FEDERAL MARITIME

COMMISSION

41st

ANNUAL REPORT

for

Fiscal Year

2002
TABLE OF CONTENTS

...

LETTER OF TRANSMITTAL ................................. 111

MEMBERS OF COMMISSION ................................ V

SENIOR COMMISSION OFFICIALS ........................... vii

I.

II.

III.

Iv.

V.

THE COMMISSION

A. History ........................................... 1

B. Functions ........................................ 1

C. Organization ...................................... 5

TIXEYEARINREVIEW ................................ 7

A. Trade Developments ................................ 8

B. Restrictive Trade Practices ....................... 12

C. Trade Oversight ................................... 13

D. Alternative Dispute Resolution ..................... 14

E. Enforcement ..................................... 16

MONITORING AND ENFORCEMENT

A. Monitonng.......................................lg

B. Enforcement .................................... 20

DEVELOPMENTS IN MAJOR U.S. FOREIGN TRADES

A. Transatlantic ..................................... 23

B. Mediterranean ................................... 27

c. MiddleEast ...................................... 29

D. Africa .......................................... 30

E. Latin America and the Caribbean ..................... 32

F. Transpacific ..................................... 35

G. Worldwide.. ..................................... 39

THE FOREIGN SHIPPING PRACTICES ACT OF 1988

A. General ......................................... 43

B. Top Twenty U.S. Liner Cargo

Trading Partners ............................. ..4 4
VI. SIGNIFICANT OPERATING ACTIVITIES BY

ORGANIZATIONAL UNIT

A. Office of the Secretary ............................. 49

B. Office of Administrative Law Judges ................ 5 1

C. Office of the General Counsel ....................... 55

D. Office of Equal Employment Opportunity ........... 75

E. Office of Inspector General ......................... 79

F. Office of the Executive Director .................... 83

G. Bureau of Consumer Complaints and Licensing ......... 97

H. Bureau of Enforcement .......................... 107

I. Bureau of Trade Analysis ......................... 111

APPENDIXES

A. Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

B. Commission Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 130

C. Agreement Filings and Status . . . . . . . . . . . . . . . . . . . . . . . 13 1

D. Form FMC-1 Tariff Location Addresses -

Electronic Service Contract Filings

And Special Permission Applications . . . . . . . . . . . . . 132

E. Civil Penalties Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

F. Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

G. Statement of Appropriations, Obligations

and Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

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FEDERAL MARITIME COMMISSION

WASHINGTON, D.C. 20573-0001

March 3 1,2003

To the United States Senate and House of Representatives:

Pursuant to section 103(e) of Reorganization Plan No. 7

of 1961, and section 208 of the Merchant Marine Act,

1936, as amended, I am pleased to submit the 41”’ Annual

Report of the activities of the Federal Maritime

Commission for fiscal year 2002.

Sincerely,

Steven R. Blust

Chairman

MEMBERS OF COMMISSION*

Sfeven R. Blusf

Chainnan

Appointed 2002

Term Expires 2006

Harold J. Creel, Jr.

Commissioner

Appointed 1994

Term Expires 2004

Delmond J.H. Won

Commissioner

Appoinfed 1994

Term Expired 2002

Joseph E. Brennan

Commissioner

Appointed 1999

Term Expires 2003

* One vacancy as of April 15, 2002

SENIOR COMMISSION OFFICIALS

Counsel to the Chairman . . . . . . Rachel Dickon-Mafney

Acting General Counsel . . . . . . . . . . . . . . David R. Miles

Secretary . . . . . . . . . . . . . . . . . . . . . Bryant L. VanBrakle

Chief Administrative Law Judge . . . . . Norman D. Kline

Director, Office of

Equal Employment Opportunity . . A/ice M. Blackman

Inspector General . . . . . . . . . . . . . . . . Tony P. Kominofh

Executive Director. . . . . . . . . . . . Bruce A. Dombrowski

Deputy Executive Director . . . . . . . . . Austin L. Schmitt

Director, Bureau of

Consumer Complaints

and Licensing . . . . . . . . . . . . . . . Sandra L. Kusumofo

Director, Bureau of

Enforcement . . . . . . . . . . . . . . . . . . . . . . . . Vern W Hi//

Director, Bureau of

Trade Monitoring . . . . . . . . . . . . . . . . Horence A. Carr

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I

THE COMMISSION

A. HISTORY

The Federal Maritime Commission (“Commission” or

“FMC”) was established as an independent regulatory agency by

Reorganization Plan No. 7, effective August 12, 1961. Prior to that

time, the Federal Maritime Board was responsible for both the

regulation of ocean commerce and the promotion of the United States

Merchant Marine. Under the reorganization plan, the shipping laws

of the U.S. were separated into two categories -- regulatory and

promotional. The responsibilities associated with the promotion of

an adequate and efficient U.S. Merchant Marine were assigned to the

Maritime Administration, now located within the Department of

Transportation (“DOT”). The newly-created FMC was charged with

the administration of the regulatory provisions of the shipping laws.

The Commission is responsible for the regulation of

oceanborne transportation in the foreign commerce of the U.S. The

passage of the Shipping Act of 1984 (“Shipping Act” or “1984 Act”)

brought about a major change in the regulatory regime facing

shipping companies operating in the U.S. foreign commerce. The

subsequent passage of the Ocean Shipping Reform Act of 1998

(“OSRA”), with its deregulatory amendments and modifications to

the 1984 Act, further signaled a significant paradigm shift in shipping

regulation.

B. FUNCTIONS

The principal statutes or statutory provisions administered by

the Commission are the 1984 Act, the Foreign Shipping Practices Act

of 1988 (“FSPA”), section 19 of the Merchant Marine Act, 1920
(“1920 Act”), and Pub. L. No. 89-777. Most of these statutes were

amended and modified by OSRA, which took effect on May 1,1999.

The Commission’s regulatory responsibilities include:

Protecting shippers and carriers engaged in the

foreign commerce of the U.S. from restrictive or

unfair foreign laws, regulations, or business

practices that harm U.S. shipping interests or

ocean trade.

Reviewing operational and pricing agreements

among ocean common carriers and marine

terminal operators (“MTOs”) to ensure that they

do not have excessively anticompetitive effects.

Reviewing and maintaining a system containing

the service contracts between ocean common

carriers and shippers, and using this system to

guard against anticompetitive practices and other

unfair prohibited acts.

Ensuring that common carriers’ rates and charges

are accessible to the shipping public in private,

electronically accessible systems.

Regulating rates, charges, and rules of

government-owned or -controlled carriers to

ensure that they are just and reasonable and are

not unfairly undercutting private competitors.

Issuing passenger vessel certificates evidencing

financial responsibility of vessel owners or

charterers to pay judgments for personal injury or

death or to repay fares for the nonperformance of

a voyage or cruise.

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n Licensing ocean transportation intermediaries

((‘OTIS”) to protect the public from unqualified,

insolvent, or dishonest companies.

n Ensuring that OTIS maintain sufficient financial

responsibility to protect the shipping public from

financial loss.

n Investigating discriminatory rates, charges,

classifications, and practices of common carriers,

MTOs, and OTIS operating in the foreign

commerce of the U.S.

The Commission is authorized by the FSPA, section 19 of the

1920 Act, and section 13(b)(6) of the 1984 Act to take action to

ensure that the foreign commerce of the U.S. is not burdened by nonmarket barriers to ocean shipping. The Commission may take

countervailing action to correct unfavorable shipping conditions in

U.S. foreigncommerce and may impose penalties. The Commission

may address actions by carriers or foreign governments that adversely

affect shipping in the U.S. foreign oceanborne trades including the

intermodal operations of carriers or the operations of OTIS, or that

impair access of U.S.-flag vessels to ocean trade between foreign

ports.

The 1984 Act is applicable to the operations of common

carriers and other persons engaged in U.S. foreign commerce. It

exempts agreements that have become effective under the 1984 Act

from the U.S. antitrust laws, as contained in the Sherman and Clayton

Acts. The Commission reviews and evaluates agreements to ensure

that they do not exploit the grant of antitrust immunity, and to ensure

that agreements do not otherwise violate the 1984 Act or result in an

unreasonable increase in transportation cost or unreasonable

reduction in service.

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In addition to monitoring relationships among carriers, the

Commission is also responsible for ensuring that individual carriers,

as well as those permitted by agreement to act in concert, fairly treat

shippers and other members of the shipping public, in accordance

with the 1984 Act’s prohibition against undue discrimination. The

1984 Act also requires all carriers to make their rates, charges and

practices available in automated tariff systems that must be available

electronically to the public. Non-vessel-operating common carriers

(“NVOCCs”) may only assess the rates and charges published in their

tariffs. Ocean common carriers are permitted to enter into service

contracts with their shipper customers. Such contracts are filed

electronically with the FMC in our Internet-based system, and are

provided confidential treatment by the Commission as required by the

Act. The Commission does not have the authority to approve or

disapprove general rate increases (“GRIs”) or individual commodity

rate levels in the U.S. foreign commerce, except with regard to certain

foreign government-owned or -controlled carriers.

Pub. L. No. 89-777 requires the operators ofpassenger vessels

with 50 or more berths who embark passengers at U.S. ports to

establish financial coverage to indemnify passengers in cases of

death, injury, or nonperformance of transportation. The Commission

certifies such operators upon the submission of satisfactory evidence

of financial responsibility. The Commission ensures that all OTIS

operating in the foreign commerce of the U.S. have established

sufficient financial responsibility to protect shippers from financial

loss. Additionally, the Commission licenses all U.S. OTIS.

The Commission carries out its regulatory responsibilities by

conducting informal and formal investigations. It holds hearings,

considers evidence and renders decisions, and issues appropriate

orders and implementing regulations. The Commission also

adjudicates and mediates disputes involving the regulated community,

the general shipping public, and other affected individuals or interest

groups.

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C. ORGANIZATION

The Commission is composed of five Commissioners

appointed for five-year terms by the President with the advice and

consent of the Senate. No more than three members of the

Commission may belong to the same political party. The President

designates one of the Commissioners to serve as Chairman. The

Chairman is the chief executive and administrative officer of the

agency.

The Commission’s organizational units consist of: Office of

the Secretary; Office of the General Counsel; Office of the Inspector

General; Office of Administrative Law Judges; Office of Equal

Employment Opportunity; Office of the Executive Director; Bureau

of Consumer Complaints and Licensing; Bureau of Enforcement; and

Bureau of Trade Analysis. The Executive Director assists the

Chairman in providing executive and administrative direction to the

Commission’s bureaus. These offices and bureaus are responsible for

the Commission’s regulatory programs or provide administrative

support.

In fiscal year 2002, the Commission was authorized a total of

180 full-time equivalent positions and had a total appropriation of

$16,447,000. That appropriation supported the actual employment of

127 full-time equivalent positions during the fiscal year. The

majority of the Commission’s personnel are located in Washington,

D.C., with area representatives in New York, New Orleans, Los

Angeles, Miami and Seattle.

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II

THE YEAR IN REVIEW

The ocean shipping industry faced significant challenges in

this fiscal year, and the Commission continued through its various

programs to provide assistance to the shipping public.

The Commission closely monitored significant trade

imbalances in major trade lanes, as well as the effects of political and

economic factors and labor strife on those imbalances. The

Commission continued to gather information on potentially restrictive

trade practices, particularly in the Peoples’ Republic of China

(“PRC”) and Japan. In an effort to uncover and address unreasonable

or unfair industry practice, the Commission requested additional

information on several agreements filed this fiscal year, and

continued its enforcement efforts and concurrent drive to encourage

voluntary compliance with the 1984 Act. Use of the Commission’s

alternative dispute resolution and consumer complaint programs

continued to grow, and the Commission assisted numerous parties in

resolving disputes ranging from passenger or shipper complaints

about service to major commercial disputes that would otherwise

have resulted in litigation.

This Annual Report is structured on an office-by-office basis

and contains a synopsis of each unit’s activities and accomplishments

during the past fiscal year. Special sections are devoted to areas of

particular interest. This section summarizes some of the

Commission’s major accomplishments this year.

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A. TRADE DEVELOPMENTS

International ocean shipping remains a vital link between the

U.S. economy and the rest of the world. The Commission continually

monitors trade and economic conditions in its oversight of our

Nation’s oceanborne commerce.

Overall for fiscal year 2002, import cargo inbound to the U.S.

grew and exceeded U.S. export cargo outbound by a substantial

degree, creating large imbalances in many U.S. trades. Notably, in

the transpacific, import cargo growth was due to a surge by shippers

to stock inventories prior to the anticipated labor dispute and port

closures on the U.S. West Coast. The U.S. economy, however,

remained constrained by uncertainties associated with events that

caused political instability and financial volatility on a global scale.

While the U.S. housing market thrived, other commercial sectors of

the economy experienced declines, which are projected to continue.

On average, freight rates for ocean shipping generally fell below

fiscal year 2001 levels despite areas of renewed cargo growth, and the

overall supply of vessel capacity grew moderately as carriers brought

larger container vessels on line. To cope with excess capacity, the

trend toward increased service rationalization and coordination

through operational agreements continued among carriers, especially

in the weaker U.S. outbound direction. For example, a new global

alliance arrangement was formed between COSCO Container Lines

Co. Ltd. (“COSCO”), Kawasaki Kisen Kaisha, Ltd. (“K Line”),

Yangming (U.K.) Ltd. (“Yangming”), Hanjin Shipping Co., Ltd.

(“Hanjin”), and Senator Lines GmbH (“Senator Lines”). Due to

persistently weak trade conditions, however, Senator Lines plans to

discontinue all its U.S. services, with Hanjin, its majority owner,

assuming its service obligations in the U.S. trades. In addition, major

carriers explored greater commercial innovations in information

technology (“IT”) by expanding their web-based services over the

Internet.

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In the transatlantic, the volume of liner imports and exports

showed little change or growth from the preceding fiscal year. The

persistent weak demand in the U.S. outbound direction caused the

trade imbalance to widen in favor of the inbound direction. The fear

of a disruption in cargo flow arose as major trade disputes occurred

between the U.S. and the European Union (“EU”). The level of

freight rates continued to decline despite the tariff GRIs implemented

by the Trans-Atlantic Conference Agreement (“TACA”). TACA’s

attempt to reverse the rulings of the European Commission (“EC”)

was defeated on appeal, as a higher European court upheld the EC’s

previous findings against the conference carriers for violations of the

EU’s competition laws. TACA, however, succeeded in gaining the

EC’s approval of its revised conference agreement, but at the same

time, the EC initiated a formal review of the EU’s maritime

competition legislation. TACA also amended its agreement to

reimplement its temporary slot assist chartering program between the

months of December 2001 and February 2002. Among nonconference carriers, COSCO, K Line, and Yangming reorganized

their coordinated services in the transatlantic, and are planning further

service changes in conjunction with Hanjin under their new alliance

agreement.

Between the U.S. and the Mediterranean, the robust U.S.

housing market sustained cargo growth in the U.S. inbound direction,

while the appreciation of the euro against the dollar fostered renewed

cargo growth in the outbound direction. There was also a slight

expansion in vessel capacity relative to the considerable increase that

occurred in the preceding fiscal year. While certain carriers

coordinated and consolidated their services through operational

agreements, other carriers expanded their operations in the trade by

adding new services and port calls, or vessel upgrades. In contrast to

many U.S. trades, freight rates in the stronger inbound direction rose

moderately as members of the United States South Europe

Conference initiated several tariff GRIs during the fiscal year.

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The ongoing political strife between nations in the Middle

East adversely affected cargo growth in this U.S. trade. Cargo

volume rose slightly in the U.S. inbound direction, and fell in the

outbound direction. With Israel as a major U.S. trading partner in the

region, the steep decline in U.S. exports to Israel particularly affected

the outbound direction. With continued violence in the Middle East,

insurance rates for vessels and cargo in the trade have increased. War

risk insurance surcharges remain in place, but at lower levels than

applicable immediately after the terrorist attacks in the United States

on September 11,200l.

An improvement in trade between the U.S. and Africa has

begun to materialize as a result of promotional trade initiatives.

Growth in cargo volume was positive in both the U.S. inbound and

outbound directions. Conditions of inadequate equipment and poor

infrastructure continued to cause congestion at African ports. In

response, the U.S. Southern Africa Conference introduced a

congestion surcharge. The conference also began a rate recovery

program which resulted in a moderate increase in freight rates. Like

the trend in other U.S. trades, certain carriers operating between the

U.S. and Africa engaged in more operational agreements, while

others introduced vessel upgrades and new services.

In South America, a surge in cargo volume occurred in the

U.S. inbound direction, especially for goods in the strong U.S.

housing market. In the outbound direction, however, political

instability and chronic recessionary conditions in such major nations

as Brazil, Argentina, and Venezuela squelched the demand for U.S.

exports and sent cargo volume downward. The disparity in the flow

of cargo produced a substantial trade imbalance in favor of the U.S.

inbound direction. Consequently, carriers struggled with considerable

excess capacity and lower freight rates in the outbound direction.

There was also a noticeable lack of cohesion among carriers

participating in the South American discussion agreements.

Favorable weather conditions helped revive the national economies

in Central America and the Caribbean, especially in the production of

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fresh produce. Cargo growth between the U.S. and the region was

positive, although incremental, in both trade directions. Freight rates,

however, remained relatively low. On related agreement matters, the

Commission is reviewing a petition filed by an association of OTIS

which alleges that certain collective practices by the Caribbean

Shipowners Association violated the 1984 Act.

In the transpacific, cargo volume in the inbound direction

from the U.S. to Asia grew substantially, while outbound cargo

growth was more modest. The surge in U.S. inbound cargo was

largely attributed to a rush by shippers to stock inventories in

anticipation of a labor dispute and port closures on the U.S. West

Coast. The 1 O-day lockout of unionized dockworkers ended by court

order on October 9,2002, resulted in massive port congestion. Many

carriers serving U.S. West Coast ports initiated congestion surcharges

to defray expenses from the service disruptions and delays caused by

the port closures and subsequent congestion. Despite cargo growth,

average freight rates remained low in both trade directions. The

ability of agreement carriers collectively to implement the rate

increases recommended by the inbound Transpaczjk Stabilization

Agreement (“T&A”) and the outbound Westbound Transpaczjk

Stabilization Agreement (“WTSA”) appeared to be limitedduring the

fiscal year. On related matters, the Commission took action on issues

concerning both TSA and WTSA. The Commission instituted an

investigation to review the service contracting practices of TSA and

its members after a joint petition was filed against the agreement by

associations of OTIS. As part of its investigation, the Commission

issued a Section 15 Order to obtain relevant information from the

TSA members. In addition, WTSA members filed an agreement

amendment to implement a cargo and revenue pooling arrangement

on their refrigerated cargo moved from the U.S. to Asia. Given the

potential magnitude of the proposed arrangement, and the concerns

expressed by shippers, the Commission requested additional

information on the amendment to more thoroughly assess its probable

competitive impact under the 1984 Act. Upon the Commission’s

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action, WTSA withdrew the amendment prior to the submission of

any additional information.

B. RESTRICTIVE TRADE PRACTICES

One of the Commission’s primary missions is to identify and

address protectionist practices of other countries that unreasonably

favor their domestic companies or discriminate against U.S. trade

interests in ocean shipping. In this regard, the Commission may issue

rules in response to foreign practices that create conditions

unfavorable to U.S. shipping in general. It also may institute

countermeasures in response to foreign laws or policies that adversely

affect U.S. carriers. It also can initiate appropriate action in instances

where a U.S.-flag vessel faces unfair barriers in entering a foreign-toforeign trade.

In fiscal year 2002, the Commission continued its active

approach in this area. In particular, the Commission continued to

address practices of the PRC and Japan.

In 2002, the Commission continued to gather information on

possible unfair shipping practices arising from the laws, regulations

and practices of the PRC, and monitor circumstances in light of the

first anniversary of the PRC’s accession to the World Trade

Organization. Should the Commission determine that formal

proposals for remedial action are warranted, these proposals will be

noticed for public comment prior to their effectiveness.

The Commission also continued to monitor regulations and

port practices of the Government of Japan. In fiscal year 2001, the

Commission revised its semiannual reporting requirement for U.S.

and Japanese carriers. The Commission also ordered other carriers

serving the U.S./Japan trade to report on the effects of Japanese port

practices and changes to Japanese law and regulations which had

gone into effect in November 2000.

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Finally, a permanent International Task Force, established in

2000 and chaired by the General Counsel and made up of key

personnel in that office, the Bureaus of Enforcement, Trade Analysis,

and Consumer Complaints and Licensing, was regularly convened in

2002. The Task Force identities, evaluates and attempts to anticipate

foreign practices which might have adverse impacts on U.S. shipping

interests.

C. TRADE OVERSIGHT

The Commission maintains systematic oversight of market

conditions and prevalent practices in U.S. ocean shipping. These

efforts help to uncover unreasonable or unfair industry behavior, and

identify potentially unfavorable trade practices by foreign

governments.

During the fiscal year, the Commission requested additional

information on an agreement amendment filed by WTSA to

implement a cargo and revenue pooling arrangement on refrigerated

cargo moved by WTSA members from the U.S. to Asia. To evaluate

the amendment’s potential competitive impact and address the

concerns of shippers, the Commission’s request sought further

clarification on the pooling arrangement’s terms and procedures,

along with relevant data on the members’ refrigerated cargo

movements in the agreement trade. Upon the Commission’s action,

WTSA withdrew the amendment prior to the submission of any

additional information. The Commission also requested additional

information on a newly filed marine terminal discussion agreement

among public ports in the State of Florida. To evaluate the proposed

agreement properly, relevant information was requested on the

agreement’s authority along with specific market data relating to the

services of the MTOs. Upon review of its response, the marine

terminal discussion agreement was allowed to take effect. Other

requests for additional information were issued by the Commission

concerning the carrier status of parties to newly filed agreements. In

addition, after an extensive analysis of controlled carrier rates and

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service contracts, the Commission addressed various recommended

approaches for overseeing and reviewing the pricing behavior of

controlled carriers under section 9 of the 1984 Act.

