FEDERAL MARITIME COMMISSION

WASHINGTON D C

SPEOIAI DOI1KET No 428

CmCAGO BRIDrlE IRON h

v

STATES MARINE LINES

July 28 1971

NOTICE OF ADOPTION OF INITIAL DECISION AND

ORDER PERMITTING REFUND OF CHARGES

No exceptions having been taken to the initial decision of the Ex

aminer in this proceeding and the Commission having determined not

to review same notice is hereby given that the initial decision became

the decision ofthe Commission on July 28 1971

Itis ordered That applicant is authorized to refund 1 978 91 of

the charge previously assessed Chicago Bridge and Iron Co

Itis further ordered That applicant publish promptly in its appro

priate tariff the followingnotice

Notice is hereby given that as reqllired by the decision of the Federal MarI

time Commission In Special Docket No 428 that effective April 30 1971 the rate

on Item No 757 Slag Ground Grit forpurposes of refunds orwaiverof freight

charges on any shipments which may have been shipped during theperiod April

30 1971 to June 24 1971 is 34 00 W notsubject to Rule 26 but subject to all

other applicable rules regulations terms aud conditions of said rate and this

tariff

Itis further ordered That refund ofthecharges shall be effectuated

within 30 days of thisnotice and applicant shall within five 5 days

thereafter notify the Commission ofthe date and mannerofeffectuat

ing the refund

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

15 F M C

1
FEDERAL MARITIME COMMISSION

Sl ECIAL DOCKET No 428

CmcAoo BRIDGE IRON Co

v

STATES MAmNE LINES

Application to refund a portion of freight charges granted

INITIAL DECISION OF HERBERT K GREER

PRESIDING EXAMINER 1

States Marine Lines applicant a common carrier by water in th

foreign commerce of the United States has applied to the Commi

sion for authority to refund to Chicago Bridge Iron Compan

shipper the sum of 1 978 91 a portion of the freight charged an

collected on ashipment of 167 pallets of ground slag grit from Ne

York to Dubai Arabian Gulf pursuant to a billof ladingdated Ap

80 1971

It appears that on April 15 1971 the shipper requeste the 890

Lines an organization of carriers established for rate making pu

poses organization to conduct a telephone poll to establish a rate 

84 00 per long ton on ground slag grit as that rate was needed fo

it tobe competitive with European and Japanese suppliers Applica

evinced a willingness to lift the cargo at 84 00 per long ton if a

proved by the organization and if the organization failed to me

the shipper s

request applicant intended to exercise independent ra

action under the 48 hour provision of the agreement to which it w

subject The organization failed to conduct the telephone poll as r

quested but at a meeting held on April 28 1971 agreed to offer th

shipper a rate of 87 00 per 2 400 pounds plus the differential arb

trary charges applicable to Dubai provided the shipper accepted th

offer prior toMay 5 1971 The shipper misunderstood the offer whi

was made by telephone as the offeror failed to stress the tariff pr

vision that the arbitrary charges would not apply when the shi

1

This decision hecaIlle the decision of the COIllIlllsslon July 28 1971

15 F MC

2
CmCAGO BRIDGE IRON CO V STATES MARINE LINES 3

ment exceeded 200 revenue tons The organization did not consider

the offer accepted and 80 failed to change the existing rate Sub

sequently when the matters were clarified the organization filed the

34 00 rate per long ton with pallet allowance and a waiver of the

arbitrary charges

During the time the above events transpired applicant s officials

wereunaware of the circumstances and so failed tofile the 34 00 rate

as it could have done under the 48 hour provision of the agreement to

which it was subject and as it intended to do if the organization did

not act appropriately Due to the failure to carry out its intention

applicant was required to chargethe tariff rate then effective of 45 50

W1M or 1 978 91 more than the charge would have been had it car

ried out its commitment to the shipper

Under the authority granted to the Commission by Public Law

90 928 75 Stat 764 a common carrier by water in foreign commerce

may be permitted to refund a portion ofthe freight charges collected

from a shipper where there has been an error due to inadvertance in

failing to file a new tariff The facts here appearing warrant the con

clusion that applicant intended to file the new rate of 34 00 per long

ton prior to the shipment ifthe organization failed to do so but that

through administrative inadvertance it was not informed that the

organization would not file such rate and being unaware of the exist

ing situation failed to give 48 hour notice to other members of the

organization of its intent to file the lower rate in accordance with its

commitment tothe shipper It further appears that the organization

later filed the 34 00 rate The application involves asituation within

thepurview ofPublic Law 90298

The application was filed within 180 days of the date of the ship

ment no other shipments of the same or similar commodity moved on

conference vessels during approximately the same time as the ship

ment here involved and no other proceedings involvingthe same rate

situation are pending Good cause appearing applicant is permitted

to refund to the shipper the sum of 1 978 91 The notice referred to

in the statute shall be published in the conferencetariff and the refund

shall be effectuated within 30 days thereafter Within 5 days after

making refund applicant shall notify the Commission of the date of

the refund and themannerin which payment wasmade

S HERBERT K GREER

Presiding EilJaminer

WASHINGTON D C JuZy 18 1971

15 F MC
FEDERAL MARITIME COMMISSION

DOOKET No 701

SEA LAND SERVIOE INO INOREASES IN RATES IN THE

Us PAOIFIO CoAST PUERTO RICO TRADE

4

ugmt S 1971

Increased rates of Sea Land Service Inc in the West CoastPuerto Rico trad

found just and reasonable The arbitrary charge on shipments at Seattl

not shown to be unlawful

Wa1 r6n Price Jr and R L Damend for Sea Land Service Inc

Mario E8oudero Frederick Morning and Edward Schmeltser fo

Commonwealth of Puerto Rico protestant

R L Henry for Boise Cascade Corporation intervenor

Donald J BlUnner and Ronald D Lee Hearing Counsel

REPORT

By THE COMlIfiSSION HELEN DELIOH BENTLEY Ohairmo nj ASHTON

C BARRETT Vice Ohairman JAMES V DAY GEORGE H HEARN

and JAMES F FANSEEN OommiB8ioner8

This proceeding was instituted by the Commiesion to investigat

the lawfulness of arbitrary charges on shipments moving toand from

Seattle Washington and proposed increases in rates for the carriag

of about one fourth of the commodities in the US Pacific Coast

Puerto Rico trade of Sea Land Service Inc Sea Land The pro

posed increases weresuspended and any changes made therein durin

suspension with Commission authorization or after expiration of th

suspenion period as well as any changes in the arbitrary were als

placed under investigation The Commonwealth of Puerto Ric

Puerto Rico is a party protestant in thlproceeding Boise Cascad

Corp a shipper in the subject trade intervened Hearings were hel

before Examiner Herbert K Greer pursuant to which briefs wer

filed The Examiner thereafter issued an Initial Decision in whic

he found the arbitrary charges and increases lawful in all respectj

111 F Ho

4
SEA LAND SERVICE INC 5

Exceptions to the decision have been filed by Puerto Rico and Hearing

Counsel 1

towhich Sea Land has replied Therewas nooral argument

FAOTS

Sea Land provides a regular scheduled common carrier service by

water between the ports of Oakland and Long Beach Calif and San

Juan P R via Balboa Canal Zone

Since 1963 respondent has been the only common carrier by water

servingtheWestCoast Puerto Rico trade Itcompetes with a chartered

vessel for the carriage of rice a major moving commodity in the

trade There is also competition from water service to and from

Gulf ports and rail movement beyond Respondent s service is valua

ble to shippers since it constitutes the only complete water service

offered between the West Coastand Puerto Rico

The service provided by respondent to this trade has varied over

the years Prior to 1962 three breakbulk vessels were deployed call

ing at California ports on a 21 day frequency Calls were also made

at Portland Oreg once every 60 days or more frequently if service

was required In Septemberof 1962 respondent began phasing out the

breakbulk service and phasing in a trailership service Two trailer

ships were deployed and in early 1963 a third trailership was added

which increased the sailing frequency from once every 21 days to

once every 14 days Also provided was a non self propelled barge

service between Oakland and Portland Shipments originating at or

destined to Portland were relayed at Oakland on a vessel engaged in

the Puerto Rican trade In 1964 a fourth vessel was added and the

sailing frequency increased to every 10 days Respondent was forced

to discontinue the barge shuttle service in 1966 but it instituted a

motorcarrier service

In compliance with the request of the Government for vessels to

transport supplies from thePacific Coast to Southeast Asia respond

enthas found it necessary to redeploy vessels which hadbeen operating

in the domestic and offshore trades including the four vessels which

had been operating in the Atlantic Pacific service via Puerto Rico

In 1967 two C2X vessels were deployed and the new service

was limited to San Juan P R on the one hand and Oakland

and Long Beach Calif on the other hand All eastbound intercoastal

traffic from Pacific Coast ports to Atlantic Coast ports which moved

under rates regulated by the Interstate Commerce Commission was

discontinued

1 Intervenor Boise Cascade Corp did notexcept to the Initial Decision although it had

originally taken a position similar to that voiced by Hearing Counsel In their exceptions

15 F M C
6 FEDERAL MARITIME COMMISSION

To provide additional capacity for the Puerto Rico West Coas

trade respondent added two additional C2X vessels in early 1969

giving a weekly service in each direction Each C2X vessel has a

capacity of 225 trailers the additions increasing total trailer capacity

from 450 to 900 In early 1970 two C2Xvessels werewithdrawn and

two C2L vessels added each with a capacity of 274 trailers which

increased total trailer capacity to 998 In April of 1970 a T2M

vessel wasadded with a capacity of 332 trailers The vessels deployed

in the trade at the time of the hearing had a total capacity of 1 330

trailers

The Pacific Coast Puerto Rico trade is not balanced with respec

to direction of movement In 1969 respondent carried 112 613 tons

eastbound and 26 162tons westbound

In addition to the direct service provided in the trade respondent 

vessels deployed to the Pacific Coast Southeast Asia trade follow a

itinerary on the homebound voyage which provides a call at Seattle

Washington thence to Oakland Calif The cargo loaded at Seattle

is unloaded at Oakland and transferred to vessels regularly operating

in the trade This southbound service from Seattle is subject to a

arbitrary chargeof 4 per cubic foot or 16 per hundredweight

Respondent maintains terminal facilities in Puerto Rico and the

California ports ofLong Beach and Oakland These facilities are als

used by respondent in trades other than the Puerto Rico West Coas

trade Respondent also serves Puerto Rico from Atlantic ports From

Pacific ports it also serves trades with Japan and Southeast Asia In

determining costs allocation is made on the basis ofrevenue tons ca

ried in a trade

Respondent has not filed a general rate increase in this trade since

1960 Since July 1 1967 and prior to the increases here at issue re

spondent increased the rates on 53 specific commodities ofthe 277 com

modity rates set forth in the tariff Ofthe 53 increases 13 commoditie

are subject to additional increases here at issue Generally the forme

increases on the 13 items wereLTL cargo only Rate changes have been

based On such factors as the individual needs of shippers and con

signees and conditions relating to certain movements some of which

changes were negotiated with shippers

Respondent released its G O 11 report for 1968 on June 13 1969

This report together with knowledge of rising costs was the basi

for respondent s decision to review its rate structure in this trade A

Itappea that a of Novemhe 1970 the trade wa bololl erved by two ClIV ao

two T2 M wIth a total traUe capacIty of 1 212 See Ez 1 pale 8 10 Docket No 70

SOb 1

111 FMO
SEA LAND SERVICE INC

general rate increase was considered butrejected infavor ofaselective

commodity rate review Respondent began an examination of its tariff

page by page and the increased rates here at issue are the first to be

filed

The G O 11 report for 1968 as originally submitted tothe Commis

sion showed a loss of 185 000 but was not accepted by the Commis

sion s Bureauof Financial Analysis Discussions resulted inthe filing of

two revised reports the second revised report showing a

profit of

42 000 arate of return of0 78 percent The 1969 G O 11 report filedby

respondent shows a rate of return of 248 percent These reports have

not been accepted as fully accurate by the Commission sBureau ofFi

nancial Analysis There is a wide area ofdispute between respondent s

accountants and the Commission s Bureau regarding the items

properly included in a G O 11 report respondent contendingthat the

report does not permit full disclosure ofall related costs

Respondent has experienced substantial increases in the cost of

operating its terminals At San Juan Terminal marine expenses in

1969 increased by 225 989 over 1968 terminal operating expenses

during thisperiod increased 287 305 and terminal overhead increased

1 173 303 Similar increases at Oakland were terminal marine ex

pense by 356 161 terminal operating expense by 966 895 and terminal

overhead by 617 101 AtLong Beach the increases wereterminal ma

rine 208 129 terminal operations 314 409 and terminal overhead

139 475

In 1965 when tIle basic rates on the commodities here under con

sideration were filed hourly wages of longshoremen were 4 03 These

wages steadily increased from 1968 to 1970 the increase was from

4 64 to 5 87 per hour

Clerical wages have also steadily increased since 1965 From 1968 to

1971 the following increases weremade in weekly rates

Grade 1 employees from the 78117 69 range to the 104 149 61 range

Grade 3 employees from the 92 54 139 32 range to the 134 05 177 10 range

Grade 6 employees from the 124 04175 03 range to the 179 12228 84 range

Crew wages on C2X vessels have increased steadily since 1965 the

increase from 1968 to 1969 wasfrom 1 866 89 to 1 503 56

Vessel operating expense covering respondent s entire intercoastal

operations increased approximately 439 000 from 1968 to 1969

Based on the tonnage ofthe commodities here at issue carried in this

trade in 1969 had the increased rates been in effect they would have

produced an additional 74 348 revenue Rice the major moving com

8

Later increases on other commocUtles were placed under investigation In the Commis slou s Docleet No 701 Sub I wbleb was lustltuted by order served August 28 1970

15 F MC

7
8 FEDERAL MARITIME COloDofISSION

modity would have accounted for 38 796 of this revenue beans

9 731 and plywood 6 5lS9

The increased rate on rice is from 10 to 1 20 per 100 pounds o

trailerloads and from 1IS4 to 1 70 per 100 paunds an LTL shipments

LTL shipments aremillar During 1969 19 904 tons af semimilled ric

maved fram Califarnia parts toPuerto Rico inresPQndent s trailers

Respandent s movementaf rice intrailers began in 1965 The rate wa

then 1 20 pe 100 paunds In December 1966 hawever competitian

from an unregulated carrier forced a rate reductian to 10 Th

increase antrailerlaads wauld therefare reestablish the 1 65 rate Th

increase is 0 75 percent af the commadity pricein Puerto Rica

The percentage increa seto cQmmodity price an pawdered milk i

0049 an beans 0 44 an cleaning campaund 0 15 an table salt 0 48

and an anians 0 31 The rate increases thuswauld appear to have anl

a

very slight impact an cansumerprices in Puerto Rico

Rates an many af the cammodities here invalved are less than th

rates an similar commadities carried in bulk to Santa Damingo an

Panama

Respandent s 1969 total revenue an the cammodities here atissue i

the increased rates had been in effect wauld have been 1 230 058 les

appraximately 7 800 paid far trucking costs on cargo which move

to and fram Pance and Mayaguez 39 196 tons were carried Revenue

under the increased rates wouldhave been 31 18 per ton During 1968

expenses per tan for the West Caast Puerta Rico trade were

Vessel operating ellpenses 82 8

A G expenses 6 5

Inactive veSllel expense 1

ADlortizatlon and depreclatlon 8 6

Interest expense 1 4

Total expenses 44 5

Less credit for related cODlpany prollt 5

Net cost per ton 44 0

Thus had the increased rates been in effectduring 1969 and costs o

handlingbeen the same in 1969 as in 1968 the cost af handling woul

have been appraximately 33 percent greater than the revenue derived

from these cammodities

During 1968 when aperating two C2X vessels in this trade

respandent s carriage afall cammadities was 148 088 tons During1969

with the additian af two vessels and an increase in trailer capacity from

450 to 900 total carriage was 155 738 tons

111 FMC
SEA LAND SERVICE INC 9

THE EXAlIIINER S DECISION

The Examiner found the rate increases here under examination just

and reasonable based upon his conclusions that Sea Land had a

marginal overall rate of return in the subject trade that costs are ris

ing that a loss would be incurred inhandling the specific commodities

here involved in spite of the increased rates that respondent s service

is valuable to shippers and that in performing such service respondent

must face competition The Examiner also concluded that the Seattle

arbitrary had not been shown tobe unjust orunreasonable the manner

in which it was computed he found had not been demonstrated to be

improper and such computation revealed that the arbitrary would re

coup only 89 73 percent of the additional expense incurred by Sea

Land in calling atSeattle

DISCUSSION AND CONCLUSIONS

We agree with theExaminerthat the record inthisproceeding shows

the increased rates here under investigation to be just and reasonable

and that the arbitrary at Seattle has not been shown to be unlawful

The Rate Increa8es

Puerto Rico and Hearing Counsel except to the Examiner s deter

mination with respect to the increases alleging basically that the data

of record are not sufficient to justify them Specifically they maintain

that the record lacks material either actual or projected relating to

Sea Land s financial performance in 1970 or the future and that the

carrier s method of operation has changed radically since 1969 which

change entails concomitant changes in expenses revenues rate base

and rate of return Additionally Puerto Rico asserts that the Ex

aminer erred in treating this proceeding as one involving individual

commodities rather than a general revenue investigation in which cost

and revenue data for the trade as a whole would and should have

been considered and that theExaminer improperly failed to consider

whether the rates on other commodities are sufficiently high to offset

any losses incurred in connection with the carriage of rice beans and

plywood commodities upon which inereases have been imposed and

which are basic to the Puerto Rican economy Finally Hearing Coun

sel maintain that the Examiner improperly applied average per ton

costs for 1968 of all commodities carried in the trade against 1969

revenues per ton for the particular commodities on which the rate

increases were imposed

As we have often observed ratemaking is not an exact science and

it is enough if the results obtained with respect to determining the

15 FMC
10 FEDERAL MARITIME COMMISSION

reasonableness of rates and in making the underlying cost and revenu

computations represent a reasonable approximation to what must b

assumed tobe the reality See e g Alooa Steamahip 00 Ino Gener

lnorea86inRate8 9 FM C 220 231 1966 Increa8ed Rate8 onSuga

100S 7 FM C 404 411 1962 Of course the degree of approximatio

adequate to satisfy the requirement WIth respect to the propriety o

rates will vary from case to case depending upon the nature of th

operations involved and the data submitted

We believe that the evidence of record in this proceeding is sufficie

to support a finding that respondent s rate increases are just and rea

sonable Respondent s financial reports to the Commission G O 1

reports for the years 1968 and 1969 show that Sea Land s rate o

return inthe subject trade for those years was 0 73 percent as per tI

second revised report for 1968 and 2 43 percent as per the report fo

1969 Although the reports cannot be said to be absolutely accura

in all respects they cannot on the basis of the record herein be treate

asother than accurate Hearing Counsel in fact acknowledge that th

factual data must be presumed correct forthe purpose of this proceed

ing while Puerto Rico admits thllit there is no record basis tocontra

dict the results of the reports Such rate of return can as th

Examiner found only be said to be marginal and such conclusion 

not contested by any of the parties

A carrier s operations are always subject to change and one ca

never lmow with certainty that the method of operation employed i

the past will be used in the future We agreewith the Examiner how

ever that for the purposes of this proceeding it is more reasonab

to base determinations with respect to the probable results of futur

operations more heavily upon the results shown in the G O 11 report

than upon projections based upon changes in operation which mayo

may not occur It is true that as of April 1970 the subject trade wa

served with five vessels ratherthan four as had been the case in 196

and the first quarter of 1970 and tlatthe carrying capacity was in

creased by this change by some 382 trailers It is also true howeve

as the Examiner found that the history ofrespondent soperationgi

this trade shows that frequent chan s in vesscl deployment have bee

made sometimes due to undertonnage and also because of the neces

sity to deploy vessels at the request of the Defense Department

Further respondent s witness testified that no changes are planned fo

1970 which will materially affect the profitability in this trade

We aote la thle rerard that teltlmoay la Docket Woo 7G1 Sub 1 aa laveltltatlo

of addltloaal tncreuee oa other commodltlel by relpoadeat herela ehowl that as 

November 1970 thl trade wal a ala belD lerved by fOil vellell with a total trail

capacity of about oae hUDdred trallen lell thea had boeathe caoe with p8lt to th

five vellel oervtce SeelDz 1 pa 8

111 J1 MC
SEA LAND SERVICE INC

Similar results should thus obtain in the near future with respect to

operating costs administrative and general expenses depreciation

amortization and the terminal expenses attributable to the trade

When the operations for 1968 and 1969 are considered together with

the projection respondent has made with respect to wage increases

and the rising trend revealed by the record with respect to terminal

costs vessel operating expenses and clerical crew and longshoremen s

wages it is clear that the record will support a finding that the in

creases here under examination are just and reasonable Based upon

the tonnage of the commodities here involved carried in this trade in

1969 which in light of the history of the trade and the testimony of

record we treat as reasonably representative of respondent s activities

in the near future had the increased rates been in effect they would

have produced an additional 74 348 revenue for atotal of 31 18 per

ton while had the costs ofhandling been the same in 1969 as in 1968

44 08 per ton the cost of handling such commodities would have

been approximately one third greater than the revenue derived

The criticisms ofthe use by theExaminer of average costs for 1968

as the basis for a comparison with the revenue which would have been

derived from the carriage of the specific commodities here under ex

amination based upon 1969 tonnages are not well founded The Ex

aminer was fully justified in using average per ton costs since the

average cost per ton was one third greater than the revenue to be

recovered under the increased rates Ifthe average cost per ton had

been at all close tothe revenues to be derived from the increased rates

a more refined individual cost study might have been in order But

there appearedtobeno need for such refined analysis where the spread

between revenues and costs based on cost averages wasasgreat ashere

Similarly the factthat 1968 costs rather than 1969 costs wereused as

a basis for the comparison if anything shouldhave resulted in an un

derstatement of costs in light ofthe increases in costs in 1969 and pro

jected wages for 1970 Finally even if one wereto assume that costs

of handling the specific commodities for which rate increases were

imposed would decrease in the near future the total additional rev

enue derived from the increases 74 348 would not significantly af

fect Sea Land s profitability in the trade Since the 1969 rate base

shown in the G O 11 report was 6 896 458 the increase if totally

accruing to the carrier without any offsetting expenses would result

in only about 1 percent on arate of return which is marginal

a

A dtfterent conclusion would of course be required with respect to the use of past

experience 8S a guide to determining the reasonableness of rate Increases where the

cbange In carrying capacity was ot a degree and type unprecedented for the carrier In the

subjeet trade and the subjeet of a possIble change In manner of operation had not been

considered when the Increase was proposed ctKlmbrell Lauw6ftH Trans Ino Inorea e in

Rat B 12F M C 15 17 18 1968

15F M0

11
12 FEDERAL MARITIME COMMISSION

We also agree with the Examiner s treatment of this proceeding 

one involving individual commodity increases rather thana gener

revenue investigation Although about one fourth of the commoditie

carried in the trade are affected by the subject increases the increas

are the result not of a decision to establish a general revenue increas

but a

step by step revision of respondent s tariff which as the E

aminer found was the result of careful consideration by the carrie

sometimes after consultation with shippers giving weight to suc

factors as whether a shipper might lose his market if the rate on ce

tain commodities is increased Further contrary to Puerto Rico 

assertions there is nothing relatingto the subject proceeding to ind

cate that the carriage of cOmmodities basic to its economy has in a

way been materially affected by the rate increases here involved 

even that there is a need for other commodities to subsidize the ca

riage of beans rice and plywood as Puerto Rico contends As Puer

Rico itself has pointed out the requirement that the Commission a

with respect to the public interest as it relates to the needs of t

Puerto Rican economy must appear from the record in a particul

proceeding and must be based upon a demonstration that carrie

need a revenue cushion from the movement of nonessential commo

ities and that such cushion would increase their carria ge of commo

ities essential toPuerto Rico See Reduced Ratea on MachiIMry fro

us to Puerto Riao 10 FM C 248 253 1967 Such demonstratio

does not appear on this record The rice increase mlrlly restored t

rice rate to its 1965 level from which it had been reduced because 

competition from an unregulated cprrier while the plywood increa

merely broQghtthe rates from California ports up tothe level alrea

in effect from Seattle to remove any market disadvantage whi

might be created for the shipper utilizing Seattle Furthermore 

the Examiner found the ratio of percentage increase to commod

price on beans is 044 percent and on rice 0 75 percent Itis th

extremely unlikely that carryings of beans rice and plywood will 

a1fected by the increases here underexamination

We conclude in light of the minimal rate of return shown by th

1968 and 1969 G O 11 statements the increased expenses for 19

and 1970 both actual and projected and the rising trend for expense

shown by the record the demonstration that the revenue accruin

That the Incr as s Involvsd h re nr not those of a n ral rev lIu procdln 

furth r corroborated b7 testlmon7 In Dock t No 701 Bub 1 that no lOW Individu

rat Increas 1Lwill be mad b 70nd tho Involv d III that procedln until Dock tsNo 7

and 701 Sub 1 nr ftnull7 dlspos dotand b71l a LQnd action now und r IIIv tl at

In Doclr t No f1 D8 8

Lo Servk1 1 G rIIl 1 0 III Bot tll U

PoOIllo Ptierto Bloo 7raII of Instltutln an overall n ral rate Incr as III the ubj

trad

111 rMa
SEA LAND SERVICE INC 13

from the increased rates should at most cover only about onethird

of the costs of handling the commodities to which they relate the

lack of a showing of an adverse effect of the increase on commodities

basic to the Puerto Rican economy the value of respondent s service

and the competition with which it is faced that the subject increases

are just and reasonable

The Seattle Arbitrary

Hearing Counsel alone except to the Examiner s

finding that the

Seattle arbitrary has not been shown to be unlawful They contend

that the arbitrary can lawfully be based only on the costs of service

which are in excess ofthose which would be applicable if Seattle were

served directly i e by ships serving only the Puerto Rican trade

This would require Sea Land to limit its arbitrary charges to the

cost of transshipping Seattle cargo to the trade vessels at Oakland

All other expenses which Sea Land attempts to use as a justifica

tion for the arbitrary ie Seattle stevedoring vessel port expenses

in Seattle and Oakland and the steaming expense between these

twoports should be excluded they maintain

Sea Land had computed the additional cost of handling traffic

at Seattle and the compensation for such service provided by the

arbitrary as follows

Additional cost per loaded container

Stevedorhig Seattle h 17 50

Stevedoring Oakland 11 35

Vessel expense In

portSeattle 10 88

Vessel expense In port Oakland 3 74

Vessel expense steamlng 31 26

otal additional cost 74 73

Additional cost per cwL 0 1783

Arbitrary charge per cwt O 1600

Ratio rate to CoSL h h 89 73

Hearing Counsel do not contest the dollar amounts contained in the

above computation but maintain that the arbitrary should be limited

to 0 0271 per cwt ie 1135 per container

While we agree with Hearing Counsel that the costs of service at

Seattle to which Sea Land is entitled in the computation of the ex

penses relating to the arbitrary should be limited to those which

actually reflect the additional expense of serving Seattle we agree

with Sea Land that in the absence of a showing of a duty in law or

in fact to serve Seattle directly all of the additional costs contained

15 MC
14 FEDERAL MARITIME C0MMI8Si10N

in Sea Lands computation are properly allocable to the addition

expense incurred in serving that port Since there has been no dem

onstration on the record inthis proceeding that a duty to serve Seatt

directly exists and since moreover the additional cost of servic

at Seattle exceeds the arbitrary charged we agree with the Examin

that the Seattle arbitrary has not been shown to be unjust or unre

sonable

All contentions of the parties to this proceeding not specifica

dealt with herein have been considered and found without merit 

unnecessary for the decision

This proceeding is discontinued

SEAL S FRANOIS C HURNEY

Secretary

Such a

duty could perhaps arise Ifths rscord In a particular procsedlng reflects a cl

and convIncing showIng of undue preference Or prejudIce resultlnll from a failure 

provide a certain service at a port See e W tbound rnteroofJ tal Rate to VahO

U6

1 U S M C 770 778774 1988 SunMold B ol GrlJs A v Bluo Star U e Lt

2 U S M C 81 88 1989 and I tor a t1 Ca o kltl d Bo tr tl 2 U S M 

897 8989 1940

15 FMO
FEDERAL MARITIME COMMISSION

15

DOCKET No 7018

SACRAMENTO YOLO PORT DISTRICT

v

PACIFIO COAST EUROPEAN CoNFERENCE ET AL

I he nonabsorptlon provisions of the Pacific Coast European Conference Freight

Tariff No l lIC 14 Rule 10 nnd amended Rule 10 are unlawful since they

prevent or attempt to prevent carriers from serving a federally improved

port in contravention of section 205 Merchant Marine Act 1936

Olarenoe Morae and John J Hamlyn for complainant

F Oonger Fau oett for respondents

AUfl lt8t 9 1971

REPORT

By THE COMMISSION Helen Delich Bentley Chairman Ashton C

Barrett Vice Chairman James V Day George H Hearn

Commissioners

This proceeding results from a complaint by Sacramento Yolo Port

District the complainant against the Pacific Coast European Con

ference the respondent alleging that the Conference has violated

sections 15 16 and 17 of the Shipping Act 1916 The allegations of

the complainant were based on provisions of the respondent s basic

agreement and tariff rules which prevent absorption thus allegedly

preventing member lines from serving a federally improved port in

contravention of section 205 Merchant Marine Act 1936 which com

plainant contends renders such activity unlawful per se Presiding

Examiner Herbert K Greer issued an Initial Decision in which he

found that the type of service offered by the complainant didnot pre

vent the member lines from serving a federally improved port in con

Commissioner James F Fanseen didnotparticipate

III FMC
16 FEDERAL MARITIME COMMISSION

travention of section 205 Healso found that the prohibitions again

absorption were not shown to be unjustly discriminatory fJr unfa

or to operate to the detriment of the commerce of the United State

or to be contrary to the public interest in violatifJn of section 15 

the Act llefoundno violatiotsof section 16 First Of the Act or se

tion 17 of the Act Exceptions to the Initial Decision have been fil

by the CfJmplainant and a

reply thereto was filed by the responde

We have heard oral argument

FAOTS

Sacramento owns and operates a public terminal at West Sac

mento located on navigable waters of the United States and on 

waterway impI ovelnentp1 oje t

authorized by PubIlc Law 525 79

Congress 2nd Sess approved July 24 1946 Federal funds were e

pended for development of the ship channel and the turning basin 

thePort 1The Port is 79 nautIcal miles from the Golden Gate Brid

on San FrapciSco Bay

Approximately 25 percent of the Port s facilities can be used f

handling containers Five berths are provided for deep sea vesse

The area served by the Port produces pencil slata peaches almon

prunes vegetables cereals and other agriculture products A substa

tial portion of these products areexparted approximately twothir

of the exports moving tothe United Kingdom and Europe The p

ponderance of cargo moved through the PfJrt of Sacramento is o

bound

In JanualY

of 1970 Saoramento inaugurated a

barge service w

the C B Sacramento The service is limited to containerS The Po

receives the cargo if breakbulk the Port puts thecargo incontainers

will store it if necessary handle itand 1000ds it on thllbargeand hau

the containers to the ocean line s terminal in San Francisco Bay T

line is responsible for lifting the contain ronto the ship or the wha

The Port s charge to the vessel of 3 55 per short ton is less than t

vessel cost of a direct call tothePort Sacramento acts as the carrie

agent when providing the barge service The service is offered toc

riers notshippers

Shippers in the Sacramento area now using Conference lines sh

their produce to the Bay area by truck Since Saoramento is clo

to the origin of the shipments than the Bay area ports a shippe

costs for overland tlansportat on would be reduced if they could sh

out of Sacramento Confel encecarrie1 8 usingthe barge service wou

1

The Port I looated on a

dredged ohannelwhloh oonnoot wltb the Saoramento RIve

mile to the outh

111 F MO
SACRAJ4ENTO YOLO PORT DISTRlCT 17

have to absorb the cost in order to maintain equal rates from Sacra

mento and the Bay area ports to the foreign ports served Sacra

mento s barge holds 56 20 foot containers and can accommodate con

tainers ofdifferent sizes

The Conference operates under Agreement 5200 approved by the

Commission under section 15 of the Shipping Act The agreement

covers commerce from ports in the States of Alaska Washington

Oregon and California to ports in the United Kingdom of Great

Britain and Northern Ireland the Scandinavian Peninsula Con

tinental Europe including ports on and in the Baltic and Mediter

ranean Seas as well as seas bordering thereon and Morocco and to

theAtlantic islands of the Azores Madeira Canary and Cape Verdes

and by transshipment at the aforementioned to ports in Ireland and

West South and East Africa Section 3 of Agreement 5200 provides

There shall be no payment or refund of freight or compensation received and

no absorption at loading and discharging ports of rail truck orcoastal steamer

freights or other charges directly or indirectly by any of the parties hereto

except as may be agreed to by three fourths of theparties hereto at any regular

meeting of the conference

The Conference Freight Tariff No FMG14 provided at the time of

he ring

N 10 Shifting of Vessels Shifting of vessels is permitted witbin loading

ports bnt except as otherwise provided there shall be no absorptions for bring

ing cargo to from Or within such ports Vessels loading in the San Francisco

Bay area shall be limited to two loading berths except that vessels may shift

to additional berths for military cargo and cargo loaded in bulk Calls at addi

tional berths may be made to load a minimum quantity of 750 short tons from

one shipper

The provisions of this rule apply separately to each call into the San

Francisco Bay area from another port A modification which was

scheduled to become effective June 30 1971 would have limited the

conference vessels to one loading berthbut not alteringthenonabsorp

tion provision However all limitations on loading berths were de

clared unlawful in our Docket No 70 11 Pacific Ooast European

Oonfere IUJe Rules 10 and 13 Tariff No FMO 11 served June 14

1971 and Rule 10 in both its proposed and modified form including

the nonabsorption provisions here in issue has been cancelled

The Conference tariff places discharge ports into six groups 1

United Kingdom 2 Continent Belgium France Holland 3

ContinentDenmark and Germany 4 Scandinavian 5 Mediter

ranean France Italy Portugal Spain and Yugoslavia and 6

Mediterranean Greece Israel and Lebanon Unless otherwise speci

fied rates quoted are for direct calls Absorptions are permitted be

15 F M C
18 FEDIIlRAL MARITIMIIl COllofMISSION

tween Group 1 ports between Group 2 ports between Group 

ports betweenGroup 4 ports and betweenGroup 5 ports

If Conference lines were to use Sacramento s barge service t

Port would receive substantial revenue Only a portion of the cost 

the container facilities is represented by the investment in the bar

service Since the service was instituted it has been used only on

by a carrier not arespondent in the proceeding There are carrie

other than respondents here who are not prohibited from using t

Port s service by their rules and regulations A number of carr

respondents here are members of conferences other than the PCEC

Sacramento asserts that Rule 10 of the Conference s tariff conta

three unlawful barriers to the use of its barge service by Conferen

lines the two berth or single berth provision the 750 ton minimu

provision and the nonabsorption and transshipment provisions Ho

ever since the first two iBBues wereunder consideration in Docket N

7011 Paoific OOa8tEuroperun OonferenceRule810 and 1 TariffN

FMO 14 this proceeding was restrictedtothe lawfulness ofthe no

absorption and transshipment provisions of the organic agreement a

rule 10 Sacramento s position is that

Contrary to the principles enunllated In Section 2011 Merchant Marine A

1936 and In clear violation of Sections Hi 16 First and 17 Shipping Act 19

respondents by the proviSions of Article S FMC Agreement No 11200 and 

anti absorption and antl tran 8hlpment proviSions of their FreIght Tarl1r Rule 

and amended Rule 10 effectively prevent a member line serving the Port 

Sacramento by exercising Its managerial discretion to use the Port s Conta

Barge Service

Prohlbltlq transshipments and absorptions In the San Franc1sco Bay 

but permitting such actiVities between group terminal discharge ports vlol 

Sections 111 16 Firstand 17 of the Shipping Act 1916

While the Examiner conceded the indirect jurisdiction of the Co

miBBion over section 205 he ruled that the complainant did not m

its burden of proof to establish a violation of section 205 as requi

by the Commission s interpretation Using these cases as guidelin

the Examiner concluded that the key words in section 205 as far 

this proceeding is concerned are prevent and serve He conclud

Sacram nto a1 0 all that eotlon 8 of AIr ment 8100 I unlawful In ofar ao 

reltrlctlon on ab80rptlonl and trall h1pmentl preclude the u e of ItI barlle lervlce

SectlOD 108 provide

Without lImltlnlf the power and autllorlt otherwllev ted In the Commllllon It I

he unlawful for any common carrier by ater elth r directly or Indlr ctl throurh 

medium of an aireement conference association unden and1n or otherwise to prev

or att lIlllt to prevent all0I1Ier IUch carrler from Iervtnr anport dlllrnatecl fot 

accommodation of ocean IIolnlf vlll 181 ted on anImprovement project authorized 

the Conlfrlll orthroulfh It b

anotber arenc of theFederal Government Iylnlf wi

the contlnontel limits of tbe United Iilt tat the ame ratel which It obarres at 

nearest port a1read lerv d b It

111 FM
SACRAMENTO YOLO PORT DI9nUCT 19

that Commission precedent required that in order for a violation of

section 205 to be found the complainant had to proffer substantial

evidence that someone had either directly or indirectly prevented

another from serving a

port within the meaning of section 205 Such

service the Examiner concluded means direct service not the type

of service the complainant offers As he at page 9 of his decision

concluded

If the provisions here at issue when standing alone do not prevent a confer

ence member from providing direct 8ervloe they arenot contrary to the meaning

and intent of the section Emphasis supplied

In reply to the complainant s section 15 16 and 17 allegations the

Examiner concluded that the section 15 charges did not show how the

public interest was detrimentally affected by the nonabsorption rule

As for sections 16 and 17 the Examiner concluded that the Confer

ence s nonabsorption rule applied to outbound cargo and that it was

not unreasonable for the Conference to allow absorption when the

cargo reached its destination In conclusion the Examiner found no

evidence tosupport a section 17 violation noting that not all prejudice

isunjust and unreasonable and therefore unlawful

DISCUSSION AND CONCLUSIONS

As Sacramento urges and the Examiner agreed the Commission

though not vested with jurisdiction over section 205 of the Merchant

Marine Act 1936 the Act must consider the impact and policy of

section 205 in deciding whether to approve section lIS Shipping Act

1916 agreements Though not specifically granted jurisdiction over

section 205 under Reorganization Plan No 7 of 1961 the Plan did not

repeal section 205 and so long as it continues to be a part of the law

of the land it must be considered by the Commission in exercis

ing its delegated function Stockton Port DiIltrict v

Pacific West

bound Oon 8Upra

The Federal District Court for the Northern District of California

in Sacramento Yolo Port DiIltrict v Pacific Ooast European Oonfer

ence No 0 70499 RFP inits order filed May lIS 1970 took the same

view of section 205 pointingout that

Such a conclualon la aquarely contrary to the leplatlve hletory and wording ot

aectlon lO

The Examiner did not feel that It wae controlling that many It not all ot the

membera ot thla conterence belonged to another conterence that allowed abaorptlona

outboundtrom Europe

See Iltookton Port Dutrlot v Paolllo W tbound 0 9 F M C 19 196 S JlGld

Ro rln Grower 88 v Blue Star lAne Ltd I U S M C 81 1989 11Inolllal T Inala v

paolJlo Westboulld O n o F M B 816 19GT

111 FMO
20 FEDERAL MARIT E CO I ON

Even if FMC does not have responsibility for 205 it mnst take account of

it in its dellberations that which would contravene 5205 of the Act would

surely be grounds for disapproval under 15 of the Shipping Aet 1

That activity which contravenes the prohibitions of section 205 may

not continue to be approved under section 15 is made clear by the

legislative history of section 205 which shows that the purpose of the

Act was to remove the agency s power to make determinations with

respect to the lawfulness of a conferences restrictions against fed

erally improved ports on a case by case basis under sections 15 and

16 of the Shipping Act 1916 and to make all such restrictions illegal

per se See eg Hearings Before the Committee on Commerce U S

Senate Pursuant to S 5035 72nd Cong 2nd Sess 1933 87 90

114

The legislative history of section 205 and the established principles

of statutory construction indicate that the position and arguments of

the complainant are more in accord with the purposes of Congress

than those of the respondents which were adopted by the Examiner

The language of the statute speaks of preventing or attempting to

prevent directly or indirectly any common carrier by water

from serving any federally improved port at the same rates

which it charges at the nearest port already served by it Emphasis

supplied Thus if as the respondents contend the statute was in

tended to relate only to direct service one wonders why the word

direct was removed in an amendment offered by Mr Gant in hear

ings on the legislation Finally the vast bulk of thelegislative history

of section 205 shows that its purpose was designed to forbid confer

ences from imposing restrictions on their member lines which would

interfere with the free exercise of the line s discretion in the deter

mination of which ports they choose to serve The hearings on the

so called Allin Amendment which became section 205 of the Act

7 There Is nothing unusual orunique about such an approach For a similar treatment of

section 8 of the Merchant Marine Act 1920 yet another provision of law Dot specifically

admlnl tered by the Commission see Port 01 New York Authority v Federal Maritime

Oommloolon 429 F 2d 663 CA 5 1970 om den February 22 1971

See eg Sutherland Statato1 Oonstraction 3rd Ed Vol 2 4705 Vol 3 5505

9 The word dfreet was omitted from the flnal version See Report No 1136 to aceom

pany oS 5035 72nd Cong 2nd Sess 1933 Although the report gives no reason for such

deletion it appears to have been made pursuant to the following comment at the hearings

Mr GaDt Manager and Secretary Board of Barbor Commissioners Port of Wilmington

Marine Terminal I think that in Une 7 on page 1 that the word direct before the

word IIservlce might Very properly be omitted because of ambiguity What Is direct service

Ifanother Jlort of call tntprvenes as forexample going to the Ptw tie coast if a stop was

made at San Diego then perhaps a stop at Los Angeles orSan Francisco or up the cons

might not be considered direct service I think just for the purpose of clarity that the

word direct Ahould be omitted

The Chairman All right Hearings Before tbe Committee on Commerce U S Senate

pursuant to S 5035 72nd Cong 2nd Sess 1933 at page 27 1

15 FMC
SACRAMENTO YOLO PORT DISTRICT

showed the intent of Congress to outlaw conference regulations de

signed to impose limitations on the free choice of their members with

respect to the ports they may serve Colonel Allin the chief proponent

ofthe legislation testified

It is our desire that this legislation be enacted which is purely permissive

simply enabling any steamship company which desires to go to any port which

has been approved by Congress without hindrance of any other steamship com

pany orcombination of steamship companies

We believe that a steamship company ifit so desires of its own free will

and accord should have the right to go there any federally improved pol tand

pick it a shipment up without being hindered

We merely desire a line ifit so desires to extend its service and make use

of the Government waterway

We do notbelieve in compelling a ship to go anywhere We would like the

ship to have the right to go there without hindrance of compffiing steamShip

lines ifthat particular steamship line desires to do so

And all that we ask is that if the shipper has a shipment a boat be allowed

to come in and get it this is all

The Committee Chairman in interpreting what became section 205

stated

Itsimply says that a steamShip company may natwithstanding any conference

agreement if it desires it is purely permissive in character may go to a port

and attend to the business of that port

What I

am driving at is this We start then there with what you

might term a prohibition that is that the steamship company shall not be de

nied the right that is all the inherent right that the carrier has to go to a par

ticular piace

Therefore the conclusion must be reached that Congress intendedto

include indirect service as well as direct service The Examiner re

lying on the Encinal case supra concluded that even if section 205

included indirect service the complainant had ntJt met the burden

of proof imposed by this case in producing convincing evidence thtLt

a conference provision prevents a member from serving a

port which

a member desires to serve But this burden applies only when the con

ference agreement does not expressly prevent a member from serving

a

portY Here however the complainant has shown that wereit not for

1

Hearings before the Committee on Commerce U S Senate pursuant to S 5035 72nd

Cong 2nd Sess 1933 at page 6

11 Ibid page 7

12 Ibid page 8

Ibid page 10

u

bid page 13

115 Ibid page88

16 Thid page 89

11 This was In fact In the holding of the Commission In the SunMaid case supra As the

Commission stated inthe Encinal case Bupra at 821

The Sun Maid decision in no way conflicts with our findings herein If the conference

tarf6 here fnvolved contafned any provIsIon which would allow a member line to extend

overland rates to complainant ports we could find no violation of section 205

15 FMC

21
22 FEDERAL MARITIME COMMIBSrON

the existence of this limitation on absorptions each member line of t

Conference would be free to serve particular ports in the Bay area 

not as it chose in the exercise of its manltgerial discretion The limit

tion however prevents the exercise of such discretion and it was ju

such a limitation on the exercise of the discretion of individual lin

that convinced the Federal Maritime Board of the illegality under se

tion205 of the restrictions imposed in the ETicinal case BUp l

a

18

In any event the complainant s evidence did indicate that som

member lines were desirous of using the direct service The reco

indicates that some carriers operating inbound to the Bay area we

willing to use Sacramento s service but were somewhat reluctant 

since the PCEC does not recognize the service and therefore the

would only be a one way utilization of containers The inbound c

riers would then have to return outbound with the containers emp

Sacramento then points out that all the members of the two inbou

conferences which cover the trading range of the PCEC are also me

bers of the PCEC thereby inferring adesire on the part of membe

of thePCEC to use the barge service if they were allowed to do so

Inconclusion the decision has tobe reached that the nonabsorpt

provisions forme ly contained in Rule 10 and proposed Rule 10 

respondent s tariff are in direct contravention of section 205 as clea

established by the complainant and therefore are contrary to t

public interest within the meaning of section 15 of the Shipping A

1916 Similarly the absorption insection 3 ofthe conference agreeme

may not be construed to authorize absorptions which prevent service 

8

ny federally improved port This is not tobe construed as a

requi

ment that any particular line utilize the barge service Although t

Examiner found that it would not be uneconomical for a carrier 

utilize this service in opposition to making a direct call it is not to 

The fact that the restriction might have b en unanimously approved Is Immat rla

light of the legtslatlv history of ssctlon 20G

Mr Sinclair Chairman Transatlantic Assoclatsd Fr lght Conf rence The crux 

the situation as you the Chairman put It Is the conf r ncs sdenial of the right of on

Its members to certain thlugs TII con orooo do not d8llf tllo right 0 tllelr momboro 

erve port Btd Jet VB take II lIvatlon where lor the good 01 the transportatlon o

pa te a9a whole and the 8tabUtg 01 the rate th tfCJ tI8portatcon oompanles a II wh

In con eroo

unanouoltl ag oo to oucll a tiling Under tills bill tOould IlIat bo co do

08 a con erco acllon provontlng a mombor tllo r odom 0 aotlo tllat IOU 00 

The Chairman Itthey llnantmously a ee I cannot see that any question would 

arls But uppo o 0 0 mombor I

ur co orco do lred to d a

p clflc tiling Ho ca

preoluded oan he not

Mr Sinclair But t1l6 c oronco agroom t and rul60 to uld 1I0tO 110 ls pr v tod f

doing Itbl llls OtO action

The Chairman Y

Mr Sinclair ytllal tOould tlll be a violatlon tills bill Emphasis suppll

Hearings bef re the Committe on Comm rc U S S nate Pursuant to S IlOBG 

Conlf 2d S 988 at palfe91

111 FJrLO
SACRAMENTO YOLO PORT DISTRICT

required that a carrier utilize the service or make a direct call but

ratherthe member lines are tobe free to exercise their business judg

ment with respect to service absent conference imposed restrictions In

view ofthe foregoing it is unnecessary for us to consider other chal

lenges to the legality ofthe nonabsorption rule

We hold that on the basis ofthe record before us the nonabsorption

provisions ofRule 10 and proposed Rule 10 of the Conference Freight

Tariff No FMC 14 are unlawful

Allexceptions to the Initial Decision or request for findings not spe

cifically ruled upon herein have been found to be improper or imma

terial cumulative or otherwise unnecessary to the decision

An appropriate order wiII be entered requiring the Conference to

cease and desist from utilizing nonabsorption provisions in any way

to restrict the member lines from serving a United States port

SEAL S FRANCIS C HURNEY

Secretary

15 FMC

23
FEDERAL MARITIME COMMISSION

DOOKET No 7018

lJ

SAORAMENTO YOLO PoRT DISTRIOT

PAOIFIO COAST EUROPEAN CoNFERENCE ET AL

ORDER

The Federal Maritime Commission has this day served its Repo

in the subject proceeding which we hereby incorporate herein 

which it found unlawful all regulations imposed by the Pacific Coa

European Conference with respect to absorptions which restrict 

any way the United States ports or terminals served by its memb

lines

l

herefore forthe reasonsenunciated in saidReport

It is ordered That the Pacific Coast European Conference cea

and desist from in any way restricting the United States ports 

terminals at which its member lines may call by means of regulation

with respect to absorptions

By the Commission

SEAL

24

S FRANOIS C HURNEY

Seareta IY

111 F MO
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 432

COMMODITY CREDIT CORP DEPT OF AGRICULTURE

V

ISTHMIAN LINES INC

NOTICE OF ADOPTION OF INITIAL DECISION AND ORDER PERMITTING

WAIVER OF CHARGES

September 8 1971

No exceptions having been taken to the initial decision of the Ex

ami er inthisproceeding and the Commission having determined not

to review same notice is hereby given that the initial decision became

the decision of the Commission onSeptember 8 1971

It ill ordered That applicant is authorized to waive collection of

9 628 29 of the charge previously assessed Commodity Credit Corp

Department ofAgriculture

Itis further ordered That applicant shall publish promptly in itq

appropriate tariff the following notice

Notice Is hereby given as required by the decision of the Federal Maritime

Commission In Special Docket No 432 that effective May 15 1971 the rate on

bulgur for purposes of refunds or waiver of freight charges on any shipments

which may have been shipped during the period from May 15 1971 through

June 14 1971 is 51 80 W SUbject to all other applicable rules regulations terms

and conditions of said rate and this tariff

IT IS FURTHER ORDERED That waiver ofthe charges shall be

effectuated within 30 days of service of thisnotice and applicant shall

within five 5 days thereafter notify the Commission ofthe date and

mannerof effectuating the waiver

By the Commission

SEAL Signed FRANCIS C HURNEY

Secretary

25

15 F MC
FEDERAL MARITIME COMMISSION

S UL DOCKET No 482

COMMODITY CREDIT CoRP DEPT OF AGRIOULTURE

v

ISTHMIAN LINES INO

Permission grantedto waive a portion of freight charges

INITIAL DEOISION OF HERBERT K GREER PRESIDING EXAMINER 1

Isthmian Lines Inc a common carrier by water in the foreign com

merce of the United States has applied for permission to waive co

lection of a portion of the freight charges on shipments of bulgu

wheat flour carried for the Commodity Credit Corporation Unite

States Department ofAgriculture complainant from United State

Gulf ports to Surabaya Indonesia and consigned to Dr W O N

pitupulu Project Manager Djakarta Indonesia The shipments we

loaded at four Gulf ports and on the same vessel applicant s Aloh

State Four bills of lading were issued by applicant for loadings 

Galveston and Houston Texas and Baton Rouge and New Orlean

Louisiana dated respectively May 28 and 29 and June 4 and 6 197

Bulgur is an open rated item under the tariff of the Atlantic an

Gulf Indonesia Conference of which applicant is a member Prior 

the shipments and on April 80 1971 applicant contracted with com

plainant for the carriage of the commodity ata rate of 5180 p

2240 pounds Applicant filed a rate under the open rate section of t

conference tariff of 58 80 per 2240 pounds effective May 15 1971 a

expiring June 14 1971 to cover the isolated shipments However t

58 80 rate was inadvertently filed due to an incorrect rate given 

the tariff clerk by the FarEast Services Tariflic Manager and the err

was not discovered until after the shipments had been loaded and t

vessel had sailed Upon detection of the error manifest correctio

were issued for the bills of lading issued at Galveston and Houst

1

Tbls decision became tbe decision ot tbe Commission September 8 1971

26

111 FMC
FEDERAL MARITIME COMMlSSiON

and the 53 80 tariff rate applied Corrections werenot issued on the

bills of lading issued at Baton Rouge and New Orleans as the manifest

when last issued set forth the 53 80 rate

On June 7 1971 complainant was billed at the contract rate of

5180 however on June 18 1971 the billing was changed to reflect

the 53 80 rate in accordance with the filed rate Upon receipt of the

second billing complainant refused payment on the ground that

thecontractrate of5180 should beapplied

Public Law 90 298 authorizes this Commission for good cause

shown to permit a common carrier by water in the foreign commerce

of the United States to waive collection of a portion of the charges

Where there is an erI Qr in a tariff of a clerical or administrative

nature The facts set forth in the application demonstrate that the

53 80 rate wasfiled with theOommission due to incorrect information

given to the tariff clerk and that the rate intended was the 5180 rate

set forth in the freight contractdated April 30 1971 Itfurther appears

that the rate set forth in the tariff was for these isolated shipments

and expired on June 14 1971 The application involves a situation

within the purview ofPublic Law 90 298 Itwas filed within 180 days

of the date of the shipments No other shipments of the same or a

similar commodity moved on applicant s vessels duringapproximately

the same time as the shipments here involved and no otherproceeding

involving the same rate situation are now pending Prior to submis

sion of this application the applicant has filed a new rate with the

Commission which sets forth the rate on which the waiver is based

Good cause appearing and applicant having complied with the pro

visions of Public Law 90298 permission to waive collection of

9 628 29 and to apply the contract rate of 5180 per 2240 pounds is

granted The notice referred to in the statute shall be published in

the conference tariff and the applicant shall notify the Commission of

the manner in which the waiver was effected and of the amount col

lected for the shipments within 5 days of payment by complainant of

the reduced freight charges

HERBERT F GREER

Pre8iding Ewaminer

15 F M C

27
FEDERAL MARITIME COMMISSION

No 71 51

v

TYLER PIPE INDUSTRIES INC

LYKES BROTHERS STEAMSHIP COMPANY INC

NOTICE OF ADOPTION OF INITIAL DECISION

September 90 1971

No exceptions having been taken to the initial decision of the E

aminer in this proceeding and the Commission having determined n

to review same notice is hereby giventhat the initial decision becam

the decision of the Commission onSeptember 30 1971

It is ordered That reparation in the amount of 69 85 is awarde

claimant with interest at 6 percent per annum if not paid within 

days from the date of this notice

Itis further ordered That respondent within 5 days from the da

of payment ofreparation notify the Commission of the date and ma

ner of payment

By the Commission

SEAL

28

Signed FRANCIS C HURNEY

SefYletary

15 F M C
FEDERAL MARITIME COMMISSION

No 71 51

TYLER PIPE INDUSTRIES INC

v

LYKES BROTHERS STEAMSHIP COJIIPANY INC

Reparation awarded in part

Dale Thurston for complainant

John Ounningham for respondent

INITIAL DECISION OF STANLEY M LEVY PRESIDING EXAMINER 1

Complainant seeks reparation totalling 2 277 12 arising out of nine

shipments of cast iron soil pipe and fittings from Galveston Texas

to San Juan Puerto Rico aboard respondent s vessels during the

period August 9 1968 February 13 1970

Hearing in this matter was held on July 27 1971 in Washington

D C At the hearing a preliminary issue was raised whether that part

of the claim for reparation based on five of the shipments covering

the period August 9 1968 December 14 1968 was time barred Sub

sequently each party filed a brief on the issue of whether part of the

claim was barred by reason of the statutory requirement that a com

plaint must be filed within two years after the cause ofILCtion accrued

In its brief complainant asserts that although its complaint was

dated April 21 1971 2the claim did not accrue until January 12

1971 when respondent declined the claims previously submitted to it

in July 1970 by Tyler Pipe Complainant asserts therefore that the

complaint having been filed less than 2

years after it submitted its

claims to Lykes and Lykes declined payment it is not barred by Sec

tion 22 of the Shipping Act 1916 In effect claimant s position is that

the statute is tolled duringthe pendency ofits claim before the carner

1

This decision became the decision of the Commission September 30 1971

2

The complaint was not received by the Commission s Secretary until Aprl1 30 1971

and April 30 1971 Is thereby the date on whIch the complaInt 10 deemed filed

15 F MC

29
30 FEDERAL MARITIME COMMISSION

Claimant s argument is without legal basis Section 22 provides

That any person may tile with the board Commission a sworn complaint

The board Commission If the complant Is tiled within two years after the

cause of action accrued may direct the payment of reparation

The question of whether the statute is tolled during the period of

negotiations between the shipper and carrier was discussed by the

Commission in Proposed Rule Oovering Time Limit on the Filing of

Overoharge Claims 12 FM C 298 309 wherein it said in pertinent

part

In maintaining that carriers use their time limitation provisions 80 as not to

promptly hear and consider their requests and complaints shippers maintain

thst clams are often not acknowledged and that delays In settlement are

encountered

There Is however no reationship between fanures to acknowledge claims and

a limitation rule Neither Is there a

necessary relationship between delays In

settlement of a claim once It has been presented to the carrier and a rule

prescribing the time during which a claim must be sopresented

There is nothing which would prevent a

shipper from seeking reparation

based on overcharges and In a

proper case collecting them If a complaint Is

tiled under section 22 at any time within 2 years of the alleged Injury

The evidence of record gives no Indication that carriers have thwarted the

shippers right to seek reparation under section 22 by wasting away the 2 yea

period during which such action could have been brought

The cause of action having accrued at the time of shipment or a

the time of payment which ever is llter the cause of action accrued

on five shipments on or before December 14 1968 The complaint

herein having been filed on April 30 1971 5 of these claims totalling

1 466 12 covering the period August 9 1968 December 14 1968 are

time barred for failure tofile a

complaint before the expiration ofthe

2 year period set hy section 22 of the Shipping Act 1916 as incorpo

rated in section 7 of the Intercoastal Shipping Act 1933 The remain

ing 4 claims totalling 81100 covering the period June 9 1969

February 13 1970 must be considered ontheir merits

With respect to three ofthe shipments which are the subject of the

complaint herein the carrier assessed a rate of 165 per hundred

weight as published in respondent s Outbound Freight Tariff No

1 tenth revised page No 57 B Section 3 FMCF No 11 effective

April 14 1969 Cllliimant contends the applicable tariff rate assessed

and collected should have been 150 per hundred weight published

in that tariff ninth revised page No 57 A effective April 14 1969

For the purpo e of thl proeeedlnll the partie treat payment a of the date of th

shipments

lIS F MC
IND

C 

LYKES BROS STEAMSHIP CO INC 31

Regarding thb fourthshipment the carrier assessed 198 per hundred

weight pursuant to eleventh revised page No 57 B of that tariff effec

tive November 6 1969 whereas the claimant contends the rate should

have been 180 per hundred weight as set forth in tenth revised page

No 57 A of that tariff effective November 6 1969

The carrier prepared claimant s bills of lading and described the

commodity thereon as pipe not bent or shaped or fittings not

valves not coated or coated only with bituminous blacking paint or

tar pitch eight inches and up to but not including twenty inches

inside diameter

In claimants opinion the commodity involved is described on page

No 57 A of the tariff under pipe or fittings plain orgalvanized cast

or wrought viz pipe bent shaped or prefabricated not coated

or coated only with bituminous blacking paint or tar pitch This

commodity description was furnished the carrier by the shipper prior

to arrival ofeach shipment atthe port

Further the respondent assessed rates based on manufacturer s book

weights as opposed to certified public railroad weights and claimant

contends that rates should have been assessed on certified public rail

road weights ratherthan on book weights

Respondent contends on the other hand that the claims herein

are based on the proposition that inasmuch as the pipe shipped was

belled or had a flange end the pipe was bent shaped or pre

fabricated The issue thus becomes whether or not a belled or

flange end pipe is necessarily under the terms of the tariff to be con

sidered as bent shaped orprefabricated

Areview ofthe categories of the tariff herein whichmight be appli

cable on iron or steel pipe and fittings reveals that there are two major

classifications under each type of pipe as described by material or

fabrication These two classifications are

1 bent shapped or prefabricated which carries a rate

based on both weight or measurement or

2 not bent or shaped or fittings which carries a rate

based only on weight

Respondent asserts this defference is very significant because it re

flects truly different costs in handling bent as opposed to not bent

pIpe

Shaped and fabricated pipe is more awkward and costly to handle

and occupies more space and the tariff is designed to reflect a rate

which covers the extra handling involved and extra space which will

be occupied by bent shaped or prefabricated pipe

15 F M C
1

i

32 FEDERAL MARITIME COMMISSION

On the other hand the classification where the rate is based only on

weight describes pipe as not bent or shaped or fittings

Pipe as desor ibed in this classification clearly refers to pieces of

straightpipeand simplefittings It covers fittings but not valves

which would support the interpretation that the tariff is designed to

cover pipe of a more complex design only under the bent

category This interpretation is further supported by the fact that the

classifications not bent and fittings are cov

ered by thesame rate based onweight but valves are not

Fittings are small pieces of pipe either straight or elbow used to

join other pipe Fittings often have shaping and may e bent and may

have flangeor belled ends However eventhough fittings may be bent

shaped and have belled or flange ends it appears that they are included

within the not bent classification because they do no

occupy appreciatively more space than does comparable diameter

straight pipe In thissense pipes with one straight and one belled end

may be compared with tongue and grooved flooring where each piP

is tongued on one edge and grooved on the otherin order that the floor

may be fitted together Valves on the other hand appear to be ex

cluded from the classification because of the space requirements for

such Commodity

Belled or flange end pipe should not be considered bent shaped o

prefabricated within the scope of page 57 A of the tariff and thus

claimant s

interpretation of the tariffis in error

There is however merit inclaimant s contention that the rate should

have been assessed on certified public railroadweights instead of manu

facturer s book weights as assessed by respondent Although respond

ent used the weights shown on the shipper s packing list it appears

that the certified railroad weight more accurately reflects the actua

weight as shipped For the shipments of September 4 and Septem

ber 17 1969 the certified weights aggregated 4238 pounds less thaIl

the weight assessed The amount of overcharge at 165 per 100 weight

is 69 85

Reparation is awarded in the amount of 69 85 with interest at 6

percent per annum if not paid within 80 days

Signed STANLEY M LEVY

PreBid tlgEmaminer

15 FMQ
FEDERAL MARITIME COMMISSION

DOCKET No 703

UNITED STEVEDORING CoRP

v

BOSTON SHIPPING ASSOCIATION

November 93 1971

Boston Shipping Association BSA found to be an other person subject to

the Shipping Act 1916 the Act

Incorporation papers and bylaws of theBSA found to be SUbject to section 15

of theact and nothaving been filed and approved areunlawful

Agreement among and between members of theBSA as to allocation of labor gangs

among stevedores is subject to section 15 of the act and not having been

tiled and approved is unlawful

Agreement among and between members of the BSA as to the first call recall

system although implemented via a labor agreement is SUbject to section

15 of the act and not having been filed and approved is unlawful

Evidence adduced is insufficient to declare the practices of the BSA violative

of sections 16 and or 17 of the act

Hobert N Kharasoh and Olga Boikess for complainant

Leo F Glynn and Franois A Soanlan for respondent

Donald J Brunner and NormanD Kline hearing counsel

REPORT

By THE COMMISSION Helen Delich Bentley Ohairman Ashton C

Barrett Vioe Ohairman James V Day and George H Hearn

oommissioners

This proceeding was initiated by the Commission upon a

petition

of the United Stevedoring Corp alleging that the Boston Shipping

Association BSA had violated section 15 of the Shipping Act be

cause it had not obtained Commission approval fur its concerted

activities in the allocation of stevedoring gangs at the port of Boston

Commtssioner Clarence Morsedid notparticipate

15 F M C

33
34 FEDERAL MARITIME COMMISSION

As a result of the petition the Commission directed the BSA to show

cause why it should not cease and desist from its activities in allocating

gangs for failing to obtainthe required Commission approval

Upon consideration of the affidavits of fact and memoranda of law

filed by the parties the Commission referred the case to the Office of

Hearing Examiners for an evidentiary hearing toresolve the disputed

issues of fact posed by the pleadings of the parties and for the issuance

of an initial decision

Following arequest by United the Commission expanded the scope

of the proceeding to include the issue of whether the practices of

BSA in the allocation of stevedoring gangs on the Boston piers result

in violations ofsections 16 and 17oHhe ShippingAct 1916

Broadly stated United s position is that the BSA pursuant to

article 10 ofits collective bargaining agreement with theInternational

Longshoremen s Association which reserves to the BSA the right to

determine the number ofgangs to be employed and how they are to be

distributed on the vessel has confine d to four favored stevedores

all of whom are competitors of United effective daily control of

the longshore work force in the Port of Boston This effective con

trol has resulted in the ships served by the favored stevedores obtain

ing preferenco over all other ships calling at Boston and prevents

any other stevedore from offeringfairly comparableservice and obtain

ing customers Moreover this control asserts United is exercised

pursuant to an unwritten and unfiled working arrangement among

the BSA members which governs the exercise of rights re8erved to

management under a collective bargaining agreement United as

serts that it is a stevedore directly harmed by these practices

In his initial decision Examiner Richard M Hartsock ultimately

concluded 1 that the BSA is not an other person subject to the

Shipping Act 2 that the collective bargaining agreement entered

into by the BSA is not an agreement subject to approval by the Com

mission under section 15 hence the BSA has not violated section 15

by effectuating an unapproved agreement 3 that the agreement

between the members of the BSA to collectively bargain for house

gangs and first call and recall rights with the ILA is not subject to

section 15 but if it is the agreement is not unreasonable or illegal or

otherwise contrary to the act j and 4 that the BSA has not violated

sections 16 and 17 of the Shipping Act

United and hearing counsel except to each basic conclusion of the

examiner Thus the Commission is confronted with a threshold issue

of its jurisdiction over the parties in the case and their agreements in

111 F MCl
UNITED STEVEDORING CORP V BOSTON SHIPPING ASSN 35

addition to the question of the lawfulness of the particular activity

in question under sections 16 and 17 of the act

After charging that the decision is not a fair balanced orcomplete

analysis of either the Commission s

jurisdiction or the testimony or

exhibits of record and after taking some 16 general exceptions tothe

decision United regretfully asks the Commission to start from

scratch to disregard the initial decision and to consider anew our

United s opening and reply briefs to the Examiner

In much the same vein hearing counsel assert that not only did

the examiner commit serious errors oflaw regardingthe Commission s

jurisdiction he also ignored significant portions of the record re

lied on innuendo and concentrated on the portion of the record

where no violations of the Shipping Act are shown ignoring that por

tionof the record which demonstrates violations Inshort the excep

tions call for an examination of the transcript of testimony and

exhibits in the record in order to fill in the gaps left by the examiner

so as to construct a factual foundation upon which the Commission

may proceed to a determination of the issues The facts as set forth

below are not in conflict with those found by the examiner rather

they include the facts found by him and others from portions of the

recordnot dealt with in the intial decision

STATEMENT OF FACTS

United Stevedoring Corp is a locally owned stevedore at the port

of Boston United has been in business at Boston since some time in

the 1930 s The Boston Shipping Association is an association of car

riers stevedores ship agents terminal operators and other maritime

concerns at Boston The BSA is a nonprofit corporation organized

under the general laws of Massachusetts primarily for the purpose of

negotiating and administering collective bargaining agreements with

labor The board ofGovernors ofthe BSA is composed of four officers

and six members Of the five general cargo stevedores operating in the

port of Boston all but United are directly represented on the board

Except for an annual membership meeting decisions of the BSA are

made by the board and in general the board s actions do not appear

to need ratification by the membership

1

The BSA s bvlnw tltftt that tts other rmrpOFlPtl are Uto endeaTer to promote and to

assis1 In encou aging friendly Rod harmonioUB relations between shipowners shipping

agents etc to Impro e warklnA conditions In the shipping industry to encourage

sound business relationships between both the members and between the members and the

employees

15 F M C
36 FEDERAL MARITIME COMMI88ION

In September 1964 the US Department of Labor published a

study

entitled Manpower Utilization Job Security in the Longshore In

dustry Boston known as the Stow Report Among the various

findings dealing with decline in longshore employment were under

utilization of members of the work force archaic hiring procedures

lack ofpermanent gangs frequent shortage ofsufficient gangs to work

ships in port and resistance to technological change in cargo handling

methods

The basic reform arising out of the Stow report was a fundamental

change in the gang and hiring systems After an informal comparison

of prevailing practices at other east coast ports the Internationa

Longshoremen s Association local in Boston decided to replace the

previous hiring method with a system of permanent gangs and a

central hiring hall The permanent gangs were set up by what has

become known as the Final Shape On December 6 1966 each steve

dore employer of longshore labor having been notified in advance

was invited tosend hiring bosses toa place in Boston known as Castle

Island The hiring bosses stood on piles of lumber and each longshore

man chose the boss for whom he wanted to work This fianl shape

resulted in the formation of 30 permanent gangs the number remains

the same today

At thetime of the final shape there wereseven stevedores operating

in Boston six general cargo and one scrap metal Schiavonne The

six general cargo stevedores wereJ

T Clark Sons ITOCorp Jarka

Nacirema Atlantic Gulf Bay State and United According to a

general understanding among the lLA and stevedores each hiring

boss or foreman sent by a stevedore wouldbe entitledto hire two gangs

Only United apparently had some difficulty with this understanding

since it contends that it had no such understanding Clark Jarka

Nacirema and Atlantic Gulf put up three bosses each and hired six

gangs apiece Bay State put up two bosses and hired four gangs

United put up one foreman but hired only one gang Apparently

United had some difficulty in fillingevenone gang since the men were

prone to go where the work was and werereluctant to shape in

front ofUnited s boss

In the first half of 1967 one of the leading stevedores Atlantic

Gulf terminated its operations in Boston making its six gangs avail

Under the old system longshoremen would congregate daily on the streets and form

around to shape in tront of a

hiring boss OB an ad hoc basis and then rnove off to work

the shivs It was felt that this system was not only undignified butextremely Inetllelen

since the absence of permanent gangs prevented the development ot those skills attendan

an experienced team on which each member Is lam1l1ar with each 6tber s work habits

strengths and weaknesses

111 F II C
UNITED STEVEDORING CORP V BOSTON SHIPPING ASSN 37

able for redistribution among the remtllining stevedores Through

the efforts of the BSA and with the cooperation of the ILA these

gangs were redistributed in June 1967 in a way that United picked

up two more gangs while its competitors picked up one each The

reallocation left the distribution at Clark Jarka and Nacirema

seven gangs Bay State five gangs United three gangs and

Schiavonne the scrap metal stevedore onegang This distribution

is in effect today 8

Between the final shape and October 1 1969 the assignment system

operated in such a way that considerable rotation of gangs among

stevedores was permitted Thus if gangs were not requested by the

stevedores to whom they had been assigned the were free to work for

other stevedores Also it appears that no single walking boss could

secure more than three gangs This seems to have meant that asteve

dore with a single ship to service was effectively limited to the use

of three gangs even if he had five or six assigned to him This par

ticular part of the system wasmodified on October 1 1969

The change in the assignment system stemmed from the decision

ofthe BSA to secure for management a gretllwr control over the work

force for the professed purpose ofimproving service to theships caning

at Boston Consequently one of the major objectives during the col

lective bargaining in 1968 was the modificllition of the then existing

gang assignment prlliCtices so as to establish a strengthened first call

recall system This was met by resistance by the ILA who wished

tQ preserve the method of rotation of glngs under which the gangs

were dispatched by the union from the hiring hall in sequence so as

to distribute the work more equally and improve the pOSition of low

hour gangs

So insistent were the parties that the port of Boston remained on

strike in 1969 for several monthsbeyond the end ofthe strike at other

ports on the east coast The issue was finally resolved by the union

trading first call recall rights for a guaranteed annual wage program

The change in the gang assignment practices was embodied in article

Xofthe collective bargaining agreement

3In 1969 Untted attempted to obtain another gang and requested the BSA to assist It

The board of governors interceded on behalf of Untted with the union but decided that in

return for the additional lZ ung Untted should employ a second permanent hiring boss The

board felt this condition reasonable und necessary to persuade the union that United eould

produce the work Significantly other general cargo stevedores at Boston had two orthree

such bosses For reasons not entirel clear from the record the matter was not pressed and

United did not get an additional gang

At this point it should be noted that neither United nor hearing counsel challenge the

basic concept of the house gang foysttm orthe establishment of a central hiring hall Nor do

they quarrel too strenuously with the present allocation of gangs to the various stevedores

15 F M C
38 FEDERAL MARrIIME COMMISSION

Article X Gang Assignment Until Ootober 1 1969 the present system whereby

each employer s hiring foreman controls a specl1lc number of gangs shall remain

In effect Gangs not working for their regular hiring foreman shall be dispatched

by the dispatcher In accordance with the present procedures The employer shal

determine the number of gang1l to be employed and how they will Initially be

distributedon the vessel to which they have been ordered

As of October 1 1969 the effective date of the Imaranteed annual Income

program each employer will have 1Irst call on all the regular gangs assigned

to his company An employer whose regular gang Is working for another em

ployer at a time when the regular employer has no work for them may recall

his regular gang when he has work available at tbe start of the next work period

In such Instances the work commenced will be completed by other gang1l Gangs

not working for their regular employer shall be dispatched by the dispatcher

In accordance with the present procedure The employer shall determine the

number of gangs to be employed and how they will Initially be distributed on the

vessel to which they have been ordered

By the exefcise of first call recall rights provided in article X a

stevedore in addition to having the first call on any of the gangs

assigned to him may recall any of his assigned gangs to any single

vessel even though the recalled gangs may not have completed work

on the vessels from which they are recalled Under the system em

bodied in article X the stevedore exercising recall could employ his

full quota of assigned gangs seven in the cases of Clark Jarka or

Na cirema on a single vessel leaving the stevedore from whom the

gangs were recalled as few as three gangs in the case of United

even though United was working more than one ship Apparently

under the old system a vessel with a single hiring boss orwalking boss

would have been limited tothree gangs in such circumstances

Barely 2 months after article X went into effect the union com

plained to the BSA that certain gangs werenot getting sufficient work

and suggested that the union be allowed to rotate those low hour

gangs away from their assigned stevedores in this case United and

Bay State The BSA considered any such rotation tobe a breach of

the collective bargaining agreement but after a period of negotiation

it was agreed that seven gangs would be adopted by other steve

dores Under the adoption system stevedores who were designated

adopting stevedores had first call on their adopted gangs over all

other stevedores except the stevedore to whom the adopted gang was

primarily assigned This system was tried on an experimental basis

for 3 months but apparently because of problems arising under it

no attempt was made to continue it beyond the experimental period

The LAnext made known its intention to return to the old system

in effect prior to October 1 1969 where the union would fill out ngs

for any particular ship by its own selection of low hour gangs ex

111 FMO
UNITED STEVEDORING CORP V BOSTON SHIPPING ASSN 39

oopt for the two or three assigned to the particular walkingboss for

that ship Management again considered this a breach of the collective

bargaining agreement IDtimately arbitration resulted in a modifioo

tion of the bargaining agreement by which the union was permitted

to select the fourth and fifth gangs dispatched to any stevedore while

the stevedore retained the right to call his regularly assigned first

three gangs and the sixth and seventh gangs if he was entitled by as

signment to a sixth and seventh gang This was the last modification

of the first call looall syst m representing an attempt to distribute

the work among 1he 30 gangs more evenly and thereby support that

number of gangs ut the port

The original allocation at the final shape which resulted in a641 1

arrangement corresponded roupWy to the previous year s volume of

work per stevedore and reflected the ILAon the spot estimate of who

could offer the most work United did proportionately betterthan its

competitors receiving one gang per 40 000 hours worked the previous

fiscal year to one gang per 75 740 for Nacirema one gang per 63 615

for Atlantic Gulf one gang per 51 781 for Clark etc Again when

Atlantic Gulf went out of business and its gangs wereredistributed

so as to give United two more United did proportionately better than

its competitors Thus although United now had three gangs it only

produced 48 000 hours of work for the three quarters prior to June

1967 compared with Nacirema s 310 000 Clark s 270 000 Jarka s

240 000 and Bay State s 116 000 Proportionately this means that

Nacirema had two and one third the number ofgangs assigned United

but produced overeighttimes as much work

On days when there is no congestion of vessels atthe port and more

than enough gangs are available the distribution of gangs seems to

present no problems The daily average of gangs working has been

declining overthe past fewyears due tothe general decline in activity

at the port In 1969 an average of 17 94 gangs werehired dliily while

the first 6 monthsof 1970 showed a daily average of only 15 99 gangs

In 1968 the daily average was 20 15 Thus on quiet days obtaining

gangs presents no problem even under first call recall since the union

would always have gangs available and would be only too happy to

dispatch them However vessels do not call at conveniently spaced

intervals but tend to cluster on busy days On these days a steve

dore has been called upon with some freqency to work three ships

IILatest BSA records show that United continues to be the lowhour stevedore The only

competitor who had proporttonatfly more llanll8than United per hour was Bay State with

fivegangs Its hours were only 69 90fS to United s51 527

15 FMC
40 FEDERAL MARITIME COMMISSION

simultaneously Thus in theory at least even if each stevedore were

assigned the same numberof gangs there could still be laborshortages

and of course any stevedore with a low number of assigned gangs

vis avis his competitors would have greater difficulty in securing

sufficient labor

DISCUSSION AND CONCLUSIONS

The JuriBdiationallBsU6

The examiner concluded that the BSA was not an other person

within the meaning of section 1 of the Shipping Act This conclusion

is based exclusively it would appear on findings 1 that the BSA is

a nonprofit corporation formed under the general laws of Massachu

setts 2 that the BSA is not a business corporation and is without

business functions which is really just another way of saying tha

the BSA is a nonprofit corporation and 3 that the BSA is not

carryingon the business of forwarding or furnishing wharfage dock

warehouse or other terminal facilities within the meaning of the

definition of an other person here the examiner is concerned solely

with that corporate entity which is the BSA and not at all with the

individual members ofthe BSA

Additionally the examiner concluded the collective bargaining

agreement between the BSA and the ILA was not subject 00 section

15 and that the consensus of management or the agreement between

the members to negotiate for afirst call recall system wasnot asection

15 agreement The examiner dealt with no other agreements actua

or alleged

The examiner has divided the question of the Commiss on s

juris

diotion into two parts 1

jurisdiction over the parties the BSA its

members and the ILA or its members and 2

jurisdiction overthe

subject matter the particular agreements entered into by the parties

1 JwriBdiation over the parties

United and hearing counsel except to the examiner s conclusion that

the corporate entity known as the Boston Shipping Association is

not subject to the Commission s

jurisdiotion which was based on the

examiner s

finding that the BSA does not itself perform any of the

functions required by the definition of an other person in section 1

of the aot They urge that in failing to pierce the corporate veil the

examiner refused todo precisely what the Commission itself has done

on a number ofoccasions

The BSA s reply toUnited and hearing counsel is simply an elabora

tion of the examiner s bare conclusions Thus the BSA argues

1ll FMC
UNITED STEVEDORING CORP V BOSTON SHIPPING ASSN 41

The BSA has no power to perform any of the corporate business fune

tlOll8 required by the dellnitlan of an ather person subject to this Act

Petitioner United has cited no Cll8e In which a mere member of a non profit

corporation has given to that non profit corporation the member s own

jurisdictional character merely by virtue of his membership The func

tions of the members In their own corporate character are totally ultra vires of

the BSA and are therefore separate from the corporate character of the Ship

ping Association and jurisdiction overtheperson of the Respondent is perforce

dependent upon the jurisdictional character of that named Respondent and the

BSA as a non business corporatiOOl falls short of the definition of other person

subject to this Act

Apparently in recognition of the applicability of this theory to a

great many agreements admittedly subject to section 15 including

conferences theBSA concludes

Cases in which members of a conference are concerned are to be distinguished

because the relationship among members of a Conference is determined by the

contract which establishes the Conference and the Commission has jurisdiction

ab initio over the contract and theconference it creates The relationship among

members of a conference is defined by a conference agreement which the Com

mission must consider and over which the Oommission inherentlly retains

jurisdiction

Whether or not stevedoring contractors are subject to the Act

terminal operators and steamship lines certainly are thus if the

corporate veil of the BSA 1rere pierced we would have to conclude

that members of the association in their individual capacities are

subject to our jurisdiction However there is sufficient authority for

our assertion ofjurisdiction overthe BSA as an entity without resort

to a piercing ofthe corporate veil

The act itself explicitly defines the term person toinclude corpo

rations partnerships and associations ensting under or authorized

by the laws ofthe United States or any State Territory District or

possession thereof or of any foreign country Italic ours This

alone we feel is sufficient basis for jurisdiction over the as3OCiation

as an entity The U S Supreme Court in dealing with the same issue

with respect to public owners of wharves and piers stated the law

succinctly in Oaliforniav U S 320 US 577 585 1944

We need not waste time on useless generalities about statutory construction

in order to conclude that entities other than technical corporations partnerships

and associations are included among the persons to whom the Shipping Act

applies ifits plain purposes preclude their exclusion

Thus it was a foregone conclusion to the Supreme Court that tech

nical corporations partnerships and associations weresubject to our

Overlooked In this distinction is the tact that of course the uConferenee Itself does

