates

and had engaged in predatory pricing practices Upon motion by Pan Ocean

and with the advice ofthe Commission which had filed an amicus curiae brief

Judge Pregerson referred a single question to the Commission for its deter

mination namely whetherPan Ocean s rates on these neobulk commodities

charged sinceApril 1978 and still in use at the time ofthe Commission s Order

were so unreasonably low as to be detrimental to the commerce of the United

States within the meaning of section 18 b 5 of the Shipping Act 1916 The

Commission responded to Judge Pregerson s referral by issuing its Order which

was confined to the issue stated The Commission also limited the proceeding

to findings under section 18 bX5 in the nature ofa declaratory order only i e

without specifying that the Commission wished to consider whether it should

actually disapprove these rates and order new rates as section 18 b 5 ordi

narily provides The Commission established tight time schedules and provided

for the issuance of its findings approximately eight months after the Order was

served

Following the issuance ofthe Commission s Order the parties served exten

sive discovery requests and two preheating conferences were held to deal with

them and to plan for the rapid development of the evidentiary record At the

prehearing conference Pan Ocean agreed to present a special cost study in

support ofits rates to be prepared by areputable accounting finn Provisions

weremade to exchange discovery materials written direct and rebuttal cases

to depose expert witnesses and to commence hearings by March 25 1980

Certain matters required referral to the Commission relating to overseas

discovery rulings and amendment of the Commission s Order to allow the

agreed upon time schedule to go into effect After these prehearing conferences

had concluded however Retia and Pan Ocean seeking a less costly way to

resolve their differences entered into a settlement agreement contingent upon

payment ofa certain sum by Pan Ocean to Retia to be effectuated on January

14 1980 When Pan Ocean honored its agreement and paid the sum the

agreement became effective Thereafter RetIa withdrew as an intervenor in

the Commission proceeding and the parties filed their settlement with the

District Court which dismissed RetIa s action on January 23 1980 with prej

udice On the same day Judge Pregerson infonned the Commission by letter

I

The Settlement Agreementhas been furnisbed totheCommission with the request that it be held oonlidential arequest 1 am

honoring It seems to be a conventional type of scttloment agreement embodying mutual releases by which both Retia and Pan

Ocean relinquish any further claims arising out of the events described in Rella s complaint filed with the District Court and in

which a certain consideration is paid to the complainant For asimilar type of settlement seethe agreement attached as Appen

dix A to the ruling dismissing the complaint in Docket No 79 11 Del Monte Corporation v Malson Navigation Company

Scttlement Approved Complaint Dismissed Nooiember 20 1919 Judge Glant er 19 SRR 1031 There are no restrictive or

antioompetitive provisions in the Settlemcnt Agreement which might have required that the agreemcnt be approved by thc

Cornmission undersection 15 of the Act and consequently there appears to be no reason why it need be processed under that law

Docket No 19 11 Ftu llUnes IlfroIportlted v Associated Container TralUportation Australia Ltd et0 Discontinuance of

Proceeding August 10 1919 19 SRR 629 For different types of settlement agreements which contained restrictive anti

competitive provisions and oonsequently required approval under section 15 sec eg MWfSocltuseUs Port Authority v Container

Marlllt Lines II SRR 37 40 1969 AmericanExport Isbrandtsen Unes Inc 14 F M C 82 89 1970 Docket No 7622

Lakes and Rivers Tramfer CorfJOl tltWn v IndiOM Port Commission and Docket No 1659 Agreements Nos T 33 0 and

T JJII Order May 22 1979 19 SRR 330
636 FEDERAL MARITIME COMMISSION

addressed to Mr Edward G Gruis Deputy General Coull8el ofthe settl

and related matters Judge Pregerson advised the Commission as follow

In light of the foreao1ng the for my requC8ling the aulslance of the FMC to mab 

determination in connection withthe peildinglawBuit no longer exists and I withdraw my

to the Commission to conduOl investiJati lnand lBBue a decIarlItory ord01 on the question 

propriety of Pan Ocean s rates under 8OClion 18 b 5 of the Shipping AOl Letter ofJanu

1980 page 2

DIScUSSION AND CoNCLUSIONS

The only question for meto determine is whether this proceeding sho

discontinued The general principle of law governing such question is 

proceeding should be discontinued when it can no longer serve a regu

purpose Normally when the subject matter ofthe proceeding ceases to 

as in the present case a proceeding will be discontinued on the ground

it has become moot and can therefore no longer serve a useful purpose 

e

g Docket No 79 85 Trailer Marine Transpon Corpol atJon hop

Reduced Rates on Sugar Cane Refined Sugar N O S Discontinua

Proceeding October 25 1979 Docket No 7749 United States Lines 

General Inc1 Base in Rates in the US Mainland Guam Trade and D

No 77 51 Matson Navigation Company Generol Inc1 Base in Ratea 

US Mainland Guam Trade Motions to DiBmiss Granted Septemb

1978 The Pon Commission ofthe CityofBeaumont et al v Seatroin 

Inc 3 F M B 581 582 1951 Ke Steamship Company Inc v Ist

Steamship Companyet aI 2 US MC 93 941939 Rates Hong 

United States Trade 11 F MC 168 173 1967

In unusualoircumstances such as when the practioo is likely to resu

there is a need for enunciation of lJUidelines or rights ofoutside parti

involved or if much time and expense in litigation has already been cons

or for some other valid purpose a proceeding need not be discontinue

when the activities under investigation have terminated See D

Nos 73 17 74 40 Sea Land Semce Inc and Gulf Pueno Rico 

Inc Proposed Rules on Containers etc Order on Reconside

20 F M C 788 1978 Refrigerated Exp1 BSS Lines A Asia Pty Ltd 

v Columbus Line Inc et al 17 SRR 81 85 1977 and the collect

cases cited therein

In the present case the precise reason for the investigation no longer 

ie Judge Pregerson has withdrawn hisrcquest for the Commission s 

tance Furthermore as Hearing Counsel point out in their reply to the m

the very rates which were under invcstiglltion have been canceled Pan 

havingincreased them in early 1980 Moreover since section 18 b 5 a

toapply only to rates actually on file with the Commission and also appe

have no retroactive effect 2

it is obvious that the present proceeding an

I Tho Commilaloa lIy emphuized thaI MClIoa l8 b5 iI llveln natUra ond lhat panaltiaa apply only 

Commiulon hu round III to ho too NSh or too low and thereafter lhe carrier OOIIIlnUII to charae coh S

No 79 15 WutilrtA EI crk Corpora 11m SIQ lAniJ 11 Order N ber 20 1979 19 SRR 

Commiuion ralied upan l in addition to FdM MIU II CommIullmy Corap 364 F 2d 709 7172d 

and VolIlEVO lCI tlI Co Y G UIIf 14 F M C 16 26 27 1970 which Hearlni Coun 1 citocIin lholr 

motion
Commission s Order under which it began have been outstripped by events It

is readily apparent therefore that no useful purpose could be served by con

tinuing a proceeding which Judge Pregerson no longer requests in order to issue

a declaratory ruling on rates which no longer exist For the reasons expressed

above therefore the motion to discontinue is granted There remain only a few

remarks concerning Hearing Counsels

request that Irefer to the Commission

their recommendation that the Commission direct the staff to examine re

spondent s new rates

Hearing Counsel believe that the Commission has a

responsibility to look

into the question of Pan Ocean s current rates irrespective of the settlement

between Retla and Pan Ocean and the termination ofthe court action Hearing

Counselbelieve that the settlement between these two carriers does not remedy

the charges made by Retia regarding Pan Ocean s previous rates Hearing

Counsel seem to acknowledge that there may be no retroactive application of

section 18 b 5 to Pan Ocean s canceled rates under investigation but never

theless believe that the staff ought to be instructed by the Commission to

examine Pan Ocean s new rates g

iven the nature of Retia s allegations

irrespective of the status of the court proceeding

As to the merits of Hearing Counsel s

request I

agree with Chief Judge

Cograve in an analogous situation in which he dismissed two proceedings and

in which Hearing Counsel had requested that he refer their recommendation

to the Commission that the Commission instruct the staff to examine the

matter further Judge Cograve believed that the decision to instruct the staff

was one singularly within the province of the Commission and that no

recommendation from me seems either desirable or appropriate See Docket

No 74 28 International Paper Co v

Lykes Bros Steamship Co 20 F MC

117 1977 Docket No 74 39 Petition ofLykes Bros Steamship Co Inc for

Declaratory Order Motion to Dismiss Granted July 5 1977 at 3 20 F MC

117 1977 Itherefore do nothing more than refer Hearing Counsels recom

mendation to the Commission as requested

8 NORMAN D KLINE

Administrative Law Judge

February 21 1980
FEDERAL MARITIME COMMISSION

DocKET No 79 92

MATSON NAVIGATION CoMPANy PROPOSED 6 66 PERCENT BUNK

SURCHARGE INCREASE IN TARIFFS FMC F Nos 164 165 166 AND 

Matson Navigation Company is found to have imposed a bunker surcharge that is unj

unreasonable inthat it will provide the carrier witb an amount ineXCIl8lof tbe increas

costs allllOCiated with cargo moving under tho tariffs which include the proposed sur

Only those fuel costs aIIlIOCiated withca go moving under a carrier s tarilfs containing a 

surcharge sho lld be used in computing such a surcbargo

Any fuellXl8l8 tonnage and revenue figures not allllOCiated with cargo moving under a c

tarilfs must be excluded from the calculation of the lovel of bunkor surcharge to be 

to such tarifts

Because bulk sugar and molasses do not move under tarifts FMC F Nos 164 165 166 a

an allocation of fuel costs should be made between that cargo and cargo moving und

tarilfs

Because certain cargo designated nontrade cargo for bunkor surchargo calculations 

proceeding does not move under Tarifts FMCF Nos 164 165 166 and 167 an al

of fuel costs should be made between that cargo and cargo moving under such tari

Based upon methodology found appropriate in tbis proceeding tbe correct amount of tbe 

surcharge applicahle totarifts FMCF No 164 165 166 and 167 is found to be 6 48 

David F Anderson and Peter P Wilson for Matson Navigation Company

Dale N Gillings for Oscar Mayer Co Inc

Wayne Minami and Charleen M Alna for the State of Hawaii

J Raben Ewers C Dauglass Miller and CharlesC Hunter for tho Bureau of Hearing C

I

I

REPORT AND ORDER

March 28 1980

BY THE COMMISSION Richard J Daschbach Chainnan Th

F Moakley ViceChairman Leslie K

and James V Day Commissioners

This proceeding was instituted by Commission Order served Octob

1979 to investigate the lawfulness of certain amendments filed by M

Navigation Company Inc to its Tariffs FMC F Nos 164 165 166 an

These revisions resulted in the imposition of a 666 percent bunker surc

on all cargo except sugar and molasses carried by Matson in the United 

Pacific Coast Hawaii Trade Hawaii Trade effective October I 1979 
MATSON BUNKER SURCHARGE 639

6 66 percent bunker surcharge represents a net increase of 76 percent over the

5 90 percent surcharge which waspreviously applicable Although scheduled to

expire within 120days from the effective date pursuant to the requirements of

Domestic Circular Letter No 1 79 this surcharge was superseded by a sub

sequent surcharge in the amount of 5 67 percent effective January 14 1980

Protests to Matson s proposed bunker surcharge were filed by the State of

Hawaii and Oscar Mayer Co Inc both ofwhom were named as Protes

tants in this proceeding

The Order of Investigation and Heating limited the proceeding to the follow

ing three issues

I Is the proposed surcharge unjust unreasonable or otherwise unlawful in

that it will provide Matson with an amount in excess ofits increased fuel

costs

2 Should fuel costs be allocated between general cargo and sugar molasses

on the basis of measurement tons carried

3 Should an allocation be made between trade and nontrade cargo carried

between the West Coast and Hawaii

In order to avoid duplicative litigation the Commission in its Order of

Investigation ordered that the otherwise applicable procedural schedule be

held in abeyance pending the issuance of final Commission decisions in Docket

No 79 55 Matson Navigation Company Propased Bunker Surcharge in

the Hawaii Trade 19 SRR 1065 November 23 1979 and Docket

No 79 84 Matson Navigation Company Proposed 590 Percent Bunker

Surcharge Increase in Tariffs FMC FNos 164 165 166 and 167 19 S R R

1600 1980

At a preheating conference held before Administrative Law Judge William

Beasley Harris on January 23 1980 it wasagreed that the final decision ofthe

Commission in Docket No 79 55 supra would govern the resolution of the

issue noted as 2 above specified by the Commission in its Order of Inves

tigation 2

It was also agreed that an evidentiary hearing was not necessary to

resolve the remaining issues in the proceeding 3

Prehearing statements were

filed by Matson Hearing Counsel and Hawaii although only Matson and

Hearing Counsel appeared by counsel at the prehearing conference On Jan

uary 31 1980 the Presiding Officer served a procedural schedule which re

quired Opening Briefs to be served by March 14 1980 and Reply Briefs by

March 28 1980

On February 26 1980 the Commission served an Order sua sponte in

which it noted that a final decision in this proceeding must be served by

March 28 1980 under the requirements of the Intercoastal Shipping Act

1933 as amended 46 U S c 845 et seq and directed in light of the

procedural schedule ordered by the Presiding Officer and the procedural devel

opments in Docket Nos 79 55 and 79 84 that the record of the proceeding

I Matson s reduced 5 67 percent surcharge is under investigation in Docket No 80 4 Matson Navigation Company

Proposed 5 67 PercentSurcharge In lhe Hawaii Trade 20 S RR 32 1980

1

Transcript of Prehearing Conference at 8 9 25

lId at 16 17 29 30
640 FEDERAL MARITIME COMMISSION

be certified to the Commission for decision The Order also provided fo

filing of one round of simultaneous briefs by all parties on or before Marc

1980

Direct Testimony and exhibits were filed by Matson and Hearing Co

Rebuttal testimony and exhibits were filed by Matson Hearing Counse

Hawaii Oscar Mayer petitioned and was permitted to remain a party t

proceeding and to file a brief without filing testimony and exhibits Briefs 

appended exhibits were filed by Matson and Hearing Counsel Briefs wi

exhibits but containing new surcharge calculations and other substa

matter were filed by Hawaii and OscarMayer Discovery matter has also 

included in the record of this proceeding The foregoing represents the 

record upon which the Commission has based its decision

POSITION OF THE PARTIES

Matson adheres to its original position that its 6 66 percent bunker surc

is just and reasonable although it admits that in light of the findings o

Commission in Docket No 79 55 the proper level ofbunker surcharge 

Matson followed this methodology in filing its tariff amendments would 

been 6 52 percent It states that the 6 66 percent surcharge should be fou

be just and reasonable because the methodology prescribed in D

No 79 55 did not become effective until after Matson had filed the in

surcharge and that its methodology errors can be remedied by applicat

Line 7 ofForm FMC 274 in subsequently filed surcharges Itis further a

that Matson states that its 5 67 percent reduced bunker surcharge 

superseded this surcharge reflects use of this procedure

Matson has not contested in this proceeding the validity of the findin

Docket No 79 55 regarding the necessity of making an allocation of fue

between general cargo moving under the subject tariffs and bulk suga

molasses which move under tariffs containing fuel escalation clauses How

Matson urges that it should not be required to allocate fuel costs between 

and nontrade cargoes in caIcu1ating the amount of surcharge applicable 

subject tariffs It adheres to its position stated in Docket No 79 84 

nontrade cargoes constitute less than 5 percent of the service and tha

5 percent allocation exemption contained in Commission General Order N

G O 11 should be carried forward and be made applicable to bunke

charge calculations under Form FMC 274

Matson contests the argument of Hearing Counsel that the nontrade 

in the service exceeds 5 percent First Matson contends that the calcul

of Hearing Counsel are based upon an expanded definition of nontrade 

never before asserted by the Commission and not noted as an issue i

proceeding in the Order ofInvestigation and never raised by Hearing Co

until the submission of its rebuttal testimony Furthermore Matson note

on the identical issue in Docket No 79 84 Hearing Counsel stipulated 

nontrade cargo constituted only Marshall Islands mail and Interstate 

merce Commission regulated cargoes and did not include transshipmen

goes which Hearing Counsel now asserts are also nontrade cargo Alth
641

contesting the trade nontrade allocation requirement Matson has calculated

the surcharge in this case at 6 50 percent if the bulk sugar and molasses

allocation is made and only mail and ICC cargoes are found to be nontrade

cargoes and excluded from the surcharge calculation Matson also submits

calculations that indicate that if the Marshall Islands and transshipment car

goes are also allocated out of the surcharge calculation the proper level of

surcharge is 6 48 percent These latter calculations were based upon data

proffered in response to Interrogatories propounded by Hearing Counsel and

originally filed with Matson s brief

The State of Hawaii takes the position that the 6 66 percent surcharge

proposed by Matson is unreasonable in light of the Commission s decision in

Docket No 79 55 Moreover it argues that the Commission decided in Docket

No 79 84 that conceptually an allocation offuel costs must be made between

tradejnontrade cargo and refused to decide whether a 5 percent G O II

allocation exemption will be allowed in bunker surcharge calculations It notes

that the evidence adduced in this case indicates that Matson s nontrade cargo

exceeds 5 percent and therefore evenwithout deciding an exemption question

the allocation must be made here Accordingly Hawaii s position is that the

only issue to be decided is the computation ofthe correct surcharge that should

have been charged from October I 1979 through January 14 1980 In this

regard Hawaii alleges that data submitted by Matson in Docket No 80 4 as

to its actual operating experience during this period should beincorporated into

the record ofthis proceeding for determination ofthe correct surcharge More

over Hawaii urges that in computing the correct surcharge in this case the

Commission must utilize Line 7 of Form FMC 274 and deduct from Matson s

stated fuel needs the overrecoveries determined in preceding bunker surcharge

cases Finally it is stated that if such a methodology is followed the correct

surcharge in this case is 6 22 percent

Oscar Mayer basically agrees with Hawaii on the substantive issues in the

proceeding However it notes that the trade nontrade designation of the

allocation issue is misleading and that the more accurate designation would be

an allocation between cargo moving under the tariffs to which the surcharge is

applied and all other cargo carried by Matson It also notes that the fact that

such other cargo also is subject to similar fuel cost recovery devices does not

justify a failure to make such an allocation but on the contrary indicates that

Matson in fact is enjoying a double recovery of fuel costs It also notes that

Hawaii s calculations of the correct surcharge do not include all of the actual

operating data Matson has filed in response to Hearing Counsels initialdiscov

ery requests and submits that the correct surcharge should be found to be

5 86 percent

Hearing Counsel as all other parties to the proceeding submits that the

question of allocation ofgeneral cargo sugar and molasses fuel costs has been

decided by the Commission in Docket No 79 55 and that accordingly the

6 66 percent surcharge imposed by Matson is unjust and unreasonable in that

it will provide the carrier an amount of recovery in excess of its fuel costs

Hearing Counsel also alleges that an allocation must be made between what

has been designated trade nontrade cargo in this proceeding Hearing Coun
642 FEDERAL MARITIME COMMISSION

sel asserts that when a carrierimposes ablinker surcharge on specific tari

computations can only include the increased fuel costs directly resulting 

the movement ofcargo pursuant to such tariftsand cannot include the co

fuel resulting from the movement ofcargo under differenttariffs In this re

it is aIleged that Matson s G O 11 exemption argument is simply inapp

in that it relates to overall revenuesand rate of return calculations and no

cost pass throughs The Commission aIlegedIy found in Docket No 79 84 

the G O 11 exemption simply does not apply to these proceedillg1l Itis 

noted that sugar and mo1asses are technica1ly trade cargo but because 

were not subject to the tariffs that included the surcharge they could n

included in the calculations To exempt nontradecargo from such an e

sionary rule would aIlegedly be inconsistent Moreover it is argued that 

if the G O 11 exemption is applied in this case Matson s nontrade c

exceeds 5 percent and in any event must be excluded from the comput

of the surcharge

Hearing Counsel asserts that nontrade cargo includes cargo moving u

tariffs on filewith the ICC mail cargo and foreign cargo comprised ofc

destined for the Marsha1l Islands and cargo moving under transshipment

agreements on file with the CoDlJDissio 1 Hearing Counsel submits tha

Commission must apply such a1location methodology here in determinin

justness of this bunker surcharge and should not consider whether Mat

action in a subsequent surcharge justifies the surcharge imposed in 

proceeding

Noting that the Commission in its Order of Clarification in D

No 79 55 found that shippers reparations rights are affected by the dec

in these surcharge cases Hearing Counsel urges that the correct surc

be calculated In this regard it is also urged that the Commission retroac

apply the methodology found appropriate in Docket No 79 55 even th

this was not cited as an issue to be resolved in this proceeding How

Hearing Counsel asserts that because Matson has not provided the datan

sary tocompute the proper surcharge with the a1locations urged in this ca

surcharge should be found to be unreasonable in its entirety due to Mat

failure to sustain its burdenofproof Hearing Counsel submits that the po

of Hawaii regarding the use of actual operating data be rejected as it w

Docket No 79 55 Hearing Counsel does proffer alternative data shou

Commission fail to rejectthe surcharge entirely This dataisbased upon fi

that do not exclude transshipment cargo and though admittedly erron

allegedly more accurately retlectthe correct level ofsurcharge This altern

calculation proffered by He8dng Counsel sets the proper surcharg

6 44 percent

DISCUSSION AND CoNCLUSIONS

There appears to be no dispute among the parties that the method

prescribed in DocketNo 79 55 must becarried forward to this proceedin
643

party has collaterally challenged the findings of that proceeding The Commis

sion finds no basis on this record to disturb those findings and accordingly will

apply that methodology here

The first matter to be addressed is the trade nontrade allocations The

Commission determined in Docket No 79 55 that a measurement ton allo

cation of fuel costs must be made between general cargo moving under the

tariffs subject to the fuel surcharge and bulk sugar andmolasses moving under

tariffs containing different fuel escalation clauses This decision wasbased upon

the cost of service principles in applying a pure cost pass through recovery

mechanism 4

Stated differently cargo moving under a carrier s tariffs contain

ing a bunker surcharge provision can only be required to bear those increased

fuelcosts associated with the movement ofthatcargo There is no question that

the disputed nontrade cargo in this proceeding ie ICC cargo mail Mar

shall Islands and transshipment cargo does not move under the subject tariffs

containing the disputed bunker surcharge 5Therefore Matson must allocate

out the fuel costs associated with the movement of suchcargo in computing the

bunker surcharge that will be levied on cargo moving under such tariffs

Accordingly having defined what fuel costs can be included in this bunker

surcharge calcuiation the Commission refrains from addressing any collateral

issues in this regard

As to the question of whether Matson is entitled to any exemption with re

spect to these allocations the Commission is not persuaded that such an

exemption is appropriate The Commission decided in Docket No 79 84 that

while some exemption might be appropriate the G O II five percent exemp

tion would not be carried over to bunker surcharge proceedings 6

Matson did

not furnish sufficient evidence in that proceding upon which the Commission

could determine what level of exemption was appropriate Likewise Matson

has simply not convinced the Commission that any level of exemption is

appropriate in this proceeding

The final matter that must be addressed is the computation of the proper

level of surcharge that should have been established by Matson given the

methodology prescribed in this proceeding It is clear based upon the prior

decisions of the Commission concerning bunker surcharge calculations that

the calculations ofthe State ofHawaii and Oscar Mayer must be rejected The

use ofactual operating dataobtained subsequent to the institution ofa bunker

surcharge investigation wasspecifically rejected in Docket No 79 557 and that

discussion need not be repeated here

This leaves the Commission with the data submitted by Hearing Counsel

and the data submitted by Matson The calculations made by Hearing Counsel

are admittedly based upon incomplete data in that they do not include an

allocation of transshipment cargoS either in projections or in line 7 overrecovery

4 Docket 79 55 supra slip opinion at 8

Direct Testimony of Christopher A

Kane and aUached ExhibilS

6 Docket 79 84 supra slip opinion al 9

J

Docket 79 55 supra slip opinion al 5 6

Hearing Counsel s Brief at 25
644 FEDERAL MARITIME COMMISSION

calculations and do not therefore fully reflect the methodology prescribe

the Commission Forthis reason the Commission does not accept the data 

calculations submitted by Hearing Counsel

The Commission will employ the projection data submitted by Matson 

its brief However we do not accept Matson s proffered amount of 91 

representing overrecovery offuel costs through July 1979 This arnount

not reftect application of the methodology prescribed in Docket No 79 55 

the required ICC cargo mail and transshipment cargo allocations Had 

allocations been made the overrecoveryfigure used in Matson s brief w

have been greater resulting in lower net fuelcosts to be recovered and the

reducing the level of the surcharge below the 6 52 percent calculated 

Matson The Commission is of the opinion that alternative data subm

by Matson more accurately alloCate nontrade fuel costs and more prec

reftect the methodology prescribed to date because at least ICC cargo and 

are excluded Therefore the figure of 110 758 set forth on page 20 of 

son s brief will be used in calculating the proper level of surcharge in 

proceeding and on this basis the Commission finds that the proper surch

that should have been implemented by Matson is 648 percent

Using this figure Matson s proposed 6 66 percent bunker surcharge is f

to be unjust and unreasonable to the extent it exceeds 6 48 percent that 

18 percent This results in a projected overrecovery in this case of 88 

In reaching this result the Commission is aware that the other parties t

proceeding have not had an oppQrtunity to respond to or comment o

projection data first proffered by Matson with its brief and used here

calculate the just and reasonable surcharge However inasmuch as the 

charge is no longer in effect and tltat any actual overrecovery will be rem

by the application of Line 7 ofForm FMC 274 in future bunker surcha

the Commission does not view the lack of such opportunity as prohibitin

issuance of a final decision in compliance With the provisions of P L 95 4

The Commission isable on the basis ofthis record to resolveall ofthe 

posed in the Order of Investigation The allocation issues have been res

and on the ultimate issue of the justness and reasonableness of the prop

6 66 percent surcharge evenMatson has admitted that this figure is too 

The surcharge is unreasonable to the extent it exceeds 648 percent 

process will be afforded all parties if a final decision is issued at this time 

party that believes that Matson s projection data are erroneous may se

consideration of the Commission s decision

Thisamount isdetermined by multlplyin the eltlmated rovonuc lubject to tho lurcharle 56064 600 by the Imp

surcharac and from this product 3 133 902 aubatractin the product of the estimated revenue multiplied by the r

surehal lc 3 632986 and multiplying the romalnder 100916 which nlprclORtI tho lotal ovorrccovery had the l

remained ineffect the fuU l2Oday period by tho pro rataportion oftho overcharp applicable to the 160 dayslhe lurch

in efftI 00 916X 106 120 88 806 Thia eelculation canbe verifted bymultlplyina the estimated rovenuoby the d

between the implemented and realODable sUli harpa 18 percent and applyinl tho eftcctive period ratio to tho 

S56 064 6OO X 0018 X 106 12O S88 806

10Abient extraordinary circumstances the Commiuion is mandated by PL 95475 to iasuc a decision in this proce

M nh 28 1980
THERFORE IT IS ORDERED That the 6 66 percent bunker surcharge

filed by Matson Navigation Company and placed under investigation in this

proceeding is unjust and unreasonable and is disapproved to the extent it

exceeds 648 percent

FURTHER IT IS ORDERED That this proceeding is discontinued

8 FRANCIS C HURNEY

Secretary
1

FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV

FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECfING

MARITIME CARRIERS AND RELATED ACTIVITIES

I

1

GENERAL ORDER 20 AMDT 6 DocKET No 79 93

PART 540 SECURITY FOR THE PROTEcrION OF THE PuBLIC

SUBPART A PROOF OF FINANCIAL RESPONSIBILITY BoNDING AN

CERTIFICATION OF FINANCIAL RESPONSIBILITY FOR INDEMNIFICATI

OF PASSENGERS FOR NONPERFORMANCE OF TRANSPORTATION

March 31 1980

ACTION

SUMMARY

Final Rule

This amends the Commission s regulations to increas

maximum amount of insurance escrow account gua

and surety bond required ofholders of a Certificate 

formance from 5 000000 to 10000000

EFFECTIVE DATE February 20 1981

SUPPLEMENTAL INFORMATION

This proceeding was instituted by notice of proposed rulemaking pub

in the Federal Register on October 31 1979 44 Fed Reg 62546 6254

I amend section 540 90 of the Commission s regulations 46 C 

S 540 90 by increasing the maximum amount of insurance escrow ac

guaranty and surety bond required of an applicant certificant 

5 000 000 to 10 000 000 as evidence of financial responsibility 

2 effect corresponding revisions to Form FMC 13I Application 

Certificate of Financial Responsibility This amendment will not alte

existing requirements with respect to a self insurer who must demon

financial responsibility by maintenance ofworking capital and net worth 
SECURITY FOR THE PROTECTION OF THE PUBLIC 647

in an amount no less than 110 percentof highest unearned passenger revenue

within the preceding two fiscal years

In its noticethe Commission explained its belief that the maximum amount

of coverage by insurance escrow account guaranty or surety bond should be

increased to 10 000 000 based upon the inflationary impact since 1967 when

the 5 000000 maximum wasestablished the decline in thevalue ofthe dollar

the rise in the consumer price index the increase in price offuel oil and the

increase in wages all resulting in the doubling of most fares

Comments were received from 1 The International Committee of Pas

senger Lines lCPL whose membership is made up of 16 major foreign flag

passenger operators which operate some 55 passenger vessels subject to the

Commission s

regulations 2 The Liverpool and London Steam Ship Protec

tion and Indemnity Association Limited The Standard Steamship Owners

Protection and Indemnity Association Limited The Standard Steamship Own

ers Protection and Indemnity Association Bermuda Limited Sveriges

Angfartygs Assurans Forening The United Kingdom Mutual Steam Ship

Assurance Association Bermuda Limited and The West of England Ship

Owners Mutual Protection and Indemnity Association Luxembourg re

ferred to herein as the Associations who are insurance associations com

posed of shipowners and operators who mutually insure one another against

various liabilities arising out of the operation oftheir vessels and who are part

of a group of protection and indemnity associations which collectively insure

approximately 85 of the world s ocean going vessel tonnage and 3 The

Steamship Mutual Underwriting Association Bermuda Limited Steamship

Mutual Bermuda which is also an insurance association

POSITIONS OF THE COMMENTATORS

It is the position of ICPL that Ithe 5 000000 ceiling is still adequate to

protect against all reasonably foreseeable risks on nonperformance 2 that the

proposed increase will result in unnecessary costs which must ultimately be

borne by cruise passengers and 3 that in any event should the proposed

increase be adopted the effective date ofthe new regulation should be post

poned for a l2 month period ICPL argues that there have been only two

publicized instances in which it has been necessary to resort to guaranties filed

with the Commission and in both instances the 5 000000 guaranty wasmore

than adequate and proved to be approximately 5 times more than was ulti

mately required for full restitution that apart from these two isolated in

stances the cruise lines have achieved a remarkable record of satisfying their

performance obligations to more than ten million passengers transported over

the past 13 years since General Order 20 has been in effect that since there

is nothing to substantiate that the existing 5 000 000 maximum coverage will

be inadequate to deal with any reasonably foreseeable future nonperformance

ICPL members consider the Commission s proposed increase as unnecessary

and unwise that if the increase is put into effect many passenger vessel

operators now using guaranties are likely to resort to other permissible methods

ofestablishing their financial responsibility in an amount less than 10000000
648 FEDERAL MARITIME COMMISSION

resulting in increased administrative expenses on the part of the lines t

selves and additional supervision expenses on the part of the Commissi

order to insure compliance with the Commission s regulations and that 

any standpoint such extra outlays are excessive and without any commens

benefit to the traveling public at all

For the reasons put forward by ICPL the Associations join in IC

comments both as to the lack of need for the rule change and the existen

a need for a substantial lead time before its effective date if the Commi

should decide to adopt it such as an effective date 12 months follo

adoption of the change The Associations argue that adoption of the 

change would necessitate asubstantial expenditure of time and effort no

on the part ofthe passenger vessel owners and operators but on the part o

Associations in negotiating terms whereon the Associations would be pre

to issue guaranties on behalfof their members for increased amounts Ifi

instance negotiations were to fail steps would have to be taken by the me

concerned to arrange for some other form ofevidence offinancial respons

which would require the approval ofthe Commission and necessitate ste

terminate the existing guaranty of the Association concerned and that 

problems are aggravated by the distances involved with the Associatio

cated in Europe and Bermuda their members scatteredover the world an

Commission in Washington

Steamship Mutual Bermuda opposes the proposed increase in the gua

ceiling on the grounds that it is UMecessary and that it will resul

substantial increase in the cost of doing business for cruise operators w

increase will ultimately be borne by passengers However in the event th

proposed increase is adopted the Association requests that its implemen

be delayed for at least one year Steamship Mutual Bermuda states 

delaying implementation is necessary because of the financial arrangem

behind each guaranty that cruise operators submitting guaranties tothe 

mission are required to post counter security with the Association amou

to cash or its equivalent such as bank guaranties or letters of credit t

doubling of the guaranty requirement to 10000 000 will necessitate a 

stantial rearrangement of the memberoperator s

finances and since com

budgets and cash tlow projections from cruises are prepared at least a y

advance a sudden implementation of the guaranty increase could cause 

ship particularly for small operators

DISCUSSION

The Commission has given serious consideration to the comments rec

realizing that the increase in the maximum to 10000 000 could increas

cost of operations of some applicants certificants The Commission i

well aware ofthe commendable record to date ofthe cruise lines in sati

their performance obligations a fact that ithopes will not be lost on guara

and sureties

However since 1967 when the 5 000 000 maximum was establishe

intlationary impact has been severe and continues In January 1980 a 
SECURITY FOR THE PROTECTION OF THE PUBLIC 649

dollar wasworth 42 9 cents and the Consumer Price Index reached 233 2 The

price offuel oil has increased approximately 8 times since 1967 and wages have

more than doubled The inflationary spiral and rising fuel costs have resulted

in at least a doubling of most fares which continue to rise to meet increased

operating costs Unearned passenger revenue ofmany owners and charterers

has increased substantially and should continue to increase as they add vessels

to their fleets increase the number of available accommodations of their

present vessels and raise their fares to meet increased costs

Accordingly the Commission continues ofthe belief that the increase of the

maximum amount of coverage to 10000000 with respect to insurance es

crow account guaranty and surety bond is warranted Noneof the comentators

claim that 10 000 000 ofunearned passenger revenue is unattainable Con

sequently it is the position of the Commission that amaximum of 10 000 000

is fair and reasonable and necessary to provide greater protection to the pas

senger public

It should be noted that this is a maximum not a minimum requirement

Most applicants certificants presently qualifying for their Certificate Per

formance by submitting less than the present 5 000000 maximum will not

be affected except ofcourse as their unearned passenger revenue experience

requires changes in the amount of coverage Consequently we do not believe

implementation ofthe increase willcause any real hardship for small operators

With the maximum increased to 10 000 000 those cruise lines presently

submitting less than the present maximum of 5 000 000 will continue to

report unearned passenger revenue The cruise lines affected will be those

whose unearned passenger revenue presently and in the future will exceed

5 000 000 The Commission anticipates that fewer cruise lines will submit the

10000000 maximum than now furnish the 5 000000 maximum resulting in

an increased number of certificants reporting unearned passenger revenue

While this wilI increase both the workload of the certificants and of the

Commission and its staff the increase should not be overwhelming for either

All commentators request that should the Commission after considering

their positions and arguments decide to increase the maximum to 10 000 000

that implementation of the increase be delayed at least one year As justi

fication for such delay in implementation the commentators variously state

that cruise programs cash flow projections and budgets are estimated at least

12 to 18 months in advance that time is required to negotiate terms with the

P IAssociations to issue guaranties for increased amounts that additional

time may be needed to arrange for some other form of evidence of financial

responsibility and that sudden implementation of the increase could cause

hardship

The Commission is of the opinion that a delay in implementation is justified

since many applicants certificants now providing 5 000 000 may not wish to

increase the amount ofthe evidence of financial responsibiltity to 10 000000

This will require the reporting of unearned passenger revenue to the Commis

sion determining the amount of coverage required and considering possible

changes in the method of establishing financial responsibility All of these

matters require Commission approval The delay in implementation will also
permit the cruise lines and the Commission staff toexplore any new meth

establishing financial responsibility

The Commission considers the request for delay ofimplementation re

able and sets the effective date of this final rule as February 20 198

conform to the policy yearof theP IAssociations which writemost 

guaranties

The Commission has considered all filed comments and arguments su

ted in this rulemaking p g Accordingly pursuant tosection 3 ofP

Law89 777 46 US C I817e and section 4ofthe Administrative Proc

Act 5 U S C 1553 the Federal Maritime Commission hereby amend

tion 540 90 ofthe Commission s General Order 20 46 C FR IS40 90 

Application for Certificate of Financial Responsibility Form FMC 1

read as follows

1 Section 540 90 is revised to read as follows

1540 9 MISCELLANEOUS

j

The amount of IInsuranco 88 speoljled In 1 54O 5 a 2 tho escrow account 88 spec

1 54O 5 b 3 tho guaranty 88 speciflod IS045

c

or 4 tho suroty bond 88 speoljled In 

shall not be leCjuirod to exceed 10 mUUQll doUars Us

2 Introductory paragraph of Part II Performance of the Applic

Form FMC 131 is revised to read as follows

Answer items 8 15 if apply1na for Conlficate of Finaridal R08pclnsiblllty for Indemniflca

PUBOJI Olllfor Nonperformance Ifyou are ovIdonco of Insurance oscrow account g

or surety bond underSubpart A of46 CFR Part 540 and provIdina at least ton 10 million 

Us of XIVOl 8Pyou need DOl answer quostlons 1015

3 Item 8 of the Application Form FMC 131 is revised to read as fo

8 If you aroprovidlng at least ton 10 mUUon doUars U S of colerstate type ofev

and namo and address of applicant slnsuror oscrow qent auarantor or surety 88 appro

By Order of the Federal Maritime Commission

S FRANCIS C HURNBY

Secre
FEDERAL MARITIME COMMISSION

DOCKET No 79 10

RATES OF FAR EASTERN SHIPPING COMPANY

The second and third factors set forth in section 18 c 2 of the Shipping Act are those most

appropriate indetermining the justness or reasonableness of a controlled carrier s individ

ual commodity rates

Any rate of a controlled carrier which expires or is superceded deleted or withdrawn sub

sequent to the initiation of a proceeding to determine its justness or reasonableness remains

at issue and if not justified must be disapproved

The fact that a

particular commodity moves via other carriers in atrade will absent special

circumstances negate any claim that a controlled carrier s lower rate for the commodity

is necessary to assure its movement

Rate comparisons conducted pursuant to section l8 c 2 ii should include not only the

applicable freight rate as stated in the carriers respective tariffs but also any differences

insurcharges accessorial charges and tariffrules which may affect the total transportation

charge to the shipper

Rate comparisons pursuant to section l8 c 2 ii should employ rates in effect on the date of

the order instituting a

proceeding

A controlled carrier s individual commodity rate can never be the sameor similar to a Military

Sealift Command cargo N OS rate of another carrier

Though the similarity between a controlled carrier s rate and the rate of another carrier is not

conclusive proof of its justness or reasonableness such a comparison will be accorded

significant weight in the absence of evidence relating to any other appropriate factor

Steven B Chameides and John F Dorsey for Far Eastern Shipping Company

Charles F Warren and Gearge A Quadrina for Philippines North America Conference and

its member lines

William F Sheehan for American President Lines Ltd

Edward M Shea and Paul J McElligott for Sea Land Service Inc

Thomas E Kimball and Richard C Jones for Pacific Westbound Conference

Alan J Jacobson Paul J Kaller and John Robert Ewers for Bureau of Hearing Counsel
652 FEDERAL MARITIME COMMISSION

REPORT AND ORDER

April I 1980

BY THE COMMISSION RichardJ Daschbach Chairman Th

F Moakley Vice Chairman Jam

Day Commissioner

This procooding wasinitiated on March 2 1979 by Order ofSuspensio

to Show Cause to determine the justness and reasonableness of 305 f

rates of the Far Eastern Shipping Company FESCO pursuant to s

18 c oUhe Shipping Act 1916 46 U S C UI7 c The Order also li

this procooding to the submission of memoranda of law affidavits offac

supporting documentary material and waivod use of the Commission s d

ery procodures American President Lines Ltd APL SoB Land S

Inc Philippines North America Conference PNAC and Pacific West

Conference were granted leave to intervene

Following FESCO s initial responso and rebuttal the replies ofthe 

venors and oral argument the Commission issued an Order dated Octob

1979 permitting FESCO to amend its prior submissions As a result F

has filed an additional response and rebuttals in support thereof Rep

PESCO s additional responso were submitted byAPL SoB Land PNAC 

the Commission s Bureau of Hearing Counsel In addition FESCO ha

tioned the Commission to grant its previous request for discovery an

dentiary hearing SoB Land APL and Hearing Counsel have responded 

petition 2

Section 18 c2 of the Shipping Act 1916 sets forth four appropria

not limiting factors which the Commission may consider in determ

whether rates of a controlled carrier are just and reasonable 3

In its 

response FESCO primarily addressod the first of theso factors in an a

to show that its subject rates were at or above a level which is fully ca

Commillionor Lealie Kanuk will iuue aIOplrate opinion

ThoratCl in question were lpecified in Appendix A to the Order of 8uaponaion andto Show Cau which fa appen

Attachment A TIt 305 lreighl leI am to 118 durat commodltlea and are contalnad in lour FESCO tarIft 

FMC 23 FMC 24 and FMC 28

The Commluion Oldar 01Ootobar 16 1979 llatad that FESCO roq lor dlaoovery and ovidanllary haarin 

held In abeyance pcndin furtherpro oedlnp Order 012 n4 nI will now be The Ordar to Show 

instiluted this proccadl waivad the Commiaalon no al diacow l prooacIu excopl upon I TItil O

requinMI that any NqUClt for an evidentiary hoarinJ mUlt be llOCOmpaniod by a ltatement Mttinl forth indetail the

proven theirrelevance to tho illuet inthia procced1na and whysuch materialcould not be IUbmitted throuahallidavit 

to Show CaUle at 6 FESCO h81 failed to I8ti1fy this bulc roquircmont Moreover FESCQ roquea l

are 

to the factora which are appropriate to the Commiaion t

docilion in thi perticular QJe

I

Section 18 c 2 statel in part

For the purpolO of thia ubacction in detcnninlnl whether ratel by acontrolled carrier are julC and IWIOn hII th

lion may take into account appropriate factora includlnl but nOlllmited to whether

i the rata which havebeen ftlod arc below a level whleh i fullycomponaalory to the QJntrollodcarrier 

that carrier actual COlts orupon itl conatructivo coIU whkh aro hereby deftned 81 the COItI or another ca

lhan a controlled carrier oporatina similar vtIIltII and cquJpmtllt In the aamo or a similar trade

iithe rates are the I18me aa or lmilar to thGIe fnod or 8IIIIIed by other oarrien in the aame trade

iiJ the rata arc required to aauremovement of particular carp in the trade or

iv the ratc8 are requi to maintain acceptable oontinulty level orquality of oommon carrier acn10a 

ftA
RATES OF FAR EASTERN SHIPPING COMPANY 653

satory However the Commission s October 16 1979 Order rejected such an

approach because the rates in question are individual commodity rates and not

FESCO s entire rate structure in a particular trade The Order concluded

therefore that the first 18 cX2 factor is inappropriate for this proceeding and

noted that the second and third factors were those most relevant to the Com

mission s determination 4

POSITION OF THE PARTIES

FESCO prefaces its additional response with the commentthat the Commis

sion s treatment of the first 18 c 2 factor was unlawful but then proceeds to

avail itself of the opportunity to supplement its previous response by more fully

addressing the second and third l8 c 2 factors FESCO contends that once

it establishes that its rates are the same or similar to rates ofanother carrier

in the same trade FESCO s rates are conclusively just and reasonable In

Appendix K to its additional response FESCO lists by tariffand commodity

item number 92 FESCO freight rates which it claims exceed the present rates

of one or more carriers or are within 10 of a conference rate 5FESCO also

argues that some of its rates are required to assure the movement ofparticular

cargo the third factor by referring to three attached letters from United

States importers ofPhilippine goods Appendix L and to some previously filed

letters contained in Appendix F

In replying to FESCO s additional response Intervenors and Hearing Coun

sel state that

1 FESCO has failed to address a significant number of rates made subject to

this proceeding and these unaddressed rates must therefore be disapproved

2 Most of FESCO s rate comparisons are inappropriate because FESCO

compares its specific commodity rates with other carriers Military Sealift

Command cargo N O S rates

3 FESCO has disregarded important differences in surcharges accessorial

charges and tariff rules in making its rate comparisons

4 Even if some of FESCO s rates are the same or similar to those of other

carriers they are not conclusively just and reasonable because other factors

may be more appropriate

5 The fact that the various importers which have filed letters in support of

FESCO s low rates also acknowledge that they book cargo on conference

TheOrder further noted that section 18 cX2Xi did not provKle a controUed carrier the option ofdemonstrating that its rates

are oompensatory either bypresenting its actual costs orby constructing its costs TheCommission detennined that the constructive

cost provision of section 18 c

2Xi isavailable only to it as It means ofverifying the actual costs which a controlled carrier may

present or in the absence of cosl data p ided by a controlled carrier in instances in which the Commission believed the cost

criterion to be rekvant Order of October 16 1979 at 4 5 However even assuming that the first 18 c

2 flictor is appopriate

for this proceeding and FESCOis permitted the option ofconstructing its costs FESCOs

constructive costs analysis isof no value

because of its reliance on non controlled carriers Military Sealift Command MSC rates See Order of October 16 1979 at 6

n9 Moreover the Commission could not findon this record that the non controlled carriers referred to by FESCOin its attempt

to construct its costs operate similar vessels and equipment in the same ora similar trade a necessary prerequisite toany

constructive cost analysis

S

FESCOs rebuttal filed January 22 1980 included a93rd commodity comparison whkh it claims was inadvertently omitted

from its additional response

RATES OF FAR EASTERN SHIPPING COMPANY 655

However FESCO has addressed only the rates listed in Appendix A to the

Order to Show Cause in its presentation Because these changed or amended

rates have not been justified they must likewise be disapproved

Only 93 of the 208 rates which FESCO claims are at issue have been

compared to other rates Appendix Kto FESCO s additional response Three

additional rates have been addressed pursuant to the third 18 c

2 factor

Appendix G to FESCOs initial response FESCO has therefore failed to

demonstrate that the 112 remaining rates 208 96 are just and reasonable

and these rates also will be disapproved

In an attempt to show that certain of its rates are necessary to assure the

movement of particular cargo FESCO has submitted letters and docnments

from shippers trade associations and importers Appendices F and L contain

submissions relating to the movement of three commodities from the Philip

pines to the United States West Coast FMC 23 items 408 furniture 570

handicrafts and 1070 woven articles In addition Appendix G contains

docnments relating to FESCO s rates on organs and pianos from the United

States to Australia FMC 20 item 1915 and FMC 28 item 4000 These

unsworn documents are not supported by any additional data nor do they

adequately address the alleged need for a particular FESCO rate The Com

mission finds them unpersuasive and of little value to the Commission in

resolving the ultimate issue in this case

Moreover the third 18 c 2 factor will usually come into play only when a

particular commodity is not moving via other carriers in the trade See Hear

ings on nR 9998 Before the Subcommittee on Merchant Marine of the

House Committee on Merchant Marine and Fisheries 95th Cong 2nd Sess

159 1978 FESCO has not shown that any ofthe commodities do not move

via other carriers In fact several of the Philippine shippers who endorse

FESCO s rates are signatories to the PNAC Uniform Merchants Contract

and assumably ship some oftheir exports via conference carriers Cargo statis

tics provided by PNAC tend to support this assumption by indicating that the

commodities shipped by these Philippine exporters were among the major

moving commodities carried by conference members in 1977 and 1978 See

Reply ofPNAC at 12 Table IMoreimportantly however some ofthe letters

submitted in support of FESCO also indicate that those exporters and im

porters ship not only with FESCO but also via conference carriers

FESCOs comparison of 93 of its rates simply consists ofmatching the

freight rate in its tariffwith the freight rates forthe same commodity in tariffs

ofother carriers No attempt has been made to consider rates in the context

of the total transportation charge to the shipper Sea Land APL and PNAC

each note that differences in bunker surcharges currency surcharges acces

sorial charges and tariff rules may affect the total transportation charge and

have in comparing certain rates included such charges in their considerations S

In response FESCO narrowly interprets the Order to Show Cause as applying

One intervenor basa180 sugestcd wt certain cbarges prescribed by FESCQ s tariffs are not in fad assessed to shippers by

FESCO Ser APL Reply to Additional Response c FESCO Affidavit of Thomas T Mo at 3 oJ Such conduct if true

ooukI vioIate 17 and l8bX3 oflheShippinsAct 1916 USC US16and817 bX3ll bu useof the discossloo

which follows is not relevant to this proceeding
656 FEDERAL MARITIME COMMISSION

J

j

only to rates and not to any other charges classifications ru

regulations

FESCO is correct in stating that the Commission has never raise

question about the justness and reasonableness of FESCO s ch

classifications rules or regulations However this does not lead to the c

sion that the Commission is prcc1udecUrom couidering suchmatters in 

ing FESCO s rates Even though lluch charges are assumed to be ju

reasonable for this particular proceeding they are still relevant to the 

transportation charge and arc therefore appropriate factors which the 

mission may take into account See 46 V S C l817 c 2 The Comm

will consequently consider any differences which may affect the total 

portation charge in this proceeding and in all future proceedings und

Ocean Shipping Act 00978 9

For some of its rate comparisons FBSCO has compared its March 2 

suspended rates with other carriers present rates PESCO implies tha

doing it is subjecting its rates to scrutiny in the present inftatitJnary e

ment FBSCO asserts moreover that suchan approachis particularly 

priate because any rates found unjust and unreasonable will be unlawfu

that date forward 10 PNAC submits however that at least with respec

Philippine trades the rates of the non controlled carriers have decline

ficantly in the past year primarily in response toFESCOslow rates inc

its replacement rates PNAC argues therefore that any present tem

similarity between rates shouldnotjustify FBSCO slow rates Itfurther 

out that the logical corollary of FBSCO s position would require com

carriers to maintain the rate spread in effect on the date of the Order th

out the proceeding to their obvious detriment

Though neitherthe Ocean Shipping Act norits legislative history spe

addresses the question ofwhat time frame alOntrolledcarrler should us

conducting comparisons with other carriers rates the Commission is 

opinion that the rates in existence at the time an Order institutes aproc

are those most appropriate for MY rate comparison Foritwason that da

the determination wasmade that the rates of the controlled carrier 

unjust and unreasonable Thee burden then devolved upon the controll

rier to justify those challenged rates under the circumstances which 

then not events which occurred subsequently I I For the purposes 

proceeding therefore the Commission will consider only FESC

Ataminimum any controlled carrier wnato rely upon a ratecompanIOn tojultify a challcn odrate lhouk

each rate poNd 1 110 applloablo taritr 2 an oxptaion ofany acljul Il1anlBmado In tho a to ofteota 

and 3 all relevant charps which afteet tho totl tranlpOrtatlon chirp Ifany comparison HCIIIitateltho convem

container rale to aweiaht meaauro rate or vtCl1 frra reprtIII1tatiVe billa of ladinl torthlpartioular commodity lh

providCld

IlIThe Commillion notOl howevor FESCO s

provioua tawment that

APL s sugestion that FESCO scalculations should usetho bunker surcharae which has inee becomeeffective IGCm

with the comtnClWCment dale of the proc eedina Rebuttal of FESCO at 9

This does not moan that tho Commlaaion willremain oblivious to file activity in atrade durin thO OOIfl lO ofa

sudl activity coukl be another apPrOpriate flOtar forits consideration The Commilllon wiD however clololy s

reaIOI1S orany slpificant in other canieI1 11 incJlXIUJI the fael that they may have baen lowere