Other specific monitoring and research projects undertaken in

fiscal year 2002 included: economic testimony and analyses in

various formal proceedings; research and analyses on regulatory

modifications to enhance carrier agreement oversight with respect to

minutes of meetings, and information form and monitoring report

requirements; review of reports prepared by international

organizations concerning the antitrust immunity of carriers in liner

shipping; responses to Congressional inquiries; and responses to

informal complaints and requests from shippers on rates, service

matters, and agreement issues.

D. ALTERNATIVE DISPUTE RESOLUTION

During fiscal year 2002 the Commission continued its

implementation of an enhanced, comprehensive Alternative Dispute

Resolution program. Final rules implementing this program became

effective August 20,2001, and provide for the availability of a variety

of means of dispute resolution at the Commission. Under this

program, parties to a dispute are encouraged to avail themselves of

services provided by the Commission to resolve disputes through

conciliation, facilitation, mediation, fact finding, minitrials,

arbitration, or the use of ombuds services. The Commission makes

trained neutrals available to facilitate the resolution of shipping

disputes at all stages. Mediation is the most frequently chosen

method of dispute resolution for matters being litigated in formal

Commission adjudicatory proceedings. Significant cases in which

settlement was facilitated by Commission mediators during fiscal

year 2002 included Docket No. 00-02, CrowZey Liner Services, Inc.

and Trailer Bridge, Inc. v Puerto Rico Port Authority, and Docket

No. 00-03, Inlet Fish Producers, Inc. v. Sea-land Service, Inc.

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The Commission also provided significant ombuds services

to the shipping public by assisting consumers and other complaining

parties in resolving a number of problems without resorting to

litigation. During fiscal year 2002, the Commission received a high

volume of complaints, sustaining a trend that had become apparent

during the previous two years. Requests for assistance in the

aftermaths of multiple cruise line failures continued to account for

much of the complaint volume, as affected individuals sought

assistance for their efforts to recover cruise fares and deposits. The

Commission’s services were instrumental in hastening the resolution

of many compensation claims involving such situations. In addition,

the Commission’s informal complaint resolution procedures assisted

numerous consumers in resolving service disputes and other problems

involving cruise operators.

The Commission continued its efforts to bring its complaint

resolution procedures to the attention of the users of shipping

services. Information gathered from the Commission’s Internet site

directed many aggrieved parties to the available services, while state,

local and private consumer agencies, as well as various trade

organizations, provided contact information to many other

complainants. Although many complaints concerned disputes

between shipping companies, an increasing number concerned

problems encountered by individual and occasional users of shipping

services. In many cases, the Commission’s efforts enabled affected

parties to resolve their problems satisfactorily without recourse to

litigation.

During fiscal year 2002, a significant number of complaints

concerned the movement of personal effects and household goods.

Many such cases involved failure on the part of an OTI, and

consequences often arising from the OTI’s failure to discharge its

financial obligations promptly. Others involved problems arising in

foreign ports, and often concerned unanticipated problems with

foreign Customs agencies. While the Commission’s efforts were

often successful in resolving such disputes, the experience derived

-15-
from unsuccessful efforts proved to be of great assistance in advising

individuals encountering similar problems.

Other complaints and disputes brought to the Commission’s

attention covered a wide range of problems and situations. Shippers

frequently sought assistance in resolving financial claims of various

types, as well as a wide range of service problems. Shipping

companies on numerous occasions requested assistance in collecting

unpaid freight charges, while freight forwarders sought help in

enforcing carriers’ compensation obligations. While some of these

disputes fell outside of the Commission’s area of responsibility,

informal ADR techniques often helped to resolve situations and

forestall formal collection actions and possible litigation.

E. ENFORCEMENT

The Commission maintains a presence in Los Angeles,

Miami, New Orleans, New York and Seattle through Area

Representatives. These representatives serve as a liaison between the

Commission and various maritime interests in their respective areas

and also investigate activity that may violate the 1984 Act.

During fiscal year 2002, the Bureau of Enforcement

investigated and prosecuted malpractices in many trades lanes,

including the transpacific, North Atlantic, Central and South

American and Caribbean trades. This included market-distorting

activities such as various forms of secret rebates and absorptions,

misdescription of commodities and misdeclaration of measurements,

illegal equipment substitution, unlawful use of service contracts, as

well as carriage of cargo by and for untariffed and unbonded

NVOCCs. Most of these malpractice investigations resulted in

compromise settlements of civil penalties. However, some

investigations required the institution of formal adjudicatory

proceedings in order to pursue remedies under the 1984 Act.

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In addition to rate malpractice enforcement activity, several

matters arose with respect to activities pursuant to filed and unfiled

agreements between and among ocean common carriers. Further,

upon submission of a report to the Commission in Fact Finding

Investigation No. 24, the Commission instituted formal investigations

to examine the lawfulness of exclusive tug service arrangements in

certain Florida ports and at marine terminal facilities on the Lower

Mississippi. Further, the Commission, in response to a Petition,

initiated Fact Finding InvestigationNo. 25, to review the activities of

TSA members regarding service contract practices during the years

2000 to 2002.

The Commission collected $2,450,971 in civil penalties this

past fiscal year. These collections represent a wide range of

violations in all of our major trade lanes. Although the Commission

continues to undertake enforcement activity, as required by its

statutory mandate, its primary objective is to encourage voluntary

compliance by the regulated ocean transportation industry.

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III

MONITORING AND

ENFORCEMENT

A. MONITORING

The systematic monitoring of carrier activities and

commercial conditions in the U.S. liner trades is an integral part of

the Commission’s responsibilities under the 1984 Act, as amended by

OSRA. Such monitoring helps ensure that carriers operating in the

U.S. trades comply with the statutory standards of the 1984 Act and

the requirements of relevant Commission regulations. To that end,

the Commission administers a variety of monitoring programs and

other research activities designed to keep it informed of current trade

conditions, emerging commercial trends, and carrier pricing and

service activities.

The importance the Commission attaches to its ongoing

monitoring activities is a direct consequence of the removal, under

the 1984 Act, of the Commission’s previous broad discretion to

disapprove agreements. The 1984 Act provides that, unless rejected

under relevant statutory authority, agreements filed with the

Commission shall become effective on the 45th day after filing or the

30th day after notice in the Federal Register, whichever is later.

Agreements can be rejected for technical reasons or for failure to

include statutory provisions in the agreement language. Also, the

Commission may extend the original 45-day period when additional

information from filing parties is deemed necessary and is requested.

Finally, if the Commission determines that an agreement, by virtue of

a reduction in competition, is likely to increase transportation costs

unreasonably or decrease transportation service, it may seek

injunctive relief in the U.S. District Court for the District of

-19-
Columbia. As a consequence of the Commission’s limited

authority to block agreements from taking effect, the need for

adequate and timely evaluation of post-implementation agreement

activity has increased considerably. The Commission’s monitoring

program provides such an evaluation through its examination of

carrier competition, including market share, concentration, entry

conditions, general rate and service conditions, as well as pricing

trends, vessel utilization, service contracting activity, and shipper

complaints.

In fiscal year 2002, the Bureau of Trade Analysis prepared a

variety of economic analyses and reports on the activities and

practices of carriers operating in the U.S. international trades.

Projects included: (1) an economic analysis and memorandum

concerning rate levels of certain controlled carriers, approaches for

analyzing controlled carrier pricing behavior, and a revised controlled

carrier program; (2) analyses and critiques of a revised draft World

Bank paper, and an Organization for Economic Cooperation and

Development (“OECD”) draft paper calling for an end to carrier

antitrust immunity; (3) economic analyses of newly filed major

agreements and amendments under the section 6(g) standard of the

1984 Act; (4) analyzing requests by agreements for amending their

monitoring report requirements; (5) reviewing quarterly monitoring

report data submitted in accordance with the regulations on

agreement reporting requirements; (6) preparing quarterly controlled

carrier reports; and (7) responding to Congressional and informal

requests and inquiries for trade analyses and data.

B. ENFORCEMENT

The 1984 Act establishes an integrated system for the

regulation of the shipping and related industries in furtherance of the

statutory declaration of policy to ensure a nondiscriminatory,

efficient, and economic ocean transportation system for the benefit of

international trade of the U.S. The enforcement program represents

a major area of Commission activity. A principal goal of the program

-2o-
is to achieve compliance with the provisions of the 1984 Act.

Compliance, in turn, provides the pathway to the statutory objectives

of the 1984 Act. Enforcement is a traditional means to achieve

compliance through deterrence.

The Commission maintains a presence in Los Angeles,

Miami, New Orleans, New York and Seattle, through Area

Representatives based in each of those cities. These representatives

also serve the other major port cities and transportation centers within

their respective areas. Local presence in major port areas greatly

enhances the Commission’s ability to perform its various functions

and improves communications with the regulated industry and its

customers.

Interaction between the Commission’s Area Representatives

and the U.S. Customs Service (“Customs”), with respect to the

exchange of investigative information, continues to be beneficial. All

Area Representatives work closely with Customs in their respective

port districts and have established symbiotic working relationships

which contribute to the productivity and efficiency of both agencies.

During fiscal year 2002, the Bureau of Enforcement

investigated and prosecuted malpractices in many trades lanes,

including the transpacific, North Atlantic, Central and South

American and Caribbean trades. These malpractices included

market-distorting activities such as various forms of secret rebates

and absorptions, misdescription of commodities and misdeclaration

of measurements, illegal equipment substitution, unlawful use of

service contracts, as well as carriage of cargo by and for untariffed

and unbonded NVOCCs. Most of these malpractice investigations

resulted in compromise settlements of civil penalties. However, some

investigations required the institution of formal adjudicatory

proceedings in order to pursue remedies under the 1984 Act.

In addition to rate malpractice enforcement activity, several

matters arose with respect to activities pursuant to filed and unfiled

-21-
agreements between and among ocean common carriers. Further,

upon submission of a report to the Commission in Fact Finding

Investigation No. 24, Exclusive Tug Arrangements in Florida Ports,

the Commission instituted formal investigations to examine the

lawfulness of exclusive tug service arrangements in certain Florida

ports and at marine terminal facilities on the Lower Mississippi. Also,

in response to a Petition, the Commission initiated Fact Finding

Investigation No. 25 to review the activities of TSA members

regarding service contract practices during the years 2000 to 2002.

During fiscal year 2002, the Commission collected $2,450,97 1

in civil penalties. Settlements were reached with many different

segments of the industry (e.g., carriers, shippers, forwarders, and

NVOCCs) operating in the U.S. foreign trades (see Appendix E).

-22-
IV

DEVELOPMENTS IN MAJOR

U.S. FOREIGN TRADES

A. TRANSATLANTIC

Ln fiscal year 2002, the volume of liner imports and exports

between the U.S. and North Europe showed little change from the

preceding fiscal year. Trade growth was affected by sluggish

economic conditions and the decline in the value of the dollar against

the euro. Huge stock market losses, uncertainties over terrorism, and

the Middle East situation generally restrained consumer spending and

production both in the U.S. and abroad, although the U.S. housing

market continued to expand. In the U.S. inbound trade direction,

import cargo from North Europe grew by only .6 percent in fiscal year

2002. Certain products from North Europe posted greater gains,

including auto parts, paper, furniture and lumber, while imported beer

and ale declined. In the outbound trade direction, U.S. export cargo

to North Europe slipped by 1 percent in fiscal year 2002. Declines

occurred in the foreign demand for such U.S. products as auto parts,

synthetic resins and rubber, paperboard and medical supplies, while

edible nuts and sporting goods from the U.S. remained stable.

The trade imbalance between the U.S. and North Europe

continued to widen during the fiscal year as import cargo exceeded

export cargo by 54 percent, or roughly 5 15,000 TEUs. Carriers

struggled with uneven levels of vessel capacity utilization in the

opposing trade directions. On average over the fiscal year, vessel

capacity utilization in the transatlantic was 87 percent in the stronger

inbound direction from North Europe, and 61 percent in the weaker

outbound direction from the U.S. To cover the cost of repositioning

empty containers, members of the Tram-Atlantic Conference

-23-
Agreement (“TACA”) (No. 202-011375) reinstituted an equipment

repositioning charge of $100 per container on inbound cargo from

October 2001 to June 2002.

Transatlantic carriers are hopeful that the depreciation of the

U.S. dollar against the euro will eventually improve the trade

imbalance by boosting the consumption ofU.S. export goods abroad.

Improvements in U.S. export growth, however, appear threatened by

the eruption of major trade disputes between the U.S. and the EU. In

March 2002, the U.S. imposed certain restrictions on steel imports to

the U.S. as a measure to protect the U.S. steel industry. In response,

the EU placed similar protective restrictions on steel imports to

member nations of the EU. Further, pending a final ruling from the

World Trade Organization (“WTO”), the EU stands ready to place

additional restrictions on numerous U.S. export products if the

measures on steel imports to the U.S. are not lifted. In another

dispute involving U.S. tax laws, the WTO awarded the EU the right

to impose upwards of $4 billion in sanctions on U.S. exports for

damages incurred by EU companies. The U.S. tax laws give U.S.-

based companies concessions on their foreign income generated from

the sale of U.S. goods and services. The WTO views the U.S. tax

concessions as export subsidies in violation of its international trade

rules. It is feared that these disputes could potentially disrupt the

flow of cargo that is already constrained by weak market conditions

in the transatlantic trade. The magnitude of these events has pushed

negotiations between the U.S. and the EU toward trying to resolve

these disputes to avoid trade disruptions.

As a conference, TACA collectively implemented several

tariff GRIs in its efforts to bolster sinking freight rates. During the

fiscal year, TACA initiated one small tariff GRI in the outbound trade

direction and two moderate tariff GRIs in the inbound trade direction.

These collective rate initiatives, however, appeared to have little

direct impact on the trade as rates continued to fall. Rather, the

conference uses its common tariff as a means of providing some

direction to its members for their individual service contract

-24-
negotiations. As a group, the conference moved only a minimal

amount of cargo under its common tariff or service contract rates,

while upwards of 85 to 90 percent of its cargo moved under

individual service contracts with independently negotiated rates and

terms. Additionally, during the fiscal year, TACA continued to face

intense competition from independent carriers in the transatlantic,

where the conference’s market share was 48 percent in either trade

direction. Despite efforts to increase rates, industry reports estimated

that by September 2002, freight rates had fallen by 15 to 25 percent

below the 2001 levels.

Many of TACA’s ongoing issues with European regulators

were brought to a conclusion. On a number of appealed cases, the

European court upheld the decisions of the EC against TACA and its

predecessor, the Trans-Atlantic Agreement. The appealed cases

centered on the legal interpretation and application of the EU’s

competition laws and its exemption for conference agreements

between ocean common carriers. Previously, among other issues, the

EC charged that TACA violated the EU’s exemption for conferences

with respect to its former capacity management program, general

pricing structure, and common pricing for inland European transport

services. Further, the EC lifted TACA’s immunity from penalties,

and levied 273 million euros in fines on the conference carriers. The

European court ruled in favor of the EC on all of these issues, except

for the actual amount of fines. This issue remains before the court on

appeal. Thus far, TACA has chosen not to further litigate these issues

by appealing to a higher court. Instead, the conference continued to

seek the EC’s approval of a revised agreement. In 1998, TACA

revised its agreement to comply with OSRA’s legislative changes and

the EC’s directives. The revised agreement became effective under

the 1984 Act in December 1998. The agreement remained pending

before the EC due to opposition from European shippers. Recently,

the EC approved TACA’s revised agreement by exempting it from

the EU’s competition laws. Further, the EC initiated a formal review

of the EU’s maritime competition legislation that will specifically

address whether the exemption provision for ocean liner conferences

-25-
t is adequately adapted to the existing market conditions. In the review

process, the EC will invite comments from governments, industry,

I and other interested parties.

On other agreement and service matters, TACA amended its

agreement to reimplement its temporary slot assist chartering program

during the period of slack demand between the months of December

2001 and February 2002. The amendment allowed TACA members

temporarily to withdraw vessels from their weekly voyage rotations

and to charter space from each other over the program period. The

I vessels were returned to service starting on the next round-trip

rotation from North Europe. TACA has again amended its agreement

to continue the same program for the upcoming slack season.

Among other carriers, Cosco Container Lines Company,

I Limited (“COSCO”), Kawasaki Kisen Kaisha, Ltd. (“K Line”), and

Yangming (UK) Ltd. (“Yangming”) reorganized their coordinated

services between the U.S. and North Europe. The carriers

collectively removed one service string of vessels from the trade and

redirected another string to its pendulum service to cover ports in

Asia, the U.S., and North Europe. To maintain service in the trade,

COSCO, K Line, Yangming and Hanjin Shipping Company, Ltd.

(“Hanjin”) entered into the AtZantic Space Charter Agreement (No.

217-011798) to charter vessel space from members of the Grand

Alliance-Americana Atlantic Agreement (No. 232-011705). While

certain carriers removed vessels, other carriers, including

Mediterranean Shipping Co., expanded by bringing in larger vessels.

Therefore, by fiscal-year end, the overall amount of transatlantic

vessel capacity was almost 3 percent greater in either trade direction.

Further service changes are anticipated. COSCO, K Line, and

Yangming plan to consolidate all of their coordinated U.S. services

in an alliance arrangement with Hanjin and Senator Lines GmbH

I

(“Senator Lines”) under the COSCON/KL/YMUK/Hanjin/ Senator

WorldwideSlotAllocation andSailingAgreement (No. 232-011794).

Due to persistently weak trade conditions, however, Senator Lines

announced that its U.S. services will be phased out, and that Hanjin

-26-
(Senator Lines’ majority owner) will assume its service obligations

in the U.S. trades. In the transatlantic, the new alliance agreement

will supercede the existing agreements between the carriers. Under

this new agreement, the alliance partners plan to consolidate their

transatlantic services and further remove excess vessel capacity from

the trade.

B. MEDITERRANEAN

The U.S./Mediterranean trade continues to show strong

growth. Recent industry reports indicate that export and import flows

over the last seven years are up 33 percent and 71.5 percent,

respectively, and that long-term average annualized growth rates will

be in the 5 to 6 percent range. In fiscal year 2002, the volume of

import cargo from the Mediterranean grew approximately 10 percent

compared to last fiscal year cargo volumes. One factor leading to this

growth was the anticipation by shippers of labor strikes at U.S. West

Coast ports that triggered early U.S. import shipments during the

second calendar quarter of the year. Another factor accounting for the

growth in U.S. imports from the Mediterranean was the resilient U.S.

housing market and the associated demand for building materials and

home furnishings. Despite economic uncertainties and encouraged

by low interest rates, U.S. consumers continued their demand for

ceramic tiles, marble, alabaster, furniture and other commodities

associated with the housing industry.

U.S. export cargo volumes to the Mediterranean continue to

fluctuate. During fiscal year 2002, U.S. exports expanded nearly 14

percent over the previous fiscal year, in which U.S. export cargo

volumes contracted more than 14 percent over fiscal year 2000 cargo

volumes. Modest economic growth during fiscal year 2002 in

Mediterranean countries such as Turkey and France, and the rising

value of the euro relative to the U.S. dollar, helped foster greater

foreign demand for major U.S. exports such as logs, lumber, wood

pulp and raw cotton. This is in sharp contrast to fiscal year 2001,

-27-
where these major U.S. exports to the Mediterranean regions suffered

double-digit percentage losses.

The Mediterranean trade continues to be a logical collection

point for in-transit cargo that attracts a number of carriers outside the

direct U.S./Mediterranean trade. Managing excess vessel capacity

continues to be a major issue for carriers serving the direct trade.

However, the nearly two-year-long expansion in vessel capacity that

started in fiscal year 2000 finally showed signs of abating during

fiscal year 2002. The latest industry reports project that the fiscal

year will end with overall increases in vessel capacity of only 2 to 3

percent, well below the increase in capacity of 25 percent that the

trade experienced in the previous fiscal year.

To address the excess capacity situation in the

U.S./Mediterranean trade, carriers such as China Shipping Container

Line, Evergreen Line and Italia Line terminated some of their direct

services in the region and elected instead to enter into slot charter

arrangements with other carriers presently providing services in the

trade. In addition, COSCO, K Line, Hanjin and Yangming

restructured or revised their liner services by creating a pendulum

service (i.e., U.S./Mediterranean/Far East), and by consolidating their

services with other existing services. Lykes Lines Limited, LLC

(“Lykes”), A.P. Moller Maersk-Sealand (“Maersk-Sealand”),

Contship Container Lines, CMA-CGM, and Turkon Line either

expanded their operations in the trade with new services, increased

port calls, or vessel upgrades.

With vessel capacity beginning to stabilize and trade

conditions improving, rate levels in the stronger inbound direction

rose modestly. The members of the United States South Europe

Conference (No. 202-011587) (“USSEC”), which hold amarket share

of less than 50 percent, implemented two small-to-moderate tariff

GRIs in the trade during the fiscal year; further GRIs are planned for

fiscal year 2003. In the U.S. outbound trade, freight rates are still

depressed. Despite indications that trade conditions are improving,

-28-
the members of the USSEC elected not to implement any GRIs in that

trade lane during the fiscal year.

C. MIDDLE EAST

During fiscal year 2002, conditions in the U.S./Middle East

trade continued to deteriorate. Uncertainties in the region,

particularly the possibility of a U.S. war with Iraq and ongoing

violence in the region, had a negative impact on cargo volume

growth. U.S. import cargo volumes in the trade remained relatively

flat, increasing only 2 percent over fiscal year 2001. However, with

the U.S. economy slightly healthier than last fiscal year, U.S.

consumers spent more, and import shipments of commodities such as

apparel, plastics, fabrics, cotton, and women’s and infants’ ware from

the region increased during fiscal year 2002. Israel led the region

with double-digit gains on shipments to the U.S. of plastics and

cotton, yams and clothing apparel, followed by Saudi Arabia with

glassware, rugs and floor coverings.