Dot soI1cit orbook cargo does not collect rates or run ships Its members do these things

15 FMC
42 FEDERAL MARrrIME COMMISSION

I

J

I

i

jurisdiction There can be no real dispute as to our jurisdiction ove

the BSA and we conclude thlllt the examiner was in error in finding

that welacked jurisdiction

S JunBdiotion over the BUbject matter

Before proceeding toadiscussion of the agreements involving labo

we pause to consider a series of basic agreements among and betwee

the members of the BSA viz the incorporationpapers and bylaws o

that organizlttion We Itre of the opinion that those pltpers and bylaw

constitute cooperative working arrltngements within the mettning o

section 15 of the Itct

The Supreme Court in VolkBwag8nwerk AktiengeBellBchaft v

F M O 390 US 261 1968 in dealing with the Commission s inte

pretation of section 15 concluded Itt 273 thltt The Commission thu

took Itn extremely narrow view of a statute that USBS expansive lan

guage The Court continued

To limit 1111 to agreements that affect competition as the Commlslllon use

that phrase In the present case simply does not square with the structure of th

statute at 2711

And in It footnote Itt the 81tme page the Court pointed out thlllt

Section 111 requires tiling of every agreement In any of seven categories an

one of the selen comprises aU agreements which regulate competition

The other six categories would be rendered virtually meaningless by th

Commission s construction 890 U S at 2711

We ourselves have on occasion taken It brottder view of section 1

In Agreement No T 4 Terminal Leaae Agreement at Long Beac

Oalif 8 FMC 521 1965 we h

eld Itterminal lease agreement to b

subject to section 15 In response to an Itrgument thltt only Itgre

ments which are intended to restrltin competition in per se violatio

of the Sherman Act are section 15 agreements we said Itt 8 FM C

531

SectIon 111 describes In unambiguous language those agreements that mu

be filed It does not speak of agreements per se violative of the Sherman Ac

Since the wording of section 111 Is clear we need not refer to the legiSlativ

hletory there simply Is no amblgu1ty to resolve Section 111 Is not explicit

limited to those agreements that are pel Be violative of the Sherman Act ther

fOJ 6 we will not as we cannot amend the Section to limit It

The legisllttive history lends support to our conclusion thlllt suc

agreements as Itre embodied in incorporation pltperB Itnd bylaws ar

section 15 agreements In the Alexltnder report Itt 418 it WitS 81tid

the shippers who appeared as witnesses were In the gJBat majori

of Instances favorable to a comprehensive system of government supervisio

111 FMO
UNITED STEVEDORING CORP V BOSTON SHIPPING ASSN 43

and the approval of contracts agreements and arrangements and the

general supervision of all conditions of water transportation

There is ample opportunity in our opinion for such an organiza

tionas the BSA to engage in practices whichthe act contemplates shall

be subject to regulation Thus we find it necessary to reqUlire that

these papers and agreements which form the foundation of the BSA

be submitted for our approval Since these papers have not been filed

with us we are forced to conclude that they are unlawful and that

such failure to file them constitutes a violation of section 15 of the

act

With respect to the agreements involving labor the examiner was

of the view that jurisdiction over the parties to an agreement is not

alone sufficient to require that the agreement be filed for approval un

der section 15 The concerted activity called for in the agreement must

also be of the kind contemplated by section 15 The activity here in

question is the control of the longshore work at the port of Boston

The examiner concluded that the Commission lacked jurisdiction over

this activity Although he failed to state his premise it is clear that

his deduction was based upon a feeling that the control of longshore

labor is subject only tothe Nwtional Labor Relations Board andthus

not a concern of the Commission In reaching his conclusion the ex

aminer first showed that the union had a continuing interest in the

allocation of gangs He then concluded that the collective bargain

ingagreement between theBSA and the ILA formalizing inthe col

lective bargaining agreement the principles ofhouse gangs and

first call and recall rights did not constitute the type of agreement

requiring Commission approval under section 15 Finally he deter

mined that the consensus of management to exercise its perogativeto

require formaliza1llon in the collective bargaining agreement of the

house gang principle and first call and recall rights did not

constitute an agreement subject to Commission lIipproval under section

15 The examiner then described the situation as he foresaw it if the

Commission asserts jurisdiction

If these agreements were subject to section 15 management in negotiating a

collective bargaining agreement with labor would first have to determine its

t The BSA consisting of stevedoring contractors steamship lines steamship agentsline

handlers terminal operators l1ghterage companies and equipment rental companies al

though Dot operating ships or terminals makes decisions Ilnd carries out functions

relating to the shipping business in this ease distributing labor for loading and unloading

shipe which have significant competitive effects on stevedores and carriers serving the port

of Boston

8However the examiner also stated ubut the issue of first call and recall has

little or no relevance to the union because the exercise of these rights comes into play

only where there is an abundance of work for the gang The exereiBe of first call recall

rights during peak periods Is the overriding concern of Hearing Counsel and is the basis

for virtually their entire case against the BSA

15 FMC
44 FEDERAL MARITIME COMMISSION

position and what Its demands or requirements in such an agreement would be

then submit the results to the Oommlll8lon before It would be able to negotiate

with labor looking toward a meaningful collective bargaining And as the col

lective bargaining went on and its position changed management would each

time be required to come In for prior approval before new negotiations could

commence ThIs would be utterly impracticaL

United and hearing counsel except to the examiner s conclusions

here They invite attention to the fact that the examiner didn t

even

cite much less discuss the two recent cases comprising the only prece

dent thus far dealing with labor management agreements and sec

tion 15 9 Ashearing counsel put it

In both of these cases members of Shipping associations comparable to the

BSA had arranged among themselves the means to raise moneys for payments

Into funds established for labor s beneftt under the respective collective bargain

Ing agreements Involved The Indirect relationship with labor contracts was

speclftcally held not to place the all8OClatlon s arrangements outside Shipping

Aot jurisdiction

Thllit an agreement does not cease to be section 15 simply because

Itis embodied ina labor contract wasclearly indicated in Volkawagen

and in United Mineworkera of America v Pennington 381 U S 657

1965 the Supreme Court when dealing with antitrust jurisdiction

overlabor agreements said at pages 6645

This Is not to say that an agreement resulting from union employer neKotlatIons

Is automatically exempt from Sherman Act scrutiny simply because the negotia

tions Involved a compulsory subject of bargaining regardl of the subject o

the form and context of the agreement But there are limits to what a

union or an employer may olfer orextract In the name of wages and becaus

they m1lBt bargain does not mean that the agreement reached may disregard

other laws

In Volkawagen while the agreement between the Pacific Maritim

Association and the ILWU tocreate the particular Mech Fund wa

not held subject to section 15 the agreement between the members o

the associllition as to the formula for assessing the membership wa

found subject to seotion 15

Hearing counsel and United urge that the examiner s fear of 

breakdown in collective bargaining is groundless since no one is de

manding any preapproval clearance of the negotiating positions o

management during collective bargaining

The two agreements which we find to be subject to section 15 of th

act are the initial agreement among the members of theBSA toallo

cate labor gangs to the various stevedores and the later agreement t

The two ca are of couroe Vollo ag rlo v liMO 890 US 261 1968 and Agr

m t No TIU6 New Yorio SIIlpP g A oIatl O p

ratlo W rolng Arra g m

Docket No 69151 N vember20 1910

111 FX C
UNITED STEVEDORING CORP V BOSTON SHIPPING ASSN 45

provide for the first call recall system That the latter agreement is

embodied in a labor agreement by no means removes it from OUT juris

diction There is ample evidence in the record which attests to the

faot that these agreements were first worked out among and between

the members of the BSA and only then werethey incorporated into

the labor agreement In fact these two agreements wereof little or no

concern to the union whose vice president Mr Moran testified that

as far as the union was concerned Its a fight among them guys

Referring to the BSA members

We fool thatthe examiner s fear of a breakdown in collootive bar

gaining is without basis We are not suggesting in this opinion that

preapproval clearance of the negotiating positions of management

during collective bargaining need be obtained from the Commission

What we are saying however is that if an agreement subject to sec

tion 15 is embodied in a collective bargaining agreement then the

section 15 agreement must be filed for approval

Construing the statute broadly as theUS Supreme Court has man

dated we cannot conclude otherwise but that the two agreements here

are cooperative working arrangements within the meaning of section

15 of the act Thus in the instant proceeding we find thatboth the

initialallocwbion of gangs agreement as well as the later first call

recall agreement embodied in the labor agreement constitute coop

erative working arrangement s within the meaning of that phrase

in section 15 ofthe act Itis therefore our conclusion that both these

agreements are section 15 agreements and as such must be filed with

the Commission for approval Since these agreements remain unfiled

they are unlawful and failure to so file constitutes a violation ofthe

aot

Itis not poss ble to lay down any hard and fast rules concerning the

filing of agreements within the category of cooperntive working

arrangements Whether an agreement must be filed would depend

upon the facts and circumstances under which the agreement came

into being and the aims and purposes expressed therein The Shipping

Act was formulated in order to regulate carriers by water engaged

in ocean transportllltion Thus any cooperative working arrangement

dealing with or pertaining to ocean transportation and encompassed

within the scope of the Shipping Act is an agreement subject to the

Commission s scrutiny

The two agreements in issue are cooperative working arrange

ments Whether they are cooperative working arrangements as that

phrase is used in section 15 is quite another matter but that they are

15 F MC
46 FEDERAL MARITIME COMMISSION

cooperative working armngements within the literal meaning of th

phrase isindisputeble

Proceeding from the premisethat these agreements are literally coop

erative working arrangements we would reach the conclusion tha

they are soobion 15 agreements even werewe to proceed by the theor

of ejuadem generis thought too narrow in the Volk8wagen Suprem

Court opinion

EjU8dem generis would have us categorize section 15 agreement

into seven headings as enumerated in section 15 of the act to wi

1

fixing or regulating transportation rates or fares 2 giving

or receiving special rates accommodations or other special privilege

or advantages 3 controlling regulating preventing or destroy

ing competJition 4 pooling or apportioning earnings losses o

traffic 5 allotting ports or restricting orotherwise regulatingthe

number and character of sailings between polts 6

limiting o

regulating in any way the volume or character of freight or passenge

tmffic to be carried 7 or in any mannerproviding for an exclu

sive preferential or cooperative working arrangement

Thus inorder for a

cooperative working arrangement tofall within

the purview of section 15 the principle of ejU8dem generis require

that the last category 7 of section 15 agreements relate back to the

previous six subheadings Under this view it is our conclusion tha

the cooperative working armngements under consideration herein ar

of the same general nature as those enumerated in subheadings 1 6

The allocation of gangs and the first call recall system agreement

clearly give special accommodatiQns or other special privileges or ad

vantages to certain members of the BSA The agreements also regulat

competition among the various stevedores since those assigned fewe

gangs cannot hold themselevs out as able to handle as much wor

asastevedore with more gangs Itis therefore apparent that even unde

the stricter construction of section 15 required by ejuadem generi8 the

cooperative working armngements among the BSA members ar

section 15 agreements

In the Volk8wagen case supra the U S Supreme Court held tha

such a narrow construction of section 15 as would be warmnted b

the ejuadem generi8 theory was not required In fact in that case th

examiner proceeding from the premise that the agreement in ques

tion assessment oT PacificMaritimeAssociation members for a Mech

anization and Modernization Fund was a cooperative working

arrangement concluded by means of the eju8dem generis theory that i

was not a section 15 agreement The Commission agreed with th

examiner and added that the agreement was not subject to the ac

because it did not affect competition

111 llMO
ULTIMATE CoNCLUSIONS

UNITED STEVEDORING CORP V BOSTON SHIPPING ASSN 47

As we pointed 011t above in our discussion concerning the BSA in

corporation papers and bylaws the Supreme Court felt the Commis

sion had taken an extremely narrow view of a statute that uses

expansive language Our rationale as well as the authority cited for

our conclusion with respect to the BSA incorporation papers and

bylaws applies equally as well as to the agreements considered pres

ently Hence as we concluded in that discl1SSion whether or not the

agreements affect competition is beside the point thelegislative history

ofthe statute squares with our conclusion that these cooperative work

ing arrangements are section 15 agreements

The Alleged Violati 11J

of Seotions 16 and 17

The examiner concluded that even were the jurisdictional ques

tions resolved in favor of United the record failed to establish that

United had been harmed by the practices of the BSA The case is

built upon gang shortages on peak days and necessarily upon gang

shortages under preisce and specific circumstances Thus in Order to

shOw that it has been prejudiced under tion 16 or that the practices

of the BSA are unfair or discriminatory under section 17 United

must show

1 That it has more than one vessel in port on a given day thus

establishinga need for additional gangs

2 That all other gangs are unavailable because they hltve been

called or recalled and

3 That at leJaSt one of United s stevedore competitiors is working

only one vessel with all ofits seven gangs

Anythingless than this which is the allegation ofUnited and hear

ing counsel might cOnst tute prejudice or discrimination but it would

not be undue orunjust

We have analyzed the record in this proceeding and have found no

evidence to support any findings that the above situation actually oc

curred Thus we conclude that there have been no violations of sec

tions 16 and or 17 of the act

For the foregoing reasons the examiner is reversed in all his con

clusions except that as to sections 16 and 17 violations We conclude

that 1 the BSA as an entity is subject to the act 2 the incorpora

tion papers and bylaws of the BSA constitute section 15 agreements

and must be filed for our approval 3 the agreement among and

between members of the BSA as to allooation of labor gangs among

stevedores is subject to sootJion 15 of the act and must be filed for our

15 FMC
48 JEDl lRAI MARITIME COMMISSIO

approval 4 the agreement among and between members ofthe BS

as to the first call recall system is subject to seotion 15 and must 

filed for our approval and 5 there have been no violations of s

tions 16 and or 17 of the act As to the examiner s conclusion th

the individual stevedoring members of the B8A are not subject 

our jurisdiction we express no opinion since to reach our decision 

is unnecessary to resolve this jurisdictional question We will ord

the B8A to cease and desist from operating under its present agr

ments until such agreements have been filed with and approved by t

Commission

An appropriate order will be issued

8 FRANCIS C HURNEY

Seoreta TJI

ORDER

The Federal Maritime Commission has this day served its rep

in the subject proceeding which we hereby incorporate herein 

which inter alia it found several agreements among and betwe

parties subject to the Shipping Act 1916 to be section 15 agreeme

Therefore for the reasonsarticulated insaid report

Iti8 ordered That the incorporation papers and bylaws ofthe B

ton Shipping Association BSA be submitted to the Commiss

for approval

Iti8 further ordered That the agreement among and between 

members of the BSA as to the allocation of labor gangs among ste

dores be submitted to the Commission for approval

Iti8 further ordered That the agreement among and between me

bers ofthe BSA as tothe first call recall system be submitted to

Commission for approval and

Iti8 further ordered That the BSA cease and desist from operat

under the subject agreements until such time as they may be approv

by the Oommission

By the Commission

S FRANCIS C HURNEY

SeoretOll

111 FH O
49

FEDERAL MARITIME COMMISSION

WASHINGTON D O

SPECIAL DOCKET No 429

OPPENHEIMER INTERCONTINENTAL OORP

v

MOORE McOORMACK LINES INC

SIECfAl DOCKET No 430

OPPENHEIMER INTERCONTINENTAL OORP

v

SOUTH AFRICAN lURINE OORP

November 30 1971

NOTICE OF ADOPTION OF INITIAL DECISION

No exceptions having been filed to the initial decision of the exam

iner in this proceeding served November 2 1971 and the Oommission

having determined not to review same notice is hereby given that the

decision became the decision ofthe Oommission onNovember 30 1971

It i8 ordered That the applications of Moore McOormack Lines

Inc in Special Docket No 429 and South African Marine Oorp in

Special Docket No 430 are denied

By the Oommission

SEAL 8 FRANCIS O HURNEY

Secretary

15 FMC
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 429

OPPENHEIMER INTERCONTINENTAL CORP

V

MooRE McCOIWACK LINES INC

SPECIAL DOCKET No 480

OPPENHEIMER INTERCONTINENTAL CORP

V

SOUTH AFRICAN MARINE CORPORATION

ll ulal of applications to waive a portion of freight charges

INITIAL DECISION OF STANLEY M LEvY PRESIDING EXAMIN

Moore McCormack Lines Inc applicant respondent seek

mission to waive 2 178 to Oppenheimer International Corp 

per being a

portion of the freight charges on ashipment in t

20 foot containere consisting of 12 peanut combines and 24 pe

digger shaker windrawers from Savannah Ga toEast London 

Africaon January 19 1971

South African Marine Corp applicant respondent seeks pe

sion to waive 2 112 to Oppenheimer International Corp ship

being a portion of the freight charges on a shipment in twelv

foot containersof peanut combines cultivators diggers and ports 

Savannah Ga to East London South Africa on January 20 

The tariff involved is South and East Africa Conference S

bound FreightTariff No 1 FMC No 2

The conference proposed to institute a

general rate increase 

tive OctQber 1 1970 On September 23 1970 Oppenheimer wro

1

This d8C lslon bBcams ths dsclslon of thsCommission Nov 80 1971

110

111 I
OPPENHEIMER INTERCONTINENTAL CORP 51

the conference requesting relief from the then pending inCreaBe in

order toprevent loss of sales of peanut combines and peanut digger

shaker windrawer which had been consummated on the basis of the

rate in existence prior to October 1 At a meeting on September 30

1970 the conference agreed to maintain the existing rate through

January 31 1971 and changed thetariff accordingly

Overlooked by the staff of the Conference was a previous action

taken by the Conference on September 9 1970 to increase the mini

mum rate 3for shipments made in containers from 90 cents per cubic

foot to 110 per cubic foot based on the cubic capacity of the con

tainer The capacity of 20 foot containers is stated on page 88 of the

tariff to be 1 100 cubic feet At 10 per cubic foot the minimum

charge per container is 1 210 at 90 cents per cubic foot the minimum

chargeper containerwas 990

The bill of lading for the Moore McCormack shipment establishes

that each container had in it a shipment of 935 cubic feet If the ship

ment had been rated at 44 per 40 cubic feet as intended by the parties

on September 30 1970 the result would have been a charge per con

tainer of 1 028 50 This charge would have been in excess ofthe for

mer minimum charge of 990 but 18150 less per container than the

new minimum charge of 1 210 The bill of lading for the South Af

rican Marine Corp shipment established that the content of the 12

containers varied between 915 cubic feet and 975 cubic feet per con

tainer for a total of 11 280 cubic feet Ifthe shipment had been rated

at 44 per 40 cubic feet as intended the result would have been atotal

charge of 13 608 and would have been in excess of the former mini

mum charge totaling 11 880 for the 12 containers The parties failed

to realize however that a penalty would accrue on each shipment by

reason ofthe applicationof anew minimum charge

Ifproper cognizance of the higherminimum charge had been taken

by the conference staff an exception could have been filed in the tariff

exempting complainant s commodities from the application of the

higher minimum charge through January 31 1971 to correspond with

the date for which the rate was filed It is the difference between

1 028 50 per container and the new container minimum of 1 210 that

Moore McCormack seeks authority to waive This difference for 12

containers totals 2 178 Itis the difference between 13 608 and the

FIrat revision page 143 e

ectlve date OOct 8 1970 oExcept as otherwise herein

provided Peanut combines and peanut dlgger sbaker wlndrawers effective Oct 1 through

Jan al 1971

EIrlIve Jan I 1971

BtII of lading No 8 Mormacrlllel Jan 19 1971

BtII of lading No I WelchClly Jan 20 1971

III FX C
52 FEDERAL MARITIMECOMMIBSION

new container minimum totaling 15 720 that South African Marin

seeks to waive

DISCUSSION AND CONCLUSIONS

Section 18 b 3 of the Shipping Act 1916 specifies that no com

mon carrier by water in foreign commerce or conference of such ca

riers shall charge or demand or collect or receive a greater or Zess o

different compensation for the transportation of property than th

rates and charges which are specifiedin its tariffs on file with the Com

mission and duly published and in effect at the time nor shall an

such carrier rebate refund or remit in any manner or by any devic

any portion of the rates or charges so specified But because the Con

gress was aware ofthe possibility that errors in filed tariffs might re

sult in ncharge other than intended it provided a specific remedy Th

statute accordingly further sets forth that the Commission in it

discretion and for good cause may permit a carrier to refund a po

tion of the charges collected or waive collection of a portion where 

appears that there is an errorin atariff of a clerical oradministrativ

nature or an error due to inadvertence in failing to file a new tariff

The statute expressly states however that the Commission ma

permit a refund or waiver only Provided further that the commo

carrier by water in foreign commerce or conference of such carrier

has prior to applying for authority to make refund filed a new tari

with the Federal Maritime Commission which sets forth the rate o

which such refund orwaiver would be based

The statute further provides that such application for refund o

waiver must be filed with the Commission within 180 days from th

date of shipment

Thus it is clear that no carrier may charge less than the filed tari

in effect at the time of shipment unless it is granted permission by th

Commission It is equally clear that before any such permission ca

be granted the carrier must first file a new tariff and thereafter fil

an application requesting the new tariff be made applicable to th

prior shipment Failure to take timely either of these twosteps pre

cludes the Commission from considering whether to permit a lesse

charge than was actually in effect at the time of the shipment This 

so because the jurisdiction of the Commission to permit a refund 

expressly set forth and expressly circum ribed by the statute Fai

ure of a carrier to comply with the statutory prior conditions deprive

the Commission of jurisdiction

111 F MO
OPPENHEIMER INTERCONTINENTAL CORP

Although the carriers filed applications within 180 days of the

shipments involved herein 6

the filingthereof is anullity for failure to

filea new tariff prior to filingthe applications

Should the conference now file a new tariff and thereafterthe car

riers file another application such applications in the instant cases

would fail for not having been filed within the statutory required pe

riod of180 days from the dateofshipment

Because the examiner deemed critical to a decision in thisproceed

ing the question of whether the Commission has jurisdiction to grant

the relief requested when there has been no prior filing of a tariff

which would form the basis for refund or waiver ofcollection on Au

gust 6 1971 after receipt of the completed applications filed on

August 4 1971 he requested the parties to submit amemorandum of

law on this issue The South and East AfricaConference filed amemo

randum in response thereto

In its memorandum the conference asserts that it filed a new rate

prior to the applications This begs the question The rate filing re

ferred to in its memorandum is the first revision page 143 The waiver

concerns itself with another provision of the tariff which governs the

involved shipment Itis relief from the application of ruleB 15 first

revision page 93 effective date January 1 1971 which is sought and

which must be obtained before waiver ofcharges is lawful Nofurther

revision of thisrule through the filingof a new tariff was everunder

taken prior to the filing on July 3 1971 of the applications for au

thority to waive the collection of a portion of the freight charges

If it was the intention of the parties to exempt the commodity

shipped from the increase in container minimum charges as exem

plified by the first revision to page 93 ofthe tariff then an appropriate

further revision should have been filed Failure to file such further re

vision prior to the shipment could be remedied after shipmentonly as

provided by the statute

There has been a failure of compliance ith the statutory require

ment No authority resides with the examiner or the Commission to

waive a statutory requirement unless the statute itself permits the

waiver This statute does not permit awaiver of the requirement of a

filing of a new tariff prior to filing an application for authority to re

fund orwaivecollection of a portion ofthe freight charges

The applications were flIed witb the Secretary of the Commission on July 3 1971 174

and 175 days after shlpmE nt Although the appl1catloDs were incomplete they were subse

quently completed on Aug 4 1971 and are considered as having been filed within 180

day of blpment M r Do Prato Florence eto v Med Gulj Gonj etc 13 F M C 135

1969

15 FMO

53
54 FEDERAL MARITIME COMMISSION

1

i

There is no question that the carriers and the conference acted in

good faith and that the publication first revision page 143 was in

tended to implement the intention of the parties and preserve the

lower rate through January 31 1971 However the proper charges o

It common carrier by water in foreign commerce or conference of suc

carriers is established as specified in its tariffs on file with the Com

mission and duly published and in effect at the time The tariff looked

at as a whole as it must be established a rate at the time ofthe ship

ment which was higher than contemplated by the agreement of the

parties

The conference in its memorandum suggests that the minimum

container charge is not a rate within the meaning ofthc statute sinc

this charge appears in the rules section of the tariff and not in th

rate section It says that in effect the charge sets a floor for the pe

container revenue and does not become operative until the revenu

produced by the rate falls below the level of the minimum charge

Here the increased minimum container charge which was applied t

this shipment was at the same level as the rate that is 110 per cub

feet for the charge and 44 per 40 cubic feet for the rate The charg

was applied to space not occupied by the shipment Hence the con

ference contends in this sense the charge was not in fact a rate an

therefore would not need to be filed prior to application for waiver i

circumstances where the basic rate intended to be applied was on fi

at the time ofshipment

The suggestion of the conference is contrary to the very rationa

which is the foundation and cornerstone of section 18 of the Shippin

Act 1916 requiring published tariffs The conference admits that th

minimum container charge establishes a floor for the per contain

revenue Yet the charge contended for by it would ignore the clear

resulting revenue floor established by the application and utilizatio

of rule C2 relating to charges per cubic foot The conference wou

read this rate out of the tariff No such reading out is permitted b

section 18 b 3

The applications for authority to waive a portion of the freigh

charges are denied because of applicants respondents failure to file 

new tariff which would set forth the rate on which such waiver wou

be based Freight charges hitherto waived should be collected

S STANLEY M LEVY

PIeBiding EJ amine l

WASHINGTON D C

Novembe l 19rt

111 FMO
55

FEDERAL MARITIME COMMISSION

DOCKET No 6844

MALPRACTICES BRAZIL UNITED STATES TRADE

December 3 1971

Companhla de Navegaclon Maritima Netumar Norton Line Companhla de

Navegacao Lolde BraslIelro Empresa Llneas Marltlmas Argentinas and

Na l egacao Mercantll S A Navem found to have violated sections 16 Second

and 18 b 3 of the Shipping Act 1916

Sanford O Miller for respondents Brodin Lines Columbus Line

Holland Pan American Line and Northern Pan American Line

Harold Mesirow for respondents Booth Steamship Co Dovar Line

andLamport HoltLine

Elmer O Maddy and Baldwin Einarson for respondents Norton

Line and Ivaran Steamship Line

Donald Macleay and Thomaa E Stakem for respondents Delta

Steamship Lines and Moore McCormack Lines

Frank J McOonnell for respondent Navegacao Mercantil S A

Navem

Frank P Kopp for respondent Georgia Steamship Corp

DavidKay and Seymour H Kligler for respondent Empresa Lineas

MaritimasArgentinas

Renato O Giallorenzi for respondent Companhia de Navegacion

Maritima Netumar

Marvin J Ooles Neal N Mayer and William T Foley Jr for re

spondent Companhia de Navegacao Lloyd Brasileiro S A

Philip J Harter for intervener Department ofTransportation

James LMalone PaUl Fitzpatrick and Donald J Brunner hearing

counsel

REPORT

By THE COMMISSION Helen Delich Bentley chairman Ashton C

Barrett vice chairman James V Day George H Hearn com

missioners

On October 28 1968 the Commission pursuant to sections 16

18 b 3 and 22 ofthe Shipping Act 1916 instituted an investigation

and hearingto determine whether

Commlssioner Clarence Morse did notparticipate

15 FMC
56 FEDERAL MARITIME COMMISSION

any common carrier by water 10 the trades betwesn the U S Atlantic

and gulf coasts and Brazil either alone orIn conjunction with other pereons d

rectly or Indirectly made or gave any undue preference or advantage to an

particular person locality ordescription of traffic to any undue or unreaeonabl

prejudice or dleadvantage In any reepect whatsoever In violation of section 1

ftrst of the act and whether any common carrier or other peraon subject to th

act either alone or In conjunction with any other person directly orIndirectly

allowed any person to obtain transportation for property at less than the regula

rates or charges then established on the line of such carriers by means of an

unjust orunfair device or means In violation of section 16 second and 18 b 8

of the act

During the course of the hearing and upon motion by hearing counse

the order of investigation was amended to expand the proceeding to

determine whether any common carriers by water made or gave o

are making or giving undue preference or advantage or whether an

common carrier by water orother person subjecttothe act either alon

or in conjunction with any other person directly or indirectly a

lowed or is allowing any person to obtain transportation of property

at less than the regular rates

Memoranda were filed by hearing counsel and 10 of the designate

respodnents including Navegacao Mercantil S A Navem Brodi

Line Columbus Line Inc The Northern Pan American Line S A

NOPAL Companhia deNavegacao Lloyd Brasileiro Loide Em

presa Lineas Maritimas Argentinas EL M A Ivaran Line Norton

Line Georgia Steamship Corp and Companhia de Navegacao Mor

tima Netumar Netumar

Presiding Examiner Herbert K Greer issued an initial decision i

which he found that rebating is and hasbeen since 1964 a practice i

the nQrthbound trade between Brazil and the United States Spe

cifically he found that respondents Norton EL M A Navem 

and Netumar violated section 16 second of the act by allowing Im

perial Commodities Corp Imperial to obtain transportation a

less than the regular rates or charges by the unjust and unfair mean

of compensating Procafe and or Stockler exporters from Brazil f

the privilege of being selected as the carrier of coffee sold by thos

exporters toImperial and the passing on of all or a part of that com

pensation by the exporters toImperial who paidthe freight He als

found respondents Norton E L M A Navem Loide and Netuma

to have violated section 18 b 3 of the Shipping Act 1916 4

US C 801 et 8eq by receiving le88 or different compensation for th

transportation ofcoffeethan specified inthe applicable tariff He foun

no violations of section 16 first of the act as the record did not disclos

that anyone was an actual victim of prejudice or disadvantalre

111 FHO
EXOEPTIONS

MALPRACTICES BRAZIrJUNITED STATES TRADE 57

Exceptions to the examiner s decision have been filed by Loide

Norton Navem Netumar and E L M A We have heard oral argument

THE EXAMINER S DEcISION

After a careful and thorough review of the record before us we

have concluded that the examiner s initial decision both sets forth a

true and complete statement ofthe facts as they existed inthe tradein

question and constitutes a correct and justifiable resolution of the

issues presented for determination Therefore we adopt the ex

aminer s initialdecision a

copy ofwhich is attached hereto and made

apart hereof asour own

In excepting to the examiner s decision the respondents set forth

identical or similar arguments many of which simply reemphasize

points or positions made in their initial legal memoranda The crux

of these exceptions is the proposition that under the Administrative

ProcedureAct 5 US C 500 et seq an agency s ultimate finding must

be supported by substantial andprobative evidence which respondent s

contend hearing counsel have failed to adduce with respect to tlle

present allegations ofrebating Instead they contend in common that

the evidence is uncorroborated hearsay based on rumor gossip be

liefs and statistics which fail to show a specific rebate by any carrier

Cited in support oftheir position inter alia are the cases ofEdison v

Labor Board 305 U S 197 1938 and Willapoint Oysters v Ewing

174 F 2d 676 9th Cir 1949 wherein the courts said in one form or

another that substantial evidence included more than uncorrobo

rated hearsay orhearsay cooroborated by mere scintilla

We however affirm the examiners analysis of the quality of the

evidence in this record As pointed out by the examiner in his initial

decision there is sufficient reliable evidence inthe record to corroborate

the hearsay testimony in the record before us

Moreover the respondent s argument that uncorroborated hearsay

may not constitute reliable probative and substantial evidence to

support a

finding in ouradministrative proceeding is unfounded As

appropriately pointed out byhearing counsel there is a well developed

trend favoring increased relaxation of the so called jury trial rules

when making findings in administrative proceedings There are times

when uncorroborated hearsay can constitute substantial evidence to

support an administrative finding and times when it does not depend

ing upon a number of variables When the conditions are appropriate

there is nothing in our opinion to prevent an examiner from basing

15 F M C
58 FEDERAL MARITIME COMMISSION

his decision which is adverse to a claimant on hearsay evidence if

such evidence has sufficient probative force to support the decision

The sufficiency of the hearsay to support a

finding must be judged by

taking into account the convincing quality of the particular hearsay

or lack ofit the opposingevidence or lack of it and the circumstances

Indeed the Supreme Court has most recently handed down a deci

sion in the case of RiChard80n v Perale8 39 LW 4497 May 3 1971

wherein it held that hearsay evidence may constitute substantial evi

dence supportive of a finding by the hearing examiner adverse to the

claimant The question thersin essentially was what procedural due

process required with respect to examining physician sreports in a

social security disability claim hearing and whether such reports could

constitute substantial evidence supportive of a

finding of non

disability The court held that the written reports by the physician

constituted substantial evidence not withstanding the reports hear

say character the absence of cross examination and the directly

opposing testimony by the claimant and his medical witness

Of particular interest are the Court s comments on Mr Chief Jus

tice Hughes statement in OOlU1olidated Edison 00 v NLRB 30

US at 230 mere uncorroborated hearsay or rumor does not consti

tute substantial evidence That statement and ones of similar conten

have been referred to frequently by respondents in the case presentl

beforeus The courtsaid in referencethereto

we feel that the claimant and the court of appeals read too much int

the single sentence from Oonsolidated Bdlson The contrast the Chief Justice wa

drawing at the very page cited was not with material that would be deeme

formally inadmissible in judicial proceedings but with material without 

basis in evidence having rational probative force This was not a blanket r

jection by the court of administrative reliance of hearsay Irrespective of re

ablllty and probative value The opposite was the case

While there are however certain factual differences between that cas

and the one before the Commission the decision does support th

general assertion that hearsay evidence can constitute under certai

conditions substantial evidence to support an administrative finding

The Court therein was prompted in its analysis by a number of fac

tors which it felt assured the underlying reliability and probativ

value ofthe evidence in question

We likewise feel that regardless of the question of corroboratin

evidence the record herein repeatedly indicates that rebating wa

practiced by the rlspondents and substantiates that conclusion wit

evidence which as the examiner indicates under existing condition

is logically probative of the existence of the fact sought to be shown

111 FMC
MALPRACTICES BRAZlr UNITED STATES TRADE 59

Therefore respondents exceptions to the examiners decision based on

his reliance on hearsay evidence are without merit under the present

facts

Norton joined by ELM A also except to the examiner s con

clusion that if a

finding of violations of the act is supported by this

record which both lines maintain is not the case the person nom

inated by the line to solicit freight in Brazil was its agent for the

purpose ofengaging in the alleged rebating transactions Both Norton

and ELMA contend it has not been shown on the record that they

knew or should have known that anyone in Brazil purporting to act

in their behalf was involved in the transactions that the examiner

suspects may have occurred Proof that the person nominated by them

to solicit freight in Brazil was their agent for the purpose of engaging

in the alleged transactions is in their opinion vital to any finding of

violation of law by either line Norton and ELMA contend there

is simply no evidence ofthis sort on the record

Having found that the alleged incidents of rebating were proven

on the record the above exception is without merit As validly pointed

out by hearing counsel the Shipping Act cannot be circumvented

through the medium of an agent and therefore whether the carrier

authorized the agent to rbate or indeed even knew of such activity

is not the fundamental concern

ELMA further excepts to the examiner s additional finding of

fact wherein an incident ofrebating wasfound based on an ELMA

bill of lading dated January 25 1970 and a Procafe credit memo

randum dated January 30 1970 That finding involves the testimony

of Mr Anisansel as president of Imperial and exihibits 293 294 and

295 introduced into evidence as a result of his testimony involving

events which transpired on or after January 19 1970 E LMA

argues the alleged violation is outside the scope of the investigation

since the latest time as of when the Commission could have spoken in

utilizing the term current and in amending the order to include

present tense verbs was as of the date of its amendatory order ie

January 5 1970

The examiner summarily rejected the contention and ELMA

excepts to his conclusion on the grounds that it could set precedent

for indefinitely extending the duration of every Commission investi

gation and that such interpretation would render it unconstitutional

as a violation of the constitutional precept of due process in that

respondents have been denied adequate warning ofthe parameters of

the investigation prior to the hearing so that they can have time to

prepare therefor

15 FMC
60 FEDERAL MARITIME COMMISSION

We fail however tofind any merit in this complaint The examiner

has given the only logical interpretation to our use of present tense

verbs and the word cur nt in our amended order of investigation

Respondents have received adequate warning of the parameters of

the investigation in order to prepare their defense No precep11J of due

process have been violated and the examiner s rejection of E t A s

argument is upheld

Also in support of its assertion that it was denied a fair hearing

E LMA excepts to the examiner s failure to issue the requested sub

pena to Imperial for missing documents related to exhibits 293 295

and showing the terms of the purchase of the 5 000 bags of coffee by

Imperial from Procafe EL MA asserts that the examiner s failure

to issue the subpena prejudiced its right to a full and complete cross

examination of the witness Anisansel concerning its alleged violation

of law in regard to the shipment on the Rio Bermejo and therefore

violates any evidentiary value which may be ascribed to exhibits 293

295 and Mr Anisansels

testimony concerningthem

Though the record indicates that there may have been some con

fusion on the part of all parties as tothe status of the request for the

subpena the examiner was correct in finding that the conditional na

ture of the request by ELM A for the issuance ofthe subpena did not

comply with the procedure outlined in the Commission s rule 9 a of

the rules of practice and procedure 46 CFR 502 et seq and therefore

could not be honored More importantly however wasthe conditional

nature of the examiner s original agreement to issue a subpena if a

need eaJists a need which the examiner subsequently found in his

judgment did not exist in light of Imperial s exhaustive search for any

other relevant documents We affirm that judgment by the examine

and conclude that ELMA has not shown in our opinion that the

examiner s action prejudiced its righ to a full and complete cross

examination ofthe witness

Finally E LM A excepts to the examiner s ruling that he would

limit the cross examination by any respondent s counsel of any witness

called duringthe duration of the hearing to that part of the witness

direct testimony in regard to the respondent carrier which that at

torney represented It is E LM As contention that such curtailmen

of cross examination prevented E LM As counsel from demonstrat

ing material inconsistencies and gross defects in Mr Anisansels testi

mony and therefore vitiates the testimony adduced at the hearing

The examiner justifiedhis ruling on the ground that it was made

to avoid undue delayin the conduct ofthehearing

ELM As counsel has properly pointed out the sacred stature o

the right tocross examination in order to obtain a full and true dis

111 FMO
MALPRACTICES BRAZlr UNITED SlIATES TRADE 61

closure of the facts under both the Administrative Procedure Act

section 7 d and the Commission s own rules of practice and pro

cedure rule 10 n However under the same Commission rule the

examiner is giventhe rightto limit cross examination ofthe witnesses

when in his judgment such evidence is 1 cumulative or is 2 pro

ductive ofundue delay in the conduct of a

hearing The determining

factor is the independent judgment ofthe presiding examiner and in

our opinion his judgment should be upheld unless it results in some

serious miscarriage of justice E LMA s counsel has failed to con

vince us in the present case ofany denial ofhis rightto a fulland fair

cross examination No miscarriage of justice has resulted from the

examiner s ruling and his action is therefore affirmed

CONCLUSION

We are fully cognizant of the numerous difficulties which face an

inquiry such as this includingamong others theproblems of non avail

ability of witnesses and documents located in foreign countries Rec

ognizing these problems however it is still our responsibility to

insure that all common carriers by water operating in the commerce

of the United States with foreign countries and its own territories

perform in such manner as not to jeopardize the legitimate and en

forceable interests of any common carriers participating in the same

trade

Therefore our goal in all controversies is to arrive ata

just orequit

able result for all parties in accordance with themandates ofthe Ship

ping Act 1916 and with a minimum of governmental interference

We trust that in the future when problems such as those now before us

arise in the United States Brazil trade we may expect the continued

cooperation of the Government of Brazil in resolving those problems

on an informal basis without resorting to time consuming and often

pointless litigation Much progress has been made in resolving the

problems that have traditionally plagued the United States Brazil

trade and it is our intent with the cooperation of the carriers con

cerned to exert every effort to further develop that long sought after

spirit of cooperation

Whenever possible Governments should permit commercial inia

tive to be the chief catalyst in solving problems in ocean commerce

The Government at either end of a trade route should intervene only

when carriers or conferences are unable to resolve the issues or when

there is actual or imminent harm to the country s

foreign waterborne

commerce And the United States certainly will intervene to prevent

15 FM O
62 FEDERAL MARITIME COMMISSION

all unjust discriminations or protective devices against our ships 01

cargoes and any other conditions causing detriment to our foreign

commerce We will do so whether the detriment is caused by commer

cial orgovernmental action

Carriers should avoid creating situations which necessitate solutions

by regulation decree or similar Government action Conferences and

carriers must bear the responsibility tocooperate in maintaining stable

and reliable service

Theintroduction to this or any trade ofrebatingand other malprac

tices can lead only to chaos and will produce prohibitive costs to ship

pers carners and national interests As a result of this proceeding

and the role played by the parties and Governments concerned we

hope and expect tosee in the BraziljUnited States trade the stability

and reliability necessary to serve the best interests of the users and

suppliers of ocean transportation

Any other exception to the initial decision or requests for findings

not specifically ruled upon herein have been found to be improper or

immaterial cumulative orotherwise unnecessary to the decision

An appropriate order will be entered

sEAIl

S FRANOIS C HURNEY

Seoretary

III F MC
68

FEDERAL MARITIME COMMISSION

DOCKET No 6844

MALPRACTICES BRAZlL UNlTED STATES TRADE

ORDER

The Federal Maritime Commission instituted this proceeding to

determine whether

any common carrier by water In the trades between the U S Atantlc

and gulf coasts and Brazil either alone or In conjunction with other persons

directly or indirectly made or gave or are making or giving any undue pref

erence or advantage to any particular person locality or description of tralllc

to any undue orunreasonable prejudice or disadvantage in any respect whatso

ever In violation of section 16 first of the act and whether any common carrier

orother person subject to the act either alone orin conjunction with any other

person directly or Indirectly allowed or Is allowing any person to obtain trans

portation for property at less than the regular rates orcharges then established

on the line of such carriers by means of any unjust orunfair device or means in

violation of section 16 second and 18 b 3 of the act

The Commission having fully considered the above matter and

having this date made and entered its report stating its findings and

conclusions which report ismade apart hereof

Iti8 ordered That all carriers serving in the northbound trade

between Brazil and the United States and specifically EL M A

Loide and Netumar as the only remaining carriers in that trade of

the respondents found in violation of the Shipping Act 1916 hence

forth cease and desist from transporting coffee at less or different

compensation thanthat specified intheapplicable tariff

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

111 FMC
FEDERAL MARITIME COMMISSION

No 6844

MALPRACTlOESBRAZnUNlTED STATES TRADE

Companhia de Navegacao Maritima Netnmar Norton Line Companhla 

Navegacao Lolde Brasllelro Empresa Llneas Marltmas Argentinas a

Navegacao lIercantll S A found to have violated sections 16 second a

18 b 8 of the Shipping Act 1916

So rd O Miller for respondents Brodin Lines Columbus Lin

Holland Pan AmericanLine and Northern Pan American Line

narold M esir IJJ for respondents BoothSteamship Co Dovar Lin

and Lamport Holt Line

Elmer O Maddy and Baldvin EinarsOrt for respondents Nort

Line and Ivaran Steamship Line

Donald Macleay and Thomas E Stakem for respondents De

Steamship Lines and Moore McCormack Lines

Frank J MoOonnell for respondent Navegacao MercantilSIA

Frank P Koppforrespondent Georgia Steamship Corp

Seymour H Kligler for respondent Empresa Lineas Maritim

Argentinas

Renato O Giallorensi for respondent Companhia de Navegac

Maritime Netumar

Marvin J Ooles Neal N Mayer and William T Foley Jr 

respondeIltCompanhia de Navegacao Loide Brasileiro

Phillip J Harter for intervener Department of Transportatio

Donald J Brunner Paul Fitspatriok and James L Malone hear

counsel

INITlAL DECISION OF IIERBERT K GREER PRESIDING EXAMINE

This proceeding was instituted for the purpose of determin

whether any common carrier by water in the trades between the U 

1

Tbls decision becametbe decision of tbe Commission Dec 8 1971

111 FMC

64
MALPRACTICE8 BRAZIWUNITED STATES TRADE 65

Atlantic and gulf coasts and Brazil either alone or in conjunction

with other persons directly or indirectly made or gave any undue

preference or advantage to any particular person locality or de

scription of traffic to any undue or unreasonable prejudice or disad

vantage in any respect whatsoever in violation of section 16 first of

the Shipping Act 1916 the act and whether any common carrier

or other person subject to the act either alone or in conjunction with

any other person directly or indirectly allowed any person to obtain

transportation for property at less than the regular rates or charges

then established and on the lines of such carriers by means of any

unjust or unfair device or means in violation of section 16 second

and 18 b 3 of the act During the course of the hearing and upon

motion by hearing counsel the order of investigation was amended to

expand the proceeding to determine whether any common carrier by

water made or gave or are making or giving undue preference or

advantage or whether any common carrier by water or other person

subject to the act either alone or in conjunction with any other person

directly or indirectly allowed or is allowing any person to obtain

transportation ofproperty at less than the regular rates

Common carriers by water made respondents are Brodin Line

The Booth Steamship Co Ltd Booth Columbus Line Inc Com

panhia de Navegacao Loide Brasileiro Loide Companhia de Nave

gacao Maritima Netumar Netumar Delta Steamship Lines Inc

Delta Dovar Line Empresa Lineas Maritimas Argentinas

E LM A Georgia Steamship Corp Holland Pan American

Line HOPAL Ivaran Line Lamport Holt Line Limited Nave

g

acao Mercantil S A Navem The Northern Pan American Line

S A NapAL MontemarS A Commercial YMaritima Montemar

Moore McCormack Lines Inc Moormac and Norton Line The

Department of Transportation intervened but took no active part in

the proceeding

FINDINGS OF FACT

1 The northbound trade between Brazil and the United States

involves many Brazilian produced commodities including coffee

cacao sisal binder twine castor oil and Brazil nuts The trade is

highly competitive and the profit margin narrow Brazilian exporters

and US importers carryon their negotiations principally by means of

telex and cable communications Offers and counteroffers include not

only the price of the commodity but the privilege of selecting the

vessel onwhich theshirment will be made

15 FMC
66 FEDERAL MARITIME COMMISSION

2 Brazilian exporters quote two prices for their products the lower

price being conditioned upon the right of the exporters to select the

vessel The importers pay the freight charges but generally they will

waive the right to select the vessel in order to obtain the commodities

atthe lowerprices orto obtain other benefits

3 The term points is used in negotiations forthe sale and purchase

of coffes aswell as the priceper bag Abag of coffee weighs 132 pounds

and a point represents one hundredth of a cent per pound or 1 3

cents per bag

4 The importers and exporters in negotiating the terms of their

purchase and sale agreements by telex and cable frequently use the

terms rebate freight rebate and freight kickback

6 TheU S importers have not beenshown tohave received freight

rebates directly from the carriers The benefits they receive in return

for relinquishing their rightto select the vessel insofar as the record

discloses emanate from the lower prices paid or from credits on

accountaccorded tothemby theBrazilian exporters

6 When the dual quotation system results in the selection of the

vessel by the Brazilian exporters the vessels selected are of foreign

flag lines

7 TheUS flaglines Delta and Moormac have experienced signifi

cant losses of revenue for the reason that they have refused to rebate

While this loss of revenue generally results in connection with the ca

riage of all commodities in the trade the loss has been particularly

evidentwith respect tocoffee Delta and Moormac have been tradition

ally the predominant carriers ofcoffee

8 Prior to 1957 Delta carried over 70 percent of the coffee exported

each year from Brazil toU S gulf coast but during the period from

1958 to 1968 its carryings steadily decreased to 28 57 percent and

during the first 9 months of 1969 it carried 12 86 percent E LM A

yearly carryings rose from 3 08 percent in 1958 to 10 12 percent in

1968 and during the first 9 months of 1969 to 27 57 percent Navem

entering the trade in 1968 carried 11 69 percent and during the firs

9 months of1969 it carried 18 51 percent

9 During 1956 Moormac carried 47 percent of the coffee exporte

from Brazil to the U S east coast which share steadily decreased each

year and to 26 percent in 1968 The carrier with the most significan

increase in the carriage of coffee during this period was Loide from

7 percent to30 percent

10 Rebating wasa subject openly discussed by Brazilian shippers i

the presence of representatives of US flag lines Brazilian exporter

have refusedtodo business with the U S flag lines because those line

wouldnotoffer rebates

111 FMO
MALPRACTICE8BRAZIWUNITED STATES TRADE 67

11 U S importers generally accepted the existence of the practice

ofrebating by some lines and it wascommon knowledge on the street

that thepractice existed

12 Rebating has been a

subject discussed between officials of US

flag lines and Brazilian officials during attempts to eliminate the

practice

13 Duringperiods covered by this investigation the Brazilian Gov

ernment issued decrees to enhance the carriage by their national flag

lines

14 The U S flag lines offer equal orbetter service than the lines se

lected by Brazilian exporters under the dual quotation system

Additional findings of fact as applicable to the individual respond

ents will be set forth hereinafter

POSITION OF THE PARTIES

Hearing Oounsel

Hearing counsel contend that the record shows widespread rebating

by many respondent carriers to exporters of Brazilian commodities

the passage on ofall orpart of the benefits ofthe rebates to American

importers through the medium of price reductions and specific viola

tions ofsections 16 first and second and 18 b 3 ofthe act by Loide

Navem ELMA Netumar and Norton They rely on the evidence

which demonstrates that it is common knowledge in the trade that

rebates are made by certain respondents and that the practice has been

common since January 1964 with scattered instances dating back to

1960 They find probative value in the opinion ofexperts in the trade

givenon thebasis of personal knowledge derived from discussions with

Brazilian exporters contacts with representatives of their carrier

competitors and reports from carrier traffic and sales personnel Rec

ognizing the abundance of hearsay evidence in the record they pro

pose a liberal application of the substantial evidence requirement and

contend

Quite aside from whether there has been certain corroborating circumstantial

evidence hearing counsel contends that to the extent their proposed findings of

fact rest on wholly hearsay evidence they nevertheless constitute substantial

evidence upon which the Commission may rely inmaking findings

The requirements of APA section 7 c calling for Commission findings based

only upon reliable probative and substantial evidence can be and indeed in

this proceeding are met by hearsay evidence alone

In support of their contention the statement of Judge Hand in

NLR B v Remington Rand 94 F 2d 2d Cir 1938 at page 873

cert den 304US 576 is quoted

15 F MC
68 FEDERAL MARITIME COMMISSION

mere rumorwill not serve to support afinding but hearsay may do

so it more Is not convEnlently available and If In the end the finding Is supported

by the kind of evidence upon which reasonable perlrons are accustomed to rely

In serious afralrs

Relatinp this proceeqing to the fact that witnesses and documentary

evidence in Brazil cannot be made available to the Commission Judg l

Hand is further quoted from G and O Memman 00 v Syndioate

Publishing00 207 F 5152d Cir 1913 at page 518

If this Isnot evidenCE Ican see noway of getting any better and the fact cannot

be establlshEd at all Surely the law Is not so unreasonable as that

Also cited is John Bene SonB Inc v FT O 299 F 468 2d Cir

1924 and quoted is the Court s statement at page 471 that

We areof opinion that evidence ortestimony even though legally Incompetent

Ifof the kind that usually afrects falrmlnded men In the conduct of their dally

and more Important afralrs should be received and considered but It should be

donE fairly

Professor Davis 2 Davis AdminiBtrative Law TreatiBe 14 10 1958

is quotedon thequestion ofevaluation hearsay as

a The alternative to reliance on the Incompetent evidence b the state of

the supporting and opposing evidence Ifany c the policy of the program being

administered and the consequences of a decision either way d the Importance

or unimportance of the subjEct matter and considerations of economy of govern

ment e the degree of etllcacy or lack of etllescy of cross examination with

espect to particularhearsay declarations

To demonstrate the flexibility ofthe substantial evidence requirement

and the problem faced in applying it Jacobowite v United StateB 424

F 2d 555 Ct C1 1970 at page 561 is cited and the Court s discussion

of theproblem quoted

What thEn Is substantial evidence This Is a constantly recurring problem

whkh has troubled courts for a long time A precise definition of substantial

evidence Is dltllcult to express In away that will make It applicable to all situa

tions In all cases This Is so because there areso many factors that have to be

ponsldered such as dlfrerent statutes and regulations good hearsay and bad

healBaY which are difficult to define whether ornot hearsay Is Objected to or

IOrroborated and If corroborated by what and how much and whether the hear

say Is contradicted by direct legal and competent evidence and whether the

agency has subpena power

Hearing counsel further cite United States eaJ reZ Dong Wing Ott v

ShaughneBBY 116 F Supp 745 S DN Y 1954 at page 750 to sup

port the argnment that Congress has explicitly avoided the require

ment of competent evidence to support findinp sin the Administrative

Procedure Act Also relied upon is Amerioan Rubber ProdiuotB Oorp

v NL R B 214 F 2d 47 7th Cir 1954 They point out that the

1 FMO
MALPRACTICEB BRAZILUNITED STATES TRADE 69

evidence adduced is not contradicted and argue that under the cir

cumstances here appearing hearsay evidence may support administra

tive conclusions if moreis not conveniently available

Respondents

Those respondents having filed briefs contend in common that haar

ing counsel have not adduced evidence which is substantial as required

by the Administrative Procedure Act to support an Administrative

Agency s conclusions The evidence is characterized as uncorroborated

hearsay based on rumor gossip beliefs and statistics which fail to

show a

spec fic rebate by any carrier They rely principally onEdiaon

v Lab01 Board 305 US 197 230 1938 wherein the Court is com

mentingon the substantial evidence requirement stated

The statute provides that the rules of evidence prevailing in courts of law

and equity shall not be controlllng The obvious purpose of this and similar pro

visions is to free administrative boards from the compulsion of technical rules

so that the mere admission of matter which would be deemed incompetent in

judicial proceedings would not invalidate the administrative order But

this assurance of a desirable flexibility in administrative procedure does not go

so far as to justify orders without a basis in evidence having rational probative

force Mere uncorroborated hearsay or rumor does not constitute substantial

evidence

Also cited is Willapoint Oysters v Ewing 174 F 2d 676 9th cir

1949 at page 690 whereinit washeld

The requirement that the administrative flndings accord with the substantial

evidence docs notforbid administrative utilization of probative hearsay inmaking

such findings Such construction would nulllfy the first portion of section 7 c

Administratiye Procedure Act providing for the receipt of such evidence

The degrees of probative force and reliability of hearsay evidence are infinite

in variation and its use by administrative bodies ex necessitate must in part be

governed by the relative unavailability of other and better evidence However

since substantial evidence includes more than Huncorrobated hearsay and

more than a mere scintilla the findings to be valld cannot be based on hearsay

alone not upon hearsay corroborated by mere scintilla Founded upon these re

quirements the test whether the evidence is substantial is whether in the

individual case before thecourt there is such relevant evidence as a reasonable

mind might accept asadequate to support a conclusion

Norton refers to Oohen v Perales 412 F 2d 44 5th Cir 1959 re

hearing denied 416 F 2d 47 cert grantedsub nmn Elliott L Rich

ardson Secretary of Health Eduoation and Welfare v Pedro Perales

402 US 389 1970 as themost recent confirmation ofthe substantial

evidence rule This case cites most of the authorities relied upon by

respondents

Sl The question of the probative value of bearsay may be decided by the Supreme Court

In this appeal

15 FMC
70 FEDERAL MARITIME COMMISSION

Brodin Columbus and Nopal criticize hearing counsels inference

that all respondents were rebating and that uncontradicted evidence

involves these carriers Failure to rebut by evidence if made a factor

is seen as imposing the duty on a carrier to contradict rumors passed

by competitors Ivaran Lines contend that the general statement by a

witness that he knew all lines wererebating is not reliable or proba

tive evidence and that no substantial evidence hasbeen adduced to im

plicate this respondent in any malpractice Netumar sees only rumor

displayed on the record and points out that knowledgeable executives

engaged in the trade could not cite any instance of rebating Navem

refers to the many reasons which may influence vessel bookings to

include friendship business relations national pride and competi

tionas well as efficiency in carriage and also the necessity touse tny

ve sel available to get the coffee to the buyer on aspecified date

The testimony relied upon by hearing counsel to involve Loide

Netumar Navem ELMA and Norton with deals made between Im

perial aUS importer and Procafe a Brazilian exporter is said by

them not to demonstrate that the carriers were rebating but only to

show that a credit arrangement existed between Imperial and Procafe

not involvingthe carriers

Norton in general agreement with other respondents that only

tmcorroborated hearsay has been adduced goes into some detail re

garding the coffee trade pointing out that Brazilian exporters are

allowed toregister coffee sold 90 days before exportation which regis

tration guarantees the price for that period that special contracts are

allowed for large roasters which result in a decrease in the price of

Brazilian coffee which is called special coffee that the Brazilian

Government gives gratuities in exchange for buying more Brazilian

coffee not in the form of currency but called advisos jthat the

Brazilian Government may set a minimum price for coffee in order to

conserve foreign exchange and the importer will at times be invoiced

for this price but when the world price is above the minimum price

some companies will issue a debt advice to evidence the difference be

tween the Government price and the sales price It is contended that

the evidence does not show any credit advice to be for sales below

the minimum price although credits in evidence were said to be re

bates It is further contended by Norton that the hearing was fund

mentally unfair in that the examiner was disposed to admit evidence

because if it was not admitted hearing counsel could not prove their

case The examiner is admonished to stay within his role as a judicial

officer and toreach a decision based on evidence and that as the evi

dence is unsupported hearsay this proceeding should be discontinued

111 FMO
MALPRACTICESBRAZILUNITED STATES TRADE 71

This investigation is seen by Norton as an attempt by the Commission

to interfere with US relationships with Brazil contrary tothe comity

of nations

E LMA in general agreement with other responents as to the

quality ofthe evidence objects to the curtailment of its right to cross

examine under the examiner s ruling that cross examination of awit

ness would be limited to the respondent or respondents regarding

whom the witness testified Itfurther contends that the incidents hear

ing counsel rely on to demonstrate a violation of the act by this re

spondent occurred subsequently to the time period set forth in the

amended order of investigation and are thus beyond the scope of this

investigation Additionally that rebating has not occurred as the al

leged payments by this carrier were made prior to the payment of

freight by the consignee The examiner s refusal to issue a subpena

duces tecum directed to Imperial is saidto beerror

Loide argues that the evidence adduced is only uncorroborated

hearsay which cannot be the sole basis for findings that the expert

testimony is of no value as such testimony must be based on facts oc

curring not on conjecture Hearing counsels case is considered weak

unreliable and farcical and insufficient to support a finding of rebat

ing as to Loide Itcontends that Loide always received the fullfreight

and neveroffered orpaida rebate

Georgia Steamship Corp moves that it be dismissed as a party as

the record is totally bereft of even a scintilla of evidence that it en

gaged in malpractices Other respondents did not file briefs

DISCUSSION

The briefs deal primarily with the question of rebating for the

reason that hearing counsel rely principally on that practice to estab

lish violations of the act Nevertheless the issues presented by the

order ofinvestigation as amended are broader and other violations of

sections 16 first and second and 18 b 3 are also involved For brev

ity and convenience the term respondents as hereinafter used refers

tothose havingfiled briefs

The basic issue is whether the record discloses substantial evidence

hearsay and direct or circumstantial sufficient to support findings of

violations of the act In Unapproved Section 15 Agreements S Afri

IanTrade 7 F M C 159 1962 at page 169 the Commission held

The weight to be accorded the statement of someone not on the stand ie

hearsay does not govern and should not be confused with its admissibility If

competent under the criteria applicable in an administrative proceeding the

15 FMC
1

72 FEDERAL MARITIME COMMISSION

statement Is receivable In evidence and may be used to support agency action it

there Is at least some other supporting proof In the record of a direct nature

There Is no question here as to the exclusive use of hearsay To the contrary

there Is more than ample proof In the record both oral and written and often

squarely related to and corroborative of the hearsay evidence to just fy accord

Ing the latter credibility and weight See N LR B v Remington Rand 94 F 2d

862 878 eA 2 1988 cert den 804 U S 576

This decision is consonant with the authorities cited by the respond

ents These cases do not however resolve the question of the quality

of the evidence necessary to support hearsay beyond holding that a

mere scintilla or remotehearsay is insufficient The Court in discussing

substantial evidence in Universal OOlTMra Oorp v NL R B 340 US

474 1951 at page496held

We Intend only to recognl e that evidence supporting a

concluslQn may be less

substantial when an impartial experienced examiner who has observed the wit

nesses and lived with the case has drawn conclusions The findings of the

examiner are to be considered along with the consistency and Inherent proba

bility of testimony The slgnlllcance of his report of course depends largely on

the Importance of credibility In a particular case To give it this signficance doe

not seem to us materially more ditllcult than to heed the other facts which In

sum determine whether the evidence Is substantial

Tbe directionIn which the law moves Is often a guIde for decision In particular

cases and here It serves to confirm ourconclusion However halting its progress

the trend In litigation Is toward a rational Inquiry Into truth In which thetri

bunal considers everything logically probative of some matter requiring to be

proved

The Court in International A n

of Machinists v N L RB 110 F 2d

29 D C Cir 1939 atpage 35 affirmed 311 U S 72 stated

In the decision of questions of fact the Board s findings are made conclusive

If supported by evidence which must he snbstantlal But It Is only convincing no

lawyer s eldence which Is required The Board Is not limited to rules of evidence

prevailing In courts of law orequity The evidence must be such as a reasonable

mind might accept though other like minds might not do so We are re

quired to sustain the Board s findings If reasonable minds unhampered by

precon ptlons derived from the technical law of evidence might differ as to

conclusions to be drawn from the evidence presented

Analysis of the cases cited by the parties and other authorities leads to

the conclusion that the substantial evidence test isflexible and When as

here direct evidence of the actual payment by carriers to Brazilian ex

porters is not available the test is whetherthe hearsay is supported by

the evidence direct or circumstantial which a reasonable mind might

accept as logically probative of the existence of the fact sought to be

shown

As a background for the determinlttion of whether any pltrticular

respondent hits violltted the act it is appropriate to examine the entire

record and make preliminary determination of whether rebltting has

111 FMO
MALPRACTICEB BRAzILUNITED STATEa TRADE 73

been a general practice in the trade at times covered by this investi

gation

The record abounds with hearsay evidence that rebating wasprac

ticed It would be unduly burdensome and of little value to refer to

every document of record or toset forth the testimony of every witness

which was received as relevant to thisgeneral question The record is

voluminous Typical are the reports made by US linerepresentatives

to theirhome offices setting forth the results of their investigations into

the reason for the failure to obtain cargo Many of these reports were

supported by the testimony of the author Not all of the statements

made in thereports werebased upon remote hearsay but on statements

made to the author by exporters who expressed facts within their per

sonal knowledge Rebating was accepted as an element of doing busi

nessby Brazilian exporters Itwas a subject openly discussed among

themselves and in the presence of representatives of U S flag lines

There is testimony that Brazilian officials admitted that the practice

existed A former representative of a US flag line testified that when

stationed in Brazil he constantly visited exporters and carrier repre

sentatives and as a result of his discussions with these individuals he

knew that Brodin Booth Columbus Loide ELMA Ivaran Lam

port Holt Navem Montemar and Norton wererebating There is ad

ditional hearsay which involves foreign flag respondent carriers in the

practice

If as hearing counsel contend hearsay alone may support findings

when other evidence is not conveniently available the fact is well es

tablished There is however reliable evidence to corroborate the hear

say The fact that dual quotations dependent upon the selection of the

vessel were made by Brazilian exporters to U S importers is estab

lished by direct and uncontradicted evidence Itis equally well estab

lished by the testimony of individuals directly engaged in dealing with

Brazilian exporters that Moormac and Delta wererefused cargo be

cause these lines did not rebate Statistics demonstrate that these lines

during the relevant periods experienced significant decreases in the

carriage of cargo in this trade although the service they offered was

equal to or better thanthe lines gaining business There is the testimony

of a New Orleans importer that in his experience discounts were of

fered on his purchases if shipments could be made on vessels of Loide

Navem and ELMA The negotiation between U S importers and

Brazilian exporters were mainly conducted by telex and cable com

munication These documents received in evidence because relevant to

the issue of violations of the act and as they reflect the terms of the

transactions were from the records of importers maintained in the

15 FMa
74 FEDERAL MARITIME COMMISSION

ordinary course of business and bear the guarantee ofreliability which

is found in the accuracy which inheres in the performance of routine

work As they represent conditions offers and counteroffers made con

temporaneously with the transactions with which they were concerned

and without contemplation of the use of the information in any con

troversy they may be accorded the assurance of a high degree of

accuracy Further they represent the best evidence obtainable as to

the negotiations towhich they relate and there is a practical necessity

of their being received if evidence is to be had of the offers counter

offers and conditions of sale imposed by or agreed upon by Brazilian

exporters See United State8 v We8ooat 49 F 2d 193 10th Oir 1931

at page 195 These documents reHect that a lower price is offered by the

exporter if the cargo is shipped on certain foreign Hag lines or if the

exporter has the righttoselectthe vessel IIi the negotiations the terms

rebates freight rebates and freight kickbacks appear SomE

examples taken from the records of these negotiations follow Also

indicate exact rebate we would receive We have one steamer ofLloyd

Brasileiro called Loide Guatamala 25 7 tp New Orleans and another

possibility working with Navem which will be confirmed laterj

What would the rebate heW The rebate in 5 500 bags is 30 cents per

bag ie 15 for you and 15 for us j Re freight rebates Largest we

have heard is Loide which 80 R 80 Brazilian cents or about 30 R 30

U S cents per bagj Above prices rock bottom and including frei ht

rebate which we can reasonably expect for that period and therefore

choice of steamers would have to he oursj However freight kick

backs for our account Parafours still traded locally equivalent

83 90 34 10 duly considering freight rebates Freight rebate obtain

able 1015 points Meanwhile there is a discount steamer There

can be no doubt that US importers and Brazilian exporters recog

nized that rebating was a factor to be considered in their transactions

Delta s president a qualified expert on tlansportation conditions in

the trade testified that in his opinion Loide Navem and EL MA

were rebating This opinion testimony has been attacked as based on

facts not of record however the witness founded his opinion on sta

tisitcs reports received from subordinates stationed in Brazil and on

personal conversations with Brazilian officials This opinion is ac

corded probative value on the question of the general practice in the

trade In Standard Oil 00 v Moore 215F 2d 9th Oir 1958 at

page218 the Court held

It Is a common practice for a prospective witness In preparing himself to ex

press an expert opinion to pursue pretrial studies and Investiaatlons of one kind

or another Frequently the Information so gained Is hearsay or double hearsay

Ul FHo
MALPRACTICE8 BRAZlrJUNITED STATES TRADE 75

In so far as thetrier of facts Is concerned This however does not necessarily

stJand In the way of receiving such expert opinion in evidence It Is for the trial

court to determine In the exercise of its discretion whether the expert s sources

of Information are sufficiently rellable to warrant reception of the opinion

Logically probative of the fact that rebating exists and has existed

in the trade is that there is no basis whatsoever for a belief that the

Brazilian exporter would accept a substantial loss of revenue merely

for the privilege of selecting the vessel Thetrade ishighly competitive

and the profit margin small Patriotism was ruled out by the testimony

that profit wasthe basic motive ofpersons engaged in the tradeand in

any event this motive as well as Brazilian Government decrees would

not apply to non Brazilian flag lines The only incentive for the ex

porter to select the vessel would be that he would profit thereby and

the only source of profit or even funds to reimburse him for the loss

of revenue incident toaccepting a lower price would be the carrier he

selected The fact that the importer pays the full freight and does not

directly receive a rebate from a carrier would not detract from the

conclusion that rebating is practiced Rebating or refunding any por

tion of the freight by any manneror means directly or indirectly is i

prohibited by the act If as here monetary consideration given to a

shipper by any device is traceable tothe freight paidby that shipper

rebating is shown

While there are other factors which may enter into the selection of a

vessel this record considered as a whole demonstrates that rebating

wasthe primary reason

Itis concluded that the practice of rebatinghas existed in thetrade

since 1964

Hearingcounsel rely upontransactions between Imperial Commodi

ties Corp Imperial aNew York based importer of coffee and Pro

cafe and StockIer Brazilian exporters of green coffee toprove specific

violations of the act by respondents Norton Loide Navem Netumar

and E LMA As tothese transactions the following additional facts

are found

ADDITIONAL FINDINGS OF FACT

I As toNorton

A On June 26 1967 Norton issued four bills oflading for shipment

of coffee from StockIer to Imperial The negotiations between Imperial

and StockIer prior to the shipment included a telex from Imperial

stating Ship Svenskwnd 1 000 bags New York 500 Philadelphia 15

pts per Ib rebate this steamer our account The shipment was made

via that steamer and on July 7 1967 StockIer credited 297 to Im

1ll FMC
76 FEDERAL MARITIME COMMISSION

perials

account as Rebate on freight regarding 1 500 bags coffee

shippedon board S S SveMkund 15 points per pound

B On May 16 1969 Norton issued bills of lading for shipment of

coffee from Procafe to Imperial A total of 1 000 bags was carried on

the Dorotea Negotiations between Procafe and Imperial prior toship

ment included a telex exchange which included We now show 750

bags balance undestined What we would like now is to have a total o

1 500 bags S L600 to beshipped onthe Dorotea to New York at prices

reflecting freight rebate of 20 Repeat freight rebate of 20 points

Minimum 2000 bags Dorotea in order with us if owners accept ship

basis minimum 20 points discount Shipt 750 bags balance C1487 and

1250 bags SIL 600 against C1484 On May 22 1969 Procafe issued to

Imperial a credit memorandum for Excess on the following invoice

12501Dorotea 248 50 750 bags idem 148 50 atotal of 396 represent

ing 20 points

C On September 26 and 29 1969 Norton issued bills of lading fo

shipments of coffee from Procafe to Imperial from Santos and Para

nagua to New York option Philadelphia The coffee was carried o

the Gudmurulra a Norton vessel Negotiations between Procafe an

Imperial by telex prior to shipment included We have another re

bate steamer by the name of Gudmwndra and she is sailing the da

after tomorrow southbound and paying 20 points We werecalling

you tosee how your rebate dept was functioning If we close atota

of 2 500 bags they will pay 33 points whilst 1 000 bags the rebate is 3

points On 4000 bags shipped Procafe credited Imperial 1 76

representing 33 points

D On March 16 1970 Norton issued bills of lading fora shipmen

of coffee by Procafe to Imperial from Paranagua to Philadelphia

Five hundred bags of coffee were carried on the Norton vesse

Gudrrvurvlra Procafe credited Imperial with 30 points on this ship

ment

II As toNetumar

A On March 28 and 29 1968 Netumar issued bills of lading for 

shipment by Procafe to Imperial from Paranagua on the Netuma

vessel DiOlTla The transaction between the importer and exporter in

volved 50 000 bags of coffee This shipment involved 6 250 bags only

The negotiations between Procafe and Imperial by cable included

We accept stklot6oo 34 35 Delmundo to New Orleans The respons

was Please ship 6250 bags our Paranas DiOITIa destination later pr

vided price changed to33 37 FOB 6250 B C Parana price reduce

to33 37 FOB Imperial purchaeed the coffeeat33 75 cents per poun

and Procafe invoiced it at33 37 cents per pound a 38 point allowanc

111 FMO
MALPRACTICESBRAZIL UNITED STATES TRADE 77

because Imperial agreed that the shipment would be carried on the

Diana

B On March 21 and 22 1968 Netumar issued biNs oflading onShip

ments of coffee by Procafe from Paranagua to Imperial The shipment

was handled by the Netumar vessel Dalila and involved a portion of

the 50 000 bags referred to in A above Procafe credited Imperial

on this transaction with 4 180 which represented 38 points on 8250

bags of coffee

C On June 30 1969 Netumar issued a bill of lading for shipment

of 5 000 bags of coffee by Procafe from Santos to Imperial on the

Netumar vessel Ped lO Teireei laThe negotiations preceding the ship

ment between the importer and exporter included We are thinking

of Netumar Line s Ped lo Teireei la What do they indicate in the

way of rebate You may ship 7 500 bags per the SS Ped lo Teireei la

to New York 15 cents per bag rebate against PO 1 614 and have

purchase price PO 1 613 remain unchanged at 33 50 The rebate on

the 5 500 bags is 30 cents per bag ie 15 for you and 15 for us total

amount around doll 825 each The rebate will be the same as for

Pedro Teixeira for quantities of 5 000 bags or more Five thousand

bags werecarried on the Ped lo Teireei la Imperial received a credit on

July 4 1969 of 750 or 15 cents per bag one half ofthe 30 cents per

bag credit

IIIAs to Loide

A Under a Loide bill oflading a

shipment arrived in New Orleans

on December 19 1967 from Central CO OP of Coffee Culture to Im

perial of 1 000 bags of coffee The negotiations between the exporter

and importer included Loide PefUto New Orleans On thisvessel we

to receive difference 500 old cruzeiros On this transaction Procafe

credited Imperial with the 500 old cruzeiros

B Under a Loide bill of lading Procafe shipped to Imperial 500

bags of coffee on the Loide vessel SunnyLady whioh arrived in Phila

delphia on April 13 1970 The negotiations between the importer and

exporter prior to the shipment by telex exchange included We have

tried to find a possibility of downgrading a total of 1 000B to shipped

Sunny Lady but cannot do better than 24 points Please instruct

Imperial replied Regret cannot ship total 1 000 bags as our buyer

requests shipment tobe made on two steamers Apprec ur efforts Will

have to accept 24 As resolved by theparties 500bags Sunny Lady

Imperial received a credit from Procafe of 24 points on this transac

tion

IV As toNavem

A Under a Navem bill of lading dated April 16 1963 a shipment

from Procafe to Imperial of 1 500 bags of coffee was carried on the

15 FMC
78 FEDERAL MARITIME COM MISSIO

Navem vessel Oo ina from Santos to Houston On April 22 1968

Procafe credited Imperials account in the amount of 752 40 Excess

our invoice value covering shipment of 1 500 bags of coffee per SS

Oo ina a 88 point reduction The negotiations for this transaction

included Ship 1500 B C Oo ina reducing price to 84 12

B Navem issued bills of lading dated June 4 1969 for shipments

from Procafe to Imperial of 4000 bags of coffee on the Oo ina On

this transaction Procafe allowed Imperial acredit of 20 points which

amounted to a shadeover 1 000

C Under Navem bills of lading dated June 1011 1969 Procafe

shipped 5 000 bags of coffee to Imperial on the Piratini from Santos

Negotiations between the importer and exporter included We offer

firm FOB basis sight draft5 000 b c S L 600 84 25 If Piratini

088 less Imperial accepted and received a credit of sa points ap

proximately 2 500 The telex exchangebetween these parties included

Are we tounderstand that you really will not get the rebate unless

the quantity is21 000 bags

D Under a Navem bill of lading dated July 17 1969 4500 bags of

coffee were shipped by Procafe to Imperial from Santos The telex

negotiations included Re 4500 bags have now firm 85 cents per bag

from Navem for shipment SS Maren Skou PIs ship the 4500

bags on the Maren Skou to New Orleans intransit Vancouver 85 cents

per bag split Procafe credited Imperial on this transaction with

171 2 cents representingits share thesplit

V As toE LM A

A Under an E L M A billof lading dated January 25 1970 Pro

cafe shipped to Imperial 5 000 bags of coffee The telex negotiations

between the importer and the exporter included We wud like to

downgrade quality on Jan shipt however wud prefer New Orleans

destination See what can be done Cud downgrade quality and re

duct price by 25 points Shipment scheduled for S S Rio Bermoje to

N O leaving P gua 21170 The shipment was made on the Rio

Bermoje On January 80 1970 Procafe issued a credit memorandum

to Imperial for Allowance of 25 pts on 5 000 bags of coffee shipped

Rio Bermoje redowngrading of quality which amounted to 1 650

Imperial would not have put the shipment on this vessel without get

ting acredit This vessel was notthe only vessel available as Delta had

a fairly regular schedule and could have carried the shipment

VI The term downgrade was a code term used by Imperial and

Procafe to represent a credit because of shipment on a certain des

ignated vessel The term discount as used in their negotiations had

a similar meaning

111 FMO
MALPRACTICESBRAZILUNITED STATES TRADE 79

VII Imperial did not directly receive a rebate from any carrier

its benefit derived from permitting Procafe or Stockler to select the

vessel having been in the form of credits on account The funds used

by Procafe or StockIer for credits to Imperial represented payments

to them by thecarriers

The question presented as to these transactions is whether there is

substantial and convincing evidence to corroborate the hearsay testi

mony of Imperials president that the funds used by the exporters for

crediting Imperials account came from payments received by the

exporters from the carriers Imperials president had no first hand

knowledge of what went on between the exporters and the carriers

and his firm had not received a freight rebate directly from any car

rier Nevertheless in evaluating the testimony ofImperialspreSident

it is apparent that he was well aware that the vessels werethe source

of the credits for one reason that he had been so told by Procafe of

ficials in plain English This testimony is hearsay but not remote

hearsay as the individuals who received the funds from the carriers

supplied the witness with the information Corroboration is found in

the records of the transactions between the exporters and Imperial

and as their negotiations were conducted exclusively by telex and

cable these records are the best evidence available The term rebate

was used frequently in the negotiations Itwould be naive to believe

that individuals experienced in shipping were not conversant with

the meaning and intent of the term j

that it related to freight E LM A

attempts to discount the testimony as to the meaning of the term

downgrade used by the parties for the reason that the witness had

not been the person directly connected with the arrangement between

Procafe and Imperial and thoseadopting the code word didnot appear

to testify However Imperials president charged with responsibility

for the carrying on ofthe company business was aware ofthe meaning

ofthe term Discount also appears in the nepotiations and in at least

one transaction it was used interchangably with the word rebate

The established pattern of the negotiations between the importer and

the exporters was that benefits would accme to the importer provided

the exporters selected the vessel and that downgrade or discount

related to these benefits The finding that rebating was widely prac

ticed in the trade gives support to the conclusion that these transac

tions involved credits related to freight The fact that the US flag

lines not rebating carried none of the coffee involved has significance

Imperials president testified that he would not have used the vessels

selected by the exporters had his firm not been offered something in

return forpermittingtheexporter to select the vessel

111 FMC
80 FEDERAL MARITIME COMMISSION

As above discussed the only motive for exporters frpm Brazil to

insist on the right toselect the vessel would be that they would some

how profit by the selection It cannot be determined whether the ex

porters passed on all or only part of the funds received from the

carriers except that in two of the transactions there was a split a

fact which denotes that the exporters were not usingtheir own funds

to credit Imperial but that the funds came from athird source De

spite the admitted lack of knowledge of direct rebating or paymen

by carriers to the exporters Imperials president was well aware o

the source of the funds representing his firm s credits testified tha

StockIer wasnot a philanthropic organization engaged in giving money

away and that they must have gotten the money from a third party

If there was any source other than the carriers to so find would

strain credulity Patriotism could not have been a motive for selecting

a vessel as Procafe was jointly owned by D StockIer and B Rothos

of Hamburg Germany Nor could the service offered by competing

US lines make a difference that service being equal to orbetter than

the service offered by the lines obtaining the cargo Applyingthe fact

which sutTounded the relations between the importer and the exporter

to the hearsay testimony of Imperials president it is evident tha

Imperial received credits only because it permitted the exporters t

select the velBe1 and the relationship of these credits to the selectio

of the vessel requires the conclusion that the funds represented th

freight charges received ortobe received by the carrier from Imperia

Section18 b 3 ofthe act provides

8 No common carrier by water in foreign commerce or conference of suc

carriers shall charge ordemand or collect or receive a greater or less or difteren