Xmpetitive with a controllod carrier lower rep1aooment ra while awaldn fGIOb tlon of the pI C4IOdina
RATES OF FAR EASTERN SHIPPING COMPANY 657

comparisons which employ rates of other carriers which were in effect on

March 2 1979

As mentioned above FESCO has compared 93 of its rates to the rates of

other carriers in the same trade in an attempt to show that they are the same

or similar 12 The majority involve comparisons between FESCO s individual

commodity rates and MSC rates of other carriers especially with respect to

rates contained in FESCO tariffs FMC 23 and FMC 24 13

MSC rates apply to the transportation by water of U S Department of

Defense cargoes There are generally only three MSC rates quoted for any

particular trade cargo N O S reefer and vehicles The latter two are not

material to this proceeding The cargo N O S rate is in effect a freight all

kinds rate for military cargo one rate regardless of the commodity It is

against this one cargo N O S rate that FESCO compares many of its individ

ual commodity rates The Commission finds such comparisons inappropriate

and of no value in assessing the effects of FESCO s specific rates on rates for

those same commodities carried by other carriers in a trade A specific com

modity rate is not the same or similar to acargo N O S rate for purposes

of section 18 c 2 ii Any comparisons solely employing MSC rates will

therefore be disregarded

The similarity between a controlled carriers rate and the rate of another

carrier in the same trade is not conclusive proof that the rate is just and

reasonable However it is one of the four appropriate factors which Congress

enumerated in the Ocean Shipping Act Therefore absent any proof offered

concerning other factors by a controlled carrier or developed by other parties

or the Commission this factor should be given significant weight The Commis

sion will therefore determine the justness and reasonableness of FESCO s

remaining subject rates by relying primarily on the second i8 c 2 factor

Attachment B lists FESCO rate comparisons employing other carrier s rates

which were effective on March 2 1979 14 A review of this list reveals that

several of FESCO s rates are indeed the same as or similar to those filed or

assessed by other carriers in the same trade

For example in tariff FMC 20 nine of FESCO s local per container rates

are the same as or higher than rates charged by Karlander Kangaroo Line

even without considering the fact that FESCO s rates are subject to an addi

tional 3 percent currency adjustment factor In FMC 23 the FESCO local

rates on plywood are higher than rates of the Maritime Company of the

Philippines even when these latter rates are corrected to the same basis per

40 cubic feet Although FESCOs overland common point OCP rate on

footwear is 6 percent lower than that ofZim Israel Navigation Company and

its local rate on handicrafts 4 6 percent lower than the conference rate in the

absence ofany specific evidence that these differences in rates are causing trade

Illn two earlier submissions fESCO also profcrrcd some rate comparisons Appendices E and J However Appendix K

appears to be FESCO s

sole remaining justification concerning the second J8 c 2 factor

II FESCO s

two earlier rate comparisons Appendices E and J did not employ MSC rates There FfSCO compared i ts fate

on a

specific commodity to the rateon the same commodity of an irldependent carrier in the same trade

14While Appendix K appears to be FESCO s

only extantrate comparison seenote II supra this list also includes several rate

comparisons contained in Appendix J to FESCO s initial submission
658 FEDERAL MARITIME COMMISSION

disruptions the Commission finds those rates similar to those of othe

ers

IS Thethroe rates shown for tariff FMC 24 are all higher than com

rates Finally in tariff FMC 28 the three FESCO per container ra

equal to or higher than rates of Karlander However the rate meas

rate comparisons betwoenFBSCO and Seatrain require an adjustm

Seatrain s rates since they are stated on the basis of a weight ton o

kilograms and ameasurement ton of 1 cubicmeter Soatrain s equivale

are thusbetwoen 18 and 10 percent higher than FESCOs Again th

mission finds those rates similar for purposes of this proceeding 

absence of evidence of any disruptive effects of those rates on the tra

The Commission concludes therefore that the FESCO rates sh

Attachment B are just and reasonable However thoso rates mentione

which FESCO has failed to demonstrate are just and reasonable 

disapproved by the Commission pursuant to section 18 c 1 46 

817 c 1

Any rate replacing a disapproved rate which is lower than the lowes

a national flag carrier in the trade for the same commodity when con

in light of any differences in applicable transportation charges will like

subject to suspension and disapproval unless the controlled carrier can 

strate that a lower rate is necessary to assure the movement ofthe com

or to effectively compete with some other carrier 16

THEREFORE IT IS ORDERED That the Petition of Far Easte

ping Company that the Commission Grant FESCO sPrevious Req

Discovery andEvidentiary Hearing is denied and

IT IS FURTHER ORDERED That all rates of Far Eastern S

Company asset forth in Attachment A are hereby disapproved ex

those rates set forth in Attacbment Band

IT IS FURTHER ORDERED That this proceeding is discontinu

S FRANCIS C HURNEY

Secr

UWhether a lower FESCO rato is tho limeorlimllar to another carrier s ralewill always depend upon tho pa

or acase The Commiulon notes howcver that ovon FESCO concedet thaI a1 1 COlt dlftorontial of allltde 81 

have a

significant impact on importer and exporters or certain commoditlea Additional ROIPOf I

of FESCO at 

I Becaule tM dirapproraJ of many of htIe tatea 11 bated JOJoJy on a anureofproof the Commlaalon rccoanlzes t

instances a

replacement ratemay actually be lowerthan the dl appnwed rate butltill meot this ltaitdard
RATES OF FAR EASTERN SHIPPING COMPANY 659

AITACHMENT AI

Far Eastern Shipping Company TariffFMC 20

From Pacific Coast Ports in the United States and Ports in Hawati

To Ports in Australia and New Zealand

Tariff

Item Rate

No Commodity Basis Local OCP

70 Agricultural Implements Machinery Parts WjM 11100 107 00

122 00 119 50

190 Automobiles Passenger WjM 128 00 109 00

149 00 125 25

195 Automobiles WjM 89 00

89 75

215 Automobile Cushions

In 20 Foot CYJCY containers PCj20 2200 00

In 40 ft CYJCY containers PCj40 3800 00

WjM 10100

220 Automobiles Truck and Trailer Parts N OS WjM 10100

Special Rate In 20 ft CYJCY containers 113 75

only incl Terminal Receiving Charges PCj20 1800 00 1800 00

320 Batteries and Parts N O S In CYJCY WjM 166 00

containers only 177 75

PCj20 2400 00

2450 00

PCj40 5500 00

5550 00

360 Boxboard Cardboard Chipboard Paperboard WjM 130 00

Woodpulp Board 13800

372 Tabulating Machines Card Stock LT 99 00

110 25

390 Boats Yachts Air Cushioned Vehicles WjM 75 00

Jet Skis 100 25

400 Books Pamphlets WjM 143 00 124 00

163 50 140 00

Books Pamphlets Religious In 40 ft PCj40 4000 00

CYJCY containers 4050 00

PCj20 2150 00

2550 00

482 Camping Equipment WjM 102 00

113 00

488 Canned Apricots

Special Rate

In 20 Ft CYJCY containers PCj20 2140 00

2200 00

655 Charcoal Briquettes WjM 10100

10125

660 Chemicals N OS

Value exceeding 750 00 per 2000 WjM 17200

174 00
660 FEDERAL MARITIME COMMISSION

Far Eastern Shipping Company TariffFMC 20 Continued

From Pacific Coast Ports in the United States and Ports in Hawaii

To Ports in Australia and New Zealand

Tariff

Item Rate

No Commodity Basis Local 

Chemicals N OS Non Hazardous

Value does not exceed 750 00 per 2000 W M 164 00

174 00

680 Clay Common W M 85 00

9175

740 Compound Cleaning W M 152 00

189 00

831 Raw Materials specifically Designed or W M 114 00

Manufactured for the Manufacture of 118 50

Disposable Diapers

832 A Dispensers Metal Towel In CYICY Containers W M 119 00

120 00

PC 4O 4000 00

4050 00

890 Engines Internal Combustion W M 108 00 

115 25 

900 Engines Marine

In CYICY containers only Overland PC 20 

Overland PC 4O 

1072 Freon Gas in shipper owned tank trailers W 132 00

151 50

1075 Freight All Kinds

In twenty foot containers PT20 1850 00

In forty foot containers PT40 3600 00

In Shipper owned 20 foot CYICY PT 20 1500 00

containers

1090 Fruit Dried W M 114 00

126 50

1115 Garage Door opening equipment systems W M 135 00

136 00

In CYICY 20 ft containers PC 20 2800 00

2810 00

1170 Glass Fiber W M 129 00

137 50

1232 Helium Liquid in shipper provided containers W M 1500

or shipper provided tank trailers Not 128 25

subject to heavy lift or long length charges

PC 4O 5700 00

6030 00

1237 Herbicides W 144 00

153 50
RATES OF FAR EASTERN SHIPPING COMPANY 661

Far Eastern Shipping Company TariffFMC 20 Continued

From Pacific Coast Ports in the United States and Ports in Hawaii

To Ports in Australia and New Zealand

Tariff

Item Rate

No Commodity Basis Local OCP

1241 Houses Knocked Down W M 126 00

134 75

PC 20 2289 00

PC 4O 4578 00

1260 Insecticides Fungicides Herbicides W M 152 00 145 00

Pesticides and Rodenticides 157 75 150 00

1270 Insulation Fiber Glass Plastic Sheets W M 120 00

and Boards 127 50

1610 Machinery and Machines W M 117 00 109 00

123 00 115 00

1624 Machinery

Portable Aluminum Lifting Equipment PC 20 2600 00

CYICY only 2625 00

PC 4O 4000 00

4025 00

1629 Machinery Machine Parts W M 136 00 124 00

124 25 114 25

Machines Coin operated CYICY W M 114 00 114 00

1642 Automatic Car Washers W M 11100

In 40 Fl CYICY containers PC 4O 4500 00

1790 Motorcycles and Side Cars Overland only W M 126 00

134 00

Children s motorized Vehicles W M 147 00

Motor Scooters Overland 157 50

1800 Mowers Grass Gang W M 9100

118 00

1820 Non Dairy Cream Milk Substitutes W M 130 00

In 20 ft CYICY containers PC 20 2300 00

In 40 ft CYICY containers PC 4O 4500 00

1838 Nuts Almond Shelled W 160 00

16125

Nuts Shelled

In packages not less than I cu ft ea W M 125 00

125 25

In packages of less than I cu ft ea W M 135 00

14175

1842 Nuts in shell W 160 00

164 00

1915 Organs and Pianos Electronic

Per 40 ft container PT40 4400 00

4500 00

Per 20 ft container PT 20 2200 00

2250 00
662 FEDERAL MARITIME COMMISSION

Far Eastern Shipping Company TariffFMC 20

From Pacific Coast Ports in the United States and Ports in Hawaii

To Ports in Australia and New Zealand

Tariff

Item Rate

No Commodity Basis Local 

1970 55 Paints Artists W M 140 00

144 0

2110 Paper Printing LT 17300 

185 0 

2510 Recreational Vehicle Parts Accessories W M 94 00

1010

2540 Drugs and Medicines Harmless W M 229 00

2700 Resins Synthetic Dry

Value up to and including 5650 00 per 2000 W 109 00

103 00

Value oyer 5650 00 up to and including W 115 00

51000 00 per 2

Value oyer 51000 00 up to and including W 129 00

51700 00 per 2000

Value OYer 51700 00 per 2 W M 10100

2714 Rice in bags W 96 00

10175

2770 Rubber Tires W M 68 00

72 25

In 20 ft CYICY containen PC 20 1400 00

In 40 fl CYICY container minimum 20 LT 140 00

LT per 40 ft CYICY

2814 Scales Bathroom W M 133 00

2995 Sprinklen and Irrigation Equipment N OS

Containen include terminal PC 20 2100 00

receiving charge 2150 00

PC 40 4200 00

4250 00

3001 Stain Folding Includes terminal PC 40 4000 00

receiving charge 4050 00

3008 Stereo Hi Fidelity Assembled Units W M 96 00

Components or Parts 104 25

In 40 ft CY ICY containers not subject PC 40 5200 00

to terminal receiving charge 5000 00

3035 Swimming Pool Toys Games and Furniture W M 85 00

90 00

3150 Toys and Parts Hobby Kits and Skate Boards W M 97 00

Toy Books 106 50

In 20 ft CYICY containers PC 20 2200 00

3248 Water Mattresses Water Beds W M 132 00

135 00

3280 Wine W M 150 00

162 00
RATES OF FAR EASTERN SHIPPING COMPANY

Far Eastern Shipping Company TariffFMC 20

From Pacific Coast Ports in the United States and Ports in Hawaii

To Ports in Australia and New Zealand

Tariff

Item

No Commodity

3310 Woodpulp

Measurement not over 45 cu ft per 2240

In Bales in bundles of 6 or more bales

per unit

Over 45 cu ft to and including 50 cu ft

per 2240

Over 50 cu ft to and including 55 cu ft

per 2240

Over 55 cu ft to and including 60 cu ft

per 2240

In CYICY 20 ft container

I Rates in brackets filed between March 2 1979 and May 7 1979

Rate

Basis Local

LT 74 00

76 75

LT 72 00

74 75

LT 79 00

82 50

LT 84 00

88 00

LT 90 00

93 75

PC 20 1400 00

663

OCP
664 FEDERAL MARITIME COMMISSION

ATTACHMENT A Continued

Far Eastern Shipping Company TariffFMC 23

From Ports in the Philippines

To United States Ports

RATE

Tariff Overland

Item Rate Atlantic Common

No Commodity Basis Ports Point P

100 Beer Mineral Waters Soft Drinka M 61 00 

anlSpirits 

200 Chan oal M 48 00 48 00 

PC 20 1400 00 1150 00 1

220 Cigars and Cigarettes M 93 00 78 00 

Inclu ling Refrigeration M 127 00 113 00 

270 Coconut Desiccated W 115 00 98 00 

10l 25 

Unitiud PwretiRd Shipm W 112 00 95 25 

97 50 

425 Fiberglass Sheets in CYICY PT 20 1

containers 1

PT40 20

21

450 Fish Dried Salted Smoked M 79 00 

460 Food StuftsBotlled Canned or M 62 00 53 00 

Preserved 53 50 

W 69 00 58 00 

7125 

470 Footwear M 57 00 50 00 

50 50 

480 Furniture Made of Bamboo M 55 00 39 00

Buri Rattan 4100

PC 20 15

PC 40 25

510 Glass Manufacturers N OS M 63 00 

W 70 00 

Sheet and Window Glass M 55 00 

W 6100 

570 Handicraf M 72 00 62 00 

63 25 

580 Hemp

In standard bales Bale 17 50 15 00 

16 50 

In high density bales Bale 16 50 13 50 

13 75 
RATES OF FAR EASTERN SHIPPING COMPANY 665

Far Eastern Shipping Company TariffFMC 23 Continued

From Ports in the Philippines

To United States Ports

RATE

Tariff

Overland Item Rate Atlantic Common No Commodity Basis Ports Point Pacific

850 Pineapple Pineapple Products W 63 00 52 00 58 00 Canned or Preserved 53 50 59 00

870 Plywood 40CFT 45 80

To Long Beach Los Angeles 40CFT 37 65 3550 To San Francisco Bay Area Ports 40CFT 38 70 37 40 To Ports North of San Francisco 40CFT 39 90 38 40

To East Coast Gulf Coast ports 40 CFT 45 80

To Long Beach Los Angeles 40CFT 36 10

890 Reefer Cargo

Crustaceans W 207 00 19100

Fish Packed W 134 00 127 00

910 Rope Cordage Binder Twine W 136 00 119 00 127 00

122 75 130 00

920 Rope Synthetic W 15100 147 00

15175

930 Rope Yarn W 119 00 116 00

960 Sea Corals Shell and Shell Waste M 60 00 50 00 55 00

50 25 55 25

W 67 00 55 00 6100

55 25 6125

990 Textiles Natural Synthetic M 7700 7400

alone or in combination 74 25

1020 Tobacco M 62 00 5100 57 00

58 25 52 75

1050 Wood Products

Finished M 78 00 67 00 7100

67 25 7125

Knocked Down Semi Finished M 64 00 54 00 58 00

54 25 58 25

1070 Woven Articles M 65 00 54 00 59 00

54 25 59 25

1080 Yarn Natural Synthetic M 74 00 70 00

alone or in combination 7225

2 Net Weight
666 FEDERAL MARITIME COMMISSION

ATIACHMENT A Continued

Far Eastern Shipping Company Tariff FMC 24

From United States Pacific Coast Ports

To Ports in the Far East

Tariff

Item Rate

No Commodity Basis Japan M

3055 Diapers Disposable W M 63 00

69 25

4600 Hides Wet Saltad Green and Hides SpUt W 43 00

In 40 Ft CYICY Containerloads 43 25

LOC Each II90 00 1

16

OCP Each 960 00 1

12

4870 Iron and Steel Articles

Pipe and Fittings N OS W M 90 00 

4880 Steel BlUel W M 62 00

j

8310 Soap Bar orToilet W M 92 00

i

8315 Soap Cleaning Compound Detorgenl

and Household Cleaners

LOC W M 

OCP W M 50 00 

55 00 

8525 Sodium HexametaphOllphale

Non Hazardous LOC W 82 00

86 50

9550 Trucks Fork Lift W M 97 00 

97 25 

10320 Zinc W 

10330 Ingol

In 20 ft CYICY Containers PC 20 104000

10340 Skimming PC 20 975 00

5980 Molybdenum Oxide and Trloxides W 6100

6150

6027 Motorcycles New or Used

MolO lcoOlers Motorbikes W M 94 00 

1

9720 Onions and Garlic M 63 00

6610 Painl Water based interior W M 88 00

87 50

5255 Lumber

Cedar Rough

In 20 ft CY ICY Containerloads PC 20 1010 00
RATES OF FAR EASTERN SHIPPING COMPANY 667

AITACHMENT A Continued

Far Eastern Shipping Company lntermodal Freight TariffNo 7 FMC 28

From Rail Terminals at U S Atlantic Gulf Port Cities

To Ports in Australia

Tariff

Item Rate

No Commodity Basis Australia

982 Abrasive Pads

To All Ports PT40 4600 00

To All Ports except Adelaide PT 20 2500 00

To Adelaide only PT 20 2850 00

987 Acetaminophen CYICY

To All Ports except Adelaide PT 20 2500 00

2600 00

To All Ports PT40 4800 00

4900 00

To Adelaide From

East Coast Ports PT 20 2850 00

2950 00

Gulf Coast Ports PT 20 2550 00

2650 00

1120 Additives for Petroleum Lubricant or Fuel

other than Gasoline

Petroleum Lubricating Grease

Petroleum Lubricating Oil including W M 115 00

White Industrial 129 00

1150 Agricultural Machinery Implements Parts W M 124 00

and Accessories N OS 124 25

1200 Air Conditioners Air Conditioning W M 110 00

Machinery and Parts N OS 113 75

1205 Air Conditioners W M 102 00

108 00

1210 Air Conditioners for Recreational Vehicles PT 20 2800 00

9250

1330 Automobiles W M 135 00

145 00

1350 Auto Truck Trailer Parts N OS W M 89 00

96 50

1390 Board Not Coated Impregnated or Laminated W M 134 00

154 00

1400 Books N OS W M 140 00

155 50

1423 Bowling Equipment Parts Accessories W M 178 00

1427 Breakfast Cereals Bars W M 125 00

126 00

1490 Camping Equipment W M 107 00

109 50

Special Rate

To All Ports Except Adelaide PT 20 2500 00

To All Ports PT40 4600 00

100 00
668 FEDERAL MARITIME COMMISSION

Far Eastern Shipping Company Intermodal Freight Tariff No 7

FMC 28 Continued

From Rail Terminals at U S Atlantic Gulf Port Cities

To Ports in Australia

Tariff

Item

Rate

No Commodity Basis Aus

1600 Carpets Rug Carpet Backing W M 95 0

95 2

Special Rate From Philadelphia Only CYICY PT 20 2205 0

1850 Chemicals Non Hazardous

Mixed shipments of 5 or more Chemicals W M 154 0

162

1900 Chemicals N O S

Value up to and including 225 00 per 2240 Ibs W M 109 0

124 7

Value over 225 00 up to and including 750 00 W M 120 0

per 2240 Ibs 140 

Value over 750 00 up to and including 1000 00 W M 154 

per 2240 Ibs 16

Value over 1000 00 up to and including 1250 00 W M 163 

per 2240 Ibs 175 

Value over 1250 00 up to and including 1500 00 W M 170 

per 2240 lbs 185 

Value over 1500 00 per 2240 Ibs W M 180 

196 

2

1930 Cigarette Tow

Not exceeding 80 cu ft per 2000 Ibs LT 160 

168 

Exceeding 80 cu ft but not exceeding W M 75 

100 cu ft per 2000 Ibs 76 

Measurement exceeding 100 cu ft per W M 115 

2000 Ibs 119 

2200 Cotton and orSynthetic Piece Goods W M 142 

From Gulf Coast Ports Only PT 20 2650 

From East Coast Ports Only PT 20 3000 

Corduroy Piece Goods PT40 4500 

2345 Ethafoam Sheets Planks PT 20 3000 

PT40 6000 

2520 Filter Paper Resin Impregnated W M 90 

95 

In 40 ft CYICY Containers PT40 3800 

3950 

2600 Floor Covering W M 115 

132 

2800 Freight All Kinds

Per 20 Foot Container PT 20 3000 

3100 

Per 40 Foot Container PT40 5000 

5100 
RATES OF FAR EASTERN SHIPPING COMPANY 669

Far Eastern Shipping Company Intermodal Freight TariffNo 7

FMC 28 Continued

From Rail Terminals at U S Atlantic Gulf Port Cities

To Ports in Australia

Tariff

Item Rate

No Commodity Basis Australia

3100 Glassware Machine Made WjM 95 00

99 00

Special Rates Minimum twenty 40 foot

Containers per vessel CYJCY

To Melbourne Sydney Brisbane Only PT40 4000 00

To Adelaide Only PT40 4475 00

3200 Herbicides Fungicides Insecticides W 140 00

140 00 LT

3700 Nylon Hosiery Yarn CYjCY PT 20 2500 00

105 50

PT40 3S00 00

170 50

3900 Nylon Yarn Carpet Yarn PT40 3S00 00

105 50

4000 Organs Electronic

Pianos Parts including Stools WjM 92 00

93 25

4062 1 Paper Cups WjM IIS OO

IIS 25

4063 Paper Latex Impregnated WjM 116 00

135 50

4077 Paratertiary Butylphenol LTjM 16100

PT 20 3000 00

4100 Perambulators CYJCY PT 20 3200 00

PT40 4500 00

4365 Printed Matter N O S WjM l7S 00

4370 Refrigerators Refrigerating Equipment Parts WjM 109 00

109 25

CYJCY Except Adelaide PT 20 2S00 00

3000 00

CYJCY Except Adelaide PT40 3S00 00

4000 00

4440 Rubber Goods N O S WjM 170 00

17175

Special Rate In straight or mixed PT40 4S00 00

shipments CYJCY

4470 Rubber Synthetic Not Liquid

Measurement not exceeding 65 cu ft W 123 00

per 2240 Ibs 137 50 LT

Measurement exceeding 65 cu ft WjM 115 00

per 2240 Ibs 129 50 LT

5600 Spirits including Whiskey Bourbon Tequila WjM 132 00

110 00
Far Eastern Shipping CompanY Intermodal Freight TariffNo 

FMC 28 Continued

From Rail Terminals at U S Atlantic Gulf Port Cities

To Ports in Australia

Tariff

Item

No Commodity

5700 Stereo Equipment Components Parts Radio

Sets including Automobile Radios

Radio Parts Equipment

5800 Synthetic Resin N OS

Value up to and including 650 00

per 2240 Ibs

Special Rate Minimum of 35 20 ft

containers per vessel From Houston

New Orleans only to Sydney or

Melbourne only CYICY One shipper

to one Conaignee

5850 Synthetic Rubber Based Tubing used in the

maintenance of Refrigeration Air

Conditioning Equipment

From Houston or New Orleans only to

Sydney or Melbourne only

6070 Tobacco Leaf

6254 Veneer

6341 Yarn Acrylic

6345 Yarn Fiberglass

Rate

Basis A

W M 13

1

10

9

W M 13

LT 13

13

PT20 210

PT 20 22

22

PT40 35

35

W M 1

W M 1

W M 1

1

1

W M 1

1

LT M Rate Buis
ATTACHMENT B

FMC 20

FESCO FESCO Rate FMC Item Other Carrier s

Item No Commodity Challenged No No Comparative Rate

Karlander

320 Batteries LOC PC 20 2400 00 12 320 LOC PC 20 2400 00

Parts N OS LOC PC 40 5500 00 LOC PC 40 5500 00

Karlander

488 Canned Apricots LOC PC 20 2140 00 12 488 LOC PC 20 2100 00

Karlander

1915 Organ Pianos LOC PC 20 2200 00 12 1915 LOC PC 20 2100 00

Electronic LOC PC 404400 00 LOC PC 40 4300 00

Karlander

2995 Sprinklers LOC PC 20 2100 00 12 2995 LOC PC 20 2100 00

Irrigation LOC PC 40 4200 00 LOC PC 40 4200 00

Equip N O S

Karlander

3008 Stereo LOC PC 40 5200 00 12 3008 LOC PC 40 5000 00

Hi Fidelity

Karlander

3150 Toys Parts LOC PC 20 2200 00 12 3150 LOC PCj20 2200 00

Hobby Kits

Skate Boards

Toy Books

ZIM

470 Footwear OCP M 50 00 14 475 OCP M 53 25

PNAC

570 Handicrafts LOC M 72 00 14 550 LOC M 75 50

Maritime Company

of Philippines

870 Plywood

LB LA LOC 40CFT 35 50 14 881 LOC CBM 28 50

32 26

SF LOC 40CFT 37 50 14 881 LOC CBM 27 00

3056

Ns F LOC 40CFT 3840 14 881 LOC CBM 26 25

29 72

LB LA LOC 40CFT 36 10 14 881 LOC CBM 25 25

28 58

OOCL

14 881 LOC CBM 35 25

39 90

Equivalent rateson basis of measurement ton of 40 cubic feet
ATTACHMENT B Continued

FMC 24

FESCO FESCO Rate FMC Item Other Carrier 

Item No Commodity Challenged No No Comparative 

OOCL Japan

3055 Disposable Japan 80 3055 WjM 62 00

Diapers WjM 63 00

OOCL Mani

4600 Hides Manila 80 4600

Wet Salted LOC PCj40 1615 LOC PCj40 

OCP PCj40 1270 OCP PCj40 
C

Continued

FMC 28

FESCO FESCO Rate FMC Item Other Carrier s

Item No Commodity Challenged No No Comparative Rate

Seatrain

1200 Air Conditioners W1M 110 00 105 2351 W1M 104 00

Machinery W 114 71

Parts N O S M 117 73

Seatrain

2520 Filter Paper W1M 90 00 105 2051 W1M 8100

W 89 29

M 9169

Karlander

2800 Freight PC 20 3000 00 10 1000 PC 20 3000 00

All Kinds

Karlander

4000 Organs Electronic PC 20 3000 00 10 1800 PC 20 2450 00

Pianos Parts PC 4050oo oo PC 4049OO 00

Seatrain

4440 Rubber Goods W1M 170 00 105 2510 W1M 170 00

N O S W 187 39

M 192 44

Seatrain

6070 Tobacco Leaf W1M 101 00 105 2820 W1M 93 00

W 102 51

M 105 28

Seatrain

6345 Fiberglass Yam W1M 102 00 105 3241 W1M 100 00

W 110 23

M 113 20

Equivalenl rateson basis of weight ton of 2000pounds and measurement ton of 40 cubic feet
FEDERAL MARITIME COMMISSION

SPECIAL DocKET No 678

APPLICATION OF YAMASHITA SHINNIHON LINE FOR THE

BENEFIT OF NISSHoIwAI AMERICAN CORPORATION

ADOPTION OF INITIAL DECISION

April 8 1980

By Order served February 25 1980 applicant Yamashita Shinnihon 

wasdirected to submit an affidavit advising as to whether any shipments o

relevant commodity Edible Nuts Mixed were transmitted under Pa

Westbound Conference Local and Overland Freight Tariff No 5 FMC 

Failure to do so would have resulted in denial of the application

Applicant has filed the requisite affidavit Accordingly the Commis

hereby adopts the initial decision herein

Applicant shall promptly cause to be published in the appropriate tarif

following notice

Notice is given as required by the decision of the Federa Maritime Commission in S

Docket 678 that effective January I 1979 and continuing through April 24 979 inclusiv

rate on Edible Nuts Mixed was 163 00W during that period for purposes of refund or w

of charges subject to all other applicable rules regulations terms and conditions of said rat

this tariff

Applicant shall refund charges within 30 days and furnish to the Secr

within five days thereafter evidence of such refund along with a

copy o

above described notice

By the Commission

S FRANCIS C HURNEY

Secreta
FEDERAL MARITIME COMMISSION

SPECIAL DocKET No 678

APPLICATION OF YAMASHITA SHlNNIHON LINE

FOR BENEFIT OF NISSHoIwAI AMERICAN CoRPORATION

Adopted April 8 1980

Permission granted to refund 2 724 42 portion of an aggregate freight charge of 3 56103

collected

INITIAL DECISION OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Yamashita Shinnihon Line a common carrier in foreign commerce joined

in by the Pacific Westbound Conference to which it belongs makes application

pursuant to special docket provision of Rule 92 of the Commission s Rules of

Practice and Procedure 46 C FR 502 92 and section 18 b 3 of the Ship

ping Act 1916 for permission to refund due to an error in the applicable tariff

ofan administrative nature a 2 724 42 portion of an aggregate freight charge

of 3 56103 collected from shipper Nissho Iwai American Corporation for a

shipment of Edible Nuts Mixed from Los Angeles to Tokyo Japan

The Conference certified that the instant application wasmailed October 5

1979 by it to the Secretary of this Commission Under such circumstances and

Rule 92 a 3 of the Commission s Rules ofPractice and Procedure 46 C FR

502 92 a 3 the said date is the date of filing ofthis application The date

of the sailing of the commodity on the carriers vessel Japan Ace from Los

Angeles was April 17 1979 supporting evidence of proof of sailing date is

attached to the application The filing of the application on October 5 1979

waswithin the required 180days from the date of sailing of the shipment thus

the filing of the application is timely

The application describes the commodity as Edible Nuts Mixed

Yamashita Shinnihon Steamship Lines Bill of Lading No LAT OOI dated

April 12 1979 describes 1 20 foot container S T C 1428 cartons Canned

Nuts Chipper s Brand Gross Weight 9345 5 4239 KGS Measurement

1

Thisdecision will beoome the decision ofthe Commision in the absence of review thereof by the Commission Rule 227 Rules

of Practice andProcedure 46 CF R 5502 227
676 FEDERAL MARITIME COMMISSION

614 17 376M3 The port of loading is Los Angeles California on the v

Japan Ace Voyage 4715 B Freight charges are shown as

Meas 17 376M3 at 164 M3 2 849 66 prepaid

CAF 21 598 43 prepaid

mc 6 50 M3 112 94 prepaid

Total 3 56103

Under date of November 2 1979 the Presiding Administrative Law J

sent a letter to the Pacific Westbound Conference none to carrier as he 

only an address in Japan for carrier subsequently advised by PWCof car

agent Lilly Shipping Agencies address in San Francisco One Califo

Street San Francisco California 94111 asking for explanation as to how 

can tell from the description on the Bill of Lading that the commodity i

involved shipment consists of Edible Nuts Mixed and how one arrives a

conclusion that description and Canned Nuts Chipper s Brand are wit

more the same or interchangeable Also asked when the omission in the 

of a specific item for mixed nuts was discovered The PWC in a letter d

November 9 1979 received November 13 1979 attached a copy of Ha

Terminal Services delivery receipt No 32742 dated April 12 1979 to v

Japan Ace from Chipper s Nut Hut full container YSAA 26973 0 

cases ofmix sic nuts The letter also advised that the omission in the 

was discovered on April 19 1979 and that action to correct the omis

effective April 25 1979 wastaken by the Conference Alsowished to poin

that in Exhibit A of the application the Conference incorrectly marked 

Item 053 9055 06 as the applicable item for mixed nuts The correct 

which also appears on the same exhibit is 053 9060 06 with no chan

applicable rates from 053 9055 06 The application indicates the said fr

charges were paid by the shipper NisshoIwai Corp that the rate appli

at the time of shipment was 164 00 W M tariffItem 001 090000 as s

on Pacific Westbound Confe nce Local and Overland Freight T

No 11 FMC 19 Revised 3rd Page 229 effective April 1 1979 Comm

Edible Nuts and Fruits N O S Ordinary Stowage Exhibit B 1 atta

to application

The Conference in its Tariff No 5 FMC 13 12th Revised Page 

effective September 1 1978 had Item No 053 9060 0 Commodity N

Except Peanuts Prepared or Preserved Packed which provided a 

freight rate to Japan Base Ports of 153 00 WT Eld1ibit A attache

application When the Conference converted its Tariff No 5 FMC 

conform to the Schedule B numbering system adopted by the Congress 

No 11 FMC 19 effective Jalluary 1 1979 Exhibit B attached to ap

tion the application states that through oversight the Conference fail

establish a specific item for m ed nuts Thus an N OS item 001 090

Original Page 229 effective January I 1979 Tariff No ll FMC 19 E

Nuts and Fruits N O S Ordinary Stowage applied in which the rate 

154 W M to Japan Base Ports According to the application when 

nmi inn wasdiscovered itwasnot until after the Conference s announce
APPLICATION OF YAMASHITA SHINNIHON LINE 677

filedApril 1 1979 general rate increase came into effect Exhibit C attached

to application

The Conference established Tariff Item 145 9000 00 Mixtures of two or

more kinds of edible nuts 5th Revised Page 230 of TariffNo ll FMC 19

effective April 25 1979 The rate is 163 00 WT This is the rate which is

sought to be applied in this proceeding

The applicants averthat through oversight the Conference failed to establish

a specific item for mixed nuts

In addition to the above information applicants submit

They have no knowledge of docket numbers of otherSpecial Docket Appli

cations or decided or pending formal proceedings involving the same rate

situations

They have no knowledge of shipments of other shippers of the same or

similar commodity which moved via applicants during the period of time

beginning on the day the bill oflading was issued andending on the day before

the effective date ofthe conforming tariffand moved on the same voyage of the

vessel carrying the shipment described in this application

When the omission was discovered it was not until after their announced

and filed April 1 1979 general rate increase came into effect see Exhibit C

Effective April 25 1979 Tariff Item 145 9000 00 wasestablished for mixed

nuts at a rate to Japan Base Ports of 163 00 Wt which reflects the pre

January I 1979 rate of 153 00 plus the April 1 1979 general rate increase

of 10 maximum 1000 see Exhibit D

Based upon the administrative error and subsequent correction outlined

above they pray the Commission will give favorable consideration to this

application and allow a refund to NisshoIwai American Corporation in the

amount of 2 724 42

DISCUSSION

Upon consideration of the above it isfound and concluded by the Presiding

Administrative Law Judge that the applicants have satisfactorily pointed out

and explained the administrative error so as to warrant the finding andconclu

sion that they have met the requirements for special docket relief as per section

18 b3 of the Shipping Act 1916 and Rule 92 referred to above and that

permission to refund as requested should be granted

For the reasons given the Presiding Administrative Law Judge finds and

concludes in addition to the findings and conclusions hereinbefore stated

I The application was filed timely

2 There was filed with the Commission prior to this application an

effective tariff setting forth the rate on which the refund would be based

3 There was an errorof an administrative nature which resulted in the

necessity for refund

4 The refund requested will not result in discrimination as between

shippers

5 The application for permission to refund should be granted

Wherefore it is ordered that
A The application be and hereby is granted

B Applicant carrier Yamashita Shinnihon Line and applicant conference

Pacific Westbound Conference are granted permission torefund for the b

of NisshoIwai American Corporation a 2 724 42 portion of an aggr

freight charge of 3 56103 collected

C Appropriate notice shall be published by the applicants in the app

ate tariffs

I

S WILLIAM BEASLEY HARRIS

Administrative Law Ju

WASHINGTON D C

November 14 1979
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 550 1

INTERPUR A DIVISION OF DART INDUSTRIES INC

V

BARBER BLUE SEA LINE

INFORMAL DocKET No 628 1

INTERPUR A DIVISION OF DART INDUSTRIES INC

V

BARBER BLUE SEA LINE

INFORMAL DocKET No 629 1

INTERPUR A DIVISION OF DART INDUSTRIES INC

V

BARBER BLUE SEA LINE

INFORMAL DocKET No 643 1

Dow CORNING CORPORATION

V

UNITED STATES LINES INC
680 FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 646 1

SCM CoRPORATION

v

COMPANIA SUVAMERICANA DE VAPORES

INFORMAL DocKET No 667 1

FMC CORPORATION

v

SEA LAND SERVICE INC

INFORMAL DocKET No 708 1

J T BAKER CHEMICAL CoMPANY

v

PoLISH OcEAN LINES

PARTIAL ADOPTION OF DECISIONS OF SETTLEMENT

OFFICERS

Apri 8 1980

In each of the above captioned proceedings the Settlement Officer aw

reparations to Complainants for violations by Respondents ofsection l8 

of the Shipping Act 1916 46 U S C 1817b 3

The findings and conclusions of the Settlement Officers as to aw

reparations will not be disturbed The Commission has undertaken a rev

these proceedings for the sole purpose of addressing the matter of inter

grants ofreparations

BecaUIC he Commiaslon isCORIiderin onJy award ofmtereJl ineach prooocdlng those proceedinp are being conllO

review purposes
As a general rule it is the intention of the Commission to grant interest on

awards of reparation in cases involving the misclassmcation of cargo and

arising under section 18 b3 Exceptions from the general policy will be

considered on an ad hoc basis Moreover interest shall until further notice be

calculated at the rate of 12 accruing from the date ofpayment offreight

charges

THEREFORE IT IS ORDERED That the decisions of the Settlement

Officers in these consolidated proceedings are adopted except as indicated and

IT IS FURTHER ORDERED That each Respondent pay to the re

spective Complainant in each proceeding 12 intereston the award ofrepara

tion accruing from the date of payment of freight charges and

IT IS FURTHER ORDERED That these proceedings are discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

DocKET No 78 11 GENERAL ORDER 44

SUBCHAPTER B REOULATlONS AFFECTING MARITIME CARRIERS 

RELATED ACTIVITIES

PART 525 ExEMPTION OF CoLLECTIVE BARGAINING AGREEMEN

PART 530 INTERIM POLICY STATEMENT

COLLECTIVE BARGAINING AOREEMENTS

Aprl IO 980

Final Rule

The Federal Maritime Commission is hereby estab

a new Part 525 to Title 46 of the Code of Federal 

lations to provide for the exemption ofcollectivebarg

agreements between labor unions and maritime 

employer collective bargaining units from the filin

approval requirements of section 15 Shipping Act 

EFFECTIVE DATE April 16 1980

SUPPLEMENTARY INFORMATION

Notice is hereby given that the Federal Maritime Commission is ado

rule providing for the exemption of collective bargaining agreements 

maritime industry from the filing and approval requirements of sectio

the Shipping Act 1916 the Act

ACTION

SUMMARY

BACKGROUUND

On March I 1978 the Supreme Court of the United States he

collective bargaining agreements as a class are not categorically exem

the filing requirements of section 15 of the Act and that the Com

is the public arbiter of competition in the shipping industry 

Maritime Commission v Pacific Maritime Association 435 U S 
EXEMPTION OF COLLECTIVE BARGAINING AGREEMENTS 683

1978 PMA The Supreme Court recognized however that the Commis

sion need not require the filing of all or even most collective bargaining con

tracts entered into in the shipping industry The Court explained that while the

only collective bargaining agreements covered by section 15 are agreements

between a union and amulti employer bargaining unit not all such agreements

are necessarily subject to the requirements of section 15 And to the extent such

agreements may be subject to the section 15 requirements the Court noted the

Commission s authority under section 35 of the Act to exempt from those

requirements any classofagreements between persons subject to this chapter

or any specifi activity of such persons Citing United Stevedoring

Corporation v Boston Shipping Association 16 F MC 7 1972 BSA

The Commission as a result of the Court s decision in PMA and because of

its concern that needless uncertainty and delay could result in the collective

bargaining process ifall collectively bargained agreements between unions and

maritime multi employer collective bargaining units hereafter employer

units on all U S coasts were filed for approval under section 15 sought to

develop an expedited procedure for permitting such agreements to take effect

Therefore on April 26 1978 the Commission published in the Federal Regis

ter 43 Fed Reg 17845 an Advance Notice of Proposed Rulemaking to

solicit comments on aCommission proposal which would either exempt certain

collective bargaining agreements from the pre implementation approval re

quirements ofsection 15 ofthe Act or grant such agreements interim condi

tional or final approval under that section

The Commission concurred with the consensus of opinion expressed in the

comments on the Advance Notice ofProposed Rulemaking that any procedure

which effectively leaves the legitimacy of a collective bargaining agreement or

any provision s thereof in limbo pending Commission review regardless of

the dispatch with which such review could be undertaken has a potential for

disrupting the collective bargaining process to a considerable extent I

The clear

pattern of collective bargaining in the maritime industry is that immediate

implementation is called for once a settlement has been reached The adoption

ofany preimplementation filing requirement would cause delay and introduce

a destabilizing element into the collective bargaining process which could

precipitate or prolong strikes and cause substantial harm to the industry its

employees its customers and the national interest Moreover the uncertainty

associated with potential disapproval of such agreements even if they were

permitted to be implemented prior to section 15 finality may hamper labor

management negotiations and relations in a manner contrary to the national

labor policy of the United States without any corresponding Shipping Act

benefit

I

From the comments received it was also apparent that there wasaneed to notify the public orlheaction the Commission would

take with regard to collective bargaining agreements which are filed with the Commission during the period prior to adoption of

afinal rule m this proceeding Consequently on June 12 1978 the Commission served an Interim Policy Slalemenl Colleclive

Bargaining Agreements 46 CF R 1530 9 which established procedures for interim approval and ortemporary exemption of

collective bargaining agreements becoming effective after June 9 1978 Thefinal ru1e in thisproceeding supersedes the procedures

set forth in 46 CF R 530 9
684 FEDERAL MARITIME COMMISSION

In view of the foregoing the Commission concluded that section 35 

Act may provide an appropriate remedy for accommodating the con

labor and shipping policies presented by collective bargaining agre

which involve persons subject to the Commission sjurisdiction under th

Accordingly on February 21 1980 the Commission pursuant to its e

tion authority under section 35 published aNoticeofProposed Rulema

the Federal Register proposing a new Part 525 to Title 46 of the C

Federal Regulations to provide for the exemption of collective barg

agreements from the filing and approval requirements of section 15 4

Reg 11514 The proposed exemption was on the condition that the pa

a collective bargaining agreement who are subject to the act execute a

with the Commission a certification providing that they agree to make 

tion for or otherwise remedy any loss or injury to any person caused 

provision of the agreement or by any practice in implementation of the 

ment which is found to violate any provision of the Act The certificati

provided that a copy ofeach of the collective bargaining agreements to 

it applied would be provided to the Commission upon request

The Commission considered the proposed exemption to be justified 

basis that it would facilitate its administration of the Act in a mann

sonant with the national labor policy without impairing either the C

sion s effective regulation of activities engaged in by parties subject to t

under the agreements or the protection of parties of interest with res

activities found to be unjustly discriminatory or unfair or which g

unreasonable preference or advantage within the meaning of section 

and 17 or are otherwise violative of the laws administered by the Comm

It should be noted that the proposed rule addressed collective bar

agreements exclusively

Comments on the Notice of proposed Rulemaking were submitted on 

of eleven parties six maritime multi employer collective bargaining un

ployer units the New Orleans Steamship Association NOSA th

YorkShipping Association NYSA the Pacific MaritimeAssociation 

the Council ofNorth Atlantic Shipping Associations CONASA the 

Steamship Association MSA and the Boston Shipping Association 

one labor union the National Marine Engineers Beneficial Asso

MEBA the Labor Management Maritime Committee a group comp

U S flag liner and tanker interests in association with American m

labor LMMC Agreement 10109 a group ofocean carriers authorized 

Commission to discuss matters affecting the handling of the

containerized cargo Standard Fruit and Steamship Company Inc 

Brands Inc and Salen Shipping Agencies Inc Standard et al 

National Customs Brokers and Forwarders Association of Americ

NCBFA

J Section 35 provides that the Commission upon application or on its own motion may byorder or rule Ollompt 

agreements between persona subject to the Act or any specified activity of such persona from any requirement oft

it finds that such Clxemption will not impair effective quJalion by the Commission be unjuatly dilitriminatory orb

to oommcrce It further provides that the Commission may attach condition to any such exemption
EXEMPTION OF COLLECTIVE BARGAINING AGREEMENTS 685

POSITIONS OF THE PARTIES

While the employer units generally support the concept of exempting col

lective bargaining agreements from the filing and approval requirements of

section 15 they are unanimously opposed to any exemption conditioned upon execution of the certification set forth in the proposal as discussed more fully

under section 523 3 a below

NCBFA opposes the proposed exemption and has requested oral argument

citing the grave consequences it believes would flow from the rule s

imple

mentation In particular it contends that the Commission s proposal would

permit unions to impose work rules such as the International Longshoremen s

Association socalled 50MileRule which NCBFAargues is unjust and unrea

sonably prejudicial to the shipping public As an alternative NCBFA suggests

a procedure wherein collective bargaining agreements would be filed with the

Commission and granted a temporary exemption upon filing which would

become final if no complaints were received by the Commission within sixty

days of the filing Ifa complaint is received the Commission would have thirty

days to determine whether the complaint had a reasonable basis Ifit did the

Commission would begin an expedited proceeding under section 15 if it did

not the temporary exemption would become final NCBFA submits that its

recommended procedure would achieve the objective of allowing collective

bargaining agreements to be implemented immediately yet it would preserve for all segments of export import commerce the protection that Congress

intended under the Act

Section 525 20

MEBA believes that the proposed rule could be interpreted as requiring the

certification for collective bargaining agreements not subject to section 15

Therefore it recommends that the definition of employer be clarified to make

certain that the rule would have no application to collective bargaining agree

ments between a single employer and a union As drafted MEBA submits that

the proposed rule fails to adequately distinguish between single and multi

employer agreements an ambiguity which it believes could lead to an over

broad interpretation in excess of the Commission s

jurisdiction under the Act

Specifically MEBA states that the definition is not clear with regard to

whether two or more persons subject to the Act merely must be parties to an

association which negotiates with a union or whether two or more such persons

must be parties to a single collective bargaining agreement so negotiated

Therefore MEBA suggests that the definition be clearly drafted to reflect that

a multi employer association is an employer for the purpose of the rule only

when it negotiates a collective bargaining agreement to which two or more of

its members subject to the Act are actually bound

J AU oomments whether or not specifically described or discussed herein have nevertheless been carefully reviewed and

considered by the Commission
686 FEDERAL MARITIME COMMISSION

Section 525 2 c

This section defines the tenn collective bargaining agreement for the pu

of the Rule

Standard et al and Agreement 10109 recommend that assessment

employee benefits that are set forth in a collective bargaining agreeme

ineligible for an exemption In this regard Standard et al state that i

event an assessment is detennined to operate unfairly the appropriate re

not simply to award reparations for the past but also to modify the assess

fonnula prospectively Agreement 10109 submits that while an assess

may ultimately be found unacceptable the Rule would allow the im

mentation ofan assessment without Commission approval which wouldre

in effect until otherwise found unlawful and which could be disastrous t

parties damaged by the assessment

CONASA is concerned about the exclusion of agreements among emp

members to which the employee organization is not signatory such as 

employer assessment agreements for funding benefits Ifassessment fon

which are in the body of the collective bargaining agreement are to be ex

from section IS CONASA contends that all such assessment fonnulae i

menting fringe benefit funding requirements should beexempt from sectio

regardless of whether a union is party to the agreement In this regard C

ASA believes that it makes no sense from either a policy standpoint 

regulatory standpoint to exempt only those agreements to which a unio

signatory when the Commission has no jurisdiction over that signatory p

ularly where the Commission would retain jurisdiction under sections 16 

17 of the Act to detennine whether the assessment rate is unreasonab

discriminatory

Section 525 3 a

As noted above while the employer units commenting on the propose

generally support the concept ofexempting collective bargaining agreem

from the filing and approval requirements of section IS they unanim

oppose the proposed certification requirement set forth in this section 

objections of this requirement are essentially threefold

First the certification requirement is characterized as superftuous an

necessary since the Commission would retain its jurisdiction under section

17 and 22 ofthe Act which should enable the Commission to determin

lawfulness ofany practices arising out of a collective bargaining agree

Second many ofthe employer units criticize the certification requireme

a blank check which would impose open ended liability for which empl

would not otherwise be lawfully responsible because of the labor exem

from federal antitrust laws The Commission is advised in this regard th

responsible party could possibly execute such a certification in view o

liability particularly since an employer would thereby incur an obligatio
EXEMPTION OF COLLECTIVE BARGAINING AGREEMENTS 687

make reparation to any person damaged by practices implementing the agree

ment undertaken by other employer unit members who mayor may not be

subject to the Act or by a union or its members

Third the certification requirement is criticized as being particularly unrea

sonable and unfair since the entire burden of harmonizing the Shipping Act

with the national labor policy would fall solely on employers subject to the Act

rather than all of the parties to a collectivebargaining agreement including the

union and those employer unit members who are not subject to the Act

Alternative Proposals

Several commentators suggested alternatives to the exemption proposed in

the Rule

NOSA submits that exempting collective bargaining agreements entirely

from section 15 would not leave the parties and their labor agreements un

governed rather such an approach would place maritime labor agreements

where they properly belong i e before the Department of Justice and the

courts under federal antitrust law which is the regulatory scheme applicable

to labor relations in all other U S industries

NYSA recommends the adoption ofan alternative rule which would provide

for section 15 approval rather than exemption of collective bargaining

agreements that includes a certification which would provide that in the event

a complaint is filed with the Commission with respect to particular provisions

ofa collective bargaining agreement the parties wouldmodify those provisions

to comply with the provisions of the Act and take such further action as the

Commission may lawfully direct after a final determination that the provisions

violate the Act and are not labor exempt under the Act and the antitrust laws

Until such final determination however NYSAs proposal provides that the

agreement and the approval thereof would continue in full force and effect

PMA states that while the apparent purpose for the certification is to make

sure that the exemption from section 15 does not exempt persons subject to the

Act from other sections of the Act the rule can simply state so as a condition

of the exemption

LMMC recommends that the Commission give automatic approval to col

lective bargaining agreements upon filing with further consideration of such

agreements limited to specific complaint if and when brought before the Com

mission by a party who contends he has suffered loss or injury as the result of

the agreement

MSA suggests that a procedure calling for filing and provisional approval

subject to later non retroactive disapproval upon further study or challenge

would better accommodate the interests ofthe parties to a collectivebargaining

agreement and those affected by it
688 FEDERAL MARITIME COMMISSION

PISCUSSION

Section 525 20

Eventhough the exemption adopted by the Commission in this proceedin

not have a certification requirement as discussed more fully below in t

terest of avoiding any ambiguity with regard to the proper application 

exemption the definition of employer under this section will be revised 

manner suggested by MEBA

Section 525 2 c

The Commission does not concur with the recommendations of Stan

et 01 and Agreement 10109 that the exemption exclude employee b

assessment provisions set forth in collectivebargaining agreements Neith

Commission nor the courts have held that such assessment provision

equivocably require Commission scrutiny pursuant to section 15 To est

an exemption which is applicable to part but not all of a collective barg

agreement would largely defeat the exemption s purpose with no counterv

benefit in view of the jurisdiction the CommiSsion is retaining under se

16 17 and 22 of the Act

Nor does the Commission agree with CONASA s position that the e

tion should include agreements to which the employee ianot a signatory 

as intra employer assessments agreements for funding benefits While t

emption of assessment provisions in the context of COllective bargaining 

ments is clearly warranted by labor policy considerations once such prov

are removed from a collective bargaining agreement the Commission 

longer faced with the problem of resolving the confticting national labo

shipping policies which justify the exemption of collective bargaining 

ments Therefore while the Commission is aware of the necessity for p

action on intra employer assessment agreements it finds that the exemp

such agreements from the filing and approval requirements of section 15 

warranted

Section 525 3 0

After careful consideration ofthe comments on this issue and in view 

jurisdiction it will retain under sections 16 17 and 22 the Commission 

that the certification requirement set forth in the proposed rule is supe

and unnecessary Consequently the certification requirement will be d

from section 525 3 and section 525 1 will be revised accordingly

The foregoing is responsive to some ofthecomments offered on the pro

exemption However the Cominission does not consider the other altern

offered to be viable for the following reasons
EXEMPTION OF COLLECTIVE BARGAINING AGREEMENTS 689