Due to regional problems, fiscal year 2002 U.S. export cargo

volumes contracted approximately 5 percent compared to fiscal year

2001. Many of the top U.S. exports to the region suffered doubledigit losses. Israel, one of the leading U.S. trading partners in the

region, experienced more than a 3 1 percent decrease in U.S. exports

of wastepaper, wood pulp and industrial resins. Other countries in

the region also saw their U.S. export cargo volumes decline. Saudi

importers reduced their purchases of U.S. furniture, refrigeration

equipment, groceries, wood pulp and air conditioners. Even with a

marginal trade growth of 5 percent over last fiscal year, United Arab

Emirates’ consumers reduced their purchases of U.S. exports of air

conditioners, grocery products and fruits. In Kuwait, U.S. exports

were down by 14 percent compared to a year ago.

The continued conflict between Israeli and Palestinian

factions placed an additional strain on relations between Middle East

nations. Because of this, carriers continued to incur higher costs for

-29-
premiums imposed by insurance companies. However, through

renegotiations with ship insurance firms, many carriers in fiscal year

2002 reduced war risk surcharges that had been implemented the

previous year. Toward the end of the fiscal year, many carriers in the

trade were contemplating the establishment of congestion surcharges

in their tariffs and service contracts in order to offset expenses due to

labor disputes at U.S. West Coast ports.

D. AFRICA

The United Nations Economic Commission for Africa has

forecasted an average Gross Domestic Product (“GDP”) growth rate

of 3.4 percent for calendar year 2002. Although GDP growth rates

for most African countries are modest, they are expected to exceed

the population growth rate of approximately 2.6 percent.

Consequently, a modest gain in per capita income is expected for

calendar year 2002.

The increase in trade was due to trade expansion initiatives

undertaken by the U.S. and African countries. During the fiscal year,

the U.S. and African countries continued to promote trade through a

number of initiatives, such as several Trade Investment Framework

Agreements, the African Growth and Opportunity Act of 2000, and

several bilateral trade agreements concluded by the U.S. Trade

Representative. These initiatives, particularly the African Growth

and Opportunity Act of 2000, were credited with increasing trade

between the U.S. and Africa during fiscal year 2002.

Despite low rates of economic growth over much of the

continent during the fiscal year, the volume of liner cargo transported

between the U.S. and Africa continued to grow. During fiscal year

2002, compared to the previous fiscal year, U.S. exports to Africa

grew by 2 percent, while U.S. imports from Africa grew by 11.3

percent. The principal U.S. exports were apparel, animal feed, paper

and wastepaper, and synthetic resins. The major U.S. imports from

Africa were miscellaneous apparel, men’s ware and cocoa.

-3o-
African ports continued to be considered substandard due to

inadequate equipment and infrastructure, which resulted in lower

efficiency, higher port costs and congestion. Several ports are

addressing this problem by investing in comprehensive plans to

improve infrastructure. For example, the port of Maputo in

Mozambique is being refurbished at a cost of $61 million. Many

African ports also are implementing congestion surcharges to

alleviate congestion problems by encouraging faster movement of

cargo through the port. For example, the port of Durban in the

Republic of South Africa initiated a congestion surcharge of $75 per

container, while other South African ports increased harbor duties by

25 percent during the fiscal year. In response, members of the U.S.

Southern Africa Conference introduced a port congestion surcharge

for all cargo between the U.S. and Southern Africa.

Following a period of falling rates during calendar year 2001,

members of the U.S. Southern Africa Conference implemented a rate

recovery program. It appears that this program was somewhat

effective, as rates increased slightly in the trade during the fiscal year.

In an effort to reduce operational costs and also to improve their

bottom line, some carriers entered into alliances and cooperative

working agreements.

A number of changes were made in the liner services between

Africa and the U.S. during fiscal year 2002. Safmarine Line

introduced larger ships in its services in response to an increase in

U.S. import cargo volumes. TMM Lines Limited, LLC began a new

service in conjunction with Lykes between the U.S. East Coast and

Africa; and Maersk-Sealand acquired Torm West Africa Line, with

the hope of improving its breakbulk service between Africa and the

U.S.

-31-
E. LATIN AMERICA AND THE CARIBBEAN

Overall imports from South America to the U.S. surged 15

percent during fiscal year 2002 compared to last fiscal year. On a

regional basis, imports of furniture, logs and lumber, coffee, and

tobacco were the biggest gainers from the East Coast of South

America. Goods from Brazil dominated this trade lane, accounting

for almost 75 percent, and primarily were responsible for the

increases in furniture and logs and lumber shipments as the continued

strength of the U.S. housing market elevated demand for housing

products. U.S. inbound trade also expanded from the West Coast of

South America, with imports from Chile leading the way. Chile is

the largest U.S. trading partner in the West Coast region and is the

leading supplier of wood millwork. U.S. consumers fueled the

demand for construction-related commodities from this region. The

demand for agricultural products from this area, especially fruits and

horticultural products, also expanded during fiscal year 2002 and is

expected to continue its upward trend.

While U.S. imports from South America surged in fiscal year

2002, U.S. exports continued to decline following a downward trend

over the last two fiscal years. The combined effects of slowing

economies in many South American countries and weakened

currencies have restrained consumption of U.S. exports. The decline

in U.S. exports to the East Coast of South America more than offset

the slight increase in U.S. exports to the West Coast of South

America. The contraction in demand was the largest in Brazil with

a wide variety of commodities affected, most notably trucks, lifts, and

parts, along with industrial inputs. A strong U.S. dollar, as well as an

economic downturn in this region, contributed to the decline. A

Brazilian and Argentine recession is expected to keep the demand for

U.S. goods low in the near future. The countries of the West Coast

of South America have enjoyed higher economic growth compared

to their eastern neighbors, which explains the increase in U.S.

exports. Melamine and resins provided a large increase, along with

wastepaper. Chile, Ecuador, and Peru all have contributed to the

-32-
growth in this region, while Columbia continues to struggle in the

manufacturing sector.

Overall, annual real GDP growth in all countries except Peru

was lower in calendar year 2002 compared to 200 1. In Argentina and

Venezuela, annual real GDP dropped into negative territory. Political

instability will continue to plague South American countries, and it

is not expected to improve in the near future. Recent elections in

Brazil have left markets uncertain and apprehensive, while GDP

growth remains sluggish. Brazilian export growth resulting from a

devalued peso will continue to boost this economy. Argentina’s

exports will also continue to help this country, which is in its fourth

year of recession. The construction of a crude oil pipeline in Ecuador

will give this country a needed economic boost in the form of more

jobs and investment, as its GDP is expected to grow 3.7 percent next

calendar year. The prospect of market conditions improving in South

America in fiscal year 2003 remain bleak. While U.S. imports from

South America are expected to remain strong into fiscal year 2003,

U.S. exports to this region are expected to continue a downward

trend.

Carriers serving the East Coast of South America trade were

increasingly challenged during fiscal year 2002 due to trade

imbalances. Currency devaluations in both Argentina and Brazil

boosted their exports to the U.S. and elsewhere as they tried to export

their way out of an economic recession. Carriers introduced larger

ships in the trade to accommodate this surge in demand. However,

outbound cargo volumes from the U.S. were curtailed by low foreign

consumer demand. As a consequence, a large surplus of vessel

capacity into the East Coast of South America had developed, with

freight rates falling accordingly. This trade imbalance affected the

carriers negatively, with declining rates leading to a lack of carrier

cohesion particularly amongst the members of the East Coast of

South America Discussion Agreement (No. 205-011421). Earlier in

fiscal year 2002, members of this Agreement failed to sustain a GRI.

In the West Coast of South America trade, exports out of this region

-33-
rose significantly, attracting new carriers to this trade lane. However,

this trade remains small relative to other U.S. trade lanes, which

explains why most services to and from this region involve some

form of a triangular rotation between the Caribbean and the West

Coast of North America. Similarly, the members of the West Coast

of South America Discussion Agreement (No. 205-011426) had

difficulties implementing a GRI due to lack of carrier cohesion and

competition from non-discussion agreement carriers.

Industry reports noted that vessel capacity utilization levels

through the first three quarters of fiscal year 2002 improved

dramatically for U.S. imports originating from South America

compared to fiscal year 2001. Capacity utilization levels showed an

increasing trend, while averaging 65 and 70 percent for U.S. imports

originating from the East and West Coasts of South America,

respectively. Although capacity utilization levels improved during

the first three quarters of fiscal year 2002 compared to fiscal year

2001, utilization levels for vessels carrying U.S. exports have shown

a downward trend at 61 percent and 60 percent for those vessels

destined for the East and West Coasts of South America, respectively.

Spared from the devastating effects of droughts and hurricanes

experienced during the previous fiscal years, the economies of

Central America and the Caribbean showed signs of improvement

during fiscal year 2002. Production ofcoffee, bananas, melons, fruits

and vegetables, for example, rebounded noticeably during the fiscal

year. For the fiscal year, imports from Central America and the

Caribbean increased by nearly2 percent, mainly due to increased U.S.

demand for agricultural goods and apparel, while U.S. exports to the

region increased by 2.1 percent.

U.S. exports to Central America and the Caribbean consisted

mainly of cotton and yarn, of which the greater portion was exported

to Honduras and Costa Rica. The countries of the Caribbean

imported U.S. grocery products, glassware, building material, and

automobiles.

-34-
Carrier members of agreements serving the Central America

and Caribbean trades attempted to raise freight rates during the fiscal

year. Excess vessel capacity and the continuing trade imbalance

between the U.S. and the region, however, caused rate levels to

remain relatively low. Nevertheless, industry representatives are

hopeful that expanding free trade initiatives will improve the level of

northbound commerce that could lead to a better two-way balance in

the movement of containers. This could reduce the number of empty

containers moving northbound and possibly improve rate structures.

F. TRANSPACIFIC

During fiscal year 2002, while both U.S. import and export

cargo growth increased, the transpacific trade was hit hard by

unstable and deteriorating rate levels and a West Coast port

shutdown.

The Transpac@ Stabilization Agreement (“TSA”) (No.

205-011223) covers the inbound trade from the Far East to the U.S.

and presides over the largest U.S. liner trade. Asian imports

surpassed 6 million TEUs for the fourth consecutive fiscal year. TSA

consists of 14 carrier members, with a collective market share

exceeding 80 percent. Members exchange information, discuss

pricing-related issues, such as proposed GRIs and standardized

surcharges, and establish voluntary service contract guidelines in the

U.S. inbound Far East trade.

In fiscal year2002, the inbound transpacific trade experienced

a strong increase in cargo volumes with growth of over 12 percent,

compared to the dismal 3 percent growth rate achieved in fiscal year

2001. Despite the increase in cargo volumes, the trade suffered from

low rates. Service contracts based on modest 2002 trade growth

forecasts resulted in the negotiation of low contract rates for the 2002/

2003 service contract season. The cohesiveness of TSA and its

ability to implement surcharges and rate increases effectively

continued to be challenged by previously low contract rates and

-35-
terms, as well as continued overcapacity in the trade. While

overcapacity was not as severe as it had been in past years, carriers

continued to struggle to maintain a cost-effective balance between

supply and demand for vessel capacity in the trade.

In the past few years, many carriers saw their rates in the

transpacific trade fall to their lowest levels. As a result, TSA

announced a 2002 rate restoration program. Among its many aspects,

this program recommended that a peak-season surcharge (“PSS”) and

a GRI clause be included in TSA members’ individual service

contracts. Despite high cargo volumes, TSA members’ ability to

achieve GRI and PSS objectives was greatly challenged. While there

was a 25 percent increase in cargo volume for the second quarter of

2002, the average freight rate reportedly declined by 5 percent

compared to the first quarter of 2002.

Many industry analysts attribute the second quarter c,argo

volume boom to cargo being shipped earlier than usual due to the

anticipated West Coast port shutdowns. September 29,2002, was the

beginning of a 1 O-day lockout of the International Longshoreman and

Warehouse Union by the Pacific Maritime Association. The

shutdown has been estimated to have cost the U.S. economy between

$1 to $2 billion a day. In fiscal year 2002, TSA members moved over

5 million TEUs through U.S. West Coast ports. TSA members

incurred sizable costs due to the port shutdown. While TSA

collectively declined to implement port congestion surcharges, many

carriers on an individual basis announced congestion surcharges in an

attempt to recoup some losses.

During the fiscal year, a group of NVOCCs filed Petition No.

Pl-02, Petition of the National Customs Brokers and Forwarders

Association of America, Inc. and the International Association of

NVOCCs, Inc. for an Investigation ofthe Contracting Practices of the

Transpaczj?c Stabilization Agreement, with the Commission alleging

that the TSA and it members had violated various sections of the

1984 Act, by engaging in a concerted practice of discrimination

-36-
against NVOCCs regarding the negotiation of, and rates implemented

pursuant to, their service contracts. Specifically, the Petitioners

alleged that TSA members had charged significantly higher rates than

those assessed against proprietary shippers for the same services, and

refused to negotiate service contracts with NVOCCs until TSA

members had completed negotiations and signed service contracts

with proprietary shippers. Based on staff research and

recommendations, the Commission determined to initiate a fact

finding investigation into these allegations, Fact Finding Investigation

No. 25, Practices of the TranspaciJic Stabilization Agreement

Members Covering the 2002-2003 Service Contract Season. As part

of its investigation, the Commission issued a Section 15 Order that

requested documents, information, and data from TSA and its

members. The Commission also held hearings in which NVOCCs

provided testimony regarding their allegations that TSA members had

targeted NVOCCs. The Commission is in the process of reviewing

and analyzing information received from TSA and its members in

response to the Section 15 Order, and further investigating the

allegations made by Petitioners.

The Westbound Transpac@c Stabilization Agreement

(“WTSA”) (No. 205-011325) is the outbound counterpart to TSA. It

also operates as a forum for the exchange of information among its

members, and authorizes them to discuss and agree on pricing and

related matters. In fiscal year 2002, U.S. container exports to Asia

modestly increased by 3.3 percent compared to a .4 percent decrease

in fiscal year 2001. This cargo growth was comprised mainly of lowvalued products such as wastepaper, animal feeds and scrap metals.

For calendar year 2002, it is forecasted that China will surpass Japan

as the Asian nation that imports the largest volume of U.S.

containerized goods.

In February 2002, WTSA tiled an amendment to its agreement

to establish a reefer trade management program (“RTMP”). The

stated purpose of the amendment was to promote stable and

consistent service to shippers requiring refrigerated (“reefer”) service.

-37-
The RTMP would have allowed member lines to formulate a cargo

and revenue pooling arrangement for reefer cargo. At the time the

amendment was tiled, WTSA carried over 95 percent of U.S. reefer

shipments to the Far East. Given the almost complete market

domination of the containerized reefer market by WTSA members,

and the anticompetitive nature of the RTMP, the proposed

arrangement raised serious concerns with the Commission. In

addition, the Commission received letters from several shipper groups

raising questions over the legality and possible adverse effects of the

proposed pooling arrangement. The Commission requested

additional information from WTSA to evaluate thoroughly the

commercial and economic consequences of the RTMP. In the face of

the Commission’s concerns about the program, WTSA withdrew the

amendment.

During the fiscal year, WTSA attempted to establish

minimum rates and modest rate increases on selected commodities.

These attempts do not appear to have been successful. MaerskSealand, the largest carrier in the trade, announced in July that it

would withdraw from WTSA. The carrier cited the “lack of resolve”

by other member lines to adhere to WTSA’s rate restoration programs

as the reason for terminating its membership in WTSA. MaerskSealand, however, continues to serve the trade. Even without

Maersk-Sealand, WTSA members carry around 75 percent of all

containerized U.S. exports to Asia.

The trade imbalance between the U.S. and the Far East

continued during fiscal year 2002 with Asian imports outnumbering

U.S. exports by a two-to-one margin. This imbalance resulted in low

capacity utilization for outbound vessel sailings and very low freight

rates. Morever, combined with the inability to increase inbound

freight rates to pre-2001 levels, transpacific carriers expect trade-wide

losses to exceed $1.2 billion for fiscal year 2062.

-38-
G. WORLDWIDE

Fiscal year 2002 was difficult for ocean common carriers

serving the U.S. liner trades, with the threat of a U.S. invasion in Iraq,

the continuing war on terrorism, Middle East violence, stock market

volatility, and a slow U.S. economic recovery. U.S. imports grew by

10.2 percent during the fiscal year, primarily in the transpacific trade.

On a cautionary note, however, this growth rate may not be

sustainable. U.S. import growth during the fiscal year was due

primarily to shipper efforts to stock holiday goods prior to the

anticipatedU.S. West Coast port shutdown, and to rebuild inventories

following the recessionary period. U.S. exports, on the other hand,

grew by a mere 1 percent during fiscal year 2002. As U.S. imports

largely outstripped U.S. exports in terms of volume, the U.S. trade

deficit is expected to be the largest in U.S. history during calendar

year 2002. Although consumer confidence continued to soften, and

job growth in the U.S. was slower than anticipated during fiscal year

2002, consumer spending was still strong in certain sectors, including

the U.S. housing market.

While overall trade volumes began to rebound from the low

levels of last fiscal year, freight rates generally continued to decline.

According to some industry reports, rates in mid-calendar year 2002

were 15 percent below 2001 levels, and most carriers are expected to

post losses for calendar year 2002.

The trend in the liner shipping industry has been to build and

operate larger container vessels. At the end of calendar year 2001, the

average ship size was 1,897 TEUs, compared to 955 TEUs in 1980 --

representing a 98 percent increase in the average container vessel

size. Overall, vessel capacity utilization during fiscal year 2002,

combining U.S. imports and exports, improved significantly to 7 1.3

percent through the first three quarters of fiscal year 2002, and

reached its highest level since 1991. The gains were due primarily to

the continued growth in U.S. imports, relative to U.S. exports.

Several large ships were introduced in the U.S. trades during the

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fiscal year, increasing supply by only 4 percent in the aggregate.

While this increase in aggregate vessel capacity was relatively small,

excess vessel capacity still remains in most U.S. trades as a result of

the record number of vessels deployed during previous fiscal years.

Carriers serving the U.S. liner trades continued to use vesselsharing arrangements to improve vessel-utilization levels and,

ultimately, freight rates. According to industry reports, although

vessel-sharing activity is still present in the relatively robust U.S.

import trade lanes, it seems to have leveled off. It has continued to

increase on the U.S. export trade lanes, however, where it is

significantly more difficult for one carrier to independently fill

vessels to profitable levels. These operational agreements comprised

62 percent of all effective carrier agreements on file with the

Commission during fiscal year 2002. They range in scope and

complexity from simple space-sharing arrangements, to the highly

integrated multi-carrier, multi-trade lane global strategic alliances.

For example, COSCO, K Line, Hanjin, Senator Lines and Yangming

filed an agreement with the Commission that involved joint liner

services between the U.S., Asia, and Europe.

Major carriers continue to make large capital investments in

IT. INTTRA, GT Nexus and Cargo-Smart are ocean-carrier-backed,

business-to-business, web-based Internet platforms or “portals”

established by third-party service providers designed specifically for

the liner shipping industry. Portals were organized to attract a wide

customer base -- from large multi-national shippers to small

businesses looking to trim costs. Since their inception, portals have

developed a stronger position in the market with registered members

now including freight forwarders. Portals provide shippers with

simplified booking and allow them to manage their global container

cargo business. They also offer access to sailing schedules, cargobooking facilities and track-and-trace capabilities, and provide other

value-added services. For example, INTTRA standardizes and

supports door-to-door ocean transport for customers booking with

more than one carrier, and GT Nexus offers a broad range of cargo

-4o-
planning and transport life-cycle modules. Other products offered by

GT Nexus include cargo forecasting systems and rate request and

response networks.

According to industry reports, liner carrier members of

INTTRA control 42 to 45 percent of worldwide container capacity,

GT Nexus members control approximately 35 percent, and CargoSmart members control about 7 percent. Between 1,500 and 2,000

users in 90 countries have registered with the three portals. One

industry consultant estimates that 2.2 million TEUs have been

handled through INTTRA’s portal services since its inception in

2001. Although this is a sizable amount of business, it is still

approximately only 12 percent of what the individual group members

move collectively. As carriers invest in e-logistic technology, this

area of transportation is likely to grow in importance to the shipping

community.

-41-

V

THE FOREIGN SHIPPING

PRACTICES ACT OF 1988

A. GENERAL

The Foreign Shipping Practices Act of 1988 (“FSPA”)

became effective on August 23, 1988.

The FSPA directs the Commission to investigate and address

adverse conditions affecting U.S. carriers in U.S. oceanborne trades,

which conditions do not exist for foreign carriers in the U.S., either

under U.S. law or as a result of acts of U.S. carriers or others

providing maritime or maritime-related services in the U.S.

In fiscal year 2002, the Commission monitored potentially

unfavorable or discriminatory shipping practices by a number of

foreign governments. However, no FSPA action was taken in 2002.

In fiscal year 2002, the Commission’s Task Force on

Restrictive Foreign Practices continued to meet. The Task Force,

chaired by the General Counsel, is a network of representatives from

a number of Commission bureaus and offices, and meets to exchange

information regarding new or continuing areas of concern relating to

restrictive foreign shipping practices possibly necessitating action

under one of the Commission’s statutory authorities in this area. The

regular meetings of the Task Force also aid the Commission in

developing efficient methods to address conditions as they arise.

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B. TOP TWENTY U.S. LINER CARGO

TRADING PARTNERS

Section 10002(g)( 1) of the Omnibus Trade and

Competitiveness Act of 1988 requires the FMC to include in its

annual report to Congress “a list of the twenty foreign countries that

generated the largest volume of oceanborne liner cargo for the most

recent calendar year in bilateral trade with the United States.”