compensation for the transportation of property orfor any service in connectio

therewith than the rates and charges which are specilled in its tarifts on Il

with the Commission and duly published Rnd in eftect at the time norshall an

such carrier rebate refund or remit in any manner orby any device any portio

of the rates orcharges so specllled nor extend ordeny to any person any priv

lege or facility except in accordance with suchtarifts

ELMA contends that as the credits to Imperial from Procafe wer

made prior to Imperial s payment of the freight rebating could no

have occured Reference is made to section 14 fil ljlt which prohibit

defatTed rebatesand which definesthe term as

a return of any portion of the freight money by a carrierto any shipp

as a consideration for the giving of all or any portion of his shipments to th

same or any other carrier or for any other purpose the payment of which 

deferred beyond the completion of the service for which it is paid and is mad

only if during both the period computed and the period of deferment the shipp

has complied with the terms of the rebate agreement or arrangement

Hearing counsel argue that E L MA is engaging in patTying wit

semantics and that This verbal artifice does not mask the fact tha

illF MO
MALPRACTICES BRAZrrJUNITED STATES TRADE 81

the receipt from ELMA or ELMA s agent in Brazil by Procafe

of a monetary kickback enllible PrOCllife to reduce the effective price

at which it offered coffee shipped on the Rio Ber1 lUJjo to Imperial by

25 points thus reducing the ocean freight which Imperial was outof

pocket the price reduction in the coffee Imperial bought was

reimbursed it for a portionofthis cost

The pattern ofthe negotiations between the exporters and Imperial

demonstrates that in many of the transactions not all dates of cred

its were specified on the record Procafe or Stockler credited Impe

rials account prior to Imperials payment ofthe freighttothe carrier

Although the term deferred rebate is not used the plain meaning of

the terms rebate refund and remit as used in section 18 b 3

is that aviolation ofthat nature must involve a return of aportion of

the rates or charges received by the carrier Thus as to these five re

spondents rebating refunding or remittinghas not been shown How

ever section 18 b 3 is not limited to rebating Carriers are prohib

ited from receiving a lesser compensation for the transportation of

property than the rates specified in their tariffs This portion of the

section is not limited to repayments rebates or refunds Itis violated

if the carrier s ultimate compensation derived from the carriage of

property is less than the tariff rate Although it appears that the car

riers received from Imperial the correct fre ght as set forth in the

applicable tariff it must be concluded that the exporters engaged in a

highly competitive endeavor which involved a narrow profit maI1gin

received compensation from the vessels at the time of shipment and

when according Imperial credits had the funds on hand which related

to the shipment and that it was out of these funds that credit was

passed on in whole or in part to Imperial Inasmuch as the com

pensation received by the exporters was in return for selecting the

vessel an inescapable conclusion the compeIlJSation related to freight

which was the carrier s source of revenue Regardless of whether the

carrier compensated the exporter for being selected to transport the

goods before or after payment of freight was received from the im

porter or whether the importer received credit before the freight was

paid to the carrier the ultimate outcome was that the importer s cost

was reduced by indirect receipt of carrier funds thus related to the

freight charges

Violation of section 16 first is not found as the record does not dis

close that anyone was an actual victim of prejudice or disadvantage

Pacific Far ElMt Lines Alleged Rebates 11 F MC 357 366 1968

However aviolation of section 16 second has been shown Thesection

provides that it shall be unlawful for any cornman carrier by water

directly or indirectly

16 FMC
82 FEDERAL MARITIME COMMISSION

To allow any person to obtain transportation for property at less than the

regular rates or charges then established and enforced onthe line of such carrie

by means of false billing false classUlcatlon false weighing false report o

weight or by any other unjust or unfair device or means

Payments to Procafe or StockIer by the carriers and by them passed

on all or in part to Imperial by mean l of credits which emanated

from luch payments is an unjust or unfair device or means of allow

ing Imperial to obtain transportation for property at less than the

regular rates and chalges thenestablished Acgain it is immaterialtha

the payment of the freight was subsequent to the credits granted to

Imperial If the final outcome is that the credits are related to the

freight as hasbeen herein found the violation IS established Nor does

the fact that Imperial paid the full freight detract from this conclu

sion Ithad indirectly received funds by means of credits to apply

when the freight waspaid

It is concluded that respondents Norton E L MA Netumar Loide

and Navem have violated sections 18 0 3 and 16 second of the act

The record does not support findings of specific violations of the ac

by other respondents

Further issues raised by respondents which merit consideration in

clude ELM As contention that the transaction in which it is alleg

edly involved occured subsequent to the date of the amended order o

investigation and thus is beyond the scope of the investigation Th

amended order which was issued prior to the date of the alleged

involvement of E LM A in a specific transaction expanded the

investigation to include whether any respondent is giving undu

preferences or advantages or allowing the carriage of good

at less than the tariff rateThelanguageof theamended order plainly

overs any event occuring during the hearing Theundesirable altern

ative would be the institution of an additional investigation as to this

transaction and the further expenditure of time and litigation costs

E LM A further contends that the examiner s

ruling that crossex

amination would be limited to counsel representing any responden

involved in the direct testimony improperly hampered E LM A

counsel in cross examination and that the ruling vitiates all of the

testimony adduced at the hearing The ruling wasbased on rule 10 n

of the Commission s rules of practice and procedure and was made to

avoid undue delay in the conduct of the hearing Nine counsel ap

peared to represent the various respondents Had each counsel cross

examined every witness it is evident that the hearing would be un

duly prolonged Counsel for E LM A vigorously cross examined eac

witness who testified as to his clients involvement He bases his tech

nical point on the ground that he was refused the right to cross ex

lIS FMO
MALPRACTICE BRAZlr UNITED STATES TRADE 83

amine a witness who testified that all foreigIJ lines were rebating

Such testimony being too general in nature tohave probative value

was not considered in any finding here made IfE LMA has been

deprived of any substantial right the fact has not been persuasively

demonstrated

Additionally ELMA finds fatal error on the ground that the

examiner refused to issue a

subpena duces tecum The docket discloses

that counsel wrote to the examiner stating that if counsel for Im

perial failed to furnish certain additional documents voluntarily

within a reasonable time then I

request that you issued a subpena

duces tecum A further letter advised the examiner Iwish to

avoid the necessity for issuance of a

subpena duces tecum for the pro

duction of all ofthe telexes which Iwas told Iwould receive Un

less this is done voluntarily by Imperial s counsel I

request the

issuance of a

subpena duces tecum for their production And IfMr

Simons fails to furnish these documents voluntarily within a reason

able time then I

request that you issue a

subpena duces tecum for the

production of these telexes Further Itherefore request that

Mr Simons have his client undertake a further search in his office to

ascertain where the missingtelexes are Unless thisis donevoluntarily

I

request the issuance of asubpena duces tecum for their production

Itappears that Imperial conducted a further search of its files and

produced two additional telexes and advised the examiner that Im

perial was of the opinion that they were the only documents relevant

to the request of E LM As counsel The conditional nature of any

request for the issuance of the subpena does not constitute a proper

request for action by the examiner Counsel did not submit an original

and two copies of the subpena which the Commission s rule 9 a re

quires when production of evidence is sought Nor did counsel avail

himself of the available discovery procedure Under these circum

stances the issuance of a

subpena duces tecum was neither warranted

nor required ELMA also contends that speculation about actions of

its agents does not constitute a basis for a valid finding of aviolation

of the act This goes to the sufficiency of the evidence and is above

discussed

Counsel for Norton consider this investigation an ill founded at

tempt by the Commission to interfere with the relationships inBrazil

contrary to the comity of nations and that taken in their best light

the allegations against Norton concern dealings between its agent in

Brazil and a Brazilian coffee exporter This arugment is not persua

sive If a carrier subject tothe Commission s

jurisdiction could avoid

the regulatory authority of the Commission by carrying out mal

practices on foreign soil and by persons who could not be required

15 FMC
84 FEDERAL MARITIME COMMISSION

to appear before the Commission the obvious result would be thtL

malpractices could not be controlled and they might become rife to

the detriment of commerce This question was resolved by the Com

mission in Urtap fY01ea SeetiO 1 15 Ag1eement8 SpaniBhP01tugueae

bade 8 FM C 596 609 1965 A carrier may not immunize itse

from responsibility to adhere to the act s provision by disassociatin

itself from its a nt s activities re rdless of where these a

are conducted Norton further attacks the examiner s conduct of the

hl aring as fundamentally unfair as he wasdisposed to admit evidence

forunless he did hearing counsel could not prove a case Theexamine

stated on the record that he recognized the difficulty of adducing proo

under the circumstances existing Hearsay was admitted some of 

remote if it was relevant to the issues involved However the adm

ting of hearsay is not reversible error If the examiner conducte

himself with less than the judicial detachment required for a fa

hearing it is for a

reviewing forum to determine by examination o

the entire record

Other contentions advanced by respondents include an attack o

the evidence adduced by hearmg counsel particularly the testimon

of Imperial s president as unreliable inconsistent and mere con

jecture The only testimony herein considered was given by witnesse

who were subpenaed and as one of them stated while walking on 

tight rope Many faced the possibility of offending the persons 

Urazil with whom they did business or the Brazilian government 

the detriment of their businesses As toshipperwitnesses particular

Imperials president they would be aware of that portion of sectio

16 of the act which makes it unlawful for a shipper toobtain or a

tempt to obtain transportation atless than the applicable rates The

is some inconsistency between testimony given on direct and on cros

examination but there can be no implication that any witness failed 

respond to any question propounded to the best of Ais ability Th

examiner considered these factors in weighing the evidence togeth

with his observation of the witnesses while testifying Rumor or r

mote hearsay have not been relied upon to arrive at any findinlt mad

also beenconsidered in weighingthe evidence but hasnot been deem

probative of the factthat the practice of rebating waswidely know

in the trade The fact that the sources of informaiton set forth in th

hearsay evidence were persons not available for cross examination h

alsobeen considered in weighingthe evid nce but bas not beendeem

to be a basis for excluding non remote hearsay from the category 

probative evidence The sources of the hearsay werenot available 

hearingcounsel although respondents could have made available the

111 IHO
MALPRACTICESBRAZIL UNITED STATES TRADE 85

own pel SOnnel oragents inBrazil to rebutthe hearsay had theyelected

to do so As one counsel has stated no carrier is required to rebut

rumor alledgedly spread by competitors but there is far more than

rumor spread on this record Loide s argument that a standard of

lvidence higher than mere hearsay is required in view of possible

criminal and civil penalties has been considered but it is not persua

sive in view of the Commission s decision in UnapprO Jed SectiAYn 15

Agree IMnt8 S African Trade 8upra The Commission is an admin

istrative body Penalties may be imposed only by the courts and in

such proceedings the limitations on evidence are far stricter than in

an administrative proceeding Hearing counsel has established a

prima facie case of violations of the act by respondents Netumar

RLMA Navem Loide and Norton Respondents elected not to reo

but the evidence adduced Violations of the act are supported by

evidence far more substantial than a scintilla mere rumor or uncor

lOborated hearsay In this proceeding there is such relevant evidence

that is logically probative that is such as a reasonable mind might

accept as adequate and of rational probative force tosupport the con

clusions made Willapoint OY8ters v Ewitng supra Edison v Labor

Board supra Universal Oa IMra Oorp v NLR B supra

ULTIMATE CONOLUSIONS

Rebating is and has been since 1964 a practice in the northbound

tradebetweenBrazil and theUnited States

Respondents Norton E LM A Navem Loide and Netumar

violated section 16 second of the act by allowing Imperial to obtain

transportation at less than the regular rates or charges by the unjust

and unfair means of compensating Procafe and or Stockler exporters

from Brazil for the privilege of being selected as the carrier of

coffee sold by those exporters to Imperial and the passing on of all or

a

part of that compensation by the exporters to Imperial who paid

the freight

Respondents Norton ELMA Navem Loide and Netumar

violated section 18 b 3 of the act by receiving less ordifferent com

pensation for thetransporation of coffee than specified in the appli

able tariff

As to all other respondents this proceeding is dismissed

S HmmERT K GmmR

Pre8iding E0

WASHINGTON D C

March 15 1971

lIS IMO
FEDERAL MARITIME COMMISSION

WAilHlNGTON D C

SPECIAL DOCKET No 431

YAHAHA MOTOR CoMPANY LTD

v

PARTIEil To JAPAN GREAT LAXEil MEMORANDUM

December10 1971

NOTICE OFADOPTION OF INITIAL DECISIONAND

ORDER PERMITTING REFUND OF CHARGES

No exceptions having been taken to the initial decision of the Ex

aminer in this proceeding and the Commission havinj determined

not to review same notice is hereby given that the initial decision be

came the decision of the Commission onDecember 10 1971

Iti8 ordered That applicant is authorized torefund 11 19453 of the

charge previously assessed Yamaha Motor Company Ltd

Iti8 further ordered That applicant publish promptly in its

appropriate tariff the following notice

Notice is hereby given that as required by the decision of the Federal Maritim

Commission in Special Docket 481 that effective June 20 1971 the rate on Item

No 1586 Snowmoblles for purposes ofretunds or waiver of freight charges o

any shipments which IlIlY have been shipped during the period June 20 1971

to June 1971 is 46 73 W1M but subject to all other applicable rules regula

tions terms and conditions of said rate and this tariff

Iti8 further ordered That refund of the charges shall be effectuated

within 30 days of this notice llnd applicant shall within five day

thereafter notify the Commission of the date and mannerof effectuat

ingthe refund

By the Commission

SEAL 8 FRANClil C HURNEY

Secreta1 lJ

86

111 FX C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 431

YAMARA MOTOR CoMPANY LTD

v

PARTIES To JAPAN GREAT LAKES MEMORANDUM 1

Respondent is permitted to refund to complainant the sum of 5194 53 as part

of the freight charges assessed and collected for the transportation of snow

mobilesfrom Shimizu Japan to Chicago Illinois

A A deGiglio for respondent

INITIALDECISIONOFASHBROOK P BRYANT

PRESIDING EXAMINER

This is an application filed by respondent under Public Law 90298

90th Congress for permission to refund to complainant the sum of

5 194 53 aspart ofthe charges assessed and collected by Nippon Yusen

Kaisha amember of respondent for the transportation of the cargo

referred to below

On June 10 1971 complainant requested respondent to establish a

special rate on snowmobiles from Japan to Chicago the rate at that

time being 68 25 W1M on sporting goods N O S Respondent acceded

to the request and published arate of 46 75 W1M on snowmobiles to

become effectiveJune 14 1971 and complainant wasso notified on June

11 1971 Because of aclerical error in transmission the new rate was

not timely filedwith the Commission

On June 20 1971 complainant shipped 300 cartons of snowmobiles

from Shimizu Japan toChicago Illinois onNippon Yushen Kaisha s

MIS King Minos bill of lading No 85 006 and charges of 16 665 28

werecollected from complainant Itwas later discovered that the new

rate had not been filed with the Commission whereupon additional

t The correct name of respondent 18 Japan Great Lakes Rate MemoraDflum

Ii This decision becamethe decision of the Commission December 10 1911

87

15 FMO
88 FEDmtAL MARITIME OOMMISSION

charges of 0 194 53 were collected from complainant based upon 

tariff which the conference had intended to amend The present 

plicationseeks refund ofthisadditional freight

Section 18 b 3 of the Shipping Act 1916 as amended by Pu

Law 90298 referred toabove provides that the Commission may 

its discretion and for good cause shown permit acommon carrier 

water in foreign commerce or a conference of such carriers to refu

aportion of freight charges collected where it appears that there is 

error in a tariff of aclerical or administrative nature and that s

refund will notresult in discrimination among shippers The appli

tion discloses a set of facts and circumstances which fall within 

purview and intent of the statute Having complied with the requ

ments of the statute and good cause appearing applicant is permit

torefund tocomplainant the sum of 5 194 53 Thenotice required 

thestatute shall be published in the conference tariff and refund sh

bemade within 30 days of such notice Within five days thereafter 

plicant shall notify the Commission of the date of the refund a

the mannerinwhichpayment has been made

S ASHBROOK P BRYANT

WASHINGTON DC November 19n

111 F X 
FEDERAL MARITIME COMMISSION

WASIDNGTON D C

SPECIAL DOCKlET No 433

COMMODITY Crown ColU ORATION AS AGENT FOR AID

I

MINI CARRIERS SYSTEMS INC

Decembere9 1971

NOTICE OF ADOPTION OF INITIAL DECISION AND

ORDER PERMITTING WAIVER OF CHARGES

No exceptions having been taken to the initial decision of the

Examiner in this proceeding and the Commission having determined

not to review same notice is hereby given that the initial decision

became the decision of the Commission on December 29 1971

Itis ordered That applicant is authorized to waive collection of

151 208 1Y8 of the charge previously assessed Commodity Credit

Corporation

Itis further ordered That applicant shall publish promptly in its

appropriatetariff the followingnotice

Notice Is hereby given as required by the decision of the Federal Maritime

Commission In Special Docket No 483 that effective September 28 1971 the

rate on wheat bulgar for purposes of refund or waiver of freight charges on any

shipments from New Orlean Louisiana to Georgetown Guyana which may

have been shipped during the Ptrlod from September 23 1971 through October 20

1971 Is 29 50 W subject to all other applicable rules regulations terms and

conditions of said rote and this ta riff

Itis further ordered That waiver ofthe charges shall be effectuated

within 30 days of service ofthis notice and applicant shall within five

5 days thereafter notify the Commission of the date and manner

of effectuatingthewaiver

By the Commission

SEAL 8 FRANCIS C HURNEY

Searetary

15 FM C

89
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 433

COMMODITY CREDIT CORPORATION AS AOENT FOR AID

v

MINI CARRIERS SYSTEMS INC

Application to waive a portion of freight charges granted

INITIALDECISION OF STANLEYM LEVY

PRESIDINGEXAMINER 1

This is an application filed by respondent pursuant to section 18 

3 of the Shipping Act 1916 for permission to waive collection 

151208 58 for the transportation of a shipment of wheat bul

from New Orleans Louisiana to Georgetown Guyana on Septe

ber 23 1971 aboard respondent s vessel M V Mini Lap

At the time the shipment for the Commodity Credit Corporat

as agent for AID was arranged the carrier erroneously thou

the CQmmodity to he a wheat flour for which the tariff provided a r

of 29 50 per 2 000 pounds The parties intended that the shipm

be transported at 29 50 per 2 000 pounds with aresultingtotal cha

of 2 628063 8In fact wheat bulgar is a

sepprate and distinct c

modity from wheat flour and for which the tariff had no specific ra

Having no specific r8ite wheat bulgarwould otherwise have to be ra

as Cargo N O S at 92 50 per 40 cubic feet or 2 000 pounds At s

rate the transportation charges of 153 837 218 would be far in exc

of the parties intention and agreement In order to rectify the er

and close the gap in the tariff structure Mini Lines filed an ame

ment to the tariff reflecting a rate for wheat bulgar of 29 50 

2000pounds

1

This decision becamethe decl810n of the Commission December 29 1971

1II1nl Line Southbound Frelrht Tarllr No 8 F III C No 8 Third revised pare 

elrectlve AprU 28 1971

Includes 472 21 of mtBcel1aneous charres The shipment measuring 66 815 cubic 

welrhed 146 198 pounds

Telerraphlc revtBlon to pare 68 Item 2060 elrectlve October 21 1971 received by 

Commission October 21 1971

15 F M

90
COMMODITY CREDIT CORP V MINI CARRIERS SYSTEMS 91

Section 18 b 3 provides that the Commission may in its dis

cretion and for good cause shown permit a common carrier by water

in foreigncommerce to waive the collection of a portion of the freight

charges from the shipper where it appears there is error in the tariff

of an administrative nature and that such waiver will not result

in discrimination among shippers and provided further that the car

rier prior to filing for authority to waive collection filed a new tariff

with the Commission which sets forth the rate on which such waiver

would bebased

The circumstances in this case fall within the purview and intent

of the statute Having complied with the requirements of the statute

and good cause appearing applicant is permitted to waive collection

of 151 208 58 Notice of waiver shall be published in the tariff within

30 days ofthisdecision

S STANLEY M LEVY

Pre8iding Ewaminer

WASmNGTON D C Decemberfl 1 97

15 F MC
FEDERAL MARITIME COMMlSSION

DooKET No 71 17

VIOLATIONS OF SECTIONS 14 FOURTH 16 FIRST AND 17 SHIPPING AC

1916 IN THE NONASSESSMENT OF FUEL SUROHARGES ON MrLrrAR

SEALIFT COMMAND MSC RATES UNDER THE MSC REQUEST FO

RATE PROPOSALS RFP BIDDING SYSTEM

J afll Miry 19 1m

Motion to Strike Portions of Hearing Counsel s Reply denied

No violation of section 14 Fourth Shipping Act 1916 found In the failure 

respondent carriers to Impose a surcharge on the carriage of military ca

for MSC while Imposing the surcharge on the carriage of commercial ca

Section 16 First Shipping Act 1916 found to be violated by the above practi

Section 17 Shipping Act 1916 also found to be violated by the above pract

Richard W Kur1 U8 and Howard A Levy for American Exp

Isbrandtsen Lines Inc United Sttes Lines Inc and Seatrain Line

Inc GeraldA Malia for Sea Land Service Inc Edward D Ramo

and Thomas E Kimball for American Mail Line Ltd Americ

President Lines Ltd Pacific Far East Line Inc and States Stea

ship Co RonaldA Oapone for Central GulfSteamship Corp Llo

F Douse for Gulf South American Steamship Co Inc Sterling 

Stoudenmire Jr for Waterman Steamship Corp John B South

for Columbia Steamship Co Inc Dal id Simon for Prudential Gra

Lines Inc Robert N Kharasch for States Marine International In

Isthmian Lines Inc and Global Bulk Transport Inc W J Amo

Jr forLykes Bros Steamship Co Inc David F Anderson and Pe

P Wilson for Matson Navigation Co Amy Soupi for Americ

Union Transport Alan F WohZstetter for United Fruit

respondents

Dudley J Clapp Jr Milton J Stickles Jr and E Duncan Ha

ner Jr for MilitarySealift Command intervenor

Joseph B Slunt and Donald J Brunner Hearing Counsel

92
VIOLATIONS OF SECS 14 16 AND 17 SHIPPING ACT 19 16 93

REPORT

By THE COMMISSION Helen Delich Bentley Ohairmanj Ashton C

Barrett Vice Ohairmanj James V Day George H Hearn Oom

missioners

On February 23 1971 weordered respondent carriers 1to show cause

why their failure toimpose afuel surcharge on military cargo carried

pursuant totheMilitary Sealift Command s MSC competitive pro

curement system is not in violation of section 14 Fourth section 16

First and or section 17 of the Shipping Act 1916 in view of the fact

that such surcharge was imposed upon all commerciill cargo carried

A subsequent Commission order of investigation in Docket No

7135 Investigation of Oompetitive Procurement Practices on Mili

tary Oargo issued onApril 7 1971 prompted hearing counsel to move

for dismissal of the instant proceeding on the ground that the issues

herein would be resolved in Docket No 7135 This motion to dismiss

wasdenied by order served on June 16 1971

Abrief sketch ofthe facts surrounding the imposition of the bunker

surcharge is in order Beginning in the fall of 1970 common carriers

in the foreign commerce of the United States began filing in their

tariffs bunker surcharges to offset increases in the cost of fuel These

surcharges range from 1 per freightton to as highas 5 percent of the

applicable rate However most of the surcharges are published as

either a 2 or 3 per freightton or a 2or 3 percent increase in the ap

plicablefreightrate

With the few exceptions mentioned below all the surcharges have

been assessed solely against commercial and nonmilitary government

cargoes The American flag common carriers who transport most mili

tary cargoes under the cargo preference laws have not assessed sim

ilar surcharges against military traffic The military cargo moving via

these lines under shipping and container agreements which are filed

with the Commission in lieu of tariffs moves in the same vessels at

thesame time that commercial cargoes aremoving

Since it would seem that any increase in the cost of fuel which neces

sitates the carrier to assess a

surcharge against commercial cargoes

1

Respondents in tbls proceeding include American Export Isbrandtsen Lines Inc

American Mail Line Ltd American President Lines Ltd j American Union Transport

Inc Central Gulf SteamRhlp Corporation Columbia Steamship Company Inc Global

Bulk Transport Incorporated j Gulf South American Steamship Co Inc Isthmian

Lines Inc Lykes Bros Steamship Co Inc Matson Navigation Co Moore McCormack

Lines Inc Pacific Far East Line Inc Prudential Grace Lines Inc Sea Land Service

Inc j Seatraln Lines Inc j States Marine International Inc States Steamship Co

United Frnlt Co United State Line Inc and Waterman Steamship Corp

10 F M C
94 FEDERAL MARITIME COMM8SlION

would also necessitate the assessment of a surcharge againstthose 

tary cargoescarried having the same general characteristics the Co

mission instituted this proceeding to determine if the practice in qu

tion violated pertinent provisions of the Shipping Act 1916 j name

sectionS 14 Fourth 16 First and 17

By a petition for leave to intervene the commander of theMilita

Sealift Command became a party to the proceeding and has file

brief on behalf of the Department of Defenlle Three of the abo

named respondents submitted replies stating that they were no lon

operating as common carriers or no longer carried military cargo 

requested that this proceeding as to them should be dismissed As 

these three carriers American Union Transport Inc United F

Co and Matson Navigation Co the proceeding is dismissed

Hearing counsels Reply to respondents answers to the s

cause order wasfiled on July 15 1971 This prompted Sea Land S

ice Inc to file a Motion to strike Portions of Hearin gCoun

Reply which wassubmitted on July 19 1971

DIsCUSSION AND CONCLUSION

1 Themotion toBtrike

In its motion tostrike portions of hearing counsels Reply S

Land Service Inc claims that several of hearings counsels st

ments are in error and could be misleading and therefore prejudi

Thestatsments towhich Sea Land refers are that the Milit

Sealift Command s container agreements do not allow for the imp

tionof a surcharge for bunkers and that the carriers have failed 

levy a fueLsurchalge against military cargoes Further 

ferrM tois hearing counsels allegationof a

practice of chargin

surcharge only against commercialtraftlc and finally he sic re

to our failure toimpose amilitary surcharge

j

1

j

S ctlon 14 Fourth prohibits common carri u bv wat r trolll making any unj

discriminatory contract with any hlpp r ba d on volume o tr lght The tact tha

hlpplng and contaln r agr m nts do not allow the carriers the right to as addi

charge ther under ev n a a r ult ot the In zp ct d cumulatlv Incr as p I 

In r ard to bunker fu l co t I al l

to r ult In a prima facl violation of s ctlo

Fourth

Section 16 FIrst mak s It unlawful tor any common carrl r by water to glv any u

sonabl pr tr nc or advantage to any d scrlptlon ot tralllc Thus the fllur to Im

abunk r urcharge on mUltary cargowhUe comm rolal carau has to pay torthe InOa

bunk r co ts woul l also cr at a prima lacl vlolatlon of aectlon 16 Flr t

S ctlon 17 forbids Common carri 18by wat r

In tor 1l1f comm rce frOm chargln

coll ctlng any rat or char whiCh Is unjustly dIscriminatory b tw en shlpp rs A 

comm rclal hlpp rsar being charged a bunko urcharg whU a large portion ot 

I not lmllarly a d a urchar this al o r ult In a prima facl violatio

ectlon 17

111 FM
VIOLATIONS OF SEes 14 16 AND 17 SHIPPING ACT 19 16 95

Sea Land is particularly disturbed at hearing counsel for failing to

take into account the pending case at the Armed Services Board of

Contract Appeals ASBCA where Sea Land is currently pursuing

its attempt to collect the surchargeon militarycargo

Despite hearing counsels oversights the Commission will be able

to render a

cogent decision without resort to striking portions of hear

ingcounsel s

reply The Commission is well awareof the fact that Sea

Land is presently pursuing its remedy before the ASBCA and it is

felt that the other statements referred to by Sea Land will not cause

irreparable damage to any party nor willthey hinder the Commission

in resolving the issues in the instant proceeding For the foregoing

reasons themotion to strike is denied

2 The violations

In general the consenus of the replies to the Commission s order

to show cause was that any assessment ofthe surcharge against MSC

would be futilesince it has flatly refused to acquiesce in the imposition

ofsurcharges ofany kind

The real blame for the problems encountered by the industry in its

dealings with MSC is alleged to be due to the arbitrary procurement

practices followed by MSC Thus the substance of respondents argu

ment is that there is something rotten in the state of the entire pro

curement system Although it would appear that the industry is not

entirely blameless MSC bears the burden of responsibility for this

proceeding caused in great part by its overly restrictive contractural

prohibitions The Commission is attempting to sort out the problems

of the system by means of an investigative proceeding in Docket

No 71 35 The immediate problem under consideration herein the

imposition of surcharges to compensate for increased bunker fuel

costs has been alleviated for the future by the implementation ofRFP

600 effectiveApril 16 1971

This proceeding is not concerned with the matter of the fairness of

the system as a whole rather the precise issue herein is whether the

failure ofthe respondent carriers to impose a surcharge on the carriage

ofmilitary cargo for the MSC while imposing the surcharge on thecar

riage of commercial cargo is unlawful under the Shipping Act 1916

Therefore the contentions of the various respondents with respect

to the ills of the MSC procurement system as a whole are deemed to be

irrelevant to this proceeding Similarly respondents protestations

regarding the underlying contract and the inherent unfairness of

RFP 500 are also beside the point Consequently substantive portions

of respondents hearing counsel s and especially MSC s briefs dealing

15 F M C
96 FEDERAL MARITllIm COMMISSION

with the above subjects can for practical purposes be ignored Fo

purposes of this report only those portions of the briefs dealing wit

the alleged violations the only issue in this proceeding will 

considered

Aside from the above mentioned general replies that the impositio

of asurcharge would be afutilegesture in view of MSC s

totally ad

mant attitude toward the payment of same several respondents su

mitted more detailed briefs in their defense of these only o

respondeilt Sea Land Service Inc has taken one of the two remedi

for relieving itself of the alleged violations Sea Land has impos

the surcharge and is currently attempting to collect it by pursuin

its remedy before the Armed Services Board of Contract Appea

ASBCA

The other alternative available to respondents in the event that 

violation is found is of course to remove the surcharge from t

commercial cargo onwhich it has so farbeen levied This would ther

fore eliminate any trace of discrimination or preference Once ha

ing pursued the former alternative the imposition of the surchar

on military cargo followed by resort to the ASBCA a

responde

would have done all it can as far as the Commission is concern

since the shipper MSC is beyond its jurisdiction in this type 

situation where no violations of the act by the shipper have be

alleged

We therefore conclude that Sea Land Service having imposed t

surcharge and pursued its remedy before the ASBCA is no longer 

violation ohny of the sections of the ShippingAct in issue Howev

as to the remaining respondents if any violations of the IUlt 

found these respondents having relied on their defense that to i

pose the surcharge would be futile will be held liable for tho

violations

A THE SECTION 14 FOU1lTB VIOLATION

Section 14 Fourth of theShipping Act 1916 is saidtobe violated

the fact that the failure toimpose and collect a

llurCharge on the m

tary car carried constitutes an unfair or unjustly discliminato

contractwith ra shipper based on the volume of freight offered

The section 14 Fourth contentions advanced by respondents MS

andheariilg counsel miss the mark as they are concentrated on 

underlyin l contra titself ar lUinl either that RFP 1i00 is or is no

volume contractof the sort proscribed by section 14 Fourth It is n

however the underlying contractwith which we are concerned here 

ratherthe surcharge and the manner ofitsimposition or lack there

111 FM
VIOLATIONS OF SECS 14 16 AND 17 SH1PPING ACT Ul 16 97

As regards respondents and MSC s argument that these contracts

are not volume contracts suffice it to state that the Commission as

well as the courts took a

longand hard look at the present competitive

bidding system when it first went into effect in 1967 The D C Court

of Appeals in Amerioan Export J8brandtsen Lines v FM O 380

F 2d 609 D C Cir 1967 concluded that the contracts under con

sideration there under agreement RFP 100 were volume contracts

subject to section 14 Fourth

Thus it is clear that the underlying contracts are in fact volumecon

tracts subject to section 14 Fourth On this point we are in agree

ment with hearing counsel We cannot agree with hearing counsels

argument however that section 14 Fourth is violated by the ship

ping and container agreement s failure under RFP 500 to contain a

provision which would allow a surcharge to be imposed during the

course of a full year on such a large share of a carrier s

cargo

As stated above the basic contract itself is irrelevant to this proceed

ing its inherent defects if any are the subject of Docket No 7135

What must be analyzed in light of the prohibitions of section 14

Fourth is the fact that a surcharge has not been imposed on the car

riage of cargo for one particular shipper viz MSC while the sur

charge wasimposed on the carriage of cargo for all other shippers

The question which must then be asked is whether such an imposi

tion of a surcharge constitutes an unfair or unjustly discriminatory

contract with a shipper based on the volume of freight offered The

answer to thisquestion in the instant proceeding weconclude must be

no It is readily apparent that the imposition of the surcharge has

absolutely nothing to do with the volume of freight offered it was

imposed on one shipper and not another merely because one shipper

had stated that it would not acquiesce in the surcharge Thus the

volume of freight offered is irrelevant The nature of the activity pro

scribed by section 14 Fourth is not the alleged violation of this

proceeding

B THE SECTION 16 FIRST VIOLATION

Section 16 First of the Shipping Act 1916 is alleged to have been

violatedby the fact that the imposition ofthe surcharge upon cargo of

one shipper and not that of another constitutes the giving of an un

due and unreasonable preference or advantage to MSC as well as an

undue or unreasonable prejudice or disadvantage to the commercial

shippers

Respondents replies to this allegation center around the necessity

for a competitive relationship between the shippers or between the

15 F MC
98 FEDERAL MARITIME COMMISSION

types of traffic with a showing of injurious effect upon the traff

discriminated against as a condition precedent for a violation of se

tion16First

Itis true that a competitive relationship is necessary before a vi

lation of this section can be found in the ordinary rate dispar

case since it is only logical that the cost of shipping bananas shou

bear no relationship to the cost of shipping heavy industrial equ

ment Thus to find an unlawful discrimination in transportatio

charges quite properly requires ashowing of competitive relationsh

between two shipperswho are assesed different rates

However when dealing with a service whichis absOlute or an acro

the boardfixed chargeon all cargo carried regardless ofthe commod

involved the instant surcharge the competitive relationship is 

longer required As the Commission stated in Investigation of F

Time Practioes Port of San Diego 9 F MC 526 1966

unequal treatment has no place In a regulated Industry The equa

required in situations of this kind is absolute and is not conditioned on s

things as competition proximate cause and the like To the extent that the ot

cases may read as requiring the establishment of a competitive relationship 

the situation here Involved they areoverruled 9 F MO at 647

As hearing counsel correctly pointed out a surcharge is not gea

to either transportation factors or the differing chaoocteristics of co

modities since it is imposed on each and every ton of cargo regardle

of the commodity or length of voyage Here respondents had an o

gation toadminister the surcharge equally to all commodities Failu

todo so estwblishes a clear situation ofundue prejudice to a desc

tion of traffic vis a vis other commodities in violation of section 

ofthe act

Hearing counsel also point out that the Investigation of Free Ti

PractiOe8Port of San Diego case supra i

tated the principle th

section 16 First may be violated by shiftingthe burden of paying 

cost of a service to nonusers of the service This in turn wasbased 

the principle first enunciated by the Commission in Practioes Eto 

SJYl Frarwisoo Bay Area Terminals 2 U S M C 588 603 1941 t

it was not proper to shift the burden of paying for certain term

services to users of otherterminal services Thus the surcharge sit

tion is analogous since its imposition upon only nonmilitary ca

places the burden of paying for an increased vessel operating expe

solely on commercial shippers

Respondents argument thatthe resultant discrimination if a

is unintentional does not impress us Although we have no reason 

suspect their good intentions an otherwiSe unjustly prejudicial p

111 Jl M
VIOLATIONS OF SECS 14 16 AND 17 SHIPPING ACT 19 16 99

tice will not be saved from condemnation As the Commission stated

in Am Tobacco 00 v Oompagnie Generale Tramatlantique 1

D S S B 53 56 1923 if a carrier s conduct subjects a shipper to

undue discrimination the carrier s knowledge or lack of knowledge

of such condition is plainly immaterial We conclude that section 16

First is clearly violated by the imposition of the surcharge on non

military cargo only

C THE SECTION 17 VIOLATION

Hearing counsel claim that section 17 is violated by a disparity in

rates which cannot reasonably be justified as in the instant case Re

spondents argument is that the Commission has held that in order

to find a section 17 violation there must be two shippers oflike traffic

over the same line between the same points under the same circum

stances and conditions but who are paying different rates Since the

commodities involved in this proceeding are different ie military

cargo versus commercial cargo it is argued that there can be no section

17 violation

As in the discussion of the section 16 First violation which discus

sion is equally applicable to the section 17 violation what we are

concerned with is not the initial rates of carriage which are justifiably

different for military and for commercial cargo but rather the flat per

ton surcharge imposed across the board without regard to the type of

commodity carried We conclude that the failure to collect this charge

from MSC and to collect it from commercial shippers only constitutes

the collection of a charge which is unjustly discriminatory between

shippers in violation ofsection 17 ofthe act There is no reason what

soever tojustify the collection of the surcharg from commercial ship

pers and not from the military shipper MSC Without any justifica

tion for the collection of the surcharge from one shipper and not

another under the circumstances of this case one Clin only conclude

thatrespondents are in violation ofsection 17

We conclude that for the foregoing reasons there is no violation of

section 14 Fourth but there are violations of sections 16 and 17 by

virtue of respondents failure to impose and collect the surcharge on

the carriage of military cargo for MSC whileimposing and cotleding

the surcharge on the carriage of commercial cargo This discrimina

tion is clearly to the disadvantage of the commercial shipper who as

a

consequence is forced tobear the burden of increased vessel operating

expenses which would otherwise be spread equally over all shippers

The alternatives available to respondents are the imposition of the

surcharge and the further effort to collect it as Sea Land Service has

15 F lfC
100 FEDERAL MARITIME COMMISBlION

done in its pursuit before the ASBCA or the cancellation of the su

charge imposed against shippers of commercial cargo Accordingl

an appropriats orderwill beentered

CoHHI88IONER CLAllENOE MORSE dissenting

The sole issue in this case is stated in the report as being wheth

the failure ofthe respondent carriers toimpose asurcharge on the ca

riage of military cargo for the MSC while imposing the surcharge o

the carriage of commercial cargo is unlawful under the Shipping Ac

1916 Page 95

The report holds that respondents violated sections 16 First and 1

Shipping Act 1916 by the mere fact of failing to assess a surcharg

against military shipments when assessing a surcharge against com

mercial shipments In my opinion the report of the majority errs as 

matter of law in at least two basic respects namely 1 in holdin

that as amatter of law the surcharge must be imposed on milita

lhipments if asurcharge is imposed on commercial shipments and 

it disregards the guaranteed time and rate terms of contracts MST

P 26 andP 27

First The law is clear the government may lawfully be granted 

duced rate transportation In the Matter of the Oarriage of Milita

Oargo 1966 10 FMC 69 81 footnote 19 affirmedAmerioan EllJp

Isoramiltsen Lines v FYO 1967 880 F2d 609 In fact the Rep

itself reaffirms this statement when it declares what we are co

cerned with is not the initWl rates of CIJI1 1iage which are justifiab

different formilitary and for fItMroial oargo but ratherthe flat p

ton surcharge imposed across the board without regard to the type 

commodity carried Underscoring supplied page 99 Ifthe init

MSC rates werejustifiably different then the surchrage no surchar

situation may be justifiably different for the surcharge here is b

a rate increase by another name SW1 OhO l

ge of North Atlantio We

bownd Freight Association Docket 71 28 14 FMO B9B I fail to 

any difference in principle between giving the government reduc

rate transportation as compared torates to commercial shippers a

the actions here taken of assessing nobunker surchargeon governm

cargo but assessing a bunker surcharge on commercial cargo Hold

that the mere absence of the surcharge against military cargo is 

lawful if a surcharge is assessed against commercial cargo negates 

principle that government cargo may lawfully receive more favora

rates terms and conditions than that accorded to commercial car

All discriminations are not ipso facto unjust discrimination

111 114 0
VIOLATIONS OF SECS 14 16 AND 17 SHIPPING ACT 1916 101

Second Respondents and MSC entered into one year contracts

wherein respondents severally agreed to transport merchandisebetween

specified ranges of ports when tendered by MSC at firm specified

rates In American Ercport sbraruitsen Lines both the Commission

10 FMC at70 and Court 380 F 2d at 619 recognize the contracts in

question provide that the rates are guaranteed for one year Under

these contracts the cost of bunker fuel is for the account and risk of

respondents The contracts specify the terms conditions and proce

dures under which the contracts may be modified or terminated

Hence absent a change of circmnstances of such magnitude as to

amount to commercial frustration respondents must perform at the

stipulated rates unless granted relief in the manner permitted under

the contracts

For us to compel respondents to assess the bunker surcharge against

MSC in this situation is to hold in effect that respondents are not

firmly bound by the rate tenns of a firm fixed price contract of

carriage For us to compel respondents to assess the bunker surcharge

against MSC in this situation is to say that respondents by their

unilateral actions voluntarily imposing bunker surcharges on com

mercial shipments can effectively change the terms of the MSC con

tracts from a firm fixed price contract to a firm fixed price plus

three dollars per ton contract For us to compel respondents to assess

the bunker surcharge against MSC in this situation is to rewrite the

terms of the guaranteed fixed rate contract This Icannot accept

Itmay be contended that ifrespondents refrained voluntarily from

assessing a bunkersurcharge against military shipments it wasunlaw

ful under sections 16 First and 17 to assess any bunker surcharge

against commercial shipments That does not follow for the reason

that government shipments may lawfully be accorded different more

favorable treatment than that accorded tocommercial shipments For

like reasoning it follows that because respondents may be foreclosed

by their contracts from assessing a bunker surcharge against military

shipments respondents have not foreclosed themselves from assessing

a bunker surcharge against commercial shipments But the effect of

the Report when it requires the surcharge tobe applied against all or

none is diametrically opposed to that view Nevertheless if by be

coming a party to MSTS P 26 and P 27 respondents have thereby

foreclosed themselves from assessing abunker surcharge on commer

cial cargo and with such an argument I

disagree then so be it We

did not shape the facts We can only apply the law and reason to the

facts which are presented to us

15 F M C
102 FEDERAL MARITIME COMMISSiION

There was no evidentiary hearing The limited record here doe

not establish a whether the 3 surcharge against commercial carg

was justified by costs or whether the surcharge in fact should hav

been higher or lower b whether the surcharge levied against com

mercial cargo was intended to effect a full recovery of the entir

bunker cost increase or whether it was intended to effect recove

only of commercial cargo s share of the bunker cost increase or c

whether respondents didordid not include in their bids toMSC unde

RFP 500 acost factor tocover projected increased bunker price cost

Atlantio and Gulf West Ooast of South ArMnoa Oonference FMC

Docket 7043 Dec 21 1970 14 FMC 170 details the several yea

of spiraling bunker oil costs immediately preceding the signing b

respondents of the contracts with MSC To my mind these are e

sential facts which should have been developed and without which 

reasoned judgment cannot issue even if Iam held to be incorrect o

the two points I have argued supra I am not asserting that discou

rates to the government are alwayslawfuI What Iamsaying is tha

on this record there is no proof of undue or unreasonable preferenc

orprejudice by bare proof or difference in treatment as to the bunke

surcharge

I am not unsympathetic to the desire of my associates to ass

respondents fight against the competitive bid system utilized b

MSC but I cannot associate myself with the manner of assistanc

herein provided by the majority

Respondents had duly filed commercial tariffs and also tariffs wit

the Commission which incorporated the rates terms and conditions o

contracts MSTS P 26 and P 27 Therefore inview of section 18 b 3

ofthe act Ifail to understand the alternative suggestions voiced in th

penultimatesentence of the report

The two alternatives proposed in the report to cure the violation

found are one impose the surcharge against military cargo and pursu

carriers remedies beforeASBCA and two remove the surcharge from

the commercial cargo on which it has so far been levied If MSC 

successful in defeating thl surcharge before ASBCA the charge

difference in treatment of different shippers surcharge against com

mercial and no surcharge against MSC has not been corrected S

how has the carrier purged itself when its inability to collect from

MSC stems from a contract it the carrier voluntarily entered into

Likewise and assuming ASBCA disallows the surcharge again

military cargo to remove the surcharge in the second alternativ

Na hvill B1 v T nn 262 us 818 1928

111 FMC
VIOLATIONS OF SEes 14 16 AND 17 SHIPPING ACT 1916 103

must mean if it is to place all shippers on the same level the refund

ing of an bunker surcharge heretofore collected from commercial

shippers and immediate cessation of the assessment prospectively To

my thinking the two alternatives are unrealistic

Iconcur in the view that acompetitive relationship need not exist in

this situation in order to apply section 16 First or section 17

SEAL 8 FRANCIS C HURNEY

Secretary

15 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 71 17

VIOLATIONS OF SEOTIONS 14 FOURTH 16 FIRsT AND 17 SHIPPING Am

1916 IN THE NON AssESSMENT OF FUEL SURCHARGES ON MILITAR

SEALIFT Colll ll AND MSC RATES UNDER THE MSC REQUEST FO

RATEPROPOSALS RFP BIDDING SYSTElII

ORDER

This proceeding Wll8 instituted on February 23 1971 by 0Comm

sion issued Order to Show Cause to determine whether the failure 

the carriers involved inthe carriage of military cargo to impose a fu

surcharge on military cargo carried pursuant to the Military Sea

Command s MSC competitive procurement system results in vio

tion of sections 14 Fourth 16 First and or 17 of the Shipping A

1916 in view of the fact that suc surcharge was imposed upon 

commercial cargo carried Respondents replies and responses of 

other interested parties have been duly considered The Commissi

has this day issued its report inthe instantproceeding which ishere

incorporated herein by reference in which it determined that respon

ent carriers with four exceptions werein violation of sections 16 Fi

and 17ofthe ShippingAct 1916

Therefore it ia ordered That with respect to American Uni

Transport Inc United Fruit Co Matson Navigation Co and Se

LandService Inc thisproceeding is dismissed

Itia further ordered That the motion to strike portions of heari

counsel s Reply is denied

Itia further ordered That all other respondent carriers ease a

desist from further violations of sections 16 First and 17 of theSh

ping Act 1916

By the Commission

SEAl S FRANOIS C HURNEY

Seoretary

104

111 F MC
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 434

A ID US DEPARTMENT OF AGRICULTURE

V

STERLING NAVIGATION CO LTD

NOTICE OF ADOPTING OF INITIAL DECISION AND

ORDER PERMITTING WAIVER OF CHARGES

February 3 197e

No exceptions having been taken to the initial decision of the Ex

aminer in this proceeding and the Commission having determined not

to review same notice is hereby giventhat the initial decision became

the decision ofthe Commission on February 3 1972

It i8 ordered That applicant is authorized to waive collection of

1 557 486 55 of the charge previously assessed Agency for Interna

tional Development US Department ofAgriculture

Iti8 further ordered That applicant shall publish promptly in its

appropriate tariff the followingnotice

Notice is hereby given as required by the decision of the Federal

Maritime Commission inSpecial Docket 434 that effective Novem

ber 15 1971 the rate on FLOUR Bagged for purposes of

refund or waiver of freight charges on any shipments from U S

Great Lakes ports toAshdod Israel whichmay have been shipped

during the period from November 15 1971 through December 27

1971 is 38 50 per 2240 pounds subject to all other applicable

rules regulations terms and conditions of said rate and this

tariff

Iti8 further ordered That waiver ofthe charges shall be effectuated

within 30 days of service of this notice and applicant shall within 5

days thereafter notify the Commission of the date and manner of

effectuatingthe waiver

By the Commission

SEAL

15 FMC

Signed FRANCIS C HURNEY

Secretary

105
FEDERAL MARITIME COMMISSION

SPEOIAL Doo ur No 484

AI D U S DEPARTMENT OF AGRIOULTURE

v

STERLING NAVIGA ON Co LTD

Applicllition towaive a portion of freight charges granted

INITIAL DECISION OF HERBERT K GREER PRESIDIN

EXAMINER 1

S rling Navigllltion Co ua a common carrier by water in t

foreign commerce of the United States has applied for permissi

to waive collection of a portion of the freight charges on four sh

ments of bagged flour carried for theAgency for International Dev

opment Department of Agriculture from U S Great Lakes ports 

Asbdod Israel pnrsuant to bills of lading dated November 15 19 

and 30 1971 At the time of the shipments applicant s tariff did n

contain a rate for bagged flour and under its tariff filed with the Co

mission FMC No 3 original p No 16 the applicable rate w

250 per 2 000 pounds The lweight of the four shipments w

12 403 890 pounds

Prior to the shipments and as evidenced by the rate set forth 

the bills of lading and cargo booking confirmations the pplicant h

agreed to carry the shipments at the rate of 88 50 per 2 240 poun

Applicant intended tofile this rate with the Commission according 

the contract negotiated between the parties but through inadverten

failed todo so Priorto the filingof this application applicant amend

its tariff by filing a rate of 88 50 per 2240 pounds on flour bagg

Public Law 90298 authorizes the Commission for good cau

shown to permitiii commo carrier by water in the foreign con unerce

of the United States to waive collection of a portion of the freig

charges where there is an error in Ii tariff of a clerical oradminist

tive nature or an error due to inadvertence in filinga new tariff T

facts demonstrate an inadvertent failure to file the rate of 38 50 p

8ssist auce when billing customers

106 lIS FMO
A rD U S DEPARTMENT OF AGRICULTURE 107

240 pounds in accordance with the agreement with the shipper a

situation within the purview of Public Law 90298 The application

was filed within 180 days of the date of the shipments and no other

shipments of the same or a similar commodity moved on applicant s

vessels during approximately the same time as the shipments here

involved No other proceeding involving the same rate situation is

now pending

Good cause appearing and applicant having complied with the pro

visions of Public Law 90298 permission to waive collection of

1 557 486 55 and to apply to the shipments the agreed rate of 38 50

per 2 240 pounds is granted Applicant shall publish notice in its

tariff as required by the statute The waiver of the charges here

authorized shall be effectuated within 30 days of service of this notice

and applicant shall within 5 days thereafter notify the Commission

ofthe date and mannerof effectuating the waiver

HERBERT K GREER

Presiding Ewaminer

Washington DC
FEDERAL MARITIME COMMISSION

WASHINGTON D C

SPECXAL DOCKET Nos 435 AND 486

US DA

V

AxuR MABm ra CORP

Feb 1lB18 197

NOTICE OF ADOPTION OF INITIAL DECISION AND

ORDER PERMITTING WAIVER OF CHARGES

No exceptions having been taken to the initial decision of the e

aminer in these proceedings and the Commission having determin

not to review same notice is hereby given that the initial decisi

became the decision of the Commission on February 8 1972

Iti8 ordered That applicant is authorized to waive collection 

474 80 and 1 877 90 of the charges previously assessed Commod

Credit Corporation US Department ofAgriculture

Iti8 further ordered That applicant shall publish promptly in 

appropriate tariff the followingnotice

Notice is hereby given as required by the decision of the Federal Maritim

Commission in Special Dockets 485 and 486 that effective November 11 19

the rate on Grain and Grain Products in bap including Corn Soyabea

Soyabean Meal Bulger Flour for purposeR of refund 01 wntvPI of flPhrht

Charges on any shipments which may have been shipped during the period fro

November 11 1971 through January 4 1972 is 44 110 W per Long Ton and 

Cluding Seaway Tolls subject to all llther applicable rules regulations ter

and conditions of said rate and this tariff

Iti8 further Mdered That waiver of the charges shall be effectuat

within 80 days of service of this notice and applicant shall within 

days thereafter notify the Commission of the date and manner 

effectuatingthe waiver

By the Commission

SEAL

108

S FlwiOlS C HURNEY

Se01 6tary

15 IMC
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET Nos 435 AND 436

US D A

v

AMBER MARITIME CoRP

Applications to waive a portion of freight charges granted

INITIAL DECISION OF STANLEY M LEVY

PRESIDING EXAMINER 1

Amber Maritime Corp respondent a common carrier by water in

the foreign commerce ofthe United States has applied for permission

to waive a portion of the freight charges on 10 shipments of bagged

grain and grain products carried for the Commodity Credit Corpora

tion as agent for AID from Great Lake Ports to Bangkok Thailand

and Singapore Malaysia

Four of the shipments aggregating 1 488 437 pounds 2wereloaded

in Chicago and destined for Bangkok Six of the shipments totalling

4 319 455 pounds were loaded in Milwaukee and destined for Singa

pore All shipments moved pursuant to Amber sfreight tariff No 1

F MC ll page 10 issued October 8 1971 effective November 11

1971 at 44 50 per metric ton At such rate the charges for the four

shipments toBangkok aggregated 30 044 19 and forthe six shipments

to Singapore ag regated til 188 4J As set forth heleltftpi J e 1oIHlent

seeks to waive 474 80 of the Bangkok charges and 1 377 90 of the

Singapore charges

The negotiations for the booking of these shipments with the U S

Department of Agriculture were initially carried out with the freight

rate being based on metric tons and respondent filed its tariff on

October 8 1971 in anticipation of a booking on thisbasis However

the negotiations were later changed and ultimately concluded on a

1

This decision became the decision ot the Commission February 8 1972

Special docket No 435

8

Special docket No 436

15 FMO 109
110 FEDERAL RIT E CO ON

long ton basis by the brokers with the quantity on each booking r

maining in metric tons but the freight rate basis changedtolong ton

The actual booking notices were however not issued until N

vember 5 1971 although as set forth wbove in anticipation the tar

had been filed on O dber 8 1971 to become effective November 1

1971 The change in the booking notice reflecting long tons as t

basis for the freight rate wasinadvertently overlooked by the carrie

operation manager who thus failled to file a revised tariff before r

ceiving the shipments When the ms Department of Agriculture 

the process of checking freight invoices discovered the higher billing

based on metric tons it notified the carrier who prior tothe filing 

the applications herein did on December 29 1971 effective January 

1972 file a firstrev page10 toits tariff

Public Law 90298 authorizes the Commission for good cau

shown to permit a common carrier by water in the foreign commer

of the United States to waive collection of a portion of the freig

charges where there is an error in atariff of a clerical or administ

tive nature or an error due to inadvertence in filinga new tariff T

facts demonstrate an inadvertent failure to file the rate of 44 50 p

2 240 pounds in accorda ne with the agreement with the shipper 

situation within the purview of Public Law 90298 The applicati

was filed within 180 days of the date of the shipments and no oth

shipments of the same or a sim lar commodity moved on applican

vessels during approximately the same time as the shipments he

involved No other proceeding involving the same rate situation 

now pending

Good cause appearing and applicant having complied with the pr

visions of Public Law 90298 permission to waive collection 

474 80 and 1 377 90 and to apply tothe shipments the agreed rate 

44 50 per 2 240 pounds is granted Applicant shall publish notice 

its tariff as required by the statute The waiver of the charges he

authorized shall be effectuated within 30 days of service ofthis noti

and applicant shall within five 5 days thereafter notify the Co

mission of the date and manner of effectuating the waivers

S STANLEY M LEVY

Presiding Ewaminer

WASHINGTON DC JaTl Mlr 18 1975

15 F MC
FEDERAL MARITIME COMMISSION

WASHINGTON D C

SPECIAL DOCKET Nos 438 AND 439

COlUIODITY CREDIT CoRPORATION AS AGENTS FOR WORLD FOOD

PROGRAM

V

SAN Rocco LINE ANCHOR SHIPPING CoRP GENERAL AGENTS

February 16 1971

NOTICE OF ADOPTION OF INITIAL DECISION AND

ORDER PERMITTING WAIVER OF CHARGES

No exceptions having been taken to the initial decision of the ex

aminer in these proceedings and the Commission having determined

not to review same notice is hereby given that the initial decision

became the decision of the Commission on February 16 1972

It is ordered That applicant is authorized to waive collection of

51 703 05 for the shipments described in special docket No 438 and

2 411 70for the shipment described in special docketNo 439

Itis further Ofdered That applicant shall publish promptly in its

appropriate tariff the followingnotice

Notice is hereby given as required by the decision of the Federal Maritime

Commission in Special Dockets 438 and 439 that elfective December 2 1971 the

rate on Fiour N O S for purposes of refund or waiver of freight charges on

any shipments which may have been shipped from U S Great J akes Ports to

Beirut Istanbul and Famagusta during the period from December 2 1971

through January 3 1972 is 35 75 W inCluding all Terminal charges and Seaway

Tolls subject to all other applicable rules regulations terms and conditions of

said rate and this tarilf

Itis further ordered That waiver ofthe charges shall be effectuated

within 30 days of service of this notice and applicant shall within five

5 days thereafter notify the Commission ofthe date and mannerof

effectuating the waiver

By the Commission

SEAL

15 F M C

S JOSEPH C POLKING

Assiatant to tlleSecretary

111
FEDERAL MARITIME COMMISSION

SPEOIAL DooKET Nos 488 AND 489

COMMODITY CREDIT CORPORATION AS AGENTS FOR WORLD FOO

PROGRAM

V

SAN Roooo LINE ANOHOR SHIPPING CORP GENERAL AGEN

Permission to waive a portion of freight charges granted

INITIAL DECISION OF HERBERT K GREER PRESIDIN

EXAMINER

San Rocco Line a common carrier by water in the foreign comme

of the United States through its agent Anchor Shipping Corp 

filed applications for permission to waive collection of a portion 

the freight charges on four shipments carried for the Commo

Credit Corporation agents for the world food program from M

waukee Wis to Famagusta Cyprus

Special Dooket No 498 Pursuant tothree bills of lading dated D

cember 2 1971 applicant carried atotal of 2 868 568 gross pounds 

Flour All Purpose Each billof lading set forth a rate of 85 75 

2 240 pounds including terminal charges and seaway tolls the r

agreed upon by the parties prior to the shipments Due to clerical 

administrative error applicant failed to file the agreed rate with 

Commission and atthe time of the shipments the rate applicable 

84 75 W1M on cargo NOS not dangerous or hazardous which 

charged would amount to 51 708 05 more than the agreed rate

Speoial Dooket No 499 The rate situation in this proceedin

identical with the facts above set forth Applicant s bill of lad

dated December 2 1971 was for a

shipment of 110 249 gross pou

of Bulgar Assessment of the applicable NOS rate would impos

charge on complainant of 2 411 70 in excess of the rate agreed u

prior to the shipment

I This decision became the decision of the CommissionFebruary 16 1972

112 111 FM
Prior to submitting the applications applicant filed with the Com

mission a rate of 35 75 per 240 pounds on FLOUR NO S for

account ofU S Department ofAgriculture Rates include all terminal

charges and Seaway Tolls FMC No 1 revised page 25 and the

same rateonBulgar FMC No 1 revisedpage 26

Public Law 90298 authorizes the Commission for good cause

shown to permit a common carrier by water in the foreign commerce

of the United States to waive collection of a portion of the freight

charges where there is an error in a tariff of a clerical or administra

tive nature or an error due to inadvertence in filing a new tariff The

facts demonstrate an inadvertent failure to file the 35 75 per 2 240

pounds rate in accordance with the agreement with the shipper a situa

tion within the purview of Public Law 90298 The application was

filed within 180 days of the date of the shipments The waiver will

not result in discrimination among shippers An additional applica

tion for waiver of a portion of the charges on a similar shipment

carried byapplicant for complainant ispending

Good cause appearing and applicant having complied with the pro

visions of Public Law 90298 permission to waive collection of 51

703 05 for the shipments described in special docket No 438 and

241170 for the shipment described in special docket No 439 and

to apply the 35 75 rate per 2 240 pounds to such shipments is granted

Applicant shall publish notice in its tariff as required by the statute

The waivers of the charges here authorized shall be effectuated within

30 days of the service of the notice and applicant shall within 5 days

thereafter notify the Commission of the date and mannerof effectuat

ing the waivers

S lIERBERT KGREER

Pre8iding E1Jaminer

WASIDNGTON DC January 28 197f

15 FMC
FEDERAL MARITIME COMMISSION

Doo urr No 704

YORlt FORWAlIDING CORP

J B WOOD SHIPPING Co INC

AND EDWARDS FUGE CORP

Licensed freight forwarders with shipper connections Indlcatlng an opportu

for Interrelationships and control found not to be Independent freight 

warders within the meanlug of sections 1 and 44 of the Shipping Act 1

Licensed freightforwarders engaging 1Ji exclusive preferential working arran

ments and failing to file a memorandum for approval to this elfect fo

to violate section 115 of the Shipping Act 1916

Absent a JIleanlugful showing that wages and other payments were rece

for any reason other than for services rendered and such payments are 

assertedly correlative to rates and charges of any shipment orshipme

such practices cannot be equated to an unfair device or means used 

obtain transportationat less than the rates orcharges otherwise applica

and held to be In violation of section 16 of the Shipping Act 1916 or sec

1510 24 c of General Order 4 of this Commission

Licensed freight forwarder who willingly allows person or persons not 

plOYed by It to perform forwarding ll11rvlces under Its license found 

violate section 1510 23 a of Geueral Order 4 of this Commission

License of freight forwarder operating In name only and without quali

persounel ordered revoked

License of freight forwarder which formerly provided good and valuable ser

to the shipping public allowed to be retained sub3jlCt to certain requireme

Morton Zuckerman for respondents

Pam J Koller and Donald J Brwnner as hearing counsel

Maroh 9 197e

REPORT

By THE COMMISSION Helen Delich Bentley Chairman James 

Day and George H Hearn Commissioners

The Commission instituted this proceeding to determine 

Whether York Forwarding Corp York and J B WoodShipp

Vlce Chairman Ashton C Barrett and Clarence Morse Commissioner did Dot pa

pate

114 115 FM
YORK FORWARDING CORP J B WOOD SHIPPING CO INC 115

Co Inc Wood Shipping continue toqualify as independent ocean

freight forwarders and whether their licenses should be continued in

effect or be revoked pursuant to section 44 of the Shipping Act 1916

the Act and section 510 9 of Commission General Order 4 2

whether York and Wood Shipping are in fact independent of shipper

connections as defined in section 1 of the Act 3 whether York and

WoodShipping are operating in violation ofsection 15 of the Act or

have so operated by carrying out an unapproved exclusive cooperative

working arrangement 4 whether Edwards Fuge Corp EFC vio

lated section 16 First of the act by having obtained or attempting to

have obtained directly or indirectly transportation by water for prop

erty at less than the rates orcharges which would otherwise be appli

cable 5 whether York and or Wood Shipping violated section 16

Second of the Act by indirectly allowing EFC to obtain transporta

tion for property by oceangoing common carriers at less than the

freight rates established by such carriers through the unjust means of

permitting EFC to benefit from the compensation received by York

and or WoodShipping onEFC shipments 6 whether York shared

any compensation or freight forwarding fee in violation of section

510 24 c of General Order 4 and 7 whether York willfully

falsified its application for its ocean freight forwarder license

Subsequently and at the request of Hearing Counsel the Commis

sion amended its initial order ofinvestigation to include the following

additional issues 1 Whether the principals ofrespondents York and

Wood Shipping willfully misrepresented information and made false

statements to a Commission investigator in an attempt to obstruct the

investigation in violation of sections 510 9 b and c of General

Order 4 and 2 whether they permitted their names and licenses to

be used by persons not employed by them for the purpose of freight

forwarding services in violation of section 510 23 a of General

Order 4

Hearings were held before Examiner Richard M Hartsock who

issued an initial decision Jointexceptions to the Examiner s decision

were filed by respondents York Wood Shipping and EFC to which

Hearing Counsel have replied We heard oral argument

FACTS

York Forwarding Corp previously held Federal Maritime Board

Certificate No 2353 issued on September 10 1958 Afterthe enactment

of the new section 44 to the Shipping Act York filed an application

for a license as an independent ocean freight forwarder under that

15 FMC
116 FEDmRAL MARITIME COMMISSION

section This application indicated inter alia that 1 Nora Mc

Donnell was president treasurer and sole stockholder of York 2

William Otero was secretary and 3 neither York nor any officer

director stockholder owing 5 percent or more of stock or employee

thereof was in any way shipper or consignee connected Since nothing

in York sapplication or the staff s

investigative report indicated tha

the applicant wasnot qualified tobe licensed York was issued a Com

mission license onAprilS 1964

The Edwards Fuge Corp has for more than a decade been an ex

porter and shipper toforeign countries by oceangoingcommon carrie

Prior to 1960 EFC performed all of its own ocean freight for

warder functions with respect to its shipments Subsequently whe

the law required that ocean freightforwarders be independent of ship

pell and or consignee connections the ocean fljlight forwarding activ

ities related to EFC s shipments and those of its customers wer

transferred toYork The president of EFC and the central figure i

this proceeding is Albert J Fuge Dr Fuge The only other office

or employee of EFC is Dr Fuge swife Bertha Dr and Mrs Fuge ar

alsothe sole owners ofEFC

At the time Dr Fuge wasan ownerand officer of EFC he was als

an officer and stockholder along with his wife in what is now Yor

Forwarding Corp Dr Fuge remained an officer of York until lat

1959 when he and the other officers of the corporation resigned The

were replaced by Mrs Fuge and one Nora McDonnell a former em

ployee of EFC and a long time friend of Dr Fuge By late Septembe

of 1960 all of the York stock had been transferred by gift to Mrs

McDonnell Because Mrs McDonnell has no experience in forwardin

operations s

an EFC employee William Otero was made secreta

of York and became York sprimary employse responsible for all o

York s

freight forwarder operations This entailed performing th

same services for the same clients as hehad done as anEFC employe

When Mr Otero left the employ ofYork inJanuary of 1965 he wa

immediately replaced by another EFC employee one Ernest Zimme

mann Mr Zimmermann however did not appear on York s payro

until early October of 1965 Therefore subsequent to Mr Otero 

1

In addition to EFC York s other principal shipper clients areBorr Warner Internation

Corp acompany trom which EFC purchaled goods tor resale and BOPSA Bojalate

Panama an overseas cu tomer ot EFC The standard transmittal torm by which Yo

distributed documsnts to thess cUsnts spsclllcally rsquested them to reter to a spec

EFC 1I1e number

In 1948 Dr Fop became an omcor ot Jatret Corp whose name was chanred In 1U

to York Ferwardlnr Corp

The record indicates that Mro McDonneltcannot Identity an Invoice or describe 

purpose norstate whatdocuments are prepared In conjunotlon with ocean shipment Mo

over she was unable to prepare an ezport declaration or bill ot ladln and even need

assistance when billing customers

15 FMC
YORK FORWARDING CORl J B WOOD SHIPPING CO INC 117

departure and while still in the employ of EFC Mr Zimmermann per

formed all of York s

freight forwarding functions for some seven

months Even during Mr ZilIllpermanns period of employment with

York Mrs McDonnell never participated in the preparation of ship ping documents Her functions with York werelimited tomanningthe

switchboard and actIng as a messenger Any questions concerning freight forwarding matters were taken up directly with Dr Fuge who worked in the adjoining office

Wood shipping was established by Joseph B Wood in 1922 and

issued Independent Ocean Freight Forwarder License No 81 by the

Commission onFebruary 8 1963 In 1964 Wood Shipping was located

on the eighth floor of 80 Broad Street in New York City Following

Mr Wood s death in March 1966 Andrew Aquino and Tom Barber

arranged to purchase Wood Shipping each acquiring 50 percent of

the eompany s stock By subsequent separate negotiations between

Mr Barber and Nora McDonnell an agreement was reached whereby

Mrs McDonnell would receive 35 percent of Wood Shipping stock

and Mr Barber would acquire 100 percent interest in York 6

Shortly after the purchase of Wood Shipping its offices were re

located to the 24th floor of 80 Broad Street with Dr Fuge and Mr

Aquino negotiating the new lease Wood Shipping shared its new

premises on the 24th floor with the Imperial Iranian Air Force Pur

chase Mission Iranian Mission Mitradad Co represented by Ed

wards Fuge Associates Inc Agat International and Grand Cargo

The lease to these premises was maintained in the name of Wood

Shipping and the rent waspaidbyWoodShippings

Today Wood Shipping leases an entire building at 33 Worth

Street in New York from Agat International The first floor of this

address is occupied by the main telephone switchboard and the ship

pingand receiving departments of both York 1

and Wood Shipping

Wood Shipping occupies the second and third floors and the fourth

floor is occupied by the Iranian Mission The premises at 33 Worth

4

York and EFC oceuplerl adjoining offices on the 11th floor of a

building In New York

City Identified variously a 95 Broad Street 24 Stone Street and 59 Pearl Street depending

upon from which street one faced the building EFC used the address 95 Broad Street whlle

York used the 24 Stone Street address

15 Tbe reeord shows that at the time of the purchase of Wood Shipping neither Mr

Aquino nor Mr Barber knew or bad any relation with Dr Fuge or Mrs McDonnell

Although the record shows that these transactions have yet to be tully effectuated

Mrs McDonnell has already voted her Interest In Wood Shipping

1 Dr Fuge and Mr Aquino were also the parties with whom the management of 80 Broad

Street dealt as to matters pertaining to Wood Shipping after the death of Mr 3 B Wood

S By letter of September 23 1966 Wood Shipping advised that It had moved agatn and

was now sbaring office space wltbYork at 17 Battery Place New York

Salvatore Alba and Albert Abdalla a bookkeeper for York and Wood Shipping are

president and vice president respectively of Agat Mr Alba Is also an employee of Wood

Shipping

10 York has apparentl made no rental payments since November 1967

15 FMC
118 FEDBlRAL MARITIME COMMISSION

1

Street are also used as a

telephone and mailing address for EFC Aga

and Albert Fuge Associates the latter being a consulting service i

the person of Dr Fuga WoodShippingpays for all telephoneservice

including the switchboard which serves the entire building Moreove

it has expended some 47 000 for maintenance and general improv

ments of the premises including paintingof the building

Since 1966 Mr Aquino has been president of both York and Woo

Shipping Sometime in 1966 an arrangement wasmade whereby Yor

would prepare shipping documents for Wood Shipping payments t

be based upon man hours of work performed by the two York em

ployees Mr Zimmermann preparing the shippingdocuments and Mrs

McDonnell serving as a messenA llr l1 During fiscal years through 1969

York received from Wood Shipping 14 185 18 585 and 12 914

respectively for preparing shipment and incidental documents fo

Wood Shippingpursuant totheir agreement During fiscal year 196

cash receipts show other Yorkincome of only 2 052 being the inlan

freight on EFC shipments Wood Shipping accounted for 18 585 o

York s total handling income of 22 947 duringfiscal 1968 and 6 23

out Of 9 172 in1969

In 1967 WoodShipping entered into an agreement with the Iran

an Mission whereby Wood Shippin 9 would reforward material from

US points of origin to Iran Although WoodShippinghas mor

than nine experienced freight forwarders on its staff Dr FUl e an

his associate Gus Vogle received 11 040 and 15 850 respectively i

1969 as special consultants to Wpod Shipping with respect to tha

account In addition Wood Shipping paid 3 230 to Fujl e an

1 486 to Vogle during 1969 for travel expenses and entertainmen

An aiiditional 3269 was paid toTWA for transportation At pres

ent Wood Shippingappears tobe in a state of financial decline hav

ing suffered losses of some 37 000 during 1969 During that sam

calendar year however Wood Shipping s cash disbursement ledge

shows that it paid for lpairs to an automobile owned by Dr Fug

and for legal services rendered to EFC Edwards Fuga Associate

and AgatInternational Moreover from September 26 through Dec

I

j

1

J

1

1

ThIs arreement was not altered whea Mr ZImmermann left York ln 1988 Mrs

MeDonnellrequeatBd that the arranll8ment be continued and Mr AquIno consented altbou 

Mrs McDonnell lIIld Albert Abdalla the 0II11 two pet onlfwho remaIn on York s

PQlOU

are admIttedly unknowled eable alfdlllUperlenClSd In frelcht forwarder op ratlons Durin

thIs perIod some of York s work mat have been plIrformed bl Mr Zlmmermalln thou 

no lonrer an employee orbl another nouemplolee o bl Wood Shlpplnl personnel

u

bert Fu e AssocIates and Gus VOIle ABSOclates became the erscutlves called for 

the a eement betweenWand ShIppIng and the Iranla1l MIs lon

Mr AquIno plalned that Itwas nece ary for Dr Fuge to attend m tlng concernIn

the IranIan MIssIon account DUring 1969 he traveled to Iran Panama Ilwlbe1land an

London

111 FMO
YORK FORWARDING CORP J B WOOD SHIPPING CO INC 119

ember 26 1969 Mrs Fuge 14

was paid 175 per week for a total of

2275 to accompany certain Iranian Nationals who werealso custom

ers of Wood Shipping around New York City The disbursement

ledger also indicates that six months rent at 250 per month waspaid

by Wood Shipping for the accommodations of an Iranian Mission

Warrant Officer Examination ofthe books and recordsof WoodShip

ping also shows that it either loaned or advanced sumsof money

in varying amounts to not only its officers Mrs McDonnell and Mr

Barber and certain employees Mrs Fug eand A J Fuge Jrbut

also to Albert Fuge Associates Dr Fuge and two members of the

Iranian Mission

Yorkand EFC have also made personal loans toofficers ofthe other

respondents York s books and records show that duringthe two fiscal

years immediately prior to the hearings in this proceeding Mrs

McDonnell borrowed a total of 17 23125 in addition to her salary

The record indicates that of that sum only 6 675 has beln repaid o

The cash disbursements ledger ofEFC for the period May 1 1969 to

April 30 1970 shows total loans of some 1 200 to Mr Abdalla the

bookkeeper for York and Wood Shipping and a loan of 1 000 to

Mr Aquino president of Wood Shipping and York

DISCUSSION AND CONCLUSIONS

In his initial decision the presiding examiner concluded

1 Neither York nor Wood Shipping are in fact independent as de

fined in section 1 oftheAct

2 York and Wood Shippinghave and are operating in violation of

section 15 oftheAct by carrying out an unapproved exclusive coopera

tive working agreement

3 EFC violated section 16 First of the Act by having obtained in

directly transportation by water for property at less than the rates or

charges whichotherwise would be applicable

Dr Foge s entire family Is on the Wood ShIppIng payroll Albert Foge Jr has

received remuneration from Wood Shipping for bls services as a traffie clerk In Wood

Shipping and Joanne Fuge assists the company tn bookkeeping and clerical matters Dr

Foge himself has on at least one occasion held himself out as acttng tn a managerial or

representative capacity for Wood Shipping Exhibit 26 Is a copy of a letter dated June 6

1969 from Wood Shipping to an overseas consignee In Australia regarding nonpayment ot

an Invoice In the amount of 29 37 The letter was signed by Dr Fuge for uJ B Wood

Shipping Co Inc U

In August 1969 there arose a

dispute as to thebillings of York to Wood ShIppIng on the

rates and hours ot service performed by York The disputed amount 6 675 was agreed to

by Mr Aquino and Mrs McDonnell as representing a fair refund of York s overcharges

to Wood Shipping tor the period involved This amount was entered on the books ot Wood