With regard to NCBFA s proposal it is not clear what would happen to the

temporary exemption upon the filing of a complaint It would appear that in

such event the exemption would either be partially withdrawn which would

deprive that aspect of the agreement of its legitimacy under the Act and

thereby threaten the stability ofmaritime labor management relations or the

exemption would be continued pending an expedited section 15 proceeding In

either event however there would remain a certain delay in making injured

parties whole a delay which cannot be wholly eliminated without violating the

precepts of due process and the appropriate accommodation of conflicting

national labor and shipping policy considerations Notwithstanding NCBFA s

position on the socalled 50 Mile Rule the inclusion of such provisions in the

context ofcollective bargaining agreements is not an insuperable obstacle to the

proposed exemption either The issue of whether such provisions in a collective

bargaining agreement are subject to section 15 has never been specifically

addressed by the Commission or the courts Moreover if such provisions are

included in a collective bargaining agreement and are granted a

temporary

exemption under NCBFA s proposal or permanent exemption under the

Commission s proposal the fact remains that the inclusion of such provisions

is not the same thing as the implementation of the practices provided therefor

by parties subject to the Commission s

jurisdiction Even if such provisions in

the context of collectivebargaining agreements are exempted from section 15

under the rule expedited section 16 17 and 22 procedures will remain available

to parties affected by practices in implementation of such provisions and the

Commission fully intends to exercise its statutory authority in this regard

Under the Commission s earlier Interim Policy Statement in this proceeding

the Commission has been conferring interim section 15 approval of portions of

collective bargaining agreements pending Federal Register notice opportunity

for comment and subsequent action by the Commission under the Act How

ever a grant of automatic section 15 approval to the entirety of a collective

bargaining agreement upon its filing as suggested by NYSA and LMMC

would exceed the Commission s statutory authority under section 15

NOW THERFORE IT IS ORDERED That effective upon publication

in the Federal Register Subchapter B of Chapter IV ofTitle 46 of the Code

of Federal Regulations is amended by the addition of a new Part 525 as set

forth below

IT IS FURTHER ORDERED That the Interim Policy Statement

46 cFR 530 9 be revoked

PART 525 EXEMPTION OF COLLECTIVE BARGAINING AGREEMENTS

Sec

525 1 Purpose and Scope

525 2 Definitions

525 3 Exemption

AUTHORITY Sections 15 35 and 43 46 US C 814 833a and 841a
690 FEDERAL MARITIME COMMISSION

i

525 1 Purpose and Scope

Section 15 of the Shipping Act 1916 the Act requires that certain 

ments between persons subject to the Act be filed with and approved 

Commission prior to implementation Section 35 of the Act provides th

Commission upon appliQition or on its own motion may by order 

exempt any class of agreements between persons subject to the Act 

specified activity of such persons from any requirement of the Act w

finds that such exemption will not impair effective regulation by the Co

sion be unjustly discriminatory or be detrimental to commerce

This part provides for the exemption of maritime collectivebargaining 

ments from the filing and approval requirements of section 15 in o

facilitate the Commission s administration of the Act in amanner con

with national labor policy The grant of such exemption will not imp

effective regulation by the Commission of the activities engagedin purs

these agreements by parties subject to the Act

J

i

525 2 Definitions

As used in this part

a Employer means any association oof employers of maritime 

established for the purpose of negotiating and administering collecti

gaining agreements to which two or more persons subject to the Shippi

1916 as set forth in on 1 of that Act are bound

b Employee means any association of employees established 

purpose of dealing with employers on matters relating to grievances 

disputes wages rates of pay hours of employment or conditions of w

c Collective bargaining agreement includes any agreement 

amendment of an agreement between an employer and an employee 

regulates terms and conditions ofemployment It does not include an 

ment among employer member to which the employee is not asignato

as an intra employer assessment agreement for funding benefits

i

525 3 Exemption

Collective bargaining agreements are exempt from the filing and a

requirements of section 15 of the Act

By the Commission

S FRANCIS C HURNEY

Sec

j

1
v

FEDERAL MARITIME COMMISSION

INFORMAL DocKET NO 5301

GEORGE W MOORE INC

INTERNATIONAL CONTAINER EXPRESS INC

PARTIAL ADOPTION OF DECISION OF SETILEMENT OFFICER

April 11 1980

This proceeding is before the Commission upon its determination to review

the decision ofSettlement Officer Charles C Hunter served January 9 1980

denying reparation The Settlement Officer found that International Container

Express Inc Respondent did not violate section 18 a of the Shipping Act

1916 46 US c 817 in receiving duplicate payments from Complainant

George W Moore Inc as well as from consignees on a series of F O B

shipments from New Jersey to Puerto Rico

POSITIONS OF THE PARTIES AND

DECISION OF THE SETTLEMENT OFFICER

Complainant alleges that it mistakenly paid 2 419 62 in charges when it

received copies of the bills of lading from Respondent and mistook them for

currently payable charges Complainant contends that Respondent also re

ceived payment from the consignees on each of the 43 shipments in issue

violating section 18 a by collecting greater compensation than the rates in its

tariffs

Respondent notes that it had previously refunded to Complainant 2 027 62

in similar erroneous payments and admits that for most of the shipments

currently in issue there were duplicate payments by Complainant and consign

ees Respondent has since begun operating under Chapter XI of the Bank

ruptcy Act and has notified the committee of creditors that Complainant is a

valid creditor in the amount of 1 635 36

I

Complainant originally alleged 2 456 35 in duplicate payments but has since admitted that a

36 73 claim wasmade in error
692 FEDERAL MARITIME COMMISSION

The discrepancy between the 1 635 36 which Respondent claims 

and the 2419 62 which Complainant claims is owed is the produ

dispute between the two parties as to certain of the transactions I o

bills oflading Respondent has no record ofreceipt from a consignee 2 

others Respondent claims no record of receipt of payment from Comp

and 3 in two others credit was taken by the consignee for the 

payment In response Complainant admits that as to the first group 

unable to contact the consignees for verification that the consignees 

paid the charges Complainant reasserts its claim for refunds on the

ments until proof is presented that these claims were not paid by cons

Complainant also asserts that as for the remaining claims in conten

proof that it paid the charges suffices to justify reparation

The Settlement Officer denied reparation on several grounds Citing 

cate Payments ofFreight Charges 350I C C 513 1975 which h

duplicate payments do not constitute overcharges as defined in 

16 3 g of the Interstate Commerce Act the Settlement Officer co

that duplicate ocean freight payments were not violations of section 

the Shipping Act 1916 He also concluded that some of the claims were

by the two yearlimitations period prescribed by section 22 of the Shipp

1916 46 V S C 1821 and that the remaining claims failed beca

burden of proof had not been met

DISCUSSION AND CoNCLUSION

The underlying rationale of the Interstate Commerce Comm ion 

decision relied upon by the Settlement Officer i e that once a proper p

of freight charges is made the contract for transportation service iscom

and the submittal of a duplicate bill no longer represents charges fo

portation service is unacceptable for Shipping Act purposes The Com

concludes that collection of duplicate payments does constitute compe

for transportation service greater than that lawfully specified in the ap

tariffs 2

Other considerations bar recovery on most ofthe disputed claims h

The five claims in which Respondent alleges no record of receipt of p

from Complainant and two other claims in which neither party prod

record of receipt of payment from a consignee were all filed more th

years after the date of shipment and payment by Complainant Thus 

tion for these seven claims is barred by the statute of limitations

Complainant has not met its burden of proof on six other claims i

it admits that it could not verify that the consignees actually made p

Complainant s challengetothe Respondent to prove that the consignees 

make payment constitutes an attempt to shift its burden of proof 

spondent As Complainant has not proven as alleged in its compla

It i noteel however that section 2 of the lntor ollltal Shlppln Act 1933 46 U SC

1844 is he mlna 

provilion
S FRANCIS C HURNEY

Secretary

GEORGE W MOORE INC V INTERNATLCONTAINER EXPRESS 693

Respondent collected duplicate payments for these shipments reparation on

these claims will also be denied

The Settlement Officer denied reparation on two claims as to which Re

spondent refuses to refund Complainant s payment on the ground that credit

was taken by the consignees 3

Respondent admits receiving a double payment

on both claims but chose to creditthe consignees the amounts they paid rather

than to refund the amounts mistakenly paid by Complainant Respondent s

subsequent gratuitous and misdirected action on behalf of the two consignees

does not negate the fact that it had accepted duplicate payments for the

transportation services rendered and does not serve as a defense to Com

plainant s claims Reparation on these two claims will therefore be granted

THEREFORE IT IS ORDERED That the decision of the Settlement

Officer is adopted except as indicated and

IT IS FURTHER ORDERED That International Container Express Inc

pay reparations in the amount of 125 92 to George W Moore Inc at 12

interest accruing from August 6 1976 4

and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

lThese claims refer to bills of lading JSY 837 106515 4336 and JSY 837 106516 82 56

4 Date of payment by Complainant
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 530 1

GEORGE W MOORE INC

v

INTERNATIONAL CONTAINER EXPRESS INC

Partially Adopted April II 1980

DECISION OF CHARLES C HUNTER SETTLEMENT OFFI

REPARATION DENIED

On April 5 1978 George W Moore Inc GWM filed a complai

the Federal Maritime Commission which alleged that International Co

Express Inc ICE had collected duplicate payments for the carriag

number ofGWM shipments Itwasasserted therein that ICE s

receipt 

duplicate payments constituted a violation of Section 18 a of the Sh

Act 1916 46 U S C i817 2

As a result of the alleged violation of 

18 a GWM sought reparation pursuant to section 22 of the Shippin

1916 45 U S C i821 in the amount of 2456 35

By answer dated May 9 1978 ICE acknowledged that it had r

duplicate payments for the transportation of cargo shipped by GW

advised that all such monies with the exception of 1 635 26 had b

turned to GWM ICE s recent transition from a manual billing and a

receivable system to a computerized system was stated to have occasio

retention of the duplicate payments ICE further advised that it was cu

operating in accordance with the provisions of Chapter XI of the Ban

Act 11 U S C i

1101 and that it had notified the committee of credito

GWM wasa valid creditor in the amount of 1 635 26

1 Both parties having coolCnted to the informal procedure outlined in Rule 19 8 of the Commi88ion s Rules of 

Procedure 46 C FR 1502 301 304 this decision will become final unless the Commiasion elects to review it within 

the date of service thereof

2 Section 18 a reads in pertinent part as follows

No common carrier by water in interstate commerce shaU demand charge or collect a greater compensat

trllnllMrtAtinn than the rates fares and charRC8 filed in compliance with this section
GEORGE W MOORE INC V INTERNATL CONTAINER EXPRESS 695

J

James G Cannon Settlement Officer

By letter dated June 2 1978 the Settlement Officer directed GWM and

ICE to submit affidavits addressing the 82109 discrepancy between the

amount that was claimed by GWM and the amount that ICE acknowledged

that was due GWM

On June 8 1978 ICE submitted the affidavit ofPaul Braneky President In

his affidavit Mr Braneky offered the following itemization of the 82109

discrepancy

I 408 46 No record of the receipt of payment by ICE from the consignee

2 249 98 No record of the receipt of payment by ICE from GWM

3 36 73 GWM responsible for payment of freight charges

4 125 92 Credit for the double payment taken by consignee

82109

In the affidavit ofCraig E Lundberg President dated June 21 1978 GWM

responded to the itemization of the 82109 discrepancy which Mr Braneky

had detailed in his affidavit Mr Lundberg stated that GWM had been unable

to verify that the consignee actually had paid the 408 46 figure which Mr

Braneky asserted that it failed to pay However with the exception of the

36 73 figure which GWM had mistakenly included in its claim Mr Lundberg

asserted that all sums sought by GWM were paid by it to ICE and he

therefore reasserted GWM s claim to these funds

During the period October 1975 through January 1977 GWM made a

series ofshipments aboard ICEvessels from the Port ofElizabeth New Jersey

to the Port of San Juan Puerto Rico The terms of these shipments were

EO B Waltham Massachusetts GWM s principle place of business The

consignee in Puerto Rico was responsible for the payment of the applicable

freight charges

ICE forwarded record copies of all bills of lading reflecting these shipments

to GWM GWM alleged that it mistakenly tendered payment to ICE of all of

the freight charges specified in these bills of lading It was further alleged by

GWMthat ICE also collected from the consignee on all of these bills of lading

In its efforts to secure repayment of the monies it had mistakenly paid to

ICE GWM initiated an informal claim with the Commission s Office of

Domestic Commerce as well as filing its Complaint in the subject docket As

of this date ICE has refunded 2027 62 to GWM and has acknowledged the

validity of GWM s claim for an additional 1 635 26 At this juncture the

amount in dispute is 784 36

GWM s claim to the disputed 784 36 must be denied on a number of

grounds Initially the shipments which occasioned the freight charges which

comprised the 249 98 figure for which ICE has alleged that it has no record

ofthe receipt of payment from GWM wereall made in late 1975 These freight

charges were allegedly paid by GWM in November and December 1975

Section 22 of the Shipping Act 1916 4authorizes the Commission to order

reparation to a complainant who has alleged an injury resulting from a vio

Section 22 reads in pertinent part

1be board if the complaint istiled within two years after the cause of action accrued may direct the payment on orbefore

a day named of full reparatton to the complainant for the injury caused by such violation
696 FEDERAL MARITIME COMMISSION

lation of the Act only if that complainant had filed a complaint with

years after the given cause of action had accrued It is well established 

shipper s cause of action which is based upon a carriers collection of exc

compensation accrues at the time of the shipment or at the time of th

ment whichever is later TylerPipe Industries Inc v Lykes Brothers S

ship Company Inc 15 FMC 28 1971 Inasmuch as GWM shipp

cargo and allegedly tendered payment of the freight charges encomp

within the 249 98 figure prior to two years before it filed its Complaint 

subject docket this Commission may not orderICE to pay reparation to 

in this amount

Further GWM s remaining claim for 534 38 must also be denied 

GWM has failed to meet its burden of proof regarding its claim fo

amount In order to trigger the right to receive reparation for a viola

section 18 a a complainant must establish by a preponderance ofthe ev

in the record that a carrier collected compensation in excess of the app

tariff rate See Madeplac SA Industria De Madeiras v L Figueried

vegacao SA a k a Frota Amazonica SA 20 FMC 578 1978 

present proceeding GWM has alleged that ICE collected duplicate pay

offreight charges in the amount of 534 38 ICEhas denied GWM s alle

asserting that of the 534 38 claimed by GWM ICE has no record 

receipt of payment from the consignee in the amount of 408 46 and ha

credit to the consignee in the amount of 125 92 No evidence ha

submitted by GWM which supports its claim or refutes ICE s denial 

has established that it paid the applicable freight charges but has fa

prove that these freight charges also were paidby the consignee Hence 

has not substantiated its allegation that ICE collected duplicate paym

those freight charges Consequently GWM has not met its burden of p

this proceeding

Finally and perhaps most significantly GWM s claim for reparatio

be denied because this Commission does not possess the authority to ord

to reimburse GWM for any duplicate payments received by ICE It 

established that wheredissimilarities in the respective modes of transpo

do not warrant a different construction the Shipping Act should be co

in the light of similar provisions of the Commerce Act North Atlantic 

iterranean Freight Conference Rates on Household Goods 11 F M

1967 See Far East Co lference v United States 342 U S 570 1952 

Interstate Commerce Commission has addressed directly the questio

authority to deal with duplicate payment offreight charges under the Int

Commerce Act 49 U S C 5 lln Duplicate Payments of Freight Charg

IC C 513 1975 the ICC held that duplicate payments clearly do not 

tute overcharges under the Interstate Commerce Act Emphasizing t

gressional intent evidenced by the mandate that no carrier shall c

greater compensation for the transportation of property than that spe

its tariff the ICC noted that

The duplicate payment situation bears no relation to this intent to prohibit discriminat

rates charged different shippers

350 I C C at 519
S CHARLES C HUNTER

Settlement Officer

Explaining this perspective the ICC stated that

In the duplicate payment situation the carrier has assessed and the shipper or consignee has paid

the published charges We are unable to view carrier submittal to the shipper of a duplicate bill when one bill for services rendered has previously been paid as representing charges for

transportation service

350 IeC at 519

In conclusion the ICC added that

Omitting duplicate payments from the term overcharge excludes Commission consideration of

these cases and places them solely within the jurisdiction of the civil courts

350 Iee at 520

The Commission s authority to deal with duplicate payments of freight

charges is no more expansive than that of its sister agency The duplicate

payment of freight charges does not constitute an overcharge under either the

Interstate Commerce Act or the Shipping Act 1916 and therefore does not

stand as a violation of section 18 a As noted by the ICe the duplicate

payment bears no relation to the transportation service performed and there

fore does not fall within the scope of this Commission s

jurisdiction 350 ICC

at 520 The remedy GWM seeks is available to it only in the civil courts

For the reasons set forth above GWM s claim for reparation in the amount

of 784 36 is denied As ICE has already informed the committee of creditors

that GWM s claim to the remaining 1 635 26 is valid it is unnecessary to

issue a

ruling regarding these funds

January 9 1980
FEDERAL MARITIME COMMISSION

DOCKET No 79 84

MATSON NAVIGATION COMPANY PROPOSED 5 90 PERCENT

BUNKER SURCHARGE INCREASE IN TARIFFS

FMC F Nos 164 165 166 AND 167

ORDER ON RECONSIDERATION

April 14 1980

On February 19 1980 Oscar Mayer Co Inc filed a pleading 

proceeding entitled Petition for Reopening For the Purpose of 

sideration Because of Error in Figures Used to Make the Ultimate Dec

Because this pleading is ambiguous procedurallyI

and wasnot filed suff

in advance of the date a final Commission decision wasdue to allow for 

by other parties to the proceeding under Rule 230 the Commission 

governing the reopening ofa proceeding 46 C F R 1502 230 2

and to 

procedural due process to the other parties to the proceeding it is being 

as a Petition for Reconsideration Replies to the Petition were filed 

Commission s Bureau ofHearing Counsel and Matson Navigation Co

POSITIONS OF THE PARTIES

The Petition seeks reconsideration of that portion of the Initial D

adopted by the Commission concerning the calculation of the KOPA

nage Oscar Mayer argued to the Presiding Officer and on exception 

Commission that the tonnage figures submitted for the KOPAA in th

ceeding were not stated in measurement tons and that a conversion fa

9524 must be applied to produce ameasurement ton figure Matson in

to the Presiding Officer and in its reply to Oscar Mayer s exception t

figure was indeed measurement tons It is now alleged by Oscar Maye

Petition that the submissions of Matson in another case i

e

I

The pleading cites Rule 201 174 46 C F R a Maritime Administration replalian as its procedural basis 

different places in the document it appears to be addl ClllCd to the Presidia Officer a8 well as the Commission

l Replies to aPetition to Reopen would have been due 10 days after the roocipt of thePetitlon 46 CF R IS02 2

February 29 1980 By law a final decision in this proceedina was required to be served by February 21 1980 M

Commission had already decided this case on January 30 1980 and a reopening would have required agreem

Commissioners to a 6Oday extension 46 USC1845
PROPOSED 5 90 BUNKER SURCHARGE INCREASE IN CHARGES 699

No 79 92 filed after the Commission rendered its decision in this proceeding

reveal that Matson did apply a conversion factor of 9524 to the KOPAA

tonnage figures indicating that these tonnagefigures were not originally stated

in terms of measurement tons Itis further argued that applying the conversion

factor in this case reduces the permissible surcharge from 5 73 as found by the Commission to 5 03

Hearing Counsel in its Reply agrees with Oscar Mayer that the 9524

conversion factor should be applied to the KOPAA tonnage calculation but

disagrees as to the calculation of the proper surcharge 3It included with its

reply an extensive exhibit calculating the surcharge at 5 72

Matson states in its Reply that Oscar Mayer s Petition should not be re

ceived because it does not comply with the requirements of Rule 261 in that

it was filed before the issuance of a final decision and did not contain a dated

certificate of service Moreover it allegedly repeats arguments made prior to

the decision and rejected by the Commission and raises other matters not

admitted into evidence

Matson admits however that it did make an error in computing the

KOPAA tonnage but disputes the surcharge computed by Oscar Mayer Mat

son argues that Oscar Mayer apparently failed to include past underrecoveries

of fuel costs in its computations contrary to the requirements of Form

FMC 274 It argues that Oscar Mayer s calculations are unsupported by any

evidence and are unexplained Matson further states that in any event any

overrecovery resulting from the incorrect computation will be compensated for

in subsequent surcharges by operation of Line 7 of Form FMC 274

DISCUSSION

It appears that Matson did misrepresent its submissions in this proceeding

and that a conversion factor should have been applied to the KOPAA tonnage

figures However the impact of this alteration appears to be de minimis ie

01 While OscarMayer alleges thatthe impact is more significant it has not

proffered any underlying documentation of its calculations to support this

conclusion In contrast Hearing Counsel has submitted a detailed document

supporting its calculation of the proper surcharge level

The question then becomes what if any corrective measures should be

taken

Bunker surcharge calculations in these cases are based upon estimated data

and do not purport to be so precise as to be correct within one hundredth of

one per cent See Increased Rates on Sugar 7 F MC 404 411 1962 The

Commission has recognized this in establishing a bunker surcharge procedure

which adjusts for past projection and methodology errors in future surcharges

by carrying forward past over and under recoveries to such calculations i e the

Line 7 remedy Docket No 79 55 Matson Navigation Co Proposed

Bunker Surcharge Order of Clarification 19 S R R 1411 1980 Accord

l

Hcaring Counsel also urges the Commission to treat this pleading as a Petition for Reconsideration noting that it would clearly fall within the substantive error provision of Rule 261 46 CF R 1502 261
700 FEDERAL MARITIME COMMISSION

ingly while the Commission hIlS calculated bunker surcharges and th

sulting projected overrecoveries with some precision these efforts serve o

reduce the margin of error and do not represent the actual fuel cost ne

the actual overrecoveries It is the methodology established in these proce

as it is applied in future surcharge filings that give them their signifi

Since in future surcharges the conversion factor will be applied to the KO

tonnage figures in the calculation of the overrecovery of fuel costs res

from prior surcharges a calculation error resulting in a surcharge that 

01 greater than the theoretically correct surcharge would appear to 

no real consequence

4

Accordingly the Commission will deny the procedural relief requeste

reopening of the proceeding but will grant the Petition to the extent c

factual findings contained in the Order Adopting Initial Decision serve

ruary 21 1980 are reconsidered and amended The Commission the

adopts the factual assertions of Hearing Counsel and concludes that b

the effect of the permissible surcharge is de minimis i e 01 and b

the error can readily be remedied in future surcharges by operation of L

Form FMC 274 no regulatory purpose would be served by reopenin

proceeding However Matson is cautioned to avoid suchsituations in the 

by being more careful in its data preparations and submissions

THEREFORE IT IS ORDERED That the Petition for Reopen

the Purpose of Reconsideration Because of Errorin Figures Used to Ma

Ultimate Decision of Oscar Mayer Co Inc is granted to the 

indicated herein and is denied in all other respects and

IT IS FURTHER ORDERED That the Order Adopting Initial De

served February 21 1980 is amended in accordance with this Order

By the Commission

S FRANCIS C HURNEY

Secre

Ahltoulh this may lheorotlcally rod alhlppar potentlal ry In OIl22 mplalnt proceodlnp the Com

ated that Una 7 01Form FMC274 is tho primary hipper romody In thislOpnI Docket 79 55 IN MOlOOYOr O

avor urd1arp of 55 SO per ton on aeoonl car this would ItIn lOharp roductlon 01 5009 perton Or

III1 hll DIdIIOII 19 Saa 1399 1401 1980
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 574 1

S C JOHNSON SON INC

v

OVERSEAS SHIPPING COMPANY

AGENT FOR EAST ASIATIC Co LTD

ADOPTION OF THE SETTLEMENT OFFICER S DECISION

April 4 1980

By complaint filed September I 1978 S C Johnson Son Inc seeks

reparation in the amount of 4 298 30 for freight overcharges assessed by East

Asiatic Company Ltd on two shipments of mixed lots of Insecticides and

Buffing Polishing Compounds carried by East Asiatic from San Francisco to

Singapore

Settlement Officer John L Sheppard issued a decision on December 27

1979 which awarded 4298 30 to S C Johnson Son Inc No exceptions

were filed but the Commission on its own motion determined to review the

Settlement Officer s decision

The Commission concurs in the Settlement Officer s decision awarding rep

aration and that decision will be adopted However it is unclear from the

Settlement Officer s decision against whom that award was made Overseas

Shipping was not a carrier and acted merely as ageneral agent for East Asiatic

In this role it accepted service made bookings and generally acted on

the carriers behalf Hence the proper party to pay such reparation to

S C Johnson is East Asiatic and not Overseas Shipping

THEREFORE IT IS ORDERED That the Settlement Officer s Deci

sion issued in this proceeding is adopted and made a part hereof and

IT IS FURTHER ORDERED That East Asiatic Company Ltd is di

rected to pay reparation in the amount of 4298 30 to S C Johnson Son

Inc plus 12 interest accruing from the date the freight charges were paid

By the Commission
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 574 1

S C JOHNSON SoN INC

v

OVERSEAS SHIPPING CoMPANY AGENT EAST ASIATIC CoMPANY L

Adopted Aprll14 1980

DECISION OF JOHN L SHEPPARD SETTLEMENT OFFIC

Reparation Awarded

S C Johnson Son Inc of Racine Wisconsin are manufactu

various household products such as cleaning compounds waxes insec

and so forth

East Asiatic Co Ltd is a common carrier by water in the foreign com

of the United States and operates in the trade between Singapore and th

West Coast mainland among others Overseas Shipping Company isag

East Asiatic in San Francisco California and may accept service make 

ings and generally act on the carrier s behalf

The complainant alleges that on two occasions they shipped mixed 

insecticides and buffing polishing compounds from San Francisco to its 

apore subsidiary via vessels of East Asiatic The complainant further 

that in accordance with Local Singapore requirements the bill of 

indicated certain of the items shipped to behazardous cargo which caus

cargo to be assessed the hazardous cargo rate of 179 00 cubic met

applying in the carrier s tariff Ilhazardous cargo socalled red label 

according to U S Coast Guard Regulations 2

In fact however thcsepr

were excepted from classification as hazardous cargo by virtue ofbeing 

in appropriate containers holding less than 19 3 ounces each of the p

The products in question were in cans some of 16 ounces and some 

I

Complainant consonting andthe Carrier failinlto abject both parties arc deemed 10 haveoon80nted to the infon

of the Commil8ion s Rules of Practice andPnx odure 4611502301 304 this decision will be flnal unlcu the Comm

to review it within 30 days from tho date of service thereof

1

Paciflc Straits Conference Local Ovcrlllnd Froight Tariff No 1 FMC 7 Items 554 20000 00 and 599 2000
S C JOHNSON SON INC V OVERSEAS SHIPPING COMPANY 703

S JOHN L SHEPPARD

Settlement Officer

ounces and should therefore have been assessed the same rate as the otheritems

in the shipment

Specifically 2710 cartons pails of buffing and polishing compound and 668

cartons of insecticide moved under carrier B L 4l on August 10 1977 under

a rate of 179 00 cubic meter and 929 cartons of buffing and polishing com

pound and 2100 cartons of insecticides moved under carrier B L48 on

June 18 1977 at 179 00 cbm The above commodities should have moved

under a rate of 129 00 cubic meter The resultant discrepancy resulted in a

total overcharge of 4298 30

Overseas Shipping Company speaking for the carrier conceded the merits

of the claim and agreed that the complainant was overcharged 4298 30 but

declined to honor the claim because to do so would be in violation of the

applicable tariffrule which requires such claims to be filed within six months 3

In fact Overseas suggested that the complainant initiate this informal com

plaint so that they could legally pay the claim

It is well settled that a claim may be filed with the Commission up to two

years after the cause of action notwithstanding any tariff rule

The only issue between the carrierand complainant is thus disposed of Both

agree that the cargo as packaged was not hazardous or dangerous cargo ac

cording to the regulations of the U S Coast Guard which serve to define

hazardous cargo for the purposes of the tariff Both B Ls are claused This

shipment contains dangerous goods of various classes in small receptacles

Authorized per USA competent authority certificate No 001 77 copy at

tached This notification was required by Singapore authorities Overseas

Shipping s

freight department saw the clause and did not refer to the attached

material but rated the items as dangerous even though they were excepted by

virtue of being in small receptacles

Since the only issue here is the question as to whether the claim is time

barred by the carriers six month rule and such rules have been declared a

nullity reparation is hereby awarded in the amount of 4298 30 Evidence of

payment should be furnished to complete the record

J Rule 33 2 Six Months Rule of FMC 7
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 566 1

EXCAM INC

v

LYKES LINES AGENCY INC AND COSTA LINES

ORDER ON REMAND

April 17 1980

By complaint filed August 16 1978 Excam Inc seeks reparation 

amount of 1 594 10 for freight overcharges assessed by Lykes Bros 

ship Co Inc on two shipments described on the bills of lading as Fire

Excam further seeks reparation for overcharges assessed by Costa Line 

amount of 778 38 on one shipment that was also rated as Firearms

Settlement Officer Donald T Pidgeon issued a decision on Decem

1979 awarding 1 594 10 and 743 17 in reparation to Excam on the ba

the merchandise shipped was in fact Replica Arms and not Firearms 

Commission determined to review the Settlement Officer s decision on 

motion

The Commission after a review of the record is not convinced that 

has satisfied its burden and demonstrated that these shipments were 

Replica Arms and not Firearms The Settlement Officer s decision 

exclusively upon Lykes Bros failure to contest the claims This is not su

in amisrating proceeding Complainant must always produce tangible ev

eg

invoices bills of lading manifests to corroborate its assertion t

identity of the commodity actually shipped wasdifferent than the des

stated on the bill of lading

This matter was addressed in E DuPont v Seatrain Interna

18 S R R 879 1978 where it was held that

a detennination of the applicable rate must be based noton a mere admission by th

that it misrated the cargo but on evidence in the record showing the true nature of the co

shipped 18 S R R at 880

It is in this regard that Excam has failed to sustain its burden of pro

cordingly this matter will be remanded to the Settlement Officer for ex
S FRANCIS C HURNEY

Secretary

EXCAM INC V LYKES LINES AGENCY INC AND COSTA LINES 705

handling in order to issue a supplemental decision which includes additional

findings of fact and conclusions of law on the question raised herein

One further point requires clarification The Settlement Officer s decision

does not clearly indicate whether the award for reparation wasmade against

Lykes Bros or Lykes Lines Agency Inc The latter corporation is not a carrier

and acted merely as a general agent for Lykes Bros In this role it accepted

service made bookings and generally acted on the carrier s behalf but is not

the proper party to pay reparation to Excam

THEREFORE IT IS ORDERED That this proceeding is remanded to the

Settlement Officer for decision consistent with this Order

By the Commission

Commissioner Peter N Teige did not participate because the case was decided before he took office
j FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 688 1

Dow CORNING CoRPORATION

v

SEA LAND SERVICE INC

ADOPTION OF THE SETTLEMENT OFFICER S DECISIO

April 17 1980

By complaint filed May 17 1979 Dew Corning Corporation seeks re

tion in the amount of 645 73 plus 6 interest for freight overcharges as

by Sea Land Service Inc on one shipment containing synthetic resin 

icals and silicon rubber compound carried by Sea Land from New Yo

Antwerp Belgium on August 3 1977

Settlement Officer Hubert E Bradford issued a decision on Janua

1980 denying reparation The Commission determined to review the 

tlement Officer s decision on its own motion

The Commission concurs in the Settlement Officer s decision and it w

adopted Itis to be noted however that the lawful rate found to be app

in this proceeding results in a higher freight charge 2 582 15 than orig

assessed and collected by the carrier 2 502 00 Hence Sea Land 

statutory duty to collect 8015 in freight due on this shipment

THEREFORE IT IS ORDERED That the Settlement Officer s de

in this proceeding is adopted and made a

part hereof and

IT IS FURTHER ORDERED That Sea Land Service Inc is direc

collect the applicable freight charge due in the amount of 80 15 from 

Corning Corporation

By the Commission 2

S FRANCIS C HURNE

Sec

I

Section 18 bX3 of the Shipping Act 1916 46 USC 817 bX3 states inpertinent part

No common carrier by water shall charge ordemand orcollect orreceive aareater orIcss ordifferent compe

the transportation of property than the rates and charges which are specified inita tariffs on file with the C

and duly published Ilnd in effect at the time

l Commisaioner Petcr N Teigc did not participate bctaUlle the case was decided before he took office
v

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 688 1

Dow CORNING CORPORATION

SEA LAND SERVICE INC

Adopted April 17 1980

DECISION OF HUBERT E BRADFORD

SETTLEMENT OFFICERI REPARATION DENIED

Dow Corning Corporation claimant by informal docket claim filed

May 17 1979 seeks recovery of alleged overcharges of 645 73 plus 6 interest

from Sea Land Service Inc respondent Claimant is located in Midland

Michigan and is engaged in the manufacture and distribution of synthetic

resin silicon rubber compounds and various chemicals Respondent is a com

mon carrier engaged in transportation by water from New York New York to

Antwerp Belgium and as such is subject to the provisions of the Shipping

Act 1916

Claimant states that when its overcharge claim was filedwith the respondent

on January 24 1979 the respondent refused to honorthe claim stating that the

statute oflimitations as contained in Rule 8 of the NACFC TariffNo 29 had

expired Said rule states that the claim must be submitted to the carrier in

writing within six months of the date of shipment Section 22 of the Shipping

Act 1916 however permits the filing of such claims within two years of the

cause of action therefore the claim must be considered on its merits 2

Respondent transported a shipment of synthetic resin chemicals and silicon

rubber compound from New York to Antwerp on August 3 1977 This ship

ment moved aboard thevessel Galoway on bill oflading No 901 498508 The

Bill of lading reflects that the shipment consisted of one house to house con

tainer containing 30 leverpaks ofSilicone Rubber Compound Dimethyl Vinyl

End Block Methyl Vinyl Dimethyl Polysiloxane Combustible Liquid N O S

I Both parties having consented to the informal procedure of46 CF R502301 304 as amended this deci sQn wl1 be final

unless the Commission elects 10 review it within 30 days from the date of service thereof

1

It has beenwellestablished by the Commission that carrier s socalled six month rules cannot act to barreXveryof otherwise

legitimate overcharge claims
708 FEDERAL MARITIME COMMISSION

weighing 6 360 Ibs 10 drums of Chemicals Asitopysilane Corrosive L

N O S Corrosive labelweighing 4 670Ibs 30 drums and 7 pallets ofSyn

Resin weighing 25 706 Ibs and 4 drums of Synthetic Resin V

triacetoxysilane Anchorage Additive Corrosive Liquid N O S Corrosive 

terial Corrosive Label The rate of 139 00 weight minimum 40 320 Ib

container for Special Transactions not Classified According to Kind M

Containerloads of the Following Silicone Fluids Silicone Resins Solu

Silicone Rubber Compounds Silicone Base Adhesive and Sealers Sil

Antifoam Emulsions Silicone Base Lubricating Greases per 

9310120 587 as contained in the North Atlantic Continental Freight Co

ence Tariff No 29 FMC 4 was applied

Claimant seeks to apply instead the rates named in individual rate ite

follows

Chemicals N E S Packed Up to find

1 500 per 2 240 Ibs Item 510 0001225 107 OO

Synthetic Resin Item 5810001234 96 25W 

Silicone Rubber Compound Item 581 1020 001 123 50W

Total charges for the shipment were 2 502 00 Applying the rates soug

the claimant as stated above would reduce the total charges to 1 8

which is 645 73 less than collected Charges were prepaid by the clai

The respondent agrees with the complainant that the 139 00 rate tha

assessed for the shipment wasnot applicable and that theshipment should

been rated under the individual rate items as follows

Chemicals N E S Packed

Over 1 500 per 2 240 Ibs Item 510 0001229 147 75W

Synthetic Resin Item 58tooo1234 96 25W

Silicone Rubber Compound Item 581 1020 001 123 50W 

Based upon the valuation stated on the Intermodal Export Master Set 

Chemical portion of the shipment was valued in excess of the 1 500 t

fore the respondent is correct in claiming that the 47 75W1M ra

Item 5100001229 should be charged and not the rate of 107 ooW 

Item 510 000125 for value up to and including 1 500 per 2 240 Ib

claimant seeks to apply

The North Atlantic Continental Freight Conference Tariff No 29 FM

provides that the rates apply per ton of 2 240 Ibs or 40 cubic feet whic

produces the greater revenue

The carrier and the complainant are in agreement that the shipmen

improperly rated Based upon documents that both the carrier and respo

furnished it is established that the greater revenue of 2 582 15 wou

produced by rating the shipment on ameasurement basis rather than 1 8

when rated on a weight basis as stated by the claimant

The following rate computations apply

Chemicals 107 cu feet @

Synthetic Resin 692 cu feet @

Silicone Rubber 169 cu feet @

147 75M

96 25M

123 50M

395 23

1 665 13

52179

I Sl 1
8 HUBERT E BRADFORD

Settlement Officer

Accordingly the 

o

Corning Corporation c

a

against Sea 

ad Sece

Inc is denied

January 28 1980
FEDERAL MARITIME COMMISSION

i

INFORMAL DocKET No 509 1

GENERAL ELECTRIC DE COLOMBIA SA

v

FLOTA MERCANTE GRANCOLOMBIANA S A

Shipper failed to meet its burden of proof in charging that carrier misraled a shipme

overcharged shipper Reparation denied

BY THE COMMISSION RichardJ Daschbach Chairman Th

F Moakley Vice Chairman Jam

Day Leslie L Kanuk Commissi

Commissioner Peter N Teige did no

ticipate because the case was decide

fore he took office

REPORT AND ORDER

April 17 1980

This proceeding was instituted by complaint filed by General Elect

Colombia SA alleging that Flota Mercante Grancolombiana SA 

roneously assessed the rate for merchandise NOS on a shipment ide

on the bill of lading as Partes y piezas sueltas para Maquineria Caterp

loose parts and pieces for caterpillar machinery 1 Complainant argue

the shipment should have been charged under the lower rate for Tr

Parts Settlement Officer John L Sheppard agreed and awarded 

plainant reparation in the amount of 1 202 63 The Commission determ

to review the decision pursuant to 46 CF R 304 g Because the Comm

concludes that Complainant hasnot met its burden ofproof in this procee

the decision of the Settlement Officer is reversed

1

This was erroneously translatedto SmaU parts and pieca forCaterpillar Machinery in both the complaint and th

of the Settlement Officer
litis unclear whether Caterpillar in the bill of lading refers to the trademark or is used generically

GEN L ELECTRIC COL V FLOTA MERCANTE GRANCOLUMBIANA 711

DISCUSSION

The bill of lading constitutes the sole exhibit and provides the only evidence

of the nature of the commodities The Settlement Officer requested more

information from Complainant about the shipment but the record indicates no

response to the request He nevertheless concluded that tractor parts is

descriptive of the component parts of all the self propelled equipment manu

factured by the Caterpillar Tractor Company emphasis added

The Settlement Officer s statement is not only unsupported by the evidence

of record but to the extent the commodities may not have been built by the

Caterpillar Tractor Company 2

the statement is also irrelevant Moreover

there is no evidence that the commodities were tractor parts at all They may

have been parts for caterpillar type machinery other than tractors The Set

tlement Officer s statement that Caterpillar Tractor Company products are

essentially tractors is not based on the record

It is Complainant s burden to prove that an improper rate was charged

Johnson Johnson International v Venezuelan Lines 16 F MC 84 85

1973 This burden has not been met and Complainant s claim for reparation

must therefore be denied

THEREFORE IT IS ORDERED That the decision of the Settlement

Officer is reversed and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET No 76 11

IN RE AGREEMENT Nos 150 DR 7 AND 3103 DR 7

ORDER ON RECONSIDERATION

August 18 1980

The Commission has before it the joint petition ofthe Trans Pacific F

Conference of Japan Korea TPFC and Japan Korea Atlantic 

Freight Conference JKAG seeking reconsideration of the December 31 

decision conditionally disapproving Agreement No 150 DR 7 and dism

Agreement No 3103 DR 7 Seatrain Pacific Services S A and the B

of Hearing Counsel filed pleadings in response to the petitions opposin

alterations in the Commission s December 31 1979 Order

JKAG states that the Commission should either have approved its pro

dual rate contract on a standby basis or deferred all action until 

decision is reached on the proposed JKAG intermodal authority amend

pending in FMC Docket No 79 74 JapanKorea Atlantic Gulf F

Conference Extension ofIntermodal Authority Agreement No 310

As stated in the December 31st Report and Order the unavailability 

JKAG intermodal service itself prevents the approval of an intermoda

chant s contract for that conference as a matter of law See Agre

No 8765 9 F M C 333 1966 It would also be inappropriate to de

action on a docketed proceeding involving elaborate factual issues and 

questions oflaw and policy pending the specific resolution of JKAGs pro

intermodal authority in Docket No 79 74 JKAGmay instead submit a

intermodal dual rate contract proposal at such time as it obtains sect

authority to offer intermodal services Regardless of the procedure u

place JKAG intermodal contract before the Commission the burden re

on its proponents to demonstrate that currentcompetitive circumstances 

trade justify the proposal

TPFC seeks authority to use a single dual rate contract which include

intermodal and port toport shipments arequest examined and rejected 

Commission s December 31 1979 decision TPFC now alleges tha

petition in its trade has increased since the record closed and states tha

changed circumstances verify its prior contention that separate dual ra
S FRANCIS C HURNEY

Secretary

IN RE AGREEMENT NOS 150 DR 7 AND 3103 DR 7 713

tracts for intermodal and port toport cargoes would be worse than no con

tract at all Reopening of the record was not requested

No TPFC intermodal shipments are presently subject to dual rate arrange

ments and if TPFC wishes to preserve the status quo by not offering its

shippers the option of signing an intermodal dual rate contract it may do so

IfTPFC wishes to employ a unitary intermodal port toport contract how

ever it must first demonstrate a clear factual connection between the unitary

contract sought and the provision of definite transportation benefits to the

shipping public TPFC may file a further amendment to its dual rate contract

at any time in the future seeking to make such a demonstration of benefits

TPFC also seeks reconsideration or clarification ofthe condition requiring it

to release intermodal shippers using a differentthrough intermodal route than

that offered by the Conference The phrase through intermodal route was

intended to describe reasonably distinct points of origin or destination and not

the particular inland carrier chosen orthe particular path followed in traversing

the territory between such points and the ports used by TPFC vessels By

requiring the release of shippers moving cargo to or from points located a

reasonable distance from the points served by the conference the Commission

was affirming the applicability of the natural routing clause of section 14b

of the Shipping Act 1916 46 U S C 813a to intermodal transportation

Accordingly there is no need to modify the conditions imposed by the Decem

ber 31 1979 Order

Finally TPFC directs attention to a clerical error at page 36 line 20 of the

December 31 1979 Report and Order and requests recognition that the word

not wasnot intended in that sentence This request wi 1be granted

THEREFORE IT IS ORDERED That the Commission s December 31

1979 Report and Order is amended by deleting the word not from page 36

line 20 and

IT IS FURTHER ORDERED That the Petition for Reconsideration of

the Trans Pacific Freight Conference of Japan Korea and the Japan Korea

Atlantic and Gulf Freight Conference is granted to the extent indicated above

and denied in all other respects

By the Commission

Agreement No 50 DR 7 Paragraph 6 Further Proviso

Commissioner Peter N Teige did not participate because the case was decided before he took office
FEDERAL MARITIME COMMISSION

i

DOCKET No 80 1

SUNMARK INC PETITION FOR DECLARATORY ORDER

Containerload shipments of a product marketed as Fun Dip Candy and consisting o

packets of a granular substance containing 97 dextrose is properly rated as Can

than Dextrose

Lee K Mathews for Sunmark Inc

Jacob P Billig for Combi Line

REPORT AND ORDER

April 18 1980

BY THE COMMISSION RichardJ Daschbach Chairman 

F Moakley Vice Chairman J

Day Leslie L Kanuk Comm

Commissioner Peter N Teige did 

ticipate because the case was de

fore he took office

This proceeding arises from a Petition for Declaratory Order 

Sunmark Inc and the Reply to Petition filed by Combi Line

Combi Line is a common carrier by water in the foreign commer

United States Sunmark is a shipper located in St Louis Missour

manufacturer of a product known as Fun Dip This product is am

granular ingredients 97 of which is dextrose It is marketed as ca

Between March 1978 andSeptember 1978 Sunmark arranged wi

Line to transport seven containers of Fun Dip from New Orleans 

pean destinations three to Felixstowe England and four to R

Holland at the rate specified for the commodity Dextrose Dextr

Baker s Sugar Grape Sugar Corn Sugar iFreight totaling 15 35

prepaid In October 1978 Combi informed Sunmark that these 

I European Freisht Association Tariff No FMC 3 Palc 95 Item No 061 9008 Holland and Gulf U

Conferenco Tariff No FMC 18 Page 130 Item No 061 9008 BOlland The shipments were all House to hou

ultimately destined for interior points in EOlland Germany orAuatria
SUNMARK INC PETITION FOR DECLARATORY ORDER 715

should have been assessed one of three different rates for Candy When

Sunmark refused to pay additional freight Combi Line commenced a state

court action to collect the unpaid balance on the seven disputed shipments 3 On

November 6 1979 the court invoked the primary jurisdiction doctrine and

issued an order staying its judicial proceedings pending a Federal Maritime

Commission determination of lthe correct tariff rate and 2 the reason

ableness ofthe rate found to becorrect two matters governed by the Shipping

Act 1916 46 U S C S801 et seq

Sunmark now petitions the Commission to rule that its containerload ship

ments of Fun Dip were entitled to the Dextrose rate but does not seek a

ruling under section 18 b 5 or any other provision ofthe Shipping Act 1916

pertaining to the reasonableness of foreign commerce rates Combi Line re

plied to the Petition and opposes relief on either of the two possible grounds

mentioned by the St Louis County Circuit Court

POSITION OF THE PARTIES

Sunmark contends that all seven Fun Dip shipments were entitled to the

Dextrose rate because

1 Fun Dip is essentially dextrose Dextrose is corn sugar in raw form

Sunmark acquires dextrose in bulk tanks or in 100 lb bags Fun Dip is

manufactured from raw dextrose simply by blending it with minor

amounts of coloring flavoring and preservative ingredients There is no

cooking or drying Candy is typically cooked rather than blended

2 Sunmark received a written rate quotation from the Moram Agencies in

New York in January 1978 stating that Combi Line s rate for dextrose

from New Orleans to Rotterdam was 109 25 plus currency adjustment

surcharge per long ton or about 2 211 per container s

Sunmark would

also have to pay inland transportation costs in Europe and the United

States

3 Fun Dip is sold in paper packets Two dozen packets are enclosed in

cardboard retail display cartons These cartons are packed into a cor

rugated cardboard shipping container known as a case The cases sent

to England hold 8 cartons and weigh 15 Ibs The cases sent to Holland hold

16 cartons and weigh 27 Ibs A typical container load of either type case

weights approximately 42 000 Ibs

lCombi wishes to apply the commodity rates for I Candy Hard In Bags European Freight Association Tariff No