The Journal of Commerce’s Port Import Export Reporting

Service (“PIERS”) database was used to derive the Commission’s list

of top twenty trading partners. PIERS obtains data on U.S. import

and export shipments from tapes of bill-of-lading manifests filed

electronically with Customs via the Automated Manifest System

(“AM,“). PIERS also stations personnel at individual ports to collect

manually shipment data that is incomplete or not filed through AMS.

PIERS edits the raw shipment data and distinguishes liner shipments

from non-liner shipments. The individual shipment data also is

compiled into a more general and useful format for convenience.

PIERS uses standardized spellings of company names, coding of ship

lines, port names, and country code assignments. The Journal of

Commerce also employs proprietary artificial intelligence software to

increase the accuracy of its data.

The most recent complete calendar year for which data were

available is 2001. The table on the next page lists the twenty foreign

countries that generated the largest volume of oceanborne liner cargo

in bilateral trade with the U.S. in 2001. The figures in the table

represent each country’s total U.S. liner imports and exports in

thousands of TEUs.

-44-
Top Twenty U.S. Liner Cargo

Trading Partners (2001)

Rank CountrY TEUs

(ooos)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

China (PRC) ......................... 4,023

Japan ............................... 1,660

Hong Kong’ .......................... 1,329

Taiwan .............................. ..85 2

South Korea .......................... .844

Germany ............................ ..60 9

Italy ................................ ..57 2

Thailand ............................ ..47 2

United Kingdom (Incl. N. Ireland) .......... .468

Brazil ............................... ..42 3

Belgium & Luxembourg ................. .406

The Netherlands ....................... .393

Indonesia ............................ ..37 7

India ............................... ..30 4

Malaysia...............................28 7

France .............................. ..27 6

Philippines ............................ .242

Dominican Republic .................... .232

Spain ............................... ..22 3

CostaRica ........................... ..22 2

I On July 1, 1997, Hong Kong reverted to Chinese control as a special

administrative region. However, PIERS continues to report data separately for

Hong Kong because of its status as a major transshipment center.

Source: All data are aggregatedporn the PIERS (Port Import Export Reporting

Service) database maintained by the Journal of Commerce.

-45-
There were several changes to the Top Twenty list for 2001,

in comparison with the list for 2000. Costa Rica replaced Australia

in the 20th place (Australia placed 23’d); Guatemala and Honduras

occupy the 21”’ and 22”d positions, respectively; Belgium and

Luxembourg rose to 11 th place compared to 13th place in 2000; and

Lndia moved up three places to number 14.

In terms ofranking order, China (PRC) continued its lead with

an increase in volume of almost 12 percent over 2000’s volume; this

represented a 37 percent increase over 1999’s volume. Japan, Hong

Kong and Taiwan registered modest decreases in volumes of 8.24

percent, 3.20 percent, and 11.34percent, respectively, over their 2000

levels. India was the only country that registered a substantial

increase in volume -- 18.29 percent over its 2000 share. Other

countries that registered slight growth in volumes were Italy with a

2.51 percent increase, and Belgium and Luxembourg with a 3.57

percent increase. The other top twenty countries all registered

decreases in volumes ranging from 3 percent to 10 percent less than

2000 levels.

-46-
VI

SIGNIFICANT

OPERATING

ACTIVITIES

BY

ORGANIZATIONAL UNIT

A. OFFICE OF THE SECRETARY

1. General

The Office of the Secretary serves as the focal point for all

matters submitted to and emanating from the members of the

Commission. Accordingly, the Office is responsible for preparing

and submitting regular and notation agenda of matters for

consideration by the Commission and preparing and maintaining the

minutes of actions taken by the Commission on these items; receiving

and processing formal and informal complaints involving violations

of the shipping statutes and other applicable laws; receiving and

processing special docket applications and applications to correct

clerical or administrative errors in service contracts; issuing orders

and notices of actions of the Commission; maintaining official files

and records of all formal proceedings; receiving all communications,

petitions, notices, pleadings, briefs, or other legal instruments in

regulatory and quasi-judicial proceedings and subpenas served on the

Commission or members and employees thereof; administering the

Freedom of Information, Government in the Sunshine, and Privacy

Acts; responding to information requests from the Commission staff,

maritime industry, and the public; issuing publications and

authenticating instruments and documents of the Commission;

compiling and publishing bound volumes of Commission decisions;

and maintaining and promulgating official copies of the

Commission’s regulations.

The Secretary’s Office also participates in the development of

rules designed to reduce the length and complexity of formal

proceedings, and participates in the implementation of legislative

changes to the shipping statutes. During fiscal year 2002:

n The Commission issued decisions concluding three

formal proceedings. Four initial decisions of

administrative law judges became administratively

-49-
final without Commission review. Eight

proceedings were dismissed or discontinued,

including one rulemaking proceeding. The

Commission also concluded 14 special docket

applications. During the same period, the

Commission issued final rules in two rulemaking

proceedings.

Eight rulemaking proceedings and three formal petitions were

pending before the Commission at the end of the year. Final

decisions in these matters are anticipated in fiscal year 2003.

The Office of the Secretary also serves as a public

information/press office for the Commission. It manages the

Commission’s web site content; coordinates the issuance of

Commission News Releases; directs public inquiries to the

appropriate Commission bureau/office for response; and monitors the

trade press for matters of agency interest for referral to the Chairman,

Commissioners and Commission staff.

2. Library

The FMC Library serves the Commission’s research and

information needs. Its holdings consist of specialized material

primarily covering the various segments of the shipping industry, as

well as historical and current regulatory materials covering all phases

of shipping in the U.S. foreign trades. It also contains material on

several related fields such as engineering, economics, political

science and an extensive collection of legal publications. The library

includes such sources of information as law encyclopedias,

engineering textbooks, legal treatises, Comptroller General Decisions,

and editions of the various National Reporter systems. The Library’s

holdings consist of approximately 4,000 volumes and numerous

microfiches, CD-ROMs and on-line services.

-5o-
B. OFFICE OF

ADMINISTRATIVE LAW JUDGES

1. General

Administrative Law Judges (“ALJs”) manage the

development of an evidentiary record through rulings and conferences

with counsel for the litigating parties, rule upon dispositive motions,

and preside at hearings held after the receipt of a complaint or

institution of a proceeding on the Commission’s own motion.

ALJs have the authority to administer oaths and affirmations;

issue subpenas; rule upon offers of proof and receive relevant

evidence; take or cause depositions to be taken whenever the ends of

justice would be served thereby; regulate the course of the hearing;

hold conferences for the settlement or simplification of the issues by

consent of the parties; dispose of procedural requests or similar

matters; make decisions or recommend decisions; and take any other

action authorized by agency rule consistent with the Administrative

Procedure Act.

At the beginning of fiscal year 2002,14 formal proceedings

were pending before the ALJs. During the year, nine cases were

added. The ALJs formally settled four formal proceedings, dismissed

or discontinued four formal proceedings, and issued three initial

decisions in formal proceedings. The Commission dismissed one

formal proceeding which had been pending before the ALJs.

2. Commission Action

The Commission adopted two formal initial decisions,

four orders of approval of settlement, and two dismissals of

complaints, and dismissed one formal proceeding of the ALJs.

One initial decision and two dismissals of complaints of the ALJs

-51-
were pending consideration by the Commission at the end of the

fiscal year.

3. Decisions of Administrative Law Judges (in

proceedings not yet decided by the Commission)

Sea-Land Service, Inc. - Possible Violations of Sections

1 O(b)(l), I O(b)(4) and 19(d) of the Shipping Act of 1984

[Docket No. 98-061.

This is a major investigation ordered by the Commission to

determine if the then-largest American ocean carrier had violated the

aforesaid sections of the 1984 Act in 1996 through1998 by charging

shippers inapplicable rates on cargo in 20-foot containers when the

cargo moved in 40-foot containers, such cargo not qualifying to move

under those lower rates because of excessive weight and volume, and

when both the shippers and Sea-Land acted knowingly in violation of

law. Moreover, Sea-Land also was charged with paying

compensation to ocean forwarders who did not perform their

statutorily-mandated duties and to other forwarders who were not

entitled to compensation. In a 250-page decision, the presiding judge

found that these violations were proven on some 149 shipments, but

the question of the amount of civil penalties to be assessed was

deferred to a later decision after the parties submit legal briefs on this

question.

Green Master Int ‘1 Freight Services Ltd. - Possible

Violations of Sections IO(a)(l) and IO(b)(l) of the

Shipping Act of I984 [Docket No. Ol-lo].

This proceeding was an investigation instituted by the

Commission to determine whether Green Master Int’l Freight

Services, Ltd., an NVOCC located in Taiwan, had violated sections

lo(a)(l) and 10(b)(l) of the 1984 Act on various occasions in 1997

-52-
through 1999 by improperly accessing a service contract held by

another NVOCC on 48 occasions and by failing to charge the rates

specified in its tariff on 20 occasions, respectively. By these

violations, it was found that Green Master had knowingly and

willfully obtained transportation from vessel-operating carriers at

lower rates than those lawfully applicable and had moreover

mischarged its own shipper customers. It was found, furthermore,

that there were no mitigating factors, but there were some aggravating

factors. Green Master was ordered to pay a civil penalty amounting

to $1,530,000 and to cease and desist from the aforesaid violations.

Anchor Shipping Co. v. Alianca Navegacao e Logistica

Ltda. [Docket No. 02-041.

In this proceeding an NVOCC operating out of Miami,

Florida, alleged that Respondent ocean carrier had violated some

16 sections of the 1984 Act by, among other things, breaching a

service contract with Anchor, denying bookings, interfering with

Anchor’s ability to obtain other service contracts, and coercing

Anchor to accept unfavorable rates or services. As provided by the

service contract, the parties went to arbitration, and Anchor was

awarded over $381,000 on its claims. However, Anchor sought

additional money damages of some $l,OOO,OOO in the instant

complaint case, alleging that the arbitrator had erred and had not been

authorized to determine Shipping Act issues. Respondent ocean

carrier argued that the complaint should be dismissed because

Complainant had already won in arbitration and should not be

allowed under law to seek additional relief, thus undermining the

strong policy in law favoring arbitration as a means to settle disputes,

and also had submitted voluntarily its Shipping Act claims to the

arbitrator as its service contract allowed it to do. The complaint was

dismissed on the grounds submitted by Respondent.

-53-
Pro Transport, Inc. v. HSAC Logistics, Inc., f/ka

Columbus Line USA, Inc., et al.[Docket No. 02-131.

In this case, Pro Transport, Inc., a motor carrier, alleged that

Respondents, HSAC Logistics, Inc. and others operating as ocean

common carriers, remsed to provide certain units known as “gensets”

that motor carriers need to affix to refrigerated containers when the

motor carriers pick up reefer cargoes at the Port of Miami, Florida.

Complainant alleged that such conduct violated section lO(b)( 10) of

the 1984 Act, which prohibits carriers from unreasonably refusing to

deal or negotiate, and asked for a cease and desist order, unspecified

money damages, and other things. Respondents contended that

Complainant’s employees had been stealing fuel from the “gensets”

and that Respondents would resume servicing the truckers ifthey paid

for the allegedly stolen fuel and instituted procedures to ensure that

the alleged stealing would cease. The parties began discussions to

resolve their dispute amicably and, reaching settlement, moved to

dismiss the complaint, which dismissal was granted.

4. Pending Proceedings

At the close of fiscal year 2002, there were eleven pending

proceedings before the ALJs, of which six were investigations

initiated by the Commission. The remaining proceedings were

instituted by the filing of complaints by common carriers by water,

shippers, conferences, port authorities or districts, terminal operators,

trade associations, and stevedores.

-54-
C. OFFICE OF

THE GENERAL COUNSEL

The General Counsel provides legal counsel to the

Commission. This includes reviewing staff recommendations for

Commission action for legal sufficiency, drafting proposed rules to

implement Commission policies, and preparing final decisions,

orders, and regulations for Commission ratification. In addition, the

Office of the General Counsel provides written or oral legal opinions

to the Commission, its staff, and the general public in appropriate

cases. As described in more detail below, the General Counsel also

represents the Commission before the courts and Congress and

administers the Commission’s international affairs program.

1. Rulemakings and Decisions

The following are rulemakings and adjudications

representative of matters prepared by the General Counsel’s Office:

(a) Rulemakings

The Content of Ocean Common Carrier and Marine

Terminal Operator Agreements Subject to the Shipping

Act of 1984 [Docket No. 99-131, (August 

ofmquiry to seek comments

from interested parties rgarding possible changes to the

Commission’s rules governing the content of ocean common ca

and MT0 agreements that are tiled with the Commission 

accordance with the 1984 Act. The proceeding was initiated 

response to comments received in the rulemaking proceedin

Docket No. 98-26, Ocean Common Carrier and Marine Terminal

Operator Agreements Subject to the Shipping Act of 1984, which

-55-
amended the Commission’s agreement regulations to implement

changes made by OSFL4. Those comments requested that the

Commission’s rules on content standards for agreement filing be

updated and refined. Interested parties were given 60 days to

comment in response to the Notice of Inquiry, which was published

in the Federal Register on August 3,1999. Comments were received

from carriers, shippers, and other interested parties and are currently

under review to determine what further action may be warranted.

@I Decisions

Canaveral Port Authority -Possible Violations of Section

~Wb)W!), unreasonable Refusal to Deal or Negotiate

(Order to Show Cause) [Docket No. 02-02],29 S.R.R. 484

(February 25,2002).

On February 25, 2002, the Commission issued an order

directing the Canaveral Port Authority (“CPA”), an MTO, to show

cause why it should not be found to have violated section lO(b)(lO)

of the 1984 Act, 46 U.S.C. app. 0 1709(b)( lo), for unreasonably

refusing to deal or negotiate when it refused to consider the

application for a tug franchise at Port Canaveral tiled by Tugz

International. Tug service providers seeking to operate at Port

Canaveral are required to obtain a “franchise” from CPA in order to

provide those services, which may be obtained only by filing an

application to be considered by CPA at a public hearing to determine

its convenience and necessity. Seabulk Towing, Inc., has been

granted an exclusive franchise to provide tug services at the port since

1958; however, no other company has ever been awarded a franchise.

Tugz International filed an application in June 2000, but CPA has

never granted a hearing to consider the application.

CPA filed a petition to have the case consolidated with a

companion case, Docket No. 02-03, Exclusive Tug Arrangements in

Port Canaveral, Florida, an investigation to determine whether CPA

-56-
violated sections 10(d)(l) and/or 10(d)(4) of the Shipping Act, 46

U.S.C. app. $0 1709(d)(l) and 1709(d)(4), by failing to establish,

observe and enforce just and reasonable regulations and practices

relating to tug and towing services, and/or by giving an undue or

unreasonable preference or advantage to Seabulk Towing, Inc.; or

imposing undue or unreasonable prejudice or disadvantage with

respect to other potential tug providers, including Petchem, Inc., and

Tugz International. The Commission denied CPA’s request to

consolidate, because it would not create efficiencies. In fact, it would

cause delay and possibly prejudice the parties involved. The case is

currently before the Commission, and the final order is due

February 24,2003.

Exclusive Tug Franchises - Marine Terminal Operators

Serving the Lower Mississippi [Docket No. 01-061, 29

S.R.R. 770 (April 12,2002).

On June 11,2001, the Commission issued an Order to Show

Cause directing 12 MTOs on the lower Mississippi River to show

cause why they have not violated sections lO(d)( 1) and 1 O(d)(4) of

the 1984 Act, 46 U.S.C. app. $3 1709(d)(l) and (d)(4), by entering

into exclusive tug assist service arrangements resulting in

unreasonable practices and/or undue or unreasonable preference or

advantage or unreasonable prejudice or disadvantage, respectively.

Respondents filed petitions requesting, inter alia, discovery, a new

procedural schedule, and referral of the proceeding in its entirety to

the Office of ALJs. The Bureau of Enforcement (“BOE”) and River

Parishes Co., Inc. (an intervener), filed petitions opposing these

requests. The Commission issued an order on October 15, 2001,

granting many of Respondents’ requests, including establishing a new

procedural schedule and referring the case in its entirety to an ALJ.

The Commission found that discovery was required before the

parties’ tiling of memoranda of law and affidavits of fact, because

there are various questions of fact rather than just questions of law,

that usually comprise show cause proceedings. Therefore, the

-57-
Commission set forth a schedule setting dates for petitions for leave

to intervene, discovery, and the issuance of the Initial Decision by

July 1,2002.

On January 2, 2002, the ALJ issued rulings concerning

discovery and a protective order addressing whether Respondents

should receive certain materials that Commission staff used to

support the Commission’s issuance of the Order to Show Cause.

BOE objected to furnishing these materials, asserting various

privileges, including: deliberative process, attorney work product,

attorney-client and informant’s privileges. After reviewing the

materials, the ALJ decided that many of the documents should be

disclosed, but that a protective order should issue to protect the

disclosure ofcertain documents. BOE and Respondents filed appeals.

On April 12, 2002, the Commission reversed the ALJ’s order to

disclose documents that BOE argued were shielded by the

deliberative process, attorney work product, and attorney-client

privileges, and maintained the protective order for the most part as

written by the ALJ, but vacated the portion of the ALJ’s ruling

limiting the production of responses to BOE’s discovery of

Respondents to BOE, and further found that each Respondent should

receive all responses to the information requests ordered released by

the ALJ. The parties currently are proceeding with discovery in

accordance with that order.

World Line Shipping, Inc. and Saeid B. Maralan (AKA

Sam Bustan - Order to Show Cause [Docket No.

00-OS], 29 S.R.R. 808 (January 24,2002).

The Commission initiated this proceeding on April 20,2000,

by issuing an Order to Show Cause against Respondents World Line

Shipping, Inc. and Said B. Maralan (AKA Sam Bustani). The Order

directed Respondents to show cause why they should not be found to

have violated sections 8, 19(a), and 19(b) of the Shipping Act, 46

U.S.C. app. $5 1707, 1718(a) and 1718(b). Further, it directed

-58-
Respondents to show cause why they should not be found to have

violated several cease and desist orders issued by the Commission in

Docket No. 98-19, Said B. MaraZan (AKA Sam Bustani), World Line

Shipping, Inc. et al. - Possible VioZations of Sections 8(a)(l),

1 O(a)(I), 19(a) and 23(a) of the Shipping Act of 1984,28 S.R.R. 1244

(1999). In addition, the Order directed Respondents to show cause

why they should not be instructed to cease and desist from providing

or holding themselves out to provide transportation as an OTI within

the U.S. foreign commerce. Finally, the Order directed that a

determination be made whether civil penalties should be assessed and

cease and desist orders issued against Respondents in the event they

were found to have committed the violations.

The Commission issued a Report and Order on January 8,

2001, finding that between October 21, 1999, and April 9, 2000,

Respondents committed 32 violations of the Shipping Act, including

7 violations of the cease and desist orders issued in Docket No.

98-19. The Commission then directed the Office of ALJs to

determine what civil penalties should be assessed for the violations.

On June 19, 2001, the presiding ALJ issued an Initial

Decision in which he assessed a civil penalty against each

Respondent in the amount of $687,500.

On January 24, 2002, the Commission issued a decision

affirming the ALJ’s decisions. BOE had filed exceptions asking the

Commission to overturn the ALJ’s decisions to: (1) include only

paragraphs 1,3 1,32, and 33 of an affidavit submitted by BOE; and

(2) the ALJ’s decision to assess penalties for only 25 of the 32

violations found by the Commission.

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Stallion Cargo, Inc. - Possible Violations of Sections

1 O(a)(l) and 1 O(b)(l) of theshipping Act of 1984 [Docket

No. 99-181, 29 S.R.R. 665 (October l&2001).

This proceeding was initiated by the Commission on

October 5, 1999, as an investigation into the activities of Stallion

Cargo, Inc., an NVOCC. The investigation sought to determine

whether Stallion violated sections 10(a)(l) and 10(b)(l) of the

Shipping Act, 46 U.S.C. app. $9 1709(a)(l) and (b)(l), by willfully

and knowingly obtaining transportation at less than the rates and

charges otherwise applicable by misdescribing the commodities

actually shipped; and by charging, demanding, collecting or receiving

less or different compensation for the transportation of property than

the rates and charges shown in its NVOCC tariff. The Order also

directed the presiding officer, in the event violations were found, to

determine: whether civil penalties should be assessed against

Respondent and in what amount; whether Respondent’s tariff should

be suspended; whether Respondent’s OTI license should be revoked;

and whether a cease and desist order should be issued. The presiding

ALJ issued a decision in which he found that Stallion knowingly and

willfully violated sections lO(a)( 1) and 10(b)(l) at various times in

1998, 1999, and 2000, by misdescribing cargoes tendered to vesseloperating common carriers (“VOCCs”) on 15 occasions and by

failing to charge its applicable tariff rates on 152 occasions. The ALJ

determined that a civil penalty in the amount of $50,000 should be

assessed, and a cease and desist order should issue.

On Exceptions, the Commission affirmed those portions of

the ALJ’s decision finding that Stallion knowingly and willfully

violated section 1 O(a)( 1) on 15 occasions and section 1 O(b)( 1) on 152

occasions. The Commission, however, vacated the ALJ’s findings

that: Stallion’s interpretation of its tariff could be construed as

reasonable; Stallion’s violations ceased after June 2000, and thus this

constituted a mitigating factor in assessing penalties; 33 ofthe section

10(b)(l) violations were technical in nature and did not warrant a

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civil penalty; 10 footwear violations did not cause harm to shippers,

thus no civil penalties should be assessed for them; and assessing

civil penalties for shell tariffs would run “counter to the

Commission’s efforts to eliminate ‘shell’ tariffs.” The Commission

also vacated the ALJ’s assessment of a $50,000 penalty and imposed

instead a civil penalty in the amount of $1,340,000. Finally, the

Commission revoked Stallion’s license to operate as an OTI and

issued a cease and desist order barring it from operating in the U.S.

as an OTI.