Shipping upon receipt ot a check tn that amount trom York Thereafter EFC issued a

check noted as uloan Qnl v to Mrs McDonnell tor 6 675 which Mrs McDonnell made

payable to the order of York Mrs McDonnell repaId the EFC loan In May 1910

15 F M C
120 FEDERAL mlUTIME COMMISSION

4 York and Wood Shipping violated section 16 Second of the Ac

by allowing EFC to obtain transportation for property at 1688 than

the regular rates orcharges then eStablished by means of an unjust o

unfair device or means

5 Wood Shipping and York violated section 510 24 c of Genera

Order 4 by permitting EFC to share indirectly the compensation

orfreightforwarding fee of the licensee

6 York permitted its name and license to be used by persons no

employed by it for the purpose of freightforwarding services inviola

tionof section 510 28 a of General Order4

7 The licenBe8 of WoodShippingand York should be revoked pur

suant tosection 510 9 ofGeneral Order4

Our conclusions differ somewhat from thoseof the Examiner We are

convinced that York has never been an independent ocean freigh

forwarder Pri rto1960 Dr uge President of EFC wasanownero

York and while he has divested himself of ownership he neve

relinquished control as advisor to York on matters relatingtofreigh

forwarding Such control is evid ced in the fact that in 1960 Mrs

McDonnell a

longtime friend of Dr Fuge who is inexperiencedas a

ocean freight forwarder was given 100 percent ownership of Yor

and made its President The only inference tobe drawn from the rec

ord is that Mrs McDonnell was but Dr Fuges alter ego In addition

William Otero an EFC employee was made Secretary of YOrk an

became responsiblefor runningits freightforwardingoperation whic

actually involved performing the same services for the Bame clients

he did as anEFC employee Furthermore when OteroleftYork he wa

replaced byZimmermann another EFC employee whom Otero trained

in the techniques of ocean freightforwarding and as the new Secretary

of York became responsible for ite forwarding operations In fac

Mr Zimmermann performed these functions for eight months in 1965

while he was actually stillemploy by EFC

WoodShipping lost its independence as an ocean freight forwarde

followingthe death of Mr Wood in 1966 Dr Fuge had no connection

with Wood Shipping prior to the death of Mr Wood and nsithe

Andrew Aquino norThomasBarber ever knew Mrs McDonnell or D

uge priO to that time Thereafter Mre McDonnell obtained contro

of 811 percent of the stock ofWoodShipping and was elected a directo

and officer of WoodShipping After the death of Mr Wood Dr Fug

arranged for the relocation of Wood Shipping s offices with the build

ing management and Wood Shipping began to share officupace wit

the Iranian MiBBion Edwards Fuge ABlociates and others

Since 1966 York hasbeenvirtually absorbed byWoodShippingand

isconnected with and controlled by thosewho control Wood Shipping

11 I l
YORK FORWARDING CORP J B WOOD SHIPPING CO INC 121

one of whom is Dr Fuge The arrangement between York and Wood

Shipping ultimately resulted in York operating without experienced

personnel as itis now doing since neither Mrs McDonnell norAlbert

Abdalla are qualifiedas ocean freightforwarders

The record is replete with evidence of Dr Fuges participation in

Wood Shippings business affairs and amply demonstrates a pattern

of controlling connections and interrelationships that existed between

York Forwarding WoodShipping and Dr Fuge the ownerof EFC

Therefore the Examiner rightfully concluded that neither York nor

Wood Shipping is in factindependent of shipper connections within

the meaning of sections 1 and 44 ofthe Shipping Act 1916 These sec

tions were intended to prevent even the opportunity for a shipper to

exercise control over a freightforwarder See Application for Freight

F01 11Jarder LicenseYork Shipping Oorp 9 F MC 72 75 1965 It

must be remembered that neither the shipper s intention notto exercise

control nor the forwarder s intention to prevent such exercise is ma

terial See Applicationfor FreiglLt Forwader License DelmarShip

ping Oorp 8 F M C 493 497 1965

As noted the Examiner concluded Wood Shipping and York were

violating section 15 of the Shipping Act by carrying out an unap

proved section 15 agreement Itis of course not possible tolay down

hard and fast rules concerning the filing of agreements within the

category of cooperative working arrangements and whether apar

ticular agreement must be filed depends upon the facts and circum

stances under which the agreement came into being and the aims and

purposes expressed therein Here it is apparentthat an exclusive and

preferential working arrangement existed between Andrew Aquino

as president of both York and Wood Shipping and Mrs McDonnell

for the performance by York of some of the freight forwarding work

of Wood Shipping

While nonexclusive cooperative working agreements between li

censed ocean freight forwarders which provide for the completion of

documentation and performing of other services on export shipments

on behalf of the parties have been granted an exemption from the pro

visions of section 15 of the Shipping Act 1916 17 this is not the situa

tion that exists here where there has been a gradual overt absorption

of one forwarder by another by means of II thorough and comprehen

sive working arrangement Because of the close interrelationship be

tween them it is evident that York and WoodShipping werenot op

IIMr AquIno owns GO pereent of the stoek of Wood ShIppIng It will be recalled that

an agreement was reached between Mr Barber and Mrs McDonnell whereby she would

receIve 81l pereent of the stock of Wood ShIppIng and Barber would become 100 pereent

ownerof York

ITSee46 ern G10 26 b

15 FMC
122 FEDERAL MARl 1IME COMMt88ION

erating as tntities separate and apart from each other The failure

to file amemorandum of this arrangement witJh the Commission for

approval under section 15 constitutes a violation of that section See

VoZkawagervwerk v FMO 390 U S 261 1968 and AmerioanEllJport

abrandtaenLine8 no 14F M C 82 1970

EFC was found by the Examiner tohave violated section 16 First

of the Shipping Act 1916 by indirectly obtaining from Wood Ship

ping and York transportation by water for property at less than the

rates or charges which would otherwise be applicable Conversely

the Examiner found that WoodShipping and York had violated sec

tion16 Second by allowing EFC to obtaintransportation atless than

the regular rates or charges then established by means of an unjust

or unfair device or means These violations weregrounded upon the

general conclusion that Wood Shippinghad been used as a conduit for

preferential treatmentof EFC

The record does show that Wood Shipping paidan auto repair bil

for Dr Fuge and certain attorney s fees for EFC and Albert Fuge

Associates WoodShippingalso paid Bertha Fuga 2 275 during 1969

for accompanying her husband while entertaining the Iranian Mis

sion Finally Wood Shipping paid Dr Fuga a

salary and traveling

expenses for performing some ill defined consultant services fo

WoodShipping

The real difficulty in concluding that this conduct violated section

16 is found inthe attempt toequate it with an unfair device ormeans

used toobtain transportation atless than the rates orcharges other

wise applicable There has been no meaningful showing that the

wages received by the Fuge family wereanything other than for servo

ices rendered to Wood Shipping Nor is it entirely clear that the re

pairs on Dr Fugas automobile werenot paid for on the basis of its

use in Wood Shippingbusiness Finally there is no asserted correla

tion between the wages and the cost of repairs and the rates a d

charges of any shipment orshipments In short we simply are withou

the essential ingredients of a section 16 violation See Paoiflo Far Eas

LineaAlleged Rebate8 11 FM C 357 1968 The same is true o

the legal expenses of EFC

Our disposition of the alleged violations of section 16 of the Ship

ping Act 1916 dictates a similar conclusion under section 510 24 c

of General Order 4 46 CFR 510 24 c which provides

No licensee shall share directly orindirectly any compensation or freight fo

warding fee with a shipper consignee seller purchaser or their agents am

iates oremployees nor with any person orpersons advancing the purchase price

of the merchandise or guaranteeing payment therefor nor with any person o

persons having benetlcialinterest in the shipment

13 114 0
YORK FORWARDING CORP J B WOOD SHIPPING CO INC 123

Here as under section 16 there is simply insufficient evidence of

record of any sharing by Wood Shipping and York of their forward

ing fees and compensation There is however a quite different situa

tionunder section 510 23 a of General Order 4 46 CFR 510 23 a

That section provides inpart

No licensee shall permit his license or name to be used by any person not

employed by him for the performance of any freight forwarding service No

licensee may provide freight forwarding services through an unlicensed branch

office or other separate establishment without written approval of the Federal

Maritime Commission

The record clearly shows that the forwarding services provided by

York to its clients had since 1968 for a time been performed by Zim

mermann while not in the employ of York and some other unidenti

fied person not employed by York Thus because persons not em

ployed by York werepermitted to perform forwardingservices under

York s license the Examiner properly concluded as do we that York

violated section 51023 a ofGeneral Order4

Finally the Examiner recommended that the licenses of York and

Wood Shipping be revoked We can only partially agree with the

Examiner The record here makes it obvious that York is a freight

forwarder in name only and that its dissolution would be literally

without impact on the shipping public Ithas no qualified personnel

and whatever the real reason for its existence it does not qualify for

a forwarding license under theShipping Act Like the Examiner we

can see no valid reason for continuing its license Accordingly the

license of York will be revoked However we find a different situa

tion toexist in the case of Wood Shipping and we cannot agree that

something less than the rather drastic action of revocation would not

satisfy thelaw s

requirements

Insofar as the record shows Wood Shippinghas been an established

and respected forwarder since 1922 Nothing in the record would lead

us to believe that during these years Wood Shipping has provided

other than good and valuable services to the shipping public More

over Wood Shipping employs some 25 people and we are mindful

of the hardship revocation would work on these employees Wood

Shippings real difficulty arises from its association with York and

Dr Fuge and his various enterprises In our opinion were ageneral

house cleaning to occur and these associations terminated Wood

Shipping could again meet the requirements of an independent ocean

freight forwarder which is fit willing and able to perform the serv

ices required Accordingly if the requirements set forth below are

met WoodShipping will be allowed to retain its license

15 F MC
124 FEDERAL MARITIME COMMISSION

As conditions to the retention of its license Wood Shipping must

meettl1e followingrequirements

1 Wood Shippingshall completely disassociate itself from any and

all relationships with EFC Albert Fuge Associates Dr Fuge his

wife and immediate family the Imperial Iranian Air Force Mission

lHtradad Agat International and Grand Cargo and guarantee tha

any of the above named persons or officers directors or employees o

the above named corporations ororganizations are not nor will in the

future become an employee officer ordirector of Wood Shipping no

will become involved in the day to day management of Wood Ship

ping

2 As a contingent tobeing found fit or able to perform the required

services Wood Shipping shall collect any and all outstanding debt

in the form of advances or personal loans and in connection with the

persons corporations and organizations listed in requirement 1 above

shall settle or cancel all outstanding obligations of any kind and

3 Wood Shippingshall purchase back all outstanding stock certif

cates and ownership interest from Mrs Nora McDonnell and com

pletely divest Mrs McDonnell of any interest in WoodShipping and

guarantee that she is not now nor in the future will be an employe

director or officer of Wood Shipping or become involved in the day

to day management ofWood Shippi g

Inorder to insure compliance with the above we will require Woo

Shippingto submit within 90 days of service of this report and orde

a full report on the mannerin which it has complied with the require

ments The failure to submit the report will result in revocation o

Wood Shippings license without further proceedings An appropr

ate order willbe entered

SEAL1 S FRANCIS C HURNEY

Secretr rry

lIS FMC
FEDERAL MARITIME COMMISSION

DOCKET No 704

YORK FORWARDING CORP J B WOOD SHIPPING CO INC

AND EDWARDS FUGE CORP

ORDER

This proceeding was initiated by the Federal Maritime Commission

to determine inter alia whether York Forwarding Corp and J B

Wood Shipping Co Inc continue to qualify as independent ocean

freight forwarders and whether their licenses should be continued in

effect or be revoked and the Commission has fully considered the mat

ter and has this date made and entered of record a Report containing

its findings and conclusions thereon which report is hereby referred

to and made a part hereof The Commission found inter alia that the

l

icense of York Forwarding Corp as an independent ocean freight

forwarder be revoked and that the license of J B Wood Shipping

Co Inc as an independent ocean freight forwarder be allowed to be

l etained subject to certain specific conditions

No v

therefore it is ordered That the license of York Forwarding

Corp as an independent ocean freight forwarder be and it is hereby

revoked effective thisdate

It is further ordered That J B Wood Shipping Co Inc be al

lowed to retain its license as an independent freight forwarder sub

ject to thefollowing conditions

1 J B Wood Shipping Co Inc shall completely disassociate itself

from any and all relationships with Edwards Fuge Corp Albert

Fuge Associates Dr Fuge his wife and immediate family the Im

perial Iranian AirForce Mission Mitradad Agat International and

Grand Cargo and guarantee that any of the above named persons or

officers directors or employees of the above named corporations or

organizations are not nor will in the future become an employee

officer or director of J B Wood Shipping Co Inc nor will become

involved in the day to day management of J B Wood Shipping

Co Inc

15 F M C 125
2 J B Wood Shipping Co Inc shall collect any and all outstan

ing debts in the form of advances or personal loans and in connecti

with the persons corporations and organizations listed in 1 abo

shall settle or cancel all outstanding obligations of any kind and

3 J B Wood Shipping Co Inc shall purchase back all outstan

ing stock certificates and ownership interest from Mrs Nora McDo

nell and completely divest Mrs McDonnell of any interest in J 

Wood Shipping Co Inc and guarantee that she is not now nor 

the future will be an employee director orofficer of J B WoodSh

ping Co Inc or become involved in the day to day management 

J B Wood Shipping Co Inc

Iti8 further Qrdered That to insure complIance with this Ord

J B WoodShipping Co Inc shall submit a full report tothe Co

mission on the mannerin which it has complied with the requireme

as heretofore set out within 90 days of service of thisReport If J 

Wood Shipping Co Inc fails to submit the required report 

license as an independent ocean freight forwarder will be revo

without further proceedings

By the Commission

SEAL S FRANCIS C HURNEY

SeJ1etary

15 JIM
FEDERAL MARITIME COMMISSION

DOCKET No 7148

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE ApPLICATION GUY G SORRENTINO

Adoption of Initiol Decision

March 2 1972

By THE COMMISSION Ashton C Barrett Vice Ohairman James V

Day George H Hearn Oommissioners

This proceeding was instituted by a CommisRion iRsned Order of

Investigation andHearing served onMay 3 1971 to determine whether

one Guy G Borrentino hereinafter Applicant is fit willing und

able to carryon the business of forwarding as required by section 44

of the Shipping Act 1916 and the Commission s rules and regula

tions and whether his application as an independent freight for

warded shouldbe granted

By a certified letter dated March 18 1971 the Commission notified

Applicant of its intent to deny his application for In inr hw 1

independent ocean freight forwarder license Applicant upon receipt

of the Commission letter requested a hearing be held to show that

denial of the application is unwarranted Thereafter the Order of

Investigationand Hearingissued

A hearing was held in New York on August 4 1971 presided over

by Examiner Ashbrook P Bryant

In his initial decision served November 5 1971 the Examiner found

that Applicant was fit willing and able properly to carryon the

business of freightforwarding

Hearing Counsel intheirexceptions claim that theExaminer hedged

on the facts and did not give them the legal significance to which

they wereentitled

Upon review of the exceptions we conclude that they are but a

restatement of the contentions already advanced before the Exam

iner and that the Examiner s

findings and conclusions on these con

15 FMC 127
128 FEDERAL MARITIME COMMlSSION

tentions wereproper and well founded Accordingly we hereby adop

the initial decision a copy of which is attached to and made a par

hereof adding only thi admonition As we pointed out in Docke

No 664IMepeMent OoeanFreight Forwarder Lic6Tl8e Application

J0IIM8 J Boyle 00 10 F M C 121 1966 we are charged with the

responsibility of maintaining the high degree of responsibility re

quired in the profession of ocean freight forwarding Congress ha

required us to review license applications and limit access to the

profession to those who are fit willing and able to carry on the

business of ocean freight forwarding We have therefore establishe

a high standard of moral conduct to which an applicant as well a

a licensee must conform Anything less than this is considered con

duct unsuited to the profession and will result in our swift action to

remedy the misconduct whether by denial of a license or suspension

COMMISSIONER CLARENOE MORSE concurring with whom CHAIRMA

BENTLEY joins

Although Applicant s conduct is not defensible I nevertheless con

curin the decision of the majority for the reasons therein stated A

applicant for a license should be confronted with no more severe test

than those applied in determining whether a license should be revoke

Shipping Act 1916 section 44 d Administrative Pwcedure Act

section 9 b General Order4 46 CFR Part 510

The record discloses that the questionable methods used in describ

ing the shipments involved may have been dictated by the shipper Fo

this the shipper was charged and pleaded guilty to several counts

No action wastaken againstthe oceancarrier

The shipments were Clothing Snap Fasteners The record show

that the commodity description on the ocean bills of lading prepared

by the freight forwarder was stated as Textile Machinery Parts and

as such was rated properly by the ocean carrier as TextileMachinery

N O S The freight rate on TextileMachinery NO S wasless than

the freight rate on General Cargo Other Than Dangerous Cargo

N O S which latter rating would have been applied to Clothing

Snap Fasteners On the shipper s export declaration the freight for

warder typed in below the phrase Textile Machinery Parts the fol

lowing inparenthesis Clothing Snap Fasteners A validated copy o

the shipper s export declaration showing the commodity description

Textile Machinery Parts Clothing Snap Fasteners was lodged

with the ocean carrier before the latter issued its bill of lading and

its freight bilI forthe shipments

Hence the ocean carrier may have acquiesced inthis improper prac

tice for a casual comparison of the bill of lading as presented tothe

ocean carrier by the freight forwarder with the validated shipper s

111 llY O
LICENSE APPLJ CA ION GUY G SORRENTINO 129

export declaration would have put the ocean carrier on notice that the

rating oftheshipments should be double checked or that the shipment

should have received the General Cargo N O S rating as Clothing

Snap Fasteners Reasonable diligence on the part of common carriers

to verify the proper rating ofshipments from documents in their pos

session is the least that is required of common carriers under section 16

Second ShippingAct 1916

Iam not unaware of the holding in Royal Netherlands Steamship

00 v Federal Maritime Board 304 F 2d 938 1962 With deference

to that court Ibelieve it erred when it required that the knowingly

and willfully test contained only in the first paragraph of section 16

Shipping Act 1916 be applied when charging the common carrier

under section 16 Second Section 16 Second in plain simple language

states That it shall be unlawful for any common carrier by water

either alone or in conjunction with any other persron directly

or indirectly Second To allow any person to obtain transporta

tion for property at less than the regular rates or charges by means

of false billing false classification orby any otherunjust orunfair

device or means The phrase knowingly and willfully does not ap

pear Instead the test is allow Ifail to find any reasons for reading

in themore rigorous knowingly and willfully test

Inmy opinion cases such asPrince Line v AmericanPaper Export

55 F 2d 1053 1932 MisclassijicationandMisbilling of GlassArticles

6 F MB 155 at 161 166 1960 reversed on this point in Royal

Netherlands and Inre Rubin Rubin Rubin Oorp 6 F MB 235

at 242243 1961 more logically and correctly reflect the intent of

the Congress

This is a stale matter and therefore little can now be done For the

future in fact situations of thisnature Iwould urge that investigations

be initiated against the shipper and the ocean freight forwarder for

violation of the first paragraph of section 16 Shipping Act 1916 and

against the ocean carrier for violation of section 16 Second Shipping

Act 1916 Section 16 declares that one who violates the section is

guilty of amisdemeanor punishable by afine ofnot morethan 5 000 00

for each offense

SEAL Signed FRANCIS C HURNEY

Secretary

lfi FMC
FEDERAL MARITIME COMMISSION

No 7148

INDEP ENENT OCEAN FllEIGHT FORWARDER LICENSE AFPuCATlON

GuYG SORRENTINO

Applicant found to be fit wll1ing and able properly to carry on the busines

freight forwarding His long history of creditable performance as an oc

freight forwarder the substantial economic loss he has already sutlered 

addition to hIs frank admission of past fault and his expressed intent

fully to discharge the duties and responsibilities of a licensed freight 

warder In the future are found to mitigate the etlects of his cnlpa blllty 

falllng to prevent violations of the Shipping Act 1916 y a licensed oc

freight forwarder of which he was President and principal stockhol

Applicant however Is warned ot the seriousness of the conduct he 

at least condoned and is cautioned that In view of his past lapses he sho

be doubly alert to avoid future deviation from strictest adherence to 

requirements of the Shipping Act 1916 the Commission s rules and reg

tions and the high lltandards of trust and confidence which his sta

imposes

GUIJI G SO1 r8fItno forhimself

Dorv ildJ B1IJ11ner 0IM1Ronald Lee Hearing Counsel

INITIAL DECISION OF ASHBROOK P BRYANT

PRESIDING EXAMINER 1

On December 17 1970 Guy G Sorrentino filed his application 

a license as independent freight forwarder pursuant to General Ord

No 4

a

and section 44 of the Shipping Act 1916 the Act s Applica

was notified by certified letter dated March 18 1971 that the Co

mission intended to deny his application unless he requested o

1 This decision becamethe declBlon of the COIllll1 B8lon March 2 1972

General Order No 4 Rev lIS F R 12ltM September 6 1968 46 CFR 10

Section 44 of the Sh1pplng Act 1916 46 USCA e41 b

b A forwarder s license shall be Issued to any qualllled applicant therefo

It Is found by the Commission that the applicant Is or wf 1 be an IndePen

ocean freight forwarder as dellned In this Act and Is lit willing and able to cr

on the bUBiness of forwarding and to conform to the provisions of this Act and 

requirements rules and rerulatioDs ot the Commission issued thereund r and t

the proposed forwal dlng business Is or wf 1 be conelstsnt with the natlonal mariti

policies declared In the Merchant Marine Act 1986 otherwise such applica

shall be denied tI

130 111 F MO
LICENSE APPLICATION GUY G SORRENTINO 131

portunity to show that the denial was unwarranted The reason for

the action was alleged involvement of Sorrentino in misc1assification

from 1964 through 1966 ofexport shipments by Sorrentino Shipping

Inc a licensed independent ocean freight forwarder of which appli

cant waspresident and director in order to obtain lower ocean freight

rates in violation of section 16 of the Act A hearing was requested

and duly held at which applicant was advised of his right to counsel

He stated that he did not wish toavail himself of that right At the

hearing and in the subsequent preparation and filing of briefs appli

cant was afforded substantial procedural latitude to assure that his

side ofthe story wasamply reflected inthe record

FACTS

Applicant has successfully engaged in the business of ocean freight

forwarding in various capacities since 1942 In that year he went to

work for Bryant and Heffernan foreign freight forwarders as

messenger junior clerk He served honorably in the US armed serv

ices during World War II between 1943 and 1946 In 1947 he was

again employed by Bryant and Heffernan He later transferred to

another ocean freight forwarder Distribution Forwarding Services

Inc and was employed there until he formed Sorrentino Shipping

Inc which was then known as Confidential Overseas Forwarding

in 1951 From then until December 31 1970 when he voluntarily

severed his connection with the company applicant was president of

Sorrentino Shipping Inc and actively engaged in the business of

ocean freight forwarding He has never engaged in any other busi

nessbut foreign freightforwarding

Applicant s technical competence as an ocean freight forwarder is

not questioned The sole issue to be decided then is whether appli

cant s connection with violations of the Act of which Sorrentino

Shipping Inc was convicted in and of itself renders him unfit

properly to carryon the business of forwarding and to conform to

the provisions of the Act and the requirements rules and regulations

of the Commission issued thereunder The circumstances of these

violations are crucial to the application and will be considered in

detail

Tr p 3 4 August 4 1971

Previously applicant had been fully advised of his right to counsel as indicated by the

following f

fom his letter of June I 1971 to the Examiner

I V11sh to confirm that I shall be pleased to attend the hearing in Washington

Further please be informed that I w1ll attend without benefit of counsel You pointed

out my rights in this connection for which Ithank you

For the appltcant s convenience the hearing was later scheduled In New York

6

As Hearing Counsel stilted OpenIng Brief p 2 There Is no doubt that he has the

requisite teehnieal expertise or know how to carryon the business of for ardiDg

15 F MC
132 FEDERAL MARITIME COMMISSION

In about September 1951 Guy G Sorrentino together with Fraois

Bertrand owned in equal shares the outstanding capital stock of

Confidential Overseas Forwarding Inc which they operated as an

ocean freight forwarder under FM B registration No 1375 About

June 1958 that company was renamed Sorrentino Shipping Inc

and in January 1962 SorrentinoShipping Inc of which Sorrentino

now owned all the outstanding 20 shares of capital stock applied for

alicense as an independent ocean freight forwarder which wasissued

tothat company on January 3 1964 FM C License No 878

In June or July 1964 Rau Fasteners Company of Providence

Rhode Island Rau contacted Guy G Sorrentino to engage the

services of Sorrentino ShippingInc in connection with Rau s export

of merchandisetoUnifast Manufacturing Company S A of Brussels

Belgium All contacts with Rau were through its export manager

Albert N Winegrad The method of handling Rau s shipments was

initially worked up between Guy G Sorrentino on behalf of Sorren

tino ShippingInc and Albert N Winegrad on behalf of Rau There

after Rau s dircllt contacts with Sorrentino Shipping were through

one ofits employees William Huze

Sorrentino Shippings method of handling Rau s shipments wa

as follows Sorrentino Shipping received from Rau copies of Rau 

invoice and packing list on each of its shipments to Unifast Al

goods weremoved by truck from Providence to the piers atNew York

at Rau s direction and under its control Sorrentino Shipping using

the invoices and packing lists furnished by Rau prepared the ocean

bills of lading dock receipts and shipper s export declarations Sor

rentino Shippingbooked the freight with the ocean carriers lodgedthe

dock receipts at the steamship company piers lodped the ocean bills

of lading with the steamship companies and picked up the oripina

onboard copies from them submitted the shipper s export declarations

to the Bureauof Customs and had themvalidated lodged the validated

copieswith the steamship companies and obtained maritime insurance

on each shipment When lhipments were complete Sorrentino Ship

ping received the freight biIls from the steamship companies for the

prepaid ocean fleight and paid them as agent for Rau Sorrentin

Shipping submitted its own invoices to Rau billing it for prepaid

ocean freight marine insurance and other monies expended as we

as its own forwa dingfee

In October 1964 Sorrentino Shipping placed the first two of Rau 

shipments to Unifast aboard the American Oomrnatnder United State

Lines using the commodity description clothing snap fasteners o

the bills of lading on the basis of which United States Lines assesse

and collected the then prevailing freight rate of 70 25 W1M unde

111 FMC
LICENSE APPLICATION GUY G SORRENTINO 133

Item 9161 of Tariff NO 26 ofNorth Atlantic Continental Freight Con

ference applicable to General Cargo Other ThanDangerous NO S

Sometime after the second of Rau s shipments to Unifast Rau by

Albert N Winegrad instructed Sorrentino Shipping that clothing

snap fasteners wereto be described on ocean bills of lading from then

on as textile machinery parts This instruction was given either di

rectly to Guy G Sorrentino or toWilliam Huze who in turn relayed

the instructions toGuy G Sorrentino

In handling Rau s shipments SorrentinoShipping prepared a ditto

master for each shipment from which copies of all necessary docu

ments such as dock receipts bills of lading shipper s export declara

tions etc were run off on Sorrentino Shippings ditto printer After

Sorrentino Shipping was instructed to describe the clothing snap

fasteners henceforth on ocean bills of lading as textile machinery

parts all documents reproduced from its ditto master including hills

of lading and shipper s export declarations bore the commodity de

scription textile machinery parts to describe the clothing snap

fasteners

In order to comply with the requirements ofthe Bureau ofCustoms

William Huze was instructed by Guy G Sorrentino to type in

parantheses under the commodity description textile machinery

parts on the shipper s export declarations the further description

clothing snap fasteners Huze did so However no such steps were

taken to modify or supplement the commodity description textile

machinery parts appearing on the remaining documents including

the billsof lading

On 16 occasions between April 23 1965 and March 11 1966 Sor

rentino Shipping handled shipments of clothing snap fasteners for

Ran which werede cribed on bills oflading and other necessary docu

ments as textile machinery parts On 14 such occasions the misclassiti

cation resulted in the shipments being assessed at a substantially lower

freight rate than would have been the case had the consist ofthe ship

ment been correctly described on the bill of lading In each such in

stance Sorrentino Shipping prepared the necessary papers and in

each case only the export declaration included in addition to the de

scription textile machinery parts the further description clothing

snap fasteners in order to comply with the requirements of the Cus

toms Bureau In the two remaining cases the same description sub

eGuy G Sorrentino makes the following explanation with regard to this aetton Reply

Brief of Guy G Sorrentino p 1

liThe insertion of additional Information on a Shipper s Export Declaration after

a

general description of merchandise Is used Is not only common but absolutely

necessary In order to eomply with the Export Control Laws of the United States

Department of Commeree Whne it Is common ptactice to describe merchandise on

shippfng documents as Macblnery Parts or Road Machinery Parts or llTexttle

15 F MC
134 FEDERAL MARITIME COMMISSION

mitted on Rau s shipment by Sorrentino Shipping was challenged by

the carrier and the higher rate wascharged and collected

On April 22 1970 Sorrentino Shipping was found guilty in the

US District Court Southern District of New York on 16 counts

ofviolation of theAct involvingthe misclassified shipments described

above On June 17 1970 Sorrentino Shipping was fined a total of

1 600100on each count

DISCUSSION AND CONCLUSIONS

Under section 44 of the Act one who would become a licensed ocean

freight forwarder should not only possess and display the required

qualifications but in addition must conduct his affairs and maintain

his business relationships with a high degree of professional integrity

and responsibility The Act provides that the Commission shall issue

such a license to a qualified applicant but only after it affirmatively

findsthat such applicant Tis fit willing and able properly tocarryon

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

and the requirements rules and regulations of the Commission issued

thereunder Before a license shall issue the record must establish

that applicant is not only technically competent but of such moral

character as to reasonably insure that he will act honestly and effec

tively in the capacity of ocean freight forwarder Where applicant is

a corporation or other impersonal entity it must appear that those

natural persons who will assume responsibility must meet these stand

ards An important matter to be considered in determining an ap

plicant s fitness is the fact that the prospective licensee will be a

fiduciary for clients and in addition will occupy a unique position of

trust in dealing with carriers and the public Hence it must appear

that as licensee applicant will maintain a standard of professional

conduct reflecting the highest degree of business responsibility and

integrity not only with clients but also with carrierrs and with the

public This latter duty is imposed in part because in many instances

ocean freight forwarders have the practical ability to grant or with

hold clients freight moneys which of course are part of the lifeblood

ofthe highly competitive business whichthey serve As a result by the

grantof alicense an ocean freight forwarder gains the opportunity to

use his experience and technical knowledge of the ocean freight busi

ness to enhance his own competitive and economic position at the ex

Machinery Parts it Is neeeBSary 4ft aU inatano8B to specify on the Shipper s Expor

Declaration the description ot the part or parts being shipped under the general

nomenclature Otherwise Customs wl1l refuse to authentlc te the Shipper s Export

Declaration CODsequently the method used Is an accepted practice In shipping

clrclsnd oortslnly WB 8 not used by my tormer office or myselt to dente trom

the law butto comply withIt

T

Sec 44 46 USCA 841 b s amended see note 8 at

5 FMC
LICENSE APPLICATION GUY G SORRENTINO 135

pense ofthe carriers and the public Such opportunities while they are

frequent and tempting must be resisted The customs of their high

calling as reflected in the statute and the Commission s rules and

regulations require freight forwarders to be ever mindful of their

responsibility to the carriers and the public they serve as well as their

dutyto their clients

As the Commission has said s

The freight forwarder occupies a position of enormous competitive and eco

nomic power as to carriers and enjoys a fiduciary relationship with shippers

He is in a position to do grave economic ha m to both p 116

p 118 The business integrity of one who occupies the position of freight

forwarder should be above reproach and he should clearly demonstrate a com

plete awareness of and a willingness to accept the responsibilities that the

preferred position imposes emphasis supplied

the philosophy of section 44 is such that the shipping public should be

entitled to rely upon the responsibility and integrity as well as the technical

ability of a freight forwarder

In the investigation which led to the issuance of General Order 4

the Commission after an exhaustive inquiry described with some par

ticularity the powerful position occupied by forwarders in the eco

nomics of the ocean freight industry Among other things the

Commission said p335

With respect to a substantial portion of theshipments handled by forwarders

they are authorized by their shipper clients to arrange for the booking of the

cargo and to select the carrier over whose line the shipment will move It

is clear that the forwarders are in a position with respect to shipments for

which they have booldng authority to favor one carrier over another where

there is competitive service to the destination port For this reason the for

warders are regnlarly solicited for business by the carriers

Despite his relationship as fiduciary to his shipper clients acts or

conduct which do not comport with the freight forwarder s responsi

bility to carriers and the public may not be justified or excused by

the plea that they were engaged in to forward the client s interest or

in deed to retain his favor Nor may a manager or executive of a

licensed freight forwarder avoid responsibility by claiming lack of

knowledge of or actual participation in improper acts or conduct by

his subordinates or employees He must see to it that the licensed

freight forwarder assumes the responsibility and displays the in

tegrity required of it o

The standard of conduct of freight forwarders must be above re

proach They will not be permitted to cut corners or engage in ques

8

Application forLlcenae No 8 F M C 109 Dixie Forwarding

8

FreIght Forwarder Investigation etc 6 F M B 327 1961

See section 610 4 b Gen Order 4 46 CFB 610 4 bl

15 FMC
136 FEDERAL MARITIME COMMISSION

tionable practices at the expense of their shipper clients of carriers

or of the public This is particularly true where as here the record

supports the conclusion that the applicant at least condoned if he

did not actually participate in serious violations of the Act It is the

prime duty of a licensed freight forwarder to acquaint himself with

and scrupulously adhere to the law and the rules and regulations

of the Commission thereunder In this case applicant s burden to

clearly demonstrate acomplete awareness of and willingness to ac

cept the responsibilities that the preferred position imposes is in

deed a heavy one But it is not insurmountable In making a

determination as to applicant s fitness ie whether he can be relied

upon and trusted to carry on the profession of freight forwarder in

an honorable and responsible fashion we should look at all the cir

cumstances of the applicant s case as they presently exist and no

only atthat part of his overall conduct and business operation which

failed tomset the required standards

As above stated on April 22 1970 Sorrentino Shipping Inc was

convicted in the US District Court Southern District of New York

on 16 counts of misclassification of export shipments in violation of

theAct and on June 17 1970 duly fined 1 600 100 on elich count

Applicant was not named as a defendant in the criminal action

However he was president and principal executive officer of Sor

rentino Shipping Inc during the entire period from April 1965 to

March 1966 in which all the instances of misclassification took place

There is not much doubt that applicant was at least aware of the

course of dealing between SorrentinoShippingInc and Rau through

which the misclassification of these shipments was arranged and car

ried out

It also appears that applicant was aware that the method used by

SorrentinoShippingtoprepare shipping documents and the descrip

tion of the merchandise was calculated to and did result in obtaining

lower freight rates for Rau s shipments However there is no evi

dence that Guy G Sorrentino personally benefited from these decep

tions apart from his share of whatever feeaSorrentino Shipping

received for its freightforwardingservices

As Hearing Counsel says in his brief if Guy G Sorrentino is found

not to be fit and willing and able to carryon the business of freight

forwarding his application must be denied Such action in turn wil

have the effect of removing him from a field of endeavor in which

hehasengaged for nearly 30 years

Applicant on his part does not deny responsibility as principa

officer of Sorrentino Chipping Inc for these acts of misclassification

e

readily admits that he should have used better judgment and

111 FMO
LICENSE APPLICATION GUY G SORRENTINO 137

should have scrutinized more carefully the shipper s instructions

to use the description textile machinery parts But he says

11

Irealize I did not use good judgment In not scrutinizing more carefully the

shipper s Instructions to us to use the description textile machinery parts I

realize It Is the forwarder s obligation to ascertain the proper description of

merchandise exported I also realize that as chief officer of my company I was

responsible for the actions of my employees This Is the only Instance

In my experience of approximately thirty years where I was reprimanded In

any form orfashion for such a violation

Applicant asserts however that denial of his license would in

effect pronounce an economic death sentence on his productive life

Hesays

12

After being gainfUlly and happily employed for approximately thirty

years a denial action would have theetlect of ending my productive life At age

47 and with an entire life devoted to one field I

find It ImpoSsible to start a new

career at this time With the business recession In our country there are prac

tically nojobs tor middle management level In my field Even menial occupations

are being denied me In this field as prospective employers find It easy to say

this job Is not for you

The record indicates that applicant has not engaged in any phase

of the freight forwarding business since his separation from Sorren

tino Shipping thl first of this year Also as above stated he has

severed his connection and disposed of his financial and proprietary

interest in Sorrentino Shipping the freight forwarding business

which he built up overthe years of activity in the shipping business

On October 27 1970 the Commission served an order pursuant to

section 44 d ofthe Act requiring Sorrentino Shipping Inc to show

cause why its license should not be suspended for 60 days because it

had been in violation of section 16 of the Act The violations of law

upon which the order to show cause was based were those of which

Sorrentino Shipping Inc had been convicted and which constitute

the basis for the Commission s order herein 14 The order to show cause

was published in the Federal Register on October 31 1970 After

Guy G Sorrentino disassociated himself from Sorrentino Shipping

the show cause proceeding was discontinued February 2 1971

u

Lette1entitled Brief of Guy G Sorrentino September 4 1971 p 1

18 Ibid p

4

18 See Minutes of Speclal Meeting of Board of Directors of Sorrentino Sblpplng Inc

October 1970 Sorrentino resigned as of December 81 1970 with all salary and other

compensation terminatin at that date He agreed to usurrender bls twenty shares ot

stock ten to Mr Risch and ten to Mr Vlsone The present policy maintained by the

corporation on the life of Guy Sorrentino In the amount of 7 OOO wlIl be turned

over to Mr Sorrentino tree R F1 of December 81 1970 with no liens by the corporation

1

Docket No 704 lndependent Ooean Freight Forwarder LkenS6 No 878 Sorrentlno

Shipping Inc

18 Vol 8 F R No 218 p 16867

15 F M C
138 FEDERAL MARITIME COMMISSION

Applicant argues with some plausibility that had he refused to

divest himself of his interest in and control of Sorrentino Shipping

Inc the maximum penalty assessed against that enterprise in which

he retained a principals status would have been a 60 day suspension

of its license 18

He says ineffect that he hasbeensufficiently punished by his volun

tary removal from the freight forwardingbusiness for a period longer

than would have beenthe case underthe Commission s proposed order

that the seriousness of the violations of law by Sorrentino Shipping

has been thoroughly impressed upon himj

that the Commission s

regulatory purpose has been achieved j and that todeny him a license

to engage in the only profession which he knows with the consequent

disastrous effects on his ability toearn a livelihood would be excessive

and unfair

Hearing Counsel points out in his reply brief that the Commission

might well have taken amore stringent position in its order to show

cause had it not also been dealing in that action with the rights and

economic interests of innocent third parties who had no part in the

violations of law by Sorrentino Shipping However the practical re

sult of the show cause proceeding had applicant not divested himself

of his interest inSorrentino Shipping apparently would have been no

more severe in its effect on applicant than a sixty day suspension of

Sorrentino Shipping The result might well have been that after a

brief interval applicant would have continued as a third owner and

perhaps manager of Sorrentino Shipping a licensed freight for

warder This is not of course to say that the fact that the show cause

proceeding might have resulted in a lesser penalty ought to dictate

the result in this proceeding The actions are different and the deter

minations tobe made are not identical However on balance the ap

plicant sconnection with the sixteen instances ofmisclassification here

in pleaded does not appear tohave been so culpable as forever to bar

him when all the circumstances are considered from pursuing the

trade which has occupied all of his mature life and which as a rea

matter is probably his only means of gaining a livelihood He has no

engaged in any phase of the shipping business since hesevered his con

nection with Sorrentino Shipping the first of the year Since then he

10 In this sbow cause order tbere never was tbe mention of revocation of lleanse

Conssquently lt appears to me tbat If I bad remained wltb Sor ntlnO Sblpplnr Inc

tbe maximum penalty tbe 1Irm of wblcb I W8 a member would bave suffered would

bave been a 60 day suspension I cannot justify In my own mind wby a more dnLstlc

pen alty Is belnr Bougbt aralnst me personally by means of denYlnr me a license 8 pe

my application Brief of Guy G Sorrentino p

8

1G FMC
LICENSE APPLICAT ION GUY G SORRENTINO 139

has been without gainful employment Obviously he has already suf

fered substantial economic loss as a result of his transgressions

Applicant has a

long history of useful and profitable service in the

shipping industry and is technically well qualified to serve shippers

carriers and thepublic This long fruitful history ofcreditable service

in his profession coupled with his frankadmission of his fault in addi

tion tothe fact that he had suffered substantial economic and profes

sionalloss by his voluntary self exclusion from the freight forward

ing profession for 11 months tends to mitigate the effects of his

culpability Applicant is cautioned however that the violations

of law which he at least condoned were serious and involved the es

sence of the high responsibility which he must assume as a licensed

freight forwarder Applicant should be extremely jealous ofhis priv

ileged status as ocean freight forwarder and particularly in view

of his past lapses should bedoubly alert to avoid any future deviations

from strictest adherence tothe requirements of law the Commission s

rules and regulations and the position of trust and confidence which

his tTcense imposes Any future violations by applicant of the Act or

the Commission s applicable rules and regulations such as those

involved herein would warrant action to revoke applicant s license

Under the foregoing circumstances Guy G Sorrentino is found to

be fit willing and able to carry on the business of forwarding within

the meaning of section 44 of theAct and the Commission s rules and

regulations and qualifies as a freightforwarder

The applicationofGuy G Sorrentino is granted

Signed ASHBRooKP BRYANT

Presiding Ernaminer

Washington D C

Date November 5 1971

TR p 16

I certainly realize I have had plenty of time to understand the extent ot

the law on which infractions were based and I reaUze I had been negligent in that

particular matter but It Is the only one tn approximately thirty years in actioa

as an independent ocean freight forwarder

15 F M C
FEDERAL MARITIME COMMISSION

DOORET No 71 12

WALL STREET CRUISES INC

FAILURE To QUALIFY FOR PmlroBHANCE CERTIFICATE

Wall Street Cruises Inc tound in violation ot section 8 ot PubHc Law 891

and section MO 8 ot Commission General Order 20 tor tailure to establ

its ftnancial responsib1l1ty and to obtain trom tbe Commission a Cert11lcate 

Financial BesponslblUty tor Indemnification ot Passengers tor Nonperfor

ance ot Transportation prior to pubUshing a series ot advertisements off

ing cruises trom United Statss porta

Respondent ordered to cease and desist trOIp arranging offering advertising 

providing cruise passage until after it has compUed witb tlnancial respon

blUty requirements ot P L 89ll and General Order 20

MOUrice Mato1on for Wall Street Cruises ne

Donald J BMJ1ner and J08eph B Slunt Hearing Counsel

March 9 1979

REPORT

By THE COMMISSION Helen Delich Bentley Ohai 1llWln Ashton 

Barrett Vice Ohairman James V Day and George H Hear

OommiB8Wner8

On July 19 1971 we ordered Respondent Wall Street Cruises In

toshow cause why it should notbe found tobe inviolation of section 

of Public Law 89777 and section 540 3 of Commission General Ord

20 for advertising a series of cruises from United States ports on t

S S Independence without firsthavingqualified for and received fro

the Commission aCertificate of Financial Responsibility for Indem

fication of Passengers for Nonperformance of Transportation a

why it should not be ordered to cease and desist from arrangin

offering advertising or providing passage on the S S Independen

until after it has complied with the financial responsibility requi

ments of PL 89 777 and General Order 20

Comml loner Clarence MOrRe did notparticIpate

111 1 11 0

140
WALL STREET CRUISES INC 141

Respondent through the person of Mr Maurice Matalon its presi

dent and principal stockholder filed an affidavit in response to the

Order to Show Cause to which Hearing Counsel replied We have

heard oral argument

BACKGROUND

In May June and July 1971 Respondent a New York corporation

purportingto have an option 1

to purchase theSS lndependence from

American Export Isbrandtsen Lines Inc published a series of ad

vertisements in the New York Time82 offering cruises from United

States ports on the SS Independence

Section 3 a of PL 89 777 provides that

No person in the United States shall arrange offer advertise or provide pas

sage on a vessel having berth or stateroom accommodations for fifty or more

passengers and which Is to embark passengers at United States ports without

there first having been filed with the Federal Maritime Commission such In

fonnation as the Commission may deem necessary to establish the financial

responsibility of the person arranging offering advertising or providing such

transportation or inlieu thereof a copy of a bond orother security In such fonn

as the Commission by rule or regulation may require and accept for indemni

fication of passengers for nonperformance of the transportation

Section 540 3 of Commission General Order 20 provides as follows

No person in the United States may arrange offer advertise orprovide passage

on a vessel unless a Certificate Performance has been issued to or covers

such person

Since Respondent advertised for and offered cruises from United

States ports on a vessel having passenger accommodations for more

than fifty passengers without first having qualified for and received

from the Commission a Certificate Performance as required byPL

89 777 and Commission General Order 20 the present Order to Show

Cause was issued

DISCUSSION AND CONCLUSIONS

In its response to the Commission s Order Respondent denies any

violation of PL 89 777 on the grounds that it did not request nor

collect any money from any prospective passenger as a result of its

advertised cruise program on the SS Independence and that the sole

purpose of the advertisement was in its words to test the market

Hearing Counsel would rejectthe suggestion that the advertisements

atissue constitute a market test and while admitting that section 3

1This option whichoriginally was to esplre In Augnst 1971 was later reportedly esteoded

to October15 1971

These advertlsements appeared on May 80 June 13 June 20 June 21 and July 4

1971

15 FMC
142 FEDERAL MARITIME COMMISSION

of P L 89 777 was primarily designed to protect cruise passengers

from loaa of money due to the nonperformance of the transportation

contracts they point out that it is clearly preventive in nature and

by its clear terms bars all advertising prior to the establishment of a

person s financial responsibility Hearing Counselsposition is correct

To hold otherwise would not only frustrate the language of P L

89 777 but the intent of the law as well

At the outset we find Respondent s characterization of the adver

tisements inquestion as market tests tobe unconvincing As Hearing

Counsel have pointed out the advertisements which appeared in the

New York Timea quote specific fares and name specific dates and

purport to solicit business for actual cruises These advertisements

are similar to regular advertisements published by established pas

senger lines and clearly invite response by the public to either Re

spondent or travel agents The advertisements which Responden

published in the New York Times do not indicate that their purpose

was metely to determine the potential traveling public s reaction to

the proPosed cruise program

Nor does the fact that the advertisements in question incorporated

caveats stating that the offer of the above program is based on an

Option Agreement for the purchase of the vessel upon which the

transportation offer was to be performed dissuade us from this view

They did not clearly condition the sailing of the cruises offered upon

the exercise of the option agreement or otherwise effectively serve

notice on prospective passengers of the uncertain status ofthe cruises

The notices which Respondent caused to appear in the Sunday edi

tions of the New York Time8 on several occasions during the months

of May June and July 1971 constituted advertisements within the

real meaning of the word rather than merely reflecting a market

test as Respondent would have us believe

Under section 3 of Public Law 89777 oftentimes referred to as

the Safety of LifeatSea legislation however no person is permitted

to arrange offer advertise or provide passage on a vessel having

berth or stateroom accommodations for fifty or more passengers and

which is toembark passengers atU S ports without first establishing

his financial responsibility for indemnification of passengers for non

performance of transportation In implementing that section the

Commission itself has required in section 540 3 of General Order 20

that prior toany person arranging offering advertising or otherwise

providing passage on a vessel such person WUIIt have been issued a

Certificate evidencing financial responsibility

In enacting P L 89 777 Congress expressed its intent to insure that

the traveling public be protected from financial loss at the hands of

vessel owners and operators or other persons booking transportation

111 FMC
WALL STREET CRUISES INC 143

on oceangoing vessels Accordingly PL 89 777 is clearly designed to

prevent vessel owners operators orother persons who have not demon

strated their financial soundness in advance from arranging offering

or advertising passage on specified vessels from United States ports

This fact was emphasized by Representative Maillard the ranking

minority member of the House Subcommittee on Merchant Marine

when he explained in discussing the bill which ultimately became

PL 89 777 that

The way the legislation Is worded my understanding of It Is that this Informa

tion and the proof of financld responslblllty must be on file before anyone can

offer this service

Thus the actual collection or noncollection of any fares is clearly not

crucial to afinding ofa violation of section 3 ofPL 89 777

Viewed in light ofthe above Respondent s action in advertising for

a series of cruises aboard the S S Independence without first having

qualified for and received from the Commission a Certificate Per

formance establishing its financial responsibility for the indemnifica

tionof passengers constitutes a violation of section 3 a ofPL 89 777

and section 540 3 of Commission General Order 20 And while we

applaud Respondent sattempt to put the S S Independence back into

operation under the American flag and thereby revive at least in part

our floundering passenger vessel service we cannot ignore or condone

violations of the law and our own regulations

We are accordingly left with no choice but to order Respondent to

cease and desist from advertising or otherwise offering arranging or

providing passage on the S S Independence including any collection

of deposits or fares either directly or indirectly on its own behalf

or through agents until it has complied with the financial responsi

bility requirements of section 3 of PL 89 777 and the provisions of

Commission General Order 20

CoMMISSIONER GEORGE H HEARN CONCURRING

I

agree with the conclusions of the majority in this case and with

the supporting arguments

As the majority opinion states the collection or noncollection of

fares is not crucial tothe finding of a violation However based on all

the evidence Iwould find in mitigation of the violation that the

Respondent had no intention to deliberately defraud the public or

perform a fraudulentact

An appropriate orderwill be entered

SEAL S FRANCIS C HURNEY

Secretary

111 Congressional Record 2G9GO 196G

15 FMC
FEDERAL MARITIME COMMISSION

DooDTNo 71 72

WALL STREET CRVI8E8 lNo

FAILt11lIl To QuALD JFOR PJiluoltHANOE CmmnOATE

ORDER

This proceeding having been initiated by an Order to Show Ca

issued by the Federal Maritime Commission upon its own motion a

the Commission having fully considered the matter and having t

day made and entered of record aReport oontaining its findings a

conolusions which Report is hereby referred to and made a p

Mreof

Itorvkrea That Wall Stre4lt Cruisss Ino cease and desist fr

arranging oilering advertising or providing passage on the 8

IMe until it has complied with the finanoial responsib

requirements of section 3 of P L 89 777 and Commission Gene

Order 20

Bythe Commission

IlEAL S FltANOI8 C Hll ltNEY

StJ0f 6fll1 1

15 FX 

144
FEDERAL MARITIME COMMISSION

WASHINGTON DC

SPECIALDOCKET No 440

AI D US DEPARTMENT OFAGRICULTURE

v

STERLING NAVIGATION Co LTD

NOTICE OF ADOPTION OF INITIAL DECISION

ANDORDERPERMITTINGWAIVER OF CHARGES

Maroh7 197

No exceptions having been taken to the initial decision of the Ex

aminer inthis proceeding ald the Commission having determined not

to review same notice is hereby giventhat the initial decision became

thedecision of the Commission onMarch 7 1972

Itis ordered That applicant is authorized to waive llection of

16 014 68 of the charges previously assessed AID US Department

ofAgriculture

Itis IJther Q1ered That applicant shall publish promptly in its

appropriatetariff the followingnotice

Notice 18 hereby given as required by the decision ot the Federal Maritime

Couunlsslon In Special Docket 440 that effective January 2 1972 the rate on

Bqged Bulgar West Coast only tor purpolleB ot refund or waiver ot freight

charleB on any shlpmentll which may have heen shipped during the period trom

January 2 1972 throuah February 7 1972 Is 8700 W1M including bunker sur

charge of 2 00per revenue ton subjeM to all other appllcable rules regulations

terms and conditions ot said rate and this tarllr

Itis IJther ordered That waiver of the charges shall be e1Fectuated

within 80 days of service of this notice and applicant shall within five

days thereafter notify the Commission of the date and manner 01

e1fectuating the waiver

By the Commission

SEAL S FRANcis C HUllNEY

Seoreta rJ

1411 111 1110
FEDERAL MARITIME COMMISSION

SPEOIAL DOOKETNo 440

A ID US DEPARTMENT OF AGRIo JLTURE

v

STERUNG NAVIGATION CO LTD

ApJ lUcation to waive a portion of freight chargesgranted

INITIALDECISION OF HERBERTK GREER PRESIDIN

EXAMINER 1

Sterling Navigation Co Ltd a common carrier by water in 

foreign commerce of the United States has applied for permission 

waive colIection of a portion of the freight charges on five 5 sh

ments of bagged bulgar carried for the Agency of Internatio

Development Department of Agriculture shipper from Sea

Washington to Surabaja and Djakarta Indonesia pursuant to fo

bills of lading dated January 2 1972 and one bill of lading da

January 12 1972 Prior to the shipments applicant and shipper h

entered into a contract for the carriage of bagged bulgar at a rate 

37 00 per 2000 pounds including bunkerage surcharge as eviden

by cargobooking confirmations

Applicant inadvertently neglected to file the agreed rate with 

Commission prior tothe shipments but did file a rate of 37 00 

2000 pound effective January 13 1972 FMC No 3 revised page 1

By reason of clericalerror the rate filed didnot set forth the provisi

Rate includes bunker surcharge of 2 00 per revenue ton and w

the shipments were made the bunkerage surcharge FMC No 

original page 14 was applicable tothe shipments Prior tofiling

application applicant corrected its tariff to include the provision 

advertently omitted FMC No 3 revised page 7 The aggreg

weight of the shipments was 16 014 675 pounds Ifthe rate effective 

the time of shipments was applied the result would be total frei

charges of 16 014 68 in excess ofcharges atthe agreed rattl

1

Thl8 decllloll became the decllloll of the Comml8lloll Hareh T 11lTlI

146 III IH
A I D U S DEPARTMENT OF AGRICULTURE 147

Public Law 90298 authorizesthe Commission for good cause shown

to permit a common carrier by water in the foreign commerce of the

United States to waive collection a portion ofthe freight charges where

there is an error in atariff of a clerical or administrative nature or an

errordue to inadvertence in filinganew tariff The facts demonstrate

an inadvertent failure tofile the rate of 37 00 per 2000 pounds includ

ing the bunkerage surcharge in accordance with the agreement with

the shipper a situation withinthe purview of Public Law 90298 The

application wasfiled within 180 days of the date of the shipments and

no other shipments of the same or a similar commodity moved on ap

plicant s vessels during approximately the same time as the shipments

here involved atthe rate applicable at the time of these shipments No

other proceeding involving the same rate situation is now pending

Good cause appearing and applicant having complied with the pro

visions of Public Law 90298 permission to waive collection of 16

014 68 and to apply totheshipments the agreed rate of 37 00 per 2000

pounds including thebunkerage surcharge is granted Applicant shall

publish notice in its tariff as required by the statute The waiver ofthe

charges here authorized shall be effectuated within 30 days of serv

ice of this notice and applicant shall within five 5 days thereafter

notify the Commission of the date and manner of effectuating the

waIVer

8 fuImERTK GREER

Presiding Ewaminer

WASHINGTON D C

February 15 1MB

1li FMO
FEDERAL MARITIME COMMIS

WAllHINGTON DC

SPBOUL DOOXET No 441

COHODITY CRmIT CoRP

11

SAN Roooo tnm

ANOHOR SBIPPING CoRP GEN AGENTS

NOTICE OF ADOPTION OF INITIAL DECISION AND

ORDER PERMITTING WAIVER OF CHARGES

Jlaroh 7 197

No exceptions having been taken to the initial decision of the 

aminer in this proceeding and the CommissionhaV ing determined 

to review same notice is hereby giventhat the initial decision bec

m

the decision ofthe Commission onMarch 7 1972

ItiB ord6 1ed That applicant is authorized to waive collection 

171 227 110 of the charges previously assessed Commodity Cr

Corporation

It iB further Oflered That applicant shall publish promptly 

its appropriate tariff the following notice

Notice Is hereby given as required by the decision ot the Federal Marit

Comml8Blon In Special Docket 441 that effective December S l7l the rate 

Flour N O S tor account of U S D A tor purposes ot refund or waive

freight charges on any shipments which may have besn shipped from Chlca

Milwaukee to Beirut Istanbul lInd Farmapsta during the period from Dec

ber S 1971 through January 8

1972 Is 711 W lncludlq all terminal cha

and Seaway Tolls subject to all other applicable rules relUlattons tsrms 

condtttoDB ot satd rate and this tarltr

ItiB further ord6 1ed That waiver of the charjl8S shall be effectua

within 30 days of service of this notice and applicant shall within 

days thereafter notify the Commission of the date and manne

effectuatingthe waiver

By the Commission

SI lAL S FRANOIS C HURNEY

S
15 FMC 149

FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NQ 441

CQMMQDITY CREDIT CQRP

V

SAN Rocco LINE

ANCHOR SHIPPING CoRP GEN AGENTS

Permission to waive a portion of freight chargesgranted

INITIAL DECISION OF HERBERT K GREER PRESIDING

EXAMINER 1

San Rocco Line a commQn carrier by water in the fQreign CQmmerce

Qf the United States through its agent AnchQr Shipping Corpora

tian has filed an applicatiQn fQr permissiQn tQ waive cQllectiQn af a

portiQn af the freight charges Qn twa shipments carried far the

CQmmodity Credit CarporatiQn agents fQr theWarldFood PrQgram

fram KenQsha Wiscansin toBeirut LebanQn

Pursuant to twa bills af lading dated December 8 1971 applicant

caITied atotal Qf 7 827 543 grQss pounds Qf all purpase flQur Each bill

aflading set farth a rate af 35 75 per 2 240 PQunds including terminal

charges and seaway tolls the rate agreed UPQn by the parties priQr to

the shipments Due to clerical and administrative errQr applicant

failed to file the agreed rate with the CQmmissiQn and at the time

Qf the shipments the rate applicable was 84 75 W1M an cargQ NOS

not dangerQus Qr hazardQus which if charged WQuld amQunt tQ

171227 50 mare than the agreed rate

Priar to submitting the applicatiQns applicant filed with the CQm

missiQn a rate af 35 75 per 240 PQunds an FlQur N O S fQr

account Qf US D A Rates include all Terminal Charges and Seaway

TalIs F M C Na 1 revised page 25

Public Law 90298 authorizes the CommissiQn far good cause

shown topermit a camman carrier by water in the fQreign CQmmerce

af the United States to waive collectiQn Qf a portiQn af the freight

1

Tbls decision became the decIsion of the Commission March 7 1972
150 COMMODITY CREDIT CORP V SAN ROCCO LINE

charges where there is an error in a tariff of aclerical or administ

tive nlbture or an error due toinadvertence in filing anew tariff T

facts demonstrate an inadvertent failure to file the 35 75 per 2

pounds rate inaccordance with the agreement with the shipper a sit

tion within the purview of Public Law 90298 The application 

filed within 180 days of the date of the shipments The waiver w

not result in discrimination among shippers Two additional appli

tions for waiver of aportion of the charges on similar shipments c

ried by applicant for complainant have been granted Special Doc

Nos 488 and 439

Good cause appearing and applicant having complied with 

provisions of Public Law 90298 permission to waive collection o

total of 171 227 50 on the two shipments and toapply the 35 75 r

per 2 240 pounds to the shipments is granted Applicant shall pub

notice in its tariff as required by the statute Thewaivers ofthe char

here authorized shall be effectuated within 30 days of the service 

the notice and applicant shall within 5 days thereafter notify 

Commission of the date and manner of eilectuating the waivers

S HERBERT K GREER

P16Biding Emamine

WASHINGTON DC

FebfUQrJj 16 197B

111 FX C
151

FEDERAL MARITIME COMMISSION

DOOKET No 71 87

ASSOOIATED LATIN AMERICAN FREIGHT CONFERENCES AND THE Asso

CIATION OF WEST COAST STEAlIfSHIP COMPANffiS ArfENDED TARIFF

RULES REGARDING VHARFAGE AND HANDLING CHARGES

March 9 19713

REPORT

The revised rules and charges filed by the Associated Latin American Freight

Conferences and theAssociation of West Coast Steamship Companies relat

ing to the imposition of wharfage and handling charges are found to be in

contravention of section 205 of the Merehant Marine Act 1936 and there

fore contrary to the public interest within the meaning of section 15 of the

Shipping Act 1916

Jolvn R Mahoney and John J McGonagle Jr for the Associated

Latin American Freight Conferences et al respondents

Thomas F Ham80n for the State of New York Loui8 L Walter8

for the city of New York Richard M PiBacane for theState of New

Jersey Arthur L Winn Jr for the Port of New York Authority

Philip G Kraemer for the State of Maryland Martin A HeckBcher

for the Commonwealth of Pennsylvania Delaware River Port Au

thority and the Port of Philadelphia Marine Terminal Association

William A Imhof for the Secretary ofAgriculture and Commodity

Credit Corporation intervenors

Norman D Kline and Donald J Brunner hearing counsel

By THE CoMllnSSION Helen Delich Bentley Ohairman Ashton C

Barrett Vice Ohairman James V Day George H Hearn and

Clarence Morse Oommi88ioner8

On November 19 1971 the Commission ordered the Associated

Latin American Freight Conferences and the Association of West

Coast Steamship Companies and their member lines 1

to show cause

why the Commission should not find the conferences concerted action

1

For a l1st of these conferences and the member lines see appendls A to this report

15 F MC
152 FEDIlRAL MARITIME COMMISSION

in publishing revised tariff rules relating to wharfage and handlin

charges to be in violation of section 205 Merchant Marine Ac

1936 and tJherefore contrary tothe public in rest within the mea

ing of section 15 Shipping Act 191 and accordingly order su

rules and char stricken from the tariffs Petitions for leave 

in rvene were filed and granted in behalf of the Port of New Yo

Authority the Delaware River Port Authority the city of Ne

York the US Department of Agriculture the State of Marylan

the S4la of New York the CommonweaJth of Pennsylvania the Po

of Philadelphia Marine Terminal Association the State of Ne

Jersey and the Port of New Orleans

The proceeding was limited to affidavits of fact and memorand

of law Memoranda werefiled by the respondent conferences jointly

hearing counsel and all of the intervenors In addition the respon

ents and five of the intervenors filed supporting affidavits Or

argument washeld on January 12 1972

BAOKGROUND

The Associated Latin American Freight Conferences represen

a llfOUD of 10 activeconferences TheAssociation ofWest CoastSteam

ship Companies is a conference operating in trades between Unite

States Atlantic and gulf ports and ports in Central and Sou

America pursuant to Commission approved aweements These co

ferences publish separate outbound and inbound tariffs which co

tain rules relating to the assessment of wharfage and handli

charges Prior tothe revised tariffs in question the relevant wharfe

and handling charge provisions limited the cargo s cost for su

service to the tollage whll lfege handling and or other charg

assessed apamst tlhe cargo

In late May 1971 these conferences revised their tariff rules so 

to fix wharfage and handling charges and generally to shift th

assessment from carrier to cargo at US Atlantic and lf por

Tariffs initiating these changes werefiled with the Federal Maritim

Commission on June 28 1971 to become effective approximately 

I SectIon 20G of the Merchant Marine Act 1988 problblt any common car

by water eltber directly or Indirectly tbroUlh the medium of an agreement conferen

clatlon underatandlDI or otherwll to prevent or attempt to prev nt any otber 

carrierfrom ervlDlr any port dulllDed for the accommodatIon of oceanojlOlnll vooae1 loca

on any Improvement project authorl ed by tbe Con or tboullb Itby any other atre

of the Fede1 Government lylDll Wltbln thecontinental limIt of the Unlted State at 

ame rate whlcb It cbarg at t e nearoot port already rularly erved by It

I SectIon IG of tbe Shlpplnll Act 1918 In part direct the Comml llon to 

approve cancel or modify aDY alree ent or any modUleatlon or cancellation ther

wbetheror Dot prevlou ly approved by It tbat it lIDd to be coDtrar r

to the pu

Interest and shall approve aU other aJleements modlflcattoDI or cancellatloDS

15 FMC
ASSOCTATED LATIN RICAN FREIGHT CONFERENCES 153

days thereafter or on October 4 1971 Subsequen tto that filing the

President issued on August 15 1971 Executive Order No 11615

which in effect froze all prices including freight rates and charges

through November 12 1971 Accordingly the respondent conferences

deferred the effective date of their revised wharfage and handling

charges to November 15 the first business day after the conclusion of

phase Iofthe wage price freeze program

Protests and petitions from the Governors of the States of New

York and NMv Jersey werethen filed with the Commission On No

vember 14 1971 the US District Court for the Eastern District

of New York granted a temporary restraining order to expire No

vember 24 1971 restraining collection of the revised charges at the

port of New York

On November 18 1971 a stipulation and order was signed which

extended the temporary restraining order for 180 days from Novem

ber 24 1971 or until such earlier date prior thereto as the Federal

Maritime Commission shall have issued a final decision and order

on the issues raised ihy the Protests and Petitions of the Governors

of New York and New Jersey filed with the Federal Maritime Oom

mission on orprior toNovember 11 1971

Subsequently addi tional protests and petitions similar to those

of New York and New Jersey werefiled by the States ofPennsylvania

and Maryland In reply thereto the respondent conferences stipu

lated and awood to refrain from assessing the charges in issue at

the ports ofPhiladelphia and Baltimore for the same period provided

in the stipulation and order involving the port of New York

he conferences amended wharfage and handling charge tariff

provisions would include in the cost to be borne by the cargo the

charges for such service previously assessed against the carrier as

set forth in the pertinent terminal tariffs The conferences tariffs

publish exceptions thereto for service at Baltimore Philadelphia

and New York At New York a wharfage charge of 1 per short ton

is published together with a handling charge of 3 per short tonwith

specified exceptions At Philadelphia and Baltimore wharfage and

handling oharges are as set forth in governing terminal tariffs with

the exceptions that at both ports shipper loaded containers and cargo

delivered to carriers in rail boxcars will pay a handling charge of

150 per short ton The same exceptional conditions on handling

are applied to New York for these two classes of traffic except that at

New York there will be no handling charge on cargo delivered by

shippers within reach of ship s tackle free of expense to the vessel

Therefore the implementation of these revised tariff rules will re

15 F M C
154 FEDERAL MARITIME COMMl88 ION

sult in the assessment of individual charges by the conferences which

vary in amount from port to port within the continental United

States

DISCUSSION AND CoNOLUSIONS

The Commission in this proceeding is presented with a single lega

issue involving the applicllibility of section 205 of the Merchant

Marine Act 1936 46 US C 1101 et seq to the Commission s exer

cise of its powers under section 15 of the ShippingAct 1916 46 US C

801 et seq The question is whether the provisions of section 205

of the 1936 lIiCt constitute a bla nket prohibition against any con

ference taking concerted action which results in the lUISeSSment o

VlIirying lIlites and charges among federally improved continenta

US ports thereby rendering such action COntrary to the public

interest under section 15 of the 1916 act and beyond the power o

the Commission to sanction by its lIipproval

For the reasons set forth herein we think it clear that not only

is it proper to consider and give hood tosection 205 in decidinA cases

arising under the Shipping Act but also that we are obligated tocon

form our decisions to the congressional policy expressed in section

205

The point made by hearing counsel but missed by respondents i

that section 205 and section 15 are both part of acoordinated regula

tory scheme dssigned to regulate conferences and protect ports from

potential or lIiCtUaJ harmful discrimination The fact that differen

agencies may bear primary responsibility for enforcing the two sec

tions does not mean that the substantive or policy content of thos

sections exists in a VlIiCUum independent of 8lIiCh other In implemen

ing section 15 the Commission is not free to ignore section 205 or an

other relevant policy ofCongresslliS expressed into law

Accordingly we must conclude that section 205 of the 1936 ac

has removed from the Commission s

jurisdiction all authority to ap

prove under section 15 of the 1916 act any activity proscribed b

section 205 and requires the Commission to disapprove such activity

To conclude otherwise is in our opinion to ignore both the plai

meaning of the language used and the authoritative interpretation

of section 205 rendered by both this Commission and the courts

Prior to Reorganization Plan No 7 of 1961 75 Stat 840 ou

predecessors found the prohibitions set forth in section 205 of th

1936 lIiCt to be relevant tothe determination of section 15 violations i

the proceedings before those agencies and more recently we ou

See e

g liI ol 1 r ln 1a v Pllolllo W tbou d Oo r F M B 816 19 7

Jrllll Hllrbor Pul J PlJIler 00 v A 11 Xl v 0 A S 2 U S M C 866 869 87

1940 SuMlJld BIJIBI Jr A v Blu Stllr LI Ltd 2 U S M C 81 1989

III FMC
ASSOCIATED LATIN AMERICAN FREIGHT CONFERENCES 155

selves have recognized that notwithstanding the absence of an express

delegation in Reorganization Plan No 7 section 205 remains part

of the law of the land and an expression of the Public interest

within the meaning of section 15

This approach was quite recently sanctioned by the US District

Court for the Northern District of California which in May of 1970

observed that

Even If the FMC does not have responsibility for fi 205 it must take account

of it in Ita deliberations That which would contravene 1205 of the

Merchant Marine Act would surely be grounds for disapproval under fi 15 of

the Shipping Act Sacramento Yolo Port District v POEO 8 SRR 20 569 20 570

1970

Respondents suggestion that the Commission must accede to the

Department of Commerce s action or inaction under section 205

because of the terms of Reorganization Plan No 7 of 1961 or some

Doctrine of Administrative Abstention cannot override the force

of the above decisions and the clear intent of Congress as expressed

in the legislative history The purpose of Congress in enacting section

205 was to remove from the then US Maritime Commission the

power to legalize conference restrictions against federally improved

ports on acase hy case basis under sections 15 and 16 of theShipping

Act 1916 and to make all such restrictions illegal per se See e g

hearings before the Committee on Commerce U S Senate pursuant

to S 5035 72d Cong 2d Sass 1933 pp 30 33 39 82 84 87 90 114

The fact that section 205 was not assigned to the Commission by

Reorganization Plan No 7 affords no indication whatsoever that it

was the intent of Congress to dilute in any mauner the policy and

proscriptions set forth in that section Whatever may have been the

reason for failing to specifically transfer the section to the Commission

in the reorganization it cannot be seriously argued that this failure

now leaves the Commission free to do that which Congress enacted

section 205 to expressly prohibit The real question here is not one

of the primary responsihility for the administration of section 205 of

the 1936 act That section and section 15 of the 1916 act and other

relevant sections are all part of a coordinated regulatory scheme

which was put together by Congress and remains the law of the land

Certainly various agencies perform functions within that scheme but

each cannot operate in its own statutory vacuum oblivious to the over

all policy or objectives of Congress Neither its predecessors nor this

Commission have operated this way We have consistently given con

I See e

g Sacramento Yolo Port District v Pacific Coad European ConlereMe et a1

US FMC US served Aug 10 1971 Pactfto Ooast European ConferenceRules 10 and 1

TtJriff No FMO 14 served June 15 1971 stockton Port District v Pacific Westbound

Oon erenee et 01 9 F M C 12 1965

15 FMC
156 FEDERAL MARITIME COMMmsION

sideration to the will of Congress as expressed in other statutes when

administering section 15 of the 1916 act The most obvious example is

the antitrust laws wherein the Commission has had toconsider policies

set forth in those laws in determining whether toapprove agreements

filed pursuant to section 15 See e g

I8brandt8en 00 v United

State8 211 F 2d 51 D C 19M Section 8 oftheMerchant MarineAct

1920 46 US C 861 867 is yet another example of congressional

policy embodied in a Btilltute which is not specifically administered

by the Commission but which nevertheless has played a part in

deliberati ll8 under the 1916 act The policy of section 8 is to promote

the development of ports and transportation facilities on a natural

tributary basis This policy has been given weight by the Commis

sion in determining questions of discrimination or prejudice toward

a port See e II Irvve8tigation of Overland OOP Rate8 and Ab8orp

tion8 12 FM C 184 1969 j Reduced Rate8 onMaohinery and Trac

tor8 to Puerto Rico 9 FM C 465 476 1966 j Stookton Port DiBtriot

v Pacific We8tbownd Oon et oJ 9 FM C 12 1965 j Oity ofPortland

v Pacific We8tbownd Oonference 4FM B 664 1955 Inthe Reduoed

Rate8 to Puerto Rico case 8upra at 476 the Commission summed

up its treatmentof section 8

This right the right of a port or carrier aervlnlf that port to cargo from

naturally tributary areas is codified In section 8 of the Merchant Marine Act

1920 whieh aa a statement of congresalonal poliCY although not one specifi

cally appearing In the statutes we administer should be and haa been followed

by this OommillR1on whenever pollR1ble

Little would be left of the concept of the public interest wer

we to exclude from it that clear interest of the public in the jus

application and enforcement of those statutes enacted by Congres

which are relevant considerations in the overall regulatory program

for the waterborne commerce of the United States We think it b

now beyond doubt thwt the prohibitions of section 201S of the 193

act form an essential part of any consideration of the public interes

under section lIS of the 1916 act

Respondents would however exclude section 205 from our delibera

tions in this case for yet another but we think equally invalid rea

son They urge that the history of that section clearly establishes tha

its prohibitions wereintended to be applied only to small west coas

ports and to conferences operating in the intercoastal and coastwis

trade when serving those ports

The language in section 205 clearly makes it applicable toall ports

regardless of size if they lie within the continental United States

To suggest a more limited meaning through reliance on excerpte

legislative history violwtes as pointed out by hearing counsel th

111 FMC
ASSOCIATED LATIN AMERICAN FREIGHT CONFERENCES 157

fundamental principle of statutory interpretation which calls for

the use of legislwtive history only to resolve dowbts and ambiguities in the meanings of words used by the legislature See Fairport P and

JR 00 v Meredith 292 US 589 1934 Moreover respondents

selective treatment of the legislative history ignores testimony which

clearly indicates thwt the language in question was intended to apply

to all ports regardless of size or the particular coast on which they

are located See e g hearings before the Committee on Merchant

Marine and Fisheries House of Representatives pursuant to H R

7521 74th Cong 1st sess 1935 pp 97 48390 493 1153 hearings

before the Committee on Commerce U S SenaJte pursuant to S 5035

72d Cong 2d seas 1933 pp 6 9 31 74 76 77 79 80 88 and 93

Respondent s attempted restriction of section 205 to the coastwise

and intercoastal tradee

ignores the existence and purpose of section 2

of the Intercoastal Shipping Act 1933 46 U S C 843 et seq which

provides in part that

it shall be unlaw11 for any such carrier either directly or Indirectly

through the medium of any agreement conference association ullderstanding

or otherwise to prevent or attempt to prevent any such carrier from extending

service to any publicly owned terminal located on any Improvement project

authorized by the Congress at the same rates which It charges at its nearest

regular port of call

Section 2 was specifically designed to regulate common carners

in the intercoastal trade Thus respondents would reduce section 205

of the 1936 act to sheer congressional redundancy and surplusage

Aside from the difficulties inherent in attributing any such design to

Congress the limitation urged by respondents will simply not square

with either the language of the section or any complete analysis of

the legislative history of section 205 1

Finally respondents assert that by our reliance herein on section

205 as constituting a

complete prohibition against differences in rates

as between ports we are in effect emasculating sections 16 and 17 of

the 1916 act a result obviously never intended by Congress Again

At least one group ot conferences the Trans Atlantic Associated FreIght Conferences

thought the section sappllcablllty to foreIgn commerce clear enough to warrant opposing

its passage

See e

g hearings betore the Committee on Merchant MarIne and FisherIes House ot

Representatlves pursuant to H R 7ri21 upra 4867 and partlcularly p 488 wherein

Congressman Burnham representlng the 20th DIstrIct of CaUtornla stated inreference to

what became the substance ot sectlon 20ri that 1114 The Congress recognized the pollcy

ot provIdIng tor equaUzatlon ot rat s to new oraddltlonal ports with rates applyIng at

the nearest port of call In passing the Intercoastel Shipping Act of 1933 but thfl

law doe not applg to lorelgn and coastwise operations The proposed amendment u

tlesil1Md to correct tAu e1 and lack 01 regulation lri the proposed amend

ment whIch simply makes effecUve the amendment already Incorporated 10 the Intercoastal

ShIpping Act ot 1938 applicable to foreign and coastwise line EmphasIs ours Also

see hearIngs before the CommIttee on Commerce U S Senate pursuant to 18 ri035 72d