FMC 18 ItemNo 062 0100twoshipments before June 7 1978 2 Confectionery Candy European Freight Association

ItemNo 062 01J 5 twoshipments after June 7 1978 and 3 Candy Gulf United Kingdom Conference Tariff No FMC 3

Item No 062 0115

J Combi Line v Sunmark Inc Circuit CourtofSt Louis County Missouri Case No 425905 Cambi clalms additionalfreight

in the amount of 6 886 14 based upon the difference in the tariff ratesdescribed in notes 1 and 2 above

4 The Commission has authority to judge the intrillsic reasonableness of carrier rates in domestic offshore commerce but its

foreign commerce ralemaking powers are more limited Compare 46 US c 1817 a with 46 V S c U817 b5 811 c 816

and 815 First

Sunmatk does not assert that Moram is an agent fot Combi Line The letter ultimately recommended the useofa BalticGulf

Lines intermodal tate

SUNMARK INC PETITION FOR DECLARATORY ORDER 717

2 The commercial description of the product given by the shipper for sales

purposes should be controlling Mead Johnson Co v Atlantic Coast

Line R R 168 IC C 157 1930 The Commission frequently determines

the tariff status of commodities from descriptions in the shipper s sales

literature or stock catalog E g Reliance Pet Products Corp v Nippon

Yusen Kaisha 19 S R R 904 1979 European Trade Specialists v

Prudential Grace 17 SRR 1351 1354 1977 In this instance the

gustatory aspects of the product dominate Sunmark s display packaging

and the word dextrose appears only in small type on the ingredients

section

3 The end use is a necessary factor to consider in categorizing commodities

for tariff purposes E

g

Pan American Health Organization v Moore

McCormack Lines 19 S R R 762 764 1979 where a Stationery rate

was applied in lieu of a Bond Paper rate See also Continental Can Co

v United States 272 F 2d 312 315 2d Cir 1959 Fun Dip is neither

intended to nor likely to have any use other than as a candy treat

4 There is no ambiguity in Combi Line s tariffs because the Dextrose and

Candy rates are not equally applicable The Candy rate is more

specific because demand for the finished article rather than the raw mate

rials of which it is comprised provides the sole reason for transporting the

commodity to Europe

5 Combi Line s subsequent creation of a lower rate for Fun Dip is not an

admission that the earlier rate was an unlawfully high rate Dubuque

Packing Co v H W MotorExpress Co 62 MC C 101 102 1953

Unless additional evidence of unreasonableness were required a carrier

could accomplish a retroactive application of rates merely by amending its

tariff The Shipping Act was clearly intended to prohibit the retroactive

application of rates E Mahlab v Concordia Line 8 F MC 133 136

1964

6 Sunmark s January 1978 letter from the Moram Agencies is not only

unconvincing for lack ofa firm connection to Combi Line or to Fun Dip

but is generally irrelevant Amisquotation ofrates cannot be ajustification

for the shipper s payment of less than the proper tariff rate Louisville

Nashville R Co v Maxwell 237 U S 94 97 1915

DISCUSSION

The question presented is whether Sunmark s Fun Dip cartons wereprop

erly rated as Dextrose instead of one of three Candy items available in

Cambi Line s tariff

The applicable freight rate depends upon the intrinsic nature and market

value of the goods actually shipped matters whch are not necessarily deter

mined by the description provided by a manufacturer or shipper the use

intended by a consignee the physical appearance or chemical composition of

the goods or any other single factor See CrestlineSupply Corp v Concordia

Line 19 F MC 207 211 1976 In a particular case however one or more

factors can be decisive in establishing the true nature of the commodity being

I The items from Gulf United Kingdom Conference Tariff No FMC 18

most relevant to Sunmark s three shipments to England are

a Sugar in bags open

b Glucose NOT syrup solutions

Liquid or Powdered 107 W

c Dextrose Dextroglucose Baker s Sugar Grape

Sugar Corn Sugar 114 W

d Candy 63 M

2 The items from European Freight Association Tariff No FMC 3 pre

June 7 1978 most relevant to Sunmark s first two shipments to Holland

are

a Sugar Raw or Refined

b Glucose NOT Solutions

c Dextrose in House House containers min

40 320 Ibs 97 25 W

d Confectionery Candy 182 75 W

3 The items from European Freight Association TariffNo FMC 3 June 7

1978 most relevant to Sunmark s last two shipments to Holland are

a Sugar Raw or Refined 142 25 W

b Glucose NOT solutions 114 75 W

c Dextrose in House House containers min

18 289 kgs

d Confectionery Candy

e Candy hard in bags

128 75 W

104 50 W

107 75 W

180 00 W

130 00 W
FEDERAL MARITIME COMMISSION

DOCKET No 79 95

CANCELLATION OF TARIFFS FOR NONCOMPLIANCE

WITH TARIFF FILING REGULATIONS

REPORT AND ORDER

April 23 1980

BY THE COMMISSION RichardJ Daschbach Chairman T

F Moakley Vice Chairman Jam

Day Leslie Kanuk Commissioners 

N Teige Commissioner did no

ticipate because the case was decid

fore he took office

On November 15 1979 a show cause proceeding was commenced 

approximately 350 foreign commerce ocean carriers Respondents 

carriers were ordered to show cause why some 600 Federal Maritime Co

sion tariffs published by them should not be cancelled for noncomplianc

Part 536 ofthe Commission s Rules 46 C FR 1536 as amended on N

ber 16 1977 1 A copy of this Order was mailed to each Respondent 

address listed on the subject tariffs and wasalso published in the Novem

1979 Federal Register Replies were due by January 7 1980

A large number of Respondents were either unreachable by the 

States Postal Service at the addresses contained in their tariffs or simply 

not reply to the Show Cause Order The tariffs of this group of carri

listed in Appendix A to this decision and will be cancelled pursu

sections l8 b 4 and 22 ofthe Shipping Act 1916 46 U S C 18l7 b 

821 2

I

Rtport 011 RtcOIUlderollOllln Docket NO 7 2 19 20 F M C 286 1977 42 FIli ReI 5925 Tho 1977 amendmen

first sianiftcllnt revimn 0Part S36 inQC 196Their principal object WIIIl to prelCtibe J9 now 20 mandatory topicsfo

in common carrier tarifts A numberina IYltcm tor these tariff rulea was alao pl elCribod 46 C PR IS36 S d 

amendments took effect on January I 1978 for nowly ftlod tariffs Exiltin tariffs Wert Jiven until January I 1919 

All foml commerce carrien were mailed three Qircular lottendurinl1977 and 1978 remindina themofthe approach

and announcinl the availability or FMC conducted aemlnal l on the new requiremonts Circular Letter NOI 2 77 2 78 

l Those carriers whichdid not receive notaby mail relelvcd Yolk conltNctive notice under 44 US C I107by v

Federal Regllter publication Set NorthAm ICQn Phannacal Inc I DtpMtnwnt of Health Education and Wf

546 8th elr 1973 Moreover llOCtion 36 a 9 of the CommWJonsRulcI requim carriors to maintain acurRln

their FMCtariffl
CANCELATION OF TARIFFS 721

Asecond group of Respondents replied by stating that they had previously

cancelled one or more of the subject tariffs were immediately cancelling their

nonconforming tariffs or were tendering amendments which brought their

tariffs into conformity with revised Part 536 The tariffs of this group are listed

in either Appendix B properly amended or Appendix C previously

cancelled

Only eight carriers contested the proposed cancellation of 17 different tariffs

and two of these carriers filed conforming amendments before the date of this

decision A third carrier N Y KLine stated that its tariff FMC No 84 was

a specialized governing tariff issued under section 536 13 of the Commis

sion s Rules and was not affected by the 1977 amendments This container

interchange tariff was inadvertently included in the instant proceeding and

accordingly will not be cancelled

Ofthe five remaining carriers United Intermodal Lines attempted to replace

its nonconforming tariff FMC No 14 with another tariff FMC No 26 The

later filing was rejected however and tariff FMC No 14 remains non

conforming and subject to cancellation Palau Shipping Co Inc Pacific Van

and Storage Co Inc and Hellenic Lines indicated that they would either

revise their tariffs or cancel them but to date they have not taken the necessary

actions to do so Mamenic Line submitted an unauthorized response to Hearing

Counsels memorandum which claimed Mamenic was unable to amend tariff

FMC Nos 16 and 19 because it was never informed of the particular

deficiences which required correction 3Individual notice describing the non

conforming aspects of each affected tariff was not required The three FMC

circular letters sent over the course of a year advised all foreign commerce

carriers of the new Part 536 requirements and offered Commission assistance

in achieving compliance Moreover Mamenic Line did properly amend two

other foreign commerce tariffs FMC Nos 22 and 23 before the instant

proceeding commenced Examination of Mamenic s January 4 1980 response

to the Show Cause Order indicates that it may not have amended tariff Nos

16 and 19 because it has suspended service in all or part of the Central

American trades covered by these tariffs 4Because a tariff which does not

describe an active and bona fide offer of common carrier service is also incon

sistent with Part 536 and section 18 b of the Shipping Act 1916 Mamenic

has presented no defense to the proposed cancellations Inactive Tariffs of

Vessel Operating Common Carriers 20 F MC 433 1978

Carriers which have tariffs cancelled as a result of this proceeding may

immediately file a successor tariffwhich conforms to Part 536 and takes effect

upon 30 days notice

THEREFORE IT IS ORDERED That the tariffs listed in Appendix A

to this Order are cancelled without prejudice to the publishing carriers and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary

J

Letter dated February 29 1980 from United States Navigation Inc Mamenic sagent in the United States

4 Mamenic is1 Nicaraguan carrier It advised the Commission that its operations in Nicaragua have ceased because ofpolitical

disturbances
I

FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 4201

STOP AND SHOP CoMPANIES INC

BRADLEES DIVISION

v

BARBER BLUE SEA LINE AND

BARBER STEAMSHIP LINES INC

ORDER ON REMAND

April 25 1980

By complaint filed June 28 1977 Stop Shop Companie

reparation in the amount of 252 64 for freight overcharges assess

Blue Sea Line and Barber Steamship Lines Inc on one shipment 

the bill of lading as Hardware Gadget Assortment

Settlement Officer James S Oneto issued a decision on Febru

dismissing this proceeding on the basis that Stop Shop was n

party to bring such an action because ithad not furnished proof th

freight charges in question and accordingly suffered injury Th

Officer determined that the freight charges had been paid by 

Company an independent ocean freight forwarder The Comm

own motion determined to review the Settlement Officer s decis

The Commission after a review of the record is not convin

Complainant was given an adequate opportunity to demonstrate 

standing to bring this action Consequently this matter is rema

Settlement Officer with instructions that he determine whether S

actually reimbursed Pistorino Company for freight charges ad

to the Respondent If this is found to be the case the Settleme

further directed to address the merits of the proceeding

THEREFORE IT IS ORDERED That this proceeding is rem

Settlement Officer for issuance of a decision consistent with this 

By the Commission

S FRANCIS C HU
FEDERAL MARITIME COMMISSION

46 C F R 536 538 DOCKET No 79 58

DUAL RATE CONTRACT SYSTEMS IN THE FOREIGN

COMMERCE OF THE UNITED STATES RATE INCREASE

ON LESS THAN NINETY DAYS NOTICE

AGENCY

ACTION

Federal Maritime Commission

Withdrawal ofProposed Rule

SUMMARY The proposed rule prescribed a uniform method for ocean

carriers and conferences to justify short notice less than 90

days dual rate increases The Commission has decided not

to amend its existing regulations at this time and accord

ingly withdraws the proposed rule

SUPPLEMENTAL INFORMATION

This proceeding was instituted by Notice ofProposed Rulemaking published

June 6 1979 44 Fed Reg 32408 32418 The proposals would amend

Article 14 ofthe Uniform Merchants Contract contained in Subpart BofPart

538 of the Commission s Rules 46 C F R S 538 10 This Article sets forth in

the dual rate contract a provision allowing less than 90 day rate increases in

extraordinary circumstances The proposal would also add a new section to the

Commission s tariff filing rules 46 C FR Part 536 prescribing a form of

justification for carriers or conferences seeking to invoke Article 14 of the

Uniform Merchants Contract The proposal wasdesigned to allow increases in

rates covered by Commission approved exclusive patronage contracts to go into

effect on as little as 15 days notice for sudden severe and unforeseen cost

increases The proposed rule was intended to cover among other things un

foreseen cost increases in bunker fuel

Comments have been filed by carriers conferences and shippers Upon

review of these comments and reexamination of the proposed rule the Com

mission finds that the rule will not serve its intended purpose and that the

Commission s current regulation of short notice dual rate increases better

serves to grant relief to ocean carriers and conferences for sudden severe and
724 FEDERAL MARITIME COMMISSION

unforeseen cost increases including bunker fuel costs Accordingly 

posed rule is withdrawn and this proceeding is discontinued

It Is So Ordered

By the Commission

8 FRANCIS C HURNEY

Sec

Commissioner Peter N Teige did not panicipate becaullC the case was decided before he took office
v

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 440 1

ALLIED STORES INTERNATIONAL INC

SUBSIDIARY OF ALLIED STORES CORPORATION

UNITED STATES LINES INC

INFORMAL DOCKET No 441 1

THE STOP SHOP COMPANIES INC

BRADLEES DIVISION

v

BARBER BLUE SEA LINE

INFORMAL DOCKET No 460 1

KRAFT FOODS CORPORATION

v

BARBER BLUE SEA LINE

INFORMAL DOCKET No 701 1

WARNER LAMBERT LTD

v

COMPANIA PERUANA DE VAPORES
726 FEDERAL MARITIME COMMISSION

PARTIAL ADOPTION OF DECISIONS

OF SETTLEMENT OFFICERS

I

j

May 1 1980

In each of the abovecaptioned proceedings the Settlement Officer aw

reparations without interest to Complainants for violations by Responde

section l8 b 3 of the Shipping Act 1916 46 U S C i817 b 3

In cases involving the misclassification of cargo and arising under s

18 b 3 the Commission has determined to grant interest on awar

reparation calculated at the rate of 12 percent and accruing from the d

payment of freight charges Interpur A Division of Dart Industries I

Barber Blue Sea Line 19 S R R 1554 April 8 1980 This policy sh

applied in these proceedings

THEREFORE IT IS ORDERED That the decisions of the Settle

Officers in these consolidated proceedings are adopted except as indicated 

IT IS FURTHER ORDEREQ That each Respondent pay to the resp

Complainant in each proceeding 12percent interest on the award of repa

accruing from the date of payment of freight charges and

IT IS FURTHER ORDERED That these proceedings are discont

By the Commission i

I

S FRANCIS C HURNEY

Secre

III Because the Commi8lion is considering only award of intetelt in each procccdina th proceedings are being c

for decision
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

DOCKET No 78 26

TRIMODAL INC INDEPENDENT OCEAN FREIGHT

FORWARDER APPLICATION AND POSSIBLE VIOLATIONS OF

SECTIONS 16 PARAGRAPH 18 b I 18 b 3 AND 44

NOTICE

May 2 1980

Notice is given that no appeal has been taken to the March 26 1980

dismissal of this proceeding and that the time within which the Commission

could determine to review has expired No such determination has been made

and accordingly the dismissal has become administratively final
FEDERAL MARITIME COMMISSION

No 78 26

fRIMODAL INC INDEPENDENT OCEAN FREIGHT

FORWARDER APPLICATION AND POSSIBLE VIOLATIONS

OF SECTIONS 16 FIRST PARAGRAPH 18 b 3 AND 44

PETITION TO REACTIVATE PROCEEDING AND AME

ORDER OF INVESTIGATION AND HEARING DENIE

Finalized May 2 1980

On March 7 1980 Hearing Counsel served the instant petition 

tivate Proceeding and Amend Order of Investigation and Hearing T

mission order on request to settle was served October 27 1978 The 

states among other things that On December 31 1980 sic Trimo

the Commission s General Counsel entered into a settlement ag

which inter alia called for Trimodal to pay civil penalties As Trimo

paid a portion of the civil penalties as part ofthe settlement agreemen

executed a promissory note which provided that installment payments 

begin on January I 1980 Trimodal has failed to pay the first installm

on the promissory note and is now two months in arrears Trimodal wa

by a certified letter from the General Counsel that the Commission 

Trimodal to be in default of the note but Trimodal has not respond

General Counsel s letter

Trimodal has not replied to the instant petition

DISCUSSION

The Order of Investigation and Hearing in this proceeding w

June 23 1978 Some 18 monthslater Trimodal and the Commission 

Counsel entered into a settlement agreement Trimodal according 

stant petition paid a portion of the civil penalties as part of the s

agreement and also executed a promissory note 2

However the Com

General Counsel never filed a petition requesting the Commission to 

I No evidence of thesettlement agreement isin this docket nor isthere any statement as to the amount ofcivil pe

1 No evidence of the promissory nole is in this docket
S WILLIAM BEASLEY HARRIS

Administrative Law Judge

TRIMODAL INC APPLICATION POSSIBLE VIOLATIONS 729

order discontinuing the proceeding because says Hearing Counsel of Tri

modal s failure to meet the terms of the promissory note

Although Trimodal has remained silent does it not have cause for concern

that the settlement agreement was treated as it wasand no petition for discon

tinuance served

Trimodal a non vessel operating common carrier and applicant for a license

to operate as an Independent Ocean Freight Forwarder by letter dated No

vember 14 1978 withdrew its application for a freight forwarder license

The Shipping Act Amendments of 1979 PL 96 25 in the 2nd provision of

section 10 empowers the Federal Maritime Commission to assess all civil

penalties prescribed by the Shipping Act 1916 and it is indicated that this will

not only expedite the formal assessment of penalties and eliminate the existing

likelihood of inconsistent treatment varying on the basis of the particular

U S District Court in which the action is brought but will assist the Federal

Maritime Commission in compromising penalties before trial

It appears that in this prqceeding there wasa compromise before trial which

was not processed nor a petition filed to discontinue the proceeding No copy

of the compromise has been presented herein The promissory note that had

been executed as part of the settlement could be converted to judgment

Perhaps thecircumstances ofthe case may warrant such There is not sufficient

information herein to determine

This non vessel operating common carrier has withdrawn its application for

a license as an Independent Ocean Freight Forwarder There has not been

adequate showing that aregulatory purpose would be served or a deterrent to

violations ofthe Shipping Act 1916 would be realized by pursuing this matter

other than through processing the settlement agreement and pursuing recovery

through the promissory note

Further this proceeding begun in June of 1978 under the circumstances

well may best serve the interests of the public and regulatory purpose by the

settlement and pursuance of action on the promissory note

In addition the petition is found not to comply with Rule 69 ofthe Commis

sion s Rules ofPractice and Procedure 46 CF R 502 69 having failed to cite

by appropriate reference the statutory provision or other authority relied upon

for relief

Upon consideration of the above the Presiding Administrative Law Judge

finds and concludes the instant petition should be denied

Wherefore it is Ordered

I

Petition is denied

2 Proceeding is discontinued

March 26 1980
FEDERAL MARITIME COMMISSION

DocKBT No 79 102

SEA LAND SBRVICE INC PROPOSBD TwBNTY FIVB

PERCBNT GBNBRAL RATB INCREASES IN THB

PuBRTO RICO TRADES

ORDER

May 8 1980

Sea LandService Inc hasfiled aPetitionfor Clarification in this proc

addressing certain portions ofthe Order Approving Offer of Settlement 

on March 17 1980 That Order approved and adopted with c

clarifications the order of the Presiding Officer Administrative Law 

Seymour Glanzer served March 3 1980 approving Sea Land s offer 

tlement Replies to the Petition have been filed by the Military Sealift 

mand MSC and the Commission s Bureau of Hearing Counsel

BACKGROUND

Sea Land on November I 1979 filed a 25 general rate increase 

trades between US East and Gulf Coast Ports and Puerto Rico and 

Islands Ports to become effective January 1 1980 1 The Commission 

Order of Investigation and Suspension served December 26 1979 ques

the reasonableness of Sea Land rate increases due to certain methodo

used in computing its rate of return and accordingly suspended 10 

Puerto Rico Trade increases and placed those increases under investiga

Subsequently the Commission reconsidered its Order of Investigatio

I

Tho larift to which the 2 rateilKlrelllO appliod woreFMC F No 27 between United Slatcl Atlantic and Gulf 

Virgin I

iandl poI1I via t hipmclll le PMC F No 34 botwcon V S Atlanllc poI1I and porto in PoortoRico 

No 36 from UsSouth Atlantic portlto pol tlin Puerto Rico FMC F No 37 from porttin PuertoRiwto Us Sout

pono FMC F No 40 from V S Gulf porto to porto In Puerto Rico FMC P No 41 from porta in Poorto Rico to 

portl and FMC F No 53 betwoan SuI Juan Puono Rico and Canadian ports with intcrchaRjC at New JoIBO J

tarift

1

The lpeciftC i uCInOled by the Commiuion initI Order of IntWllaation and Suponaion were a II the 

by Sca Land in maklna C81 JO volume projection approprlato7 2 Are Sea Land car o volume projection adequato

Sea Land properJy calculated Aocount 940 ManaJomont Fees and Commluion AffIliatol7 4 I Sea Land rateof 

rate bale In the North Atlantic South Atlantle Gulf Puerto Rico Tradea exc1udina the Virain I lands exCOllivo
GENERAL RATE INCREASES IN THE PUERTO RICO TRADES 731

Suspension and included the Virgin Islands Trade rate increases in the in

vestigation although it did not suspend any portion of those increases 3

After the proceeding commenced negotiations among the parties resulted in

an offer of settlement by Sea Land which wasagreed to by all parties except the Puerto Rico Manufacturers Association PRMA A stipulation between

Sea Land and the Commission s Bureau ofHearing Counsel was filed regard

ing a resolution of the specific issues noted in the Order of Investigation and

Suspension Also filed was a Joint Motion For Expedited Consideration of

Settlement and Issuance ofOrder in which all parties except PRMA joined

The settlement offer wasultimately approved by both the Presiding Officer and

the Commission

The settlement offer essentially required Sea Land to reduce its general rate

increase to 21 over the base rates in effect on December 31 1979 The

reduction of the Virgin Islands rates was to be accomplished on 5 days notice

within 3 work days of the Commission s approval of theoffer ofsettlement The

reduction of the Puerto Rico rates was to be accomplished by June 30 1980

The 21 increase limit was a ceiling increase on individual rates and not a

prescription of a uniform 21 increase in all rates As a result the settlement

offer would have permitted Sea Land to institute individual rate item increases

of less than 21 if competitive conditions so required The approval of the

settlement offer would also have precluded the Commission from requiring further financial justification of these increases or suspending and or in

vestigating individual rate changes

The Commission approved the settlement agreement and adopted the order

of the Presiding Officer with the express understanding that the settlement

applied to only the general revenue aspects of the rate increases Itspecifically

noted that the condition not to suspend investigate or require further

justification for the individual rate item increases did not encompass issues of

the reasonableness that were separate and distinct from the issue of the general

revenue needs of the carrier As a result individual rate changes could be

suspended and investigated on the basis of issues of preference and prejudice

or ofjustness and reasonableness due to the transportation factors affecting an

individual commodity The Commission therefore reserved to itself the right

to investigate and suspend any such increase of 21 or less on any individual

rate item under section 18 a of the Shipping Act 1916 section 3 a of the

Intercoastal Shipping Act as amended and section 16 First of the Shipping

Act 1916 5

l

The Commission had originally determined that the projected ratc of returnin the Virgin Islands trade was not excessive

However on reconsideration it determined that the methodological issues raised in this preceding might affect the projectc d

rate

of return in that trade and accordingly placed tariffFMC F No 27 under investigation Because the Virgin Islandsrate increase

had already gone into effect the Commission could not suspend any portion of that increase applicable thereto Alaska Steamship

Co vFM C 362 F 2d 406 9th Cir 1966

PRMA did not endorse orapprove the settlement offer but did not object to it and after being given an opportunity by the

Commission did not file anotice of intent to file exceptions to the Presiding Officer s

approval of the settlement

sOrdcr Approving Offerof Settlement served Manh 17 1980 slip opinion at 3
732 FEDERAL MARITIME COMMISSION

i

POSITIONS OF THE PARTIES

In its Petition for Clarification Sea Land now takes the position tha

Commission s reservation of the right to suspend and investigate the indiv

rate changes has the effect ofsubstantially altering the terms ofthe settle

offer It argues that the Commission s authority to determine the justnes

reasonableness of any such rate changes is limited to proceedings inst

under section 22 ofthe Shipping Act 1916 46 U S C 8821 and that 

that provision the Commission has no authority to suspend rate increases 

are the subject matter of the settlement offer Sea Land concedes how

that rate reduction below the 15 general rate increase originally allow

the Commission are not within the settlementagreement and that the Com

sion would have full statutory authority over such rate changes

Sea Land also notes that the Commission s Order did not address the 

nical aspects ofthe implementation of the settlement agreement and whi

specifically seeking clarification of this issue submits its view of its obliga

thereunder Sea Land states that it will 1 submit tariff amendments w

will incorporate the 15 general rate increase not suspended 2 indica

such amendments that a 25 general rate increase was filed eff

January 1 1980 but that 10 was suspended through June 28 1980 3 

changes to its tariffs not to exceed 21 over the December 31 1979 base 

on not less than 30 days notice and 4 inform the Commission s st

transmittal letter of its tarifffilings effectuating the Order of March 17 

Finally Sea Land advises that although all parties agreed to a June 30 

limitation on individual rate changes in the Puerto Rico tariffs the time p

was intended to coincide with the suspension period ie June 28 1980

MSC concurs with the position taken by Sea Land that the Commis

suspension authority is exhausted Moreover MSC is ofthe opinion th

Commission s

investigative authority under section 3 of the Intercoastal 

ping Act 46 U S C 8845 is also precluded to the extent that individua

increases filed on or before June 30 1980 that do not exceed 21 of the 

rates in effect on December 31 1979 are beyond the reach of the Commi

under that section MSC notes that the Order of Investigation and Suspe

did not set forth any issues regarding individual rates and on that 

concludes that individual rates filed by Sea Land pursuant to the settle

agreement may be investigated but not suspended

Hearing Counsels

reply addresses the following three basic argum

which it views as being raised by the Sea LandPetition I the Commis

reservation of suspension authority substantially alters the settlement a

ment 2 the Commission has exhausted its suspension authority ove

proposed rate changes in its Order of Investigation and Suspension instit

the proceeding and 3 section 22 of the Shipping Act 1916 represent

Commission s only authority to redress potential injuries to individual ship

In response to the first argument Hearing Counsel disagrees with 

Land s assertion that the settlement agreement has been substantially alt

Hearing Counsel states that the agreement only dealt with the COl1 111ission 

inquiry into the general revenue needs ofthe carrier and that the author
GENERAL RATE INCREASES IN THE PUERTO RICO TRADES 733

the Commission over new Sea Land rates under other statutory provisions was

never discussed

Hearing Counsel asserts that Sea Land s second contention assumes that

any subsequent rates to be filed under the settlement agreement are part of

those rates originally filed by the carrier and not new rates within the

meaning of section 3 ofthe Intercoastal Shipping Act 6

In this regard Hearing

Counsel is of the opinion that the reduced rates that Sea Land is permitted to

file under the agreement are clearly new rates within the meaning of that

section The fact that the Commission did not act on the rates originally filed

by Sea Land in this proceeding and instead has agreed not to question the

carrier s general revenue needs for a 21 general rate increase allegedly does

not alter this fact

Hearing Counsel notes that because under the agreement Sea Land is not

required to file individual rate increases or a general rate increase Sea Lands

rate structure could change and under the carrier s

interpretation ofthe agree

ment the Commission would be precluded from suspending future rates which

are different from the rates originally filed Hearing Counsel argues that the

settlement agreement only limits the issues which may be noted in any future

suspension and investigation of Sea Land s rate changes i e the general rev

enue needs of the carrier will not be questioned

As to the third argument Hearing Counsel submits that the suspension

authority was clearly intended to protect the interests of individual shippers

regardless of the availability of section 22 procedures

DISCUSSION

The two major issues presented by Sea Land s Petition are 1 whether the

Commission s interpretation of the settlement agreement is in conformity or

contrary to the intention of the parties thereto and 2 whether the Commis

sion s

interpretation of the settlement agreement exceeds its statutory

authority

There is no question as to the Commission s

interpretation ofthe agreement

The Commission made it abundantly clear in its Order approving the set

tlement agreement that its approval of the agreement extended only to the

general revenue aspects of the rates to be established under the agreement and

that it in no way affected the Commission s authority to address those rates

under other Shipping Act and Intercoastal Shipping Act provisions and

requirements 7

Section 3 a of the Intercoastal Shipping Act of 1933 provides infer alia that

U

w henever there shall be filed any

schedule stating a new individual or joint rate fare orcharge orany new individual or joint classification or any new individual

orjoint regulation orpractice affecting any rate fare or charge the Commission shall have authority to enterupon a

hearing concerning the lawfulness of such rate fare charge classification regulation orpractice Section 3 b provides inter

alia that the Commission may suspend the operation of such schedule for up to 180 days after the proposed effective date

thereof

7

TheCommission could dispose of Sea Land s Petition For Clarification on this basis alone However the Petition isactually

one for reconsideration under Rule 26 of the Commission s Rules of Practice and Precedure 46 CFR 5502 261 Because the

Commission wishes to consider the Petition on its merits the deficiencies of form in this regard will be waived under Rule 0 46

CF R 5502 10
734 FEDERAL MARITIME COMMISSION

This interpretation is supported by the record established by the par

support ofthe settlement agreement The specific language of Sea Land 

stated that Sea Land Service Inc will be permitted to file individu

actions in the Puerto Rican tariffs increase in the December 31 1979 bas

to a level not to exceed 21 of the base rate through June 30 1980 w

any further requirement ofjustifyingthose rates and that rate activity w

be subject to suspension or investigation by the Commision Em

added Neither the offer the factual stipulation arrived at with H

Counsel nor the Joint Motion of the parties to the proceeding contai

reference to any Shipping Act and Intercoastal Shipping Act conside

other than the general revenue needs of the carrier

Although Sea Land now asserts that section 22 is sufficient to prot

interests ofindividual shippers no suchposition wasadvanced at the time 

making of the agreement

8 Sea Land did not indicate and sti1 has no

cated exactly what rates it intends to implement and accordingly it do

appearthat the parties agreed to individual rate items as part ofthe agre

Moreover Sea Land has admitted in its Petition that it did not conte

that the Commission would be totally precluded from examining ind

rate items It admits that the Commission could investigate those item

sponte under section 22 of the Shipping Act and that it could both inve

and suspend such items under section 3 ofthe Intercoastal Shipping Act 

were less than 15 over the December 31 1979 base rates These adm

and the absence of any evidence or indication supporting Sea Land s res

interpretation of the language of the settlement offer on the matter 

Commission s suspension authority over the new rates mitigate in favo

rejection of this position The Commission s Order of March 17 1980 

a reasonable and objective interpretation of the scope and applicability 

settlement agreement

The second issue to be resolved here is whether the Commission s rese

of limited suspension authority over the individual rate items to be 

mented as part of the agreement is within its statutory authority The 

tion of this issue depends on whether the rates to be implemented un

settlement agreement are viewed as new rates within the meaning 

tion 3 ofthe Intercoastal Shipping Act or whether they are included in th

filed by Sea Land in its original rate filings in this proceeding

It is clear that under no circumstances will the rates to be impleme

the same as those originally filedby Sea Land in this proceeding They 

be different rates Unless a clear contrary intent is shown in the leg

history ofa statute the term new rates must be given a literal interpr

Trans Alaska Pipeline Rate Cases 436 U S 631 643 646 1978 N

contrary intent has been shown by the parties and a review of the leg

history of the statutes reveals none It appears therefore that such ra

new rates under the meaning of the statute and the Commission reta

A

If Sell Landlltssertions in this regard arc construed 85 an argument that sa It matter of law the Commiaaion 

powers may not be used to protect the interClta of individual ahippor such an araument has no merit See 

Cancellations and Rrstric lons 2 US M C 397 1940
GENERAL RATE INCREASES IN THE PUERTO RICO TRADES 735

statutory authority over them subject to whatever limitations result from its

approval of the settlement agreement

That the rates to be filed are part of an agreement between the litigating

parties does not alter the status of these filings The Commission has merely

exercised implied powers under its rate regulation authority by conditionally

approving a proposed new rate filing by the carrier which in essence replaces

the originally proposed rate increase A limited and conditional withholding of

rate suspension power based upon the carrier s

representations as to the partic

ular need for the revenues derived from a rate increase has been held to be a

reasonable legitimate and direct adjunct to the statutory power to suspend and

prescribe rates United States v Chesapeake Ohio R Co 426 U S 500

514 515 1976 While such a conditional approval of revenue needs may have

induced Sea Land to settle for a 21 increase in lieu of its originally proposed

25 increase the approval was limited to the undertakings and concessions

contemplated by the settlement agreement The blanket approval of an

undefined future rate structure was not contemplated by the agreement or

granted by the Commission In any event neither the fact that the rates to be

filed are the product of a negotiated settlement ofa prior contested general rate

increase nor the fact that the Commission will not suspend or investigate them

on the sole issue of Sea Land s general revenue requirements changes their

essential nature as new rates Sea Land s argument to the contrary is there

fore rejected

The final point raised by Sea Land in its Petition goes to the mechanics of

the implementation of the settlement agreement The Commission s Order of

March 17 did not specifically address this matter other than allowing a short

ened time period for filing the new Virgin Islands rates and stating that the

suspension of 10 of the Puerto Rico rate increases would not be lifted until

the filing ofnew rates in those trades Sea Land has indicated that in addition

to adhering to these procedures it will substitute its original tariffs imposing a

25 general rate increase with ones reflecting a 15 general rate increase and

an additional 10 increase suspended through June 28 1980 It will then file

individual rate items not to exceed 21 over the base rates of December 31

1979 on not less than 30 days notice and inform the Commission s staff by

transmittal letter which individual rate changes are being made pursuant to the

settlement agreement it being contemplated that other rate changes will occur

outside of the agreement by June 28 1980

The Commission s Order of March 17 1980 did not include a requirement

that the carrierfile reduced rates by June 28 1980 The language is permissive

and if the carrier fails to file reduced individual rate items by June 28 1980

the expiration date of the suspension period the original 25 rate increase

becomes effective on those items for which a substitute rate has not been filed

Sea Land s offer to file a 15 general rate increase as an intermediate step in

the process would solve this problem if the tariffs do not provide that the

remaining 10 will become effective on June 28 1980

The procedures suggested by Sea Land are acceptable to the Commission

However Sea Land will be permitted only one rate change per tariff item by

June 28 1980 under the settlement procedures and any subsequent item
736 FEDERAL MARITIME COMMISSION

I

I

changes are deemed not to fall within the terms of the agreement

THEREFORE IT IS ORDERED That the second ordering para

of the Order Approving Offer of Settlement issued March 17 19

amended to read as follows

IT IS FURTHER ORDERED That Sea Land Service Inc file tariff amendments 

rating a I S general rate increase over the base rates effective December 31 1979 i

FMC F Nos 34 36 37 40 41 and S3 and canceJling the proposed 2S general rate 

applicable to those tariffs made subject to suspension and investigation in this proceedin

and

IT IS FURTHER ORDERED That the language by one amendm

each individual rate item is inserted after the word rates on line four 

third ordering paragraph of the Order Approving Offer of Settlement 

March 17 1980 and

IT IS FURTHER ORDERED That the Petition for Clarification o

Land Service Inc is granted to the extent indicated above and denied 

other respects

By the Commision

S FRANCIS C HURNEY

Secre

III

Commi ioner Peter N Teip did not participate inthis proceeding
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 750 1

GENERAL ELECTRIC DE COLOMBIA S A

v

FLOTA MERCANTE GRANCOLOMBIANA S A

PARTIAL ADOPTION OF DECISION OF

SETTLEMENT OFFICER

May 12 1980

In the above captioned proceeding Settlement Officer Edgar T Cole

awarded reparation without interest to General Electric de Colombia S Afor

violation by Flota Mercante Grancolombiana S AofSection 18 b 3 ofthe

Shipping Act 1916 46 U S C 817 b 3

In cases involving the misrating ofcargo and arising under section 18 b 3

the Commission has determined to grant interest on awards of reparation

calculated at the rate of 12 percent and accruing from the date ofpayment of

freight charges Interpur A Division of Dart Industries Inc v Barber Blue

Sea Line 19 S RR 1554 April 8 1980 This policy shall be applied here

THEREFORE IT IS ORDERED That the decision of the Settlement

Officer is adopted except as indicated and

IT IS FURTHER ORDERED That Flota Mercante Grancolombiana

S A pay to General Electric de Colombia S A 12 percent interest on the

award ofreparation accruing from the date of payment offreight charges and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 750 1

GENERAL ELECTRIC DE COLOMBIA SA

v

FLOTA MERCANTE GRANCOLOMBIANA S A

DECISION OF EDGAR T COLE SETTLEMENT OFFICER

Partially Adopted May 12 1980

This complaint wasfiled with the Commission on November 20 19

Traffic Service Bureau Inc Agent for General Electric de Colombia 

located in Bogota Colombia hereinafter referred to as complainant a

porter and exporter ofelectric lamps and parts Complainant alleges that 

Mercante Grancolombiana S A Grancolombiana assessed charges in e

of those lawfully applicable for the transportation of a shipment of 

necessary for electric lamp bulbs from New York to Barranquilla Colom

aboard the vessel Cludad deArmenia bill oflading Z 25 dated Februa

1979

The record indicates that the carrier applied a rate of 114 50 W1M 

on the commodity description published in Item 510 found in the East 

Colombia Conference Freight Tariff S B ECCS FMC I

resulting in 

freight charges of 3194 70 Reparation in the amount of 9197 is soug

complainant based on the tariff description of Bases incandescent lam

sulting in the application ofa class rate of 90 75 W1M The application o

rate results in total freight charges of 2602 73

Claimant maintains that a claim for overcharge was submitted to the c

well within the six month time limitation as prescribed by Rule 20 pub

in the tariff but was turned down on that basis A review ofthe foregoin

reveals that there is a six month time limitation however a further read

the rule provides that

Adjustment of freight based on alleged error in weight measurement or descriDlion 

declined unless application is submitted in writing suffiCiently in advance to permit rewe

I Both parties having consented 0

the informal prooedl lte or 46 C F R 1502 301 304 as amended this dcision wi

unlt Sli the Commission elects to review it within 30 days from the date of service thereof
S EDGAR T COLE

Settlement Officer

GEN L ELECTRIC COL V FLOTA MERCANTE GRANCOLUMBIANA 739

remeasuring or verification of description before tbe cargo leaves the carrier s possession

underscoring supplied

Contact with claimant indicates that claim was filed April 16 1979 approx

imately two months after possession of the cargo had taken place and had left

the custody ofthe carrier Therefore claim does not appear to have been denied

on the basis that claim was filed after six months as claimant suggests but on

the fact that the cargo had left the possession of the carrier before they could

verify the misdescription

The test the Commission applies on claims of reparation involving alleged

error of a commodity tariff classification is what the complainant can prove

based on all the evidence as to what wasactually shipped differed from the bill

of lading description 2The complainant however has a heavy burden of proof

once the shipment has left the custody of the carrier 3

The bill of lading describes the commodity as parts necessary for electric

light bulbs In addition an invoice prepared by General Electric clearly states

that the commodity is aluminum bases The carrier has classified the com

modity as Lamps or Lighting Fixtures Incandescent Electric Electric Light

Bulbs NOS Itis the opinion of this Settlement Officer that the carrier has

erred and that the commodity is in fact a part for lighting fixtures Le

aluminum bases The carrier incorrectly applied the rate applicable to lighting

fixtures incandescent electric

The complainant in the instant case has satisfied the required burden of

proof as to the actual commodity shipped Therefore reparation in the amount

of 59197 is awarded to General Electric De Colombia S A based on the

following computation

997 cu ft 24 925

24 925X 90 75 226194

Container 174 48

HIC Container Discharge 5240

Port Charge 113 91

Total 2602 73

Amount assessed by carrier 3194 70

Correct Charges 2602 73

Difference 59197

Upon evidence of payment of the amount awarded this record will be

Complete

2 Western Publishing Company v

Hopag Lloyd AG Docket No 283 l May 4 t972 BSRR 16 I912

lCo gatePalmolive Co v United Fruit Co Docket No 115 September 30 1970 11 SRR 979 1970
FEDERAL MARITIME COMMISSION

DOCKET No 80 14

IN THE MATTBROF COMPENSATION OF

INDEPENDENT OCEAN FREIOHT FORWARDERS

ORDER DENYING PETITION FOR DECLARATORY ORDE

May 13 1980

On January 29 1980 Kuehne Nagel Inc K N a licensed ind

dent ocean freight forwarder petitioned the Commission to issue a 

claratory order finding the following

1 Receipt of payment from an ocean common carrier by an indepen

ocean freight forwarder at a rate different from that published in 

carrier s tariff does not violate any section of the Shipping Act o

Commission s

regulations or retlect adversely upon the forwa

fitness under section 44 of the Act

2 Receipt of payment from an ocean common carrier by an indepe

ocean freight forwarder at a rate different from that published i

carrier s tariff does not in itself give rise to an agreement required 

filed under section 15 of the Shipping Act

3 Receipt of payment in any amount from an ocean common carrier 

person who is not an independent ocean freight forwarder which pay

or payments are solely for the securing or booking of cargo and not fo

services connected with the dispatching or forwarding of cargo is not 

ment for carrying on the business of forwarding as defined in sectio

the Shipping Act and does not violate any section ofthat Act nor doe

such payment give rise to an agreement which must be filed for app

under section 15 of the Act

The Commission s Bureau of Hearing Counsel filed a Reply opp

K N s Petition for Declaratory Order Specifically Hearing Counsel m

tains that the Petition should be denied because it 1 does not confor

either the letter or spirit ofRule 68 ofthe Commission s Rules and Regula

46 C F R 5502 68 or the Administrative Procedure Act APA and 

raises issues presently pending in another Commission proceeding Do

No 80 20 Kuehne Nagel Inc Independent Ocean Freight Forwa
COMPENSATION OF INDEPENDENT OCEAN FREIGHT FORWARDERS 741

License No 1162 Order of Investigation and Hearing served April 3 1980

Because K N s Petition allegedly raises three abstract issues based upon

eight hypothetical situations Hearing Counsel argues that this matter is not

the proper subject ofa declaratory order In this regard Hearing Counsel cites

Ashfroft v Mattis 431 U S 171 172 rehearing denied 433 US 915 1977

where it was held that

For a

declaratory judgment to issue there must be a dispute which calls not for an advisory

opinion upon a hypothetical basis but for an adjudication of present right upon established facts

Emphasis added

Hearing Counsel further points out that the Commission in determining

whether to exercise its discretionary authority to issue a declaratory order

should consider whether an actual controversy has been presented whether

the facts alleged under all circumstances show that there is a substantial

controversy between parties having adverse legal interests of sufficient imme

diacy and reality to warrant the issuance of a declaratory judgment Mary

land Casualty Co v Pacific Coal Oil Co 312 U S 270 273 1941

Hearing Counsel notes that these criteria have been codified by Rule 68 of the

Commission s Rules of Practice and Procedure 46 cFR 502 68 which

directs that declaratory order petitions include among other things

a a complete statement of the facts and grounds prompting the petition together with full

disclosure of petitioner s interest

c Petitions under this section shall be accompanied by the complete factual and legal presentation

of petitioner

Itis Hearing Counsel s position that K N s Petition does not present facts as

required by the APAand Commission Rule 68 upon which a declaratory order

could be issued

Hearing Counsel further argues that the issues raised by K N are pend

ing before the Commission in Docket No 80 20 Kuehne Nagel

Inc Independent Ocean Freight Forwarder License No 1162 Order of In

vestigation and Hearing served April 3 1980 Accordingly Hearing Counsel

concludes that the Commission should deny K N s

request for a declaratory

order and allow the issues raised to be resolved in the evidentiary hearing to be

held in connection with Docket No 80 20

We find Hearing Counsels arguments convincing and accordingly deny

K N s Petition K N s Petition is of a hypothetical nature and therefore

appears not to comply with the requirements of Commission Rule 68 In any

event all of the issues raised by the K N s petition are currently under

investigation in the specific context of Docket No 80 20 It would be pre

mature to resolve those issues at this time They will more properly be

disposed of in the adjudicatory proceeding now pending before the Commis

sioQ

It This isin keeping with the Commission sgeneral policyenunciated in Petition orDeearatory OrderofSea rain International

SA 18 SRR805 806 1978 that

It isgenerally inappropriate for the Commission 10 terminate a

controversy in a pending adjudicatory proceeding by

independently issuing a declaratory order
THEREFORE IT IS ORDERED That the Petition for Decla

Order of Kuehne Nagel Inc Claus D Schuster and Peter Till is d

By the Commission

S FRANCIS C HURNEY

Secre
S FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 593 1

IDEAL Toy CORPORATION

v

ATLANTIC CONTAINER LINE

ADOPTION OF DECISION OF SETTLEMENT OFFICER

May 14 1980

This proceeding is before the Commission upon its determination to review

the decision of the Settlement Officer denying reparation Complainant had

alleged that a shipment of Used Molds which the carrier rated as Electrical

Machinery N E S should have been rated as Plastic Working Machinery

Upon careful review of the record the Commission concludes that the

Settlement Officer s denial ofreparation was correct Complainant offered no

evidence establishing the nature of the commodity or supporting its contention

that the commodity wasmisrated Complainants failure to meet its burden of

proof therefore requires that reparation be denied

THEREFORE IT IS ORDERED That the Decision of the Settlement

Officer is affirmed and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 593 1

IDEAL TOY CORPORATION

v

ATLANTIC CONTAINER LINE

DECISION OF FRANK L BARTAK SETTLEMENT OFFIC

REPARATION DENIED

Adopted May 14 1980

By complaint filed October 5 1978 Ideal Toy Corporation Idea

174 29 as reparation plus 6 interest from Atlantic Container Line 

claiming a freight overcharge on a shipment from New York New Y

London England on the Atlantic Cognac The shipment consisted of I

of Used Molds weighting 9 465 pounds 34 cubic feet and 3 paIlets 

cartons ofToy and Game Parts weighting 4 089 pounds I18 cubic fee

shipment moved on ACLs Bill of Lading A67056 dated May 28 19

Ideal through its agent Traffic Service Bureau Inc does not disp

charges with respect to the Game and Toy Parts Ideal does dispute the 

with respect to the 11 cases of Used Molds which were rated as El

Machinery N ES per item 720 0001 at a rate of 16350 per ton as co

in the North Atlantic United Kingdom Freight Conference Tariff N

FMC 3 Ideal claims that the Used Molds should have been rated as 

Working Machinery Item 719 8005 at a rate of 122 25 per ton of th

tariff

Consequently Ideal claims an alleged overcharge of freight in the 

of 174 29 2

ACL initially denied Ideals claim in accordance with Rule 22 of the 

Atlantic United Kingdom Freight Conference Tariff which provides t

The partics have consented to the informal procedure of 46 CF R 1502 301 304 as amended This decision w

unJesa the Commillllon electB to review it within 30 days from the date of service hereof

l 163 50 X 4225 tonl or 9 465 pounds 690 79

122 25 X 4225 l

or9 465 pounds

Amount Cllllmed S174 29
IDEAL TOY CORPORATION V ATLANTIC CONTAINER LINE 745

claims otherthan those based on errors inweight or measurement for adjust

ment of freight charges must be presented to the carrier in writing within 6

months after date of shipment Subsequently ACL denied the claim on the

grounds that the documents submitted by Ideal do not verify that the Used

Molds were Plastic Working Machinery and parts thereof 3

In support ofits claim Ideal submitted copies of some invoices covering the

shipment on the Atlantic Cognac which contain the following descriptions

1 EX Van Used Roof Mold

2 EK Van Used Windshield Mold

3 E KVan Used Wheel Mold

4 E KVan Used Chassis Mold

5 Beat 8 Ball Used Funnel Mold

6 Jaws Used Teeth Mold

7 E K Cycle Used Left Right Cylinder Mold

8 Jaws Used Access Mold

Ideal and ACL were invited to submit additional information in support of

or in defense of the claim herein Neither accepted the opportunity

Under section 22 of the Shipping Act 1916 a complaint may be filed within

2

years after the cause ofaction accrued Itis well established that a conference

rule cannot bar recovery of a meritorious overcharge claim filed with the

Commission within 2 years of its accrual See Union Carbide Inter America

Inc v Venezuelan Line Compania Anonima Venezolana de Navegacion 19

F MC 97 1976 and Polychrome Corp v Hamburg America Line North

German Lloyd 15 F MC 220 1972

While complainants

recovery may not be barred by a 6 month time lim

itation the Commission has held that where the shipment has left the custody

of the carrier a complainant has a heavy burden of proof to establish the

validity ofhis claim Kraft Foods v Moore McCormack Lines Inc 19 EM C

407 1976 Western Publishing Co Inc v Hapag Lloyd A G 13 SRR 16

1972

This Settlement Officer finds it difficult to understand why complainant has

not accepted the opportunity to submit additional evidence in support of its

claim herein particularly in light ofthe denial ofreparation in Informal Docket

No 607 1

4

concerning its similar claim denied for failure to meet its burden

ofproof

Although offered the opportunity to do so Ideal has not established that the

Used Molds should have been rated Plastic Working Machinery Ideal has

J By letter dated November 9 1978 addressed to the Settlement Officer ACL stated in part as follows

We wish to point out that at the time of shipment all documents submitted to us by the IdealToy Corporation stated Used

Molds and Fixtures This description is much too vagueto pin XInt the actual commodity and does not necessarily mean that

these molds are as stated Plastic Working Machines

We understand the molds are used in machinery Since there was nothing to tie it down to Plastic Working Machines the

rate for Machinery NES was applied These molds could be used in Rubber Metal orGlass Making Machinery