Compania Sud Americana de Vapores S.A. v. InterAmerican Freight Conference, et al. [Docket No. 96-141,

29 S.R.R. 442 (December 12,200l).

This proceeding was initiated by a complaint tiled by

Compania Sud Americana de Vapores S.A. (“CSAV”) against

Respondents Inter-American Freight Conference (“IAFC”), Section

C of the IAFC, A.P. Moller Maersk Line, Crowley American

Transport, Inc., A/S Ivarans Rederi, Companhia Maritima National,

Companhia de Navegacao Lloyd Brasileiro, Empresa Lineas

Maritimas Argentinas, S.A., Empresa de Navagacao Alianca S.A.,

Frota Amazonica S.A., Hamburg-Sudamerikanische

Dampfschiffahrts-Gesellschafi Eggert & Amsinck, and TransroWSeaLand Joint Service. CSAV alleged that the Respondents violated

sections 1 O(a)(2) and 10(a)(3) of the 1984 Act, 46 U.S.C. app.

0 1709(a)(2) and (3), by charging CSAV for expenses allegedly not

authorized by the IAFC Agreement. CSAV claimed to have been

damaged by the IAFC’s action in drawing on a CSAV-supplied letter

of credit to pay for a portion of the winding-up expenses of a juridical

entity known as the Sociedade Brasileira de Administracao de

Conferencias de Frete (“Sobracon”). In response to the complaint,

Respondents submitted a Motion to Dismiss and/or for Summary

Judgment. CSAV then filed a Cross-Motion for Partial Summary

Judgment. The presiding ALJ issued a decision in which he granted

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the Respondents’ Motion for Summary Judgment and dismissed the

complaint.

The Complainant had argued that the Respondents violated

section 1 O(a)(2) by failing to file with the Commission an agreement

to dissolve Sobracon, a Brazilian corporation employed to administer

the Respondents’ conference activities in Brazil. The ALJ found that,

as a matter of law, the Respondents had provided sufficient language

in their filed FMC Agreement to satisfy the agency’s filing

requirements. Disagreeing with this conclusion, the Commission

issued an Order in which it determined that the Respondents had not

filed the agreement to dissolve the corporation, and that this failure

to file constituted a violation of section 10(a)(2) of the Act. After the

Commission issued its Order, the Respondents tiled a Petition for

Reconsideration, and several outside parties tiled an amicus curiae

brief in support of the Petition for Reconsideration. On December 12,

2001, the Commission issued an Order denying the petition for

reconsideration and denying leave to file an amicus curiae brief. The

Commission affirmed its original Order finding a violation of section

1 O(a)(2) of the Act. On March 7,2002, the parties voluntarily entered

into a settlement agreement, which the presiding ALJ approved. The

Commission determined not to review the settlement agreement on

April 10,2002, and it became administratively final, formally ending

the proceeding.

2. Litigation

The General Counsel represents the Commission in litigation

before courts and other administrative agencies. Although the

litigation work largely consists of representing the Commission upon

petitions for review of its orders filed with the U.S. Courts of

Appeals, the General Counsel also participates in actions for

injunctions, enforcement of Commission orders, actions to collect

civil penalties, and other cases where the Commission’s interest may

be affected by litigation.

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The following are representative of matters litigated by the

Office:

Federal Maritime Commission v. South Carolina State

Ports Authority, et al., Sup. Ct. No. 01-46.

In this case, the Commission represented itselfbefore the U.S.

Supreme Court in a proceeding to review the decision of the U.S.

Court of Appeals for the Fourth Circuit in South CaroZina State Ports

Authority v. Federal Maritime Commission, 243 F.3d 165 (4th Cir.

2001). In that case, the Fourth Circuit had overturned the

Commission’s determination in South Carolina Maritime Services v.

South Carolina State Ports Authority, FMC Docket No. 99-2 1, that

the Eleventh Amendment to the United States Constitution does not

forbid the Commission from hearing a privately-tiled Shipping Act

complaint against a state-run marine terminal. The Fourth Circuit

found that the Eleventh Amendment and broader constitutional

principles of state sovereign immunity bar such proceedings against

state-run terminals.

The Commission argued in its petition for certiorari that the

scope of sovereign immunity for state-run marine terminals is an

important constitutional question with national and international

implications, and that the Fourth Circuit’s decision would adversely

affect the agency’s regulatory authority over state-run terminals. The

South Carolina State Ports Authority and the Solicitor General of the

United States filed briefs opposing the Commission’s petition. The

Supreme Court granted the petition on October 15,200l.

The Commission tiled a brief on the merits, and the joint

appendix, on November 29, 2001, and the Solicitor General tiled a

brief in support of the Commission’s position on that same date. The

Commission argued that, since the Eleventh Amendment specifically

addresses “Judicial power” and “suit[s] in law or equity,” the

Amendment should have no application to Commission proceedings,

which involve the exercise of Executive Branch power and are not

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lawsuits as that term has traditionally been understood. Amicus

curiae briefs were filed in support of the Commission by: Senators

Edward Kennedy and Russell Feingold; the American Federation of

Labor/Congress of Industrial Organizations; the United States

Maritime Alliance and Carriers Container Council; and the National

Association of Waterfront Employers. The South Carolina State

Ports Authority filed its brief on January 11,2002, and amicus curiae

briefs were filed in support of its position by: the Charleston Naval

Complex Redevelopment Authority; the National Governors

Association, et al. ; and the State of Maryland, et al. The Commission

and the Solicitor General each filed a reply brief on February 11,

2002.

The Commission presented oral argument to the Supreme

Court on February 25, 2002. The Deputy Solicitor General also

appeared at the oral argument, in support of the Commission’s

position.

The Court issued its opinion on May 28,2002, affirming the

Fourth Circuit. In an opinion written by Justice Thomas and joined

by Chief Justice Rehnquist and Justices O’Connor, Scalia, and

Kennedy, the Court held that “state sovereign immunity bars . . . an

adjudicative proceeding” initiated by a private person against a staterun port. While the Commission had argued that the Eleventh

Amendment provided a specific, textual limit on the scope of the

States’ sovereign immunity from suit through its requirement that the

“Judicial power of the United States” not be extended to “any suit in

law or equity” filed against an unconsenting State, and additionally

that the Commission, as an independent Executive Branch agency,

does not exercise judicial power, the Court ruled that such a

conclusion “does not end [the] inquiry” because “the sovereign

immunity enjoyed by the States extends beyond the literal text of the

Eleventh Amendment.” The Court determined that the Eleventh

Amendment “does not define the scope of the States’ sovereign

immunity; it is but one particular exemplification of that immunity.”

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The Court thus concluded that the proper inquiry is not

whether Commission adjudications are covered by the Eleventh

Amendment, but instead whether “the Framers would have thought

the States possessed immunity” from regulatory adjudications. The

Court first looked to history to discern what the Framers would have

believed. However, the Court found that “the relevant history does

not provide direct guidance for our inquiry” because of a “relatively

barren historical record.” Prevented by a lack of evidence from

engaging in a historical analysis, the Court looked instead to its own

precedent, and noted that it had “applied a presumption” in past cases

that the Constitution would not allow proceedings against States that

were “anomalous and unheard of when the Constitution was

adopted.”

To determine whether that presumption was applicable, the

Court examined Shipping Act adjudications and concluded that the

similarities in procedural rules and processes between such

adjudications and civil litigation in Federal district court were

“overwhelming.” The Court then concluded that because the Framers

had understood the States to be immune from suit in Federal district

court, they would have understood the States to be immune from

administrative proceedings as well. The Court further explained that

“[tlhe preeminent purpose of state sovereign immunity is to accord

States the dignity that is consistent with their status as sovereign

entities.” Due to the procedural similarities between Commission

proceedings and civil litigation, the Court found that it would be an

affront to the States’ “dignity” to subject them, against their will, to

regulatory adjudications.

Justice Breyer wrote the principal dissent from the Court’s

opinion, joined by Justices Stevens, Souter, and Ginsburg. Justice

Breyer first noted that the majority’s opinion lacks a basis in the text

of the Constitution. He observed that the Court had never before said

that the Eleventh Amendment’s limit on the “Judicial power of the

United States” should be read to include “the executive power of the

United States.” He also suggested that the terms relied upon by the

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majority in reaching its conclusion, including “constitutional design,”

“system of federalism,” and “plan of the convention,” are not valid

because they “do not actually appear anywhere in the Constitution.”

He then argued that, in the absence of textual support, the Court’s

decision must be supported by “considerations of history, of

constitutional purpose, or of related consequence.” He found all of

these lacking.

Justice Stevens also wrote a separate dissenting opinion, in

which he argued that the majority’s conclusions were “anachronistic.”

Maryland Port Administration v. Federal Maritime

Commission, qfh Cir. No. 97-2418.

This proceeding sought review of the Commission’s decision

in Docket No. 94-O 1, Ceres Marine Terminals, Inc. v. Maryland Port

Administration. Ceres, an MT0 alleging violations of sections

lO(b)(l l), lO(b)(12), 10(d)(l) and 10(d)(3) of the 1984 Act, and

sections 16 and 17 of the Shipping Act, 1916, claimed that the

Maryland Port Administration (“MPA”) engaged in unjust preference

and prejudice and unreasonable discrimination by failing to grant it

equivalent lease terms and terminal facilities that it provided to an

ocean common carrier in its lease with the Port. MPA argued that

ocean common carriers and MTOs are not similarly situated, and

thus, any disparate treatment was not unjust or unreasonable.

On October 10,1997, the Commission found that the ALJ had

failed to consider or address the evidence or to reflect the applicable

standards for his decision. Therefore, the Commission vacated the

Initial Decision and decided the case de novo. The Commission

found that MPA had violated sections 1 O(b)( 11) and 1 O(b)( 12) of the

1984 Act by relying on a vessel call guarantee to justify granting more

favorable lease terms to an ocean common carrier and refusing those

same, or substantially similar, terms to an MT0 solely because of its

status, where the vessel call guarantee did not provide to the Port any

more security or assurances than the MT0 could have provided, and

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further violated section 1 O(d)( 1) by imposing on the MT0 rates and

charges that were excessive in relation to the benefit received,

particularly where the degree of disparity in the rates so greatly

disfavored the party committed to moving substantially more cargo.

The Commission also found that Respondent violated sections

1 O(b)( 11) and lO(b)( 12) by refusing to grant the MT0 rates for its

barge service that were comparable to those offered to another barge

operator unless the MT0 dropped its existing state court lawsuit and

paid amounts allegedly due, and further violated section 1 O(d)( 1) by

imposing on the MT0 rates for its barge service that were excessive

in comparison to the rates provided to the operator of another barge

service for the same service and that were not reasonably related to

any legitimate goal of the Port.

Respondent appealed the Commission’s decision to the U.S.

Court of Appeals for the Fourth Circuit in Richmond, Virginia, and

Ceres intervened in the proceeding. On October 13, 1998, the Court

issued an unpublished decision in which it affirmed in part, reversed

in part, and remanded the case to the Commission. The Court

affirmed the Commission’s decision that Ceres’ barge traffic counts

towards the container guarantee in its lease with MPA. However, the

Court further found that the Commission failed to consider fully

MPA’s claim that Ceres was estopped from challenging the terms of

its lease from MPA. The Commission’s decision rejected MPA’s

claim but did not elucidate that rejection to the Court’s satisfaction;

therefore, the Court remanded the issue to the Commission for its

consideration. The Court also noted that should the Commission

determine that MPA’s estoppel challenge is without merit, the

Commission is encouraged to revisit its determination with respect to

the measure of damages due Ceres.

On May 26, 1999, the Commission issued an Order

establishing a procedural schedule for disposition of the remanded

issues. Opening briefs were filed on June 25, 1999, and reply briefs

on July 20,1999. In its reply, MPA contended that in view of recent

Supreme Court decisions, it is immune from Ceres’ damages claim

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under the Eleventh Amendment to the Constitution. On August 16,

1999, MPA filed a response in which it did not object to Ceres’

motion, but also filed a motion for leave to amend its answer and a

request for a briefing schedule on the sovereign immunity issues. On

September 10, 1999, the parties filed a joint Motion to Approve

Stipulation, in which they sought to preserve the sovereign immunity

issues for resolution in a future Federal court proceeding. The

Commission granted the Motion on September 17, 1999.

The Commission issued an Order on August 15, 2001,

addressing the issues remanded by the Court. Initially, the

Commission held that the common law doctrines of waiver and

estoppel may not be invoked to prohibit a party to an agreement

subject to the Commission’s jurisdiction from challenging that

agreement in a complaint filed with the Commission alleging that one

of the parties to the agreement violated a duty imposed on it by the

1984 Act. In addition, the Commission reiterated its view that the

proper measure of damages, in a case where a duty imposed by the

1984 Act is absolute and a competitive relationship is not necessary

to prove undue or unreasonable preference or prejudice, is the

difference between the rate charged and the rate that would have been

charged but for the violation of the 1984 Act. The parties also were

directed to file supplemental briefs addressing the merits of MPA’s

sovereign immunity defense, which issue had not previously been

presented to the Commission.

On October 1, 2001, both parties filed opening briefs and

MPA filed a motion to dismiss on sovereign immunity grounds. On

October 15, 2001, MPA filed a Petition for Review in the Fourth

Circuit, seeking review ofthe Commission’s August 15,2001, Order.

On October 18, 2001, the Commission issued an order holding the

agency proceeding in abeyance, pending the decision by the U.S.

Supreme Court in Federal Maritime Commission v. South Carolina

State Ports Authority. Thereafter, the Commission filed a motion to

dismiss in the Fourth Circuit, asserting that the August 15, 2001,

Order is not a final agency action within the meaning of 28 U.S.C.

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5 2342 and, therefore, is not yet reviewable. Themotion was granted,

and the case was dismissed on October 30,200l. Following issuance

of the Supreme Court’s decision in FMC v. SCSPA, the Commission

reinstated the briefing schedule on August 23,2002, and reply briefs

were filed on September 22,2002.

New Orleans Stevedoring Co. v. Federal Maritime

Commission and United States of America, D.C. Cir.

No. 02-1259.

On August 15,2002, New Orleans Stevedoring Co. (“NO,“),

a division of James J. Flanagan Shipping Corporation, filed a petition

for review in the U.S. Circuit Court of Appeals for the District of

Columbia. The Board of Commissioners of the Port of New Orleans

filed a Motion for Leave to Intervene on August 21,2002. NOS is

seeking review of the Commission’s Order issued on June 28,2002,

dismissing its complaint against the Port alleging that the Board

violated sections 10(d)(3) and 10(d)(4) of the Shipping Act by

unreasonably refusing to deal or negotiate and providing an

unreasonable preference or advantage. The Commission’s Order

affirmed the ALJ’s dismissal of NOS’ complaint, finding that NOS

had not provided any basis to warrant overturning the ALJ’s initial

decision. A certified index of the record was filed on September 30,

2002. Petitioner’s brief is due on December 30,2002, and the FMC’s

brief is due on January 29,2003.

3. Legislative Activities

The General Counsel represents the Commission’s interests

in all matters before Congress. This includes commenting on

proposed legislation, proposing legislation, preparing testimony for

Commission officials, responding to Congressional requests for

assistance, and preparing agency responses to requests from the

Office of Management and Budget (“OMB”) on proposed bills and

testimony.

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During fiscal year 2002, 125 bills, proposals and

Congressional inquiries were referred to the Office of the General

Counsel for comment. The Office also worked closely with

Congressional staffs on proposed legislation that affected the

Commission. The Office also collaborated with the Office of General

Counsel of DOT to prepare a codification of title 46 of the U.S. Code

as it relates to shipping. The new sections of the proposed

codification pertaining to the Commission include the Shipping Act,

46 U.S.C. app. 4 1701, as amended by OSRA, Pub. L. No. 105-258;

section 19 of the 1920 Act, 46 U.S.C. app. 5 876; the FSPA, 46

U.S.C. app. f~ 1710a; and Evidence of Financial Responsibility -

Passenger Transportation, 46 U.S.C. app. $0 817d and 817e. On

October 1,2002, the Commission submitted comments to OMB on

the revised final version of the draft bill to revise, codify and enact

certain maritime laws as part of Title 46, U.S. Code, Shipping.

In fiscal year 2003, the Office will continue to take the lead in

accomplishing the agency’s performance goal related to providing

assistance and technical advice to Congress regarding issues for

possible legislative consideration.

4. Foreign Shipping Restrictions and International

Affairs

The General Counsel is responsible for the administration of

the Commission’s international affairs program. The General

Counsel monitors potentially restrictive foreign shipping laws and

practices, and makes recommendations to the Commission for

investigating and addressing such practices. The Commission has the

authority to address restrictive foreign shipping practices under

section 19 of the 1920 Act and FSPA. Section 19 empowers the

Commission to make rules and regulations governing shipping in the

foreign trade to adjust or meet conditions unfavorable to shipping.

The FSPA directs the Commission to address adverse conditions

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affecting U.S. carriers in foreign trade, which conditions do not exist

for foreign carriers in the U.S.

In fiscal year 2002, the Commission continued to monitor

potentially restrictive shipping practices of the governments of PRC

and Japan.

The Commission continued to monitor developments relating

to restrictive practices in Japanese ports, including the effects of

amendments to the Port Transportation Business Law enacted in

2000. The Commission continued to receive and evaluate reports

from its ongoing proceeding in Docket No. 96-20, Port Restrictions

and Requirements in the United States/Japan Trade.

On August 12, 1998, the Commission initiated Docket No.

98-14, Shipping Restrictions, Requirements and Practices of the

People’s Republic of China, with the issuance of Information

Demand Orders to vessel-operating carriers of the U.S. and the PRC

for information on Chinese policies and practices regarding port

access, the licensing of multimodal transport operations, and the

establishment of representative and branch offices. The Commission

met in January and June 1999 to review information collected in this

docket. In a press release dated June 24, 1999, the Commission

stated that the responses to the FMC’s inquiries indicated that

Chinese laws and regulations discriminate against and disadvantage

U.S. carriers and other non-Chinese shipping lines with regard to a

variety of maritime-related services. For example, U.S. carriers are

barred from opening wholly-owned companies or branch offices in

the PRC in locations where carriers’ vessels do not make monthly

calls, thus U.S. carriers must rely on Chinese agents (affiliates of the

state-owned Chinese shipping lines) to solicit business, book space,

accept goods, and perform other functions in many port cities and

inland locales. U.S. carriers also are subject to high minimum capital

requirements, and are barred by Chinese law from performing a

number of integral vessel agency services for themselves, such as

arranging for entry/departure, customs clearance, consignment,

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transshipment and multimodal transport. The Commission also

expressed concerns about: Chinese restrictions on U.S. carriers’

freight forwarding operations; existing requirements that ocean

carriers obtain governmental permission before beginning or

changing international vessel services; and proposed rules that could

require the disclosure of confidential service contract rates or terms,

and further restrict non-Chinese carriers’ ability to offer multimodal

transport services in China. To address these restrictions, the

Commission directed its staff to prepare a formal proposal for action

under section 19. The Commission may take actions including

limitations on sailings, suspension of tariffs, suspension of regulated

agreements, fees not to exceed $100,000 per voyage, or any other

measure necessary and appropriate to address the unfavorable

conditions. Such proposed measures would, upon Commission

approval, be noticed to the public for comment by interested parties

prior to becoming effective.

Later in 1999, there were a number of further developments.

A new Chinese controlled carrier, China Shipping Container Lines

(“CSCL”), announced plans to enter the U.S. trades, and bilateral

maritime talks resumed between the U.S. and China. Also, the U.S.-

flag carrier, Sea-Land Service, Inc., announced that it was to be

acquired by the parent of Maersk Line. In light of these

developments, the Commission, in November 1999, determined to

further review these matters and supplement the record before taking

up the issue of whether to initiate a section 19 rulemaking proceeding

targeting practices of Chinese carriers. Accordingly, the Commission

issued an information demand order to CSCL inquiring about the

scope of its operations in China and the U.S.; CSCL’s response was

received February 29,200O. Also, after the finalization of Maersk’s

acquisition of Sea-Land’s services, the Commission issued an order

demanding information about the extent of that company’s services

in China, and the effect of Chinese restrictions on its operations in

U.S. commerce. Maersk Sea-Land’s response was received

March 24,200O. The Commission had the matter under review at the

end of fiscal year 2001.

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On March 12,2002, the Commission issued a new Notice of

Inquiry after it learned that the government of the PRC had issued a

new Regulation on International Maritime Transport, effective since

January 1, 2002. It appeared that while this new Chinese law may

have alleviated a few of the concerns the Commission had previously

expressed, it also may have created new restrictions on shipping in

the U.S.-China trade, especially on the operations of OTIS in that

trade. On June 28,2002, the Commission issued a Further Notice of

Inquiry (“FNOI”) when it learned that the Chinese Ministry of

Communications had released a “Notice Inviting Comments on

Implementing Rules for the Regulations of the PRC on International

Maritime Transportation.” The FNOI specifically requested

information about the impact of these Implementing Rules. The

comments filed in response to these notices are currently under

Commission review.

The Commission’s Task Force on Restrictive Foreign

Practices, chaired by the General Counsel, is a network of

representatives from a number of Commission bureaus and offices.

The Task Force met to exchange information regarding new or

continuing areas of concern relating to restrictive foreign shipping

practices possibly necessitating action under one ofthe Commission’s

statutory authorities in this area. The regular meetings and activity

reports of the Task Force also aid the Commission in developing

efficient methods to address conditions as they arise.

Another responsibility of the Office is the identification and

verification of controlled carriers under section 9 of the 1984 Act.

Common carriers that are owned or controlled by foreign

governments are required to adhere to certain requirements under the

1984 Act, and their rates are subject to Commission review. The

Office investigates and makes appropriate recommendations to the

Commission regarding the status ofpotential controlled carriers. The

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Office, in conjunction with other Commission components, also

monitors the activities of controlled carriers.