Cong 2d eess 1933 p 32

15 FMC
158 FEDJIlRAL MARITIME COMMISSION

respondents analysis ignores the existnce of a coordinated regula

tory scheme wherein a

single activity may violate several laws simu

taneously and in this we agree with hearing counsel who view

sections 16 and 17 as broad in scope applying to anumber of things

besides discriminatory conference rates If fuere is any shortcut

owing to seetion 205 it is because Congress specifically prohibited

one particular type of concerted action and has removed from the

Commission any discretion toapprove it under section 15

Our action herein does not in any manner demeaJ l sections 16 and

17 of the 1916 act and the conference activities in question may b

equally violative of the broader and more general preference an

prejudice provisions of those seotions But this does not relieve u

of the obligation toapply section 205 in considering whether respond

ents actions are contrary to the public interest within the meanin

of section 15 of the 1916 act

Accordingly and for the foregoing reasons we find that the rule

and charges relating to the wharfage and handlingcosts atissue ar

in contravention of section 205 of the Merchant Marine Act 1936

and are therefore contrary tothe public interest within the meaning o

section 15 of the Shipping Act 1916

Any argument not specifically desJt with in this report has bee

considered and found to be either irrelevant immaterial or unnece

sary toour decision herein

An appropriate order will be issued

SEAL S FRANCIS C HURNEY

Seoreta lfl

APPENDIX

Atlantic and Gulf West 00a8t at South America Oonfel llllce

Atlantic and Gulf West Coast of Central America and Mexico Conference

East Coast Colombia Conference

U S Atlantic and Gulf Haiti Conference

U S Atlantic and Gulf Jamalca Conference

Leeward and Windward Islands and Gulanas Conference

Atlantic and Gulf Panama Canal Zone Colon and Panama City Conference

U s Atlantic and GuIt Santo Domingo Conference

U S Atlantic and Gulf Venezuela and Netherlands Antilles Conference

West Coast South America Northbound Conference

Assoclllltion at West Coast Steamship Companies

Caribbean TraIler IIlJ pres Ltd

Lykes Bros Steamship Co Inc

utaShipping eo Azta LIne

Marine Mercante Nlcaral l1ense S A Mamenlc LIne

Sea Land Service Inc

Gulf Puerto Lines Inc

United Fruit Co a division of United Brands Co

Atlantic LInes Ltd

111 FMC
ASSOCIATED LATIN AMERICAN FREIGHT CONFERENCES 159

Booth Steamship Co Ltd

Lamport Holt Line Ltd

L Figueiredo Navegacao S A

Linea Amazonlca S A

Pan American Mall Line Inc

The Honduran Line Empre sa Hondurena deVapores S A

Hapag LloydAG HapagfLloyd Magellan Service

Colombiana Internaclooal de Vapores

Companla Sud Americana de Vapores Chilean Line

Flota Mercante Grancolomblana S A

Gulf South American Steamship Co Inc

Kawasaka Klsen Kalsha Ltd K Line

Nippon Yusen Kaisha Lines N Y K Line

Prudential Grace Lines Inc

Vaasa Line Oy

Westtal Larsen Co A S Westtal Larsen Line

Companla Peruana de Vaporee Peruvian State Line

Alcoa Steamship Co Inc

Companla Anonlma Venezolana de Navegacion Venezuelan Line

Delta Steamship Lines Inc

KoninkUjke Nederlandsche Stoomboot Maatschappij N V Royal Netherlands

Steamship Co

Nopal Lines The Northern Pan American Line A S

15 FMC
FEDERAL MARITIME COMMISSION

DOOXET No 7187

AaSOOIATED LATIN AHEmOAN FREIGHT CoNFERENCES AND THE A

CIATION OF WEST COAST STEAJrlSHIl COKPANmS AmNDED Tu

J

RULES REGARDING WHAllFAGE AND HANDLING CHARGES

ORDER

I

This proceeding having been instituted by the Federal Marit

Commission and the Commission having fully considered the m

ter and having this date made and entered of record a

report 

taining its findings and conclusions therein which report is he

referred toand made apart hereof

Therefore it is ordered That the rules and charges relating to

wharfage and handling costs in issue which were filed by the A

ciated Latin American Freight Conferences and the Associatio

West Coast Steamship Companies are to be stricken from the ta

relating thereto

By the Commission

SEAL S FRANCIS C HURNEY

S

160 111 FY 
FEDERAL MARITIME COMMISSiON

WASmNGTON DC

DOCKET No 7021

DILLINGHAM LINES INC INCREASE IN FREIGHT CHARGES IN THE

US PACIFIC COAST HAWAII TRADE

Marah 16 197fJ

NOTICE OF ADOPTION OF INITIAL DECISION

This proceeding was instituted by the Commission to determine

whether certain increased rates of respondent Dillingham Lines Inc

Dillingham in the U S Pacific coast Hawaii trade applying to

the port ofHonolulu and effective as ofSeptember 7 1970 are lawful

under section 18 a of the Shipping Act 1916 and sections 3 and 4

I

f the Intercoastal Shipping Act 1933 The State of Hawaii inter

vened in the proceedings Hearing counsel also participated Ex

aminer Charles E Morgan issued an initial decision in which he

concluded and found that Dillingham s increased rates were just and

reasonable and not shown tobe unlawful

No exceptions having been taken to the initial decision of the Ex

aminer in this proceeding and the Commission having determined not

to review same notice is hereby given that the initial decision became

the decision ofthe Commission on March 16 1972

Therefore it is ordered that the proceeding be and hereby is

discontinued

By the Commission

SEAL 8 FRANCIS C HURNEY

Searetary

The Commission has now been advised that Dillingham has recently ceased its U S

Pacific cOQst HawaU servtC e Itthat he flO wewould expect DUUngham to cancel forthwith

the appropriate tarUrs on 111e with the Commission

161

15 F MC
FEDERAL MARITIME COMMISSION

No 7021

DILLINGHAM LINEs INO INCBEASE IN FREIGHT CHARGES IN

THE US PAOIFIO COAST lAWAU T1wE

Increased rates in the U S Paciftc coast and Hawaii trade und just a

reasonable and not shown to be unlawful

Amy Scupi and Jaqn e8 N Albert for respondent DilQingham Lin

Inc

Bertram Kanbara Jetfrey N Watanabe Jokn T Rigby and Geo

Pai for petitioner the Sttte of Hawaii

Donald J Brwnner and Ronald D Lee as hearing counsel

INITIAL DECISION OF CHARLES S MORGAN

PRESIDING EXAMINER 1

This proceeding was instituted by the Commission to determ

whether certain increased rates of the respondent Dillingham Li

Inc Dillingham in the US Pacific coast Hawaii trade are law

llnder section 18 a of the Shipping Act 1916 and sections 3 an

of the Intercoastal Shipping Act 1933 The increased rates in is

apply to the port of Honolulu and they became effective Septembe

1970

Nolonger in issue are certain so ca led outport arbitraries or ra

and charges on cargo loaded or discharged atcertain ports in Haw

other than Honolulu These outport arbitrarles were canceled by D

lingham prior tothe hearing in December 1970

The three parties to the proceeding are the petitioner the State 

Hawaii the State which contends that the increased rates 

unlawful and Dillingham and hearing counsel who contend that 

increased rates are lawful Direct testimony was mainly in the fo

of written exhibits and the oral testimony was mainly cross exami

tion One of the main contentions of the State is that Dillingham 

ThIs decl lon becamethe decl lonof the CommissIonMarch 18 1972

162

15 FM
DILLINGHAM LINES INC

not met its burden of proofto show what rate ofreturn is lawful in

this trade

Dillingham s service int his trade is by means of tugs and barges

with each tug towing one or two barges The barges generally are

loaded and unloaded by the roll on roll off method Some cargoes

such as earth moving road grading and construction machinery and

equipment automobiles trucks and buses are self propelled Other

cargoes such as steel and steel products wallboard household goods

and cementasbestos clay pipe are loaded and unloaded by fork lift

trucks

The movement is preponderantly westbound On one round trip

voyage Dillingham may handle about 5 500 revenue tons westbound

and about 900 revenue tons eastbound

Dmingham provides a

regular fortnightly service with each tug

making its round trip voyage in about 28 days including port times

Often a tug will tow two barges in tandem if the cargo offerings

justify In rough winter weather it is more likely that only one barge

will be towed

Dillingham s service is not nearly so fast as is the service of a con

tainership carrier such as Matson Navigation Co and therefore most

of the commodities handled by Dillingham are believed to be those

which are not suitable for transportation in containers These com

modities include fabricated and structural steel ih large widths large

heights or large lengths long steel reinforcing bars 8 foot wide wall

board which is difficult to place in 8 foot wide containers self pro

pelled vehicles andoversized constructionand roadmaking equipment

Additional cargoes are those which do notsuffer from the longer trans

portation time element when there is proper planning by shippers

and consignees including some construction commodities

A witness for the State employed by the State s Public Utilities

Commission considered DiUingham to be one of the dominant modes

of transportation available in this trade for the type of cargo trans

ported by Dillingham

DiUingham has operatedin the trade for only afew years Itbegan

its service in this trade in May 1966 with one barge between San

Diego and Honolulu on a monthly turnaround In April 1968 the

California port of call was changed to Long Beach and since then

Dillingham s service has been between Long Beach and Hawaii A

second barge was put in service in August 1968 when the present

fortnightly service was inaugurated

Tugs and barges used by Dillingham have been owned or chartered

from affiliated companies Presently three barges are owned The two

15 FMC

163
164 FEDERAL MARITIME COMMISSION

principal barges are the M OJU1cfJlT aand the Makaluuni whichhave ste

decks and are 268 feet ong and 60 feet wide A third barge th

DL e9 waspurehased in May 1970 and is utilizedas the second barg

in a double tow when needed The DLe9 is about one third the siz

of the othertwo barges

Both the Maulcalna and Makaluuni are single deck barges offerin

underdeck stowage in a hold as well as in a deck house On dec

stowage is abaft of the deck house These two barges usually a

operationally full when loaded with 5 000 to 5 500 measurement ton

of cargo

The number of measurement tons loaded on anyonevoyage depend

upon the stowage characteristics of the cargo Broken stowage ishig

for commodities such as automobiles trucks and earth moving an

roadmaking machinery because other cargoes cannot be stowed o

top of or immediately adjacent to these articles

Other carriers in tlle trade such as Matson Navigation Co a

Seatrain Lines Inc primari y provide services for container C

goes but with some space for conventional cargo and vehicles Stat

Steamship Co which offers amonthly service betweenCaUfornia a

the Far East with an intermediate call in Honolulu provides acom

nation container and conventional cargo service Pacific Hawaiia

Line Inc offers barge service between San Francisco the Paci

Northwest and Honolulu Its barges are equipped with cranes f

lift on and lift offloading and unloading and it is primarily a lumb

camero

In 1969 Diningham operated a 02 vessel the Surfer betwe

Portland Oreg San Francisco Calif and Guam Marianas Island

wit ll an intermediate call at Honolulu for three round trip voyage

Separating out these three Surfer voyages from the usual tug a

barge operations of Dillingham results for 1969 in a rate base 

2 769 680 a net profit after Federal income taxes and loss of relat

companies of 120 349 and arate of return of 43 percent

Another computation for 1969 allocating a portion of the SUrfe

rate base revenues and expenses insofar as this vessel carried car

to and from Hawaii resullt in a total DilUngham Hawaiian tra

rate base of 2 774 850 a net profit after taxes and related compani

loss of 115 787 and arate of return of 42 percent

For 1970 based on revenue through September 15 and on expens

through August 31 and with projections for revenues and expens

for the balances of the year results in a rate base of 4 131 629 ah

income after taxes and profit of related company of 191 668 and 

rate of return of 4 6 percent

lIS FMl
DILLINGHAM LINES INC

For the year 1971 Dillingham projects a rate base of 3 938 060 a

net profit after taxes and pmfit of related company of 334 945 and a

rate ofreturn of 8 5 percent

There is some question raised as to whether the third barge the

DL f39 should be included in the rate base on a year around basis

because the DL f39 had not obtained certain insurance certification

year around It was used during the winter of 1969 and it was the

intent to use it in the winter of 1970 In the projected year 1971 Dil

lingham attrrbuted a net after depreciation of 446 115 in investment

in the DL f39 Assuming that the DL f39 is usable for only 6 months

of the year hearing counsel suggested a net value for the DL19 of

223 057 and a

resulting reduced 1971 rate base of 3 715 003 AJso

making an adjustment for 6 months depreciation on the DL 19

and on taxes hearing counsel reaches a net profit after taxes etc of

344451 and arate of return on the adjusted rate base of 9 27 percent

The record shows that some shippers apparently would use the DL 1fJ

in the winter in thisHawaiian traderegardless ofthe insurance prob

lem and since the DL 19 was used in winter months therefore it ap

pears proper to leave the DL 19 in the rate base for the whole year

In any event the computed rates of return of 8 5 percent and 9 27

percent are not so different as to significantly affect the ultimate

conclusions herein as toa proper rate ofreturn

The tugs used hy Dillingham are chartered from affiliates In the

past as many as fourtugs and as many as six barges have been used

by Dillingham in the trade in asingle year In calculating rate bases

the investment in tugs and barges has been apportioned toDillingham

on the basis of the days of a

year the equipment has been used by

Dillingham Among the divisions SUbsidiaries affiliates etc of Dil

lingham Line Inc are the parent company Dillingham Corp

Young Brothers Ltd an inter Hawaiian Islands carrier Hawaiian

Tug and Barge Co an owner of tugs and barges and charterer

Diningham Shipyards Oahu Railway and Terminal Warehousing

Co which indudes an accounting department traffic department and

steamShip agency Foss Tug and Barge Co Pacific Tow Boat Co

and Albina Engine Machine Works

The State is concerned that there may have been a lack of arms

length dealings between and among Dillingham Line and its affiliates

The tug Malanae wasbuilt hy the Albina Engine Machine Works for

Hawaiian Tug and Barge which in turn charters the Malanae to

Dillingham Line

The Malanae is a larger vessel than othertugs used by Dillingham

It has 2 660 horsepower The Malanae replaced the Mikimiki whIch

15 F MC

165
166 FEDERAL MARITIME COMMISSION

had only 1 600 horsepower The Mawnae cuts 1 days off the roun

trip voyage The quarters galley and crew facilities are modern It

first voyage was in March 1970 the Malanae is designed to cope mor

efficiently with roughwinter waters and totow two barges intandem

The Mikimiki could not handle a dou ble towproperly

Besides providing a faster more dependableservice and towingtw

barges the MrilaJnn eisthe most economical tug in Dillingham s service

in operating expenses per day In the first 6 months of 1970 it cos

1 336 per day to operate the Mawnae whereas in the 12 months o

1969 it cost 1 580 per day to operate the Mikimiki Other tugs oper

ated by Dillingham from time to time ranged in operating expense

per day from 1 585 to 2 334 in 1969 and from 1 688 to 1 797 i

1970 These tugs werethe Eleu Mikio and Moi For 1971 Dillingham

contemplated using the tugs Malanae and Pacific Ranger The latte

tug was being repaired and refitted in 1970 so as to be ready in 197

with the necessary horsepower to provide the same service as th

Mawnae

The State would use the four tugs in service in 1969 rather tha

those used in 1970 in calculating Dillingham s rate base for 1970 an

1971 The State believes that Dillingham was not justifiedin usingth

newer and more costly tugs Howevel on cross examination th

State s witness responded that ifthe Malanae will be dedicated to tha

service it oughtto be included in the rate base

In 1969 the amounts in Dillingham s rate base for related compa

nies included for tugs 265 897 Eleu 502 794 Mikioi 201 52

Mikimiki and 59 134 Moi or a total of 1 029 347 for tugs Th

barge total for related companies was 930 487 which was for th

barges HTB fO HTB 17 YB f6 and YB90 This made a total o

tugs and barges for related companies of 1 959 834 less depreciatio

of 405 883 or a net for property and equipment of related companie

of 1 553 951 For 1969 DiJ ilingham had an investment in its ow

barges the Maukana and Makahini of 992 788 ess depreciation o

22 602 or anet of 970 186

The above figures of 1 533 951 for tugs a d barges of related com

panies of 970 186 for Dillingham barges plus 42 820 for office an

terminal equipment and 202 723 for working capital result in th

total ratehase for 1969 referred to previously of 2 769 680

For 1971 as projected the net investment in vessels of Dillingham

the three barges Mau7cana Makahini and DL SO is 2 172 316

office and terminal equipment is 46 233 working capital is 269 778

and property and equipment of related companies the tugs Mawna

1 019 141 and Pacific Runger 486 986 less depreciation of 56 36

15 FMO
DILLINGHAM LINES INC

for both tugs is 1 449 733 or a grand total of rate base for 1971 as

referred to previously of 3 938 060

The State is concerned with the fact that the tug Malanae contrib

utes significantly to the increase in Dillingham s rate base from 1969

to 1970 The State would use the tugs Eleu Mi1cio Moi and Mi1cimi1ci

for the days used in 1969 to compute the rate base in 1970 for tugs of

fi92 441 including 115664 for the Mi1cimiki for 124 days On the

other hand Dillingham comp1tes a 1970 rate base for tugs same tugs

above except Malanae instead of Mikimi1ci of 1 824 356 total in

cluding 768 008 for the Malanae for 249 days in 1970 Itis conduded

that Dillingham properly included the Mdanae in its rate base for

1970 and for 1971 primarily because theMalanae wasused in 1970 and

the Mi1cimi1ci was not used in 1970 This issue would have been very

clear Ha very highvalued tug were to have been included in the rate

base but had not been used in the year in question Itis equally im

proper to include in arate base any tug not used whether a high value

or a low valuetug

The voyage dnys used in calculating rate base operating expenses

and revenues must be the same for anyone year Investment in vessels

in 1 year should not be calculated on the number of voyages in an

earlier year while using the Inter year s voyages to determine oper

ating revenues Some of the States calculations were on this mixed

basis

Careful consideration of the entire record leads to the conclusion

that the rate base and net profit figures for 1969 1970 and 1971 sub

mitted by Dillingham and listed above are substantially correct and

justifiedby the evidence ofrecord

The State expresses concern about increases in the rate base of

Dillingham over the 1969 rate base attributable to intercompany

transfers of barges and increased investment of related companies

in tugs and the State concludes that the increased investments in

tugs and barges were imprudent and unreasonllible The Stnte also

contends thllit the chartering or purchase of tugs or barges from

affiliates results in a fluctuating rate base which base allegedly is im

proper for ratemaking purposes In particular the State protests the

purchases of the barges Ma1cahani and DL 29 and the chartering of

the tug Malanae The State insists that if the rate increases are ap

proved there will be nothingto prevent the diversion ofthe expensive

equipment now utilized to other more lucrllitive purposes in the Dil

lingham Corp s empire along with the substitution of less costly and

less efficient eauiDment in the Hawaiian tradehere in issue The matter

of possible diversion of equipment is of course speculation and only

lliF MC

167
168 FEDERAL MARITIME COMMIB8ION

when and if such diversion occurs and if there is aresulting chang

in the mte base only then can appropriate findings be made

The State also contends thatAlhina Engine Machine Works did n

transfer such a large and valuableasset as the tug M rila fIU atits co

with no profit toHawaiian Tug Rnd Barge Co and insists that an

net profit realized by Albina should be excluded from Dillingham 

rate base But there are no factsof record toghow what if any prof

Albina may have realized and the States arguments rest mainly o

speculation without factual foundation

All of the contentions of the State concerningthe proper rate base

of Dillingham have been considered carefully and generally thes

contentions appear to be without factual support or tobe unjustifie

by the proper interpretation of those facts which are of record Th

sllime conclusion is juatified concerning the State s arguments regar

ing Di Ilingham s

cha mer expenses Again wemust accept the facts an

figures of record of actual operations and the allocations manA ofove

head expenses We appreciate the States concern that cost allocation

as between affiliatlldoompanies makes for certain difficulties in inte

preting financial re8U but again we must rely on record data

The Stateprojects 10 percent annual growth factor in revenue ton

of Dillingham between Long Beach and Hawaii In 1969 there we

20 round tripvoyages and 121 300 revenue tons and in 1970 the

were 22 voyages and 136 087 revenue tons Tons per voyage in 19

were about 6 065 and in 1970 were about 6 186 The percentage i

crease per vayage wasIlIbout 2percent For 1971 Dillingham projecte

137 526 revenue tons for 21 voyages or about 6 549 tons per voyag

about a 4 percent increase per voyage In 1970 the construction i

dustry in Hawaii experienced a somewhat downward adjustment 

the last part of the year During the first 9 months of 1970 Dilain

ham s barges were generally operationally full on the westbou

movements The DL e9 generally was used in tandem tow all of t

time during these 9 months Considering the capacities of the barg

used by Dillingham and other facts of record it is concluded that t

Dillingham projection of revenue tons for 1971 was based on reaso

able expectations

One argument of the State on brief is that the rate increases 

issue are on widely varying percentage bases that the increases we

selective and that they result in discriminatory relationships betwe

commodities This issue was not brought up at the prehearing co

ference nor at the hearing No evidence was introduced of speci

examples of discriminatory relationships nor are any such exampl

cited on brief Inasmuch as Dillingham has made asubstantillil e

u rMC
DILLINGHAM LINES INC

dentiary record in support of its increases and has met its initial

burden of proof it is concluded that the burden of going forward

and showingany examples of the discriminatory relationships between

commoditiesshifted totheState Itisconcluded that thematter of any

discriminatory rate relationships either was not an issue or that if it

were in issue that no unlawfulness with respect thereto has been

shown

The remaining issue is whether the rate of return of 8 5 percent or

9 27 percent as supported respectively by Dillingham and hearing

counsel is within the zone of reasonwbleness for a rate of return for

Dillingham in this trade There is no specific evidence of record as to

the particular risks inherent to Dillingham s service in thePacific wa

ters as contrasted to the risks inherent in othertrades in otherwaters

There is evidence that the parent Dillingham Corp wanted Dilling

ham to realize a net return after taxes etc of about 9 or 10 percent

so as to justify the use of a new piece of equipment in Dnlin ham s

trade

In Alcoa Steamship 00 rw Gene lal 1UJ7ease in Rate8 9 F M C

220 239 decided in 1966 the Commission approved Itrate ofreturn of

10 percent for Alcoa in the Puerto Rican trade and stated that it

appeared reasonable to approve a rate of return for Alcoa no higher

than those approved for other carriers in other trades with similar

risks The Commission indicated also that the risks attendant to the

Puerto Rico trade were more akin tothose of the Hawaii and Alaska

trades than to the Guam trade in which latter trade a more stable

situation appeared to exist and risks of operation were lower based

upon thenumber ofcarriers in the Guamtrade

The number of carriers presently in the Hawaii trade is not large

but there are enough carriers apparently to constitute brisk competi

tion and to entail risks which would seem to justify a 10 percent rate

of return on rate base

In Geneml 1UJ7eases in Rates 1981 7 F M C 260 291 292 de

cided in 1962 the Commission found to be not excessive rates ofreturn

for 1960 and 1961 of 8 32 percent and 10 59 percent respectively in the

Pacific coast Hawaii trade Itwas noted that there are no laws pre

venting a diminution or wbandonment of service by the transfer of

ships anywhere in the world where the rate of return is greater and

that the sale or transfer ofships would be disadvantageous to shippers

and to the economy of Hawaii Also it was noted that other carriers

are free to enter the trade so that competition is a factor affecting a

carrier sability to attractcapital

15 FMC

169
170 FEDmRAL MARrrn tE COMMISSION

In view of the past decisions of the Commission and in view of th

ability of the parent corporation of Dillingham apparentJly to sh

equipment such as tugs and barges amo Di lngham s affiliates 

well as the parent corporation s desire to relillize9 or 19 percent n

profit after taxes etc it is concluded and found that Dillingham ha

met its burden of proof as toaproper rate of return in this trade an

it is concluded that a rate of return of either 8 lS percent or 9 27 perce

ill not excessive

It is concluded and found that the increased rates of Dillingha

inthe US Pacific coast and Hawaii trade in issue herein aTe just an

reasonable and not shown to be unlawful The proceeding will b

discontinued

8 OEwus E MOlIGAN

Pre8irlAmg E

WASHINGTON DC Feb 1UOlT l16 19714

1

111 FX a
FEDERAL MARITIME COMMISSION

DOCKET No 7012

CoMMODITY CREDIT CORPORATION AND UNITED STATES

AGENCY FOR INTERNATIONAL DEVELOPMENT

V

AMERICAN EXPORT ISBRANDSTEN LINES INC ET AL

Action by carriers reducing rates to meet Independent competition while memo

bers of one conference does not as a matter of law require similar action

by these carriers as members of a different conference where transportation

and competitive situations are different Complaint dismissed

R Stanley Barah for complainants Commodity Credit Corporation

and US Agency for International Development

Stanley O Sher for respondent American Great Lakes Mediter

raneanEastbound Freight Conference et 01

Boward A Levy for respondent American Export Isbrandsten

Lines Inc

March 17 1972

REPORT

By THE COMMISSION Helen Delich Bentley Ohairman James V

Day Oowmi8aWner

This proceeding is before us on exceptionstothe Initial Decision of

Herbert K Greer Presiding Examiner issued May 19 1971 Excep

tions were filed and oral argument was held on November 5 1971

This proceeding arises out of a complaint brought by the Com

modity Credit Corporation and the United States Agency for Inter

national Development against the American Great Lakes Eastbound

Freight Conference and its member lines alleging certain violations

of sections 15 16 17 and 18 of the Shipping Act 1916 The Examiner

issued an Initial Decision finding no violations of the Act and dis

Vlce Chairman Ashton C Barrett did not psrtlclpate

171

15 Fld C
172 FEDERAL MARmME COMMISSION

missed the complaint Complainants excepted to the Initial Decisio

towhich respondents replied

The complainants in their exceptions urge procedural as well 

factual error arguing that the Examiner slanted the facts in fav

of the respondents and omitted pertinent points in his discussion a

determinations

We find that the exceptions of complainants and the replies of r

spondents are essentially a reargument of contentions which weree

haustively briefed and considered by the Examiner in his Init

Decision Upon careful consideration of the record the exception

briefs and argument of counsel we conclude that the Examine

factual findings and his conclusions with respect thereto were w

supported and correct Accordingly we adopt the Initial Decision 

our own and make it part hereof

CoHHISSIONER CLARENCE MORSE CONCURRING AND DISSENTING j WIT

WHOH COllllllISSIONER GEORGE H HEARN JOINS

Iconcur with the majority in concluding the rate disparity w

justified on the facts In so doing Iwish to disassociate myself fro

that part of the Initial Decision which suggests as to the Unite

States Government or its agencies that there exists a necessity 

showing a competitive relationship between shippers to support 

violation of sections 16 Firstand 17 Such a

requirement would usua

preclude the Government from establishing sections 16 First and 

violations or from securing reparations for seldom does the Gove

ment ship in competition with any other shipper In all events 

prudent commercial shipper would have shipped via Canadian po

if its delivered costs would have been less and while for good a

valid policy reasons complainants elected to ship via United Sta

ports ratherthan Canadian ports the resultant higher delivered co

may be disallowable as reparations

SEAL Signed FRANCIS C HURNEY

SeuretOl1J

OIn adoptlnl the Esamlner s doelslon we consider ths EzamlDers dlscuBBlon of 

nood for a compstltlve relationship betwoon shlppe to be unnecessary to the deelllon

point which the Ezamlner himself makes eonsequently the adoption here Is not to 

taken as espressln either arrsement or dlsarreemsnt with his views We would 

ordinarily consider It nscessary to make this point and we do so only In view of 

concurring and dissenting opinion ot Commissioner Morse with whom Commissio

Hearn joins

lIS FII C
FEDERAL MARITIME COMMISSION

DOCKET No 7012

COMMODITY CREDIT CORPORATION AND UNITED STATES

AGENCY FOR INTERNATIONAL DEVELOPMENT

V

AMERICAN EXPORT ISBRANDTBEN LINES INC ET AL

ORDER

This proceeding was instituted upon complaint of the Commodity

Credit Corporation and the United States Agency for International

Development The Commission has fully considered the matter and

has this date made and entered its report adopting the Examiner s

initial decision which report and initial decision are made a part

hereofby reference

Therefore it is ordered That the proceeding be and it is hereby

dismissed

Bythe Commission

SEAL Signed FRANCIS C HURNEY

Secretary

INrrIAL DEcISION OF lIERBERT K GREER PRESIDING EXAMINER 1

Commodity Credit Corporation CCC and United States Agency

for International Development AID seek reparation from respond

ents American ExportIsbrandtsenLines Inc AEIL Niagara Line

Fabre Line Montship Capo Great Lakes Service Montship Orient

Mid East Lines Orient Yugoslav Great Lakes Line Yugoslav

Zim Israel Navigation Company Ltd Zim Israel and Concordia

Line Great Lakes Service Concordia alleging violation Of sections

15 16 First and 17 Of the Shipping Act 1916 the Act by reaeon

of being subjected to the payment of rates which wereand are unduly

and unreasonably prejudicial and disadvantageous unjustly dis

1

This decisIon beeame the decIsion of the CommIssIon on March 17 19711

15 FMC

173
174 FEDERAL MARITIME COMMISSION

criminatory and contrary to the public interest and violation of

section 18 b 5 of the Act because respondents charged rates so

unreasonably high as tobe detrimental to the commerce of the United

States Also sought is an order requiringcancellation or modification

of the tariff of respondent American Great Lakes Mediterranean

Eastbound Freight Conference respondent conference

International ABBociation of Great Lakes Ports and Great Lakes

Terminal ABSOciation intervened

THE FACTS

1 Complainant CCC isan agency and instrumentality of the United

States created by Act of CongreBB its capital stock being owned

entirely by the Government

2 Complainant AID is an agency of the United States with respon

sibility to admi nister the provisions of the Foreign ABBistance Act

of 1961 asamended 75 Stat 424 22 US C 2151 2407

3 Respondent conference is an organization of common carriers by

water operating under an agreement on file with the Federal Maritime

CommiBBion No 9000 its members being engaged in the transporta

tion of property from United States Great Lakes and Saint Lawrence

River ports toAtlantic coastports ofthe Iberian Peninsula European

Asian and African ports on the Mediterranean Sea including Black

Sea ports and Atlantic coast African ports including but not south

of CasBiblanca either direct or by tranBBhipment The members of the

conference establish the conference rates

4 Between March 1 1968 and April 21 1969 AEIL Niagara

Fabre Montship Concordia Yugoslav and Zim Israel were the sole

members of the conference On April211969 Orient became amember

of the conference and on June 22 1969 AEIL withdrew from

membership

5 The Canada Mediterranean Freight Conference Canadian con

ference is an association of steamship lines engaged in the trans

portation by water of property in the trade from Canadian Great

Lake ports and Canadian Saint Lawrence River ports to ports of

discharge of the respondent conference under its own rates and

charges

6 From March 1 1968 through June 30 1969 AEIL Niagara

Concordia Yugoslav and Montship operatingas two separate lines

Montship Lines and Capo Line Zim Israel and Fabre were mem

bers of the Canadian conference with sufficient votes toestablish rates

for AEIL see Finding4

111 FH C
COMMODITY CREDIT CORP V AMERICAN EiXPORT ISBRANDSTEN 175

7 The shipments involved in this proceeding were made under

Title II of the Agricultural Trade Development and Assistance Act

of1954 7U S C 1721 1724 PL 480 Programs carried out under

this Act are usually called the Food for Peace Programs through

which food and other agricultural commodities are made available

on special terms to nations that cannot afford to pay cash for them

and for the purpose of thwarting hunger and meeting human needs

in foreigncountries

8 There are three major segments to the PL 480 program The

largeSt accounting for about halfof the donations involves donations

ofcommodities to religious and charitable voluntary agencies such as

CARE Church WorldServices and others which distribute toneedy

persons overseas The next largest is the government to government

program under which commodities are furnished to other nations to

provideemergency food assistance tovictims ofdisasters and to carry

out other economic development programs The third is the World

Food Program WFP involving the United Nations and in which

74 countriesparticipate the United Stllites providing about 40 ofthe

budget chiefly in the form of commodities

9 Within the United States WFP is administered much like other

Title IIprograms Requests come from WFP headquarters in Rome

and are considered by aninter agency group in Washington primarily

AID and the Department of Agriculture USDA Ifa project is

approved commodities are supplied by USDA and ocean transporta

tion is paid for out of CCC funds

10 USDA is responsible for supplying all U S Title II commodi

ties The commodities come either from CCC inventories or are pur

chased from commercial sources on a competitive bid basis In the

latJter case invitations for bids are issued with sales terms FAS ports

Evaluation of the bids includes the lowest landed cost at destination

and considered are ocean transportation costs from all ports desig

nated by the bidders Frequently loading ports designated may be on

more than one coast ofthe United States In the case of commodities

taken 1rom CCC inventories USDA decides which storage location

will supply the commodity by considering the lowest total transporta

tion cost tothe country of destination Transportation costs are paid

from funds allocated tothe program

11 Either CCC or the voluntary agency concerned contracts for

the transportation of the commodities made available under the pro

grams Cargo bookings by the government agency are made pursuant

to the Cargo Preference Act 46 US C 1241 b which requires at

least 50 of the cargo to move on U S flag vessels if available at fair

15 FIf C
176 FEDERAL MARITIME OOMMIS ON

and reasonable rates The policy of AID which is fbllowed by CCC

as its agent is to move 100 of such cargo on U S flag vessels If

such vessels are not available first consideration is given to carriers

accepting full payment in local currency then to carriers accepting

part payment in local currency and finally foreign flag vessels insist

ing on full payment in dollars When commodities are made available

throughvoluntaryreliefagencies the agency performs its own booking

functions AID policy is followed toinclude the use of U S flag ves

sels whereavailable atfair and reasonable rates AID with funds made

available by COC administers a freight reimbursement program for

the benefit ofthe voluntary agencies

12 There isno prohibitionas tothe use of ports for shipmentof US

relief cargo and altho lgh U S ports are used as amatter of policy

Canadian ports may be utilized

13 Theshipments involved in this proceeding were made predomi

nately by the voluntary reliefagencies CARE and Catholic Relief and

consisted principally of flour bread wheat and all pul P0S6 corn

meal and non fatdry milk

14 Prior toApril 1 1968 the rates of respondent conference and

the Canadian conference for relief cargoes were in general parity

on shipments out of Great Lakes ports however the Canadian con

ference rates for shipments out of Montreal the port as towhich that

conference automatically used to establish rates were lower than

the rates ofrespondent conference Comparative rates are hereinafter

set forth as they relate tospecific issues

15 PriortoApril 1 1968 WFPtwice negotiated with the Canadian

conference for reductions in rates both times the conference voted

not to make the drastic reduction requested WFP issued instructions

toits Canadian agents toship exclusively on aRussian flag line which

had been operating in the trade Members of the Canadian conference

faced with the loss of substantial cargo reopened negotiations with

WFP and as a result WFP gave the conference first refusal on its

relief cargoes and the conference reduced its rates underthe conditions

and in the amountshereinafter set forth in detail

16 The agreements between the Canadian conference and WFP

for reduced rates was premised on the shipment of relief commodities

out of ports east of the Saint Lawrence Seaway the Seaway and

during the relevant period allbut approximately 2 of WFPcargoes

carried by respondents as members of the Canadian conference moved

out of those ports

17 The transportation conditions atports east of the Seaway diffe

to a significant extent from such conditions atUS Great Lakes ports

111 rMO
COMMODITY CREDIT CORP V AMERICAN EXPORT ISBRAND8TEN 177

Transportation conditions at ports east of the Seaway are more favor

able to carriers than at Great Lakes ports the cost difference being

approximately 17 15 per tariff unit

18 During March 1968 a Russian flag line joined the Canadian

conference and that conference in two steps raised its rates toa level

which restored the former relationship between the rates of the two

conferences

19 Recently there has been a serious drop in volume both com

mercial and relief cargoes in the trade served by respondent

conference

POSITIONS OF THE PARTIES

Oomplainanta

A prima facie violation of sections 16 First 17 and 18 b 5 of

the Act is saidto have been established by the evidence that at thetime

of the shipments involved there was a substantial disparity between

the rates of the Canad an conference and the rates charged by re

spondents and that such identical relief commodities as wherut flour

and powdered milk were carried by respondents in both trades on

the same outbound voyage They contend that a legal obligation was

imposed upon respondents to lower their rates on US relief cargoes

atthe time they lowered the rates on Canadian relief cargoes as the

competition in the U S Mediterranean trade was as great or greater

than in the Canadian Mediterranean trade They argue that the re

duction ofrates in the Canadian trade was destructive and unlawful

as itwasmadefor the purpose ofdrivingacompetitor the Russian flag

line out of the trade

As to the transportation conditions in the two trades the only sig

nificant difference is alleged to be that ten times more relief cargo

moved from US ports than from Canadian ports during 1968 and

that during that first half of 1969 the ratio was six to one and that

lIS the volume favored U S ports those ports should have charged

lower rates They argue that any difference which might exist in car

rier costs due to different ports of loadingor the distances involved was

more than compensated for by the differentials set forth in the

Canadian conference tariff for ports on the Great Lakes While agree

ing that most ofthe Canadian relief cargoes were loaded at Montreal

and east ofthe Seaway they contend that although U S relief cargoes

were loaded lilt US Lakes ports the carriers incurred no additional

outofpocket expense as the Lakes ports were on their normal voyage

pattern in accordance with the MEDCRI Inbound Pooling Agree

ment which required calls at distant Lakes ports regardless of whether

outbound cargo wasavailablefor loading

11l FMC
178 FEDERAL MARITIME OOMMJSSION

A presumption of the unreasonableness of respondents rates and

the rate disparity is said to have arisen because for along period the

rates of the two conferences were in general parity then for a shor

time made disparate and finally restored to parity

A competitive shipper relationship ill said tobe unnecessary tosup

port a violation of sections 16 First and 17 of the Act under the cir

cumstances shown and that althoughthere is no shipper competition

section 17 has been violated because of the competitive port situation

Additionally it is contended that the rate disparity served to deprive

shippers of natural routinga A violation of section 15 is based upon

the alleged fact thatrespOndent carriers had llIgr8toadopt the rate

of competing conferences forthe transportation ofUS relief cargoe

which was beyond the scope of respondents basic confersnce

agreement

Damage is computed by comparingthe Canadian conference rates a

Montreal to the higher rates paid by complainants to respondents

with adjuStments in the Canadian conference rates based upon differ

entials set forth inthe tariff for ports on the Great Lakes and for var

ations in terminal chargeS which were included in respondent con

ference rates but not in the Canadianconference rates Other adjuSt

ments said to reflect actual costs and conditions were made

ReapMldentB othe1 than AEIL

These respondents deem complainants position highly academic

As the alleged rated disparities bve now been eliminated they con

tendthere is nobasis for future relief They see incomplainants argu

ment an assumption that the Russian flag competition was used onl

as an excuse for the Canadian conference rate reduction when in fac

the competition wasactual and necessitated the reduction Complain

ants attempt tocompare the Canadian and US trades is saidtoignor

respondents evidence that the disparity is justified on the basis o

costs and distances and by rate comparisons with more comparabl

trades US Atlantic and Gulf rates They take the position tha

from April 1 1968 through July 1 1969 the Canadian relief rate

weresharply depressed due tosevere competition They pointout tha

after WFPofficials werenot successful inobtaining an agreement with

the Canadian conference for a sharp reduction in rates WFP gav

instructions toits Canadian agents toship exclusively on the Russian

flag line Artic and that thillline had previously carried 12 000 ton

of WFP cargo in the trade They fer tothe real concern as toRus

sian flag competition and the failure of the Canadian conference t

persuade the Russians to coexist with them in the trade prior to th

111J K O
COMMODITY CREDIT CORP V AMERICAN EXPORT ISBRANDSTEN 179

rate reduction The fact that the reductions made were not below the

nonconference rate is cited as well as the fact that the reduction was

not as drastic as WFP had originally requested

Using flour as illustrative ofthe differential that being the most fre

quently carried commodity they show that the respondent conference

rate was 43 25 as compared to the Canadian rate of 25 58 out of

Montreal or a differential of 17 67 Additional costs per tariff unit in

serving Great Lakes ports overMontreal costs are said to be

a Loading stevedoring terminal etc 3 94

b Seaway Insurance 1 12

c Seaway and Lakes pilotage vessel tolls 1 47

d Seaway cargo toll 45

e Agency commlsslons 2 80

f

lTesseloperatlng 6 43

g Bunkers 94

Total 17 15

Respondents find a failure by complainants toprove a violation of

theAct A

competitive situation between shippers is said to be required

if aviolation of section 16 is to be found and no competition between

shippers is shown Section 17 is said to require a comparison of trans

portation between the same points but the record demonstrates that

the loading points and discharge points were different in each trade

The allegations of violation of section 18 b 5 are said to be moot

because in December 1969 rate adjustments by respondents eliminated

the alleged disparity in the rates of the two conferences

Additional differences between the U S Great Lakes tradeand the

Canadian trade are cited Montreal generates as much commercial

cargo as do all ofthe U S Great Lakes ports combined Inthe Cana

dian arrangement withWFP theconferenceis grantedfirst refusal on

all relief WFPcargo a situation not found in the respondent confer

ence s trade Canadian cargo may be transshipped or unloaded onto

lighters while U S relief shipments may not be so handled The US

cargo moves only during two peak periods while the Canadian ports

ofMontreal and Halifax permit year round service AnumberofU S

ports have only relief cargoes to offer and at Green Bay Duluth and

Buffalo no inbound cargo is discharged and additional costs of serv

ing these ports must be prorated against only relief cargoes

Respondents point out that ofthe relief commodities carried six of

the ten cornmeal butter oil canned butter formula 3 bulgar wheat

and formula 2 did not move out of Canada During the period cov

ered by the complaint and as to the remaining four commodities

15 F MC
180 FEDERAL MARITIME COMMISSION

bread flour wheat flour all purpose flour and milk there is no evi

dence toshow whether they are comparable toCanadian relief cargoes

Respondent AEIL

This respondent contends thlllt there is justification for the rate dis

parity The Russian rate cutting competition and the fair interest o

this respondent is said tohave made the reductions necessary to pre

serve its WFPcargoes and also todeny the rate cutter of a base from

which to slash commercial rates as well The higher and completely

offsetting cost df service in the United States Mediternmean trade is

cited Itis argued that the substantial losses sustained by this re

spondent even though it wasailmost an exclusive carrier of USDA

cargo in the trade would show that the rates werenothigh unjustly

discriminatory or prejudicial A vast difference is seen in the USDA

and WFP as customers which is exemplified by the WFPproviding

a

patronage commitment and accepting carrier ocean bills of lading

while USDA required shipper favorable Government bills atlading

on numerous shipments and gave preference to certain flag oorriers

because of willingness to accept soft nonconvertible currency They

contend that the USDA used both conference and nonconference lines

to whipsaw respondent conference against US North Atlantic and

Gulf conferences They pointout that AEIL carried none of the WFP

cargoescovered by the complaintout of Canada atany time Reference

is made to the hazards and difficulties incident to serving the US

Great Lakes ports west of Montreal factors nonexistent in the Ca

nadian trade which is centered predominately in the Eastern ports

further that Canada s chief ports ontreal and Halifax operate al

year round while most of the US Great Lakes ports cannot operate

during the long ice locked winter They see advantage tothe United

States from the reduced rates as it contributes 40 tothe WFP budget

and thus benefits by the lower rates available to that program out of

Canada No injury is seen to complainants nor any impairment toits

mission by virtue of the rates because funds spent on the Title II pro

gram as authorized by Congress and budgeted by the Executive

Branch were unaffected and so long as the rates paid were fair and

reasonable complainants were not subjected toundue or unreasonable

prejudice or disadvantage

As a

general comment AEIL finds aportion of complainants brief

superfluous as it relates toan alleged unfiled section 15 agreement an

issue which complainants had raised and abandoned but had soughtto

pursue under a new theory during the hearing and in their brief A

15 JI HO
COMMODITY CREDIT CORP V AMERICAN EXPORT ISBRANDSTEN 181

competitive relationship between shippers is seen as lacking proof but

lluch a

relationship is deemed necessary to afinding of 11 violation of

section 16 First

Inte7 1Jener

The International Association of Great Lakes Ports supports

respondents position Intervener refers to the fact that cargo is

declining in the U S Great Lakes Mediterranean tradeand that apre

requisite to the growth of the trade is the continuing existence and

viability of a

regular and dependable liner service A

competitive re

lationship between U S and Oanadian Great Lakes ports is saidnot to

exist the real competition to members of the association emanating

from Atlantic and Gulf ports Complainants argument that inland

carriage to Canadian ports would have resulted in aD overall saving

is seen as unrealistic except for the possibility that when US Great

Lakes ports are closed during the winter season other Canadian ports

Montreal and Halifax might be used Reference is madeto thestate

ment in complainants brief that the policy is to use only U S ports to

ship relief cargoes andcomplainants position is seen asa veiled threat

to change this long standing policy which is unsettling particularly

when the association members look tothe Government 11S an important

force in fostering the development of US Great Lakes ports The

record is said to disclose that the Lakes carriers and ports have been

holding rates downandbhat onDecember 1 generally the closing date

of Lakes operations East coast and Gulf rates were increased The

holding down of rates in the face of extra costs due to charges and

requirements ofthe Seaway not applioable to Gulf and Atlanticcar

riage isseen as amajor contribution to the relief programs Intervener

expresses concern as tothe effectof an award ofsubstantial reparation

against respondent carriers in relation to theirability ordesireto serve

the trade in the future

Intervener Great Lakes Terminal Association didnot fileabrief

DIsCUSSION

Complainants contend that a

prima facie case of violation of sec

tions 16 First 17 and 18 b 5 of the Act has been established by

the evidence that respondent lines named the ratEl in both the Cana

dian and respondent conferences put into effect lower rates on Cana

dian relief cargoes than on similar U S relief cargoes and carried

both US and Canadian relief cargoes on the same outhound voyages

Section 16 First provides that it shall be unlawful for any common

111 FlC
182 FEDERAL MARITIME COMMISION

carrier by water either alone orin conjunction with any other person

directly or indirectly

To make or give any undue orunreasonable preference or advantage to any par

ticular person locality or description of tratllc In any respect whatsoever orto

subject any particular person locality ordescription of tratllc to any undue o

unreasonable prlljudlceordisadvantage In any respectwhatsoever

Section17 inpertinent part provides

That no common carrier by water in foreign commerce shall demand charge o

collect any rate fare orcharge which Is unjustly discriminatory between ship

pers orports or unjustly prejudicial to exporters of the United States as com

pared with theirforeign competitors

Section 18 b 5 provides

The Commission shall disapprove any rate or charge filed by a common carrie

by water in the foreign commerce of the United States or conference of carriers

which after hearing It finds to be so unreasonably high or low as to be detri

mental to the commerce of the United States

Complainants do not contest the lawfulness of respondents rates

prior to the rate reduction eifected by the Canadian conference bu

take the positionthat

having reduced Canadian rates under a claim of carrier competition re

spondents were then under a legal Obligation to treat like shippers equally b

adopting like rate reductions on the same commodities from U S ports

There is no allegation in the complaintthat like cargoes werecarried

under similar transportation conditions Apparently complainants

rely principally on a legal obligation which they contend is imposed

upon respondent carriers to maintain a

general rate parity between

the rates ofthe two conferences without regardtodifferingtransporta

tionconditions

TheCommission dealt with a comparisonbetween foreign toforeign

and U S toforeign rates in Outbound Ratea Affeoting EaJport High

Prea8Ur6 Boilers 9 FM C 441 458 1966 holding that a disparity

between such rates should bejustifiedby

showing that transportation conditions In the two trades are not the sam

In material respecta orthat the attendant transportation circumstances require

that the rate be set at that level

In North Atlantic Metlite lV1lMOi1 Freight Oonlerenoe House

hold Goods 11 FM C 202 209 1967 the Commission stated

This prohibition against undue or unreasonable preference or prejUdice Is de

signed to deal with two or more competing shippers or localities 1ICeivlng dU

I The Commission s order wal modified in AtnfflOan g port brandtun Llne8 v FedeM

Marltlm 00 10 409 F 2d 12G8 2d Clr 1969 the Court holding that as the two

Government agenCies fnvolved were responsible tor the dUrerence In rates section 17 bad

not be violated

15 FY C
COMMODITY CREDIT CORP V AMERICAN EXPORT ISBRANDSTEN 183

ferent treatment which is not justl1led by differences in competitive or trans

portatlon conditions

And at page 210

All this however is not to say that a case of undue prejudice is made out by a

mere showing of lower rates between competing shippers Other factors may

work to make a preference or prejudice reasonable or due For instance com

petition from another carrierat the allegedly preferred point of destination or

of origin may justify the difference in rates Tewas E Pac Railway v 1 0 0 162

U S 197 1896 East Tenn de Ry an v 1 00 181 U S 1 1901

InPhila Ocean Traffic Bureau v Ewport SS Oorp 1 U S S BB

538 541 1936 itwasheld

The uniformity of treatment contemplated by the Shipping Act is a relative

equality based on transportation conditions only To justify an order compelling

exact equality of rates a complainant must show a substantial similarity In the

conditions surrounding the transportation under the rates sought to be equalized

Among factors to be considered are the value of the service to the shipper the

Interest of the earner the relative volume of traffic the relllltive cost of the

service the competition as between carriers and the advantages or disadvan

tages which Inhere In the natural oracquired position of the shippers orlocalities

concerned

In Iron and Steel Rates Export Import 9 FM C 180 191 1965

it washeld

Our experience shows that the existence of a rate disparity in and of itself

has no conclusive legal significance This Is so because only with reference to

other facts can we determine whether either rate Isharmful

See also Ala8ka Livestock v Aleutian Mari Tle 7 FM C 387 391

1962 wherein it was recognized that rate comparisons depend on

the circumstances surrounding the rates

Rate comparisons must be considered on the basis not only of

similarity in commodities but also on comparative transportation

conditions Without one or both methods of comparison it cannot

be determined whether the shippers in the two trades are receiving

comparable tratment

In support of their legal obligation concept complainants take

the position thatrespondent lines could not lawfully reduce their rates

as members of the Canadian conference because of competition unless

they also reduce their rates on relief commodities in the U S trade

where competition was substantially as great They cite FiwOoal

to Eau Olaire and Ohippewa Falls Wis 309 IC C 583 1959 Okla

homa Oorp 007Tllm v Kansas O G Ry 00 266 IC C 495 1946

and otherIC C decisions to support this contention But the premise

of the argument that the competitive situation in the two trades was

III FMC
184 FEDERAL MARITWll OOMMIS IN

comparable is not borne out by the facts as they relate to the relief

cargoes with whichthisproceeding isconcerned

Itappeare that respondent carriers competed with carriers of U S

relief cargoes operating out of US Atlantic Gulf ports but that a

material times the rates were at the same level Ifthere was competi

tion for U S relief cargoes from independent carriers it does not ap

pear that suchcompetitors oftered rates so farbelow respondents rates

that a drastic reduction was necessary toavoid the lose of relief ca

goes As members of the Canadian conference Respondentlines were

in a difterent competitive situation Prior to the rate reductions 

Russian flag line had carried 12 000 tons of WFP cargoes out o

Canadian ports east of the Seaway On August 28 1967 WFP with

offices in Rome Italy and administering a program to which man

nations including the United States contributed wrote to the Cana

dian conference requesting a reduction in the rate on flour from 81li0

to 20 002200 on powdered milk from ll7lS0 to 8aoO and o

cheese from 68 96 to 36 00 WFP did not address a similar reques

to respondent conference The letterfut ther advised that as there

was no flag preference for Canadian relief lIhipments WFP coul

make their cargoes available to any member of the conference Twenty

thousand tons of cargo was anticipated during the next two years

predominantly wheat and wheat flour

The Canadian conference met to consider the request but decide

that it was impossible to grant suen a drastic reduction WFP pe

sisted inits eftorts toobtain the reduction contactingthe member line

individually But again the conference met to decline the requeste

reduction During the spring oflD68 Russian flag line advertise

iI service from Montreal and Quebec tothe Mediterranean The recor

is not olear on whether the rates oftered by the Russians wereatth

level proposed by WFP but there iIt testimony that nonconferenc

rates were substantially below conference rates The Canadian con

ference received word that WFP had issued instructions toits Cana

dian agents to ship relief cargoes gclutivelyon the Russian line

Realizing the gravity of the competitive situation and faced with th

possibility of losing substantiahmounts of cargo the C8Jladian con

ference reopened negotiations with WFP which resulted in an agree

ment that WFP would grant conferenCe vessels fil Strefusal on relie

cargoes and that the conference would subetantiillIy lower the rate

The rates were established on the buisthat the shipments would b

loaded atports east of the Seaway Although loading atHalifax wa

not contemplated a 200 difterentialwas agreed upon for that po

181 MO
COMMODITY CREDIT CORP V AMERICAN EXPORT ISBRANDSTEN 185

Pursuant to the agreement with WFP and on April 1 1968 the

Canadian conference reduced its rates on the following commodities

expressed in Canadian dollars from Montreal

Exlstlna rate Reduction to Percent

Flour h

m m

00 00

Bll8JlSnhnn 00 00 00 00

mnn

W1k Powder

Ch 00

00 00 mnn

00

n

00

Vesetablo on 00 00 00nh

n

hn00

31 110

36 78

57 60

M 9ol

54 00

25 00

30 00

4ol oo

6 00

38 110

The shipments set forth in the complaint weremade between March 1

1968 and July 1 1969 During March 1969 the Russian line joinedthe

Canadian conference The conference no longer faced with Russian

flag competition decided that the rates should be restored to normal

levels and the followingchanges weremade

Apr I 1969 ln1y I 1969 Dec I 1969

Flour mm 00 00

n 0000 mOo

mmn 00

Beans

M1Ik

Powder

hnnmmn n n

Ch n

00

0000

m 00 00

nmnnh

n

m 00

00 00

Vesetablo on 0000

nnn

mn

mm

00

00 m n

27 110 30 25

33 00 33 00

47 00 51 75

51 00 n

m

m

42 110 4ol 1IO

Duringthisperiod respondent conference rates were

Flour nnmnnm hmnm mnn nmmnn

h mnm

Bll8JlSnnn mhmnnn

nhm

m

m 00

mm 00 00

n mnnm

00

00

Mllk Powder

Ch n

mm 00 00 00 00 00 0000

00 00 00 nm

ooo

Vesetablo on otc 0000000000h

0000

00 m 00 00

1968 1969

39 110 43 211

40 110 40 110

63 75 68 75

62 75 62 75

5400 119 25

Although the Canadian rates above set forth were for loadings east

of the Seaway the conference tariff included adifferential of 6 50 per

ton for cargoes loaded at Great Lakes ports west of Samia Canada

and 3 50 for cargoes loaded east thereof

Complainants compare the rates at US and Canadian Great Lakes

ports using the Canadian conference differentials todemonstrate the

breadth of the disparity However in their amended complaint they

allege

During the period ot March 1 1968 through June 30 19611 he respondent steam

ship lines who weremembers ot respondent Conference charged ocean transpor

tation rates for the Shipment of reliet cargoes trom United States ports on the

Great Lakes to ports on the Mediterranean which were substantially greater

than those charged tor shipment ot Identical or nearly Identical rellet cargoes

trom Canadian ports on the Great Lakes and Saint Lawrence River to Medlter

ranean ports ot discharge

15 FM C

21

16

22

22

29

36 25

33 00

119 76

51 00

51 211
186 FEDERAL MARITIMI l COMMISSION

4

I

The thrust of the complaint is that complaints were injured be

cause respondents charged them and they paid substantially greater

rates than as members oLthe Canadian conference respondents

chal1ged Canadian shippers of similar cargoes It appears that all but

approximately 2 of the WFP shipments during the relevant period

wereloaded atports east of theSeaway at the rates applicable atthose

ports All US relief cal1goes were loaded atUS Great Lakes ports

To determine whether complainants were in fact subjected toundue

prejudice or disadvantage by the imposition of unreasonably high or

otherwise unlawful rates it is necessary to compare the rates and the

transportationconditions as ofthe actual ports of 10adiI g

The alleged preferred point of origin was east of the Seaway As

held in HoU8ehold Goods supra competition at the alleged preferred

point may justify a difference in rates It appears that respondent

lines as members of the Canadian conference encountered competition

atports out of which Canadian relief cargoes werecarried that wasnot

present atports outof whichUS relief cargoes were carried The com

petition for relief cargoes at Canadian ports was not as complainants

variously designate it a mere glimmer or substantially as great as

at U S ports There is no reason to doubt that had not the Canadian

conference reduced its rates its members would have been deprived of

WFP relief cargoes because WFP would have carried outits arrange

ment with the Russian flag line and the instructions issued to its

Canadian agents

In view of these circumstances which demonstrate the substantial

difference in the competitive situation for obtaining Canadian and

U S relief cargoes it cannot be found that respondents as members

ofrespondent conference wereunder alegal obligationto reduce their

rates As members of the Canadian conference they reduced the rates

substantially and thus created a rate disparity but the reduction was

not below the level necessary for the retention of WFP cal1goes

Inasmuch as complainants rely on the disparity as establishing a

prima facie case of unlawfulness it is proper to consider the addi

tional evidence adduced by respondents to demonstrate that the rate

disparity was justifiedby the differences in thetransportation condi

tions in the two trades Evidence was presented to show that carrie

costs at US Great Lakes ports exceeded costs at ports east of the

Seaway by 17 15 Complaints chall nge this computation and re

ferring tothe differentials set forth in the Canadian conference tariff

contend

In the Ordinary situation It would appear that conclusions as to port cost dlf

ferentlals derived from long established carrier rating practices would be en

111 FMO
COMMODITY CREmT CORP V AMERICAN EXPORT ISBRAND8TEN 187

titled to greater probative weight than any cost data assembled and submitted

by carriers for the sole purpose of defending a rate discrimination and prejudice

practiced against shippers

Nevertheless vhe figures adduced by respondents represent the only

evidence of record as to the additional costs They reflect Seaway

chavges which are greater than the rate differentials set forth in the

tariff of the Canadian conference Ithas been shown that the tariff

differentials were not applied to Canadian relief cargoes and further

that they were minimum charges which varied as to commodities No

evidence was adduced to contradict the computation of additional

costs other than the Canadian conference rate differentials which were

not applied to relief shipments thus not to be considered for the pur

pose of determining whether Canadian shippers of relief cargo ac

tually received preferential rates

Additional variances between shipping conditions in the two trades

appear Carriers of US relief cargoes assume greater responsibility

than do carriers of Canadian relief cargoes as to whom responsibility

begins and ends at ship s tackle United States relief cargo may not

be transshipped or discharged onto lighters restrictions not imposed

on Canadian relief cargoes Canadian relief cargoes are predominantly

loaded at ports east of the Seaway those ports being geographically

desirable while the loading ofU S relief calgoes necessitates serving

a large number of ports In serving US Lakes ports for relief car

goes respondents calls are subjected to certain disadvantages At

Green Bay Duluth and Buffalo no inbound cargo is discharged and

practically no outbound commercial cal1go loaded thus relief cargo

must be charged for additional costs incurred by carriers calling at

those ports Relief shipments do not move from Cleveland or Detroit

although those ports receive most of the inbound cargo The Great

Lakes service is seasonal and hazardous Special equipment is required

by Seaway regulations and conditions US relief cargo is subject to

carrier preference first to US flag vessels and tJhen to carriers ac

cepting local currencies While WFP relief cavgo loaded at Canadian

ports is subject to the Canadian conference first refusal there is no

flag preference or currency limitation

Complainants view these circumstances as failing to show areason

able reloationship between the rate disparity and the dlfference in

transportation conditions and cite Eden Mining 00 v Bluefields

Fruit 8 8 00 1 U S S B 41 45 1922 and Am Tobacoo 00 v

Oompagnie Generale Transatlantique 1 U S S B 53 56 1923 to

support the necessity for such a

relationship Ifthe 17 15 additional

cost ofserving Great Lakes ports is added to the Montreal rates there

15 F MC
188 FEDERAL MARITIME COMMISSION

is no significant disparity A comparison between Canadian and US

Great Lakes transportation conditions and costs would show alesser

justification as of the 17 15 only the additional loading and terminal

costs of 3 95 and agency commissions of 2 80 wouldapply As tosuoh

factors above set forth relatingto restrictions imposed uponUS relief

cargoes not applioable to Oanadian cargoes the additional cost is

speculative but it is eViident that such factors would narrow the ilis

parity In any event and as bove discussed the complaintis founded

on the allegation tihat complainants were damaged because they paid

more for shipments of relief cargoes than Oanadian relief shippers

paid and the rate compaNson is to be made in relation to tllansporoa

tion conditions attheactual pom of Ioading

Complainants contention that respondent carriersincurred no addi

tional costs in serving U S Great Lakes ports because suoh polts were

regularly served seeks to impose upon cargoes loaded atports east of

the Seaway charges incident to serving Lakes pollbs This contention

is not consonant witJh late making principles Geographical advantages

or disadVantages may Ibe properly reflected in Iates SJw rp Paper

Speciality 00 1111 v Dollar StearMhip Line Ino Ltd et al 2

U S MC 91 92 1939 See also Phila OceOlft Tratfio Bureau 8upra

Of significance to the issue of the reasonwbleness of respondents

rates is the experience of AEIL duTing the period covered by the com

plaint At least 90 of its ou1fuound cargo was loaded at U S Lakes

ports of which approximately 80 was Government cargo princi

pally Title IIrelief shipments The 10 loaded at Canadian ports was

taken on east of the Seaway and consisted of low rated commercial

cargo This respondent did not oarry out ofOanadian ports lliny ofthe

relief cargo upon which the claim for reparation is based Although a

preferred U S flag line and receiving sulhstantial subsidy from the

Government and charging rates complainants contend wereunreason

ably high a loss was experienced Whether other respondent lines

profited or lost oannot be ascertained but the experience of AEIL

would not warrant a finding that the rates charged for the carriage of

relief cargoes were unreasonably high Of the 738 070 12 sought as

reparati8n complainants seek to recover 293 744 45 from AE L

whioh would add toits 10S incurred in handlingrelief cargo

Respondents raise the issue of actual damage ilo complainltnts

arguing that even if a violation of sections 16 First and 17 had been

shown complainants werenot injured In Eden Mining 00 v Blue

field8 supra ilhe Commission reject ed the contention that mere proof

of the amount by which rates charged It complainant exceeds rates

15 F MC
COMMODITY CREDIT CORP V AMERICAN EXPORT ISBRANDSTEN 189

charged others establishes injury and the amount of damage Here

complainants compute their alleged damage in relation tothe amount

paid and the amount they would have paid ltthe lower rates allowing

certain adjustments In 10 0 v United States 289 U S 385 390

1933 the Supreme Court held

The question Is nt how much better off the complainant would be today ifithad

paid a lower rate The Question is how much worse off itIs because others have

paid less

See also Gillen s Sons Lighterage v American Stevedores 12 F MC

328 347 1969 Complainants would indeed have been betJter off had

they paid the lower rates Butthey wereno worse off than they would

haveboon had not the Canadian conference reduced its rates Com

plaimmts continued to pay the rates they had paid prior to sU0h re

duciion and the subsequent increases in those rates Mtes which were

not shown to be in themselves unreasonably high Fundamentally

complainants seek toderive oonefit from asituation which did not have

an effeci on the hasic reasonaibleness of the rates charged Rnd paid

to respondents To award reparaJtion underthe circumsliances here ap

pearing would be inequitable See Parsons Whitmore IM v John

son Line et al 7 F MC 720 731 1964

To be considered is the situation which would have occurred had the

respondent conference reduced its rates to the Canadian conference

level The rates then would have been lower than the rates of the car

riers serving the U S Atlantic and Gulf trades for carrying relief

cargoes In the absence of any competitive justification relatingtothe

trade served by respondents the lawfulness of such a reduction would

have been questionable Certainly respondents had no legal obligation

to place themselves in that position or as a witness testified to take

actionwhich would generate a rate war

Complainants contention that as members of the Canadian con

ference respondents

instituted rate reductions for the destructive purpose of threatening the

traffic or financial position of another carrier Accordingly the rate reductions

were neither just nor reasonable

needs but brief mention as this position as well as any other argument

relating tothe lawfulness of the Canadian rates is premised upon the

assumption that the provisions ofthe Act extend to foreign to foreign

commerce The Canadian conference rates are here relevant only for

the purpose of comparison and determining whetherrespondent lines

as members of both conferences prejudiced disadvantaged or dis

criminated against complainants by charging higher rates on US

15 F M C
190 FEDERAL MARITIME COMMISSION

relief cargoes tha non Canadia n relief cargoes under similar trans

portationconditions

The issue of the necessity to show a competitive relationship be

tween shippers to support aviolation of sections 16 First and 17 has

been discussed in the briefs The Commission has applied the com

petitive relationship doctrine in cases concerning rates for ocean trans

portation We8t Indies Fruit 00 etat

v Flota lIleroante 7 F MC 66

1962 In Irvveatigaticn of FreetVme Practice8 Port of SJj1Diego

9 FM C 525 547 1966 and New York Foreign Frgt F JR A88 n

v Federa tlIlaritVme 00l7llmia8ion 337 F 2d 289 5th Cir 1964 cited

by complainants a competitive relationship was found not required

however those cases did not concern freight rates for transportation

by sea

As precedent now stands it is required that in a proceeding suc

as this one shipper competition is a necessary element of proof

Complainants additionally lontend as to competition

Even though devoid of acompetitive shipper relationship the instant case i

not without a

very important competitive relationship This is the competitiv

relationship between U S and Canadianports

There is no statutory requirement that the subject Title II relief commoditie

must be shipped from U S ports Complainants are entitled under the law t

route the SUbject relief cargoes out of Canadian ports if the rates and charge

are more favorable Department of Agriculture regUlations specifically authoriz

recipient nations to route sales shipments under Title I of P L 480 throug

Canadian ports

This argument is not only based on insubstantial factual ground bu

constitutes an attempt to establish a

right to reparation because o

alleged injury to someone other than complainants Section 22 of th

Act provides

That any person may ftle with the board a sworn complaint setting fort

any violation of this Act by a common carrier by water orother person subje

to this Act and asking reparation for the injury if any caused thereby

If reparation could be awarded it must be founded upon a violatio

oftheAct which caused injury to complainants No actual competitio

between U S and Canadian ports has been demonstrated There wa

no deviation of relief cargo from a US port to a Ca nadian por

Itwascomplainants policy toship through US ports not a statutor

requirement The fact that this policy could be changed would n

support a finding that competition between US and Canadian por

did exist Intervener representingboth US and Canadian ports denie

the competition On this record it appears that respondents compe

tition for relief cargoes wasprincipally from U S Gulf and Atlant

111 F MC
COMMODITY CREmT CORP V AMERICAN EXPORT 18BRANDBTEN 191

ports It further appears that US Lakes ports have experienced a

sharp decrease in loadings of both commercial and relief cargoes due

to competition from US eastern ports

The questionof competitive relationships isnot however determina

tive of complainants rights to reparation In summary the manner

in which the case was presented raised two primary issues first is

there a

requirement in law on respondent lines to reduce their rates

on US relief cargoes when reducing their rates on Canadian relief

cargoes and second complainants having shown a rate disparity

have respondents demonstrated a justification for the difference in the

rates because of differing transportation conditions The first issue

must be decided in the negative because the competitive situation

required a reduction in the rates ofthe Canadian conference on relief

commodities which reduction was not below the level necessary to

retain those cargoes a competitive situation which was not present

as to US relief cargoes As to the second issue respondents adduced

evidence to demonstrate that transportation conditions in the two

trades including the competitive situation warranted a higher rate

for U S relief cargoes loaded at Great Lakes ports than for Canadian

relief cargoes loaded at ports east of the Seaway where substantially

all WFPcargoes wereloaded

Even had it been shown that respondents rates were unreasonably

high complainant may not rely on a violation of section 18 b 5

as a basis for reparation under the circumstances here appearing

There had not been adetermination by the Commission that respond

ents rates were violative of that section prior to the assessment of

such rates Only after the Commission has determined that a rate

serves to violate section 18 b 5 may its assessment constitute a

violation for which reparation may be awarded Federal Maritime

OomJlni8sion v Oaragher 364 F 2d 709 717 2d Cir 1966 More

over no evidence was adduced to support a conclusion that the rates

paid by complainants to respondents were unreasonably high by the

applicationof theusual rate making factors

An additional issue raised by complainants in theirbroad approach

to the question of the lawfulness of respondents rates is that their

rates were established by adopting the rates of other conferences thus

that they carried out an unwritten agreement and one not encom

passed by the basic confereilce agreement At the prehearing con

ference counsel for complainants agreed that any issue relating to an

unfiled agreement would be limited to such an agreement relatingto

maintaining a disparity in the rates of the Canadian and respondent

conferences The complaintincludes allegations that respondents pur

15 FMC
192 FEDmRAL MARITIME COMMISSION

portedly acting accordingly to said conference agreement established

the rates charged by respondent conference and that certain respond

ents controlled the rates of the Canadian conference Further

10 the respondent steamship lines who were members of responden

Conference charged ocean transportation rates for the shipment of relief cargoes

from United States ports on the Great Lakes to pOrts on the Mediterranean

which were substantially greater than those charged for the shipment of Iden

tical or nearly Identical relief cargoes from Canadian ports on the Great Lakes

and Saint Lawrence Riverto Mediterranean pOrts of discharge

11 Because of the facts stated In the foregoing paragraphs ceC and AID

have been and are being subjected to the payment of rates for transpOrtation

and services which were when ellaeted and IItl lare und1lliy and unreasollllbly

prejudicial and disadvantageous unjustly dIscrIminatory and contrary to the

public Interest In violation of sections 111 16 ald 17 of the Shipping Act 1916

Aside from the fact that respondents had relied upon complainants

statement at the prehearing and were surprised and unprepared to

meet the issue subsequently raiaed by complainants it would be a

unduly broad interpretation of the allegationa of the complaint to

include an unfiled aection 15 agreementu an issue The complain

alleges injury due to rate disparity between the rates of the Canadia

and respondent conferences Itappears that complainants counsel co

rectly stated at the prehearing conference that if an unifiledagree

ment WlU7 to be included would be limited to an aJleged agreement t

maintain this rate diaparity No evidence was adduced to warran

a finding that suchan agreement was cllirried out The fact that the

diaparity was eliminated when the competitive situation returned t

normal would negate such a cnclusion The record discloses that re

spondent oonfllrencll rates wllre with some exceptions at the genera

level of the ratelil ofconferenceuerving US Gulf and Atlantic ports

Even if the issue wasproperly raised something more thana mer

inference is needed to aupport a finding that carriers opel llted unde

Jln filed agreementLBiH l

aJ2tLll R flm p wment Oargo68 11 FM C

263 284 1967 Every agreement contemplated byaec twrrtlHlQiS

not include routine operations rel lting to conventional rate oharges

B08ton Shipping A8fn v PQl

tQIBo8tO fl Marine TermiUJ t

llFM C

1 5 1967 Conventional rate changes may properly include rat

modifications which relate tothe co petitive situation between Grea

Lakes and other U S ports Itis concluded that the issue of an un

filed agreement between respondent lines to adopt the rates of othe

conferences wasimproperly raised and even had it been it could no

be supportedby the facts ofrecord

Under the oircumstances here appellinng it cannot be found tha

complainants suffered actulliHnjuryfrom undue 01 unreasonable pre

1I1F MC
Noviolation of section 15 16 First 17 or 18 1 5 has been shown

The complaintis dismissed

HERBERT K GREER

Presiding Examiner

COMMODITY CREDIT CORI o V AMERICAN EXPORT ISBRANDSTEN 192A

judice or disadvantage or from unjust discrimination between ship

pers or ports Nor can it be found that the rates of respondent con

ference wereor are unlawful

All issues raised have been considered but further discussion is un

necessary to determine that complainants are not entitled to repara

tion The rate disparity complained of no longer exists and as there

is no evidence to support a finding that respondents present rates

are unlawful a cease and desist order or other Commission action is

not required

ULTIMATE CoNCLUSION

15 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 71 11

MIDLAND METALS COll1 ORATION NEW YORK N Y

v

MITSUI O S K LINE NEW YORK N Y AND ITS SUBCONTRAOTOR THE

LUCKENBACH STEAMSHIP COMPANY PHILADELPHIA PA

Assessment of penalty demurrage charges during that period of strike by

steel haulers from bona fide unsuccessful attempt at pickup of goodS until

first successful pickup found to be unreasonable But assessment of penalty

demurrage during period of strike from first pickup until completion of

removal of gOOds held to be reasonable Reparation awarded

BamF deVriea forcomplainant Midland Metals Corporation

Francis A BOanUan for respondent The Luckenbach Steamship

Company

G A Murphy for respondent Mitsui O S KLine Ltd

April 6 197B

REPORT

By THE COMMISSION Helen Delich Bentley Ohairman Ashton C

Barrett Viae Ohairman James V Day George H Hearn and

Clarence Morse OOlTllfTI issione1s

By a complaint filed with the Commission Midland Metals Corp

aNew York company engaged in the import and export of steel and

othermetals claimed it wasthwarted in its bona fide attempt to pick

up a shipment of steel by a group ofstriking steel haulers who threat

ened Midland s truckers Free time expired before Midland was able

to remove its goods and consequently respondent Luckenbach opera

tor of the terminal at which the shipments were located assessed first

second and third period demurrage charges against Midland Itis

Midland sposition that the penalty element in the assessment was un

reasonable Midland seeks reparation in the sum of 316 60 and an

15 FMC

193
194 FEDERAL MARITIME COMMISSION

order directingrespondents to cease and desist from asserting a claim

for any demurrage charges Examiner Ashbrook P Bryant in his

Initial Decision served October 20 1971 denied the complaint on the

ground that the assessment was not shown to be unreasonable Mid

land excepted but no replies toerceptions werereceived

FAOTS

Respondent Mitsui O S X Line is a common carrier by water in

volved in transportation between Japan and the United States Luc

kenbach Steamship Company operates a terminal facility pier and

warehouse in the Port ofPhiladelphia and is an other person subject

to theShipping Act 1916

Mitiui s S S Sacra TMnto Yam arrived at Philadelphia on April 4

1970 with a shipment of 599 coils of steel wire consignedtoMidland

The shipment was to be oncarried by truck from Philadelphia to

Waterallry Connecticllt Pursuant to instructions issued by Midland s

freight forwarder inPhiladelphifl Jones Motor Co of Spring City

Pennsylvania Jones hadbeen retained to pick up and deliver the

steel wiretoMidland s customer inWaterbury The cargo wasreleased

by Customs on April 6 1970 The fOl egoing just about exhausts the

supply of uncontroverted facts in the record before us For the chain

of events leading tothe assessment in question we first take Midland s

version

OnApril 9 1970 one day prior tothe expiration of free time Jones

sent two flat bed trailers to Pier 84 South Philadelphia operated by

lAckenbach as a terminal where cargo irom the Sacra TMnto Mamhad

been discharged and was ready for delivery tothe consignee

At that time there existed a national steel haulers strike carried

out by a

group of steel truckers belonging to the Teamaters Union

This group of strikers as reported in thepless did not limit itslllf to

striking but picketed ports and trucking terminals and involvild itself

inintimidation ofcarriers and violence

Thus it was that onApril 9 1970 the Jones Co drivers upon their

arrival wete told by the strikers not togo in past the main gate of

the terminal if they didn twant to get hurt or have their equipment

torn up The drivers never entered the terminal on that day

Midland next attempted tosecure railcars to move the cargo This

proved futilesince all available railcars had been ordered out to move

steel frop the steel pills to the fabricators due to the steel haulers

1

Becau e the amouDt ID coDtroveny wa DomlDal U1e GO oulllt ID tile colDpIa Dt

both 8lae a ed to lIave the ca decldea aD the bul of the documeDtl aDd petltloDI

lubmltted by them

TheBe eveDtl of Aprll 9 1910 we let out ID a ltatemeDt from the lOD Motor Co

placed ID the record by Midland

lIS FMO
MIDLAND METALS CORP V MITSUI O S K LINE 195

strike On April 15 1970 part of complainant s cargo was removed

from the terminal by vans on complainant s

request and the drivers

were not bothered by the pickets The remaining cargo was removed

between April 16 and April 21

After removal of the cargo Luckenbach applied first second and

third period demurrage on the cargo Midland let Luckenbach know

that it objected to that assessment Midland then broughtits problem

to our Division of Terminals which at Midland s

request contacted

Luckenbach and proposed the assessment of first period demurrage

only Luckenbach refused and Midland ultimately filed its complaint

Luckenbach s version of events differs from Midland s in several

important respects While acknowledging the existence of a strike

Luckenbach insists that it in no way interfered with pickups on Pier

84 To prove this five bills of lading were submitted to show that

cargo was indeed delivered during the period in question Lucken

bach s terminal was not tied up due to strikes or workstoppages of

longshoremen or personnel employed by the terminal operator Since

these are the only conditions under which Luckenbach s tariff author

izes the extension of free time Luckenbach feels its refusal to com

promise even on the basis of first period demurrage is fully justified

Luckenbach s ultimate position is that its terminal was open for busi

ness during the entire period of the strike and that there were no

teamster pickets outside its terminal Quite simply Midland should

have picked up its cargo and since it did not Midland is liable for

the full amount of thedemurrage

DISCUSSION AND CONCLUSIONS

Finding the record at best somewhat sketchy the Examiner con

cluded that on balance the record fails to establish that com

plainant was in fact prevented from removing his cargo from Lucken

bach s pier by factors beyond his control namely the steel haulers

strike which affected all or a substantial part of the port of Philadel

phia Therefore he concluded that there was no unjust or unreason

able regulation or practice under section 17 Additionally the

Examiner concluded that the record was wholly inadequate to permit

comparison of conditions and practices in the ports of New York

and Philadelphia for the purposes of section 16 First

Midland in its exceptions states three objections to the Initial

Decision

a Midland however In a letter to the Examiner points out that of the five shipments

documented by the exhibits only one was a steel shipment of less than a truckload

which can hardly be compared to the movement of six full open traUerIoads of steel