Ideal Toy COJporalion v Atlantic Container Line Decision served July 16 1979 and Supplemental Decision on remand

served December 21 979
failed to meet the heavy burden of proof required of a claimant on

shipment has left the carriers custody

Accordingly reparation is denied

S FRANK L BARTAK

Settlement O

March 10 1980
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

DoCKET No 79 51 GENERAL ORDER 45

PART 547 PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS

May 14 1980

ACTION

SUMMARY

Final Rules

The Federal Maritime Commission is hereby issuing final

rules to provide procedures for implementing the National

Environmental Policy Act of 1969 42 US C 4321 et

seq in compliance with the regulations of the Council on

Environmental Quality These procedures apply to all

Commission actions though for certain specified actions no

environmental analysis will normally occur

DATES Effective May 21 1980

SUPPLEMENTARY INFORMATION

This proceeding was initiated by Notice ofProposed Rulemaking published

May 18 1979 in the Federal Register 44 Fed Reg 29122 29126 The

Federal Maritime Commission Commission proposed to establish procedures

implementing the National Environmental Policy Act of 1969 NEPA as it

applies to the Commission s regulatory framework

Comments were received from or on behalf of I Pacific Coast European

Conference PCEC 2 Tampa Port Authority Tampa 3 Pacific West

bound Conference Pacific Straits Conference Pacific Indonesian Conference

and Pacific Cruise Conference Pacific Conferences 4 United States Lines

Inc USL 5 Philippines North America Conference Straits New York

Conference Trans Pacific Freight Conference of Japan Korea Japan

Korea Atlantic GulfFreight Conference Agreement No 10107 and Agree

ment No 10108 PNAC 6 a group of eleven conferences and rate agree
748 FEDERAL MARITIME COMMISSION

ments AEUSC and 7 Stephen J Buckley 2

Subsequent to rec

comments the Commission s staff prepared a proposed final rule wh

submitted to the Council on Environmental Quality CEQ for its 

pursuant to 40 C F R i

1507 3 a After conducting its review CE

comments and recommended changes to the Commission All comment

proposed rules raising substantive issues and the resultant revisions i

rules are discussed below Those comments not specifically discusse

nonetheless been thoroughly reviewed and considered by the Commiss

1 Section 547 1 Purpose and Scope PCEC suggests that the s

these rules be narrowed to all major non adjudicatory actions ofthe 

Maritime Commission significantly affectingthe quality ofthe human e

ment Such a revision is unnecessary NEPA applies to all federal 

However because ofthe nature of certain federal actions the specific 

forcing requirements of NEPA are often inapplicable These rules hav

drafted with this distinction in mind Though they apply to all actions 

Commission their various procedural requirements may not be applica

a variety ofreasons eg the actions are categorically excluded or will n

a significant effect upon the human environment

2 Section 547 2 0rganization Because it is apparent throughou

rules that the Commission s Office of Environmental Analysis will adm

the majority ofthe activities to be performed under this Part this inform

section has been deleted from the final rule As a result the remaining s

have been renumbered

3 Section 457 3 Definitions Both PCEC and Mr Buckley ques

term potential action PCEC contends that itis unnecessary and expa

Commission s

regulations beyond statutory and regulatory require

While it may be true that the Commission need not commence its e

mental assessment process until there is a proposed action it is by no 

clear that an agency cannot commence this process earlier For certain 

mission actions most notably investigations and adjudications the C

sion s proposed action will not occur before the issuance of its repo

Aberdeen Rockfish RR Co v SCRAP 422 U S 289 320 21 19

wouldbe impractical to defer the assessment process to this particular s

activity The use of potential action permits the Commission to as

environmental responsibilities and prepare necessary environmental doc

at a more reasonable pace

4 Section 547 5 Categorical Exclusions Initially AEUSC conten

these rules should be specifically limited to actions affecting the envir

I Austrlllill Eastern USA Shipping Conference Orcccc United StaWs Atlantic Rate Agreement Iberian US No

WClIlbound Freight Conference Marseilles North Atlantic U S A Ff4i ht Ccwfercnce McdouJf Conference Me

Nonh Pacific Coast Freight Conference North Atlantic Mediterranean Fre1aht Conference US Atlantic 

AustruJin NewZellland Conference US North Atlantic Spain Rate Alrecmcnt U S South Atlantic Spanish 

Moroccan and Mediterranean Rate Agreement Bnd the Weat Coast of Italy Sicilian and Adriatic Ports North Atl

Conference

In addition by letter dated SePtember 20 1979 the Advisory Council on Historic Preservation noted that th

provisions in the rules which ensure compliance with the National Historic Preservation Act 16 US C

1470 e

Commluion hus reviewed this statute and concludes that it has noappJicabiIJty to tbe Commission s proceedings Ther

lherefore to include provisions conCerning the National Historic Preservation Act in tbese rules
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 749

ofthe United States This position appears to be contrary to the policy enumer

ated in Executive Order 12144 44 Fed Reg 1957 January 9 1979 that for

certain federal actions agencies should take into consideration the environment

outside the United States its territories and possessions The Commission has

concluded that ofthe four classes ofactions mentioned in this Executive Order

only the first actions significantly affecting the environment of the global

commons outside the jurisdiction of any nation could potentially apply to its

various requlatory activities Consequently the Commission has revised pro

posed sections 547 7 a and 547 8 a 4 to indicate that a finding of no

significant impact and an environmental impact statement EIS will consider

the potential impact on the environment of the United States and in appropri

ate cases the environment of the global commons

Several parties have commented on the scope of the categorical exclusions

suggesting revisions of those already proposed and the inclusion of others

PNAC would extend the scope ofproposed subsection 547 5 a 11 exclud

ing the receipt of non exclusive transshipment agreements to actions in

volving requests for section 15 approval of exclusivetransshipment agreements

They contend thateven though exclusive transshipment agreements continue to

require section 15 approval they would have no more environmental impact

than would non exclusive transshipment agreements However regardless of

the environmental effects of a non exclusive transshipment agreement the

Commission lacks the ability to alter it The Commission merely receives

non exclusive transshipment agreements for informational purposes hardly a

federal action for purposes of NEPASee 46 C F R Part 524 On the other

hand exclusive transshipment agreements must be submitted for Commission

approval pursuant to section 15 of the Shipping Act and this type of federal

action could permit the Commission to consider the environmental effects of

such agreements in appropriate cases The Commission will therefore con

tinue categorically to exclude only non exclusive transshipment agreements

from its NEPA rules section 547 4 a l3

PCEC and PNAC question proposed subsection 547 5 a 8 which excludes

amendments to section 15 agreements which neither increase nor diminish the

originally granted authority PCEC would alter this exclusion to apply to all

amendments to section 15 agreements Its only justification is that the present

language poses serious definitional difficulties The Commission cannot ac

cept such a substantial enlargement of the scope of this exclusion Our intent

was to limit the scope ofthe exclusion to only those amendments which would

not normally have significant environmental effects

PNAC expressed concern that amendments submitted for the sole purpose

of extending the life of an agreement beyond its expiration date might be

considered an increase in the authority originally granted and therefore not

within this particular exclusion Under certain circumstances such an amend

ment might be an increase in the authority originally granted The Commis

sion therefore finds no reason for restating this subsection and will interpret

it accordingly

The Pacific Conferences contend that it is unfair to exempt actions concern

ing the rates and practices of controlled carriers proposed section
750 FEDERAL MARITIME COMMISSION

547 5 a 15while not similarly exempting the rates and practices of all 

carriers or conferences in the foreign commerce of the United States 

additionally claim that NEPA applies only where a federal agency 

significant discretionary powers and that the Commission s rate author

foreign commerce is strictly confined by statutory and decisional criteria 

latter contention is unconvincing Our public laws must be interpreted 

administered in accordance with NEPA s policies 42 U S C 4332 a

may well be appropriate for the Commission to consider environmental fa

in making determinations pursuant to its rate statutes even though pre N

precedent does not mention such criteria Moreover the Commission doe

believe it is unfair to exempt only the rates and practices ofcontrolled ca

The Ocean Shipping Act of 1978 P L95 483 92 Stat 1607 which am

sections I and 18 of the Shipping Act 1916 46 U S C U801 817 

relatively recent statute The Commission has yet to acquire any subst

experience in administering it but there are early indications that such a

will most likely not have significant environmental impacts Should the 

mission s experience prove otherwise this exemption will be reconsidered 

such time environmental consideration is still possible in such matters 

sections 547 4 b or c

The Pacific Conferences contend that adversary adjudications befo

Commission should be exempted from NEPAThey cite judicial author

the proposition that some federal actions are exempt from NEPA beca

their unique circumstances even though there is no express exemption 

Act They also refer to a 1975 CEQ memorandum which concluded 

NEPA should not apply to Federal Trade Commission adjudicatory 

ceedings They further note that CEQ s regulations exempt the bring

civil or criminal enforcement actions 46 C F R 1508 18 a

There has yet to be a clear judicial pronouncement that NEPA doe

apply to an agency s adjudicatory proceedings Moreover the CEQ m

randum relied upon by the Conferences has subsequently been renounc

CEQ CEQ clearly indicates that it interprets NEPA as applying to all f

actions including adjudications Moreover it appears that the conference

have overlooked or misinterpreted the scope and effect of proposed s

547 5 a 20 which exempts

Investigatory and adjudicatory proceedings pursuant to the Shipping Act 1916 and the Me

Marine Act of 1920 or portions thereof the purpose of which isto ascertain past violations 

Acts

This particular exclusion now section 547 4 a 22 should alleviate m

their concerns No further exemption for adjudicatory proceedings is 

ranted at this time

AEUSC suggests that consideration of special permission applic

should be expressly exempted from environmental assessment The Co

sion agrees and has therefore included such an exemption in its fina

section 547 4a 6 The Commission further agrees that many of the 

of section 15 agreements listed in AEUSC s proposed subs

547 5 a 30 a s will not individually or cumulatively have a

sign

effect on the quality of the human environment Section 547 4 a 10 
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 751

final rule consequently excludes those types of section 15 agreements which

solely regulate intra conference or intra rate agreement relationships or per tain to administrative matters of conferences or rate agreements The remain

der of the categorical exclusions proferred by AEUSC are rejected Proposed

subsection 547 5 a 28 exempting activities in or under the jurisdiction of a

nation other than the United States is unnecessary in light of our revisions

contained in sections 547 6 a and 547 7 a 4 AEUSCs proposed subsec

tion 31 would effectively exempt every section 15 agreement except for those

which would normally require the preparation ofan EIS The Commission has

chosen a different approach that of identifying based upon its experience

those agreements which should be specifically excluded

PCEC states that aCommission decision categorically to exclude a particu

lar action should be final and not subject to reinclusion It would accordingly

delete proposed sections 547 5 b and c which contain procedures for consid

ering the environmental effects of what wasotherwise an excluded action The

Commission rejects such a

rigid approach in light of the requirement that it

pJrovide for extraordinary circumstances in which a normally excluded ac

tion may have a significant environmental effect 40 C F R 1508 4 These

subsections meet this requirement The Commission likewise rejects PNAC s

revision of proposed section 547 5 b to permit challenges to exclusions only

in unusual and extraordinary circumstances and only after a specific referral

order from the Commission to OEA We do not believe that the procedure now

set forth in subsection 547 4 b will result in any significant delay in Commis

sion actions especially since the OEA must review submissions challenging a

categorical exclusion within 30 days

5 Section 547 6 Environmental Assessments USL suggests that in all

cases the Commission should publish a notice of intent to prepare an environ

mental assessment in the Federal Register PCEC suggest clarification of

proposed section 547 6 b to explain the appropriate cases in which notice of

intent may be published and also suggest the addition of a subsection c to

provide a timetable for completion of an environmental assessment by the

OEA The nature of the action will determine the time required to prepare an

assessment and does not lend itself to setting a fixed timetable for all cases

There is no requirement that notice be given prior to the preparation of an

envronmental assessment As presently worded section 547 5 b provides the

OEA with the discretion to publish notice in those cases where it deems it

useful In all other cases decisions on the significance of an action s environ

mental impact can be reached more expeditiously without notice and comment

6 Section 547 7 Finding ofNoSignificant Impact The Commission has

made several changes in this section now section 547 6 in response to various

comments First it has clarified the fact that it is only concerned with impacts

on the quality of the human environment of the United States or of the global

commons Once a finding of no significant impact is prepared the OEA will

publish notice of its availability in the Federal Register This will be the only

such notice to the general public If petitions for review of a finding of no

significant impact are filed the Commission will serve notice of its decision on

all parties who filed comments concerning the action assuming there was a
752 FEDERAL MARITIME COMMISSION

prior notice ofintent to prepare an assessment or who filedpetitions for re

There is no need for the Commission to adopt a finding of no signi

impact PCEC s recommendation of a 30 day period for review ofpetition

review has been partially adopted The Commission wil1 now decide 

petitions within 45 days of their receipt

7 Section 547 8 Environmental Impact Statement a General 

Commission has deleted subsection 1 ii because of its decision to 

proposed section 547 9 Subsection 3 has been amended to reflect the 

that in certain cases the issuance of an initial decision by an Administ

Law Judge may be a major decision point in the EIS process Subsectio

clarifies that EIS s shall consider impacts only on the environment o

United States and the global commons outside the jurisdiction of any n

b Draft Environmental Impact Statements The Pacific Conferences 

that the proposed rules provide a maximum of 60 days within which to 

ment on a OEIS They suggest that the words for up to 15 days be d

from proposed section 547 8 b 3 so that extensions based upon good 

are open ended Though amaximum of 60 days within which to comme

a OEIS is indeed rigid it is not unreasonable This is all the more true 

these new procedures are in effect since the OEA will be preparing O

more expeditiously and their length will likely be reduced

USL submits that proposed section 547 8 b 3 unnecessarily limi

scope of comments concerning a OEIS to its adequacy or the merits 

alternatives discussed in it The Commission did not intend to limit com

in this manner and has accordingly revised this section now s

547 7 b 3

c Final Environmental Impact Statements Sections 547 8 c 2 th

5 of the proposed rules set forth a procedure for utilization of a com

FEIS which wil1 apply to all Commission proceedings The Commission 

however that it was also considering an alternative procedure which 

require the consideration of FEIS s in formal administrative hearings 

and PNAC support the former proposal The Pacific Conferences and 

support some variation of the latter The Pacific Conferences object 

proposed procedure because 1 the FEIS will not be sponsored by a w

subject to cross examination and 2 the findings which will be part 

record of decision may not necessarily be only those supported by r

evidentiary standards such as reliability and relevance They contend tha

adversary administrative adjudication the right to an evidentiary hea

provided by the Administrative Procedure Act 5 U S C 556 d and g

teed by the due process clause of the Fifth Amendment They conseq

recommend an addition to proposed section 547 8 c 3 or in the alter

support the hearing procedures provision which was included in the supp

to the proposed rules

The Pacific Conferences also note that proposed section 547 8 c 4 do

permit a

party objecting to an AUs environmental finding of fact t

exceptions to the Commission prior to its ultimate decision They conten

the exception procedure is available for other factual issues and should li

pertain to environmental issues They suggest therefore that proposed 
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 753

547 8 c 4 be revised to allow any party within 30 days after anALJ certifies

a finding of fact to file amemorandum and briefexcepting to any suchfinding

CEQ supports a procedure whereby an FEIS would be placed before anALJ

for consideration prior to the preparation of an initial decision

The procedure adopted by the Commission section 547 7 c 3 and 4

meets CEQ s objections and also resolves some of the problems perceived by

the Pacific Conferences Under this procedure the FEIS will be submitted to

an ALJ for consideration of the environmental impacts and alternatives in

preparing an initial decision in those cases assigned to an ALJ for hearing

However in all cases a party may petition the Commission for an evidentiary

hearing concerning an alleged substantial and material error of fact in the

FEIS In such instances the Commission has two options I it can simply

refer the petition to an ALJ for resolution or 2 to the extent it grants the

petition it can determine those issues which are substantial and material and

then refer them to a ALJ for a hearing and factual resolution

8 Section 547 9 Actions Normally Requiring an EIS CEQ s

regulations

state that agency procedures shall include specific criteria for and identification

of those typical classes of action which normally do require environmental

impact statements 40 C F R 1507 3 b 2 i

In an attempt to meet this

requirement the Commission set forth in proposed section 547 9 four classes

of actions which will ordinarily require the preparation of an EIS Several

commenters have questioned the general nature of these classes of action and

the applicability of this requirement to the FMC s

regulatory scheme The

Commission has reviewed this section in light of the comments received and

concludes that it should be deleted in its entirety The FMC regulates the

conduct of the ocean shipping industry and does not administer programs and

projects as do other federal agencies It is not possible to identify with any

reasonable degree ofspecificity typical classes of actions normally requiring an

EIS In fact it has been the Commission s experience since 1969 that NEPA

actually impacts on but avery few of its actions Any such action will be

identified during the environmental assessment process and will result in the

preparation of an EIS ifwarranted The broad and vague categories proposed

in section 547 9 would be of little practical use

9 Section 547 11 Information Required by the Commission As an initial

matter this section has been redesignated section 547 9 and the reference to

dual rate contract applications deleted Various commenters have suggested

that this section shifts what is primarily a Commission responsibility onto a

private party They also claim that it places an undue burden on parties whose

activities may have no environmental impact and that failure to comply fully

with this section could apparently have adverse effects on actions before the

Commission This section has been redrafted slightly to alleviate these concerns

and to clarify its intended effect The requirements of this section will only arise

following a specific Commission request for such information and will not

therefore apply in all instances Parties who appear before the Commission

seeking some sort ofrelief are often in a position to provide information that

the Commission might otherwise have difficulty obtaining As reworded the

type ofinformation expected ofthose persons identified in subsection a should
754 FEDERAL MARITIME COMMISSION

not be unduly burdensome Moreover the Commission has emphasized t

expects persons to provide such information only to the fullest extent 

ble Individuals are urged to contact OEA for informal assistance pr

submitting any complaint protest petition or section IS application 

requests Commission action as enumerated in this section Ifthe OEA use

suchinformation in the preparation of an environmental assessment or an 

it will independently assure its accuracy The OEA will of course re

primarily responsible for the preparation of all necessary environm

documents

10 Section 547 12 Time Constraints for Final Administrative A

PNAC notes that the time constraints on final adminstrative actions b

Commission imposed by this section since renumbered as 547 10 are m

tory and repose no discretion in the Commission It suggests that these 

constraints be observed only to the maximum extent practicable These 

periods are consistent with CEQ sdirective 40 C F R 115060 b lan

The Commission has altered this section slightly to reflect that the pres

periods may be reducedonly with the approval ofthe Environmental Prot

Agency for compelling reasons ofnational security 40 C F R 11506 IO

when a statutory deadline is imposed on the Commission s action

The Pacific Conferences maintain that many of the questions presen

the Commission cannot await the delays inherent in the environmental 

process They propose a new section which would permit the Commiss

waive or suspend these rules to take emergency or interim action to 

unwarranted hardship Such an addition to these rules is uMcccssary S

1506 11 of CEQ s regulations which have been incorporated into these 

sets forth the procedures applicable to emergency circumstances In 

instances CEQ will advise the Commission on appropriate eme

arrangements

II Other Comments The Pacific Conferences have indicated some co

thatthese regulations beinstituted in a prompt and orderly manner Thes

rules will be effective upon publication in the Federal Register and wil

to all proceedings or actions commenced thereafter

Therefore pursuant to section 4 of the Administrative Procedu

5 U S C 1553 and section 43 of the Shipping Act 1916 46 

1 841 a Part 547 of Title 46 Code of Federal Regulations is adopte

By the Commission

S FRANCIS C HURNEY

Secre

Commlllioner Peter N Toil did not participate
PART 547 PROCEDURES FOR

ENVIRONMENTAL POLICY ANALYSIS

PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 755

Sec

547 1 Purpose and Scope

547 2 Definitions

547 3 General Information

547 4 Categorical Exclusions

547 5 Environmental Assessments

547 6 Finding of no Significant Impact

547 7 Environmental Impact Statements

547 8 Record of Decision

547 9 Information Required by the Commission

547 10 Time Constraints for Final Administrative Actions

AUTHORITY Section 43 of the Shipping Act 1916 46 US C 841 Sec

tion 102 of the National Environmental Policy Act of 1969

42 US c 4332 2 B

Sec 547 1 Purpose and Scope

a This Part implements the National Environmental Policy Act of 1969

NEPA and Executive Order 12114 and incorporates and complies with the

Regulations of the Council on Environmental Quality CEQ 40 C F R 1500

et seq

b This Part applies to all actions of the Federal Maritime Commission

Commission To the extent possible the Commission shall integrate the

requirements of NEPA with its obligations under section 382 b of the Energy

Policy and Conservation Act of 1975 42 U S C 6362

Sec 547 2 Definitions

a Shipping Act means the Shipping Act 1916 as amended 46 U S c

801 et seq

b Common Carrier by Water or OtherPerson Subject to the Act means

any common carrier by water as defined by section 1 of the Shipping Act

including a conference of such carriers or any person not a common carrier by

water carrying on the business of forwarding or furnishing wharfage dock

warehouse or other terminal facilities in connection with a common carrier by

water

c Environmental Impact means any alteration of existing environmental

conditions or creation of a new set of environmental conditions adverse or

beneficial caused or induced by the action under consideration

d Potential Action means the range of possible Commission actions that

may result from a Commission proceeding in which the Commission has not

yet formulated a proposal
756 FEDERAL MARITIME COMMISSION

e Proposed Action means that stage of activity where the Comm

has determined to take a particular course of action and the effects o

course of action can be meaningfully evaluated

f Environmental Assessment means a concise document that ser

provide sufficient evidence and analysis for determining whether to prepa

environmental impact statement or a finding of no significant im

40 C F R 1508 9

g Recyclable means any secondary material that can be used as 

material in an industrial process in which it is transformed into a new pr

replacing the use of a depletable natural resource

Sec 547 3 General Information

a All comments submitted pursuant to this Part shall be addressed 

Secretary Federal Maritime Commission 1100 LStreet N W Washi

D C 20573

b Alist of Commission actions for which a finding of no significant i

has been made or for which an environmental impact statement is 

prepared will be maintained by the Commission in the Office of the Sec

and will be available for public inspection

c Information or status reports on environmental statements and 

elements of the NEPA process can be obtained from the Office of En

mental Analysis Federal Maritime Commission 1100 LStreet N W 

ington D C 20573 telephone 202 523 5835

I

Sec 5474 Categorical Exclusions

a No environmental analyses need be undertaken or environmenta

ments prepared in connection with actions which do not individually or 

latively have a significant effect on the quality of the human enviro

because they neither increase nor decrease air water or noise pollution 

of fossil fuels recyclables or energy or are purely ministerial action

following types of Commission actions are therefore excluded

1 Issuance modification denial and revocation of freight forwa

censes pursuant to section 44 of the Shipping Act

2 Certification of financial responsibility of passenger vessels purs

46 C F R Part 540

3 Certification of financial responsibility for water pollution clean

suant to 46 C F R Parts 542 and 543

4 Promulgation of procedural rules pursuant to 46 C F R Part 5

5 Acceptance or rejection of tariff filings in foreign and d

commerce

6 Consideration of special permission applications filed pursu

46 C F R 531 18 and 536 15

7 Receipt of terminal tariffs pursuant to section 17 of the Shippin

8 Suspension of and or decision to investigate tariff schedules purs

section 3 of the Intercoastal Shipping Act 1933
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 757

9 Consideration of amendments to agreements filedpursuant to section IS

of the Shipping Act which neither increase nor diminish the authority granted

in the original approval of the section IS agreement

10 Consideration of agreements between common carriers or other

persons subject to the Shipping Act which solely affect intraconference or

intra rate agreement relationships or pertain to administrative matters of con

ferences or rate agreements

II Consideration of agreements between common carriers or other per

sons subject to the Shipping Act to discuss propose or plan future action the

implementation of which requires filing a further agreement under section 15

of the Shipping Act

12 Consideration of equipment interchange husbanding or wharfage

agreements filed for section 15 approval

13 Receipt of non exclusive transshipment agreements pursuant to

46 C F R 524

14 Action relating to collective bargaining agreements

IS Action pursuant to section 18 c of the Shipping Act concerning the

justness and reasonableness ofcontrolled carriers rates charges classifications

rules or regulations

16 Receipt of self policing reports and shipper requests and complaints

pursuant to 46 C F R Parts 527 and 528

17 Receipt of finanacial reports prepared by common carriers by water in

the domestic offshore trades pursuant to 46 C F R Parts 511 and 512

18 Adjudication of small claims pursuant to 46 C F R 502 301 et seq

and 46 CF R 502 311 et seq

19 Action taken on special docket applications pursuant to 46 C F R

502 92

20 Consideration of matters related solely to the issue of Commission

jurisdiction

21 Investigations conducted pursuant to 46 C F R Part 513

22 Investigatory and adjudicatory proceedings pursuant to the Shipping

Act or the Merchant Marine Act of 1920 or portions thereof the purpose of

which is to ascertain past violations of these Acts

23 Consideration of dual rate contract systems pursuant to section 14b of

the Shipping Act

24 Action regarding access to public information pursuant to 46 C F R

Part 503

25 Action regarding receipt and retention of minutes of conference meet

ings pursuant to 46 C F R Part 537

26 Administrative procurements general supplies

27 Contracts for personal services

28 Personnel actions and

29 Requests for appropriations

b Ifinterested persons allege that a categorically excluded action will have

a significant environmental effect egincreased or decreased air water or

noise pollution use ofrecyclables use of fossil fuels or energy they shall by

written submission to the Commission s Office of Environmental Analysis
758 FEDERAL MARITIME COMMISSION

OEA explain in detail their reasons The OEA shall review these submis

and determine not later than 30 days after receipt whether to prepa

environmental assessment If the OEA determines not to prepare an en

mental assessment suchpersons may petition the Commission for review 

OEA s decision within 15 days of receipt of notice of such determinatio

c Ifthe OEA determines that the individual or cumulative effect 

particular action otherwise categorically excluded offers a reasonable pot

of having a significant environmental impact it shall prepare an environm

assessment pursuant to section 547 5 of this Part

Sec 547 5 Environmental Assessments

a Every Commission action not specifically excluded under section 

of this Part shall be subject to an environmental assessment

b The OEA may publish in the Federal Register a notice of int

prepare an environmental assessment briefly describing the nature ofthe 

tial or proposed action and inviting written comments to aid in the prepa

of the environmental assessment and early identification of the sign

environmental issues Such comments must be received by the Commiss

later than 20 days from the date of publication of the notice in the F

Register

Sec 547 6 Finding of No Significant Impact

a If upon completion of anenvironmental assessment the OEA dete

that a potential or proposed action will not have a significant impact 

quality of the human environment of the United States or of the globa

mons a finding of no significant impact shall be prepared and notice 

availability published in the Federal Register This document shall inclu

environmental assessment or a summary of it and shall briefly prese

reasons why the potential or proposed action not otherwise excluded 

section 547 4 of this Part will not have a significant effect on the 

environment and why therefore an environmental impact statement EI

not be prepared

b Petitions for review ofa finding ofno significant impact must be re

by the Commission within 20 days from the date of publication of the 

of its availability in the Federal Register The Commission shall revi

petitions and either deny them or order the OEA to prepare an EIS pu

to section 547 7 of this Part The Commission shall within 45 days of 

of the petition serve copies of its order upon all parties who filed com

concerning the potential or proposed action or who filed petitions for 

Sec 547 7 Environmental Impact Statements

a General I An EIS shall be prepared by the OEA when the e

mental assessment indicates that a potential or proposed action may 
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 759

significant impact upon the environment of the United States or the global

commons

2 The EIS process will commence

iFor adjudicatory proceedings when the Commission issues an order of

investigation or a complaint is filed

ii Forrulemaking or legislative proposals upon issuance of the proposal by the Commission and

Hi For other actions the time the action is noticed in the Federal Register

3 The major decision points in the EIS process are i the issuance of an

initial decision in those cases assigned to be heard by an Administrative Law

Judge ALJ and ii the issuance ofthe Commission s final decision or report

on the action

4 The EIS shall consider potentially significant impacts upon the quality

ofthe human environment of the United States and in appropriate cases upon

the environment of the global commons outside the jurisdiction of any nation

b Draft Environmental Impact Statements

I The OEA will initially prepare a draft environmental impact statement

DEIS in accordance with 40 C F R 1502

2 The DEIS shall be distributed to every party to a Commission pro

ceeding for which it was prepared There will be no fee charged to such parites

One copy per person will also be provided to interested persons at their request

The fee charged such persons shall be that provided in 46 C F R 503 43

3 Comments on the DEIS must be received by the Commission within

forty five 45 days of the date the Environmental Protection Agency EPA

publishes in the Federal Register notice that the DEIS was filed with it

Sixteen copies shall be submitted as provided in section 547 3 a of this Part

Comments shall be as specific as possible and may address the adequacy ofthe

DEIS or the merits of the alternatives discussed in it All comments received

will be made available to the public Extensions of time for commenting on the

DEIS may be granted by the Commission for up to 15 days if good cause is

shown

c Final Environmental Impact Statements

I After receipt of comments on the DEIS the OEA will prepare a final

environmental impact statement FEIS pursuant to 40 C FR Part 1502

which shall include a discussion of the possible alternative actions to a potential

or proposed action The FEIS will be distributed in the same manner as

specified in section 547 7 b 2 of this Part

2 The FEIS shall beprepared prior to the Commission s final decision and

shall be filed with the Secretary Federal Maritime Commission Upon filing

it shall become part of the administrative record

3 For any Commission action which has been assigned to an ALJ for

evidentiary hearing

iThe FEIS shall be submitted prior to the close of the record and

iiThe ALJ shall consider the environmental impacts and alternatives

contained in the FEIS in preparing the initial decision

4 iFor all proposed Commission actions any party may by petition to

the Commission within 20 days following EPAs noticein the FederalRegister
760 FEDERAL MARITIME COMMISSION

assert thatthe FEIS contains a substantial and material error offact whi

only be properly resolved by conducting an evidentiary hearing and exp

request that such a hearing be held Other parties may submit replies 

petition within 15 days of its receipt

ii The Commission may delineate the issue s and refer them to a

for expedited resolution or may elect to refer the petition to an A

consideration

iii The AU shall make findings of fact on the issue s and shall 

such findings to the Commission as a supplement to the FEIS To the 

that such findings differ from the FEIS it shall be modified by the supp

iv Discovery may be granted by the ALJ on a showing of good caus

if granted shall proceed on an expedited basis

Sec 547 8 Record of Decision

The Commission shall consider each alternative described in the FEI

decision making and review process At the time of its final report or ord

Commission shall prepare a record of decision pursuant to 40 C F R 

Sec 547 9 Information Required by the Commission

a Upon request of OEA a person filing a complaint protest pet

section 15 application requesting Commission action that will

I Alter cargo routing patterns between ports or change mo

transportation

2 Change rates or services for recyclables

3 Change the type capacity or number of vessels employed in a 

trade or

4 Alter terminal or port facilities

shall submit to OEA no later than 25 days from the date of the req

statement setting forth in detail the impact of the requested Com

action on the quality of the human environment

b The statement submitted shall to the fullest extent possible i

I The probable impact of the requested Commission action on th

ronment egthe use of energy or natural resQurces the effect on ai

or water pollution compared to the environmental impact created by 

uses in the area affected by it

2 Any adverse environmental effects which cannot be avoided if th

mission were to take or adopt the requested action and

3 Any alternatives to the requested Commission action

If environmental impacts either adverse or beneficial are allege

should be sufficiently identified and quantified to permit meaningful 

Individuals may contact the OEA for informal assistance in prepar

statement The OEA shall independently evaluate the information su

and shall be responsible for assuring its accuracy ifused by itin the prep

of an environmental assessment or EIS
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 761

c In all cases the OEA may request every common carrier by water or

other person subject to the Act or any officer agent or employee thereof as

well as all parties to proceedings before the Commission to submit within 25

days ofsuch request all material information necessary to comply with NEPA

and this Part Information not produced in responseto an informal request may

be obtained by the Commission pursuant to section 21 of the Shipping Act

Sec 547 10 Time Constraints on Final Administrative Actions

No decision on a proposed action shall be made or recorded by the Commis

sion until the later of the following dates unless reduced pursuant to 40 C F R

l506 1O d or unless required by a statutorily prescribed deadline on the

Commission action

a Ninety 90 days after EPA s publication of the notice described in

section 547 7 b of this Part for a DEIS or

b Thirty 30 days after publication of EPA s notice for an FEIS
FEDERAL MARITIME COMMISSION

DOCKET No 79 75

INTERPOOL LTD ITEL CORPORATION CONTAINER

DIVISION TRANS OCEAN LEASING CoRPORATION

v

PACIFIC WESTBOUND CoNFERENCE FAREAsT

CoNFERENCE AND MEMBER LINES

Dismissal of proceeding is justified under 46 C FR fS02 210 b 3 by Complainan

failure to answer or object to discovery requests and their refusal to obey two writte

of the administrative law judge

Robert J Ables for Interpool Ltd Itel Corporation Container Division and Tran

Leasing Corporation

Thomas E Kimball Robert B Yoshitoml and Charles Lagrange Coleman III fo

Westbound Conference Far East Conference and Member Lines

REPORT AND ORDER

May 15 1980

BY THE COMMISSION Richard J Daschbach Chairman T

F Moaldey Vice Chairman Ja

Day and Leslie Kanuk Commissio

This proceeding was initiated by Complaint of Interpool Ltd It

poration Container Division and Trans Ocean Leasing Corporation 

July 24 1979 alleging that certain amendments to the tariffs of the 

Westbound Conference the Far East Conference and their memb

violated section 15 of the Shipping Act 1916 46 V S C 1814 in t

amendments were adopted without section 15 authority and would a

result in violations of antitrust laws The proceeding is before the Com

on Complainants Exceptions to Administrative Law Judge William 

Harris order dismissing the proceeding for Complainants failure to res

discovery

Commissioner Peter N Teige did not pllrtici tc
BACKGROUND

INTER POOL LTD ET AL V PACIFIC WESTBOUND CONF ET AL 763

The tariff amendments at issue state in part

a

Any container not owned or leased by a member line or affiliate thereof prior to its delivery

to a shipper for loading shall be deemed to be a shipper owned or leased containerfor the purpose

of this rule and once so deemed such containers shall remain shipper owned or leased for the entire

duration of its transit both by water and by land

Complainants allege that these amendments will result in the elimination of

the neutral container system in that the carriers would no longer reimburse

shippers for their use of containers owned by independent container leasing

companies such as Complainants The practical effect of the amendments

Complainants argue is to require shippers to use containers controlled by the

carriers

On July 13 1979 the US Court of Appeals for the District of Columbia

Circuit denied Complainants motion for a stay and preliminary injunction of

implementation of the tariffamendments on the basis ofComplainants failure

to exhaust administrative remedies Five days later on July 18 1979 Com

plainants filed the present complaint requesting the most expedited or short

ened procedure possible I On August 14 1979 Complainants obtained a

preliminary injunction from the U S District Court for the Northern District

of California pending disposition of the instant proceeding

On August 31 1979 Respondents served discovery requests on Com

plainants consisting of interrogatories and requests for production of docu

ments Answers or objections were due on October 1 1979 Obtaining no

response from Complainants Respondents fileda Motion to Compel Discovery

on October 15 1979 On October 29 1979 Complainants answered the Mo

tion to Compel alleging that the discovery requests were irrelevant to the

subject matter of the proceeding By order served November 13 1979 the

Presiding Officer granted the Motion to Compel and directed Complainants

immediately to answer the interrogatories and respond to the requests for

documents On November 15 1979 Respondents filed a Motion to Compel

with regard to supplemental discovery requests

Complainants continued to decline to respond to the discovery requests and

on December 3 1979 filed a Motion for Protective Order Against Discovery

or in the Alternative ifSuch Motion is Denied for Certification of the Ques

tion to the Commission This was followed by Complainants Supplemental

Memorandum in Support of Motion for Protective Order Memorandum in

Opposition to Respondents Motion to Compel and Further Supplemental

Memorandum in Support of Complainants Motion for Protective Order

By order served December 28 1979 the Presiding Officer denied asuntimely

Complainants Motion for Protective Order as well as the Motion for Cer

tification of Question to Commission He again ordered Complainants to re

spond to Respondents discovery requests within 10 days Complainants

again failed to comply filing instead thirteen days later aMotion for Leave to

I

Complaint at 8 Complainants slated in a subsequent motion thai we tiled this complaint with the FMC only to get

administrative standing on the Respondents rules to file a new request for injunction Motion fOf Protective Order at 6
764 FEDERAL MARITIME COMMISSION

Appeal thePresiding Officer s December 28 1979 order On January 11 

Respondents filed a Request for Sanctions 2

On January 11 1980 the Presiding Officer dismissed the proceed

sponte citing Complainants failure to comply with two ofhis orders to 

discovery 3

POSITIONS OF THE PARTIES

Complainants argue that they fully complied with applicable pro

requirements that at most their failure to file timely objections tothe d

requests was the product of a good faith misunderstanding of the P

Officer s desired procedures and that dismissal is an improper remedy 

plainants argue that the Presiding Officer erred in denying their vario

tions in refusing to scope the proceeding and in failing to bring the 

together to resolve the discovery impasse

Finally Complainants argue that dismissal is too drastic and ex

sanction in the instant proceeding as their failure to respond to d

demands did not arise out of bad faith wilfulness or a desire to obst

proceedings Complainants assert that this proceeding also involves 

erations of public interest and should be reinstated for that reason 

Respondents in their Reply to Exceptions dispute Complainants co

that Complainants misunderstood rather than ignored the Presid

ficer sorders Respondents argue that Complainants wilfully refused to 

with the Presiding Officer s clear instructions and with the Commission 

of Practice and Procedure and that dismissal is an appropriate sanc

Complainants actions 4

DISCUSSION

The Commission concludes for the reasons stated below that the P

Officer s ruling is proper and is hereby affirmed In so concluding the C

sion finds that Complainants failed to respond or object to discovery 

this conduct waswilful and deliberate

1 Respondents requested that the Presiding Officer make cenain findings of rll t previously lOulht to be estab

Kpondents discovery requests

lOn that same day Complainants filed a Petition for Declllnltory Order socking an order from the Com

Respondentlure not Iluthorizcd to appeal to a federal district court to enforce the PresidioS Officer sorder requiri

with the discovery requests

The Commission sdetision to uphold the dismissal ofthis proceeding obviates the nCCOlSity ofitl reaching the 

the discovery demands of Respondents were proper Timely objection to the discovcrypurBuant to the Commiss

Practice und Procedure 46 C F R II 502 206 a

and S02 207 b would have resulted In a

ruling on the merits

Complainants argue thatRespondents wereon a fishing expedition and object to Respondents statement that 

proceeding is whether Complainants neutral container system Is tainted with Illegality Discovery aimed at thi

plainunts assert is not only irrelevant but woul be wasteful burdensome and harmful seeking confidential a

information involvins tens of thousands of documents and consumins thousands of man hours

Respondents justify their disoovery requests by citing the principle that relevancy and materiality arc most bro

in discovery Respondents alllO lusue that the dlsoovery requests were desianed to elicit Information rclardins pos

by Complainants ofthe Shippin Act andof antitrust laws and that thodiscovery requests were relevant because the 

tariffamendments serve to eliminate such violations
INTERPOOL LTD ET AL V PACIFIC WESTBOUND CONF ET AL 765

Complainants do not deny receiving the discovery requests but contend that

they responded to Respondents request for discovery at a prehearing confer

ence held September 12 1979 at which counsel for Complainants stated that

he disagreed with Respondents views ofthe issues raised in the proceeding and

asked the Presiding Officer to define the scope of the proceeding to help

resolve the discovery matter 5Counsel for Complainants explained at thattime

Ido not want to have to fight my way through to a final conclusion as

to whether we have to respond to Respondents request for discovery

The Presiding Officer responded by advising Complainants to consult the

Commission s Rules ofPractice and Procedure for guidance on how to resolve

the discovery dispute The Presiding Officer stated

I am sure Mr Ables you are familiar with the rules There are ways to deal with that They

certainly tell you just what you can do I do not know whether you have to answer them lthe

discovery until you raise certain matters about them

Prehearing conference at 69

Upon a subsequent request at the conference from the Commission s Bureau

of Hearing CounseF that the Presiding Officer scope the proceeding the

Presiding Officer indicated that he would not do so because only Respondents

had addressed in writing the potential issue of illegalities in the neutral con

tainer system He left the issue open so that other parties could also respond

in writing 8

The Presiding Officer s statements clearly indicated that any objections or

concerns Complainants had with the discovery requests should be expressed in

writing pursuant to the Commission s rules so thatthe matter could be properly

resolved Moreover this advice wasgiven 19 days in advance ofthe termination

of the 30 day period allowed in 46 CF R 502 206 and 502 207 for objec

tions inwriting ample time for Complainants to comply with the rules and the

Presiding Officer srequest

The record offers no support for Complainants contention that they were led

to believe that when some determination had been made as to the issue in the

case the question would be ripe for determination as to what if any discovery

would be required 9Far from suggesting that the Commission s rules should

besuspended orthe time period extended with respect to responses to discovery

the Presiding Officer took pains to indicate that the rules should be followed

Neither the record nor the rules gave Complainants any reason not to answer

the discovery requests or to make an appropriate and timely objection

Nor are Complainants other excuses for not following the rules persuasive

Complainants have claimed This case is unique procedurally o

The record

indicates no uniqueness in this proceeding at all although Complainants

The Commission s Rules of Practice and Procedure authorize a presiding officer to delineate the scope of a

proceeding 46

CF R 1502 147 0

6

Prehearing conference at 62

1

Hearing Counsel participated at the prehearing conferencebut its Petition to Intervene in the Proceeding was eventually denied

Prehearing conference at 77

9

Appeal from Ruling on Protective Order at 13

10

Motion for Protective Order at 2
766 FEDERAL MARITIME COMMISSION

i

I

reason for instituting this proceeding may have been unusual See n

supra Complainants also seek to excuse their failureto respond to the d

ery requests on the ground that their position on the issues wasalready k

to Respondents The parties know each other very well and they kno

issue the arguments and the reasons therefor They know these things b

the precise question was litigated befote in FMC Docket No 76 36 

Familiarity with opposing counsel and opposing counsel s

familiarity wi

issues in another proceeding hardlyjustify disregardof theCommission s 

of Practice and Procedure

Moreover none of Complainants excuses for their initial failure to re

to discovery goes to their failure to comply with two orders of the Pre

Officer The November 13 1979 order required Complainants to answ

covery immediately The December 28 1979 order directed complianc

discovery within 10 days Both orders left no possibility of a mis

standing as to Complainants obligations

Complainants cite several cases for the proposition that dismissal 

proceeding is unnecessarily drastic aremedy for refusal to respond to disc

Each of the cases cited however is clearly distinguishable from the i

situation In Israel Aircrqft Industries Ltd v Standard Precision 55

203 2d Cir 1977 and Securities and Exchange Commission v Re

Automation Corp 512 F 2d 585 2d Cir 1975 the court found that dis

was improper because there had been in those cases neither an order co

lingdiscovery nor a complete failure to respond In the instant case ther

two orders and a complete failure to respond In the other cases relied u

Complainants the courts noted absence of factors which are present 

instant proceeding such aswilfulness a clear record ofdelay repeated re

to comply or clear court orders or directives See Griffin v Aluminum 

America 564 F2d 1171 5th Cir 1977 Flaks v Koegel 504 F 2

2d Cir 1974 E F Hutton Co v Moffatt 460 F2d 284 5th Cir 

Robertson v Christofersen 65 FRD 615 D N D 1975

The Commission concludes that Complainants wilful disregard ofthe 

mission s rules and the Presiding Officer sordQrs requires dismissal 

proceeding The principles set forth by the United States Supreme Co

National Hockey League v Metropolitan Hockey Club Inc 427 U S 

reh denied 429 U S 874 1976 are of critical relevance here

T he mostsevere in the spectrum of sanctions provided by statute or rule must be availab

district court in appropriate cases not merely to penalize those whose conduct may be de

warrant such a sanction but to deter thlllCwho might be tempted to such conduct in the 

of such a deterrent

427 U S at 643

There the Court upheld dismissal of a complaint for the failure ofpla

to answer interrogatories despite the trial court s admonitions to do so

II Reply to Motion to Compel at 2 3 In Docket NOI 76 34 and 76 36 the Commission considered tariff rules w

virtuully identical to Reapondenta tariffamendmcnta in tho inltant proceedina TariffFMC 6 Rule 22afthe Contine

Atanl c We ftbound Freight Co lference and Tari lfRules Conce edly Published Dfjinln P actlces of Corlfe nu

Agreement Members Rega ding the Acceptance andResponsibility for Shippe Owned or Shlppel Lttued T allers0 

I H S RR 1343 1978 That decision iscurrently on review beforethe US Clun ofAppclala for the Districtof Colum
INTERPOOL LTD ET AL V PACIFIC WESTBOUND CONF ET AL 767

Similarly in Dellums v Powell 566 F 2d 231 D C Cir 1977 the Circuit

Court ofAppeals for the District of Columbia Circuit ordered the dismissal of

plaintiffs who failed to respond to discovery requests The court s rationale

applies with equal force to proceedings before this Commission

If parties are allowed to flout their ohligations choosing to wait to make a

response until a trial

court has lost patience with them the effect will he to embroil trial judges in day today supervision

of discovery a result directly contrary to the overall scheme of the federal discovery rules

Footnote omitted

566 F 2d at 235 236

See also G K Properties v Redevelopment Agency 577 F 2d 645 9th Cir

1978

Although administrative agencies are expected to exercise more flexibility

and informality in their proceedings than do the courts there are nevertheless

limits to what the agencies may tolerate Agencies must protect their integrity

and assure the orderly conduct of business in order to maintain their effec

tiveness Adherence to agency procedure is necessary to maintain the agency s

integrity and to ensure the orderly conduct of agency business in a manner

protective of the rights of all parties

Complainants also allege that the Presiding Officer s denial of their Motion

for Protective Order as untimely was an abuse of discretion complainants

argue

The Commission s rules state only that the presiding officer on motion of the party

interrogated may make such protective order as justice may require 46 C F R sec 502 206 b

1978 The rule does not set forth a specific time limit in which such a motion must he filed

Complainants misstate the rule Omitted from Complainants quotation of

Rule 206 b is language revealing that the statement refers to supplementary

interrogatories Rule 206 b clearly imposes the JO day limit of Rule 204 b

for motions for protective orders with respect to initial interrogatories This

rule was ignored by Complainants who filed their Motion for Protective Order

fully two months after service of the discovery requests and only then after

receiving the Presiding Officer s admonition at the prehearing conference and

after Respondents Motion to Compel was granted and Complainants were

ordered to answer discovery immediately Under the circumstances the

Presiding Officer s denial of the motion as untimely was not an abuse of

discretion and is justified by the principles enunciated in National Hockey

League and Delurns

13

Complainants assert that dismissal is an unreasonably extreme sanction but

do not suggest an alternative sanction The Commission has carefully consid

ered all other options under 46 C F R S502 210b and has found none of

them to be feasible in this proceeding Certainly the sanction sought by

Respondents findings of fact regarding illegalities in Complainants neutral

11

Exceptions at 19

IJ

Complainants also argue that courts are not obliged to reject motions for protective order on the ground of untimeliness

citing Silkwood v Kerr McGeeCorp 563 F 2d 433 10th Cir 1977 Sfkwood is inapposite There the courtfound that denial

orthe motion as untimely was improper because I there weresubstantial FirstAmendment constitutional questions involved

and 2 it was not inappropriate to withhold filing of a motion for protectiveorder regarding a deposition pending resolution of

a motion to transfer the 10000tion of the deposition No such mitigating orextenuating circumstances exist in this case
768 FEDERAL MARITIME COMMISSION

container system appears to be even more extreme than dismissal i

such findings would be far reaching and of unproven accuracy The Co

sion concludes that dismissal is the only appropriate sanction under 

circumstances

Complainants would have the Commission remand the proceeding 

Presiding Officer for a ruling on the merits on Complainants Motio

Protective Order Such a course of action would ignore Complainant

regard of the Commission s rules and the Presiding Officer s orders and 

even reward Complainants conduct by prolonging this proceeding 14

THEREFORE IT IS ORDERED That the Exceptions of Interpool 

Itel Corporation Container Division and Trans Ocean Leasing Corpo

are denied 15 and

IT IS FURTHER ORDERED That this proceeding is discontinue

By the Commission

S FRANCIS C HURNEY

Secre

H

The order of the District Courtfor the Northern District of California enjoinins implementation of the tariff a

in issue remains effective pending II final decision of the FMC Docket NO 75 79 sic and the final result of 

therefrom

I

Anyexceptions not specifically addressed have nevertheless been fully considered by the Commiuion and found to 

merit or irrelevanl
v

FEDERAL MARITIME COMMISSION

DOCKET No 79 87

TDK ELECTRONICS CO LTD

JAPAN LINES LTD AND

KAWASAKI KISEN KAISHA LTD

ORDER ADOPTING INITIAL DECISION

May 20 980

This proceeding was initiated by complaint filed by TDK Electronics Co

Ltd TDK alleging that Japan Lines Ltd JL and Kawasaki Kisen Kaisha

Ltd K Line had violated section 18 b 3 of the Shipping Act 1916 by

overcharging TDK and its subsidiary TDK Mexico S Ade C V TDK Mex

ico on 70 shipments of Iron Oxide carried from Tokyo to Mexico via the Port

of Los Angeles between January 13 1977 and August 31 1978 I

TDK main

tains that these shipments should have been rated as Iron Oxide Item

No 1945 00 rather than as Chemicals N O S Item no 2520 05 the

classification applied by respondents 2

As a result of these alleged erroneous

assessments TDK seeks reparation in the sum of 80 113 18 and 3 387 751

Japanese yen

Administrative Law Judge Joseph N Ingolia issued an Initial Decision in

which he concluded that Complainant had substantiated its claim and was

accordingly entitled to reparation However the amount of reparation

awarded was less than the amount sought by TDK TDK filed Exceptions to

the Initial Decision to which there were no replies

BACKGROUND

On May 1 1979 TDK filed an informal docket claim pursuant to Rule 304

of the Commission s Rules of Practice and Procedure 46 C F R 502 304

I

TDK Mexico assigned its rights to TDK with respect to these shipments involving payments made by TDK Mexico See Trone

Co v South African Marine

Corp

9 EM C374 1976

l

All of the shipments in question were transported by JL orK Line and moved under Trans Pacific Freight Conference of