In fiscal year 2002, the Office reviewed documents and

information relating to the controlled carrier status of a number of

carriers. The Office determined to add one carrier to the

Commission’s controlled carrier list. On January 7,2002, Shanghai

Hai Hua Company, Ltd. (“HASCO”) was classified as a carrier

controlled by the government of the PRC. At fiscal year end, the

classifications of several carriers were still under review.

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D. OFFICE OF

EQUAL EMPLOYMENT

OPPORTUNITY

The Office of Equal Employment Opportunity (“EEO”)

applies knowledge of Federal EEO and personnel management

concepts, procedures and regulations to develop and manage a

comprehensive program of equal employment opportunity. The

Office works independently under the direction of the Chairman to

provide advice to the Commission’s management in improving and

carrying out its policies and program of non-discrimination and

affirmative program planning.

The Office is responsible for affirmative program planning,

special emphasis programing, and complaints processing and

adjudication, with the assistance of collaterally-assigned EEO

counselors.

The Office works closely with the Commission’s Office of

Human Resources, managers and supervisors to:

n Improve recruitment and representation of

women, minorities and persons with handicapping

conditions in the workforce.

n Provide adequate career counseling.

n Facilitate early resolution of employment-related

problems.

n Develop program plans and progress reports.

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The Director, Office of EEO, arranges for counseling or

Alternative Dispute Resolution for employees who raise allegations

of discrimination; provides for the investigation, hearing, fact-finding,

adjustment, or early resolution of such complaints of discrimination;

accepts or rejects formal complaints of discrimination; prepares and

issues decisions for resolution of formal complaints; and monitors

and evaluates the program’s impact and effectiveness.

Significant accomplishments in fiscal year 2002 include the

following:

1. Provided briefings to senior staff.

2. Provided workshops on racial and gender diversity and

sensitivity.

3. Provided counseling assistance to managers, supervisors

and employees.

4. Reviewed and assessed management and personnel human

resource activity and actions.

5. Maintained an effective discrimination complaint process

that attempted to resolve issues informally, expeditiously, and at

the lowest possible level.

6. Provided support and assistance to managers and

supervisors in maintaining and effectively managing a diverse

workforce.

7. Developed information and materials for training senior

executives, area representatives, EEO counselors and other staff.

a. Planned and developed special emphasis programs for

FMC! employee participation.

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9. Continued to improve FMC’s image and identity among

Federal agencies and the community by developing cooperative

programs in the special emphasis areas.

10. Continued non-discrimination policy and programs in

response to Pub. L. No. 103-123.

During fiscal year 2003, the Office will continue all existing

programs and initiate additional activities designed to increase an

understanding of EEO concepts and principles.

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E. OFFICE OF

INSPECTOR GENERAL

The Office of Inspector General (“OK?‘) at the Commission

was established pursuant to the Inspector General Act of 1978, which

was amended in 1988 to provide for additional statutory inspectors

general at designated Federal entities, including the Commission.

It is the duty and responsibility of the OIG to:

n Provide policy direction for and conduct,

supervise, and coordinate audits and investigations

relating to the Commission’s programs and

operations.

n Review existing and proposed legislation and

regulations relating to the Commission’s programs

and operations and to make recommendations

concerning the impact of such legislation or

regulations on the economy and efficiency in, and

the prevention and detection of fraud and abuse

in, the administration of the Commission’s

programs and operations.

n Recommend policies for, and conduct, supervise,

or coordinate other activities carried out or

financed by the Commission for the purpose of

promoting economy and efficiency in the

administration of, or preventing and detecting

fraud and abuse in, the Commission’s programs

and operations.

n Recommend policies for, and conduct, supervise,

or coordinate relationships between the

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Commission and other Federal agencies, state and

local governmental agencies, and nongovernmental

agencies with respect to all matters relating to: the

promotion of economy and efficiency in the

administration of, or the prevention and detection

of fraud and abuse in, programs and operations

administered or financed by the Commission; and

the identification and prosecution of participants

in any fraud or abuse.

n Keep the Chairman and the Congress fully and

currently informed by means of semiannual and

other reports concerning fraud and other serious

problems, abuses, and deficiencies relating to the

administration of programs and operations

administered or financed by the Commission,

recommend corrective action concerning such

problems, abuses, and deficiencies, and report on

the progress made in implementing such corrective

action.

During fiscal year 2002, the Office issued the following audits

in final:

AOl-01 Review of the Commission’s Property

Management System (Followup)

A02-01 Evaluation of the Agency’s Procurement of

the Form FMC-1 System

A02-02 Assessment of the Office of Information

Resources Management

A02-03 Review of the SmartPay Program

-8O-
A02-04 Review of the FMC Compliance with the

Government Information Security Reform

Act

During the year, various Hotline complaints were received,

and investigations, both informal and formal, were opened and

pursued. At the end of the fiscal year, there were no formal

investigations pending.

The OIG issued a revised Strategic Plan which outlines the

OIG’s assessment of its strategic direction through the end of fiscal

year 2007. In this plan, the OIG has identified its mission, developed

goals to support that mission, set forth expected performance

outcomes associated with each goal, outlined strategies for achieving

the goals, and provided performance measures to determine our

effectiveness in meeting these goals.

In fiscal year 2003, we plan to conduct audits in the IT area,

and will continue to perform evaluations of agency programs and

operations. Other audits also will be handled as the Office carries

out the OIG’s statutory mandate to combat waste, fraud, and abuse in

agency programs. These audits are tied to both the agency and the

OIG strategic plans. The Office also will initiate investigations, both

formal and informal, as warranted.

The IG, as an active member of the Executive Council on

Integrity and Efficiency, will continue working with that group on

joint projects which affect the IG community.

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F. OFFICE OF THE

EXECUTIVE DIRECTOR

The Executive Director, as senior staff official, is responsible

to the Chairman for the management and coordination of Commission

programs managed by the:

n Bureau of Consumer Complaints and Licensing,

n Bureau of Enforcement, and

n Bureau of Trade Analysis,

and thereby implements the regulatory policies of the Commission

and the administrative policies and directives of the Chairman.

Also, the Executive Director provides administrative guidance

to the:

n Office of the Secretary,

n Office of the General Counsel, and

n Office of Administrative Law Judges,

and administrative assistance to the:

n Office of the Inspector General and

n Office of Equal Employment Opportunity.

The following offices report directly to the Office of the

Executive Director:

n Office of Budget and Financial Management,

n Office of Human Resources,

n Office of Information Resources Management, and

n Office of Management Services.

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This management structure has been established to ensure the

timely and proper achievement of Commission goals and objectives.

In addition, the Executive Director is the Commission’s Chief

Operating Officer, Chief Financial Officer, and its Senior

Procurement Executive. The Executive Director is also the

Commission’s Audit Follow-up and Management (Internal) Controls

Official.

The Deputy Executive Director serves as the Commission’s

designated Chief Information Officer and Competition Advocate, and

is its representative, as Principal Management Official, to the Small

Agency Council. The Office also is responsible for directing and

administering the Commission’s Information Security Program.

A significant achievement of the Office during fiscal year

2002 was overseeing the process to replace the agency’s long-time

personnel/payroll and accounting cross-servicing provider. During

the fiscal year, agreements were finalized with the National Finance

Center (“NFC”) for personnel/payroll services and with the Bureau

of Public Debt (“BP,“) for financial and accounting services. All

run-up activities with NFC were completed, and that transition took

place in May 2002. Transition activities with BPD were completed

at fiscal year-end to permit full conversion as of October 1, 2002.

Further, the Office refined the Commission’s teleworking program

after a pilot phase and drafted an internal Commission order which

formalized it, and guided staff efforts towards developing a revised

program for the effective monitoring of controlled carrier rates and

practices.

The Office also oversaw a plan to update the internal

Commission issuances that specify procedures for a variety of

programs and activities, and guided Commission efforts to comply

with the Government Papenvork Elimination Act of 1998 (“GPEA”)

and the Government Information Security Reform Act (“GISRA”).

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Additionally, the Office continued to coordinate implementation of

the agency’s five-year Strategic Plan and Annual Performance Plan,

as well as preparation of the Annual Program Performance report, as

required by the Government Performance and Results Act of 1993

(“GPRA”), oversaw the semiannual review of the user fee schedule

for Commission services, and continued its comprehensive internal

control review which assesses ongoing compliance with corrective

actions initiated in response to past Inspector General audits. Also,

the Office served as coordinator in the aftermath of September 11

regarding mail delivery issues and testing for possible anthrax

contamination, and reinstituted an agency-wide technology users

group for improved IT decisionmaking and better dissemination of

IT-related information.

The Office’s key objectives for fiscal year 2003 are guiding

Commission efforts regarding continued development or redesign of

programs to support the Commission’s statutory mandates; managing

the Commission’s conformance with the requirements of GPRA;

ensuring a smooth transition with the new cross-servicing providers

for accounting and personnel/payroll; determining what changes

should be made in the agency’s IT program based on

recommendations made by the Inspector General through a contractor

assessment; and bringing the Commission into compliance with

GPEA and GISRA. The Office will continue to take the lead in

accomplishing the agency’s performance goals related to ensuring an

effective agency-wide computer security program and reviewing

internal Commission issuances for continued applicability, accuracy

and clarity.

1. Office of Budget and Financial Management

(4 General Office Responsibilities

The Office of Budget and Financial Management (“OBFM”)

administers the Commission’s financial management program and is

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responsible for offering guidance on optimal utilization of the

Commission’s fiscal resources. OBFM is charged with interpreting

government budgetary and financial policies and programs, and

developing annual budget justifications for submission to the

Congress and OMB. The Office also administers internal control

systems for agency funds, travel, and cash management.

04 Achievements

During fiscal year 2002, OBFM:

n Collected and deposited $2,912,842 from user fees,

fines and penalty collections, and ocean freight

forwarder and OTI application and passenger

vessel certification fees.

n Coordinated and prepared budget justifications

and estimates for the fiscal year 2003

Congressional budget and fiscal year 2004 budget

to OMB.

n Prepared a variety of external reports, including:

the Annual Leave Year Report and the Report on

Workyears and Personnel Cost for 2001 (Office of

Personnel Management - “OPM”); the Report on

International Travel for FY 2001 (OMB); and the

Report on First-Class Airline Accommodations for

fiscal year 2001 (General Services Administration -

“GSA”).

n Prepared monthly status reports on workyears,

funding, travel and receivables.

n Managed the Commission’s travel and cash

management programs.

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n

n

n

n

n

n

(cl

Participated on a task force to review and update

user fees collected by the FMC.

Participated on a task force with other FMC staff

and Department of the Treasury contractors to

identify and select new cross-service providers for

payroll/personnel and accounting and financial

services support.

Assisted the Office of Human Resources with midyear conversion and implementation to NFC for

payroll/personnel services.

Assumed the primary responsibility for the

conversion to BPD for financial services effective

October 1,2002.

Developed alternative ways to fund local travel

expenses after eliminating the Commission’s

Imprest Fund as of September 30, 2001, per the

Department of the Treasury’s direction.

Continued to manage and distribute employee

disbursements for the Commission’s Transit

Benefit Program.

Future Plans

Financial management goals in fiscal year 2003 include:

(1) ensuring a smooth transition to the new BPD accounting system;

(2) developing a fully integrated financial management system; (3) in

conjunction with the Offices of Management Services and

Information Resources Management, continuing implementation of

electronic commerce to automate the processing of purchase orders,

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obligations and payments; (4) reviewing procedures and controls for

cash management; and (5) ongoing pursuit of initiatives leading to

economy and efficiency in budget and financial operations.

2. Office of Human Resources

(a) General Office Responsibilities

The Office of Human Resources (“OHR”) plans and

administers a complete human resources management program,

including recruitment and placement, position classification and pay

administration, occupational safety and health, employee assistance,

employee relations, workforce discipline, performance management

and incentive awards, employee benefits, career transition, retirement,

employee development and training, and personnel security.

0-Q Achievements

During fiscal year 2002, OHR:

n Researched, coordinated and successfully

implemented conversion of payroll/personnel

services to NFC, and developed an appropriate

security plan in conjunction with GISRA.

w Conducted a comprehensive training program in

accordance with the agency’s strategic and

performance plans, promoted e-learning

opportunities, and participated in the Small

Agency Council Training Program.

n Revised the Senior Executive Service Candidate

Development Program plan and worked with the

FMC Executive Resources Board to initiate the

program to address executive succession.

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n Administered action on Presidential initiatives

such as teleworking and increasing opportunities

for veterans and employees with disabilities.

n Reestablished the partnership for acquisition of

assistive devices through the Department of

Defense’s Computer/Electronic Accommodations

Program.

n Conducted a comprehensive recruitment program,

utilizing alternatives for recruitment, such as those

under the Presidential Management Intern

program, the Veterans Employment Opportunities

Act, etc.

w Continued to promote preventive health services,

including issuing e-mails focusing on monthly

preventive health themes and reestablishing the

Smoking Cessation Program.

n Publicized the Long Term Care Insurance

Program and coordinated two open enrollment

periods.

n Managed and conducted numerous employee

benefit and charitable contribution programs and

open seasons, such as the Combined Federal

Campaign, Thrift Savings Plan and Federal

Employee Health Benefits Program, and

coordinated and publicized family-friendly

initiatives.

n Conducted a cyclical position management

program review to maintain balanced

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organizational structures and ensure positions

remained current and accurately classified.

n Conducted a pro-active retirement program to

provide counseling, annuity and estimates of other

benefits, and timely processing of all retirement

applications.

n Conducted a comprehensive security program,

including initiating and adjudicating security

investigations for new and reinvestigated

employees, and began work to automate security

clearance data for the Clearance Verification

System pursuant to the E-Clearance project.

(cl Future Plans

In fiscal year 2003, OHR plans to continue to: (1) advise

agency management and staff on all human resources matters and

ensure the maintenance of a sound and progressive human resources

program; (2) implement pertinent portions of the agency’s strategic,

training and related performance plans; (3) implement e-Government

initiatives of the President’s Management Agenda and related human

capital objectives; (4) oversee automated payroll/personnel services,

processes and activities to ensure a continued smooth operation and

good working relationship with NIX; and (5) explore and implement

simplification, flexibility, and accountability of human resources

management programs.

3. Office of Information Resources Management

(a) General Office Responsibilities

The Office ofInformation Resources Management (“OIRM”)

plans, coordinates and directs the oversight of automated information

-9o-
systems with respect to information resources management (“DUW’).

OIRM provides administrative support to the program and

administrative operations of the Commission. The Director, OIRM,

serves as the Commission’s Senior IRM Manager, FMC Computer

Security Officer, Forms Control Officer, and Records Management

Officer.

OIRM is responsible for ensuring that the Commission’s IRM

functions are administered in a manner consistent with applicable

rules, regulations and 1 guidelines. These IRM functions

include conducting IRM management studies and surveys; managing

data telecommunications; developing and managing databases and

applications; coordinating records management activities;

administering IRM contracts; and developing Paperwork Reduction

Act clearances for submission to OMB. The Office also is

responsible for managing the computer security and forms programs.

00) Achievements

During fiscal year 2002, OIRM:

n Conducted an agency-wide systems security

assessment to determine data sensitivity and

systems criticality and developed the FMC IT

Systems Inventory.

n Cooperated in an assessment of the Commission’s

information security program performed by the

OIG and a private contractor, and implemented

several contractor-recommended computer and

network security enhancements.

n Administered a contract for expert assistance with

GPEA compliance, and updated the Commission’s

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GPEA strategy plan to establish electronic

reporting options where practicable.

n Prepared and updated quarterly FMC’s Plan of

Action and Milestones in response to GISRA.

n Cooperated in the development of refinements to

the Commission’s mission-critical Internet-based

Service Contract Filing System (“SERVCON”).

n Continued compliance activities pursuant to

Section 508 of the Rehabilitation Act, as amended,

to include drafting policies, assessing technical and

administrative needs and requirements, and

employing contractual language and contractor

assistance as needed.

n Maintained and enhanced the FMC homepage,

and provided advice and technical support to all

bureaus and offices in developing Internet and

database applications.

n Provided technical assistance and guidance for

cross-servicing of the agency’s payroll/personnel

system with the NFC.

n Provided technical assistance and guidance for the

implementation of the Commission’s Internetbased Form FMC-1.

n Administered the agency’s IT technical support

and technical assistance contracts.

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n Furnished agency-wide advice and coordination 0x1

records management, OMB clearances and

information management issues.

n Maintained liaison with the Government Printing

Office (“GPO”) regarding the agency’s

Government Information Locator Systems records

maintained on the GPO Access System.

n Initiated a contract for off-site storage of

Commission data in support of Computer Security

Contingency Planning initiatives.

(c) Future Plans

In fiscal year 2003, OIRM will continue to emphasize ongoing

support for Commission and externally mandated government-wide

programs. Major initiatives include plans to: (1) ensure compliance

with GPEA, GISRA, E-Sign, and section 508 of the Rehabilitation

Act; (2) assist in the administration and refinement of SERVCON;

(3) develop an FMC Enterprise Architecture and Capital Planning and

Investment Control process; (4) develop and submit to the National

Archives and Records Administration schedules for electronic

program and administrative records and other records not currently

scheduled or covered by the General Records Schedule; (5) provide

continued agency-wide advice and coordination on records

management, OMB clearances and information management issues;

(6) continue maintenance and the update of the Commission’s

homepage to provide information to the public; and (7) facilitate the

Commission’s ability to take advantage of e-commerce.

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4. Office of Management Services

(4 General Office Responsibilities

The Office of Management Services (“OMS”) directs and

administers a variety of management services functions that

principally provide administrative support to the regulatory program

operations of the Commission. The Director of the Office serves as

the Commission’s Contracting Officer.

The Office’s support programs include telecommunications,

procurement of administrative goods and services, property

management, space management, printing and copying management,

mail and records services, facilities and equipment maintenance, and

transportation. The Office’s major functions are to secure and furnish

all supplies, equipment and services required in support of the

Commission’s mission, and to formulate regulations, policies,

procedures, and methods governing the use and provision of these

support services in compliance with the applicable Federal guidelines.

00 Achievements

During fiscal year 2002, OMS:

n Coordinated with the U.S. Postal Service and OPM

concerning the anthrax crisis, established agencywide guidelines for the processing and handling of

FMC mail, and tested and ensured that agency

mail processing areas were clear and received a

negative report for anthrax.

n Coordinated with GSA and other building tenants

concerning the proper level of building security to

protect against terrorism.

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n

n

n

n

n

I

n

Cc)

Completed the implementation of Verizon’s Tone

Commander telecommunications system

throughout the Commission.

Awarded a follow-on contract with the subcontractor on the Form FMC-1 acquisition for

completion of and enhancements to the original

web-based form.

Awarded new cross-servicing contracts for the

Commission’s personnel/payroll services and

financial/accounting services support.

Modified the SERVCON contract to provide new

system enhancements for better user functionality.

Awarded a contract for the OIG to receive expert

assistance in reviewing the Commission’s IRM

program.

Arranged for specialized network systems support

to assist OIRM in resolving concerns with the

Commission’s e-mail and Local Area Network

functionality.

Conducted a procurement survey through the

Small Agency Council’s procurement community

for recommendations and solutions to the

Commission’s IT concerns.

Future Plans

In fiscal year 2003, the Office’s objectives include the

following: (1) review the FMC’s Smart Card purchase program and

update the manual; (2) resolve outstanding lease renewal issues with

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GSA and execute a new long-term occupancy agreement for

Headquarters space needs; (3) implement the PRISM automated

procurement system through BPD as part of the Commission’s crossservicing contract for accounting services; (4) review the invoice

processing program to improve the processing functionality between

FMC activities and BPD; and (5) continue to provide advice and

assistance to FMC activities regarding innovative support service

approaches.

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G. BUREAU OF CONSUMER

COMPLAINTS AND LICENSING

1. General

The Bureau of Consumer Complaints and Licensing has

responsibility for the Commission’s OTI licensing program,

passenger vessel certification program, alternative dispute resolution

(“AD,“) program, and consumer assistance program. In

administering these programs, the Bureau:

n Licenses and regulates OTIS, including ocean

freight forwarders and NVOCCs.

I Issues certificates to owners and operators of

passenger vessels that have evidenced financial

responsibility to satisfy liability incurred for

nonperformance of voyages or for death or injury

to passengers and other persons.

H Manages programs assuring financial

responsibility of OTIS and passenger vessel

operators, by developing policies and guidelines,

and analyzing financial instruments and financial

statements.

w Responds to consumer inquiries and complaints,

acting as an intermediary to resolve difficulties

encountered by consumers with respect to cruises

and shipments of cargo.

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n Develops and maintains an ADR program,

arranging for and providing mediation and other

dispute resolution services where appropriate.

n Develops and maintains information systems that

support the Bureau’s programs and those of other

Commission entities.

In carrying out these functions, the Bureau provides

information and referrals in response to a wide array of informal

inquiries, provides guidance with respect to licensing and bonding,

and where appropriate, advises about various means available to

resolve complaints, both informally and formally. The Bureau also

focuses on facilitating conflict resolution through informal and nonbinding approaches in an effort to minimize litigation expenses.

The Bureau is organized into three offices. The Office of

Consumer Complaints (“OCC”) has responsibility for responding to

consumer inquiries and complaints, and assists with the development

and implementation of an ADR program. The Office of

Transportation Intermediaries has responsibility for reviewing

applications for OTI licenses, and maintaining and updating records

about licensees. The Office of Passenger Vessels and Information

Processing has responsibility for reviewing applications for

certificates of financial responsibility with respect to passenger

vessels, managing all activities with respect to evidence of financial

responsibility for OTIS and passenger vessel owner/operators, and for

developing and maintaining all Bureau databases and records of OTI

applicants and licensees. All offices respond to a number of inquiries

and concerns about programs for which they are responsible. During

fiscal year 2002, the Bureau responded to more than 9,115 inquiries.