of whicb our shipment consisted

15 FMC
1

196 FEDERAL MARITIME COMMISSION

1 The burden of proof required by the Examiner places an unrea

sonable burden upon complainant in thatrequiring witnesses to attest

to the extent of the strike would be unduly expensive

2 The acceptance of Luckenbach s statement that there were no

pickets outside its terminal from which it was implied that there were

no obstacles to the removal of the cargo Midland claims Luckenbach

submitted no evidence in support of its statement which raises two

questions i

e if there were no pickets why was the attempt at

pickup thwarted and if the pickets were not outside Luckenbach s

gate at what point did the Jones truckmen encounter them and

3 The written statement from Jones did not receive proper

consideration

We find that the Examiners ultimate conclusion that there was no

unjust or unreasonable regulation or practice under section 17 is in

error Turing to the interpretative rules for demurrage assessment

there are several basic precepts essential to the resolution of any dis

pute on the matter In SouthernRy 00 v Al1tminum 00 of America

119 F Supp 389 E D Tenn 1951 aff d 210 F 2d 139 6th Cir

1954 these rules of construotion for demurrage oharges were set forth

at 396

The demurrage rules promUlgated bya carrier must In all Instances be con

strued most favorably to the shipper 18 0 J 8 Oarrlers 1848

So demurrage canbe exactad by a carrier unless the delay In loading Is clearly

attributableto the fault of the shipper orconslpee

This was iterated in St LouiB Southweatern Ry 00 v Robert H

Maya 177 F Supp 182 E DArk 1959 where the oourt stated at

184

demurrage cannot be collected where the delay Is not due to the fault of the

ShiPper or consignee orwhere it Is caused by the fault of the carrier

In the first Commission investigation of demurrage practices Free

TiJme 0ITI jDemurrage Ohargea at New York 3 US M C 89 1948

the Commission stated at page 107 with respect to demurrage charges

When property lies at rest on a pier after free time haa expired and con

slgnees through reasons beyond their control are unable to remove It the

penal element of demurrage charges assessed against such property has no

etrect In accelerating clearance of the pier To the extent that such charges are

penal Ie In excess of a

compensatory level they are a useless and con

sequently unjust burden upon consignees and a source of unearned revenue to

carriers The levying of such penal charges therefore constitutes an unjust and

unreasonable practice In connection wlth the storing and delivering of property

and should be forbidden The carrierIs entitled however to fair compensation

for sheltering and protecting a consignee s property during the period of In

oluntary bailment after expiration of free tlme

111 FMO
MIDLAND METALS OORP V MITSUI O S K LINE 197

To provide this compensatory level of charges when through no

fault of its own the consignee is unable to remove its goods either first

period demurrage charges are applied or as in the instant Philadel

phia tariff particular charges are specified Here these charges are

one cent per one hundred pounds however the conditions under

which these charges are applicable are limited to the conditions set

out in the tariff ie strikes of longshoremen or personnel employed

by the terminal operatoi or water carrier In addition if the cargo

was on free time when the specified condition s arose free time will

be extended for the duration ofthe existence ofthe condition s

Putting aside forthe moment the Examiner s emphasis on the un

sworn nature ofthe statement from Jones Motor Co it is to be noted

that this statement wasuncontroverted from the tenor of the papers

filed by the parties including thecorrespondence between the Director

Bureau of Enforcement of the Commission and thePhiladelphia Port

Association there can be no question that there was in existence at the

time in question a steel haulers strike Rule 10 p

ofthe Commission s

Rules of Practice and Procedure 46 CFR 502 156 states that all

evidence which is relevant material reliable and probative shall be

admissible Although the Examiner did admit the unswornstatement

of Wilkinson terminal manager for Jones Motor Co it was not given

much weight We conclude under the circumstances of the instant

situation and especially inasmuch as the statement went unchallenged

that it must follow that Midland through its agent Jones Motor Co

did infact make a bona fide attempt to pick up its goods which attempt

was thwartedby the strikers This conclusion is supported by the fact

that when the goods werefinally removed on April 15 16 17 20 and

21 the 18th and 19th fell on Saturday and Sunday they wereplaced

in vans and not flatbed trucks presumably to avoid the wrath of the

strikers

The courts in dealing with demurrage reparation matters have

referred the cases to the appropriate agencies Thus in Penn R R 00

v Moore McOormack Line8 Ino 370 F 2d 430 2d Cir 1966 at432

Where demurrage charges are unreasonable a

shipper may apply to the 100

for a

reparatldll and the ICC has ordered reparations in cases similar to the

onehere

That case involved astrike of third party employees which prevented

the consignee from picking up its goods Cited as authority for the

court s statement wereseveral ICC cases which laid the groundwork

for that agency s general rule that where circumstances beyond the

control of the consignee prevent it from releasing equipment of car

riers the assessment of penal demurrage charges is unwarranted

15 FRO
198 FED RAL MARITIME COMMI8 IN

We have often looked to the Interstate Commerce Commission to

see how that Commission has resolved matters which are common to

both agencies In F D OroceB 00 Inc v N Y Oentral BB 00

et al 272 IC C 1 1948 railroad cars with fruit and vegetables were

detained for complainant because of a truck drivers strike which pre

vented it from picking up its goods The tariff provided for assessment

of nonpenalty demurrage when employees of the consignor or con

signee wereon strike hence the tariff was not applicllible

The Commission stated at page3

The purpose of the penalty element in demurrage charges is to impel prompt

release of equipment by shippers That purpose fails whenever the release of

equipment by the shipper is made impossible by circumstances beyond Its control

Consequently in such circumstances the principle has become established that

the exaction of a penalty charge is unreasonable Citing ICC cases in which

the Commission found unreasonable the eollection of the usual demurrage charges

for detention of cars on aceount ot strikes beyond the control of complainants

therein and prescribed a lower basis of charges to cover such periOds

The facts in the instant case are on all fours with the above ICC

case There the defendantclaillled that the conditions attending the

strike were notsuch as to prevent the unloading of the cars within the

free time had complainant made an earnest effort todo 80 The testi

mony of witnesses for the parties differed and little of it was based on

firsthand knowledge Complainant s vice president testified his in

formation wasobtained by word of mouth from the company s drivers

who did not appear At 272 IC C 5

The testimony at the vicepresident was that picket lines were formed adjacen

to defendant s property that the pickets sometimes encroached upon it that they

threatened complainant s drivers and chased them away and that the unload

Ing was tlnally accomplished In a piecemeal manner by sending the drivers to

the yards early in the morning and at lunch time when the pickets were les

alert

Defendant claimed that the picket lines were stationed on public

streets and did not trespass on the railroad property that there wa

no violence or eveninterference with the shippers drivers or vehicles

Defendant showed that most oUhe carsreceived at the railroad station

during the strike period were unloaded from which he inferred tha

there wasno stoppage of businees activity

Little objection was made by either side to the hearsay characte

of the evidence presented by the other

The evidence may therefore be given consideration and Is entitled to suc

prObative elfect as the circumstances may warrant

In ouropinion the evidence warrants the conclusions that complainant s drivers

were threatened and Intimidated by the strikers and were thus prevented trom

unloading the threecars In question within the tree time allowance and that thi

was the proximate cause ot the accrual of the demurrage We are ot the view tha

15 F1I 0
MIDLAND METALS CORP V MITSUI O S K LINE 199

in the circumstances complainant exercised due dlllgence This we believe is

shown by the surreptitious and piecemeal manner in which the unloading was

accomplished 272 IC C 5

The ICC ordered assessment for demurrage at a reasonable amount

tocompensate the carrier thus no penalty element was assessed

Likewise in the instant case we find that Midland was thwarted

in its bona fide effort to pick up its goods This situation was brought

about through no fault of its own Therefore the assessment of the

penalty element in its demurrage charges is an unreasonable prac

tice However the circumstances of this case do not justify the assess

ment of no demurrage atall as requested by Midland Although the at

tempt at pickup was made while the goods were still on free time the

actual pickups did not begin until April 15 with additional pickups

onApril 16 17 20 and 21

Therefore we conclude that for the period from the expiration of

free time onApril 10 to the first successful pickup on April 15 Mid

land be required topay a compensatory sum to Luckenbach as compen

sation for keeping the goods and providing services incidental thereto

We find that just compensation would be the amount specified in the

tariff one cent per one hundred pounds per day However for the

period from April 16 to April 21 the last day of pickup we conclude

that a penal element should be assesed for those remaining goods

There is nothing in the record to indicate why Midland was unable to

remove its entire consignment on the 15th its first successful pickup

date when presumably itwould have removed all its goods ond the 9th

the day ofits unsuccessful pickupattempt

Thus thetotal demurrage towhichLuckenbach is entitled is 218 24

calculated as follows

For period April 11 15 5 days entire consignment to be com

pensated for at 1 cent per hundred pounds per day Total Consign

ment 199 079 pounds Compensation at 1f ijCWTjday 99 54

For period April 16 80 remainder of consignment on first period demurrage

0 05 per OWT

Pickup dote Weight BlllcllBdlng Demurragc charge

1

89 882

89 882

411 336

0017 0020 19 94

0023 0024 19 94

0018 002Ii 20 17

For period April 81 85 remainder of consignment on first period demurrage plus

second period demurrage 0 10 per OWT

Pickup dote WeIght l Blllclllldlng Demurragc charge

April 21 m n 0018 0022 19 66 89 1C

68 6ll

89 096

15 FMC
199A FEDERAL MARITIME COMMI8SION

Therefore total penal demurrage charges are 11870 added to

the compensatory charge of 99 54 the total amount towhich Lucken

bach isentitled is 218 24

Consequently Midland having been billed and having paid 316 60

toLuckenbach is entitled to reparations in the amount of 98 36

For purposes ofthis decision weneed notform any conclusions with

respect to the comparison of conditions and practices in the Ports of

New York and Philadelphia in light of section 16 First An appro

priateorderwill be entered

SEAL FRANOIS C HURNEY

Seoretary

ORDER

The Federal Maritime Commission has this day served its Report

in the subject proceding which wehereby incorporate herein inwhich

we found that the assessment of penalty demurrage charges during

that period of a strike by steel haulers from bona fide unsuccessful at

tempt atpickupofgoods until first successful pickup wasunreasonable

Therefore forthe reasonsenunciated in said Report

Itis ordered That the demurrage charges assessed and collected be

reduced tothe sum of 218 24 and that reparations be awarded in the

sumof 98 36 with interest at six percent per annum if not paid within

thirty days ofthe date ofthisOrder

By the Commission

SEAL signed FRANOIS C HURNEY

Seoretary

15 FMO
FEDERAL MARITIME COMMISSION

WASHINGTON DC

No 71 24

MID PACIFIC FREIGHT FORWARDERSINCREASES IN FREIGHT A

KINDS RATE IN THE U S PACIFIC CoAST HAWAII TRADE

April 6 1978

NOTICE OF ADOPTION OF INITIAL DECISION

No exceptions having been taken to the initial decision of the E

aminer in this proceeding and the Commission having determin

not to review same notice is hereby given that the initial decis

became thedecision ofthe CommiBBion onApril 6 1972

Iti8 ordered That this proceeding is hereby discontinued By t

Commission

SEAL S FRANCIS C HURNEY

Secretary

111 Fld C

200
201

FEDERAL MARITIME COMMISSION

No 71 24

MID PACIFIC FREIGHT FORWARDERS INCREASES IN FREIGHT ALL

KINDS RATE IN THE U S PACIFIC CoAST HAWAII TRADE

Increased rates in the U S Pacific coast Hawaii trade found just aud reasonable

and notshown to be unlawful

Milton W Flack for respondent fid Pacific Freight Forwarders

George Pai and Walton D Y Hong for intervener the State of

Hawaii

Donald J Brunner and Paul J Kaller as Hearing Counsel

INITIAL DECISION OF STANLEY M LEVY PRESIDING EXAlII INER 1

Respondent Harry H Blanco Co dba Mid Pacific Freight For

warders Mid Pacific a nonvesseloperating common carrierby water

NVOCC filed Supplement No 2 to Tariff FMCF No 2 This

supplement increased its rates on freight all kinds between US

Pacific coast ports and Hawaiian ports to become effective onApril 1

1971 By order served March 24 1971 the Federal Maritime Commis

sion instituted this proceeding to investigate the lawfulness of said

rates and charges and suspended the effective date of those rates until

August 1 1971 By Supplement No 4 the effective date was further

suspended until September 20 1971

The State of Hawaii petitioned and was granted leave to intervene

Hearings were held in Los Angeles Calif on December 7 and 8 1971

Thereafter revised financial exhibits were submitted by respondent

and received into evidence on January 12 1972 Hearing Counsel

cross examined respondent with respect to those exhibits by written

interrogatories In conjunction with its answers thereto respondent

again submitted revised financial exhibits which were received into

evidence onFebruary 17 1972

1This decision became thedecision of the CommissionApr 6 1972

15 FMC
202 FEDERAL MARITIME COMMISSION

Prior to the rate increllBe under investigation the rate structure o

Mid Pacific in the Hawaiian trade was 72v per cubic foot or 144 pe

100 pounds The rate increase under investigation provides for a rate

of 81f per cubic foot shipments with a density exceeding 50 pound

per cubic foot to be assessect on the basis of one cubic foot per 50

pounds Minimum charges per shipment increased from 5 to 8 pe

shipment

Respondent is awholly owned subsidiary of Signal Trucking Serv

ice Ltd S11S STS is a California based contrat motor carrie

operating solely within theState of California with operating right

issued by the Oalifornia Public Utilities Commssion and the Inter

state Commerce Commssion STS provides ground transportation

services on a local basis

As an NVOCC Mid Pacific receives LCL freight at one of its tw

terminals assumes responsibility for the goods coordinates and con

solidates the freight into container loads prepares the proper docu

mentation and delivers the containers to underlying ocean carriers

and at the end of the voyage breaks the freight down for delivery t

the consignee

In addition Mid Pacific also engages lIB a licensed ocean freigh

forwarder with FMC License No 303 In California Mid Pacific ha

terminal faciilties located at Long Bea ch and Oakland The Long

Beach facilities consist of 12 000 sq ft with 2 000 to 3 000 sq ft o

office space The Oakland facility has approximately 20000 sq f

with about 5 000 sq ft of office space Both facilities are located o

pier or within the port area Both terminals are lellBed and contain 

dock dispatching office and anormal across the dock terminal facilit

operation The total Los Angeles terminal facilities are exclusivel

used by Mid Pacific and are subleased by STS or a subsidiary o

STS to Mid Pacific The total rental is paid by Mid Pacific In

Oakland the terminal facility is leased by Mid Pacific from th

Port of Oakland Prior to November 1971 a portion of the facilit

was used by STS and Paxton Trucking Co a subsidiary of STS

Rental use for the fair share used by Paxton and STS was paid t

Mid Pacific However since November of 1971 the affiliates moved ou

and Mid Pacific exclusively uses the Oakland terminal In additio

to the terminal facilities utilized by Mid Pacific as aforesaid it als

utilizes corporate office facilities for which it is charged by the paren

company

Mid Pacific in its NVOCC operation has 11 employees which ar

exclusively used by it They are paid by STS under one payroll an

then charged by the parent company toMid Pacific In additioll re

111 FMO
MID PACIFIC FREIGHT FORWARDERS 203

spondent also employs Harry H Blanco who devotes his time ex

clusively to its licensed freight forwarder operation The basis for

compensation of these employees is either under union contract if

union employees or salary basis if management personnel Various

physical activities ofthe NVOCC operation such as physical handling

and loading of the containers are conducted by STS or its employees

and billed by STS to Mid Pacific In addition STS provides such

services to respondent as salesmen accounting and billing corporate

office facilities claims officer employees containerhandling and stuff

ing supervision and clerical personnel and surface transportation

between terminal and dock These costs are billed by STS based upon

either a negotiated charge allocated on the basis of time devoted to

Mid Pacific operations or a direct charge

Cargo is delivered to the Mid Pacific terminal by either local or

interstate carrier The transportation charges for this transportation

is either prepaid or collect As an accommodation toits customers this

transportation charge may be advanced by respondent and then sepa

rately billed to the customer

Transportation of the cargo from the Mid Pacific terminal in Long

Beach or Oakland to the dock or pier is transported by steamship

lines where the steamship line provides the service In some instances

however Mid Pacific provides the transportation from terminal to

dock and an lIe lOa wt reimbursement is given by the steamship

company Transportation of the cargo from the container yard of the

steamship line to the Hawaiian terminal of Mid Pacific is accom

plished by an Hawaiian surface carrier who acts as an agent of re

spondent Where the customer or consignee requests transportation of

the cargo to its store door in Hawaii the costs of transportation are

paid for by the consignee or customer or at their request advanced

by Mid Pacific and separately billed tothe customer

The increase in the tariff was due to increases in variouG costs In

creased costs have been experienced in handling segregation and

stuffing of the containers prior to placement on board ship In addi

tion there haNe been increases in clerical and personnel costs material

purchases and ocean charges Increases in insurance premiums taxes

and licenses also have occurred

Mid Pacific projected a 20 percent increase in revenue for the year

1972 over that of 1971 This projection is based on volume only

The purpose of this proceeding is to determine the lawfulness of

the rate increase pursuant to sections 18 a and 22 of the Shipping

Act 1916 and sections 3 and 4 of the Intercoastal Shipping Act 1933

15 F MC
204 FEDmRAL MARl lIME COMMIsaION

The primary issue is essentially whether the rates are just and reason

able The method of determinatipn and allocation of costs and expenses

is a subsidiary issue Traditionally the test of reasonableness of rates

is based on the rate of return of equipment Alooa Steam8hip 00

Ino General InoreaBe in Rates 9 RM C 220 1966 Atlo ni

Gulf Puerto Rico General InMeaBe 7 FM C 87 104 108109 11

1962 Rate8 of Inter I8land Steam Navigation 00 Ltd 2US M C

253 1940 However where a carrier has as Mid Pacific little or n

investment in equipment it is usual to consider at least as an importan

factor the operating ratio methodtodetermine reasonalbless of rates

TransoO lte Ino OoruJolidated EJJpre88 Ino 14 FM C 35 1970

The record discloses that based on the previpus rates respondent 

operating ratio for the 6 months ended June 30 1971 waseither 115 

percent 1011 percent 112 1 percent or 1119 percent depending o

the method utilized for allocation of expenses between Mid Pacific 

Hawaiian and other trades and treatment of revenue derived from

purchased transportatipn charges advanced by Mid Pacific and sub

sequently collected reimbursed from its customers Under any o

the methods of allocation or treatment of purchased transportation

expenses it is demonstrated that the respondent operated ata loss in

its Hawaiian NVOCC operatipn underthe 794 rate

The record further reveals that Mid Pacific has experienced in

creased costs which are likely toincrease further

Under the 81 rate the projected revenue and expenses for the firs

6 months of 1972 show a reduction of that loss of approximately 

percent Although respondent s financial statements indicate that this

increase in rates still dpes notrender aprofit in the Hawaiian NVOCXJ

operation the increased rate along with factors of competition an

the adverse impact that agreater increase at this time might have o

the Hawaiian economy have precluded respondent from seeking a sti

higher rate There is nothing in this record however to show tha

the increased rates would be detrimental to the Hawaiian economy

No evidence was introduced by either Hearing Counsel or the Stat

of Hawaii which purported to show that the increased rates are un

lawful or unreasonl1ibly high The positio of Hearing Counsel in it

opening brief is that the rates at issue in this proceeding are neithe

unjust unreasonable npr otherwise unlawful The State of Hawa

submitted no openingbrief but by letter stated that it does not objec

to the necessity for the tarifl increase BOught

111 FMO
ULTIMATE FINDINGS AND CoNCLUSIONS

05

Respondent s previous rates have resulted in operating losses The

rates sought herein will not produce excessive earnings and will not

adversely affect the economy oftheState ofHawaii

The rates under investigation are not unjust unreasonable or other

wise unlawful under section 18 a of the Shipping Act 1916 and or

sections 3 and 4oftheIntercoastal ShippingAct 1933

This proceeding is hereby discontinued

S STANLEY M LEVY

Pre8iding Ewaminer

WASffiNGTON D C March 10 1972

15 FMC
FEDERAL MARITIME COMMISSION

DOOKET No 71 25

UNITED NATIONS CUILDREN S FUND

lJ

BLUE SEA LINE

Assessment of hIgher of two tarIff rates for poultry equIpment when ta

Is ambIguous found to be unreasonable Refund ordered

J086 Miranda forUnited Nations Children s Fund

W F Latham for Blue Sea Line

ApriZ 6 19713

REPORT

By THE COMMISSION Helen Delich Bentley Ohairrno nAshton 

Barrett Vic6 Ohairman James V Day George H Hearn a

Clarence Morse OommiB8ionera

By complaintfiled with the Commission on March 15 1971 Unit

Nations Children sFund UNICEF claimed that the Blue Sea Lin

a common carrier by water between the United States Atlantic a

Gulf ports to ports in the Republic of Indonesia Portuguese Tim

and West Irian and a member of the Atlantic and Gulf Indone

Conference Conference had on three occasions assessed freight ra

higher than those properly applicable in accordance with the issu

tariff Examiner Ashbrook P Bryant in his Initial Decision serv

December 18 1971 dismissed the complaint The proceeding is bef

us on exceptions filed by UNICEF to which no reply was receiv

FAOTS

On three shipments from New York to Belawan Deli Surabay

and Djakarta various items of poultry equipmentfor which Respo

ent had originally assessed a machinery and parts N O S rate w

later reclassified by Respondent as cargo N O S a higher rate a

UNICEF wasbilledfor the difference

115 F M

206
UNITED NATIONS CHILDREN S FUND V BLUE SEA LINE 207

Specifically the items in question wereegg incubators egg candlers

chicken debeakers and feed crushers At the time of the shipments

February 12 1970 there was no specific commodity rate for poultry

equipment Such a rate was established on March 16 1970 The car

der orginally assessed the machinery N O S rate of 72 75 per 40

CFT on all shipments except that part of B L 4 New Yorkl

Djakarta which was for debeakersj these were assessed the cargo

N O S rate of 93 50 per 40 CFT However the debeakers in the

other shipments B L 1 New York Belawan Deli and B L 4

New York Surabaya were assessed the machinery N O S rate

On June 5 1970 Respondent submitted to UNICEF due bills stating

that all the items with the exception of feed crushers and the one

exception of the debeakers mentioned above had been incorrectly as

sessed at the machinery N O S rate when the correct rate to be

applied was cargo N O S UNICEF was therefore charged the dif

ference between 957 96 the amount originally assessed and 1 213 18

the amount assessed by the amended bills or a total of 255 22

UNICEF submits that the assessment of any of the above enumer

ated poultry equipment at the higher cargo N O S rate was un

warranted and claims tohave been overcharged as aresult by 258 34

Its position is that all of the goods should have been assessed at the

machinery N O S rate in the original assessment Pointing out that

in the original assessment the debeakers in B L 4 New Yorkl

Djakarta were assessed as cargo N O S UNICEF claims that the

original assessment should have been 95484 instead of 957 96 This

makes the difference between what UNICEF claims to be the proper

freight rate and the amount ofthe amended bills 258 34 which is the

refund UNICEFclaims

The time frame of events in this proceeding must be noted The

shipments weremade on February 12 1970 and the original bills of

lading dated February 5 1970 On March 16 1970 a

specific com

modity rate of 7100 per 40 CFT for poultry equipment was effec

tuated On June 5 1970 Furness Withy Co agents for Blue Sea

Line submitted due bills to UNICEF for the difference between the

original assessment and an assessment on the basis of cargo N O S

Respondent s sole defense as voiced by its agents is that onApril 22

1971 after receipt of the complaint the subject of which rates

applied was placed before the full Conference membership which

These items are Tespectlvely a device forholding at constant temperature and humidity

a

quantity of eggs during their period of Incuhatlon a device for examining eggs during

preparation tor marketing to determine any flaws within the shell a device forremoving

a portion of n chicken s upper beak thus preventing the birds from picking at one another

orat tbeir eggs a device tor crushing dried ears of corn wheat oats barley alfaIta

etc tnto grain suitable In size forchicken feed

15 FMC
208 FEDERAL MARITIME COMMISSION

unanimously concluded that while thefeed crushers wereentitledtothe

machinery N O S rate the remainder of the consignment was not

The basis of Respondent s argument is that debeakers egg candlers

and egg incubators are actually apparatus and not machinery and

are not entitled tothe machinery rate

DISCUSSION AND CONCLUSION

The Examiner in dismissing the complaint relied entirely on the

following proviso of the Conference tariff

The rates includin authorized tarl1r Interpretations rules regulations ou

port charges conditions provisions packing requirements or commodity descrip

tions which appear In this Taritr are expIlclt and subject only to Conferenc

Interpretation Emphasis added

This the Examiner felt provided an orderly method for the Confer

ence to resolve any tariff ambiguity

In our opinion the Examiner was in error as a matter of law Iti

a well established rule of law that ina matter of contractual inte

pretation any ambiguity is construed most strongly against the write

of the contract More specifically in tariff matters this rule has bee

utilized time and again For instance in United States v M K T

BB 00 194 F 2d 777 5th Cir 1952 the Fifth Circuit Court o

Appeals set out its rule for tariff interpretation

The construction of a printed tarltr presents a question of law and does n

dltrer In character from tllat presented when the construction of any other doc

ment Is In dispute The construction should be that meaning which th

words used might reasonably caTry to the shippers to whom they areaddrellse

and any ambiguity or reasonable doubt as to their meaning must be resolve

against the carriers 194 F 2d at 778

This rule was applied by the Fifth Circuit shortly thereafter i

United States v Strickland Transp 00 Ino 200 F 2d 234 5th Ci

1952 Here there was a dispute between the shipper and the carrie

as towhich rate was to apply to airplane internal combustion engine

Engines steam or internal combustion NOI not otherwise in

dexed under the general heading Machinery orMachines or Par

Named whichtook alow rate or Aircraft Parts which took a hig

rate In agreeing with the shipper the court stated that if it b

considered that the shipment could come within either of the two cla

sifications the shipper wasentitledto the Machinery orMachines cla

sification because the rate prescribed by it is the lower 200 F 2d 

235 The court decided that the tariff was ambiguous and unclear as 

which rating the articles belonged under and therefore concluded th

111 FMC
UNITED NATIONS CHILDREN S FUND V BLUE SEA LINE 209

ambiguity must be resolved in favor of the shipper and the lower

rate must be awarded to him Id

We have heretofore had occasion to apply these principles of con

struction to tariffs filed with us In Petel Bratti Associates Inc v

Prudential Lines rwand lVIN A O 8 F MC 375 1965 an ambi

guity in the tariff wasfound to exist and we concluded

When theinterpretation of a tariff is the issue any ambiguity of the tariff pro

visions which in reasonableness permit misunderstanding and doubt by shippers

must be resolved against the carrier the party preparing the document

Thus although there Is support for the interpretation advocated by both parties

the shipper s

Interpretation must prevail 8 F MC at 379

Thus itis clear from the foregoing that the threshold issue in a tariff

interpretation problem is determining whether an ambiguity in the

tariff does in fact exist Once itis determined that an ambiguity does

exist then the tariff must be construed in such a manner so as to re

solve such ambiguity in favorofthe shipper

From the evidence before us there can be no quarrel with the fact

that an ambiguity in the tariff did exist at the time of the shipments

in question We are drawn to this conclusion by the following factors

The tariff contained no specific commodity rate for poultry equip

ment the Respondent originally assessed the goods as machinery

N O S the Conference itself was doubtful of the proper classifica

tion ofthe goods since it placed the matter before its full membership

for resolution by vote and most importantly given the facts of the

instant case the use of the classification machinery N O S in our

opinion under these circumstances gives rise to a bona fide dispute

over the interpretation of this tariff provision ie whether poultry

equipment ofthe instant nature could be considered to be machinery

N O S

As regards the latter respondent s position has been that the goods

are not machines but apparatus and therefore cannot be classified

as machinery N O S UNICEF s argument is that these particular

items are in fact machines The existence of a good faith difference of

opinion among reasonable men over a tariff provision not resulting

from a strained or unnatural construction of that provision raises an

ambiguity which perforce must be resolved against the creator ofthe

tariff

In the present situation it is not necessary to resort to a strained

or unnatural construction of the tariff in order to classify the instant

poultry equipment as machinery N O S We begin with the proposi

tion that

the classification machinery N O S covers individual

machines since machinery is by definition a group of machines

15 F M C
210 FEDERAL MARITIME COMMISSION

Respondent made no change in the original classification of the feed

crushers as machinery N O These devices are the most obvious

form of machinea combination of static and moving parts perform

ing useful work

In our opinion Respondent s argument that the debeakers candlers

and incubators are not machines but apparatus is unsound This

reasoning fails to take into account the fact that the commonly ac

cepted usage of the word apparatus is as a generic term used to en

compass the entire collection or set of materials instruments appli

ances or machinery designed for a particular use Web8ter 8 Third

New Inte rnatwnal Dictionary 1964

The American Heritage Dictwnary of the EngliBh Language 1970

definesamachine as

1 a Any system usually of rigid bodies formed and connected to alter trans

mit and direct applied forces In a predetermined manner to accomplish a

spe

cific objective such as the performance of useful work

Web8ter 8 Seventh New Oollegiate Dictionary 1969 defines 

machine as

an assemblage of parts that are usually solid bodies but Include In som

cases fiuld bodies orelectricity In conductors and that transmit forces motion

and energy one to another In some predetermined manner and to some desire

end

Synonyms listed for machine include engine apparatus and

appliances

It is apparent that the commonly accepted definition of machin

includes devices with no moving parts which have as their functio

the conversion of energy from one form to another forthe purpose o

performing useful work Existing case law reinforces this definition

Thus in F08ter Wheeler Oorp v United State8 290 F Supp 375 38

Cust Ct 1968 amachine was defined as amechanical contrivanc

that modifies utilizes or applies energy or force provided the con

trivance hasa useful function orauseful objective

In the instant case it would appear that all three devices can rea

sonably be considered to be machines The debeakers consist of bot

static and moving parts which acting in conjunction with one a

other quite clearly utilize energy and convert energy from one form

intoanother electrical energy is transformed into mechanical energ

which in turn performs auseful function the debeaking of a chicke

Likewise the incubator in this case kerosene operated converts foss

fuel into heat energy in order to perform the function of maintainin

constant temperature during the incubation period of the eggs som

111 FMO
21 days The manufacturer s literature on the incubator refers toit as

a machine Lastly a candler converts electrical energy into light to

enable one to determine whether eggs are marketable

Hence it is readily apparent that given the tariff as it existed on

February 5 1970 the date of the bills of lading a shipper and a

carrier could reasonably be expected to differ on the classification

of the above poultry equipment This reasonable difference ofopinion

in conjunction with 1 the carrier s own original assessment of these

items as machinery N O S and 2 the Conference s own doubt

as to the proper classification evidenced by its voting on the matter

evidences an ambiguity in the tariff Thus given this ambiguity and

having resolved it in the shipper s favor we conclude thatUNICEF is

entitled to a refund in the full amount of the overcharges claimed to

wit 258 34 Accordingly an appropriate order will be entered

SEAL Signed FRANCIS C HURNEY

Se01etary

10 F MC
FEDERAL MARITIME COMMISSION

DOOKET No 71 25

UNITED NATIONS CHILDREN S FUND

11

BLUE SEA LINE

ORDER

The Federal Maritime Commission has this day served its Repo

in the subject proceeding which we hereby incorporate herein 

which we found that the assessment of the higher of two tariff rate

was unreasonable

THEREFORE forthe reasonsenunciated in saidReport

Itia ordered That respondent Blue Sea Line be required to refun

to complainant UNICEF the amount of overcharges in the sum 

258 34 with interest at six percent per annum if not paid with

thirtydays from thedate ofthis Order

By the Commission

SEAL

212

Signed FRANOIS C HURNEY

Secretary

111 F MO
FEDERAL MARITIME COMMISSION

WASHINGTON D C

No 71 23

PACIFIC HAWAIIAN TERMINALS INC INCREASES IN FREIGHT ALL

KINDS RATE IN THE U S PACIFIC COAST HAWAII TRADE

NOTICE OF ADOPTION OF INITIAL DECISION

No exceptions having been taken to the initial decision of the

Examiner in this proceedmg and the Commission having determined

not to review same notice is hereby given that the initial decision

became the decision of the Commission on April 13 1972

By the Commission

SEAL 8 FRANCIS C HURNEY

Secretary

15 F M C

213
FEDERAL MARITIME COMMISSION

No 71 23

PAOIFIO lIAWAllAN lERmNALS INo INOBEA8ES IN FREIGHT AL

KINDS RATEIN THEU S PAOIFIO COAST lIAWATI TRADE

Increased rates of Pacific Hawaiian Terminals Inc arenot unjust unreasonab

orotherwiseunlawful

Oarl H Fritze for respondent Pacific Hawaiian Terminals In

George Pai and Walton D Y Hong for State of Hawaii interven

Donald J Brwnner and Paul J

Kaller Hearing Counsel

INITIAL DECIIS lON OF STANLEY M LEVY PRESIDIN

EXAMINER 1

Pacific Hawaiian Terminals Inc Pacific Hawaiian filed seve

Revised Page No 39 to Tariff FMCF No 2 to become effective 

March 22 1971 increasing its Freight All Kinds rate between U

Pacific coast ports and Hawaii by 121 2 percent On March 18 19

the Commission ordered an investigation and suspension to determ

whether or not the increased rates and charges are unjust unreaso

able orotherwise unlawful under section 18 0 of the Shipping A

1916 and or sections 3 and 4 of the Intercoastal Shipping Act 19

Although the Commission suspended the effective date of the increa

through July 21 1971 respondent having been inoperative for m

than 1

year formally agreed not to commence operations pursu

to Tariff FMCF No 2 prior to February 15 1972

Intervener State of Hawaii the State informed the Exami

that it did not intend toactively participate in hearings Counsel 

respondent and Hearing Counsel agreed to proceed upon a stipula

factual record Resolution of the issues therefore is based on the s

mitted record and briefsand without oral hearing

1

This decision bs ams the decision ot the Commission April 18 1912

1 FM

214
PACIFIC HAWAIIAN TERMINALS INC 215

Pacific Hawaiian an NVOCC is a wholly owned subsidiary of

United Drayage Corporation United Drayage As an NVOOO it

receives LCL freight at it terminllil in San Francisco Calif assumes

responsibility for the goods consolidates and loads into containers

furnished by either Matson Navigation Co or Seatrain Lines Cali

fornia prepares the propel documentation and arranges for delivery

of the containers tothe underlying carriers At the end of the voyage

the process is reversed and the containers are broken down for delivery

of the individual shipments to the ultimate consignees In Honolulu

the services are performed by an agent of respondent whose charges

toPacific Hawaiianare pursuant to tariffs filed withthe Hawaii Public

Service Commission

Pacific Hawaiian has no written leases notes mortgages encum

brances or othE r evidence of indllbtedness covering property arid

equipment owned or used by respondent in its domestic offshore opera

tions pursuant to the tariff here under investigation It leases its

telminal facility from HonoluluFreight Service Honolulu Freight

another wholly owned subsidiary of United Drayage The reason for

this isthatPacific Hawaiian wasa new corporation and it wasimpossi

ble to obtain a favorable lease for Pacific Hawaiian Terminals Inc

and accordingly the terminal facility WlliS leased by HonoluluFreight

The full rental is charged to respondent without any add ons or

subtractions therefrom by Honolulu Freight No written agreement

has been entered into between the two corporations for this property

United Drayage performs the container loading at San Francisco

for the price of 43 cents per 100 pounds providing all labor therefor

This is equivalent to 125 00 per container paid by Honolulu Freight

inPortland Ore to a nonrelated company

Honolulu Freight provides service for collection and disbursement

of cash maintaining corporate books and handling of claims for cargo

damage There are no charges to Pacific Hawaiian for these services

Respondent s shipments averaged 28 509 pounds per container from

1966 to 1970 butduring the period 1969 1970 the average weight was

reduced to 24 16R pounds per container The reason for this decrease

in weight factor is that at the inception of the operations heavier

freight predominated As the operations became more established and

through growth respondent received a larger share of the light and

bulky traffic which is vital to lower cost operations Itis anticipated

thatthis trend will continue

Itisestimated that there will be a deficit in thefirst year of projected

operations but respondent projects a growth rate of 1015 percent

This rate should have the effect of reducing losses and ultimately

returning aslight profit This should occur because increased volume

15 FMC
216 FEDERAL MARITIME COMMIS8ION

would allow a

greater spread of administrative costs and the greater

the volume the lower the actual per container loading costs Also as

volume increases the freight mix reaches a more desirable level

namely not quite the preponderance of heavy freight and a larger

proportion of the valuable light and bulky freight

Hearing Counsel supports the rate increase because the evidence

demonstrates that even with it the operations will result in a loss for

theprojectedyear 1972

The State contends that respondent has failed tosustain its burden

of proof in showing with reliable probative and substantial evi

dence that it is entitled tothe increase Pacific Hawaiian s case pri

marily is based on a projection for a

typical year The State argues

that the evidence is not indicative or representative of a typical year

based on expenses and revenues for the years 1968 1969 and 1970

In 1968 Pacific Hawaiian had an operating ratio of 93 6 percent

in 1969 85 87 percent and in 1970 94 04 percent

The total expenses for 1968 1969 and 1970 divided by the total

revenues for the same years indicates an average operating ratio of

98 1 percent 814 668 92 divided by 887 996 55 The projected year

however shows an operating ratio of 106 2 percent The Statesuggests

that it is unreltSOnable that the operating ratio should increase so

drastically in the projected year To thisend it points tothe projected

year increases in salary expenses and administrative salary expenses

and the fact thfttthere is no explanation why these two categories

should be increased so drastically It concludes that these two cate

gories are notrepresentative of the expenses to be attributable to 1972

inview of PacificHawaiian s past perfolmance and the slight increase

8 1 percent incontainer revenuesfrom 1970 to1972

A recomputation by the State shows that with all other figures

remaining the same a 2O percent increase in the two categories o

salaries and administrative office salaries will result in an operating

ratio of 94 1 percent A 80 pel C8Dt increase in the two categories

again with the other figures remaining exactly as stated by respond

ent results in an operatingratio of 95 7 percent A 50 percent increase

in the two categories the other figures remaining the same results

in a 98 9 percent operating ratio Assuming that a 20 or 80 percen

increase inthese two categories isreasonable Pacific Hawaiian s oper

ating ratio is still within the reasonable range of operating ratios fo

NVOCC swithoutincreasingthe rates

The State also attacks the projected revenue from loading and cub

ing Pacific Hawaiian projects it at 776 00 and says it is based on th

average of the last 4years but the only figure in respondent s exhibit

15 FMO
PACIFIC HAWAIIAN TERMINALS INC

is 3 104 00 for 1970 The State fails to see how the 776 00 projected

figure can be an average of the last 4years

Pacific Hawaiian s

reply brief suggests that the State s position is

based on an inadvertent misunderstanding of the nature of the cost

statement submitted by respondent The year 1970 wasnot a complete

year covering only the approximately 9 months respondent was opera

tional As such respondent contends the projections for 1972 cannot

becompared with 1970 Inaddition current costs and wages have been

used intheprojection

Hearing Counsel supports respondent s contention and disputes

the State s anal vsis and maintains that the data submitted appears

to be a reliable projection of a typical year They point out that

respondent susrcnded operations in September 1970 and in conjunc

tion with this investigation agreed not to commence operating until

after February 15 1972 Hearing Counsel argues that respondent

having been dormant for 1 years its projected typical year cannot

be expected tocompare favorably with the results of operations during

aperiod of sustained activity Hence eventhough the projected return

is out of line with the results of operations for 1968 through 1970

it should not be indicative of an unreasonable orunreliable projection

The expense figures referred to by the State for calendar year

1970 actually pertain only tothe period January August after which

operations weresuspended Annualizing these figures traffic and salary

expense would be 14 175 rather than 9 450 representing an increase

of 18 5 percent over 1970 rather than 78 percent as indicated by the

State and office salary and administrative expense would be 18 160

rather than 12 107 representing an increase of 38 percent over 1970

rather than 108 percent as indicated by the State On this basis the

apparent discrepancy between past operation and projected year is

significantly diminished

Office salaries and administrative expense of 2515 is based upon

the wages of 2

persons at the present teamsters scale Nothing in

this record would indicatethat an annual salary of 10200 is unreason

able for one office staff member Traffic and salaries expense of 16 800

is computed from 1970 salaries of 950 per month increased by 23

percent based on union increases plus 3 000 in bonuses There is no

indication that these figures are unreasonable

Areview of respondent s revenues from loading and cubing reveals

that itrealized income from that source in only one ofthe 4years that

it has operated In that year 1970 it received 3 104 00 The average

income from loading and cubing over the years of its existence has

been 776 00 and it is this amount that respondent utilizes in the

15 FMC

217
218 FEJlIlRAL MARlTIME COMMI8SION

I

projectedyear For the projected year groM revenue is 188 008 00 If

loading and cubingis increased from 776 00 as respondent depicts to

8 104 00 as suggested by the State revenues would increase

to 185 826 00 This increase would reduce the projected deficit to

5 958 00 and would improve the operating ratio slightly but would

not changerespondent s financial picture materially

Operating ratios often are a matter of dispute when comparisons

are made between past actual results and projected results In addi

tion the weight which should be given to NVOCC operating ratios

as well as to the area of permiBBibleratios hasnever been quantitatively

determined by the Commission The Commission has said that it

has been usual to consider at least as an important faCtor in proceed

ings relatingtothe reasonableness of rates of carriers with little capita

investment in comparison with their total costs of operation the

operating ratio of such carriers ie the margin between revenue

and expensesof operation

In allowing l rate increase where the evidence indicated that the

operating ratio did not exceed the 98 percent which the Interstate

CommerceCommiseion appears frequently to have approved the

CommiBBion went on to say that there was no showing that a 98

percent operating ratio is neceBBarily proper or a standard fo

NVOCC s and that nothing we say here is to be construed as imply

ing that such operating ratio is in fact proper or a standard

T1 arI8oO 1l6aJ Ino OOTIJJolidated EaJP1688 Ino 14 FM C 85 45 1970

With the CommiBBion s caveat in mind the Examiner cannot con

clude that any operating ratio which is reflected in the various pos

tions is such as to require a disapproval of thl

rate increase Eveil i

the projected operating ratio of 106 2 percent is unduly peBBimistic

the record does not reveal that the average operating ratio of 98 

percent or the 1970 ratio of 94 04 percent exceeds the 98 percent rati

found in the Tr0 tn8oO 1l6aJ casetobe no bartoapproval of rate increases

The record is devoid of any basis to establish an operating ratio i

exceBB of 98 percent hence there is no reason to conclude that if pro

jected figures are in errorthat sucherrorwould be sufficient tochang

the operating ratio from the projected 106 2 percent tothe 98 percen

level

Inaddition tothe factor of operating ratios considering the adjus

ments neceBBary to properly compare a 9 month operation in 197

with a projected typical year and taking into account present pa

scales and other cost increases to which the NVOCC is subject th

I The eater themargin the lower the ratio Bence a ratio of 100 percent Indicate 

break ven opratlon a ratio In Rce of 100 percent IndIcate a 1088 operation

11l1lMO
record supports a finding that the increased rates are just and

reasonable

ULTllIIATE CONCLUSION

Itis concluded and found that the increases in the rates here under

consideration are not unjust unreasonable or otherwise unlawful

The proceedingis discontinued

Washington D C

March 15 1972

15 FMC

8 8TANLEyM LEvy

Presiding EJaminer
FEDERAL MARITIME COMMISSION

No 729

POLYOHROME CORPORATION

v

HAMBUllO AMERIOA LINE NoRTH GERMAN LLOYD

NOTICE OF ADOPTION OF INITIAL DECISION

No exceptions having been filed tothe initial decision of the Exam

iner in this proceeding and the Commission having determined n

to review same notice is hereby given t tthe initial decision becam

the decision of the Commission on April 18 1972

By the Commission

SEAL Signed FRANOIS C HUllNEY

Secretary

lIS FMC

220
FEDERAL MARITIME COMMISSION

No 72 9

POLYCHROME CORPORATION

v

HAMBURG AMERICA LINE NoRTH GERMAN LLOYD

Reparation awarded

Seth07088 forPolychrome Corporation

P J E ar r

Y

for Hamburg AmericaLine North German Lloyd

INITIAL DECISION OF STANLEY M LEVY

PRESIDING EXAMINER 1

Polychrome Corporation complainant seeks recovery of 760 03

from Hamburg America Line North German Lloyd respondent

alleging assessment of a rate that was higher than the rate published

inthe governingtariff NorthAtlantic Continental Freight Conference

Tariff No 28 F M C 3

The parties have consented that the proceeding may be conducted

under shortened procedure without oral hearing pursuant to Rule 11

of the Commission s Rules of Practice and Procedure

Involved is a shipment 2

alleged to be Paper Stencil Base which

pursuant to Item 2738 of the tariff should be transported at a rate of

86 per ton weight of 2240 pounds The tariff in question also has a

rate under Item 2671 for Paper Stencil at a rate of 87 50 per 40

cubic feet The carrier assessed 1 962 19 pursuant to Item 2671

whereas the charge should be only 1 202 16 if Item 2738 is applicable

Examination of the bill of lading and dock receipt relating to the

shipment reveals that the goods are clearly identified as stencil base

1

This decision becamethe decision ot the Commission Apr1l18 1972

9 New York to Bren en aboard respondent s vessel Elbe Eaprells Bill ot Lading No 126

dated AprlI17 1970

115 FMC

221
paper 

oee ote shipping documents s tee any description

or language which would indicate that the commodity was Paper

Stencils

Complainant certifies that the goods shipped were in fact stenci

base paper as described in the billof lading and dock receipt and no

stencil paper as rated by respondent Respondent does not contend

that the goods were other than stencil base paper but has declined

adjustment on the basis of Tariff Rule 8 which requires prompt sub

mission of such claims The conference rule however is not barrier to

recovery because the Commission has repeatedly ruled that under the

S hipping Act 1916 a claim arising out ofalleged overcharges cannot

be barred from a determination on the merits if as herein it is filed

with the Commission within two years of accrual of the claim

The evidence supports a finding that the goods shipped were sten

cil base paper for which the applicable rate is found in Item 2738

Complainant was overcharged 760 03 and respondent is directed to

pay thisamount plus 6 percent interest per year if not paid within 30

days

STANLEY M LEVY

PTesiding EwumineT

WASHINGTON D C MaTch 1J4 1972

15 FMC
FEDERAL MARITIME COMMISSION

DOCKET No 71 80

MARITIME FRUIT CARRIERS CO LTD AND REFRIGERATED EXPRESS

LINES A ASIA PTY LTD

May 3 lore

Agreement between two carriers for coordination of sailings sharing of expenses

etc and which provides that each party shall remain an individual mem

ber with a separate vote in any conference found not to be contrary to the

provisions of section 15 Shipping Act 1916

John R Mahoney for petitioner Blue Star Line Ltd Ellerman

Lines Ltd and Port Lines Ltd

Edward Aptaker EdwardSchmeltzer andEdward J SheppardIV

for petitioner FarrellLines Inc

Sanford O Miller forpetitioner Columbus Line

Stanley O Sher and Alilin S Davis for respondents Maritime Fruit

Carriers Co Ltd and Refrigerated Express Lines A Asia Pty

Ltd

Donald J Brwnnerand PatriciaByrne Hearing Counsel

REPORT

By THE COMMISSION HelenDelich Bentley Chairman Vice Chairman

Barrett and Commissioner Morse concluded that the provision of

Agreement 9944 permitting each party to remain an individual

member with a separate vote in any conference is not contrary to

section 15 of the Shipping Act 1916 Theirrespective views are

set forth below

Ohairman Bentley and Vice OhaiTmilin Barrett

This show cause proceeding involves a dispute over the number of

votes tobe exercised by the MaritimeFruit Carriers Co Ltd MFC

and Refrigerated Express Lines A Asia Pty Ltd REL as

members of the Australia US Atlantic and Gulf Conference The

Conference operates in the trade to United States Atlantic and Gulf

ports from Australia pursuant toAgreementNo 9450

15 FM O 223
224 FEDERAL MARITIME COMMISSION

REL and MFC are parties to Agreement 9944 a

cooperativ

working arrangement under the terms of which MFC and REL a

permitted to coordinate sailings in the trade from Australia topor

on the East Coast of North America including St Lawrence Riv

and Seaway and Great Lakes Ports 1

The agreement also permi

REL and MFC to share revenue and certain expenses from these sa

ings and to employ a common agent in Australia Agreement 99

further provides that each party shall manage and operate its ow

service and vessels continue to issue its own bills of lading and whe

rates are not established by the Conference REL and MFC will ea

establish their own rates and publish their own tariffs Finally ea

party to the agreement shall remain an independent member of a

conference they belong to and shall vote independently of the othe

Agreement 9944 was first filed for approval under section 15 

April 1971 but an amended version cancelling the original was file

in June of that year Protests to both the original and the amend

versions were filed by Pacific Atlantic Container Express Servi

PACE Columbus Line and Farrell Lines Inc The protes

were confined to the question of conference voting status and 

August 23 1971 the agreement was approved with the proviso th

the issue of voting would be the subject of a subsequent proceedin

As a result of that approval this proceeding was instituted and w

limited to the submission of affidavits of fact and memoranda of la

and replies Oral argument was heard

The Conference is presently composed of six members Aside fro

REL and MFC they are Atlanttrafik Express Service Columb

Line Farrell Line and PACE Atlanttrafik REL and MFC opera

conventional and palletized vessels Columbus Line has inaugurate

full containerservice and FarrellLine presently operates convention

ships but expects to employ full container vessels in the near futur

An unanimous vote is requiredtoamend any ofthe provisions of t

conference agreement while a three quarters vote is sufficient for 

othermatters

DISOUSSION AND CONOLUSIONS

To MFC and REL their agreement is nothing more or less than 

Cooperative working arrangement Indeed they have forma

1

The agreement does not cover the outbound trade to Australia since REL does not o

aservice inthat trade

I PACE Is a

Iljolnt service establ1shed under Agreement 992 and Is composed 

Associated Container Transportation Australia ACT A land Ausrallsn National L

ACT Al Is Itself a joint service compoeed of Blue Star Line Ltd Port Line Ltd a

Ellerman Lines Ltd Thll 1 Joint servtce Is operated under Agreement 9767

15 FMC
MARITIME FRUIT CARRIE RS CO LTD 225

labeled it just that s

To PACE Columbus and Farrell Agreement

9944 is just as emphatically a

joint service This question of labels

assumes its unwarranted importance in the eyes of parties because of

certain provisions in our General Order 24 which offers guidance to

persons seeking approval for agreements undertheShipping Act 1916

Section 522 2 4 of General Order 24 46 CFR 522 2 4 defines

a

joint s rvice as

An agreement which establishes a new and separate line or service to be oper

ated by the partle s as a

joint venture The new and separate service fixes its own

rates publishes its own tariffs issues its own bllls of lading and acts generally

as a single carrier

Section 522 6 d 1 of General Order 24 a

provision which in reality

does nothing more than provide a convenient form for use in drafting

joint service agreements would limit joint services to acting as a

single member or party to conference agreements But it should be

kept in mind that the definitions in General Order 24 are for guid

ance and convenience They do not purport to set hard and fast rela

tionships among parties to agreements whatever they may be labeled

Both sides have spent a

great deal oftime and efforthere comparing

Agreement 9944 to the definition of a joint service and to a

variety of

other agreements which we have approved and which restrict the

parties to one vote in conferences While we think this instructive

particularly on the question of the weight to be accorded labels we

alsothink these analyses miss the point

The issue ofsingle ormultiple conference votes for parties to joint

service agreements or cooperative working arrangements should

not under normal circumstances be decided exclusively from the terms

of the particular joint service or cooperative arrangement in question

After all section 15 requires that we approve an agreement unless we

find that it would be

unjustly discriminatory or unfair as between carriers shippers ex

porters importers or ports or between exporters from the United States and

their foreign competitors or to operate to the detriment of the commerce of the

United States or to be contrary to the public interest orto be inviolation of this

Act and shall approve all other agreements modifications or cancellations

Clearly in the vast majority of cases the approvability of an agree

ment will depend upon the operational impact of the joint service or

cooperative arrangement on the conference operating in the trade

involved

a

As filed for approval Agreement 9944 was entitled a Hcooperatlve working arrange

ment

15 F MC
226 FEDERAL MARITIME COMMIS ION

The parties here are themselves aware that the question of labels is

not decisive Other grounds for a single vote restriction are offered

Initially the protestants saw in the multiple vote provision of Agree

ment 9944 an opportunity for the breakbulk carriers to dominate the

Oonference through bloc voting and thereby thwart such confer

ence actions as were necessary to afford shippers in the trade the full

benefits of completely containerized operationsall to the detriment

of course of the now or BOon to be containerized operators Simple

mathematics however forced theabandonment ofthisposition

The Oonference nowhas six members and requires a three quarters

majority tocarry an item of business If REL and MFC retain their

individual memberships and votes five votes will be necessary tocarry

amatter At least one more than any bloc has If REL and MFO are

restricted to a single membership and one vote the Conference would

have five members with four votes needed to constitute the required

majority Again the bloc lacks the votes

The fears of bloc domination have now been replaced by the neces

sities of simply equality The prime proponent of equality isPAOE

who as a result of informal discussions at all levels of the Commis

sions staff receded from its position that at least three votes were

warranted for the individual members of PACE Our order approv

ingthe PAOE agreement provided

ItIs expected that PACE Line will commence Its operations In May 1971 and

will about tbat time apply for membership In the Atlantic Gulf Australia

and New Zealand Conference Agreement No 6200 and In the Australian At

lantic and Gulf Conference Agreement 94110 Presently three lines which have

organized and established ACT Australia are members of these conferences

They are Blue Star Line Port Line and Ellerman Lines Should PAOE

Line join the constituent lines In the Oonferences tbe combination would have

at Its command four of nine votes In each Conference In the light of this the

Commission Is of the opinion that the constituent lines should resign from the

Conferences at such time as the PACE Line becomes amember Order of March

80 1971

Whatever the subject of the informal discussions the order of ap

proval makes clear the concern which prompted the expression o

opinion by the Oommission the impact on conference operations o

theretention ofmultiple votes by themembers ofPACE At any event

the constituent lines resigned when PAOE joined and presumably

harmony would have prevailed had not REL and MFC entered into

their cooperative working arrangement with its provision for indi

vidual votes However they did and PAOE now seeks equality Bu

Ithas been sUgJested that the voting restrictions upon pAOm are particularly abhorren

111 FMO
MARITIME FRUIT CARRIERS CO LTD

the equality sought by PACE belies the very arguments made against

the agreement here for itis an abstractequality based on nothing more

than the fact that PACE has one vote This brings us almost full

circle and is but another way of resorting to labels or pigeonholes

into which all agreements are to be forced without regard to their

differences An agreement is unfair as between carriers only in a

particular and given circumstance Here as we have said before the

circumstance istheimpact votingstatus on conferenceoperations

Conference voting mechanisms are at best delicate things presum

ably arrived at after due deliberation of alternatives By and large

the various procedures and they cover a wide range work well when

considered in the light of the large number and variety of agreements

existing in our foreign commerce These considerations when taken

with the continuing change in carrier relationships tradeconditions

and economic and competitive circumstances makes us on the one hand

cautious in the interference with existing voting procedures absent a

showing ofneed and on theother makes itextremely difficultto form

ulate hard and fast rules for the governance of future voting

procedures

Caution should not however be confused with unwillingness and a

distinction should be made between an alerady established procedure

which is allegedly disciminatory unfair orwhatever and a proposed

or new precedure which is attacked The former situation arose in

Paoifio Ooast EU1opean Oonfe1ence 3 F M B 11 1948 where the

Conference s unanimous voting rule wasunder attack by shippers who

had allegedly been discriminated against by the rule The Commission

there in refusing to disapprovetherule said

The Question here is not whether a unanimous ormajority rule might be better

or whether it could conceivably be abused but whether the record indicates that

the rule has been abused by respondents inviolation of the act

There are conferences which have the unanimous two thirds threefourths or

majority voting rules No one of these can be disapproved as an organizational

procedure but the lawfulness of anyone of them must be based upon evidence

as to their working in practice

Where a procedure is new and untried and there is no operational ex

perience against which to test it something less is of course required

to AustraUa National Line the national flag Hoe ot Australta As the first flag Une in

the trade ANL feels that it has been reduced to the status of a second class citizen

Whtle weare quite well aware of the evlls of second class citizenship In many areas of life

section 15 of the Shipping Act simply does not allow us to confer a particular conference

statu8 on the basis of citizenship however sympathetic wemay be with the pride of a

country In its merchant marine

15 FMC

227
228 MARITIME FRUIT CARRIERS 00 LTD

I

I

I

at the least though there should be a reasonable showing that the par

ticular procedure will operate unlawfully The question here involves

elements of both situations However the record before us contains

nothing in the way of past experience which would dictate a single

membership and one vote in the Conference for REL and MFC nor

does the record contain anything concerning the future which would

require the imposition ofsuch a restriction

Accordingly we will continue our approval of 9944 Indoing so we

are not unaware of the breadth of the problems raised by protestants

but we think that perhaps the solution is to be found on another track

As we have emphasized throughout this report the real question here

is that of the effect of Agreement 9944 upon conference operations

Thus whatever else it may be it is a question of conference member

ship under equal terms and conditions Absent the participation of

REL and MFC inthe Conference the question of voting just does no

arise Perhaps the better way to approach the question of voting by

parties to ancillary agreements would be under the membership pro

visions of conference agreements This approach at least emphasizes

the need to examine the voting question in tha context of the opera

tions of the particular conference involved

There remains only the question of whether the burden of going

forward has been sustained by REL and MFC Everyone seems to

agree that there is no burden of proofquestion butPACE at leastfeels

that REI and MFC have failed tosustain their burden of presenting

facts to the Commission which indicate why the maintenance of two

votes is not contrary to section 15 of the Act There are ap

parently two grounds for this contention We thinkthe argument bes

expressed inthe protagonists own words

In Agreement No 9905 Docket 7042 served 1128 70 tbe Commission stated

that it may require the proponent of a proposed agreement to come forward wit

Information supporting approval of the agreement Since the Commission make

reference to a bearing on the voting question In Its Order of Approval for Agree

ment 9944 PACE Line believes that the Commission has made no Initial deter

mination of the voting IS8ue PACE Line furthermore believes that Its own ex

perience with the Commission In being limited to a single vote In Agreement No

9925 establishes a prima facie case that the maintenance of dual votes by RE

and MFC would be contrary to section 15

What we have already said has disposed of the prima facie cas

made by No 9925 vis a vis 9944 As for our calling into question the

voting issue in our order of approval it would seem only necessar

to point out that it wasthe sole ground of protest by PACE Were the

question of burden decisive here PACE as the proponent of an orde

15 F MC
MARITIME FRUIT CARRIERS CO LTD

restricting REL and MFC toone vote would have the burden ofgoing

forward with facts to show why the maintenance of two votes wascon

trary to section 15 As for the remaining ground we are unable to de

termine how our lack of prejudgment of the issue here relates tothe

burden ofgoing forward However it is unnecessary to decide thiscase

on questions of burden

For the foregoing reasons Agreement No 9944 is not found to be

contrary to the provisions of section 15 Accordingly this proceeding

is hereby discontinued

CLARENCE MORSE OorrvmiBsioner concurring

Iconcur but in doing so Ibelieve it may be helpful to express my

reasoning

Istart from the basic premise expressed insection 15 Shipping Act

1916 as amended that

The Commission shall by order after notice 8 nd hearing disapprove cancel or

modify any agreement or any modification or cancellation thereof whether or

not previously approved by It that It finds to be 1 unjustly discriminatory or

unfair as between carriers shippers exporters Importers or ports orbetween

exporters from the United States and their foreign competitors or 2 to operate

to the d4trlment of th4 commerce of the United States or 3 to be contrary to

the public Interest or 4 to be In violation of this Act and shall approve all

otheragreements numbering supplied

From the foregoing it is clear that if any ofthe fourfindings specified

insection 15 are made by us wemust disapprovetheagreement absent

making any of the four specified findings we must approve the agree

ment Let us examine the matter within the foregoing guidelines

Ifind nothing in this record which enables me to make any of the

findings required by section 15 as condition precedent to disapproval

of the plural votes agreement True there has been hard negotiation

and bargaining within the Australia US Atlantic and Gulf Con

ference between the container carriers and the break bulk carriers

True there may be fears that plural votes by MSC and REL may de

feat full initiation and implementation of container line services But

fear alone is not substitftte for proof Rate Agreement EilJolU8We Pa

t1 onageSystem 1968 11 FMC 513 523 True PACE which acceded

to our staff s

request that it restrict itself to a single vote may feel

abused if REL and MFC have plural votes In that respect it may

be that PACE should not have been so easily dissuaded by staff and

should have insisted on a section 15 Commission hearing on its right

to plural votes This is particularly true where the Commission has

never issued aGeneral Order or an interpretative ruling specifying

that members of a joint service agreement are restricted to a single

Iii FMC

229
230 FEDElRAL MARITIME COMMISSION

vote True one s subjective point of view may lean strongly toward a

single vote concept But where from this record is there proof that

plural votes toREL and MFC affront any of the four criteria spelled

out above in section lIS W I find none

Some so calledjoint service agreements set up a separate corporation

to conduct the joint service and its members are but shareholders

Other so called joint services are in fact joint ventures Others are

but the loosest kind of cooperative working arrangements Wheth 

the joint service has a single vote or plural votes may turn in part on

the form in which it isconducted

An examination of those conference agreements which have a join

service or a cooperative working arrangement hereinafter for con

venience also called joint service for the principles under discussion

appear to apply toboth as one ofthe conference members immediately

establishes that whether a joint service hasbut a single vote or whethe

each of the members comprising the joint service has an individua

vote is not always dictated or covered in the voting provisions con

tained inthe conference agreement itself Others do impose specifically

the condition that a joint service and its members are entitled to but on

vote Hence in practice in those conference agreements where ther

is no provision concerning voting by a joint service the conferenc

turns to the terms of the joint service agreement itself to ascertai

whether there is but a single vote for the joint service or an individua

vote for each member of the joint service

Many joint services restrict themselves to a single vote for the entir

membership But this is not the uniforJll practice Within the las

several years this Commission has approved a number of joint servic

I See the followlag arre eat as Ollample wllere there I ao restrlctloa oa vote b

member comprlsllll a jolat service

Agreemeat No G7 Paclllc We tbouad Confereace

Alreement No llloTraas Paclllc Frel ht Coatereace of Japaa

Arreemeat No G20oPaclflc Coast IIluropeaa Confereace

Arreemeat No GSGoNorth Atlaatlc Westbouad F lght Assoclatloa

AgreemeatNo 94GoAustralla US Atlaatlc Gulf Confereace

Agreemellt No 9MSIater Amerlcan Frelht COlltereace

I See for ample

Agreement No 17 FarEast Collfereace

Agreement No 2744 Atlaatlc aad Gulf West Coast of South AmerIca Confereace

r Beeforezample

Agreemeat No 7G9S Ho llh Llaes

Agreemeat No 7SS1 Coacordla LlDe

Agreement No 78GSBlue Funnel Llae

AgreeJllent No 9S0SStates MarIneLlae

I See for eraiDple

Agreemeat No llSSSBlue Star EAC JoInt Service

Agreemeat No 9902Euro Paclflc JoInt Se vlce

15 FX C
MARl lIME FRUIT CARRIERS CO LTD

agreements or variations of joint service agreements which grant

votes to each individual member as distinguished from a

single vote

for the group when voting on matters coming before a conference 9

In the instant matter for the record discloses that on at least one

occasion the several members ofthe j

oint service Agreement No 9944

voted opposed to each other on matters where their interests were op

posed Is that necessarily bad or in violation of the 1916 Act In the

instant proceeding it was reported that Australian National Line is

unhappy because Agreement No 9925 denied it in a vote in the con

ferenceindependent ofthe PACE vote

Let us consider another aspect Suppose an American flag line enters

into a joint service with two foreign flag lines and the joint service

becomes amember of a

steamship conference which itself has no voting

rule restricting the voting rights ofmembers of a joint service Itmay

well be that on an occasional matter the interests of the American flag

line are opposed to the intersts of the foreign flag lines Then unless

the joint service has a unanimity voting rule the interests of

the American flag line would be subordinated to the views of its

foreign flag partners And if there were a unanimity rule the joint

service would lose its vote on the specific matterunder consideration by

the conference for inability of the joint service to reach a unanimous

position on the issue

Hence if we are to restrict all joint services to a single vote this

necessarily means that an individual carrier must balance the advan

tages of being a member of ajoint service as against the disadvantages

which may result if its views are subordinated to the views of its fel

low joint service members Because ofthis to restrict a joint service to

a

single vote tends to discourage the formation of a joint service even

where it might be beneficial not only to the carriers but also to the

commerce of the United States The phrase one man one vote

espoused by some but taken from a different context and milieu is to

my thinking inapposite

Conferences and joint services have existed for many years With

the exception of the present proceeding Iam unaware of any com

plaints against plural votes made to this agency Hence there exists

no ground swell in favor of the concept of one man one vote

which would be the case if plural votes werebeing used in an unfair or

abusive manner In all events we are not without arms to correct

any abuses that may exist under the present plural vote practice

To restrict ajoint service to a single vote requires either a precision

In addition to the agreements listed inFootnote8 see

Agreement No 9935Fjell Fred Olsen Lines Joint Serviceo

15 F M C

231
232 FEDERAL MARITIME COMMISE lION

in definition or an all inclusive catch 1l11 definition Would one apply

the one vote restriction to any cooperative working arrangement

Or would one restrict it only to those agreements where there is a

pooling of revenues and expenses Or would one restrict it only to

those agreements which are on all fours with section 522 2 4 o

General Order 24 46 CFR section 522 2 4 Or would some othe

standard be applied

Ifail to find anything in this record or in the records of the Com

mission which is persuasive against the decision of the majority

herein Ifthe single vote principle is tobe adopted by this Commission

it should be done in a

rulemaking proceeding wherein all facets of the

problem are aired

JAMES V DAY Oommi88ioner dissenting

This is an investigation to determine the legality of a portion o

Agreement 9944 providing on the one hand for a close working

arrangement between two carriers yet stating on the other that inany

conference where the arrangement is operative that instead of the

arrangement being represented by one joint vote each of the tw

carriermembers shall have avote 10

The particular issue as specified in our order is whether the indi

vidual voting provision would be unjustly discriminatory or unfair t

other carriers in any conference where the arrangement was involved

or would operate to the detriment of our commerce and be unapprov

able under section 15 oftheShippingAct ofl916

This is the first case where this issue has been precisely contested

Itprovides aneeded landmark for our commerce overquite uncharte

seas While we should not adhere tosome immutable guide for all vot

ing agreements the instant case can indeed shed some light on wha

considerations are most pertinent under general circumstances such a

those here present

Inote first the pertinent provisions of section 15 which state tha

carriers shall file every agreement providing for a pereferential o

cooperative working arrangement and that the Commission mus

disapproveany agreement thatit findstobe unjustly discriminatory o

unfair or to operate to the detriment of our commerce

l1

The Commission has formulated a principle toimplement section 1

which requires that any agreement which interferes with the policie

1DThe two carrier parties are Maritime Fruit Carriers Co Ltd MFC and Refrigerate

Espre Lines AIAsia Pty Ltd REL

u

Section 1 also requires disapproval of any agreement which fatls to provide equ

terms and condition for conference membership

111 FHO
MARITIME FRUIT CARRIERS CO LTD 233

of the anti trust laws will be approved only if there are facts to

demonstrate that the agreement is required by a serious transporta

tion need necessary to secure important public benefits or is in further

ance ofvalid regulatory purpose oftheShipping Act n

An agreement 1 setting up a carrier combination which in effect

is asingle commercial entity and 2 providingthat such entity would

exercise not one but two votes upon joining a conference where other

entities have but a single vote doubles the potential power of the com

bine as opposed to the others The very nature of such an agreement

would appear to interfere with the policies of the anti trust laws

Thus application of the above noted principle to the case at bar

may appropriately illuminate what result is best reached in such mat

ters as these

Our initial inquiry then is to determine if the subject carrier com

bination per Agreement 9944 is truly a

single commercial entity

judging from the terms of the Agreement and the surrounding

circumstances

The terms of Agreement 9944 provide that the carriers 1 will

coordinate their service schedules to compete more effectively with

other services 2 will help each other in dividing available capacity

for cargo 3 will share profits and losses 4 will have a

single gen

eral agent in Australia to deal with shippers and 5 will not compete

between themselves

The agreement also contains terms providing that each party 1

will manage and operate his vessels at own risk and expense and be

responsible for the manning and navigation thereof 2 issue his

own bills of lading 3 and maintain a separate agent in the United

States

The agreement further provides that each party will 1 establish its

own rates and tariffs where not covered by conference agreement and

2 remain an independent member of any conference and be repr

sented by its own representative at conference meetings the above

noted voting provision

In addition Inote a press release issued in Australia by the parties

announcing their new service relative to their above noted arrange

ment Itannounces the formation of Australasian Unit Lines Pty

Ltd a

company jointly owned by the two carrier parties to Agree

ment 9944 for the pooling of resources which will provide competi

tiveexport shippingto North America when other conference members

SeeFMO v 8venBka Amerlka Llnlen 390 U S 238 243 1967

15 FMC
234 FEDERAL MARITIME COMMISSION

are about to introduce containerships The release further says that the

system will be extended toother trade routes 8

The presently existing conference in the Australian United State

trade to which the parties belong is that formed pursuant to Agree

ment 9450 The carrier parties number six Atlanttrafik Express Serv

ice MFC and REL all conventional or palletized operations and

Columbus Line Farrell Line and Pacific Atlantic Container Express

Service PACE all involved with container operations A unan

imous vote is necessary to amend any of the provisions of the con

ference agreement while a three quarters vote is required for all othe

matters

Ofparticular pertinence to here note are the further facts that the

present conference Agreement 9450 in which the combined two ca

rier service Agreement 9944 now would operate establishes rates and

practices in the trade from Australia to the United States meat com

prises about two thirds of this trade and meat with infrequent ex

ception is shipped on a prepaid basis with the Australian shippe

selecting the carrier

The terms of the Agreement 9944 which go to show the creation o

a singlecommercial entity are thoseprovidingfor coordination of serv

ice to compete more effectively with other services division of cargo

capacity sharing of profits losses having a

single Australian solicita

tion agent and the covenant not to compete between themselves suc

covenant militating against divergent positions by the parties in thei

dealings and voting as members of a conference e g Agreemen

9450 10

Taken as awholeAgreement 9944 presents the picture of a carrie

combination formed as one cooperative unitto compete with other car

riers and to capture as much ofthe Australian export commerce aspos

sible The tenorof the press release announcing the formation ofAus

U

Bee PACE LIne Exblblt B Altbougb tbe releawas I ued In connection wlt

Agreement 9944 a origInally filed and we are bere pa lng upon Agreement 9944 a

amen ded the press release has Dot been shown on this record to have been publ1cly negate

wltb r pect to It general de crlptlon of tbe propo ed Au trallan export operation o

Intere t to blpper

l PACE Is actually a joint service comprised of several carriers but has only OD

conference vote

1

The provision tor separate 8011cttatton agents in the United States is not pertinen

wben we note above tbe bulk of tbe trade orIgInates wltb sblppe In Australia Th

provIsIon for separate bills of ladIng I of little erect on sblpper customers wbo InItiall

arrange to gIve tbelr buslnes tbrougb contact wltb tbe sIngle agent Australasian Un

Lines The clauses providing torthe separate management operation manning and nay

ration of vessels are minor In comparison with the provision of ultimate economic impor

tancethat providing tor the sharing at profits and losses lhe covenant to estabUs

separate tariffs where such are not covered by conterence agreement is hardly pertinen

when weare here concerned with conterence operations

15 F MC
MARITIME FRUIT CARRIERS 00 LTD 235

tralasian to pool resources to provide competitive shipping further

reveals the intent of the parties and thetrue nature ofthe arrangement

as a

single commercial force

Under Agreement 9944 this single force further has the power

acting in unison to cast a double vote vis a vis other entities in a con

ference The current conference to which thisprovision applies is made

up ofcarrier entities each of whichhas only a single vote

Notonly are we concerned with the present conference Agreement

9450 of which the subject carriers are members but it should also be

remembered that the combine s double vote is asserted to be operative

in any other future conference which it may join Any approval in

this caseshould not imply a blank check for thefuture

However here Ido not see where the double vote provision is pres

ently required by such serious transportation needs or necessary to

secure such important public benefits as would predominate and dictate

approval The existing conference requires a three fourths vote for

action under its current agreement Ifthe combine has two votes it can

block any action by the other four separate members The power to

block action hardly weighs in favor of progress benefit or need In

factthe power to block as much as itentails any power to preserve

conveys a power to destroy There is here no proven need or benefit

which overrides possible detriment

Nor do Isee the double vote for the combine as being in furtherance

of a valid regulatory purpose On the contrary the statement of policy

contained in FMC General Order 24 46 C F R 522 6 d 1 sug

gests that a joint service should have butone vote

Ithus conclude that the provision for double votes for the service

under Agreement 9944 is unjustly discriminatory and unfair as be

tweenthe service and other carriers 11 and under present circumstances

is not approvable under section 15ofthe1916 Act l8

GEORGE H HEARN Oommi88ioner dissenting

Idissent from the Commission s decision in this case because Ibe

lieve the parties toAgreement 9944 should be limited to one vote in the

conference in which they will participate pursuant to thatAgreement

IIIn tact the negative potential of the combines double vote more probably could have

an adverse affect on our commerce Much as I

recognize the enduring value of the

combines more conventional type service the newest ship type development which w1ll

be expanding In the trade Is that of containerization note the press release and Farrell s

operations Substantial deterrent to this development Is to be regretted

17 Ie Conference AAreement 9450 which is comprised of the combine and four one vote

carrier entitles one of which is PACEanother multiple carrier service

18 I

further concur with thc position of Commissioner Hearn expressed in his separate

opinion that Agreement 9944 provides for conference membership pursuant to unequal

terms and conditions and must be disapproved

15 FM C
236 FEDERAL MAiUTIME OOMMl8SroN

In the relevant conference trad from Australia tothe United States

pursuant toAgreement 94110 the two camers MFC and REL wil

disappear as separate service entities and will provide a single service

As the parties and the Commission majority acknowledge this cas

cannot be decided by adherence to labels or pre cast forms The true

nature of the Agreement must instead he determined from its particu

larprovisions the surrounding circumstances and the expressed inten

of the parties

Hearing Counsel aptJy described Agreement 9944 as a hybrid 1

and as a resultof changes in ocean transportation we have seen othe

hybrid or unconventional agreements and can expect more Conse

quently we must judge eaili such agreement on its merits and not he

bound by rigidforms

Inthis case as inother instances there are some factors oftheAgree

ment which might permitthe exercise of more than one vote When

however as here the basic provisions of the Agreement and the ac

companying circumstances establish the essential aspects of single

carrierservice thenthe one vote limitationis required

The primary pieces of evidence leading to tlhis conclusion are the

non compete clause the sharing of profits and lOBBes the single agenc

in Australia and the press release

Section II ofAgreement 9944 provides that MFC and REL will no

compete with each other in the trade from Australia to the United

States Thus the two camers will luive a complete mutuality o

economic interelit in the trade and cannot realistically he expected to

adopt divergent views within the conference with respect to iBBue

concerning competition in the relevant trade In fact according t

respondents counsel the non compete clause is so strict as to preven

differingvotes on conference matters so

Furthermore under section 2 b of Agreement 9944 the partie

will not he operating the ships in the trade solely for their separate

l1OOounts 11MFC and RELare toshare the profits and losses of the com

bined service It will therefore be in the interest of each party to pro

motethebusineBB notonly ofitself butalso ofthe other n

Reply Brief of Hearing Conneel page 6

Transcript of Oral ArlUmeDt pp 747G SectloD G AsreemeDt 88H That MFe aD

RIIlL have already cast dllferlDll votes Ie notrelevant beeauBe Agreement 8844 althoug

approved hu not beeD Implemented R poDle of Maritime Fruit Carriers Co Ltd an

Refrigerated IIlxpresB LInAIABle Pty page 10

11 SectionIt Asreement 88H

Section 2 a Agreement 8844

111 FMC
Section 4of Agreement 9944 provides that the MCF REL service

is tobe represented in Australia by a

single general agent Theparties will not however employ an existing agent in common but instead

REL and MFC will cause to be formeda

corporation toact as general

agent inAustralia Thus therewill be a common solicitation effort

by a

newly created entity in the tradefor carriers who have previously

carried over forty percent of meat cargoes the largest single com

modity in northbound Australia United States trade hat section

4of AgreeI ent 9944 provides for separate agents in the United States

is not relevant The type of cargo generally carried by MFCIREL is

customarily shipped prepaid with the shipper selecting the carrier

and the agreement does not apply to the southbound trade where the

parties are notacting in concert so that solicitation in the US has no

bearingon the agreement

Finally there is the press release issued by the parties announcing

the new unified service Although it is conceded that the statement was

issued in connection with a filed but withdrawn predecessor agree

ment the press release has apparently not itself been rescinded

publicly especially in Australia as to its essential parts 27 In all its

aspects the press release creates the image of a single carrier service

to beoperated pursuant toAgreement9944

The respondents attempts to negate the importance of the press

release because it relates to a withdrawn agreement is not convincing

The earlier agreement wasnot retracted but merely rephrased Acom

parison ofthe two forms of the agreement shows them to be the same

inall significant respects

Except for a few changes in the agreement notrelevant to the issues

here the respondents rely primarily on their having added three

provisions

One is for separate agents in the United States which Idiscussed

earlier Another Section 3 is for separate bills of lading This pro

Section 4 Agreement 9944

Petitioner s PACE Line Reply to Respondents Opening Memorandum of Facts and

Law Exhibit uBIt Transcript of OralArgument page 1ST

Reply Memorandum of Petitioner Farrell Lines Ine pp 7 8

Section 9 Agreement 9944

orSeeTranBcrlpt of Oral Argument pp 71 72

AgreemeDlt 9944 was entered Into and IIled 10 Its original form on April 20 1971

The IIllog waB noticed In theFederal B 1Io r April 29 1971 Vol 36 No 83 p

8092

15 FMC
38 

vision seeks to accomplish in one brief phrase what the agreemen

as awhole cannot Allthe pJOvisio ls must be read together todeter

mine the total effect

The third provision also in section 8 states that each party wi

manage and operate its own vesselsatits own risk and expense This

however seemsat the least inconsistent with section 2 b which pro

vides that the parties shall share the profits and losses of the C

ordinllited Services It is unclear what separate economic factor

are likely tobe or could be segregated from the elements contributin

tothe profits and losses of the Coordinated Services

Consequently the revised agreement does not change the origina

filing The agreement taken as awhole and the parties intent as ex

pressed in the agrsement and press release warrant the conclusio

that a

single operating entityhasbeencreated inthe trade

No inquiry isnecessary contrary tothe view of the majority repo

as to applicability of the four general grounds for disapproval of 

conference agreement set forth in section 15 i e unjustly discrimina

tory detrimental to commerce contrary to the public interest in vi

lation of the 1916 ActatAs the majority reportaptly states the questio

here involves aspecific ground for disapproval in addition tothe fo

general grounds ie whether the agreement permits conference mem

bership under equal terms and conditions and as the Commission ha

said

It however our first ana17sla of the allreem t shows that any or aU of t

three requirements of poUclnll admlBSlon proc ures and shippers complain

are not met disapproval Is warranted on that basis alone and nofurther Inqui

as to the general etfect on the qreement IsneceBBary

For the foregoing reasons I conC1Ude tto permit MFC and RE

to have separate votes as pamies to ent 9450 creates unequ

terms and conditions for membership in violation of section 15 b

dilutingthe vote of other parties to A ent 9450 j and the provisio

of Agreement 9944 which establish s separate voting should 

disapproved

8IIlAL S FlwiOIll C HtlBNJ lY

Seu

I

Bowever I ee reneraU r with the vlew f CommleBloner Da r

herein coneern

the appllcabUIt y of PJlO V 81 G 4merlllG 880 U S 288 186T

Oil O ltI GI N r PIJIlI IO PrelI 0 10 IIM C 848 858 alf d 8

11 24881 DC ctr 186T
FEDERAL MARITIME COMMISSION

WASHINGTON D C

SPEOIAL DOCKET No 442

BEKAERT STEEL WIRE CoRP

V

HAPAG LLOYD AG

May 25 1972

NOTICE OF ADOPTION OF INITIAL DECISION AND

ORDER PERMITTING WAIVER OF CHARGES

No exceptions having been taken to the initial decision of the ex

aminer in this proceeding and the Commission having determined not

to review same notice is hereby given that the initial decision be

came the decision of the Commission onMay25 1972

Itis ordered That applicant is authorized to waive collection of

15 628 67 ofthe charges previously assessed Bekaert Steel Wire Corp

Itis further ordered That applicant shall publish promptly in its

appropriate tariff the followingnotice

Notice is hereby given as required by the decision of the Federal Maritime

Commission In Special Docket 442 that effective January 5 1972 the rate on

Metal Spools Returned on Racks In Drums or Strapped on PaUets Service 3

for purposes of refund or waiver of freight charges on any shipments which may

have been shipped during the period from January 5 1972 through February 9

1972 is 72 50 W subject to aU applicable rules regulations terms and condi

tions of said rate and this tarlll

Itis further 07dered That waiver of the charge shall be effectuated

within 30 days of service of this notice and applicant shall within 5

days thereafter notify the Commission of the date and manner of

effectuating the waiver

By the Commission

SEAL s FRANCIS C HUlI NEY

SeC1 eta1 J

239

15 FMC
FEDERAL MARITIME COMMISSION

SPEOIAL DOCKET No 442

BEKAERT STEEL WIRE CORP

v

IAPAG LLOYD AG

Respondent Is permitted to waive to complainant the sum of 111 628 67 as par

the freight charges assessed for the transportationof empty metal spools

Roy E MeBBinger forrespondent

INITIAL DECISION OF STANLEY M LEVY PRESIDING

EXAMINER 1

This is an application by Hapag Lloyd AG respondent for p

mission to waive collection of 15 628 67 being aportion of freig

charges for the benefit of Baekert Steel Wire Corp complainant 

cOI llection with a shipment returning empty metal spools from B

timore to Antwerp Belgium aboard respondent s vessel MOBel 

preBB voya ge 86 E B per bill of lading No 8 dated January 5 19

The rate applicable at the time of shipment was 5125 per 40 cu

feet per NACFC Tariff 29 FMC 4 effective January 1 1972 T

shipment aggregated 14 559 cubic feet for a total charge of 22 681

Respondent collected 7 002 96 and seeks permission to waive 

balance

NACFC Tariff No 28 FMC S had been effective through Dece

ber 81 1971 and for the goods of the type involved in this applicat

the rate was 72 50 per 2240 pounds At that rate the shipment wo

have been assessed 7 00296

The conference in order to foster standardization according 

S LTC concepts compiled an entirely new tariff effective the s

I Tbls decision becams tbe decision ot tbe Commission May 2G 1012

Bblpplnlf Act 1016 section lB b 8 as amended

111 Fld

240
of this year In so doing inadvertently and without intending to do

so the new tariff changed the rate from one computed on a weight

basis to a weight or measurement basis As a

consequence computa

tionon a measurement basis would increase the cost for ashipment of

the type involved herein by more than 300 percent The shipper was

unaware of the change and only when it was billed did it bring it to

the attention of the carrier It was then recognized that the tariff

should have continued to be based on weight rather than on a weight

or measurement basis A new tariff wasfiled toeliminate measurement

as a basis and restore weight as the sole basis for assessing charges

and waiver wasapplied for

Section 18 b 3 of the Shipping Act 1916 as amended by Public

Law 90298 referred to above provides that the Commission may in

its discretion and for good cause shown permit a common carrierby

water in foreign commerce or aconference of such carriers to waive

a portion of freight charges where it appears that there is an error

in a tariff of a clerical or administrative nature and that such waiver

will not result in discrimination among shippers The application dis

closes a set of facts and circumstances which fall within the purview

and intent of the statute Having complied with the requirements of

the statute and good cause appearing applicant is permitted to waive

to complainant the sum of 15 628 67 The notice of waiver required

by the statute shall be published in the conference tariff

S STANLEY M LEVY

Presiding Ewaminer

WASHINGTON D C

May 3 197e

NACFC Tarllr 29 FMC 4 Item 692 2208 001 2nd revised page 211 correction

No 571

15 FMC
FEDERAL MARITIME COMMISSION

DooXET No 71 91

INDEPENDENT OOEAN FmIGIlT FORWA1lIlRAPPLIOATION

FABIO A Ruxz DIBIA FAD EXPREBS COMPANY

ADOPTION OF INITUL DECISION

May 16 1971

By Tm COMMISSION Helen Delich Bentley Ohairmatn Ashton 

Barrett Vice Ohai1 mJJames V Day George H Hearn 

Clarence Morse OommiBaione lB

This proceeding was instituted by the Commission issued Orde

Investigation and Hearing served on November 29 1911 todeterm

whether one Fabio A Ruiz doing business as Far Express Comp

hereinafter Applicant is fit willing and able tocarry on the b

ness of forwarding as required by section 44 of the Shipping A

1916 and the Commission s rules and regulations and whether 

application as an independent ocean freight forwarder should 

granted

In his Initial Decision served April 14 1972 the Examiner fo

that Applicant was fit willing and able properly to carry on 

business of freight forwarding

No exceptions were filed Upon review of the record we conc

that the Examiner s

findings and conclusions were proper and w

founded Accordingly we hereby adopt the Initia Decision a c

of which is attached to and made a part hereof adding only 

admonition

An arbitrary denialof a license constitutes a denial of due proc

of law On the other hand the government can requirehighstanda

of qualifications such as good moral character or proficiency in 

freightforwarder industry before it admits an applicant So

16

Boatrrl of BOIl E0rurrWner8 3113 US 232 191l7 This matter of fitn

or good moral character is a gray area where fair minded men m

242

111 FMO
FABIO A RUIZ D BIA FAR EXPRESS COMPANY 243

draw differing judgments from the same set of facts As stated by

Mr Justice Frankfurter in his concurring option in 8chwa le

No doubt satisfaction of the requirement of moral character involves

an exercise of delicate judgment on the part of those who reach a conclusion

having heard and seen the applicant for admission a judgment of which It may

he said as It was of many honest and sensible judgments in a diflerent context

that it expresses an intuition of experience which outruns analysis and sums

up many unnamed and tangled Impressions impressions which may lie beneath

consciousness without losing their worth

Itis within this framework of delicate judgment that we must test

Applicant s qualifications

In this case concededly Applicant was an experienced and knowl

edgeable freightforwarder The soleissue here is whether Applicant s

voluntary conduct of acting as a

freight forwarder on 23 occasions

without alicense disqualifies him

The proceeding before the Presiding Examiner wason astipulated

record in lieu of an oral hearing The Presiding Examiner did not

have the opportunity to observe Applicant and place an evaluation

on his moral character and fitness based on observation ofthe individ

ual Hence we are lacking the aid of such an evaluation

Both Hearing Counsel and the Presiding Examiner rely in part on

Independent Oaea nFreight F01 Warder License ApplicationGuy

G S07 1entino Docket No 7148 15 FMC 127 March 3 1972 That was

acase where we found extenuating circumstances including assessment

of penalties against the holder of the freight forwarder license by

whom Sorrentino was then employed plus the extended processing

time period which occurred subsequent to the filingby Sorrentino of

his application for a freight forwarder license The combination of

these and other factors justified the granting of a freight forwarder

license in that case S07 1entino may not be used as precedent for the

granting of a freightforwarder license in every case where the action

of applicant in acting as a freight forwarder without a license is

combined with normal delay in processing an application for other

wise a person could frustrate the intent of the Freight Forwarder s

Act by operating without a license until it suited his convenience to

file an application for a license without encountering the hazard of

denial of the license based on absence of fitness

If the licensing statute is to achieve its desired ends it necessarily

follows that any applicant who conducts afreightforwarding activity

without a license must do so athis peril

SEAL Signed FRANCIS C HURNEY

SeC1 eta1 J

15 Fld C
FEDERAL MARITIME COMMISSION

No 71 91

INDEPENDENT OOEAN FREIGHT FORWAllDER APPLIOATION

FABIO A RUIZ D B A FAR EXPRESS COMPANY

AppUcant found to be lit w1lltng and able properly to carryon the busine

freight forwarding

Guille rfMA RUia for applicant

Donald J B7UfIMland O DOU Jl8 Miller Hearing Counse

INITIAL DECISION OF STANLEY M LEVY

PRESIDING Ex AMINER 1

On September 8 1971 Fabio A Ruizd b aFar Express Com

filed his application for alicense as an independent freight forwa

pursuant to General Order No 4and section 44 of the Shipping 

1916 the Act

By a letter dated October 29 1971 Mr Ruiz was notified o

Federal Maritime Commission s intent to deny his applicatio

an independent ocean freight forwarder license The reason fo

intended denial was that the applicant engaged in unlicensed 

freight forwarding activities without a license in apparent viol

of the Act Mr Ruiz requested a hearing to show the intended d

wasunwarranted

By order served November 29 1971 the Commission grante

Ruiz s

request

Hearing Counsel and counsel for respondent agreed to procee

a

stipulated record in lieu of an oral hearing Good cause appe

the Presiding Examiner accepted the stipulation as the factual r

in this proceeding Accordingly the stipulation with attachment

entered on the record and the record was closed There are no 

atissue

1

This decllOion becsme the decision ot theCommission May 2 1972

111 F 

244
FABIO A RUIZ D BIA FAR EXPRESS COMPANY 245

FINDINGS OF FACT

1 Mr Ruiz was familiar with the licensingrequirements of section

44 of the Act and the provisions of General Order 4 at the time he

forwarded the shipments in question

2 Mr Ruiz is not a newcomer to the freight industry He has

worked for various freight forwarders and exporters for the past

twenty years Healso teaches Export ImportPractices atLindsay

Vocational School Miami Fla

3 During the course of the licensing investigation Mr Ruiz advised

the investigator that he had carried on the business of forwarding

from approximately August 1 1971 through September 17 1971

During this period he handled 23 shipments for various long time

customers from which he realized a total gross profiit of 416 90

4 In a letter dated September 20 1971 Mr Ruiz explained his

activities as follows

Because I was not looking for employment with any local finn In this field

and decided to be on my own Itook the liberty to handle some of these ship

ments I

was forced to do It under extenuating circumstances In order to be able

to support my family and I did not walt for the Issuance of my License that

Iapplied for

I could handle these shipments through some of the local freight forwarders

many of them being good personal friends of mine and perfonn a legal service

protected by their license or Icould notto show myself as an agent and prepare

aU pertinent documents for my customers and make them sign the documents

as If prepared by themselves On both cases it Is probably alegal circumvention

of the rules And In both cases It was a lie and I was against these steps con

trary to my own principles I

thought after all the licensing procedure will

be so regularly fast that I will have my License while preparing some of these

shipments and decided to handle them openly Showing my name sic

5 All shipper and employer references contacted by the Commis

sion investigator indicated that Mr Ruiz is considered honest and

highly reliable by his business associates

DISCUSSION AND CONCLUSIONS

Itis clear that Mr Ruiz has violated theAct in that he engaged in

the business of an independent ocean freight forwarder without hav

ing been licensed by the Commission And it is clear that Mr Ruiz

recognized that his activities were unlawful at the time

Prior to going into business on his own he requested the necessary forms to file an

application for an independent ocean freight forwarding llceDse Pursuant to his request

of June 2 1971 Mr Rulz was sent copies of Public Law 87 254 Section 44 of the Act

and the Commission s General Order 4 together with tbe necessary application forms