Japan Korea Tariff No 35 FMC 6
770 FEDERAL MARITIME COMMISSION

requesting reparation with respect to certain alleged overcharges by JL 

Line This filing wasreturned to TDK by the Secretary ofthe Commissio

a letter advising that because TDK s claim was for an amount in exc

5 000 it could not be considered under the informal docket procedure

TDK should file aformal complaint under Rule 62 ofthe Commission s 

of Practice and Procedure 46 C F R 1502 62 The letter further advise

a formal complaint must allege a violation of a specific Shipping Act s

and be verified

Subsequently on July 10 1979 TDK refiled requesting the use 

shortened procedure provided in subpart K of the Commission s Ru

Practice and Procedure 46 C F R I

02 181 187 This document was

returned by the Secretary because it alleged no violation of a specific Sh

Act section and was not verified

Thereafter on August 27 1979 TDK filed the present complaint whi

handled under the shortened procedure

INITIAL DECISION

In his Initial Decision served January 15 1980 the Presiding Office

cluded that I with respect to all of the shipments the proper rate cla

tion was Iron Oxide and not Chemicals N 0S

3

2 the governin

for the purpose ofawarding reparation wasAugust 27 1979 4

3 all ofth

ments carried by JL 19 and the first 14 of 51 shipments carried by K

and the date of payment of freight charges for these shipments pr

August 27 1977 and accordingly the claims based on such shipmen

barred by the twoyear statute of limitations provided in section 22 

Shipping Act 1916 4 claims as to the remaining misrated shipment

timely filed On the basis of these conclusions K Line was ordered 

reparation to TDK in the amount of 3 380 449 Japanese yen and to 

on behalf of TDK Mexico 39 180 41

POSITION OF THE CoMPLAINANT

TDK claims that the Initial Decision erred in limiting reparations s

the overcharges paid during the twoyear period prior to August 27 

TDK contends that the governing period is the twoyearperiod prior to 

1979 or alternatively July 10 1979

TDK maintains that the filing of the May Icomplaint tolled the tw

statute of limitations Although admittedly defective it is alleged t

complaint should not have been returned but retained as part of the 

record s

TDK argues that under Commission Rule 61 46 C F R 150

J

The Pl CIiding Oftlcer advised that both JL and K Uno Breed with this findln

4

The PJ CBlding Officer applied the acneral rule that a

cause of aceion baled upon a claim for reparation aecrueI 

of shipment orupon payment of the fralah charaea whichtver illater US xrei Loulfllllle C mtnt Co I

Ice 

644 1918 CSC InttrlllltlonaJ Inc v Or1m OHrmuCoflltJ MrLlntl Limited 19 F M C 465 470 1977

TDK citel tho recent case ofMldlond Melll Corp v Lykes Bros St llmlhlp Co Inc 19 S R R 47 1979 

filing ofan informal complaint washeld to be insuffictcnt to 8IIIUt the claim inqUClltlon but acted totoll tho statuto of
TDK ELECTRONICS CO LTD V JAPAN LINES LTD 771

proceeding is commenced upon filing a complaint albeit incomplete TDK also

submits that except for its failure to allege a violation of a specific section of

the Shipping Act the May 1 document essentially meets all the requirements

of Commission Rule 62 which specifies the contents of a complaint This

failure is allegedly not fatal however because Rule 62 provides that

If complaintfails to indicate the sections of the acts alleged to have been violated or clearly to slate

facts which support the allegation the Commission may on its own initiative require the com

plaint to be amended

In short TDK maintains that the Commission should not have returned this

informal complaint but should have made it part of the record as of May I

1979 Thus TDK concludes that the statute of limitations was tolled as ofthat

date

TDK also contends that a lack of verification is not a sufficient basis for

rejecting a complaint especially if the verification is subsequently obtained In

this regard TDK cites Henry Gillen s Sons Lighterage Inc v American

Stevedores Inc 10 SRR 195 198 1968 where it was held that

The purpose of requiring a demand for reparation to be filed within two years is to cut offliability

for stale claims such purpose is not connected with the sworn complaint provision whose

purpose is only to relieve the respondent and Commission from the mandatory investigation of

reckless orfalse claims Whether a claim is stale however depends on when it is made not whether

or not it is sworn to at the time

Finally TDK contends that in any event if the May 1 complaint is found

wanting the July 10 complaint should be found sufficient to toll the statute of

limitations TDK argues thatthe submission ofthe August 27 1979 complaint

in which the defects in the July 10 complaint were rectified is actually an

amendment to the original complaint Accordingly the August 27 complaint

allegedly should be deemed to relate back to the date the document was filed

ie July 10 1979

DISCUSSION AND CONCLUSION

Ifeither the May 1 or July 10 complaints are to form a basis to extend the

reparations period it is necessary to establish that they may be accepted for

filing notwithstanding that 1 they allege no specific statutory violation and

2 lack a verifying affidavit

Allegation of a Violation of a Specific Section ofthe Shipping Act

Rule 62 specifies what a complaint must contain TDK s complaint complied

with this provision in all respects except that it failed to allege a violation of

a specific section of the Shipping Act This failure does not however necessar

ily render the complaint null and void Indeed Rule 62 permits the Commis

sion to allow a defective complaint to be amended and rectified

Ifcomplaintfails to indicate the sections of the acts alleged to have been violated the Commis

sion may on its own initiative require the complaint to be amended to supply such further

particulars as it deems necessary Emphasis supplied
772 FEDERAL MARITIME COMMISSION

As the Commission stated in Trane Company v South African M

Corp 19 F M C 375 385 1976

Amendments to complaints areliberally permitted under the Commission s rules so as to 

rights which might expire under the twoyear period of limitations contained in section 2

Act Amendments which have corrected defects such as omitting signatures seals o

statements or selecting incorrect remedies or measure of damages have been permitted 

Commission in the interest of justice and the spirit of administrative flexibility

The Commission has also held that a complaint which wasoriginally de

because it chose an incorrect remedy but correctly stated the substa

gravamen of the claim could be cured subsequently even if the limit

period had meanwhile expired Hetro Chemical Corporation v PortLine 

14 F MC 228 1971 This is in keeping with the Commission s g

policy as enunciated in City of Portland v Pacific Westbound Confe

5 F M B 118 129 1956

It is the duty of the Commission to look to the substance of the complaint rather than 

and it is not limited in its action by the strict rules of pleading and practice which gover

of law Emphasis added

In this regard it is to be noted that TDK s May I and July 10 comp

although defective because neither alleged a specific violation of the Sh

Act did contain specific requests for reparation with supporting doc

tation Therefore we find that the May I and July 10 complaints 

possibly inadequate to apprise Respondents of specific charges against 

were sufficient to toll the statute of limitations 7

Verification

Neither the May I norJuly 10 complaint was verified However subs

verification wasobtained as evidenced by the August 27 complaint Ge

the lack of a supporting sworn statement is not a jurisdictional defe

would bar the tolling of the statute of limitations but rather a technic

that can be cured subsequently even it the statute had run Gillen 

Lighterage Inc v American Stevedores Inc 12 F MC 325 1969 

Borax and Chemical Corporation v Pacific Coast European Conf

II F MC 451 1968 Oakland Motor Car Company v Great Lakes 

Corporation I U S S B B 308 1934

For the foregoing reasons the Commission finds the May I compla

quate to toll the statute of limitations

THEREFORE IT IS ORDERED That except to the extent noted 

the Initial Decision in this proceeding is adopted by the Commission 

IT IS FURTHER ORDERED That the Exceptions of TDK Ele

Co Ltd are granted and

IT IS FURTHER ORDERED That Kawasaki Kisen Kaisha L

reparation to TDK Electronics Co Ltd in the amount of 7 565 70 

Thi holding parullels thut in Mid and Metals Corp v Lykes Bros Steamship Co Inc 19 S R R 47S 1979 

informal complaint wus filed incorrectly but acted to toll the statute of limitations

1

The Commission does not necessarily condone TDK s

conduct but under the particular circumstances of this 

TDK s Exceptions should nonetheless be granted
S FRANCIS C HURNEY

Secretary

TDK Electronics Co Ltd in the amount of 8 945 06 and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission
FEDERAL MARITIME COMMISSION

No 7987

TDK EacoNcsCo LTn

JAPAN LNES LTD AND

KAWASAKI KISBN KAISHA LTD

Adopted May 20 1980

Section 22 Shipping Act 1916

1 Where Complainant eought roparation undar eection 22 becauee two common carriera 

and received froight charges in excesa of those apecified in the peRinont tariff on file 

Commiseion the Commisslon may not direct the paymant of roparadona for any e

giving riae to e cause of action which accrued more than two years prior to the fili

Complaint

2 Whara ahipmanta of raw materials waro by woight 90 parcont iron oxido the pr

classification under the tarifl wea ae ronOxide Item No 1945 00rather then as 

Chemicals NOSItem No 2520 OSend the Commisaion may direct payme

overcharges ae reparation whero sucfi acdon ia not barred by the etatutory twayear li

periad

Heihach Matsubara for Complainant TDK Electronica Co LW

Davtd Snow for Respondent Japan Lines LW

Ro6nt F Edwards for Raspondent Kawesaki Kieen Kaieha Ltd

INITIAL

ADI

DECISION OF JOSEPH N INGOLIA

rIINISTRATIVE LAW JUDGE

On Auguat 27 1979 TDK Electronics Co Ltd TDK filed a wm

under section 22 of the Shipping Act 1916 alleging that Japan Line

JL and Kawasaki Kisen Kaiaha Ltd KKK had violated section 1

3

by overcharging TDK and its subsidiary TDK Mexiw SAde CV

Mexico for certain shipments ofiron oxide moving from Tokyo to Mex

the Port of Los Angeles betwean January 13 1977 and Auguat 31 1Z

Thic dxieion will hecame ihe dwiuon ofthe Commieeion inthea6sonce ofroview thereot bythe Commiaion Rule 

of Proctice und Praceduro 46CFRf502227

TDK Maxico hus uesi4ned ite righte w iu cluim to TDK with raepecl w theea ehlpmenu involving peymante me

Mexica See Trpnt Ca vSoulh AJ rlran Mqrlne Cwp 19 FMC l74 1976
TDK ELECTRONICS CO LTD V JAPAN LINES LTD 77S

filing its complaint TDK requested that the case be handled under the Short

ened

The

Procedure 3

Respondents agreed to the Shortened Procedure provided the time for

filing answering memoranda wasextended form 25 to 30 days The extension

wasgranted and the Respondents have filedanswering memoranda where they

admit the substance of the complaint but make certain changes in the amounts

involved The Complainant failed to file a timely reply but has indicated by

telex and by mail that it agrees with the corrections made in the RespondenYs

Answering Memoranda

FINDINGS OF FACT

1 TDK is a Japanese corporation located in Tokyo Japan engaged in the

manufacture and sale of electronic components and devices

2 TDK Mexico is a subsidiary ofTDK and is engaged in the production of

ferrite magnets

3 JL and KKK are Japanese carriers and common carriers by water as de

fined in the Shipping Act 1916 and are engaged in transportation between

Japan and the United States

4 Beginning on January 13 1977 and to August 31 1978 TDK shipped

the raw materials to be used for ferrite magnet production to TDK Mexico

from Japan to Mexico via the Port of Los Angeles in dry containers on vessels

operated by JL and KKK The raw materials are powdered materials almost

all ofwhich are by weight 90 percent iron oxide and are identified on pertinent

invoices and bills of lading as Ferrite Powder Iron Oxide Dry Type They

were packed into craft paper bags each containing 25 kilograms In addition

to the ferrite powder a small de minimus percentage of the material shipped

was alundum powder

5 The materials transported by JL and KKK moved under Trans Pacific

Freight Conference of Japan Korea Tariff No 35 FMC 6Item No

2520 OSof the tariffwasdesignated as Chemical NOSItem No 1945 00

was identified as Iron Oxide

6 The base rate in the pertinent tariff and the currency adjustment factor

with regard to relevant item numbers from January 1 1977 to August 31

1978 is as follows

US PEx RT

tem No Item No CAF

Date 2520 45 945 00

I177 9300 6700 20

4177 106 00 7600 40

7l7 60

101 77 90 178 120

4178 113 00 8100 I50

7

1 78 200

The Commission sRules ot PracliCO and Procedure Subpart K sections 181 187 46CFR502181 I87eliminate the

mN for oraltestimony and hcaringa by providing hati if the panies agree the caae may be decided upon a record consisting of

1he com0 aimand amemorandum of facts and argument together with supporting documenta 2Ihe respondenCs answoring

memorandum and supponing dacuments ad3the campleinent s

memorendum ofreply Under the rules thc filing ofthe reply

cloaes ihe record unless the Pruiding OMcer dcems the reco dinsulficient and requires additional evidence

RT Revenue Tons I000 Kgs orIm
C FEDERAL MARITIME COMMISSION

7 JL tranaported 19 shipments of femte powder to TDK Mexico v

Port of Los Angeles FOB Shimizu Japan between January 13 1977 

July 20 1977 It billed TDK Mexico at the rate applicable under 

No 2520 OS ChemicalsNOSThe freigfit charges wero paid with

days of the bill of lading date Pertinent information ineluding the diffe

between the rate charged and the rata that would have been applicable 

Item 1945 00Iron Oxide is as follows

BL BL Rates US 

Vessef Date No ltem No 2520 OS ltem No 1945 00 

Japan

Ace 1l377 JO50 00006 93 2 1727 97 67 2Yo 1244 88 

America

Maru 12077 10001 3004 28 21993 

Queen s

Way Br 12977 10010 4396 71 3188 99 

Pacific

Arcow 2677 00142 5879 76 4296 31 

America

Maru 30377 10072 3071 94 213 12 

Japen

Aca 31577 10085 3964 26 2890 73 

Yamashin

Maru 32577 00218 1616 90 187 48 

Asia

Maru 41077 10131 106 4 2008 14 76 4 1439 79 

Yamashin

Maru 42277 10142 3970 62 2719 6t

Queen s

Way Br 43077 10161 7809 40 599 19 

Kushu

INaru 5IS77 10180 I960 23 1279 82 

Yamashin

Maru 52077 10185 2784 07 1999 71 

Japan

Ace 52577 10189 4016 2b 2879 59 

Queen s

Way Br 53077 0194 346 89 2399 65 

Kashu

Maru 6IS77 0231 45532 3199 54 

Japan

Ace 62377 10247 346 89 2399 65 

Asia

Maru 7137 10295 690 240 56 6 14678 

Yamashin

Maru 7207 10307 3411 25 2445 80 

Yamashin

Maru 720I7 10306 47755 3424 12 

Total 48

8 KKK transported 41 shipments of ferrite powder toTI KMex

o

Shimizu Japan between February 4 1977 and March 19 1978 It 

TDK Mexico at the rate applicable undor Item No 2520 OS Chem

NOSTDK Mexico paid the freight charges within ten days of the 
TDK ELECTRONICS CO LTD V JAPAN LINES LT0 7I7

lading date Pertinent information between the rate charged and the rate which

would have been applicable under Item No 1945 00is as follows

1 ncluded in 4 ofIhe 41 shipments were small quantities ofalundum powder which involve rateadjustments that are de minimus

and are not reflected in the scheAule A detailed breakdown of ihe shipmenls involving alundum powder is as follows

Golden Gaie eridge 1398A l0097K052 51159

Now Read Should Read Balonre

aIron Ozide Base Rate at 1

I06 00KT at 5 7600KT

70360KT

0 Freight S 7218 16 E2307 76

bAlundum Powdec Base Rate at 5 1060KTat S 132 00M3

0307KT0714 Ml

0 Freight 5 3254 5 9425

c Cumphor Bnse Ra e at S 140 00M3 at S 140qM3

0968 Ml

0 Freight S 175 52 E 135 52

Total S 366 22 125373

CAF 9 S 104 76 S 228 34

S 3690 98 12765 47 1 925 51

Parifir Anow 2053A ll077K051 51188

Naw Read Should Read Balattte

a Iron Ozide Base Ra e aS 106 00KTat S 7610KT

34408 KT

0 Freight S 3647 25 E2615 01

bAlundum Powder Base Rate at S 106 00KTal 5 166 00KT

0J07KT0166 M3

0 Freight S 3254 S 5096

c Cumphoe Base Rate ut 140 00M3al E 140 00M3

0968 M3

0 Freight 5 135 52 IS3552

Tonl 5 38151 E2801 49

CAF 996 5 343g 252 13

S 4158 69 51105 07

KasHu Maru 3001A l11177K031 51323

Now Read Should Read Balance

a Iron Oxide Base Rate at S 106 00KTet S 7600KT

108284KT

0 Freight 511478 10 58229

b Alundum Powder Base Rate al S 106 00KTat S 166 00KT

0256KT0149 M3

0 freight 5 2714 5 4250

c Cnmphor Base Rate nt S 140 00M3at 140 00M3

1613 M3

0 Freight S 225 82 S 225 82

Total 51173 06 8497 90

CAF 9 I OS S 764 81

12S 786 86 92 271 I3524 15

AxiaMaru 457 il011678K051 31607

Now Read Should Read Balattce

uIron Oxide Basc Rate at S 106 00KTat S 7600KT

5061KT

0 Freighl S 5361 60 53645 fi0

b Alundum Powder Base Ra eat S 106 00KTal S 166 00KT

0670KT0505 M3

0 Freight 922 S 144 42

c Camphor Base Rate at 140 00MJat S 140d10 M3

1530 M3

0 Freight 21410 S 2140

Totnl 5 5670 02 542042

CAF 12 84 S 5041

S 6350 42 457063
FEDERAL MARITIME COMMISSION

BL BL

Rates US 

Vessel Date No temNo 1510 OSItemNo l943 00

G

Bridge 02477 K052 S1399 93 2Ro 3071 74 67 290 213 12 

Keahu

Maru 03177 51723 1535 98 106 56 

Japan

Ace 031477 SI720 1727 97 1244 88 

Pacific

Arrow 033077 S1735 3071 94 213 12 

Yamashin

Mnru 042177 51753 106 4 4239 39 76 490 2805 75 

Asia

Maru OSll77 51775 4016 26 2879 58 

Pacific

Arrow 06977 52014 36618 26392 

QW

Bridga 062977 51810 1673 44 199 83 

QW

Bridge 062977 51809 1896 56 1359 80 

QW

Bridge 07297 51870 60 36386 6 2608 85 

Pacific

Arrow 077 51852 2046 75 14679 

Pacific

Arrow 077 51851 4093 50 29346 

Asia

Maru OS1377 51878 5685 42 4076 34 

Kashu

Maru 08177 51886 4025 4025 

America

Maru 09277 52202 5369 63 3889 28 

Pacific

Arrow 09OS77 52214 3866 09 2771 91 

G

Bridge 0977 52224 3866 09 2771 91 

Yamashin

Maru 092177 52235 6283 90 4546 10 

America

Maru 100177 52245 996 1819 33 9 1304 43 

G

Bridge 100977 52259 3690 98 2765 47 

Keahu

Maru 10277 52139 2104 68 1509 02 

America

Maru 1029J77 52277 3507 79 2515 03 

Pacific

Arrow II077 52288 4158 69 3053 62 

xn

Maru II2177 52294 81845 5868 39 

Yamashin

Maru 112877 52298 3741 64 26829 

Japan

Ace 120177 52308 4209 35 30182 

America

Maru 12OS77 52311 2104 68 1509 02 
TDK ELECTRONICS CO LTD V JAPAN LINES LTA 7I9

G

Bridge 1277 52321 6314 03 4527 04 1786 99

Kashu

Maru 12277 52325 12786 86 9262 71 3524 I5

Asia

Maru 122477 52335 2104 68 1509 02 5956

Japan

Ace 01OS78 52411 12 8418 70 12 60355 2382 65

Paciflc

Arrow 011278 52347 10813 02 7523 3060 29

Kashu

Maru 01278 52356 444 59 322 48 1221

Asia

Maru OI2678 52370 7328 82 5254 63 2074 19

G

Bridge 012978 52381 4325 20 3101 09 1224 ll

Pacific

Arrow 02178 52390 6487 81 46514 18367

G

Bridge 0378 52632 8289 98 5943 76 23462

Asia

Maru 022678 52607 6350 42 47083 64L69

Yamashin

Maru 03II78 52640 482 53 360 43 I1220

Yamashin

Maru 03Il78 52638 4325 20 3IOL09 12241

America

Maru 031978 52648 189833 136L07 537 26

TOTAL 50809 9

These shipmenis contuined small amoums of alundum powder

9 KKK transported 10 shipments of ferrite powder to TDK Mexico via

the Port of Los Angeles FOB Shimizu Japan between April 22 1978 and

August 6 1978 Freight was prepaid by TDR in Japanese yen at the rate

applicabie under Item No 2520 OSChemicals NOSPertinent infocma

tion including the difference between the rate charged and the rate which

would have been applicable under 1945 00is as follows s

Included in 2 oflhe 10shipmenis wero smell quantities ofaWndum powder which involve rate adjustmeNs that are de minimua

adare nol roflated in the uheAule A detailed brwkdown of ihe shipmo nts involving alundum powder is as follows

Queett sWoy eridge 5837A 041178XOSI 51686

Now Read Should Read BaJanee

uIron Oxide Bau Ra e al S I13 00KT at 5 8100KT

75015KT

0 Freight 57956J0 5283612

bAlundum Powder Bax Rate at 113 00KT at S 174 00KT

0410 KT0169 M3

0 Freigh S 4633 S 7134

c Camphor Buu Rate at 5 148 00M3 at S 148 00M3

302 M3

0 Freighl S 4bb 70 S 488 70

Total 54491 73 53396 26

CAF IStS 1 677 76 S 509 44

55165 49 53905 70 51259 79

at en rate 225 40 Y283 957
c

3

C

0

3

n a o e

r

n a

1mCJ

d3waFG3mmmwm

3 c

J6 on

oFo

ae c m c sc c

n

4 n

y

o

J

P

O

J J J J J J J J J J

CO W W W W W O W

X

0

N

W

N

N N N N N N N 1J

A oa oo O O O J o0

y

N y p O J N W O

W

N

A J O O N N P U

J

O

D O O O O A J

iNpi U

up pp q b J N J

U b

0

e

7

O

N

Q

gv S9 O

W N J W W

m A

W

W b O b w O

N N J O J U

o o m a w o u o 0

C

ti

w

u N

N

a

J A O J O O P iJ

J J W W J N

O W O W O

J b J W V A N A O O

W

O J J a N O O W

O N

4 O O O P J

Y J

I

I I

I

I

I I 1 I I I

N N N N N N N N

O O O O N N N W N

p U JP

Wp W Tp

O O n tn tn tn O O O O
TDK ELECTRONICS CO LTD V JAPAN LINES LTD 7H1

10 For the period from September 1 1979 to February 28 1979 there

were other shipments from TDK to TDK Mexico which were transported by

JL and KKK where the materials shipped were rates under Item No 2520 OS

rather than Item No 1945 00TDK has requested from the carriers that they

reimburse the excess monies paid to them In addition as ofFebruary 28 1979

suchshipments have been rated on the basis of Item No 1945 00Iron Oxide

rather than on the basis of Item No 2520 OS ChemicalsNOS

11 The bills oflading in each instance involved herein were prepared by the

ComplainanYs local fowarder in Japan He placed on the bills of lading the

rates specified thereon

12 The complaint was filed on August 27 1977

ULTIMATE FINDINGS OF FAC f

13 The raw materials shipped by TDK via JL and KKK was iron oxide and

is properly rated as such under Item No 1945 00of the pertinent tariff

14 JL and KKK collected and received amounts which exceeded the appro

priate rates specified in the tariff on file with the Commission

15 The Commission may not direct the payment of reparations by JL

because none of the shipments involved gave rise to the accrual of a cause of

action within two years from the date the complaint was filed

16 The Commission may direct the payment of reparations by KKK to

TDK and TDK Mexico for those shipments whichgave rise to a cause of action

accruing within two years of the date the complaint was filed There are 37

shipments where reparation is warranted beginning with the shipment evi

denced by the bill of lading dated September 2 1977

DISCUSSION AND CONCLUSIONS

The Findings of Fact are a composite of the complaint ofTDK and accom

panying attachments the Answering Memoranda of JL and KKK and accom

panying attachments and the ultimate stipulation of the parties as to what

Faotnote mntinued

Queen sWay Bridge 6658AOS108K051 517 3 7

Naw ReaE ShoulA Read Balanee

a Iron Oxide Base Rate at E I13 00KT at 5 8100KT

1244KT

0 Freigh EI 37217 S 983 66

bAlundum Powder Base Rale at S II700KT at 174 00KT

051KT025 M3

0 Freight S 576 S 87

c Camphor Bau Rate at S 146 00M3 at S 148 00M3

0 Freight S 2445 S 244 75

d Ferrite Magnel

NOt Magneliud at S 9700M3 at E 9700M3

0709 M3

0 Preight S 6877 5 6877

Total 51691 15 51305 65

CAF IS 5 253 67 5 195 85

51944 62 51010 S 443 32

at ex rate 228 40 Y101 254

TDK cluims an overpaymenl of738751yen bnuA on lhe exchange rate betwcen yen and dollars az ofthe preceding day of each

shipment
72 FEDERAL MAR TIME COMMISSION

transpired Tothe extent they are not specifically refened to in this por

the decision they are inwrporated by reference The Findinga of Fact 

two primary issues Firat dces the Commiasion as to each shipmen

jurisdiction to grant the reparations requested by the Complainant s

have the shipments been miaratod and if sowhat ia the amount of repa

to be granted With reapect to both iasues the partias haveagraed and 

been found as a fact that the raw material shipped by TDK to TDK M

was iron oxide with the excaption of a amall amount of alundum powd

that the correct rate applicable was that sat forth under Item 1945 00

Oxide rather than Item No 2520 OSChemicala NOSThe partie

also agreed and it has also been found as fact that as corrected the over

as to JLsshipments was19415 81rather than 21996 70that the 

overcharge regarding the 41 shipments made via KKK and paid for by 

Mexico was50809 9rather than 58116 4and that the correc

charge regarding the 10 ahipmanta made by KKK and paid for by TD

380449yen rather than 387751yen Further it has been found as 

that all of the shipments made via JL were ahipped and paid for p

August 27 1977 and that 14 of the shipmants made via KKIf were s

and paid for prior to that date

Issue No 1Jurisdiction

Section 22 of the Shipping Act 1416 providea

That eny persort may file with the board a aworn complaint setting forth any violation of 

by a common carrier by water or other peraon subject to this Act and asking for npar

the injury if any cauaed thereby The board ifthe comp alntisfiled within twoye

the cause of acrlon accrued may dicect the payment on or beforo the day name

reparation to the complainant for the injury caused by such violation Emphasis supp

The provisions of section 22 are clear and it is well aettled that the t

y

period of limitations is a jurisdictional impediment which cannot be wa

the Commission Carton Print Inc x TheAustasta Conta nerExpress S

ship Co Docket No 7427 served July 29 1974 17 SRR 571 581 

determination by the Commiasion not to review July 7 1977 US

Chemical Corp v Pac Coast European Conf 11FMC451 471 4

SRR 75 1968 Aleutian Homes Inc v Coastwise Ltne et al 5FMB

612 1959 As to the date the cause of action accrues it is equally well 

that a cause of action based upon a claim for reparation accrues at the 

shipment or upon payment of the freight charges whichever ia later 

rel Louisville Cement Co v ICC 296 US638 644 1917 CSC Inteon

Inc v Ortent Overseas Contatner Unes Limited 14FMC255 260 

Aleutian Homes Inc v Coastwtse Line et al supra See also Comm

Rules of Practice and Procedure section 5023 46CFR50230

plying that legal principle here itis clear that any overcharges which ma

occurred regarding the shipments made via JL cannot be cured by 

reparation As to each such shipment both the date of shipment and th

of payment were more than two years from the date the complaint w

ff
TDK ELECTRONICS CO LTD V JAPAN LINES LTD IH3

and

T

the cause of action could not have arisen within the two year period

herefore the Commission cannot direct the payment ofreparation Likewise

with respect to the first 14 shipments made by KKK paid for by TDK Meacico

The shipments and payments were made more than two years before the filing

of the complaint and therefore the Commission cannot order that reparation

be made As to the remaining KKK shipments they began on September 2

1977 and ended on August 6 1978 so that the cause of action accrued within

two years of the date of the filing of the complaint gUnder section 22 the

Commission has the authority to direct the payment ofreparations respecting

those shipments

Issue No 2Reparations

In considering whether or not reparations should be awarded the threshhold

question is whether or not there is amisrating and the amount of the resultant

overcharge The question is factual in nature and it has already been found that

the materials should have moved under the rate applicable as Iron Oxide

rather than under the rate charged as ChemicalsNOSThe Complainant has

satisfied his burden ofproof in this regard and the Respondents agree that the

finding of fact is correct Wha remains is to determine the amount of the

overcharge on shipments where reparations are not barred by the two year

limitation period set forth in section 22

Beginning with the 15th ofthe 44 shipments made viaKKK the overcharges

through the 41st shipment paid for by TDK Mexico total39180 419The

overcharges paid by TDK respecting all of the 10 shipments made via KKK

totalY3380449 10

ULT MATE CONCLUSIONS

In view of the above facts and discussion Ihereby conclude

1 With respect to all of the shipments fram January 13 1977 to

August 6 1978 JL and KKK collected and received amounts which exceeded

the appropriate rates specified in the tariff on file with the Commission and

which violated the provisions of section 18b3

2 All of the shipments made via JL and the first 14 shipments made via

KKK weremade and paid for and the causes of action accrued more than two

years from the date of the filing of the complaint and therefore the Commis

sion dces not have jurisdiction to direct the payment ofreparations regarding

such shipments

3 As to 27 shipments KKK collected and received charges from TDK

Mexico which were improperly rated as ChemicalsNOSrather than as Iron

Oxide as follows

See the schedule aceompanying Finding of Fac1 7 wherelhe lalest hillof lading date is found to be July20 1977 which even

ulluwing 10 days for puyment is morethun Iwoyears from August 27 1979 the date the complaint was filed

See the xhedule in Finding of Fact 8

See the schedula in Findings of Facl 8 and 9

Sce the schedule in Finding of Fact 8

See Ihe uhedulc in Finding of Fecl 9
4 FEDERAL MARITIME COMMISSION

BL BL

Rates US 

Vessel Date No temNo 1510 05temNo 1945 00

Americe

Maru 09277 K052 52202 106 4 5369 63 76 4 3889 28 

Pacific

Arrow 09OS77 52214 3866 09 2771 91 

G

Bridge 0977 52224 3866 09 2771 91 

Yamashin

Maru 092177 52235 6283 90 4546 10 

America

Maru 10Ol77 52245 1819 33 1304 43 

G

Bridge 100977 52259 3690 98 2765 47 

Kashu

Maru 10277 52139 2104 68 1509 02 

America

Maru 102977 52277 3507 79 3515 03 

Pacific

Ar ow 11077 52288 4158 69 3053 62 

Kashu

Maru II2177 52294 81845 5868 39 

Yemaehin

Maru Il2877 52298 3741 64 26829 

Japan

Ace 12O1 77 52308 4209 35 30182 

America

Maru 12OS77 52311 2104 68 1509 02 

G

Bridge 1277 52321 6314 03 4527 04 

Kashu

Maru 12277 52325 12786 86 9262 71 

Asie

Maru 122477 52335 2104 68 1509 02 

Japan

Aca 01OS78 52411 8418 70 60355 

Pacific

Arrow 011278 52347 10813 02 7523 

Kashu

Maru 01278 52356 444 59 322 48 

Asia

Maru Ol2678 52370 7328 82 5254 63 

G

Bridge O1 2978 52381 4325 20 3101 09 

Pacific

Arrow 02178 52390 6487 81 46514 

G

Bridge 0378 52632 8289 98 5943 76 

Asia

Maru 022678 52607 6350 42 47083 

Yemashin

Maru 03I178 52640 482 53 360 43 

Yamashin

Meru 03li78 52638 4325 20 3101 09 

America

Maru 031978 52648 1896 33 1361 07 

Total 
TDK ELECTRON CSCO LTD V JAPAN LINES LTD IHS

4 As to 10 shipments KKK collected and received charges from TDK

which were improperly rated as ChemicalsNOSrather than as Iron Oxide

as follows
i

f

I

C N

IGySv3S3

O

v m

e

DO

m Y3

b

Yw

OW

w

a

a

a

m Nm v m

5

o

n 5

Ipo c

Do n cscac n E m

8

3

6

3

O

P N A

p

oo N O O N

w oJO m w w m oJO m W

N

V U N V U ln U

W N N N N N N NN

Q O J J J CO J J N P

W N U O O W J N W P

N

P J V O N s

A

UO b A v

N W O W P

b O O O Q l A J

Up

N

O P P O J N J Q b

trQ

R

O h

N

O

3

39 O

b

a

N1

W N J IJ

Wp 8

W Lr m J V O O O

J

N

1

O P J tn

O J W J Co W J

W O O Oi A W O W O O

9

Np p

N A

p

J V

p

W J N O W O O j

I

J p J W U A N A O V vR I

I

l J J

N b O

W IfI

O N CO U d S N W QJ lA y

I

W W Q Q A l A J

1 I

I

I

I I 1 1 1I

ZI

O

O O O N N N N N

p

P W N Q

Wp

W

P

VA O O tn u u ln O O O O
TDK ELECTRONICS CO LTD V JAPAN LINES LTD H7

WHEREFORE IT IS ORDERED that KKK shall pay as reparation to

TDK on behalf of TDK Mexico 39180 41 within 30 days from the date of

the Commission sfinat order in this case and it is

FURTHER ORDERED that KKK shall pay as reparation to TDK

Y3380449 within 30 days from the date of the Commission sfinal order in

this case

S JOSEPH NINGOLIA

Administrative Law Judge

WASHINGTON DC

January 8 1980
FEDERAL MARITIME COMMISSION

DOCKET No 79 29

ANGEL ALFREDO ROMERO INDEPENDENT OCEAN FREIGH

FORWARDER APPLICATION AND FOREIGN FREIGHT FORWARDERS 

POSSIBLE VIOLATIONS OF SECTION 44 SHIPPING ACT 191

Joseph B Slum and William D Welswasser for Bureau of Hearing Counsel

ORDER ADOPTING INITIAL DECISION

May 22 1980

BY THE COMMISSION RichardJ Daschbach Chairman 

F Moakley Vice Chairman J

Day Leslie Kanuk and Peter N 

CQmmissioners

Chief Administrative Law Judge John E Cograve issued an Initia

on March 19 1980 in which Angel Alfredo Romero was found to hav

section 44 of the Shipping Act 1916 46 VS C 5841b by en

unlicensed forwarding activities As a result the Presiding Officer a

penalty of 2 500 against Mr Romero but left up to the Commi

setting ofterms and conditions of payment Initial Decision at 12 N

tions were filed to this decision The Commission has thoroughly rev

Initial Decision and adopts it as its own

Generally in those cases where aPresiding Officer assesses a civilp

the basis of a settlement or stipulation the better course of action wo

have the Commission s Bureau of Hearing Counsel arrange payme

with the respondent which could then be submitted to the Presiding O

approval In thisparticular case however toavoid the unnecessary ex

effort which would occur upon a remand the Commission will inste

Mr Romero to contact the Office of General Counsel to establish 

terms including interest on any unpaid balance If agreement is no

within 30 days the entire penalty amount shall become due
ANGEL ALFREDO ROMERO 789

THEREFORE IT IS ORDERED That the Initial Decision in this pro

ceeding is hereby adopted and

IT IS FURTHER ORDERED That within 30 days of the date of this

Order Angel Alfredo Romeroshall contact the GeneralCounsel ofthe Federal

Maritime Commission to arrange payment terms on the assessed penalty If

such arrangement is not reached within this time period the entire penalty

amount shall become due and payable and

FINALLY IT IS FURTHER ORDERED That this proceeding IS

discontinued

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 79 29

ANGEL ALFREDO ROMERO INDEPENDENT OCEAN FREIGH

FORWARDER APPLICATION AND FOREIGN FREIGHT FORWARDE

INC POSSIBLE VIOLATIONS OF SECTION 44 SHIPPING ACT 1

Adopted May 22 1980

Applicant found to have violated section 44 of the Shipping Act 1916 Civil penal

Joseph B Slunt and William D Weiswasser as Hearing Counsel

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGEI

The Commission instituted this proceeding to resolve the followi

1 Whether Foreign Freight Forwarders Inc and orAngel Alfredo 

as President and majority stockholder of Foreign Freight Forward

violated section 44 a Shipping Act 1916 by engaging in unlice

warding activities

2 Whether on his application for a license as an independent ocea

forwarder Angel Alfredo Romero willfully concealed both his c

with Foreign Freight Forwarders Inc and the functions performe

in regard to the activities of Foreign Freight Forwarders Inc

3 Whether in light ofthe evidence adduced pursuant to the foregoi

together with any other evidence adduced Angel Alfredo Rom

willing and able properly to carry on the business of forwardin

conform to the provisions ofthe Shipping Act 1916 and the requ

rules and regulations of the Commission issued thereunder

Shortly after the institution ofthe proceeding Romerowithdrew hi

tionZ and sought permission to negotiate a settlement ofall claims ag

arising from any past violations of the Shipping Act under Part 5

Commission s Rules of Practice and Procedure 46 C F R i

505 1 e

This decision will become the deqjlion ofthe Commission in the absence ofreview thereof bythe Commission 

of Practice Ilnd Procedure 46 CF R 1502 227

J Romero swithdrawal of his application makes it unncc eaaary to decide Issue Number 3
ANGEL ALFREDO ROMERO 791

stayed the proceeding on July 2 1979 pending outcome ofthe negotiations On

August 30 1979 the Commission amended its Order of Investigation to

provide for the assessment or compromise ofcivil penalties under section 32 of

the Act 46 VS C 831 The order wasamended by the addition of a fourth

issue

4 whether civil penalties should be assessed against Angel Alfredo Romero

and or Foreign Freight Forwarders Inc pursuant to 46 US C 831 e

for violations of the Shipping Act 1916 and if so the amount of such

penalties

The Commission gave the parties until November 26 1979 to conclude any

settlement negotiations Hearing Counsel on November 26 1979 moved to

reactivate the proceeding saying that despite the cooperation and best efforts

of all concerned it had not been possible to reach a final settlement On

November 28 1979 Ischeduled a prehearing conference to be held on Decem

ber 11 1979 Hearing Counsel then advised methat the case could be submit

ted upon affidavits and memorandum Icanceled the prehearing conference

and established a procedural schedule The case is now ready for decision

The parties have agreed by stipulation that the evidentiary record will consist

of

IThe affidavit of Angel Alfredo Romero

2 The findings of fact proposed by Hearing Counsel in its memorandum of

law filed June 8 1979 and

3 The affidavits of Miguel Tello Harry T Statham Charles L Clow and

Jules Z Johnson

The above are admitted into evidence as Exhibits 1 2 and 3 respectively

BACKGROUND

On April S 1977 Angel Alfredo Romero applied for an independent ocean

freight forwarder s license The application was filed by Mr Romero as an

individual to be licensed as a sole proprietorship On the next day Mr Romero

was contacted by telephone to confirm some of the information in the applica

tion and stated that he was then employed by WTC Air Freight and that he

would leave WTC as soon as he obtained his license

Following the April 6 1977 phone conversation a letter also dated April 6

1977 was sent to Romero specifically directing his attention to section 44 of

the Shipping Act 1916 which as the letter said prohibits any person from

engaging in the business of forwarding unless such person holds a licenseissued

by the Federal Maritime Commission Romero s attention was also directed

to section SIO 2 of the Commission s General Order 4 46 C F R SIO l

Licensing of Independent Ocean Freight Forwarders Section SIO 2 defines

Carrying on the business of forwarding A copy of General Order 4 was

enclosed in the April 6th letter By another letter dated April 6 1977 the staff

I

The proposed findings of Hearing Counsel do not give the full picture of the plight and activities of Angel Romero The

background statement comes from the affidavits comprising Exhibit 3
792 FEDERAL MARITIME COMMISSION

requested additional information from Romero He did not furnisb t

quested information and on May 13 1977 Romero was told by lette

unless be did supply the information bis application would be placed 

inactive status On June 21 1977 Romero was informed that bis appli

bad been placed in an inactive file due to a lack of prosecution of 

application on your part

On December 23 1977 tbe staff received a letter from Romero statin

be wisbed to reactivate bis application He explained that be bad prev

been unable to furnisb tbe information requested by tbe staff because b

tben employed by a company wbicb bas been long establisbed and 

refused my affiliation He went on to say Iamnow employed by a

com

to wbicb Iamaffiliated and tbus able to furnisb all the required informa

However witb tbe exception of one credit reference from tbe Interconti

Bank of Miami tbe staff received none of tbe information requested

InAprilof 1978 Mr JulesZ JOMson aDistrict Investigator in the Co

sion s Gulf District office visited Romero wbo was in tbe offices of a bu

entity called Foreign Freigbt Forwarders Inc Wben asked by Mr Jobn

be bad been carrying on tbe business of freigbt forwarding witbout a li

Romero said tbat Dade County Florida bad issued Foreign Freigbt For

ers Inc an occupational license Mr Jobnson tben explained to Romer

notwitbstanding tbe Florida license federal law required a license fro

Commission before anyone could engage in forwarding activities Romer

stated tbat it was bis understanding tbat an FMC license wasnecessar

if be collected commissions from carriers and tbat be bad only b

sbipments prepared bills of lading and export declarations and perf

otber forwarding functions necessary to move cargo

After being advised tbat be was in violation of tbe law and of tbe p

consequences of bisunlicensed activity Romero agreed to give Mr Jobns

documentation on eacb sbipment be bad bandied From tbe document

plied by Romero Mr Jobnson establisbed that during tbe period Decemb

1976 to Marcb 30 1978 Romero under tbe name ofForeign Freigbt For

ers Inc acted as forwarder on 74 sbipments and collected forwarding 

1 875 00

On 3 oftbe 74 sbipments tbe shipper wasnamed as JEP Enterprises 

president of tbat company is one Josepb Pinder wbo until October of 197

Secretary Treasurer of Foreign Freigbt Forwarders Inc and owne

sbares of its common stock representing 45 of tbe corporation s e

Romero assured Mr Jobnson that tbe documents furnisbed represented 

tbe sbipments on whicb be bad acted as a freight forwarder However M

G Tello also a District Investigator in the Gulf Office was to prov

statement false

While Mr Johnson was conductin his investia8tlon of Romero activities the latter on May 15 1978 wrotcto M

L Claw Chief of the Commission s Office of Freiaht Forwarders stating

I Will informed by you that as lon as I did not collect broker fees I was not In violation of 

regulations however following your advice I have not IlIked for brokerase roea from ahlpplna companies I 

Mr Clowin an affidavit Itates that hcdid talk to Romero but did not at any timoaUJICII that Romero oould engaae In th

of forwarding without Il license so long albrokerage wal not collected rrom carriers
ANGEL ALFREDO ROMERO 793

Mr Tello s first contact with Romero came as a result of Mr Tello s

investigation of the use by Fast International Forwarding Corp of the freight

forwarding license of Land Joy International Forwarders Inc In reviewing

some documents of Land Joy Mr Tello came across bills of lading which

displayed five numbers preceded by the letters FFF One Orlando Fernandez

President of Land Joy first denied knowing what FFF referred to claiming

he had not been with Land Joy during the period covered by the bills However

Magali Fernandez ex wife of Orlando who had been president during that

time told Mr Tello that the letters FFF referred to invoice numbers of

Foreign Freight Forwarders Inc The former Mrs Fernandez explained that

Land Joy had been allowing Foreign Freight Forwarders Inc to use Land Joy s

name and license number 1768 and that Foreign Freight Forwarders Inc

billed the shippers for the forwarding fees while Land Joy charged the carriers

brokerage Magali Fernandez also stated that the arrangement began while

Orlando Fernandez wasPresident the first shipment being made in March of

1977 and continued until June of 1977

When confronted with the statements of his former wife Orlando admitted

that his earlier denial was false and agreed to give Mr Tello 16 bills of lading

bearing the FFF reference Mr Tello next visited Romero who when faced

with the evidence admitted that he had used Land Joy s license number and

produced 26 more bills of lading on which Land Joy s number had been used 5

As if this were not enough Mr Tello in his continuing investigation of

Romero s activities uncovered some 89 shipments on which Romero used the

name and FMC license number of United Dispatch Services Quite naturally

Mr Tello went to United Dispatch and there met a Mr Lopez and a Mr Ro

mano partners in that enterprise They admitted that they had loaned

Romero United s license but explained that they thought the only prohibition

against such charity was the sharing with the borrower of compensation re

ceived from the carrier Itseems almost superfluous to say that whenthe results

of the investigations of Romero s activities were gathered and analyzed the

Commission decided to issue the letter of intent to deny Romero a license

which ultimately led to this proceeding

THE STIPULATED FACTS

A Violation ofSection 44 0 Shipping Act 1916

IAngel Alfredo Romero applied as an individual to be licensed as an

independent ocean freight forwarder on April 5 1977

2 Following receipt of Mr Romero s application in April 1977 the Office

of Freight Forwarders sent him a letter warning him not to carry on the

business of forwarding without a license

Mr Tello went back 10 Orlando Fernandez with the additional bills of lading supplied by Romero Fernandez said that the

hills represented Irlnsactions whit h occurred after Magali Fernandez had told Romero to stop using land Joy s license number

Eventually Mr Tello obtained 42 bills of lading on which Foreign Freight Forwarders Inc Romero used Land Joy s

license

number
794 FEDERAL MARITIME COMMISSION

3 As of March 22 1978 Mr Romero held himself out to the pu

able to provide ocean freight forwarding and all related services

4 As ofMay 16 1978 Mr Romerowascarrying on the business off

forwarding without a license under the name of Foreign Freight Forwa

Inc FFF

5 Mr Romero failed to give investigator Johnson all the documen

which he requested of him in April 1978 despite representing that h

6 Mr Romero forwarded at least 42 shipments using the name and 

license of Land Joy International Freight Forwarders Inc between Ma

1977 and June 20 1977 He did not disclose these shipments to Inves

Johnson

7 On April 6 1978 Mr Romero waswarned by Investigator John

cease forwarding activities unless he obtained a license Mr Romero 

that he would cease such activity

8 Mr Romero admits using the name and FMC license of Unite

patch Services to carry on the business of forwarding 89 shipments 

March 1978 through September 1978

9 United Dispatch Services by its General Manager Rene Lopez 

ted having lent its FMC license to Mr Romero

10 United Dispatch Services collected ocean freight compensation fro

carriers for the shipments which Mr Romero d b a FFF forwarded us

name and license of United

II Records received from Mr Romero reveal that between Augu

1978 and September 14 1978 he d b a FFF charged 1 375 00 for 

ping handling and forwarding and charged his customers a total of 

for document preparation banl ing arrangements and special fees The 

ments involved in number approximately 60 and include some of the 2

pled by Investigator Tello

12 Between December 10 1976 and March 30 1978 Mr Romero 

FFF forwarded at least 74 shipments without an FMC license wh

admitted to Investigator Johnson and 42 more shipments under the na

Land Joy International Forwarders Inc which he later admitted 

vestigator Tello

13 Both Mr Fernandez of Land Joy and Mr Romero ofFFF adm

Land Joy International Forwarders Inc a licensed independent ocean 

forwarder allowed Foreign Freight Forwarders Inc to use its license to 

on the business of freight forwarding

B Respondent s Concealment of FFF Connection and Fitness to be Lic

as an Independent Ocean Freight Forwarder

14 On January 13 1977 Fred Romero wrote the Gulf District 

requesting that application forms for a FMC License Number be 

Foreign Freight Forwarders Inc Exhibit T I

IS In response to Exhibit T I the Gulf District Office sent Exhibit 

letter with application forms and copies of General Order 4 and sections 
ANGEL ALFREDO ROMERO 795