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2. Alternative Dispute Resolution

Final rules implementing the Commission’s new and

expanded ADRprogram were issued in August 2001. These rules set

forth guidelines and procedures for arbitration and provide for

mediation and other ADR services to be provided by the

Commission. During fiscal year 2002, the Bureau focused on

implementation of the program under the new rules. Seven dispute

resolution matters were opened as a result of formal proceedings

referred by the presiding ALJ, and another case was opened as the

parties wished to attempt to resolve an Informal Docket by mediation.

Of the eight proceedings, five were complaint proceedings between

private parties, while three were investigative proceedings involving

enforcement matters. Mediation led to settlements in two of the

complaint proceedings, while three were still pending at the end of

the fiscal year. In addition, mediation was able to resolve a complaint

proceeding opened during fiscal year 2001. Of the three investigative

proceedings, mediation was unsuccessful in leading to a resolution in

two cases, while discussions were planned to occur in fiscal year

2003 for the third investigative proceeding. Personnel continued to

receive training to mediate a broad range of disputes -- from informal

disputes to those involving litigation already commenced.

At the same time, the OCC provides ombuds services, and has

responsibility for the Commission’s informal complaint handling

activities, serving as an intermediary between parties in an attempt to

resolve disputes, such as those involving delay or mishandling of

shipments. It receives, records, and tracks complaints received by

OCC and other Commission components, assuring timely replies.

Through these services, the Bureau helps secure the recovery of funds

improperly collected by industry entities, facilitates the international

movement of household goods, and communicates to cruise vessel

operators the substance of consumer complaints arising from their

services, During fiscal year 2002, the OCC processed a total of 2,167

complaints and information requests. Of those, 526 complaints

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required resolution of disputes and attempts to resolve difficulties

with shipments. Refunds to the general public of overcharges,

refunds and other savings attributable to complaint-handling activities

amounted to $218,300. Since 1992, the OCC and its predecessor

office have helped complainants recover more than $1,600,000.

The Bureau also adjudicates small claims of entities seeking

reparations for violations of the shipping statutes. The dollar

limitation for claims which may use this small claims procedure was

increased in fiscal year 2001 from $10,000 to $50,000. By agreement

of the parties, these claims are adjudicated by Settlement Officers,

rather than ALJs, saving the expense and encumbrances of more

formal administrative proceedings. Although the vast majority of

small claims received a few years ago comprised freight overcharge

actions against ocean common carriers, the majority of cases now

concern claims by individuals against NVOCCs. Those complaints

generally involve alleged prohibited acts in connection with the

international transportation of household goods. Typical complaints

include situations where an NVOCC has received cargo from its

customer and taken payment for the transportation of the cargo, but

failed to deliver the cargo. Tracking down the whereabouts of a

shipment can be difficult, and often additional charges have accrued

because of delay or because the NVOCC has not made a necessary

payment, thus necessitating payment of additional funds to obtain

release of the shipment. During fiscal year 2002, three claims were

filed, while three pending cases were carried over from the previous

year. There were six pending cases at the close of the fiscal year.

The Bureau also has responsibility for the adjudication of

special docket applications. These are applications for permission to

apply other than tariff rates and to waive or refund freight charges

arising from various errors in tariff publications, an inadvertent

failure to publish an intended rate, or a misquotation of a rate. During

fiscal year 2002, thirteen special docket applications were processed.

None were pending at the close of the fiscal year.

-lOO-
In fiscal year 2003, the Commission intends to expand its

ADR program, resulting in more ADR involvement both prior to and

after the onset of litigation. The Bureau also plans to continue the

expansion of its consumer outreach programs, and to cultivate its

relationship with public and private consumer agencies and

organizations. And, the Bureau will continue to develop its capacity

to utilize available electronic means of outreach.

3. Licensing of Ocean Transportation

Intermediaries

OTIS are transportation middlemen. There are two different

types of such transportation middlemen, NVOCCs and ocean freight

forwarders. Both NVOCCs and ocean freight forwarders must be

licensed if located in the U.S. Foreign NVOCCs may choose to

become licensed, but do not require a license. Whether licensed or

not, foreign NVOCCs must establish financial responsibility. In

addition, all NVOCCs must publish electronic tariffs.

To be licensed, an OTI must establish that it is qualified in

terms of experience and character, as well as establish its financial

responsibility by means of a bond, insurance or other instrument.

Licensed ocean freight forwarders must establish financial

responsibility in the amount of $50,000, and licensed NVOCCs,

$75,000. An additional $10,000 coverage is required for each

unincorporated branch office of a licensee. In addition, unlicensed

foreignNVOCCs must maintain $150,000 in coverage. The financial

instrument must be available to pay any order of reparation assessed

under the 1984 Act, claims against the OTI arising from its

transportation-related activities, and any judgments for damages

against an OTI arising from its transportation-related activities under

the 1984 Act.

During fiscal year 2002, the Commission received 300 new

OTI applications and 225 amended applications, issued 455 OTI

-lOl-
licenses, revoked 360 licenses, and reissued approximately 90

licenses. At the end of the fiscal year, 1,295 freight forwarders, 1,305

U.S. NVOCCs, 885 joint NVOCC/ocean freight forwarders, and 40

foreignNVOCCs held active OTI licenses. An additional 665 foreign

NVOCCs maintained proof of financial responsibility on tile with the

Commission but chose not to be licensed.

During fiscal year 2002, the Bureau updated its FrequentI’

Asked Questions on the FMC homepage regarding the licensing and

bonding of OTIS. The Bureau also made progress towards publishing

a list of licensed and bonded OTIS on the Commission’s homepage,

which would assist carriers in complying with their statutory mandate

to do business only with those licensed by the Commission. In fiscal

year 2003, the Bureau plans to publish that list, develop an internal

database of OTIS to facilitate compliance and enforcement activities,

and revise the OTI license application form.

4. Passenger Vessel Certification

The Commission administers sections 2 and 3 of Pub. L.

No. 89-777 (46 U.S.C. app. 90 817d and 817e), which require

evidence of financial responsibility for vessels which have berth or

stateroom accommodations for 50 or more passengers and embark

passengers at U.S. ports and territories. The program now

encompasses 180 vessels and 45 operators, which have evidence of

financial responsibility coverage in excess of $300 million for

nonperformance and over $600 million for casualty. The certificates

issued pursuant to this program are necessary for Customs’ clearance’

of thousands ofpassenger vessel sailings annually. During fiscal year

2002, the Commission received applications for 50 certificates

(casualty and performance), while 25 casualty certificates and 35

performance certificates were approved and issued.

The Bureau offers information and guidance to the cruising

public throughout the year on their rights and obligations regarding

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monies paid to cruise lines who experience financial difficulties and

nonperformance problems. This is in addition to those disputes

between cruise lines and the cruising public that are resolved by OCC

as part of its ADR responsibilities.

The cruise industry has grown tremendously over the past

decade. New cruise lines have entered the business, and existing

cruise lines continue to build and/or purchase additional vessels to

serve an increasing demand. In addition, applicants continue to

develop more sophisticated means of establishing their required

financial responsibility. However, certain cruise line financial

fundamentals began to show deterioration during fiscal years 2001

and 2002. Following on the heels of the bankruptcy of a major cruise

line, Premier Cruise Operations Ltd. (d/b/a Premier Cruises and

Premier Cruise Lines) in September 2000, three more cruise lines

ceased operations during fiscal year 2001. New Commodore Cruise

Lines Ltd. (d/b/a Commodore Cruise Lines and Crown Cruise Lines)

and Cape Canaveral Cruise Line, Inc., participated in the

Commission’s program at the time operations ceased. Renaissance

Cruises Inc. did not participate in the Commission’s program since it

did not embark passengers at U.S. ports, even though its cruises were

marketed primarily to passengers in the U.S. At the close of fiscal

year 2001, American Classic Voyages Company (“AMCV”) filed for

bankruptcy.

The AMCV bankruptcy was a special concern to the

Commission because AMCV evidenced its financial responsibility by

means of self-insurance, which resulted in most of its passengers

receiving no reimbursement other than through their credit cards if

the cruises were charged.

The Commission acted swiftly to protect passengers should

this occur with other self-insured carriers by finalizing a regulatory

change in Docket No. 02-07, Financial Responsibility Requirements

for Nonperformance of Transportation - Discontinuance of Self-

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Insurance and the Sliding Scale, and Guarantor Limitations. This

rule, which became effective this fiscal year, eliminated selfinsurance and guaranties issued by persons other than Protection and

Indemnity Clubs as acceptable forms of financial responsibility for

passenger vessel operators. It also eliminated the sliding scale option,

which permitted carriers holding a certificate (performance) for over

five years, and with a satisfactory explanation of all claims, to reduce

the amount of coverage required. Bureau staff worked closely with

carriers evidencing financial responsibility in this manner to bring

them into compliance with the amended rules.

During this fiscal year, Bureau staff began work on a

subsequent rulemaking to amend other portions ofthe rules, including

removal of the $15 million cap on performance coverage, a

redefinition of unearned passenger revenue to eliminate certain credit

card ticket purchases which are covered under the Fair Credit Billing

Act, and increasing the frequency of reports of unearned passenger

revenue. The Notice of Proposed Rulemaking for Docket No. 02-l 5,

Passenger Vessel Financial Responsibility, was issued shortly after

the end of FY 2002. The purpose of these proposed rules is to protect

passenger fares fully and increase the Commission’s ability to

monitor the adequacy of the coverage provided. Because certain

credit card ticket purchases would not be included in the unearned

passenger revenue totals, the amount of coverage required by some

carriers would be reduced.

5. Automated Database Systems

A significant function of the Bureau is to support all

Commission programs by providing information about all regulated

entities and those doing business with the Commission. In addition,

a database is maintained that provides information about financial

coverage for all OTIS, as well as the status of license applications.

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During fiscal year 2002, the Bureau made progress toward

publishing a list of licensed and bonded OTIS on the Commission’s

homepage, thus assisting carriers in complying with their statutory

mandate to do business only with those licensed by the Commission.

This is especially helpful as carriers may incur liability for doing

business with an unlicensed OTI. An up-to-date list is a safeguard to

the shipping public, and also protects licensees from losing business

because of an inaccurate determination by a carrier as to whether the

OTI is licensed.

Also in fiscal year 2002, a database of Passenger Vessel

Operators was created which will help in monitoring coverage

amounts.

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H. BUREAU OF ENFORCEMENT

The Bureau of Enforcement is the primary investigatory and

prosecutorial arm of the Commission. Attorneys of the Bureau serve

as trial attorneys in formal proceedings instituted under section 11

of the 1984 Act, and in investigations instituted under the FSPA.

Bureau attorneys serve as legal advisors to the Executive Director and

other bureaus, and also may be designated Investigative Officers in

nonadjudicatory fact finding proceedings. The Bureau monitors all

other formal proceedings in order to identify major regulatory issues

and to advise the Executive Director and the other bureaus. The

Bureau also participates in the development of Commission rules and

regulations. On occasion, under the direction of the General Counsel,

attorneys from the Bureau may participate in matters of court or other

agency litigation to which the Commission is a party.

Through investigative personnel, and most often as the result

of information provided by the industry and other government

entities, the Bureau monitors and conducts investigations into the

activities of ocean common carriers, OTIS, shippers, ports and

terminals, and other persons to ensure compliance with the statutes

and regulations administered by the Commission. Monitoring

activities include: (1) service contract reviews to determine

compliance with applicable statutes and regulations; (2) reviews of

OTI operations, including compliance with licensing, tariff, and

bonding requirements; (3) audits of passenger vessel operators to

ensure the financial protection of cruise passengers; and (4) various

studies and analyses to support Commission programs. Investigations

are conducted into alleged violations of the full range of statutes and

regulations administered by the Commission, including: illegal or

unfiled agreements; abuses of antitrust immunity; unlicensed freight

forwarding; illegal rebating; misdescriptions or misdeclarations of

cargo; untariffed cargo carriage; unbonded OTI and passenger vessel

operations; and various types of consumer abuses, such as failure of

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carriers or intermediaries to carry out transportation obligations,

resulting in cargo delays or financial losses for shippers. The Bureau

adheres to the agency’s objectives of obtaining statutory compliance

and ensuring equitable trading conditions and focusing enforcement

efforts on activities which have market-distorting effects.

The Commission maintains a presence in Los Angeles,

Miami, New Orleans, New York and Seattle through Area

Representatives based in each of those cities. These representatives

serve other major port cities and transportation centers within their

respective areas. In addition to monitoring and investigative

functions, Area Representatives represent the Commission within

their jurisdictions, provide liaison between the Commission and the

maritime industry and the shipping public, collect and analyze

intelligence of regulatory significance, and assess industry conditions.

Liaison activities involve cooperation and coordination with other

government agencies and departments, providing regulatory

information and relaying Commission policy to the shipping industry

and the public, and handling informal complaints.

The Bureau prepares and serves notices of violations of the

shipping statutes and Commission regulations and may compromise

and settle civil penalty demands arising out of those violations. If

settlement is not reached, Bureau attorneys act as prosecutors in

formal Commission proceedings that may result in settlement or in

the assessment of civil penalties. The Bureau also participates, in

conjunction with other bureaus, in special enforcement initiatives,

fact finding investigations and in rulemaking efforts.

During fiscal year 2002, the Bureau of Enforcement

investigated and prosecuted malpractices in many trades lanes,

including the transpacific, North Atlantic, Central and South

American and Caribbean trades. These malpractices included

market-distorting activities such as various forms of secret rebates

and absorptions, misdescription of commodities and misdeclaration

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of measurements, illegal equipment substitution, unlawful use of

service contracts, as well as carriage of cargo by and for untariffed

and unbonded NVOCCs. Most of these malpractice investigations

resulted in compromise settlements of civil penalties. However, some

investigations required the institution of formal adjudicatory

proceedings in order to pursue remedies under the 1984 Act.

In addition to rate malpractice enforcement activity, several

matters arose with respect to activities pursuant to filed and unfiled

agreements between and among ocean common carriers. Further,

upon submission of a report to the Commission in Fact Finding

Investigation No. 24, Exclusive Tug Arrangements in Florida Ports,

the Commission instituted formal investigations to examine the

lawfulness of exclusive tug service arrangements in certain Florida

ports and at marine terminal facilities on the Lower Mississippi.

Further, the Commission, in response to a Petition, initiated Fact

Finding Investigation No. 25, to review the activities of the TSA

members regarding service contract practices during the years 2000

to 2002.

Interaction between the Commission’s Area Representatives

and Customs with respect to the exchange of investigative

information continues to be beneficial to both parties. Cooperation

with Customs has expanded into several joint field operations to

investigate entities suspected of violating both agencies’ statutes or

regulations. Such cooperation also has included local police and the

U.S. Immigration and Naturalization Service, when necessary.

In fiscal year 2002, the Bureau continued its OTI audit

program. This program is conducted Tom Headquarters, primarily by

mail, and reviews the operations of licensed OTIS to assist them in

complying with the statutory requirements and the Commission’s

rules and regulations, particularly as modified by OSRA. The audit

program also includes review of entities holding themselves out as

VOCCs with no indication of vessel operations.

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At the beginning of fiscal year 2002, 37 enforcement cases

were pending final resolution by the Bureau, the Bureau was party to

11 formal proceedings, and there were 79 matters pending which the

Bureau was monitoring or for which it was providing legal advice.

During the fiscal year, 3 8 new enforcement actions were commenced;

32 were compromised and settled, administratively closed, or referred

for formal proceedings; and 43 enforcement cases were pending

resolution at fiscal year’s end. Also, the Bureau participated in 9 new

formal proceedings, 6 proceedings were completed, and 14 formal

proceedings were pending at the end of the fiscal year. Additionally,

84 matters involving monitoring or legal advice were received during

the fiscal year, 80 such matters were completed, and 83 were pending

in the Bureau on September 30,2002.

In fiscal year2003, the Bureau will continue to pursue marketdistorting, fraudulent and anticompetitive practices and will continue

to monitor U.S. trades and the implementation of the changes and

regulations resulting from OSRA, to the extent that resources permit.

It will pursue initiatives aimed at entities not in compliance with the

Commission’s definition of VOCC, as well as instances of

noncompliance with statutory requirements for service contracting.

-llO-
I. BUREAU OF TRADE

ANALYSIS

1. General

The primary function of the Bureau is to plan, develop, and

administer programs related to the oversight of concerted activity of

common carriers by water under the standards of the 1984 Act as

amended by OSIU Further, the Bureau is responsible for

administering the Commission’s agreements and service contract

programs, and monitoring the accessibility and accuracy of all tariffs

published by common carriers, conferences of such carriers, and

MTOs. The Bureau’s major program activities include:

n Administering comprehensive trade monitoring

programs to identify and track relevant

competitive, commercial, and economic activity in

each major U.S. trade, and to advise the

Commission and its staff on current trade

conditions, emerging trends, and regulatory needs

affecting waterborne liner transportation.

n Conducting systematic surveillance of carrier

activity in areas relevant to the Commission’s

administration of statutory standards.

n Developing economic studies and analyses in

support of the Commission’s regulatory

responsibilities.

n Providing expert economic testimony and support

in formal proceedings, particularly regarding

unfair foreign shipping practices.

-lll-
m Processing and analyzing ocean common carrier

and marine terminal agreements.

n Reviewing and processing service contracts and

service contract amendments filed by ocean

common carriers, conferences or agreements of

such carriers, including service contract

statements of essential terms published by such

entities.

n Reviewing tariff publications in private automated

systems of carriers and conferences and ensuring

that tariffs under OSRA are accessible and

accurate.

2. Monitoring

The goal ofthe Bureau’s monitoring activities is to ensure that

carriers operating in U.S. ocean trades comply fully with applicable

statutory standards and Commission regulations. To that end, the

Bureau administers a variety of monitoring programs and other

research efforts designed to apprise the Commission of current trade

conditions, emerging commercial trends, and carrier pricing and

service activities.

For a description of the Bureau’s monitoring activities for

fiscal year 2002, see Section III. A, Monitoring.

3. General Economic Analysis

In addition to research and economic analysis pertaining to its

monitoring programs, the Bureau provides economic expertise for a

variety of Commission initiatives, including rulemaking proceedings.

Bureau economists prepare testimony in fact finding investigations

and cases of unfair shipping practices under section 19 of the 1920

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Act and FSPA. They also contribute to speeches and provide

briefings for senior agency officials.

Key projects the Bureau completed in fiscal year 2002

included: (1) economic analyses of newly filed major agreements and

amendments under the section 6(g) standard of the 1984 Act;

(2) analyses and critiques of a revised draft World Bank paper, and an

OECD draft paper calling for an end to carrier antitrust immunity in

liner shipping; (3) economic analysis in Docket No. 0 l-06, Exclusive

Tug Franchises - Marine Terminal Operators Serving the Lower

Mississippi River; (4) economic testimony in Docket No. 02-03,

Exclusive Tug Arrangements in Port Canaveral Florida; (5) research

and analysis of the record in Docket No. 89-26, The Government of

the Territory of Guam, et al. v. Sealand Service, Inc., and American

President Lines, Ltd.; (6) an economic analysis and memorandum

concerning rate levels of certain controlled carriers, approaches for

analyzing controlled carrier pricing behavior, and a revised controlled

carrier program; (7) preparation of two regulatory flexibility analyses

for proposed rulemakings to (a) eliminate self-insurance and provide

a sliding scale provision for passenger vessel operators, and

(b) update the Commission’s filing and service fees; (8) an economic

analysis of public tariff access charges; (9) reviewing and analyzing

service contracts pursuant to Fact Finding Investigation No. 25 -

Practices of Transpaczjk Stabilization Agreements Covering the

2002-2003 Service Contract Season; (10) responding to various

complaints and requests from shippers on matters including the

imposition of rate increases and/or surcharges by certain major

agreements; (11) classification of agreements to determine each

agreement’s monitoring report requirements for calendar year 2002;

(12) responding to informal requests and inquiries for industry data

or information; (13) responding to Congressional requests for trade

analyses and data; and (14) meeting with industry representatives to

discuss trends and anticipated commercial developments.

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4. Agreement Analysis

Under sections 4 and 5 of the 1984 Act, all agreements by or

among ocean common carriers to fix rates or conditions of service,

pool cargo or revenue, allot ports or regulate sailings, limit or regulate

the volume or character of cargo or passengers to be carried, control

or prevent competition, or engage in exclusive or preferential

arrangements are required to be tiled with the Commission. Except

for certain exempted categories, agreements among MTOs and among

one or more MTOs and one or more ocean common carriers also are

required to be filed with the Commission.

Generally, an agreement becomes effective 45 days after

filing, unless rejected by the Commission, made the subject of a

formal Commission request for additional information, or enjoined

by a U.S. district court under section 6(h) ofthe 1984 Act when it can

be demonstrated that it will unreasonably increase transportation costs

or unreasonably decrease service. An agreement already in effect also

can be enjoined on a similar showing by the Commission. The 1984

Act empowers the Commission to investigate and order the

disapproval, cancellation, or modification of any effective agreement

it finds to be in violation of the Act. In an investigation, the

Commission may seek to enjoin, in U.S. district court, conduct that

violates the Act. Under the Commission’s regulations, certain routine

or nonsubstantive agreements are exempt from the 45-day waiting

period and are effective on filing with the Commission.

There are two broad categories of agreements filed with the

Commission. The first category is pricing agreements, where the

main focus is the discussion and fixing of rates. Types of pricing

agreements include conferences and rate discussion agreements. The

other category is non-pricing agreements, where the focus can range

from the sharing of vessel space to the management of an Internet

portal. Types of non-pricing agreements include non-rate discussion

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agreements, vessel-sharing agreements, and cooperative working

agreements. Brief descriptions follow of the various agreement types.

(4 Conference Agreements

Conference agreements provide for the collective discussion,

agreement, and establishment of ocean freight rates and practices by

groups of ocean common carriers. Although conference carriers are

allowed to act independently, the expectation is that they will adhere

to rates and terms and conditions of service adopted by the group.

These agreements publish a common rate tariff in which all the

parties participate. The last new conference agreement was filed in

March 2000.

The Bureau has received 23 modifications to existing

conference agreements this year. These were mostly membership

changes. In fiscal year 2002, the Bureau analyzed and processed 22

filings. At the end of the fiscal year, there were 20 conference

agreements on file. Activities under two conferences in the inbound

transpacific trades remain suspended, however. During the past year,

one conference transformed itself into a rate discussion agreement,

and another conference agreement was terminated.

Discussion Agreements

Discussion agreements fall under two types: rate and non-rate

agreements. Like conferences, rate discussion agreements focus on

the fixing of rates, but any consensus reached under these agreements

is non-binding on the parties. There is no common rate tariff; each

party publishes its own tariff.

Non-rate discussion agreements are not geared to rate matters

and generally provide a forum for discussing matters of mutual

interest; in some instances, they operate much like a trade association.

Examples of this latter description are the cruise association

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agreements and the Box Club, a group of containership operators that

meet once or twice a year to discuss policy and legislative issues that

affect their industry.

During the fiscal year, the Bureau received two new

discussion agreements and 46 modifications to currently effective

agreements, again mostly membership changes. In fiscal year 2002,

the Bureau analyzed and processed 50 filings. At the end of the fiscal

year, there were 38 rate discussion agreements and 10 non-rate

discussion agreements on file. One rate discussion agreement added

conference provisions to its agreement during the fiscal year, thus

becoming a conference. Two other rate discussion agreements were

terminated.

(4 Vessel-Sharing Agreements

Vessel-sharing agreements (“VSAs”) make up the largest

group of agreements on file with the Commission. There are several

different varieties of these agreements ranging from agreements that

involve a high degree of operational cooperation with respect to space

and services down to the simple swap of container slots. The high

end of these agreements are so-called alliances, while the low end are

routine space charters. Most VSAs authorize some level of service

rationalization. The objective of these agreements is to provide a

high-quality service, while reducing individual operating costs.

During fiscal year 2002, the Bureau received 36 new VSAs,

which represented over 90 percent of all new agreement filings during

the year, and 53 modifications to the VSAs. The Bureau processed

82 filings during the fiscal year, and 21 VSAs were terminated. At

the end of the fiscal year, there were 15 1 vessel-sharing agreements

on tile.

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Cd) Joint Service Agreements

Parties to joint service agreements operate a joint venture

under a single name in a specified trading area. The joint venture

issues its own bills of lading, sets its own rates, and acts as an

individual ocean common carrier.

One new joint service agreement and no modifications to

existing agreements were filed during the fiscal year. The Bureau

processed the one filing during the year. Two joint services were

terminated last year, leaving only eight joint service agreements on

tile at the conclusion of the fiscal year.

W Cooperative Working & Other Agreements

Cooperative working agreements (“CWAs”) do not fit under

any of the foregoing agreement types. Generally, they deal with

unique management arrangements between carriers, joint service

contracting, and sharing administrative services. Other agreements

include agency, transshipment, and equipment interchange

agreements.

The Bureau received 14 filings under these categories of

agreements in fiscal year 2002. There were 18 CWAs and other

agreements on file at the end of fiscal year 2002. One CWA was

terminated.

The membership of the two Internet portal agreements, first

filed in 2001, has expanded to encompass many of the major carriers

operating in the U.S. trades. The agreements authorize the parties to

establish a common Internet portal and platform through which they,

other transportation service providers, intermediaries, and shippers

interact through a common set of transactions pertaining to the

tracking of shipments, the booking of cargo, generating shipping

documentation, and the like. These portals are evolving and

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developing to offer new services to their customers. For example,

one portal amended its agreement to allow it to offer a service

contract tender function whereby shippers can transmit service

contract proposals to one or more carriers through the portal.

(f) Marine Terminal Agreements

Marine terminals, operated by both public and private entities,

provide facilities, services, and labor for the interchange of cargo and

passengers between land and ocean carriers, and for the receipt and

delivery of cargo from shippers and consignees. The Bureau is

responsible for reviewing and processing agreements related to the

marine terminal industry.

During fiscal year 2002, the Bureau received 5 1 and analyzed

47 terminal agreements relating to port and marine terminal services

and facilities. Some terminal agreements become effective upon

filing under Commission rules that exempt certain classes of marine

terminal agreements from the waiting period requirements of the

1984 Act. Terminal agreements not entitled to an exemption are

processed under applicable statutory requirements. At the end of the

fiscal year, 357 terminal agreements were on file with the

Commission.

The number of marine terminal agreement filings generally

has been declining since 1992. That year, to lessen the regulatory

burden on the industry, the Commission exempted terminal lease

agreements from filing. Prior to that time the Commission was

receiving approximately 340 terminal agreements a year.

5. Overview of Agreement Filings

In fiscal year 2002, the Bureau received 257 agreement filings,

a decrease of 21 percent from the previous year. The Bureau

processed 25 1 agreement filings during fiscal year 2002. At the end

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of fiscal year 2002, there were 245 carrier agreements and 357

terminal agreements on file. Appendix C contains a breakdown of

receipts and processing categories for fiscal year 2002.

6. Tariffs

Since May 1, 1999, section 8 of the 1984 Act requires

common carriers and conferences to publish tariffs in private

automated systems. These tariffs set forth the rates, charges, rules,

and practices of common carriers operating in the U.S. foreign

commerce. The Bureau reviews and monitors the accessibility of the

private systems, as prescribed under the 1984 Act, and reviews

published tariff material for compliance with the Act’s requirements.

The Bureau acts on applications for special permission to deviate

from tariff publishing rules and regulations and recommends

Commission action on tariff publishing activities and regulations.

The Bureau also collaborates with other components of the

Commission to verify OTVNVOCC financial responsibility as it

relates to tariff publication.

Two Circular Letters, No. 00-1, Public Access to TarzB and

Tariff Systems under the Ocean Shipping Reform Act of 1998, and

No. 00-2, Charges Assessedfor Access to Tariffs and Tarzj?Yystems,

were issued by the Cornmission to address the carriers’ automated

tariff systems (“CATS”). The circulars were issued because the

Commission found that the public’s ability to access some tariff

systems appeared to be limited. ln fiscal year, 2002, the

Commission’s staff was in regular contact with the carriers,

conferences and tariff publishers to assist in the resolution of

problems in certain CATS. This matter will continue to be monitored

to ensure that appropriate statutory compliance is achieved.

The Bureau is directly involved in processing the

Commission’s Form FMC-1. The data on this form identifies the

location of carrier tariffs or MT0 schedules, including carrier and

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conference service contract essential terms publications. At the end

of fiscal year 2002, a total of 3,423 tariff location addresses were

posted on the Commission’s homepage.

During fiscal year 2002, the Bureau also received and

processed 46 special permission applications to deviate from the

statutory provisions of the 1984 Act and/or the Commission’s tariff

publishing regulations. The total number of special permission

applications received during the fiscal year remained relatively high

because a number of VOCCs sought to advance the effective date of

war risk surcharges for cargoes with origin/destination ports in highrisk trades. Thirty-two of these special permission applications

regarding war risk surcharges in the Middle East and Pakistan were

received in October 2001, as a result of the September 11, 2001,

tragedies at the World Trade Center and the Pentagon.

7. Service Contracts

Service contracts offer an alternative to transportation under

tariff terms. Their flexibility enables contract parties to tailor

transportation services to accommodate specific commercial and

operational needs.

Since OSRA’s effective date of May 1,1999, all contracts are

required to be filed electronically. Initially, two systems were

available to file service contracts, one which was Internet-based, i.e.,

SERVCON, and another that used a dial-up approach based on the

Commission’s former Automated Tariff Filing and Information

(“ATFI”) system. The dial-up system was discontinued September

1999, and since that time all service contracts have been filed in

SERVCON. The Internet-based system is designed for flexibility. It

does not require contract terms to be filed in any prescribed order, and

it was enhanced in fiscal year 2002 to allow carriers to submit service

contracts in nearly 90 different electronic formats, including the

previous list of acceptable formats such as WordStar, WordPerfect,

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Microsoft Word, ASCII, Excel and HTML. Other enhancements

were made to the system during fiscal year 2002 to increase search

capabilities and to obtain more efficient search results. The

enhancements continued to build upon the improvements made

during the past fiscal year that provided the contract filer with the

ability to retrieve its individual directory and service contracts at the

Commission.

During fiscal year 2002, the Commission received 48,154

new service contracts (compared to 47,629 in fiscal year 2001), and

210,172 amendments (compared to 182,403 in fiscal year 2001).

8. Controlled Carriers

A controlled carrier is an ocean common carrier that is, or

whose operating assets are, owned or controlled directly or indirectly

by a government. Section 9 of the 1984 Act provides that no

controlled carrier may maintain rates or charges in its tariffs or

service contracts that are below a level that is just and reasonable, nor

may any such carrier establish, maintain, or enforce unjust or

unreasonable classifications, rules or regulations in those tariffs or

service contracts. In addition, tariff rates, charges, classifications,

rules, or regulations of a controlled carrier may not, without special

permission ofthe Commission, become effective sooner than the 30th

day after the date of publication.

By Order on March 27, 1998, the Commission granted one

controlled carrier, COSCO, a limited exemption from the 30-day

notice period applicable to controlled carriers to reduce rates to meet

or exceed the filed rates of competing ocean common carriers.

(Petition No. Pl-98, Petition of China Ocean Shipping (Group)

Company for a Limited Exemption from Section 9(c) of the Shipping

Act of 1984.) The Commission streamlined and updated the

procedures for COSCO to comply with this Controlled Carrier Act

limited exemption in fiscal year 2001. In fiscal year 2002, COSCO

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exercised the authority granted by the Commission’s Order in 21

instances. In October 2000, China National Foreign Trade

Transportation (Group) Corp. (“Sinotrans”) petitioned (No. P2-00)

for an exemption similar to that granted COSCO under Pl-98, so that

it could lawfully reduce rates to meet or exceed the published rates of

competing ocean common carriers on one day’s notice. This petition

remained pending at the end of fiscal year 2002. Similarly, a COSCO

petition (P3-99) seeking to publish rate decreases in the U.S. foreign

commerce that would be effective upon publication without regard to

whether they are the same as or lower than rates published by

competing carriers also remains pending. The most recent list of

controlled carriers issued by the Commission was published in the

Federal Register on September 27,200O.

9. Non-Vessel-Operating Common Carriers

Ocean freight forwarders and NVOCCs in the U.S. have been

combined by OSRA into a new entity known as an ocean

transportation intermediary (“OTI”). The Commission’s Bureau of

Consumer Complaints and Licensing now monitors and reviews

compliance with OTIiNVOCC financial responsibilities under OSRA,

while the Bureau of Trade Analysis reviews the accessibility

requirements of NVOCC tariff publications in private automated

systems. At the end of fiscal year 2002, a total of 2,845 tariff location

addresses for NVOCCs had been posted on the Commission’s

homepage.

10. Marine Terminal Activities

Pursuant to OSRA, an MT0 may make available to the

public, subject to section 10(d) of the 1984 Act, a schedule of rates,

regulations, and practices, including limitations of liability for cargo

loss or damage, pertaining to receiving, delivering, handling, or

storing property at its marine terminal. Any such schedule made

available to the public shall be enforceable by an appropriate court as

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an implied contract without proof of actual knowledge of its

provisions. Pursuant to the Commission’s regulations governing

MT0 schedules, any terminal schedule that is made available to the

public must be available during normal business hours and in

electronic form. Each MT0 must notify the Bureau of the electronic

location of its terminal schedule by submitting Form FMC-1 before

commencing operations. At the close of fiscal year 2002, a total of

154 operators’ electronic location addresses for MT0 terminal

schedules were posted on the Commission’s homepage. An

additional 33 MTOs with FMC-1 submissions opted not to make

tariff publications publicly available.

11. Automated Database Systems

The Bureau currently maintains and uses the following

automated databases and filing systems: (1) Form FMC-1 System;

(2) Tariff Profile System; (3) SERVCON, the system for tiling

service contracts, and related Form FMC-83 system for registration

to file service contracts; (4) Microfiche System; (5) historical ATFI

tariff database system; (6) the tariff and service contract portions of

the FMC Imaging System; and (7) the Agreement Profile System.

During fiscal year 2002, the Form FMC-1 System reflected the tariff

location addresses of 373 VOCCs, 2,845 NVOCCs, 18 conferences,

and 154 ofthe 187 MTOs. Also, the FMC-1 System was redeveloped

during fiscal year 2002 and now allows the Commission quickly to

track the current status of any FMC-1 form submitted. Information

in the Tariff Profile System is used to review and analyze carrier

tariffs and service contract essential terms publications to ensure

compliance with Commission rules and regulations under OSRA,

particularly the accessibility of carrier tariffs. During fiscal year

2002, a separate section was added to the Tariff Profile System to

review CATS information. SERVCON contains service contract

data, most of which is only available to the Commission’s staff due

to OSRA’s confidentiality requirements. Registration to tile service

contracts into the system is authorized through the submission of

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Form FMC-83. The historical ATFI database contains all tariff and

service contract essential term publication data filed electronically

with the Commission between February 22,1993, and April 30,1999.

The Microfiche System provides a means of locating canceled tariffs

and amendments that have been microfiched. The FMC Imaging

System, among other things, provides for document storage and

retrieval of canceled tariffs and service contracts. The Agreement

Profile System contains information about the status of carrier and

terminal agreements, as well as related monitoring reports. These

databases and systems provide support for many ofthe Commission’s

programs. Certain information contained in the databases is also

available to the public.

12. Future Plans and Proposed Activities

The Bureau’s overall monitoring program will: focus on

systematic oversight of carrier and trade activity with emphasis on

upgrading monitoring systems to support the electronic transmission

of data and information provided by carriers pursuant to Docket No.

94-3 1, Information Form and Post-Effective Reporting Requirements

for Agreements Among Ocean Common Carriers Subject to the

Shipping Act of 1984; assess the impact of key issues facing the

industry in order to monitor developments in major trades and

analyze agreements in the foreign trades under the standards of the

1984 Act; and continue to refine its section 6(g) monitoring

methodology in evaluating the degree of anticompetitiveness

generated by agreements within the context of their commercial

environments. The Bureau also will continue to review tariffs and

service contracts to ensure that they comply with the Shipping Act

and the Commission’s regulations, including the statutes and

regulations related to controlled carriers. Proposed activities include:

(1) refining its controlled carrier monitoring program and reviewing

the ocean carrier constructive cost requirement contained in section

9 of the Shipping Act; (2) developing and implementing an ongoing

program to evaluate the level of adherence of individual service

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contracts to agreement voluntary guidelines in major trade areas; and

(3) developing a streamlined monitoring program, including a rule

dealing with data collected from agreement parties and minutes of

agreement meetings. Other rulemakings will be recommended

addressing certain service contract filing problems, and the possible

establishment of criteria for determining whether a vessel timecharter is an acceptable basis for ocean common carrier status under

the 1984 Act. Further, a system is being developed to facilitate

electronic signatures for various FMC information forms to comply

with requirements of GPEA.

The Bureau also will continue to furnish support and prepare

economic testimony in formal Commission proceedings arising in the

areas of its expertise; provide analyses and recommendations on

petitions, information demand orders, and Commission-initiated

rulemakings; perform pre-effectiveness analyses of newly filed

agreements to determine whether they are likely to raise issues and

specific questions under sections 5,6(g) and 10 of the 1984 Act, or

raise general policy questions; prepare recommendations to the

Commission on the more complex agreements and those agreements

that raise policy issues; and process other agreement matters under

authority delegated by the Commission.

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APPENDIXES

APPENDIX A

FEDERAL MARITIME COMMISSION

ORGANIZATION CHART

Fiscal Year 2002

Comnwstoner Commtssioner Chairman Commissioner Commissioner

I I I I I I

Office of Oftice of

the the General

Secretary Counsel

Office of the

Inspector

General

Oflice of the

Executive

Director

Office of

Admmistratwe

Law Judges

Office of

Equal

Employment

Opportunity

Bureau of Consumer

Complaints & Licensing Bureau of Enforcement Bureau of Trade Analysis

Area Representatives

New York

Los Angeles

Miami

New Orleans

Seattle

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APPENDIX B

COMMISSION PROCEEDINGS

Fiscal Year 2002

Formal Proceedings

Decisions ................................... 3

Discontinuances & Dismissals .................. 8

Initial Decisions Not Reviewed ................. 4

Rulemakings - Final Rules ..................... 2

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Special Dockets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Informal Dockets . . . . . . . . . . . . . ..**..*......... 0

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APPENDIX C

AGREEMENT FILINGS AND STATUS

Fiscal Year 2002

Agreements Filed in FY 2002

(including modifications)

Carrier..................................................... 206

Terminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

Agreements Processing Categories in FY 2002

Forty-Five Day Review ......................................... 70

ShortenedReview ............................................. 24

Exempt-Effective Upon Filing .................................. 150

Rejection of Filing ............................................. 0

Formal Extension of Review Period ................................ 6

Not Subject ................................................... 0

Withdrawals .................................................. 1

Total ,,.,.................,,............................... 251

Carrier Reports Submitted for Commission Review

Minutes of Meetings and Ad Hoc Reports ......................... 483

MonitoringReports .......................................... 312

Total ...................................................... 795

Agreements on File as of September 30,2002

Conference .................................................. 20

Discussion ................................................... 48

Joint Service .................................................. 8

Vessel-Sharing .............................................. 151

Cooperative Working & Other .................................. 18

Terminal ................................................... 357

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602

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APPENDIX D

FORM FMC-1

TARIFF LOCATION ADDRESSES -ELECTRONIC

SERVICE CONTRACT FILINGS AND SPECIAL

PERMISSION APPLICATIONS

Fiscal Year 2002

Form FMC-1 Filings

vocc.............................37 3

OTI/NVO ........................ 2,845

MT0 ............................ ..18 7

Conferences ......................... 18

Electronic Service Con tract Documents

New Service Contracts 48,154

Service Contract Amendkk 1 1 1 1 1 1 ‘210,172

Special Permission Applications

Granted.............................43

Denied

Withdrat;n’::::::::::::::::::::::::::: ;

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APPENDIX E

CIVIL PENALTIES COLLECTED

Fiscal Year 2002

Advance Ocean, Inc ................................

Air Sea Transport, Inc, Bondex China, Bondex Air & Sea

$25,000.00

.... 60,OOO.OO

Bernuth Lines Ltd..................................

De Well Container Shipping

110,000.00

Dole Ocean Cargo Express

.......................................................~~,~~~.~~

Eurasia Freight Service ............................... 8O:OOO:OO

Hanjin Shippin

f

Company Ltd ....................... 280,OOO.OO

Hecny Shippmg td ................................. 250,OOO.OO

King Ocean Central America SA ..................... 40,000.00

Led1 Corporation .................................... 20,OOO.OO

LEO Transport Corporation Ltd ......................

Lilly and Associates Int’l Freight Forwarding Inc.

25,OOO.OO

........... 70,OOO.OO

Maritime Credit Alliance ............................. 50,000.00

Mediterranean Shipping Company ......................

Middle East Ship

Pacific Champion E

ing Co. Inc.

53”CK$)CN&.C)~

........................

xpress Co. ......................... 5O:OOO:OO

Scorpion Express Line. .............................. 20,000.00

Seafreight Agencies .................................. 50,OOO.OO

Servitrans Inc....................................... 45,ooo.oo

Stallion Cargo Inc. ................................... 75,OOO.OO

Target Intermodal Inc ................................ 35,ooo.oo

Top Cargo Inc. ...................................... 22,OOO.OO

Transglobal Forwarding Co. Ltd. ......................

Transhnk Shipping Inc.

50,OOO.OO

.............................. 115,OOO.OO

TSC Container Freight ..............................

Universal Logistics Forwarding

75,ooo.oo

Wallenius Wilhelmsen Lines

...................................................X&X$;f

Water Transport Credit Group Members ................. 105~000~00

West Travel Inc. dba Alaska Sightseeing/Cruise West .....

World Lme Shipping Company

45,OOO.OO

......................... 46.471 .OO

Total Civil Penalties Collected . . . . . . . . . . . . . . . . . . . . . $2,450,971.00

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APPENDIX F

INVESTIGATIONS

Fiscal Year 2002

Investigations/Special Inquiries Opened: 89

Audits/Compliance Checks Opened: II

Total Openings: 100

Investigations/Special Inquiries Completed:

Audits/Compliance Checks Completed:

74

14

Total Completions: 88

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APPENDIX G

STATEMENT OF APPROPRIATIONS,

OBLIGATIONS AND RECEIPTS FOR

THE FISCAL YEAR ENDED

SEPTEMBER 30,2002

APPROPRIATIONS:

Public Law 107-77, 107’h Congress: For necessary expenses of the Federal

Ma&me Commission as authorized by section 201 (d) of the Merchant Marine Act

of 1936, as amended (46 App. U.S.C. 111 l), including services as authorized by

5 U.S.C. 3 109; hire ofpassenger motor vehicles authorized by 3 1 U.S.C. 1343 (b);

and umforms or allowances therefor, as authorizedby U.S.C. 5901-02; Provided,

that not to exceed $2,000 shall be available for official reception and

representation expenses.

$16,458,000

Public Law 107-206, 107’h Congress

Government-Wide Rescissions, 2002 11,000

Revised Appropriation

OBLIGATIONS AND UNOBLIGATED BALANCE:

$16,447,000

Net obligations for salaries and expenses for the fiscal year

ended September 30,2002. $16,446,643

STATEMENT OF RECEIPTS: Deposited with the General

Fund of the Treasury for the Fiscal Year Ended September 30,2002:

Publications and reproductions,

Fees and Vessel Certification,

and Freight Forwarder Applications $461,871

Fines and penalties $2,450,971

Total general fund receipts $2,912,842

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