II FMC
246 FEDERAL MARITIME COMMISSION

The issue however is whether his unlicensed forwarding activities

automaticaJly render him unfitnow tobelicensed Animportant factor

to consider in determining a person s fitness to carry on the business

of forwarding is whether he is willing to conform tothe Act and the

Commilllion srequirements rules and regulation Application for

Freight FOMOatrding Liceme 8 FM C 130132 1964

Here the record demonstrates that the violations of Mr Ruiz were

knowing and willful However the violations are the only evidence

which has been uncovered which would tend to indicatethat he is not

prepared to abide by the rules and regulations of this Commilllion

The1 8is considerable evidence that he possesses tJhe requisite fitness to

be licensed by this Commission InIMepeMent Ooean Freight For

warder LiceruJe Application LTO Air Oargo Inc 13 FM C 267

1970 the Commission found that the applicant was fit for licensing

despite the fact that the applicant had knowingly acted as an un

licensed freight forwarder on two occasions Thus a knowing and

willful violation of the Act may not automatically result in a denial

of the application I

The Commission has recently illlued areport in IMepeMent Ooean

Freight Forwarder Liceme Applicati Gwy G Sorrentino which

bears on the issue herein The applicant in Sorrentino had been

president of a firm which on April 22 1970 had been found guilty in

the US District Court Southern District of New York on 16 counts

of violations of the Act involvingthe misclassiflcation of shipments

but Mr Sorrentino himsslf was notnamed as acefendant inthe crim

inal action although the Examiner found that tJhe applicant was a

least aware of the course of dealing involved However because Mr

Sorrentino did notpersonally benefit from the deceptions and because

he was otherwise qualified under the Act the Examiner granted the

application and the Commission adopted the initial decision I

In doing so the Commilllion added this admonition

As we pointed out in Docket No 8604 lttdependen Ocean lIreIghl

11 LfoenIe AppUoa OlJ Tam T BOfIle 00 10 FMO 121 1006

we are charred with the rllBJlOlI8l blUt v

of malntalnlns the hIIh decree of re

epoll8l blUt v required in the profel810D of ocean frekht forwardlDr OOD81 88

The violation conllldel edIn LlO Involved oWy two Iblpments whloh were bul4le

Ia favor to a IMpper The forwaaler derived no IlIllOme from tbe Iblpments Benee I

Ie uDolear from th deoleloD wb th r only relatlv ly minor vlolatlonl oould be outlnltsbed

by otb rpOlltlve vld Dee of IItn

Docket No 7148 lG NO ll1 Karcb 8 1971

Tb dIeeuIllon of tb lot the oa cited tbe ltaJldardl and reQuirements fo

Ueenlln aU al setforth In detalllD that InltlelDecIo8IoD an Inoorporated In tide Initia

DecleloD alltNt fortb ID fullb reln

1lI FMC
Clearly the unlawful forwarding of Mr Ruiz did not involve ele

ments of fraud or moral turpitude The customers ofMr Ruiz recog

nized tJhat he did not have a license and used him despite that fact

Mr Ruiz did not bill or collect brokerage from the carriers and there

fore he did not file any false certifications

The positive evidence of fitness introduced in the SQ1 1entino case

is similar to that in evidence here Following the doctrine enunciated

in SQ1 1entino the Examiner finds that the violations in question do

not provide sufficient grounds for denial of the application in view of

the countervailing positive evidence of fitness

This is not tosay that the Examiner in any way condones violations

of the Act but he is convinced that no proper regulatory purpose

would be served by denying a license now tothe applicant The delay

in licensing during the pendency of the investigation herein is suffi

cient punishment for Mr Ruiz s

transgressions To permanently deny

a license to one who otherwise is fit willing and able to carry onthe

business of forwardingand toconformto theprovisions of the Act

would be shortsighted

The application is granted

S STANLEY M LEVY

PreBiding EaJaminer

has required us to review license applications and Ilmitaccess to the profession

to those who are fit willing and able to carry on the business of oceanfreight

forwarding We have therefore established a high standard of moral conduet to

which an applicant as well as a licensee must conform Anything less than

this Is considered conduct unsuited to the profession and will result in our

swift action to remedy the misconduct whether by denial of a license or

suspension

WASHINGTON D C

April 14 1971

Hearing Coun el lutheIr brief take II slmUllr posItion

1f FMC
FEDERAL MARITIME COMMISSION

DOCKET No 70 9

BOLTON MITCHELL INC INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE No 516

Decided JM9 19713

Licensed freight forwarder with shipper connections indicating interrelations

and control found not to be independent within the meaning of sections 1 

4of the Shipping Act 1916

Licensed freight forwarder receiving compensation on its own shipments the

obtaining transportation by waterat less than the applicable rates foun

violate section 16First of the Shipping Act 1916

Licensed freight forwarder falllng to show llcense number on invoice and 

ping documents found to violate section 1510 5 e General Order 4

Licensed freight forwarder imparting false information to its principalSfoun

violats section 1510 28 d Genel1al Order 4

Licensed freight forwarder withholding information as to actual price of 

chandise found to violate section 510 23 eh General Order 4

Licensed freight forwarder falllng to promptly account to its principals foun

violate section 510 28 f General Order 4

Licensed freight forwarder flllng false documents found to violate section 1

h General Order 4

Licensed freight forwarder falllng to use invoices which stated separately 

actual amount of oceanfreight price of merchandise and insurance fou

violate section 510 28 j General Order 4

Licensed freight forwarder wlllfully making false statement in connection 

an appllcation for llcense orits continuance illeffect found to violate se

510 9 c General Order 4

License of freight forwarder which engaged in lllegal activity upon advi

counsel and which formerly provided good and valuable service to the 

ping public allowed to be retainedsubject to certain requirements

Gerald H Ullman for Bolton Mitchell Inc respondent

Ronald D Lee and Donald J Brwrvner Hearing Counsel

248

15 F
BOLTON MITCHELL INC 249

REPORT

By THE COMMISSION Helen Delich Bentley Ohairman Ashton C

Barrett Vice Ohairman James V Day George H Hearn and

Clarence Morse Oommissioners

The Commission ordered this investigation into the activities of

Bolton Mitchell Inc a freight forwarder holding FMC license No

516 to determine 1 whether respondent was in fact free from ship

per connections 2 whether respondent had falsified his application

for license as an independent ocean freight forwarder subsequently

gave false oral answers in regardto its shipper connections and other

wise violated pertinent and specific provisions of General Order 4

3 whether respondent should continue to be licensed as an inde

pendent ocean freight forwarder and 4 whether respondent vio

lated section 16 First Shipping Act 1916 by willfully obtaining

transportation for property at less than the rates otherwise

applicable

Hearings 1

were held before Examiner Richard M Hartsock who

issued an Initial Decision

Exceptions to the Examiner s Initial Decision were filed by re

spondent who later moved to reopen the proceeding for receipt into

evidence ofcertain affidavits to support the testimony ofits single wit

ness and seeking a Supplemental Decision Hearing Counsel replied

to the exceptions and urged denial of the subsequent motion of

respondent

The Commission initially denied respondent s motion but later on

its own reconsideration reopened the proceeding for the limited pur

pose of receiving respondent s exhibits while denying respondent s

motion for aSupplemental Decision

1During th COUl S of the hearing in this pr Cee 11ng Tespondent had moved pursuant

to Rule 10 aa of the Commission s Rules of Practice and Procedure to have the record

held confidential alleging it could not receive a full and feir harlng on apublic record

because its response would involve Bevel IaI foreign companies and indivduals who would

be adversely aftected by respondent s disclosures In support of the motton BMI pointed

out that In order for T Spencer the active head of respondent to make a full and

complete defense it would be necessary for him to testify as to various business practices

of BMls customers who were overseas consignees BMI advised that out of loyalty to

his customers Spencer was reluctant to disclose their business practices if this infor

mation were to become publ1c and readily available

The Examiner granted respondent s motion and declared the record confidential In

view of the above ruling by the IDxam1ner respondent through ita witness Spencer

testified at some length as to the various arrangements BMI had with those overseas

principals whose shipments were involved in this proceeding After the close of the

hearings the Examiner declassified the record on the grounds that It should not have

been treated a8 eonfidentlaJ In the first place since all the matters which might adveraely

affect toreign companies and individuals had already been offered in evidence by Hearing

Counsel

15 F MO
250 FEDERAL MARITIME COMMISSION

Hearing Counsel repliedtorespondent s supplemental evidence and

respondent requested penniesion to file an answer to Hearing Coun

sels reply which was denied

c

FAOTS

Bolton Mitchell Inc applied for a license as an independen

ocean freight forwarder on January 11l 1962 At that time it stated

that it wasnot controlled associated or connected with any shipper

consignee seller or purchaser of shipments to fore1gn countries On

the basis of representations in the application and a

pre licensing in

terview with the active head of the businees Secretary Thomas A

Spencer BMI was granted independent ocean freight forwarder li

cense No 516

Subsequently in 1967 pursuant to acomplaint of aNew York City

exporter alleging that respondent was a competitor in a certain ex

port transaction the Commiesion conducted an investigation of re

spondent in which Mr Spencer was interviewed and an examination

of BMPs corporate ledgers ie cash disbursement ledger sales ledger

cash receipts ledger and check stubs was conducted Subsequently a

second interview was held with Mr Spencer at which time he wa

given an opportunity to comment upon the results of this investiga

tion Mr Spencer averred that BMI is engaged in a unique freigh

forwarding businees approximately 90 percent of which involves com

pany accounts in South America BMI originally engaged in forward

ing auto parts but has expandedtogeneral commoditieswith approx

imately 50 active accounts Mr Spencer stated that in its operation

all negotiations and transactions are conducted between the consignee

and the American supplier and it merely consolidates the numerous

small orders from the various manufacturers on asingle billof lading

and account invoice pursuant to a

copy of the purchase order for

warded toitby the consignee In response tothe fact that respondent s

ledgers indicated BMI had advanced substantiaLsums 2

in purchase

of merchandise forits consignees Mr Spencer established that Amer

ican suppliers are reluctant tonegotiatedirectly with South American

consignees being fearful of not receiving remuneration for thei

goods and BMI merely acts as an intennediary and does not purchase

commodities for its own account for resale at aprofit Mr Spencer ex

plained that the supplier understands that BMI acts only as a freigh

forwarder and not as an llxporterj that no profit is realized on the

transfer of the merchandise to the consignee because BMI bills the

Durln f

the period NOISlDber 8 196 to April 80 1961 BMII

lal led liIowed

thlt 66 percent of the Imounts pootsd to that ledller ented advan formerchandlle

III FMC
BOLTON MITCHELL INC

consignee only for the export amount advanced that BMI takes no

title tothe conunodities nor does it have any other beneficial interest

in the shipment and that BMls sole remuneration is in the form of

income derived from freight forwarder operations

Certain inconsistencies between Mr Spencer s answers in the two

interviews and discovered facts became apparent During the initial

interviews the FMC investigator was persuaded to believe that re

spondent soperations werewholly that of an ocean freightforwarder

Later however Spencer disclosed that respondent did in fact pur

chase commodities mark up the merchandise price and sell said com

modities to the consignee retaining the mark up as remuneration for

various financing and finding services These facts were borne out

by theinspection oftheoperatingledgers

In his Initial Decision the Examiner found that respondent BMI

did not continue toqualify as an independent ocean freightforwarder

and accordingly recommended that its license should be revoked pur

suant to section 44 Shipping Act 1916 and section 510 9 of General

Order 4 In reaching this conclusion the Examiner found that re

spondent was not independent of shipper connections as defined by

section 1 of the Act and that it had been operating contrary

to such definitions The Examiner further held that respondent vio

lated section 16 First Paragraph oftheAct section 510 5 e of Gen

eral Order 4 by failing to set forth its license number in its letterhead

invoices and shipping documents used in conducting its ocean freight

forwarder operations section 510 23 d by reporting false informa

tion to its principals section 510 23 e by knowingly withholding

information from its principals concerning the actual price of mer

chandise section 510 23 f

by failing promptly toaccount toits prin

cipals section 510 23 h by filing false documents section 51O 23 j

by failing to use invoices which stated separately the actual amount of

ocean freight assessed by the common carrier theactual insurance rate

and the actual price of the merchandise purchased and section 5109

c by willfully making false statements to the Commission Respond

ent at the oral hearing has urged the Commission to review de novo

the entire record and make its own decision Following an extensive

review of the record we are in general agreement with the Examiner

and makeourown findings as follows

aRespondeDt explained these uservices as llflndlng and securing the required Amerl

can suppllers obtaining quotations technical data and samples to permit the overseas

consignee to decide upon a

product and issue instructions to tbe respondent to purchase

the item Spencer entitled this a 8tart up service and testifled that the consignee agreed

to BMIretaining a marlt up orcash discount for the start up service r

fGr the separate

serviceGf purchasing the commodities inaddition to thefGrwarding fee

15 F MC

251
I

I

I

252 FEDERAL MARITIME COMMISSION

Six transactions form the basis of the Examiner s decision In the

E S DeLaney SfA file no pertinent papers indicate respondent s

ocean freightforwarder s license number Also in this file a finders

fee of 76 10 is included and considered by respondent to beits profit

on the transaction however terms of the llIgl eement establish a con

fidential 21 percent resale discount with a notation do not show dis

count on your invoice Total billingin the invoice was 1 529 68 but

only 1 483 98 was paid tothe supplier Respondent admitted that it

retained the additional income and later testified that E S DeLaney

agreed to this procedure The Mial S P A Italy file establishes that

respondent charged his client 925 for a purchasing service for

services rendered and also retained a 3 percent resale discount which

wasnot set out on the seller s invoice amountingto 586 50 and which

was not posted on the income account Respondent contended its cli

ent did not wish to have the three percent discount shown on the in

voice because this would prevent the foreign importer from obtaining

the full dollar exchange on the total value of the shipment No cor

respondence in this file contained respondent s ocean freight forward

ers license number

The Lee Filter de Peru S A file shows technical services and finders

fee of 336 73 afinancing fee of 202 04 and among others a special

handling fee of ll28 Respondent s ocean freight forwarder license

number does not appear anywhere on the documents supporting this

transaction A notice on the purchase order reads Please invoice at

prices shown and allow confidential discounts as shown under terms

Please do notshow these special discounts on your invoice The many

monetary gyrations in this transaction fail to hide the fact that re

spondent retained 836 73 as technical services and finders fees

Furthermore respondent cannot adequately account for the secrecy

surrounding the confidential discount other than to profess that its

client instructedthat the transaction be 80handled

In the Invictus Radio e Televisao Ltda Sao Paulo Brazil trans

action respondent again failed to utilize its ocean freight forwarder

license number on the purchase order Here also respondent with

held two percent of the invoice figure explaining that such sum was

retained for purchasingand other services

The transaction concerning the Industrial Btawns S A Lima Peru

again contains no FMC license number In this transaction no confi

dential discount was requested but by the use of Blandy Paper Com

pany blank invoice forms it was made to appear that the suppliers

cost more than invoiced by Blandy and that the return to respondent

on thetransaction vis a vis the merehandise aggregated452 23 When

11 F MC
BOLTON MITCHELL INC

confronted with these facts by the investigator Spencer stated that

respondent had realized a profit of 452 23 on the merchandise value

billed to Industrial Brawns

Inthe firstCaja National deSeguro Social Lima Peru transaction

respondent shipped 13 ambulances to South America at a cost to the

client of 44 854 03 while paying 43 256 to the supplier The differ

ence of 1 598 03 was retained by respondent as a

profit on the sale of

the merchandise Also the insurance rate on the cargv was inflated

First Spencer told the FMC investigator that the increase wasa pen

alty coverage provision but later when confronted stated that the

purchasing agent had requested him to inflate the ocean freight and

insurancerates and charge them totheclient

Respondent argued in its brief that since it wasdealing with the

purchasingagent it had no requirement or responsibility of disclosure

to the client

The second Caja National transaction involved respondent s pur

chase and sale of 13 rural dispensaries rural medical vehicular dis

pensaries and shows that the same procedures as in the prior trans

action were followed that is a mark up of the merchandise a charge

of2lh percent ofthe marked up purchase price asapurchasing service

charged afalse statement ofthe ocean freight afalse computation of

the insurance and the remittance to the agent of the inflated ocean

freight and insurance charges to its account with respondent in New

York

Respondent s argument that it is a

consignee forwarder and that

it was necessary and in the best interests of its clients for BMI to op

erate in the manner described above in no way alters the clandestine

character of the operations Nor do we find respondent s arguments

that it did not violate pertinent regulations persuasive The testimony

of respondent does not comport with the established facts of the rec

ord which clearly demonstrate subterfuge and deceit In several cases

the DeLaney file in particular no actual start up work was per

formed Inmost of thetransactions relatively little purchasingwork

waslikewise performed The record asestablished in the initial finding

of fact conclusively shows that the FMC investigator was persuaded

to believe that respondent s operations were only that of a licensed

ocean freight forwarder but later upon confrontation Spencer ad

mitted tothe contrary that respondent was engaged in the purchasing

of commodities involving the mark up of the merchandise price the

retaining ofaprofit thereon the financingof the merchandise and the

disposition of funds as found Further when confronted with the in

vestigator s resumestatement of the transactions although not signing

the document Spencer did affirm its correctness

15 F MC

253
254 FEDERAL MARITn tE COMMISSION

I

In the transactions discussed in each instance respondent through

its own purchase order and holding itself out ae a principal not as

an agent for others purchased merchandise marked up the mer

chandise value made aprofitthereon orreceived incometherefrom and

subsequently transferred its propietary interest therein to consignees

in SouthAmerica In 80 doing respondent became aself denominated

seller and shipper of merohandise

Respondent s activities ae spread on the record before us clearly es

tablish respondent hae violated the following provisions of the Com

mission s General Order 4

None ofrespondent s documents used inthese transactions contained

BID s

freightforwarder license number in violation of GeneralOrder

4 Rule 5105 e Respondent has a180 violated Rule 1I10 23 d by re

porting false information to its principals Rule 1I10 23 e by know

ingly withholding information from its consignee concerning the

actual price of merchandise Rule 1110 23 f in failingto promptly ac

count toits consignees for any overpayment ofthe merchandise price

Rule 1I10 23 h by filingfalse documents and Rule 1I10 23jby fail

ing to use invoices which listed separately the actual cost of ocean

freight assessed by the common carrier the insurance rate and the

price of merchandiseit had purchased forits consignees

There remains what is perhaps the paramount issue in this pro

ceeding whether or not Bolton Mitchell s conduct renders it free

from shipper connections ae required by statute and thereby should

respondent continue to be licensed ae an independent freight for

warder Section 1 Shipping Act 1916 specifies the criteria for inde

pendent ocea nfreightforward8rs as follows

An illdependent ocean freight forwarder Is a person C8nylngon the bU8lne18

Of forwardln for a conl 1deratlon who Is not a

shipper or colUllgnee or a seller

or purchallel of J1lpments toforelgn countrlllll nor has any bene1lclallnterelJt

therein nor directly orIndirect1y controls orIs controlled by such shipper or COIl

l1I nee orby any person having sucha benellclallntereet

Beneficialinterest is defined in General Order 4 46 CFR 1121 1

ae follows

1 The term bsneflclal Interest for the purpolle Of these rnles Includes but

Is not llmlted to anrUen Interest in right to use enjoy profit bsnellt or re

ceive auy advantBle either proprietary orfIDaDcll from the whole aurpart

Ofa shlPDlent or oargo 8l lsln bT f1nanclnl ot the shipment orby operation Of

law or by a 4lDt express orlmpUed provided however that al11 obUptIon

arll 1ng In favor of a Uceneee by reB80n of advances of outof pocket expen In

cuRed In dispatching of shlPDlents shall not bs lieemed a benellclallnteretlt

In his decision the Examiner concluded threspondent had acted

as a principal purchasing the merchandise marking up its value and

III FfC
BOLTON MITCHELL INC

retaining aprofit on received income from such mark up and subse

quently transferring its proprietary interest in the commodities to the

consignee in South America In so doing respondent became a seller

and shipper of merchandise and thereby does not continue toqualify

as an independent ocean freight forwarder as defined by theAct

We think the evidence of record is conclusive thatBolton Mitchell

does not possess the required independence from shipper connections

in compliance with the statute Itis not independent because it acted

either as a purchaser of shipments to foreign countries as purchas

ing agent of the consignee or as aperson having abeneficial interest

in shipments to foreign countries as afinancier of the merchandise

or aseller and shipper of shipments to foreign countries as one who

has exercised proprietary rights over the merchandise By retaining

a

proprietary interest in merchandise and collecting compensation

from the carrierfor shipment thereof BMI did willfully obtain trans

portation by water at less than the rates or charges as would other

wise be applicable violating section 16 First of the Act Under most

circumstances willful violations oflaw of the nature set furth above

would be sufficient standing alone to revoke respondent s

freight for

warder license However we note that the record establishes that Bol

ton Mitchell embarked upon this illegal activity only after consul

tation with counsel While the actions of respondent are violations of

the law nevertheless we are disinclined at this time to revoke respond

ent s license and deprive him of his livelihood when respondent ap

pears to have acted in good faith upon the advice of counsel Further

more Bolton Mitchell has been operating as a licensed freight for

warder for the past ten years and formerly provided good and valu

able service for approximately forty years without serious complaints

Accordingly we find that respondent has violated section 16 First

oftheAct by willfully obtainingtransportation by waterat less than

the applicable rates as aresult ofits receiving compensationon its own

shipments and has violated Commission General Order 4 to wit

510 5 e

failing to show license number on invoices and shipping documents

5 510 23 d Imparting false information to its principals

5 510 23 e withholding information as to actual price of merchandise

510 23 ffailing to promptly account to its principals

In response to CommlB81oner Morse queetl llng how long counsel bad served re

spondent counsel answered

SIDce tills proceeding began Well no He came to me and asked me about the legalit

of biB flnanclal matters and I advised him when this got Inro the general order four

that he could lln8Dce the shipments SD long as he did notretain a Hen upon the goods

and Ithink I

am right that the rule you have a beneficial In t

on the good If

you have alien arisingfrom th the financing and In hi financing did not have a lien

IMid Irecoold do It and that I

lhe flr ttime I advised him ona

legal hasl

SeeAdministrative Procedure Act 5 U S C f 551 558

15 FMC

255
256 FEDERAL MARITIME COMMISSION

f510 23 h tiling false documents

I

Iil023 j falJlng to use invoices which stated separately the actual amount of

oceanfreight price of merchandise and insurance and

I510 9 c willfully making false statements in connection with an application

for a license orits continuance ineffect

We further find that Bolton Mitchell is not independent of ship

per connectlOnB as required by section 1 of the Act and has operated

in violation thereof We will not however revoke respondent s inde

pendent ocean freight forwarder license No 516 but we hereby order

respondent Bolton Mitchell to cease and desist from the activities

herein found to violate the Shipping Act 1916 arid other pertinent

Commission regulations or orders if it desires to maintain its license

Furthermore respondent shall submit within 90 days from the dateof

service of this Report and Order a full report to the Commission on

the manner in which it has complied with the requirements to cease

and desist as heretofore set out Additionally within one year from

the date of service of thisReport and Order a

complete examination

of respondent s activities will be performed to assure that respondent

isacting incompliance withthe decision herein

SEAL Signed FRANCIS C HURNEY

Seuretary
FEDERAL MARITIME COMMISSION

DOCKET No 709

BOLTON MITCHELL INC INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE No 516

ORDER

This proceeding wasinitiated by the Federal Maritime Commission

to determine inter alia whether Bolton Mitchell Inc continues to

qualify as an independent ocean freight forwarder and whether its

license No 516 should be continued in effect or revoked and the Com

mission has fully considered the matter and has this date made and

entered of record a Report containing its findings and couclusions

thereon whichReport is hereby referred to and made a

part hereof

The Commission found that Bolton and Mitchell Inc did not possess

the required independence from shipper connections necessary to be

an ocean freight forwarder but declined to revoke Bolton and Mitch

ell Incs license as an independent ocean freight forwarder due to

mitigating circumstances but subjected the retention of said license

to certain specific conditions

Now therefore it is ordered That Bolton and Mitchell Inc be

allowed to retain its license as an independent ocean freight forwarder

subject to the followingconditions

1Bolton and Mitchell Inc shall immediately cease and desist from

all activities found in the Report to violate the Shipping Act 1916

and certain Commission regulations or orders and

2 Bolton and Mitchell Inc shall submit in the form of an affidavit

a full report to the Commission on the manner in which it has com

plied with the requirements to cease and desist as heretofore set out

within 90 days of service of the Report and Order IfBolton and

Mitchell Inc fails tosubmit the required report its license as an in

dependent ocean freight forwarder will be revoked without further

proceedings

15 F MC

257
Itia jJfther o

deed That to sue compliance tts Ode

complete examination of Bolton and Mitchell Incs activities will 

made within 1

year from the date of service of the Report and Ord

in this proceeding to determine whether respondent is acting in kee

ing with the decision herein

By the Commission

SEAL Signed FRANOIS C HURNEY

Secretary
v

FEDERAL MARITIME COMMISSION

DOCKET No 69 57

AGREEMENT No T 2336NEV YORK SHIPPING ASSOCIATION

COOPERATIVE WORKING ARRANGEMENT

Nos 71 2 71 8 71 26 AND 71 34 TRANSAMERICAN TRAILER TRANS

PORT INC SEATRAIN LINES INC DANIELS KENNEDY INC

CHANDRIS AMERICA LINES INC GREEK LINE INC HOME LINE

AGENCY INC INCRES LINE

THE NEW YORK SHIPPING ASSOCIATION INC

June 9 1972

Agreement No T 2890 of the New York Shipping Association providing an as

sessment formuia to meet certain fringe benefit obllgations incollective bar

gaining agreements witb tbe International Longshoremen s Association

AFLCIO when subjected to certain modifications found not to be unjustly

discriminatory nor unfair as between carriers shippers exporters or im

porters nor to be otherwise uniawfulin violation of tbe Shipping Act 1916

Agreement No T 2390 as modified herein approved

Alfred Giardino O P Lambos and Donato OaTU8o for respondents

the New York Shipping Associationand its members

Edward D Ransom for intervener the Pacific Maritime Associa

tion

Stanley O Sher Alan S Davis and Joseph Adams for interveners

States Marine International Inc Isthmian Lines Prudential Grace

Steamship Co Atlanttrafik Barber Lines Blue Sea Line Concordia

Line Hellenic Lines Hoegh Lines Meyer Line Nedlloyd Lines and

Norwegian America Line

Ronald A Oapone John Williams and Russel T Weil for inter

vener and complainant Transamerican Trailer Transport Inc

Neal M Mayer and Marvin J Ooles for intervener and complainant

Seatrain Lines Inc and for complainants Chandris America Lines

Inc GreekLine Inc HomeLineAgency Inc and Incres Line

259

15 FMl
260 FE DERAL MARITIME COMMlS8ION

Gerald A Malia and Paul J MoElligott for intervener Sea Land

Service Inc

Alan F WohlBtetter for interveners the United Fruit Co and Wal

lenius Line

Herbert Rubin Philip Elman and Oeoelia H Goeta for intervenel

Wolfsburger Transport Gesellschaft m b H

Joseph F Kelly Jr for complainant Daniels Kennedy Inc and

for intervener theMadden Corp

Walter E Maloney and Bradley R Ooury for interveners Ameri

can Export Isbrandtsen Lines Inc Atlantic Container Line Dar

Steamship Co Moore McCormack Lines Inc Hamburg America

Line and North GermanLloyd

Robert M Vorsanger and Frederick M Porter for interveners

American Sugar Company and the American Sugar Refining Com

pany of New York

William Warnerfor intervener Wilford McKay Inc

William F Giesen for interveners Universal Terminal Stevedor

ing Corp International Terminal Operating Co Inc Pittston Steve

doring Co Inc John W McGrath Corp Bay Ridge Operating Co

Inc Nacirema Operating Co Inc and Northeast Stevedoring Co

Inc

Samuel H Moerman Arthur L Winn Jr and F A Mulhern fo

intervener the Portof New YorkAuthority

Mario F Esoudero Dennis N Barnes EdwardAptaker and Robe

A PeJflyfor intervener the Commonwealth of Puerto Rico

Donald J Brunner and Norman D Kline as Hearing Counsel fo

the Federal Maritime Commission

SUPPLEMENTAL REPORT ON REOPENED PROCEEDING

AND ON CONSOLIDATED PROCEEDINGS

By THE COMMISSION Helen Delich Bentley Ohairmanj Ashton C

Barrett Viae Ohairmanj James V Day Commissioner

On November 20 1970 we issued a Report and Order in Docket N

6957 14FMC 94 which basically adopted the Presiding Examine

findings but was in disagreement with his treatment of two majo

issues i

e the trade from Puerto Rico tothe Port of New York an

automobiles trucks and buses Our decision which appended the E

aminer s initial decision served on August 13 1970 provides a bac

ground to the current proceedings and must be read in conjunctio

with this Report The ideas formulated in the prior Report provid

the routineingredients of ourinquiry into theimpact upon these issue

including the several new ones presented in the reopened and co

solidated proceedingnow beforeus

111 FMO
AGREEMENT NO T 2336 NEW YORK SmpPING Assoc 261

The agreement T 2390 under consideration is acooperative work

ing arrangement by the members of the New York Shipping Associa

tion NYSA comprised of ocean carriers stevedores and other

employees ofmaritime labor designed to assess members and non mem

bers for monies needed to finance certain fringe benefit obligations

arising out of a collective bargaining agreement between NYSA and

the International Longshoremen s Association In our prior decision

we determined that all cargoes to and from Puerto Rico and the Port

of New York should be treated under the excepted cargo status pro

vided under the excepted cargo provision of the agreement Addi

tionally we determined that automobiles trucks and buses as treated

under the agreement should be approved as submitted In all other

areas ofdispute weagreed with thePresiding Examiner

Subsequentto our decision NYSA petitioned for reconsideration of

our treatment of the Puerto Rican tradeand on the basis of numer

ous pleadings and the new issues arising from the filingofcomplaints

we reopened Docket No 69 57 and consolidated two cases which had

commenced with the filing of complaints In view ofthe dispute over

data and the increased assessmentssince thetime ofour earlier Report

we indicated that we would reevaluate our treatment ofthe many and

varied interests including automobiles trucks and buses Ever mind

ful of the data and statistical problems presented in the prior hearings

we noted in our Order that it was expectedthat the parties will at the

very least stipulate or agree upon a set of basic financial data and fig

ures and the parties should present alternative proposals

backed by arguments that could provide more equitable solutions to

the wide differences still apparent 2

In his decision on the reopened proceeding served September 22

1971 the Examiner departed from hisprevious decision where he had

provided relief to a portion of the Puerto Rican tradeassessment and

had reduced the automobile assessment from a 20 percent measure

ment ton to 18 percent Instead he approved the rate of assessment

adopted by the NYSA for both

Additionally he concluded that newsprint should also bear the as

sessment as provided in the agreement and that the complaints con

solidated with the reopened proceeding insofar as they protested the

increase in GAl werewithout merit

Exceptions to the Examiner s decision were filed by the Puerto

Rican carriers Transamerican Trailer Transport Inc TTT Sea

train Lines Inc Seatrain and Sea Land Service Inc Sea Land

the automobile interests Wolfsburger Transport Gesellschaft m bH

1 Two additional complaints were filpd and also consolidated in the reopened proceeding

2Order Reopening Proceeding and Consolidation served March 11 1910

15 F MC
262 FEDERAL MARITIME COMMISSION

Wobtrans and Wallenius Line Wallenius j

the newsprintinterests

Daniels lKennedy Inc DI and the Madden Corp Madden j

the four complainant paesenger lines Chandris American Lines Inc

Greek Line Inc Home Line Agency Inc and Incres Lines pas

senger ines j

the Commonwealth of Puerto Rico and Hearing Coun

sel NYSA and the breakbulk carriers 8 with one minor exception

support the Examiners decision We heard oral argument

The major iBBue to be decided in this lengthy complicated and

hotly contested proceeding has been the determination of the rate

of aBBeBsmentto be imposed for those carriers serving the Puerto

Rican trade and the automobile and newsprint interests The salient

facts often in dispute notably in the statistical arena have been ade

quately resolved by the Examiner Many of the legal problems par

ticularly those posed by the passenger lines have also been correctly

answered by him In fact since we are attaching his decision tothis

Report no useful purpose would be served by setting out at length

the evidence before him relating to these problems Itis sufficient to

say that he had a great mass of material before him in which he

weighed contending considerations and conflicting evidence in

framing his decision There was before him as there is before us now

0 clash of adversary argument exploring every aspect of a multi

faceted situation embracing conflicting and demanding interests

We will not attempt here to repeat the basic background facts and

views contained in our prior decision and we find it unnecessary to

repeat much of What appeal ll in the Examiner s decision attached

hereto Since as before we disagree not with the factual presenta

tion expressed in his decision we need only point to our areas o

disagreement where we have placed in the main a differing degree o

weight on the evidence which leads us to certain conclusions no

reached or treated by him

In our earlier decision we found that the Examiner failed to give

sufficient consideration to certain factors which led us to conclude

that the Puerto Rican trade deserved some degree of specia lconsidera

tion in computing its aBBessment We were primarily impressed with

the steady growth in hours and tons carried inthis trade whicl1 trans

Statel lIlarlne International Inc llthmlan Llnel Prud ntlal G Steamlhlp Co

Atlanttralllr Barber Lln l Blue Sea Lln Concordia Line BeUenlc LlIlel B08lh Llne

lIleyer Line NedUoyd Llnel an4 Norwelllan Amerloa Line

I The partloular portlonl ot the Prelldln Enmlnerl d ollllon dllonlle4 here will b

pointed out by ret renoe to the Initial declllon attaohld We will not attempt Or lInd 

neceslary to 8trike Qf comment upon eaoh And everY lentenee phrase or otherwise tha

mllht be contrary to oUr conclullonl pr lled herein Onoe a aln we a wlthh

prentetlon ot the tactl and hll dllpolltlon ot all the other Illuel not treated III ou

report onr disagreement Iles mainly tn bbl concl1l81on8 with respect to those ls6uet treate

h re

111 FMC
AGREEMENT NO T 2 36 NEW YORK SHIPPING ASSOC 263

lates to increased work opportunities for the longshoremen That

factor however was not our only consideration for we also recog

nized the peculiar status of the Puerto Rican economy and its de

pendence upon low cost ocean transportation In his most recent

decision the Examiner however has adopted and agreed with the

position of the NYSA and its breakbulk c8lrrier interveners namely

that tihis trade should be assessed on the same combination man hours

and tonnage basis as is regularly provided in the Agreementfor other

containership ro ro and other carriers in othertrades

Briefly the nub of his conclusion in treating this trade as originally

proposed and submitted by the NYSA probably can be found in his

observation that on a dollars and cents basis which is what these

proceedings are all about the most logical basis of assessment must be

related to dollars of revenue and therefore to revenue tons of cargo

handled rather than to longshore hours Additionally while

notingthat tons carried must be entitled to a greater weight in reaching

It just conclusion to the assessment problem he concluded that hours

was the key in the past and tons will be in the future In denying

this trade favored treatment he observed that other trades serving

the Port of New York would be disfavored by the imposition on them

of higher assessments to make up for assessments not collected from

the Puerto Rican trade 1 He concluded that to the extent that tihe

foreign trades would bedisadvantaged by cargo diversion andto avoid

undue discrimination between the various trades of NYSA the

fairest action under all the circumstances would be to spread the as

sessment herein on the same basis for all trades s

Finally he

reasoned that all carriers recognize in a general way that the assess

ments ofthe ILA labor fringe benefits 81re

an industry problem and that all carriers must share not only in the benefits of

the ILA contract but also In the costs of the contract Some carriers and parties

seek exceptions to the unIform assessment basis of T 2390 But granting an ex

ception here and another exception there has a snowha linj Ilect and the re

sult of granting too many exceptIons can only be chaos Exceptions must be

limited to recognized hardshIps and no others

However the unfairness of the Examiner s result is particularly

emphasized when we consider the plight in which itleaves the carriers

serving the Puerto Rican trade Obviously we are not here dealing

with the fine writing in an insurance policy In this proceeding the

arguments have extended far beyond the comparatively narrow issue

Ii Presiding Examiner sDecision September 22 1971 Hi FMC291

Old 15 FMC 295

Id 15 FMC 810

old 15 FMC810

Id III FMC811

15 FMC
264 FEDERAL MARITIME COMMlSSION

1

j

involved ie how the costs for the labor fringe benefits should be

distributed At one extreme the carriers in this trade seek the excepted

cargo status 184 per man hour compared to the oppositeextreme of

NYSA which urges assessment comparability with the containerized

operators in the foreign trades 5 97 per ton lO Between these two

extremes are the proposals submitted by Hearing Counsel

In a proceeding of this nature we are duty bound to exercise discre

tion which means to weigh contending considerations and conflicting

evidence as a matter of judgment in framing a decision tomeet the

needs of this case In assessing the benefits received and cost burdens

incurred by the parties from a stable labor force during the period of

the NYSA and ILA contract there is no calculus by whichthey can be

equally distributed We have been forced to deal with elusive and

sometimes contradictory financing of the labor fringe benefit costs

which in their nature are not within the usual province of our con

siderations In balancing the path of the extreme positions presented

to us we have found considerable merit to the proposals subniitted by

Hearing Counsel First these proposals were not fully treated by the

Examiner since the parties had not had the opportunity to comment

fully on them prior to the rendering ofhis decision And even though

the Examiner observed that the only compromise solution with the

most substantial merit is the T 2390 compromise we think he was

without benefit of argument and considerations that developed in the

pleadings and oral argument presented to us Secondly while we

recognize that the Shipping Act under which we function does not set

up machinery for conciliation mediation arbitration and adjustments

of disputes to be invoked if negotiations fail it does however impose

upon us a duty to devise solutions within the framework of our

statutory mandates It was in this framework that the Chairman of

the Commission at the completion of oral argument provided an

occasion for the parties to attempt to resolve the differences among

themselves and report back to the Commission In affordingthe par

ties the opportunity to bargain anew in an effort to devise solutions

for the troubles whichbeset the Agreement it wasmade clear that such

bargaining would not trample on our statutory duty to decide the

case Out of this opportunity providedby the Commission counsel rep

resenting the automobile interests Wobtrans and Wallenius and

the newsprint interests D K and Madden notified us that they

would accept the offer of settlement as outlined by Hearing Counsel

10 Seatraln TTT and the puoenger IIneo aloo Inolot ven that the Increa of the hourly

payment tor GAl was not authorized However we aaree with the Examiner s treatment ot

thlo loou and hlo concluolono SeeId 1 FMC 802 804

u

Id 1 FMC 80S

Id 1 FMC 808

III F MO
AGREEMENT NO T 2336 NEW YORK SHIPPING ASSOC 265

with respect to their interests Finally we look upon the proposals

of Hearing Counsel not simply as a

compromise for its own sake but

as proposals which are substantially supported by the record In

each area that they have offered proposals i e the Puerto Rican trade

automobiles and newsprint we find their reasons persuasive and sup

portable and accordingly we set them forth below in substantially

the manner presented to us in their briefs Additionally we are not

adopting the Examiner s conclusions on the Puerto Rican trade issue

because we agree with Hearing Counsel that his determination im

poses on the Puerto Rican trade at this time an unnecessarily severe

increase in costs including the so called shortfall which is mainly

attributable to conditions occurring in the foreign trade and gives

little or no consideration to the peculiar economic problems which af

fectthe Commonwealth of Puerto Rico As will be shown below in our

opinion Hearing Counsels compromise solution would require the

trade to bear its fair shareof clear industrywide costs whilegivingthe

trade special consideration by leaving itin the excepted category for

other purposes Similarly for automobiles and newsprint the com

promise solutions offered by Hearing Counsel would in our opinion

lessen the severity of the drastic increases in costs which those com

modities would have to bear under the Examiners decision at this

time while not exempting them from an increase which gives due

consideration to the benefits which these commodities derive under

the hbor contract

The major issue in the reopened proceeding is that relatingto the

rate of assessment for carriers serving the Puerto Rican trade Our

decision of November 20 1970 placed this trade in the excepted

category ie to be assessed on a man hour basis at the time of the

decision 2559 per man hour Since that time on December 7 1970

that rate was increased to 3 394 by the Board of Directors of the

NYSA

The NYSA contends that the Puerto Rican tradeought to be placed

in the regular man hour tonnage level of assessment The NYSA

submits data that indicate that the trade is substantial and can bear

the burden of the higher assessment and that it benefited greatly when

the NYSA persuaded the ILA to abandon its early demands for re

strictive conditions on containerized operations especially those relat

ing to stuffing and stripping Furthermore the NYSA contends that

all fringe benefits are interrelated and are industry costs which all

trades should assume In early June 1971 using data current at that

13 We have of course reviewed carefully the arguments presented in the exceptions as

well as those presente 11n opposition to the proposals of Hearing Counsel Accordingly we

think it Is necessary to provide the fullposition and arguments of Hearing CouDsel

15 FMC
266 FEDERAL MARITIME COMMISSION

time the NYSA estimak ed that the labor contract would end with a

deficit of 8 876 522 which could have been avoided had the Puerto

Rican trade paidagreater share of costs asper the regular man houri

tonnage level Again using data available at the time the NYSA

estimated that the Puerto Rican trade had realized a savings of ap

proximately 6 500 000 overthe life ofAgreementNo T 2890 by being

placed in the excepted status Itwas also estimated by the NYSA

that on a

per ton basis the Puerto Rican trade paid only 0 90 com

pared to 402 2 60 and 254 for breakbulk containerized and ro ro

generally

Whether these estimates of deficit and costs are reliable and as with

most other data in the record they are vulneraJble to attack because

they rely on data currentat the time and since revised they persuaded

lilie Board of Directors of the NYSA that an increase in the assess

ment rates was necessary There have been four different changes in

assessment three affecting the tonnage assessment and one the ex

cepted man hour Thetonnage rate has increased from 128 to 178

to 228 tothe present level of 8 28 whereas the excepted level has

increased from 2659 to the present level of8 894 per man hour all

of which are assessed against the carriers under the terms o e

agreement

Other significant facts about the Puerto Rican trade which are

consistent with evidence developed on the earlier record in this pro

ceeding further explain tfhe basis for the NYSA s contentions As

Mr Carter President of TTT stated the Commission was totally

correct when it found that the New York Puerto Rico trade III III III

has provided a steady growth for years resulting in increased work

opportunities That steady growth is still continuing and at even n

more accelerated rate Mr Carter offered this evidence to refute

the NYSA s allegation that Puerto Rican hours had dropped to768

810 an estimate which is clearly understated by a substantial amount

and to demonstrate that even at the excepted man hour level the

Puerto Rican carriers are contributing their fair share toward costs

of fringe benefits

By Mr Carter s calculations in the year 197071 the Puerto Rican

trade would contribute 2 837 708 toward fringe benefits atthe rak eof

2 559 per man hour which ineludes 0 72 per hour for vacations and

holidays afund not subjectto Agreement No T 2390 Even with this

extra contrrbution toward vacations and holidays this trade con

tributes only 8 68 percent of the total T 2390 expenses of 77 081 899

for that year Over the life of the agreement however according to

Mr Carter s calculations the trade contributes 8 809 580 atthe 1 71

III FB O
AGREEMENT NO T2 36 NEW YORK SHIlPING AiSSOC 267

and 184 per man hour levels ie without vacations and holidays

compared to total expenses of 148 005 142 or approximately 2 6 per

cent Mr Carter s own exhibit however shows that the Puerto Rican

trade comprises approximately 10 15 percent of total tons moving

through New York In the earlier record Mr Oarter had calculated

that Puerto Rican tons represented some 9 5 percent of the total for

the year 1969 70 2 630 000 out of 27 480 000 Other evidence of rec

ord shows the Puerto Rican proportions of assessable tons tobe 104

percent forboth 1969 70 and 1970 71

The Puerto Rican carriers dispute the NYSA s contentions regard

ing deficits They have attempted to break out each account to de

termine where adeficit if any actually occurs and contend that such

deficit appears if at all in the shortfall account for which the Puerto

Rican trade cannot be held responsible Since our decision of Novem

ber 20 held it proper to relieve the Puerto Rican trade of costs of

shortfall since the trade has continuously increased in man hours of

employment both TTT and Seatrain have explored the possibility

that the NYSA is attempting to shift shortfall costs onto the trade

improperly

TIT s and Seatrain s exercise while perhaps sound in principle is

itself of questionable reliability The NYSA does not break out in

come for each account in the ordinary course of business It did so

for purposes of isolating shortfall and to show the Puerto Rican con

tribution minus shortfall However both Seatrain and TTT have

utilized the data in exhibit 102 especially the cost per ton for GAl

for 1969 70 and 1970 71 0 647 and 0 959 in an attempt to match

income with expense and to show that the GAl account has either a

surplus or very small deficit From this TIT and Seatrain conclude

that the NYSA is attempting toshift the costs ofthe shortfall deficit

onto the Puerto Rican trade contrary to the Commission s decision

In using the NYSA data in Exhibit 102 of course TTT and Sea

train are relying on data derived from an exhibit prepared for limited

purposes based on data current atthe time Moreover their exercise

would not properly match income and expense for the GAl account

since 0647 and 0 959 per ton are NYSA figures which include con

tributions toward GAl equivalent hours for pension welfare and

clinic whereas equivllilent hours expenses have been removed by TTT

and Seatrain in accordance with their contentions that it does not

belong in the GAl account The result would have tobe an overstate

mentof income in the GAl account

Even if these various imperfections were to be corrected in our

opinion the need for such exercise can be avoided provided that an

equitable revision tothe formulacan be made

15 FMC
268 FEDERAL MARITIME COMMJSSION

Regardless of the contentions of TTT and Seatrain regarding a

surplus or minimal deficit in the GAl account the record shows that

the costs ofGAl have mushroomed drastically and that suchincreases

could not have been anticipated No one disputes the fact that the

NYSA Assessment Committee had estimated GAl costs to be 15

600 000 for 1969 70 and 15 million for 1970 71These wereestimates

employed by the Committee which was advised that the final figures

might vary substantiaNy because ofa number of factors GAl unlike

the fixed obligation for pension welfare and clinic 30 million and

19 800 000 for 1970 71 respectively varies depending upon the

number of recipients of payments equivalent hour payments to pen

sion welfare and clinic and vacation funds etc The Assessment

Committee did not anticipate the fantastic escalation as Captain

Evans described it that took place in the number of men who found

themselves beneficiaries of the GAl nor the breakdown in the prior

day ordering system which also increased costs Since the inception

of GAl in 1964 the costs of this particular guarantee had necessitated

periodic increases from an original 0 02 per man hour tothe present

including such rates as 0 12 0 22 and 0 55

According to a statement issued by Coopers Lybrand a firm

of certified public accountants the cost of GAl for 1969 70 was

actually 24 340 472 This is almost 9 million overthe earlier estimate

For 1970 71 the NYSA estimates GAl costs to be 31 756 842 This is

almost 17 million over the Mrlier estimate Perhaps the estimate

for 1970 71 is too high Nev6PtihelElSB iHs clear that the earlier esti

mates of the Assessment Committee were far off the mark and that

costs of GAl have escalated substantially Some explanation for this

development may be found inthe breakdown of thePDOsystem which

had it worked would have reduced costs by overall decline in hours

of employment at the port or by possible undue advantage taken by

some members of the labor force Whatever the reason it is eviden

that this particular contractual guarantee made by the industry in

1968 has been costly Under the previous ILA contract GAl costs

had required no more than 0 12 per man hour for funding whereas

at the time of the last assessment on the man hour basis in early

TTT and Seatraln also dispute the Inclusion of certain e pe se Items In the GAl

account and would reduce that accollnt by eliminating certain Items above the payments

to recipients such as equivalent hour expense tor vaoatlons pension welfare and medica

funds Seatraln also disputes certain administrative allocations attributable to prior day

ordering PDO Nevertheless these Items of e pense cept for PDO have apparently

been Included In the GAl account from Its Inception In 11166 accordln to the administrato

of the fund Capt Haynes In the case of equivalent bour payments this was required y a

decision of Arbitrator Theodore W Kheel which went against the NYSA Slgnlflcantly

both TTT and Seatraln have paid 0 55 per man hour toward GAl even thou h this figure

was designed to cover the disputed Items of e pense

15 FMO
AGREEMENT NO T 23t36 NEW YORK SHIPPING AiSSOC 269

1970 the rate of assesment of GAl had risen to 0 55 Unlike short

fall GAl was not one of the items for which the Commission found

the Puerto Rican trade free of any responsibility The Puerto Rican

carriers under the excepted category were and still are willing

to pay at the rate of 0 55 per man hour eventhough atthat rate they

assert that the trade would be bearing some costs attributable to other

trades

Althoughit can be shown that the decline in overallhours ofemploy

ment from 40 million to under 30 million is not a

phenomenon of the

Puerto Rican tradewhich continues to increase man hours of employ

ment annually and that the costs of shortfall could arguably be al

located to non Puerto Rican trades the same cannot be said for GAl

This is an industry expense which cannot be traced to any specific

cause nor to any trade Overall increase or decrease in total hours of

employment does not determine directly theGAl exposure Even with

an overall increase in hours of employment cost of GAl could con

ceivably increase as well The breakdown in operation of the prior

day ordering system must be accounted for as an industry misfortune

Had the system worked it promised to promote labor efficiency and

reduce costs ofGAlaccordingly Puerto Ricancarriers would also have

benefited

The increase in GAl benefits e

g

from 1 600 to 2 080 hours was an

industry promised benefit not separable by trades Containerization as

the major concern of the ILA during the 1968 negotiations played a

major role in the increase in GAl benefits Furthermore the increase

inGAl benefits served to divert the ILA from its demands for stuffing

and stripping all containers a concession that would particularly

benefit a fully containerized trade such as the Puerto Rican

GAl unlike pension welfare and clinic or shortfall cannot be

calculated by reference to the 40 million hour guarantee contained in

the lLA Contract Pension welfare and clinic are fixed sums based

upon the 4O million hour guarantee 0 75 times 40 million hours and

0 495 times 40 million hours or 30 million and 19 800 000 for pen

sions and welfare respectively for 1970 71 GAl as we have seen

is a variable depending on many factors chief among them being

the number of men receiving payments GAl must be funded by rely

ingon advance estimates which are subject torevision as actual experi

ence dictates Ifthere is an underestimate as there appears to have

been for GAl any previous rate of assessment designed tocover GAl

must likewise rise The 0 55 per man hour rate which had been ef

fective for all parties under the previous man hour basis for assess

ments would necessarily have been increased The same rate applied

under the excepted category and indeed was increased by 0 835

15 FMC
270 FJilDERAL MARITIME COMMISSION

in December 1970 As Captain Haynes explained the 0 55 per hou

rate was geared to the estimate of 156million for GAl in 1969 70

whichescalated toover million

In summary GAl should be considered tobe an industry obligation

guaranteed tothe lLA in return foranumber of benefits chief among

them being the freedom to move containers generally without stuffing

Ilnd stripping GAl unlike shortfall cannot be traced exclusively to

anyone trade Therefore all parties including carriers serving the

Puerto Rican trade have not asserted any objection tobearing thei

share of GAl costs This leaves us with the question of determining a

fair share of such costs

In our opinion a revision tothe Puerto Rican contribution unde

Agreement No T 2390 is warranted Although the trade may have

been relieved of shortfall expense on the grounds of lack of responsi

bility this argument fails towithstand analysis inthe caseofthe GAl

The most significant factwhich wasdeveloped since the closing of the

earlier record is the substantial escalation in the cost of GAl far be

yond anyone spredictions ThePuerto Rican trade enjoyingthe bene

fit of aman hour J essment designed to apply to marginal and spe

cial type highly productive cargoes would naturally contribute an

amount significantly lese than under the regular level of assessment on

thll man hour tonnage basis which has since escalated in the tonnage

portion from 123 to3 23 The NYSA has estimated a

savi tgs tothe

trade of over 6 million or an avoidance of assessments as it is de

scribed Counsel for a group of breakbulk carriers has calculated the

savings tothe Puerto Rican trade on an annual basis tobe 4 952 537 18

His calculations also show that the Puerto Rican contribution is so

low on the excepted basis that it is evenlese than half what the con

tribution would have been under the earliertonnage rate 123 which

has since almost tripled

Hearing Counsel do not advocate an increase in the Puerto Rican

contribution merely on the basis of a comparison of total aggregate

payments This lends itselftofinger pointingby one ent ofthe in

dustry toward another and toallegations that another segment is no

contributing enough in the aggregate as well Rather the basis forthe

proposal is the fact that atthe 0 55 perhour level the trade could not

be paying its fair share of total costs of GAl for the simple reason

that this figure was geared toearly estimates of 156and 15 million

which have been proven tobe substantial understatements What had

been estimated as total cost of GAl for the 2

year life of Agreemen

The record ehowe a total annual P R contribution of l M8 808 ullder the lM pe

mall hour uceptad rate a oppo 84 to 8 T88 M8 uuder the 11I1 level of emell

011 a mall hour toll ba le TheUerellce Ie 8811 88T

111 FMO
AGREEMENT NO T1I311M NEW YORK SHIPPING ASSOC 271

No 2390 in the amount of 30 6 million appears tobe in reality closer

to 56 miJJion Under a O Mper hour rate of assessment there would

necessarily be no contribution to the additional amount Evenincreas

ing the 0 55 per hour rate by 0 835 as wasdone by the Board of Di

rectors of the NYSA in December 1970 and applying it for the full

year 1970 71 rather than for the 42 3 week period as didthe Board of

Directors the additional contribution would have amounted to only

843 000 or merely 3 3 percent of the increase This illustrates to us

that the man hour basis for funding GAl is inadequate even at the

increased levelof assessment

Under the circumstances Hearing Counsel proposed that the pres

ent decision of the Commission to place the Puerto Rican tradeunder

the excepted man hour level of assessment should be modified so

that the trade will contribute a fair share of GAl costs Such ashare

they submitted would be 10 percent of the total costs ie 5 609 731

0 10 times 24 340 472 plus 31 756 842 The 10 percent is derived

from the approximate percentuge of tonnage which the record indi

cates to be the share of total volumeenjoyed by that trade

Under this proposal the carriers serving this trade would continue

to be assessed for pension welfare clinic and NYSA administration

at the man hour excepted level and would still be relieved of short

fall The only change would be an increased contribution toward GAl

thus insuring that thisgrowing and substantial trade would contribute

adequately to an industry problem This proposal is consistent with

our earlier decision since it is based upon the principle of responsi

bility By leaving the pension welfare and clinic assessments on the

man hour basis ie at 0 75 and 0 495 per hour as pmvided in the

lLA contract no hidden contribution toward shortfall will be made

This is so because those hourly rates of assessment werepremised on

the assumption that the port would work 40 million hours annually

overall Had this happened the pension and welfare clinic obligation

would have been fully funded An increase over the 0 75 and 0 495

levels is necessary because the actual total is substantially less than 40

million and therefore would be related tothe shortfall problem from

which wehave relieved thePuerto Ricantrade

Therefore if applied on a retroactive basis to October 1 1969 in

order toprevent the unfairness inherent in a prospective only increase

in the rate of assessment cited by Seatrain and TTT the Puerto Rican

trade would pay on a man hour basis for pension welfare and clinic

and NYSA administration on a

tonnage basis for GAl and be re

11According to the record with the 0885 Increase P R would contribute 2 689 916 but

only 1 846 808 at the original man hour level The dl1ference Is roughly 843 000 whlcb

Is 8 8 of the 25 4 mUlion Increase In GAl costs over the earlier estimates

1lS FMO
272 FEDERAL MARITIME COMMISSION

I

lieved of shortfall We believe that this is a reasonable compromise

between the Puerto Rican position namely everything on a man hour

basis r

t 2 559 per hour and the NYSA position everything on the

logul r mWl hour tonnage basis at 0 93 per hour and 3 23 per ton

presently Ie not only requires the Puerto Rican trade like all others

to contribute toward the industry problem of escalating GAl costs in

an adequate fashion but also cushions the trade against the severe in

crease in costs for containerized operations which results from ashift

from astrictly man hours basis of assessment totonnage

Since the total share of GAl costs for the Puerto Rican trade is

simply lQpercent of the total GAl or roughly 5 6 million and the

approximataassessable tons are roughly 2 6 million annually or 5 2

million for the life of Agreement No T 2390 the GAl cost per ton

is 108 However since payments already made by the three carriers

involved at the 0 55 and 1385 per hour levels and the 0 647 per ton

rate will be credited all that remain is for these carriers to make up

the difference between 5 6 million and these actual payments made

toward GAl an amount which the record shows would be consider

ably less than 4 5 million s

Since the overriding concern of every party naturally is how much

will it cost any proposed increase met with opposition and contentions

that the Puerto Rican eoonomy is still severely affected by poverty in

flation and unemployment and that any increase in transportation

costs would have an adverse effect It was also argued that if the

Puerto Rican trade is underassessed so are breakbulk operators or

intercoastal and bulk carriers In our opinion none of these conten

tions demonstrates that the proposal is not fair and reasonable

Poverty inflation and unemployment are serious problems affecting

the Commonwealth Nevertheless the Puerto Rican economy has made

significant gains in grOBS naMoualproouct and per capita and family

income despite inflation and importantincreabllS in particular costs

especially wages The Commonwealth of course strenuously OppOBE S

any increase in costs of transportation because it feels that any in

crease may adversely affect its programs and theColIll llission was

equally concerned in its earlier decision However eventhe Conunon

wealth realizes that it must bear a fair share of cost increases As its

As Ssatrsln shows pla lnr the Pnerto IUcan trade In the regolar assessmsnt level

woUld m anan Increa e tor lontalnerlSed Pnerto Rican carrlers from fl 84 or fll 8T per

hour to overf9 per hour ex ludln contalnerroyalty

18 As S atraln points OBt tliere was a surplus In the GAl account tor 1985 89 ot

fl 480 81l1whlch should be dOductedtrom the total GAl obllgatloniJ tor 1989 TO and

19TO 71 This leaves totalGAl obllratlons of fG4 818 TOll This also requlrss a minor adjust

ment to the proposal redu ln thePusrtuRlcall share of GAI by f148 081

111 FMO
AGREEMENT NO T2336 NEW YORK SIDPPING ASSOC 273

economic witness stated in connection with the proposed rate increases

filed by the three carriers servingthe trade

Ifthe Commission finds that the service connected cost increases justify a part

of the rate inereases our economy will have to adjust to the economic conse

quencesof this finding

The witness further explained that the Commonwealth had to con

sider the possibility that an increase in rates in some amount might

become effective with a total increase in ocean transportation costs

of 25 million orless The witness assumed that the totaltransportation

cost increases to Puerto Rico if the trade were taken out of the ex

cepted category would be some 6 million Based on total transporta

tion costs of 125 million such an increase would mean a 3 or 4 per

cent rise Actually 48 percent Ifthe Commonwealth can adjust to a

possible 25 million increase in overall transportation costs it can cer

tainly adjust to one of only 6 million Moreover under Hearing Coun

sels proposal the increase in cost to the Commonwealth would be less

than 4 5 million which amounts toonly 3 6 percent ofthe total figure

of 125 million Since February 1971 the trade has been subject

to a 3 percent bunker surcharge which it is apparently bearing Of

course the Puerto Rican carriers who contend that there should be

no increase over the excepted level of assessments because any in

crease would have adverse effects on the Puerto Rican economy are

themselves seeking far more substantial increases in the amount of 18

percent and 28 percent for containerload and less than containerload

shipments respectively See FM C Docket Nos 71 30 7142 7143

In Docket No 71 30 furthermore TTT produced evidence that such

increases would have minimal effect on price levels in San Juan that

they would not interfere with traffic in the trade and that the Com

monwealth wasenjoying growth in per capita and family income 1S

Another argument raised by the Puerto Rican interests is that one

should look to other excepted cargoes and or trades to cover any

deficits rather than to the Puerto Rican trade ie intercoastal coast

wise bulk sugar lumber at lumber terminals bananas automobiles

Alaska and Hawaii which are placedin the excepted category None

of these other interests however is truly comparable to the Puerto

Rican trade These other interests cannot compare with the Puerto

Rican trade in terms of special benefits received from the collective

1

To counteract this obvious inconsistency in positions TTT attempts to distinguish

the proposed rate Increases and the present assessment on the grounds that the former

is a service connected cost and the latter noDservice connected Of course to a eon

sumer in San Juan this distinction Is meaningless since the Impace would be the same

Itis unnecessary to Unger over the merit or lack of same for such terminology since if the

Puerto Rican trade contributes its fair share of the costs of labor under any formula such

costs must be considered to be aproper cost of service

15 F M C
274 FJllDlllRAL MARITIME COMMISSION

1

bargaining agreement whioh permitted the fully containerized trad

to oplate without a variety ofrestrictive oonditionsapplicabletoco

tainers Neither bulk scrap Ild sugar bananas nor automobiles wr

the cause ofthe ILA sconcern when it made its initial demands regar

ing stuffing and stripping Any extremely produotive oargoes suo

as bulk would suffer adrastic increase in costs in ashift from hours t

tons It would not therefore be fair to shift such a disproportionat

burden onto such cargoes whichhad little to do with the central issu

in the labor negotiations and consequently derived relatively fe

benefits comparedtocontainerized operators

No new evidence was offered regarding the Alaskan and Hawaiia

trades indicating that the NYSA isn tmuch concerned if these trade

remain in the excepted status No tonnage moves between New Yor

and Alaska The Hawaiian trade is negligible and is also subject t

diversion via west coast ports Clearly these two trades are n

comparable tothe Puerto Rican

Intercoastal and coastwise trades are not negligible according 

New York Port Authority data These trades are treated different

under theILA contracts than is the Puerto Rican which istreated lik

the deep sea trades They are ofcourse subject to rail and truck com

petition whiohis not true of Puerto Rico How much of the trade 

containerized is not shown by the record although the port authorit

attributes arise in overall coastwise trade inoluding Puerto Rico b

its definition tothe adoption ofcontainerization

Although the port authority s data regarding coastwise tonnag

show no gradual decline after dedu lting Puerto Rican cargo neithe

do they show a prosperingtrade enjoyingsteady growth Totalvolum

for 1969 was estimated to be 4648 400which is substantially belo

the volume for 1966 i

e 5 111 700 and not significantly over that fo

1960 ie 4M9 6oo Furthermore the coastwise trade even in

cluding thestesdily growing Puerto Rican trade has never reache

the levels it enjoyed prior tothe Second WorldWar when total ton

nages consistently exceeded 5 and 6 million reaching a peak of 6 

million in 1937 This situation is to be compared with the Puert

Rican trade which has quadrupled between 1958 and 1969 from 650

000002 630 000 assessable tons AceordingOO the NYSA s record

the intercoastal trade seems to be declining judging by the amoun

of container royalty payments made between 1966 and 1969 Accord

ing to these records interooastal tonnage subjeot to royalty decline

from 1 175286 in 1966 to 496281 in 1969 Captain Evans of the NYS

Assessment Committee also indicated that the intercoastal trades wer

11 FX a

I
AGREEMENT NO T 23316 NEW YORK SHIPPING ASSOC 275

considered marginal in the belief that volume and profits were de

clining and because of inland competition

The everpresent factor of inland competition to which the inter

coastal trades are subject of course further distinguiShes these trades

from the Puerto Rican The basic principle underlying the establish

ment of the excepted cargo category is that such cargo if forced to

bear an assessment on tonnage might be diverted from the port of

New York and thereby cease even limited or marginal support of

fringe benefit costs If one argues that the intercoastal assessment

should also be revised if such happens to the Puerto Rican trade he

is gambling that such an increase would not ultimately deprive the

NYSA of revenues because of diversion to rail truck or other ports

He is also comparing unlike situations As the Examiner had found

inhis earlier decision

The steady growth every year since fiscai 1957 1958 in the New York Puerto

Rican trade shows that It is not likely to dry up orwither away because of any

reasonable increase in assessment Therefore tbere appears to be no substantial

reason to blanket this entire Puerto Rican trade under the excepted cargo

status There is little likelihood that this cargo as a whole wlll be diverted to

other modes of carriage as in the case of domestic intercoastal or intercoastal

cargoes which aresubject to rail and motor truck competition

The Puerto Rioan interests also contend that the brealrlmlk opera

tors are underassessed and are enjoying a windfall It would per

haps be desirable if the entire formula could be reworked so that

every interest could be carefully examined and assessments revised in

an attempt to achieve a more equitable allocation Atthis stage in time

such an exercise would lead to administrative complexities which

would offset any slight improvement that could be achieved The most

glaring inequity as we have stated is the underassessment of the

Puerto Rican trade which has caused a shift of some 6 million in

costs to the remaining cariers subject to assessment The breakbulk

operators do realize a reduction in costs per ton or per hour compared

to the previous man hour basis of assessment This is so because any

carrier with low productivity will have comparatively fewer tons per

hour on which to be assessed But all the members ofthe NYSA real

ized this fundamental effect when they voted unanimously to depart

from an exclusively man hour basis IfthePuerto Rican carriers op

pose such reduction in cost for breakbulk operators then they would

be opposed to any uniform tonnage basis for assessment since under

such a basis the breakbulk operators stand to benefit However the

Examiner and the Commission have already found that the partial

15 FMC
276 FEDE RAL MARITIME COMMISSION

tonnage basis is fair for a number of reasons We might further add

that if the breakbulk operators do enjoy a reduction in allocation o

costs they have been overassessed not only inthe past but for the firs

year of the present contract as well since agreement No T 2390 ap

plies only to the last two years of the current abor contract ie

1969 70 and 1970 71 Therefore if the breakbulk operators enjoy a

cost savings presently so did the containerized and ro rogroup fo

many yearspreviously

In order totest the contention that breakbulk operators are indeed

contributing less than tJheir full share toward total obligations fo

the year 1969 70 hearing counsel have calculated the total breakbulk

contribution and compared it with the volume of breakbulk tons using

a similar methodology as that employed by TTT The results are

surprising Apparently owing to the man hour portion of tlhe agree

ment No T 2390 formula whieh as we have said would overasses

breakbulk these operators contribute 37 million or 52 percent toward

the total obligations of 70 923 743 although breakbulk tons comprise

only 12 3 million or 44 7 percent of totwl volume of 27 5 million tons

This calculation employs NYSA Assessment Committee estimates fo

the 1969 70 contract year and was calculated at the then 0 93 per hou

and 123 per ton rate of assessment Itdemonstrates that for the firs

year of Agreement No T 2390 the breakbulk operators werenot un

derassessed on an overall basis This is to be compared with the Puerto

Rican aggregate contribution of 3 percent compared to around 10 per

cent of total volume

Finally both Seatrainand TTThave contended that they should

contribute at the excepted rate for reasons relatingtotheir financiw

statJements TTT contJends that increasing its payments to the leve

of the regular assessment would he financially disastrous and Sea

train contJends that financial information is relevant to the issues in

these proceedings under the public interest standard of section 15

Fortheyear 1969170

Breakbulk Oontributlon

28 628 921 hou

X O 98

21 970 246 58

plus

12 284 489 tOile

X 1 28

15 109 859

21 970 247

15 109 859

87 080 106

OomparIBoll WltllTotalo

87 080 106

52

70 928 748

DB tons 12 284 43D

447

lolal tOilS 27 480 000

11 FMC
AGREEMENT NO T 231316 NEW YORK SHIPPING ASSOC 277

Relevancy of ability to pay as a standard has been disputed by

Wallenius and the breakbulk group Ifsuch a standard is relevant in

effect it means that the financial burden of certain carriers shoUlld be

relieved at the expense of other carriers In his prior initial decision

theExaminer indicated that a proper assessment for thePuerto Rican

trade could be determined without reliance on the financial situation

ofthe twoPuerto Rican carriers who raisedthe issue 21

In their treatment of the automobile issue hearing counsel argued

as follows

A highly productive cargo such as automobiles suffers an extremely

severe increase in costs in any shift to atonnage basis for assessment

although automobiles were not the major cause of ILA concern nor

the chief beneficiary of the collective bargaining agreement Underthe

principles enunciated by the Supreme Court in the VolksUlagen case

22

it is necessary to determine whetherthe severe increases in costs which

automobiles suffer are reasonably related to the benefits received

The assessment on automobiles presently at 3 23 per ton casts an

unreasonably disproportionate burden on this cargo even when the

ton is measured at 20 percent The productivity of automobiles is so

high that the 20 percent tonnage basis for assessment increases costs

over seven times for conventional automobile carriers from 0 93 to

6 66 per hour and over 13 times for ro ro carriers from 0 93

to 12 51 There is scant justification for such an assessment The 20

percent measurement rate of assessment appears simply to have been

copied from the PMA agreement on the west coast where the normal

rate of assessment was a mere 27lh cents No consideration seems to

have been given to the fact that cargo which played little role in the

substantial increases in fringe benefits suffers the greatest increase in

costs compared to the previous level of assessment The NYSA further

more seems to have ignored the recommendation of Captain Evans

concurred in by Mr Lambos who constitute two thirds of the Assess

ment Committee which formulated Agreement No T 2390 that auto

mobiles be assessed simply on a weight ton basis Clearly then some

21 The third and largest Puerto Rican earrier Sea Land Service Inc did not oppose

Agreement No T 2390 nor urge that the Puerto Rican trade be excepted in the earlier

proceedings After the Commission s decision of November 20 1970 however this carrier

bas actively participated in the proceedings In support of the decision to except the

Puerto Rican trade The record shows that the then president and now chairman of

Sea Land Mr McEvoy was one ot the members ot the NYSA Assessment Committee which

unanimously recommended the adoption ot Agreement No T 2390 without exception tor

Puerto Rico Sea Land alone ot the three Puerto Rican carriers paid on the regular

manhour tonnage basis for Puerto Rico from the inception of T 2390 to November 1970

b

VolkBWagenwerk Aktfenge8eUBchaJt v Marine Terminal8 Corp Docket No 1089 9

F M C 77 1965 a1r d ub nom Volk wogenwerk Akttenge el chaft v Ped ral Maritim

Oomm 125 US App D C 282 371 F 2d 747 DC Clr 1966 rev d and remanded 390

U s 261 1968

15 FM C
278 FEDERAL MARITIME COMMISSION

thing other than the present rate of assessment is required in all

fairness

At various stages of th prooeedingsthe automobile carriers have

suggested the followingrates of assessment 5 85 percent measurement

10 percent measurement or weight tons and excepted cargo status

Each of these suggestions has merit and itis of course impossible to be

precise in acase of this kind In the interests of compromise and for

the following reasons we suggest that the weight ton basis would be

fair and reasonable

The 5 85 percent measurement rate proposed by Wobtrans is based

upon an equalization of costs with breakbuUl operators The rationale

is that automobiles had as little to do with the increase infringe bene

fits as breakbulk and derive no more benefit from the 1968 Genelal

Cargo Agreement than does breakbulk This at least is a principle

on which to formulate a rate of assessment incontrast to merely copy

ing a rate existingon the westooast or comparing present costs per

ton without regard to the quantum of increase over previous levels

However in relying on a comparison with breald ulk operations the

proposal ignores the fact thatbreakbulk and automobiles are not com

pletely comparable The record shows that bl 8lkbulk operators hav

ing the lowest productivity suffered the greatest cost burdens under

the previous man hour rates of assessment and were therefore prob

ably overassessed in the past compared to more productive operators

This imbalance furthermore continued through the first year of the

ourrent ILA contraot ie 196869 Thus on a per ton basis at the

0 93 per hour rate current at the end of the previous labor contract

automobiles would have oontrtbuteda mere 0 10 per ton as compared

to a breakbulk rate of 1079 18 As the Examiner found in his prior

decision

It llkewise folloWs ttlat maybe automobUflII were underaeSeB8ed 111 lJltet yeare to

tile extent thattheirhigh productivity ratee and the man hours formula produced

low entB perautomobUe

We do not contend that because ofthis past history automobiles should

now be helkvily penali with sevenfold increaBeIl in posts Qur pur

pose is merely toshowthat breakbulk and automobile operations are

not completely comparable

If automobiles wereplaced under the ijexcepted rate of assessment

they would contribute atthe rate of 67 per hour preently 1 8

plus O 83lJpelhour This is practically the same as whatautomobile

wo ld pay at the 5 85 percent measurement basis 2 67 compared to

ThH IIms

are derived b

dlvldln the ptodnetlvtty faotors of 8 9 and 0 31 tons pe

hour Into 10 98forautomobUH and breakbulkrespectively

11l1l MO
AGREEMENT NO T 23la 6 NEW YORK SHIPPING ASSOC 279

2 61 per hour converted on the 5 85 percent measurement basis Be

cause of high productivity 8 9 tons per hour for Wobtrans vehicles

automobiles would be paying at the level of merely 0 30 per ton

2 67 divided by 8 9 Although under the excepted rate automo

biles would surely not be paying toward shortfall with which they are

not directly involved they would be enjoying rates which were de

signed to protect marginal traffic Moreover on a man hour basis if

any increases in productivity have occurred by a change inthe propor

tion of ro ro to conventionally loaded automobiles automobiles would

escape further contribution

A weight ton basis is a compromise position Itrepresents about 10

percent to 12 percent measurement and thus falls between the 5 85

percent suggested by Wobtrans and the 20 percent presently assessed

by the NYSA It is simple lnd was recommended by Captain Evans

oftheAssessment Committee and later concurred in by Mr Lambos

It would reduce the cost per hour substantially from 6 68 to 3 81

much closer to the breakbulk contribution of 2 61 than to the con

tainer at 9 13

As we noted before it is acceptable to Wobtrans and Wallenius as

an alternative solution to end litigation Although the NYSAhas es

timated that such a solution would result in a considerable reduction

this would be more than offset by revising the assessment on thePuerto

Rican trade as we have determined Therefore in our opinion this

proposal constitutes a reasonable compromise o

Likewise we look upon hearing counsels treatment and proposal

of the newsprint issue as supportable and with considerable merit

Accordingly we will set forth their presentation ofthisissue substan

tially in the mannerpresentedtous

In our opinion the newsprint interests have shown that neither the

NYSA s Assessment Committee nor its Tonnage Review Committee

has sufficiently considered the severe impact on newsprint resulting

from the regular man hour tonnage assessment underAgreement T

2390 Nor have they applied the tests of the Volkswagen case namely

relating benefits to burdens and determining whether any cargo bears

24 A Wobtrans vehicle has an average measurement tonnage at 8 7 and aweight tonnage

of 0 87 For WaUenlus the average imported car Is 9 tons measurement and 1 008 weight

i

e 9 to 1 average export Is 13 measurement to 1 6 weight or 8 1 to 1

0 93 3 23 times20 tlmes 8 9 6 68 per hour

0 93 8 23 times 10 times 89 8 81 per hour

We reall ethat forWallenlus aweight basis would result In sUghtly higher costs on

the average 12 measurement than forWobtrans because of the heavier Wallenlus auto

mobiles Wallenius is presently passing on the 2000 assessment by a special surcharge in

its tariffs but bas specified that it will refund to shippers any amount found by the