44 of the Shipping Act 1916 The letter warned Mr Romero and FFFnot to

engage in forwarding until being issued a license

16 The application in question was filedby Mr Romero as an individual to

be licensed as a sole proprietorship

17 Following receipt of Mr Romero s application in April 1977 he was

warned not to carry on the business of forwarding and directed to report any

changes in facts contained in his application

18 Despite two requests in April and May of 1977 for further information

and being advised that failure to provide it would result in his application being

placed on inactive status Mr Romero failed to provide further information

requested

19 In May of 1978 Charles Clow received a letter from Mr Romero

wherein he claimed to have been informed by Mr Clow that the only thing he

could not do without a license was collect brokerage sic fees from carriers

Mr Clow did not in fact ever so inform Mr Romero

20 In the above letter Exhibit 6 Mr Romero represented that the had

indeed been forwarding despite not having been issued a license but that he

had ceased

2J Mr Romero failed to reveal to the Office ofFreight Forwarders that he

had been operating as FFF

22 On May 19 1978 Mr Clow wrote Mr Romero reiterating that

Mr Romero should not engage in any aspect of forwarding regardless of

whether he collected compensation

23 Prior to May 22 1978 the only information received by the Office of

Freight Forwarders in support of Mr Romero s application wasa credit refer

encefurnished by a bank whichlisted his name along with that ofFFF At that

time Mr Romero had failed to inform the Office of Freight Forwarders that

his application was other than as an individual

24 Mr Romero d b a FFF handled at least 18 shipments for a shipper

JEP Enterprises Inc with whom he shared a postal box office number telex

number and cable address JEPENTlNC

25 The President of JEP Enterprises Inc is a former Secretary Treasurer

and 45 percent shareholder in FFF

26 Mr Romero d b a FFF handled at least four shipments for a shipper

Mifac with whom he shared quarters

AFFIDAVIT OF ANGEL ALFREDO ROMERO

J My name is Angel Alfredo Romero and Iwas the President ofForeign

Freight Forwarders Inc in April 1977 when Iapplied for an independent

ocean freight forwarder license

2 When Iapplied to the Commission for a license I

received warnings not

to carry on the business of forwarding before I

received my license Ialso

received such warnings from Gulf District Investigators Jules Johnson and

Miguel Tello

3 Foreign Freight Forwarders Inc was incorporated in the State ofFlor

ida in December of 1976 By mid year of 1977 it wasnecessary for meto hire
796 FEDERAL MARITIME COMMISSION

my first employee By the time of Investigator Johnson s visit in April 

Ihad six fulltime employees

4 Despite earlier written warnings not tocarry on the businessof forw

ing without a license Iwasunaware ofany violations on my part until the 

of Investigator Johnson in April 1978 Although Isincerely hoped to co

my business properly in all respect I was unable to follow Mr John

advice to suddenly suspend the operations of my company because of w

felt to be a commitment to my six employees Had Isuspended operations 

would all have lost their livelihood and my own wife and two young daug

would have been deprived of their sole source of support Because o

concern and solely because of it I continued to operate while awaitin

outcome of the investigation surrounding my application

S Ieventually discovered that in addition to being unfamiliar wit

requirements of licensing Iwas also unrealistic in my expectations rega

the timing and outcome ofthe investigation surrounding my application 

result Iwithdrew my application for an independent freight forwarder s li

and afterlooking for a buyer was able to sell my interest in Foreign F

Forwarders Inc in January 1979 The company is now inactive and o

verge of dissolution

6 It is my hope to resolve the problems stemming from the viola

which are the subject of this proceeding Iam faced however with exp

which nearly exceed my income and therefore am not able to suppor

ments on a large penalty My current and anticipated obligations for mort

food utilities personal loan auto loan and child support payments leav

189 00 per month income over expenses Although my personal loan 1

per month will be paid off by June 1980 Iwill incur new obligatio

September 1 1980 when Iwill begin paying my ex wife 606 00 per m

as part ofmy divorce settlement That obligation will last for one year and 

be succeeded by monthly payments of 692 00 also part of my divorc

tlement The latter obligation will also last 12 months Both obligation

secured by mortgages on my house

7 Icurrently hold a note in the sum of 9 960 00 which was given 

partial payment for the sale of Foreign Freight Forwarders Inc Id

include this as an asset in computing the figures in paragraph six becaus

maker of the note has suspended payment claiming that corporate liab

had been understated by approximately 14 000 00 The controversy 

eventually be litigated Until its resolution Ihave an uncollectable no

9 960 00 and a claim against mefor approximately 14 000 00

DISCUSSION AND CONCLUSION

The question which now arises is the level of penalty appropriate 

conduct which Respondent has admitted Generally the number of viol

would indicate that a

very high penalty should be assessed The ques

complicated by Mr Romero s tenuous financial situation By his affida

which Hearing Counsel have stipulated Mr Romero has declared sub

perjury that his present and projected liabilities far exceed the res
ANGEL ALFREDO ROMERO 797

available to meet them Under the circumstances it appears that even a

penalty as low as 5 000 would be uncollectible

The legislative history ofPublic Law 96 25 the source of the Commission s

assessment authority provides no guidance as to this problem its insight as to

penalty assessment is limited to problems related to rebating The Commis

sion s General Order 30 46 C F R 505 titled Compromise Assessment

Settlement and Collection of Civil Penalties Under the Shipping Act 1916

and the IntercoastalShipping Act 1933 does not address the level of penalty

to be imposed It does however at 505 Irefer to 4 C F R Parts 101 105 as

indicating criteria for the assessment of penalties These regulations the Fed

eral Claims Collection Standards were promulgated by the General Account

ing Office and the Department of Justice pursuant to 80 Stat 309 31 U S c

952 They apply to the administrative collection compromise termination of

agency collection action and referral to the G A O and the Department of

Justice for litigation of civil claims by the Federal Government for money or

property The concerns encompassed in the standards include onewhich would

indicate a heavy penalty and several which would indicate a lesser one Section

103 5 evidences a concern that compromise of a claim not impair the deterrent

value of a penalty Section 103 2 on the other hand permits compromise of a

Government claim if the debtor is unable to pay the full amount within a

reasonable time Determination of debtor s inability to pay may include the

consideration of present and potential income and the availability of assets or

income which may be realized upon by enforced collection proceedings Such

compromises should be for an amount whichbears a reasonable relationtothe

amount which can be recovered by enforced collection proceedings 7

having

regard for the exemptions available to the debtor and the time whichcollection

will take Also recognized as justifying a compromise are poor litigative

probabilities and high cost of collection 4 C FR 103 3 103 4 Further

4 CF R 102 9 requires compromise efforts on all cases in which it can be

ascertained that the debtor s financial ability will not permit payment of the

claim in full or in which the litigative risks orthe costs oflitigation dictate such

action Termination of collection efforts is indicated by inability to collect

any substantial amount or if cost will exceed recovery 46 cF R 104 3

Hearing Counsel recognizes that the Federal Claims Collection Act and the

regulations promulgated thereunder are strictly limited in scope to collection

but he also feels that they may aid in determining the amount of the penalty

assessed

While the violations of section 44 Shipping Act 1916 here at issue could

result in high penalties Hearing Counsel urges that the record indicates that

At paragraph seven of his affidavit Mr Romero states that he holds an uncOllectible note for 9 960 which is subject to an

olTsetting claim of approximately S 14 000 Underthe circumstances it appears that this dispute may neither be litigated nor settled

and that Mr Romero will not be able to collect on the note This assumption underlies Hearing Counsel s proposal

1

A realistic appraisal of the situationmust include a recognition of the possibility of Mr Romero sdeclaring bankruptcy In

such case a governmental penalty claim would be excepted from discharge by II use 523 a7 Bankruptcy would trigger the

priority gmnted federal claims by 31 u s e 191 This would havelittle practical el1ect however Mr Romero slargest obligation

is thai 10 his former wife for alimony and child support and these are also excepted from discharge in bankruptcy by II use

5523 a 5 Thepreference under 31 use 5

191 would not prevail overthe obligations to the former Mrs Romero sincethey are

secured by prior mortgages on Mr Romero scondominium Regardlessof whether he declares bankruptcy Mr Romerowill shortly

be insolvent in that he will be unable to meet his obligations
798 FEDERAL MARITIME COMMISSION

such penalties would be uncollectible Thus according to Hearing Counse

criteria discussed above would then become directly applicable The que

as Hearing Counsel sees it then is whetherto assess a penalty virtually ce

to be uncollectible and thus properly subject to compromise or even suspe

of collection efforts pursuant to the Federal Claims Collection Stand

4 C F R Parts 101 105 the alternative is to assess a penalty more relat

Mr Romero s ability to pay and thus realistically collectible This would 

the advantage of sparing the government an essentially redundant and 

effort at considerable administrative cost Hearing Counsel therefore pro

a civil penalty of 2 500 be imposed upon the respondent

In response to Hearing Counsel s proposed penalty Romero says

I AM MOST GRATEFUL TO YOU FOR CONSIDERING MY FINANCIAL POSITION AND REDUCIN

FINE TO THE AMOUNT OF 2500 00 I WOULDHOWEYER APPRECIATE THE TIME TO EXPLAIN

OF MY ACTIONS

I AM WELL AWARE THAT IGNORANCE OF THE LAW IS NO EXCUSE BUT WHEN YOU ARE 

UNINFORMED ONE DOESN T REALLY THINK OF THEIR WRONG DOINGS AS PURE GUILT I

YEARS THAT I WAS IN BUSINESS I BUILT A FINE REPUTATION IN THE FREIGHT FORWA

INDUSTRY AND HAD THE RESPECTOFNOT ONLY MY CLIENTS BUT MY EMPLOYEES AS WEL

REPUTATION WAS FOUNDED ON BEING AS HONESTAS ONE COULD BE AS WELL AS EFFICIE

EMPLOYEES REGARDED OUR ASSOCIATION AS ONE FAMILY AND I FELT THE SAME WAY WH

EXACTLY THE REASON WHY I TOOK THE TIME THAT I DID TO CLOSE MY OPERATION 

OBLIGATED TO ALLDW MY FAMILY EMPLOYEES AS MUCH TIME TO FIND POSITIONS AS PO

ALDNG WITH YOUR UNDERSTANDING I BEG ONE MORE REQUEST IF THERE IS SOME WAY 

COULD BE GIVEN SOME SORT OF SCHEDULE AND TIME IN ORDER FOR ME TO PAY THE 25

AGAIN I AM MOST GRATEFUL FOR THE REDUCTION AS OPPOSED TO THE ORIGINAL AM

ANTICIPATED BUT I TRULY DO NEED SOME TIME TO RAISE THE PENALTY AMOUNT

YOUR HONOR I AM MOST ANXIOUS TO CLEAR UP THIS MATTER AND BEGIN ANEW PROV

THE COMMISSION AND YOUR SELF THAT I CAN CONDUCTAFREIGHT FORWARDINGBUSINESS 

PROPER MANNER

On the basis of the record presented Ifeel that the 2 500 propos

appropriate Ido not sense an intention on the part of Romero to de

anyone On the contrary my conclusion is that Romero s lack ofundersta

ofjust what was required of him wasthe basic cause of his troubles Ther

I

accept the proposal of Hearing Counsel and Romero and hereby orde

a penalty of 2 500 be assessed Angel Alfredo Romero The penalty is 

paid by Angel Alfredo Romero under such terms and conditions as the 

mission shall impose

S JOHN E COORAVE

Administrative Law Jud

WASHINGTON D C

March 17 1980
FEDERAL MARITIME COMMISSION

DOCKET No 79 28

INDEPENDENT FREIGHT FORWARDER LICENSE

No 1321 IKEDA INTERNATIONAL CORPORATION

Independent ocean freight forwarder found to have violated Commission General Order 4

Carlos Rodriguez for Ikeda International Corporation

John Robert Ewers Joseph B Slunt and Charles C Hunter for Bureau of Hearing Counsel

PARTIAL ADOPTION OF INITIAL DECISION

BY THE COMMISSION

May 23 1980

RichardJ Daschbach Chairman Thomas

F Moakley Vice Chairman James V

Day Leslie Kanuk and Peter N Teige

Commissioners

This proceeding was initiated by Order of Investigation served April 3

1979 to determine whether Ikeda International Corporation violated section

18 b 1 of the Shipping Act 1916 46 US c 817 b 1 and Part 510 of

the Commission s Rules ofPractice and Procedure 46 C F R Part 510 and

ifso whether its independent ocean freight forwarder license should be revoked

or suspended In his Initial Decision served January 17 1980 Administrative

I

Specifically the Order sets forth the following issues fOf determination

I Whether Ikeda has violated section 51O 23iof General Order 4 by failing to clearly identify receipts issued for cargo

and distinguish such receipts from bills of lading

2 Whether Ikeda has violated section 510 23 k of General Order 4 by failing tomaintain records and books of account

in the required manner

J Whether Ikeda has violated section 510 23 1 of General Order 4 by failing to make its records and books of account

promptly available for inspection upon the request of the Commission investigative staff

4 Whether Ikeda has violated section 510 5 c of General Order 4 by failing to notify the Commission ofa

recent change

of the firm s business address within 30 days after the occurrence of the change

5 Whether Ikeda has violated section 18 b I ofthe Shipping Act 1916 by performing as a

nonvessel operating common

carrier by water without having filed with the Commission a

tariffshowing its rates and charges

6 Whether Ikeda s independent ocean freight forwarder license should be revoked or suspended pursuant to

a section 510 9 a of General Order 4 for violation of a provision of the Shipping Act 1916

b section 5 IO 9 b of General Order 4 forfailure to comply with the lawful inquiries rules regulations ororders of the

Commission

c section 510 9 e of General Order4 for conduct which renders the licensee unfit to carryon the business offorwarding
800 FEDERAL MARITIME COMMISSION

Law Judge William Beasley Harris found that Respondent had violated G

eral Order 4 but that Ikeda s license should not be revoked or suspended 

Commission s Bureau of Hearing Counsel has filed Exceptions to the In

Decision to which Ikeda has replied

DISCUSSION

Violations

Sections 510 23 1 51O 23 k and 51023 1 The Presiding Officer 

cluded that Ikeda violated sections 51O 23i 510 23 k and 510 2

1 

General Order 4 and Ikeda has not excepted to these findings The Com

sion has determined that these findings are well supported by the re

evidence and adopts them as its own

Section 510 5 c The Presiding Officer s conclusion that Ikeda did 

violate section 51O 5 c of General Order 4 constitutes the basis for on

Hearing Counsels exceptions Hearing Counsel argues that Ikeda vio

section 510 5 c in failing to notify the Commission of a change of add

In response to anApril 1972 Commission questionnaire Ikeda informe

Commission that in addition to its main office it operated a branch offi

1010 34th Avenue New York New York Inearly 1978 it began using 

34th Avenue as its main office but did not notify the Commission ofthis 

Commission investigators were initially unsuccessful in contacting Iked

they were unaware that it had moved from the address on file with 

Commission The investigators eventually located Ikeda at 1010 34th Ave

after noting that Ikeda had once reported that address as a branch offic

Hearing Counsel argues that Ikeda s failure to notify the Commissio

1978 that it was using 1010 34th Avenue as its main office wasa violati

section 510 5 c Hearing Counsel notes that none of Ikeda s letterheads 

its 1010 34th Avenue address This vioiation is a serious one Hearing Co

argues because the rule is designed to allow the Commission ready acce

a freight forwarder s operation

Ikeda maintains that its failure to notify the Commission of its 1978 ad

change is insignificant because the Commission had been notified in 1972 

the 1010 34th Avenue address was a branch office and that Commi

personnel were in fact successful in locating Ikeda at that address

ThePresiding Officer found that because the investigators found Ikeda a

1010 34th Avenue address and Ikeda had listed it six years previously 

branch office Ikeda deserved the benefit of the doubt He concluded 

Ikeda did not violate section 510 5 c

The Commission disagrees Even Ikeda had admitted that it commit

technical violation of the rule in this regard Opening Brief of Respon

at 9 Ikeda s failure to notify the Commission ofits change ofaddress thw

that which the rule was intended to ensure ready accessibility to the fr

forwarder s operation The Commission concludes that Ikeda s conduct i

regard constituted a violation of section 5105 c
INDEPENDENT FREIGHT FORWARDER LICENSE NO 1321 801

Section 18 b 1 No evidence was presented to support a

finding of a

violation of section 18 b 1 of the Shipping Act The parties agreed on this

matter and the Presiding Officer properly found no violation

Sanctions

The remaining issue is that of sanctions The Presiding Officer concluded

that Ikeda violated section 51O 9 a of General Order 4

2

but that Ikeda was

not unfit under section 51O 9 e 3 and that suspension or revocation of its

license was unwarranted Instead he ordered Ikeda to work closely with the

Commission s Office ofFreight Forwarders for six months and to furnish that

office monthly reports indicating conformity with General Order 4 Hearing

Counsel excepts to the Presiding Officer s failure to revoke Ikeda s license

arguing that Ikeda is unfit to carry on the the business of forwarding

Resolution of the sanctions issue involves not only the General Order 4

violations but also a series of complaints made by shippers Since December

1976 the Commission received ten complaints about Ikeda seven of which

were received within two years an unusually high number While a few

complaints involved the quality of Ikeda s forwarding services eg improperly

packed cargo most involved time delays in transportation of property and

difficulty in contacting Ikeda or in getting telephone calls returned

Hearing Counsel asserts that the number and nature of the complaints

demonstrate the unfitness of Ikeda to operate as a freight forwarder Hearing

Counsel emphasizes that those registering complaints have all been shippers of

household and personal goods and are particularly susceptible to a forwarder s

negligence and malpractice

Ikeda notes that none of the complaints involves specific violations of the

Shipping Act or of General Order 4 nor entails mishandling of shippers funds

and that most of the complaints have had satisfactory conclusions

The Commission finds that the major significance of the complaints is their

number None however was documented to an extent that any violations or

improprieties were proven It appears that the major cause of the complaints

was Ikeda s sometimes negligent and irresponsible manner of communicating

with its clients rather than the actual forwarding services performed

Nor have Ikeda s General Order4 violations been shown to have caused any

actual harm to a shipper Ikeda has used forms entitled Memorandum

Shipping Order and Bill of Lading as receipts in violation of section

510 23 iThese forms might have caused some confusion but the practice has

been discontinued Its records violations involving sections 510 23 k and

510 231 evidenced some degree of negligence as well as shortcomings in

Ikeda s professional manner of operation but not of fraud or improper han

l Section 51O 9 a

authorizes revocation ofalicense for violations ofthe Shipping Act However as the Presiding Officer made

no findings of any violations of the Shipping Act the conclusion that Ikeda violated section 510 9 a is clearly unsupportable

Section 510 9 b which the Presiding Officer found was not violated isthe applicable provision That section authorizes revocation

for violations of Commission rules and regulations TheCommission concludes however that revocation istoo extreme asanction

under the circumstances in this proceeding

I

5109 e authorizes revocation for conduct that renders the licensee unfit or unable to carryon the busines of forwarding
802 FEDERAL MARITIME COMMISSION

dling of funds 4

The failure to repQrt the change of address dOes not appe

have been an attempt to evade shippers or the Commission although 

confuse Commission investigators in their efforts to locate Ikeda

On these facts the Commission concludes that revocation or suspens

Ikeda s license would be an unnecessarily severe sanction The seriousne

the violations however cannot be ignored Accordingly this proceed

referred to the Commission s OfficeofGeneral Counsel for assessment of 

penalty pursuant to 46 C F R Part 50S

Additionally the Commission will impose on Ikeda a monthly repo

requirement for a period oftwelve months These monthly reports shou

directed to the Commission s Secretary and should listeach complaint rec

from Ikeda s customers describing the nature and resolution of 

complaint

THEREFORE IT IS ORDERED That the Exceptions of Hearing C

sel are granted to the limited extent indicated and denied in all other res

and

IT IS FURTHER ORDERED That Ikeda International Corporation 

file monthly reports as indicated above beginning not later than 30 days 

date of service of this Order and

IT IS FURTHER ORDERED That the Initial Decision is adopted b

Commission except as indicated and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secret

The IICc ion 51 O 23 k violation involved railure tomaintain rd properly The IOCtlon 510 231 violation involved 

fuilun to submit to Il records inspection When contaetcd by CommilSlon Itaff Ikeda was in the pl OCeIII or meving 

promised to call the staffwhen its records were unpacked It did not do 10
FEDERAL MARITIME COMMISSION

No 79 28

INDEPENDENT FREIGHT FORWARDER LICENSE No 1321

IKEDA INTERNATIONAL CORPORATION

Partially Adopted May 23 1980

Independent Freight Forwarder License No 1321 is not to be suspended or revoked in this

proceeding

The respondent is to cooperate closely with the Commission s Office of Ocean Freight Forwarders

for a six month period submitting monthly reports and receiving directions and close super

vision This will serve hopefully an underlying remedial public interest purpose

Charles C Hunter Joseph B Slunt and John Robert Ewers Director Bureau of Hearing

Counsel for Commission s Bureau of Hearing Counsel

Carlos Rodriguez for respondent

INITIAL DECISIONI OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

This proceeding pursuant to sections 18 22 and 44 of the Shipping Act

1916 46 U S C 817 822 and 841b was instituted by Commission Order

of Investigation served April 3 1979 published in the Federal Register

Vol 44 No 68 Friday April 6 1979 pages 20790 29791 to determine

1 Whether Ikeda has violated section 51O 21 W ofGeneral Order 4 by failing

to clearly identify receipts issued for cargo and distinguish such receipts

from bills of lading

2 Whether Ikeda has violated section 51O 23 k of GeneralOrder 4 by failing

to maintain records and books of account in the required manner

3 Whether Ikeda has violated section 510 23 I of General Order 4 by failing

to make its records and books of account promptly available for inspection

upon the request of the Commission investigative staff

1

This decision will become the decision ofthe Commission in the absence of review thereof by the Commission Rule 227 Rules

of Practice and Procedure 46 CF R i502 227

This undoubtedly is a

typo as section 510 21i

defines brokerage while section 51O 23 i provides Any receipt issued for

cargo by a licensee shall be clearly identified as a Receipt for Cargo and shall be in a fonn readily distinguishable from abill

of lading
804 FEDERAL MARITIME COMMISSION

I

4 Whether Ikeda has violated section 510 5 c of General Order 4 by fa

to notify the Commission of a recent change of the firm s business add

within 30 days after the occurrence of the change

5 Whether Ikeda has violated section 18 b I of the Shipping Act 191

performing as a nonvessel operating common carrier by water without 

ing filed with the Commission a tariff shoWing its rates and charges

6 Whether Ikeda s independent ocean freight forwarder license shoul

revoked or suspended pursuant to

a section 510 9 a of General Order 4 for violation of a provision o

Shipping Act 1916

b section 510 9 b ofGeneral Order 4 for failure to comply with the la

inquiries rules regulations or orders of the Commission

c section 510 9 e of General Order 4 for conduct which renders th

censee unfit to carry on the business of forwarding

Prehearing Conferences pursuant to notices served April 3 1979 

May 7 1979 were held herein on April 25 1979 and May 22 1979 

spectively Hearing in the proceeding began and concluded on Septembe

1979

The official transcript of the April 25 1979 Prehearing Conference con

ofone volume of 15 pages the May 22 1979 Prehearing Conference trans

consists of one volume designated II of 17 pages numbered 16 thru 32 

hearing ofSeptember 25 1979 consists of one volume of 157 pages The 

volumes total 189 pages Eighteen 18 exhibits were presented of which 

Exh No 8 for Identification waswithdrawn one Exh No 5 for Ident

tion was denied receipt into evidence and all the rest were received 

evidence including No 18 a latefiled exhibit Note No 11 for Ident

tion was withdrawn when inadvertently used Tr 112 and then No 11 

Tr 120 for next exhibit and received in evidence as Exh No 11 Tr 12

At the hearing the briefing schedule was developed Hearing Couns

submit its opening brief on or before October 29 1979 Tr 154 respond

reply brief to be submitted on or before November 23 1979 Tr 156 

Hearing Counsel s closing brief to be submitted on or before December 3 

Tr 156 Subsequently by notice served November 20 1979 the br

schedule was changed the counsel for the parties being notified by telep

as well on November 20 1979 that respondent s

reply brief would be du

November 26 1979 and Hearing Counsels closing brief would be du

December 6 1979

The transcript of testimony and exhibits together with all papers an

quests filed in the proceeding constitute the exclusive record for the dec

herein

In its opening brief Hearing Counsel proposed 52 findings of fact 

respondent in its reply brief designated opening brief of respondent dis

4 Nos 5 40 41 and 52 findings of fact proposed by Hearing Counse

Respondent proposed 30 findings of fact Hearing Counsel in its reply 

disputes 13 Nos 4 8 10 11 12 13 15 17 18 19 22 23 and 25 o

findings of fact proposed by respondent The Presiding Administrative 
INDEPENDENT FREIGHT FORWARDER LICENSE NO 1321 805

Judge has considered all of the proposed findings offact as well as the disputes

thereto To avoid duplication proposed facts already covered by stipulation of

the parties are not accepted The proposed findings of fact have been granted

granted in substance or denied as shown by the Presiding Administrative Law

Judge s following findings of fact

Name of Complainant

FACTS

IRespondent and Hearing Counsel entered into fourteen 14 stipulations

Exh No I Tr 1 Rearranged by the Presiding Administrative Law Judge

using alphabet instead of numbers yet identifying each stipulation by number

given it in Exhibit I

a In its original application for an Independent Ocean Freight Forwarder

License dated April 29 1969 Ikeda listed 74 West 47th Street New York

New York as its principal office Exh No 1 at 2 Stip 5

b On the letterhead of the letter dated July 21 1970 by which it reap

plied for an Independent Ocean Freight Forwarder License Ikeda listed its

address as 29 West 47th Street New York New York Id Stip 6

c On April 28 1971 Ikeda received Independent Ocean Freight For

warder License No 1321 Id Stip 7

d In response to an April 1972 Commission questionnaire issued to all

independent freight forwarders Ikeda indicated that its current address was

29 West 47th Street New York New York and that it maintained a branch

office at 10 10 34th Avenue New York New York Id Stip 8

e Bya letter received by the Commission on May 1 1973 Timothy M

Ikeda President advised that Ikeda had moved to a new address at 30 West

47th Street New York New York Id Stip 9

f The Commission has been informed ofcomplaints made by the following

individuals against Ikeda

Date Received

November 1972

March 1973

March 1975

December 1976

September 1977

March 1978

March 1978

May 1978

May 1978

July 1978

May 1979

June 1979

June 1979

Name ofShipper

American Trading Co Inc

Herminio S Cabot

Mrs Seigi Teruza

Divina S Valdez

Kanjana Kongkatong

Nekati Celin

Marlene Thomas

Dr Seiji Niimi

Maxwell Carter

Mrs John Fischer

Nanni Shield

Sammy Arthur Jr

Vincent Ho

Further information below Jd at 2 3 Stip 12

Mrs Ruth T Kaneshire

Represented by Donald Sussman

Roger Thomas

Haskins Laboratory

g

The Commission staff has not issued any written requests for the pro

duction of Ikeda s ocean freight forwarding records Id at I Stip 1
806 FEDERAL MARITIME COMMISSION

h On at least one occasion in 1978 July 7 1978 Francis P Connolly 

Louis J Catalano Investigators from the Commission s Atlantic Di

Office requested that Timothy M Ikeda President produce all of the o

freight forwarding records of Ikeda International Corporation ld at Sti

i Ocean freight forwarding records produced by Ikeda in respon

Hearing Counsel s Request for Production ofDocuments were divided in 

into separate files for each shipment handled The individual files produce

not contain copies or notations of all documents prepared processed o

tained by Ikeda for each shipment handled Additional ocean freight forw

ing records were maintained in stacks of like documents e g

ocean bi

lading ld at 1 Stip 4

U For at least the last three years on its invoices or other forms of b

Ikeda did not state separately as to each shipment the charges for each se

rendered ld at 2 Stip 10

k Prior to the institution of the present investigation Ikeda did not 

rule maintain its ocean freight forwarding records in separate files for 

shipment handled Id at 1 Stip 3

I On its invoices or other forms of billing Ikeda does state separate

to each shipment the various services performed by it ld at 2 Stip I

m The Commission has no names of persons or corporations solicite

respondent for the purpose of providing ocean transportation ld 

Stip 14

n Ikeda does not maintain a Nonvessel Operating Common Carrier T

on filewith the Federal Maritime Commission Id at Stip 13

2

Investigator Francis P Connolly of the Commission s Atlantic Di

office in New York had been on this investigation since 1978 working wit

assigned investigator Louis Catalano Mr Connolly wasassigned persona

this investigation June 4 1979 Investigator Connolly a witness in this 

ceeding testified he has been employed for 2 plus years by the Commissio

an investigator his prior employment for a period of 211 years was as a

York City police officer Tr 23

3 Complaints from shipper clients who were having difficulty wit

spondent Ikeda International Corporation the witness Connolly tes

prompted the inspection try of the records ofthe respondent Tr 14

4 Of the 13 complaints listed above Fact Hf testimony concerning 

of them was given as follows

a Thomas Tr 38 Movement was ofhousehold personal effects from 

New York area to Haiti Ikeda gave price of 2 000 to move the shipment 

brought it down to 1 500 500 was paid in advance by check The ship

did arrive in Haiti and was taken to where the shipper was residing 

shipper found her glassware was damaged and broken the shipment had 

been packed for ocean transport Tr 39 Mr Ikeda testified that sh

Thomas did notnotify him by letterthat the cargo had been received Tr 

Mrs Thomas camebackto New York Mr Ikeda had shipped the freight o

Royal Netherlands Steamship Company and had paid the ocean freight cha

Exh No H BjLNo 112 ofRoyal Netherlands Steamship Co Tr 121 
INDEPENDENT FREIGHT FORWARDER LICENSE NO 1321 807

b Vincent Ho Tr 45 Exhibit No 7 a letter dated March 27 1978 froru

attorney representing Vincent Ho to Ikeda International Corp complaining

thatshipment ofcertain goods never arrived at its destination that Mr Ho had

paid 505 00 for transportation of the goods

c Alice Dadourian Administrative Secretary for Haskins Laboratories

Exh No 6 Sent letterdated May 3 1978 to Commission s Office ofFreight

Forwarders re Dr Seiji Niimi a Research Scientist on the staff of Haskins

Laboratories who shipped personal effects to Japan through Ikeda Inter

national Corp but had not received them Tr 43 Mr Ikeda testified as to

the Dr Niimi shipment there wasno excuse but in New York there wasa dock

strike in October and November Ikeda company picked up the shipment in

January the warehouse was full also in the New York area there were 4

snowstorms the worst in 80 years his trucks could not move Tr 123

d Mrs John Fisher Her father had moved to Hungary request Ikeda

International to transport his household and personal effects to Hungary

Tr 53 The son Mr Fisher Jr according to witness Connolly advised it

took 12 months from the date of the contract until the shipment arrived

Tr 54 Mr Ikeda testified the Fisher Goods were picked up in December In

January or February Mrs Fisher aged about 75 or 76 asked that all of the

furniture be brought back it wasbrought back to the warehouse didn thear

from Fishers again until June or July he did not charge storage Tr 124 as

Mrs Fisher is an old lady

e Investigator Connolly testified he wasmade aware of complaints from

Maxwell Carter Nekati Cetin Sammy Arthur and Nannie Shield Tr 54

Mr Ikeda testified he has letter from Nannie Shield that she received every

thin fine Tr 129 Exh No 13

f Donald Sussman Shipment involved movement of certain merchandise

to Thailand for which 800 was the charge paid to Ikeda International

Tr 52 The cargo subsequently was released back to Mr Sussman 100

demurrage fee had been paid by Ikeda Request was made to Ikeda Inter

national for return of goodly portion of 800 advanced initially for the ship

ments Ikeda International and Mr Sussman came to an agreement wherein

500 would be returned to Mr Sussman Tr 53 Mr Ikeda testified that

Mr Sussman is a

representative of Ms Kongatong Ms Kongatong asked

Ikeda International to ship a refrigerator she had bought from a store the

refrigerator was brought to Ikeda International with the instruction to hold on

until Ms Kongatong was ready Tr 125 Mr Sussman advised them not to

ship so the intended cargo wasdelivered to Maersk Line Mr Ikeda had been

paid 800 Mr Sussman agreed to accept 500 consolation and Mr Ikeda

returned 500 to Mr Sussman Tr 126 Exh No 12 Tr 128

g Divina S Valdez Tr 131 Exh 14 Mr Ikeda testified the first avail

able ship was Oriental Overseas Container Line Ms Valdez wanted the

shipment to go by Maersk Line Without charge Mr Ikeda picked up the

shipment from Oriental Overseas Container Line and delivered it to Maersk

Line Tr 131 Ms Valdez had wanted shipment to arrive before Christmas

but Mr Ikeda stated it arrived a few days later maybe Christmalltime

Tr 132 see Exh No 14
808 FEDERAL MARITIME COMMISSION

5 Timothy M Ikeda is president and treasurer and ninety percent s

holder in Ikeda International Corporation The business began as a truc

business June 28 1965 Tr 105 The corporation is engaged in carryin

the business of ocean freight forwarding

6 Ikeda holds Interstate Commerce Commission licenses to carry ho

hold goods in eight states Ikeda additionally is a United States Cus

Service bonded common carrier and is licensed to move household g

within New York City Further Ikeda is a local drayman export packe

warehouseman

7 The standard procedure for a Commission compliance check i

notification by the Commission investigators of the Commission s intenti

conduct such a check the notification to be given by either registere

hand delivered letter The standard procedure was not followed in this 

Tr 72

8 Respondent has not violated section 18 b 1 of the Shipping Act 

by performing as a nonvessel operating common carrier by water wi

having filed a tariff showing its rates and charges

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

Hearing Counsel in its opening brief argues that the respondent has vio

section 510 23i p

9 section 510 23 k p

11 section 510 5 c p

section 510 23 ip15 respectively as follows

510 231

3

by failing to make available promptly all records and boo

account maintained in connection with carrying on the business of forwa

for inspection upon request of an authorized representative ofthe Commi

510 23 k

4

by failing to maintain in an orderly systematic and conv

manner and to keep current and correct all records and books of accoun

in connection with carrying on the business of forwarding

510 5 c s by failing to submit to the Commission each change of bu

address within thirty days after such changes occurred

510 23i

6

by issuing receipts for cargo which are not in a form r

distinguishable from bills of lading

l46 C F R ISIO 23 1 provides Each licensee shall make available promptly elll CQOrds and books of account in 

with currying on the business of forwarding forInspection orreproduction or other official useupon the requestof any 

representative of the Commission

46 C F R SIO 23 k provides Each Iiccnaeo shall maintain in an ordcrly aYltematic and convenient manner 

cummt Imd correct all records and books of account inconnection with carrying on the business offorward In These re

be kept in such manner 88 to permit authorized Commillion personnel to determine readily the 1i eI1lClCl 1

calh position 

reCtlvable and accounts payable As a minimum requirement the licensee must maintain the followina recordl for a

yeurs

I A current runnlna account of overall calh relCiptl dilbursements and daily blllance Thls acoount mUlt bo lup

bunk deposit IUpa paid checks and a monthly reconciliation of the bank l1atoment

2 Aseparate tUe for each Ihipment to include a

py or notation of each document prepared processed orobtai

licensee with rcapcct to each Indlviduallhipment orfiles which willmake readily available luch eopiea or notatiol1l w

to each individuallhipment Records must bo maintained which Ihow the date and amount for paymenta received an

by the licensee for the performance of servlca rendered orreimbusement for advance of outoQf pocket expcnlCS

46 C P R ISIO S c provldel Each applicant for alicon and each Independent ocean freisht forwarder to who

hus been iuued Ihalllubmlt to the Commiulon each chanae of bUlinell addlI and any other changes in the fact

In Form FMC 18 within 30daYI after luch changes occur and any other additional information required by the C

46 CF R ISIO 23m Provision ilset forth above in footnote above as to typo
INDEPENDENT FREIGHT FORWARDER LICENSE NO 1321 809

The respondent replied Opening Brief ofRespondent at 15 that there is no

substantial evidence in the record ofsuch activities and that they do not appear

in the Commission s Order of Investigation as subject of this proceeding

Respondent urges that these unsubstantiated accusations are submitted in an

inflammatory vein and are not part of this proceeding

Suffice it to say that the Order of Investigation on the first page second

paragraph states Information has been developed which indicates that Ikeda

is apparently operating in violation of sections 51O 5 c 510 230 51O 23 k

and 510 231 of the Commission s General Order 4 Further reference is

made on page 2 of the Order to section 51O 23 k 51O 5 c and 510 230 as

well as on page 3 of the Order where the Commission ordered pursuant to

sections 18 22 and 44 of the Shipping Act 1916 that this proceeding be

instituted to determine whether Ikeda violated sections 510 210 7

510 23 k

510 231 and 510 5 c section 18 b Iof the Shipping Act 1916

On the other hand as to substantial evidence to support the above alle

gations it is stipulated Facts I h and 10 above as to the Commission s

request for the respondent records and those produced

Respondent urges that the violation above and others are technical in nature

and readily remediable short of loss of respondent s ocean freight forwarding

license no 1321 Hearing Counsel has asked that said license be revoked

Reply Brief at 16 Opening Brief at 27 The respondent argues that the

Commission as well as the Courts have recognized that section 44 Shipping

Act 1916 as amended calls for remedial rather than punitive action in ap

plying sanctions relating to that Act The emphasis is on correcting abuses in

the industry and not punishment The respondent cites Dixie Forwarding Co

Inc Application for License Docket No 11l5 8 F MC 109 117 118

1964 Hugo Zanellid b aHugo Zanelli8 Co Docket No 74 6 18 F MC

60 73 74 1974 affd sub nom Zanelli v Federal Maritime Commission

524 F 2d 1000 5th Cir 1975

Hearing Counsel states Reply Brief at 7 it is well aware that section 44

of the Shipping Act 1916 is a remedial as opposed to a punitive statute

Hearing Counsel ld at 2 citing Dixie Forwarding Co supra argues that

the Congress directed the Commission to administer the program for

licensing enacted as section 44 of the Shipping Act 1916 46 VS C 841 b

and to prescribe rules and regulations governing the industry s conduct

Dixie Forwarding Co supra at 117 118 The Presiding Administrative Law

Judge finds that Dixie Forwarding Co supports Hearing Counsels position as

to administration of the licensing program however disagrees and does not

find similar support for the contentions of Hearing Counselor the respondent

as to section 44 of the Act being remedial as opposed to punitive or that

Zane i

supra supports those contentions

The respondent argues also that the Commission again most recently recog

nized that sanctions are to be corrective and not punitive citing Independent

Ocean Freight Forwarder License E L Mobley Inc 8Docket No 77 26

1

Typo is explained in footnote above

M

Presiding Judge Cograve found the act offalsification of arecord by Mr Mobley to be a momentary lapse ofjudgment and

an isolated instance and the corporate violationsof the payover rule to be not willfuland that steps had already been taken to
810 FEDERAL MARITIME COMMISSION

Commission Report served March 12 1979 19 SRR 39 The Commissio

make this statement Administrative sanctions should not however be bl

or automatically imposed and even in cases where the violation is clear 

dence ofmitigation will be considered in tailoring the sanctions to the fac

the specific case Section 44 and its regulations are based on an under

remedial public interest purpose citing the Dixie Forwarding Co

Inc 

and the sanctions imposed must serve such a purpose and not be puniti

character 19 SRR at 41

The Presiding Administrative Law Judge deems that an underlying r

dial public interest purpose does not equate to the view that sanctions a

be corrective and not punitive Itcould be an excursion into semantics s

could and well may be that the underlying remedial public interest pu

will be served best by punitive action

The respondent contends that when Ikeda was visited by Commissio

vestigators in April and July 1978 who requested Ikeda s records for pu

of a compliance check9

such wasan arbitrary and capricious action wh

prior notice had been given Respondent says that at no time was the Com

sion s authority to review any and all documents relating to the act of o

freight forwarding denied or challenged When he wasapproached Ikeda 

in the process of moving and hisdocuments were at that time in packed 

and unavailable The normal procedure of a

registered letter or a hand 

ered letter was not followed in this instance

Hearing Counsel counter that rather than providing written notice Com

sion investigators orally informed respondent of their intent to cond

compliance check during their April and July 1978 visits Also that by a

ing License No 1321 respondent indicated its intent to conform the cond

its business to the rules and regulations promulgated by the Commission f

governance ofthe ocean freight forwarding industry Thus says Hearing C

sel respondent s argument that it wasthe victim of an arbitrary and capr

action cannot be lent any credence

Hearing Counsel contends that given respondent s numerous willfu

repeated violations of the Commission s rules and regulations revocation 

license is the only appropriate and effective sanction

Much of this case has been stipulated See Facts 1 a through n The 

of the matter then boils down to whether under the circumstances of thi

ensure they would not recur thu he found that Mr Mobley continued tit to be the quaUfying officer of E L Mobley 

that the Hoone of E L Mobley Inc should not be upended orrevoked

The Commillion stated While we concur in the ProsIdin Officer ftndina that tho individual act of Mr E L Mo

tho nature ofthe violation ofthe payover rule do not warrant the IUlpenslon orrovocation oftho corporate CRiaht forwarde

wedo not aareo with hit conclusion that no aanctioDl orremedial actioRs are warranted

TheCommiaionlat Mobley down for 6 months and ordeml that helubmltmonthly financial accounts 88 to his full co

with payovcr rule

9 A

compliance check consiats of

t Anormal interview to determine who tho officeR oribecorporation aro lftheroare any chanfrom the oriainal a

to detenninc who the ItockholdeJ liof S ormore are Tr 71to detormine the addreues branchoftlCCll any adm

changes ftnancialltatements about the company iwlt

2 Review all records pcrtainlna to Ihipments cuh disbursements accounts rocelvablo 00 through files and exam

individuallhipment compare rates and charUllted in thOle flIea against disbursements that arc made

3 Review of insurance procedures

Such a

procedure in Mr Ikeda l case would take a

day and a hair
INDEPENDENT FREIGHT FORWARDER LICENSE NO 1321 811

the respondent should be permitted to retain Independent Freight Forwarder

License No 1321 which he received April 28 1971

It will be noted from the record herein that the respondent gave an expla

nation for some but not all of the complaints indicated Accepting fully the

explanations given the Presiding Administrative Law Judge is left with those

unexplained the stipulations and other factors in this record which enables

him to find and conclude by a preponderance of the evidence that the re

spondent has committed the violations of sections 51O 23i 510 23 k

510 231 of General Order 4 As to violation of section 51O 5 c of General

Order 4 since the respondent has had the address 101O 34th Avenue New

York N Y

apparently since 1972 and was found at that address the benefit

of any doubt is to be given to the respondent and the Presiding Administrative

Law Judge does not find the respondent in violation of this section

The respondent has not violated section 18 b 1 of the Act

The facts and circumstances of this case causes the Presiding Administrative

Law Judge also to find and conclude that

The respondent has violated section 51O 9 a of General Order 4

The respondent has not been proved by a preponderance of the evidence to

have violated section 51O 9 b and 510 9 e of General Order 4

The respondent asks for a second chance to correct violations short of loss

of license Brief at 13 and that the respondent be found fit willing and able

to carry on the businessof forwarding Id at 16 Hearing Counsel urges that

the respondents numerous willful and repeated violations ofthe Commission s

General Order 4 as well as the numerous complaints registered against the

respondent by the shipping public demonstrates that the respondent lacks the

requisite fitness to carryon the business of forwarding Opening Brief at 21

Hearing Counsel says respondent s

independent ocean freight forwarderlicense

should be revoked Id at 27 Repeated in Reply Brief at 16 Hearing Counsel

contends that reVocation of the respondent s license is the only appropriate and

effective sanction Reply Brief at 7 II

Hearing Counsel Id at 8 points out it shouldbe noted that respondent has

offered no substantiate for its claim thatit now operates in comformity with the

Commission s General Order 4 The Presiding Administrative Law Judge finds

this point well taken Perhaps the respondent will benefit from a period of close

cooperation instruction and supervision from the Commission s Office of

Ocean Freight Forwarders It is deemed by the Presiding Administrative Law

Judge that for a period of six 6 months the respondent should be required to

workclosely with the Commission s Office ofOcean Freight Forwarders during

which time the respondent will demonstrate through copies of its monthly

reports just how the respondent is operating and the Commission s Office of

Ocean Freight Forwarders will inspect and where necessary instruct whether

the respondent needs to make changes or other suggestions

Upon consideration of all the aforesaid the Presiding Administrative Law

Judge finds and concludes in addition to the findings and conclusions here

inbefore stated

I The license of the respondent should not be revoked
espodet opeates 

with the Commission s General Order 4 by submitting to the Commis

Office ofOcean Freight Forwarders information as to respondent s meth

operation There is to be close cooperation between respondent and said 

the latter giving direction and instructions to respondent when deemed n

sary The respondent for a period of six 6 months beginning with the 

ofthis Initial Decision shall submit to the Officeof Ocean Freight Forwa

each month thereafter a copy of the respondent s monthly report or 

reports the said Office ofOcean Freight Forwarders need in the situation 

most helpful This will serve hopefully an underlying remedial public in

purpose

Wherefore it is ordered subject to review by the Commission as pro

in the Commission s Rules of Practice and Procedure that

1 Respondent s Ocean Freight Forwarder License No 1321 shall n

suspended or revoked in this proceeding

2 The respondent shall cooperate with the Commission s Office of O

Freight Forwarders as described in 2 above

3 This proceeding is discontinued

8 WILLIAM BEASLEY HARRIS

Administrative Law Ju

WASHINGTON D C

January 5 980
8 FRANCIS C HURNEY

Secretary

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 666 1

FMC CORPORATION

v

ARGENTINE LINE

NOTICE OF ADOPTION

May 27 1980

Upon review the Commission has determined to adopt the decision of the

Settlement Officer in this proceeding served March 17 1980

By the Commission
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 666 1

FMC CORPORATION

v

Argentine Line

DECISION OF TONY P KOMINOTH SETTLEMENT OFFIC

DISMISSAL OF PROCEEDING

Adopted May 27 1980

FMC Corporation complainant amultinational manufacturer of m

ery and chemicals for industry and agriculture alleges an improper rate 

cation by Argentine Line respondent a common carrier engaged in the 

between Philadelphia Pennsylvania and Buenos Aires Argentina

According to complainant on March 9 1977 Argentine Line as am

of the Inter American Freight Conference IAFe handled a shipm

Wood Cellulose Flock for complainant with port of origin at Philad

and port of destination Buenos Aires The rate assessed was 3437 44 

puted as follows

873 cu ft @ 147 50 per 40 cu ft 3 219 19

Bunker surcharge @ 10 00 per 40 cu ft 218 25

Total 3 4374

While the source for this rate is not identified complainant asserts 

specific commodity rate was in effect at the time of the shipment whic

on a weight basis would have resulted in a total freight charge of 7

computed as follows

17 440 Ibs @ 87 50 per 2240 Ibs 268125

Bunker surcharge @ 10 00 per 2240 Ibs 85 64

Total 766 89

Complainant alleges a violation ofsection 18 b 3 in that respondent co

and received 2 670 55 in excess charges by assessing improper rates

1 Both parties hQvina consented to the informal proc edur of 46C F R 1502 301 304 as amended this decision w

unless the Commission elects to review it within 30 day from the date of service thereof

lSourcc lnter Amcrican Freight Conference Tarlft No 7 FMC No 14 Section D 1st rev at 112
FMC CORPORATION V ARGENTINE LINE 815

In its reply respondent acknowledges that a mistake was made in the tariff

rate as claimed by complainant However respondent also makes the following

observations

IThe IAFCTariffprovides that all claims for adjustments in freight charges

must be presented to the carrier within six months after the date of ship

ment Section D rule 3 2nd rev at 25

2 In FMC s complaint it is stated that freight payment was made by W M

Cook Company complainants agent whereas the relevant bill of lading

states that the freight waspayable at destination

Respondent asks for advice on these two matters

With respect to the IAFC six month rule it is well established that carrier

published tariff rules cannot act to bar recovery of an otherwise legitimate

overcharge claim when filed within the two 2 year time limit specified in

section 22 Shipping Act 1916 The instant complaint was filed with the

Commission within the two year period

The matter ofcomplainants standing to pursue this actionwith the Commis

sion was the subject of correspondence between complainant and the Set

tlement Officer

On December 13 1979 complainant acknowledged that the shipment had

moved Freight Collect and that the consignee had paid the ocean freight

charges However the consignee had authorized complainant to proceed on its

behalf to collect the overcharge This communication was subsequently fol

lowed by a formal assignment of the claim to complainant dated January 3

1980

The Commission has held that in a claim for refund or overcharges the

complainant must show that it has paid the freight or has succeeded to the

claim by assignment or other legitimate means

3

Here complainant has admit

ted that the freight charges were paid by the consignee but that it has suc

ceeded to the rights of the consignee through the execution of the assignment

However the assignment by transferring the consignee s legal interestor right

in the claim to complainant results in the substitution of a different party to

the complaint As such it is in reality a new complaint and must meet the two

year time limit as set forth in section 22 A complaint cannot be amended to

name the proper party nor can an assignment of a claim be obtained after the

two year time limit has expired 4

The original claim filed by complainant was improper in that complainant

did not have standing to seek reparations The assignment which would have

conferred standing on complainant was executed well outside the two year

statute of limitations and is timebarred

Accordingly there is no basis to address the merits of this case and the

complaint is hereby dismissed

March 27 1980

S TONY P KOMINOTH

Settlement Officer

1

Tront Company v South African Morilime Corp NY 19 F M C 374 1976 OceanFreight Consultants IIW v The

Bank Line LId 9 F M C 211 212 213 1966

4

Carton Print Inc v The Austasia Container Express Steamship Company 20 F M C 1971

Inrormal Docket No 623 I Es B Incorporated v Springbok Line Ltd Complaint dismissed January 22 1980 19 SRR 1342
FEDERAL MARITIME COMMISSION

DOCKET No 78 2

ORGANIC CHEMICALS GLIDDEN DuRKEE

DIVISION OF SCM CORPORATION

v

ATLANTRAFIK EXPRESS SERVICE

1

j

DENIAL OF PETITION FOR RECONSIDERATION

May 30 1980

By Petition filed March 10 1980 Complainant requested reconside

the Commission s denialof its motion for an order requiring Responde

expenses incurred in making proof of matters R pondent failed to 

In denying Complainant s motion as untimely under Rule 208 

Commission s Rules of Practice and Procedure 46 C F R 502 2

Commission in its Order served February 6 1980 noted that Com

could have made its motion at the close of evidence which would have 

the Presiding Officer to rule on the motion at the time he issued h

Decision

Complainant contends in its Petition for Reconsideration that Ru

does not authorize much less require the course of action suggeste

Commission Complainant arg lcs that a motion for payment of expe

be made only after the party seeking relief has proven the truth of the 

the other party failed to admit In Complainants words

He can never be stated to have made that proof even initially or tentatively until th

officer issues an initial decision which embodies a

finding that the matter has been so 

it cannot finally and firmly be stated that he has made that proofuntil the presiding off

decision has become final through action or inaction by the full Commission

Citing Rule 73 Complainant submits that once an initial decision 

issued the presiding officer no longer has jurisdiction over the proc

1

This rule providca that 8 motion forthe payment of expenses may be made to the presiding officer

l Rule 73 reads in part

After the assignment of a

presiding officer to a proceeding and before the Issuance of his recommended orIniti

motions shall be addressed to and ruled upon by the presiding officer Ifthe procecdinS is not before him m

addressed to the Commission Emphasis added

46 C F R 1502 73
FMC CORPORATION V ARGENTINE LINE 817

Complainant therefore maintains that rule 73 read with Rule 208 c creates an

ambiguity which can only be resolved by reasonably construing presiding

officer as used in Rule 208 c to mean the Commission

Complainant further argues that even though Rule 208 c was patterned

after Rule 37 of the Federal Rules of Civil Procedure the court decisions cited

in the Commission s Order are not controlling here as Rule 37 applies to court

proceedings where the trial judge retains jurisdiction overcertain matters after

judgment is issued whereas the presiding officer in Commission proceedings is

deprived of any jurisdiction after the issuance of an initial or recommended

decision

Finally Complainant maintains that the proceeding is still pending and the

motion therefore is properly before the Commission

DISCUSSION

While Rule 208 c gives a party the option whether or not to apply for the

reimbursement of expenses it directs that such a motion be addressed to the

presiding officer The rule does not present any conflict with Rule 73 as the

latter simply provides that motions to the presiding officer must bemade before

an initial decision is issued 3

In any event Rule 26I

a ofthe Commission s Rules requires that a petition

for reconsideration will be rejected unless it

I specities that there has been a change in material fact or in applicable law which change has

occurred after issuance of the decision or order 2 identities a substantive error in material fact

contained in the decision or order or 3 addresses a tinding conclusion or otber matter upon

which the party has not previously had the opportunity to comment or which was not addressed

in the briefs or arguments of any party Petitions which merely elaborate upon or repeat arguments

made prior to the decision or order will not be received

The petition here alleges no change or error in material fact or change in the

applicable law None ofComplainant s arguments presents a basis under Rule

261 a for a reconsideration of the Commission s decision that Complainant s

motion made after the issuance of the Presiding Officer s Initial Decision was

untimely Complainant s Petition for Reconsideration is therefore denied

It is so ordered

By the Commission

S FRANCIS C HURNEY

Secretary

J Rule 208 c

has sincebeen amended to specify that motions for payment fexpenses be made before the issuance orthe initial

decision In this instance Complainant liIoo its briefin the case on March 19 1979 The Presiding Officer s