Commission to be excessive In this case such would be the difference between the higher

contribution at 20 measurement and the lower at the 12 level

15 F MC
I

I

280 FEDlll RALMARITIME COMMISSION

It disproportionate increase in assessment Thus the Tonnage Review

Committee relies heavily on a mere comparison of present costs per

ton without regard to diffarencesin productivity or the quantum of

increase over the previous level of assessment Nor did the committee

agree with Captain Evans of the Assessment Committee who testified

that a highly productive commodity like newsprint in all probabil

ity would possibly be hurt Aside from the many ques

tionable practices followed by the committee in its procedures which

have been mentioned by Wobtrans as well as the newsprint interests

the failure of the committee to apply the Volk8wagen standards is

a fatal error As a non innovative commodity newsprint was not in

volved in the containerization issue which led tothe sizable increases

in fringe benefits and consequently newsprint derived fewer benefits

from the labor contract than did the innovators The Tonnage Review

Committee however seems to ignore this consideration completely

Later evidence has developed which indicates diversion to inland rout

ing as pointed out by the newsprint interest This possibility dis

counted by the committee is supposed to be afactor in favorof ex

cepted or similar status

The newsprint interests show that their cargo suffers an increase o

1346 percent atthe present 3 23 per ton assessment level over the pre

vious 0 931 per hour rate applicable under the previous labor con

tract This is tobe compared with an increase ofonly 180 percent fo

the breakbulk operators Certainly this is a disproportionate increas

in cost for a cargo which has not changed its handling methods fo

more than 30 years The problem therefore is to determine what in

crease in costs would be afair share fornewsprintto aseume

The newsprint interests suggest either excepted status or a rate

of assessment which would equalize the percentage of cost increas

with that borne by breakbulk In terms of cost per ton both sugges

tions work out to be the same ie 0 686 per ton at the present ex

cepted rate and 0 67 at the rate equalized with the breakbulk in

crease

1 There is some merit to either suggestion Excepted statu

would relieve the possibility of diversion and of contribution towar

shortfall with which this noninnovative cargo is not directly involved

It would also place newsprint together with bulk and lumber whic

are also higWy productive specially handled cargoes The alternativ

suggestion is based on the principle that every noninnovator shou

bear the same proportionate increase in costs The newsprint interest

do not suggest that newsprint enjoy special relief forever but on

or The pre ent 2 67 per hour excepted rate divided by productivity of 890 ton p

hour equal 0 686 per ton The alternative ugge tlon I 0 67 per ton

lIS FMO
AGREEMENT NO T 2313 6 NEW YORK SmpPING AsSOC 28

while the NYSA is saddled with amodernization tax as it clearly is

presently as a resultofthe 1968 negotiations

The suggestion for excepted status suffers from the fact that this

is arock bottom rate of assessment designed formarginal commodities

which would cease to move via New York on a tonnage assessment Al

though the record does not indicate the productivity for bulk obvi

ously it would be on the high side and in the case of sugar this

commodity is already paying a

royalty Uncontroverted evidence also

indicates that lumberfaces inland rail competition

The alternative suggestion based upon acomparison with breakbulk

assumes that newsprint and breakbulk are entirely comparable but as

we have seen in the case of automobiles this is not the case Because of

vast differences in productivity 3 90 for newsprint compared to 0 52

for breakbulk breakbulk suffered from overassessment in the past on

the man hour basis even duringthe first year ofthe current labor con

tract which is not the case for highly productive newsprint The rela

tively smaller increase in cost for breakbulk therefore has an equitable

basis

Reducing the newsprint assessment to the excepted or 0 67 per

ton level in the alternative would lower the newsprint contribution

annually by about 846 000 as estimated by the NYSA Newsprint

moves over 300 000 long tons which would be over 400 000 measure

ment tons per year through the port and is the sixth largest inbound

commodity in the port S

By either suggestion newsprint would be relieved not only of costs

of shortfall but of a fair share of GAl as well The excepted rate

of assessment as we have seen in thePuerto Rican situation is not an

adequate rate to fund the costs of GAl especially with its substantial

increases As the NYSA has pointed out newsprint is not free of re

sponsibility for the GAl problem maintaining a small work force

on a nonfull time basis and creating a possible exposure to GAl pay

ments estimated at 400 000

As in the case of the Puerto Rican trade we therefore find that

newsprint should be placed in the excepted category for all costs

except GAl as to which it should remain on the tonnage basis and

that newsprint should be credited with or refunded the excess pay

ments already made underthe regular rate of assessment

One final observation should be made the agreement under con

sideration in this proceeding by its very nature has invited the contro

versies and extended litigation that we have seen here There is simply

28 Danlels Kennedy Inc discharged 336 270 Measurement tons 1n fiscal 1969 70 which

Is 80 percentof the total

15 FMC
I

J

I

282 FEDERAL MARlTlME QOMMISSION

no way toobtain aperfect formula of assessment for all the divergen

interests that are affected thereby Thill proposition was recognized by

Mr Justice Harlan in his concurring opinion in VoZ1c8wagenwhere in

commenting on an analogous problem faced by the Pacific Maritime

Association he stated

The real dUDculty in this case Is to formulate a workable definition of whethe

the burdens have been unfairly allocated Obviously as the debates in the PMA

indicate there was no Perfect way to apportion the costs Of course

charges need only be reasonably related to benefits and not perfectly or exactl

related 890 U S 261 298 1968

While we fully recognize the frustrllition attendant to equating the

levels of responsibilities for fringe benefits costs with precision rate

of assessment we are convinced that the proposals as detailed above

not only have substantial record support but also obtain a reasonabl

degree ofrelwting benefits derived to the costs imposed including 

reduction of the severity of costs tothese parties had weatlopted th

exIniner s decision

We should also point out that our decision of course applies only t

the obligatio arising under agreement T 2890and the particula

collectivebargaining agreement which createdthe benefits tobe funded

We also recognize that our decision here will necessitate many assess

ment adjustmentsthat simply CllIUlot be helped for these adjus

ments are ordered on the record established in this proceeding only

and will not have appliCation to additional assessment proceedings i

any initiated inthe future

For the foregoingreasons and with the exceptions noted herein w

will adopt the Presiding ExaminerlI d8liion as our own An orde

will be issued approving agreement NOi T 2890 appropriately mod

fied as required hersin

Commissioner George H Hearn dissenting

With respect to the Puerto Rican trade I am notcompletelYlu

suadedthat weshould depart from ouroriginal decision Inthe origina

report in this case the Commission unanimously held that all cargoe

toand from Puerto Rico and the port of New Yorkshould be treate

under the excepted cargo status provided under the excepted carg

provisionof the agreement Agreement No T fJ336 NY8AOoopera

tive Wor1cing Arrangement 14 FMo

9499 1970

Although the decision of the majority represents a fair resolutio

ofthe issues herein and hassupport inthe record Inevertheless believ

that the present record will better support the Commission s origin

decision as to the entire domestic offshore trade and particularly th

Puerto Rican trade Thus the factors which led me to join in tha

decision remain uncontroverted

111 F MC
AGREEMENT NO T2313 6 NEW YORK SHIPPFNG ASSOC 283

The domestic offshore and foreign trades ofthe United States while

similar in many respects as concerns the issues herein are substantially

and pursuasively different in certain controlling aspecls

The domestic offshore trades including the Puerto Rican trade are

subject to utility type regulation by the Federal Maritime Commission

Therefore the rates and practices of carriers in the Puerto Rican

trades may not only be found unlawful by the Commission but we can

suspend their implementation and also order enforced a maximum

minimum rate 46 US C 845 845a In the foreign trades however

the carriers can implement arate increase merely by filing and giving

30 days notice 46 US C 817 b 2 We have no suspensionpower over

such rates and can halt rate increases only after noticeand hearing

Consequently the carriers in our foreign trades can and have in

creased their rates almost at will According to the tariffs on file at the

Federal Maritime Commission and ofwhich wemay take official notice

from 1965 to the present conference rates have for example increased

50 percent to70 percent in many trades serving New York and 77 per

cent inone instance

In the Puerto Rican trade during the same period rates have re

mained relatively stable and prior to the rate increases noted in this

record the last general rate increase in that trade was in 1959 As

the record herein establishes the Puerto Rican tradeis suigeneris and

the Commission has developed a policy of balancing the need for effi

cient ocean service for Puerto Rico and for not overburdening the

Puerto Rican economy with inhibiting freight rates Furthermore the

Commission has discouraged the establishment of rate fixing confer

ences in the offshore Puerto Rican trade

None of these considerations applies to our foreign commerce and I

must concJlude 1Jhat the standards applied in implementing agreement

T 2390 in the foreign trades must differ from those applied in the

Puerto Rican trade

The result reached by the majority goes part way toward recog

nizing that distinction but Ibelieve it would be preferable and more

in tune with the relevant factors if the Puerto Rican and all the

domestic trades weretotally exempted

Commissioner Clarence Morse concuringand dissenting

GAl pensions and welfare shortfall and other fringe benefits are

industry problems and not merely innovator s problems This is so

even though the newsprint and Wobtrans operations predate agree

ment T 2390 Those operations do have some impact and are reflected

to some imprecise degree in the contract negotiated with the union

hence these matters must be considered in arriving at an overrull in

dustry settlement and fundingoftheir costs

15 FMC
284 FEDERAL MARITIME COMMISSION

Puerto Rico The record conclusively shows that for the last 10

years without excepted status Puerto Rico has experienced a con

tinuing and steady growth in hOll I

ly wage rates in income per family

in excess of income over basic living costs in total exports to the

United States in exports to the U S North Atlantic in longshore

man hours utilized in New York and in most other economic indicia

It is a record of steady economic growth and of steady improvement

instandards of livinginPuerto Rico

According to exhibit 94 for the 5 fiscal years from fiscal year 1966

including fiscal year 1970 total tonnage in the US Puerto Rican

trade has increased from 2337 000 short tons to 3 401 000 short tons

Through the port of New York tonnage has increased during that

period from 1 356 000 short tons to2 177 000 short tons or an increase

from 58 percent to 64 percent of the totwl Puerto Rican movement

Of this movement between New York and Puerto Rico some 1 565

000 tons moved toPuerto Rico and 612000 tons moved to New York

In the same 5 year span longshore manchours attributable to the

Puerto Rican trade have increased from 655 800 to 1 003 700 ex 15

The Puerto Rican tradeapproximates 10 15 percent of the port of

New York s aggregate waterborne commerce by tonnage Exhibit 94

discloses fui ther that during said 5 year fiscal period Puerto Rico s

GNP increased from 3 04 billions to 4 61 billions family income

increased from 4 662 to 6 132 per capita income increased from

993 to 1 427 this 1 427 figure is but 36 6 percent of the average

US per capita income and admittedly the standards of living and

income are belowthose existinginthe United States unemployment

rate decreased from 12 1 percent to 10 8 percent and the labor force

increased from 769 000 to827 000

Hence I conclude there is nothing in this record which establishes

that the Puerto Ricaneconomy requires special and favored treatment

Accordingtly I see no justification in this record to grant excepted

status to Puerto Rican cargo and therefore concur in the examiners

conclusion that this trade should be assessed on the same combination

man hours and tonnage basis as is Tegularly provided in the agree

ment for containership ro roand other carriers in othertrades Puerto

Rico already receives speaial tax tariff and other advantages from

the Federal Government To the extent its economy requires additiona

subsidy or special treatment if any such special treatment should be

provided directly and openly by the Congress rather than heing pro

vided indirectly by this agency in an uncontrolled form of hidden

subsidy reduced freight expenses Granting excepted status conati

tutesa laxity in fiscall integrity to whioh I do not subsoribe It is tobe

111 FMC
AGREEMENT NO T 23136 NEW YORK SHIPPING A8SOC 285

remembered also that products of Puerto Rican labor are in competi

tion in the United States with products of our domestic labor market

To the extent that Puerto Rico is favored here then to that extent our

domestic labor is prejudiced

Itis also to be borne in mind that to the extent we allow excepted

status to cargo moving in our purely domestic trades we are thereby

shiftingsuchexcepted costs toour already overburdened foreign trade

In my opinion the record inthiscase discloses no hasis for granting

excepted status to any domestic cargo save for cargo in the coastwise

and intercoastal trades where the ability to meet competition from

rail and trucking carriers is critical to survival of any waterborne

trade Hence Iwould reject excepted status except in respect to the

coastwise and intercoastaJl trades Other than cargo moving toPuerto

Rico the volume of cargo moving between New York and our non

contiguous trades and territories is nominal

Automobiles Iwould assess all automobiles including those in the

Puerto Rican trade on aweight ton basis

Newsprint Iwould establish a formula on a weightand or measure

ment basis which will achieve the same relative assessment as the as

sessment on automobiles Iwould accept the basis proposed at page

281 of this report but only if it achieves my objective Neither news

print nor Wobtrans are innovative operations Both are highly pro

ductive operations and for this reason should be assessed on 11 com

parable basis

In all other respects Iconcur with the majority Ido so however

on the assumption and belief that all members of the New York

Shipping Association are in fact either common carriersby water or

shipping agents acting as the alter ego for common carriers or other

persons subject to this Act that is to say that the stevedoring com

panies and other nomcommon carriers which are members of NYSA

are other persons subject to this Act in that they are companies in

fact carrying on the business of forwarding or furnishing wharfage

dock warehouse orother terminal facilities in connection with acom

mon carrier by water If my assumptions and beliefs wereproven ill

founded Iwould have serious and fundamental problems concerning

our jurisdiction over this agreement under section 15 for the simple

reason that section 15 by its express terms refers to filingand approval

only of agreements between common carriers by water and other per

sons subject to this actnot to filing and approval of agreements be

tween common c8rriers by water other persons subject tothis act and

strangers to this act ie mixed membership agreements which

include persons who are neither common carriers nor other persons

15 F JfC
286 FEDERAL MARITIME COMMISSION

I have given serious consideration to Wobtrans suggestion that I

recuse myself on the hasis of my prior association and aotions while

on the hoard of directors of PMA at the time when the Pacific Coast

Mech cost allocation formula was adopted in 1961 At oral argument

herein I indicated my then view that my prior PMAassociation and

actions should not and did not preclude me from deciding the instant

case with impartiality and objectivity Further retlectionlf have not

caused me toalter my conclusion The easy way out both in respect to

my workload and in respect to eliminating this possible ground for

appealing from this report is to recuse myself but I conclude that

such action isneither necessary desirable noradvisable

SEAL 8 FRANCIS C HURNEY

Secretary

UF Y C

i

i
FEDERAL MARITIME COMMISSION

DOCKET No 69 57

AGREEMENT No T 2336NEW YORK SHIPPING ASSOCIATION

COOPERATIVE WORKING ARRANGEMENT

Nos 71 2 718 71 26 AND 71 34

TRANSAMERICAN TRAILER TRANSPORT INC SEATRAIN LINES INC

DANIELS KENNEDY INC CHANDRIS AMERICA LINES INC GREEK

LINE INC HOME LINE INC INCRES LINE

l1

THE NEW YORK SHIPPING ASSOCIATION INC

ORDER

The Federal Maritime Commission instituted this proceeding to

determine whether we should approve disapproveormodify a certain

assessment agreement adopted in accordance with the bylaws of and

by the membership of the New York Shipping Association Inc

NYSA and the Commission having this date made and entered its

supplemental report on reopened proceeding and on consolidated pro

ceedings adopting the examiner s initial decision therein except as to

certain modifications of the subject agreement which report and

initial decision are made a part hereof by reference

Therefore itis ordered That pursuant tosection 15 Shipping Act

1916 agreement No T 2390 as modified herein is approved effective

October 1 1969

Itis further ordered That NYSA within thirty 30 days from

the date of service of this order submit to the Commission a

report

containing the manner and method adopted by NYSA to accomplish

the adjustments in the assessments as are made necessary by the terms

and conditions of the approval of T 2390 grantedherein

Bythe Commission

SEAL FRANCIS C HURNEY

Secretary

287

15 FM C
FEDERAL MARITIME COMMISSION

DOOKET No 69 57

AGREEMENT No T 2336 NEW YORK SHIPPING ASSOCIATION

COOPERATIVE WORKING ARRANGEMENT

Nos 71 2 71 8 71 26 AND 7134

IRANSAMERICAN TRAILER TRANSPORT INC SEATRAIN LINES INC

DANIELS KENNEDY INC CHANDRlS AMERICA LINES INC GREE

LINE INC HOME LINE AGENCY INC INCRES LINE

11

THE NEW YORK SHIPPING ASSOCIATION INC

Agreement No T 2390 of the New York Shipping Association providing 

assessment formula to meet certain obligations In collective bargaini

agreements with the International LQngshoremen s Association AFLCI

when subjected to certain modifications found not to be unjustly discrimin

tory norunfair as between carriers shippers exporters or Importers n

to be otherwise unlawful In violation of the Shipping Act 1916 Al1seme

No T 2890 as modified herein approved

Alfred Giardino O Po Lamboa and Donato Oa 1WJo for respondent

the New YornShippingAssociationand its members

Edward D ROIlUJom forintervener the PacificMaritimeAssociatio

Stanley O Sher Alan S DOIIJia and Joaeplt Adams for intervene

States Marine International Inc Isthmian Lines Prudential Gra

Steamship Co Atlanttrafik Barber Lines Blue Sea Line Concord

Line Hellenic Lines Hoegh Lines Meyer Line NedlloydLines a

Norwegian America Line

Ronald A Oapone John Williama and Rusael T Weilforinterven

and complainant Transamerican Trailer Transport Inc

Neal M Mayer and M ar vin J Oole forintervener and complainan

Seatrain Lines Inc and for complainants Chandris America Line

Inc GreekLine Inc HomeLine Agency Inc nnd IncresLine

Gerald A Malia and Paul J McElligott for intervener Sea Lan

Service Inc

Alan F Wohl8tetter for interveners the United Fruit Co and Wa

leniusLine

288

1 1I M C1
AGREEMENT NO T 2313 6 NEW YORK SHIPPING ASSOC 289

Herbert Rubin Philip Elman and Oeaelia H Goetz for intervener

Wolfsburger Transport Gesellschaft m bH

Joseph F Kelly Jr for complainant Daniels Kennedy Inc and

for intervener the Madden Corp

Walter E Maloney andBradley R Goury for interveners American

ExportIsbrandtsen Lines Inc Atlantic ContainerLine Dart Steam

ship Co Moore McCormack Lines Inc Hamburg America Line and

North German Lloyd

Robert AI Vorsanger and Frederick AI Porter for interveners

American Sugar Co and the American Sugar Refining Co of New

York

William Warnerfor intervener Wilford McKay Inc

Willimn F Giesen for interveners Universal Terminal Stevedor

ing Corp International Terminal Operating Co Inc Pittston Steve

doring Co Inc John W McGrath Corp Bay Ridge Operating Co

Inc Nacirema Operating Co Inc and Noltheast Stevedoring Co

Inc

Samuelll Moerman Arthur L Winn Jr and F A Mulhern for

intervener the PortofNew YorkAuthority

Mario F Escudero Dennis N Barnes EdwardAptaker and Robert

A Peavy for intervener the Commonwealth of Puerto Rico

NormanD Kline and Donald J Brunner as hearing counsel for the

Federal Maritime Commission

INITIAL DECISION OF CHARLES E MORGAN PRESID

ING EXAMINER 1

ON REOPENED PROCEEDING AND

ON CONSOLIDATED PROCEEDINGS

All of the subject proceedings including the reopened investigation

in No 69 57 and the four complaints against the New York Shipping

Association NYSA are concerned with the lawfulness ofthe assess

ment agreement No T 2390 of NYSA and the proper mannerof

implementing this assessment agreement The assessments under this

agreement are for the purpose of raising the moneys for the so called

fringe benefit obligations of NYSA to the longshoremen of the port

of New York specifically the benefits of pensions welfare and clinics

guaranteed annual income GAl shortfall of hours worked and

administrative expenses of NYSA The agreement No T 2390 ex

pires September 30 1971

The background situation largely has been detailed in the prior

initial decision of the presiding examiner served on August 13 1970

1

This decision became the decision ot the Commission June9 1972

15 F M C
290 FEDERAL MARITIME COMMIl lSION

i

I

I

und in the Federal Maritime Commission s decision served on Novem

ber 20 1970 These two decisions should be read as part of the fol

lowing decision In addition to the reopened issues there are severa

new issues added to the old proceeding by the new complain

proceedings

On December 4 1970 NYSA petitioned for reco1 Sideration of the

Commission s

report and order served November 20 1970 and the

Commission on December 11 1970 grantedreconsideration of itstreat

lllent of the Alaskan and Hawaiian trades was denied and these two

trades are no longer in issue The Commission on March 11 1971 re

opened No 69 57 and said it did so in order to reevaluate its treat

ment of the Puerto Rican trade Reconsideration of the treatmen

of the Alaskan and Hawaiian trades was denied and these two trade

are no longer in issue The Commission on March 11 1971 reopene

No 69 57 and said it did so in order to reevaluate its treatment o

the many and varied interests of the participllnts in this proceeding

Specifically the Commission said it would consider reevaluating it

treatment of the Puerto Rican trade and its treatment of automo

biles trucks and buses The parties vere dirooted to provide alte

native proposllls backed by alguments which could provide mor

equitable solutions to the issues herein The proceeding was ordere

to be expedited

Hearing on the consolidated proceedings was held and as in th

prior proceeding direct evidence was received mainly in the form o

written statements and exhibits with the oral testimony largely cros

examination The record consists of 4429 pages oftranscript 152 ex

hibits and voluminous briefs and reply briefs

When theoriginal hearing herein started theassessment agreeme

in issue was No T 2364 which provided a tonna basis of assessmen

Thebreakbulk carriers which are themajority numerically of NYSA

favored then and still favor the tonnage only basis of a@8eSsme

because among other reasons they handle relatively few tons of carg

per man hour oflongshore labor There is much logic tothis tonnag

basis of assessment because revenues are earned on the basis of ton

carried and freight tariffs prescribe rates and charges on the bas

of tons freighted Contrariwise the containership carriers genera

favor aman houls or laborbnais or assessment because they use few

man hours of labor per ton of cargo freighted There is alsosome log

in assessments on aman hours basiS inasmuch as laboris paidon hou

worked Tariff rates and charges are not related to longshore hou

worked nor are revenues of the ocean carriers related to longsho

i

I No T 2890 was put Into the recor4 011 the thirdday of hearlna

15 FMC
AGREEMENT NO T 233 6 NEW YORK SmpPING ASSOC 291

hours worked Therefore on a dollars and cents basis which is what

these proceedings are all about the most logical basis of assessment

must be related to dollars of revenue and therefore to revenue tons of

cargoes handled rather than to longshore hours

In the future if not in the present or in the next few years NYSA

assessments of necessity will have to be based on tons freighted be

cause unless a carrier receives revenues it will not be able to pay as

sessments needed for labor benefits In other words no ocean carrier

which goes out of business can pay fringe benefits to longshore labor

Likewise if a certain ocean carrier has not gone out ofbusiness butis

losing cargoes this carrier will be less able to pay fringe benefits The

final corollary in this reasoning is that the ocean carrier which is in

ereasing its business or handling more cargoes will have to pay a

greater share ofthe fringe benefits

The last statement is true because it matters not to alongshoreman

laborer who is entitled to GAl benefits or who has earned hispension

that an ocean carrier has gone out of business or that an ocean car

rier has recently entered into an ocean trade but what matters is that

the laborer feels that he deserves his GAl or his pension from the in

dustry as a whole and if some ocean carriers have left the business the

remaining ocean carriers including thenew carriers must pay his GAl

orpension and otherfringe benefits

All of the members of NYSA unanimously recognized that the old

man hours type of assessment was outmoded and should be discon

tinued By a resolution on October 1 1968 they unanimously agreed

that the man hours basis should be discontinued and that a new sys

tem of assessment would take effect as of that date Agreement on a

new system wasslow tobe realized and in fact there has been no unani

mous agreement on any new system of assessments The agreement

that has had the most support nearest to unanimous support has been

No T 2390

The International Longshoremen Association AFLCIO herein

called the ILA or the union has been continually looking over the

shoulders of NYSA with a substantial interest in NYSA s assessment

agreements As long as the union is paid accordingto its labor contract

for its fringe benefits it supposedly would have no direct concernwith

the methods of assessment ofthe members ofNYSA butthe union has

the continuing interest of being assured that sufficient assessments are

being collected by NYSA from its members to pay for the fringe

benefits

The union at the time of the ratification of its 1968 71 labor con

tract and later recognized that the man hours burden on the break

15 F M C
292 FEDERAL MARITIME COMMISSION

bulk carriers segment of the NYSA industry should be eased When

the first year of this contract ended on September 30 1969 the union

took astronger and more insistent position and in effect said

You toldus during the negotiations that you were going to make your own allo

cations that when we raised the issue of what we considered to be necessary

protection for breakbulk carriers that you would take care of that reallocation

among yourselves and we should let you do it

However for the entire first year of the 1968 71 contract and for

part of the second year of the contract the old man hours basis of as

sessment was continued This was because of the difficulties in agree

ing on the new basis Itwas notuntil sometime after the Commission

on March 11 1970 gave its conditional approval of agreement No

1 2390 that a new method of assessment began to be implemented

The new basis in No T 2390 was a combination of man hours and

tonnage assessments

The T 2390 basis was in itself a compromise basis worked out after

many months of hard work research and soul searching by the assess

ment committee appointed by NYSA for this purpose One of the

three committee members who agreed to this basis was the president

and now the chairman of Sea Land which did not oppose T 2390 in

the original proceeding but now opposes it in the reopened proceed

ing and now supports excepted cargo treatment forthe threePuerto

Rican carriers of which Sea Land is the principal carrier tonnage

wise Sea Lands present opposition to No T 2390 is natural since

the Commission s

report on November 20 1970 gave the Puerto Rican

carriers including Sea Land very preferential treatmentm relation

t

carriers in other trades

No T 2390 was intended hy NYSA totreat all carriers alike and

all trades alike with certain exceptions based upon hardship such as

the intelcoastaland intracoastal trades of the continental United

States which are subject tooverland competition and because of such

competition were given the so caNed excepted cargo treatment

NYSA is vehemently opposedto the excepted cargo treatment for the

Puerto Rican trade a trade which in recent years has grown and

prospered

The old type of assessment agreement with assesSments on man

hours only never has been approved by the Federal Maritime Ctn

mission Such approval was not sought nor was it believed necessary

under section 15 of the Shipping Act 1916 the act until after the

decision of the Supreme Curt in Volkswagenwerk Aktiengesel18chaft

v Federal Maritime Oommis8ion 390 US 261 1968

15 F MC
AGREEMENT NO T 2336 NEW YORK SHIPPING ASSOC 293

Thus we have a situation where assessments hy NYSA have been

made in the past on both a man hours basis and more recently on a

combination of man hours and tonnage but never with any final ad

ministrative approval as agreements orcooperative working arrange

ments subject to section 15 ofthe act

In the past when there were no containership carriers and when

cargoes generally were handled in the old fashioned breakbulk

method it was fair to all the carriers to not only pay wages but also

fringe benefits on an hourly basis But times have changed

There are two key words in this report These words are tons

and hours Almost literally reams of figures and statistics have

been presented in these proceedings but in looking at any ofthe sta

tistical conclusions we must determine whether they are based on

tons or on hours Some credibility must be given to both types

of statistics but overall the tons must be considered to be entitled

to the greater weight in reaching a

just conclusion to the assessment

problem herein

Hours was the key in the past Tons will be the key in the

future In the present a combination of tons and hours is the key

Agreement No T 2390 is a combination of tons and hours It places

some of the assessment costs on a man hours basis and some on Ittons

basis Inother words it is a compromise solution

Genuine and equitable compromises are hard to come by in these

proceedings The Commission as late as July 22 1971 when it denied

a motion to certify the record to it for decision also reiterated its

request made previously when it reopened the proceeding that the

parties offer alternative proposals for solution of this multiparty

dispute The Puerto Rican carriers have failed to offer any compro

mise They insist on the man hours expected cargo basis Sea Land has

backed off from its former acceptance of the T 2390 compromise

basis

The Puerto Rican carriers adhere to their use of hours and in

effect fail to acknowledge that they have an industry obligation to

the longshoremen in the port of New York TIT arelatively new

carrier in the ocean trade in effect says Don tblame me for any short

fall in hours worked by the longshoremen and praise me because I

have added a second ship and am adding more work hours But TTT

would like to forget that it Sea Land and Seatrain the carriers in

the Puerto Rican trade do not have to pay 4 a ton royalty on their

containerized traffic instead of 1 a ton The 4a ton demand of the

longshoremen at the time of the negotiations for the 1968 71 labor

contract was dropped by the longshoremen in return for other labor

15 F M C
294 FI lDERAL MARITIME CGMMliSSION

contract benefits and now Tl Seatrain and Sea Land say we are

not responsible ror short fall and GAl which are part or the labor

contract package But these three Puerto Rican carriers gladly took

the benefit or the induatry labor contract insorar as these three car

riers escaped the 4a ton containerroyalty payment so they cannot in

all equity esoape their fair share or the induatry labor aontract obliga

tions as toshortrall and GAl irthey are toaccept the container bene

fits The Puerto Rican carriers conveniently rorget that droppingthe

4 a ton container royalty helped them greatly and was relatively of

no benefit to breakbulk carriers

The 4 a ton royalty was not the only demand or the ILA which

would have hurt the containerized Puerto Rican carriers The ILA

demanded that all containers be stuffed and stripped by ILA labor

The industry labor contract dropped this demand but again it was

offset by the NYSA industry s agreement to accept 40 million man

hours as a basis or calculating pensions and welfare and clinic pay

ments The Puerto Rican carriers again would conveniently rorget

that the breakbUllk carriers gained little or nothing relatively by the

dropping or the stuffing and stripping demand from the labor con

tract FuTthermore the Puerto Rican trade is practically 100 percent

containerized that is all the ships are rull containerships or are ro ro

ships with high productivity in tons or cargo handled per longshore

lllibor hours Other trades are partially containerized and get some

benefits rromthe dropping or the demands ror a4 royalty per ton on

containerized cargo and the droppingor the demandsto stuff and strip

all containers The carriers who got the greatest benefit out or the labo

contract inrespect tothe above demands are the Puerto Rican carriers

but they would on the excepted cargo basis escape the costs 01 the

1968 71 contract to a much grelliter degree than the roreign trades

which must pay on the combination hours tonnage basis including

the containership carriers in the roreign trade

The NYSA industry blunted the demands or the ILA against the

containership carriers by accepting the ILA s demands ror increased

pensions earlier retirements GAl and the minimum dOllllir amounts

ror contribution to the pension welfare and clinicrunds Increased

hourly wages and increased vacations and holidays paidby the hour

were a big part or the price or the 196871 contract Who pays this

price on the hourly basis Not the high productivity containership

carriers not the high productivity automobile carriers but the labo

intensive breakbulk carriers In other words the increase in wages

vacation and holiday payments passed on only a

relatively light burden

to the Puerto Rican carriers and others with high productivity wbor

15 F MO
AGRE EMENT NO T23ilM NEW YORK SmpPING MlSoc 295

The Puerto Rican carriers and others with high productivity would

like to forget history in that in the past when all werepaying NYSA

assessments on the same hours only basis those with high productivity

were being underassessed for their share of fringe benefits In the

future the Puerto Rican carriers would continue to be underassessed

if they paid assessments only on aman hours basis and not on tonnage

Of course the Puerto Rican carriers as well as containership oper

ators in other trades have made relatively high investments in their

ships cranes containers and other shoreside equipment and we must

not penalize innovation Nevertheless to the extent that there are hours

inthe No T 2390 combination man hours and tonnage formula inno

vation is aided in that these high productive carriers pay less per ton

of cargo than do the labor intensive carriers

Furthermore the investment in ships and shoreside equipment of

the containership operators is reimbursed in savings in faster tUTna

rounds of the ships with the fewer days in port and the resulting

highertonnages of cargoeshandled on yearly bases

The principal plea of the Puerto Rican carriers has been that the

Commonwealth of Puerto Rico and its economy must be helped That

may be true but it does not follow necessarily therefrom that the

Puerto Rican carriers must in effect be subsidized in these proceedings

by unduly low assessments to NYSA for longshoremen s

fringe

benefits

The Commonwealth of Puerto Rico maybe subsidized by the Gov

ernment of the United States by laws other than the Shipping Act

by means such asnoFederal incometaxes orothermeasures

Itdoes not follow that the Puerto Rican carriers should be placed

in the excepted cargo category because it is not the duty of this

Commission to equalize economic differences between the several States

of the United States or between the States and a territory In fact to

attempt to equalizesuch differences may result inunlawful discrimina

tion preference and prejudice between carriers and between ports

There appears little equity in this proceeding which compels aiding

the Puerto Rican carriers On the one hand they say and the testi

mony shows that assessing the Puerto Rican carriers on the basis

of T 2390 without any excepted cargo status for the Puerto Rican

trade will possibly result in increased rates of 4 or 5 percent On the

other hand these same Puerto Rican carriers are now seeking rate

increases in their Atlantic coast Puerto Rico trade of 18 percent and

28 percent depending on the type of cargo trailerload or less than

trailerload The Puerto Rican carriers are contendingthat the latter

increasE1S of 18 percent and 28 percent are justified and won thurt

15 F M C
296 F1EDE RAL MARITIME COMMISSION

the Puerto Rican economy but that the 4 or 5 percent increase which

may result from NYSA assessments is unjustified because it will hurt

the Puerto Rican economy

The presiding examiner trying to achieve practical justice and in

the interest of obtaining an equitable compromise in his prior initial

decision decided that the northbound segment of the Puerto Rican

trade should be granted excepted cargo status The northbound seg

ment is about30 percent or less tonnage wise and probably less revenue

wise It was in need of some stimulation but not the southbound

segment of the Puerto Rican trade which has been and continues to

enjoy substantial increases inrecent years

Now on more mature reflection and having the benefit of the evi

dence in the reopened hearing including the relatively minor effect

which a 4 or 5 percent increase in transportation costs might have on

prices of consumer and other products in Puerto Rico there appears

on this entire recordno good orsufficient reason for treatingthe Puerto

Rican trade differently from any of the foreign trades of the port of

New York and in fact if any different treatment were justifiedon the

basis of ILAdemands against container carriers it would appearthat

the Puerto Rican trade should pay higher assessments than those paid

by other trades which are only partially containerized All in the

industry knew that there would be much less hours than 40 million

worked and that there would have been a shortfall of hours but this

was a convenient way to calculate the dollars and cents to be paid

for pensions and welfare and clinic benefits The labor contractmight

have stated the pension obligationindollarsonly without any reference

to hours worked and the contract also could have stated the obligation

for welfare and clinics indollars

If these pension and welfare and clinic obligations had been stated

only in dollars then therecould haYe been less emphasis on that mean

word shortfall The hours werespecifiedin the contract so as to pro

vide aminimum dollar amount of pensions and of welfare and clinic

obligations The point of this discussion is that the ILA intended

and got by contract its dollar amounts for pensions and welfare and

clinics and these dollar amounts wereindustry obligations to be paid

by the NYSA industry including the containership segment or the

industry which in the union s view had to take a reallocation of assess

ments so as not to unduly burden the breakbulk carriers segment of

the industry

Andwhy would not the union have takenthis view when anew type

or employer the containership and ro ro operator wasproviding less

man hours or employment per ton of cargo than the older type of

employer of longshore labor the breakbulk ship operatod

15 1l MC
AGREEMENT NO T 23 36 NEW YORK SHIPPING ASSOC 297

It bears repeating and repeating that the matter of shortfall has

been greatly overemphasized as an excuse or reason for the excepted

cargo treatment of Puerto Rico Shortfall is only one element of the

labor contract and there were many other elements Besides the de

mands for 4 a ton container royalty stuffing and stripping all con

tainers on the piers by ILA labor there was a demand that all con

tainers be unloaded from vessels before a single container could be

loaded This was contrary to the existing practice of simultaneous

loading and unloading of containers and would have cut productivity

of the handling of containers in half The containership carriers bene

fited by the dropping of this demand in the labor contract not the

breakbulk carriers There was another demand which would have

increased the gangs of longshoremen employed on containerships In

summary many of the union s demands were demands against the

containership segment ofthe industry

Parenthetically as general background of NYSA union relations

some mention is appropriate of the prior day ordering system

P D a The NYSA industry in the same 1968 71 labor contract

not only took on certain obligations but also obtained certain bene

fits includingpD a whichcalls for certain mento work after having

been ordered towork on the prior day This system wasintendedin part

to alleviate unemployment of longshoremen and thereby to reduce

NYSA s obligation for guaranteed annual income payments Un

fortunately the p D a system has not worked nearly as well as antici

pated Notwithstanding the use of the p D asystem because of its

faults or because oflack ofunion rank and fileenthusiasm of checkers

or of otherpersonnel in administering the p D a system apparently

there have been many instances where senior type longshoremen have

not worked and have therefore subjected NYSA to GAl obligations

when at the same time casual type longshoremen without seniority

and without GAl rights have worked Thus GAl expenses for the 2

contract years 1969 70 and 1970 71 have amounted to some consider

able millions of dollars more than were anticipated by NYSA when

the 1968 71 contract was negotiated Estimates of GAl for the last

contract year 1970 71 have ranged as high as 32 million whereas

without experience GAl had been estimated as low as 15 million

Man hours of longshore labor are not a precise figure known trade

by trade in the port ofNew York The stevedores who directly employ

the longshore labor do not necessarily have the information nor is it

necessarily their duty or business to determine how many hours for

example should be allocated to labor of a carrier in its Puerto Rican

trade versushow many hours should be allocated to the carrier s North

Atlantic trade or to other trades As a result of this situation no

15 F M C
298 FEDERAL MARITIME COMMISSION

i

I

accurate or complete record exists tothis day of the number of man

hours in the Puerto Rican trade The parties must make and have

made theirbest estimates of the situation and have stipulated certain

man hours but with the stipulations bindingonly for thisproceeding

and subject to audit et cetera for other purposes by NYSA

TTTis an exception tothe above discuBBion because itoperates only

in the Puerto Rican trade Apparently Sea Land prior to NYSA s

petition for reconsideration had reported to NYSA that Sea Land s

total Puerto Rican tonnage in this 1969 70 contract year was llibout

1 250 000 tons and NYSA relied on this reported tonnage and used

the container productivity factor of record agreed by the parties of

2 54 tons per man hour and computed man hours for Sea Land on this

basis in making its petition to the CommiBBion for reconsideration

But just prior to the reopened proceeding Sea Land informed NYSA

that its total tonnage in 1969 70 actually was 1 690 835 tons Thisdif

ference between the earlier reported tonnage usingthe container pro

ductivity factor of 2 54 tons perman hour accounts for about 173 000

man hours inferentially under reported by Sea Land to NYSA and

in turn under reported by NYSA tothe CommiBBion in NYSA s peti

tion for reconsideration Thus we obtain a figure of llibout 941 310

Puerto Rican hours by adding the 173 000 hours to the 768 310 hours

reported by NYSA in its petition for reconsideration

The parties have stipulated 599 604 hours for Sea Land and between

240 000 and 260 00 hours for Seatrain Sea Land maintains records

which show direct ship labor but does not maintain a breakdown of

hours of lwbor by trades for terminal garage consolidating and ma

rine gate labor and it is necessary to allocate apercentage of hours of

labor to the Puerto Rican trade Seatrains stevedore United Termi

nals maintains man hour records by trade for ships labor linesmen

and terminal lobor but for the leBB than trailerload and team track

facFlities hours oflabor are not broken down by trade and may notbe

clearly separated between the LTL and team track operations and

allocations were therefore necessary to determine Puerto Rican trade

man hours for Seatrain The hours of TTT which operates only inthe

Puerto Rican trade were accepted and stipulated as substantially

correct by NYSA

These Puerto Rican hours for the 196970 year as stipulated for

these proceedings were 175 756 for TTT 240 000 as a minimum figure

for Seatrain and 599 604 for Sea Land or a total of about 1 015 360

hours This figure compares reasonably with the corrected figure of

941 300 hours above NYSA on brief says that it does not believe that

Sea Land purposely misled NYSA and likewise states that NYSA

15 FMO
AGREEMENT NO T28 86 NEW YORK sHIPPING ASSOC 299

did not as a result purposely mislead the Commission in its petition

forreconsideration in its statement of the Puerto Rican hours

Of course any person in making allocations might unconsciously

be affected by the purpose of the statistics Ifthe tonnages to be re

ported were to be used for the purpose of calculating dollar assess

ments the natural tendency at the time would be for amember cllirrier

not to make allocations in such a manner as to overstate the tonnages

At another time ifthe tonnage statistics were not any longer the basis

of assessments in one trade assessments having changed from acom

bination hours and tonnage basis in one trade to an hours basis only

then the natural human tendency of a member carrier in making ton

nage dlocations might have been to allocate higher tonnages to that

trade not assessed on a tonnage basis and to allocate lesser tonnage to

a trade assessed on a tonnage basis

NYSA had the thankless job of policing itself that is of policing

its members estimates of man hours and tonnages used for making

NYSA assessments No matter what the head of the department of

NYSA charged with the responsibility of determining the proper

figures for hours and tonnages ofNYSAmember lines did inexecuting

his duties nor no matter what his subordinates did it is natural for

anyone NYSA member to feel that maybe another NYSA member

was reporting inaccurately The record is convincing that NYSA and

Captain Haynes the NYSA official responsible for the many assess

ment calculations of NYSA did their jobs to the best oftheir abiJities

under the most trying of circumstances None of their figures as to

tonnage and hours can ever be said to be completely accurate but the

figures appear to be substantially as accurate as is humanly feasible

This record contains a vast assortment of figures and statistical con

clusions but it must not be allowed to form a smokescreen over the

essential facts and issues In summary the containership and other

highly productive carriers obtained great benefits from the 1968 71

labor contract by the elimination ofthe highly onerous demands ofthe

ILA which wereprincipalIy designedto affect these highly productive

carriers and having thus benefited it ill behooves these same highly

productive carriers to seek preferential treatment by way of very

light assessments per ton of cargo handled

The emphasis of the Puerto Rican carriers on shortfall and on the

increased GAL statistics would through their conclusions amount to

statistical legerdemain and to amistaken misleading and mischievous

viewpoint ofthese factors

If one must rely on statistical showings then let us look at costs

per ton of cargo handled

15 FMC
300 FJIIDERAL MAR lTIME COMMISSION

I

For the 197071 year as stated on page 14 of the prior initial de

cision the excepted cargo rateWMcalculated to be 184 per man hour

for the hinge benefit assessments including 75 cents for pensions

49 5 cents for welfare and clinics 55 5Cllnts for GAl and 4 cents for

NYSA support To the 184 was added 719 cents for vacation and

holidays or a totaI assessment on the man hours basis of 2 559

As of December 7 1970 because of the increasedcosts of QAI GAl

being It flexible cost which could not be precisely estimated whereas

contributions of NYSA to pensions and welfare and clinics funds

were based onminimum dollar obligationsand could be precis ly pre

dicted because no oneexpected thatthe 40 millionhours basis forthese

two fringe benefits would be exceeded the GAl assessment was in

creased by NYSA from 55 5 cents to 139 cents per man hour This

83 5 cents increase made the total fringe benefit man hours assessmen

2675 184 0 835 This increase of 83 5 cents also made the total

man hours assessment for excepted cargo including the assessmen

for vacation and holidays 3 894 2559 0 885 This explanation

is necessary because some of the parties refer tothe amount of 2 675

and other parties refer to the amount of 8 394 but both figures are

correct and they depend onwhether ornot vacations and holidays are

included

Using the 2 675 figure excluding vacation and holiday assessments

as of December 7 1970 the Puerto Rican carriers would be paying

fringe benefit assessments of only ebout 1 05 per ton of cargo calcu

lated by dividing the 2675 by the agreed productivity rate for con

tainership carriers of 2 54 tons per hour In truth TTT admitted a

productivity of 8 84tons per hour and on this basi it would bepaying

fringe lbenefit assessments of 80 cents per ton 2675 3 34 NYSA

used a Puerto Rican productivity of 2 98 hours per ton and on this

basis the Puerto Rican carriers would pay only 90 cents per ton for

fringe benefit assessment as of December 7 1970

Contrast the higher payments per ton ofother O8J1Tiers in othe

trades When the per ton portion of thecQmbination man hours

tonnage T 2390 basis was only 223 per ton on January 1 1971 the

other container carriers in other trades would pay 2 60 per ton for

fringe benefits calculated using the productivity of 2 54 tons pe

man hours divided into 93 1 cents per man hour 37 cents plus 223

per ton Similarly other TO rO carriers using a productivity of 3

would pay 254 per ton The brealfbulk operatore would pay 4 02

per ton for fringe benefits based on the productivity of O 52

The above labor costs for fringe benefits obviously benefit the Puerto

Rican carriers and any others on the excepted cargo basis with high

productive labor

15 FMO
Total cost per ton 14 24 4 97 2 96

AGREEMENT NO T 23i36 NEW YORK SHIPPING ASSOC 301

Going one step further which is essential to get the complete pic

ture one should add the costs of wages vacations and holidays and

container royalty to get total labor costs per ton of cargo under

T 2390 and under the excepted cargo hasis for the Puerto Rican car

riers using the productivity of 2 98 for the Puerto Rican carriers

The followingchart is illustrative asof January 1 1971

Toud Labor c e PerTon Under T I890

T 2390 T 2390 Puerto

breakbuIk container Rico

Wage UOporhourmmmm mm

n mnnmnn 884 1 81 I M

Valcstlonandhollday 072 m mmmmn

n 1 38 28 24

Fringe benefits T 2390 at 9a l cents permanhour plus 2 23 per

ton and excepted cargo at 267per hour mm m 4 02 2 60 90

Conta1nerroyalty 28 28

The Puerto Rican carriers fare very well under the above total labor

cost comparison at 2 96 per ton under the excepted cargo basis Even

if the Puerto Rican carriers were placed on the T 2390 combination

man hours tonnage basis they would fare very well at 4 97 per ton

compared withbreakbulk carriers at 14 24 per ton

In order for NYSA to meet its fringe benefit obligations the ton

factor in the combination hours tons T3490 formula has been in

creased from time to time from the original 123 to 173 to 2 23

and recently to 3 23 effective July 5 1971 With such an increase

in the figures in the table next above the breakbulk carriers would

bear total labor costs per ton of cargo of 15 24 the container car

riers in the foreign trades 5 97 but thePuerto Rican carriers would

remain at 2 96 per ton

Obviously the Puerto Rican carriers are underassessed on the above

basis And itis concluded again that they should pay on the same com

bination man hours tonnage basis as do container carriers in the for

eign trades Even on this basis the Puerto Rican carriers labor costs

will be far below the labor costs of the breakbulk carriers and suffi

ciently so to not discouragecontinuedinnovation

To add insult to injury Seatrain and TTT are not even satisfied

with the excepted cargo basis of 2 675 per man hour and are insisting

in their companion complaint proceedings that they should not pay

the increased man hours lSSessment of 83 5 cents Inotherwords they

With GAl costs on the Increase early In Janual Y 1971 NYSA was obliged to borrow

G million giving Its demand note to a New York bank In order to meet NYSAs fringe

benefit obligations Presumably the note has been or Is being paid ott

15 F MC
302 FEDJ RAL MARITIME COMMISSION

i

I

1

insist that they are not bound to pay any more than 1 84 per man

hour for fringe benefits or nomore than 2 559 per man hourinclud

ing the payment of 0 719 for vacations and holidays The 1 84 per

man hour amounts to only about 62 cents per ton of cargo using the

Puerto Rican productivity of298

Seatrain and TTT insist that NYSA was not authorized by agree

ment No 1 2390 to increase the hourly payment for GAl beyond the

rate of 115 5 cents These Sentiments aTe echoed by the four passenger

line complainants and in their complaint with lesser emphasis by the

two newsprint importers complainant Daniels Kennedy Inc and

intervener the Madden Corp These newsprint interests in their

briefsemphasize other bases forthe reliefwhich theyseek

Seatrain TTT and the four passenger lines on brief insist that the

terms of agreement No 1 2390 do not allow for any variation in the

excepted cargo assessment other than by formal amendment of 1 2390

This agreement provided that assessment payments on excepted cargo

were to be made on the basis of the man hour assessment presently

in eftect for pension welfare clinics GAl and NYSA administration

but not for shortfall throughSepte1tlber 30 1970 Thereafter

there shall be added to such present hourly rates the collective bar

gaining agreement escalations eftectiveOctober 1 1970 Excepted

cargo shall also continue topay any royalty whichmay beapplicable

Theterms ofT 2390 are quite clear insofar as theyrelate topension

welfare and clinics because the present hourly rates in the colleetive

bargaining agreement were precisely stated in that agreement The

same is not true as to GAI beeausethe colleetive bargaining agree

ment provided no set dollar amounts nor no eet Clllllts per mlUl hour

amounts for GAl In contrast for pensions and Welfare and clinics

specific cents per hours were pl e8Cribed in the collective bargaining

agreement with specific escalations from 1 contract year to the next

contract year

On the matter of GAl only the guaranteed yearly hours were

stated All regular employees Mvingactiveseniority status were guar

ltnteed an annual income of 2 080 burs multiplied by the applicable

basic straighttime

Thus by terms of the ILklabor agreement the dollar amount

needed for GAI had to fluctuate from quarteito qUa1 ter depending

on the numbers of longshoremen eligible for GAlAs 8imatterof his

torical fact the assessment for GAl has fluctuated from time totime

during the course of the 19671 labor contrat The mere factthat

agreement 1 2390 is NYSA s means of collecting moneys for the

fringe benefit obligationsfor GAl in nowise made the GAIobligation

115 lJ MO

i

I
AGREEMENT NO T 2313 6 NEW YORK SHIPPING ASSOC 303

fl precise amount nor did it limit GAl to 55 5 cents per hour While

the 55 5 cents per hour may have been in effect as a best estimate of

the amount needed to be collected at one time it wasnot locked into

l ffect for the duration of the ILA labor agreement because T 2390

specifically allowed for escalations according to the ILA agreement

Unfortunately T 2390 provided a partially unclear choice of words

insofar as it may have seemedto indicate that the ILAagreement gave

specific dollar amounts per hour as of September 30 1970 and as of

October 1 1970 This was true as to pensions and welfare and clinics

but not true as to GAl because on neither date did the ILA labor

agreement specify GAl in dollars and cents per hour Some of the

complainants would make up this lack of specificity for GAl in the

labor agreement by jumping to the specific figure used by NYSA as

of October 1 1970 for GAl This jump is contrary tothe labor con

tract and contrary to logic and equity

GAl collected by NYSA has to change as the costs of GAl to be

paid by NYSA change GAl was as low as 12 cents as of Septem

ber 30 1968 Itwas increased from time to time before it hecame 55 5

cents and before it became 139 cents as it is now At one early time

GAl had been as low as2 oonts

The man hour assessment for excepted cargo was understood by

both the assessment committee of NYSA and by the members of

NYSA as a whole to include a flexible amount for GAl and it was

understood that the excepted cargo rate would have to be increased to

reflectincreases in GAl costs from time to time

It is noted that aside from the parties complaining about the in

crease in GAl there are a number of other parties subject tothe ex

cepted cargo status lumber interests bulk including scrap and sugar

intracoastal and intercoastal which have not complained about the

increase intheexcepted cargorate

The underlying principle of the excepted cargo category was that

such cargo would continue to pay for all benefits except shortfall as if

theman hour method ofassessment werestill in effect

In brief the GAl escalations stem from the ILA agreement The

55 5 cents collected at one time was only an estimate of GAl costs If

theGAl costs actually hadgone down then some reduction of the 55 5

cents would have been made by NYSA and surely the carriers sub

ject to this payment would have accepted the reduction Likewise as

theGAl costs have gone up and the 55 5 cents had to be increased the

carriers must accept the increase because all ofthem are parties to the

ILAlabor contract and are bound by it

The complaints in these proceedings insofar as they protest the n

crease in GAlof 83 5 centsare withoutmerit

15 FMC
304 FEDERAL MABI lME COMMISSION

Bananas is a noncontroversial subject atthis stage of the proceed

ings Ithas been stipulated hy NYSA and United Fruit Co that the

T 2390 tonnage assessment for bananas should bs fixed at 55 percent

of measurement without further qualification Such agreement was

reached in view of the administrative difliculty in having to deter

mine on aship by shipbasis whether 65 percent or the excepted cargo

rate is the greater because of the necessity in thecase of certain car

riers ofallocatiug terminal labor maintenance men and other crafts

between banana and other general cargo operations and in order to

permit uniformity of assessment as bstweenall carriers in the port

handling bananas Accordingly it isconoluded that the tonnage as

sessment for bananas under the man hour tonnage formula applied

under agreement No T 2390 shall bsfixedat 55 percent of ameasure

ment ton without further qualification 01 reference toexcepted cargo

status

Automobiles trucks and buaes are treatedby the Commission in its

report of November 20 1910 inaooordance with the basis proposed by

NYSA in agreement No T2390 which is 20 percent of the cubic

measurementofthe vehiclesunder the combination manhours tonnage

assessment formula The record as reopened remains essentially un

changed regarding automobiles

Wolfsburger Transport Wobtrans representing Volkswagen auto

mobile interests asks that automobiles be placed in the excepted cargo

category so that rough justice would bs done orpreferably that auto

mobiles be placed under the man hours tonnage formula but with the

automobile tonnage definition changed from 20 percent to 585 perQent

of cubic measurement Wallenius continues to ask that automobiles be

placed in the excepted cargo status Wallenius also asks that auto

mobiles which are transpol tedby WaIlenius be given no less favor

able treatment than is accorded automobiles Calried by the Puerto

Rican camers Some of the arguments of the automobileinterests

parallel the arguments of the PuertoRtcan carriers The automobile

carriers say that they arenot responsiblefor shol tfalland they are not

responsible for increased GAl But the automobile carriers go ful ther

and say that the Puerto Ricancarrlers benefited greatly from innova

tion and therefore from thedroppingof the demandstostuir and strip

containers et oetera but that the automobile carriers did not bene

fit at all or very little in this respect The automobile carriers averthat

the need for the new combined man houratonnage basisof assessment

largely was brought on by containerization and is justifiedby the con

tainer revolution but add thattherejsnoeontainer revolution in the

shipload handling of automobiles The fact is that the automobile

handlingrevolution is ancienthistory

Ill F MC
AGREEMENT NO T 23136 NEW YORK SIDPPING A6S0C 305

The automobile carriers after enjoying extremely low assessments

for many years now are experiencing increased costs per automobile for

fringe benefits These increasesmight now be unlawful but for the fact

that automobiles were very much underassessed in the past and are

relatively lightly assessed if not underassessed at present The auto

mobile carriers conjure up the same old man hour comparisons but

generally avoid tons comparisons

Again we must remember that freight revenues are based upon tons

of cargo and not upon man hours of longshore labor and we must

remember that the union expects to obtain its fringe benefits from the

carriers hauling the cargoes and not from the carriers leaving the

trade Again it falls upon those carriers remaining in the trade and

those with increased tonnages to pay the increased benefits including

benefits not only brought about by the container revolution but also

brought about by inflationand by an enlightened viewpoint ofmanage

ment as to what is fairin the wayof increased benefits due the laboring

man

The productivity of the automobile carriers in tons per man hour

is very substantially greater than the high productivity of the con

tainership carrier So naturally if automobiles are assessed for fringe

benefits on the excepted cargo man hours basis only the automobile

carriers will be paying very law fringe benefit assessments To share

in their responsibility as part of the NYSA industry the automobile

carriers must pay fringe benefits at least in part on a tonnage basis

About 8 94 measurement tons of Volkswagens are unloaded per

man hour from life on lift off vessels and about 17 9 measurement

tons of Volkswagens are unloaded per man hour from ro ro vessels

On the 20 percent of measurement tons basis this means that about

1 8 assessable tons per man hour are unloaded from lift on lift off

vessels and about 3 6 assessable tons per man hour are unloaded from

ro rovessels

On the January 1 1971 basis of 2 23 per ton for the tonnage factor

in the combination formula automobile lift on lift off carriers would

pay fringebenefits of 2 75 per assessable ton and automobile ro ro car

riers 2 49 per assessllible ton compared with 402 per assessable ton

for breakbulk carriers 2 60 per ton for containership carriers in the

foreign trades and 0 90 per ton for the Pueto Rican carriers if they

were assessed on the excepted cargo basis

On the July 5 1971 basis of 3 23 per ton for the tonnage factor in

the combined formula the fringe benefits assessments would be 3 75

for the automobile lift on lift off carriers 3 49 for the automobile

ro ro carriers 5 02 for the breakbulk carriers and 3 60 for the con

tainership carriers in the foreigntrade

15 F MC
306 FEDERAL MARITIME COMMISSION

If wage vacation and holidays and containerroyalty costs are added

to the fringe benefit costs the totals per ton would be 15 24 for break

bulk carriers compared with 6 70 for lift on liftoff automobile car

riers and 496 for ro ro automobile carriers To the extent that the

LAlabor agreement increased wages and vacation and holiday costs

instead ofinceasing fringe benefit costs the automobile carriers bene

fited and the breakbulk carriers suffered It must be remembered that

I automobiles will be assessed on the T 2890 basis at only 20 percent

of measurementtons whereas the assessable ton for other cargoes is the

so called stevedore or revenue ton which is the ton of 240 pounds or

of 40 cubic feet whichever isgreater Overall it is clearly apparent that

the automobile carriers will notbe overassessed on the basis of the com

bination man hours and tonnage formula ofT 2890

Newsprint was not in issue in the prior proceeding Newsprint is

the sixth largest inbound commodity ofthe port of New York In the

year 1970 about 809 000 tons of newsprint wereshipped intothe port

of New York by water For the past 6 years in each year Daniels

Kennedy Inc D K handled morethan 280 000 longtons of news

print Tonnage of D Khas increased recently from 241 055 longtons

in the contract year 196970 to255 124 long tons in the contract year

197071 the latterbased on 711 months actual and 4 5 months estimated

Newsprint for D K is shipped in large rolls about 60 inches high

with a radius of 40 inches weighing about 1 740 pounds per roll

Three rolls are picked up inasingle lift from the hold of a ship and de

posited on the pair On D K newsprint generally four holds of a

ship are worked simultaneoU9ly by four gangs of LAlongshoremen

of about 17men in each basic gang D Kemploysother personnel not

assigned to particular gangs D K has a productivity for its LA

ships unloading labor of about 3 29 long tons per man hour The pro

ductivity of D K converted byal4density factor wouldbe3 9 assess

able tons Der man hour

Thenewsprint rolls of D K are placed on conveyors by LAlabor

onthe wharf The conveyors carry the rolls intoa terminal warehouse

owned and operated by the publisher of the New York Daily News

No LAlabor is employed after the rolls are placed on the conveyors

D K is not the employer of any person inthe warehouse D Kthus

does not use any LAterminal labor but only uses ship LA labor

Many more men would be employed by abreakbulk carrier tohandle

the same tonnage because the breakbulk carrier uses both ship and

terminal LAlabor

NYSA argues that even acontainership or ro ro operator would em

ploy more LAlabor because they also use terminal LAlllibor D K

uses its ILA labor only a few days at a time and these laborers must

III FM O
AGREEMENT NO T2336 NEW YORK SHIPPING ASSOC 307

be employed by other members of the NYSA industry at other times

or possibly impose GAl obligations on the industry In other words

we have the same situation referred to in the prior initial decision

which is that longshoremen are industry employees their vacations

pensions welfare and clinic costs and GAl are paid for by the in

dustry and the labor contractprovisions and fringe benefit obligations

must be dealt with on an industrywide basis rather than oil acarrier

by carrier basis

The Madden Corp an intervener is the exclusive agent ofthe Fin

nish Paper MillAssociation for the importing andmarketingof news

print and other paper products from Finland to the United States

The newsprint imported by Madden includes that used for magazines

Rolls weigh from 1 800 to 3 000 pounds and are lifted from the holds

of ships in a single lift and deposited on the pier Madden s rolls

of newsprint are then generally stored in adjoining warehouses by

ILA labor which is part of the gangs used to discharge the Madden

newsprint There has been no substantial change in the method of

handling Madden s newsprint for 30 years Productivity for Mad

den is about 2 1 long tons per man hour Madden imports have de

creased from 64 700 tons in 1968 to 44 943 tons in 1970 Newsprint used

for magazine printingimported by Madden is mostly destined for in

land points and has been diverted to some extent from New York to

other east and gulf ports It is estimated that 15 000 tons will b

diverted during the calendar year 1971

D K also brings up the matter of diversion of its newsprint or

of possible diversion from the present method of ocean steamship to a

combination truck rail movement from Baie Comeau Quebec Canada

which is the principal source of D K newsprint Since April of 1971

some newsprint has been moved from Baie Comeau about 90 miles

and then has been transferred torail cars for movement to New York

City All of the newsprint handled by D Kcomes from the north

shore of the St Lawrence River There is no rail service direct from

Baie Comeau nor has there been any The continued increase iil car

goes handled by D K by ocean carrier in the last 2 contract years

indicates that the danger of diversion of D K s newsprintinminimal

The Madden Corp recently entered along term lease for a

pier on the

Jersey side of the Hudson River and this would indicate that Mad

den plans to continue to use the port of New York for its imports

The principal issue raised by the newsprint interests is that the

asessments under No T 2390 will greatly increase percentagewise the

prior assessments of the newsprint interests for fringe benefits The

newsprint interests assume that their past assessments on the man

15 F M C
308 FEDERAL MARITIME COMMISSION

hour basis were fair when in fact they were greatly underassessed i

the past

Under T 2390 the newsprint interests fare relatively well on the

basis of their fringe benefit assessments per assessable ton Exhibit 10

offered by the newsprint interests shows that D K newsprint unde

the old man hours assessment prior to the present 1968 71 contract

at 93 1 cents per man hour using aD Kproductivity factor of3 2

was assessed at only 28 cents per ton and that it would be increase

796 percent to a new rate of 2 51 per ton under the T 2390 combine

man hour tonnage formula using the 2 23 per assessable ton tonnag

factor But look at the comparable figures shown in exhibit 106 for th

breakbulk carriers which are 179 prior tothe 1968 71 contract an

4 02 per ton under the T2390 basis using the 2 23 tonnage facto

The dollars and cents increase for both the newsprint and the break

bulk carrier was the same 2 23 per ton Costs of doing business ar

based to some extent on percentages but what is most important i

the dollars paid out Again considering all labor expenses includin

wages vacations and holidays the breakbulk carriers bear an eve

higher overall burden under the terms of the 1968 71 ILA labor con

traot because of their low productivity and the newsprint carriers ar

comparatively well offbecause of tl1eir higher ILA labor productivity

Itis concluded that no good reason has been shown for giving any spe

cial treatment in fringe benefit assessments to the newsprint interests

On opening brief hearing counsel heeding the desire of the Com

mission for alternate solutions have proposed their compromise solu

tion for treatment of the assessments problem relative to the Puert

Rican trade Hearing counsel propose that the excepted cargo trea

ment of the Puerto Rican trade bemodified so that the trade will con

tribute a fair share of GAl costs but leaving thePuerto Rican trad

topay pensions welfare and clinics and NYSA administration at th

man hour excepted cargo basis with no assessment for shortfall Thi

is a

complicated proposal apparently based upon much work and con

sideration by hearing counsel but it is apparently unacceptable to an

of the parties Upon reply brief hearing counsel have proposed 

weight ton assessment as asolution to the automobile issue and ex

cepted status for all costs but GAl for newsprint The parties hav

not had the opportunity to comment upon these last proposals an

they have not asked permissionto comment on them

Expeditious handling of this proceeding does not permit detaile

comments regardingthese proposals made on brief by hearing counse

However from an overall viewpoint it is concluded that the on

compromise solution with the most substantial merit is the T 239

compromise

15 F MO
AGREEMENT NO T 2g g 6 NEW YORK SIDPPING ASSOC 309

Itmust be remembered that the first proposed agreement No T 2336

approved by the membership of NYSA and submitted to the Com

mission would have assessed all the shortfall of hours under 40 mil

lion against only the tons of cargo handled in containers including

cargoes in every type of vessel including but not limited to roll onl

roll off side port and Lash vessels with the caveat that any shortfall

in hours caused by strikes should be assessed against all cargoes in

containers and otherwise excluding cargoes in the domestic trade of

the continental United States This No T 3490 formula wasnot imple

mented but ithardly wasone favorable to the containership carrier

Nor wasthe second agreement No T 2364 approved by the NYSA

membership and submitted to the Commission favorable to the

containership carrier because it was based entirely on a tonnage

assessment

No T 2390 which wasthe third basis submitted tothe Commission

was a reasonably fair compromise agreement and as modified with

respect to cargoes of bananas the Alaskan and Hawaiian trades is

approvable under the standards of the Volkswagen case above

The present NYSA proceedings are not general freight rate cases

and in fact they are not rate cases at all In the present No 69 57 et a

cases there is absolutely no need shown for any special treatment of

the Puerto Rican carriers

Now let us turn to the Commonwealth of Puerto Rico It is not

directly concerned herein but indirectly is concerned that in time the

Puerto Rican carriers will increase freight rates in the Puerto Rican

trade For this concern about freight rates we can and we should

defer to another proceeding which is directly concerned with the

freight rates This other proceeding is being heard by another presid

ingexaminer on another record involving consolidated docket Nos

71 30 7142 and 7143 In this other consolidated proceeding the

Puerto Rican carriers and the Commonwealth can paint the entire

picture necessary toa just decision relative to Puerto Rico including

the effect of the Puerto Rican carriers proposed 18 28 percent rate

increases

At one time the effective date of our approval of agreement No

T 2390 wasabig issue but it may not any longer be quite so important

from a practical standpoint We approved in our prior decision 4

the effective date of October 1 1969 for No T 2390 However it is

di1licult to make assessments effective retroactively particularly where

Both the presiding examiner s prior Initial decision and the Commission s decision ot

November 20 1970

15 F MC
310 FEDERAL MARITIME COMMIBSION

carriers have gone out of business and most assessments have bee

made by NYSA effective for future applications With the passage o

time we are nearing the expiration date of No T 2390 which is Sep

tember 30 1971 and there is little or no room for NYSA to make

changes in the assessment basis for future application Thus eve

though the Puerto Rican carriers do not win excepted cargo status

under this decision by the passage of time they appear to have wo

assessments on this basis for the largest part of the 1968 71 contrac

years Our decision herein again is toapprove No T 2390 retroactive

to October 1 1969 and this would mean retroactive collections o

assessment from the three Puerto Rican carriers and many othe

assessment adjustments

To the extent that the issue of retroactivity remains an issue an

there remains any problem of adjustment of retroactive assessments

the parties and the Commission may yet have another chance a

achieving some compromise solution acceptable to all Perhaps thi

could be broughtout on oral argument In any event one of the princ

pal effects of our approval of No T 2390 presumably will be the bear

ing of that approval on future assessment agreements of the parties

bearing in mind again that T 2390 expires September 30 1971 an

presumably that a new assessment agreement will be filed for ou

approval in due course

While attention herein has been focused to a great extent on th

Puerto Rican trade to the extent that this trade were tobe favore

by excepted cargo status the result would follow that the othe

trades of the port of New Yorkwould be disfavored by the impositio

on them of higher assessments to make up for assessments not co

lected by the Puerto Rican trade These foreign trades of the port o

New York would be disadvantaged tothe extent that some cargoes i

the foreign trades would be diverted from the port of New York t

other ports The foreign automobile interests already have alluded t

this possibility Again toavoid undue discrimination between the var

ClUS trades of NYSA the fairest action under all the circumstance

1V0uld be to spread the assessments herein on the same basis for a

trades of theport ofNew York

Not forgotten in reachingthe conclusions herein is the factthat th

carriers in the Puerto Rican trade all must be under the US flag

using U S built ships and US crew 0 making the operations of th

Puerto Rican carriers somewhat more expensive than operations wit

other ships and crews in the foreign trades but this is only one facto

in the public interest considerations and is not entitled to majo

111 FMO
AGREEMENT NO T 2336 NEW YORK SIDPPING ASSOC 311

weight in reaching ajust conclusion herein particularly when com

pared with the other factors such as the costs of longshore labor per

ton of cargo handled

As Federal taxpayers generally share both the benefits and the costs

of Government for many purposes all the parties herein who are di

rectly or indirectly affected by the ILA labor contract should share

not only the benefits of said contract but also the costs of that con

tract including thefringe benefit costs

The Puerto Rican carriers are not the only ones which have in

creased their man hours labor in recent years Although no witness

was produced it was stipulated that Barber Lines has increased its

longshore hours in the port of New York over the past 3years and

that Barber Lines operates about 37 vessels of which 30 are normal

breakbulk vessels and seven are especially fitted for and carry con

tainers Barber Lines does not seek excepted cargo treatment for

itself but if such treatment wereto be accorded Puerto Rican carriers

on the basis oftheir increased man hours in recent years then Barber

Lines and perhaps others should be accorded excepted cargo treat

ment also One must remember that the Puerto Rican trade in 1958

generated 1 250 000 man hours when it was entirely breakbulk and

that with increases in tonnages the trade has not yet reached that fig

ure in man hours of labor And the union viewpoint no doubt is that

Puerto Rican containerships have cost many union jobs including

both old jobs lost and new jobs not generated in proportion to new ton

nages handled Taking the opposite tack US lines showed a drop in

man hours of over amillion hours between 1967 and 1969 Of course

no one is insisting thatU S lines be penalized orspecially assessed for

fringe benefits because of its drop in man hours Its witness looked

upon this situation as an indU8try problem That is the just and law

ful answer All of the carriers recognize in a general way that the as

sessments of ILA labor fringe benefits are an indU8try problem and

that all carriers must share not only in the benefits of the ILA con

tract but also in the costs of the contract Some carriers and parties

seek exceptions to the uniform assessment basis of T 2390 But grant

ing an exception here and another exception there has a snowballing

effect and the result of granting too many exceptions can only be

chaos Exceptions must be limited to recognized hardships and no

others

The president ofthe ILA Thomas W Gleason has been understood

exhibit 97 to say that for a future contract beginning October 1

1971 he would be willing to consider a guarantee of benefits rather

than hours This statement confirms the view herein that it is the

15 FMC
FEDERAL MARITIME COMMISSION

DOOKET No 718

OCEAN FREIGHT CONSULTANTS INO

ITALPAOIFIO LINE

JIJM 19 197fJ

ADOPTION OF INITIAL DECISION

This proceeding is before us on exceptions tothe initial decision 

Examiner Stanley M Levy served December 28 1971 in which 

examiner concluded that the alleged misdescription was done by 

shipper not the carrier and thus the claiInant had failed to estab

any basis for granting relief

In his exceptions cla ima nt points out that the freight forward

not the shipper was actually responsible for the description of 

goods in the billof lading and urges that in any event the impo

has a

right to expect 1Jhe carrier to assess the proper rate for th

goods actually carried

Claimant urges that notwithstanding the bill of lading designot

ofthe shipment as toys the examiner having been furnished a pa

ing list which indicated that 1 200 tricycles and 400 bicycles w

actually carried was duty bound to go beyondthe alleged factuais

wholly by supposition and to search further in what the carrier 

was a toy and what is not Finally claimant request oral argum

and states that additional evidence of the correct identity of the go

shippedcan be introduced

Ocean Freight Coneultants I the lfIIlee of the claim of Fred Myer Inc an Impo

15 F M

314
OCEAN FREIGHT CONSULTANTS INC V ITALPACIFIC LINE 315

We do notfeel thwt at oral argument any new facts can he elicited to

change the examiners initial findings

Itis undisputed by the parties that the freightforwarder initiated

the hill of lading Itis also agreed thllit the carrier charged the rate as

specified in the tariff for that commodity as described on the bill of

lading Itis further agreed that the consignee had taken possession of

the cargo withoutvoicing any claimat that time

Ina recent decision informal docket No 283 1 We8tem Publiah

ing 00 Inc v Hapag Lloyd A G served May 4 1972 we chose to

review the entminer s decision not to award reparation because we

have determined the test for reparation to be what the claimant can

prove based on all evidence as to what was actually shipped Inthat

case there wereclear commodity descriptions upon the bill of lading

and an equally obvious errorin the assessment of a singlecharge totwo

different comm odities Here however the issue is not as simple Since

the shipment has been removed from the custody of the carrier and

carrier verificati on of the claim is impossible claimant has not to our

satisfaction sufficiently established that anything other than that

which was described on the bill of lading was actually shipped or

that any err o in weight measurement or description was made by the

respondent upon which reparation can bebased

Accordingly upon careful consideration of the record and the

excepti ons we conclude thwt the examiner s factual findings and his

conclusi ons with respect thereto were sUPPovted and correct We there

fore adopt the initial decision as our own and make it part hereof

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

15 F M C
I

1

FEDERAL MARITIME COMMISSION

No 71s

i

j

i

00JlWi FRmOHT COlfStJLT ANTS Ilfo

II

ITALlAOIfto LIma

Compla1nt 11lm1

H 6111l fWag1l61 forcomplainant

R Bf UC6 Matl1UJ6U forrespondent

INITIAL DECISION OF STANLEY M LEVY PRESIDIN

EXAM INER 1

Ocean Freight Consultanta Inc OF 01cl t as assipe

of aclaim seeks reparation in the amount of 1 014 60 arjai ng out 

a shipment from Genoa Italy onAugust 1 1969 toPortland Ore

abroadItlpacifio Line s 188poJident vessel MS 811oZder

i

The shipment asdescribed by the billof lading consisted of 267 ca

tons of toys having a

gross weight of 9467 kilos The lUpohdent

assessed it at the rate of 28 110 per cubic meter and based on 82 

cubic meters the charges totaled 2 8I1l1 68 plus 0110 BIL fee8

Claimant contends the correct billof lading description shouldha

been 267 cartonsof bicycles and tricycles pedal operated forwhich 

says the rate should be 189 per 1 000 kilos as per tariff rate item 0

102 page 219 by reference thereby tothird revised page 102 effectiv

date April 1 1969 Inasmuch as the shipment had a gross weight 

9 647 kilos and measured 82 6110 cubic meters it qualified for the ra

for goods cubing over7x up tolOx 7 times 9647 6Tl199 m8 10 time

9647 96470 m8

I

1

Thll4ecllloD became tbe4ec111011 of tbeCoIDlDlH1oD In 18 18TlI

o

BW of 1 410 No 8

o

K NP trellbt tarUf No 1GeectloD 1 IILO II

316

1G FIl C
OCEAN FREIGHT CONSULTANTS INC V ITALPACInC LINE 317

Since at 139 per 1 000 kilos the total charge should have been only

1 840 98 plus 0 50 B L fee rather than the assessed 2 355 53 plus

0 50 BL fee an overcharge of 1 014 60is asserted

Respondent denies that an incorrect tariff rate was applied and as

afurther and complete defense asserts thatthe claim is barred by the

statute of limitations set forth in section 22 ofthe Shipping Act 1916

which requires that claims for reparation must be filed within 2

years

The cause of action is deemed to have accrued atthe time of ship

ment or payment whichever is later LouuJVil16 Oement 00 v Int

Oomnn Oomnn 246 U S 638 1918 In the instant case the shipment

was Freight Collect The cause of action thus accrued on Septem

ber 8 1969 when the shipment reached Portland and the complaint

having been filed with the Secretary of the Commission onAugust 31

1971 it was filed within 2 years after the cause of action accrued

Section 22 Shipping Act 1916

Accordingly theclaim must be decided on the merits Both claimant

and respondent consent that the complaint be conducted under short

ened procedure without oral hearing rule 11 a

The shipment consisted of atotal of 1 600 bicycles and tricycles of

which 1 200 weretricycles and 400 bicycles There is no doubt that if

the bill of lading had been broken down into component parts the

bicycles would have qualified for a bicycle rate whatever the appro

priate rate tobe assessed the tricycles

I1he tariff has two items which are at the core of the controversy

TRIOYCLES Juvenil As Toys Item No 20110 pedal operated N O S

Not Toys As Blcycles Item No 20102

OFC relies on the subsentence to the tricycle commodity description

which says Pedal operated In doing so claimant overlooks the

limitation N O S which isalso a

part ofthesubsentence description

On the bill of lading prepared by the freightforwarder agent ofthe

manufacturer the items were otherwise specified as Toys Analysis

of the subsentence description establishes that in addition to the

N O S exclusion a second exclusion is present to wit Not Toys

Either exclusion serves to prohibit a

rating under item No 20102

The shipment herein fails on both counts

To qualify as a bicycle the tricycle must not only be pedal operated

not otherwise specified but in addition it qualifies only if it is Not

Toys Hence the tariff while permitting tricycles to be classified as

BUl of ladIng No 9

Gottardl Rulronl whom ore Identules as the shipper exhibIt A attached Ie complalnl

15 FMC
318 FEDERAL MARI lME COMMI ElS ION

bicycles strictly limits the type of tricycles thus Iatable Under the

taciff limitation a tricycle could still be rated as a toy even if it were

pedal opel llited whereas O F C sposition is that a

pedal operated tri

cycle is by definition abicycle and nota toy

In hopes of establishing the proposition that the goods are not toys

OFC introduces a letter and catalogue material of the manufacturer

exhibits 0 and M These exhibits establish that all the items are

pedal operated However these exhibits do not establish that being

pedal opel llited theyare hereby not toys To establish such premise

OFC merely asserts

OnE will recall that there are indeed tricycles 011 the market which are

NOT pedal opelted and are used for very young children wherelt apparently

Is felt unsafe to have PedalBOl wil lre these children are unable to propel the

tricycle bY a peldal device It woUild further appear frOlll thePlcturematerial of

the manufacturer that oIlly one itooi was truly a tricycle while the others are

bicycles with additional wheels for balancing safety but all were pedal operated

Such assertion by 000 lacks the probative value and quality re

quiredto meet the burden imposed on it as aclaimant for reparation

In OoZgate PaTIlnoWve 00 v United FlUitOo informal docket No

115 I Commission order served September 30 1970 thllCommission

held that claims for reparation involving allllged errors of weight

measurement or descriptioI of ty involve heavy burdens of

proof once the shipment has left thec11 lfody

of thec rrier It is

often the case as it is here that the ca in classifying and rating

a shipment must lcok tothe inforJIlWtiollgivenhim by the shipper o

freight forwarder Fairness would seem to entitle the carrier in mos

of these cases to rely on such iIlformation ahdto charge and Collect

freight in accordance with thedeecciption provided by the shipper

It is the claimant ndt the carrier who must bear the heavy burdens

of prcof and establish sufficient facts toindicate with reasonable cer

taintyor definiteness the validity ofthe claims

OFC in support of its claim attaches toits complaint copies of com

mercial invoice 414 69 exhibit B Bureau of Customs form 7521

exhibit C and a paCking listillegible exhibit D Perusal of these

documents indicates that only the pacldng listif it could be read

would offer any clue as to the number ofcartons containing bicycles

their weight and dimensions In any event there is no computation by

the claimant as to the amount which it is claimed should be assessed

against that part of the shipment comprising bicycles based On stow

age factor cube measurements

Thus although llJbout a fourth of the shipment consisted of bicycles

which could qualify for the bicycle rate which OFC alleges should be

15 FMO
OCEAN FREIGHT CONSULTANTS INC V ITALPAOIFW LINE 319

at the rate of 139 per 1 000 kilos rather than at the rate of 28 50 per

cubic meter as assessed yet this aspect of the claim must fail for lack

ofany clear and certainly not any substantial evidence as to the weight

or measurements ofthe specific cartons

The impormnce of declaring in bills of lading the correct descrip

tionof the cargo shipped cannot be overemphasized The carrier has

a

right to expect that a shipper will properly identify the shipment

The shipper similarly has the right to expect the carrier tocharge the

proper rate for the actual goods carried Where amistake occurs the

party who commits it has the heavy burden ofproofto support a claim

for rectification Here the shipper committed the mistake and has

failed to sustain its burden ofproof

Complaint dismissed

S STANLEY M LEVY

Presiding Ewaminer

WASIDNGTON D C December fZ8 1971

15 F MC

jj
jj


jjj

jj



jjj
jjjjjjj
jjj
jj
j