Initial Decision was

it

Iued on May 4 1979 and that decision became administratively final on June J I 1979 Respondent paid the amount qwarded

in reparation some time in August 1979 Complainant did not file its request for expenses until December 12 1979
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV

FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING

MARITIME CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 14 AMDT 6 DOCKET No 80 11

PART 527 SHIPPERS REQUESTS AND COMPLAINTS

May 30 1980

Final Rule

This amends the Commission s regulations by reducin

frequency of filing reports ofShippers Requests and 

plaints from quarterly to annually

EFFECTIVE DATE June 4 1980

SUPPLEMENTARY INFORMATION

This proceeding was instituted by notice of proposed rulemaking publ

in the Federal Register on March 10 1980 45 Fed Reg 15229 to a

section 527 4 of the Commission s regulations General Order 14 46 C 

527 4 reducing the frequency of filing of reports of shippers requests 

complaints from a quarterly to an annual basis The proposal provides th

January 31 of each year each conference and each other body with rate 

authority under an approved agreement shall file with the Commission a r

covering all shippers requests and complaints received during the prec

calendar year or pending at the beginning of such calendar year

By way of background section 15 of the Shipping Act 1916 the 

requires that the Commission shall disapprove any such agreement confe

or ratemaking after notice and hearing on a finding of failure or refus

adopt and maintain reasonable procedures for promptly and fairly hearin

considering shippers requests and complaints Part 527 4 of Title 46 Co

Federal Regulations presently requires the quarterly filing of reports of 

pers requests and complaints by each conference and ratemaking agree

ACTION

SUMMARY
SHIPPERS REQUESTS AND COMPLAINTS 819

Two party ratemaking agreements are required to file only an annual report

An annual submittal will reduce the workload of the regulated parties

During the fiscal year from October 1978 through September 1979 349 such

reports were received at the Commission Ifreported on an annual basis only

87 reports would have been prepared and filed for the above period and the

reporting and carry over of pending complaints reduced by threefourths

Comments from interested parties were invited with respect to the proposed

rule Atotal of 8 comments were filed on behalf of 39 representative commen

tators all conferences and rate agreements

POSITION OF THE COMMENTATORS

Twenty seven of the commentators were in total agreement with the rule

change as proposed They all emphasized that the change will significantly

reduce the workload of their staffs as well as the Commission s staff and in no

way hamper the promptness with which shippers requests and complaints are

handled by them and that the Commission s

regulatory responsibility to oversee

would not be affected

The twelve other commentators generally stated that the proposed rule

change had no particular significance to them in that the numberof complaints

requires them to maintain a continuous procedure of clerical recording for

eventual dispatch to the Commission and thatthe proposed reporting schedule

did not change this It waspointed out that the proposal will not appreciably

reduce the volume ofmaterial required to be shown by a conference to establish

that it maintains reasonable procedures for processing shippers requests and

complaints However they did say they had no objections to the proposed

regulation change

The Commission has considered all of the filed comments in this rulemaking

proceeding and has determined it appropriate to reduce the reporting require

ments set forth under section 527 4 from a quarterly requirement to an annual

requirement

Enactment of the regulation will do no disservice to the promptness with

which shippers requests and complaints are dealt and will not hamper the

Commission s regulatory responsibility to oversee this area The relaxation of

reporting requirements does not relieve carriers of their statutory duty to

promptly and fairly hear shippers requests and complaints

Accordingly pursuant to section 4 of the Administrative Procedure Act 5

U S C 553 and sections 15 21 and 43 of the Shipping Act 1916 46 U S C

814 820 and 841a the Federal Maritime Commission hereby revises section

527 4 of Title 46 C F R General Order 14 to read as follows

527 4 Reports

By January 31 of each year each conference and each other body with

ratefixing authority under an approved agreement shall file with the Commis

sion a report covering all shippers requests and complaints received during the

preceding calendar year or pending at the beginning ofsuch calendar year The
st suc

report s

abe ed by January 3

reports 

include the following information for each request or complaint

a Date request or complaint was received

b Identity of the person or firm submitting the request or complaint

c Nature of request or complaint i e rate reduction rate establishm

classification overcharge undercharge measurement etc

d Iffinal action was taken date and nature thereof

e If final action was not taken an identification ofthe request or comp

as pending

f

Ifdenied the reason

By the Commission

S FRANCIS C HURNEY

Secreta
FEDERAL MARITIME COMMISSION

DOCKET No 80 4

MATSON NAVIGATION COMPANY

PROPOSED 5 67 PERCENT BUNKER SURCHARGE

IN THE HAWAIIAN TRADE

ORDER APPROVING SETTLEMENT OF PROCEEDING

June 3 1980

The Commission has before it an Offer ofSettlement and Motion to Termi

nate this proceeding filed by Matson Navigation Company to which the State

of Hawaii Oscar Mayer Co Inc and the Commission s Bureau ofHearing

Counsel have replied 1

The proceeding was instituted by an Order of Investigation Order issued

January 17 1980 to determine the lawfulness of a Matson cumulative 5 67

percent bunker surcharge This surcharge which was filed on December 14

1979 with an effective date of January 14 1980 represented a reduction of 99

percent from the prior Matson surcharge in the Hawaii Trade 2

The Commission s Order limited the investigation to the following

1 Should the methodology found to be appropriate in Docket No 79 55 be

applied retroactively to Matson bunker surcharges in effect prior to the

effective date May 30 1979 of the surcharge that was the subject of that

investigation

2 Should an allocation be undertaken between Trade and non Trade cargo

in order to ascertain the amount of increased fuel cost that should be

recovered by Matson s proposed bunker surcharge

I Matson also filed a Motion to Stay Briefing Schedule which was granted on April 30 1980

lTwo Matson tariffs FMC F Nos 168 and 169 eastbound bulk sugar and molasses were not subject to prior bunker

surcharges under Domestic Circular letter 1 79 These commodities moved under negotiated freight agreements which included

fuel cost escalation clauses imlXlsing a

flat per ton fuel surcharge of 69 on sugar and 23 on molasses These charges compute

to 7 57 percent and 5 67 percent of the respective freein and out rates for these items Direct Testimony ofOscar Mayer Co

Inc at 3 Docket No 79 55 Matson Navigation Company Proposed BunkerSurcharge in the Hawaii Trade Initial Decision

at 19 n7 19 S R R 793 801 n

7 1979 Accordingly the 5 67 percent surcharge in this proceeding represents a reduction of

190 percent in the fuel charge for sugar and no change in the fuel charge for molasses
822 FEDERAL MARITIME COMMISSION

The Commission noted in its Order however that these issues migh

determined in pending investigations3 and that in any event a full eviden

hearing with crossexamination would not be necessary to properly decide t

issues Accordingly the matter was not referred to an Administrative 

Judge and the hearing was limited to the submission of written testim

exhibits and briefs to the Commission for decision under an expedited 

cedural schedule

On March 20 1980 the Commission allowed the State ofHawaii and O

Mayer leave to intervene and delayed the procedural schedule to permi

filing of submissions by these intervenors All parties except Hawaii have 

testimony and exhibits

POSITIONS OF THE PARTIES

Matson s Offer of Settlement concedes all substantive issues in the 

ceeding Itnotes that the Commission s March 28 1980 decision in Docke

79 92 Matson Navigation Company Matson Proposed 6 66 Pe

Bunker Surcharge Increase In Tariffs FMC Fnos 164 165 166 and 16

F MC 19 S R R 1525 is dispositive of the tradejnontrade alloc

issue in this proceeding 4Matson also states that it has already represent

this proceeding that it would retroactively apply to any subsequent bu

surcharge the methodology found appropriate in Docket No 79 55 Ma

Navigation Company Proposed Bunker Surcharge In The Hawaii T

Report and Order Adopting Initial Decision 22 F MC 19 S R R 

1979 that it had in fact previously filed such a surcharge to which it 

actively applied such methodology S and that it wouldrecompute the surch

presently under investigation in the same manner Matson submitted ex

computing the correct surcharge at 5 42 percent

Matson therefore urges the Commission to approve the offer of settle

and discontinue the investigation on the basis that no material issues of fa

law remain to be decided and any overrecovery of fuel costs in this proce

will be remedied in future surcharges by operation of Line 7 of Form F

274

Hearing Counsel agrees with Matson s position as to all relevant matte

is of the opinion that no material issues remain to be determined in 

l

The Commission advised that the qUCltion of retroactive application of methodology mlaht be roaolvcd by the then 

Petition for Clarification inDocket No 79 55 infra Ordor of Investigation at 2 and that the illueof Trade non Trade all

might be disposed of in Docket No 79 84 Mallon Na ll allon Company Propoau 90 hl Cfnt Bunker Surchargt 

in Turlfff FMCF Nos 64 16 166 and 67 Order of Invcstlsatlon at 3 However th Trade non Trade allocation i

not decided until the Commiaaion ilsued ita Report and Order In Docket No 79 92 ltifro and the iaue of the re

upplicution of methodoloay although conceded by Matlon in thlt proceeding hu yet to be formally reaolved

In Docket No 79 92 Jupro the Commiuion held that cBrao movin under a carrier tariff eontainin bunker lu

provl ion Clln only be required to bear those fuel COIta aaaoclated with the movement ofthat earao and that any n

curiO or other cllrao not lubject to bunker surcharaa without exception must be allocated out of the fuel OOIt an

surchurge computation Slip opinion at 11 I 2 19 S R R 1528 1529

On April 11 1980 MatlOn flied a 4 60 percent surcharp effecttve May 13 1980 applicable to the aamelarlff

investigation in this protWding Thejuatiftcation submlttodwlth that lurcharae lncludod a retroactive application ofmeth

prescribed In Docket No 79 55 Jupro
PROPOSED 5 67 BUNKER SURCHARGE IN THE HAWAIIAN TRADE 823

proceeding that no regulatory purpose will be served by continuing the pro

ceeding and that Matson s offer of settlement should be approved Hearing

Counsel notes that section 5 of the Administrative Procedure Act 5 US c

554 c provides for the consideration ofoffers of settlement and submits that

while Oscar Mayer had not specifically agreed to the settlement at the time

Hearing Counsel filed its reply unanimous consent of all parties to an offer of

settlement is not required ifthe proposed settlement is found to be in the public

interest6

Hawaii is also not opposed to the Commission accepting Matson s Offer of

Settlement and dismissing the proceeding

Oscar Mayer takes the position that the settlement offer is reasonable and

satisfies the two questions posed in the Order of Investigation However Oscar

Mayer argues that the inclusion of the sugar and molasses freighting contracts

underthe bunker surcharge violates the essence of the Commission s findings

in Docket No 79 55 supra and requests a Commission decision on this issue

DISCUSSION

Based on the submission of the parties and after an examination of the

testimony and exhibits submitted to date the Commission finds that there

remain no material issues of fact to be resolved in this proceeding 7 The

calculation of the alleged proper surcharge submitted by Matson and agreed

to by all parties appears to be accurate and with certain minor exceptions

noted below supported by evidence of record Therefore the continuance of

this proceeding would not appear to serve any regulatory purpose The Com

mission is therefore approving Matson s offer of settlement and granting its

motion to discontinue this proceeding

The evidentiary state of the record of this proceeding and the ambiguous

position of Oscar Mayer warrant some further discussion however

The calculation of the proper bunker surcharge is presented as an exhibit

attached to Matson s Offer and Motion This exhibit is essentially argument

and is not independent evidence that can be used to alone support a finding that

a 542 percent bunker surcharge is just and reasonable However because each

party has had an opportunity to object to this factual data and has failed to do

so its use in merely determining whether to approve the settlement offer does

not constitute a denial of due process See Giant Food Inc v Federal Trade

Commission 322 F 2d 977 984 D C Cir 1963 The Commission will accept

the document as a factual proffer and look to other corroborating evidence of

record to support its use as a basis for the calculation of the proper surcharge 8

b

Hearing Counsel cites Pennsylvania Gas Water Co v

Federal Power Commission 463 F 2d 1242 D C Cir 1972

1 While the matter of the retroactive application ofbunker surcharge decisions has not been resolved it isunnecessary to do so

in light of Matson s offer 10 voluntarily apply these decisions retroactively

The Commission notes that although Matson has cast its Motion in offer and acceptance terminology the Commission is

flut a party to the settlement agreement Such agreements are among the litigants to a proceeding with the Commission sitting

in judgment of its acceptability in terms of the public interest See Texas Eastern Transmission Corp v Federal Power

Commiuion 306 F 2d 345 5th Cir 1962
824 FEDERAL MARITIME COMMISSION

Essentially all of the basic data appearing in Matson s final calculations 

contained in its direct testimony The only exception is that data containe

Matson s answers to Hearing Counsel s

Interrogatories which form the bas

certain elements of the surcharge calculations proffered as part of the 

tlement offer 9However this same data has been incorporated into the ex

attached to Matson s settlement proposal and as has been already noted 

party has challenged the 5 42 percent surcharge figure Therefore it does 

appear that this failure to follow formal evidentiary procedures in this pa

ular proceeding is of such significance so as to impeach the overall reliab

of the surcharge calculations or deprive any party ofprocedural due pro

Nor does the Commission view it asof such significance so as to prevent a 

disposition of the proceeding 1O

Oscar Mayer s objection does not go to the settlement of this case but 

to the application of the bunker surcharge to bulk sugar and molasses mo

under Tariffs FMC F Nos 168 and 169 11 Oscar Mayer has agreed to 

settlement offer and further resolution of this admittedly collateral issue i

necessary to the disposition of this proceeding Moreover this matter wa

noted in the original Order ofInvestigation and under thestrictures ofsect

of the Intercoastal Shipping Act it may not be litigated in this investigati

THEREFORE IT IS ORDERED That Matson Navigation Comp

Offer of Settlement and Motion to Terminate Investigation is granted 

IT IS FURTHER ORDERED That the correct computation of the lev

bunker surcharge in this proceeding is found to be 542 percent and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secreta

9The data in question is the projected tranuhipment cargo measurement tons for the period February May 1980 t

transshipment cargo measurement tons for the period April November 1979 and the revenues derived from these movem

answers to Hearing Counsel s Interrogatories have not been formally proffered as evidence and are entered in the Com

docket book under the correspondencc section

IIISettlements of administrative procccdins are viewed III a form of administrative summary judgments by reviewin

Pennsylvania Gas WarerCQ v Federal PowerCommission supra Accordingly it is encumbant upon the Commission 

thut there is a proper factual basis to support the offered settlement Parties to any settlement offer should submit 

Mtipulation with ansuch offer to facilitate its disposition

11 Form rly Matson recovered excess fuelcosts applicable to these commodities through fuel costescalation clausesin n

frcightllgreements See footnotc 2

I See Docket No 79 48 Trailer Marine Transport Corp Proposed Genera Increase In Rates Rcport and Ordcr 

Adopting Initial Decision 19 S R R 985 1979
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 710

APPLICATION OF JAPAN LINE US A LTD

FOR JAPAN LINE LTD FOR BENEFIT OF

NOMURA AMERICA CORPORATION

ORDER ADOPTING INITIAL DECISION

June 12 1980

This proceeding was instituted upon the application ofJapan Line U SA

Ltd and the Pacific Westbound Conference PWC on behalf of Nomura

Corporation requesting permission to refund a portion of freight charges paid

by Nomura in connection with one shipment of Butyl Motor Tube Scrap

Butyl carried on February 6 1980 from Los Angeles California to Osaka

Japan

Administrative Law Judge Joseph N Ingolia issued an Initial Decision in

which he concluded that the applicant had substantiated its claim and was

accordingly entitled to refund a portion of its freight charges However the

amount ofrefund granted wasless thanthe amount sought by PWC and Japan

Line Japan Line filed Exceptions to the Initial Decision

BACKGROUND

Japan Line is a member of the Pacific Westbound Conference Effective

March 28 1979 PWC established a special rate of 70 WTon Butyl from the

Pacific Coast to Japan Base Ports This rate item was originally set to expire

on September 30 1979 2 This expiration date was subsequently extended to

December 31 1979 3 On December 1 1979 PWC decided to maintain the

special rate beyond the December 31 expiration date and make the then

existing rate 70 WT subject to the February 1 1980 announced general rate

increase However through administrative inadvertence the December 31

1979 expiration date symbol was not removed from the commodity item

I Pacific Westbound Conference Local and Overland Freight TarilfNo 11 FMC 19 3rd Rev Page 742 Commodity ItemNo

771 4400

lSee 6th Rev Page 19 of the tariff

lSee 14th Rev Page 19 of the tariff
826 FEDERAL MARITIME COMMISSION

number This oversight was further compounded whenthe commodity de

tion for Butyl Motor Tube Scrap was inadvertently deleted on Janua

1980 4

These errors resulted in Nomura being assessed a rate of 133 

under item 771 1440 20 Waste and Scrap of Rubber or Plastic of the 

on its February 6th shipment

On February 21 1980 the Conference amended its tariff instituti

freight rate of 77 WT for Butyl with a caveat noting that

I

tem 771 1440 40 failed to be maintained in the tariff effective January I 1980 

February 20 1980 with a contract rate to Japan Base Ports of 570 00 WT increasing to 

WT on February 1 1980

Applicant now seeks to refund 3 566 95 to Nomura which it states 

difference between what waspaid 133 WT and what should have been 

had the 70 WT rate been applied

INITIAL DECISION

The Presiding Officer found an inadvertent failure by PWC to file a 

tariff item covering Butyl and concluded that a refund was in order How

the Presiding Officer based the refund on the 77 WT rate rather tha

rate because I the shipment of Butyl was carried on February 6 1980 

days after a general rate increase went into effect and 2 the 77 rate 

formed to the amended tariff filed with the Commission on February 21 

The amount permitted to be refunded by Japan Line and PWC to Nomur

3 230 18 which represents the difference between what waspaid and th

WT rate

POSITION OF JAPAN LINE AND PWC

PWC claims that the Presiding Officer erred in reducing the refu

Nomura from 3 566 45 to 3 230 18 PWC argues that Rule 3 12 

Local Overland Tariff on file with the Commission dictates that the g

amount be refunded This provision provides that

AU local cargo in ordinary stowage will qualify for rates orcharges applicable prior to the e

date of an increase if a it is receivecny a carrier prior to the effective date of the increa

if b it is loaded to a vessel scheduled to sail within ten 10 days after the effective date 

increase Emphasis added 6

In this instance it is alleged that the containersof Butyl were received by J

Line between January 25 1980 and January 30 1980 and that the 

carrying these containers sailed on February 6 1980 Hence PWC con

that the shipment having complied with Rule 3 12 should have been ra

70 WT PWC therefore submits that the amount indicated in its applic

for refund was proper

4 See 7th Rev Pago 742 or the tarift

See 9th Rev Puge 472 of the tarift

h See Sth Rev Page S8 of the tariff It is noted thai this item was not brought to the Prcaidin g

Officer sattention d

proceeding below
APPLICATION OF JAPAN LINE U S A LTD 827

DISCUSSION AND CONCLUSION

A special docket application seeking a refund or waiver must meet cer

tain requirements as set forth in section 18 b 3 of the Shipping Act 1916

46 U S c 817 b 3 and section 502 92 a of the Commission s Rules

46 C FR 502 92 A Included among these are the requirements that the

error be bona fide and of the type contemplated by the statute that applicant

prior to submitting the application has filed a corrective tariff setting forth the

rate on which the refund would be based 1 that the application be filed within

180 days of shipment and that no discrimination among shippers result from

the grant of the application

The corrected tarifffiled by Japan Line here does indeed conform with the

requirements of section 18 b 3 Applicant s amended February 21 1980

tariff sets forth the 70 WTrate that was intended to be applied from Janu

ary I 1980 through January 31 1980 and the 77 WTrate in effect after that

date which rate includes an amount required by the February I 1980 general

rate increase 8

Here the rate applicable to the shipment is not the 77 WT rate as found

by the Presiding Officer but rather the 70 WT rate The containers ofButyl

were received by Japan Line between January 25 1980 and January 30 1980

and the containers were loaded onto the vessel within 10 days after the

February I 1980 general rate increase Hence applying the provisions of Rule

3 1 2 the rate upon which the refund must be based is the rate in effect prior

to February I 1980 i e 70 WT

THEREFORE IT IS ORDERED That the Exceptions of Japan Line and

PWC are granted and

IT IS FURTHER ORDERED That except to the extent noted above the

Initial Decision served in this proceeding is adopted by the Commission and

IT IS FURTHER ORDERED That Applicant shall publish promptly in its

appropriate tariff the following notice

Notice is hereby given as required by the decision of the Federal Maritime Commission in Special

Docket No 710 that effective January I 1980 the rate on Butyl Motor Scrap is 70WTthrough

January 31 1980 and 77 WT from February I 1980 through February 20 1980 for purposes

of refund or waiver of freight charges subject to all other applicable rules regulations terms and

conditions of said rate and this tariff

FINALLY IT IS ORDERED That this proceeding be discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

J Section 18 b 3 rejuires in relevant part

T hal the commoncarrier by water in foreign commerce orconference of such carriers has prior to applying for authority to

make refund filed a new tariffwith the Federal MaritimeCommission which setsforth the rate on which such refund orwaiver

would be bosed Emphasis added

This corrected tariff parallels the corrected tarifffound acceptable by the Commission in Application of Yamashita 8hinnihon

Line forthe Benefit ofNissho lwai American Corporation Special DocketNo 678 served February 25 1980 19 SRR 1407

In that case it was held that arefund could be based on afiled corrective tariffwhich includes an amount attributable to an

intervening general rate increase
FEDERAL MARITIME COMMISSION

SPECIAL DoCKET No 710

APLlCATlON OF JAPAN LINE U S A LTD

FOR JAPAN LINE LTD FOR BENEFIT OF

NOMURA AMERICA CORPORATION

Adopted June 12 1980

Permission is granted to Japan Line and Pacific Westbound Confcrence to refund a portion 

freight charges to Nomura America Corporation in the amount of 3 230 18

Held

I Where a Conference intended toextend a particular rate in a tariffif a significant a

of tonnage werecarried and where the Conference staff became awarethat such tonnag

carried and had authority to file anew corrected tarift and attempted to do so but th

mistake and inadvertence failed to delete the expiration date a mistake occurred with

meaning of section 18 b 3 Shipping Act 1916

2 Where a new tariff was filed prior to the application for refund setting forth the 

corrected rate without expiration as well as an intervening general rate increase and 

the tariff also contained an appropriate notice to all shippers the tariff satisfied the re

ments of section 18 b 3 and is distinguishable on the fac tsfrom the tariff filed in M

y

Cabrero v Sea Land Service lnc20 F M C 152 1977 and does notfallwithin the 

of the holding in that case

INITIAL DECISION I OF JOSEPH N INGOLIA

ADMINISTRATIVE LAW JUDGE

This is a special docket application filed on March 13 1980 by Japan 

U S A Ltd Japan Line and the Pacific Westbound Conference PW

behalf of Nomura Corporation Nomura wherein they seek permissio

refund a portion of freight charges paid by Nomura in connection with 

shipment of Butyl Motor TubeScrap Butyl which Japan Line carried 

Los Angeles California to Osaka Japan

FAClS

At all pertinent times Japan Line was a member of PWC Effe

March 28 1979 the Conference tariff established a special rate of 70 00 

I

This decision will become the decision ofthe Commission in the absence of reviewthereof by the Commission Rule 2

of Practice und Procedure 46 C F R 1502 227
APPLICATION OF JAPAN LINE U S A LTD 829

from Pacific Coast to Japan Base Ports on Butyl 2

Originally the special rate

was to expire on September 30 1979

3

and then effective September 12 1979

was to expire on December 31 1979

During October of 1979 the Conference Ad Hoc Rate Committee reviewed

all commodity items which were scheduled to expire on December 31 1979 Its

recommendations were based on the following considerations

1 Maintain without expiry special rate items showing approximately 25 tons

or more via PWC through June

2 Allow to expire on 12 31 79 special rate items showing minimal or no

tonnage through June with notification to be made in individual commodity

items Many of these items are to remain under study by the committee for

more in depth review As the deletion of many special rate items results in

a substantial increase to the NOS level staff to research reducing the

NOS levels to a more reasonable level

3 On 90 days notice delete all regular special rates showing no tonnage

through June via PWC supported by no tonnage through June as shown in

West Coast USA export statistics with notification to be made in individ

ual commodity items

4 Extend through January 31 or March 31 1980 special rate items showing

minimal or no tonnage through June recognized as being newly established

in 1979 by the Conference in response to shippers requests

In the application submitted in support of the refund D P Griffith the

Exeuctive Assistant ofPWC states in pertinent part

2 In October 1979 the Conference established four criteria as to whether or notSpecial Rates

wereto expire from ourtariff on December 31 The criteria are enumerated in our submission

to Administrative Law Judge Ingolia daied March 24 1980

3 While tariff Item No 771 1440 40 by Conference action was scheduled to expire on

December 31 1979 this commodity was to undergo continued staff study for possible cargo

movement between October and December

4 The staff discovered that 87 tons of Butyl Motor Tube Scrap moved through November 1979

making this item qualified under one of the criteria that such commodity items be extended

beyond December 31 1979 without a further expiration date

5 In matters where the Conference adopted criteria or guidelines of the nature described in this

application the staff has the authority to implement them by tariff revision

6 The staff person did implement the Conference criteria by issuing 6th Revised Page 742

indicating that the 70 00 WI rate in item number 771 1440 was to be in effect through

January 31 1980 then increased to 77 00WI effective February I 1980 Unfortunately the

December 31 1979 expiration symbol indicated under the commodity item number was not

removed and when another staff person revised Page 742 again on January 1 1980 the

commodity item was inadvertently deleted Footnotes supplied

In addition to the above on February 14 1980 a member line of the

Conference notified it that on December 18 1979 a shipper checked with the

2 Pacific Westbound Conference Local and Overland Freight Tariff No 11 FMC 19 3rd Rev Page 742 Commodity Item

No 771 144040

l5ee 6th Rev Page 19 of the tariff

See J 4th Rev Page 9 of the tariff

See 6th Rev Page 742 of the tariff

hSee 7th Rev Page 742 of the tariff
830 FEDERAL MARITIME COMMISSION

Conference staff and wasquoted the 70 00 WT rate on Butyl increase

77 00 WT on 2 1 80 It requested that the Conference reinstate the 

rate on Buty pointing out that the shipper was charged a rate of 133 00 

under item 771 1440 20 Waste and Scrap of Rubber or Plastic etc of 

tariff As a result ofthe request the Conference met and agreed to reinsta

the rate subject to the following note

Account administrative inadvertence by tariff publisher Special Rate Item 771 1440 40 fail

be maintaiped in the tariff effective January I 1980 thru February 20 1980 with a oontract 

to Japan Base Ports of 70 00 WT increasing to 77 00 WT on February I 1980 P

Westbound Conference will be make sicI special docket application to the Federal Mar

Commission in accordance with Section 18 B 3 of the shipping act seeking appropriate ref

or waivers of charges to those shipments involved in the movement of this cargo between 

including the dates of January I 1980 thru February 20 1980 Refunds or waivers of charges 

only be acoomplished upon approval by the Federal Maritime Commission and duly publi

herein as ordered by the Commission

On February 21 1980 the Conference amended the tariff 7

inserting the ab

note

On February 6 1980 ashipment ofButyl weighing 115 560 Ibs 52417 k

moved from Los Angeles California to Osaka Japan The bill of lading 

dicates that it was transported by Japan Line and that the shipper Nomu

paid freight and charges as follows

Freight and Charges

FRT 52 417

CAF

BSC 52417

TRC 52 417

Rate

133 00

8

1150

6 75

Per

KT

Pre

697

55

60

35

848

KT

KT

Total Amount of Charges

The applicant now seeks permission to refund 3 566 45 to Nomura which 

states is the difference between what waspaid and what would have been 

had the 70 00 WT rate been applied

Section 18 b 3 of the Shipping Act 1916 and Rule 92 Special Do

Applications ofthe Commission s Rules of Practiceand Procedure 46 C F 

i

502 92 permit the Commission to allow refundof a portion offreight cha

when it appears there is an error in atariff ofa clerical oradministrative na

or an errordue to inadvertence in failing tofile a new tariff provided that 

application for refund was filed within 180 days ofthe pertinent shipment 

prior to the filing of the application a new corrected tariffis filed setting fo

the rate on which the refundshould bebased and thatthe refund will not re

in discrimination amongst shippers

Here the ultimate question to be decided is whether or not there was 

errorofthe kind contemplated by Congress in enacting the statute While 

evidence originally submitted with the application does raise some question 

to exactly what transpired and why Mr Griffith s later sworn statement of

and supplemental submission does establish that the error under considera

here iswithin the ambit ofthe statute Itindicates thatthe Conference staff 

See 9th Rev Page 472 of the tariff
APPLICATION OF JAPAN LINE US A LTD 831

authority to file a new tariff that it did so on December 1 1979 butmistakenly

failed to delete a code letter denoting a December 31 1979 expiration date

and that a second corrected tariff was filed which mistakenly deleted the item

altogether

It should be noted that the application requests a refund based on the

difference between the rate charged 133 00 WT and the 70 00 WTrate on

Butyl The request is erroneous in that the shipment began on February 6

1980 and the corrected tariff provides that after February I 1980 the rate

should be 77 00 WT Consequently the refund cannot exceed the difference

between what was paid and the 77 00 WT rate The application does not

properly break down the various charges even using the 70 00 WT rate so

that it is difficult to interpolate However based on the documents submitted

with the application the refund should not exceed 3 230 18 the amount paid

of 8 545 80 less 5 315 62 the amount due at the 77 00 WT rate

Finally with respect to the corrected tarifffiled on February 21 1980 it is

important to consider its effect in light of the holding in Munoz y Cabrero v

Sea Land Service Inc 20 F MC 152 1977 That case stands for the

proposition that under section 18 b 3 an application for refund or waiver

cannot be granted unless a new corrected tariff rate is filed prior to the time

the application is filed which rate must conform to the earlier rate which had

been unintentionally deleted or had not been filed through inadvertence Here

by clearly setting forth the 70 00 WT rate through January 31 1980 and

setting forth the general rate increase from February I 1980 the applicant not

only has correctly filed a new tariffobviating the holding in Munoz supra but

has given proper notice to all shippers so as to avoid discrimination amongst

shippers

Wherefore based on the above facts and discussion Ifind that

1 There was an error which resulted in the inadvertent failure to file a new

tariff reflecting a 77 00 WT rate for Butyl which rate would have been in

effect had the error not been made

2 The refund sought will not result in discrimination amongst shippers

3 Prior to applying for a refund PWC filed a new corrected tariff which

sets forth the rate on which the refund should be based

4 The application wasfiled within 180 days from the date ofshipment and

therefore it is

ORDERED That permission is granted to Japan Line and PWC to refund

a portion ofthe freight charges to Nomura in the amount of 3 230 18 and it

is

FURTHER ORDERED That PWC promptly publish in its appropriate

tariff the following notice in lieu of the note contained therein

Notice is given as required by the decision of the Federal Maritime Commission inSpecial Doeket

No 710 that effective January I 1980 the rate on Butyl Motor Tube Scrap is 70 00 WT

through January 31 1980 and 7700 WT from February I 1980 through February 20 1980

for purposes of refund orwaiver of freight charges subject to all other applicable rules regulations

terms and conditions of said rate and this tariff

WASHINGTON D C

April 9 1980

S JOSEPH N INGOLIA

Administrative Law Judge
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER A GENERAL PROVISIONS

GENERAL ORDER No 16 AMENDMENT 35 DOCKET No 80 15

PART 502 RuLES OF PRACTICE AND PROCEDURE

June 23 1980

Final Rules

The Federal Maritime Commission has revised Rule 

of the Commission s Rules of Practice and Proced

46 C F R i502 67 The originally proposed revi

limited the application ofcertain provisions ofthe ru

vessel operating common carriers and required carr

to file testimony workpapers and exhibits with the r

vant State Attorney Generals on the same day that t

are filed with the Commission After reviewing c

ments submitted by Sea LandService Inc the Comm

sion made in addition the following changes R

67 d 2 is revisedto require the parties to serve on e

other only a prehearing statement instead of testim

exhibits and workpapers AdministrativeLaw Judg

changed to presiding officer The presiding office

Rule 67 d 2 cases is required to hold a prehearing 

ference Rule 67 a 3 isamended to require all pers

wishing to inspect workpapers underlying financial 

operating data filed in connection with a proposed 

change to submit a certification Finally Rule 6

amended to require a protestant to file is protest 

the tariff publishing officer ofthe carrier

EFFECTIVE DATE June 30 1980

SUPPLEMENTAL INFORMATION

This proceeding was initiated by a Notice of Proposed Rulemaking p

lished in the Federal Re2ister on March 24 1980 45 Fed Rejl 18991 

ACTION

SUMMARY
RULES OF PRACTICE AND PROCEDURE 833

purpose of the proceeding was to amend Rule 67 46 C F R 502 67 to limit

its applicability to vessel operating carriers and to clarify certain other aspects

of the rule Only one party Sea Land Service Inc submitted comments It

directed its comments toward that part of the proposed rule that deals with less

than general rate increases and the increases of NYO s Sea Land s comments

on the proposed rule were carefully considered by the Commission and adopted

in part

1 Section 502 67 d 2 Sea Land proposed that the following procedures

be followed for non general rate increases or decreases and non vessel operat

ing common carrierrate changes The carriershouldsubmit hisdirect testimony

exhibits and workpapers within 20 days of the Order of Investigation Hearing

Counsel and all protestants should simultaneously serve their direct testimony

exhibits and workpapers within 30 days of the Order Aprehearing conference

should be convened to help simplify and identify the issues and otherwise

prepare for resolution ofthe case orholding of ahearing Sea Land pointed out

that an administrative law judge need not preside over the case and suggested

that either an individual commissioner an administrative lawjudge or a desig

nated employee of the Commission preside Within 35 days of the Order the

conference chairman should issue an order and if necessary set a date for a

hearing before an administrative law judge to commence no later than 50 days

after the Order of Investigation Sea Land also pointed out that in cases where

the carrier only filed the financial data required by G O 11 the Commission

might not want to bind Hearing Counsel and all protestants to simultaneous

filing ofdirect cases with the carrier so it would be best to have the conference

soon after the Order Sea Land expressed concernthat requirements established

by general rules might work unfairness in particular cases

The Commission agrees with Sea Land that a prehearing conference can be

very useful and that such a conference need not be presided over by an

administrative law judge It also agrees with Sea Land on the danger of

applying inflexible general rules to particular cases In fact the Commission

feels that both the proposed rule and Sea Land s proposal as to exchange of

direct testimony exhibits and workpapers are too inflexible and might work

unfairness in particular cases Therefore the Commission has revised Rule

67 d 2 to require the carrier Hearing Counsel and all protestants to simul

taneously serve on each other only a prehearing statement instead of direct

testimony exhibits and workpapers After the service of these statements the

presiding officer shall at his discretion hold a prehearing conference to con

sider among other things ordering the exchange of written testimony and

exhibits The term Administrative Law Judge is changed to presiding

officer wherever it appears Rule 25 of the Commission s Rules ofPractice and

Procedure 46 C F R 502 25 defines presiding officer to include

a anyone or more of the members of the Commission not including the Commission when

sitting as such b one or more Administrative Law Judges or c one or more officers authorized

by the Commission to conduct nonadjudicatory proceedings when duly designated to preside at

such proceedings

The fifty 50 day limitation on the commencement ofhearings suggested by

Sea Land is rejected Section 3 b of the Intercoastal Shipping Act 1933
I

834 FEDERAL MARITIME COMMISSION

already requires that hearings be completed Wl thin sixty 60 days T

appears to be no reason to impose an additional requirement in the Com

sion s Rules of Practice and Procedure

2 Section 502 67 a 3 Sea Land proposed that whenever a carrier i

quired to provide financial data to any interestcdperson in connection w

proposed rate change that person should be required to submit aeertifica

that hewill use the material only for evaluating the rate change and identif

all those to whom the data will be made available Sea Land was conce

with the inconsistency between G O 11 and Rule 67 in cases where G O 

requires carriers tomake financial data available to interested persons and 

67 does not require submission of a certification

The Commission agrees that there is an inconsistency in the rules and 

amended 502 67 a 3 to require all persons wishing to inspect workpa

underlying financial and operating data filed in connection with a proposed 

change to submit a certification

3 Definition ofthe term file Sea Land claims that file is a term o

defined in 46 CF R 1 5312 iand that amendments should be made to 

rules to reflect the current accurate meaning of the word The Commis

does not agree that any such amendment is necessary First the definitio

a term in one order does not govern that term s meaning in other orde

rules Second the term file as used in both 46 C F R 1 531 2iand Rul

implies receipt

4 Filingprotest on the carrier Sea Land pointed ut that present rules 

require a protestant to file his protest with a carrier The rule would allow 

protestant to leave the protest at anoffice which was not aware ofthe Com

sion s requirements Instead Sea Land proposes the protestant should b

quired to file his protest with the tariff publishing officer of the carrier 

Commission agrees with this proposal and has amended the rule accordi

Therefore pursuant to section 4 of the Administrative Procedure 

5 U S C 1553 sections 2 and 3 of the Intercoastal Shipping Act 

46 U S C 11844 845 and sections 21 27 and 43 of theShipping Act 

46 U S C 11820 826 841 a Part 502 of Title 46 Code of Fed

Regulations is amended as set forth hereinafter

Section 502 67 is revised as follows

Sec 502 67 Proceedings under section 3 a ofthe Intercoastal Shipping

1933

I

1

a 1 iTheterm general rate increase means any change in rates f

or charges which will A result in an increase in not less than 50 per ce

of the total rate fare or charge items in the tariffs per trade of any com

carrier by water in intercoastal commerce and B directly result in anincr

in gross revenues of such carrier for the particular trade of not less than 

centum

ii The term general rate decrease means any change in riltes fare

charges which will A result in a decrease in not less than 50 per centu

the total rate fare or charge items in the tariffs per trade of any com
RULES OF PRACTICE AND PROCEDURE 835

carrier by water in the intercoastal commerce and B directly result in a

decrease in gross revenue ofsuch carrierfor the particular tradeof not less than

3 per centum

2 No general rate increase or decrease shall take effect before the close of

the sixtieth day after the day it is posted and filed with the Commission A

vessel operating common carrier VOCe shall file under oath concurrently

with any general rate increase or decrease testimony and exhibits of such

composition scope and format that they will serve as the VOCC s entire direct

case in the event the matter is set for formal investigation together with all

underlying workpapers used in the preparation of the testimony and exhibits

The VOCC shall also certify that copies of testimony exhibits and underlying

workpapers have been filed simultaneously with the Attorney General of every

non contiguous State Commonwealth possession orTerritory having ports in

the relevant trade that are served by the VOCC The contents of underlying

workpapers served on attorneys general pursuant to this paragraph are to be

considered confidential and are not to be disclosed to members of the public

except to the extent specifically authorized by an order of the Commission or

a presiding officer Acopy ofthe testimony and exhibits shall be made available

at every port in the trade at the offices of the VOCC or its agent during usual

business hours for inspection and copying by any person

3 Workpapers underlying financial and operating data filed in connection

with proposed rate changes shall be made available promptly by the carrier to

all persons requesting them for inspection and copying upon the submission of

the following certification under oath to the carrier

CERTIFICATION

of

Name and Title if Applicable Full name of Company orEntity

having been duly sworn certify that the underlying workpapers requested from

will be used solely in connection withprotests related to and

I

Name of Carrier

proceedings resulting from

Name of Carrier

and that their contentswill notbe disclosed

s rate increase decrease

scheduled to becomeeffective

Date

to any person who has notsigned under oath acertification in the form prescribed which has been

filed with the Carrier unless public disclosure is specifically authorized by an order of the

Commission or the presiding officer

Signature

Date

Signed and Sworn before me this Day of

Notary Public

My Commission expires
836 FEDERAL MARITIME COMMISSION

4 Failure by the VOCC to meet the service and filing requirement

paragraph a 2 may result in rejection ofthe tariff matter Such rejection 

take place within three work days after the defect is discovered

b 1 Protests against a proposed general rate increase or decrease m

pursuant to section 3 of the Intercoastal Shipping Act 1933 may be mad

letter and shall be filed with the Director Bureau ofOcean Commerce R

lation and the tariff publishing officer of the carrier no later than thirty 

days prior to the proposed effective date of the proposed changes In the e

the due date for protests falls on aSaturday Sunday or national legal hol

protests must be filed with the Director Bureau of Ocean Commerce R

lation and the carrier no later than the lastbusiness day preceding the wee

or holiday Persons filing protests pursuant to this section shall be made pa

to any docketed proceeding involving the matter protested provided tha

issues raised in the protest are pertinent to the issues set forth in the orde

investigation Protests shall include

i

Identification of the tariff in question

ii Grounds for opposition to the change

iii Identification of any specific areas of the VOCC s

testimony exh

or underlying data that are in dispute and a statement of position on each 

in dispute VOCC general rate increases or decreases only

iv Specific reasons why a hearing is necessary to resolve the issue

dispute

v Any requests for additional carrier data

vi Identification ofany witnesses that protestant would produce at a h

ing a

summary oftheir testimony and identification ofdocuments that pr

tant would offer in evidence and

vii A subscription and verification

2 Protests against other proposed changes in tariffs made pursua

section 3 of the Intercoastal Shipping Act 1933 shall be filed no later 

twenty 20 days prior to the proposed effective date of the change 

provisions of paragraph b Irelating to the form place and manner off

protests against a proposed general rate increase or decrease shall be applic

to protests against other proposed tariff changes

c Replies to protests shall conform to the requirements of S 50

Rule 74

d 1 In the event the general rate increase or decrease ofaVOCC is m

subject to a docketed proceeding Hearing Counsel the VOCC and all pr

tants shall serve under oath testimony and exhibits constituting their d

case together with underlying workpapers on all parties and lodge copie

testimony and exhibits with the presiding officer no later than seven 7 

after the tarrif matter takes effect or in the case of suspended matter s

7 days after the matter would have otherwise gone into effect

2 Ifother proposed tariff changes made pursuant to section 3 o

Intercoastal Shipping Act 1933 are made subject to a docketed proceeding 

carrier Hearing Counsel and all protestants will simultaneously serve o

parties and lodge with the presiding officer prehearing statements as spe

in paragraph f I of this section no later than seven 7 days after the 
RULES OF PRACTICE AND PROCEDURE 837

matter takes effect or in the caseof suspended matter seven 7 days after the

matter would have otherwise gone into effect

e I Subsequent to the exchange of prehearing statements by all parties

the presiding officer shall at his discretion direct all parties to attend a

prehearing conference to consider

i Simplification of issues

iiIdentification of issues which can be resolved readily on the basis of

Qocuments admissions of fact or stipulations

iii Identification of any issues which require evidentiary hearing

iv Limitation of witnesses and areas of cross examination should an evi

dentiary hearing be necessary

v Requests for subpoenas and

vi Other matters which may aid in the disposition of the hearing including

but not limited to the exchange of written testimony and exhibits

2 After considering the procedural recommendations of the parties the

presiding officer shall limit the issues to the extent possible and establish a

procedure for their resolution

3 The presiding officer shall wheneverfeasible ruleorally upon the record

on matters presented before him

fI

It shall be the duty of every party to file a prehearing statement on

a date specified by the presiding officer but in any event no later than the date

of the prehearing conference

2 A prehearing statement shall state the name of the party or parties on

whose behalf it is presented and briefly set forth

i Identification of issues which can be resolved readily on the basis of

documents admissions of fact or stipulations

iiIdentification of any issues which require evidentiary hearing together

with the reasons why these issues cannot be resolved readily on the basis of

documents admissions of fact stipulations or an alternative procedure

iii Requests for cross examination of the direct written testimony of

specified witnesses the subjects ofsuch cross examination and the reasons why

alternatives to cross examination are not feasible

iv Requests for addition specified witnesses and documents together with

the reasons why the record would be deficient in the absence of this evidence

and

v Procedural suggestions that would aid in the timely disposition of the

proceeding

g

The provisions of this section are designed to enable the presiding officer

to complete a hearing within sixty 60 days after the proposed effective date

of the tariff changes and submit an initial decision to the Commission within

one hundred twenty 120 days pursuant to section 3 b of the Intercoastal

Shipping Act 1933 The presiding officer may employ any other provision of

the Commission s Rules ofPractice and Procedure not inconsistent with this

section in order to meet this objective Exceptions to the decision of the

presiding officer filed pursuant to section 502 227 Rule 227 shall be served

no later than fifteen 15 days after date of service of the initial decision

Replies thereto shall be served no later than ten 10 days after date of service
ofexceptions 

te absece o

exceptions t

e 

presiding 

shall be final within 30 days from the date of service unless within that p

a determination to review is made in accordance with the procedures out

in 502 227 of this part

h Intervention by persons other than protestants ordinarily shall n

granted In the event intervention of such persons is lJranted the pres

officer or the Commission may attach such conditions or limitations as 

deemed necessary to effectuate the purpose of this section Rule 67

By the Commission

8 FRANCIS C HURNEY

Secreta
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 440 1

ALLIED STORES INTERNATIONAL INC

SUBSIDIARY OF ALLIED STORES CORPORATION

v

UNITED STATES LINES INC

ORDER OF RECONSIDERATION

June 30 1980

The Commission has before it a letterfrom United States Lines Inc USL

protesting the Commission s May I 1980 award of 12 percent interest on a

Settlement Officer s grant of reparation to Allied Stores International Inc I

The interest is to accrue from date of payment of freight charges USL argues

that I

it was not responsible for the long delay in the resolution of this

proceeding 2 that in 1976 when the freight payment wasmade short term

interest rates were considerably lower than 12 percent and 3 there is no

indication as to what the cut off date of the application of the 12 is USL

agrees to pay the 147 46 in reparation but will not pay the 12 interest

pending further consideration of this highly controversial issue

USL s petition will be denied Although the length of time it took to reach

a decision in this proceeding may have been out ofthe carrier s control it was

the carrier s violation ofsection 18 b 3 of the Shipping Act 1916 46 U S c

817 which prompted the proceeding The award of interest is intended to

make whole the complaining party

2

For whatever reason USL has held and

had use of the excess charges paid by Complainant Finally the Commission

considers it obvious that the interest will continue to accrue from the date of

payment of freight charges until the date of payment of the interest

I

Although not captioned as such the letter will be treated by the Commission as a Petition for Reconsideration Although the

letter refers to Informal Docket No 441 1 it isapparent that this reference isan error and that fnfonnal Docket No 440 1is

the subject of the letter

2 While the Commission spolicy of assessing interest awardsat 12 percent may reflect somewhat higher interest rates than those

in effect in 1976 the awardof 12 percent interest on a reparation of 14746 will cause neither a hardship to the carrier nor an

unjust enrichment to the complainant
THEREFORE IT IS ORDERED 

at te petition Uted 

Lines Inc is denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secreta
FEDERAL MARITIME COMMI ION

INFORMAL DOCKET No 667 1

FMC CORPORATION

v

SEA LAND SERVICE INC

ORDER ON RECONSIDERATION

June 30 1980

This proceeding is before the Commission upon Sea Land Service Incos

Petition for Reconsideration of the Commission s April 8 1980 Order award

ing 12 percent interest on the Settlement Officer s award ofreparation to FMC

Corporation The interestaccrued from the date ofpayment offreight charges

Sea Land contends that the delay between the time the freight charges were

paid and the decision of the Commission was not caused by Sea Land and that

the award of interest under these circumstances is punitive

The Commission is unpersuaded by Sea Land s argument Imposition of

award of interest is not punitive but rather compensatory It is intended to

make whole the complaining party For whatever reason Sea Land has held

and had use of the excess charges paid by Complainant

THEREFORE IT ISORDERED That the Petition for Reconsideration of

Sea Land Service Inc is denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DocKET No 684 1

JAMES BETESH IMPORT CoMPANY

v

SEATRAIN PACIFIC SERVICES S A

REPORT AND ORDER

June 30 1980

BY THE COMMISSION Thomas F Moakley Vice Chairm

James V Day Leslie Kanuk and Pete

Teige Commissioners

I

1

This proceeding is before the Commission upon its determination to re

the decision of Settlement Officer William Weiswasser served April 9 1

awarding reparation The Settlement Officer found that SeatrainPacific S

ices SA violated section 18 b 3 of the Shipping Act 1916 46 U S C i8

by overcharging James Betcsh Import Company on two shipments of sno

jackets which were incorrectly measured

Complainant alleges that upon receipt of the shipment it discovered tha

cartons were overmeasured and that it overpaid around 500 00 C

plainants proof of the allegedly correct cargo measurements consists of 

unverified warehouse receipts Complainant wrote four letters to various 

train offices demanding a refund two of the letters invited Seatrain to mea

the goods in issue at Complainant s warehouse

Seatrain did not respond to Complainant s correspondence Seatrain fi

Motion to Dismiss the complaint arguing that Complainant prod

insufficient evidence to prove incorrect measurement and that its claim 

properly denied by Seatrain because the carfo had left Seatrain s posse

and certified remeasurement was impossible

Chllinmln Richard J Daschbllch did not participate

I

Sutrain also submitted Ii letter to the Pl C8iding Oflh er after the Issuance of his decision protestin aUeled pro

irregularities and the award of reparation Because of the Commillion l dlspoIIitlon of this proccoding it isunnecessary to 

the Motion to Dismiss or the correspondence
p

itself of the opportunity to remeasure the cargo at Complainant s warehouse

prevents it from arguing that it was disadvantaged by its no longer having

custody of the cargo

DISCUSSION AND CONCLUSION

The Commission concludes that Complainant has not met its burden of

proof and that reparation must be denied The unsigned warehouse receiving

slips do not establish with any reasonable certainty the correct measurements

of the cargo asopposed to the measurements provided by the shipper on the bill

of lading Nor did Complainant offer affidavits of witnesses establishing the

exact measurements ofthe cartons evidence of use of standard size cartons in

similar shipments or any other corroboration of its claim

Itis Complainants burden to prove that the cargo wasmismeasured and not

the carner s to prove that it wasnot Complainant offered no evidence that the

shipments stored in its warehouse remained complete and unadjusted There

fore Complainants invitations to measure the cargo did not constitute an

opportunity for Seatrain to verify with assurance the correct measurements

Seatrain s failure to accept Complainant s invitation does not mitigate Com

plainant s insufficiency of evidence

THEREFORE IT IS ORDERED That the decision of the Settlement

Officer is reversed and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary