FEDERAL MARITIME COMMISSION

46 C F R PART 522

GENERAL ORDER 24 AMENDMENT NO 3

DOCKET NO 7663

FILING OF AGREEMENTS BY COMMON CARRIERS AND OTHER

PERSONS SUBJECT TO THE SHIPPING ACT 9 6

July 11 1983

Amendment of Final Rules

This grants in part Petitions for Reconsideration of the

final rules issued in this proceeding These amendments

are for the purpose of further clarifying the status and

treatment of supporting statements and for allowing

communications between Commission staff and agree

ment proponents in the case of uncontested agreements

DATE Effective July 15 1983

SUPPLEMENTARY INFORMATION

On October 18 1982 the Commission issued final rules 1

in this proceed

ing which revised regulations governing the filing and processing of agree

ments pursuant to section 15 of the Shipping Act 1916 46 U S C 8I4

A supplement to the final rules was issued on November 2 1982 2

and

the rules became effective on January 1 1983 Petitions seeking relief

from certain provisions of the final rules have been filed by a group

of fifteen steamship conferences and rate agreements Conference Group 3

by the Pacific Coast European Conference PCEC 4

by Sea Land Service

ACTION

SUMMARY

I GeneralOrder 24 Arndt 2 25 F M C 423

225 F M C 445 Notice of the Office of Management and Budget clearance of the reporting requirements

of the rules appeared in the FederalRegister on January 7 1983 48 F R 797

3

The Conference Group filed a Petition For Reconsideration Or Modification Of And Relief From The

Commission s Final Rules pursuant to Rules 261 51 and 69 of the Commission s Rules of Practice and

Procedure 46 C F R 502 261 502 51 502 69 The fifteen conferences and rate agreements joining in this

Petition are Australia Eastern U S A Shipping Conference The 8900 Lines GreeceU S Atlantic Rate

Agreement IberianU S North Allantic Weslbound Freight Conference IsraelNorth Atlantic Ports Westbound

Freight Conference Italy South France South Spain PortugalU S Gulf and the Island of Puerto Rico Med

Gulf Conference Marseilles North Atlantic U S A Freight Conference Mediterranean North Pacific Coast

Freight Conference Mediterranean U S A Great Lakes Westbound Freight Conference North Atlantic lsrael

Freight Conference North Atlantic Mediterranean Freight Conference U S Atlantic Gulf Australia New

Zealand Conference U S North Atlantic Spain Rate Agreement U S Soulh Atlantic Spanish Portuguese

Moroccan and Mediterranean Rate Agreement The West Coast of Italy Sicilian and Adriatic PortsNorth

Atlantic Range Conference

4

PCEC filed a Petition For Reconsideration on behalf of the Conference and its member lines

26 EM C 1
2 FEDERAL MARITIME COMMISSION

Inc Sea Land 5

by six of the member conferences of the Associated

Latin American Freight Conferences ALAFC 6

and by the Council of

European Japanese National Shipowners Associations CENSA 7

BACKGROUND

The final rules revise Commission procedures for a filing agreement

approval requests pursuant to section 15 including statements in support

thereof b filing comments and protests to such agreements d responsive

pleadings thereto and c the disposition of agreement approval requests

The purpose of the final rules is to ensure fair orderly and expeditious

processing of agreement approval requests

The original Notice of Proposed Rulemaking appeared in the Federal

Register on November 23 1976 41 F R 51622 51623 Numerous com

ments to the proposed rulemaking were filed by carriers conferences of

carriers and other interested parties On June 20 1979 the Commission

issued revised proposed rules and invited further comment 44 F R 36077

36080 Additional comments were submitted on the revised rules s

These comments were carefully considered and where appropriate were

incorporated in the final rules issued by the Commission The Petitioners

seeking relief from the final rules have for the most part been participants

during the course of this rulemaking proceeding 9

DISCUSSION

The particular sections of the final rules objected to by the Petitioners

are 1 sections 522 5 and 522 6 as they concern the status of supporting

statements and affidavits as public records and the confidential treatment

of such documents 2 section 522 7 as it concerns communications between

Commission staff and agreement proponents and the good cause requirement

for supplementation of a filing and 3 section 522 8 as it relates to

the notice and hearing requirement of section 15 of the Shipping Act

In addition Petitioners object to the absence from the final rules of a

provision which would establish internal Commission deadlines for process

ing agreements and the absence of a provision which would indicate that

internal staff memoranda and recommendations are part of the administrative

Sea Land filed a Petition For Clarification Or Amendment pursuant to Rules 51 and 69 of the Com

mission s Rules of Practice and Procedure

6Six of the member conferences of the ALAFC filed Comments In Support Of A Petition For Reconsid

eration Or Modification Of And Relief From The Commission s Final Rules The comments suppon the

Conference Group Petition and urge that it be granted The six ALAFC members subscribing to thecomments

are United Stales Atlantic Gulf Ecuador Freight Conference Atlantic Gulf Panama Canal Zone Colon

and Panama City Conference Atlantic GulflWest Coast of South America Conference East Coast Colom

bia Conference West Coast of South America Nonhbound Conference and United States Atlantic Gulf

Venezuela Conference

7CENSA filed a Petition For Reconsideration And ModificationOf Final Rules

s

A list of commentators is set fonh inAppendix A of the final rules 47 F R 46286 46287

One member conference joining in the ALAFC Petition and four conferences subscribing to the Con

ference Group Petition appear nOlto have previously submitted comments

26 F M C
FILING OF AGREEMENTS BY COMMON CARRIERS AND OTHER 3

PERSONS SUBJECT TO THE SHIPPING ACT 1916

record in the agreement review process Each of these objections are dis

cussed below 1O

1 Section 522 Supporting Statements and Section 522 6Federal Register

Notice

Section 522 provides that supporting statements are public records and

that no claims of confidentiality with regard to such statements will be

allowed Section 522 also provides that affidavits or other evidence may

be attached to supporting statements Section 522 6 e

provides that support

ing statements shall be available for inspection at the Commission s offices

The earlier revised rule provided that copies of the agreement and the

supporting statement would be available for inspection at the Commission

offices It did not explicitly state that requests for confidentiality would

not be allowed

Several Petitioners object to these sections as they relate to affidavits

and supporting statements filed in connection with requests for approval

of an agreement Sea Land claims that it is unclear whether the affidavits

submitted with supporting statements may be given confidential treatment

Sea Land believes that this section should be clarified to permit confidential

treatment of proprietary information contained in an affidavit or other docu

ment submitted with a supporting statement CENSA also argues that some

measure of confidentiality should be provided for in order to avoid the

alleged harm that may result from disclosure of sensitive business informa

tion Sea Land states further that if confidential treatment is not permitted

these sections should then be modified to affirm Commission practice of

providing notice to agreement proponents of any request for proprietary

data so that such information may be withdrawn prior to disclosure

Affidavits and other documents submitted with a supporting statement

are part of the supporting statement and therefore are public documents

for which confidentiality claims are not permitted This is the clear intent

of sections 522 5 and 522 6 However in order to avoid any possible

ambiguity these sections shall be amended to expressly state that affidavits

and other evidence attached to supporting statements are part of the public

record

No amendment to these sections to allow for confidential treatment of

supporting statements is necessary or appropriate Making such information

public is the consequence that proponents must accept when they seek

section 15 authority Such agreements are impressed with a public interest

and are not merely contracts governing the private business relationships

of the parties Full disclosure is required to enable protestants commentators

10 Petitioners also complain that the record in this proceeding is stale and that the final rules were issued

without additional notice and comment Petitioners do not explain how the length of this proceeding would

affect the record or the final rules themselves Moreover Petitioners and other interested persons have had

ample opportunity to comment on the rules throughout this proceeding Many of the objections raised by

Petitioners have previously been considered Finally these very Petitions have provided an opportunity to

comment on the final rules

26 F M C
j

j

i

4 FEDERAL MARITIME COMMISSION

and other interested persons to know the basis for an agreement and be

able to fashion informed responses Therefore Petitioners request that this

section be amended to allow for confidential treatment of supporting state

ments is denied

Nor is it practical to notify agreement proponents of any request for

proprietary data prior to disclosure Such a provi ion would be contrary

to the purpose of the final rules since it would be likely to delay the

processing ofagreements Therefore Petitioners request for such an amend

ment is denied

2 Section 522 7 Comments and Protests

Section 522 7 defines and sets forth procedures for the filing of comments

and protests This section also provides for the service of comments and

protests and for the filing and service of any response by proponents

of an agreement Section 522 7 e limits communications between parties

to section 15 agreements and Commission staff and prohibits further

supplementation of the proponent sfiling unless good cause is shown The

provision of 522 7 e which sets forth the good cause requirement did

not appear in the earlier revised proposed rules Other changes in section

522 7 from the revised proposed rules are non substantive in nature

Petitioners object to the prohibition against communications between

Commission staff and agreement proponents in the case of unprotested

agreements Petitioners argue that such contacts facilitate the agreement

review process that the prohibition against such contacts will delay consid

eration of agreements and that such a prohibition should apply only where

protests or comments have been filed

Petitioners also object to the good cause requirement of section 522 7 e

They argue that the good cause requirement unduly restricts a proponent s

ability to supplement its support of an agreement in unprotested cases

and is not in keeping with the Commission s

responsibility to base its

decisions on the fullest possible record

The final rule s preclusion of communication with staff in the case of

unprotested agreements was intended to expedite the agreement review proc

ess by encouraging proponents to make the proper showing required for

approval with their initial submission and to avoid piecemeal additions

of supporting infonnation which could delay the agreement review process

There are however instances where such communications may resolve

staff questions and aid the review process The Commission has determined

that with respect to unprotested agreements such contacts may on balance

be of more benefit than detriment to the agreement review process There

fore section 522 7 shall be amended to permit members of the staff of

the Bureau of Agreements and Trade Monitoring Bureau to contact the

parties to unprotested agreements at the discretion of the Bureau Director

Such contacts would not be undertaken prior to the close of the comment

period The preclusion of such contacts by the Bureau staff in the case

26 FM C
FILING OF AGREEMENTS BY COMMON CARRIERS AND OTHER 5

PERSONS SUBJECT TO THE SHIPPING ACT 1916

of protested or commented agreements remains in effect Contacts initiated

by parties to an agreement are not permitted

The good cause requirement of section 522 7 is also intended to

expedite agreement review by limiting supplementary submissions to those

instances wherein good cause is shown This provision ensures a definite

termination ofthe agreement review process and at the same time establishes

a procedure for dealing with those instances in which special circumstances

call for allowing supplementary submissions This mechanism appears to

be reasonable and fair and no amendments to the good cause requirement

appear to be warranted Therefore Petitioners requests to amend the good

cause requirement shall be denied

3 Section 522 8 Disposition ofAgreement Approval Requests

Section 522 8 sets forth procedures for the disposition of agreement ap

proval requests This section provides for further proceedings regarding

an agreement when the Commission considers further inquiry advisable

when a protest alleges material facts which would preclude approval and

when the proponents of an agreement properly exercise their right to request

a further hearing This section also establishes procedures for conditional

approval of agreements and describes the factual showing that must be

made when proponents request further hearing Although this section of

the final rules reflects certain clarifying technical and editorial changes

it is substantially the same as published in the revised proposed rules

The Conference Group contends that section 522 8 fails to ensure a

hearing prior to conditional or unconditional disapproval of an agreement

by treating the statutory right to a hearing prior to disapproval as discre

tionary It also argues that this section places an unfair triple burden on

the proponent which the Commission has not explained or justified I I The

Conference Group believes that this section will delay rather than expedite

the processing of agreements

ALAFC goes further and argues that section 15 guarantees proponents

an evidentiary hearing prior to conditional disapproval ALAFC also notes

that section 522 8 contains no definition of conditional order of dis

approval and that such orders are not final orders of the Commission

and may not be appealed to the United States Courts of Appeals

PCEC contends that the proponent of a section 15 agreement has a

statutory right to a hearing upon simple request and attacks those provi

sions in sections 522 8 b 3 and d 2 which require that a proponent

prove entitlement to a hearing

CENSA argues that section 522 8improperly limits proponents right

to a hearing and imposes new unnecessary burdensome and costly require

ments CENSA contends that the conditional disapproval procedure is not

consistent with the statutory right to a hearing before disapproval

IIThe alleged triple burden is 1 in the initial supporting statement 2 in the requirement to prove enti

tlement to ahearing and 3 in the hearing itself

26 F M C
6 FEDERAL MARITIME COMMISSION

The basic issue raised by these rules and the contentions of the parties

is not so much the right of parties to a hearing but the right of the

Commission to control the structure and procedures of hearings conducted

under the Shipping Act It is clear that the statute requires notice and

hearing before the Commission may disapprove an agreement 12 It is

also clear that the Commission has substantial latitude in constructing the

type of procedures best suited to fulfilling this hearing obligation 13 The

procedures set forth in the final rules afford filing parties a basic hearing

procedure from the date an agreement is filed Neither the language of

the statute nor the decisions of the courts require the Commission to hold

a formal evidentiary hearing prior to action on a request for approval

The kind of hearing required will depend upon the nature of the agreement

and the issues which must be resolved 14

In determining what kind of hearing is appropriate in a particular case

the Commission must of course be guided by principles of due process

and fairness to the parties IS Where an application for approval raises

disputed issues of material fact a trial type evidentiary hearing may well

be required 16 However where the disposition of the case does not involve

such issues the Commission must be able to reach intelligent decisions

about other types of proceedings which will most economically provide

fair procedures to the parties and an adequate record for Commission deci

sion and judicial review 17 The Commission must also ensure that it obtains

12 Section IS of theShipping Act 1916 provides inrelevant part that

The Commission shall by order after notice and hearing disapprove cancel or modify any agree

ment or any modification or cancellation thereof whether or not previously approved by it that

it finds to be unjustly discriminatory or unfair as between carriers shippers exporters importers

orports or between exporters from the United States and their foreign competitors or to operate

to the detriment of the commerce of the United States or to be contrary to the public interest or

to be in violation of this Act and shall approve all other agreements modifications or cancellations

IlSea Land Service Inc v United States 683 F 2d 491 495 D C Cir 1982 United States Lines Inc

v Federal Maritime Commission 584 F 2d 519 537 D C Cir 1978 In Marine Space Enclosures Inc

v Federal Maritime Commission 420 F 2d 577 589 D C Cir 1969 the court stated that The requirement

of a

hearing in aproceeding before an administrative agency may be satisfied by something less time con

suming than courtroom drama

14 The statute does not require that ahearing be held where no one requests one rather it requires only

that interested persons be given the opportunity for a

hearing This applies equally to approval or disapproval of agreements Further atrial type evidentiary hearing is not always required Where there are no disputes

as to the material facts an appropriate hearing could consist of the filing of briefs or memoranda of law

In the usual case the Commission affords interested parties an opportunity for hearing by the publication

in the Federal Register of an invitation to submit comments protests and requests for hearing If no one

lakes advantage of that opportunity or if the comments protests or requests for hearing are frivolous the

Commission is not required to hold a

hearing before approving an agreement Canadian American Working

Arrangement 16 S R R 733 738

ISSeatrain InterMtional SA v FederalMaritime Commission 584 F 2d 546 550 D C Cir 1978

161n Marine Space Enclosures the court held that where agreements which are anticompetitive in nature

involve disputed issues of material fact a further hearing was necessary As the court noted antitrust issues

do not lend themlClves to disposition solely on briefs and argument In remanding the calC to the

Commission however theMarine Space Enclosures courtdeliberately and explicitly refrained from requiring

theCommission to hold formalevidentiary hearings Marine Space Enclosures supra 420 F 2d at 590

OutwardContinental North Pacific Freight Conference v FederalMaritime Commission 385 F 2d 981

984 n9 D C Cir 1967 Persian Gulf Outward Freight Conference v Federal Maritime Commission 375

F 2d 335 340 41 D C Cir 1967

26 F M C
FILING OF AGREEMENTS BY COMMON CARRIERS AND OTHER 7

PERSONS SUBJECT TO THE SHIPPING ACT 1916

sufficient information so that its decision is based on substantial evidence ls

and reflects a consideration of all relevant factors 19

An appropriate hearing within the meaning of section 15 is one in

which the proponents of an agreement are afforded an effective opportunity

to develop a factual record and legal argument in support of the request

for approval Typically the hearing requirement of section 15 is satisfied

by affording all interested parties the opportunity to submit comments or

argument and present evidence in the form of affidavits or other documents

The procedures set forth in section 522 8 provide this opportunity and

are in harmony with the statute and relevant court decisions Proponents

may file whatever supporting information they believe is necessary in their

initial filing Should the Commission determine that this initial showing

is not adequate and issue an order of conditional disapproval section 522 8

provides that proponents may exercise their right to request a further hear

ing This further hearing will be granted provided a proper showing is

made that additional proceedings will serve some legitimate purpose which

cannot be fulfilled by less formal tools The conditional disapproval order

is in essence a notice to parties of the Commission s view that the state

of the record is such that approval cannot be granted and that absent

a request for additional procedures to demonstrate material evidence the

subject agreement will be finally disapproved at a subsequent date

Petitioners complain that section 522 8 places an undue burden on pro

ponents 20 The final rules however do not impose any mandatory filing

requirements The only burden imposed on proponents of an agreement

is the burden to satisfy the standards of section 15 In the particular case

of an agreement which would otherwise be violative of the antitrust laws

or which would be likely to have serious anticompetitive consequences

a proponent has a burden to justify the agreement under the Svenska doc

trine 21 The final rules merely set forth a procedure for meeting the burden

imposed by section 15 and where applicable the Svenska doctrine Petition

ers arguments that the final rules impose additional extra statutory sub

stantive burdens on filing parties are without merit The Commission has

I Consolo v Federal Maritime Commission 383 U S 607 1966

Seatrain International SA v Federal Maritime Commission supra 584 F 2d at 550

20 Petitioners objections to this section contain certain internal inconsistencies On the one hand they claim

that proponents are deprived of an adequate hearing and on the other that the provisions in section 522 8

which provide an additional opportunity to justify an agreement place an undue burden upon proponents The

socalled triple burden is in fact but one requirement the requirement that parties seeking Commission

action on agreements explain the reasons for the requested action and provide the agency with sufficient in

formation about their presentation to enable the agency to structure an appropriate proceeding

21 The Svenska doctrine is the proposition affirmed in Federal Maritime Commission v AkJiebolaget

Svenska Amerika Unien 390 U S 238 1968 whereby section 15 agreements which interfere with the poli

cies of the antitrust laws will be disapproved as contrary to the public interest unless justified by evidence

establishing that the agreement ifapproved will meet a serious transportation need secure an important pub

lic benefit or further a valid regulatory purpose of the Shipping Act 1916 The burden is on proponents

of such agreements to come forward withthe necessary evidence

26 F M C
8 FEDERAL MARITIME COMMISSION

simply established unifonn procedures for making detenninations as to the

type of hearing required

Petitioners claim that section 522 8 will delay the processing of agree

ments The procedures set forth in section 522 8 however should promote

more efficient management of Commission resources and hence expedite

the agency s processes A rule which would require fonnal hearings upon

mere request without any supporting information would be likely to lead

to unnecessary hearings The Conference Group s suggestion that parties

would not frivolously undertake an expensive hearing is beside the point

It is the Commission s responsibility to control its administrative processes

The burden is properly on proponents of an agreement to make a sufficient

showing of approvability to warrant further hearing Such a

requirement

is not unreasonable

It is not clear what point ALAFC intends to make when it states that

conditional orders of disapproval are not final orders of the Commission

and may not be appealed Such orders become final when the conditions

stated therein are not met and thereafter may be appealed 22 No right

of appeal is denied by the procedures ofthis section

ALAFC also complains that section 522 8 does not define the tenn

conditional order of disapproval While the tenn is not defined in the

rules the language of section 522 8 makes the meaning of the tenn readily

apparent and inclusion of an actual definition would appear to be unneces

sary

Accordingly no further revision of section 522 8 appears to be warranted

and Petitioners various requests for modification of or relief from this

section shall be denied

4 Internal Deadlines for Processing Agreements

The Preamble to the final rules states that Internal deadlines and proce

dures bave been established and are now in the process of being further

updated However these matters are inappropriate for inclusion in a Com

mission General Order and are more properly the subject of an internal

Commission directive 25 F M C 4234 On October 18 1982 simulta

neously with the issuance of the final rules the Commission published

Commission Order No 104 which sets forth internal procedures governing

the processing of agreements 47 F R 463769 This Order also be

came effective on January I 1983

The Conference Group objects to the absence in the final rules issued

in Docket No 7663 of any provision establishing binding internal deadlines

for the processing of agreements The Conference Group is aware of the

procedures set forth in Commission Order No 104 23 but contends that

22 Proponents are also free at that time to refile the lllreement with appropriate justification theconditional

disapproval OfQef having indicated the deficiencies

23ln its Petition filed on November 12 1982 PCEC slated that the Commission s internal processing

guidelines should be made public PCEC s comment completely overlooks the publicalion of the Commis

26 F M C
FILING OF AGREEMENTS BY COMMON CARRIERS AND OTHER 9

PERSONS SUBJECT TO THE SHIPPING ACT 1916

those procedures are inadequate because they are not mandatory and because

there are no sanctions for non compliance The Conference Group contends

that agreements should be processed in the order in which they are filed

The Commission has established adequate internal procedures to ensure

the expeditious processing of agreements The procedures set forth in Com

mission Order No 104 should ensure that agreements generally will be

processed in the order in which they are filed The final rules do not

nor would it be feasible given the varying complexity of agreements

guarantee that agreements will be processed strictly in the order in which

they are filed Such a rule would unduly restrict the flexibility of the

Commission

Although the internal rules do not have the force of law they do establish

a clear regime for processing agreements which the Commission is now

implementing Petitioners suggest that the rules should contain sanctions

for non compliance but do not state what sanctions would be appropriate

Commission Order No 104 sets forth the requirements which the staff

of the Commission must meet Adherence to these requirements is a matter

which concerns the performance of Commission personnel and any failure

to meet those requirements may be addressed through established Commis

sion personnel policy This is not a matter which involves the approvability

of an agreement pursuant to section 15 and hence should not be included

in General Order 24 Accordingly Petitioners request for an amendment

to the final rules providing for inclusion of internal processing rules and

sanctions related thereto shall be denied

5 Availability ofInternal Reports or Information

CENSA objects that both the final rules in Docket No 7663 and the

procedures set forth in Commission Order No 10424 permit the Commission

to make determinations on the approvability of agreements on the basis

of information which CENSA contends is not in the record CENSA argues

that staff recommendations and memoranda are part of the administrative

record upon which the Commission relies in its decision making process

and should be available to the parties CENSA argues that the full adminis

trative record must be disclosed in order to determine whether the Commis

sion acted arbitrarily

As authority for this contention CENSA cites United States Lines Inc

v Federal Maritime Commisson 584 F 2d 519 D C Cir 1978 and Home

Box Office Inc v Federal Communications Commission 567 F 2d 9 D C

Cir cert denied 434 U S 829 1977 These cases deal with the issue

of ex parte communications and hold that if a communication from outside

sion s internal rules on October 18 1982 in the same issue of the Federal Register a appeared the final

rules in Docket No 7663

24CENSA objects to the procedures in section 5 of Commission Order No 104 which provides for the

development of additional facts and the preparation of a data package by the Office of Regulatory

Policy and Planning upon request of the Director Bureau of Agreements and Trade Monitoring

FoPMr
10 FEDERAL MARITIME COMMISSION

the agency contains information which forms the basis for agency action

then that information must be disclosed to the public

These decisions do not require the routine disclosure of internal memo

randa or recommendations prepared to assist the Commission in its delibera

tions either during the agreement review process or even prior to a decision

by the Commission It is sufficient for the Commission to articulate the

facts relied upon to support its decision in the order itself even where

those facts are derived from internal Commission sources We are aware

of no legal precedent which would require the routine disclosure of internal

memoranda in all cases Accordingly Petitioners request to amend the

rules to require that such internal documents be made available to the

public shall be denied

List of subjects in 46 C F R Administrative Practice and Procedure

THEREFORE IT IS ORDERED That pursuant to 5 U S C 553 and

sections 15 21 22 and 43 of the Shipping Act 1916 46 U S C 814

820 821 and 841a Part 522 of Title 46 Code of Federal Regulations

is amended as follows

1 Section 522 5 is amended by revising the third sentence to read

as follows

Supporting statements including all documents affidavits or

other evidence attached thereto are public records

2 Section 522 6 is amended by revising paragraph e to read as follows

e A statement that the agreement and any supporting statement

including all documents affidavits or other evidence attached

thereto are available for inspection at the Commission s offices

3 Section 522 7 is amended by revising the first sentence of paragraph

e to read as follows

e Except as provided in this section and 522 5 or except

in the case of an unprotested agreement as the Director Bureau

of Agreements and Trade Monitoring may in hiser discretion

initiate or unless specifically requested in writing by the Commis

sion with copies to the proponents and persons which have filed

protests or comments no other written or oral communication

concerning a pending agreement shall be permitted

and

IT IS FURTHER ORDERED That Petitioners requests for reconsider

ation clarification modification or withdrawal of relief from or amendment

26 F M C
FILING OF AGREEMENTS BY COMMON CARRIERS AND OTHER 11

PERSONS SUBJECT TO THE SHIPPING ACT 1916

to the final rules issued in Docket No 76 63 are granted to the extent

indicated above and denied in all other respects

By the Commission

S FRANCIS C HURNEY

Secretary

t ur
FEDERAL MARITIME COMMISSION

46 C F R PART 536

GENERAL ORDER 13 AMDT 11 DOCKET NO 83 18

FILING OF TARIFFS BY COMMON CARRIERS IN THE FOREIGN

COMMERCE OF THE UNITED STATES

July 26 1983

Final Rule

This amends FMC tariff filing rules to gennit con

ferences and rate agreements to file on behalf of member

line controlled carriers lower rates on less than 30 days

notice to meet the independent action rates of member

line non controlled carriers and to meet the actions taken

by member line non controlled carriers on open rated

commodities It also pennits member line controlled car

riers to initiate action and lower their rates on open

rated commodities to a level at or above the conference

minimum

DATE Effective September 2 1983

SUPPLEMENTARY INFORMATION

The Commission previously gave notice 48 FR 12576 77 that it pro

posed to amend 46 C F R Part 536 to pennit conferences and rate agree

ments to file reduced rates with less than 30 days notice on behalf

of member line controlled carriers on open rated commodities and independ

ent action rates where the basic agreement provides for independent action

Such filings however would not be pennitted where controlled carrier

member line rates would be lower than rates of non controlled carrier

member lines

ACTION

SUMMARY

12 26 F M C
FILING OF TARIFFS BY COMMON CARRIERS IN THE FOREIGN 13

COMMERCE OF THE UNITED STATES

Comments were received from a controlled carrier lamanufacturers asso

ciation 2 7 conferences or rate agreements 3

and a non controlled carrier 4

All commentators support the Commission s proposed rule though some

have expressed reservations about certain aspects The Inter American

Freight Conference is concerned that the rule will make Conferences re

sponsible for identifying a given carrier as a controlled carrier without

their having all the facts necessary to make that determination This concern

has merit and the rule has been amended so that conferences may rely

upon the Commission s prior and continuing determinations as to which

carriers are controlled and subject to the regulatory provisions of the Ship

ping Act 1916 as amended the Act

The Trans Pacific conferences suggest that the rule be changed to specifi

cally permit controlled carrier members to initiate rate reductions on open

rated commodities where the conference or ratemaking agreement has estab

lished open rates subject to minimum rate levels The Commission concurs

Establishing rates open subject to a minimum requires collective con

ference action Therefore controlled carrier members should be allowed

to initiate rates and lower their rates on open rated commodities to a

level at or above the conference minimum This would violate neither

the intent nor the letter of the Act That portion of the rule has been

amended to permit controlled carriers to initiate actions on open rated com

modities subject to a conference imposed minimum

The Commission finds that these amendments to its rules are exempt

from the requirements of the Regulatory Flexibility Act 5 U S C 601

Section 601 2 of that Act excepts from its coverage any rule of particular

applicablity relating to rates or practices relating to such rates

As the proposed amendments clearly relate to rates and rate practices the

Regulatory Flexibility Act requirements are inapplicable

I Shipping Corporation of India

2Motor Vehicle Manufacturers Association of the United States Inc whose members are

American Motors Corporation

Chrysler Corporation

Ford MotorCompany

General Motors Corporation

Intemational Harvester Company

M A N Truck Bus Corporation

PACCAR Inc

Volkswagen of America Inc

Volvo North America Corporation

3

Malaysia Pacific Rate Agreement

TransPacific Freight Conference of JapanKorea

JapanKorea Atlantic and Gulf Freight Conference

Philippine North America Conference

Agreement No 10107

Agreement No 10 108

Inter American Freight Conference

4

Sea Land Service Inc

26 EM C
14 FEDERAL MARITIME COMMISSION

List ofSubjects in 46 C F R Part 536

Rates Maritime Carriers

Therefore pursuant to 5 U S C 553 and sections 18 c and 43 of

the Shipping Act 1916 46 U S C 817 c and 841a 46 C F R Part

536 is amended by

1 The addition of a new sentence at the end of 5366 n as

follows

Prvided however that conferences or rate agreements may on

less than 30 days notice file reduced rates on behalf of controlled

carrier members for open rated commodities 1 at or above the

minimum level set by the conference or rate agreement or 2

at or above the level set by a member of the conference or

rate agreement that has not been determined by the Commission

to be a controlled carrier subject to section 18 c of the Shipping

Act 1916 in the trade involved

2 The addition of a new sentence at the end of 536 1O a 3 as

follows

Providedfurther that conferences or rate agreements whose basic

agreements provide for independent action may file on behalf

oftheir controlled carrier members lower independent action rates

on less than 30 days notice subject to the requirements of their

basic agreements and subject to such rates being filed at or above

the level set by a member of the conference or rate agreement

that has not been determined by the Commission to be a controlled

carrier subject to section 18 c of the Shipping Act 1916 in

the trade involved

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 22

EQUAL ACCESS AGREEMENT IN THE UNITED STATEs REPUBLIC

OF THE PHILIPPINES OCEAN LINER TRADE

AGREEMENT NO 10461

NOTICE

August 3 1983

Notice is given that no appeal has been taken to the June 28 1983

dismissal ofthis proceeding and that the time within which the Commission

could detennine to review has expired No such detennination has been

made and accordingly the dismissal has become administratively final

S FRANCIS C HURNEY

Secretary

26 F M C 15
FEDERAL MARITIME COMMISSION

DOCKET NO 8322

EQUAL ACCESS AGREEMENT IN THE UNITED STATES REPUBLIC

OF THE PHILIPPINES OCEAN LINER lRADE

AGREEMENT NO 10461

PROCEEDING DISMISSED

Finalized August 3 1983

This proceeding was instituted by Order af Investigatian and Hearing

served April 14 1983 to detennine whether Agreement No 10461 an

equal access agreement between certain United States flag carriers and Phil

ippine flag carriers Propanent shauld be approved disappraved ar modified

under the provisions af sectian 15 af the Shipping Act 1916 46 D S C

814

Fallawing same interim matians and events including a prehearlng can

ference and the issuance af same procedural arders the Propanents deter

mined to withdraw the Agreement By letters dated June 15 1983 Pra

ponents withdrew the Agreement withaut prejudice to later refiling and

asked that the proceeding be discantinued By Order served June 15 1983

Iadvised that the request was deemed a matian to dismiss and that replies

if any wauld be due nat later than June 22 1983 No reply was received

Accardingly there being no appasitian to the motian and there being

no useful regulatory purpose to be served by cantinuing this proceeding

it is ardered dismissed

S SEYMOUR GLANZER

Administrative Law Judge

16 26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 15

AMERICAN COASTAL LINE JOINT VENTURE INC

v

UNITED STATES LINES INC AND SEA LAND SERVICE INC

NOTICE

August 8 1983

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

mine to review the June 21 1983 discontinuance of the complaint in

this proceeding has expired No such determination has been made and

accordingly the discontinuance has become administratively final

S FRANCIS C HURNEY

Secretary

26 EM C 17
FEDERAL MARITIME COMMISSION

DOCKET NO 83 15

AMERICAN COASTAL LINE JOINT VENTURE INC

v

UNITED STATES LINES INC AND SEA LAND SERVICE INC

MOTION TO WITHDRAW COMPLAINT GRANTED PROCEEDING

DISCONTINUED

Finalir ed August 8 1983

Complainant American Coastal Line Joint Venture Inc AMCO has

filed a Motion to Withdraw Complaint AMCO states that it hereby re

quests leave to withdraw its complaint in this proceeding without prejudice

and furthermore states that counsel for respondents United states Lines

Inc and Sea Land Service Inc have advised that respondents do not oppose

the motion

In its complaint AMCO had alleged that respondents had concertedly

submitted rates for the carriage of military cargo under the military bidding

system which rates were non compensatory and so unreasonably low as

to be detrimental to the commerce of the United States causing damage

to AMCO in an unspecified amount such conduct allegedly being in viola

tion of sections 15 and 18 b 5 of the Shipping Act 1916 Respondents

had denied any concerted action or violation of law or the filing of non

compensatory rates The Military Sealift Command MSC was granted

leave to intervene

The proceeding moved into its prehearing inspection and discovery phase

the parties serving various discovery requests on each other Several prehear

ing conferences were held as a result of which protective orders were

fashioned and established information was exchanged and other rulings

issued designed to narrow issues and expedite progress toward a

reasonably

prompt decision

DISCUSSION AND CONCLUSIONS

AMCO s motion in this proceeding resembles a similar motion filed

in a similar proceeding involving allegations of non compensatory military

rates which proceeding was discontinued on complainant s motion See

Docket No 83 19 Farrell Lines Incorporated v Sea Land Service Inc

Motion to Withdraw Complaint Granted Proceeding Discontinued 25

I Counsel for MSC has orally advised that MSC does not intend to oppose the motion

18 26 RMC
AMERICAN COASTAL LINE JOINT VENTURE INC V UNITED 19

STATES LINES INC AND SEA LAND SERVICE INC

EM C 729 1983As I discussed in the ruling cited a complainant s

motion to withdraw its complaint can be handled under Rule 73 46 CFR

502 73 the rule governing motions generally and Rule 147 46 CFR

502147 the rule setting forth the powers of presiding officers including

the power to hear and rule upon motions Furthermore under the federal

rules specifically Rule 41 a 28 U S C A

complainants are permitted to

withdraw their complaints even after answers have been filed and other

action taken in the case subject to possible terms and conditions which

courts may impose which are not relevant here In practice moreover

complainants rights to withdraw their complaints have been respected by

this Commission since the Commission has the power to institute its own

investigations if it chooses and it is generally recognized that complainants

should not be compelled to litigate cases if they do not choose to do

so See e g

Smoot v Fox 340 F 2d 301 6th Cir 1964 Tyco Labora

tories Inc v Koppers Co 627 F 2d 54 7th Cir 1980 9 Wright

and Miller Federal Practice and Procedure section 2364 p

169 voluntary

dismissals permitted in early stages of a proceeding

The instant proceeding is still in a

relatively early stage and AMCO

simply wishes to withdraw its complaint without prejudice Respondents

do not object to the motion Accordingly the motion is granted and the

proceeding is discontinued The parties are reminded of the need to comply

with paragraph 10 of the Protective Order regarding the return of confiden

tial materials to the parties furnishing them at the conclusion of the proceed

ing

S NORMAN D KLINE

Administrative Law Judge

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 24

BOB AKIN MOTOR RACING INC

v

COSMOS SHIPPING COMPANY INC

NOTICE

August 19 1983

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

mine to review the July 8 1993 discontinuance of the complaint in this

proceeding has expired No such determination has been made and accord

ingly the discontinuance has become administratively final

S FRANCIS C HURNEY

Secretary

20 26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 24

BOB AKIN MOTOR RACING INC

v

COSMOS SHIPPING COMPANY INC

Sam R Watkins Jr of Rockwood Edelstein Duffy P C for complainant

Gerald H Ullman P C forrespondent

PROCEEDING DISCONTINUED WITH PREJUDICE TO RENEW AS

REQUESTED BY PARTIES

Finalized August 19 1983

A complaint filed by Bob Akin Motor Racing Inc against Cosmos

Shipping Company was served April 27 1983 Complainant alleged that

respondent had breached its duties and responsibilities as a freight forwarder

in violation of section 44 of the Shipping Act 1916 in connection with

the shipment of a truck racing car and related parts Complainant sought

reparation in the amount of 21 569 49

The complainant also brought action in the Supreme Court of the State

of New York County of Westchester charging defendant with 1 breach

of contract 2 negligence and 3 negligent andor fraudulent misrepresen

tations seeking damages in the amount of 21 534 49 for each

The defendant answered denying all allegations made five affirmative

defenses as well as a counterclaim for 3 769 94 plus interest together

with the costs and disbursements of the action

As was noted in the memorandum anent cancellation of Thursday June

16 1983 Prehearing Conference due to parties having settled that was

served June 20 1983 settlement in this proceeding was worked out by

Mr Ullman who represents the respondent and Mr Watkins who represents

the complainant

In a letter dated June 28 1983 received June 30 1983 Mr Watkins

submitted the following

1 General Release from Cosmos Shipping Company Inc to Bob

Akin Motor Racing Inc filed in this docket

2 General Release from Bob Akin Motor Racing Inc to Cosmos

Shipping Company Inc filed in this docket

3 Letter dated June 16 1983 describing the terms of the settlement

and contersigned by counsel for Cosmos Shipping Company Inc

The letter reads as follows

26 F M C 21
22 FEDERAL MARITIME COMMISSION

Gerald H Unman Esq

Gerald H Unman P C

120 Broadway

New York New York 10271

Re Bob Akin Motor Racing Inc v Cosmos

Shipping Company Inc

Our Reference Number l337 A

Dear Gerry

Pursuant to our agreement please find enclosed herewith three signed

copies of a Stipulation Discontinuing the captioned Action with Prejudice

You should keep one copy for your records and return the others to

me I will file one with the Westchester Supreme Court and forward the

other one to the Federal Maritime Commission

Ialso enclose an original General Release to be executed by your Client

Cosmos Shipping Company Inc and returned to me after it has been

executed and notarized I also enclose a

copy of a Release which has

been forwarded to our client for execution

The net result of the agreed upon settlement between our clients is

that Cosmos Shipping Company Inc will tender a check to Bob Akin

Motor Racing Inc in the amount of 5 58181 This check should be

certified or bank funds General Releases as enclosed herewith will be

exchanged between our clients The action commenced by Bob Akin Motor

Racing Inc in the Westchester Supreme Court will be discontinued with

prejudice and Bob Akin Motor Racing Inc will withdraw its Complaint

which it filed with the Federal Maritime Commission

You will hold in escrow an settlement documents received from us

in connection with this matter until we have received your client s check

General Release your signed copy of this letter and the Stipulation Dis

continuing the Action

Please be kind enough to indicate your client s agreement to the settle

ment arrangements as set forth herein by signing and returning the enclosed

copy of this letter Thereafter I will submit a

copy of this letter along

with an other settlement documents to Judge Harris of the Federal Maritime

Commission for his approval

26 F M C
BOB AKIN MOTOR RACING INC V COSMOS SHIPPING 23

COMPANY INC

I thank you for your professional courtesy and cooperation in reaching

this settlement and throughout the course ofthis matter

Very sincerely

ROCKWOOD EDELSTEIN DUFFY P C

BY

Sam R Watkins Jr

4 Copy of certified check from Cosmos Shipping Company

Inc in the amount of 5 58181

i 0 100033 COSMOSSHIPPINGCO INC 100033 l

I

I

l

IH fOA i lFUH oM

j

NFr4 K V luno

j

I

t

6 D2 3

OU

t

0 SSRL h

t t 81 Doll rs and 81 Cents I NIlOFC

I

IS W VO totVVlk

I

i

lirt

Se

I

0

If l CUSMQSIHIPP NGCO INC

rcft JD Akil Motor Racing Ino II lh

f

r1 1

4r 0 11 I

I 11 2

t k r H y

000 3 3 i o HOO S8 cioa qa

26 F M C
24 FEDERAL MARITIME COMMISSION

5 Copy of Stipulation Discontinuing Action with Prejudice which

was filed with the Westchester County Clerk The stipulation fol

lows

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF

WESTCHESTER

Index No 24429 82

BOB AKIN MOTOR RACING INC

Plaintiff

against

COSMOS SHIPPING COMPANY INC

Defendant

Calendar No

STIPULATION DISCONTINUING ACTION WITH PREJUDICE

IT IS HEREBY STIPULATED AND AGREED by and between the

undersigned the attorneys of record for all the parties to the above entitled

action that whereas no party hereto is an infant or incompetent person

for whom a committee has been appointed and no person not a party

has an interest in the subject matter of the action the above entitled

action be and the same hereby is discontinued with prejudice without

costs to either party as against the other This stipulation may be filed

without further notice with the clerk ofthe court

Dated June 16 1983

GERALD H ULLMAN P C

Attorney s for Defendant

120 Broadway

New York New York 10271

212 732 2570 ROCKWOOD EDELSTEIN DUFFY

P C

Attorney s for Plaintiff

One Water Street

White Plains New York 10601

914 328 1500

DISCUSSION

This proceeding had all the prospects of a

very interesting and important

case involving the duties and responsibilities of a freight forwarder For

26 F M C
8 WILLIAM BEASLEY HARRIS

Administrative Law Judge

BOB AKIN MOTOR RACING INC V COSMOS SHIPPING 25

COMPANY INC

warders are subject to the Shipping Act 1916 and the requirements rules

and regulations of the Commission issued thereunder As to whether in

this proceeding the facts bring it within the necessary purview is not

known the parties having settled Although the parties in the above settle

ment material do not mention the financial saving in time research and

possible hearings official notice is taken that trial of the issues herein

could be very costly and that there is financial saving in settlement

In short as seen from the material herein approval of the settlement

in this forum is unnecessary as the complainant has withdrawn his com

plaint here and stipulated discontinuing the action with prejudice in the

New York Court

The law favors compromise and settlement The parties in three months

by settling have had this matter discontinued in two forums Counsel for

the parties deserve congratulations as well as the forums for such speedy

action

Upon consideration of the above the requests for discontinuing this pro

ceeding with prejudice to renew are granted subject to approval by the

Commission as provided in the Commission s Rules of Practice and Proce

dure wherefore it is ordered

Proceeding is discontinued

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 8022

INTERNATIONAL PAPER CO

v

SEATRAIN PACIFIC SERVICES S A ET AL

ORDER ADOPTING INITIAL DECISION

August 23 J983

This proceeding was initiated as a result of a complaint filed by the

International Paper Co IP against eight named caITiers Respondents I

alleging violations of section 16 and 17 of the Shipping Act 1916 46

U S C 815 and 816 The complaint states that certain currency adjust

ment factors CAPs imposed by Respondents are discriminatory and unlaw

ful requests that the Commission issue a cease and desist order against

the collection of the CAPs and claims reparations on all of IP s shipments

of woodpulp and milk carton stock to Japan from New Orleans

The Presiding Officer Administrative Law Judge William Beasley Harris

issued an Initial Decision 10 finding that IP had failed to prove violations

of the Shipping Act Exceptions to the ID have been filed by IP and

Respondent OOCL Seapac Replies to Exceptions have been filed by IP

and Respondents The Commission heard oral argument on June 21 1983

DISCUSSION

As a threshold matter IP and OOCL Seapac argue that the 10 is seri

ously deficient in necessary findings of fact and law While not completely

unfounded these arguments are substantially overstated An administrative

law judge need only address issues which are critical to the disposition

of the proceeding and need not address every factual or legal issue raised

I The carriers named in Ihe original complaint were Seatrain Pacific Services S A Kawasaki Kisen

Kaisha Ltd Sea Land Service Inc Nippon Yusen Kaisha Showa Line Ltd Japan Line Ltd and

Yamallhita Shinnihon Steamship Co Ltd Subsequently Seapac Pacific Services S A succeeded to Seatrain

Pacific Services S A and thereafter merged with Orient Overseall Container Line now operating as OOCL

Seapac I P s motion to amend its complaint to name OOCL Seapac a aRespondent was granted by the

Presiding Officer On Exception OOCL Seapac contends that because the amended complaint Wall not served

upon it until after the hearing and it entered no formal appearance it should not be deemed a respondent

in its own right We disagree OOCL Seapac is the successor corporation to Seatrain and Seapac and because

it hall allsumed the outstanding liabilities of those corporations it ordinarily would be held as aparty in the

proceedings Furthennore it Wall at all times fully apprised of all relevant issues in this proceeding and ha

fully participated in this proceeding before the Presiding Officer and the Commission II has been afforded

due process and lherefore will be held to be aparty respondent in its own right See Aloha Airlines Inc

v CAB 598 F 2d 250 262 D C Cir 1979

26 26 F M C
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 27

SERVICES S A ET AL

by the parties 2 The 10 discusses the nature of the charge at issue here

and how it is applied to IP It discusses the theories of the parties and

the law to be applied to the facts of this case The 10 does fail to

include a succinct discussion of whether the facts presented on the record

constitute a prima facie case of discrimination under section 16 and 17

and relies on rhetorical questions However for reasons stated below Re

spondents are correct that IP has failed to prove a prima facie case of

discrimination under section 16 and 17 in light of existing case law The

Presiding Officer was therefore correct in ultimately finding no violations

of law

IP correctly argues that the absolute obligation test of section 16

discrimination is the most relevant method of analysis that could be applied

in this proceeding 3

A CAP is an across the board surcharge levied without

regard to the particular commodity or other transportation factors involved 4

As such it is viewed as a separate charge from the underlying freight

rates which must be equally applied to all commodities Although Respond

ents are technically correct that a triangular relationship must still be

shown such a

relationship need not be competitive and is always present

when a carrier treats a shipper differently than others it serves

There is however no evidence in the record that IP or the commodities

it ships have been singled out for adverse treatment by Respondents Al

though the surcharge method selected by Respondents results in different

levels of charges depending on the particular commodity involved and

may not be the fairest or most desirable available alternative it is not

illegal The equality of treatment required under the absolute obligation

test cannot be carried to the point of requiring that all shippers regardless

of the commodity or service provided be charged identical rates or sur

charges

A percentage method of imposing surcharges has been found to be lawful

in a prior Commission proceeding 5 There is no legal requirement that

a surcharge be imposed on a uniform per ton basis as opposed to a

percentage basis Both types of surcharges have been accepted by the

Commission as lawful alternative methods of spreading common costs across

a carrier s service 6 We cannot accept IP s argument that a CAP must

be calculated on the basis of the underlying cost factors of specific move

ments which require currency conversions The Commission will not in

the context of a section 16 or 17 complaint proceeding require a movement

specific method of cost allocation in the setting of such rates

See Harborlite Corp v ICC 613 F 2d 1088 1092 1093 DC Cir 1979

See Valley Evaporating Co v Grace Line Inc 14 F M C 16 1970

See Nonassessment of Fuel Surcharges on Military Sealift Command Rales 15 F M C 92 98 1972

See Surcharge at Us Atlantic and Gulf Ports 6 S RR 657 673 10 1965 suslained 10 F M C 13

20 1966

6ld Surcharge on Cargo 10 Manila 8 F M C 395 400 1965

7

See Ludwig Mueller Co v PeraltaShipping Corp 8 F M C 361 366 1965

f F M r
28 FEDERAL MARITIME COMMISSION

Respondents argue that the CAP must be viewed as an adjunct of the

underlying freight rate and that IP s complaint must therefore meet the

section 16 traditional discrimination test This IP has allegedly failed

to do because it has not established on the record the necessary competitive

triangular relationship between itself Respondents and a preferred shipper

utilizing all water rates S

The Presiding Officer adopted this analysis and

held that because the rate differences that result from the CAP are based

upon the differences in the underlying rates of the different shippers the

complaint is not against the currency adjustment per se but rather against

the underlying rate structure of the carriers Because the same misconception

is present in both IP s traditional and absolute obligation test analysis

ie that CAP s must be based upon the currency conversion requirements

underlying a specific cargo movement it need not be determined whether

IP has proven that such a competitive triangular relationship exists in

this case

IP submitted no evidence that the rate structure ofthe carriers is discrimi

natory The discrimination theory it presented depends entirely upon its

allegations that the mini Iandbridge rate includes a cost element the rail

division which does not entail currency exchanges There is no basis to

find that CAPs must be imposed on each movement of cargo in strict

accordance with the underlying cost factors attendant to moving that cargo

Respondents have adequately established that currency conversion costs

cannot be allocated with precision to each cargo movement and must be

treated as overhead The fact that this overhead item has been appor

tioned among shippers in proportion to established rate relationships does

not standing alone establish unlawful rate discrimination

Under a traditional discrimination theory IP must show that the overall

rate differential is unreasonable in light of costs and other transportation

factors A showing of a disparity in one cost element in the overall

rate is insufficient to establish undue or unreasonable rate discrimination

in the absence of a particularized and significant injury proximately caused

thereby By its own admission and the evidence of record IP s only injury

is the difference in the amount of CAP it pays Because mini Iandbridge

and local rates are for substantially different services it is not sufficient

to merely show that there is a difference in rates between mini Iandbridge

and local shippers 9

Finally IP has failed to prove a prima facie case of discrimination

under section 17 of the Shipping Act Respondents correctly argue that

to find a violation of section 17 it must normally be shown that two

shippers of similar commodities have been charged different rates for the

See North Atlontic Mediterranean FreiRht Conference Rates on Household Goods II F M C 202 209

1967

9See CarRill lnc v Waterman Steamship Co 24 F M C 442 461 1981

1 C
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 29

SERVICES S A ET AL

same movement 1O It is clear that the mini landbridge movement and the

local movements at issue here are not similar services even if it is assumed

that they involve similar commodities I I

THEREFORE IT IS ORDERED That the Initial Decision ofAdministra

tive Law Judge William Beasley Harris issued in this proceeding on Feb

ruary 25 1983 is adopted and

IT IS FURTHER ORDERED That the Exceptions to the Initial Decision

are except to the extent noted herein denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

IONorth Atlantic Mediterranean Freight Conference Rates on Household Goods supra at 213 1967

However asurcharge which violates section 16 under the absolute obligation test of discrimination will

also nonnally violate section 17 See Nonassessment of Fuel Surcharges on Military Sealift Command Rates

supra at 99

11 Council of North Atlantic Shipping Associations v American Mail Lines 21 F M C 96 140 1977

adopted 21 F M C 91 1978

6FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 8022

INTERNATIONAL PAPER COMPANY

v

SEATRAIN PACIFIC SERVICES S A ET AL

Complainant IP is found not entitled to a refund of the difference between the CAF paid

by IP for intermodal transportation from the Gulf to Japan and thO CAF paid by its

competitors shipping directly from the West Coast to Japan IP expects to pay more

and does for mini Iandbridge than for the local tariff because there is an additional

service in mini Iandbridge There is no violation of section 16 First or section 17 by

the respondents

Proceeding is discontinued

Robert N Kharasch Olga Boikess Richard D Gluck Rhonda G Magdail Kathleen

Mahon and William E Cohen of Galland Kharasch Calkins Short P C for complainant

International Paper Company

Robert B Yoshitomi Edward D Ransom R Frederick Fisher Thomas E Kimball

Charles L Coleman Ill and Juliana A Jensen of Lillick McHose Charles for 7 respond

ents I Japan Line Ltd 2 Kawasaki Kisen Kaisha Ltd 3 Mitsui O S K Lines Ltd

4 NiPPon Yusen Kaisha 5 Sea Land Service Inc 6 Showa Line Ltd and 7 Yamashita

Shinnihon Steamship Co Ltd

Neal Michael Mayer Paul D Coleman David S Healy and Peter J King of Hoppel

Mayer Coleman formerly Coles Goertner for respondent Seatrain Pacific Services

Inc now OOCL Seapac Service

INITIAL DECISION2 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Adopted August 23 1983

The complaint in this proceeding pursuant to section 22 of the Shipping

Act 1916 and Rules 61 62 and 63 of Rules of Practice and Procedure

46 CPR 502 61 62 and 63 received April 10 1980 was served April

II 1980 The Commission was asked to a find that the carriers purported

surcharge on intermodal minibridge traffic violates section 16 First and

section 17 of the Shipping Act 1916 b order that the carriers cease

and desist from any further imposition ofdiscriminatory currency adjustment

or similar surcharges on intermodal minibridge traffic c order that the

carriers pay reparation to International Paper Company IP in the amounts

I

Is a

steamship company headquartered In Tokyo which serves ocean trades around the world with liner

tanker and tramp vessels Exh 36 p2

2

This decision will become the decision of the Commission in the absence of review thereof by Ihe Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

30 26 F M C
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 31

SERVICES S A ET AL

shown below plus interest for unlawful currency surcharges paid by IP

on shipments of woodpulp and milk carton stock moving to Japan via

New Orleans

Since

Amended To

Seatrain 159 756 35 OOCL Seapac

predecessor

18 045 16

8 220 62

2 663 76

7 520 43

506 89

786 54

7 398 11

181556 85

Kawasaki Kisen Kaisha Ltd

Mitsui OSK Lines Ltd

Sea Land Service Inc

Nippon Yusen Kaisha

Showa Line Ltd

Japan Line Ltd

Yamashita Shinnihon Steamship Co Ltd

28 200 00

13 759 40

13 629 79

20087 15

1 565 19

2 285 28

9 740 82

270 824 51

An issue arose about subpoenas and enforcement of those subpoenas

The proceeding in the Commission was in abeyance while IPand the

FMC went to federal court to enforce the subpoenas International Paper

Co v Mitsui OSK Lines Ltd No C 81 11 Misc N D Ca April 21

1981 The Court refused to enforce the subpoenas Affd No 81 4263

and 81 4325 9th Cir February 4 1982

IP presented its case through the written direct testimony of TA

Przedpelski Manager IP Operations Exh No 17 Edward R Mooney

IP s Manager Export Services Exh No 18 Charles J Nash Jr IP s

Marketing Manager Chemical Cellulose Pulp Division Exh No 19 and

Harvey R Thomas III IP s Manager Business Analysis Consumer Packag

ing Group These witnesses were presented for cross examination and cross

examined on June 28 1982 witness Przedpelski on June 29 1982 witness

E R Mooney on June 30 1982 witness Charles J Nash Jr and on

July 23 1982 witness Harvey L Thomas III

The respondents sponsored the testimony of Dr Ernest Nadel Exh No

35 and Donovan D Day Jr Exh No 37 In a letter dated July 12

1982 signed by Peter J King it was stated OOCL Seapac Service and

Seapac Container Service SA advises that it respectfully declines to submit

direct written testimony on their part OOCL Seapac believes that the pres

entation of a direct case is neither warranted nor required by the present

state of the record

They jointly sponsor testimony prepared by witnesses Don D Day Jr

and Dr Ernest Nadel not the testimony of Seiichi Hirano

The testimony of Seiichi Hirano Senior President Representative and

General Manager for the Pacific Coast of Yamashita Shinnihon Steamship

Co Ltd commonly known as Y S Line was presented Exh No 36

In its opening brief IP submitted 69 proposed findings of fact the

7 respondents in their reply to the brief of IP proposed 101 findings

of fact and OOCL Seapac Service in its reply brief to the opening brief

26 F M C
32 FEDERAL MARITIME COMMISSION

of IP proposed 139 findings of fact Thus the parties have presented

309 proposed findings of fact All of the proposed findings of fact have

been considered and have been granted granted in substance or denied

as indicated from the facts found as follows

FACTS

The complainant IP a New York corporation manufactures and exports

large quantities ofwood pulp and milk carton stock to Japan

The complainant IP s initial step prior to filing this complaint was to

protest the assessment of the currency adjustment factor CAF to the

Pacific Westbound Conference PWC Exh 17 page 2 attachment 1

Tadeusz H Przedpelski Manager International Distribution Operations for

International Paper Company sent the protest in a telex March 9 1979

to D O Day Jr Chairman of the Pacific Westbound Conference Ibid

Under date of March 12 1979 Mr Day replied to Mr Przedpelski s

March 9 1979 telex Acknowledge your message which we will distribute

to our member lines who may then consider your claim that the currency

surcharge in the PWC intermodal tariff is inappropriate Nevertheless the

member lines are each required by law to assess this charge as it is

a tariff requirement

The conference took no action Tr 628 82 p21

The instant complaint was served April II 1980 The Pacific Westbound

Conference is not a

respondent Tr 6 28 82 p

20 The PWC is a steamship

conference acting pursuant to FMC approved Agreement No 57 Exh

37 page 2 The eight 8 named respondents 3

in this proceeding were

each members of the PWC at the time the complaint was filed Ibid

p

3 The respondents are common carriers by water in the foreign com

merce of the United States and subject to the Shipping Act 1916

The claim involves two commoditieswoodpulp and milk carton stock

which IP ships to Japan Exh 17 page 2 Lost sales of woodpulp or

milk carton stock is not an issue herein

Terms Acetakraft Viscokraft AV 19 or Tyrecell Supercell A02 and

Supersoft all are grades of woodpulp produced by IP in its Natchez Mis

sissippi manufacturing facility Tr 630 82 p

332 For convenience the

following definitions were given Tr 630 82 p

338

Acetakraft is a high purity chemical cellulose grade used for the produc

tion or the manufacturing of various cellulose acetate products Acetakraft

is a trade name Exh 19 p

4

Viscokraft is a lower purity lower alpha chemical cellulose grade that

is used for the manufacturing ofcellophane or rayon

3

Since the time the complaint was filed Seatrain was succeeded and substituted for in this case by Seapac

Container Service S A CXJCL Seapac Service CXJCLSeapac is the successor to the liabilities of Seatrain

and Seapac inthis case Exh 37 p 3

26 F M C
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 33

SERVICES S A ET AL

AV I9 or Tyrecell is a high purity high alpha grade used for manufactur

ing in high tenacity industrial rayon or in the case of a shipment to

Japan it is used to manufacture carboxy methyl cellulose

Supercell A02 is a commodity woodpulp used primarily by fine paper

makers to make business papers

Supersoft is a specialty paper pulp used to manufacture disposable diapers

or female personal products

IP prefers to ship all milk carton stock in containers From time to

time due to container shortages or other contingencies woodpulp is shipped

breakbulk Exh 18 p

3 The use of containers minimizes handling and

reduces the chance for contamination or other damage in transit Exh

18 p

3 Largely for the same reasons IP also prefers to use containers

for the shipment of woodpulp Ibid

Milk carton stock originates at IP s mill in Pine Bluff Arkansas while

woodpulp originates at a mill in Natchez Mississippi Exh 17 p

2

IP makes its own land arrangements from these mills to New Orleans

Tr 628 82 p24 For the milk carton stock IP s cargo is a polyethylene

coated variety There is a small amount of milk carton stock that is uncoated

Tr 629 82 p203

With the inception of intermodal container service by the PWC from

New Orleans starting about 976 IP began to rely more and more on

the containerized intermodal service to Japan due at first to the superior

outburns lack of damage to cargo at destination experienced with the

intermodal service and more recently because few alternatives now exist

Exh 8

p

4

The volume of IP present shipments of milk carton stock and woodpulp

to Japan added together amounts to approximately 5 000 tons per month

Each 40 foot container can accommodate approximately 20 tons Seatrain

now guarantees IP approximately 35 containers per week or 140 per month

IP needs approximately 250 containers per month for its U S Japan ship

ments 250 x 20 tons 5 000 tons Exh 18 p

8

IP is the No 2 world supplier of chemical cellulose Exh 19 p4

The No 1 supplier and IP s major competitor is Rayonier with 4 mills

in the U S Ibid page 5 At present IP s only Acetakraft customer

in Japan is Daicel Ibid

In the case of milk carton stock there is one competitor Potlatch Tr

6 28 82 p26 located just across the border from Washington in Idaho

IP has two mills in the U S producing 470 000 tons annually of milk

carton stock for sale within the U S and offshore These mills are located

at Pine Bluff Arkansas and Texarkana Texas

For the milk carton stock IP s cargo is predominantly a polyethylene

coated variety Tr 6 29 82 p

203 There is a small amount of milk

carton stock that is uncoated Most of the milk carton stock manufactured

by IP and by its U S competitors is used to produce cartons sold under

the trade name Pure Pak Exh 20 p

3

26 EM C
34 FEDERAL MARITIME COMMISSION

No milk carton stock is produced in Japan Exh 20 p6 Four American

companies presently supply the Japanese market They are Potlatch

Weyerhauser Champion and IP An additional company has entered the

Japanese market selling milk carton stock Enzo Gutzeil a Finnish corpora

tion Tr 7 28 82 p398 IP recognizes that because its mill is located

in Arkansas it must pay more freight than its major competitor Potlatch

whose mill is located in Lewiston Idaho closer to the West Coast and

Japan Ibid p

8

IP is the largest annual producer of milk carton stock in the world

Tr 7 23 82 p423 Milk carton stock is essentially interchangeable no

matter where orby whom it is produced Ibid p405

PWC publishes currently Tariff No 11 from the Local and Overland

Territory to ports in the Far East and Southeast Asia and Tariff No

708 A from U S Port cities on the Atlantic and Gulf Coasts to the Far

East Tr 22481 p30 Since the imposition of a

currency adjustment

factor CAF under the PWC after 1978 the CAF expressed as a percent

age has been the same percentage to Japan on local or water service

or on intermodal service Ibid p50 IP expects to pay more for mini

landbridge than the local tariff because there is an additional service in

mini landbridge

PWC has 15 regular members and two associate members The 15 regular

members consist of carriers whose corporate nationalities include 7 nations

the United States Japan Liberia Philippines Denmark Korea and Israel

Exh 37 p2

Each carrier member of PWC submits for itself and without disclosure

to any other member carrier on a calendar quarter basis the percentages

for the PWC Japan trade constituting the items described by letters A

B C and D in the formula Exh 37 p11

The formula by which the PWC calculates the revenue loss of its member

ship in the U S to Japan trade is as follows

A A x D B xC xR X

A is the percentage of revenue from cargo bound for Japan which

is collected in Japanese yen

B is the percentage of such revenue which is collected in U S

dollars

C represents the percentage of U S dollar collections converted into

yen

D is the percentage of yen collections which are converted into

U S dollars

R is the percentage increase in the value of the yen with respect

to the dollar

26 F M C
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 35

SERVICES S A ET AL

X is the percentage of that revenue derived from cargo consigned

to Japan which is lost due to the depreciation of the value of

the dollar

Exh 37 p

8

Since the inception of the CAP on March 1 1978 at any point in

time the CAP has been the same percentage in both the LocaVOverland

and the MLB tariffs Ibid p

12

IP is not a PWC Dual Rate Contract signator Therefore IP is not

obligated to ship on PWC member vessels under any PWC tariff but

rather is free to utilize any carrier it wishes Exh 37 p19

The transit time from the Gulf to Japan all water is slightly longer

than the minibridge transit time from the Gulf to Japan It is approximately

one week quicker by mini landbridge Tr 6 29 82 p

174

Tr 6 29 82 pages 226 227 228 229 show the stipulations entered

into herein covering some figures and statistics

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

IP s

theory in this case is that IP pays for minibridge transportation

in U S dollars and that the money paid by the ocean carrier to the railroad

is solely in dollars and doesn t involve a

currency exchange that since

there is no foreign currency exchange on the rail division it is improper

to apply the currency exchange to the rail division Tr 6 28 82 pp 46

47 IP asserts that no transportation considerations justify imposition of

the surcharge on the inland portion of the rates and that the ineluctable

conclusion emerges that the assessment of the CAP on the inland portion

of the carriers intermodal rates both subjects the intermodal cargo to undue

and unreasonable prejudice and disadvantage in violation of section 16

and is unjustly discriminatory between shippers in violation of section 17

IP opening brief p

36 IP feels it is entitled to a refund of the difference

between the CAP paid by IP for intermodal transportation and the CAP

paid by its competitors shipping directly from the West Coast to Japan

Exh No 20 p10

IP contends while it is possible to analyze the section 16 violations

by the respondent carriers in this instance in terms of the classical triangular

case involving the carrier a preferred shipper and a prejudiced shipper

which IP says was described in North Atlantic Mediterranean Freight Con

ference Rates on Household Goods Docket No 6649 11 F M C 202

1967of disparity in transportation charges the assessment of the currency

adjustment factor of which IP complains because it applies across the

board and is not dependent on the particular commodity IP ships falls

most plainly within the criteria stated by the Commission in International

Trade Development Inc v Sentinel Line Anchor Shipping Corp

Docket No 78 28 22 FMC 231 1979 that a competitive relationship

is not required when the facts reveal a clear comparative disadvantage

or other type of special injury to the complaining shipper or locality

26 EM C
36 FEDERAL MARITIME COMMISSION

which 1 goes beyond the simple payment of a higher rate and 2

cannot reasonably be justified on the basis of traditional transportation

factors IP opening brief p

40

IP says it and other shippers ofintermodal cargo suffer a clear compara

tive disadvantage which goes beyond the simple payment of a higher rate

and is completely without justification on the basis of traditional transpor

tation factors IP must pay a

surcharge for the carriers currency conversion

costs which the carriers incur only with respect to the ocean portion

of their rates based on the portion of the rate allocated to inland transpor

tation in addition to the portion of the rate allocable to the ocean carriage

That says IP is a clear comparative disadvantage imposed on intermodal

cargo which is not imposed on all water cargo According to IP the assess

ment of the CAP on the inland portion of the carriers intermodal rates

violates section 16

IP asserts the violation of section 16 found by the Commission in Viola

tions of Sections 14 Fourth 16 First and 17 in the Nonassessment of

Fuel Surcharges Docket No 71 17 15 F MC 92 1972 is closely analo

gous to the one at bar IP opening brief p

43 And says IP the

violation of section 16 found by the Commission in Nonassessment of

Fuel Surcharges is very nearly amirror image of the situation now presented

to the Commission Ibid p45 In their reply the seven 7 respondents

say IP labels the Nonassessment of Fuel Surcharges case as very nearly

a mirror image of IP s complaint when the complaint is in fact the

exclct opposite of that case That case has no similarity to the position

urged by IP but rather is the reverse of that position 7 respondents

reply brief p

142 The 8th respondent OOCL Seapac Service asserts

the complainant s reference to Nonassessment of Fuel Surcharges is

unsupportive of IP s position but the facts are inapposite to the instant

case reply brief p103

IP says further the exaction of a

currency adjustment factor based on

the inland portion of an intermodal rate to compensate for currency conver

sion costs incurred only with respect to the water portion of the rate

is plainly an unjust discrimination between shippers utilizing the carrier s

intermodal service and those utilizing its all water service is a violation

of section 17 IP opening brief p

49

In sum says IP the respondent carriers assessment of a

currency charge

on the inland portion of its intermodal rate as well as on the water portion

when the carrier has no currency costs on the inland portion of its rates

is a patent failure to administer its surcharge fairly and impartially and

creates a clear situation of undue prejudice to intermodal cargo vis a

vis all water cargo in violation of section 16 opening brief p

48

The 7 respondents reply that IF s claim is defective for each of two

separate reasons First IP cannot be compared with Pacific Coast shippers

because there is no common leg between the MLB and all water movements

so the traffic does not in any way move over the same line Second

26 F M
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 37

SERVICES S A ET AL

even if there were a common leg between these movements it would

not be sufficient to state a claim under section 17 because between

the same points means the same points of origin and destination reply

brief p154 The 7

respondents further say IP has failed to prove it

has suffered any special injury which goes beyond the simple payment

of a higher rate that IP has not lost any sales as a result of the PWC

CAP Ibid p

143

Witness T A Przedpelski Manager International Distribution Operations

for International Paper Company whose direct testimony is Exhibit No

17 on cross examination was asked Tr 628 82 p20 is the PWC

a defendant in this case He replied No Then on page 21 Tr

628 82 stated being a member of the PWC was not the ingredient

involved it was whoever assessed the charge and I believe it was exclu

sively by the PWC members as far as I know

The initial step was to approach the Conference itself because the

Conference is the machinery to which you speak to the various members

Tr 21 The approach had to do with an attempt to prevent continuation

of the situation as it then existed The Conference failed to respond favor

ably to that leaving the matters apparently in the hands of the individual

members and not taking any Conference action So when lodged the com

plaint was aimed at those parties who were assessing the charge rather

than the conference itself Tr 6 28 82 p

22

IP in its dealings with the Conference and the carriers discussed the

fact that the level of the CAP was too high but IP did not bring any

legal action on that subject Ibid p

39

Respondent Yamashita Shinnihon Steamship Co Ltd provides both all

water and intermodal service to Japan as a PWC member The all water

service is provided under the PWC Local and Overland Tariff Exh 36

p

4 Witness Hirano testified that if a PWC MLB rate or charge is

to be compared with anything it should be compared with a a Gulf

or Atlantic all water rate or charge or b an independent carrier MLB

rate or charge Ibid p6

Witness Hirano testified the Japanese yen is a widely used currency

in the PWC trade to Japan Some debts are payable in yen long term

such as shipbuilding costs equipment leases crews and stevedores wages

payable under labor contracts etc and short term such as administrative

salaries agents commissions supplies repair and maintenance of vessels

etc Ibid p

7

Further there are yen expenses directly related to the rail segment of

the MLB movement For example containers owned by some carriers were

manufactured in Japan and are financed in yen Rental payments for some

of leased containers are also in yen So a carrier pays in yen the capital

or lease cost of many of its containers and this includes payment for

the periods when the containers are used in the rail movement Ibid
38 FEDERAL MARITIME COMMISSION

Witness Dr Nadel testified steamship companies operating in the foreign

trade of the United States have financial expenses and commitments and

therefore revenue needs in many foreign currencies Exh 35 p

13

The sharp and uncertain changes in the value of the U S dollar measured

against the currencies of other major trading countries has created a risk

of significant economic loss to carriers engaged in the foreign commerce

of the United States The depreciation of the U S dollar vis a vis the

Japanese yen has at times been particularly severe in recent years The

problem for the carriers arises because the dollar value of revenues is

fixed in the tariff but the yen value is not Carrier dollar revenues become

increasingly insufficient to meet yen commitments expenses and needs

As the dollar depreciates relative to the yen the need arises for carriers

to increase revenues Ibid p

14

For example a carrier with a base freight revenue of 100 000 has

determined that for a variety of business reasons has a need for 10

million yen At an exchange rate of say 275 yen to the dollar this

yen revenue need equates to 10000 000 275 36 364 So long as

the exchange rate does not change 36 364 of the carrier s earnings converts

to 10 million yen The remaining 63 636 of the earnings stay in dollars

But if the exchange rate subsequently falls to say 230 yen to the dollar

the carrier s 36 364 earnings convert to only 36 364 x 230 8 364 million

yen Under these circumstances the carrier would be revenue deficient

by approximately 1 636 million yen due to the depreciation of the dollar

Ibid p15

To make the carrier s revenue whole in terms of yen a currency

adjustment factor is required Ibid p

16

The PWC MLB rates are far more closely related to FEC rates than

to PWC local rates Ibid p57

IP s impHcit theory that MLB is local service plus a train ride is

simply incorrect Ibid p

60

If MLB rates were cost based the MLB rates would exceed the local

rates for corresponding commodities by more than they do now Ibid

p

83

IP makes a simplistic and unrealistic evaluation of the economic dif

ference between local or MLB service IP has focused only on the rail

division and has ignored other economic components of MLB Ibid p

87

The carriers do not know the precise amount of yen revenue losses

caused by dollar depreciation or the impact of these losses in their revenue

needs until after freight charges are paid by shippers and financial commit

ments are met by the carriers Ibid p17

The CAP could just as well take the form of a percentage general

rate increase GRI as it could a surcharge Ibid p

34

Witness Day testified separating out the rail division when the bill of

lading is prepared is a physical impossibility At the time the bill of

I

JlUf
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 39

SERVICES S A ET AL

lading is prepared and the freight rate including surcharge is calculated

a PWC carrier does not know how much the rail division is so that

it can be substituted for the through rate freight The ICC has deregulated

the Trailer on Flatcar and Container on Flatcar rates which constitute the

rail division of the MLB rate This deregulation included removal of

the requirement that the rail carriers publish or file their rates The FMC

has a similar exemption for ocean tariffs and the PWC no longer publishes

the rail division in PWC tariffs Exh 37 p16

There is no sound rationale to justify treating rail divisions differently

from any of the myriad other dollar expenses incurred by the ocean carrier

Ibid p

17

IP is not a PWC Dual Rate Contract signator Therefore IP is not

obligated to ship on PWC member vessels under any PWC tariff but

rather is free to utilize any carrier it wishes Ibid p

19

The basic purpose behind surcharges is to reimburse the carriers for

additional costs temporarily incurred by the performance of their services

and which costs the carriers are not recovering through their basic freight

rates Surcharge on Cargo to Manila Docket No 1155 8 EM C 395

399 1965 As the United States Shipping Board Bureau said in Intercoastal

Rate of Nelson SS Co Docket No 139 1 U S S B B 326 336 1934

the interest of the public demands that the carrier shall receive revenues

which will enable them to keep their fleets in good repair and maintain

efficient service That is just as true today as it was in 1934

It is true that the Commission has been and is concerned about the

development of methods of transportation to serve shipping needs IP says

that the Commission s references to its desire to foster intermodal transpor

tation are legion opening brief p

54 and that the Commission said

in Disposition of Container Marine Lines Through Intermodal Container

Freight Tariffs Nos 1 and 2 FMC Nos 10 and 11 Docket No 68

8 11 F M C 476 489 1968 Ibid p

55 the Federal Maritime

Commission can and must play an important role in encouraging improved

services for shippers In that same paragraph the Commission said

the Commission does not intend to create or permit impediments to the

improvement of shipping services Enlightened regulation is the key to

effective regulation

In the instant case IP calls attention to the case of Harborlite Corp

v ICC 613 F 2d 1088 1979 and the opinion of Circuit Judge Tamm

upon review of a decision of the ICC dismissing a complaint that alleged

unlawful rate discrimination in violation of section 3 1 of the Interstate

Commerce Act 49 U S C A 10741 b The case was remanded for further

proceedings consistent with the opinion

Circuit Judge Tamm wrote in the Harborlite case p

1091 In the

leading case of Chicago and Eastern Illinois Railroad v United States

384 F Supp 298 N D Ill 1974 three Judge court per curiam aff d

memo 421 U S 956 959 Ct 1943 44 L Ed 2d 445 1975 the court

26 EM C
40 FEDERAL MARITIME COMMISSION

stated the four elements of a section 3 1 action and the burden of proof

on these elements to support a finding of a violation of section 3 1

it must be shown 1 that there is a disparity in rates 2 that the complain

ing party is competitively injured actually or potentially 3 that the carriers

are the common source of both the allegedly prejudicial and preferential

treatment and 4 that the disparity in rates is not justified by transportation

conditions The complaining party has the burden of proving the presence

of the first three factors and the carriers have the burden of justifying

the disparity if possible in connection with the fourth factor

To connect IP cites North Atlantic Mediterranean Freight Conferenc

Rates on Household Goods Docket No 6r49 11 F M C 202 209 1967

that it is well settled that the provisions of the Shipping Act which confer

upon the Commission authority over the rates and practices of water carriers

and prescribe its mode of exercise closely parallel those of the Interstate

Commerce Act establishing relations of the Interstate Commerce Commis

sion to carriers by rail and where dissimilarities in the respective modes

of transportation do not warrant a different construction the Shipping Act

should be construed in the light of the similar provision of the Commerce

Act Section 16 of the Shipping Act is substantially identical with section

3 1 of the Interstate Commerce Act

Containerization has been one of the developments in the maritime field

that has moved rapidly and changed the face of the industry in recent

years Intermodal service similarly has been greeted as part of the present

and future service in transportation The Federal Maritime Commission

and the various conferences are interested in such developments However

as the Commission said in Agreement No 17 34Application of the Far

East Conference for Intermodal Authority Docket No 7453 21 F M C

750 753 1979 Overall this evidence shows that conferences generally

have not acted quickly to develop intermodal services after approval of

their intermodal amendments and the majority ofthose which did implement

intermodal service did so only after an individual member pioneered in

the field The record here therefore tends to run counter to previous

Commission findings regarding the expected public benefit of promoting

intermodal development under conference rate authority

In this case the CAP is under PWC authority The conference has

developed a formula for the CAP No one brought the PWC into this

proceeding as arespondent nor did the PWC seek intervention Since

the tariff is on file the tariff is approved and lawful No one has questioned

the operation of the tariff Nevertheless how can one check on the applica

tion of the formula without the information supplied by the carriers in

the conference only to the conference and not even to the individual mem

bers of the conference

It is patently clear that intermodal service is distinctive a sought after

service in a new still developing phase of change in transportation Users

such as IP benefit from such service and to sanction no CAP on the

26 F M C
INTERNATIONAL PAPER COMPANY V SEATRAIN PACIFIC 41

SERVICES S A ET AL

services land leg and to require a rate for mini Iandbridge from the Gulf

to Japan to be the same as the all water route from the West Coast

to Japan would be an irony not encompassed by any ICC action or common

sense

Undoubtedly the issue of foreign currency revenue needs costs and

many other factors are prevalent in the maritime picture today more so

than ever before Is the PWC CAF the answer

Upon consideration of the above and the record herein the Presiding

Administrative Law Judge finds and concludes that the respondents have

not violated section 16 First 4

or section 175 of the Shipping Act 1916

as amended

Wherefore for the reasons given above and the record herein IP s re

quests are denied

It is ordered

This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

Section 16 First To make or give any undue or unreasonable preference or advantage to any particular

person locality ordescription of traffic in any respect whatsoever or to subject any particular person local

ity or description of traffic to any undue or unreasonable prejudice ordisadvantage inany respect whatsoever

s

Section 15 That no common carrier by water in foreign commerce shall demand charge or collect any

rate fare or charge which is unjustly discriminatory between shippers or ports or unjustly prejudicial to

exporters of the United States as compared with their foreign competitors

26 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1021

APPLICATION OF KOREA SHIPPING CORPORATION FOR THE

BENEFIT OF SUNKYONG MAGNETIC LTD

SPECIAL DOCKET NO 1022

APPLICATION OF HANJIN CONTAINER LINES LTD FOR THE

BENEFIT OF LATEX GLOVE CO INC

SPECIAL DOCKET NO 1023

APPLICATION OF AMERICAN PRESIDENT LINES LTD FOR THE

BENEFIT OF LUX CHEMICAL CORP

SPECIAL DOCKET NO 1024

APPLICATION OF YAMASHITA SHINNIHON STEAMSHIP CO LTD

FOR THE BENEFIT OF MELCO SALES SINGAPORE PTE LTD

In special docket applications the Commission has discretion whether to reguire the identifica

tion of every affected shipment for which refund or waiver of freight charges is sought

Under the present circumstances caused by a single error and involving a very large number

of shipments a detailed description of each shipment would be unnecessarily burdensome

The Order of Discontinuance is therefore reversed and the relief sought is granted

Ted F Fordney for the applicants

REPORT AND ORDER

August 23 1983

BY THE COMMISSION Alan Green Jr Chairman Thomas F Moakley

Vice Chairman James Joseph Carey James V Day and Robert

Setrakian Commissioners

These four proceedings are before the Commission upon its determination

to review the April 20 1983 discontinuance by Administrative Law Judge

William Beasley Harris for failure to prosecute

Special docket applications were filed on March 9 1983 by Ted F

Fordney a registered practitioner with the Pacific Coast Tariff Bureau

PCTB on behalf of the above captioned carriers The carriers alIege that

on October 1 1982 approximately 450 tariff amendments to FMC tariffs

were inadvertently delivered to the ICC The error was discovered on

42 26 F M C
APPLICATION OF KOREA SHIPPING CORPORATION ET AL 43

FOR THE BENEFIT OF SUNKYONG MAGNETIC LTD ET AL

October 14 1982 whereupon PCTB filed the intended rates However

for three weeks shipments were rated in accordance with amendments

erroneously believed to be on file with the Commission

The instant applications consist of documents describing a single affected

shipment for each carrier Each application requests that

ifthe waiver of freight charges is approved it is intended that

the required notice be published in a general way without noting

anyone specific shipment or tariff item and then to be filed

as a supplement to the effected sic tariffs instead of within

each tariff item involved

This general approach is requested to lessen the burden to

the applicant to PCTB and also to the FMC in its workload

directed towards the application and the other applications citing

this unfortunate mishap

By letter dated March 23 1983 the Presiding Officer advised the carriers

that they failed to conform with the form prescribed for special docket

applications at 46 C F R 502 92 a 5 He noted that each application

included only one bill of lading for one shipment and appeared to suggest

that this rendered the applications defective He requested an amended

application or individual applications within 10 days of the letter In a

March 29 1983 telephone conversation with Mr Fordney the Presiding

Officer advised him that possibly the wrong applicant had gone forward

and that he might submit a brief in support of his position Finally on

April 20 1983 having received no response the Presiding Officer discon

tinued the proceedings for failure to prosecute The Commission deter

mined to review that decision sua sponte

DISCUSSION

It is unclear whether the Presiding Officer s action stemmed from the

carriers failure to address each individual shipment the failure to brief

the Presiding Officer on Mr Fordney s standing to file the applications

or both As a

registered practitioner before the Commission Mr Fordney

could file on behalf of the carriers Thus any misgivings by the Presiding

Officer on the latter issue were unfounded

On the former issue the Commission has discretion whether to require

or waive the identification of specific shipments In Special Docket No

1026 Application of F MC Agreement No 10107 for the Benefit of Atar

Inc and Others also served on April 20 1983 the administrative law

judge granted a waiver of freight charges where the applicant Agreement

identified at least 10 affected shipments by a

single member line and

requested relief for other shipments of the commodity which may have

The Presiding Officer s letter slated

It is my judgment that your proposed disposition is not in keeping with the handling of special

docket applications Since you know or should know all affected you should provide for each the

information required by the form referred above

26 EM C
44 FEDERAL MARITIME COMMISSION

been carried by unspecified other member lines It was not deemed nec

essary that the applicant provide detailed information on every affected

shipment with its application

In the instant proceedings there are very likely a large number of ship

ments affected by the misfiled tariff amendments To require a detailed

description of each shipment in the applications would be extraordinarily

burdensome under these circumstances and would serve little purpose The

error which caused all the misratings has been fully described Moreover

when special docket relief is afforded carriers are required to publish

notice of the corrected tariffs for the information of any and all affected

shippers during the relevant period

The Commission has determined therefore to reverse the Presiding Offi

cer s discontinuance of these proceedings and to grant the requested relief

The Commission is satisfied that it received prior to the filing of these

applications the effective tariff amendments setting forth the rates on which

any waivers would be based See 46 C F R 502 92 a 2

THEREFORE IT IS ORDERED That the Order of Discontinuance in

these proceedings is reversed and

IT IS FURTHER ORDERED That Korea Shipping Corporation Hanjin

Container Lines Ltd American President Lines Ltd and Yamashita

Shinnihon Steamship Co Ltd are granted permission to refund andor

waive freight charges as requested in their special docket applications

on the condition that each carrier publish the applicable portion of the

following as a supplement to its tariff

Korea Shipping Corporation Tariff FMC No 19

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1021 that subject

to all applicable regulations terms and conditions of this tariff

a The currency surcharge of 3 and the bunker surcharge of

2 00 per revenue ton published on 50th Revised Page 5 are

effective October 1 1982 and continuing through October 18

1982

b The matter contained on 66th Revised Page 66A 66th Re

vised Page 72 and 34th Revised Page 74B is effective October

1 1982 and continuing through October 5 1982

c The matter contained on 72nd Revised Page 52 75th Revised

Page 54 34th Revised Page 64 and 68th Revised Page 74 is

effective October 1 1982 and continuing through October 7 1982

d The matter contained on 58th Revised Page 50 51st Revised

Page 51 A 32nd Revised Page 66B and 57th Revised Page

77 A is effective October I 1982 and continuing through October

12 1982

e The matter contained on 54th Revised Page 65 and 6th Revised

Page 76A is effective October 1 1982 and continuing through

October 14 1982

26 F M C
APPLICATION OF KOREA SHIPPING CORPORATION ET AL 45

FOR THE BENEFIT OF SUNKYONG MAGNETIC LTD ET AL

f The matter contained on the pages listed below is effective

October I 1982 and continuing through October 18 1982 except

as otherwise noted

21st RIP I

36th RIP 52 E

35th RIP 52 F

20th RIP 57 B

58th RIP 60

45th RIP 62 A

44th RIP 64A

2nd RIP 64C except

special rate to Nagoya

of 1600 per 20

container in Item 5240

effective 1118 82

83rd RIP 72 A

52nd RIP 72 B

55th RIP 74A

65th RIP 76

2nd RIP 76B

17th RIP 77 B 1

17th RIP 77C 1

12th RIP 77C 2

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time and of the freight charges on any shipments of the com

modities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

Korea Shipping Corporation TariffFMC No 20

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1021 that subject

to all applicable regulations terms and conditions of this tariff

a The matter contained on 8th Revised Page 83 A 32nd Revised

Page 85 A 48th Revised Page 91 A and 31st Revised Page 93

A is effective October 1 1982 and continuing through October

3 1982

b The matter contained on 41st Revised Page 95 and 29th

Revised Page 99 is effective October 1 1982 and continuing

through October 18 1982

This Notice is effective for purposes of refund or waiver of freight

charges on any shipments of the commodities contained on the

above referenced pages which may have been shipped during

the specified period of time

Korea Shipping Corporation TariffFMC No 22

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1021 that subject

to all applicable regulations terms and conditions of this tariff

a The currency surcharge of 3 and the bunker surcharge of

20 00 per revenue ton published on 29th Revised Page 8 are

effective October I 1982 and continuing through October 27

1982

b The matter contained on lIth Revised Page 167 except for

the special rate applicable to Japan in Item 646la which is

effective October 8 1982 and 14th Revised Page 316B is effec

tive October I 1982 and continuing through October 14 1982

c The matter contained on 10th Revised Page 182 is effective

October 1 1982 and continuing through October 18 1982

26 F M C
46 FEDERAL MARITIME COMMISSION

This Notice is effective for purposes or waiver of bunker and

currency surcharges assessed during the specified period of time

and of freight charges on any shipments of the commodities de

scribed on the above referenced pages except as noted which

may have been shipped during the specified period of time

Korea Shipping Corporation TariffFMC No 23

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1021 that subject

to all applicable regulations terms and conditions of this tariff

a The currency surcharge of 3 and the bunker surcharges

of 16 00 per revenue ton published on 20th Revised Page 7

are effective October 1 1982 and continuing through October

18 1982

b The matter contained on 3rd Revised Page 79 is effective

October 1 1982 and continuing through October 18 1982

This Notice is effective for purposes of refund or waiver of sur

charges assessed during the specified period of time and of freight

charges on any shipments of the commodities contained on the

above referenced pages which may have been shipped during

the specified period of time

Korea Shipping Corporation TariffFMC No 25

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1021 that subject

to all applicable regulations terms and conditions of this tariff

a The matter contained on 56th Revised Page 56A 4th Revised

Page S6A 2 and 11 th Revised Page 560 is effective October

1 1982 and continuing through October 3 1982

b The matter contained on 22nd Revised Page 56B is effective

October 1 1982 and continuing through October 12 1982

This Notice is effective for purposes ofrefund or waiver offreight

charges on any shipments of the commodities described on the

above referenced pages which may have been shipped during

the specified period of time

Korta Shippinq Corporation TariffFMC No 27

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1021 that subject

to all applicable regulations terms and conditions of this tariff

a The currency surcharge of 4 published on 3rd Revised Page

7 is effective October 1 1982 and continuing through October

18 1982

b The bunker surcharge of 10 00 per revenue ton published

on 5th Revised Page 8 is effective October 1 1982 and continuing

through October 18 1982

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time

26 F M C
APPLICATION OF KOREA SHIPPING CORPORATION ET AL 47

FOR THE BENEFIT OF SUNKYONG MAGNETIC LTD ET AL

Hanjin Container Lines Ltd TariffFMC No 2

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1022 that subject

to all applicable regulations tenns and conditions of this tariff

a The bunker surcharges of 12 00 per revenue ton 400 per

20 container and 600 per 40 container published on 33rd Re

vised Page 8 are effective October 1 1982 and continuing through

October 18 1982

b The matter contained on 15th Revised Page 157 is effective

October 1 1982 and continuing through October 18 1982

This Notice is effective for purposes of refund or waiver of sur

charges assessed during the specified period of time and of freight

charges on any shipments of the commodities described on the

above referenced pages which may have been shipped during

the specified period oftime

Hanjin Container Lines Ltd Tariff FMC No 4

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1022 that subject

to all applicable regulations tenns and conditions of this tariff

a The currency surcharge of 4 published on 40th Revised

Page 8 is effective October 1 1982 and continuing through Octo

ber 19 1982 and the bunker surcharges of 1000 per revenue

ton 325 per 20 container and 400 per 40 container published

on 40th Revised Page 8 are effective October 10 1982 and

continuing through October 19 1982

b The matter contained on the pages listed below is effective

October 1 1982 and continuing through October 20 1982 except

as otherwise noted

Supplement No 7 2nd RIP 218 2nd RIP 238

2nd RIP 199 2nd RIP 219 2nd RIP 239

2nd RIP 20 I 2nd RIP 220 2nd RIP 240

2nd RIP 202 2nd RIP 221 4th RIP 241

2nd RIP 203 2nd RIP 222 10th RIP 242 except as

RIP RlPm oo

2nd RIP 205 2nd RIP 225 Japan in Item 33440

2nd RIP 206 2nd RIP 226 10

RIP RlPm RlPW

RlPD RlPm RIP

2nd RIP 209 2nd RIP 229 1 st RIP 245

2nd RIP 210 2nd RIP 230 8th RIP 245 A

2nd RIP 211 2nd RIP 231 2nd RIP 248

2nd RIP 212 2nd RIP 232 5th RIP 249

3rd RIP 213 4th RIP 233 4th RIP 25 I

7th RIP 214 except as 2nd RIP 234 3rd RIP 252

noted in Item 1320 00 2nd RIP 235 3rd RIP 253

2nd RIP 215 2nd RIP 236 2nd RIP 254

2nd RIP 217 2nd RIP 237 3rd RIP 255 A

26 F M C
48 FEDERAL MARITIME COMMISSION

I

10th RIP 256 3rdRIP 279

3rd RIP 257 6th RIP 280

1st RIP 258 1st RIP 281

3rd RIP 259 1st RIP 282

2nd RIP 260 5th RIP 283

1 st RIP 261 3rd RIP 284

5th RIP 262 2nd RIP 285

8tn RIP 263 4th RIP 286

5th RIP 264 except for 2nd RIP 287

46 per container rates 2nd RIP 288

for StethoScopes 2nd RIP 289

applicable from Japan in 2nd RIP 290

Item 472020 3rd RIP 291 A

2nd RIP 265 2nd RIP 292

6th RIP 266 2nd RIP 293

2nd RIP 267 2nd RIP 294

2nd RIP 268 2nd RIP 295

2nd RIP 269 2nd RIP 296

2nd RIP 270 6th RIP 297

3rd RIP 271 1st RIP 298

4th RIP 272 2nd RIP 299

3rd RIP 273 6th RIP 300

4th RIP 275 2nd RIP 301

3rd RIP 276 1 st RIP 02

2nd RIP 277 3rd RIP 303

2nd RIP 278 7th RIP 304

c The matter contained on the pages listed is effective October

1 1982 and continuing through October 26 1982 except as other

wise noted

6th RIP 305

8th RIP 306

1st RIP 307

1st RIP 308

1st RIP 309

1st RIP 310

3rdRIP 311

8th RJP312

7th RIP 313

2nd RIP 314

2nd RIP 315

8th RIP 316

2nd RIP 317

4th RIP 318

13th RIP 319

2nd RIP 320

5th RIP 321

2nd RIP 323

2nd RIP 324

3rdRIP 325

3rd RIP 326

2nd RIP 327

2nd RIP 328

2nd RIP 329

2nd RIP 330

9th RIP 246 Except as noted in Item 3610 0

8th RIP 246A Except as noted in Item 3612and Item 3615

0

18th RIP 247 Except as noted in Item 3650 0 Item 3650

07 and Item 3655 0

16th RIP 250 Except as noted in Item 4110 0

8th RIP 255 Except the addition of New Orleans for Special

Rate in Item 4360 00is effective October 8 1982

10th RIP 274

23rd RIP 291 Except as noted in Item No 5573 00

This Notice is effective for purposes ofrefund or waiver of cur

rency and bunker surcharges assessed during the specified period

oftime and of freight charges on any shipments of the commod

ities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

26 F M C
APPLICATION OF KOREA SHIPPING CORPORATION ET AL 49

FOR THE BENEFIT OF SUNKYONG MAGNETIC LTD ET AL

Hanjin Container Line Ltd TariffFMC No 5

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1022 that subject

to all applicable regulations terms and conditions of this tariff

a The currency surcharge of 4 published on 39th Revised

Page 7 is effective October 1 1982 and continuing through Octo

ber 19 1982 and the bunker surcharges of 10 00 per revenue

ton 325 per 20 container and 400 per 40 container published

on 39th Revised Page 7 are effective October 10 1982 and

continuing through October 18 1982

b The matter contained on the pages listed below is effective

October I 1982 and continuing through October 19 1982 except

as otherwise noted

Supplement No 7

2nd RIP 188

2nd RIP 190

2nd RIP 191

2nd RIP 192

3rd RIP 193

2nd RIP 194

2nd RIP 195

2nd RIP 196

2nd RIP 197

2nd RIP 198

2nd RIP 199

2nd RIP 200

6th RIP 20 I

4th RIP 202

12th RIP 203

2nd RIP 205

8th RIP 207

3rd RIP 208

3rd RIP 210

5th RIP 211

5th RIP 212

2nd RIP 213

2nd RIP 214

3rd RIP 215

3rd RIP 216

2nd RIP 217

4th RIP 218

2nd RIP 219

2nd RIP 220

2nd RIP 221

2nd RIP 222

4th RIP 224

2nd RIP 226

4th RIP 227

18th RIP 228

7th RIP 228 A

10th RIP 229

19th RIP 231

6th RIP 232

4th RIP 233

20th RIP 234

9th RIP 235

5th RIP 236

3rd RIP 237

3rd RIP 238

3rd RIP 239

5th RIP 240

4th RIP 243

I st RIP 244

5th RIP 245

2nd RIP 246

I st RIP 247

5th RIP 248

7th RIP 249

3rd RIP 250

2nd RIP 251

2nd RIP 252

10th RIP 253

2nd RIP 254

8th RIP 255

5th RIP 256

9th RIP 257

6th RIP 258

5th RIP 259

4th RIP 260

2nd RIP 261

I st RIP 262

I st RIP 262 A

3rd RIP 263

7th RIP 264

2nd RIP 265

4th RIP 266

2nd RIP 267

3rd RIP 268

9th RIP 269

I st RIP 270

1st RIP 271

17th RIP 272

3rd RIP 274

11th RIP 275

2nd RIP 276

4th RIP 277

2nd RIP 278

3rd RIP 279

2nd RIP 280

23rd RIP 281

2nd RIP 282

3rd RIP 283

2nd RIP 284

2nd RIP 285

2nd RIP 286

I st RIP 288

2nd RIP 289

9th RIP 290

2nd RIP 291

I st RIP 292

2nd RIP 293

9th RIP 294

8th RIP 295

I st RIP 297

I st RIP 298

I st RIP 299

1st RIP 300

6th RIP 30 I

26 F M C
50

2nd RIP 302

12th RIP 303 except as

noted in Item 6200 0

5th RIP 304

3rd RIP 306

2nd RIP 307

4th RIP 308

4th RIP 309

5th RIP 310

5th RIP 312

3rd RIP 313

2nd RIP 315

2nd RIP 316

6th RIP 317

FEDERAL MARITIME COMMISSION

5th RIP 318

4th RIP 319

7th RIP 320

3rd RIP 321

2nd RIP 322

5th RIP 323

2nd RIP 324

3rd RIP 325

2nd RIP 326

2nd RIP 327

2nd RIP 328

1st RIP 329

5th RIP 330

7th RIP 331

3rd RIP 332

3rd RIP 333

8th RIP 334

4th RIP 335

4th RIP 336

7th RIP 337

2nd RIP 338

2nd RIP 339

2nd RIP 340

2nd RIP 341

2nd RIP 342

9th RIP 344

c The matter contained on the pages listed below is effective

October 1 1982 and continuing through October 24 1982 except

as otherwise noted

8th RIP 206

15th RIP 209

8th RIP 225

9th RIP 227 A

18th RIP 230

13th RIP 241 Except the Special rate of 1590 per 40 container

for Wooden Kitchen and Vanity Cabinets from Korea to Los

Angeles and Long Beach only published in Item 4360 14 which

is effective October 4 1982

24th RIP 242 Except the 2133 per 40 container rate applicable

from Japan published in Item 4380 05 which is effective October

4 1982

14th RIP 287 Except the 2150 per 40 container rate applicable

from Korea in Item 5820 12 which is effective October 4 1982

14th RIP 296

10th RIP 305 Except the 2375 per 40 container rate applicable

from Korea in Item 6240 00 which is effective October 4 1982

12th RIP 311 Except the 2125 per 40 container Special rate

for 2 or more containers per vessel in Item 6540 00 which is

effective October 4 1982

16th RIP 343

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time and of the freight charges on any shipments of the com

modities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

26 F M C
APPLICATION OF KOREA SHIPPING CORPORATION ET AL 51

FOR THE BENEFIT OF SUNKYONG MAGNETIC LTD ET AL

Hanjin Container Line Ltd TariffFMC No 6

Notice is hereby given as required by the decision of the Federa

Maritime Commission in Special Docket No 022 that subject

to all applicable regulations terms and conditions of this tariff

a The currency surcharge of 4 and the bunker surcharges

of I2 00 per revenue ton 400 per 20 container and 600

per 40 container applicable from Hong Kong and Taiwan pub

lished on 41st Revised Page 7 are effective October 1 1982

and continuing through October 18 1982 and the bunker sur

charges of 10 00 per revenue ton 325 per 20 container and

400 per 40 container applicable from Korea and Japan pub

lished on 41 st Revised Page 7 are effective October 10 1982

and continuing through October 18 1982

b The matter contained on 163rd Revised Page 1 is effective

October 1 1982 and continuing through October 5 1982

c The matter contained on the pages listed below is effective

October 1 1982 and continuing through October 18 1982

Supplement No 9 4th RIP 92 5th RIP 107

3rd RIP 78 6th RIP 93 I st RIP 108

3rd RIP 80 3rd RIP 94 I st RIP 109

4th RIP 82 3rd RIP 96 IIth RIP III

6th RIP 83 3rd RIP 97 12th RIP 113

4th RIP 84 3rd RIP 98 17th RIP 114

7th RIP 85 4th RIP 100 7th RIP 115

3rd RIP 86 lIth RIP 101 1st RIP 116

24th RIP 87 10th RIP 102 1 st RIP 117

7th RIP 87 A 4th RIP 103 1st RIP 118

3rd RIP 88 6th RIP 104 1st RIP 120 A

8th RIP 89 7th RIP 105 8th RIP 121

12th RIP 91 lIth RIP 106 3rd RIP 122

d The matter contained on the pages listed below is effective

October 1 1982 and continuing through October 24 1982 except

as otherwise noted

14th RIP 79

21st RIP 81 Except for the 2600 per 40 container rate applicable

from Korea to Chicago and the 2650 per 40 container rate

applicable from Korea to Dallas in Item 0100 00 which are effec

tive October 4 1982

10th RIP 90

15th RIP 95

15th RIP 99

16th RIP 10

6th RIP 2

4th RIP 9

20th RIP 20

26 F M C
j

J

1

52 FEDERAL MARITIME COMMISSION

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time and of the freight charges on any shipments of the com

modities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

Hanjin Container Line Ltd TariffFMC No 9

Notice is hereby given as required by the decision ofthe Federal

Maritime Commission in Special Docket No 1022 that subject

to all applicable regulations terms and conditions of this tariff

a The matter contained on 81st Revised Page Iis effective

October 1 1982 and continuing through October S 1982

b The currency surcharge of 3 and the bunker surcharges

of 18 00 per tOOO kilos or 16 50 per 1 cubic meter published

on 31 st Revised Page 8 are effective October 1 1982 and continu

ing through October 18 1982

c The matter contained on 8th Revised Page 84A l is effective

October 1 1982 and continuing through October 7 1982

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time and of the freight charges on any shipments of the com

modities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

Hanjin Container Line Ltd Tariff FMC No 10

Notice is hereby given as required by the decision ofthe Federal

Maritime Commission in Special Docket No 1022 that subject

to all applicable regulations terms and conditions of this tariff

a The currency surcharge of 3 and the bunker surcharge of

13 00 per revenue ton published on 31st Revised Page 5 are

effective October 1 1982 and continuing through October 18

1982

b The matter contained on 24th Revised Page 104 is effective

October 1 1982 and continuing through October 12 1982

c The matter contained on 37th Revised Page 127 is effective

on October 1 1982 and continuing through October 6 1982

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time and of the freight charges on any shipments of the com

modities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

American President Lines Ltd TariffFMC No 124

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1023 that subject

26 F MC
f PMr

APPLICATION OF KOREA SHIPPING CORPORATION ET AL 53

FOR THE BENEFIT OF SUNKYONG MAGNETIC LTD ET AL

to all applicable regulations terms and conditions of American

President Lines Ltd TariffFMC No 80

a The bunker surcharge of 27 50 per revenue ton applicable

from Sri Lanka as published on 66th Revised Page 7 A ofAmer

ican President Lines Ltd TariffFMC No 80 is effective October

1 1982 and continuing through October 18 1982

b This matter contained on 2nd Revised Page 76 A 2 of Amer

ican President Lines Ltd Tariff No 80 is effective October

1 1982 and continuing through October 18 1982

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time and of the freight charges on any shipments of the com

modities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

American President Lines Ltd TariffFMC No 81

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1023 that the bunker

surcharge applicable to Hong Kong Manila and Japan of 2 50

per revenue ton the bunker surcharge applicable in India Pakistan

and Sri Lanka of 2100 per revenue ton and the currency adjust

ment factor applicable to Japan of 3 as published on 55th

Revised Page 7 are effective October 1 1982 and continuing

through October 18 1982 subject to all applicable regulations

terms and conditions of this tariff

This Notice is effective for purposes of refund or waiver of bunker

and currency surcharges assessed during the specified period of

time

American President Lines Ltd TariffFMC No 118

Notice is hereby given as required by the decision of the Federal

Maritime Ccmmission in Special Docket No 1023 that the bunker

surcharge of 161 2 as published on 13th Revised Page 5 is

effective October 1 1982 and continuing through October 17

1982 subject to all applicable regulations terms and conditions

of this tariff

This Notice is effective for purposes of refund or waiver of sur

charges assessed during the specified period of time

American President Lines Ltd TariffFMC No 119

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1023 that subject

to all applicable regulations terms and conditions of this tariff

a The matter contained on 4th Revised Page 3 and 8th Revised

Page 167 except as noted by telex filing of September 27 1982

to Item 5650 is effective October 1 1982 and continuing through

October 18 1982
54 FEDERAL MARITIME COMMISSION

b The matter contained on 9th Revised Page 168 is effective

October 1 1982 and continuing through October 5 1982

This Notice is effective for purposes of refund or waiver of cur

rency and bunker surcharges assessed during the specified period

of time and of the freight charges on any shipments of the com

modities contained on the above referenced pages except as noted

which may have been shipped during the specified period of

time

Yamashita Shinnihon Steamship Company Ltd Tariff FMC No

33

Notice is hereby given as required by the decision ofthe Federal

Maritime Commission in Special Docket No 1024 that subject

to all applicable regulations terms and conditions of this tariff

the matter contained on the pages listed below is effective October

1 1982 and continuing through October 20 1982

7th RIP 2 2nd RIP 38 2nd RIP 51

IIth RIP 5 Original 39 Original 52

27th RIP 25 2nd RIP 40 Original 53

Original 28 2nd RIP 41 4th RIP 54

2nd RIP 29 Original 42 Original 55

Original 30 2nd RIP 43 2n 56

Original 31 3rd RIP 44 O g nal 57

Original 32 Original 45 Ongmal 58

Original 33 Original 46 2n P 59

Original 34 Original 47 O g

nal 60

Original 35 2nd RIP 48 Ongmal 61

2nd RIP 36 Original 49

2nd RIP 37 3rd RIP 50

This Notice is effective for purposes of refund or waiver of the

freight charges on any shipments of the commodities contained

on the above referenced pages which may have been shipped

during the specified period of time

Yamashita Shinnihon Steamship Company Ltd Tariff FMC No

37

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1024 that subject

to all applicable regulations terms and conditions of this tariff

the matter contained on 66th Revised Page 1 1 st Revised Page

4 8th Revised Page 60 and 9th Revised Page 61 is effective

October I 1982 and continuing through October 17 1982

This Notice is effective for purposes of refund or waiver of freight

charges on any shipments of the commodities described on the

above referenced pages which may have been shipped during

the specified period oftime

J C A
APPLICATION OF KOREA SHIPPING CORPORATION ET AL 55

FOR THE BENEFIT OF SUNKYONG MAGNETIC LTD ET AL

Yamashita Shinnihon Steamship Company Ltd Tariff FMC No

40

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1024 that subject

to all applicable regulations terms and conditions of this tariff

the matter contained on 2nd Revised Page 3 and 1 st Revised

Page 530 is effective October I 1982 and continuing through

October 17 1982

This Notice is effective for purposes of refund or waiver offreight

charges on any shipments of the commodities described on the

above referenced pages which may have been shipped during

the specified period of time

and that each carrier shall file with the Secretary within 60 days of the

date of this Order a

copy of the tariffs so amended and

IT IS FURTHER ORDERED That each carrier shall notify the Commis

sion of the actual waiver or refund of charges within five days of said

waiver or refund and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

l ur
FEDERAL MARITIME COMMISSION

DOCKET NO 82 36

46 C F R PART 536

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN

THE FOREIGN COMMERCE OF THE UNITED STATES

REQUIREMENTS FOR FILING CURRENCY ADJUSTMENT FACTORS

REFLECTING CHANGES IN THE EXCHANGE RATE OF TARIFF

CURRENCIES

September 6 1983

Discontinuance ofProceeding

The Commission has detennined to discontinue this pro

ceeding without issuing a final rule

DATE Effective September 13 1983

SUPPLEMENTARY INFORMATION

By notice published in this proceeding 47 F R 31407 31410 July 20

1982 the Federal Maritime Commission proposed to amend its rules to

provide requirements for filing currency adjustment factors reflecting

changes in the exchange rate of tariff currencies Comments were received

from conferences carriers and shippers Upon consideration of these com

ments the Commission has decided to discontinue this proceeding The

Commission will continue to monitor industry practices and shipper com

plaints concerning currency adjustment factors in the foreign trades of the

United States

ACTION

SUMMARY

By the Commission

S FRANCIS C HURNEY

Secretary

J lAr
FEDERAL MARITIME COMMISSION

46 C F R 538 10 DOCKET NO 81 54

PROPOSED RULEMAKING TO ALLOW A THIRD REBUTIABLE

PRESUMPTION UNDER ARTICLE 6 CLAUSE D OF THE

UNIFORM MERCHANT S CONTRACT

September 27 1983

Discontinuance of Proceeding

The Commission has determined to discontinue this pro

ceeding without modifying the Uniform Merchant s Con

tract to allow for the inclusion of an optional provision

raising a third rebuttable presumption that the merchant

paying the freight charges on a given shipment has the

legal right to select the ocean carrier

DATES Effective October 4 1983

SUPPLEMENTARY INFORMATION

The Uniform Merchant s Contract 46 C F R 538 10 implements the

provisions of section 14b of the Shipping Act 1916 which authorizes

the use by carriers or conferences of carriers of a dual rate system that

provides for lower freight rates for merchants who pledge all or a fixed

portion of their shipments to said carriers By Notice of Proposed Rule

making 46 FR 4498 published in the Federal Register on September

9 1981 the Commission instituted this proceeding to allow the optional

inclusion in the Uniform Merchants Contract of a rebuttable presumption

that the merchant paying the freight charges on a given shipment has

the legal right to select the ocean carrier In response to the Notice

comments were received from 18 conferences 7

shippers and an association

representing approximately 400 freight forwarders and customs brokers

Upon review of the comments submitted and reexamination of the rule

proposed the Commission has determined that no regulatory purpose would

be served by promulgating that rule at this time Accordingly the Commis

sion is withdrawing the proposed rule and discontinuing this proceeding

ACTION

SUMMARY

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C 57
FEDERAL MARmME COMMISSION

DOCKET NO 82 34

AGREEMENT NO T 3856

NOTICE

October 7 1983

Notice is given that no exceptions have been filed to the August 29

1983 initial decision in this proceeding and the time within which the

Commission could detennine to review that decision has expired No such

detennination has been made and accordingly that decision has become

administratively final

As set forth in the initial decision a revised copy of Agreement No

T 3856 signed by the parties or their duly authorized representatives shall

be filed with the Commission amending Article 8 to provide for the agree

ment s tennination five years from the date of approval The agreement

will stand approved effective on the date the appropriately modified agree

ment is received by the Commission

8 FRANCIS C HURNEY

Secretary

58 26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 34

AGREEMENT NO T 3856

Proponents have established that certain anticompetitive provisions of Article 2 of Agreement

No T 3856 which authorize members to discuss and make non binding recommendations

with respect to rates and charges are required by a serious transportation need are

necessary to secure public benefits and are in furtherance of a valid regulatory purpose

Application approved upon condition that Proponents file an amendment providing for termi

nation of Agreement No T 3856 five years after the date of approval by the Commission

Robert L McGeorge and Joseph Tasker Jr for Proponents Mid Gulf Seaports Marine

Terminal Conference Terminal Operators Conference of Hampton Roads and South Atlantic

Marine Terminal Conference

John Robert Ewers and Aaron W Reese for Hearing Counsel

INITIAL DECISION OF SEYMOUR GLANZER ADMINISTRATIVE

LAW JUDGE

Finalized October 7 1983

This proceeding is an investigation instituted under the provlSlons of

sections 15 and 22 of the Shipping Act 1916 46 U S C 814 and 821

to determine whether Agreement No T 3856 should be approved dis

approved or modified

The proceeding was initiated by Order of Investigation and Hearing

Order served July 7 1982 The Order designated the three parties to

Agreement No T 3856 as Proponents and named Hearing Counsel as a

party The Proponents are Mid Gulf Seaports Marine Terminal Conference

MGSMTC Terminal Operators Conference of Hampton Roads TOCHR

and South Atlantic Marine Terminal Conference SAMTC

As their names indicate each of the Proponents is a

regional marine

terminal conference operating under an approved section 15 agreement

2

TOCHR s membership is comprised of Virginia ports at the mouth of

Chesapeake Bay in the area known as Hampton Roads SAMTC s members

range from North Carolina to and including Florida but not those Florida

ports which are members of the agreements shown in the note below 3

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2MGSMTC s approved agreement is No T 2002 TOCHR s is No T 8435 and SAMTC s is No T 8455

3

Port Everglades Freight Handlers Agreement No T 2592 Marine Freight Handlers Agreement No T

2629 Marine Terminal Operators of Tampa Agreement No T 2291

26 F M C 59
60 FEDERAL MARITIME COMMISSION

MGSMTC s members are the ports in Alabama Louisiana Mississippi

and Texas 4

Agreement No T 3856 was entered into on August I 1979 and was

filed with the Commission for approval on September 4 1979 The sub

stantive purposes of Agreement No T 3856 are contained in Article 2

which as pertinent provides that the members of the Proponent conferences

acting through those conferences may meet confer discuss exchange

information and make recommendations with respect to rates charges prac

tices legislation port administration and on matters of concern to the

marine terminal industry Article 8 of Agreement No T 3856 provides

that the agreement shall become effective when approved by the Commis

sion and that upon approval another agreement No T 2299between

TOCHR and SAMTC shall terminate Agreement No T 2299 essentially

authorizes TOCHR and SAMTC to engage in those practices which approval

of Agreement No T 3856 would empower TOCHR SAMTC and

MGSMTC to do

Although the filing of Agreement No T 3856 evoked neither protest

nor comment the Commission determined that it was not approvable as

filed In lieu of unconditional approval the Commission issued an Order

dated April 16 1981 granting approval conditioned upon deletion of those

parts of Article 2 which would allow Proponents to discuss and make

recommendations concerning rates and charges s

The Commission imposed its conditions because it was concerned that

there was insufficient support in the material submitted by Proponents

to demonstrate that the discussion of rates and charges was required by

legitimate transportation needs or other public interest objectives In the

Order initiating this proceeding the Commission explained its concerns

as follows

The Commission imposed the above conditions because the discus

sion of matters relating to rates even though the Agreement does

not confer rate making authority or bind the members to rec

ommendations made pursuant to the Agreement 6

can be expected

to affect the level of rates and charges or result in the establish

ment of uniform rates and charges in the relevant port areas

As such the Agreement is anticompetitive and cannot be approved

unless Proponents can demonstrate that the Agreement is required

by a serious transportation need necessary to secure public bene

fits or is in furtherance of a valid regulatory purpose Federal

Maritime Commission et al v Aktiebolaget Svenska Amerika

Linien et al 390 U S 238 1968 hereinafter Svenska United

4

A list of the members of each of the Proponents at the time of filing of Agreement No T 38S6 appears

in Appendix I A list of current members appears inAppendix II

The Order of April 16 1981 also required that parallel references to discussions and recommendations

with respect to rates and charges which appear in a Whereas clause of Agreement No T 3856 be deleted

6

The several conference agreementsNos T 2002 T8435 and T 845S do include ratemaking authority

but at the present time only TOCHR publishes a conference wide tariff

26 F M C
AGREEMENT NO T 3856

States Lines Inc v Federal Maritime Commission 584 F2d 519

1978

The Order of April 16 1981 further provided that if the conditions

were not met Agreement No T 3856 would be disapproved unless a

request for further hearing were to be filed by one of its signatories

On August 17 1981 the Proponents filed a petition declining to make

the changes suggested by the Order of April 16 1981 and requested

a hearing to determine whether said Agreement should be unconditionally

approved as filed The petition was granted by the Order initiating the

proceeding

There were two prehearing conferences 7Afterwards there was one day

of hearing 8At the hearing Proponents submitted several volumes of pre

pared documentation 9together with proposed findings of fact JO based on

the evidence contained in those documents Hearing Counsel joined with

Proponents in the proposed findings of fact 11 Hearing Counsel and Pro

ponents each called one witness to testify in support of unconditional ap

proval of Agreement No T 3856 12 Thereafter on April 11 1983 Hearing

Counsel and Proponents submitted separate briefs in support of approval

of the Agreement 13

In my judgment the Agreement as filed and as modified see n 13

below should be approved

STIPULATED FACTS 4

1 Pursuant to Agreement No T 8435 TOCHR members meet periodi

cally to discuss issues of common concern to port authorities and operators

Agreement No T 8435 grants authority to TOCHR to publish conference

wide tariffs applicable to all members subject to each member s reserved

right of independent action TOCHR currently has a conference wide tariff

published and on file with the Commission

2 Pursuant to Agreement No T 8455 SAMTC members meet periodi

cally to discuss issues of common concern to port authorities and operators

7

August 3 1982 and December 7 J 982

March21 1983

Exhibit Nos I 2 3 3 a 4a 5 and 6

10 Exhibit No 7

IIThus ineffect the facts are stipulaled

12 On January 10 1983 the California Associalion of Port Authorities and Northwest Marine Terminals

Association wrote a letter to the Secretary of the Commission advising the Commission of its support of

lhe inclusion of rate making discussion rights in Agreement No T 3856 A copy of that letter was ad

dressed to me By letter dated January 17 1983 the sender of the letter was advised by the Secretary that

I

rejected the letter and that I would not consider any of the views expressed therein

13 Proponents brief contained some additional proposed findings of fact baled upon testimony adduced at

the hearing In addition Proponents acquiesced in the recommendation concerning the term of the Agreement

made by Hearing Counsel s witness at the hearing Proponents had sought an open ended term upon approval

Hearing Counsel s witness Mr Robert E Hollifield of the Commission s Shoreside Agreements staff sug

gested adefinite term of five year s duration In their brief Proponents agreed to this modification

14 With slight editing these findings generally accept the stipulated facts including Proponents unopposed

additional proposed findings as submitted

26 F M C

61
62 FEDERAL MARITIME COMMISSION

Agreement No T 8455 grants authority to SAMTC to publish conference

wide tariffs applicable to all members subject to each member s reserved

right of independent action SAMTC does not at the present time have

a conference wide tariff published or on filewith the Commission

3 Pursuant to Agreement No T 2oo2 MGSMTC members meet periodi

cally to discuss issues of common concern to portauthoriti s and operators

While Agreement No T 2002 grants authority to MGSMTC to publish

conference wide tariffs there have been no conference wide tariffs for sev

eral years Each MGSMTC member sets and publishes its own rates and

charges independently

4 Members of TOCHR and SAMTC met periodically since 1969 to

discuss issues of common concern to port authorities and operators in

the Hampton Roads and South Atlantic port ranges pursuant to Agreement

No T 2299 as amended This agreement authorizes the parties to discuss

but not to agree upon terminal rates and charges

5 Proposed Agreement No T 3856 would permit MGSMTC members

to join in inter port discussions including discussions of terminal rates

and charges currently authorized by Agreement No T 2299 as amended

As is the case under Agreement No T 2299 participants in discussions

under Agreement No T 3856 could discuss rates and charges in a multitude

of contexts but would not have authority to set rates and charges among

the participants

6 United States maritime ports are vital elements of our national transpor

tation system particularly that portion of the transportation system which

serves our foreign and domestic offshore trades

7 In 1980 imports and exports amounting to 847 5 million short tons

moved through the nation s ports

8 As much as 95 percent of all United States foreign trade moves

through the nation s ports

9 On a tonnage basis TOCHR SAMTC and MGSMTC ports handle

about one third of the nation s

import and export ocean borne cargoes

10 Historically most United States ports were operated as public services

A significant portion of their operating and capital costs were furnished

by local state and federal governments because terminal rates and charges

were not sufficient to operate or develop the ports on a self sustaining

basis This governmental support was based at least in part on the percep

tion that economic benefits to the general public are to be derived from

port activity

II At present but in terms of 1977 dollars the cash value of all

types of marine terminal facilities at the nation s 189 seaports is over

40 billion and the estimated replacement cost of these facilities is about

54 billion

12 The value of capital assets at those TOCHR SAMTC and MGSMTC

ports which were able to provide data are

26 F M C
AGREEMENT NO T 3856

a Port facilities at Lambert s and Sewell s Points Norfolk Newport

News and Portsmouth 137 8 million acquisition basis

b Facilities of the South Carolina State Ports Authority at George

town Charleston and Port Royal 176 7 million acquisition

basis and 436 6 million replacement cost basis

c Facilities at the Port of Gulfport Mississippi 28 million

d Facilities owned by the Port of Lake Charles 712 million in

1975 dollars Current replacement cost is estimated at 100 mil

lion

e Facilities ofthe Port of Orange 13 3 million invested The esti

mated replacement cost is 43 million

13 The United States Department ofTransportation Maritime Administra

tion MarAd estimates that total capital requirements for development of

necessary marine facilities in the United States from 1980 to 1990 will

be more than 5 billion

14 Particular port development plans for the 1980 s exclusive of dredg

ing at TOCHR and MGSMTC ports are expected to involve the following

outlays

a TOCHR ports 50 75 million

b MGSMTC ports 76 million at the Port of Mobile Alabama

380 million by 1992 at the Port of New Orleans the Port

of New Orleans currently spends 100 000 on capital improve

ments every working day 18 million at the Port of Orange

now under construction

15 MarAd also estimates that these new marine terminal facilities will

be required during the 1980 s to handle a 40 percent increase in the

total volume of foreign trade moving through U S ports

16 The Chairman of MGSMTC estimates that expenditures of 3 8 billion

will be needed for port facilities throughout the State of Louisiana by

the year 2000 because it is estimated also that cargo at all of Mid

America s ports will exceed existing capacity by almost 700 million tons

annually

17 Historically ports relied heavily upon state local or port authority

bonds to finance necessary capital improvements However in recent years

the capital formation process has become more difficult and expensive

for the nation s ports in part due to highly volatile financial markets

18 Historically the federal government provided significant amounts of

financial and other assistance to the ports maintenance and development

programs Primarily the United States Army Corps of Engineers constructed

and maintained navigation channels and harbors In addition the United

States Department of Commerce s Economic Development Administration

provided loans and grants to help finance port improvements However

since the beginning of the fiscal year 1983 the latter no longer provides

such federal funding

1 F M

63
64 FEDERAL MARITIME COMMISSION

19 Federal support for dredging the nation s harbors declined since World

War II While expenditures for Corps of Engineers maintenance dredging

increased 400 percent from 1963 to 1979 actual yardage dredged increased

by only 8 percent

20 No new seaport dredging project has been authorized by Congress

since 1976 despite the fact that generally larger and deeper draft ships

were coming on line For example at the Port of New Orleans the number

of large vessels 60 000 deadweight tons and over that could draw up

to 55 feet if channels were that deep increased from 23 to 3 000 between

1970 and 1979

21 Currently some officials and some private sector groups are proposing

that the federal government impose a user fee on the nation s ports to

recoup all or a significant portion of the Army Corps of Engineers dredging

costs

22 In the meantime some ports are assuming the increasing dredging

costs themselves For example

a The Jacksonville Port Authority spent 1 million per year for

each ofthe last five years on maintenance dredging

b The South Carolina Ports Authority spent more than 1 1 million

on dredging projects over the last five years

c The Mississippi State Port Authority at Gulfport spent 100000

over the three years 1980 1982 on dredging

d The Port of Houston spent 5 8 million on maintenance dredging

in 1981 alone ls

23 All of Proponents ports were subjected to rapidly escalating operating

costs in the last several years due to inflation and resultant increases

in the areas of construction energy and labor

24 Cost increases in the recent and more distant past vary significantly

among the ports sometimes even within a single conference For example

those member ports which provided data on cost increases reported the

following

a TOCHR ports from 19761980

Labor 57 increase

Equipment maintenanc increase

Fuel and power 48 increase

b Georgia Ports Authority SAMTC Total costs increased 300

from 1970 to 1980

c South Carolina State Port Authority SAMTC from 1978 1982

Labor 64 5 increase

Equipment Maintenance loo increase

15 The Port of New Orleans is conlemplaling plans including a financial suppon program for dredging

ils exisling 4Ofool deep channel 10 a deplh of 55 feel The eSlimaled COSI is 435 million
AGREEMENT NO T 3856

Fuel and Power l27 6 increase

General repairs 40 9 increase

d Mississippi State Port Authority at Gulfport MGSMTC from

19761980

Labor excluding ILA labor 60 7 increase

Fuel and Power 93 9 increase

e Orange County Navigation and Port District Texas MGSMTC

from 1976 1980

Labor I 12 increase

Fuel and Power 96 7 increase

General repairs I 12 increase

25 The nation s ports collectively are spending about 42 million per

year to comply with mandatory federal and state environmental employee

health and safety and cargo security regulations These expenditures are

expected to increase about 50 to 64 million during the 1980 s TOCHR

SAMTC and MGSMTC ports bear a proportionate share of these costs

26 Faced with prospective diminishing federal state and local financial

support the TOCHR SAMTC and MGSMTC ports must develop methods

to become self sufficient This means that the ports will be operated more

as businesses than as municipal services and that port revenues rather

than tax dollars will have to provide funding to cover operating costs

as well as capital for future development

27 To achieve this self sufficiency ports need to initiate and maintain

procedures to insure that they possess the most accurate and current informa

tion before undertaking programs designed to control costs and to develop

terminal facilities

28 In recognition of these needs MarAd recommended that

Individual ports should not already having done so

I Develop a careful and realistic assessment of the revenue sup

portive short fall in their tariff rated facilities taking into account

depreciation factors and replacement requirements a fair rate of

return rates of inflation and levels of cargo volume 16

In order to implement those recommendations MarAd further recommended

that those ports voluntarily

2 Consider participation with existing or new regional or sub

regional Maritime Terminal Conferences for the purposes of dis

cussing rates and charges I

Emphasis supplied

29 Members of the TOCHR and SAMTC discussion agreement Agree

ment No T 2299 utilized their existing discussion authority to improve

16MarAd Current Trends in Port Pricing August 1978 at ii Ex I Exhibit C attached to Keown affida

vit

7

d

65
66 FEDERAL MARITIME COMMISSION

the efficiency of their ports TOCHRSAMTC discussions focused on topics

such as a operations and procedures b cost management c compliance

with government regulations d ratemaking philosophies and e planning

Some of the details ofthose topics are as follows

a Discussion of operations and procedures over the past five years

included such things as federal and state regulations relating to

the handling of hazardous materials Coast Guard regulations a

TOCHRSAMTC Port Procedures Committee study on ways to

increase operating efficiencies the advantages of uniform dock

receipts and delivery order forms collection problems and solu

tions and cost accounting systems to identify all relevant costs

and determine whether existing tariff charges cover associated

costs Of necessity these discussions involved related issues in

cluding such matters as the imposition of charges to cover those

costs and the appropriate level of those charges

b TOCHRSAMTC cost management discussions concerned projec

tions regarding ILA wage demands in forthcoming labor negotia

tions including analyses of the impact ofa 50 mile rule and

ILA s proposal for a unified contract for all Atlantic and Gulf

ports

c TOCHRSAMTC discussions with respect to compliance with fed

eral and state regulations involved such matters as MarAd reports

and contracts federal record retention requirements federal and

state hazardous materials regulations and Federal Maritime Com

mission regulations including licensing of independent ocean

freight forwarders and the impact of those regulations on marine

terminal operators free time and demurrage regulations and rules

concerning section 15 agreements

d TOCHRSAMTC rlltemaking discussions 18 examined the many

facets of marine terminal ratemaking philosophy In the course

of these discussions members exchanged information on costs

and prices including the following

i the proper level of wharfage charges for loaded containers

empty containers and containers stuffed or stripped at the

pier

H incentive container handling rates

Hi dockage charges

iv minimum assessments and the proper definition of a ship

ment for assessment purposes

v free time and demurrage charges

laOf course neither Agreement No T 2299 nor Agreement No T 3856 confers ratemaking authority as

such However because discussing rates and charges and making recommendations pursuant to those discus

sions may affect the level of rates and charges or result in the establishment of uniform rates and charges

in the relevant port areas pp 34supra I will refer to those features of the two agreements as rate

making hereafter
AGREEMENT NO T 3856

vi charges for in transit cargoes

vii tenninal services charges

viii charges for stevedores use of tenninal equipment

ix charges for cleaning rail cars

x

surcharges for late arriving vessels and

xi surcharge for hazardous cargoes

e TOCHRSAMTC planning discussions involved

i

projections indicating further declines in break bulk traffic

and increases in containerized traffic and resulting require

ments for acquisition of additional container handling equip

ment and facilities

ii estimates of the frequency and legal implication of mainland

China flag vessel calls at Atlantic ports

iii analysis of the increased exposure of tenninal operators to

claims for liability arising from a recent container accident

case

iv analysis of the proposed federal user fee s

impact on harbor

improvement and maintenance costs

30 One of the benefits to be derived from ratemaking discussions under

Agreement No T 3856 is the continuing education of participants concern

ing the factors which should be given consideration when a pricing structure

is established Those factors of course include costs and the appropriate

levels of charges rates to recover those costs The experiences of TOCHR

SAMTC ratemaking discussions some of which were detailed above show

that members acquired those benefits and were thereby aided in their daily

operations and in developmental planning

31 Some topics which MGSMTC members suggested for future discus

sion upon approval of Agreement No T 3856 are

a the economics of a COFC TOFC facility This would involve

utilizing particular traffic studies of various participating ports

b capital improvement programs examining the possible role of U S

customs revenue

c procedures for collecting delinquent accounts

d the effects of trigger price mechanisms

e the effects of government or labor induced embargoes

t the establishment of dual metric criteria in tariffs and

g

free time and demurrage charges

32 Statistical studies 19 for 1970 show that the port industry was respon

sible directly and indirectly for

a gross sales revenues of 28 billion

19MarAd Economic Impact of the U S Port Industry pp ii iii 1978

67
68 FEDERAL MARITIME COMMISSION

b a 15 billion contribution to the gross national product

c over 1 million jobs

d personal in ome of 9 6 billion

e business income totaling 3 7 billion

t

federal taxes totaling 5 7 billion and

g

state and local taxes amounting to 2billion

It is estimated that the foregoing dollar impact figures have doubled since

1970 20

33 The following are some illustrations of the economic impact of

particular ports on communities and surrounding regions

a Hampton Roads Ports In 1979 general cargo operations generated

7 315 jobs 117 million in payrol1 and 12 9 million in tax revenues

In that same year throughout the CommonwealtJ l

of Virginia there

were 134693 jobs related to the movement of cargo through the Hamp

ton Roads ports The port related jobs resulted in earnings of 2 3

biUion and yielded tax revenues amounting to 267 4 million In the

Hampton Roads area alone the ports created more than 50000 jobs

approximately 1 biUion in payrol1 and 120 million in state and

local taxes Directly and indirectly the businesses which are attracted

to the ports create another 10 000 jobs a payroll of 184 million

and taxes of 204million

b Georgia Ports Authority In 1982 the public ports were responsible

for 10 000 port related jobs a payrol1 of 200 miUion and 100

miUion in retail sales throughout Georgia Directly and indirectly port

activities induced another 19 900 jobs 290 million in personal income

and 162 million in statewide retail sales

c Port of Houston In 1981 port activities provided employment

directly and indirectly for 160 000 people and generated more than

3 biUion in wages and sales Port activities resulted in more than

47 million in state and local tax revenues

d Port of New Orleans Total direct and indirect employment from

oceangoing commerce at the pon is estimated to be over 44000 jobs

paying 600 million in wages Total employment including that in

duced by the presence of the port is estimated to be 100 000 jobs

with an almost 1 3 billion payroll in a six parish area State tax

revenues measured by the annual value of Louisiana goods and serv

ices generated by port activities amount to 143 million a

year A

1980 study indicated that the overal1 impact on the State of Louisiana

amounts to almost 9 percent 2 9 billion of the State s gross product

34 Members of TOCHR SAMTC and MGSMTC must develop terminal

facilities which are closely matched to the Nation s future transportation

needs

20 rd

c

0
AGREEMENT NO T 3856

35 Any significant shortages of necessary general or specialized marine

terminal facilities are likely to lead to bottlenecks in the Nation s

transpor

tation system thereby reducing the efficiency of the national economy

and defense Nevertheless TOCHR SAMTC and MGSMTC ports cannot

afford to build superfluous facilities which will not be amortized by user

fees

36 The Nation s ports in general and TOCHR SAMTC and MGSMTC

ports in particular are essential factors in the U S defense program

37 Most of the public TOCHR SAMTC and MGMTC members were

created by state law in the public interest

38 Ifthey are to continue to provide the marine terminal services which

are essential to the economy and national security TOCHR SAMTC and

MGSMTC members soon must make crucial near and long term decisions

concerning the operation and future development of their facilities The

quality of this decisionmaking will be greatly enhanced if it is based

on the most current information available and the shared knowledge and

experience of other port operators

39 Agreement No T 2299 demonstrates that TOCHR SAMTC and

MGSMTC members will gain valuable insights into managing their ports

more efficiently by becoming familiar with the methods ofoperation organi

zational structures rate setting philosophies labor management relationships

accounting principles and management programs of other operators in their

regions

40 At the beginning of an era of self sufficiency in which ports will

be required to depend upon operational revenues instead of tax dollars

to finance operations and improvements the need to exchange shared knowl

edge and experience with respect to terminal management generally and

ratemaking in particular takes on added importance in decisionmaking

However these exchanges of information are not likely to result in competi

tion between ports being stifled because Agreement No T 3856 does not

empower the participants to fix common rates or to allocate rates to individ

ual ports or conferences

41 The right of each port operator to independent action will not be

altered by approval of Agreement No T 3856 just as it was not affected

by approval of Agreement No T 2299 Experience under the latter Agree

ment demonstrates that the right of independent action continued to be

exercised on many occasions

42 There are other examples establishing that Agreement No T 2299

did not produce TOCHRSAMTC common rates and charges merely because

discussions of those subjects were authorized and in fact took place

a Wharfage charges are not equal and uniform During October

1982 wharfage charges on breakbulk cargo per net ton were

1 55 at Hampton Roads Charleston and Savannah and 1 60

at Jacksonville and Wilmington Wharfage charges for container

26 F M C

69
70 FEDERAL MARITIME COMMISSION

ized cargo per net ton were 120 at Charleston Jacksonville

and Savannah 125 at Hampton Roads and 130 at Wilmington

b Handling charges are not equal and uniform During October 1982

handling charges per net ton on plywood were 5 05 at Wilming

ton 5 15 at Charleston 5 00 at Savannah 5 00 to 7 75 at

Hampton Roads and 410 to 6 60 at Jacksonville

c Dockage charges are not equal and uniform Dockage charges

during October 1982 were 11 cents per registered gross ton and

175 per lineal foot at Wilmington Charleston Savannah and

Jacksonville and 121 4 cents per registered gross ton and 185

per lineal foot at Hampton Roads

43 There are at least three forcing factors which acted as safeguards

against uniform ratemaking under Agreement No T 2299 and concomi

tantly are likely to continue having that effect under Agreement No

T 3856 They are competition between ports local economic conditions

which cause rates and charges to reflect the community s cost structure 21

and vigorous state government regulation of public ports The latter two

factors also serve as a further stimulus to competition

44 There is no evidence of abuse of the discussion authority with

respect to rates and charges under Agreement No T 2299 There continues

to be a great diversity of rates and charges at TOCHRSAMTC ports

Yet there is evidence of relative rate stability among the port members

of those conferences Although there is no necessary direct connection

between this stability and Agreement No T 2299 it is a fact that from

1974 to 1981 terminal charges at the member ports rose only about 57

percent compared to an increase of about 83 percent in the producer price

index an verall economic indicator measuring approximately equivalent

levels ofeconomic activity 22

45 A number of ocean carriers serving the affected ports have increased

their bargaining power in negotiating terminal rates and charges by forming

Commission approved joint service agreements Among the leading joint

services currently providing services in these port ranges are

Hoegh Lines

Atlantic Container Line OJE

Dart Container Line

Associated Container Transportation Australia Ltd

Hoegh Ugland Auto Liners AS

Orient Overseas Container Line

Barber Blue Sea Line

Oulf Europe Express

2

E gIhere are separate rate slruclures aI each of the two Georgia Pons Authority s pons due to dif

ferences in local conditions and cost factors

22 The Commission s Office of Shoreside Agreements which has the responsibility to review all marine

terminal agreements and to prepare recommendations to the Commission concerning approval disapproval

or modification thereof pursuant to secrion I S suggests thai the lag behind the producer price index dem

onstrates Ihatthose terminal charges are depressed

26 F M C
AGREEMENT NO T 3856

Other joint services with authority to serve one or more of these ports

include

Moller Maersk Line A P

R C D Shipping Services

Central Gulf Container Line

Combi Line

Sea Express Service

Celtic Bulk Carriers

Georgia Aztec Line

Pakistan Line

Bank and SaviIle Line

46 Inter conference terminal discussion agreements which permit the

parties to discuss terminal rates and charges should provide ports with

a carefully measured and controlled counterbalance to the bargaining power

enjoyed by participants in joint service agreements even though there is

nothing in the record to show that so far ports have been placed at

a disadvantage by this bargaining power

47 TOCHR SAMTC and MGSMTC ports face strong competition from

Canadian and Mexican ports This is manifest from evidence that Servico

Multimodal Transistmico a Mexican container landbridge system now com

petes directly with Continental United States surface carriers and carriers

using the Panama Canal for European and Far East cargo and by sightings

of Canadian port based CAST Lines containers in Atlanta Georgia The

ability to discuss rates and charges is expected to be a useful tool to

enable member ports to meet Canadian and Mexican competition 23

48 The empiric evidence supports Proponents premise that members

of terminal conferences need authority to discuss ratemaking factors and

make non binding recommendations with respect to rates and charges in

the developing era of public as well as private port self sufficiency and

Proponents other premise that if allowed this authority wiIl enable ports

to become more cost effective and operationally efficient without adversely

affecting inter port competition all of which will permit those ports to

continue to induce economic growth in and provide other public benefits

to their communities

DISCUSSION AND CONCLUSIONS

I GENERAL

The vital role of terminal operators in the stream of interstate and foreign

commerce subject to regulation by the Federal Maritime Commission is

23 There are indicators that its government has allocated billions of dollars to be spent overthe next twenty

years for Mexican port development Coupled with Mexicos natura labor and fuel cost advantages this fund

ing is expected to presage even greater competitive impact inthe future

26 F M C

71
I

72 FEDERAL MARITIME COMMISSION

well established Tenninal operators fonn an intennediate link between

carriers and the shippers or consignees The Boston Shipping Association

Inc v Port of Boston Marine Terminal Association 10 F M C 409 414

1967 24 The importance of that link to the regulatory scheme fonnulated

by the Congress was pinpointed by the Court of Appeals for the District

of Columbia Circuit in American Export Isbrandtsen Lines Inc v Federal

Maritime Commission 444 F 2d 824 828 829 D C Cir 1970

The law for centuries has recognized that public wharves piers

and marine tenninals are affected with a public interest Footnote

omitted

These tenninals stand athwart the path of trade Efficiency

ofthe manpower ships and vehicles is dependent upon the prompt

handling of such cargo and detennines whether the flow of inter

state and foreign commerce is obstructed or facilitated The public

interest in their efficieht operation is unquestioned

Because of the vital importance of these Tenninals to inter

state and foreign commerce Congress in the Shipping Act of

1916 provided for their regulation by the Federal Maritime Com

mission and authorized it to promulgate and enforce just and

reasonable regulations and practices related to or connected with

the receiving handling storing ordelivering of property at harbor

tenninal facilities

The power thus conferred is to be used for the purpose

of facilita1in the free flow of commerce by guaranteeing an

efficient tennmal system

Manifestly then facilitating the freefl w of commerce by guaranteeing

an efficient tenninal system is the beacon by which the Commission

charts the course of marine tenninal regulation and the ratemaking features

of Article 2 must be examined in that light

The Order of April 16 1981 is not to the contrary It does not stand

for the proposition that under the standard for marine tenninal regulation

Agreement No T 3856 is unapprovable substantively if theratemaking

features remain That order finds that the ratemaking provisions are anti

competitive and thereby invade the territory of the national antitrust laws

It is well settled that such anticompetitive provisions in an agreement

submitted for approval pursuant to section 15 cannot be approved absent

a proper showing that the agreement is required QY a serious transportation

need necessary to secure important public benefits or in furtherance of

a valid regulatory purpose of the Shipping Act 25 Because the justification

24After thedecision in thecited case became administralively final i1WBS collaterally allacked in the Unit

ed States District Court for the District of Massachu8ells but the District Court refused to review the merits

The Court of Appeals for the Pirst Circuit disaareed allowing acollateral review on the merits Port ofBos

ton MariM Terminal Assn v Boston Shipping Assn

Inc 420 P 2d 419 1 Cir 1970 The Supreme Court

reversed the Pirst Circuit and upheld the District Court on the collateral review issue Port of Boston Marine

Terminal Assn v RederlalcJlebolaget Transatlantic 400 U S 62 1970

25 Svenska supra 390 U S at 243

26 F M C
AGREEMENT NO T 3856

submitted by Proponents at that time failed to meet the Svenska require

ments the ratemaking provisions could not pass muster Thus the Order

ofApril 16 1981 simply holds that there was a failure ofproof

In my judgment Proponents remedied that failure at the hearing and

now the ratemaking features of Agreement No T 3856 merit approval

II THE ANTITRUST ISSUE

Although Proponents generally acquiesce in the Commission s determina

tion expressed both in the Order of April 16 1981 and in the Order

that the ratemaking features are anticompetitive and an incursion into anti

trust principles they suggest that perhaps these features are not an intrusion

into the antitrust laws 26 This suggestion is rejected

The argument as conceived by Proponents has its genesis in some

Supreme Court cases holding that some exchanging of price information

among competitors is permitted under the antitrust laws or that the per

se violation rule has never been applied to the dissemination of price

information itself 27 Whatever validity there may be to that argument in

those cases the contention is wide of the mark in this proceeding for

the very reason contained in the statement of the standard by which Pro

ponents ask that this issue be judged the rule of reason

The rule of reason which governs analysis of exchanges of price

information among competitors frequently has been cited with approval

by the courts See eg Continental T V Inc v GTE Sylvania Inc 433

U S 36 49 1977 In Chicago Board of Trade v United States 246

U S 231 238 1918 Mr Justice Brandeis explained the rule this way

The true test of legality is whether the restraint imposed

is such as merely regulates and perhaps thereby promotes competi

tion or whether it is such as may suppress or even destroy com

petition To determine that question the court must ordinarily con

sider the facts peculiar to the business to which the restraint

is applied its condition before and after the restraint was imposed

the nature of the restraint and its effect actual or probable The

history of the restraint the evil believed to exist the reason

for adopting the particular remedy the purpose or end sought

to be attained are all relevant facts This is not because a good

intention will save an otherwise objectionable regulation or the

reverse but because knowledge of intent may help the court to

interpret facts and to predict consequences

It is not necessary to belabor the issue to understand the differences

between the circumstances and commercial enterprises involved in those

cases where dissemination of price information may be permitted under

26Proponents brief pp 4 13 27

Proponents cite United States v Citizens and Southern National Bank 422 U S 86 113 1975 and

cases cited therein

26 F M C

73
74 FEDERAL MARITIME COMMISSION

the antitrust laws and those involved in this proceeding It is sufficient

to recognize that here 1 the Proponents are bodies which are empowered

to fix rates for their members 28 under limited antitrust immunity granted

by approved section 15 agreements 2 Proponents members individual

terminal practices are subject to regulation by this Commission and 3

although the authorization to recommend rates and charges may not be

binding upon Proponents or their members it would be folly to believe

that the sought for power to recommend rate action is intended solely

for the purpose of having the participants in the discussion agreement

reject the recommendation

Thus applying the rule of reason to the facts and circumstances

of this proceeding I

find that the ratemaking features of the agreement

are anticompetitive and invade the antitrust laws

III THE SVENSKA TEST HAS BEEN MET THE AGREEMENT IS

REQUIRED BY A SERIOUS TRANSPORTATION NEED NECESSARY

TO SECURE PUBLIC BENEFITS AND IS IN FURTHERANCE OF A

VALID REGULATORY PURPOSE

Preliminarily it may be observed that by specifying Agreement No

T 3856 is to be measured by the Svenska yardstick the Order subsumes

that the other criteria for approval under section 15 have been adjudged

satisfied and are not in issue at this time

Proponents have established that the ratemaking features of Agreement

No T 3856 are required by a variety of earnest transportation imperatives

each of which reflects a serious transportation need but overall may be

seen as constituent elements of the need to maintain and preserve an

efficient marine terminal system in order to accommodate the present and

future demands of the nation s commerce and defense In turn the rate

making features represent a measured response and minimal intrusion into

the antitrust laws but one necessary to secure the public benefits contained

in the statement of the need and one which serves the regulatory purpose

of facilitating the free flow of commerce by guaranteeing an efficient

terminal system

As more fully set forth in the Facts supra the Proponents demonstrated

that the nation s port system is in transition from an age ofpublic funding

of operational and capital investment costs to an era in which ports must

finance their operations and capital improvements from revenues alone

This incoming era has brought with it an urgent need for sophisticated

and exact decisionmaking by port managers in order to avoid the potential

for profligate redundancy while maintaining port efficiency providing the

shipping public with essential transportation services preserving the delicate

competitive balance within the system and fostering effective competition

with foreign ports

28 Albeit the right of independent action is preserved

26 F M C
AGREEMENT NO T 3856

I find that the ratemaking features of Article 2 of Agreement No

T 3856 meet the criteria enunciated in Svenska and warrant approval under

section 15 of the Shipping Act

I find further that the Agreement shall be amended to include a provision

for termination at the end of five years from the date when Agreement

No T 3856 is approved by the Commission 29

ORDER

It is ordered that Agreement No T 3856 be approved upon condition

that Article 8 be amended to provide for termination five years after the

date of approval by the Commission

It is further ordered that within five days after approval by the Commis

sion Proponents shall file with the Commission the amendment required

under the terms of the preceding ordering paragraph

S SEYMOUR GLANZER

Administrative Law Judge

29 The provisions of 46 CFR 521 2c set forth the procedures for applying for an extension of an approved

agreement due to expire by its own terms

26 F M C

75
76 FEDERAL MARITIME COMMISSION

APPENDIX I

List of Members ofProponent Conferences at Time ofFiling of Agreement

No T 3856

1 MID GULF SEAPORTS MARINE TERMINAL CONFERENCE MGSMTC

I Alabama State Docks Department

2 Board of Commissioners of the Port of Beaumont Navigation

District of Jefferson County Texas

3 Board of Commissioners of Lake Charles Harbor and Terminal

District

4 Board ofCommissioners of the Port ofNew Orleans

5 Board ofTrustees ofthe Galveston Wharves

6 Greater Baton Rouge Port Commission

7 Mississippi State Port Authority at Gulfport Gulfport Mississippi

8 Orange County Navigation and Port District of Orange Texas

9 Port Commission of the Port of Houston Authority of Harris

County Texas

10 South Louisiana Port Commission

II TERMINAL OPERATORS CONFERENCE OF HAMPTON ROADS

TOCHR

1 Elizabeth River Terminals Inc

2 Lamberts Point Docks Inc

3 Maritime Terminals Inc

4 Peninsula Terminals Ltd

5 Portsmouth Terminals Inc

6 Virginia PortAuthority

III SOUTH ATLANTIC MARINE TERMINAL CONFERENCE SAMTC

1 Almont Shipping Company

2 Brunswick Ports Authority

3 Georgia Ports Authority

4 Jacksonville Port Authority

5 North Carolina State Ports Authority

6 South Carolina State Ports Authority

26 F M C
APPENDIX II

Current List ofMembers of Proponent Conferences

IMID GULF SEAPORTS MARINE TERMINAL CONFERENCE MGSMTC

1 Alabama State Docks Department

2 Board of Commissioners of the Port of Beaumont Navigation

District of Jefferson County Texas

3 Board of Commissioners of Lake Charles Harbor and Terminal

District

4 Board of Commissioners of the Port of New Orleans

5 Board of Trustees of the Galveston Wharves

6 Greater Baton Rouge Port Commission

7 Mississippi State Port Authority at Gulfport Gulfport Mississippi

8 Orange County Navigation and Port District of Orange Texas

9 Port Commission of the Port of Houston Authority of Harris

County Texas

10 South Louisiana Port Commission

II TERMINAL OPERATORS CONFERENCE OF HAMPTON ROADS

TOCHR

1 Elizabeth River Terminals Inc

2 Lamberts Point Docks Inc

3 Portsmouth Terminals Inc

4 Virginia Port Authority

5 Port Authority Terminals Inc

6 Virginia International Terminals Corp

7 Pier 8 Terminal

III SOUTH ATLANTIC MARINE TERMINAL CONFERENCE SAMTC

1 Almont Shipping Company

2 Brunswick Port Authority

3 Georgia Ports Authority

4 Jacksonville Port Authority

5 North Carolina State Ports Authority

6 South Carolina State Ports Authority

7 Port Carriers Inc

26 F M C 77
FEDERAL MARITIME COMMISSION

DOCKET NO 82 56

SNYDER GENERAL CORPORATION AND

AIRCONDI REFRIGERATION Pl Y LTD

v

SOUTH AFRICAN MARINE CORPORATION LTD

NOTICE

October 7 1983

Notice is given that no exceptions have been filed to the August 31

1983 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No such

determination has been made and accordingly that decision has become

administratively final

S FRANCIS C HURNEY

Secretary

78 26 FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 56

SNYDER GENERAL CORPORATION AND AIRCONDI

REFRIGERATION PTY LTD

v

SOUTH AFRICAN MARINE CORPORATION LTD 2

M Troy Murrell for Complainants

David A Brauner for Respondent

INITIAL DECISION3 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Finalized October 7 1983

The complainants allege they have been injured by reason ofrespondent s

overcharge for freight in the amount of 64278 35 and seek reparation

thereof in accordance with section 18 b 3 of the Shipping Act 1916

This proceeding by consent of the parties and with approval ofthe Presiding

Administrative Law Judge was conducted under Shortened procedure 46

C F R 502181 et seq without oral hearing

The original complaint herein was served December 3 1982 At the

prehearing conference in Washington D C on Tuesday February 1 1983

the complainants requested and were granted leave to file an amended

complaint Tr 11 The First Amended Complaint was served February

28 1983 The respondent served its Answering Memorandum of Facts

and Argument to First Amended Complaint March 16 1983 The respondent

stated among other things There is absolutely no change in the substance

of the Complaint or in the evidence submitted in support thereof

all of the arguments and citations contained in Respondent s Answering

Memorandum of Facts and Argument to the original Complaint are equally

applicable to and are hereby incorporated herein and renewed in reply

to the First Amended Complaint

The amended complaint alleges that the Complainant Snyder is a Texas

corporation engaged in the manufacturing of heating and air conditioning

equipment Its principal place of business is Red Bud Illinois Its export

operations are conducted from its office in Carteret New Jersey Complain

I Added as acomplainant inFirst Amended Complaint

2

Two named a

respondents in the original complaint Springbok Line Limited and Springbok Shipping

Company Limited by stipulation of the parties at February I 1983 prehearing conference Tr 16 were

dismissed from this complaint

3

This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

26 F M C 79
80 FEDERAL MARITIME COMMISSION

ant Aircondi is a concern in the business of buying and selling refrigeration

equipment Its principal place of business is Pretoria South Africa

Respondent South African Marine Corp Ltd does not dispute the fact

that the shipments which are the subject of this proceeding were made

and billed as set forth in the complaint and further concedes that it was

the common carrier by water with respect thereto Answering Memorandum

of Facts and Argument served December 22 1982 Received December

27 1982

The Commission s Office of Energy and Environmental Impact under

date of December 21 1982 reported it had examined this Docket No

82 56 and determined that no environmental analysis needs to be undertaken

and no environmental documents prepared in connection with this docket

There are six 6 shipments involved The South African Marine Corpora

tion N Y as Agents Bills ofLading show

BIL No 18 dated at New York date illeginle The Singer Company

Climate Control Division shipped on the vessel lktinos for discharge at

Capetown South Africa

One20 Container STC

52 Cartons of Industrial Air Conditioning Parts

Gross Weight 6 351 Ibs 292 cft

Freight Forwarder American Forwarder Service Inc

FMC 1657 R

Paid Freight

Consignee Aircondi Refrigeration Pretoria South Africa

Freight Prepaid Sailing date July 10 1982 Alleged overcharge

for freight is 3 333 41

1 SA lktinos The complainant alleges the products coded as CC are

self contained products and less than 60 000 BTU HR as illustrated by

Climate Control Brochure attahced as document 2 The freight rate charged

for the products was 166 50 M3 The total freight bill for these products

was 4858 13 as illustrated by Document 3 As stated above Document

3 is illegible Copy of check is also illegible Nor has complainant proved

by a preponderance of the evidence that the commodity shipped was Air

Conditioners Self Contained nor Air Conditioning Equipment Complain

ant says the units shipped on the lktinos were entirely self contained air

conditioners It was without question that the CC units were heat pumps

Respondent says Claimant attaches to its memoranda a tariff page that

shows a higher rate for self contained air conditioners

BIL No 3 dated at New York date illegible The Singer Company

Climate Control Division shipped on the vessel SA Morgenster for dis

charge at DurbanSouth Africa

340 H H Containers STC

Industrial Air Conditioners

Container ITLU5035777

26 F M C
SNYDER GENERAL CORP ET AL V S AFRICAN MARINE 81

CORP LTD

Said to contain 255 ctn 21 955 Ibs 1973 0eft

Container SCXU4263632

Said to contain 193 ctn 16 757 Ibs 1517 10 eft

Container SCXU4302580

Said to contain 29 600 Ibs 1640 0eft

Freight Forwarder The Singer Co Export Import Dept

Paid Freight

Consignee Aircondi Refrigeration Pretoria South Africa

Freight Prepaid Sailing date May 8 1981 Overcharge for freight

allegedly is 10 60174

2 S A Morgenster The complainant alleges the products coded as EA

are self contained products and less than 60 000 BTU HR The respondent

says the EA unit is conceded to be apparently self contained

The documents as to payment are illegible

B L No 13 dated 12 3182 at New York The Singer Company Climate

Control Division shipped on the vessel SA Constantia for discharge at

DurbanSouth Africa

One 40 Container STC

228 Ctns Air Conditioning Machinery Equipment

Gross Weight 32 180 Ibs 1966 eft

One Container NR CTIU4439007

One 40 Container STC

138 Ctns and 8 crates Air Conditioning Machinery Equipment

Gross Weight 36 196 Ibs 1691 eft

One 40 Container STC

294 Ctns Air Conditioning Machinery Equipment

Gross Weight 32 028 Ibs 1969 eft

One 40 Container STC

228 Ctns Air Conditioning Machinery Equipment

Gross Weight 31 616 Ibs 1846 eft

Freight Forwarder American Forwarding Services Inc FMC

1657 R

Consignee Aircondi Refrigeration Pretoria South Africa

Freight collect Sailing date December 31 1981 Overcharge of

14 190 18 alleged

3 SA Constantia The complainant alleges the products coded as EA

are self contained products and less than 60 000 BTU HR The products

coded as AJ and AK are compressors for the products coded EJ and

EK

Respondent says although the EA EJ and EK units appear to be self

contained the only way this shipment could be entitled to self contained

26 F M C
82 FEDERAL MARITIME COMMISSION

air conditioner rate would be on the basis of Rule 2 G However Tariff

contains specific rates for compressors

BIL No 35 dated 5782 at New York The Climate Control Division

of Snyder Gen Corp shipped on the vessel Ostfriesland for discharge

at DurbanSouth Africa

One 40 Container HIH STC

238 CartonsAir Conditioning Machinery Parts

Gross Weight 31 356 1825 cft

14 223 Kg 51 679M3

One 40 Container HIH STC

262 CartonsAir Conditioning Machinery Parts

Gross Weight 31 644 1846 cft

14 354 Kg 52 274M3

One 40 Container HIH STC

210 CartonsAir Conditioning Machinery Parts

Gross Weight 31 020 1799 cft

14 071 Kg 50 943M3

One 20 Container HIH STC

70 CartonsAir Conditioning Machinery Parts

Gross Weight 14 140 814 cft

6414 Kg 23 050M3

Freight Forwarder Rohner Gehrig Co Inc FMC 375

Notify Aircondi Refrigeration Pretoria South Africa

Freight Collect

Sailing date May 7 1982 Complainants claim to have been over

charged 13 644 37

4 Ostfriesland The complainant alleges the products coded as EA

are self contained products and less than 60 000 BTU HR Checks are illegi

ble

Respondent says the EA unit described herein appears to be self con

tained However says complainant submits wrong tariff page in support

of claim It would be the 21st revision of Page 153 which reflects a

rate of 77 00 not 85 50 as sought by claimant Complainant says it

will gladly accept respondent s

suggestion of a 77 00 tariff rate with

respect to this shipment

B L No 11 dated at New York date illegible The Singer Company

Climate Control Division shipped on the vessel lason for discharge at

DurbanSouth Africa Overcharge for freight allegedly 3 615 56

One 40 Container STC

227 Cartons Air Conditioning Machinery Equipment

Gross Weight 18 728 Ibs l 545 eft

26 F M C
SNYDER GENERAL CORP ET AL V S AFRICAN MARINE 83

CORP LTD

Freight Forwarder American Forwarding Services Inc FMC

1657 R

Consignee Aircondi Refrigeration Pretoria South Africa

Freight collect Sailing date December 4 1981

5 Jason The complainant alleges the products coded as HW are self

contained air conditioners and less than 60 000 BTU HR The products

coded as EJ are selfcontained products and less than 60 000 BTU HR

The products coded as AR are self contained products and less than 60 000

BTU HR

Respondent says the HW system described herein is by its own literature

a split system and therefore irrefutably not self contained although it does

appear to be under 60000 BTU s in capacity The EJ unit appears to

be self contained The AR unit is not by any means an air conditioner

it is a remote condensing unit The appropriate rate for this unit is

probably machinery NOS at 274 00

Neither the HW nor AR units are entitled to self contained air conditioner

treatment

B L No and date illegible at New York The Singer Company Climate

Control Division shipped on the vessel Alanti for discharge at Durban

South Africa

One 40 Container STC

233 Cartons Air Conditioning Machinery Equipment

Gross Weight 31 140 Ibs 1779 eft

Freight Forwarder American Forwarding Services Inc FMC

1657 R

Consignee Aircondi Refrigeration Freight Collect

Sailing date January 8 1982 Overcharge of 3425 57 alleged

6 Alanti The complainant alleges the products coded as EA are self

contained products and less than 60 000 BTU HR

The respondent says the EA unit described is self contained but the

part in question is the heating coil bringing into focus the previously

made argument concerning whether these combined heating cooling units

are under any circumstances entitled to air conditioner treatment

Claimant says such heat pumps are entitled to air conditioner treatment

The burden of proof that the complainant has to meet is proof by

a preponderance ofthe evidence as to what is claimed

The applicable tariff covering all shipments is United States South and

East Africa Conference Southbound Freight Tariff No 6 FMC No 8

From United States Atlantic and Gulf Ports To Ports in Southwest South

Southeast and East Africa and the Islands of Malagasy Republic Madagas

car Reunion Mauritius Comotos Ascension Seychelles St Helena as

named The 16th Revised Page 153 of the Tariff effective date July 1

i1981 Item 130Air Conditioners Self Contained See Rule 21 not air

conditioning machinery C contract Capetown 142 50 1 Note when

26 F M C
84 FEDERAL MARITIME COMMISSION

shipped in carriers standard 12 19 m container on a house to house move

ment shall be subject to minimum utilization of 49 53 CBM per container

of one commodity or any combination of the following commodities at

8550 WIM Contract basis Capetown Durban Range Exception to Rule

2013 15 16 and 17

The complainant stated because of the number of shipments and the

volume of documents presented herewith for each shipment the Memoran

dum of Facts and Argument is presented separately by shipment with

the documents pertaining to each shipment immediately following the recita

tion offacts and arguments for that shipment page 1 complainant s Memo

randum of Facts and Argument received June 14 1983

Discussion Reasons Findings and Conclusions

In this proceeding the complainants seek inter alia reparation in the

amount of 64278 35 an order commanding the respondent to cease and

desist from violation of the Shipping Act 1916 Of course the burden

of proof is upon the proponent of the order Rule 155 Commission

Rules of Practice and Procedure 46 C F R 502 155 to prove by a prepon

derance of the evidence the claim

The complainant Snyder General Corporation s allegation of being the

successor in interest to the Climate Control Division of the Singer Company

brought a prove it response from the respondent Respondent asserts that

the claimant s bold allegation of being the successor in interest to the

Singer Company s Climate Control Division hardly constitutes even a scin

tilla of evidence to that effect much less that such allegation even if

true gives claimant standing to pursue this claim Respondent Memorandum

ofFacts and Argument received December 27 1982 page 3 And respond

ent says insofar as the standing of Aircondi to pursue this claim is con

cerned there is no more evidence that Aircondi paid the freight charges

on some or all of the subject shipments than there was that Snyder had

paid such charges The mere fact that the bills of lading indicate freight

collect is not sufficient to give Aircondi standing herein Documentary

evidence of the actual payment of the freight charges by Aircondi or

Snyder as the case may be or an assignment from the person who did

pay such charges is required to confer standing Answering Memorandum

of Facts and Arguments to First Amended Complaint received March 21

1983 pages 2 and 3 The complainants in their reply served July 5

1983 to respondent s contention that no evidence has been submitted to

support the proposition that Snyder is the successor in interest to the

Singer Company state that Snyder purchased the Climate Control Division

of the Singer Co on April 3 1982 The contract pursuant to which that

purchase was made is voluminous the closing documents comprise two

bound volumes consisting of almost 2 000 pages That is nQt and should

not be an issue in this case However if the Commission feels that such

proof is necessary it can be furnished by supplemental affidavit although

26F M
SNYDER GENERAL CORP ET AL V S AFRICAN MARINE 85

CORP LTD

the complainant maintains that the same is not material and constitutes

an invasion of privacy of both the Singer Company and Snyder General

Corporation pages 2 and 3 The complainant failed to cite any Commission

or judicial decision in support

Respondents argue that the complaint is deficient in that it failed to

provide paid freight bills in support of the claim for reparation as provided

in Rule 186 of the Commission s Rules of Practice and Procedure 46

CF R 502186 Without these documents it cannot even be determined

whether in fact claimant paid the freight charges Claimant submits in

support of its complaint in this regard copies of five checks four of

which are such poor copies as to be illegible in various significant respects

such as payee and amount Respondent requests that it be provided with

legible copies of the documents Answering Memorandum of Facts and

Argument received December 27 1982 page 2 No evidence was submit

ted with the First Amended Complaint other than duplicate copies ofdocu

ments submitted with the original complaint which incidentally are as

illegible as those submitted previously March 23 1983 Answering Memo

r dum to First Amended Complaint page 3

The respondent asserts that complainant s submission of Memorandum

of Facts and Arguments under cover letter of June 13 1983 represents

complainant s third formal opportunity to document and support its case

Respondent s Answering Memorandum of Facts and Arguments received

June 28 1983 page 2 Respondent says that complainant has still failed

to submit adequate evidence of the payment of the freight charges by

either Snyder or Aircondi Ibid p

3 Only the actual payment of freight

charges by a Complainant or receipt of an assignment from the actual

payor of freight charges creates standing to pursue a claim for reparation

Ibid p

4 Complainant having failed to provide such evidence on at

least three separate occasions in formal submissions to the Commission

it must be concluded that no such evidence exists andor no such payment

was made Ibid

Complainants submit that the evidence of payment to South African

Marine is complete with respect to each and every shipment that respondent

presents absolutely no evidence and indeed does not even argue that

South African Marine was not paid Complainants Reply Brief received

July 12 1983 page 2

As to issue of legibility the complainants argue that those attachments

which were submitted are as legible as can be obtained from the microfilm

records which were thereafter photocopied

The Presiding Administrative Law Judge upon consideration of the above

finds and concludes that the complainant acknowledges if proof is needed

that Snyder is successor in interest to the Climate Control Division of

the Singer Co it can be furnished by supplemental affidavit Thus com

plainant tacitly admits such proof is needed The respondent has alluded

to the complainant having had three formal opportunities to document

26 EM C
86 FEDERAL MARITIME CO MISSION

and support its case This case is not the same as a special docket applica

tion under section 18 b 3 of the Act where there is only the applicant s

seeking pennission to waive collection of or refund a portion of freight

charges for the benefit of person who paid or is responsible for payment

of freight charges In such cases additional infonnation is sometimes sought

and obtained to complete processing the application In this shortened proce

dure case in which there is a complainant and respondent it is an adversary

proceeding And the memorandum should contain concise arguments and

fact the same as would be offered if a fonnal hearing were held and

briefs filed If reparation is sought paid freight bills should accompany

complainant s original memorandum Rule 186 of Commission s Rules of

Practice and Procedure 46 C FR 502186 Complainants have had ample

opportunity to prove they have standing to pursue their claim There is

no reason equitable or otherwise to allow complainants any further oppor

tunity to prove they have standing to sue Respondent has already been

subjected to lengthy proceedings and fairness dictates that the decision

in this proceeding be made on what has been submitted See Pacific Freight

Audit Inc v Sea Land Service Inc Docket No 78 24 Pacific Freight

Audit Inc v American President Lines Docket No 78 25 22 F M C

207 1979

The complainants seek reparation To seek reparation a person must

show proof of pecuniary loss or valid succession to another s claim See

FiatAllis Construction Machinery Co v Sea Land Service Co Docket

Nos 810 1 811 1 20 SRR 481 482 1980 citing Trane Co v South

African Marine Corp Docket No 7625 19 F M C 375 1976 Ocean

Freight Consultants Inc v The Bank Line Ltd Docket No 1185 9

F M C 211 1966

In its answering memorandum of facts and argument received December

27 1982 the respondent requested that it be supplied with legible copies

of documents The complainant did not comply Rule 111 of the Commis

sion s Rules of Practice and Procedure 46 C F R 502111 calls for clear

and legible copies The Presiding Administrative Law Judge finds and con

cludes some of the documents are not clear and legible for example Docu

ments 2 consisting of 5 pages 4 and 7 as to the vessel SA Iktinos

Thus the failure of the complainants to prove they have standing to

sue after at least three opportunities to do so warrants no further oppor

tunity by amendment of the complaint but does warrant dismissal of the

complaint

The merits as to each separate shipment was considered herein above

as the complainant aligned them in the booklet containing them in complain

ant s Memorandum of Facts and Argument received June 14 1983

The only case mentioned by the complainants is the Fedders case cited

by the respondent Fedders World Trade Corporation v South African

Marine Ltd Infonnal Docket No 1242 1983 The complainants respect

fully urge that Commission applied the wrong interpretation to the phrase

II t1l A r
SNYDER GENERAL CORP ET AL V S AFRICAN MARINE 87

CORP LTD

self contained If one strictly applied the Commission s standard enun

ciated in Fedder then even a through the window air conditioning unit

would not qualify for self contained treatment since all it does is bestir

ambient air Yet no one would seriously argue that such unit is not

a self contained air conditioner Complainants submit that the Commission

should carefully re examine the meaning of self contained However the

complainant offers no substantive suggestions as to what any re examination

should consider or for that matter what is self contained as it applies

in this case

One further observation the tariff page submitted herein presents a code

C denotes contract rates S single rates See Rule 14 for noncontract

rates The rates the complainant proposes as applicable are all C or contract

rates The complainants did not introduce any evidence tending to show

they were eligible for the carrier s contract rate The Commission has

determined that where a claimant is seeking the benefit of a contract

rate evidence should be adduced showing that the shipper was indeed

eligible for such rate National Starch Chemical Corp v Hapag Lloyd

United States Navigation Inc Agent Informal Docket No 340 1 20

F MC 321 1977

In addition to the findings above the Presiding Administrative Law Judge

finds and concludes that the complainants have failed to prove by a prepon

derance of the evidence the burden of their claims This complaint should

be dismissed

Wherefore it is ordered

A Complaint is dismissed

B This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

1 PM
FEDERAL MARITIME COMMISSION

DOCKET NO 81 75

E A JUFFALI BROTHERS

v

WATERMAN STEAMSHIP COMPANY

ORDER OF ADOPTION

October 21 1983

The proceeding is before the Commission on Exceptions of Complainant

EA Juffali and Brothers and the Reply ofRespondent Watennan Steamship

Company to the Initial Decision of Administrative Law Judge Joseph N

Ingolia in which he denied the Complainant srequest for refund offreight

overcharges Complainant also excepts to the Presiding Officer s Order

of July 12 1983 denying a motion that he recuse himself For the reasons

set forth below the Initial Decision rendered in this proceeding as well

as the Presiding Officer s denial of the Motion to Recuse Himself are

hereby adopted by the Commission

DIscussioN

The complaint alleges freight overcharges in the amount of 19 19177

on five shipments of household freezers carried by Respondent from Nor

folk Virginia to Damman Saudi Arabia The overcharges allegedly stem

from Respondent s refusal to grant a 3 00 pallet allowance provided in

Rule 28 ofthe applicable tariff I

The Presiding Officer denied relief on the ground that although the

shipments were delivered on pallets Complainant had failed to prove that

the pallets complied with the requirements of the tariff The Presiding

Officer also rejected a request of counsel for Complainant to recuse himself

from the case for his allegedly intemperate overreaction to Complainant s

request for a postponement of the hearing and insuitability to be impartial

in this matter

On Exceptions Complainant contends that the Presiding Officer misinter

preted both the facts and the tariff when he concluded that the conditions

set forth in Rule 28 were material elements which called for strict compli

ance and that Complainant had not shown that the shipments met those

requirements Complainant s position is that Items 2 through 5 of the Rule

I 8900 Rate Agreement F M C Agreement No 8900 Freight Tariff No 8 F M C No 8 1st and 2nd

rev page 35 effective 11 1 80 and 61 80 respectively and original page 36 effective 8179

88 26 F M C
E A JUFFALI BROTHERS V WATERMAN STEAMSHIP 89

COMPANY

are merely technical in nature so that non compliance with those require

ments should not bar recovery if what was actually shipped can be identi

fied Complainant points out that the bills of lading not only confirm

that the freezers moved on pallets but also show the total weight and

measurements of each shipment which confirm that on the average the

pallets exceeded the 2000 pounds or 40 cubic feet minimum requirement

ofTariff Item 3 b

With respect to the Presiding Officer s refusal to remove himself from

the case Complainant contends that the Presiding Officer s patently im

proper conclusion supports the request for recusal as well as his intem

perate and unjudicial treatment of an application for extension of time

which demonstrated obvious predisposition towards one of the parties Com

plainant therefore asks that the Initial Decision be reversed and Complainant

be granted the relief requested

Respondent disagrees with the argument that the mere statement in the

bills of lading of the gross weight and measurements and of the number

of pallets satisfied the requirements of Rule 28 Respondent maintains that

Complainant has failed to show by a preponderance of the evidence that

the packing of the cargo actually complied with the material elements

of the palletization allowance rule 2

Upon a careful consideration of the record in this proceeding the Com

mission affirms the Presiding Officer s

finding that Complainant has not

sustained its burden of proving by a preponderance of the evidence that

the pallets satisfied the requirements of Rule 28 of the tariff and supports

his refusal to recuse himself from the proceeding

Complainants argument that the conditions set forth in Rule 28 are

merely technical and procedural and need not be strictly adhered

to is without merit As the Presiding Officer correctly found those condi

tions are material elements of the palletization rule in that the rationale

for requiring that the pallets be constructed in a certain manner is the

benefit to the carrier of greater efficiency in loading and handling the

cargo

3 While the bills of lading confirm that the shipments were palletized

the record contains no evidence that the pallets complied with the other

requirements ofthe palletization rule

A tariff must be considered in whole and not in part in order to avoid

discrimination among shippers Storage Practices at Longview Wash 6

F M B 178 182 1960 Rule 28 requires among other things that the

pallets be constructed to provide a lip of at least 4 inches on two opposite

sides for the lighting aboard vessel with ship s own equipment and that

the pallets be double decked and constructed so as to permit the entry

2

Even though it finds it irrelevant Respondent also objects to Complainant s introduction at this stage

of the proceeding of a telex and a letter from the expon packer attached to Complainant s brief on excep

tions which were not offered in evidence in the course of the hearing nor mentioned in Complainant s post

hearing brief

3Rule 28 does not apply to palletized cargo moving in containers or on trailers

t

FMC
90 FEDERAL MARITIME COMMISSION

of forks or fingers of fork lift trucks or pallet trucks Apart from showing

that the shipments were palletized Complainant has failed to prove that

the pallets met any of those requirements Furthermore Complainant s at

tempt to show that the pallets complied with the weight and measurements

requirements of the Rule is meaningless Because not all the pallets con

tained the same number of pieces averaging the total weight and measure

ment of the pallets in each shipment as Complainant suggests does not

necessarily prove that each pallet exceeded the minimum weight or measure

ment requirement of Item 3 b of the Rule See eg Singer Manufacturing

Co Inc v Delta Steamship Lines Inc 24 F M C 907 1982 The Carbo

rundum Company v Venezuelan Line 17 F M C 195 1973 Kraft Foods

v Prudential Grace Line 17 F M C 159 1973

With respect to Complainant s challenge to the Presiding Officer s denial

of the Motion to Recuse Himself the record is completely devoid of

any evidence that Complainant s counsel was subjected to any abuse In

National Labor Relations Board v Webb Ford Inc 689 F 2d 733 7th

Cir 1982 the court stated

Our standard in determining whether an AUs display of bias

or hostility requires setting aside his findings and conclusions

and remanding the case for hearing before a new ALJ is an

exacting one and requires that his conduct be so extreme that

it deprives the hearing of the fairness and impartiality necessary

to the fundamental fairness required by due process Citations

omitted

Nothing in this record reflects a lack of fairness and impartiality on

the part of the Presiding Officer Rather in light of the Commission s

time limit on the hearing it tends to indicate the Presiding Officer s concern

for an orderly and speedy disposition of the proceeding See In re IBM

Corp 618 F 2d 923 2d Cir 1980 Furthermore the rendering of an

adverse decision is not an indication of bias on the part of the Presiding

Officer Capitol Transportation Inc v U S 612 F 2d 1312 1st Cir 1979

In conclusion the Commission finds that the record supports the Presiding

Officer s denial of the pallet allowance as well as his refusal to remove

himself from the proceeding Other contentions and arguments not specifi

cally discussed have nevertheless been carefully considered and found to

be either without merit or irrelevant to the issues presented

THEREFORE IT IS ORDERED That the Initial Decision of Administra

tive Law Judge Joseph N Ingolia rendered in this proceeding as well

as his denial of the Motion to Recuse Himself are adopted by the Commis

sion and made a part hereof

IT IS FURTHER ORDERED That the complaint is dismissed

l ur
S FRANCIS C HURNEY

Secretary

E A JUFFALI BROTHERS V WATERMAN STEAMSHIP 91

COMPANY

FINALLY IT IS ORDERED That the proceeding is discontinued

By the Commission

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 81 75

E A JUFFALI BROTHERS

v

WATERMAN STEAMSHIP COMPANY

1 Where a tariff provided for a pallet allowance of 3 00 per 40 cu ft and further contained

specific requirements including those that the pallets had to be constnlcted and stacked

in a prescribed manner for loading it is the complainant s burden of proof to establish

that those requirements have been met Such requirements are not merely technical

in nature and are the basis of the pallet allowance in the first instance

2 Where the record contains bills of lading indicating that household freezers moved on

pallets such description standing alone is insufficient to establish that the tariff require

ments giving rise to a pallet allowance have been met and the complainant has failed

in its burden of proving what was actually shipped

Henry Martin and Paul S Aufrichtig for complainant

George H Hearn forrespondent

INITIAL DECISION J OF JOSEPH N INGOLIA ADMINISTRATIVE

LAW JUDGE

ADOPTED OCTOBER 21 1983

By complaint filed on December 10 1981 E A Juffali Brothers

Juffali alleged that Watennan Steamship Corporation Watennan had sub

jected it to payment of rates for ocean transportation in violation of section

18 b 3 of the Shipping Act 1961 The allegation is based on the failure

of Watennan to make a pallet allowance for household freezers shipped

by Juffali aboard vessels owned by Watennan More detailed facts and

discussion are set forth below

FINDINGS OF FACT

1 On December 10 1981 the complainant filed a complaint wherein

it alleged that the respondent had subjected Juffali to

assessment of an ocean freight rate on an exported commod

ity which is entitled to a pallet allowance properly applicable

in accordance with the issued tariff filed with the Federal Maritime

Commission and in effect at the time ofthis shipment

We challenge the omission of the pallet allowance for tariff

No 8 rule 25 page 5

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

92 26 F MC
E A JUFFALI BROTIfERS V WATERMAN STEAMSHIP 93

COMPANY

E A Juffali Brothers has been subjected to payment

of freight rate s without pallet allowance which is unjust and

unreasonable and in violation of l8 b 3 2

Complainant prays that the respondent be required to

pay to said complainant by way of reparation for the unlawful

charge s described in the attached claims the sum of 19 19177

Complaint

2 The complainant submitted bills of lading for the record indicating

that it made five shipments of household freezers from Norfolk Virginia

to Damman Saudi Arabia during the period March 20 1980 through

July 8 1980 aboard Waterman vessels Attachment to Complaint

3 At the time the shipments described in paragraph 2 above were

made The 8900 Rate Agreement under F MC Agreement No 8900

Freight Tariff No 8 FMC No 8 tariff was in effect Page 35 Rule

28 ofthe tariff in pertinent part is as follows

28 PALLETIZED CARGO

1 The provisions in these rules will apply only to prepalletized

cargo on shipper s non returnable pallets except not applicable

to the following commodities

TARIFF ITEMS

30 Air ConditionersCoolers Parts

305 Sodium Tripolyphosphate

All Dangerous and Hazardous

Cargo Items in Accordance with

Rule 16

420 Drilling Muds Clays and Additives

425 Drugs Medicines and Pharma

ceuticals Refrigerated Stowage

only

490 Feed Animal or Poultry Packed

530 Flour not prepared packed in Bags

or Balers

795 Meal including Soybean Cotton

seed and Meat

905 Photographic Apparatus Equipment

etc as described in Item 905

Refrigerated Stowage only

995 All Refrigerated Cargo

1000 Refrigerators or Freezers H H

1015 Rice packed in bags or balers

1065 Salt Table

1155 Stoves Ranges or Ovens and Parts

1265 Washing Machines Dryers H H

Applicable via Waterman Isthmian Line Only

Rule 28 at Page 36 also provided in pertinent part that

2

The complainant later amended the complaint to include section 22 of the Shipping Act 916

26 F M C
94 FEDERAL MARITIME COMMISSION

28 PALLET ZED CARGO Continued

2 These rules do not apply to palletized cargo shipped in cargo

containers and trailers

3 a Shipper to indicate at time of booking that the shipment will

be pre palletized it being understood that each unit is to comprise

cargo destined for one port of discharge and to one consignee

only

b The gross weight or measurement of the pallet and cargo

shall not be less than 2000 lbs or alternatively 40 cubic feet

nor exceed 4480 lbs

c Pallets with cargo unit load are to be of sufficient strength

to withstand the ordinary risks of the ocean voyage and for han

dling and movement during loading and discharge by slings for

lift trucks etc in respect of which it is the shipper s responsibility

toensui ethat these conditions are fulfilled

Pallets must be constructed to provide a lip of at least 4 inches

on two opposite sides for lifting aboard vessel with ship s equipment

Furthermore the pallet must be double decked and constructed so

as to permit the entry of forks or fingers of fork lift trucks or pallet

trucks preferably from any side but at least from two opposite sides

Recommendable size of pallet 40 by 48

d The unit load cargo and pallet must be squared on all

four sides level on top be of sufficient strength to allow overstow

age by other pallets andor other cargo and the cargo must com

pletely cover and preferably overlap the pallet It is recommended

that the overlap does not exceed about one inch on anyone

side

Cargo must be securely fastened on pallets

e When pallet load is made up of more than one commodity

and provided the carrier is supplied with shipper or supplier s

packing list showing dimensions and contents of each package

on the pallet the freight will be assessed on basis of the rate

applicable on each individually packed commodity However if

a package contains more than one commodity the rate for the

highest rated commodity contained therein must be assessed on

the package

t

The identifying marks including the port mark and gross weight

of the cargo and pallet to be clearly visible on two opposite

sides viz those sides adopted for fork lift entry

g Where dangerous cargo is concerned if more than one com

modity is included in the unit load the commodities must be

compatible in classification and stowage requirements and the stat

utory regulations of the country of the carrying Line as to marking

labelling and packing both of unit load and individual package

must be strictly observed

26 F M C
E A JUFFALI BROTHERS V WATERMAN STEAMSHIP 95

COMPANY

4 Bills of Lading shall be c1aused as follows

pallet s said to contain packages

of pounds gross weight including gross weight

ofPallet s

5 a Freight charges on shipments complying with this rule will

be assessed on the measurement based on tariff rule 21 or

weight of the cargo which information must appear on the Bill

of Lading and supported by certified packing list Ifthe measure

ment of the unit load cargo and pallet Rule 5 b below applies

In the event at time of shipment the packing list is not supplied

by the shipper or forwarder or alternatively at the shipper s request

Rule 5 B will apply instead of 5 A

b On Unit loads complying with this rule the cubic measurement

shall be determined by subtracting 10 of the overall cubic meas

urement of the unit load On cargo freighted on a weight basis

the freight to be charged on the gross weight of the unit load

less an allowance of 5

c Further a discount of three dollars 3 00 per revenue ton

for cargo moving under the terms and conditions of this rule

will be made

Exhibits 1 2 and 5

4 Effective September 26 1980 Page 35 of Rule 28 was changed

as follows

28 PALLETIZED CARGO

I The provisions in these rules will apply only to pre palletized

cargo on shipper s non returnable pallets except not applicable

to the following commodities

TARIFF ITEMS

305 Sodium Tripolyphosphate

All Dangerous and Hazardous

Cargo Items in Accordance with

Rule 16

425 Drugs Medicines and Pharma

ceuticals Refrigerated Stowage

only

490 Feed Animal or Poultry Packed

530 Hour not prepared packed in Bags

or Balers

795 Meal including Soybean Cotton

seed and Meat

905 Photographic Apparatus Equipment

etc as described in Item 905

Refrigerated Stowage only

995 All Refrigerated Cargo

1015 Rice packed in bags or balers

1065 SaIt Table

Attachment to Complainant s Post Hearing Brief

26 EM C
96 FEDERAL MARITIME COMMISSION

5 After the shipments involved here were made Ocean Freight Consult

ants OFC conducted a post audit of the complainant s shipping expenses

As a result it filed five overcharge claims for a total amount of 19 19177

with Watennan dated December 8 1980 The basis for the claims was

as follows

Reason for correction Pallet allowance omitted in error see

Rule 28 applicable via Watennan Line only PLEASE SEND

US A COPY OF CORRECTION NOTICE

Attachments to complaint

6 After receiving the overcharge claims Watennan issued correction

notices in the amount claimed during the period December 1980 through

March 1981 However Watennan later cancelled the corrections and made

no refunds Attachment 3 to Respondent s Post Hearing Brief

7 By letter dated April 23 1981 the complainant wrote the Federal

Maritime Commission FMC as follows

Mr James A Warner Chief

Office ofForeign Tariffs

Bureau ofTariffs

Federal Maritime Commission

Washington D C 20573

Dear Mr Warner

We are sorry to be directed to you so needlessly but we have encountered

a confusing exemption which leads us to a dual interpretation of Rule

28 on page 35 1st rev in freight tariff No FMC No 8

In this rule there is a list of tariff items that are excluded from the

benefits of the provision Within the list item 1000 appears exempting

refrigerators from being eligible for the pallet allowance However the

asterisk and its explanations denote that shipments of refrigerators carried

via Watennan Line would in fact be granted the allowance provided by

Rule 28 Ifthis is not the case it is our contention that all other carriers

maintained by your conference would have been listed instead making

it clear that the exemption for refrigerators is NOT APPLICABLE to them

but it is applicable to Watennan only

PM r
E A JUFFALI BROTHERS V WATERMAN STEAMSHIP 97

COMPANY

In addition we would also like to make mention of the fact that this

particular carrier had amended previous shipments via manifest correction

notices therefore agreeing with our contention as stated above We ask

kindly for your informal opinion so we may have the understanding intended

and will consequently be guided in the right direction

Sincerely

S ROBERT LEE

P S Another point for consideration is the matter of ambiguity in the

tariff which as a general rule and if ambiguity does exist it should

be decided in favor of the shipper and not the writer of the tariff

in this case the conference or the steamship company

Attachment to complaint

8 The reply to the letter dated May 28 1981 was as follows

Mr Robert Lee

The OFC Group

World Headquarters

1 World Trade Center

Suite 2473

New York New York 10048

Dear Mr Lee

Reference is made to your letter dated April 23 1981 with enclosures

seeking our informal opinion on the interpretation of Rule 28 published

on 1st Revised Page 35 to 8900 Lines Freight Tariff FMC 8 as it applies

to Waterman Isthmian Line

We agree with your contention and the position as allegedly concurred

in by Waterman Isthmian Line that those items annotated with an asterisk

on the above tariff reference are subject to a pallet allowance when shipped

via Waterman Isthmian Line

As you are perhaps aware 3rd Revised Page 35 effective September

26 1980 provides that Rule 28 is not applicable to Waterman Isthmian

Line Therefore from that date forward Waterman Isthmian Line offers

no allowances for pre palletized cargo on shipper s non returnable pallets

Ifwe can be of further service please feel free to call on us

Sincerely yours

S JAMES A WARNER

JAMES A WARNER CHIEF

OFFICE OF FOREIGN TARIFFS

BUREAU OF TARIFFS

Attachment to complaint

J

I f

r
98 FEDERAL MARITIME COMMISSION

ULTIMATE FINDINGS OF FACT

9 The pallet allowance provided for in the pertinent tariff is applicable

only after certain requirements set forth in the tariff have been satisfied

10 Many of the requirements are not mere technical or book

keeping requirements but rather are material requirements directed to

the manner in which the cargo is loaded and unloaded which in turn

affect the costs of handling the cargo and the reason for the pallet allow

ance in the first instance

11 The record in this case is insufficient and does not establish that

the material requirements contained in the tariff have been satisfied so

as to justify the pallet allowance The complainant has failed to sustain

its burden ofproof

DISCUSSION AND CONCLUSIONS

There is no controversy in this proceeding regarding the fact that the

complainant made five shipments of household refrigerators aboard vessels

of the respondent and as to the date the shipments took place The parties

also agree that the tariff on file governing the shipment contained a basic

rate of 106 00 per 40 cu ft Where they do disagree is on whether

or not a pallet allowance of 3 00 per cu ft should be applied to each

of the shipments giving rise to a refund of 19 19177

Initially the parties argued the applicability of the pallet allowance on

the basis of the meaning of page 35 of the tariff as set forth in the

Findings of Fact paragraph 3 The complainant argued that Rule 28 ex

cepted certain tariff items from the palletized cargo rules but that the

four items bearing an asterisk and applicable to Waterman only were

not excepted and gave rise to the 3 00 per 40 cu ft allowance On

the other hand the respondent argued that the text of Rule 28 identifies

13 commodity items for which no palletization will be provided by any

of the member lines and that as to the four asterisked items including

household refrigerators the rule s nonapplicability would extend only to

Waterman

Once the case was at issue the respondent also asserted that the complain

ant was not entitled to the pallet allowance absent a showing that he

has complied with the rule He asserts that

Complainant s only evidence to substantiate his claim consists

of bills of lading and single page freight claims prepared by a

freight consultant up to eight months after the cargoes were

shipped The bills of lading show only the gross weight and

measurement of each shipment The freight claims simply give

a number of pallets and a gross measurement

Provisions of Rule 28 5 of the applicable tariff provide that

shipments complying with all of the provisions of the rule will

be assessed on the measurement or weight of the cargo less

the measurement of the pallet if this information appears on

J1U
E A JUFFALI BROTHERS V WATERMAN STEAMSHIP 99

COMPANY

the bill of lading and is supported by a certified packing list

In the event that the measurement of the pallet itself exceeds

10 of the measurement of the unit load cargo and pallet

or if a certified packing list is not supplied or upon the shipper s

request the freight charges will be reduced by 10 of the unit

load measurement on measurement rated cargo or 5 of the unit

load weight on weight rated cargo

Section 4 of the Palletized Cargo Rule requires that bills of

lading shall contain a clause stating the number of pallets the

number of packages and the gross weight of the unit loads

Complaint has not complied with these requirements

On the other hand the complainant argues that the bills of lading

issued by the Respondent correctly identify on their face that the goods

in question were palletized Further the complainant asserts

A review of the testimony demonstrates that the Respondent

placed its principle emphasis for seeking to escape liability in

this proceeding upon the alleged technical noncompliance by the

Complainant with certain procedural aspects ofRule 28 The con

ditions to which Respondent alludes are procedural in nature only

Nothing can gainsay the fact that the shipment was accepted

by Respondent and shipped as palletized cargo and is identified

as such on the bills of lading issued by the respondent

In their briefs both of the parties agree with the principle enunciated

by the Commission in Western Publishing Co v Hapag Lloyd A G 13

SRR 16 1972 that reparation for overcharges is based on what is actually

shipped 3 In supporting its view that the tariff palletization requirements

here are merely technical in nature and should not bar recovery the com

plainant cites a series of cases They indicate that the Commission has

allowed reparation even though the shipper did not comply with the tariff

trademark rule 4or has failed to indicate on the bill of lading that the

cargo was proprietary even though the tariff requires such a designation s

While we do not disagree with the holdings in these cases as well

as others cited by the complainant we do not think they are controlling

here In those cases the Commission determined what was shipped and

then held that having once determined what moved it would apply the

tariff rate despite the fact that the bill of lading might be in error or

3See also Ocean Freight Consultants Inc vItalapacijic Line IS F M C 314 13 SRR 151 1972 Merck

Sharp Dohme IA Corp v FiOla Mercante Grancolombiana S

A

18 F M C 384 14 SRR 1624 1975

Pan American Health Organization v Prudential Lines Inc 9 F M C 412 976 where the tariffpro

vided that Bills of lading describing articles by trade name are not acceptable for commodity rating

Bill of lading reflecting only trade names will be automatically subject to application of the rate specified

herein for Cargo N OS as minimum See also Abbott Laboratories v Venezuelan Line 19 F M C 412

1976 Carborundum Co v Royal Netherlands Steamship Co Antilles NV 19 F M C 431 1977

See Durite Corp Ltd v Sea Land Service Inc 20 F M C 674 1978 where the tariff required the

bill of lading to be claused All materials included in this bill of lading are of a wholly proprietary nature

and may not be resold at destination See also Cities Service International Inc v The Lykes Bros

Steamship Co Inc 19 EM C 128 1976
100 FEDERAL MARITIME COMMISSION

that the shipper misdescribed the cargo or that requirements as to trade

names and proprietary cargo may not have been complied with Here

we must determine what moved in light of the issue presented In

determining what moved we are not faced with the usual dilemma

of identifying a particular commodity there is no question that household

refrigerators were shipped Rather in determining what moved here we

must ascertain whether in shipping the refrigerators on pallets the complain

ant complied with the material requirements of the tariff which give rise

to the pallet allowance in the first instance

In essence the complainant urges us to hold that since the bills of

lading indicate the refrigerators were on pallets that is sufficient and all

other tariff requirements are technical in nature We cannot agree While

it may be true that some of the tariff s paper requirements are not material

it is obvious that others are The 300 allowance is clearly based on

the shipper s ability to construct the pallet to provide a 4 inch lip on

two opposite sides to permit the entry of fork lift trucks from at least

two opposite sides to allow the load to be stowed in a particular manner

etc 6

These prerequisites are not technical but are obviously intended to

allow for more efficient loading of the cargo and that efficiency is precisely

why any carrier would give a pallet allowance Merely placing the refrig

erator on a pallet is not sufficient

So here the complainant has the burden of establishing what was actually

shipped Admittedly that burden is in the Commission s words a heavy

burden in that it is difficult to assimilate the necessary facts after ship

ment 8 Such is the case here and the burden has not been met The record

is silent as to whether or not the palletized cargo satisfied any of the

material requirements of the tariff rule and therefore the panet allowance

cannot be allowed While cases of this nature will generally rise or fall

on their own facts this case is similar to the Commission s holding in

Singer Products CQ Inc v Delta Steamship Lines Inc 24 F M C 907

1982 Informal Docket No 1120 1 Like Singer there is a failure of

proof

In their briefs the parties make argument about whether the pallet allow

ance was ever claimed before by the complainant and about the effect

of the respondent s issuance of correction notices These facts while indi

rectly material are not controlling to the resolution of the issue here The

same is true regarding the correspondence with Commission personnel

especially where there is a question of whether or not all facts were

known at the time the correspondence took place

Finally since we have held that the complainant has not met its burden

of proof in establishing what was shipped it is unnecessary to interpret

the meaning of the respondent s tariff rule 28 page 35 We would be

6See Finding of Fact No 3

7Western Publishing Co Inc supra

8

Sanrio Company Ltd v Maersk Line 23 F M C 150 204 1980

Ii PM
E A JUFFALI BROTHERS V WATERMAN STEAMSHIP 101

COMPANY

remiss however if we did not comment by way of dicta that the language

of the tariff and the rule itself was ambiguous and should be avoided

in the future In summary we again wish to stress the fact that in our

view where a pallet allowance is predicated on satisfying material require

ments enumerated in a tariff it is the responsibility of the shipper to

prove what was actually shipped namely whether cargo was correctly

palletized so as to warrant the allowance Conclusory statements on bills

of lading are not enough to satisfy the preponderance of the evidence

test and the record must contain additional facts to establish just how

the cargo was palletized in light of the tariff requirements Any other

result would establish a precedent whereby in effect the respondents in

these cases would be asked to carry a burden of proof which rightfully

is that of the complainants

In light of the above the relief sought in the complaint is denied and

this matter is discontinued

8 JOSEPH N INGOLIA

Administrative Law Judge

26 F M C
FEDERAL MARmME COMMISSION

DOCKET NO 83 29

UNITED STATES NORTH ATLANTIC ITALY POOL AGREEMENT

AGREEMENT NO 102862

NOTICE

October 25 1983

Notice is given that no appeal has been taken to the September 8

1983 discontinuance of this proceeding and that the time within which

the Commission could determine to review has expired No such determina

tion has been made and accordingly the discontinuance has become admin

istratively final

S FRANCIS C HURNEY

Secretary

102 26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 29

UNITED STATES NORTH ATLANTIC ITALY POOL AGREEMENT

AGREEMENT NO 10286 2

MOTION TO WITHDRAW AGREEMENT GRANTED

Finalized October 25 1983

The Proponents filed Agreement No 10286 2 Amendment No 2 which

amends Agreement No 10286 a revenue pooling agreement among Costa

Line Farrell Lines Inc Italia S p

A N Jugolinija Sea Land Service

Inc and Zim Israel Navigation Company Ltd The Commission served

an Order of Investigation and Hearing on July 13 1983 By letter dated

July 29 1983 the Proponents by their counsel withdrew Agreement No

10286 2 and requested that this proceeding be discontinued The Bureau

of Hearing Counsel the only other party to the proceeding has not offered

any objection to the discontinuance Wherefore it is

Ordered that Docket No 83 29 is hereby discontinued

S JOSEPH N INGOLIA

Administrative Law Judge

26 F M C 103
FEDERAL MARITIME COMMISSION

46 C F R PART 540

DOCKET NO 8330

SECURITY FOR THE PROTECTION OF THE PUBLIC

ACI10N

SUMMARY

DATE

Discontinuance ofProceeding

By notice published in this proceeding 48 F R 35675

August 5 1983 the Federal Maritime Commission solic

ited comments regarding its regulations concerning the

Proof of Financial Responsibility to meet Liability In

curred for Death or Injury to Passengers and Other Per

sons on Voyages and for Indemnification of Passengers

for Nonperformance of Transportation 46 C F R Part

540 This notice was published in conjunction with the

Commission s review of the instant regulations conducted

pursuant to section 610 of the Regulatory Flexibility

Act Pub L 9635494 Stat 1164 1169 No comments

were received Since the Commission is unaware of any

need or basis for amending or modifying the require

ments of Part 540 at this time and no comments were

received the Commission has decided to discontinue this

proceeding

Effective October 27 1983

By the Commission

104

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 34

CONTRACT MARINE CARRIERS INC

v

RICHMOND WATERFRONT TERMINALS INC

NOTICE

November 7 1983

Notice is given that no appeal has been taken to the September 28

1983 dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

S FRANCIS C HURNEY

Secretary

26EM C 105
FEDERAL MARITIME COMMISSION

DOCKET NO 83 34

CONTRACT MARINE CARRIERS INC

v

RICHMOND WATERFRONT TERMINALS INC

COMPLAINT DISMISSED

Finalized November 7 1983

This proceeding began with the filing of a complaint on August 17

1983 by Contract Marine Caniers Inc which for the purposes of the

complaint alleged that it is a common carrier by water Complainant alleged

furthermore that respondent Richmond Waterfront Terminals Incorporated

a marine terminal operator filed a Port Improvement Fee in its tariff

effective August 1 1983 which would be assessed against all cargo moved

by complainant through respondent s wharves Such fee according to com

plainant constituted an unjust and unreasonable practice in violation of

section 17 of the Shipping Act 1916 and was prohibited by the Commis

sion s

regulations dealing with wharfage At the request of the parties

I

permitted respondent to defer filing its answer to the complaint to allow

the parties to discuss the situation

On September 22 1983 complainant notified me and respondent by

letter that it wished to withdraw its complaint on the ground that respondent

has withdrawn the subject fee from its tariff effective September 17 1983

In the instant case as complainant notes no answer has been filed

Customarily both the federal courts under Federal Rule 41 a l 28

U S C A and the Commission recognize that a complainant has the right

to withdraw its complaint without conditions when no answer has been

filed and can do so under the federal rules merely by filing a notice

of dismissal See discussion in Companhia Siderurgica Nacional v Lloyd

Brasileiro Complaint Dismissed 25 F M C 655 1983

Accordingly the complaint is dismissed

S NORMAN D KLINE

Administrative Law Judge

106 26 F M C
FEDERAL MARITIME COMMISSION

46 C F R PART 531

GENERAL ORDER 38 AMENDMENT 5 DOCKET NO 8351

PUBLISHING FILING AND POSTING OF TARIFFS IN DOMESTIC

OFFSHORE TRADE

ACTION

SUMMARY

December 8 1983

Final Rule

This amends Federal Maritime Commission tariff filing

rules to provide for 24hour receipt of tariff filings in

the domestic offshore commerce including those trans

mitted by use of electronic filing methods This will

benefit carriers and shippers by enabling them to meet

commercial exigencies

DATE Effective December 14 1983

SUPPLEMENTARY INFORMATION By Notice published in the Federal

Register of October 25 1983 48 FR 49308 49309 the Commission pro

posed to amend its tariff rules for filings in the domestic offshore trade

to permit the receipt of tariff filings on a

24hour basis including those

transmitted by means ofelectronic filing methods

Comments were received from Matson Navigation Company and United

States Lines in response to the Notice Both carriers supported the proposal

fully Accordingly the Commission is adopting the proposed in final form

The provisions of the Regulatory Flexibility Act 5 U S C 601 et

seq do not apply to this final rule Section 601 2 of that Act excepts

from its coverage any rule of particular applicability relating to rates

or practices relating to such rates

List of Subjects in 46 C F R Part 531 Maritime Carriers Reporting and

Recordkeeping Requirements

Therefore pursuant to 5 U S C 553 section 43 of the Shipping Act

1916 46 U S C 841 a and section 2 of the Intercoastal Shipping Act

1933 46 U S C 844 Part 531 of Title 46 is amended as follows

Section 531 2 is amended by revising paragraph i to read as follows

i File Filed Filing of Tariff Matter The actual receipt by

the Federal Maritime Commission at its offices in Washington

D C including those received by electronic transmission

1

Electronic filings are those transmitted through the use of

commercial data processing terminals and conforming to all

the regulations applicable to permanent tariff filings

26 F M C 107
108 FEDERAL MARITIME COMMISSION

Section 5313 is amended by revising paragraph e to read as follows

e Tariff matter will be received by the Commission at its Wash

ington D C offices on an around tile clock basis Receipt of

tariff filings during other than normal business hours will be

timestarnped at a tariff mail drop in the lobby of the Commis

sion s Washington D C offices E1ectronictariff fllingstransmit

ted by electronic modes will be receipted by a datetime device

on the receiving machine

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 50

GENERAL MOTORS CORPORATION V MAERSK LINE AND

W R FILBIN CO INC

NOTICE

December 13 1983

Notice is given that no appeal has been taken to the November 3

1983 dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

5 FRANCIS C HURNEY

Secretary

26 F M C 109
FEDERAL MARITIME COMMISSION

DOCKET NO 8250

GENERAL MOTORS CORPORATION

v

MAERSK LINE AND W R FILBIN CO INC

SETTLEMENT APPROVED COMPLAINT DISMISSED WITH

PREJUDICE

Finalized December 13 1983

The complainant General Motors Corporation GM and the two respond

ents Maersk Line and W R Filbin Co Inc filed a joint motion request

ing approval of their settlement agreement Iand dismissal of the complaint

with prejudice

In my judgment the motion should be granted

PROCEDURAL BACKBROUND

GM filed a complaint served by the Secretary of the Commission on

October 27 1982 seeking reparation in the amount of 25 812 10 from

Maersk 2a common carrier by water in the foreign commerce ofthe United

States in connection with thirty nine shipments ofinternal combustion diesel

engines or such engines and parts from Oakland California to Singapore

during the period from August 1981 through April 1982

As later amended 3the complaint alleged that Maersk had misc1assified

the shipments and charged higher rates for them than should have been

charged had another classification with lower rates been applied all in

violation of section 18 b 3 of the Shipping Act 1916 46 VS C 817 b 3

Maersk responded to the complaint alleging that it had applied the

proper tariff classification and rate to the shipments and requesting that

the complaint be dismissed 4

1 The senlement agreement Settlement is appended to thisorder as AppendiK II

2

A P Moller Maersk Agency and A P Moller Maersk Line were named as respondents in the complaint

Later Maersk Line was substituted for those respondents and the caption of the proceeding was amended

to reflect that change See Procedural Schedule served April 6 1983 Maersk is amember of the Pacific

Straits Conference

3

Amendment to Complaint November 10 1982

4

Memorandum of Arguments on Behalf of Respondents Maersk Line Agency and Maersk Line Answer

December 6 1982

110 26 F M C
GENERAL MOTORS CORPORATION V MAERSK LINE AND 111

W R FILBIN co INC

Thereafter OM again amended the complaint S

this time to bring in

Filbin as an additional respondent Filbin is a licensed foreign freight for

warder 6

In effect OM alleged that after Filbin was informed by Maersk

that the tariff classification affording the lower rates could not be applied

to OM s shipments Filbin failed to relay this information to OM in viola

tion of 46 CFR 510 32 c and d and therefore in violation of section

44c ofthe Shipping Act 1916 46 D S C 84Ib c

7

Filbin filed an answer to the amended complaint 8

denying that it had

failed to inform OM of Maersk s refusal to apply the tariff classification

with the lower rate

There was an extensive prehearing conference on April 5 1983 Near

the conclusion of that conference the parties indicated a willingness to

enter into discussions to explore the possibility of settlement With the

understanding of all parties that my presence during settlement discussions

and negotiations would not result in a request for my recusal should the

effort fail to succeed I agreed to participate to the extent requested in

order to facilitate the settlement process

9

In accordance with that standard

I did participate in off the record discussions at the prehearing conference

and in subsequent telephone conferences

THE TARIFF PROVISIONS IN ISSUE

The governing tariff is Pacific Straits Conference Local and Overland

Freight Tariff No 12 FMC 8 The following Commodity Descriptions

and Commodity Item Numbers appear in that tariff

Commodity Description Commodity Item

I Engines Internal Combustion Piston

Type Engines Compression Ignition

Engines Including Locomotive

2 Parts of Internal Combustion Engines

Including Parts of Non Piston Type En

gines

660 4130 50 10

Hereafter 600 series

660 5000 30 II

Hereafter 600 series

Second Amendment to Complaint January 10 1983

6

F M C No 803

7

See Tractors and Farm Equipment Ltd v Waterman Steamship Corp 25 F M C 375 1982 and

Terfloth and Kennedy Ltd v American President Lines Ltd 22 F M C 81 1979 administratively final

1979 Both stand for the proposition that the Commission has jurisdiction to entertain a complaint alleging

a violation of section 44 arising from aviolation of 46 CFR 510 et seq the Commission s regulations pre

scribing the conduct of licensed freight forwarders and to award reparation therefor under section 22 of the

Shipping Act 1916 46 U S C 821

8Answer to Complaint and Affirmative Defenses Filbin Answer February 17 1983

9Transcript Tr 435

IOTariff p 287

IIld p 289
112 FEDERAL MARITIME COMMISSION

Commodity Description

3 Mixed Commodities

Parts as Per Following

Replacement Assembly and Compo

nent Tractor Parts and

Roadmaking Machinery Parts and

or Combined With Engine Parts

and Generator Parts

Commodity Item

795 0000 1112

Hereafter 700 series

NOTE

Bills of Lading must be claused as follows

This will certify the commodities contained in this shipment

comply with Item 79S 000 11 of Pacific Straits Tariff No 12

FMC 8 13

OM urges that the proper classification and rating for the shipments

is the 700 series whereas Maersk takes the position that the proper classi

fication is one of the two Items in the 600 series depending on whether

the shipment consisted of engines or engines and parts The rates for

the 600 series are higher than the rates for the 700 series

FACIS

14

OM conducts its business through various manufacturing divisions and

wholly owned subsidiaries I Among the many things OM so produces

and sells are diesel engines and parts Over the past twenty years one

of its customers of those products has been General Diesel Supply S

PTE Ltd ODS of Singapore ODS is a fabricator assembler and distribu

tor of machinery including generator sets and diesel electric power plants

In February 1981 OM informed Maersk that it would be making ship

ments of diesel engines and parts to ODS OM advised Maersk that it

believed the 700 series classification and rates to be applicable and shortly

thereafter commenced shipping the engines and parts to Singapore In

2Id p348

3

Among other things Maersk defended on the grounds that the 39 Bills of Lading did nOl contain the

cited clause A parallel situation was presented in Darite Corporalion LId v Sea Land Service Inc 20

F M C 674 1979 ajfd sab nom Sea Land Service Inc v Federal Marlllme Commission 610 F 2d 1000

D C Cir 1979 In Darlle the Commission ruled that a Commission regulation directing the publication

of a similar clausing statement in a tariff ie special project rates was an obligation placed on the carrier

but does not itself impose any obligatIon on the shipper 20 F M C at 676 Thus the shipper s failure

to clause the Bill of Lading is not fatal to its cause in a section 18 b3 reparation case because what

actually is shipped governs the rate to be applied Id

The facts are disputed The statement of facts which appears in the text and which generally paraphrases

complainanl s unlested allegations is intended forthe dual purposes of explainin the ciRumstances underly

ing the proceeding and placIng the Settlement inperspective The statement shall nOl be deemed to constitute

findings of fact

I No useful purpose will be served by singling out the division and subsidiary participating in lhe ship

menlS although they are specified inlhe various documents which make up the adminislrative record

26F M C
GENERAL MOTORS CORPORATION V MAERSK LINE AND 113

WR FILBIN CO INC

March 1981 Maersk notified OM that it was Maersk s preliminary opinion

that the 600 series commodity description was applicable

In May 1981 GM received confirmation from GDS that the end use

of the engines and parts conformed to the standards contained in the 700

series commodity description This information was transmitted to Maersk

whereupon Maersk s Detroit office agreed that the 700 series classification

and rates would be appropriate At approximately the same time GM

notified Filbin its freight forwarder to use the 700 series on the documents

for all upcoming shipments to GDS

StilI later on September 3 198 1

16 Maersk decided that the shipment s

were not entitled to the 700 series rates and that the 600 series rates

should be charged Maersk notified Filbin of its decision to terminate the

700 series rates and to apply the 600 series rates Filbin failed to inform

GM ofMaersk s decision 17

OM did not discover the effect of the September 3rd decision until

the paid freight bilIs were audited 18

Sometime during the latter part of May 1982 Maersk again permitted

the traffic to move at the 700 series rates 19

THE SETTLEMENT

As more fully described in the Joint Motion For Dismissal of Complaint

and Approval of Settlement Joint Motion the Joint Affidavit In Support

of Settlement Agreement 2o and in the Settlement in order to avoid the

expense of what might otherwise become costly and time consuming litiga

tion including an oral hearing to resolve both disputed material facts and

expert testimony the parties have agreed to an allocation whereby the

25 812 1021 claim can be settled The allocation requires Maersk to pay

GM the sum of 13 500 00 and requires Filbin to pay GM the sum of

4 000 00 in full satisfaction of GM s claims against them Mutual releases

wilI be exchanged Neither respondent admits to a violation of the Shipping

Act

The parties also agree that the Settlement shall become effective only

upon approval by the Commission

16 None of the shipments which took place before August I 1981 is in issue Apparently the September

3rd decision was given retroactive effect 10 August I st by way of the issuance of corrected freight bills

See e g Complaint Appendix J Nevertheless Filbin s Answer Appendixes D E and F indicates that with

the knowledge and approval of someone at Maersk some August shipments were carried at 700 series rates

17 There are three different versions concerning theevents which occurred on orabout September 3rd

18 Tr 37

19The events which precipitated this action are unclear but the use of the 700 series rates seems to have

received the sanction of the Pacific Straits Conference Complaint Appendix I Answer p

7 Tr 21 29

3840 41

20The Joint Affidavit is appended as Appendix I

21 By my calculations based on Complaint Appendix K the claim should be reduced to 25 655 28 This

minimal difference does not however affect the Settlement

26 F M r
114 FEDERAL MARITIME COMMISSION

DISCUSSION AND CONCLUSION

It is well settled that legislative and Commission policy encourage settle

ment ofadministrative proceedings and that this policy has met with judicial

favor See e g Terfloth and Kennedy Ltd v American President Lines

Ltd supra 22 F M C at 85 and Del Monte Corp v Matson Navigation

Co 22 F M C 364 367 369 1979 and the authorities cited in each

Nevertheless it is the responsibility of the Commission to ensure that

settlements of section 18b 3 complaints do not result in payment of

charges for transportation which would not otherwise be permitted under

the carrier s tariff Docket No 82 57 Clark InternationalMarketing SA

A Division of Clark Equipment Company v Venezuelan Line Order of

Remand served October 5 1983 Otherwise the Commission explained

to permit application of an improper rate contrary to the provision of

a tariff would be to permit a refund or rebate prohibited by section

18 b 3 Id

In accordance with those principles the established test to determine

approvability of a settlement of a section 18 b 3 complaint22 is as follows

A settlement of a section 18b 3 complaint therefore can only

be approved on a finding that the settlement reflects a reasonable

interpretation of the carrier tariff unless circumstances make such

a finding infeasible Footnote omitted Id

T1e test laid down is stringent but it is infused with an elastic capability

enabling adaptation to situations where circumstances warrant Thus the

strictness ofthe requirement that the settlement reflect a reasonable interpre

tation of the tariff may be alleviated if it is shown that circumstances

exist which make infeasible an application of rates and charges exactly

conforming to the tariff rates indicated by the reasonable construction

The following are some illustrative e amples

Tupperware Co v Compania SudAmericana De Vapores Chilean Line

24 F M C 140 1981 exemplifies the application of the compound strict

test 23 There the Commission vacated an order approving a 40 000 settle

ment of a section 18b 3 complaint seeking reparation in the amount

of 72 072 37 Although the tariff reasonably could have been interpreted

to mean what the complainant claimed and the carrier and shipper agreed

that under that construction there was an overcharge of 72 072 37 no

infeasibility factors were present to invoke the flexibility approach Con

sequently a settlement for less than the amount claimed could not be

approved

22The test wa developed to give parties the opportunity to sellle section 18 b 3 disputes without afind

ing of violation Organic Chemicals Glidden Durkee Division of SCM Corp v Atlanttrajik Express Service

18 SRR IS36a IS39 1979 Organk Chemicals

23N b The twofold test requires that a a reasonable construction of the tatiff pennits application of lower

ratesto the shipments and b the selllement confonn precisely to the specified rates which match that inter

pretation
GENERAL MOTORS CORPORATION V MAERSK LINE AND 115

W R FILBIN CO INC

The flexible test was applied in Terfloth and Kennedy Ltd v American

President Lines Ltd supra The complaint in that case as here alleged

violations of section 18 b 3 by a carrier and violations of section 44 c

by a freight forwarder Approval was given to a settlement whereby the

allegedly culpable carrier and freight forwarder agreed to make individual

payments which together amounted to less than the precise charges under

the tariff as reasonably interpreted

Similarly in Organic Chemicals supra the Commission departed from

the strict test in favor of the more flexible approach stating that a proposed

settlement may be approved even if a finding that the settlement is consist

ent with the tariff cannot be made provided 3

24 the complaint

on its face presents a genuine dispute and the facts critical to the resolution

of the dispute are not reasonably ascertainable

Again in Robinson Lumber Co Inc v Delta Steamship Lines Inc

21 F MC 354 1978 a settlement was approved for less than the full

amount of the section 18 b 3 claim where the complaint also alleged

other violations of the Shipping Act sections 15 16 and 17 46 D S C

814 815 and 816 and where termination of a companion court action

was included in the settlement

In applying the approvability test to the Joint Motion I find that the

Settlement reflects a reasonable interpretation of Pacific Straits Conference

Tariff No 12 FMC 8 and that circumstances exist which make it infeasible

for the Settlement precisely to conform to the 700 series rates

The finding that the Settlement reflects a reasonable interpretation of

the tariff is manifest from the text of the 700 series commodity description

and this interpretation is buttressed by Maersk s

rating of identical shipments

made before September 1 1981 and with apparent Conference approval

after April 30 1982

The finding that there are circumstances which make infeasible the need

for the Settlement exactly to conform to the 700 series rates is based

on several factors As seen the complaint alleges violations of section

18 b 3 by a carrier and of section 44 c by a freight forwarder Cf

Terfloth and Kennedy Ltd v American President Lines Ltd supra More

over it is clear that absent a settlement this proceeding will continue

to be vigorously contested and will require an oral hearing in Detroit

Michigan and possibly San Francisco California to resolve disputed facts

24Subparagraphs I and 2 the technical standards of Organic Chemicals require the following condi

tions to be met

I

a signed agreement is submitted to the Commission 2 the parties file with the settlement

agreement an affidavit setting forth the reasons for settlement and attesting that the settlement is

abona fide attempt by the parties to terminate their controversy and not a device to obtain transpor

tation at other than the applicable rates and charges orotherwise circumvent the requirements of

the Shipping Act

I have characterized subparagraphs I and 2 a technical standards for ease of reference only

Obviously the information required by those subparagraphs provides the substantive basis for the

decision maker to determine whether the settlement is bona fide and approvable under the broader

criteria for settlement of formal proceedings generally

26 F M C
116 FEDERAL MARITIME COMMISSION

including the putative testimony of expert witnesses and issues of culpabil

ity if any

Generally Ifind that the Settlement and Joint Affidavit appended hereto

meet the technical standards of Organic Chemicals supra More important

I find that the Settlement reflects a valid fair and rational solution to

a knotty dispute and obviates the need for extensive and costly litigation

Finally I

find that the Settlement is a bona fide attempt by the parties

to terminate the controversy and is not a device to obtain transportation

at other than applicable rates or charges I

find the Settlement does not

do violence to the regulatory scheme nor does it otherwise seek to cir

cumvent the requirements of the Shipping Act

Accordingly it is ordered that the Settlement be approved and the com

plaint be dismissed with prejudice It is further ordered that within ten

10 days after this order becomes final the parties file an affidavit of

compliance with the terms of the settlement

S SEYMOUR GLANZER

Administrative Law Judge

1

Cj

26 F M C
GENERAL MOTORS CORPORATION V MAERSK LINE AND 117

W R FILBIN CO INC

APPENDIX I

BEFORE THE FEDERAL MARITIME COMMISSION

GENERAL MOTORS CORPORATION

Complainant

v

MAERSK LINE and W R FILBIN CO INC

Respondents

DOCKET NO 82 50

JOINT AFFIDAVIT IN SUPPORT OF SETTLEMENT AGREEMENT

We the undersigned on behalf of complainant General Motors Corpora

tion and respondents Maersk Line and W R Filbin and Company Inc

and being each first severally sworn depose and say for and on behalf

of our respective parties

I The claim involved in Docket No 82 50 arises under the Shipping

Act 1916 and presents a genuine dispute the facts critical to the resolution

of which are not readily ascertainable

2 The parties to Docket No 82 50 have entered into the accompanying

Agreement of Settlement and Mutual Release Settlement Agreement which

upon approval by the Commission will conclusively resolve their dispute

3 The accompanying Settlement Agreement was entered into after a

full and thorough consideration of all the material circumstances involved

herein including among other things the estimated cost of further litigating

the issues herein the possibility to each party of an unfavorable decision

on the merits after further litigation and the desirability of maintaining

amicable relations between the parties

4 The accompanying Settlement Agreement is a fair and reasonable

commercial settlement of the dispute in this case which will avoid the

need for further extensive costly and economically unjustified litigation

5 The accompanying Settlement Agreement is a bona fide attempt by

the parties to terminate this controversy in a commercially reasonable man

ner and is not a device to obtain transportation at other than the lawfully

applicable rates and charges or otherwise circumvent the requirements of

the 1916 Shipping Act or any other applicable law

WHEREFORE for all the foregoing reasons the parties respectfully re

quest Commission approval of their settlement and dismissal of the proceed

26 EM C
118 FEDERAL MARITIME COMMISSION

ing herein in accordance with the tenns of the accompanying Settlement

Agreement

MAERSK LINE

By S MARC J FINK

ROBERT A HAZEL

2033 K Street N W

Washington D C 20006

202 4299090

NOTARIZED

GENERAL MOTORS CORPORATION

By S BENSON T BUCK

3044 West Grand Boulevard

Detroit Michigan 48202

313 5564013

NOTARIZED

i

i pur
GENERAL MOTORS CORPORATION V MAERSK LINE AND 119

W R FILBIN CO INC

W R FILBIN COMPANY INC

By S ROBERT L HINDELANG

235 Lincoln Road

Grosse Pointe MI 48230

313 834 0608

NOTARIZED

26 F M C
120 FEDERAL MARITIME COMMISSION

APPENDIX II

BEFORE THE FEDERAL MARITIME COMMISSION

GENERAL MOTORS CORPORATION

Complainant

v

MAERSK LINE and W R FILBIN CO INC

Respondents

DOCKET NO 82 50

AGREEMENT OF SETTLEMENT AND MUTUAL RELEASE

It is hereby agreed by and between the undersigned complainant General

Motors Corporation GM and respondents Maersk Line Maersk and W R

Filbin Company Inc Filbin that the dispute between these parties

as embodied in Docket No 82 50 should be fully settled and resolved

by mutual accord on the following terms and conditions

1 Within fifteen days after approval of this Agreement by the Federal

Maritime Commission Maersk shall pay to GM the sum of 13 500 in

full satisfaction of GM s claims against Maersk in Docket No 82 50

2 GM in consideration of said payment as provided in paragraph 1

above hereby releases Maersk from any and all claims arising out of

the shipments which are the subject of the claim in Docket No 82

50 GM shall in addition consent to Maersk s

taking all necessary action

to have the complaint against it in Docket No 82 50 dismissed with

prejudice

3 Within fifteen days after approval of this Agreement by the Federal

Maritime Commission Filbin shall pay to GM the sum of 4000 in full

satisfaction of GM s claims against Filbin in Docket No 82 50

4 GM in consideration of said payment as provided in paragraph 3

above hereby releases Filbin from any and all claims arising out of the

shipments which are the subject of the claim in Docket No 82 50 GM

shall in addition consent to Filbin s

taking all necessary action to have

the complaint against it in Docket No 82 50 dismissed with prejudice

5 Neither GM Maersk Filbin nor any successor in interest of the

foregoing parties shall initiate any new claim against any of the other

parties arising in connection with the complaint in Docket No 82 50 except

for enforcement of any provision of thisAgreement

6 It is understood and agreed that this Agreement of Settlement and

Mutual Release is in full accord and satisfaction of all the claims involved

in Docket No 82 50

26 F M C
GENERAL MOTORS CORPORATION V MAERSK LINE AND 121

W R FILBIN CO INC

7 This Agreement shall be submitted for any necessary approval to

the appropriate governmental authorities and shall become effective and

binding upon the parties when such approval is obtained

8 This Agreement of Settlement and Mutual Release constitutes the

entire agreement between the parties

MAERSK LINE

By S MARC J FINK

ROBERT A HAZEL

2033 K Street N W

Washington D C 20006

202 4299090

NOTARIZED

GENERAL MOTORS CORPORAnON

By S BENSON T BUCK

3044 West Grand Boulevard

Detroit Michigan 48202

313 5564013

NOTARIZED

26 EM C
122 FEDERAL MARITIME COMMISSION

W R FILBIN COMPANY INC

By S ROBERT L HINDELANG

235 Lincoln Road

Grosse Pointe MI 48230

313 834 0608

NOTARIZED

26 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1059

APPLICATION OF DISTRIBUTION SERVICES LTD

FOR THE BENEFIT OF TARGET STORES A DIVISION

OF DAYTON HUDSON CORPORATION

ORDER

December 14 1983

This proceeding arose from an application filed by Distribution Services

Ltd DSL requesting permission pursuant to section 18 b 3 of the Ship

ping Act 1916 46 U S C 817 b 3 to waive portions of freight charges

on certain shipments of various commodities The applications are based

on DSL s alleged inadvertent failure to file timely time volume contracts

which it negotiated with Target Stores a

shipper

In his Initial Decision issued on September 16 1983 Administrative

Law Judge Norman D Kline granted the application subject to certain

minor adjustments and required the following notice published in DSL s

tariff

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1059 that this con

tract became effective on January 1 1983 for the purposes of

refunding or waiving any portion of freight charges on any ship

ment that may have moved at a time when the contract was

not filed in this tariff or in DSL s previous tariff FMC No

2

No exceptions were filed to the Initial Decision but by Notice served

October 24 1983 the Commission determined to review the decision of

the Presiding Officer

The Commission has reviewed the Initial Decision and has determined

that the Presiding Officer s

findings and conclusions were proper and well

founded However because the Commission is concerned that the notice

which the Presiding Officer required may not adequately define the period

during which shipments must have moved in order to qualify for a refund

or waiver of freight charges and may not indicate clearly that other quali

fied shippers may take advantage of these contract rates this notice will

be revised by the Commission The Initial Decision will otherwise be

adopted

26 F M C 123
124 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That the Initial Decision issued in

this proceeding be modified to delete the first ordering paragraph and

substitute in its place the following

1 DSL shall publish the following notice in an appropriate place

in its tariff

Notice is hereby given as required by the decision of the

Federal Maritime Commission in Special Docket No 1059

that this contract was effective January 1 1983 continuing

through June 24 1983 This notice is effective for the pur

poses of refund or waiver of freight charges on shipments

qualifying for the time volume contract rates which were

shipped during the specified period of time Retroactive con

tracts for other qualified shippers during this time period

are hereby offered at the same terms applicable to Target

Stores

IT IS FURTHER ORDERED That in all other respects the Initial Deci

sion issued in this proceeding is adopted and is made a part hereof

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1059

APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE

BENEFIT OF TARGET STORES A DIVISION OF DAYTON

HUDSON CORPORATION

Application for pennission to waive portions of freight charges on approximately 190 shipments

of various commodities granted

Applicant had negotiated a time volume contract with the shipper Target Stores but its

tariffpublishing agent had inadvertently neglected to file the contract in the tariff before

January I 1983 as intended The contract was filed effective March 6 1983 was

rejected on March 28 1983 refiled on April 8 and further clarified on April 19 and

June 24 1983

Supplemental evidence furnished by applicant s tariff filing agent provides justification to

pennit applicant to apply the time volume contract from January I 1983 to June 24

1983 and thereafter notwithstanding the temporary rejection and subsequent filing and

clarifications Otherwise the innocent shipper would be deprived of its contractual rights

and similar shipments would be treated differently

Slight misratings occurred on three shipments resulting in a small net undercharge Applicant

will adjust the account accordingly

John Collins Lee Meister and Roy R Sumner for applicant

INITIAL DECISION 1 OF NORMAN D KLINE ADMINISTRATIVE

LAW JUDGE

Partially Adopted December 14 1983

This is the first of three applications filed by a non vessel operating

common carrier by water known as Distribution Services Limited DSL

located in California involving the failure of DSL to file time volume

contracts which it had negotiated with three individual shippers in its tariff 2

The application was first filed received by the Commission s Secretary

on June 27 1983 and was prepared by DSL s tariff publishing agent

Transworld Tariff and Research Service Inc located in Washington D C

Essentially by this application DSL is seeking permission to waive approxi

mately 66 000 in connection with over 190 shipments of various commod

ities which DSL carried from Taiwan Hong Kong and Japan to Los

Angeles utilizing vessels of underlying ocean carriers during the period

January I 1983 through early April 1983 The reason for the application

in short is that DSL s tariff publisher Transworld failed to file the time

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

The other two applications involve Wal Mart Stores Special Docket No 1060 and Edison Brothers Inc

Special Docket No 1061

26 F M C 125
126 FEDERAL MARITIME COMMISSION

volume contract which DSL had negotiated with the shipper Target Stores

in DSL s tariff to be effective on January 1 1983 as intended Instead

the contract was not filed to be effective until March 6 1983 and because

of certain technical problems with the filing was rejected on March 28

1983 refiled on April 8 and further clarified on April 19 and June 24

1983 The upshot of this failure to file was that except for the period

March 6 to March 28 DSL s time volume contract with Target was not

on file in its tariff and the numerous shipments carried under that tariff

for Target were subject to higher tariff rates and in the aggregate substan

tially higher freight costs Because DSL honored the contract and generally

charged the rates which the contract provided DSL is now asking permis

sion to waive the substantial additional freight due under non contract tariff

rates in effect at the times of the shipments DSL therefore is simply

trying to implement the time volume contract which it had negotiated with

Target from January 1 1983 to the time it filed the contract in its tariff

notwithstanding the initial failure to file on the ground that such failure

constituted the type of clerical administrative or inadvertent error which

caused unintended freight increases and which section 18 b 3 was amended

to cure

The application and supporting evidence originally submitted with it pre

sented a number of problems Thus although the evidence included a

tabulation of the 190 or so shipments and copies of the relevant bills

of lading the time volume contract and tariff pages the factual narrative

was relatively sketchy and did not fully explain the error involved nor

the various events following the error and the subsequent filing of the

time volume contract Because of the inadequacy of the initial evidence

furthermore it was impossible to determine a number of critical matters

relating to the validity of the application under law For example one

could not determine if the error involved an inadvertent failure to file

rather than a mistaken understanding of law whether the time volume con

tract had ultimately been filed in the tariff prior to the filing of the applica

tion as required by law whether an application was necessary during the

period March 6 through March 28 1983 when the time volume contract

was on file with DSL s tariff whether the application could be granted

for the period between March 28 1983 when the time volume contract

had been rejected by the Commission s staff for technical reasons and

April 8 1983 when it was refiled whether DSL had misrated a number

of shipments whether the time volume contract in some instances provided

for higher rates than the regular tariff and whether there were discrepancies

between applicant s tabulation of shipments and the data shown on the

underlying bills of lading See my letter to Messrs Sumner and Granthan

dated July 22 1983 asking for explanations of these particular matters

In response to my inquiries Mr Lee Meister of Transworld obtained an

swers to these various questions conducted a more thorough analysis of

the critical events and furnished supplemental evidence which corrected

26 F M C
APPLICATION OF DISTR SERVo LTD FOR THE BENEFIT OF 127

TARGET STORES A DIV OF DAYTON HUDSON CORP

the various deficiencies in the original record See Applicant s Submission

of Additional Justification Statements August 19 1983 Addendum A

and various tariff pages and bills of lading attached On the basis of

these supplementary materials the record has been sufficiently developed

to permit the following findings and conclusions

FINDINGS AND CONCLUSIONS

As shown by the supplemental evidence furnished by DSL s tariff pub

lisher Transworld DSL failed to file a time volume contract which it

had negotiated with the shipper Target Stores in its tariff and had intended

to become effective on January 1 1983 This time volume contract was

originally executed between DSL and Target on December 16 1982 and

as is customary with such contracts provided that DSL would charge

Target certain rates for the transportation of containerized cargo from Far

Eastern countries to Los Angeles or Long Beach California in return for

Target s commitment to ship a certain minimum volume of cargo The

rates set forth in the contract were fa

k

freight all kinds rates ranging

from 37 to 48 per cubic meter However if DSL s tariff published

a lower per container rate on a particular commodity Target would get

the benefit of that lower rate Paragraph 4 E of the original contract

Such contracts are lawful provided they are filed in the carrier s tariff

and comply with other conditions set forth in the Commission regulation

46 CFR 536 7

After negotiating and executing the time volume contract DSL sent a

letter to its tariff publishing agent in Washington Transworld on December

26 1982 instructing Transworld to file the contract in DSL s then current

tariff FMC No 2 However the instructions were sent during the holiday

season which was rather hectic and Transworld set them aside to permit

other filings and then overlooked them with the result that the contract

was not filed to be effective on January 1 1983 as intended The failure

to file furthermore which normally would have been promptly detected

by DSL was not discovered because DSL s pricing supervisor who had

been involved with the contract had taken personal leave from the office

in early January and that person s acting successor had not been informed

that there were any problems about the filing of the contract in DSL s

tariff DSL therefore believed that its time volume contract with Target

had been properly filed in its current tariff and accordingly carried and

rated shipments of Target at the rates prescribed in the contract between

the two It was not until DSL prepared its new tariff FMC No 7 which

included the contract with Target and instructed that it be filed with the

Commission which filing was accomplished on or about February 4 1983

to be effective March 6 1983 that the failure to file the time volume

contract in DSL s tariff was initially corrected However even after March

6 1983 further problems with the filing occurred Thus on March 28

1983 the Commission s staff rejected the contract because of certain ambi

26 EM C
128 FEDERAL MARITIME COMMISSION

guities which the staff believed required correction under the prOVISIons

of the relevant regulation 46 CPR 536 7

3

Promptly after this rejection

DSL and its tariff publishing agent Transworld consulted with the Commis

sion s staff in order to correct the deficiencies and on April 8 1983

the corrected time volume contract was filed once more in DSLs current

tariff FMC No 7 Still further modifications and corrections were nec

essary as a result of the Commission s staffs concern regarding publication

of a mailing address in the United States and the arrangement of certain

items in the contract These matters were corrected on April 19 1983

Finally on June 24 1983 DSL through its agent Transworld filed further

revisions to the contract concerning the method for calculating penalty

charges to the shipper and how minimum volume quantity levels would

change if the force majeure clause had to be invoked To summarize

DSL s time volume contract was not filed with its then current tariff FMC

No 2 between January I 1983 and March 6 1983 From March 6

1983 to March 28 1983 it was on file It was not on file from March

28 1983 to April 8 1983 because of the staffs rejection It was again

on file with certain modifications and clarifications after April 8 1983

and remained in the tariff but was again clarified in certain respects on

April 19 1983 and on June 24 1983 in response to certain concerns

expressed by the Commission s staff

The above history of filings rejections and corrections may appear to

complicate the validity of this application That is because DSL is seeking

to implement an unfiled time volume contract which it negotiated with

Target although for a period of time March 6 to March 28 1983 the

contract was in fact on file in its tariff FMC No 7 was temporarily

out of the tariff between March 28 and April 8 1983 while corrections

and clarifications were made and was again on file in the tariff but was

subjected to further clarifications and modifications The question arises

whether the application can be granted to implement the contract notwith

standing the various changes in the contract and the fact that from March

28 to April 8 1983 the contract was out of the tariff not because of

DSL s inadvertence in failure to file it but because of the staff s concern

over technical requirements and ambiguities in the contract Upon careful

consideration of this situation however I conclude that the particular tech

nical deficiencies and peculiar filing history of the contract ought not to

be interpreted so as to deny the innocent shipper Target the relief which

the remedial statute was intended to grant

3

The corrections to the contract which the staff required had to do with clarifying what rates covered what

cargo and a change in the force majeure clause of the contract As originally tiled effective March 6 1983

the contnlCt provided for f a k rates per cubic meter ranging from 37 to 48 depending on the country of

origin It also provided for alternative commodity rates when application of such rates would result in lower

freight See paragraph 4 E of the original tiling This rating situation was clarified by the tiling on April

8 to specify the a1temate commodity rates The force majeure clause paragraph 8 was also amended to

eliminate reference to commercial contingencies as required by 46 CPR S36 7b 6

26 FM C
APPLICATION OF DISTR SERVo LTD FOR THE BENEFIT OF 129

TARGET STORES A DIV OF DAYTON HUDSON CORP

It is clear that P L 90298 which amended section 18 b 3 of the

Shipping Act 1916 was designed to be remedial ie to relieve innocent

shippers of additional freight costs which they in no way caused but were

brought about because of carriers tariff filing errors The statute is therefore

to be liberally construed and not hindered by narrow interpretations in

order to effectuate its remedial purposes Nepara Chemical Inc V Federal

Maritime Commission 662 F2d 18 22 D C Cir 1981 T he

statute is intended to remedy carrier tariff errors which have adverse eco

nomic effects on shippers shippers should not be made to bear

the consequences of a carrier s bona fide neglect or omission D F

Young Inc v Cie Nationale Algerienne de Navigation 21 F M C 730

731 1979 PL 90298 is a remedial statute enacted to relieve shippers

from the economic consequences of a carrier s error in the filing of tariff

rates Too narrow a construction of the statute would defeat the legislative

intent Ghiselli Bros v Micronesia Interocean Line Inc 13 F MC

179 182 T here is no reason to impose such a strict interpretation

to the filing of special docket applications P L90298 itself is permissive

and affords the Commission wide latitude of discretion in the granting

of special docket applications Application of Lykes Bros to Benefit

Texas Turbo Jet Inc 24 F M C 408 411 1981 As a remedial statute

section 18 b 3 needs to be liberally construed

In order to effectuate the purposes of the remedial statute and to ensure

uniformity to all shipments rated under the contract negotiated between

DSL and Target and ultimately filed in DSL s tariff I conclude that the

application should be granted so as to implement the time volume contract

from the original date January 1 1983 on which it should have been

filed but through the inadvertence of DSL s tariff publishing agent Trans

world was not so filed Therefore from the period January 1 1983 to

March 6 1983 when the time volume contract was not on file in either

DSL s tariff FMC No 2 or its later tariff FMC No 7 relief clearly

ought to be granted and DSL ought to be permitted to waive collection

of additional freight due under tariff rates other than those provided in

the time volume contract From March 6 1983 to March 28 1983 tech

nically DSL may not need permission to apply the time volume contract

rates That is because that contract had been filed effective March 6 and

remained in the tariff until rejected by the Commission s staff on March

28 1983 because of certain ambiguities or deficiencies in the contract

which the staff believed to require clarification under the relevant regulation

46 CPR 536 7 For the period March 28 to April 8 1983 however when

the contract was temporarily out of the tariff I conclude that DSL should

likewise be permitted to waive collection of additional freight due under

higher non contract tariff rates Although one may argue that during this

period the failure to have the contract on file was not caused by the

usual type of clerical or administrative error encountered in special docket

proceedings one could also argue that the failure was the result of an

26 F M C
130 FEDERAL MARITIME COMMISSION

inadequate or unclear filing that OSL had therefore committed another

error which is remediable under section 18 b 3 of the Act and that

OSL had never succeeded in filing the contract in fully satisfactory condition

until June 24 1983 If so then relief should be given the shipper from

January I 1983 through that date so as to eliminate all adverse effects

flowing from the original error and any subsequent errors

Regardless of how one construes the error involved in the March 28

rejection by the staff however there are independent grounds for granting

the relief requested during the entire period between January I 1983 and

June 24 1983 First the remedial provisions of section 18 b 3 of the

Act require uniformity among similar shippers and shipments by providing

that applications can be granted only if discrimination among shippers

does not thereby result Section 18 b 3 first proviso last clause Although

the statute refers to shippers rather than shipments clearly it promotes

uniformity among shipments of similar commodities in accordance with

the traditional purpose of tariff law4As OSL argues denial of relief

for the brief period March 28 April 8 on technical grounds would result

in disparate treatment of shipments which were all intended to be covered

by rates provided in the contract namely application of the contractual

rates from January I 1983 to March 28 1983 application of non contract

tariff rates between March 28 and April 8 1983 and application of contrac

tual rates thereafter This result would upset the contractual expectations

of both parties and produce a bizarre disparity in rating among shipments

of similar commodities Such denial would also penalize the innocent ship

per Target by prohibiting application of its contractual rights because

of ambiguities in the original filing of the contract of a technical nature

and a consequent staff decision to reject the filing pending clarifications

Second the Commission does not usually penalize parties because of tech

nical errors which result in temporary rejection of a filing which is later

corrected especially under a remedial statute See Application of Southern

Pacific International Inc for the Benefit ofGeneral Motors Overseas Corp

21 SRR 833 10 F M C notice of finality June 11 1982 TDK Elec

tronics Co Ltd v Japan Lines Ltd 22 F M C 769 1980 5

I conclude

4Moreover the implementing regulation Rule 92 a 46 CPR 502 92 a indicates that uniformity among

similar shipments is also intended when it specifies that applicants must state whether there are shipments

of other shippers of the same or similar commodity See alsoApplication ofPacific Westbollnd CoTfference

for theBenefit of Minnesota Mining Mfg Co 21 SRR 793 I D F M C notice of finality May 14 1982

In that application reliefwas granted to shipments of the same commodity for the single shipper even though

some early shipments fell outside the ISO day period of limitation This was done to prevent discrimination

among similar shipments

In the former case cited the Commission permitted the grant of an application which had first been re

jected for technical reasons by the Commission s Secretary but had been corrected and refiled beyond the

180day period of limitation prescribed by section 18 b 3 of the Act The Commission considered the origi

nal defective filing which had been within the 18O day period as valid for purposes of meeting the time

limitation In TDK Electronics similarly the Commission considered the merits of a

complaint alleging viola

tions of law even though the complaint had originally been returned because of technical deficiencies but

had been corrected and refiled beyond the two year period permiued by section 22 of the Act Moreover

in an effort to ensure uniformity among shipments of similar commodities in special docket proceedings the

26 F M C
APPLICATION OF DISTR SERVo LTD FOR THE BENEFIT OF 131

TARGET STORES A DIV OF DAYTON HUDSON CORP

therefore that there are valid grounds to permit DSL to waive collection

of additional freight costs on every shipment moving between January

1 1983 and June 24 1983 when the final corrected version of the contract

was filed in satisfactory condition including the brief period March 28

to April 8 when the contract was out of the tariff undergoing correction

in response to the requests of the Commission s staff

I conclude in summary that DSL committed an error of the type con

templated by section 18 b 3 of the Act when its tariff publishing agent

inadvertently failed to file in DSL s tariff the time volume contract which

DSL had negotiated with the shipper Target Stores by January I 1983

I conclude furthermore that to ensure uniformity among shipments and

eradicate all effects ofthe original tariff filing error DSL should be allowed

to implement the time volume contract from January 1 1983 when it

should have been filed to the time it finally filed a fully satisfactory

form ofthe contract in compliance with the Commission s

regulation which

was done on June 24 1983 and of course to implement the contract

thereafter as published in DSL s tariff The effect of this decision is

to relieve the shipper Target Stores of some 60 000 of additional freight

costs less some additional costs which DSL erroneously included in its

application during the period March 6 to March 28 1983 when the contract

had been on file and such costs would not have been due 6

I find also that the three statutory conditions regarding the time of

filing the application the filing of the new corrective tariff and the preven

tion of discrimination among shippers have been satisfied The only remain

Commission has pennitted retroactive application of unfiled tariff rates for overa

year s time notwithstanding

the nonnal 180 day period of limitation in the filing of such special docket applications See Application of

Pacific Westbound Conference on Behalf of Korea Marine Transport Co Ltd for the Benefit of Mitsui and

Co U S A Inc 25 F M C 350 1982 See also Application of Pacific Westbound Conference for theBene

fit of Minnesota Mining Mfg Co cited above 21 SRR 793

6

Although the original filing of the time volume contract on March 6 1983 was rejected by the staff

on March 28 1983 for cenain technical reasons and ambiguities of language the general rule is that the

tariff contract while it was on file was legally binding and did not become unlawful until after rejection

Therefore OSL would have been bound to charge contract rates during the period March 6 to March 28

1983 See EJ DuPont de Nemours and Co v Sea Land Service Inc 22 F M C 525 535 536 1980 and

cases cited therein

7

As mentioned earlier the application was originally filed received by the Commission s Secretary on

June 27 1983 The application was lacking acenificate showing the date of delivery ormailing which cer

tificate was furnished on July 8 1983 The Commission has pennitted the original date of filing to control

notwithstanding later corrections and refilings as I have discussed above See Application of Southern Pacific

International Inc cited above 21 SRR 833 and TDK Electronics Co Ltd v Japan Lines LId cited above

22 F M C 769 All of the shipments concerned moved on or after January 5 1983 which is only 173 days

before June 27 1983 and therefore within the 180 day period required by law The time volume contract

was filed in OSL s tariff FMC No 7 initially effective March 6 1983 and again with clarifications on

April 8 1983 April 19 1983 and finally on June 24 1983 See OSL s tariff FMC No 7 original first

second and third revised pp 147 148 149 The affected shipments all concern one shipper Target Stores

As required by section 18 b 3 and the Commission sregulation concerning the filing of time volume con

tracts OSL will be required to file atariff notice which will publicize the contract with Target This should

prevent discrimination among shippers However it should be noted that there is no evidence of another Tar

get like shipper seeking such a contract and OSL has negotiated and filed contracts with other large volume

shippers for two of whom OSL has also filed special docket applications because of similar failures to file

the contracts

14 r
132 FEDERAL MARITIME COMMISSION

ing matter concerns a few misratings which DSL will be required to correct

as a condition for the granting of the application

INADVERTENT MISRATINGS AND NECESSARY CORRECTIONS

As mentioned above earlier in this decision examination of the bills

of rating under which the approximately 190 shipments moved revealed

several apparent discrepancies and rating errors On certain shipments it

appeared that DSL had applied incorrect rates not found in the tariff or

in the TVC and initially that on some shipments granting the application

might result in increased freight costs because contract rates were higher

However applicant has furnished explanations and evidence showing that

in most of the questionable shipments DSL applied correct rates and that

freight costs did not increase under the contract rates On three shipments

out of more than the 190 involved however it appeared that DSL had

made inadvertent rating errors and after DSL had been notified of these

apparent mistakes DSL acknowledged them See my letter to Messrs

Collins of DSL and Meister of Transworld dated August 23 1983 and

Mr Meister s sWl rn statement of September 7 1983 The net result of

the rating errors on the three shipments is an undercharge of 67 31

which DSL will be required to recover by an appropriate adjustment in

its account with Target 8

Accordingly the application is granted provided that DSL complies with

the following instructions

1 DSL shall publish the following notice in an appropriate place in

its time volume contract filed in its tariff

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1059 that this con

tract became effective on January 1 1983 for the purpose of

refunding or waiving any portions of freight charges on any ship

ments that may have moved at a time when the contract was

not filed in this tariff or in DSLs previous tariff FMCNo

2

2 DSL shall waive portions of freight charges in connection with the

shipments discussed above for the benefit of the shipper Target Stores

within 30 days of service ofthe Commission s notice rendering this Initial

Decision administratively final and shall within 5 days thereafter notify

the Commission ofits action in this regard

s

The three shipments are shown as nos 2 10 and 16 on applicant s Addendum A and in my letter

of August 23 1983 In no 2 DSL had inadvenently applied arate of 45 to ashipment from Japan instead

of the ITeCt rate of 48 Rsultiog in an under harge of 27 83 In no 10 DSL had harged a shipment

of fumiluR kid under a 2000 per ODtainer rate fortwo containers and a 37 rate for the third The correc l

rate for each container was 1680 The error Rsulted in an overcharge of 660 52 In no 16 DSL had

charged a shipment of seven containers at 1400 per container instead of the correc t rate of 1500 per con

tainer for a shipment of seven containers The result was an under harge of 700 The net result of lhese

undercharges and overcharge is 67 31 727 83 less 660 52 See MeiSler statement of September 7 1983

aur
APPLICATION OF DISTR SERVo LTD FOR THE BENEFIT OF 133

TARGET STORES A DIV OF DAYTON HUDSON CORP

3 DSL shall make an appropriate adjustment to its account with Target

to correct the rating errors that occurred on three shipments discussed

above and similarly notify the Commission

NORMAN D KLINE

Administrative Law Judge

26 EM C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1060

APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE

BENEFIT OF WAL MART STORES INC

SPECIAL DOCKET NO 1061

APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE

BENEFIT OF EDISON BROTHERS INC

ORDER

December 14 1983

This proceeding arose from two applications filed by Distribution Services

Ltd DSL requesting permission pursuant to section 18 b 3 of the Ship

ping Act 1916 46 U S C 817 b 3 to waive portions of freight charges

on certain shipments of various commodities The applications are based

on DSL s alleged inadvertent failure to file timely time volume contracts

which it negotiated with two shippers Wal Mart Stores Inc and Edison

Brothers Stores Inc The applications were consolidated for decision by

Administrative Law Judge Norman D Kline

In his Initial Decision issued on October 3 1983 the Presiding Officer

granted the applications subject to certain minor adjustments and required

the following notices published in DSL s tariff

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1060 that this con

tract became effective on January 1 1983 for the purposes of

refunding or waiving any portion of freight charges on any ship

ment that may have moved at a time when the contract was

not filed in this tariff or in DSL s previous tariff FMC No

2

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Docket No 1061 that this contract

became effective on January 1 1983 for the purpose of refunding

or waiving any portion of freight charges on any shipment that

may have moved at a time when the contract was not filed

in this tariff or in the previous tariff FMC No 2

No exceptions were filed to the Initial Decision but by Notice served

October 26 1983 the Commission determined to review the decision of

the Presiding Officer

134 26 EM C
APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE 135

BENEFIT OF WAL MART STORES INC ET AL

The Commission has reviewed the Initial Decision and has determined

that the Presiding Officer s

findings and conclusions were proper and well

founded However because the Commission is concerned that the notices

which the Presiding Officer required may not adequately define the period

during which shipments must have moved in order to qualify for a refund

or waiver of freight charges and may not indicate clearly that other qualified

shippers may take advantage of these contract rates those notices will

be revised by the Commission The Initial Decision will otherwise be

adopted

THEREFORE IT IS ORDERED That the Initial Decision issued in

this proceeding be modified to delete the first and second ordering para

graphs and substitute in their place the following

1 DSL shall publish the following notice in an appropriate place

or places in its tariff

Notice is hereby given as required by the decision of the

Federal Maritime Commission in Special Docket Nos 1060

and 1061 that this contract was effective January 1 1983

continuing through June 24 1983 This notice is effective

for the purposes of refund or waiver of freight charges on

shipments qualifying for the time volume contract rates which

were shipped during the specified period of time Retroactive

contracts for other qualified shippers during this time period

are hereby offered at the same terms applicable to Wal

Mart Stores Inc and Edison Brothers Stores Inc

IT IS FURTHER ORDERED That in all other respects the Initial Deci

sion issued in this proceeding is adopted and is made a part hereof

By the Commission

FRANCIS C HURNEY

Secretary

i F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1060

APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE

BENEFIT OF WAL MART STORES INC

SPECIAL DOCKET NO 1061

APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE

BENEFIT OF EDISON BROTHERS INC

Applications for pennission to waive portions of freight charges on approximately 300 ship

ments of various commodities granted

Applicant had negotiated time volume contracts with two shippers but its tariff publishing

agent had inadvertently neglected to file the contracts in the tariff before January I

1983 as intended subjecting the two shippers to substantial increases in freight costs

Essentially the same error occurred affecting another contract in Special Docket No

1059 Application of Distribution Services Ltd for the benefit of Target Stores which

application was granted

Slight misratings occurred on three shipments of Wal Mart Stores Inc resulting in a small

net undercharge Applicant wiII adjust the account accordingly

John Collins Lee Meister and Roy R Sumner for applicant

INITIAL DECISION I OF NORMAN D KLINE ADMINISTRATIVE

LAW JUDGE

Partially adopted December 14 1983

This decision involves two applications filed by a non vessel operating

common carrier by water known as Distribution Services Limited DSL

located in California and concerns DSL s inadvertent failure to file timely

two time volume contracts which it had negotiated with two shippers Wal

Mart Stores Inc and Edison Brothers Stores Inc Because the applications

involve virtually the same problems I have consolidated them for decision

as designee of the Chief Judge Rule 148 46 CPR 502 148

The facts surrounding DSL s inadvertent failure to file the two time

volume contracts and DSL s subsequent filings and clarifications of the

contracts in its tariff are virtually identical to those existing in an earlier

special docket proceeding Special Docket No 1059 Application ofDistribu

tion Services Ltd for the Benefit of Target Stores a Division of Dayton

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

136 26 F M C
APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE 137

BENEFIT OF WAL MART STORES INC ET AL

Hudson Corporation 26 F M C 123 2

Essentially as in No 1059 DSL

had negotiated time volume contracts with the shippers Wal Mart and Edi

son Brothers some time in December of 1982 December 16 and December

27 respectively providing for certain rates in return for a specified mini

mum volume of cargo the contracts to expire on December 31 1983

and September 30 1983 respectively However as in No 1059 DSL

sent instructions in late December of 1982 to its tariff publishing agent

Transworld Tariff and Research Service Inc located in Washington D C

but because of end of the year pressures Transworld overlooked the instruc

tions and failed to file the contracts by January 1 1983 as DSL had

intended Furthermore because of DSL s failure to note that the time

volume contracts had not been filed in DSL s current tariff FMC No

2 as of January 1 1983 the contracts were not filed until early February

to be effective on March 6 1983 in DSL s new tariff FMC No 7

As with the Target contract in No 1059 furthermore the two contracts

were found to be defective under the Commission s

regulations 46 CFR

536 7 were rejected by the Commission s staff on March 28 1983 to

allow appropriate clarifications and were refiled on April 8 1983 after

the corrections had been made In response to other staff concerns the

contracts were again corrected and refiled on June 24 1983 3

DSL s inadvertent failure to file the contracts by January 1 1983 and

the subsequent rejection on March 28 1983 affected numerous shipments

which DSL had carried for Wal Mart and Edison Brothers beginning on

or after January 7 and January 8 1983 respectively approximately 141

shipments for Wal Mart and 160 for Edison Brothers Unless DSL is granted

relief and is allowed to implement its contracts with these two shippers

DSL will have to recover something like 23 000 in additional freight

from Wal Mart and 18 000 from Edison Brothers although those shippers

had entered into contracts with DSL in the expectation of having the

contracts honored under the lower rates prescribed and DSL honored the

contracts and charged the rates prescribed therein notwithstanding the tariff

filing error

4

2

In No 1059 applicant s original application and supporting evidence were incomplete and unclear as to

the nature of the tariff filing error the events surrounding the filing of the contract and other maUers The

record was satisfactorily developed by supplemental evidence however and the various ambiguities and un

certainties were eliminated Similarly applicant has supplemented the record in these two proceedings show

ing that the contract involved in No 1059 and the two contracts involved in these two proceedings were

essentially all affected by the same events See swom statement of Lee Meister September 27 1983

3

As with the Target contract the staff had rejected the filings on March 28 1983 because of lack of

clarity as to what rates applied on particular commodities and because of a

problem with the wording of

the force majeure provisions of the contracts After refiling on April 8 there were other technical problems

with the contracts which were corrected on May 9 and June 3 1983 having to do with inclusion of a United

States mailing address description of the foreign ports covered and inclusion of a rate on handtrucks On

June 24 1983 the contract was clarified again with respect to the force majeure and penalty provisions See

sworn statement of Lee Meister September 27 1983

4

As in the case of the Target application No 1059 these figures may be somewhat overstated because

they include the period March 28 through April 8 1983 when the contracts were on file in the tariff and

Continued

26 EM C
138 FEDERAL MARITIME COMMISSION

I have discussed the facts and legal consequences in detail in my Initial

Decision in No 1059 cited above and need not repeat them here in

detail Briefly Ifound that the initial failure to file the time volume contract

qualified under the remedial provisions of section 18 b 3 of the Shipping

Act 1916 as an inadvertent failure to file negotiated rates resulting in

increased costs to an innocent shipper I further found that the subsequent

rejection clarifications and refilings on March 28 April 8 and June 24

1983 in that case ought not to prevent the granting of complete relief

In other words as in No 1059 DSL ought to be able to implement

its contracts from January 1 1983 to date and give the shippers the benefits

of their bargains regardless of the peculiar filing history of the contracts

and the question of whether during the period March 6 through March

28 1983 when the contracts were on file relief is technically required

As in No 1059 I

rely upon the remedial purposes of the statute the

various admonitions of a court and the Commission to read the statute

broadly rather than narrowly and technicalJy in order to effectuate its

beneficial purposes the specific need to ensure uniformity among similarly

situated shipments carried throughout the affected periods and the Commis

sion s policy of not penalizing parties because of their technical filing

errors which are later corrected

I conclude therefore that as in No 1059 DSL committed a tariff

filing error in failing to file two time volume contracts in its tariff by

January 1 1983 as intended and that the application should be granted

to cover the entire period January 1 1983 to June 24 1983 the date

of final filing so as to implement the contractual rights of the innocent

shippers and ensure uniformity among shipments Ifind also that the three

statutory conditions regarding the time of filing the application the filiAg

of the new corrective tariff and the prevention of discrimination among

shippers have been satisfied s The only remaining matter concerns a few

misratings in connection with three Wal Mart shipments which DSL will

be required to correct as a condition for the granting of the application

INADVERTENT MISRATlNGS AND NECESSARY CORRECTIONS

As happened in the Target case it appears that out of some 141 shipments

for Wal Mart DSL inadvertently committed some minor errors in rating

These rating errors occurred on three shipments on bills of lading dated

January 20 January 24 and March 23 1983 On the first bill of lading

DSL charged a rate of 40 00 WM instead of the contract rate of 60 60

were probably legally binding Ifso then DSL would have had to charge contract rates anyway and arguably

need not seek permission to waive additional charges for tbal period of time

The applications were both filed received by the Commission s Secretary on June 27 1983 which is

less than the 180 days required by law from the date of shipment on orafter January 7 1983 The contracts

were filed effective March 6 1983 and withclarifications on June 24 1983 The affected shipments involve

only Wal Mart and Edison Brothers The tariff notice which DSL will be required to file will publicize the

contracts and there is no evidence of any similar shippers who were seeking the same contracts but were

denied such contracts

4C C l A
S NORMAN D KLINE

Administrative Law Judge

APPLICATION OF DISTRIBUTION SERVICES LTD FOR THE 139

BENEFIT OF WAL MART STORES INC ET AL

WM from the Philippines On the second bill of lading DSL charged

a rate of 4318 WM instead of the contract rate of 425 from Korea

On the third bill of lading a tiny shipment of only 24 cubic meters

DSL apparently showed no charge at all on its bill of lading These apparent

errors I called to DSL s attention through its tariff publishing agent Trans

world to allow DSL to check and verify them After so doing DSL

acknowledged the errors The netresult of the three errors is an undercharge

of 258 95 See Addendum A attached to sworn statement ofLee Meister

September 27 1983 DSL will be required to recover this amount by

an appropriate adjustment to its account with Wal Mart

Accordingly the applications are granted provided that DSL complies

with the following instructions

1 DSL shall publish the following notice in an appropriate place in

its tariff applicable to the subject contract with Wal Mart

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1060 that this con

tract became effective on January 1 1983 for the purpose of

refunding or waiving any portions of freight charges on any ship

ments that may have moved at a time when the contract was

not filed in this tariff or in DSL s previous tariff FMC No

2

2 DSL shall publish the following notice in an appropriate place in

its tariff applicable to the subject contract with Edison Brothers

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1061 that this con

tract became effective on January I 1983 for the purpose of

refunding or waiving any portions of freight charges on any ship

ments that may have moved at a time when the contract was

not filed in this tariff or in the previous tariff FMC No 2

3 DSL shall waive portions of freight charges in connection with the

shipments discussed above for the benefit of the shippers Wal Mart Stores

Inc and Edison Brothers Stores Inc within 30 days of service of the

Commission s notice rendering this Initial Decision administratively final

and shall within 5 days thereafter notify the Commission of its action

in this regard

4 DSL shall make an appropriate adjustment to its account with Wal

Mart to correct the rating errors that occurred on the three shipments

discussed above and similarly notify the Commission

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 21

MODIFICATION OF NEW YORK FREIGHT BUREAU AGREEMENT

NO 570029

NOTICE

December 2J J 983

Notice is given that no appeal has been taken to the November 14

1983 dismissal of the complaint in this proceeding and that the time within

which the Commission could detennine to review has expired No such

detennination has been made and accordingly the dismissal has become

administratively final

S FRANCIS C HURNEY

Secretary

140 26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 21

MODIFICATION OF NEW YORK FREIGHT BUREAU AGREEMENT

NO 570029

MOTION TO DISMISS GRANTED

Finalized December 21 1983

On November 3 1983 the respondents filed a motion to dismiss this

proceeding pursuant to Rule 73 of the Commission s Rules of Practice

and Procedure 46 CFR 502 73 They state

In a duly constituted action taken in Hong Kong on Novem

ber 1 1983 the Bureau voted to withdraw the application ie

Agreement No 570029 and to notify the Commission s Secretary

ofthe said withdrawal action

This motion is grounded upon the premise that inasmuch as

the subject matter of the proceeding has become moot there is

no longer a need to pursue the issues assigned in the docketed

case and the proceeding should be dismissed

On November 7 1983 Hearing Counsel which is the only other party

to the proceeding other than the respondents filed a

reply to the respond

ents Motion to Dismiss wherein they stated they had no objection to

the motion being granted

Wherefore in view ofthe above it is

Ordered that the respondents Motion to Dismiss this proceeding is

granted and the proceeding is hereby discontinued

S JOSEPH N INGOLIA

Administrative Law Judge

C l Ar 111
FEDERAL MARITIME COMMISSION

46 C F R 508 DOCKET NO 82 58

ACTION TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO

SHIPPING IN THE UNITED STATES VENEZUELA TRADE

December 30 1983

Discontinuance of Proposed Rule

On September 13 1983 Concorde Nopal Line moved

the Commission to suspend action on its Petition For

Issuance of Rules To Adjust Or Meet Conditions Unfa

vorable to Shipping in The United States Venezuela

Trade filed on July 8 1983 In that motion the Commis

sion was advised that the United States and Venezuela

had entered into a Memorandum of Consultation en

compassing terms permitting Concorde Nopal to apply

for provisional status to participate in the U SlVenezuela

trade Concorde Nopal has now notified the Commission

by letter from its counsel that its application for provi

sional status has been granted

Concorde Nopal will thus be able to carry cargoes otherwise reserved

by the Government of Venezuela to Venezuelan flag and associate carriers

continuing its longstanding service in the trade Concorde Nopal states that

its status is provisional pending the outcome of further negotiations sched

uled for the first quarter of 1984 between the U S and Venezuela concern

ing a bilateral maritime agreement and is subject to certain unspecified

conditions applicable only to the operations of Concorde Nopal in this

trade Concorde Nopal asks the Commission to continue to suspend further

proceedings on this matter

Concorde Nopals concerns regarding its continued participation in the

trade appear to have been alleviated by the Venezuelan government s grant

of provisional associate status The Commission sees no reason to continue

the present docket because of Concorde Nopal s apparent fears that its

provisional status will prove transitory or because of dissatisfaction with

the unnamed conditions imposed on its service The information provided

the Commission by Concorde Nopal indicates simply that it has been granted

provisional associate status a state of affairs no more transitory or less

secure than the interim associate status previously granted the two U S

flag carriers whose petitions for relief under section 19 b of the Merchant

Marine Act 1920 46 U S C 876 b resulted in initiation of this proceed

ing If Concorde Nopal s status changes or its service suffers from the

imposition of significant discriminatory conditions it may again petition

ACTION

SUMMARY

142

Delta Steamship Lines Inc and Coordinated Caribbean Transport

26 F M C
ACfION TO ADJUST OR MEET CONDITIONS UNFAVORABLE 143

TO SHIPPING IN THE UNITED STA TES vENZUELA TRADE

the Commission for action pursuant to section 19 No purpose would be

served by continuation of the present inactive proceeding

THEREFORE IT IS ORDERED That this proceeding is discontinued

DATE Effective January 12 1984

SUPPLEMENTARY INFORMATION

None

By the Commission

S FRANCIS C HURNEY

Secretary

f PMr
j

j

FEDERAL MARITIME COMMISSION

DOCKET NO 83 33

IN THE MATIER OF RATES APPLICABLE TO OCEAN SHIPMENT

OF ASSOCIATED FACTORIES INC

Because neither the canier s tariff nor prevailing steamship practice define the method to

be used to calculate the cube of rolls of carpet shipper may have the benefit of the

measurement method which yields the lowest rate

Where an ambiauity exists in the canier s tariff it will be construed in a manner most

favorable to the shipper

Edward T Brennan and Stephen W Irving for Associated Factories Inc

Claudia E Stone and Stephen F Wahl for Sea Land Service Inc

REPORT

December 30 1983

BY THE COMMISSION Alan Green Jr Chairman James J Carey

Vice Chairman James V Day Thomas F Moakley and Robert

Setrakian Commissioners

This matter comes before the Commission on referral from the United

States District Court for the Southern District of Georgia

The case before the Court concerns a dispute between Associated Fac

tories Inc Associated and Sea Land Service Inc Sea Land over the

correct method of rating shipments of carpets Associated has refused to

pay ocean freight which Sea Land believes is due on several shipments

of carpets As a result the 8900 Rate Agreement to which Sea Land belongs

has revoked Associated s credit privileges Associated brought the action

in District Court seeking to have its credit privileges restored and is seeking

punitive damages The specific question referred to the Commission by

the District Court is how the volume of carpet rolls should be measured

for the purpose ofcalculating ocean freight

By Notice served August 3 1983 August Notice the Commission ad

vised that it would treat the matter as a request for declaratory order

under Rule 68 of the Commission s Rules of Practice and Procedure 46

C F R 502 68 The August Notice also established a briefing schedule

allowing for the filing of memoranda of law and affidavits of fact Both

Associated and Sea Land have responded to the Commission s August No

tice

DISCUSSION

The ultimate issue presented here is simply whether Sea Land properly

rated the shipments of carpets tendered to it by Associated in calculating

144 26 F M C
IN THE MATIER OF RATES APPLICABLE TO OCEAN SHIPMENT 145

OF ASSOCIATED FACTORIES INC

the cubic measurement of the rolled carpet using the greatest dimensions

of the roll hereinafter rectangularization

Sea Land argues that Rule 21 A of the 8900 Rate Agreement Freight

Tariff No 8 FMC No 8 Original Page 29 governs the measurement

of carpet rolls Rule 21 A states in relevant part 1 All cargo shall

be measured on the overall measurements ofthe individual packages unless

otherwise specified Sea Land contends that applying Rule 21 A to the

measurement of a roll of carpet results in a volume which is the product

of the length of the roll times its width i e diameter times its height

i

e diameter

Associated on the other hand claims that the tariff rule is ambiguous

and believes the proper and commercially acceptable method for measuring

the volume of rolls of carpet is pi 314 times the radius squared times

the length which is the formula for finding the volume of a cylinder

hereinafter the geometric formula Upon consideration ofthe arguments

presented and review of the tariff provisions relied upon the Commission

finds for Associated

Rule 21 A states only that all cargo shall be measured on the overall

measurements of the individual packages What is meant by the overall

measurements of a

package is not defined or explained Nor does Rule

21 specify what method is to be used to calculate the overall measure

ments of a package In this regard it is unlike those tariffs which state

that the cubic measurement shall be the product of the three greatest dimen

sions Specifying that the cubic measurement of the cargo shall be based

on the depth width and length of the cargo precludes the use of the

geometric formula for calculating the cubic volume of a cylinder In contrast

nothing in Rule 21 precludes the use ofthe geometric formula in determin

ing the overall measurements of the carpet rolls By this decision

we are in no way overruling the general rule stated in Orleans Material

and Equipment Co Inc v Matson Navigation Co 8 EM C 160 1964

Where rectangularization is clearly indicated it continues to be a valid

and essential means of rating cargo Our holding here is based on our

judgment that Rule 21 A is sufficiently ambiguous to lead us to rule

in favor ofAssociated

In the absence of a tariff rule which clearly specifies the method to

be used in order to determine the overall measurements of cargo we

conclude that in this instance Associated may have the benefit of the

geometric formula Ambiguous tariff provisions are construed against the

maker i e the carrier and in a manner most favorable to the shipper

The Commission may look to matters outside the express language of the tariff to aid in its construction

if there exists a custom or usage of atrade or course of dealing of the parties which although not in the

tariff is such that it should be applied Great Northern Ry v Merchants Elev Co 259 U S 285 291

292 1922 Sacramento Yolo Port Dist v Fred F Noonan Co Inc 9 F M C 551 560 1966 Although

many tariffs specifically require rectangularization of cargo in calculating thecubic measurement for rating

purposes this does not establish that rectangularization is such auniversal custom or usage in this trade

and with this commodity so that it must be applied even though it is not specifically required by the tariff

26 F M C
146 FEDERAL MARITIME COMMISSION

in tenns of yielding the lowest rate Bratti v Prudential et al 8 F M C

375 379 1964 Sacramento Yolo Port Dist v Fred F Noonan Co

Inc 9 F M C 551 558 1966 United Nations Children s Fund v Blue

Sea Line 15 F M C 206 209 1972

We therefore find and conclude that under the facts presented the carpet

rolls at issue should have been measured for rating purposes using the

geometric fonnula rather than the rectangularization method

By the Commission

S FRANCIS C HURNEY

Secretary

fPMr
FEDERAL MARITIME COMMISSION

DOCKET NO 83 39

ARMADAlGLTL EAST AFRICA SERVICE AGREEMENT NO 10464

NOTICE

January 5 1984

Notice is given that no exceptions have been filed to the November

23 1983 initial decision in this proceeding and the time within which

the Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has become

administratively final

S FRANCIS C HURNEY

Secretary

26 EMC 147
FED RALM4RITii1 CQMI ISON

DOeKET NO 8339

ARMADA GLTL EAST AFRICA 3LRVICB AG1tEEMENT NO 1464

An Agreement between a company known as AFinada Great Lakes East Africa Service Ltd

Armada East Africa a purported non common carrier and Great Lakes Transcaribbean

Line GLTL an admitted common carrier establishes by joint venture a common camer

known as Armada GLTL East Afriea Service Arn ada GLTL line The parties to this

AgreemenY contend that it is not subject to section 15 of the Shipping Act 1916

beeause Armada East Africa is not a common carrier Proteating carriers and Hearing

Caunsel disagree It is held

1 There are significant continuing relationships baEween th commonarrierjoint aervice

and GLTL the commonarrierouner relating to options to charter vessels to the joint

service handling claims voting on sailings and vessels and not competing with the

service These relationships alone support section 15 jurisdiction

2

The very words of the Agreement contemporary affidavits and other evidence show

that the Agreement is really intended to include commonarrier affiliates of Armada

j

Sast 4ftica snd fiLTL

3 Armsda East Africa operates the commonarrierservice as a full active partner with

GLTL using a trade name for the joint service shares eamings and liabilities for the

pint service provides funds makcs operational decisions and carries out the very purpose

for which Armada East Aica was first formed and has even filed Anti rebating Certifi

cates as required of common carriers Armada East Africa is therefore a common carler

itself

Thomas D Wilcox for proponents

John W Angus for protestants

JohnRobert Ewers Joseph B Slunt and 5tuartJames for Hearing Counsel

IrTITIAL DECISION i OF NORMAN D KLINE ADMINISTRATIVE

LAW NDGE

Finalized January 5 1984

On January 11 1983 Agreement No 10464 was filed with the Commis

sion under section 15 of theShpping Act 1916 The Agre ment is between

two companies one known as Atmada Great Lakes East Africa Service

Ltd Armada East Africa and the other a company known as Great

Lakes Transcaribbean Line GMBH GLTL Under the Agt eement these

two companies agreed to operate a commonarrier service as a joint venture

in the trade bgtween Canada USGreat Lakes Atlantic and Gulf Coasts

ports and SoutEas Africa known as Armada GLTL East Africa Service

Armada GLTLline

This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502227

1 dR 26FMC
ARMADA GLTLEAST AFRICA SERVICE AGREEMENT NO 149

10464

The Commission noted that although one of the ovvners of the new

line GLTL was a common carrier by water operating between ports in

the United States and various ports in the Caribbean and South America

the other Armada East Africa did not appear to be operating as a common

carrier subject to the Act Therefore the Commission was concerned that

it might not have jurisdiction to approve or disapprove the Agreement

and before turning to the question of the merits of the Agreement the

Commission wished to determine the jurisdictional question Therefore by

Order of Investigation served September 9 1983 the Commission instituted

this expedited proceeding limited to the jurisdictional question and ordered

the presiding judge to serve an Initial Decision no more than 75 days

after service of its Order ieon or before November 23 1983

In describing its concerns as to the jurisdictional question the Commis

sion delineated several areas of inquiry First it specified that the issue

that must be resolved is whether Agreement No 10464 involves two or

more common carriers by water over which the Commission has in perso

nam jurisdiction Order p 2 footnote citation omitted In this regazd

the Commission noted that Armada East Africa the apparent non common

carrier owner of the new joint service was part of the socalled Armada

Group which consists of a number of companies providing shipping serv

ices among which companies were two common carriers by water subject

to the Act Arrnada Lines and Atlantic Cross Shipping Because the Agree

ment apparently contained a covenant not to compete which bound not

only the signatory owners but affiliates the Commission was concerned

that this covenant involved two common camers namely the Armada

GLTL line joint service itself and at least one affiliate of the owner

Armada East Africa namely Arrnada Lines Therefore the Commission

questioned whether Armada East Africa should be considered to be a com

mon carrier in other words whether the commonarrier status of the

affiliate Armada Lines should be imputed to Armada East Africa

A second azea of inquiry set forth by the Commission concerned the

question whether the two owners of the Armada GLTL line existed as

separate entities in the subject trade by doing such things as issuing separate

bills of lading or furnishing crews and operating vessels in that trade

If such separate identities existed and were not subsumed in the Armada

GLTL line the Commission opined that both owners might be common

carriers subject to the Act

Finally the Commission stated that even if Armada East Africa could

not be considered to be a common carrier subject to the Act there may

yet be section 15 jurisdiction over the Agreement if it establishes a

continuing relationship between the Armada GLTL line and GLTL both

of which are common carriers subject to the Act Order p 3 In this

regard the Commission cited a previous decision in which it had found

jurisdiction on the basis of a continuing relationship Agreement No 9955

1 18 FMC426 1975 and even though the Armada GLTL line did

26FMC
1 SO FEDERAL MARITIME COMMISSION

not itself sign the Agreement the Cammission nevertheless stated that

it may be appropriate to consider the Armada GLTL line a party to

the Agreement if it places obligations on ttre joint venture visaits

owners Ord rp 4

Order

In order

I convened

to meet

a

the

prehearing

expedited

conference

schedule mandated

on September

by the

27

Commission s

1983 The

conference was attended by counsel for proponents for the pratesting mem

bers of the United Statesouth and East Africa Conference 2and by Hearing

Counsel At the conference it was agreeci and established that proponents

would answer certain questions posed by Hearing Counsel mainly in af da

vit form would attempt to stipulate the facts and would le a single

round of briefs if ali parties agreed that the Commission had jurisdiction

over the Agreement If not the parties would file opening and reply briefs

As it turned out following the submission of affidavits proponents contin

ued to contend that the Commission lacked jurisdiction whereas protesting

members of the Conference and Hearing Counsel contended to the contrary

The parties expressed satisfaction with the adequacy of the record and

accordingly these briefs were led See my rulings served September

30 and October 19 1983 3

FACTUAL BACKGROUND

The Parties to the Agreement and Their Operations

1 Great Lakes Transcaribbean Line GmbH GLTL formerly known

as KG Great Lakes Transcaribbean Line GmbH has since 1965 operated

a commonarrier service only betweenUSCanadian Great Lakes ports

and ports in the Caribbean Sea West Coast of South America under a

tariff led with the Federal Maritime Commission GLTL has not and

dces not own or operate any ships in any trade between USports and

ports inEast South or West Africa

2 GLTL is currently owned by Mr Hellmuth Essen of Hamburg Ger

many a private person and by KG MONSUN Schiffahrtsgesellschaft

Co Nachfolger Hamburg a

company which is owned and controlled by

Two protests to the Agreement had been filed in February 1983 by members of the Conferonce and by

Ceres Navigation Ltd having to do with the merits and Spprovability of the Agreement which protests

because of the limited jurisdictional

of the protesting member lines I amended

issue in

the

this

Commiasion s

expedited proceeding

Order which

arc

had

not now

atated

relevant

tHat the

On

Conferense

requ t

had filed the protests Sce 46 CFR 502 147fa and Notice of Rulings Made at Prehearing Conferonce Septem

ber 30 1983 Protestant Ceres although kept infortned of the conference and the proceeding did not partici

pate in this limited proceeding

As nally developed the evidentiary record conaisted of two affidavits of offiars or managers of Ameda

East Africa and of GL71 a

copy of the Agreement No 10464 and two amendments and acopy of the

letter of lransmittal of the Agreement to the Commisaion dated January 11 1983 with supporting statements

See my ruling October 19 1983

Fnnr
ARMADA GLTL EAST AFRICA SERVICE AGREEMENT NO 1 S 1

0464

Hugo Stinnes Mulheim a

private limited partnership GLTL dces not

know of Mr Essen sownership if any in any other common carrier

by water in the US foreign commerce KG MONSUN dces not own

or operate a commonarrier service in the US foreign commerce Hugo

Stinnes Mulheim are engaged in industrial and shipping businesses They

partially own and operate five general cargo vessels which aze chartered

to other lines They do not operate any other commonarrierservice operat

ing in the US foreign commerce Hugo Stinnes Mulheim and another

independent company known as Ozean LinieGmbH Hamburg own Ozean

Stinnes Linien Gemeinschaftsdienst a carrier operating in the trade between

Mexico Gulf and North Europe

3 Armada Great Lakes East Africa Service Ltd Arrnada East Africa

the other party to Agreement No 10464 was incorporated under the laws

of the Republic of Liberia on March 26 1981 for the sole purpose of

entering into a joint venture with GLTL to provide commonarrierservice

between US and Canadian ports on the Great Lakes and ports in South

and East Africa Armada East Africa neither owns nor operates vessels

in any trade and is a onehalf owner only of the Armada GLTL line

joint service

4 Armada East Africa is a member of the Armada Group See table

in Appendix The Armada Group is owned twohirds by Guldan Maritime

Co Ltd and one third by Skua Holding Ltd both Liberian companies

The Armada Group owns in whole or in part several companies engaged

in all aspects of maritime commerce worldide of which only three are

engaged in common carrier service at United States ports The three are

a

Armada Lines Ltd a Liberian corporation organized in 1978 to operate

as a common carrier between Montreal US Atlantic and Gulf ports and

ports in West Africa changing in 1979 to concentrate between US and

Canadian Great Lakes ports and Montreal as loading areas Armada Lines

files a tariff with the Commission It is managed jointly by three companies

which are also members of the Arrnada Group Armada Shipping SA

Switzerland Armada Shipping Aps Denmark and Armada Shipping

Inc Houston Texas USIt has three general agents for booking and

ports services Protos Shipping Company Montreal Protos Shipping Com

pany Chicago Illinois and Bateaux Maritime Inc New York NY

b Atlantic Cross Shipping Co a joint venture between Clipper Mari

time Inc a Liberian corporation and member of the Armada Group and

Georgia Pacific Corporation FMC Agreement No 10434 Atlantic Cross

operates as a common carrier between US East and Gulf Coast ports

and ports in Europe and the United Kingdom pursuant to tariffs filed

with the Commission Since November 1981 Atlantic Cross has been man

aged by Armada Shipping Inc Houston Texas Initially Atlantic Cross

For ready reference and visual aid atable of ownership showing how the parties to the Agreement aze

owned by and related to other companies discussed inthis decision is attached to this decision as an Appen

dix

26FMC
152 PEDERAL MARITIME COMMISSION

employed ships furnished by Georgia Paci clutlater chartered ships itself

a Atlantic Cross has three managing agents Arrnada 3hipging Aps Den

mark Armada Shipping SASwifzerland and AFinada Shipping Inc

TexasUSThese Ehree do noC own or operate vessels

c Armada GLTL East Africa Service Armad GLTL line the joint

venture created by the subject Agreernent is described more fully below

5 Armad GLT Lline is a vesset operating common carrier wlrich is

jointly and equally owned by Armada East Africa and GLTL It began

as a joint veaEure agreement which these two parties entered into on April

24 1981 ince its beginning it has operated as a comtnon carrier pursuant

to tariffs on ftle with the Commission between gorts in the USand

Canadian Great Lakes and ports in East and South Africa undar the trade

name of Armada GLTLEast Africa Service In December 1982 the owners

decided to expand the service to includ USAtlantic and Gulf Coast

ports and filed the appropriate taciffs with the Commission

6 Armada GLTLline is managed jointly by Armada Shipping SASwit

zerland Armada Shipping Aps Denmark and Armada Shipping Inc

Houston Texas USInitially Protos Shipping Company Montreal and

Chicago were booking and gort agents for the service but later Nortan

Lilly Co Inc New York was added as agent with the expansion of

service to the USAtlantic and Gulf porfs

7 Armada GLTL line owns no vessels to date has employed vessels

chartered on the open market and has not employed or chartered vessels

owned by any Armada company GLTL or the Stinnes Group ofHamburg

Germany All cargo of the service has been carried under bills of lading

issued in the trade name of Armada GLTIFast and South Africa Service

pursuant to the tac ffs on file with the Commission No cargo has been

carried by the service under a bill of lading issued by any other carrier

or agent of any such carrier

8 Since there is no westbound cargo available to the service from

ports in East and South Africa the service presently is eastbound only

from the United States and is performed by vessels that are voyage or

trip ehartered on the free mazket and returned off hire to the owner

or chartered at the completion of the eastbound voyage

9 The brQad or general operational decisions of the service are made

by representatives of its owners Armada East Africa and GLTL Day

taday management is under the direction of Per Gullestrop Armada Ship

ping Inc TexasUS

10 The service dces not coordinate its ogerations with GLTL or with

Atlantic Cmss Shipping or Armada Lines Ltsl Each of these is a separate

legal and operatianal entity GLTL dces provide certain services for the

Armada GLTLline as discussed below and dces participate in broad policy

decisions However the parties to the joint service view the Agreement

as not legally binding on af liates of either Armada East Africa or GLTL

Similarly the parties view their covenant not to compete Article 6 of
ARMADA GLTLEAST AFRICA SERVICE AGREEMENT NO 1 S3

10464

the Agreement as being an agreement between the two owners of the

joint service that neither owner will compete with the joint service without

the consent of the other owner

Description of the Agreement

11 Agreement No 10464 originally entered into on April 24 1981

was established for the purpose of operating a line between Canada

USGreat Lakes and East SouthAfrica as a joint venture between

its two owners Armada East Africa and GLTL The parties agreed to

participate with a share of 50 each on the expenditures earnings respon

sibilities and liabilities of the joint venture The liner sefvice was to

be operated in accordance with the general cargo policy to be always

mutually agreed between the parties

12 Article 2 of the Agreement provides for agreement between the

parties as to the frequency of the sailings and the insertion of vessels

in the liner service It also provides that

When Armada which shall deem to include any company in the

Armada group shall have a vessel in position Armada shall have

the first option to fix such vessei to the line at the market rate

prevailing and in the event Armada shall have no vessel

in position or dces not exercise their option GLTL shall have

the second option of fixing one of their or Stinnes group sown

or chartered vessels to the line

13 Article 3 of the Agreement provides for the appointment of Armada

Shipping Aps Fredensborg Denmazk as the exclusive agents and manager

of the line and sets forth the agents commission It also provides that

tonnage shall be fixed with Armada East Africa as charterers and that

GLTL shall indemnify Armada with 50 on claims and ordisputes arising

under such charter or bills of ladings and that GLTL shall have the same

rights and obligations under such charter party or bills of lading as if

they had been inserted as joint charterers with Armada GLTL also agrees

to provide a cargo superintendent for the line to supervise the loading

and discharging of the cargo and see that voyages are prosecuted with

the utmost dispatch Article 3 also provides that all cargo claims and

claims in connection with the chartering of vessels are to be handled

by GLTI and that as to the handling of claims a commission at 025

per cent of the gross amount of voyage freight of all cazgces booked

to the line is to be paid to GLTL

14 Article 4 of the Agreement among other things gives GLTL authority

to commence legal proceedings or defend in them in the matter of claims

or other proceedings brought against the ship her owners charterers or

managers GLTI is authorized to settle claims up to less than 1000

All claims are to be forwarded directly to GLTL who will register such

26FMC
1 S4 FEDERA MARITIME CQMMISSION

elaims enab ing the paties et all times to aseerintkeexact claims amount

settled outstanding on eaeh voyage

I5 Article 5 provides for the furnishing of funds to operate the line

by the parties and among other things provides for the funds to be depos

ited in a separate bank account for the line and for surplus of nancial

liquidity to be distributed to the parties under certain conditions

16 Article 6pro rides

None of the parties of fhis agreement nor any of their affiliated

controlled or associated companies shall during the duration of

the joint venture carry out similar or eompating liner setvice

in the same trade provided for in this agreement unless the other

party shall give its consent thereto

The parties now state that this covenant not to comgete means only

that the two parties to the Agreement will not compete with the joint

service without the consent of the other party and not that the covenant

is legally binding on any companies liated with Armada East Africa

or GLTL The only way to bind those aff iliates in the view of the parties

to the Agreem ntwould be to have those companies sig the Agreement

themse vewhich they have nodon

17 Ieremaining Articles of the 4greeme t7 througtt 11 deal with

effective dates of its existence termination and agreement not to use the

trade name of the line in such event the ser ding of notices to the psrties

schedaling of ineetings every three months adthe applicability of English

law

18 The Agreement was amended twice In the first amendment dated

February 5 1982 the Agreement was extend dfrom April 1 1982 to

March 31 1983 and Article 5 was amended regarding the furnishing of

statements of accaunt of the line and distribution of surplus In the scond

amendm ntdated I3ecember 16 1982 the line was expanded beyond the

Great Lakes to srveUSAtlantic and Gulf ports GLTL s name was

changed to reflect its current status and the Agreement was extended

to March 31 1984

The Filing ofthe Agreement for Approval and Contemporaneous Statements

19 The Agreement was filed with the Commission on January I1 1983

At that time the proponents requested theCorr mission to approve pursuant

to its suthority under section IS ofthe Shipping Act 191b and requested

expedited processing to perrnit sai ings out of the Atlantic by late January

or early February 1983 and to meet shipper needs Ticy contended that

the reqair meats of section 15 hacl been mtand that the agreements

shoald be approved

20 Th parties to the Agreement acknpwledged that tliay had not pre

viously filed their agreements for approval by the Commissian but stated

that the reason for tkis failute was the fact that Armada East Africa had

26FMC
ARMADA GLTL EAST AFRICA SERVICE AGREEMENT NO ISS

10464

not been a common carrier although GLTL was At the time they first

led on January 11 1983 however they thought that Armada East Africa

presumably might have become a common carrier when the Armada

GLTL line s tariffs were first filed with the Commission and the Armada

GLTL line s service was advertised to the shipping public They stated

no intention to avoid any legal obligations cited the fact that they duly

led tariffs required by law and stated that they made a we and complete

disclosure of all material facts underlying their agreements

21 In support of their request for approval the proponents submitted

a Statement of Affidavit dated January 21 1983 in the name of three

gentlemen Mr Wolf Neuendorff GLTL Line Manager MrDietrich Mcehle

v Hoffmannswaldau Manager of the Legal Department of GLTL and

Mr Jens Erik Valentin Treasurer of Armada East Africa 5

They stated

In order to establish an efficient regular workable Liner Service

the Parties agreed that only with the consent of the Partners

of the Joint Venture their affiliated controlled or associated Com

panies shall carry out a similar Liner Service in the same trade

and to assure participation of all subsidiary or controlled Compa

nies of the twoPartners

Identical language is contained in a companion Statement in the name

of the above three named gentlemen also dated January 21 1983

Contentions of the Parties

As noted earlier notwithstanding the filing of the Agreement on January

11 1983 or the earlier beliefs of the parties to the Agreement regarding

the status of Armada East Africa proponents of Agreement No 10464

now contend that the Commission lacks jurisdiction over it Essentially

proponents contend that one of the parties to the Agreement Armada East

Africa is not now and never has been a common carrier by water subject

to the Shipping Act that the Agreement cannot legally bind common

carrieraf liates of Armada East Africa or of GLTL and that there are

no ongoing relationships between the Arrnada GLTL line and its common

catrier owner GLTL which could subject the Agreement to section 15

of the Act In more detail proponents argue that Armada East Africa

5 Mr Jens ErikValentin is also Secretary of Armada East Africa the non common catrier pany to the

Agreement is Senior Vice President of Artnada Shipping Ina Texas and is an officer of other companies

of the Armada Group According to the Anti rebating Certificates filed with the Commission pursuant to 46

CFR 552 Mr Valentin was Chief Executive Offlcer of Armada East Africa and of Armada Lines Ltd the

common carrier affiliate of Armada East Africa in July 1981 and August 1982 when the certificates were

filed The facts of these filings are officially noticed under 46 CFR 502226 Interestingly Armada East Afri

ca one of the parties to the Agreement which contends that it is not a common carrier dces not own or

operate ships nor publish taziffs and which contends that its commonarrier affiliates are not affected by

the Agreement and that their commonarrier status cannot be imputed to Armada East Africa nevertheless

Gled the Anti rebating Certificates under 46 CFR 552 which normally are led by common carriers orother

persons subject to the Act As noted however at leact as of January 1983 the parties thought that Armada

East Africa might have become a common carrier when the Armada GLTLline filed tariffs and advertised

isservice

26FMC
156 FEDERAL MARITIME COMMISSION

dces not own or operate ships dces not publish any tariffs and dces

not hold itself out as a common carrier in any trade Proponents argue

further that the mere fact that Armada East Africa is a merr br of the

Armada Group which comp ises at least two common carriers Armada

Lines and Atlantic Cross or that GLTL is affiliated with a common

carrier member of the Stinnes group Ozean Stinnes Liflien dces not mean

that Armada East Africa should be considered to be a common carrier

itself or to have the eommon carrier status of its common earrier affiliates

imputed to Armada East Africa That is because according to proponents

each of the eompanies is a sepazate entity which cannot be bound by

the parties to the Agreement Furthermore notwithstanding the language

of Articles 2 and 6 of the Agreement stating that Armada shall deem

to include any company in the Armada Group and that none of the

parties of this agreement nor any of theiraf liated controlled or associated

companies shall carty on competing services etc the parties to the Agree

ment contend that such language cannot legally bind those affiliated compa

nies and these two Articles merely express an agreement between the

two owners of the joint service one of which is not a common carrier

not to compete with their jointly owned subsidiary without the consent

1

of the other parent Proponents azgue that neither Armada East Africa

nor GLTL issues bills of lading les tariffs or furnishes crews for ships

in the subject trade in other words that the identities of the two owners

are totally subsumed in the joint venture which alone holds out to provide

service to the trade Proponents see no ongoing relationships between the

joint service and GLTL which subject the Agreement to section 15 The

various functions which GLTL provides for the joint serviee according

to proponents ie appointment of the man giragent cargo supervision

and claims handling are only managerial functions incidental to ownership

as are decisions regazding frequency of sailings and isertion of vessels

Finally the language of Article 2 of the Agreement whic gives Armada

East Africa arst option and GLTL a second option to xa vessel

to the joint service dces not convert the Agreement into one requiring

approval under section 15 All that Article means is that if either owner

or a company related to an owner has a ship in position and wants

to offer it at mazket rate prevailing to the joint service then the owners

rst Armada East Africa and then GLTL shall have the rst option

to fix the ship to the joint service Proponents Qpening Brief pp 8

9 Proponents state that neither owner has ever chartered a ship to the

joint service in the past and that unlike the agreement in the Dart

Containerline case cited below the joint service if it ehaters from its

owners would do so at market rates rather than at rates to be determined

by the owners Nor is the joint service here required to charter from

its owners and compensate the owners by a portion of the pro ts derived

from the operation of the ship by the joint service as was the situation

26FMC
ARMADA GLTLEAST AFRICA SERVICE AGREEMENT NO IS7

10464

in another case Agreement No 9955 1Star Shippirtg 18 FMC426

428 1975

Protesting members of the United Statesouth and East Africa Conference

strongly dispute proponents contentions Protestants argue that Arrnada East

Africa became a common carrier when it signed the Agreement or even

before when it was incorporated solely to operate a commonarrierservice

and that Armada East Africa is part of the Armada Group which owns

in whole or in part three common carners by water including the present

Armada GLTLline joint service Protestants argue that the Agreement con

fers rights privileges and obligations on members of the Armada Group

as well as on GLTL a

recognized common carrier with respect to the

commonarrierjoint service and notes that the Chief Executive Officer

of Armada East Africa is also the Chief Executive Officer of a common

carrier Armada af liate Protestants azgue vigorously that the Commission

ought to pierce the corporate veil citing much case law because of

the close affiliation of Armada East Africa with other common carriers

in the Armada Group common management or officers and in order to

carry out statutory objectives Protestants point out that members of the

Armada Group and GLTL have certain options to charter ships to the

Armada GLTL line joint service that GLTL is given authority to handle

claims for the line and that proponents contentions now that the language

in Article 6covenant not to compete that appears to cover companies

affiliated with or related to the parties to the Agreement has no binding

effect on such companies contradicts the proponents statements when they

rstfiled the Agreement

Hearing Counsel argue similarly Hearing Counsel contend that Armada

East Africa was formed solely to enter a joint service with GLTL is

a member of the Armada Group and has common management and other

ties with the commonarrier members of that Group Hence common

carrier status ought to be extended to Armada East Africa Hearing Counsel

also argue that there are certain ongoing relationships between the Armada

GLTL line joint service and with GLT LThus Hearing Counsel point

out that GLTL has second option rights to chaRer vessets to the joint

service and that GLTL provides supervising services and handles claims

for the joint service Hearing Counsel express concern that if the subject

Agreement can be found not subject to section 15 because of the formation

of a new corporation Armada East Africa which joins with a common

carrier to do something otherwise covered by section 15 and no one

looks behind the formation of such corporation it will open the door

for any common catrier to evade the requirements of section 15 by merely

forming new corporations to enter into any new section 15 agreements

Opening Brief ofHearing Counsel pp 56

In the final round of reply briefs proponents argue against jurisdiction

under section 15 by pointing out that the joint service line as well as

the common carrier GLTL and any commonarriermember of the Armada

26FMC
ISH FEDERAL MARITIME COMMISSION

or Stinnes Group are st ll subject to the Slripping Act and that the kgree

ment is designed to promote competition Proponents also contend that

the protesdng members of the Conference actuatly desire ta restricE competi

tion and are seeking to artificially transform a nan cotnmon cazrier owner

into a common catrier owner in order to limit or preve tcompetition

in their trades Proponents contend furthermore that it was not tleintent

of Congress to have the Commission engage in legal fictions simply W

exercise jurisdicEion oer an agraement which increases competition and

that there is no reason in this case to pi rce any corporate veil 6Pro

ponents concede however that there is an obligation on the part of the

joint serviee to its owners regarding the owners options to fix vessels

to the line but contend that the charter rates for such vesseis will ultimately

be xed by arbitrators in case of dispute Proponents Reply Brief p

5

Heari g Counsel in their reply brief reiterate their earliar contentions

namely that there are ongaing relatio ships between the joiflt service and

GLTL the cott mon carrierowerregar igsailings vessels funding han

dling claims and legal proceedings supervising no compecing and making

operational decisions Hearing Cou sel also reiterate their argument that

the commonarrier status of inembers of the Armad Group ought to

be imputed to Armada East 4frica because of language in the Agreement

tying those members to the Agreement especially with respect to the cov

enant not to compete with the joint service line and because of corr mon

management between comrnon carrierme bers of the Armada Group and

the joint service Hearing Counsel note that the propoaents even eplain

in their opening brief p 6 that the purpose of Article 6 of the Agreement

was to ensure tFiat the joint servic would be free from direet competition

by the owners or the owners affiliated controlled or associated companies

without the consent of the owner

DISCUSSIQN AND CONCLUSIONS

As mentioned earlier the Commission advanced three areas of inquiry

1 whether Armada East Afrjca should be considered to be a common

carcier because of its relationship with commonarrier memb rsof the

Armada Group and because of certain language in the Agreement appearing

to apply to those me bers 2 whether the two owners and parties to

the Agreement Armada East Africa and GLTL retain separate identities

Proponents final arguments thal their Agrcement promotes rather than restricts competition in my opin

ion gees to the merils of the Agrament rather than to the question of jurisdiction over it Ifparties enter

into coopereUve working arrangementa or aher ventures falling under section 15 the fact that the arrange

ments may promote competition by introducing anew competitor or otherwise dces not mean that the ar

rangements are removed from section 15 jurlsdiction See discussion in Agreement No 995S I

Star Ship

ping 18FMCat 45Q Similarly the pctssibin motivations of protes antsinopposing approval of the subject

Agreement are not relevant to the question of jurisdiction Finally as will be seen later in this decision the

facts of record are sucientto detemtine the status of Armada Fast Africe without engaging in fictions or

piereing coryorate veils

26FMC
ARMADA GLTL EAST AFRICA SERVICE AGREEMENT NO 159

0464

in the subject trade and are therefore in effect common carriers in the

trade and 3 whether there was a continuing relationship between the

Armada GLTL line joint service and GLTL both of which are common

carriers subject to the Act such as if the joint service had certain obligations

toward its owners imposed upon it by the Agreement

I

find that there are clearly continuing relationships which create rights

privileges and obligations between the Arrnada GLTL line joint service

and at least one of its owners the common carrier GLTL so that there

is section 15 jurisdiction on that basis alone I find also that there are

sufficient grounds to consider that the parties to the Agreement include

commonarrier members of the Armada Group Ind finally that the

record persuasively shows that Armada East Africa far from losing its

identity is a full and active partner in running a commonazrier service

with GLTL funding that service sharing earnings and liabilities and carry

ing out Armada East Africa ssole purpose which was to operate a common

carrier service in partnership with GLTL Accordingly Armada East Africa

is itself a common carrier by water as apparently it believed itself to

be until recently arguing to the contrary

The Continuing Relationship Between the Joint Service and GLTL

It is of course basic that section 15 jurisdiction does not attach to

an agreement unless there is an ongoing relationship between two or more

common carriers by water subject to the Commission sjurisdiction rather

than a single discrete event over which the Commission would have no

continuing duty of surveillance Federal Maritime Commission v Seatrain

Lines Inc 411 US726 729 1973 In the case of a joint venture

in which one party only is clearly a common carrier by water subject

to Commission jurisdiction but the other or others aze not it has been

held that jurisdiction will still lie over the agreement if there is a continuing

relationship between at least one commonarrierowner and the common

carrier joint venture itself See Dart Containerline Company Ltd Agree

ment No 9745 3Report on Remand September 2 1983 22 SRR 352

355 Agreement No 9955 1Star Shipping 18 FMC 426 453 455

1975

Section 15 of the Act 46 USC 814 provides in pertinent part that

a common carrier must file

a true copy or if oral a true and complete memorandum of

every agreement with another such carrier or other person subject

to this Act to which it may be a

party or conform in

whole or in part giving or receiving special rates accommoda

tions or other special privileges or advantages controlling regulat

ing preventing or destroying competition allotting ports or re

This case is back before the Court of Appeals and is pending decision of that Court inDart Contuinerline

Co Ltd vFederal Muririme Commission No 821403DCCirJ

26FMC
1 GO FEDERAL MARITIME COMMISSION

stricting or otherwise regulating the number and character of

sailings between ports or in any manner providing for an

exclusive preferential or cooperative working arrang ment

The above statute has been held to be broadly drafted and therefore

not

390

to

US

be

261

given

273

unduly

1968

nan ow

The

interpretations

Commission thus

Volkswagenwerk

took an

vFMC

extremely narrow

view of a statute that uses expansive language Federal Maritime Com

mission v Facific Maritime Association 435 US40 54 1978 It is

appropriate therefore that the Court has recognized the broad reach of

section 15 and resisted improvident attempts to narrow it Id at 55

56 but the Court in Volkswagenwerk did emphasize the breadth

of the statutory language and the determination of Congress reflected in

section 1 S to subject to the scrutiny of a

specialized governmental agency

the myriad ofrestrictive agreements in the maritime industry

In interpreting agreements under the Shipping Act and determining their

scope furthermore it has also been held that the Commission has some

flexibility is not strictly bound by what the parties claim to be their

intent and in case of ambiguity the agreement is construed against the

parties who drafted them See Swift Co uFederal Maritime Commission

306 F 2d 277 281 DCCir 1962 Federal Maritime Commission v

Australia US

SDNY

Atlantic Gulf Conference 337 F Supp 1032 1037

1972 having drafted the Agreement a dual rate contract

under secdon 14b of the Act any ambiguity in its terms will be resolved

against the Conference Furthermore although usualiy encountered when

determining the approvability of agreements rather than jurisdietion over

them it is established doctrine tlrat the Commission is not conned to

the mere words in an agreement submitted under section 15 of the Act

but must consider the effects of such agreement See egAgreement

No T4 Terminal Lease Agreement Log Beach California 8 FMC

521 529 1965 Where agreements are strongly protested as here we

must examine not only the terms of an agreement but also the competitive

consequences which may be expected to flow from the agreement and

other facts which show the objectives and results of the agreements

see also discussion in Agreement No 9955 1Star Shipping cited above

18FMCat 4656

In the instant case Ind that there are clearly ongoing relationships

between the Armada GLTI line joint service and its owners of which

one GLTL is admittedly a common carrier by water subject to the Act

which relationships furthermore are the type specified in section 15 This

is most clearly seen in Article 2 of the Agreement which confers a

right

of rst option on Armada East Africa and a second option on GLTL

for the fixing of vessels to the joint service at market rates Although

proponents contend that the joint service has never had to charter ships

from its owners and that even if it did the charter rates would simply

be the prevailing market rates it is clear that the joint service cannot

26FMC
ARMADA GLTLEAST AFRICA SERVICE AGREEMENT NO 161

10464

simply go out into the charter market to obtain ships but first must see

if its owners have a ship available and wish to charter it to the joint

service The owners in other words enjoy an option which is a special

right or privilege not enjoyed by other shipowners or ship charterers gen

erally Thus this option granted to Armada East Africa and the common

carrier own GLTL constitutesaspecial privilege or advantage as

well as providing for an exclusive preferential or cooperative working

arrangement Of course if Article 2 is read as it is written then any

number of the Armada Group which includes two common carriers would

also have the right offirst option to fix vessels9

The ongoing or continuing relationships between the joint service and

its owners GLTL is also shown elsewhere in the Agreement Thus Article

2 also imposes some control over the joint service sdecisions as to fre

quency of sailings and insertion of vessels because GLTL has the right

to vote down sailing or vessel plans which the joint service might proffer

to the owners Perhaps this is merely an agreement between the two owners

and deals with management or is incidental to ownership as proponents

would contend This might be the case if the literal terms of the Agreement

were to be construed in favor of the parties who drafted it As noted

however it is more proper to construe any doubts against the persons

drafting the Agreement

There are however perhaps ciearer examples of continuing relationships

between the joint service and GLTL which fal within the scope of activities

set forth in section 15 Article 3 of the Agreement gives GLTL certain

rights and obligations toward the joint service Thus GLTL agrees to

handle all

cargo claims and claims in connection with the chartering

of vessets for which it is paid a commission derived from gross amount

of voyage freight earned by the joint service Article 4 further describes

GLTL s

authority in handling claims against the joint service by authorizing

GLTL to prosecute legal proceedings or arbitrations or oppose and defend

in such proceedings brought against the ship her owners or charterers

or managers including the right to settle certain claims It is very difficult

to conclude that this undertaking by the commonarrier owner in behalf

of the commonarrierservice dces not constitute at the very leastacoop

erative working arrangement within the meaning of the expansively written

section I5 It is also arguable that the undertaking by GLTL to act for

the joint service in this fashion gives that joint service aspecial privilege

eIn other contexts an option is concidered to be a right orprivilege conferred on someone for consider

ation to purchase lease etc See Black sLaw Dictionary Sth EdJ at 986A right which acts as acontinu

ing offer a

privilege existing in one person

9

As I discuss later the record shows that it was the intent of the parties or their understanding that related

companies of the parties would be irtvolved notwithstanding their laterdi sclaimers Indeed even in pra

ponents opening brief pp 89proponents explain that All that Article 2 of Agreement No 10464 means

is Ihat ifei her owner ora company related m an owner has a ship in positiod and wants to offer it

shall have

at market

the

rates

first

prevailing to the joint service then the owners first Armada East Africa and then GL1 L

option to fix the ship to the joint service Emphasis added

hFM
1 EZ FEDERAL MARITIME COMMISSION

or advantage not normally enjoyed by other common carriers Cf Agree

ment No 9955 1Star Shipping cited above 18 FMC at 4567

and In the Matter of Agreement FF 71 17 FMC 302 305 1974

regarding the enhanced competitive abilities of parties to an agreement

as constituting special privileges and advantages

Finally although the full meaning and extent of the words cannot be

ascertained in this limited proceeding it appears from Article 3 that in

addition to agreeing to indemnify Armada East Africa with 50 percent

on claitns or disputes arising under charters or bills of lading GLTL

is given the same rights and obligations under sueh charter party or

bills of ladings as if they had been inserted as joint charterers with Ar

mada Without a full record which would describe what these words

or other words in the Agreement are supposed to mean it is difficult

to find with certainty how the Agreernent operates Hawev eragain constru

ing any doubts against the persons drafting the Agreement I would at

least have to conclude that GLTL has som rights or obligations in connec

tion with the joint service sbills of ladings which must constitute a type

of cooperative working anangement and that contrary to proponents con

tentions the GLTL entity mig t

not have become completely subsumed

in the Armada GLTL line joint service which issues bills of lading i

the name of the joint service As I discuss below whether there is a

continuing relationship between GLTL and the commonarriermembers

of the Armada Group because of the covenant not to compete in Article

6 depends upon the interpretation of the literal language of Article 6 and

the weighing of certain contradictory evidence

Involvement of Armada Group Members in the Agreement

y Although the above discussion demonstrates that the Commission has

jurisdiction over the Agreement because of continuing relationships written

into the Agreement between the Armada GLTL line joint service and at

least one ofits owners the common carrier GLTL there are further grounds

on which jurisdiction can be based although the record is limited However

even on this limited record the preponderance of the evidence shows that

the Agreement was drafted with the intention of involving members of

the Armada Group notwithstanding later denials

As discussed above proponents contend that despite the explicit language

in Article 2 which refers to Armada which shall deem to include any

company in the Armada Group and in Article 6 which refers not only

to the parties to the Agreement but to any of their affiliated controlled

or associated companies these other companies have not signed the Agree

ment and therefore cannot be legally bound by it In other words notwith

star ding clear language proponents contend that the members of the Armada

Group or affiliates of GLTL are not involved in the Agreement Protestants

and Hearing Counsel on the other hand ask me to pierce the corporate

26FMC
ARMADA GLTLEAST AFRICA SERVICE AGREEMENT NO 163

10464

fictions and extend the commonarrier status of two members of the Ar

mada Group at least to Armada East Africa 10

The Agreement here is certainly cleazly written to include any ompany

in the Aimada group Article 2 and affiliated controlled or associated

companies Article 6 Furthermore contemporaneously more or less

with the filing of the Agreement in January of 1983 the statements of

the three officers of Armada East Africa and GLTL asserted that only

with the consent of the Partners of the Joint Venture theiraf liated con

trolled or associated companies shall carry out a similar Liner Service

in the same trade and to assure participation of all subsidiary or controlled

Companies of the two Partners Statement ofAf davit January 21 1983

and Statement January 21 1983 found in Exhibit 4 As late as the

filing of the proponents opening brief on October 31 1983 proponents

explained Article 2 to mean that if either owner or a company related

to an owner has a ship in position then the two nominal parties

Armada East Africa and GLTL have the options described above Pro

ponents Opening Brief p

8 Emphasis added In contrast to the above

evidence the same three officers who gave the evidence above at the

time of filing now contend that Article 6 has no legal effect because

the related companies are not signatories to the Agreement and cannot

be bound to it No express mention is made by them of Article 2

regarding

the options to fix vessels to the joint service but there is a general statement

in Mr Valentin slater affidavit that there is no operational coordination

or relationship between the joint service and commonarriermembers of

the Armada Group in the matter of vessel utilization

This later evidence which was prepared and submitted in response to

questions of Hearing Counsel during litigation must be compared with

earlier statements which were prepared in order to seek approval under

section 15 without regard to the jurisdictional issue It is usual to give

more weight to evidence given without contemplation of litigation than

to evidence prepared in contemplation of or during litigation However

even if this rule were not applied proponents own remarks in their opening

brief interpreting Article 2 to refer to related companies would tilt

the balance against proponents Furthermore as discussed above if there

were any doubt such doubt should be construed against the parties who

drafted the Agreement Federal Maritime Commission v Australia USAt

lantic Gulf Conference cited above 337 F Supp at 1037

On the basis of the above evidence of record limited though it may

be by the time constraints established in this proceeding Ind that the

1OProtestants and also Hearing Counsel azgue that I should disregard corporate fictions and pierce the

corporate veil so as to impute commonartierstatus to Artnada East Africa because of its affiliation with

commonazrier members of the parent Armada Group Protestants provide numerous cace authorities holding

that courts and regulatory agencies can disregard corporate fictions when necessary to prevent fraud injustice

circumvention of law etc As I discuss below however I find no deliberate attempts by proponents to cir

cumvent law in the past on this record and in any event find ample evidence to show that it is not necessary

topierce any corporate veils inorder to find jurisdiction overthe Agreement

7hFM
164 FEDERAL MARITIME COMMISSION

preponderance of credible evidence shows that the Agreement was intended

to apply to members of the Armada Group and to af liates of GLTL

which members and affiliates include several common carriers by water

subject to the Act I note furthermore that the evidence tending to show

that the affiliates of the nominal parties were intended to be participants

in the Agreement is fortified by other facts consistent with such a conciu

sion citec by protestants and Hearing Counsel relating to the management

and staffing of Armada East Africa Thus Armada East Africa shazes

the same three management companies members of the Armada Groap

with Armada Lines a commonarrier member af the Group Armada East

Africa has or did have tlie sarne Chief Executive Officer Mr Valentan

as Armada Lines and Armada East Africa employs the services of the

same agents Protos Shigping Company as Armada Lines While these

facts of sommonality may not by themselves show that the members of

the Acmada Group were supposed to participate in the xing of vessels

under the option granted in Article 2 or the covenant not to compete

under Article 6 such common relationships certainly are consistent with

that conclusion and would faci itate such intentions The cumulative effect

of all of the above evidence therefore is to support the conclusion that

it really was the parties intention to assure participation of all subsidiary

or controlled companies of the two partners as all three witnesses for

proponents stated in January 1983 There is therefore sufficient evidence

to find that the affiliates of the two nominal parties are involved with

the Agre ment and that they are in effect parties to it even if they

did not themselves sign it Cf Dart Containerline Company Ltd Agreement

No 97453cited above 22 SRR at 3545

Armada East Africa Is Itself a Common Carrier by Virtue of its Partnership

Arrangement With GLTL

As discussed above the Commission stwo areas of inquiry into the

question whether there are continuing relationships between the Arniada

GLTL joint service and GLTf and whether commonarrier members of

the Aimada Group or affiliates of GLTL are involved with the Agreement

can be answered affirmatively fhus conferring jurisdiction over the Agree

ment The Commission however also inquired whether Armada East Africa

As Hearing Counsel noted in their roply brief p 3 furthertnore even as Ia1e as October 31 1983

proponents in their opening brief p 6 scem to conade ihet the purpose of Article 6the covenant not

to compete was to make sure Ihet the joint service wnuid be free from direct competition by the owners

or the owrcrsaliated controlled or associated companies Proponents insist that this covenant

is really only an agrament between Armada East Africa and GLTL However under a more realistic and

common senseanalysis it appears at leas4 that neither of the owners would want to compete with their off

spring as the courts recognize in cases involving joint vrnturos under the antitruat laws See United Swtes

vPenn OlinCo 378 US158 169 1964 The effect then is that the new commonarrierjoint service

would enjoy a protection against competition from either of its owners and as even proponents seem to con

cede in their opening brief from any affiliates of tha owners In effect then the Agreement either involves

the joint service and ita owner GLTL another common tarrier or involves the joint service and carriers

affiliated with its owners

26FMC
ARMADA GLTLEAST AFRICA SERVICE AGREEMENT NO 1 ES

10464

and GLTL maintained their separate identities so that both could be consid

ered to be common carriers and not to have been subsumed in the joint

service Although the Commission cited such possible facts as providing

crews and issuing bills of lading as facts showing separate commonarrier

identities I find that the record shows persuasively a number of reasons

why Armada East Africa as well as GLTL far from erasing their identities

as common carriers have maintained themsetves as common carriers to

a large extent because unlike the situation in the Dart Containerline and

Star Shipping cases cited above or the Viking Line case cited below

Armada East Africa and GLTL formed not a corporation but a

simple

partnership in which the partners retain responsibility and liability personally

for the activities of the partnership provide funds and make operational

decisions thereby demonstrating that they are not simply incorporators

who lie silently in the background In addition other evidence relating

to Armada East Africa s

purpose when it became a corporation and its

own previous actions tending to show that even it believed that it had

become a common carrier notwithstanding the more recent denials in this

proceeding demonstrate that Armada East Africa itself became a common

carrier in partnership with GLT Lanother common carrier when these com

panies decided to operate their partnership under the Armada GLTL line

trade name Therefore for purposes of jurisdiction the Commission may

consider the joint service as a trade entity with continuing relationships

with GLTL its common carrier owner may conclude that common

cantier members of the Armada Group are involved in the Agreement

or may look at the arrangement between the parties more realistically

and conclude that a11 it is is a partnership between two common carriers

operating jointly under a trade name

The record shows that Armada East Africa was formed for only one

purpose namely to enter into a joint venture with another common carrier

GLTL to provide commonarrier service in a United States trade and

that in April 1981 it became half owner in the joint service The

Agreement which embodies this joint venture however does not appear

to be a corporation but rather a

partnership Indeed the three witnesses

for the joint service referred to each of the owners as partners in

the affidavit and statement submitted in January 1983 It appears to be

true that Armada East Africa neither owns nor has it chartered ships to

the joint service However as in any partnership arrangement the Agree

ment provides that Armada East Africa shazes expenditures earnings

responsibilities and liabilities of the joint venture Agreement No 10464

first page

Proponents however contend that Armada East Africa has no identity

in the trade as a common carrier dces not publish tariffs own or operate

ships etc therefore it should not be considered to be a common carrier

itself but has been subsumed in the joint service The above contention

gets into the question of who or what is a common carrier ie when

26FMC
166 FEDERAL MARITIME COMMISSION

dces an owner itself become the common carrier rather than being a person

or company remaining silently in the background Interestingly at one

time proponents thought that Armada East Africa itself became subject

to the Act when tariffs of the joint service were filed and the joint service

was advertised to the shipping public See letter of transmittal dated

January l

l1983 page 4 Exhibit 4

The Commission has held for some time that one may become a common

carrier although not owning or Qperating vessels Such a carrier has long

been known asanon vesseloperadng common carrier NVOCC See

Common Carriers by Water Sttusof Express Companies Truck Lines and

Other Non Vessel Carriers 6 FMB245 1961 Puget Sound Tug

Barge v Foss Launch Tug Co 7 FMC 43 1962 Charging Higher

Rates than Tari 19FMC43 51 1975 Therefore owning or operating

vessels is not the factor determining status The Commission has also

held that incorporators do not become common carciers by water merely

because they have fortned a new company See Grace Line Inc v Skips

AS Viking Line et al 7 FMC 432 4489 1962 In the Viking

case it was argued that two companies which otherwise appeared to be

shipowners located in Norway known as Laly and Imica who had incor

porated the Viking Line themselves became common carriers by so doing

The Comrissionrejected this argument because ifit be correct it means

that all individual incorporators of a steamship line have always been

and are violators of section 15 of the 1916 Act 7 FMC at 448

449 Cf also Agreement No 9955 1Star Shipping cited above 18FMC

436 451 4523 462 in which the Star arrangement which set up

a corporation under Norwegian law did not serve to convert the non

common carrier owners of Star into com non carriers subject to the Act

In the instant case it dces not appear that the joint service is a corporation

but rather a partnership in which case it is really two companies Armada

East Africa and GLTL doing business as the Afmada GLTL line The

joint service itself is therefore no corporate entity Indeed as proponents

witnesses themselves state The use of the name Armada GLTL Line

East Africa Service is purely a mazketing decision unrelated to any legal

considerations ValentinAf davit Exhibit 1 Nor is it therefore necessary

to pierce the cotporate veil so as to impute to Armada East Africa

the commonazrier status of affiliated companies in the Armada Group

All that is necessary is to recognize that Armada East Africa was set

up to operate a common carrier service as a partner with another company

a common carrier that such a partnership was set up that the two gartners

share earnings and liabilities as in all partnerships and that they do business

as common carriers as the Armada GLTLline a trade name only unralated

to any legal considerations In previous cases the Commission has 1QOked

behind mere forms to determine who the real carriers were even though

such scrutiny required disregarding corporate entitaes and even though the

person found to be a common carrier had suppressed its own name its

26FMC
ARMADA GLTLEAST AFRICA SERVICE AGREEMENT NO IE7

10464

identity and its holding out in favor of another carrier In Agreement

9597 Uiterwyk cited above 12FMC83 the Commission rejected claims

of companies known as Uiterwyk and Continental which argued that they

were agents of a common carrier known as Flomerca because among

other things the carrier operation in

question was conducted in the name

of Flomerca only whose name was used in manifests bills of lading

advertising solicitation and tariffs and that neither Uiterwyk nor Continen

tal had ever operated as a common carrier 12 FMCat 92 100 The

Commission found however that Uiterwyk Continental were in reality the

common carriers notwithstanding their disclaimers and that they had entered

into agreements with Flomerca which had not been filed as required by

section 15 of the Act The Commission also answered the argument that

Uiterwyk Continental could not be the common carriers involved because

only Flomerca held itself out as such in the trade by holding that both

F7omerca and UiterwyWContinental were common cairiers ttse former a

nonvessel operating common carrier and the latter the underlying common

carrier 12FMCat 1002 The Commission was also motivated by the

legal principle that corporate fictions may be disregarded when necessary

to prevent parties from attempting to circumvent a statute or when compa

nies are erected as implements for avoiding cleaz legislative purposes 12

FMCat 1012 The record in the Uiterwyk case showed that the

arrangements in question had been drafted in order to free the operation

from Commission jurisdiction and to immunize it from protests by compet

ing carriers and that the parties felt that this could best be done by

putting it purely in the name of Flomerca 12FMCat 93

In the instant case the limited record dces not show that the Armada

Group deliberately forrned the Armada East Africa corporation as a means

to avoid the requirements of section 15 of the Act or any law On the

contrary as mentioned Armada East Africa believed at least in January

1983 that Armada East Africa had presumably become a common carrier

itself when it published tariffs in the name of the Armada GLTL line

joint service and advertised the service Moreover Armada East Africa

led two Anti rebating Certificates as required of common carriers by

Commission regulations again indicating an apparent belief that it was

operating as a common carrier Nor dces the record show that Armada

East Africa was formed asashell corporation in order to conceal

the fact that commonarriermembers of the Armada Group were intended

to be participants in the Agreement On the contrary the parties did file

1z Interestingly although Flomerca which otherwise in other trades was a vessel operating common carrier

in the subject trade was merely a sort of dummy whose name was being used by the real operators of the

service Uitenvyk who gave Flomerca royalty payments for the use of the Flomerca name Flomerca doing

little else Nevertheless the Commission found F7omerca as well as Uitenvyk to be a common carrier in the

subject trade In the instant case the Agreement provides that Armada East Africa shall share earnings re

sponsibilities and liabilities of the joint venture Armada East Africa is far more than the mere dummy

that was Flomerca in the Uiterwyk agreement yet the Commission found Flomerca to be a commonarcier

party to the agreement

26FMC
1EH FEDERAL MARITIME COMMISSION

the Agreement in January 1983 and even submitted affidavits conceding

that they intended to assure participation of all subsidiary or controlled

companies of the two partners Therefore I cannot find on this record

that there is an element of concealment or deception as there was in

the Uiterwyk case in which Uiterwyk had established a number of puppet

corporadons and otherwise suppressed its name in order to avoid the require

ments of section 153

Nevertheless although apparently free ofthe scheming that was prevalent

in the Uiterwyk case Armada East Africa is as much as or more of

a coc mon carrier in the subject trade than was Flomerca the dummy

bwner in the Uiterwyk case since unlike Flom rca which had merely

lent its name to the commonarrieroperation and received royalty pay

ments Armada East Africa shares earnings responsibilities and liabilities

of the Armac aGLTLline provides fuds whenever necessary for operat

ing of th line and participates in operational decisions for the line

in other words is a full active partner operating a commonarrier service

under a different trade name with a

recognized commonazrier partner

In conclusion then IndArmada East Afriea which was formed specifi

cally for the sole purpose of entering into a joint venture W provide

common carrier service which believed it had become a common carrier

when it filed tariffs and advertised for the joint service which filed Anti

rebating Certi cates with the Commission as common carriers are required

to do which shares earnings responsibilities and liabilities of the common

cairier joint service which presumahly provides its share of funds to operate

the line and which participates in operational decisions for the line is

itself a common cairier doing business as a partner with another common

carrier using a trade name which admittedly was selected for marketing

not legal purposes To paraphrase a common saying if it walks like a

duck acts like a duck quacks like a duck and was born to be a duck

it is indeed a duck 14

13I am aware of the protest fikd by Ceres Navigation Ltd relating to tht question of approvabillty of

the Agroement an issue not before me in which Ceres arguea against approving the Agreement on the

gound that the parties operated without approval and should have ban or were aware of the requirements

of section IS as evidenced by the filing ofAnti robating Certificates by GLTL orArmada ocials My find

ings in this proceeding have nolhing to do wilh approvability nor with the paKies motivations or beliefs

in failing to file for approval i cite the evidence regarding Ihe filing ofAnti robating Certificates and the

beliefthat Arm aEast Africa may have become a common cartier at some time as showing just thst name

ly that at some time before January 1983 Artnada 6ast Africa came to the belief that it might heve become

a common carrier by water and should file its Agrament with GL 71 with the Commission uoder section

I5 In other words the record before me is not sufficient to find that the parties wero engaging in the type

of deliberate deaption that was the siwation in the Uiterwyk case

Itis surprising that nei8m protestant nor Hearing Counsel who arc concemed that corparate fictions

not be used to shidd the real parties and carrien from their logal obligationa did nnt quite perceive that

the Armada GLTLline joint service is not even acorporation but is eimply a

partnership end a trade name

Ifcorporation A iorporated to be acommon carrier had operated and advertised the C Line a trade

neme only wauld anyon doubt that the common carrier was corporation A Why ahould it make any dif

feronce if corporation A and corporation B a common carrier Qpereted the C Liae as a partnership the

C Line being atrade name only7 Thet is precisely what Artnada East Africa and GL71 have done in

operating the Artnada GL71line

26FMC
ARMADA GLTL EAST AFRICA SERVICE AGREEMENT NO 169

0464

ULTIMATE CONCLUSIONS

Proponents of Agreement No 10464 contend that it is not subject to

section 15 of the Act because one of the nominal parties to the Agreement

Armada East Africa is not a common carrier by water and that there

aze no continuing relationships with the commonarrierline joint service

Armada GLTL line which Armada East Africa and GLTL a

recognized

common carrier formed by the Agreement Protestants and Hearing Counsel

disagree strongly arguing that Armada East Africa is tied to common

carrier members of the socalled Armada Group by the very terms of

the Agreement should therefore be considered a common carrier itself

and that there are continuing relationships between GLTL the common

carrier owner of the Armada GLTLline and the line

The record shows three grounds for finding jurisdiction over the Agree

ment First there are continuing relationships between GLTL the admitted

commonarrierowner of the Armada GLTLjoint service which aze critical

relating to GLTL s

option to charter vessels to the joint service to vote

on sailings and insertions of vessels to handle claims and legal proceedings

and a covenant not to compete with the joint service These relationships

constitute special privileges or advantages or cooperative working arrange

ments between GLTL and the joint service line within the meaning of

section 15 of the Act

Second as shown by the very words of the Agreement by af davits

filed contemporaneously with the Agreement when it filed for approval

and even by the parties to the Agreement in their more recent opening

brief these parties intended to assure participation of companies affiliated

with and related to Armada East Africa in the Armada Group and to

GLTL Therefore the Agreement really includes commonarriermembers

of the Armada Group which owns Armada East Africa regarding critical

covenants not to compete and options to charter vessels

Third the record leads persuasively to the conclusion that Armada East

Africa has itself become a common carrier by water so that it is not

even necessary to pierce corporate fictions or impute commonarrier status

to Armada East Africa because of its ties to commonarrier members

of its parent Armada Group That is because as the record shows Arrnada

East Africa is operating a commonarrier service a partnership not a

corporation as a full partner with GLTL using the trade name for market

ing not legal purposes of the Armada GLTL line In so operating Armada

East Africa is carrying out the purpose for which it was speci cally formed

namely to operate a commonarrier service jointly with GLTL Further

more Armada East Africa itself had believed that it had become a common

carrier when the joint service filed tariffs and advertised to the shipping

public and Armada East Africa had even filed Anti rebating Certificates

with the Commission as common carriers are required to do Armada

East Africa also shares earnings responsibilities and liabilities of the joint

service ine as is customary in partnerships and Armada East Africa pro

26FMC
17O FEDERAL MARITIME COMMISSION

vides its share of funds to operate the line and participates in operational

decisions for the line To paraphrase a common saying if it walks like

a duck acts like a duck quacks like a duck and even was born to

be a duck it is indeed a duck

S NORMRN D KLINE

Administrative Law Judge

26FMC

FEDERAL MARITIME COMMISSION

DOCKET NO 83 26

PACIFIC COAST EUROPEAN CONFERENCE AGREEMENT

NO 5200

i

A 120 day advance notice provision in the Conference Agreement is found to be contrary

to the public interest within the meaning of section IS of the Shipping Act 1916

and ordered to be deleted from the Agreement

David C No an for Pacific Coast European Conference

Stuart James and John Robert Ewers for Bureau of Hearing Counsel

i

REPORT AND ORDER

January 18 1984

BY THE COMMISSION Alan Green Jr Chairman James J Carey

Vice Chairman James V Day and Robert Setrakian Commissioners

ThomasF Moakley Commissioner dissenting in part

This proceeding was initiated by Order of May 31 1983 directing the

Pacific Coast European Conference PCEC and its member lines to show

cause why Agreement No 5200 should not be modified to delete from

the Agreement a 120 day advance notice provision on intermodal rate offer

ings and if not so modified why the Agreement should not be found

contrary to the public interest within the meaning of section IS of the

Shipping Act 1916 46 U S C 814 and disapproved pursuant to that

section The proceeding was limited to the filing of affidavits of fact

and memoranda of law but allowed for requests for evidentiary hearing

and discovery PCEC filed a response with exhibits I The Bureau of Hearing

Commissioner Moakley s opinion dissenling inpart is allached

I PCEC submilled the following exhibits a portion of the sworn statement dated December 3 1976 of

Raymond A Velez aformer PCEC Chairman Exh A aSllIlernent dated November 16 1976 of Manuel

Diaz the Executive Director of the Associated Nonh Atlantic freight Conferences Exh B the sworn testi

mony dated July 8 1983 of Donald Thiess the present PCEC Chairman Exh C an affidavit dated July

7 1983 submilled on behalf of Johnson Scanstar Exh D an affidavit dated July 7 1983 submilled on

behalf of Scan PacifIC Line Exh E an affidavit dated July 8 1983 submitted on behalf of United Yugo

slav Lines Exh F an affidavit dated July 8 1983 submilled on behalf of Compagnie Generale Maritime

Exh G an affidavit dated July 8 1983 submilled on behalf of Intercontinental ICT B V Exh H an

affidavit dated July 8 1983 submilled on behalf of Hapag L1oyd A G Exh I

an affidavit dated July

II 1983 submilled on behalf of d Amico Societa Di Navigazione SpA Exh J an affidavit dated July

II 1983 submilled on behalf of Italian Line Exh K and an affidavit dated July II 1983 submilled on

behalf of Zim Israel Navigation Co Ltd Exh L

172 26 F M C
PACIFIC COAST EUROPEAN CONFERENCE AGREEMENT NO 173

520

Counsel Hearing Counsel filed a

reply and one exhibit 2

The parties

did not request an evidentiary hearing or discovery

BACKGROUND

Agreement No 5200 is the basic agreement ofthe Pacific Coast European

Conference The members of the Conference are Johnson Scanstar Scan

Pacific Line United Yugoslav Line French Line Incotrans Line Hapag

Lloyd D Amico Line Italian Line and Zim Container Line The Con

ference was originally established in 1937 to provide all water service in

the trade from U S Pacific Coast ports to European destination ports

In 1977 the Commission approved subject to certain conditions Agree

ment No 520029 Amendment 29 an amendment authorizing Conference

service to inland points in Europe See Conditional Approval of Agreement

No 5200 29 January 12 1977 Amendment 29 required an individual

member line to give the Conference 120 days advance notice before offering

an intermodal service which is within the scope of the Agreement and

which is not being served under a Conference tariff3 One of the conditions

to approval imposed by the Commission required amendment of the notice

clause to add a proviso that an individual intermodal tariff would be super

seded only where the Conference tariff is no less favorable to the promotion

and development of the intermodal service involved than the parallel provi

sions of the applicable individual tariff The Conference accepted this condi

tion ofapproval

Subsequent to the approval of Amendment 29 the Commission in ad

dressing another conference srequest for intermodal authority ruled that

an individual member of a conference may not be required to provide

any advance notice to a conference where the member wishes to offer

a new intermodal service that is within the scope of conference authority

and that is not included in a conference tariff See Application for Approval

of an Amendment to the American West African Freight Conference Agree

ment No 7680 36 18 S R R 339 342 1978 AWAFC The Commission

found that advance notice provisions generally burdened the filing of indi

2Hearing Counsel submitted the affidavit of Austin L Schmitt Chief Economist of the Office of Policy

and Planning and International Affairs Federal Maritime Commission Schmitt Affidavit

3

The notice provision in the thirdparagraph of Article I as modified provided that

In the event a member line desires to offer an intermodal service within the scope of this Agree

ment but not being offered by the Conference under its tariff it shall first present the matter to

the Conference in writing for consideration and joint action Only in the event the Conference does

not within one hundred twenty 120 days of such presentation establish such service shall the

proposing member or any other member line be free to act unilaterally in respect to the matter

proposed In the event the Conference shall by such vote subsequently adopt and effectuate a tariff

ortariffs covering the service embraced by any such member s individual tariff the member s tariff

to the extent of such duplication shall be cancelled by said member or members which are parties

thereto coincidentally with the effectiveness of such Conference tariffor tariffs Provided however

that such cancellation shall be required only to the extent the relevant tariff rates rules or regula

tions so adopted by the Conference are no less favorable to the promotion and development of the

intermodal service involved than the parallel provisions of the applicable independent tariff or tar

iffs

26 F M C
174 FEDERAL MARITIME COMMISSION

vidual intennodal tariffs to an unreasonable degree and therefore held that

the only notice period which an individual member line must observe

is the 30 day statutory notice upon filing of a tariff required under section

18 b of the Shipping Act 1916 46 U S C 817 b

The 120 day notice provision contained in Agreement No 5200 came

to the attention of the Commission in connection with the filing of Agree

ment No 5200 4 Amendment 40 This amendment divided the Con

ference into trade area groups and authorized each groupto take independ nJ

action Amendment 40 also restated the entire basic agreement The Com

mission found that the previously approved 120day notice provision was

contrary to the policy and precedent established in AWAPC and therefore

approved Amendment 40 on the condition that the 120 day notice provision

be deleted from the Agreement See Modification of the Pacific Coast

European Conference Agreement Agreement No 5200 4 Order ofCondi

tional Approval August 20 1982

Subsequently and as a result of a petition filed by PCEC the Commission

modified its August 20 1982 order and approved Amendment 40 as filed

without condition 4but at the same time initiated this proceeding by sepa

rate Order to Show Cause s

DISCUSSION

In the Order commencing this proceeding the Commission directed PCEC

to show cause why its 120 day advance notice provision should not be

deleted from Agreement No 5200 Despite extensive briefing of general

issues relating to advance notice the Conference has not addressed the

specific issue which caused the Commission to initiate this action For

reasons stated below we adhere to established precedent on this issue

and will require PCEC to delete the provision from its Agreement

PCEC s advance notice clause must be analyzed under the principles

expressed in the Commission s AWAFC decision AWAFC stated as Com

mission policy that conferences generally may not require a member to

observe a notice period prior to the filing of an individual intennodal

tariff where the proposed service is within the scope of the conference

agreement and is not being provided under a conference tariff This policy

is based on the Commission s

finding that the practice of requiring a

member line to provide advance notice to the conference prior to the

publication of an intennodal tariff had not brought about the rapid develop

ment of intennodal transportation by conferences The Commission adopted

this policy in order to secure the development of innovative transportation

services by protecting the initiative of an individual member line

The Commission has in a number of instances required agreements which

do not comply with the AWAFC policy to be modified The Commission

4

See Modification of the Pacific Coast European Co lference Agreement Agreement No 200 40 Order

May 25 1983

In its petition PCEC indicated its willinpss to defend the 120day notice clause in a proceeding

26 FM C
PACIFIC COAST EUROPEAN CONFERENCE AGREEMENT NO 175

520

has required that any expansion of an agreement s intermodal authority

be conditioned upon the deletion of advance notice provisions 6

The Com

mission has also required the deletion of previously approved advance

notice clauses 7In order to justify a departure from this policy a conference

must demonstrate the existence of specific trade conditions which require

some specific period of notice beyond that otherwise required of a member

line by section 18 b

8

prior to the filing of an individual intermodal

tariff or otherwise adequately explain the need for any such notice 9

PCEC suggests that its advance notice provision should be judged under

a legal standard which is similar to that applied in the case of independent

rate action provisions 1O PCEC believes that the independent naming of

a new inland point is similar to the taking of an independent rate action

and argues that a notice period should be permitted in both instances

The concept of notice prior to independent rate action however should

not be confused with advance notice prior to the offering of an independent

intermodal service Notice of independent rate action and advance notice

of a new intermodal service differ in terms of their manner of operation

and the particular interests which are at stake The Commission therefore

has formulated different policies with regard to each

Independent rate action provides that a conference member may offer

its own rate for a particular commodity which differs from an already

existing conference rate Some period of notice to the conference is gen

erally required before the member may file its own tariff In the case

of independent rate action there is already a service being offered by

the conference for a particular commodity at a particular rate Independent

rate action contemplates that the independent rate will co exist with the

conference rate The purpose of an independent rate action provision is

to introduce an element of flexibility into the conference ratemaking mecha

nism Independent rate action may help to maintain conference stability

by allowing enough flexibility to retain membership and by providing a

means by which members compete more effectively with non conference

carriers The Commission has recently announced an interim policy or

presumptive approval of independent rate action authority which provides

for a 30 day notice period Such a period of notice is deemed to strike

a proper balance between the conflicting interests of stability and flexibility

while at the same time taking into account the potential predatory effects

of conference line independent action on non conference carriers in the

6Philippines North America Conference Agreement No 5600 42 21 S R R 345 347 1981

7 Conditional Approval of Agreement No 809016 19 S R R 831 833 1979

Section 18 b provides that a new rate or service may not become effective until 30 days after the filing

of the tariff with the Federal Maritime Commission This 30 day statutory waiting period would apply to

the naming of anew inland point by a PCEC member

9 U S Atlantic GuljlAustralia New Zealand Conference Agreement No 620020lntermodal Author

ity 21 S R R 89 93 1981 JapanKorea Atlantic and Gulf Conference lntermodal Amendment Agreement

No 3lO3 j7 23 F M C 941 948 n 24 1981

IOHearing Counsel takes the position that the Commission s decision in AWAFC is the controlling standard

by which PCEC s advance notice clause must be judged

26 EMC
176 FEDERAL MARITIME COMMISSION

trade Shorter or more extended notice periods require explanation and

justification in order to ensure that independent action is neither ineffective

nor predatory

A notice period prior to the offering of a new intermodal service by

an individual conference member operates in a different mannerand involves

different concems than independent rate action and caUs for a different

policy Advance notice provisions with respect to intermodal service apply

where an individual conference member wishes to offer an intermodal serv

ice that is within the scope of the agreement and that is not offered

by the conference Such provisions require the member to notify the con

ference and then wait for a specified period of time before filing an inter

modal tariff with the Commission In the event that the conference subse

quently files a tariff which offers the same service the individual tariff

is automaticaUy superseded by the conference tariff The purpose of such

a clause is to prevent the individual member from offering a new service

until the conference has had an opportunity to consider for example the

naming of a new inland point Balanced against this coUective desire for

stability however is not only the interest of the individual member but

also a public interest in the development of new efficient innovative

transportation services The Commission has determined that the develop

ment of such new services by an innovative member should not be hampered

in any way and that no notice other than the 30 day statutory notice

required by section 18 b of the Shipping Act need be given I I

Because of the different underlying interests the Commission has estab

lished different policies with regard to intermodal service and advance

notice on independent rate action It is not correct therefore to treat inter

modal notice provisions as if they were independent rate action clauses

Commission policy regarding independent rate action is not applicable to

the question of whether PCEC s 120 day advance notice provision is justi

fied The relevant legal standard and policy by which that provision must

be judged is that expressed in the AWAFC decision

As support for its 120 day clause PCEC relies upon the Commission s

decision in Atlantic GulflWest Coast ofSouth America Conference Agree

ment No 274430 13 F M C 121 1969 Atlantic Gulf In the Atlantic

Gulf case Hearing Counsel had urged that the grant of intermodal

authority be linked to a provision which would allow an individual member

to establish an independent intermodal service where the conference failed

to do so Hearing Counsel s position in that case was based upon its

concern that a conference might refuse to file a conference intermodal

tariff and thereby frustrate the desire of an individual member to establish

an intennodal service on its own Although it recognized the validity of

Hearing Counsel s concern the Commission required individual conference

IIPCBC only argues that some advance notice is required However as noted above section 18 b already

applies a 3Oday notice period to the namlna of a new inland point by a PCEC line PCEC would in fact

have such notice ifit monitored the tariffs filed by its members with the Commission

26 F M C
PACIFIC COAST EUROPEAN CONFERENCE AGREEMENT NO 177

520

members to wait 12 months before negotiating their own tariffs In this

early statement of intennodal policy the Commission favored collective

action by the conference because of the novelty of intennodalism l2 Subse

quently the Commission acquired additional experience in intennodal trans

portation 13 that led to a change from the view expressed in Atlantic

Gulf and the adoption of the policy in AWAFC The decision relied upon

by PCEC has been superseded by AWAFC which is the present controlling

policy

PCEC takes exception to this change in policy and to the general applica

tion of the principles expressed in AWAFC PCEC states that Atlantic

Gulf represents the correct detennination on the issue of whether advance

notice should be pennitted and further states that it does not know what

facts or evidence led to the change in policy PCEC also believes that

the general rule of no notice enunciated in AWAFC should have been

adopted by rulemaking rather than adjudication PCEC claims that it had

no opportunity to comment on the AWAFC policy at the time it was

promulgated

These objections are without merit The AWAFC decision itself clearly

articulates the background for the change in policy and discusses the early

approaches that the Commission tried regarding intennodalism What PCEC

would prefer is an earlier interim policy of the Commission PCEC appar

ently would not object to the general application of the Atlantic and Gulf

decision PCEC cites Patel v INS 638 F2d 1199 9th Cir 1980 Patel

for the general proposition that the practice of adopting rules of general

application through adjudication rather than rulemaking has been dis

approved However the Patel decision itself acknowledges that an agency

is not precluded from announcing new principles or policies in an adjudica

tory proceeding and that the choice between rulemaking and adjudication

lies primarily in the infonned discretion of the administrative agency See

NLRB v Bell Aerospace Co 416 U S 267 294 1974 see also British

Caledonian Airways Ltd v CAB 584 F2d 982 992 93 D C Cir

1978 PCEC has introduced nothing into the record which would in any

J2The Commission stated inAtlantic Gulf I3 F M C at 126127 that

Current fonns of the intennodal concept are new and their fruition will occur undoubtedly only

after some experimentation and much give and take among the parties in interest Itcan come about

only through the cooperation of all concerned Thus if each member of aconference is free to

pursue his own way at any point in the midse of conference efforts the possibility is very real

that successful conference action would be frustrated

13 See for example the Commission s

summary of its subsequent experience as stated in Application of

the Far East Conference for Intermodal Authority 21 F M C 750 753 1979

Statistical evidence in this record indicates that of the thirty two intennodal amendments to con

ference agreements approved by the Commission only six have even filed intennodal tariffs Of

those six five conferences did not file tariffs until after individual members had instituted inter

modal service Overall this evidence shows that conferences generally have not acted quickly to

develop intennodal services after approval of their intennodal amendments and the majority of

those which did implement intennodal service did so only after an individual member pioneered

in the field The record here therefore tends to run counter to previous Commission findings re

garding the expected public benefit of promoting intennodal development under conference author

ity

26 EM C
178 FEDERAL MARITIME COMMISSION

way indicate that the Commission abused its discretion by adopting a

new policy in the AWAFC decision

Finally PCEC argues that the AWAFC standard should not be applied

where a conference has implemented its existing intermodal authority

through the filing of an intermodal tariff as it has done for its European

intermodal service 14 PCEC believes that such tariff filing is a sufficient

indication that intermodalism has not been stifled ls Therefore PCEC con

cludes that AWAFC should not apply and that its advance notice clause

should not be deleted

While the policy enunciated in AWAFC is based upon the Commission s

finding that the practice of requiring advance notice had not brought about

the rapid development ofintermodal transportation by conferences its objec

tive is not limited to those cases where the conference has never imple

mented its intermodal authority through the filing of a tariff The rationale

of the AWAFC decision has a broader purpose namely to ensure that

the development of intermodalism is not hindered and that the transportation

benefits achieved by such service are not arbitrarily restricted An advance

notice requirement is a mechanism that on its face restrains innovative

action by an individual member 16 In order to justify such a restraint

the Conference must show trade conditions which require it or otherwise

explain why such a restriction is necessary

In this proceeding the burden is on the Conference to justify the 120

day restraint The mere fact that the Conference has filed an intermodal

tariff does not justify an exception to the established policy The purpose

of the policy would be defeated were it possible to avoid its requirements

by the mere filing of a tariff The tariff might be a paper tariff under

which no cargo moved PCEC makes no effort to describe the services

provided under its European intermodal tariffs by for example indicating

how much cargo moves under these tariffs

PCEC argues that Conference control over the inland portion of a phys

ically intermodal movement is necessary in order to preserve Conference

stability Moreover according to PCEC unless such control is maintained

I PCEC refers to its European inland tariffs but does not further describe this service Exh C at 11

Hearing Counsel cites the following PCEC inland European tariffs FMC Tariff Nos 2 3 and 18 Hearing

Counsel Reply at 3

ISThe affidavits of PCEC members also state that in their view the development of intermodalism has

not been inhibited by the 120day rule Exhs DL

16The restraining effects of such aprovision were described in AWAFC 18 S R R at 341 as follows

This procedure requires any member line of the Conference that wishes to offer an intermodal serv

ice to expend that member s time money and effort to research the poims of origin of different

commodities negotiate agreements with land carriers calculate the appropriate intermodal rates for

various commodities and fashion an intermodal tariff and then hand the result of those expendi

tures to its purported competitors in lheConference who after preventing the implementation of

the proposal for 90 days may adopt it as their own The result would be to deny to the innovative

carrier any reward for its effons There being no reward it is not to be expected that the effons

will be expended

Such a

restraining impact would IIflpear to be heightened inatrade where shon sea on agricultural products

are a significant portion of the commodities shipped

26 F M C
PACIFIC COAST EUROPEAN CONFERENCE AGREEMENT NO 179

5200

competitive forces within the Conference will be unleashed which will

hamper the ability of the Conference to stabilize the trade and which

may even destroy the Conference 17 PCEC contends that a notice require

ment is necessary in order to prevent uncontrolled and reckless point nam

ing According to PCEC some period of notice is needed in order to

give other members of the Conference an opportunity to consider a proposed

new point for possible collective action Without the control provided by

a notice period PCEC believes that a proliferation of individual tariffs

naming a host of inland points would result which would produce intense

intra conference competition and undermine Conference stability 18

Instead ofoffering evidence of actual conditions to support its instability

argument 19 PCEC offers a theory illustrated by hypothetical examples

One example posits that a PCEC member might establish a rate on pencil

slats to Nuremberg while another might name a competing rate on pencil

slats to Stuttgart In another example PCEC theorizes that Conference

rates could be avoided by naming Monza rather than Milan on walnut

shipments

While we do not dismiss the possibility of a theoretical justification

of an advance notice provision we believe that a theoretical justification

must go beyond the general assertion that a no notice rule will increase

intra conference competition and that intra conference competition is desta

bilizing Some specific potential for this instability in the PCEC trade

in the absence of a notice clause should be demonstrated PCEC also

might demonstrate the existence of destabilizing point naming in a similar

conference trade which does not have a notice provision No attempt at

submitting this kind ofevidence wasundertaken by the Conference

PCEC also maintains that some period of advance notice is necessary

in order to provide other members of the Conference with a fair opportunity

to consider the naming of a new inland point and to compete with the

proposed new service PCEC states that the naming of new inland points

involves substantial operational changes Without sufficient notice of the

naming of a point an individual member who was the first to file a

new tariff allegedly could obtain an unfair advantage over other Conference

members in soliciting cargo As a hypothetical example PCEC describes

a situation which might occur on a shipment of walnuts to Hanover Ger

many Walnuts as do other agricultural products which make up a large

part of the PCEC trade have a short shipping season Without any notice

7PCEC cites the reasons for its original application for European inland authority in Amendment 29

namely that without such authority Conference members would be able to undercut other Conference mem

bers by offering benefits or making concessions on the inland transportation arrangements beyond the terminal

gate

8

Both the statement of the Conference Chairman and several member lines statements express the belief

that a nonotice rule would lead to intense intra conference competition

9We recognize that in this instance PCEC may not be able to introduce evidence of actual destabilizing

point naming The fact that PCEC is currently operating under the 120 day provision prevents actual impact

of nonotice conditions from being established This is to be expected because of the highly restrictive

nature of a120 day notice requirement

26 F M C
180 FEDERAL MARITIME COMMISSION

requirement an individual member allegedly could secretly make all of

the necessary arrangements to support an independent intermodal rate to

an inland point not named in the Conference tariff and then use this

rate to undercut the Conference rate On the hypothetical walnut shipment

it is alleged that a carrier could gain a competitive advantage over other

Conference members and could solicit and obtain a significant portion

of that cargo before other members could respond to the new point and

complete the difficult and time consuming arrangements for offering a com

petitive service Exh C at 8 10 According to PCEC an advance notice

provision prevents the possibility of such sub rosa bookings by which

an individual member might gain an unfair competitive advantage

This argument is for the most part based on the assumption that naming

a new inland point involves a substantial amount of time and effort PCEC

offers no evidence to indicate how difficult it might be to name a new

inland point or how much lead time might be required Moreover in

a different context PCEC maintains that there is no difficulty at all in

naming a new inland point on walnut shipments 2o Furthermore in a short

season market of 26 months a long notice period such as appears in

Agreement No 5200 might effectively preclude an individual member from

ever offering a new intermodalservice Finally PCEC s argument overlooks

the fact that the naming of a new inland point could not become legally

effective until the 30 day statutory notice under section 18 b is observed

An attentive Conference would be aware of the filing of any new intermodal

service and would have 30 days notice before cargo could be carried

under the new tariff Other member lines would have an opportunity to

match the proposed new service The Conference could adopt the tariff

of the individual member thereby superseding that service and obviating

any possible competitive advantage 2J

PCEC maintains that the notice provision in its Agreement should not

be deleted or modified in any way Response at 8 PCEC therefore seeks

to retain the full I20 day period of notice Throughout its submission

PCEC however argues only that some period of notice is necessary At

20 See Response at pp 34 In this day and age of containerized shipping there is vinually no operational

obstacle to delivering a container of e

g

California walnuts to anywhere in Western Europe Ifan individual

PCEC member line wished to increase or reduce the walnut rate it would have to go to the Conference

and if the member line were out voted that would be the end of the proposal Perhaps one could say its

innovative proposal has been stifled yet the procedure represents the very essence of the steamship

conference system something which has not only been permitted but encouraged inU S trades since 1916

Under the apparent view espoused in the Show Cause Order however that same member line could take

that same container of walnuts at the same total rate proposed not to Milan which the PCEC tariff covers

but to Monza afew kilometers funher where the Conference does not yet have tariff coverage all without

any consideration let alone democratic vote by the other member lines No COSIly service is involved

all illalees is abooking Emphasis added

21 Nor would there necessarily be any lag lime in the effective date of a

superseding conference tariff be

cause section 18 b 2 46 U S C A817 b2 empowers the Commission in its discretion and for good

cause to allow a tariff change to become effective upon less than 30 days notice The Commission s Rules

allow for expedited means of filing such applications for special permission inemergency situations See 46

C F R A S36 IS c

26 F M C
PACIFIC COAST EUROPEAN CONFERENCE AGREEMENT NO 181

520

one point PCEC approaches the question of how long that period of

notice should be but does not expressly state that 120 days is needed

Exh C at 7 8

Hearing Counsel states that although PCEC should be allowed to retain

some period of advance notice in its Agreement the present 120 day period

is excessive It suggests 30 days as being sufficient to provide adequate

notice to the Conference

Neither Hearing Counsel nor PCEC discuss the effect of the statutory

notice provisions of section 18 b At least for the first filing of a rate

to a particular inland point a 30 day notice period prior to tariff filing

would in effect result in a 60 day delay because of the additional 30

day statutory notice on new or initial rates required under section 18 b

With respect to short season commodities such a waiting period can render

meaningless the option to offer an independent service

Finally we note that it would not be inconsistent with Commission

policy for PCEC through amendment to its Agreement to require members

to notify the Conference at the time that an individual intermodal tariff

is filed Such a provision would relieve the Conference of the task of

monitoring intermodal filings by its members and would ensure that the

Conference and each of its members had 30 days actual notice before

a new intermodal service became effective

CONCLUSION

PCEC has failed to provide either evidence of actual trade conditions

or an adequate rationale which would justify the highly restrictive 120

day notice requirement in its Agreement or the lesser 30 day period sug

gested by Hearing Counsel Accordingly we conclude that the 120 day

advance notice provision is contrary to the public interest within the meaning

of section 15

PCEC shall have 60 days in which to file an appropriate modification

which deletes the advance notice requirement from its Agreement Otherwise

the Agreement shall be disapproved pursuant to section 15 as contrary

to the public interest

PCEC is free at any time to seek to reinstate a notice period by showing

actual or potential trade conditions which require it Moreover PCEC may

through appropriate amendment to its Agreement require its members to

give actual notice to the Conference of a new intermodal service simulta

neously with the filing of an individual tariff

THEREFORE IT IS ORDERED That the Pacific Coast European Con

ference shall by March 19 1984 file an amendment with the Secretary

which deletes the 120 day notice provision from the third paragraph of

Article 1 of Agreement No 5200

FURTHER IT IS ORDERED That if by March 19 1984 the amendment

required by the first ordering paragraph is not filed as required then Agree

ment No 5200 is disapproved pursuant to section 15 on March 20 1984

F M r
182 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That this proceeding is hereby discontinued

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

Commissioner Moakley dissenting in part

While I agree with the majority that 120 days notice is an excessive

time period for conference review of a member s proposal for new inter

modal service I

disagree with their decision to permit no such notice

The reasons for this policy disagreement are essentially those set forth

in my recent partial dissents in connection with Agreement Nos 93 30

and 93 31 orth Europe U S Pacific Coast Freight Conference Agreement

and Agreement Nos 9314 31 et al orth Atlantic Intermodal Agreements

However the majority here have offered a rationale for this no notice

policy which did not appear in those prior decisions

In attempting to explain why the decision in American West African

Freight Conference AWAFC I

is better policy than earlier contrary deci

sions upon which respondent PCEC relies the majority opinion explains

that additional experience with intermodal transportation between 1969 and

1978 led to this change in policy 2Iwholeheartedly agree that regulation

of intermodal transportation has been rapidly evolving since the late 1960 s

but would strongly suggest that the pace of this evolution has accelerated

since the late 1970 s Ritual adherence in 1983 to an intermodal policy

decision founded upon 1978 circumstances is therefore at least as question

able as such adherence would have been in 1978 to a policy founded

on 1969 circumstances

The Commission s concern expressed in AWAFC in 1978 and in Far

East Conference supra in 1979 that some conferences had used their

intermodal authority to stifle the intermodal initiatives of member lines

was well founded and well documented Today however most conferences

must either offer meaningful and attractive intermodal services or face

the risk of extinction Shippers have become accustomed to the service

and independent carriers or individual conference members will offer such

service if the conference is unwilling or unable to do so The Commission

had graphic evidence of this before it recently in connection with the

applications by various North Atlantic Conferences for intermodal authority 3

In this case PCEC has implemented its intermodal authority since 1977

without complaint from either carriers or shippers There is no allegation

CommissionerThomas F Moakley s dissent inpart is allached

I Application for Approval of an Amendment to the American West African Freight Conference Agreement

No 768036 18 S R R 339 1978

2Curiously the only citation to arecord in which facts were developed as the basis for this policy change

isApplication of the Far East Conference for Intermodal Authority 21 F M C 750 753 1979 decided the

year after the AWAFC policy pronouncement

Agreement Nos 9314 31 et alNorth Atlantic Intermodal Agreements Order of Approval served De

cember 9 1983
PACIFIC COAST EUROPEAN CONFERENCE AGREEMENT NO 183

520

much less any evidence that this conference has used its authority to

stifle the initiative of member lines In fact all of the member lines have

submitted affidavits in support of retaining the present notice provision

and the conference chairman states that he is aware of no instance where

a member indicated that it was in any fashion inhibited from providing

a proper service demanded by a customer because of this particular notice

provision

Thus despite the majority s attempts to broaden the scope of the holding

in AWAFC the factual predicate for that policy pronouncement is not

valid in this case and I question whether it has any validity at all in

today s intermodal environment

As counsel for PCEC succinctly argued

It is not the intent of the prior notice requirement to inhibit

any member line from developing new services or intermodal

concepts but only to have a reasonable opportunity to discuss

the same with a view toward adopting the proposal as a group

exactly the same way as PCEC handles the yearly hundreds of

other tariff modification requests and suggestions Response to

Order to Show Cause p

3 emphasis supplied

I would not preclude this conference from adopting a reasonable notice

period for discussion of members proposals for new intermodal services

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 37

IN THE MATTER OF RATES APPLICABLE TO CHARITABLE

SHIPMENTS BY U S ATLANTIC AND GULF JAMAICA AND

HISPANIOLA STEAMSHIP FREIGHT ASSOCIATION

ORDER

February 24 1984

The United States Atlantic and Gulf Jamaica and Hispaniola Steamship

Conference Conference or Petitioner has petitioned the Commission pursu

ant to Rule 68 of the Commission s Rules of Practice and Procedure

46 C F R S02 68 for a declaratory order to remove uncertainties concern

ing the refundwaiver of port charges paid to the Conference by various

charitable organizations

The Petition advises as follows By letter dated May 4 1983 the Haitian

Minister of Finance instructed the Director General of the National Port

Authority of Haiti to exempt Catholic Relief Services Church World Serv

ices Cooperative for American Relief Everywhere Inc and Seventh Day

Adventist Welfare Service from port charges assessed on cargo entering

Haiti The Conference learned of the exemption approximately one month

later and amended its tariff to exempt the charitable organizations from

the port charges shown in the tariff

During the month between the time the Haitian authorities acted and

the Conference amended its tariff there were several shipments for the

account of the charitable organizations involved The Conference seeks

a declaratory order authorizing it to waive collection of or refund Haitian

port charges for any shipment of Public Law 480 Title II aid cargo on

behalf of the aforementioned charitable organizations during the period

May 4 through June 3 1983 Petitioner believes that such an order is

required to enable its members to make the necessary adjustments without

violating sections 16 and 18 of the Shipping Act 1916 46 U S C 815

and 817

Upon consideration of the Petition the Commission determined that no

action could be taken because the Petition as filed failed to provide

certain relevant information Accordingly by letter dated November 29

1983 the Commission requested Petitioners to provide the following

1 The relevant tariff provisions involved

I The Petition WI published inthe FederalRegister on September 1983 but elicited no replies

184
IN THE MATIER OF RATES APPLICABLE TO CHARITABLE 185

SHIPMENTS BY U S ATLANTIC ET AL

2 Bills of lading and other documents evidencing the dates of ship

ments in question and amounts paid

3 The statutory authority or legal theory upon which the Petition

for declaratory order is based

4 An explanation as to the precise method or procedure by which

the Haitian fees at issue are assessed eg are they assessed

against the carrier and passed on to the shipper or assessed directly

against the cargo

In response to the Commission s November 29 request the Conference

filed a supplemental brief and furnished some tariff pages and bills of

lading The tariff pages identify the charges only as additional charges

However Petitioner s brief states that

The charge in question is assessed against the cargo collected

by the carrier from the party paying the freight charges then

remitted to the Haitian Port Authority by the carrier The carrier

merely acts as the collection agent for the Haitian Port Authority

In this case the Haitian Port Authority exempted this cargo from

their charge before advising the Conference Supplemental Brief

at 3

The supplemental brief further advises that the waiver refund procedure

of section 18 b of the Act is inapplicable here because there is no clerical

error involved Although the original Petition cited no statutory authority

for the relief sought the supplemental brief relies on the Commission s

exemption authority under section 35 of the Shipping Act 1916 46 D S C

833a

Based upon the representations contained in the supplemental brief the

Commission finds that the charge at issue is a form of tax or fee which

is solely within the province of the Government of Haiti Although the

charge appears in the Conference tariff it does not appear to be a rate

or charge for the transportation of freight or a terminal or other

charge under the control of the carrier or conferences of carriers

within the meaning of section 18 b l of the Act 46 D S C 817 b l

The charge at issue is therefore not subject to the tariff filing and rate

adherence requirements of section 18 and section 16 2

Accordingly these

sections do not preclude the Conference members or the Government of

Haiti from making adjustments with respect to that charge

2There is therefore no need for the Commission to consider Petitioner srequest for asection 35 exemption
186 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That the Petition for Declaratory Order

filed in this proceeding is granted to the extent indicated above

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 83 25

BURLINGTON INDUSTRIES INC

v

DART CONTAINERLINE CO LTD

NOTICE

February 28 1984

Notice is given that no exceptions have been filed to the January 23

1983 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No such

determination has been made and accordingly that decision has become

administratively final

S FRANCIS C HURNEY

Secretary

26 F M C 187
FEDERAL MARITIME COMMISSION

DOCKET NO 83 25

BURLINGTON INDUSTRIES INC

v

DART CONTAINERLINE CO LTD

Shipment properly classified Reparation denied

Ben J Tyler forBurlington Industries Inc

E C Dickinson for Dart Containerline Co Ltd

INITIAL DECISION I OF JOHN E COGRAVE ADMINISTRATIVE LAW

JUDGE

Finalized February 28 1984

Complainant Burlington claims that its shipment of woven fiberglass

piece goods was improperly rated by respondent Dart with a

resulting

overcharge of 3 04062

The shipment consisting of 85 cartons stowed in one 40 container was

described on the bill of lading as Woven Fiber Glass Piece Goods

Dart classified the shipment under item 653 8009 003 of the North Atlantic

United Kingdom Freight Conference TariffNo FMC 12 This item covered

Piece Goods Fiberglass Burlington challenged the classification and

filed an overcharge claim with Dart arguing that the shipment should have

been classified as Fabrics Piece Goods viz Cotton Denim Corduroy

Pocketing or other Woven Fabrics N E S under Item 652 2305 017 Dart

rejected the claim pointing out that this N E S Not Elsewhere Specified

rate could not apply since there was indeed a rate specified elsewhere

which described Burlington s product exactly Fiberglass Piece Goods

Burlington then went to the Conference arguing that the rejection of

its overcharge claim was unreasonable since the transportation characteris

tics of woven piece goods and woven fiberglass piece goods are the same

The Conference too rejected the claim and Burlington filed this complaint

alleging the foregoing and claiming that it had been subjected to the

payment of rates for transportation which were when exacted discrimina

tory unreasonable and in violation of the Shipping Act sections 16 and

17 Burlington asked that the matter be handled under Subpart K of

the Commission s Rules of Practice and Procedure 46 CPR 502 181 et

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

188 26 F M C
BURLINGTON INDUSTRIES INC V DART CONTAINERLINE 189

CO LTD

seq Notwithstanding its desire to use the Shortened Procedure of Subpart

K Burlington failed to accompany its complaint with the verified and

subscribed to memorandum of fact and argument as required by Rule

182

Dart answered the complaint saying that it agreed with the facts as

stated in the complaint but failed to indicate its consent to the shortened

procedure Since the facts were not in dispute I set up a schedule for

the submission of the case pursuant to the provisions of Subpart K In

response to the schedule Burlington filed a Memorandum ofFacts which

was but a shortened version of its complaint Dart filed a restatement

of its original answer to the complaint Burlington failed to file areply

Burlington says Dart has violated sections 16 and 17 of the Act by

exacting rates which were discriminatory and unreasonable As relevant

here section 16 makes it unlawful for a common carrier

to make or give any undue or unreasonable preference or

advantage to any particular person locality or description of traffic

or to subject any person locality or description of traffic

to any undue or unreasonable prejudice or disadvantage

Section 17 again as here relevant makes it unlawful for a common

carrier to demand charge or collect any rate fare or charge which is

unjustly discriminatory Neither section speaks of rates which are

fixed at unreasonable levels 2 Instead they deal with dissimilar treatment

and There must be at least two interests involved in any case ofpreference

prejudice or discrimination West Indies Fruit Co et al v Flota

Mercante 7 F M C 66 1962 Burlington fails to make mention of any

other shipper who received the treatment from Dart that Burlington seeks

here This failure is fatal to Burlington s claim under sections 16 and

17 This ultimate reliance on sections 16 and 17 seems curiously out

of kilter with the rest of the complaint which reads like the typical prelude

to a charge of simple misclassification in violation of section 18 b 3

of the Act Indeed it would appear that Burlington s overcharge claim

was couched solely in terms of a tariff misclassification It seems odd

that no reliance whatsoever was placed on 18 b 3 by Burlington in its

complaint But whatever the reason for its omission the inclusion of an

18 b 3 allegation would not have saved Burlington s claim Based on

the slim record before me it is clear that Dart s treatment of the shipment

was correct The classification sought by Burlington was available only

for those products not specifically dealt with elsewhere in the tariffs Fiber

glass Piece Goods were so dealt with and the shipment was properly

classified under that item

2

The only section of the Shipping Act dealing with foreign commerce which addresses the level of rates

is 18 b 5 which prohibits rates which are so unreasonably high or low as to be detrimental to the commerce

of the United States

26 F M C
190 FEDERAL MARITIME COMMISSION

The complaint is dismissed

S JOHN E COORAVE

Administrative Law Judge

lillur
FEDERAL MARITIME COMMISSION

DOCKET NO 83 28

IN RE AGREEMENT NOS 10457 10458 10332 3 10371 2 AND IN

RE AGREEMENT NOS 10457 1 AND 10458 1

ORDER PARTIALLY ADOPTING INITIAL DECISION

February 29 1984

The proceeding was instituted by Order of Investigation and Hearing

and Approval Pendente Lite served June 17 1983 to determine whether

Agreement No 10457 an agreement between Korea Marine Transport Com

pany KMTC and Nippon Yusen Kaisha NYK Proponents to cross

charter space jointly schedule and advertise sailings pool revenue or cargo

interchange equipment and appoint reciprocal agents and Agreement No

10458 an agreement between KMTC and NYK to subcharter space to

Showa Line Ltd should be approved disapproved or modified pursuant

to section 15 of the Shipping Act 1916 46 U S C 814 Sea Land

Service Inc United States Lines Inc American President Lines and Lykes

Bros Steamship Co which opposed approval of the Agreements were

named Protestants in the proceeding

After discussions with Protestants Proponents withdrew Agreement Nos

10457 and 10458 and substituted Agreements Nos 10457 1 and 10458

1 which deleted authority for revenue pooling and joint agencies placed

limitations on vessels capacity and sailings and restricted transshipment

On December 30 1983 Administrative Law Judge Seymour Glanzer

Presiding Officer issued an Initial Decision in which he approved Agree

ments Nos 10457 1 and 10458 1 In addition he concluded that the nego

tiations between Protestants and Proponents which led to the filing of

Agreement Nos 10457 1 and 10458 1 were not agreements subject to

the filing and approval requirements of section 15 On January 30 1984

the Commission determined to review that portion of the Initial Decision

relating to the existence and need for filing of any settlement between

Proponents and Protestants The remainder of the Initial Decision including

the approval of Agreements Nos 10457 1 and 10458 1 became administra

tively final in accordance with Rule 227 of the Commission s Rules of

Practice and Procedure 46 CF R 502 227

As originally filed Agreement No 10457 would have authorized the Proponents to operate such

other vessels as they may subsequently agree to operate under this Agreement

26 F M C 191
192 FEDERAL MARITIME COMMISSION

DISCUSSION

Upon review of the Initial Decision s treatment of the settlement negotia

tions between litigants under section 15 the Commission is satisfied that

the Presiding Officer correctly concluded that there was no agreement be

tween Proponents and Protestants which would be subject to the filing

and approval requirements of that section We do not agree however

with portions of the expressed rationale underlying the Presiding Officer s

conclusion

In concluding that no agreement between litigants here need be filed

the Presiding Officer appears to draw a distinction between formal executed

settlement agreements of the type present in American Export Isbrandtsen

Lines Inc 14 F M C 82 1970 Isbrandtsen and oral agreements The

distinction finds no support in section 15 which expressly requires oral

understandings to be reduced to writing and filed for approval In determin

ing whether a settlement among litigants must be filed for approval pursuant

to section 15 it is necessary to look at the terms of the settlement The

form of the settlement is not controlling

The Presiding Officer distinguishes Isbrandtsen on other grounds Citing

Federal Maritime Commission v Seatrain Lines Inc 411 U S 726 1973

Seatrain and American Mail Line v Federal Maritime Commission 503

F 2d 157 D C Cir 1974 AML he finds that the settlements here in

volve a discrete event and do not govern ongoing relationships The

Commission is not convinced that Seatrain and AML can be applied to

this case A merger of the type in Seatrain and AML effectively destroys

one of the parties to the agreement Seatrain 411 U S at 732 The

parties to a settlement of litigation remain separately functioning entities

Accordingly we are not adopting the Presiding Officer s rationale based

on Seatrain and AML We need not however resolve that issue conclusively

here because the record otherwise does not evidence an agreement among

the parties In deciding to amend Agreements Nos 10457 and 10458

Proponents were no doubt influenced by the discussions they had with

Protestants but those discussions with Protestants without more did not

however rise to the level of an agreement which must be filed and approved

pursuant to section 15

THEREFORE IT IS ORDERED That the conclusion in the Initial Deci

sion served in this proceeding on December 30 1983 that the negotiations

between Protestants and Proponents do not result in an agreement subject

to section 15 of the Shipping Act 1916 is adopted except as indicated

above and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 28

A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 10371 2

B IN RE AGREEMENT NOS 10457 1 AND 10458 11

Publication of the revised agreements Agreement Nos 10457 1 and 10458 1 in the Federal

Register as a condition precedent to consideration for approval is not required

On this record there is no need for section 15 approval of the settlements arrived at

by the former Protestants individually and the Proponents

Proponents haveestablished that the revised Agreement Nos 10457 1 and 104581 are required

by a serious transportation need are necessary to secure public benefits and are in

furtherance of a valid regulatory purpose

Charles F Warren George A Quadrino David N Dunn and Benjamin K Trogdon

for Proponents Korea Marine Transport Co Ltd Nippon Yusen Kaisha and Showa Lines

Ltd

Robert T Basseches and DavidB Cook for American President Lines Ltd

Edward M Shea and John E Vargo for Sea Land Service Inc

J Alton Boyer and William H Fort for Lykes Bros Steamship Co Inc

JohnRobert Ewers Alan Jacobson and Janet Katz for Hearing Counsel

INITIAL DECISION 2 OF SEYMOUR GLANZER ADMINISTRATIVE

LAW JUDGE

Partially Adopted February 29 1984

This proceeding began as an investigation instituted under the provisions

of sections 15 and 22 of the Shipping Act 1916 46 U S c 814 and

821 to determine whether Agreement Nos 10457 10458 10332 3 and

10371 2 should be approved disapproved or modified 3

BACKGROUND

The proceeding was initiated by Order of Investigation and Hearing

and Approval Pendente Lite Order served June 17 1983 4

The Order

designated Korea Marine Transport Company KMTC and Nippon Yusen

I

I amended the caption by adding Part B to the original which I designated Part A to reflect changes

which occurred during the course of the proceeding As will be seen the Proponents of Agreement Nos

10457 and 10458 withdrew those agreements from consideration and proffered in place thereof unilateral

more restrictive modifications for consideration The modified agreements were identified by the I suffix

to distinguish them from the earlier versions Agreement No 10457 1 is set out in Appendix I Agreement

No 104581 appears in Appendix 11

2

This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

Notices of filing were published in the Federal Register on September 20 1982 47 F R 4142324 and

on March 22 1983 48 F R 11987

4The Order was published in the FederalRegister on June 22 1983 48 F R 28550 52

26 F M C 193
194 FEDERAL MARITIME COMMISSION

Kaisha NYK as Proponents with respect to all four captioned agreements

and designated Showa Line Ltd as a Proponent with respect to Agreement

Nos 10458 and 10371 3 only American President Lines Ltd APL was

made a Protestant as to all agreements while Lykes Bros Steamship Co

Inc Sea Land Service Inc and United States Lines Inc USL S

were

made Protestants as to Agreement Nos 10457 and 10458 only Hearing

Counsel was made a party to the proceeding

Agreement No 10457 between KMTC and NYK would permit the parties

to cross charter space jointly schedule and advertise their sailings have

reciprocal agency representation and interchange equipment This agreement

would allow the parties to operate three or more vessels as they might

later agree between ports in Korea Hong Kong and Taiwan in the Far

East and ports on the United States Pacific Coast including those in Hawaii

and Alaska In addition it would authorize the parties to pool revenue

or cargo originating in or destined to Korea and to subcharter space not

to exceed 780 TEUs 6 month to Showa

Agreement No 10458 between KMTC NYK and Showa sets forth

the terms upon which Showa could subcharter space from KMTC and

NYK

Agreement No 10332 3 between KMTC and NYK proposes to extend

until July 1 1986 the term of previously approved Agreement No 10332

between the same parties Agreement No 10332 is similar to Agreement

No 10457 but it is applicable to a direct non intervening ports of call

service between Korea and the United States Pacific Coast

Agreement No 10371 2 between KMTC NYK and Showa proposes

to extend until July I 1986 the term of previously approved Agreement

No 10371 Agreement No 10371 is an arrangement allowing NYK and

KMTC to subcharter a maximum of 420 TEUs per month to Showa

Agreement Nos 10457 and 10458 were intended to succeed Agreement

Nos 10332 as amended and 10371 as amended These amendments were

among the subjects of Docket No 8052 Agreement Nos 10186 as amend

ed 10332 as amended 10371 as amended 10377 10364 and 10329 7

In that proceeding the Commission approved Agreement No 10371 1 and

granted conditional approval to Agreement No 10332 2 Upon findings

that the record in that proceeding did not justify provisions for the use

of joint agents coordination of sailings and revenue pooling by KMTC

and NYK the Commission insisted that those provisions be deleted as

conditions of approval

On June 23 1983 USL moved to be dismissed as aparty because it no longer sought to oppose approval

of Agreement Nos 10457 and 10458 The motion was granted with prejudice on July 19 1983 See order

entitled Dismissal Of A Party served July 21 1983

6Container carriage is often measured by TEUs TEU is an acronym for trailer container equivalent units

The basic unit is atwenty foot container A forty foot container is counted as two TEUs

Report And Order served December 22 1982 2S F M C 538 Order Of Modification served May 13

1983 at 22 SRR 113

t P M
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 195

10371 2 B IN RE AGREEMENT NOS 10457 AND 10458 1

After reviewing the agreements identified in Part A of the caption

the statements submitted in support thereof and the comments and protests

thereto the Commission determined that an evidentiary hearing was required

to resolve certain specified issues in order to ascertain whether the agree

ments met the so called Svenska test 8 The Commission noted that the

available information was not complete enough to permit an evaluation

of the scope of the agreements and the degree to which they would restrict

competition To remedy this deficiency the Commission directed the parties

to address the following issues

I Have NYK and KMTC engaged in bloc voting in the con

ferences to which they belong

2 Should Agreement No 10457 provide for a vessel or TED

limitation or both What should the limitation be

3 What is the relationship between Agreements Nos 10457

and 10458 on the one hand and operations of Japanese Flag

vessels in the Transpacific trades on the other

4 What is the geographic scope of the authority of Agreement

No 10457 How if at all should that scope be limited

5 What reporting provisions if any should be included in

the Agreements to enable the Commission to perform its oversight

function

In addition to those issues the Order directed that the following questions

concerning legitimate commercial objectives be addressed

6 Does KMTC a carrier with several years experience in

the trade continue to require technical assistance from NYK see

Article 4 Agreement No 10457 in order to compete in the

trade

7 Do NYK and KMTC require a joint sales force in order

to adequately compete in this trade see Article 4 Agreement

No 10457

8 Is the authority to coordinate sailings see Article I a

Agreement No 10457 necessary in order for the shipping public

to benefit from the space chartering provisions of Agreement No

10457 and can the space chartering provisions feasibly operate

without coordinating the sailings

9 Given Showa s historical carriage what is the justification

for authorizing Showa to charter an average of 600 TED s per

month

8

The Order explained the Svenska test this way

Section 15 agreements which interfere with the policies of the antitrust laws will be disapproved

as contrary to the public interest unless justified by evidence establishing that the agreement

if approved will meet a serious transportation need secure an important public benefit or further

a valid regulatory purpose of the Shipping Act 1916 The burden is on proponents of such agree

ments to come forward with the necessary evidence Federal Maritime Commission v Aktiebolaget

Svenska Amerika Linien 390 U S 238 1968
196 FEDERAL MARITIME COMMISSION

10 Is the U S Far East trade including the trades between

the U S Japan Korea Taiwan and Hong Kong over tonnaged

as a whole If so what impact will the subject agreements have

on the problem

11 What public benefit can be expected if NYK and KMTC

are authorized to enter into a

space charter agreement in the

U SJHong Kongffaiwan trades

12 Is revenue sharing on Korean origindestination cargo nec

essary to offset NYK s status as a third flag carrier in the Korean

trade and is it necessary for KMTC s continued development

in this trade Is this revenue sharing necessary for the continued

functioning of the entire arrangement

Finally the Order sought clarification of certain terms concerning agree

ments which might be reached in the future under Articles 1 a 5 a and

6 ofAgreement No 10457

In the meantime because of the Commission s concern for the preserva

tion of stability in the United StatesKorea trade and a fear that a sudden

cessation of approved space chartering authorities could be disruptive to

that trade the Order permitted the continuation of Agreement Nps 10332

and 10371 on the same terms allowed in Docket No 8052 supra pending

the outcome ofthis proceeding

On June 24 1983 one week after the Order was served APL filed

a document embracing issues in this proceeding and Docket No 80

52 With respect to the issues in Docket No 8052 the document responded

to a petition filed by KMTC and NYK seeking continuance of existing

joint agency arrangements for a limited period of time 9

With respect to this proceeding the document was treated as a motion

seeking a determination that no agreement which might be approved would

be permitted to contain provisions authorizing revenue pooling sailing co

ordination or joint agency It was the gravamen of the motion that in

the light of the Report and Order in Docket No 8052 those provisions

were barred under the related doctrines of collateral estoppel or res judi

cata tO This motion was overtaken by later events and may be regarded

as withdrawn for all practical purposes However it was important because

it appears to have led in part to the settlements reached by the parties

as hereinafter described

There were three prehearing conferences The first was held on July

6 1983 Prehearing I the second on September 7 1983 Prehearing II

9The Docket No 8052 issues spilled over into this proceeding Consequently when the petition was ap

proved the order of approval was issued in this proceeding See Docket No 8328 In Re Agreements Nos

10457 10458 10332 3 and 10371 2 Order Pennitting Temporary Continuance of Existing Agency Arrange

ments served July I 1983

10 See Order Severing Issues served June 30 1983 In support of its motion APL urged that the justifica

tion submitted by Proponents for approval of the agreements identified in Part A of the caption relied

on the same facts presented in Docket No 8052

1 J1ur
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 197

10371 2 B IN RE AGREEMENT NOS 10457 AND 10458 1

and the third on October 11 1983 The third was converted into a

hearing

on the merits

At the hearing there was intrOduced into evidence the sworn statement

of Mr Morisaki Assistant General Manager Business Division No 1

NYK on behalf of all Proponents Mr Morisaki s statement was supported

by twelve appendixes Hearing Counsel presented Bruce A Dombrowski

as a witness Mr Dombrowski who now is the Assistant Secretary of

the Commission testified in his former capacity of Senior Transportation

Industry Analyst with the Commission s Bureau of Agreements and Trade

Monitoring

Mr Morisaki s statement included an explanation of the circumstances

which gave rise to the withdrawal of the agreements identified in Part

A of the caption and the substitution therefor of the agreements shown

in Part B of the caption For the purpose of placing subsequent events

in context these are the pertinent passages from the statement II

6 After initial clarification at the executive level that settlement

discussions might be possible our review of the Commission s

order noted that many of the issues to be investigated were matters

either that we had previously offered to withdraw or modify in

our Reply to Protests last year or were matters that we had

internally considered were not essential to our operations at least

over the long term Accordingly we instructed our attorneys to

approach the Protestants and later Hearing Counsel to ascertain

their particular concerns on the issues under investigation and

to discuss whether amendments could be made to the Agreements

that would make them more palatable

7 Subsequently meetings and discussions were held in Wash

ington both among attorneys for all the parties and when appro

priate between our attorneys and the attorneys for one or another

of the protestants Our attorneys reported to us on the progress

of these discussions and recommended to us the modifications

they believed would be required to resolve the opposition to the

Agreements After several internal meetings and discussions we

decided it was in our best interests to accept certain of the amend

ments recommended to us and to amend our Agreements accord

ingly On other matters however we concluded we could not

accept an amendment without jeopardizing the basis of our service

itself or the needs of our customers Subsequently at the Prehear

ing Conference held on September 7 1983 in Washington Agree

ment Nos 10457 and 8 as originally filed were withdrawn by

our attorneys and copies of the amended Agreements were submit

ted and identified as Prehearing Exhibit No 2 Appendix 2

8 Following the Prehearing our attorneys met with Hearing

Counsel to attempt to resolve the remaining matters Hearing Coun

IIAPL Sea Land and Lykes in separate memorandums generally are in accord with these passages insofar

as they describe the activities of the Protestants Obviously they cannot confirm the references to the Pro

ponents internal discussions and meetings

26 F M C
198 FEDERAL MARITIME COMMISSION

sel had identified on the record as concerns As these matters

were largely technical we agreed to all of Hearing Counsel s

requests

As a result of the withdrawal of the agreements identified in Part A

of the caption and the substitution of Agreement Nos 10457 1 and 1045R

1 therefor Sea Land Lykes and APL withdrew as Protestants Perhaps

overpedantically or overtechnically they pointed Ol 1t individually that since

the original agreements were withdrawn their protests ended and inasmuch

as they had no opposition to the revised agreements they should no longer

be regarded as Protestants However out of an abundance of caution should

I or the Commission approve the revised agreements more expansively

than submitted for approval by Proponents 12 they asked for and were

given permission to remain as parties to the proceeding

Proponents submitted a Brief including proposed findings of fact in

support of the revised agreements Individually Sea Land APL and Lykes

submitted memorandums explaining certain facts and their positions with

respect to particular aspects ofthe proceeding

FINDINGS OF FACT 13

1 NYK and KMTC currently operate a two vessel container service

in the Korea U S trade pursuant to Agreement No 10332 3 as approved

pendente lite in the Order

2 NYK and KMTC subcharter on Agreement No 10332 vessels the

maximum of 420 TEUs of container space per month to Showa pursuant

to Agreement No 10371 2 as also approved pendente lite in the Order

3 Agreement No 10457 as originally filed was a

space charter arrange

ment between NYK and KMTC establishing a coordinated vessel service

between ports in Korea Hong Kong and Taiwan and the U S Pacific

Coast including Hawaii and Alaska The agreement provided for space

charter among the parties revenue pooling joint scheduling and advertise

ment of the parties vessels reciprocal agency representation and inter

change of equipment Chartering a maximum of 780 TEUs per month

to Showa was also permitted

12 See Sea Land Service Inc v Federal Maritime Commission 653 F 2d 544 D C Cir 1981 discussed

i1Jfra

13 Proponents proposed findings of fact were not opposed by Hearing Counsel Hearing Tr 3032 The

facts may be regarded as stipulated for all practical purposes Some editorial changes have been made by

me

N b It was stipulated by APL Sea Land and Lykes and by Proponents that the adoption of the

proposed findings of fact submitted by Proponents or any other findings and conclusions made by

the Administrative Law Judge or the Commission in this proceeding would not be relied upon by

Proponents as preclusive against either of them in any other pending or future litigation in this or

any other forum However this stipulation shall not be construed to bar Proponents or any of them

from establishing the same facts or conclusions derived from them based upon an independent

record inany other proceeding See Hearing Tr 17 26

26 F M C
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 199

10371 2 B IN RE AGREEMENT NOS 10457 AND 10458 1

4 Agreement No 10458 as originally filed was an implementing agree

ment by which NYK and KMTC were to charter to Showa space not

to exceed 780 TEUs per month

5 Following initial clarification at their executive level Proponents and

Protestants through their attorneys held meetings and discussions in Wash

ington D C following which Agreement Nos 10457 and 10458 were

withdrawn by the parties Substitute agreements were proffered on the record

at Prehearing II and Protestants stated on the record that they did not

oppose the substituted agreements Prehearing Ex No 2 Prehearing II

Tr 8 9 27 29

6 Subsequent discussions with Hearing Counsel following the prehearing

conference caused Proponents further to amend their agreements Hearing

Ex 1 App 4 Tr 28 As a result Hearing Counsel and the Commission s

staff announced their support for the revised agreements Hearing Tr 20

30

7 The revised agreements redesignated Agreement Nos 10457 1 and

10458 1 are the only ones offered for Commission approval The major

changes from the agreements as originally filed are the deletion of revenue

pooling and joint agency and the limitations on vessels capacity and

sailings and the restrictions on transshipment

8 Agreement No 10457 1 is a

space charter arrangement between NYK

and KMTC establishing a three vessel direct service between ports in Korea

Taiwan and Hong Kong and the Pacific Coast of the United States exclud

ing the ports in the states of Hawaii and Alaska and providing for block

chartering vessel coordination container and equipment interchange and

chartering of space to Showa

9 Under Agreement No 10457 1 the parties will operate three vessels

with a capacity not exceeding 2 923 TEUsl4 and offer not more than

28 annual sailings The maximum amount of space which may be operated

and cross chartered during any calendar year will not exceed 27 343 TEUs

eastbound or westbound

10 NYK and KMTC will schedule and advertise their sailings in the

trade so as to promote optimum vessel utilization and charter space to

and from each other on terms as they may agree and the essential details

of the space charter arrangement in writing to the Commission NYK and

KMTC are authorized to subcharter up to an average of 600 TEUs per

calendar month not to exceed 780 TEUs in any single month to Showa

11 The parties may transship up to 3 000 TEUs of cargo originating

in or destined to Alaska the Philippines Singapore or Malaysia in any

calendar year

12 Agreement No 10457 1 shall terminate on the third anniversary

of approval by the Commission

140ne vessel Pacific Express has a capacity of 851 TEUs The others Pacific Trader and Pacific Sun

shine have acapacity of 1 036 TEUs

26 EM C
200 FEDERAL MARITIME COMMISSION

13 Agreement No 10458 1 is a

space charter arrangement by which

NYK and KMTC agree to subcharter space to Showa up to 600 TEUs

per average calendar month not to exceed 780 TEUs in any single month

on vessels operated pursuant to Agreement No 10457 1

14 The direct service offered by the three parties pursuant to Agreement

No 10457 1 shall be their exclusive direct service in the trades between

Korea Taiwan and Hong Kong and the Pacific Coast of the United States

excluding the states of Hawaii and Alaska

15 Showa is authorized to transship cargo which originates in or is

destined to Alaska the Philippines Singapore or Malaysia subject to the

3 000 TEU limitation on all parties on transshipment of cargo imposed

under Article 5b of Agreement No 10457 1

16 The vessels to be operated initially under Agreement No 10457

1 are Pacific Trader operated by NYK Pacific Sunshine and Pacific

Express operated by KMTC Each vessel is a fully cellularized containership

having an operating speed of 20 to 22 knots and having a turnaround

time of 38 to 40 days Vessel itineraries include calls at Kaosiung Hong

Kong Keelung Busan Kobe andor Tokyo Los Angeles Oakland and

Seattle

17 NYK and KMTC will continue their existing public terminal oper

ations at Busan Seattle and Taiwan and will continue to use approved

arrangements with Matson terminals at Los Angeles and Oakland and with

Hong Kong Modem Terminals at Hong Kong KMTC will use NYK s

terminal facilities in Japan

18 NYK and KMTC may employ common but not joint agents in

the United States until March 1984 15

19 The three vessel operation under Agreement No 10457 1 will provide

essentially the same semimonthly service as is currently being provided

by two vessels under Agreement No 10332 3 but with the addition of

direct call service at Taiwan and Hong Kong

20 Direct service to Hong Kong and Taiwan under Agreement No

10457 1 is deemed by Proponents to be superior to their current indirect

or transshipment service because it reduces losses resulting from extra

handling and shipping of cargo on and off vessels at transshipment ports

and absent Agreement Nos 10457 1 and 10458 1 NYK would be forced

to introduce two more vessels KMTC one and Showa three in order

for each to separately offer the shipping public a semimonthly service

in these trades

21 Since the agreements identified in Part A of the caption were

filed for approval KMTC has independently introduced its new vessel

Pacific Express in the U S Korea trade and would consider continuing

to operate independently ofNYK if the revised agreements are not approved

Showa has planned to introduce at least one new vessel in the U S

See Agreement No 10483 Prehearing Tr 17 18

26 F M C
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 201

10371 2 B IN RE AGREEMENT NOS 10457 AND 104581

Far East trades to be used in conjunction with its existing transshipment

service and NYK has internally decided to initiate its own Far East service

ifAgreement Nos 10457 1 and 10458 1 are not approved

22 All major carriers in the Far East U S trades serve Hong Kong

and Taiwan directly except Proponents and twoJapanese carriers

23 In filing Agreement Nos 10457 1 and 10458 1

requests for joint

agency solicitation revenue sharing and technical assistance have been

deleted 16 In addition the issue of bloc voting Order Issue No 1 has

been removed by the withdrawal ofProtestants who raised itJ7

24 The public benefits which are currently realized in the U S Korea

service operated under approved Agreement Nos 10332 and 10371 as

amended are likely to flow from space chartering in the U S Hong Kong

Taiwan trades These include better capacity utilization of vessels and equip

ment with less total capital expenditures a more quantifiable reduction

of tonnage deployed in the trade as compared to space available charter

agreements and the opening of new shipping opportunities for shippers

and consignees in the growing Far East markets

25 The benefits of direct service provided under Agreement Nos 10332

and 10371 in the Korea market such as reduction in transit time and

losses incurred in handling should accrue to the Hong KongTaiwan market

under Agreement Nos 10457 1 and 10458 1

26 Direct service to Hong KongiTaywan is important to carriers operating

in the trades because many consignees include no transshipment clauses

in their letters of credit

27 Agreement Nos 10457 1 and 10458 1 should reduce shipper and

consignee inventory requirements storage and warehouse expenses and

related capital expenditures through the frequent and regular service to

be offered under these agreements

28 Fuel consumption under Agreement Nos 10457 1 and 10458 1

should amount to about two thirds less than that which would be consumed

if NYK KMTC and Showa each were to establish individual semimonthly

service to the Far East

29 The space charter and vessel coordination provisions of Agreement

No 10457 1 allow NYK and KMTC to use common terminal facilities

Utilizing a single berth at U S and foreign ports should increase the effi

ciency of each line s service and of terminal operations at those ports

The ability to coordinate vessel schedules in the U SHong Kong trades

should alleviate port and terminal congestion Coordination should enable

Proponents to operate the minimum number of vessels required to provide

viable service in the trades

16The deletion of those items has the effect of satisfying the Commission s interest in having the Pro

ponents provide answers to questions Nos 6 7 and 12 posed in the Order

17 Hearing Counsel did not independently address these maUers Moreover this issue does not appear

facially to involve anticompetitive restraints other than those suggested by Protestants comments and does

not therefore require further scrutiny under the public interest standard of section 5 See Marine Space

Enclosures Inc v Federal Maritime Commission 420 F 2d 577 D C Cir 1969

26 EMC
202 FEDERAL MARITIME COMMISSION

30 Vessel coordination is essential for space chartering and the

concommitant benefits to the shipping public It would allow NYK and

KMTC to provide regular and reliable semimonthly service None of the

parties could provide competitive service without availability of the other

party s vessels Independent scheduling would adversely affect the competi

tive benefits expected to be derived from the services offered under Agree

ment Nos 10457 1 and 104581 Coordination of sailing is the catalyst

for the benefits to be derived from optimal employment of resources and

the enhanced competitive service which is expected to result

31 A space available charter arrangement would not be sufficient

for the Proponents as it would require them to operate more vessels in

order to offer a complete service It would not improve the efficiency

or reliability of service nor permit the use of joint or common terminal

arrangements Operation of an individual service obviously increases the

potential for overtonnaging an ever present concern

32 There is no vessel scheduling under Agreement No 10332 as amend

ed and NYK and KMTC each operate one vessel on a 30 day turnaround

They have been serving Korea and the U S Pacific Coast pursuant to

the same itineraries established and followed without variation for nearly

five years

33 Under Agreement No 10457 1 three vessels will be operated with

direct calls in Korea Hong Kong Taiwan and Japan This expanded geo

graphical scope of operation is another factor underlying the need for

coordination of sailings

34 Liner cargoes in the Korea Hong Kong Taiwan U S Pacific Coast

trades have shown strong and consistent growth for the last 15 years

Eastbound cargoes have almost tripled in the U S Pacific Coast Philippines

Malaysia Singapore Peoples Republic of China trades from 1976 through

1982 and Japan U S Pacific cargoes have grown at a compounded rate

of 3 percent eastbound and 4 5 percent westbound between 1974 through

1982

35 A Commission economist has forecast growth rates of from 1 to

8 percent annually for the next two years for various non Japanese segments

of the transpacific trades IS

36 In 1982 cargoes remained virtually stable although substantial addi

tional tonnage was introduced by established carriers and newcomers in

the trade

37 NYK KMTC and Showa s carryings both eastbound and westbound

improved steadily each year under Agreement Nos 10332 and 10371 East

bound utilizations rose to 60 percent in 1982 and to over 70 percent

in the first eight monthsof 1983

18 The Commission economisl teslified in Docket No 82 S4 Other economists testifying inthat proceeding

were equally or more sanguine

26 F M C
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 203

10371 2 B IN RE AGREEMENT NOS 10457 AND 104581

38 Capacity increases by individual lines in the trades make it difficult

to predict whether overtonnaging will become a problem however Agree

ment Nos 10457 1 and 10458 1 should ameliorate its threat19

39 The combined effect of increasing turnaround times and the introduc

tion of the Pacific Express result in an approximate continuation of NYK

KMTC and Showa s current annual capacity under Agreement No 10332

as amended as maximum annual capacity under Agreement No 10332

is limited to 25 200 TEUs while under 10457 1 it is 27 343 TEUs ail

85 percent increase When the discontinuance of KMTC s

independent

operation of the Pacific Express under Agreement No 10457 1 is taken

into account the overall annual capacity is decreased by 20 percent20

40 The proviso contained in Agreement No 10457 1 which allows

KMTC to serve Japan resulted from the acknowledged policy ofthe Korean

Government requiring KMTC to carry cargo other than Korean cargo

41 The increase in space to be chartered to Showa under Agreement

No 10458 1 reflects the expected growth in Showa s carryings based on

Showa s historically higher utilizations than the other parties and its experi

ence in the Far East trades outside ofJapan and Korea

42 The only evidence adduced concerning a relationship between

Agreement Nos 10457 1 and 10458 1 and the operations of Japanese

flag vessels in the transpacific trades indicates that none exists 21

43 The reporting requirements attached to Agreement Nos 10457 1

and 10458 1 have met with the approval of the Commission s staff and

appear sufficient to fulfill the Commission s needs to oversee operations

under the agreements and to satisfy its interest as set forth in Order

Issue No 5

44 Given the limitation on overall capacity and on transshipment cargo

which may be carried under the agreements NYK and Showa will continue

to transship some cargo via Japan as a supplementary service Direct service

under Agreement Nos 10457 1 and 10458 1 will not be in competition

with any other direct services by the parties

45 KMTC s commencement of direct service in the JapanlU S trades

is not likely to have a significant impact on those trades

DISCUSSION AND CONCLUSIONS

IPRELIMINARY MATTERS

A Publication of the Revised Agreements in the Federal Register as a

Condition Precedent to Consideration for Approval is Not Required

J9Cf Finding Nos 31 35 and n 18 supra Taken togelher these facts and Finding No 45 infra furnish

as complete an answer to Order Issue No 10 as could be made available

20Given the withdrawal of the Protestants and Hearing Counsel s and the Commission s staff s

support

for the revised agreements Findings Nos 2 9 and 39 appear to satisfy the Commission s interesl in Order

IssueNo 2 See also Marine Space Enclosures Inc v Federal Maritime Commission supra

2

See Hearing Ex I par 60 which addresses Issue No 3 specified in the Order See also Finding No

23 and n 17 supra

26 F M C
204 FEDERAL MARmME COMMISSION

As noted on September 20 1982 the Commission published notice in

the Federal Register that Agreement Nos 10457 and 10458 had been

filed accompanied by a descriptive summary of those agreements The

summary included all the provisions which were later modified by Agree

ment Nos 10457 1 and 104581

When the revised agreements were proffered I solicited advice whether

I or the Commission could prOCeed to consider and process them without

prior publication in the Federal Register On the basis of the authorities

cited by the parties I am satisfied that such publication is not necessary

in these circumstances

Recently a substantially identical question was presented to the court

in Sea Land Service Inc v Federal Maritime Commission supra The

section 15 issue concerned joint services to be performed by several carriers

The proposed agreement was extensively negotiated and compromised by

the Proponents and Protestants therein After that the Commission modified

the agreement on its own initiative The issue before the court on judicial

review concerned the Commission s modification The Commission sought

to distinguish between modifications fonnulated by private interested parties

which the Commission suggested might require new notice to allow non

parties to protect their interests and modifications made by the Commission

in the discharge of its responsibilities which the Commission argued did

not require publication

The court addressed only the question before it whether publication

of changes made by the Commission would be required It appears to

me however that the standards enunciated by the court for determining

whether new publication is required when the modification is made by

the Commission have equal validity for privately made alterations to agree

ments subjudice

Chief Judge McGowan speaking for an undivided panel stated that

the distinguishing factor to exami is whether the changes expand the

authority sought or restrict that authority for expansive changes do require

notice but restrictive changes do not He wrote 653 F 2d at 552 553

The generally accepted distinguishing factor and one we consider

applicable to this case is whether the final agency action expands

the authority proposed by the parties to the agreement This limita

tion is sound from the standpoints of legal precedent and policy

Where the modification does not alter the substance of the agree

ment in any respect the Commission should have every right

to edit the agreement to conform with Commission practices or

simple principles of organization Similarly any modification

which serves only to restrict not to expand the authority of

the parties to the agreement should not require notice and hearing

In that event only the proponents will be aggrieved and they

are always free to abandon the modified agreement and to submit

an amended agreement for new consideration

26 F M C
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 205

10371 2 B IN RE AGREEMENT NOS 10457 AND 10458 1

We think however that agency action expanding proposed au

thority is improper without proper findings based on substantial

evidence adequate notice and consideration of objections

It is clear that Agreement Nos 10457 1 and 10458 1 sharply restrict

the much broader authority initially sought by Proponents in Agreement

Nos 10457 and 10458 Accordingly under the rationale of Sea Land Serv

ice Inc v Federal Maritime Commission Ifind that notice of those

revised agreements need not be published in the Federal Register

B On this Record There is No Need for Section 15 Approval of the

Settlements Arrived at by the Former Protestants Individually and

the Proponents

Another issue which Iasked the parties to address is whether the settle

ments arrived at by Lykes Sea Land and APL individually with Pro

ponents whereby Proponents modified their agreements restrictively were

themselves subject to section 15 approval in the light of the Isbrandtsen

decision American Export Isbrandtsen Lines Inc 14 F M C 82 1970

I

expressed a preliminary view that I saw distinctions between the settle

ments and the operative agreement in Isbrandtsen and suggested that

in the circumstances it might only be necessary to explain for the record

how the settlements came about As noted the parties complie9 In

addition they noted some of the differences between the settlements

and the Isbrandtsen agreement

FactualIy Isbrandtsen began with a subsidy application which went to

hearing before the Maritime Subsidy Board ofthe Federal Maritime Admin

istration During the proceedings some protestants and the applicant entered

into a stipulation which was determined to provide for an exclusive pref

erential or cooperative working arrangement to constitute a special privilege

or advantage and to control regulate or destroy competition The Commis

sion concluded that the stipulation constituted an independent section 15

agreement requiring filing for approval by the Commission

I

find that the settlements here are not agreements of the Isbrandtsen

type

Section 15 applies to agreements between persons subject to the Shipping

Act 22 which fix or regulate transportation rates or fares give or receive

special rates accommodations or other special privileges or advantages

control regulate prevent or destroy competition pool or apportion earnings

losses or traffic allot put or restrict or otherwise regulate the number

or character of sailings between ports limit or regulate in any way the

volume or character of freight or passenger traffic to be carried or in

any manner provide for an exclusive preferential or cooperative working

arrangement Under Isbrandtsen a formal executed agreement between per

22 The Proponents and fonner Protestants are such persons
206 FEDERAL MARITIME COMMISSION

sons subject to the Act which results in conduct encompassed by any

of section IS s subject matter categories becomes subject to the Commis

sion s

filing and approval requirements whether vel non it results from

a settlement ofdifferences between parties to a formal proceeding

There are a number of differences between what went into these settle

ments and the Isbrandtsen agreement The settlements are not formal

executed agreements The settlements involve a discrete event and do

not govern ongoing relationships d Federal Maritime Commission v

Seatrain Lines Inc 411 U S 726 1973 American Mail Line v Federal

Maritime Commission 503 F 2d 157 D C Cir 1 974for if the Pro

ponents wish they may in the future seek approval of an agreement

or agreements containing provisions of the kind they changed or deleted

from Nos 10457 and 10458 without subjecting themselves to allegations

of breach

Arguably it may be said that the resulting deletions and more restrictive

provisions than appeared in the original agreements might subject the set

tlements to section 15 jurisdiction I

think not at leBSt in this case

The settlements were much like what the court referred to as the agree

ments which were the product of negotiation and compromise between

the parties to the agreements on the one hand and various independent

carriers who were likely to be significantly affected by the agreements

on the other Sea Land Service Inc v Federal Maritime Commission

supra 653 F 2d at 546 Those negotiations and compromises were not

placed under the independent scrutiny of section 15 process It appears

that the Commission s requirements were satisfied simply by spreading

those facts on the record

But there is one thing more which tilts these settlements away from

Isbrandtsen Without belaboring the arguments made in APL s motion for

a determination that the principles of collateral estoppel and res judicata

govern the agreements identified in Part A of the caption or deciding

that motion 23 it is clear that the settlements resulted in effect in

the acceptance by Proponents of the major conditions for approval enun

ciated in the Commission s Report and Order in Docket No 8052 It

does not seem to me that settlements which are built on the foundation

of a pertinent Commission decision require independent section 15 approval

It should be made clear that I do not find generally that negotiations

and compromises which result in settlements are not subject to section

IS s

requirements for filing and approval Imerely find that these settle

ments in the limited circumstances of this proceeding do not require

an independent filing for section 15 approval

II Proponents Have Established That the Revised Agreement Nos 10457

1 and 10458 1 Are Required by a Serious Transportation Need Are

23 Proponents were not required to and did not reply to themotion

26 FM C
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 207

10371 2 B IN RE AGREEMENT NOS 10457 AND 10458 1

Necessary to Secure Public Benefits and Are in Furtherance of a

Valid Regulatory Purpose

A Preliminary Matters

As noted the Order requires that the agreements identified in Part A

of the caption be scrutinized under the Svenska test 24 This mandate contin

ues to apply to the revised agreements despite the withdrawal of the origi

nals and the withdrawal ofopposition T he Commission retains an affirm

ative duty to review an agreement in some detail even when proponents

and opponents alike have settled their differences below because mere

acquiescence by private parties does not determine whether the agreement

fosters competition in the shipping industry as a whole Agreement No

9902 3 et al Modification of Euro Pacific Joint Service 21 F MC

959 19 S RR 141 143 1979 Sea Land Service Inc v Federal

Maritime Commission supra 653 F 2d at 550

Nevertheless the fact that the agreements were revised has eliminated

some issues from consideration as I indicated without objection at Prehear

ing II pp 52 57 and as I reiterated in my Findings of Fact Thus there

will be no need further to address the issues specified in the Order as

Nos 1 2 3 5 6 7 10 and 12 except as they may bear upon other

features of the case In this connection it should be noted that some

of those numbered issues such as Issue No 2 regarding vessel or TEU

limitations seemed to be directed more at clearing up ambiguities than

with concerns about substantive values Thus the insertion of particular

vessel and TEU limitations acceptable to the Commission s staff and Hear

ing Counsel appears to satisfy the Commission s interest in Issue No

2 For similar reasons Issue No 4 with respect to the geographic scope

of Agreement No 10457 may be considered removed from consideration

Issue No 9 presents a somewhat different problem of clarification but

one which need not be discussed under the Svenska test The Commission

asked for justification for authorizing Showa to charter an average of 600

TEUs per month Mr Morisaki s testimony demonstrates that even though

those 600 TEUs will apply to the expanded geographical scope of the

agreements they represent only a slight proportional increase over historical

experience solely in the KoreaU S trade

Finally the general unnumbered ambiguities which the Commission want

ed addressed have been resolved under the terms of the reporting require

ments sought by the Commission s staff which have been made a part

ofAgreement No 10457 1

B The Svenska Considerations

When Agreement No 10457 was filed it contained authority for NYK

and KMTC to act as one another s agents in respectively the U S and

Korean trades and to pool revenue carried in the Korea U S trade These

24 See n

8

supra

f PMr
208 FEDERAL MARITIME COMMISSION

two features each of which had been disapproved by the Commission

in Docket No 8052 were eliminated from Agreement No 10457 1 There

remains for consideration a straight space charter vessel coordination asree

ment in which tne parties compete head to head By virtue of its space

charter and vessel coordination features the revised agreement dilutes some

competition which might otherwise have been occasioned

In general Agreement No 10457 1 should not have a serious adverse

impact on other carriers in either the KorealU S trades or the Hong Kong

Taiwan US trades With the addition of direct calls at other Far st

ports the capacity deployable in the KorealU S trades may even decrease

from the current level It is unlikely that the expansion of service to

the Hong Kong TaiwanU S trades would result in any anticompetitive

effect in those trades given the limitations on capacity and frequency

Approval of Agreement No 10457 1 should instead promote competi

tion as it will allow new services to enter the Hong Kong Taiwan US

trades Also it will permit KMTC to provide a direct Japan service The

agreement should enhance the commercial stability of the proposed services

because fewer resources are to be committed than would be the case

if each participant placed vessels in the Hong Kong TaiwanU S trades

If NYK and KMTC attempted to enter these trades independently the

capital costs and risks to each would be higher than those reasonably

to be anticipated under the revised agreements

It is perceived that the limited reach of Agreement Nos 10457 1 and

10458 1 will have little anticompetitive effect on the relevant trades This

is reflected by the withdrawal of opposition to the revised agreements

The limited anticompetitive effect is more than balanced by the additional

competition likely to flow from allowing new carriers to enter the trades

on a stable economic footing

The Commission recognizes the public benefits which flow from space

charter agreements similar to the proponents amended agreements See

e g Agreement No 9835 14 FMC 203 1970 Agreement Nos 9718

3 and 9731 5 19 FMC 351 1976 Agreement No 10470 Order ofCondi

tional Approval served August 29 1983 FMC When those benefits seem

achievable without the presence of revenue pooling or joint agency and

where no protests are outstanding the Commission has approved that kind

of agreement E g Agreement No 10459 approved February 23 1983

One of the benefits of space charter arrangements is the moderating

effect on possible overtonnaging in the trade Order Amending Order of

Investigation and Conditionally Approving Certain Agreements Pendente

Lite Docket No 82 54 served August 19 1983 Proponents have shown

that they should be able to maintain service levels which would otherwise

be difficult to sustain without substantially increasing the number of vessels

deployed if they are permitted to block charter and coordinate sailings

Ithas also been shown that NYK KMTC and Showa are likely to introduce

additional vessels into the trade if the revised agreements are not approved

26 F M C
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 209

10371 2 B IN RE AGREEMENT NOS 10457 AND 10458 1

Thus it is fair to find that the space chartering and vessel coordination

provisions of the revised agreements should produce the benefit ofrestricting

capacity in the trade

The Hong Kongffaiwan U S trade has been volatile in recent years

due to the high growth in cargo relative to other Far East countries Carriers

in the Far East trades have added substantial capacity to their services

or have announced plans to do so in the near future By introducing

a service with a limited number of vessels the parties have shown an

understanding of the need to limit the potential for overtonnaging in the

trades That understanding is demonstrated further by the parties limitations

on the total vessel capacity to be deployed in the trades to vessels of

the size currently operated and on the number of annual sailings These

limitations also should produce the public benefits of reduced fuel consump

tion and lower transportation costs to shippers which are derived from

decreased fuel costs

Another benefit to be derived of the operations under the revised agree

ments is a reduction of cargo transshipments from Hong Kong and Taiwan

and in the case of KMTC Japan By calling directly at Hong Kong

and Taiwan the parties will be able to provide more efficient and faster

service with a significant reduction in loss and damage often inherent

to transshipments Accordingly shippers and consignees should in the fu

ture be provided with a better service than that currently offered by the

parties

The space charter and vessel coordination provisions should allow the

parties to establish reliable service on a

regular schedule This produces

the further economic benefit which shippers and consignees derive from

being able better to plan their shipping schedules

Another benefit which should be achieved is the reduction of port and

terminal congestion in U S and foreign ports The vessel coordination and

space charter provisions allow the parties to fix their arrivals at regular

intervals thus allowing use of common terminal and berthing facilities

which in turn reduces congestion at ports This in turn allows ports

better to allocate their own resources

The revised agreements are likely to serve the valid regulatory purpose

of easing the entry of three competitors each of which has the potential

to offer an individual direct service into the Hong Kongffaiwan trades

Frequent regular service and elimination of wasteful competition are bene

fits which the Commission does consider in determining whether to approve

agreements Agreement No 1011 1 21 FMC 775 807 08 1979

The remaining particular issue to be considered is Issue No 8 Here

the Commission requested evidence showing whether the authority to coordi

nate sailings was necessary to achieve the benefits expected Although

there was no opposition to Proponents revised request for such authority

Proponents furnished sufficient evidence to show that coordinated sailings

are needed to obtain the expected benefits under both revised agreements

26 F M C
210 FEDERAL MARITIME COMMISSION

Under Agreement No 10457 1 the beneficial effect to be obtained by

way of reducing the vessels and tonnage needed to provide regular semi

monthly service with only three vessels would be seriously impaired if

not prevented entirely absent vessel coordination Moreover the benefits

ofreducing port and terminal congestion and maintenance of regular reliable

service would be at risk absent vessel coordination Without the ability

to rely upon the schedule established by the other party or parties it

would be difficult to guarantee shippers or consignees regular sailing dates

In addition Showa would be deprived of guaranteed sailing dates under

Agreement No 10458 1

I find that the authority to coordinate sailings is a necessary part of

this chartering agreement

Accordingly Ifind that Agreement Nos 10457 1 and 104581 are re

quired by a serious transportation need are necessary to secure public

benefits and are in furtherance of a valid regulatory purpose

ORDER

It is ordered that Agreement Nos 10457 1 and 10458 1 be approved

It is further ordered that these agreements shall not be implemented

or take effect until such time as the Federal Maritime Commission receives

appropriate notice that the Korea Maritime and Port Administration has

approved Agreement Nos 10457 1 and 104581 These agreements under

their own terms shall expire on the third anniversary after approval by

this Commission

S SEYMOUR GLANZER

Administrative Law Judge

2iF M C
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 211

10371 2 B IN RE AGREEMENT NOS I0457 AND 10458 1

APPENDIX I

FMC AGREEMENT NO 10457 1

This Agreement made in Seoul Korea the 6th day of September 1983

by and between the undernoted parties

Witnesseth

WHEREAS Korea Marine Transport Co Ltd KMTC and Nippon

Yusen Kaisha NYK hereafter sometimes the parties currently coordi

nate their containership services in the trade between Korea and the Pacific

Coast of the United States under the terms of Agreement No 10332 as

approved by the Federal Maritime Commission and

WHEREAS KMTC and NYK now desire to inaugurate as their exclusive

direct services in the trades between Korea Taiwan and Hong Kong and

the Pacific Coast of the United States a

space chartering arrangement as

hereinafter described

NOW THEREFORE in consideration of the premises and of the mutual

undertakings of the parties it is hereby agreed as follows

1 Service and Sailings

a The parties will operate three containership vessels between ports

in Korea Taiwan and Hong Kong and the Pacific Coast of the United

States excluding ports in the States of Hawaii and Alaska The total capacity

of the said vessels shall not exceed 2923 TEU s and the parties shall

offer no more than 28 sailings per annum with the maximum amount

of space which may be operated and cross chartered on the vessels during

any calendar year not exceeding 27 343 TEU s Eastbound and 27 343 TEU s

Westbound The parties shall schedule and advertise their sailings in the

trades as to promote optimum vessel utilization provided that one or more

of the parties vessels may call at a port or ports in Japan to load and

discharge any KMTC cargo moving to or from Japan All vessels operated

by the parties to this Agreement or by either of them in the trades between

Korea Taiwan and Hong Kong and the Pacific Coast of the United States

shall be operated under this Agreement

b In the event any vessel is lost or damaged the parties may substitute

another appropriate vessel provided that the capacity limitation stated in

Article l a is not exceeded The Parties will notify the Korea Maritime

and Port Administration KMPA and the Federal Maritime Commission

FMC of any such substitutions

2 Containerized Cargo

The cargo subject to this Agreement is that which is placed in containers

for shipment of the parties container vessels but nothing herein shall

preclude the parties from carrying on their own container vessels other

available cargo

26 F M C
212 FEDERAL MARITIME COMMISSION

3 Bills ofLading

The parties shall operate their own respective common carrier services

issuing their own separate bills oflading

4 Agents

Neither party shall act as the agent of the other in the trades covered

by this Agreement and the parties shall not have a common agent except

in the United States until March 31 1984

5 Charterage

a The parties shall ship their loaded and empty containers including

containers which they own lease or control on their vessels and on each

other s vessels and shall charter space to and from each other on terms

as they may agree The parties shall report the essential terms of their

space charter arrangements in writing to the FMC and shall provide the

level of compensation under the charter agreement upon the request of

the FMC s Director of the Bureau of Agreements and Trade Monitoring

Subject to their own priorities the parties may also charter andor subcharter

no more than 600 TEU s per average calendar month but not to exceed

780 TEU s in any single month to Showa Line Ltd only on terms

as they may agree KMPA and FMC shall be notified within 30 days

of any and all charter arrangements agreed upon Any continuing charter

agreement with Showa Line shall not be implemented without prior FMC

approval

b The parties may load or discharge cargo on or from the vessels

which they employ for direct calls within the trades as referred to herein

provided that the parties will not transport in the service authorized herein

any transshipment cargo except such cargo originating or terminating in

Alaska the Philippines Singapore or Malaysia Not more than 3000 TEU s

Eastbound and 3000 TEU s Westbound of the capacity shall be used for

the carriage of such transshipment cargo during any calendar year Any

transshipment arrangements which they may individually conclude with other

carriers shall be filed with the FMC as may be necessary

6 Force Majeure Strikes

In the event of force majeure marine casualty or any circumstances

where a carrying vessel is offhire and the chartering arrangements pro

vided for in Article 5 are frustrated the parties shall adjust their account

to the extent that services have been contracted for but not rendered

In the case of strikes lockouts work stoppage or slowdowns or other

labor disturbances which render it necessary to cease operation of one

or more of their container vessels the parties may utilize or operate under

the terms of this Agreement such substitute vessel or vessels as they may

agree provided that the capacity limitation stated in Article l a is not

exceeded

otC C r
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 213

10371 2 B IN RE AGREEMENT NOS 10457 AND 104581

7 Container Interchange

The parties may interchange their empty containers andor related equip

ment as the circumstances and conditions of the trade may require subject

to such mutually acceptable terms and conditions as they may see fit

The parties shall report the essential terms of their interchange arrangements

in writing to the FMC

8 Modifications

The terms of this Agreement may be modified upon mutual consent

in writing of the parties Copies of such modifications shall be promptly

furnished to KMPA and FMC for whatever approvals may be required

by the laws of the Republic of Korea and of the United States

9 Withdrawal

NYK may withdraw from this Agreement by giving one hundred eighty

180 days prior written notice to the other party KMPA and the FMC

and KMTC may withdraw from this Agreement by giving ninety 90

days prior notice to the other party KMPA and the FMC

10 Non assignment

The parties hereto shall not assign or transfer this Agreement or all

or any part of its rights hereunder to any person firm or corporation

without the prior written consent of the other party

11Effectiveness

This Agreement shall become effective when approved by the KMPA

and by the FMC and upon the said effective date Agreement No 10332

as then in effect shall terminate The parties shall notify the FMC of

the date of KMPA s approval

12 Reports

The parties shall submit to the FMC on a semiannual basis reports

describing their operations under the Agreement A copy of the form on

which the reports will be filed is attached to this Agreement

13 Termination

This Agreement shall terminate on the 3rd anniversary of the FMC s

approval

26 F M C
214 FEDERAL MARITIME COMMISSION

IN WITNESS WHEREOF the parties have executed this Agreement

through their responsible representatives duly authorized as of the date

and year hereinabove first written

Korea Marine Transport Company Ltd

Nippon Yusen Kaisha GEORGE A QUADRINO

Attorney in Fact

TABLE NO 1

AGREEMENT NOS 10457 10458

WESTBOUND

LEVELS OF CAPACITY

FOR THE PERIOD THRU

Capacity 4

Carrier

Vessel

Name 2

Vessel

3

b

On Deck

TEU s

c

Below Deck

TEU s

d

Total Bale

Cubic Feet

a e

I E g January March 1983 This report should be compiled quarterly and submitted semi

annuaIly no later than 60 days after the conclusion of each semi annual period concluding June

30 and December 31

2 List each vessel deployed as part of this agreement by each participating carrier

3C Container SC Semi container and B Breakbulk

4

For fuIly containerized vessels it is sufficient to provide total TEU capacity rather than On

Deck TEU s Below Deck TEU s and Total Bale
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 215

10371 2 B IN RE AGREEMENT NOS 10457 AND 104581

Total Capacity

No of Sailings

On Deck

TEU s

g

c x f

Below Deck

TEU s

h

d x

f

Bale

Cubic Feet

i

e x f

Vessel

Utilization5

f

j

5

Estimate vessel utilization at departure from last American port Explain how capacity utili

zation was calculated for each type of vessel deployed

TABLE NO 2

AGREEMENT NOS 10457 10458

EASTBOUND

LEVELS OF CAPACITY

FOR THE PERIOD THRU

Capacity 4

Carrier

Vessel

Name 2

Vessel

Type 3

b

On Deck

TEU s

c

Below Deck Total Bale

TEU s Cubic Feet

a

d e

I E g January March 1983 This report should be compiled quarterly and submitted semi

annually no later than 60 days after the conclusion of each semi annual period concluding June

30 and December 31

2

List each vessel deployed as part of this agreement by each participating carrier

3C Container SC Semi container and B Breakbulk

4

For fully containerized vessels it is sufficient to provide total TEU capacity rather than On

Deck TEV s Below Deck TEU s and Total Bale

16 F M c
216 FEDERAL MARITIME COMMISSION

Total Capacity

On Deck Below Deck Bale Vessel

No of Sailings TEU s Cubic Feet Utilization5

t g b i

j

c x

t

d x t

e x t

5 Estimate vessel utilization at departure from last Far East port Explain how capacity utiliza

tion was calculated for each type of vessel deployed

TABLE NO 3

AGREEMENT NOS 10457 10458

USAGE OF SPACE CHARTER ALLOCATIONS

FOR THE PERIOD THRU

Cargoes Booked By 2 On Vessels of Eastbound

KMTC KMTC

NYK

NYK KMTC

Showa KMTC

NYK

Westbound

I

Ie July Sept 1983 This report should be compiled quarterly and submitted semi annually

no later than 60 days after the conclusion of each semi annual period including June 30 and De

cember 31

2 Ifcontainers report in TEU s Ifbreakbulk report in short tons

J D f
A IN RE AGREEMENTS NOS 10457 10458 10332 3 AND 217

10371 2 B IN RE AGREEMENT NOS 10457 AND 10458 1

APPENDIX II

FMC AGREEMENT NO 10458 1

THIS AGREEMENT made in Seoul Korea on the 6th day of September

1983 by and between the undernoted parties

WITNESSETH

WHEREAS pursuant to the authority contained in Article 5 of Agreement

No 10457 Korea Marine Transport Company Ltd KMTC and Nippon

Yusen Kaisha NYK desire to continue to charter space to Showa Line

Ltd Showa on vessels which they are authorized to operate in the trades

between Korea Taiwan and Hong Kong and the Pacific Coast of the

U S A and

WHEREAS Showa desires to continue to charter space from KMTC

and NYK on the said vessels

NOW THEREFORE in consideration ofthe premises and of the mutual

undertakings of the parties it is hereby agreed as follows

1 KMTC and NYK hereby agree to subcharter to Showa space not

to exceed 600 TEU s to be accomplished on an average monthly basis

but not to exceed 780 TEU s in any single month on the vessels which

they are authorized to operate in the said trades and Showa hereby agrees

to charter space from KMTC and NYK not to exceed the said maximum

The term of this Agreement and the charter shall commence upon the

termination of Agreement No 10332 as amended and shall expire upon

the earlier of 1 termination of Agreement No 10457 or 2 the third

anniversary of the FMC s approval of this Agreement In the event the

Agreement expires because of termination of Agreement No 10457 the

parties shall promptly notify the Commission of such event Said charter

may also include such customary terms and conditions of charter as the

parties may agree not inconsistent with this Agreement regulating the rela

tionship between charterer and vessel owners including space allocation

stowage charter hire cargo claims marine liability vessel liens breaches

and arbitration The parties may implement the said charter as authorized

herein upon notification to Korea Maritime and Port Administration KMPA

and Federal Maritime Commission FMC

2 In connection with said charter Showa shall at all times issue its

own bills of lading in respect to the cargo including such transshipment

cargo as it is permitted to carry herein it books and shall be responsible

to its customers for delivery care and carriage of the cargo and shall

hold KMTC and NYK harmless Showa shall not transport in the service

authorized herein any transshipment cargo except such cargo originating

or terminating in Alaska the Philippines Singapore or Malaysia Showa

shall carry such transshipment cargo subject to the limitation as is imposed

under Article 5 b of Agreement No 10457 Showa s direct service in

the trades between Korea Taiwan and Hong Kong and the Pacific Coast

J111A r
218 FEDERAL MARITIME COMMISSION

of the United States shall be provided exclusively on space chartered under

this Agreement

3 This Agreement shall take effect when approved by KMPA and FMC

whichever is the later The parties shall notify the FMC of the date of

KMPA s approval

IN WITNESS WHEREOF the parties have executed this Agreement

through their responsible representatives duly authorized as of the date

and year hereinabove written

Korea Marine Transport Company Ltd

Nippon Yusen Kaisha

Showa Line Ltd S GEORGE A QUADRINO

Attorney m Fact

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 31

VOLUME INCENTIVE PROGRAM POSSIBLE

VIOLATIONS OF THE SHIPPING ACT 1916

NOTICE

February 29 1984

Notice is given that no exceptions have been filed to the January 19

1984 initial decision on the adjudicatory portion of this proceeding and

the time within which the Commission could determine to review that

decision has expired No such determination has been made and accordingly

that decision has become administratively final

8 BRUCE A DOMBROWSKI

Assistant Secretary

26 F M C 219
FEDERAL MARITIME COMMISSION

DOCKET NO 83 31

VOLUME INCENTIVE PROGRAM POSSIBLE

VIOLATIONS OF THE SHIPPING ACT 1916

Held

I Where two conferences published tariffs containing a novel marketing scheme called a

Volume Incentive Program VIP wherein each conference member gives refunds to

qualified enrollees based upon a portion of the freight revenues it receives during a

twelve month period provided the total freight dollars paid by the enrollee exceed certain

stated levels of revenue and where each of the two conferences has general rate making

authority in agreements previously approved by the Commission under section 15 of

the Shipping Act 1916 the VIP as reflected in the appropriate tariff is interstitial

to the basic agreements which themselves contain the authority to implement the VIP

2 Where each VIP provides that it is to be administered by an independent accounting

firm which is to collect funds from each carrier to payout the refunds and where

the accountant invoices each carrier monthly and places the funds received in separate

accounts for each member which funds are also kept separate and apart from conference

revenues and where the accountant will pay refunds directly to the qualified enrollee

the operation of the VIP does not result in a pooling agreement requiring approval

under section IS

3 Where the VIPs provide for refunds ranging from 5 to 10 percent based on increments

of freight dollars ranging from five hundred thousand dollars to two million dollars

the allocations are reasonable and based on recognized rate making factors and do not

violate sections 16 or 17 of the Shipping Act 1916 Further none of the other provisions

of the VIPs are unjustly discriminatory or unduly or unreasonably preferential so as

to violate section 16 or 17 of the Act

4 Where the adjudicatory aspect of a proceeding is bifurcated from possible rulemaking

so as to expedite disposition of the adjudicatory issues and where the record establishes

that disposition of the adjudicatory case warrants approval of the VIPs and where the

record indicates that approval of the VIPs will not hinder or thwart any possible rule

making and indeed may aid in such rulemaking the VIPs may be implemented as

soon as possible without having to await the outcome of any rulemaking that may

later ensue

Charles F Warren George A Quadrino David N Dunn and Benjamin K Trogdon

for Respondents New York Freight Bureau and Trans Pacific Freight Conference Hong

Kong

Robert T Basseches Timothy K Shuba and David B Cook for Respondent American

President Lines

Edward M Shea John E Vargo and Linda J Gyrsting for Respondent Sea Land Service

Inc

Raymond P DeMember for Intervenor International Association of NVQCCs

John Robert Ewers and Stuart James forBureau of Hearing Counsel

220 26 F M C
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 221

THE SHIPPING ACT 1916

INITIAL DECISION 1 OF JOSEPH N INGOLIA ADMINISTRATIVE

LAW JUDGE

Finalized February 29 1984

Preliminary Matters

On July 29 1983 the Commission served its Order of Investigation

and Hearing and Notice of Rulemaking wherein it recited that On July

I 1983 the members of Agreements Nos 10107 and 10108 instituted

a novel marketing scheme which they have designated the Volume Incen

tive Program VIP The salient feature of this arrangement is a refund

to the shipper based upon the total freight dollars received by all agreement

members during a twelve month contract period 2

In its Order the Commission discussed certain aspects of the VIP program

in question and stated

THEREFORE IT IS ORDERED That pursuant to sections 15

16 17 and 22 of the Shipping Act 1916 46 U S C 814

815 816 and 821 an investigation shall be instituted to determine

whether the practices of respondents named herein as they related

to their Volume Incentive Programs are in violation of sections

15 16 First or 17 of the Shipping Act 1916 This investigation

will address only material factual and legal issues including those

discussed above and

IT IS FURTHER ORDERED That as part of this investigation

a determination shall be made as to whether the Commission s

General Order 13 should be amended to include a rule governing

volume incentive programs refunds based on total freight revenues

received Ifthe record developed in this proceeding demonstrates

that such a rule is needed the initial decision shall propose the

promulgation of an appropriate rule and

IT IS FURTHER ORDERED That the members of Agreements

Nos 10107 and 10108 are hereby made Respondents in this pro

ceeding and

IT IS FURTHER ORDERED That in accordance with the Com

mission s Rules 46 C F R 502 42 the Bureau of Hearing Coun

sel is hereby made a party to this proceeding

IT IS FURTHER ORDERED That persons other than those named

herein having an appropriate interest and desiring to participate

in this proceeding may petition for leave to intervene pursuant

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2

As will become clearer in latter portions of this decision as of September 12 1983 the agreements them

selves were dissolved and the agreement members became members of either the Trans Pacific Freight Con

ference TPFCHK or the New York Freight Bureau NYFB whose tariffs are now in question in this

proceeding

26 F M C
222 FEDERAL MARITIME COMMISSION

to section 502 72 of the Commission s Rules 46 C F R

502 72

As the case progressed several petitions to intervene were filed The

International Association of NVOCCs NVOs were allowed to intervene

for all purposes The Atlantic Gulf Indonesia Conference et a1 the

United States Atlantic Gulf Southeastern Caribbean Conference et al

the Westwood Shipping Lines Inc and the North Europe Conferences

NEC were allowed to intervene with respect to the rulemaking aspects

of the proceeding In addition to the petitions to intervene the respondents

filed a motion to sever the section 15 authority issue in the case and

to expedite the hearing of that issue The motion was denied as to section

15 alone Instead all parties agreed to adjudicate expeditiously all of the

merit issues relating to sections 15 16 and 17 After several prehearing

conferences the case washeard on November 18 1983

Before setting down any findings of fact discussing the issues involved

and reaching any decision it must be made clear at the outset that this

decision applies only to the provisions set forth in the agreements and

the tariffs involved It is an ad hoc decision which does not apply to

other agreements or tariff provisions which may contain dissimilar provisions

or even factual variations within the ambit of the provisions considered

herein Further while this decision may refer to the VIP it means

this VIP and no other The temptation to lump together all VIP agreements

or tariff provisions to which one might ascribe validity because of statements

made within this decision is great but such an approach would be wrong

There is no magic in the label VIP and in future cases standing

alone it should connote nothing more than a type of agreement which

mayor may not be approvable under section 15 and acceptable under

other provisions of the Shipping Act 1916

Findings of Fact

1 The Trans Pacific Freight Conference Hong Kong TPFCHK func

tions pursuant to Commission approved Agreement No 14 as amended

from or via Hong Kong and ports or inland points in Macao Taiwan

Cambodia and Vietnam to Hawaii Alaska and U S Pacific Coast ports

or inland points in the United States via such ports Ex 1 para 3 App

1

2 The New York Freight Bureau NYFB functions pursuant to Commis

sion approved Agreement No 5700 as amended from ports in Hong Kong

Macao and Taiwan to United States Atlantic and Gulf Coast ports Ex

1 para 3 App 1

3 On July 1 1983 the members of Agreements Nos 10107 and 10108

instituted a novel marketing plan which they designated the Volume Incen

411 1 6
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 223

THE SHIPPING ACT 1916

tive Program VIP 3 Order of Investigation and Hearing etc served

July 29 1983

4 The VIP provisions referred to in paragraph 3 above provided that

upon the cancellation of the Agreements the obligations of the members

would inure to and be binding upon those members of the successor

conferences who might elect to join On September 12 1983 Agreements

Nos 10107 and 10108 were cancelled because all of their members with

drew Those members with the exception of Mitsui O S K Lines Ltd

which only became a member of NYFB then became members of

TPFCHK and NYFB which Conferences became the successors to the

VIP originally set forth in Agreements Nos 10107 and 10108 4 Ex 1

para 6 Apps 2 3 4

5 On October 19 1983 effective November 18 1983 the Conferences

suspended their VIP tariff rules They now read as follows

I Effective 18th November 1983 Rules 150 and 150 of this

Tariff are hereby temporarily suspended pending the Federal Mari

time Commission s determination of Section 15 issues in FMC

Docket No 83 31 In the event said issues are decided in favour

of the Bureau the Rules shall be promptly reinstated in which

event the period of suspension shall be added to the period of

enrollment in computing the enrollee s twelve 12 month period

Rule No 150 VOLUME INCENTIVE PROGRAM VIP

Members of New York Freight Bureau will pay refunds as

set forth below to qualified shippers and consignees who

have enrolled under and who comply with all of the terms

and conditions of the Volume Incentive Program VIP as

described in this rule

The VIP refund will be applied to total VIP freight dollars

by all transportation modes utilized by Bureau members and shall

be calculated according to the following scale for each enrollment

period

12 Month Total VIP Freight Percentage of Refund

Dollars Note 3

From US 500 thousand to

US 999 999 99 5 0

percent

From US 100 million to US

1 999 999 99 75 percent

3The VIP wa set forth in Rule 150 et seq of FMC Agreement No 10107 Common Tariff No 2 FMC

3 and inFMC Agreement No 10108Common Tariff No I FMC I

4

As of July I 1983 the members of Agreement No 10 107 were American President Lines Ltd Barber

Blue Sea Line JiS The Ea t Asiatic Company Ltd Kawa aki Kisen Kaisha Ltd Korean Marine Transport

Co Ltd Mitsui OS K Lines Ltd Moller Maersk Line A P Sea Land Service Inc United States Lines

Inc and the Trans Pacific Freight Conference Hong Kong The members of Agreement No 10 108 were

Barber Blue Sea Line liS Kawa aki Kisen Kaisha Ltd Moller Maersk Line A P United Slates Lines Inc

and the New York Freight Bureau

The VIP was incorporated in TPFCHK and NYFB tariffs

26 F M C
224 FEDERAL MARITIME COMMISSION

12 Month Total VIP Freight Percentage of Refund

Dollars Note 3

US 2 0million and over 10 0

percent

Examples of application ofrefund are as follows

Account A 12 months revenue dollars of 700000 qualifies for

5 refund equal to 35 000

Account B 12 months revenue dollars of 15 million qualifies

for 7 5 refund equal to 112 500

Account C 12 months revenue dollais of 3 0 million qualifies

for 10 refund equal to 300 000

Except as otherwise provided the provisions of the VIP may

be modified or cancelled subject to the following

a Changes which result in a monetary benefit to the qualified

enrollee under this Rule will be effective immediately

b Changes which result in a reduction of monetary benefit to

the qualified enrollee will apply only to new or renewed

enrollments

Note 1 VIP freight dollars will be composed only of port to

port ocean freight charges and will exclude the follow

ing additionals and charges

1 Macao Arbitraries

2 Heavy Lifts Charges Rule 4

3 Long Length Charges Rule 5

4 Diversion Charges Rule 23

5 Destination Delivery Charges Rule 64A

6 TRS Charges Rule 48

7 CFS Receiving Charges Rule 59

8 Container Equipment Detention Charges at Base Loading

Ports Rule 61

9 Container Equipment Detention Charges at Discharging

Ports Rule 62

10 Demurrage Charges at Discharging Ports Rule 67

11 Detention in Transit Charges Rule 79

12 Storage Charges at Base Loading Ports Rules 80

80A

13 Bunker Surcharge if applicable

14 Currency Surcharges ifapplicable

C Note 2 For purpose ofcalculating the quatum sic ofthe refund

all VIP freight dollars paid to all members of New

York Freight Bureau for cargo moving under the Bureau

tariff will be combined

C I
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 225

THE SHIPPING ACT 1916

Note 3 Refunds will be paid in U S dollars only to the qualified

enrollees

Terms Conditions

1 A qualified enrollee must be the manufacturer seller or pur

chaser having a proprietary financial interest other than in the

transportation or physical consolidation or deconsolidation in the

export or import cargo as applicable and who is named as a

shipper or consignee on bills oflading or whose corporate affiliate

is so named

2 All enrollees must complete the enrollment form contained in

Rule 150 and submit same to the Bureau ChairmanSecretary

The Bureau ChairmanSecretary shall assign the enrollment number

which must be placed on all bills of lading covering cargo moving

under VIP Only one number may appear on a bill of lading

to ensure the appropriate VIP refund The name of the qualified

enrollee or its affiliate and the applicable enrollment number must

also appear on the bill of lading All communications in connection

with the VIP must be sent directly to the Bureau Chairman

Secretary s office To assure prompt attention each communication

originating outside of Hong Kong should be sent by registered

air mail and the notation VIP should be clearly marked on

the envelope

Exception On cargo shipped during the month of July 1983

by a qualified enrollee or affiliate any bills of lading which

do not contain the enrollment number may be submitted to the

ChairmanSecretary by the enrollee or its affiliate for inclusion

in the VIP

3 Each enrollment shall run for 12 months starting from the first

day of the month immediately following enrollment The bill of

lading date shall determine the month in which each shipment

is to be credited

Exception Initial application for enrollment during the month

of July will be in effect on all shipments from 1st July 1983

4 VIP refunds shall become due and payable as soon as practicable

but not later than 60 days after completion of each individual

12 month enrollment period Payment of VIP refunds shall be

made by the Bureau s

Independent Accountant directly to the

qualified enrollee In the event an enrollee ceases to ship with

the Bureau at any time during the 12 month period any refunds

accrued for his account during the period of his participation

will be paid as above

5 All freight payments in respect of cargo originating in Hong Kong

Macao and Taiwan carried by all members of the Bureau destined

to all New York Freight Bureau ports will be included in the

VIP
226 FEDERAL MARITIME COMMISSION

6 All freight payments in respect of commodities moving under

the following tariff or successor or reissues thereto New York

Freight Bureau Tariff No 27 FMC 14 will be included in the

VIP

7 Carriers will supply directly to the Bureau ChairmanSecretary

andor the party designated by the Bureau ChairmanSecretary

such supporting documents as are required to ensure appropriate

and timely application of the VIP refund Any question regarding

the application or administration of VIP shall be referred to the

Bureau ChairmanSecretary by the enrollee with such supporting

documentation as may be applicable Decisions of the Bureau

ChairmanSecretary shall be final and binding

8 All tariff rates and conditions in effect at the time of shipment

shall apply to VIP

9 No refunds will be paid unless and until all freight and charges

for the period and shipments in question including charges for

cargo in transit have been paid to the carriers

10 Freight revenue of a qualified enrollee s parent subsidiary

or other related companies listed in the enrollment form who

may engage in the shipment of commodities under this tariff

and over whom the enrollee regularly exercises direction and work

ing control in relation to shipping matters whether the shipments

are made by or in the name of the enrollee any such related

company or an agent or shipping representative acting on the

enrollee s behalf shall be counted as revenue to the enrollee

The names of such related companies shall be listed on the VIP

enrollment form The enrollee warrants and represents that the

list is true and complete that he will promptly notify the Bureau

ChairmanSecretary in writing of any future changes in the list

and that he has the authority to enroll under the VIP on behalf

of the related companies so listed To insure proper credit under

the VIP all bills of lading covering qualified shipments must

contain the enrollment number

Exception Bills of lading covering qualified shipments during

the month of July 1983 may be submitted to the Bureau Chair

manSecretary without the enrollment number

Effective 18th November 1983 Rules 150 and 150 1 of this

Tariff are hereby temporarily suspended pending the Federal Mari

time Commission s determination of Section 15 issues in FMC

Docket No 8331 In the event said issues are decided in favour

of the Bureau the Rules shall be promptly reinstated in which

event the period of suspension shall be added to the period of

enrollment in computing the enrollee s twelve 12 month period

C r
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 227

THE SHIPPING ACT 1916

C Rule No 150 1 SPECIMEN OF VOLUME INCENTIVE PRO

GRAM VIP

The following specimen enrollment fonn on enrollee s com

pany letterhead shall be completed signed and forwarded to

the ChainnanlSecretary New York Freight Bureau c o Com

mercial Management Ltd 801 4 Sincere Building 173 Des

Voeux Road Central Hong Kong Telex Number 73701

ANSWERBACK SIGNAL COMMAN HX Telephone Num

ber 5 445077 and a

copy of the fonn with an enrollment

number will be promptly returned to the enrollee

ChainnanlSecretary

New York Freight Bureau

c o Commercial Management Ltd

801 4Sincere Building

173 Des Voeux Road Central

Hong Kong

Re New York Freight Bureau s FMC Agreement No

5700Volume Incentive Program

Dear Sir

Name of Shipper or Consignee hereby applies for enrollment

in Volume Incentive Program VIP on tenns and conditions

as are specified in Rule 150 of FMC Agreement No 5700

tariff as on file with the Federal Maritime Commission

We understand that our participation in the VIP will run

for a period of 12 months commencing on the first of the

month immediately following enrollment and as soon as pos

sible after each 12 month period but not later than 60 days

therafter a refund will be paid for shipping cargo on Bureau

members vessels in accordance with the tenns and conditions

of Rule 150

Under tenns of Rule 150 we further understand that refunds

will be paid in U S dollars only to the qualified enrollee

but will not be paid unless the assigned enrollment number

appears on the bills of lading covering the cargo movement
228 FEDERAL MARITIME COMMISSION

Yours faithfully

S

ENROLLEE S NAME PLEASE PRINT

ADDRESS

TELEX

NAME AND ADDRESSES OF LEGALLY AFFILIATED COMPANIES SEE RULE

No 150 SEcrJON 10 AUTHORIZED TO USE OUR ENROLLMENT NUMBER

ARE AS FOLLOWS

C Enrollment Number Assigned by ChainnanlSecretary of New York

Freight Bureau

5

Ex I App 4

51n essence the TPFC HK tariff is exactly like that of the NYFB tariff except that the Freight Dollars

in relation to Percentage of Refunds are as follows

12 Month Total VIP Freight

Dollars

Percentage ofRefund

Note 3

From US 100 million to US

2 499 999 99

From US 250 million to US

4999 999 99

US 5 0 million and over

5 0

percent

75 percent

10 0 percent

Examples of application of refund are as follows

Account A 12 months revenue dollars of 15 million qualifies for 5 refund equal to 75 000

Account 812 months revenue dollars of 3 0 million qualifies for 7 5 refund equal to 225 000

Account C 12 months revenue dollars of 70 million qualifies for 0 refund equal to 700 000

C
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 229

THE SHIPPING ACT 1916

6 As of October 31 1983 106 enrollees were participating in the

TPFCHK VIP and 66 of these use affiliates The NYFB has 72 enrollees

47 of whom list affiliates Five enrollees have qualified for a refund in

the TPFCHK and one enrollee has qualified in the NYFB Ex I App

7 paras 4 5

7 The difference in the range of freight dollar increments in paragraph

5 above is attributable to the substantially smaller volume of cargo moving

in the NYFB trade Ex 1 para 10

8 Under TariffRule No 150 as filed a qualified enrollee was defined

to be a manufacturer seller or purchaser having a proprietary financial

interest in the cargo and who is named as a shipper or consignee on

the bill of lading or whose corporate affiliate is so named Ex Ipara

11 App 4

9 The enrollee however must have listed the names of its affiliates

on the enrollment form and only then may an affiliate use the enrollee s

enrollment number on the shipments it makes Ex 1 para 11 App 4

10 The Conferences have taken action in Hong Kong however to

revise the definition of qualified enrollee in Rule 150 to specifically

include NVOCCs within that definition Tr p

23 App 4

II In order to qualify an enrollee must complete the enrollment form

contained in Rule 150 1 which is then processed by the ChairmanSecretary

of the Conference for assignment and issuance of an enrollment number

Ex 1 para 11 App 4

12 It is required that the assigned number and the name of the enrollee

or affiliate appear on all bills of lading covering the cargo moving under

the VIP Ex I para II App 4

13 The cargo shipped by an enrollee over 12 consecutive months is

the basis the rule specifies for purposes ofcalculating the refund entitlement

This period commences on the first day of the month following submission

of the completed enrollment form Ex 1 para II App 4

14 Upon the completion of each 12 month period but not later than

60 days thereafter refunds are due and payable provided all freight and

charges have been paid Ex I para II App 4

15 After the enrollment period has been completed there is no obligation

on the enrollee to do anything more in order to receive the benefit to

which it is entitled Ex 1 para 12 App 4

16 The Conferences have each appointed the international accounting

firm of Peat Marwick and Mitchell PMM to administer the task of

paying out the refunds directly to each qualified enrollee Ex I

para

12 App 4

17 PMM will invoice each carrier for the amount for which it is liable

under the VIP on a monthly basis with collections within 60 days Ex

I App 7 para 8

J Mr
230 FEDERAL MARITIME COMMISSION

18 The only Conference members who advance monies for the mainte

nance of accounts in their names are those which move cargo for qualified

enrollees Ex 1 App 7 para 8

19 The amount each conference member pays into its member account

with PMM is based on the revenues paid to it by enrollees Ex 1 App

7 para 8

20 PMM will notify the individual conference members of their potential

VIP refund liability on a monthly basis and the members will in turn

submit the monies to PMM Ex 1 App 7 para 8

21 The individual contributions to be made will be based upon each

member s recent carryings plus an additional 10 percent to account for

anticipated growth Ex 1 App 7 para 8

22 All member accounts are maintained separate and apart from con

ference revenues as the monies are collected by PMM and placed in

a separate account for each member Ex 1 App 7 para 8

23 The accounts will not be commingled with conference funds and

they will be maintained so that each enrollee s status can be determined

at any time Ex 1 App 7 para 8

24 No revenues derived outside of the VIP will be included in the

separate member accounts Ex 1 App 7 para 8

25 PMM will handle only monies derived from and related to the

VIP Ex 1 App 7 para 8

26 PMM will send a detailed monthly statement to each enrollee showing

the calculation of the revenue generated pursuant to the VIP both on

a monthly and cumulative basis Ex 1 App 7 para 9

27 PMM will also determine the level and amount of any refund at

the end of the VIP pursuant to the governing tariff rule Ex 1 App

7 para 9

28 Any question regarding the application or administration of the VIP

will be referred to the ChairmanSecretary by the enrollee with supporting

dqcumentation Ex 1 App 7para 10

29 Any refund earned will be paid solely to the enrollee whose VIP

number must appear on the bill of lading Ex 1 App 7 para 12

30 Since each member will pay PMM his contribution on a

regular

current basis if a member should resign there should be sufficient funds

available to satisfy his obligations to an enrollee Ex 1 App 7 para

13

31 The VIP uses revenue received rather than quantity as a basis

for determining a refund because of the nature of the Hong Kong Taiwan

U S trade Ex 1 App 7 para 1

32 The trade is dominated by consignees who are major retailers and

department stores who import a wide variety of consumer goods Ex 1

App 7 para 1

33 Inherent in the importation of consumer goods for retail sale is

the problem that the commodity mix of goods which is shipped varies

26 F M C
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 231

THE SHIPPING ACT 1916

greatly not only from season to season but also from sailing to sailing

Ex 1 App 7 para 1

34 Additionally the same consignees will use all major forms of trans

portation offered by the Conference including all water mini landbridge

and interior point intermodal Ex 1 App 7

para 1

35 This wide range of commodities types of shipments and use of

various forms of carriage makes it difficult to base a VIP on the quantity

of cargo shipped Ex I App 7

para 1

36 By utilizing the amount of revenue produced variables resulting

from use of different types and sizes of containers relative cargo mix

between consignees and the difference in rates filed by individual members

under independent action are all harmonized Ex 1 App 7

para 1

37 TPFCHK and NYFB separately established through conference de

liberation the refund levels in their respective tariff rules Ex 1 App

7

para 5

38 The qualifying refund levels were established after considering various

trade factors including the rates being offered by non conference lines on

an average basis Ex I App 7

para 5

39 Currently 19 non conference carriers offer regular service with mod

em vessels and equipment in competition with the II TPFCHK members

while 8 non conference carriers compete with a similar number of NYFB

members Ex I

paras

23 24 App 10 Ex 3

para 3

40 By 1982 competition from non conference carriers had pushed rates

below levels prevailing in 1978 Ex 1 para 25 App II

41 As non conference carriers have adjusted their rate schedules to attract

larger shippers the conferences believed that it was necessary to provide

for increased percentage refunds in the VIP to assure that the larger shippers

and consignees would continue to use their services once the initial qualify

ing refund level was met Ex I App 7 para 5

42 It was believed by the conferences that a 10 percent maximum

refund when combined with the revenue level was sufficient to provide

adequate incentive for large volume shippers and consignees to use their

services Ex I App 7

para 5

43 The VIP was suspended effective November 18 1983 in an attempt

to limit any potential antitrust liability Ex 1 paras 7 8 App 4

44 The conferences in establishing the VIPs relied upon the basic

ratemaking authority contained in Article 6 entitled Freight Charges

of each respective conference agreement Ex 1 para 14 App I Tr

pp 32 33 35

45 At the present time the Commission has in place time volume rules

46 CFR 536 7

46 The Commission s current time volume rules are based on a specific

or minimum quantity of cargo moving over a specified period of time

Tr p27 46 CFR 536 7

26 F M C
cJ

J

232 FEDERAL MARITIME COMMISSION

47 The beneficiaries of the time volume contracts are the major importers

and exporters in the foreign commerce of the United States Tr p 27

48 The effect of time volume rules upon smaller shippers was considered

by the Commission to be no different than volume rates which were in

tariffs that apply on a particular sailing Tr p

27

49 The Commission stated in its final Order regarding time volume

rules that time volume rate making was routine and is interstitial to most

basic rate making agreements Tr p28 Docket No 8054

50 The basic difference between time volume contracts and the VIP

is that one is a contract based on quantity and the other is a tariff application

based upon revenue Tr p30

51 From a shipper s perspective there is no basic fundamental difference

between basing a refund upon the quantity of cargo carried or the amount

of revenue received Tr p30

52 The Commission s staff believes that the Commission should look

favorably upon aVIP type concept Tr p

31

53 The Commission s staff does not believe that any of the provisions

in the proposed VIP are inherently discriminatory Tr p31

54 It is the Commission s staff opinion that the Conference already

possesses sufficient section 15 authority to implement the VIP

55 When dealing with multiple commodity shippers it is easier to keep

accounting records on a revenue basis as apposed to a time volume rate

that is based on the commodity or mix of commodities Tr p33

ULTIMATE FINDINGS OF FACT

56 Both the NYFB and the TPFCHK possess rate making authority

in their basic Agreements and the implementation of the VIP program

is interstitial to the basic agreements Entire record

57 The VIP involved here does not result in a pooling agreement requir

ing approval under section 15 Entire record

58 The VIP adjusts the tariffs involved pursuant to normal recognized

rate making factors which are includable in the Conferences tariffs as

a routine rate making matter not requiring approval under section 15 Entire

record

59 The VIP is neither unjustly discriminatory nor unduly or unreasonably

preferential and does not violate sections 16 or 17 Entire record

60 The provisions establishing levels af revenue which are necessary

to participate in the VIP as well as the increments of freight dolllU S

set forth are reasonable and do not constitute a violation of sections 16

or 17 Entire record

61 The provisions of the VIP which include affiliated companies within

the definition of qualified enrollee do not constitute a violation of sec

tions 16 and 17 Entire record

26 EMC
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 233

THE SHIPPING ACT 1916

DISCUSSION AND CONCLUSIONS

Section 15 Authority

Section 15 of the Shipping Act 1916 46 CPR 814 provides that

Every common carrier by water or other person subject to this

Act shall file immediately with the Commission a true copy

or if oral a true and complete memorandum ofevery agreement

with another such carrier or other person subject to this Act

or modification or cancellation thereof to which it may be a

party or conform in whole or in part fixing or regulating transpor

tation rates or fares giving or receiving special rates accommoda

tions or other special privileges or advantages controlling regulat

ing preventing or destroying competition pooling or apportioning

earnings losses or traffic allotting ports or restricting or otherwise

regulating the number and character of sailings between ports

limiting or regulating in any way the volume or character of

freight or passenger traffic to be carried or in any manner provid

ing for an exclusive preferential or cooperative working arrange

ment The term agreement in this section includes understand

ings conferences and other arrangements but does not include

maritime labor agreements or any provisions of such agreements

unless such provisions provide for an assessment agreement de

scribed in the fifth paragraph of this section

The Commission shall by order after notice and hearing dis

approve cancel or modify any agreement or any modification

or cancellation thereof whether of sic not previously approved

by it that it finds to be unjustly discriminatory or unfair as

between carriers shippers exporters importers or ports or be

tween exporters from the United States and their foreign competi

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

States or to be contrary to the public interest or to be in violation

of this Act and shall approve all other agreements modifications

or cancellations

Here the question is not whether the VIP is subject to and requires section

15 approval for clearly it is a rate making activity coming under the

statute but rather whether the Conferences have already been granted suffi

cient authority to implement the VIP We think it clear that the TPFCHK

and NYFB both have such authority There is no question that Article

6 of Agreement Nos 14 and 5700 provides for comprehensive rate making

authority within the Conferences respective geographic scopes FF 1

2 Under the rate making provisions of Article 6 the Conferences have

implemented conference wide tariffs establishing rates charges rules and

regulations applicable to all cargo moving within the scope of the Agree

ments Over the years the Conferences have published in their tariffs

rates of many types and varieties including local and OCP rates rates

based on weight alone or weight measure per container rates ad valorem

26 F M C
1

1

1

j

234 FEDERAL MARITIME COMMISSION

rates and rates based on volume The VIP while a novel rate making

device as the Commission s Order points out is nevertheless a form of

rate making which when analyzed is similar to other forms ofrate making

which the Commission has already characterized as interstitial to the basic

rate making agreement

In Docket No 8054 which authorized the establishment of time volume

rates and contracts the Commission directl considered whether conferences

offering discounted rates based on time volume concepts require separate

rate making authority Itheld

Finally there is the question of wheth r conferences and dual

rate conferences in particular should be authorized to participate

in timelvolumeratemaking Certain commentators afiUe that tlme

volume rates are not conventional o rouqne ratemaking and that

contracts for such rates contravene section 14b of the Act 46

U S C 813a The Commission disa ees Time volume rates are

a routine form of ratemaking inte titial to agreemeJlts approved

pursuant to the Shipping Act 1916 Docket No 8054 Final

Rule served July 2 1982 6

Given the record made in this proceeding where all of the parties agree

that time volume rates and the VIP are similar and differ signifICantly

only in that one uses the quantity of cargo as a basis While the other

uses revenues it seems clear as Hearing Counsel points out that The

situation associated with the VIP is almost indistinguishable It is

a novel rate making system filed in the conference tariffs by two con

ferences which already possess approved rate making authority

Prior to the time volume roling the Commission in Investigation of

OverlandandOCP Rates and Absorptions 12 FMC 184 1969 considered

whether overland or OCP rates and absorptions which bad been filed in

various conference tariffs were covered by the conferences basic rate

making authority or whether additional seetion 1 Sapproval must be sought

The Commission found that the overlai1d1OCP rates were the product

of routine activities within the cover of authority conferred by the coo

ference agreements therefore there was no need for separate Commission

approval of overlandOCP rates or rate making practices It states further

that

t he Commission and its predecessors have uniformly held that

the issuance of tariffs inCluding rules and regulations covering

their application is a routine mattet authorized by an approved

basic conference agreement not requiring separate approval under

section 15 Citations omitted In 1961 section 15 of the Act

was amended to reflect this principle and more specifically

excepts tariff rates fares and charges and classifications roles

and regulations explanatory thereof from the requirement of prior

6

See In Time VQlllme Rate Contract Tariff Filing Regll Qtlons Applicable to Carriers and Conferences

inthe FQrelgn Commerce ofthe United States 2S F M C I 1982

CIIr
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 235

THE SHIPPING ACT 1916

approval where agreed upon by approved conferences

and filed and published in accordance with section 18 b the

tariff filing section of the Act Id at 205

It is significant that in the above cited case as it has in others the Commis

sion recognized as a cardinal principle the right of conferences to com

pete for shippers patronage Id at 206 Agreement No 134 21Gulf Medi

terranean Ports Conference 8 FMC 703 709 1965

In discussing the question of section 15 authority the Commission s

Order of Investigation and Hearing states that the VIP itself might be

considered a new ratemaking arrangement requiring separate section 15

approval emphasis supplied citing Persian Gulf Outward Freight Con

ference 10 FMC 61 65 1966 While the inquiry is certainly valid the

record made in this proceeding places this case apart factually In Persian

Gulf a unique two tier ratemaking plan based upon the flag of a vessel

was involved The Commission characterized it factually as a ratemaking

plan bearing no resemblance to any recognized ratemaking method

and just as the Commission upheld the interstitial nature of the OCP rates

and the time volume rates so too is the VIP interstitial and the Persian

Gulf holding inapplicable As the Commission stated in the Investigation

ofOCP Rates supra at pp 212 213

That the Commission found the Persian Gulf scheme to require

separate approval as an entirely new scheme of rate combination

and discrimination is no more pertinent than the similar finding

in the case ofthe exclusive patronage dual rate system

So here in the final analysis we believe that the theory of the VIP

as witnesses Dick Gottshall Velez and Schwarz all affirmed is

conceptionally no different from time volume rate making In both cases

shippers who ship a specified quantity of cargo during an agreed upon

time period are entitled to a reduction in their total freight charges In

the case of time volume rates the quantity of cargo is variously measured

in terms of weight tons revenue tons or TEUs Under the VIP quantity

is measured in terms of revenue paid by the shipper In time volume

contracts the reduction in freight charges is based on a negotiated rate

applicable only if the volume commitment is met Under the VIP the

reduction is based on published tariff levels which are also applicable

only if the volume revenue commitment is met Conceptually and prag

matically there is no real distinction in terms of the rate making authority

required under section 15

A further issue raised by the Commission s Order of Investigation and

Hearing as it applies to section 15 is placed in focus by the Commission s

statement that

While the VIP tariff rules do not directly address the point it

seems apparent that members of the Agreements Conferences

who receive revenues from qualifying for a refund must somehow

26 F M C
236 FEDERAL MARITIME COMMISSION

remit a portion of those revenues to the Agreement Chainnan

so that the refunds can be made The process by which these

payments are gathered and allocated could result in an agreement

among common carriers to pool or apportion earnings which might

require approval under section 15 of the Shipping Act 46 U S C

814 Parenthesis and emphasis supplied

Here the Commission s concern is again concise and appropriate However

the record made in the proceeding clearly negates the jdea that the method

used in the VIP to gather and allocate funds constitutes a pooling agreement

requiring section 15 approval Such an agreement is defined as

An agreement which provides for the division of the cargo

carryings or earnings andlor losses among the parties in accordance

with a fixed fonnula Part 522 2 a 3 Commission s Rules of

Practice and Procedure 46 CPR 522 a 3

In this proceeding the uncontroverted evidence supplied by all witnesses

which we have found as fact indicates that there is no division ofcarryings

or earnings much less a fomula for doing so The tecord establishes

that each Conference member contributes revenue only to the extent it

carries for a particular enrollee Further the level of the contribution is

limited strictly by the level of the member s carriage for each enrollee

If a member does not carry for a particular enrollee no contribution need

be made If for example only one member carries for an enrollee then

the entire contribution is made by that member As to the funds themselves

a separate account is maintained by PMM for each Conference member

Each account is kept separate and apart from all other accounts and from

all Conference accounts and monies without commingling at any time

for any purpose At the end of a twelve month period refunds earned

by the enrollee are paid directly to tbatenrQllee by PMM

From all of the above as well as the remaining evidence in the record

we hold that the process by which these VIP funds are gathered and

allocated does not result in a pooling agreement requiring approval under

section IS

Another aspect of this proceeding having to do with section 15 approval

is whether or not the general rate setting authority contained in the Con

ference agrsements under which this VIP becomes operative is limited

to the adjustment of rates as thenonnal economic forces which govern

the establishment of such rates may require as the Commission decision

in the Investigation of OverlsndlOCP Rates and Absorptions supra re

quires In other words under the VIP have the tariffs been adjusted pursuant

to nonnal recognized rate making factors such as competition so as to

be includable in published tariffs as routine matters or do the VIP provi

sions in the tariffs merely constitute a device having some unacceptable

purpose and effect such as the stifling of competition within the trade

We think the record here establishes clearly without even a semblance
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 237

THE SHIPPING ACT 1916

of evidence to the contrary that this VIP tariff provision was based on

legitimate recognizable and permissible rate making factors The Chairman

Secretary of the NYFB and TPFCHK stated and we have found as

fact that this VIP was promulgated in response to the current time volume

rules adopted by the Commission He noted and we have found as fact

that because of the nature of the Hong KongTaiwan U S trade that his

Conference members could not utilize the time volume rules citing that

because of the presence of multi commodity shippers in the trade and

the various forms of carriage utilized by these shippers a volume incentive

program based upon the quantity of cargo carried would not be feasible

As a result the Conferences perceived that the independent single commod

ity carriers were enjoying a competitive advantage over them by being

able to utilize the Commission s time volume rules In answer to that com

petition the VIP system was designed and based upon revenue received

which represented a practical common denominator both from the point

of view of the nature of the trade and the administration of the program

In addition to the Conferences witnesses the above facts and their effect

were corroborated by the testimony of the Commission s Senior Transpor

tation Industry analyst who is also a member of the Tariff Compliance

Review Board in the Bureau of Tariffs So here in view of the above

we hold that the VIP involved was filed pursuant to recognized rate

making factors and as such is includable in the Conferences published

tariffs as a routine rate making matter not requiring section 15 approval

In light of the preceding discussion and based on the entire record

we hold that the VIPs involved here are neither unjustly discriminatory

or unfair as between carriers or shippers nor do they operate to the det

riment of the commerce of the United States or contrary to its public

policy Further it is held that the Conference Agreements already contain

sufficient section 15 authority to allow implementation ofthe VIPs contained

in their tariffs

Possible Violations of Sections 16 and 17

As to possible violations of sections 16 and 17 of the Shipping Act

1916 the Commission s Order of Investigation etc states

A review of the VIP provisions filed with the Commission raises

several areas of concern Section 16 First of the Shipping Act

makes it unlawful for any common carrier to make or give any

undue or unreasonable preference or advantage to any particular

person or to subject any particular person to any undue or unrea

sonable prejudice or disadvantage 46 U S C 815 Section 17

prohibits common carriers from charging any rate which is unjustly

discriminatory as between shippers 46 U S C 816 The levels

of revenues necessary in order to participate in the VIP together

with the procedures for aggregating revenues from affiliated com

panies may discriminate against small shippers or shippers of

low value commodities to such a

degree that sections 16 First

2 F M C
238 FEDERAL MARITIME COMMISSION

andor 17 are violated In addition the definitian of qualified

shipper based as it is on a proprietary interest in the cargo

excludes certain categories of shippers from the VIP including

but not necessarily limited to non vessel operating common car

riers NVOCCs consolidators deconsolidaters warehousemen

and freight forwarders This kind Of discriminatian may also vio

late sections 16 First andor 17 Emphasis supplied

Section 16 first provides that it shall be unlawful for any camman carrier

by water Or other person subject to this Act either alane Or in conjunction

with any other person directly or indirectly

To make or give any undue Or unreasonable preference or advan

tage to JUly particular person locality or description of traffic

in any respect whatsoever Or to subject any particular person

locality or description of traffic ta any undue or unreasanable

prejudice or disadvantage in any respect whatsoever

Sectian 17 pravides

That no common carrier by water in foreign cammerce shall

demand charge or callect any rate fare or charge which is

unjustly discriminatary between shippers Or parts

There is na question but that the VIP invalved here is discriminatary

andar preferential in that shippers who meet certain revenue prerequisites

receive lower rates than do those shippers wha da nat meet those pre

requisites The real questian hawever is whether Or nat the discriminatian

invalved is unjust and the preference undue Or unreasonable See

Matson Navigation Co 21 FMC 538 540 1978 Given the record made

in this case we hold that there was neither unjust discriminatian nar undue

Or unreasenable preference and that the VIP does net vielate either section

16 Or sectian 17 Of the Shipping Act It is axiematic that a commen

carrier Ought to be able te cempete far traffic Texas Pac Ry v

ICC 162 U S 197 1896 North Atlantic Freight Conference 11 FMC

202 210 1967 Matson Navigation supra Here the recerd establishes

that the Cenferences wished te attract te members services shippers whe

are largely responsible fer sustaining the Hang Keng Taiwan United States

trades Currently nonconference carriers have been able ta secure increas

ingly large portiens Of carge that are being shipped by majer shippers

F F 3841 by use Of time velume centracts The Cenferences are new

seeking te implement the VIP which is mere werkable fer them in place

Of time velume centracts In se deing they de nat discriminate Or establish

preferences any differently than de time velume centracts which the Cem

missien has already appraved Further as te the effect the VIP wauldshave

en small shippers Once again that effect is the same as what takes place

in establishing time velumerules where the Cemmission has decided that

the effect ofthe rules is ne different than the velume rates which were

inordinary tariffs that apply te a particular sailing It has been 26

F M C
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 239

THE SHIPPING ACT 1916

consistently held that such volume rates are not per se violative of any

section of the Shipping Act In the Matter of the Carriage of Military

Cargo 10 FMC 69 73 1966 Puerto Rican Rates 2 U S M C 117

121 2 1939 Docket No 82 54 supra So here the VIP and time volume

rules are the same in that both allow a discount based on the volume

of cargo moved which standing alone does not violate sections 16 or

17

As to the levels of revenue which are necessary to participate in the

VIP the evidence establishes they are between 5 and 10 percent on incre

ments of freight dollars ranging from 500 000 00 to 2 000 000 00 These

are reasonable ranges and the fact that a large number of qualified enroll

ees 178 have become members of the VIPs indicates that the system

is not intended for a select group of large shippers Also the testimony

of all witnesses including the Commission expert establishes that the level

of refunds are not unduly preferential or discriminatory within the meaning

of sections 16 and 17

In its Order of Investigation the Commission noted that the VIP proce

dure of aggregating revenues from affiliated companies might discriminate

against small shippers Once again while the concern is valid the facts

in this case establish that as with Merchant s Contracts the inclusion of

affiliates was made to allow shippers and consignees to avail themselves

of the VIP without forcing them to restructure their corporate organizations

The VIP includes only affiliates overwhom the enrollee regularly exercises

direction and working control in relation to shipping matters It thereby

allows shippers and consignees the flexibility they need in maintaining

their corporate structures Excluding their controlled affiliates might unrea

sonably discriminate in favor of unitary companies that conduct their

operations through unincorporated divisions or offices and might cause the

rejection of the VIP by the Conferences major consignee accounts Finally

the Commission has recognized the use of affiliates and subsidiaries by

shippers and consignees and adopted regulations treating affiliates as parties

to shipping arrangements entered into by parent corporations The Dual

Rate Cases 8 FMC 16 33 1964 So here the record is devoid of

any evidence establishing discrimination under sections 16 and 17 by virtue

of the inclusion of affiliated companies as qualified enrollees under the

VIPs and we hold that the provision does not violate those sections of

the Shipping Act

As to whether the VIP use of a revenue based discount would unjustly

discriminate against shippers of low rated cargo we hold that it does

not so unjustly discriminate The respondents argue and we agree that

the fundamental concept behind traditional commodity pricing dictates that

certain low value cargoes must be rated at relatively low levels or they

otherwise would not move in the foreign commerce In other words it

is probable that the shippers of those low valued low rated cargoes already

receive discounts as reflected in the Conferences existing rate structure

26 F M C
1

j

240 FEDERAL MARITIME COMMISSION

Thus any shipper of such cargo who might not qualify for the VIP refund

levels is not unjustly discriminated against as to the price paid for moving

his cargo since his discount has already been included in th base rate

Further in these particular VIPs the testimony establishes that the trades

involved are dominated by large department store accounts and not by

large shippers of low rated quasi bu1k commodities so that the danger

of unjust discrimination against such shipper is less a concern than it

otherwise might be

Finally with respect to sections 16 and 17 the Commission in its

Order raises a question regarding the definition of a qualified enrollee

as used in the VIPs It notes that since the VIPs exclude those shippers

who do not have a proprietary interest in the cargo it excludes NVOCCs

The National Association of NVOCes intervened in the proceeding alleging

violation of sections 15 16 and 17 However the Conferences have now

agreed to include NVacCs within the definition of a qualified enrollee

and the National Association of NVacCs have withdrawn from the adju

dicatory phase of the proceeding and the issue regarding them has become

moot7

In light ofthe above we hold that the VIP is not unjustly discriminatory

nor does it give undue or unreasonable preference or advantage so as

to be violative of sections 16 and 17 of the Shipping Act 1916 We

think the holding is all the more justified because no adverse party has

appeared to contest the VIP or to allege harm or injury resulting from

its implementation

Bifurcation of Issues Adjudication and Rulemaking

We have already noted that the adjudicatory phase of this proceeding

having to do with violations of sections 15 16 and 17 of the Shipping

Act 1916 has been bifurcated from the issues raised in that portion of

the Commission s July 29 1983 Order having to do with Rulemaking

We have also noted that there are seveial intervenors who have been

allowed to intervene in the rulemaking aspect of the proceeding We propose

to schedule hearings on the rulemaking phase as soon as possible wherein

we will consider whether or not rulemaking is appropriate in the first

instance and if it is what provisions the rule should contain There will

be an initial decision on rulemaking which as the Commission s Order

requires shall propose the promulgation of an appropriate rule

In the meantime this initial decision shall become operative as to the

adjudicatory aspects of the VIP The particular VIPs involved here need

not and should not await rulemaking before being allowed to go into

effect The record made here which occasioned the bifurcation of issues

in the fJrSt instance demonstrates a need to expedite implementation of

the VIPs if this holding is to have any real practical application The

7

It is our understanding that the pertinent tariffs will be or have been amended to include NVOs within

the meaning of qualified enrollee Approval of these VIPs is predieated on that change being made

26 F M C
VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF 241

THE SHIPPING ACT 1916

record shows that the VIPs have already obtained many enrollees who

have made qualified shipments toward a refund Any uncertainty as to

the future status of the program or any unreasonable delay such as the

need to await the outcome of possible rulemaking is both unnecessary

and more importantly unfair Such uncertainty and delay can only adversely

affect the respondents good will and their ability to attract cargo from

those customers who are interested in the VIP

In addition to the above the record in the proceeding lacks any viable

reason why these VIPs should not be implemented Indeed Hearing Coun

sels expert witness testified that

I don t think it would be detrimental to a

rulemaking to

have the VIP effective particularly because Ithink the experience

that would be gained paralleling the time the rulemaking would

be going on would probably be beneficial to the Commission

in determining what rules would be applicable through that experi

ence

Thus it appears allowing the VIPs to go into effect prior to rulemaking

would provide the Commission with data that could be used in promulgating

any rule that might be necessary based on the experience gained in the

operation of the VIPs Such a foundation for any necessary rule would

serve to aid in the administration of the Commission s

regulatory respon

sibility and might well allow for a more definitive approach to the imple

mentation ofVIPs generally

Finally it must again be stressed that this decision including the holding

that these VIPs be promptly implemented is based on these specific VIPs

and the record made in this proceeding That record compels one to suggest

that since these are the first VIPs coming before the Commission care

must be taken to properly monitor them to insure that they function as

the respondents say they will and that any changes in the VIP tariff provi

sions are properly evaluated regarding any possible violations of sections

15 16 and 17 8

S JOSEPH N INGOLIA

Administrative Law Judge

The fact that this decision holds that these VIPs should be implemented expeditiously prior to any rule

making that may ensue should not be taken to mean that these VIPs will not be subject to any rules the

Commission may later adopt Indeed the import of this decision is that if the Commission adopts any rules

that require changes in these VIPs then such changes will be made by the respondents

26 EM C
4 FEDERAL MARITIME COMMISSION

46 CPR PART 502

GENERAL ORDER 16 AMDT 44 DOCKET NO 82 48

MISCELLANEOUS AMENDMENTS TO INFORMAL

COMPLAINTS PROCEDURES

March 8 1984

Final Rules

The Commission amends its Rules ofPractice and Proce

dure to 1 increase the jurisdictional limit for the adju

dication of small claims from 5 000 to 10 000 2

provide for tariff notification of decisions of Administra

tive Law Judges and Settlement Officers in formal and

informal docket proceedings and 3 provide for submis

sion of petitions for reconsideration in informal adjudica

tions to Settlement Officers The increase in the ceiling

reflects the present day cost of doing business Tariff

notice is necessary to ensure that all shippers are treated

equally The procedure for filing of petitions for recon

sideration will remedy a defect in the roles which permits

parties to file such petitions with the Commission itself

even though parties in informal claims procedures have

waived the right to file exceptions to Settlement Officer

decisions

DATE Effective March 16 1984

SUPPLEMENTARY INFORMATION

On October 18 1982 the Commission published in the Federal Register

a Notice of Proposed Rulemaking 46 F R 46338 46339 which would

amend its Rules of Practice and Procedure to provide for revised procedures

with respect to overcharge claims Specifically the jurisdictional limit for

small claims would be raised from 5 000 to 10 000 tariff notices may

be required to be published in cases involving overcharge claims and

petitions for reconsideration in small claims procedures would be submitted

to Settlement Officers rather than the Commission itself

In response to the notice Sea Land Service Inc Sea Land and the

Transportation Department of 3M 3M submitted comments Sea Land sup

ported the proposed roles 3M proposed the following

I Eliminate the jurisdictional limit entirely

2 Notrequire tariff notification

ACflON

SUMMARY

242 26 F M C
MISCELLANEOUS AMENDMENTS TO INFORMAL COMPLAINTS 243

PROCEDURES

3 Pennit fonnal proceedings only under certain circumstances

and within certain limitations and

4 Raise the jurisdictional limit for special docket applications

from 180 days to 2 years

With respect to 3M s comments the suggestion that the jurisdictional

limit be eliminated entirely was not contemplated within this proceeding

In addition its assertion that the 10 000 limit was set arbitrarily is not

accurate The limit was established after review of all overcharge claims

filed since 1975

3M s objection to the tariff notification requirement is that it would

add another element to already crowded and ambiguous tariffs The

purpose of the notification is to assure that all shippers are treated equally

This outweighs any problems which may be experienced with additions

to tariffs

3M s

remaining two comments with respect to the conduct of fonnal

proceedings and special docket applications are outside the scope of this

proceeding In particular the suggestion as to special docket applications

would require a legislative change

After consideration of the comments submitted in response to the Notice

of Proposed Rulemaking the Commission has detennined to adopt the

rules as proposed

List of subjects in 46 CFR 502 Administrative Practice and Procedure

Therefore pursuant to 5 U S c 553 and sections 22 and 43 of the

Shipping Act 1916 46 U S C 821 and 841 a Part 502 is amended to

read as follows

1 Section 502 301 is amended by changing the 5 000 limitation in

the first sentence to read 10000

2 Section 502 304 gis amended by addition of the following sentence

after the first sentence

Where appropriate the Settlement Officer may require that the carrier

publish notice in its tariff ofthe substance of the decision

3 A new section 502 304 h is added to read as follows

Within thirty days after service of a final decision by a Settlement

Officer any party may file a petition for reconsideration Such petition

shall be directed to the Settlement Officer and shall act as a stay of

the review period prescribed in section 50234 g

A petition will be

subject to summary rejection unless it 1 specifies that there has been

a change in material fact or in applicable law which change has occurred

after issuance of the decision or order 2 identifies a substantive error

in material fact contained in the decision or order or 3 addresses a

material matter in the Settlement Officer s decision upon which the peti

tioner has not previously had the opportunity to comment Petitions which

merely elaborate upon or repeat arguments made prior to the decision

or order will not be received Upon issuance of a decision or order on

26 F M C
244 FEDERAL MARITIME COMMISSION

reconsideration by the Settlement Officer the review period prescribed in

section 502 304 gwill recommence

4 Section 502 261 is amended by addition of a new paragraph c

to read as follows

c The provisions of this section are not applicable to decisions issued

pursuant to Subpart S of this Part

5 Section 502 225 is amended by the addition of a new sentence

to read as follows

In proceedings involving overcharge claims the presiding officer may

where appropriate require that the carrier publish notice in its tariff of

the substance of the decision this provision shall also apply to decisions

issued pursuant to Subpart T ofthis Part

By the Commission

S FRANCIS C HURNEY

Secretary

26 FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 52

IN THE MATTER OF THE STATUS OF MATSON AGENCIES INC

AND MATSON FREIGHT AGENCIES INC

ORDER ON PETmON FOR DECLARATORY ORDER

March 13 1984

Matson Agencies Inc Matson Agencies and Matson Freight Agencies

Inc MFA Petitioners have petitioned the Commission to issue a declara

tory order determining that neither is a common carrier by water or other

person subject to section 1 of the Shipping Act 1916 46 U S C 801

Matson Agencies and MFA advise that an uncertainty has arisen because

of their affiliation with Matson Navigation Company Inc Matson a com

mon carrier and Matson Terminals Inc Matson Terminals an other

person subject to the Act Petitioners explain that they perform steamship

agency services exclusively and submit that they are not subject to the

Act unless they are so deemed because of their affiliation with Matson

and Matson Terminals

A Notice of the Matson AgenciesMFA Petition for Declaratory Order

Petition was published in the Federal Register 48 Fed Reg 51978

In response to that Notice the Association of Ship Brokers and Agents

U S A Inc ASBA petitioned to intervene and filed areply to the

Petition The Commission s Bureau of Hearing Counsel has also filed a

petition to intervene and a reply The petitions of ASBA and Hearing

Counsel will be granted and their replies considered herein

BACKGROUND

The Petition provides the following information relating to the activities

and affiliations ofPetitioners Matson and Matson Terminals

Petitioners are both Hawaii corporations with headquarters in San Fran

cisco California Matson Agencies and its predecessor Matson Agencies

Inc have performed steamship agency services since 1973 Services are

presently performed for Nippon Yusen Kaisha under FMC Agreement No

10052 and until January 31 1984 were performed for Korea Maritime

Transport Company Ltd under Agreement No 10483 Since January 1

1983 Matson Agencies has been a wholly owned subsidiary of MFA The

officers and directors of Matson Agencies are also officers and directors

of MFA Matson Agencies has no employees of its own and the employees

of MFA manage its day to day business

26 F M C 245
246 FEDERAL MARITIME COMMISSION

MFA currently performs agency services for Columbus Line in Hawaii

freight traffic services for Delta Line in Los Angeles and Portland and

has in the past provided agency services for Moore McCormack Lines

and United Yugoslav Lines In addition it provides husbanding services

for various tramp vessels MFA is a wholly owned subsidiary of Matson

The list of officers and directors of MFA is not identical to the list of

officers and directors of Matson or Matson Terminals I Certain corporate

functions such as personnel legal purchasing corporate accounting and

treasurers functions are performed for MPA by Matson pursuant to an

agreement between the companies

Matson operates as a common carrier in the domestic offshore commerce

between the U S Pacific Coast and HawaiiJohnston Atoll In the foreign

commerce of the United States Matson serves only Kwajalein and Majuro

which are part of the Pacific Islands Trust Territory administered by the

United States

Matson Terminals a subsidiary of Matson performs stevedoring and

terminal services for Matson and other vessel operators at Oakland and

Los Angeles California Seattle Washington and Honolulu Hawaii In

addition it performs container equipment maintenance services at Hayward

California and Portland Oregon and operates and manages a container

terminal under contract with and on behalf of the City of Richmond

POSITIONS OP THE PARTIES

Petitioners maintain that if they were not affi1i ted with Matson and

Matson Terminals they would not be considered subject to Shipping Act

requirements However Petitioners advise that because of that affiliation

they have filed various agency agreements which they have with the carriers

they serve In those instances the parties asked that the agreements be

determined not subject to section 15 of the Shipping Act 1916 46 U S C

814 but if they were that they be approved Petitioners advise that in

all such instances the agreements were approved Petitioners argue that

the necessity of their obtaining section 15 approval of these agency agree

ments places them at a competitive disadvantage vis a vis other steamship

agents that are not affiliated with persons subject to the Act and which

need not file their agency agreements Petitioners advise that while this

filing burden has been lessened due to the exemption provisions in 46

C P R 520 12 2 there are still instances when they must file their agency

agreements

J Mosl of MFA s officers and directors are however also officers of Matson Standard Poor s

Register

of Corporations Directors and Executives 1625 1984

226 C F R 520 12provides in relevant part

Agency agreements between persons subject to the Act except those a where acommon carrier

is to be an agent for a competing carrier in the same trade or b which permil an agent to enter

into similar agreements with more than one carrier in a trade are exempted from the filing and

approval requirements of section IS
IN THE MATTER OF THE STATUS OF MATSON AGENCIES INC 247

AND MATSON FREIGHT AGENCIES INC

Petitioners acknowledge that certain agency agreements entered into be

tween competing carriers in a trade may require filing and approval pursuant

to section 15 They argue however that the relationship of the agents

carrier principals should not determine the status of the agent under the

Act

Petitioners claim that the purposes of section 15 are not served by

concluding that they are subject to the Act Petitioners point out that because

they perform services solely for vessels operating in the foreign commerce

ofthe United States and Matson s services are limited to domestic offshore

commerce except for a monthly barge call at Majuro and Kwajalein they

do not perform services for aMatson competitor

Petitioners advise that they were created for corporate not regulatory

reasons and that the scope of work performed by them differs from that

performed by their affiliates Matson and Matson Terminals which are

admittedly subject to the Shipping Act 1916 Petitioners therefore believe

that the Commission should recognize the corporate distinctions Petitioners

point out that the Supreme Court has held that if the legislative purpose

is not frustrated corporate entities should not be disregarded Schenley

Distillers Corp v United States 326 U S 432 1946

ASBA contends that companies acting as steamship agents whether for

common carriers or others subject to the Shipping Act are not themselves

persons or other persons subject to the Shipping Act by virtue of

their activities as agents ASBA goes on to argue that the mere fact that

a controlling stockholder or even a sole stockholder is itself subject to

the Shipping Act is immaterial ASBA does not take a position as to

the relief sought by Petitioners to the extent it depends upon particular

facts surrounding the Petitioners individual circumstances or the particular

manner or means in which they accomplish their agency functions

Hearing Counsel supports the Petition It submits that while a person

subject to Commission jurisdiction may not segment its operation to make

part of it subject and part of it exempt if such segmentation results in

unjust discrimination absent a showing that the segmenting of operations

results in some activity which is proscribed by the Act the entity subject

to the Act may organize its operations in any fashion it chooses Puerto

Rican Forwarding Co IncPossible Violations of the Shipping Act 1916

and the Intercoastal Shipping Act 1933 No 75 8 EM C Initial Decision

served September 24 1976 16 S RR 1433 1451 Hearing Counsel be

lieves that the particular facts here indicate that the performance of agency

operations by Petitioners which are corporately separate from Matson does

not result in any activity proscribed by the Shipping Act 1916 Accordingly

Hearing Counsel believes that no regulatory purpose would be served by

asserting jurisdiction overPetitioners

C Ar
i

j

J

248 FEDERAL MARITIME COMMISSION

DISCUSSION

Section 15 jurisdiction extends to any agreement between two or more

common carriers

fixing or regulating transportation rates or fares giving or

receiving special rates accommodations or other special privileges

or advantages controlling regulating preventing or destroying

competition pooling or apportioning earnings losses or traffic

allotting ports or restricting or otherwise regulating the number

or character of sailings between ports limiting or regulating in

any way the volume or character of freight or passenger traffic

to be carried or in any manner providing for an exclusive pref

erential or cooperative working arrangement

An agreement which would authorize a common carrier to be an agent

for a competing carrier in the same trade is an agreement controlling

regulating preventing or destroying competition Such an agreement does

not fall within the exemption in 46 C F R 520 12 and is fully subject

to the filing and approval requirements of section 15 See for example

Agreements Nos 10186 As Amended 10322 As Amended and 10371

As Amended Agreement No 10377 Agreements Nos 10364 and 10329

Docket No 8052 F M C Order of Modification served May 13 1983

Carriers may not use the device of separately incorporated subsidiaries

in order to avoid the filing and approval requirements imposed on such

agreements by section 15 For example an agreement between a steamship

agent and a common carrier may be considered an agreement among two

common carriers if the agent is a subsidiary of a competing carrier in

the trade It is well established that where the statutory purposes of the

Shipping Act could be frustrated through the use of separate corporate

entities the Commission is entitled to look through corporate form and

treat the separate entities as one and the same for purposes of regulation

General Telephone Company v United States 449 F 2d 846 855 5th

Cir 1971 Mansfield Journal Co v F C C 180 F 2d 28 37 D C Cir

1950 The reasons for separate incorporation are not controlling when

the fiction of corporate entity defeats a legislative purpose Kavanaugh

v Ford Motor Company 353 F 2d 710 717 7th Cir 1965 Accordingly

the Commission may not disregard the fact that Petitioners are subsidiaries

of Matson in determining their status under the Shipping Act

To the extent the Petition seeks to have the Commission declare that

under no circumstance would Petitioners be considered common carriers

or other persons subject to the Act it must be denied However the

Commission is satisfied that the particular facts surrounding the present

operations of Matson and Petitioners form a sufficient basis upon which

to grant relief to Petitioners At present Petitioners appear to be operating

solely as steamship agents for steamship lines operating in trades in which

Matson does not participate There is no evidence that the separate organiza

tion of Petitioners enables Matson to engage in activities which would

C
IN THE MATTER OF THE STATUS OF MATSON AGENCIES INC 249

AND MATSON FREIGHT AGENCIES INC

otherwise be proscribed by the Shipping Act 1916 We believe that no

purpose regulatory or otherwise would be served by asserting jurisdiction

over all agency agreements between Petitioners and their carrier principals

solely on the basis of Petitioners affiliation with Matson Absent such

a purpose the Commission will not impute the common carrier status

of Matson to Petitioners The Petition will therefore be granted to the

extent that it seeks a determination that Petitioners agency agreements

with common carriers which are not Matson competitors are not agreements

subject to the requirements of section 15 of the Act

It must be emphasized that our determination here is based on the particu

lar facts set forth in the Petition and may be modified or rescinded on

the basis ofchanged facts

THEREFORE IT IS ORDERED That the petitions for intervention filed

by the Association of Ship Brokers and Agents USA Inc and Hearing

Counsel are granted

IT IS FURTHER ORDERED That the Petition of Matson Agencies

Inc and Matson Freight Agencies Inc for Declaratory Order is granted

to the extent indicated above

By the Commission

S FRANCIS C HURNEY

Secretary

t

J1ur
4

FEDERAL MARITIME COMMISSION

DOCKET NO 8320

RATES APPLICABLE TO OCEAN SHIPMENT OF AABCO INC

FILING OF PETITION FOR DECLARATORY ORDER

ORDER

March 14 1984

By Petition for Declaratory Order Petition filed pursuant to Rule 68

of the Commission s Rules of Practice and Procedure 46 C F R S02 68

AABCO Inc requests advice as to which of two rates filed by United

States Lines USL for the carriage of household goods applied to certain

shipments of military household goods Replies to the Petition have been

submitted by USL by the Military Traffic Man ement Command MTMC

on behalf of the Department of Defense 000 by Sea Land Service

Inc which later withdrew from the proceeding by Imperial Van Lines

International Inc Imperial which requested and was granted leave to

intervene and by the Commission s Bureau of Hearing Counse1 1

BACKGROUND

AABCO tendered two shipments of military household goods to USL

for transportation from Bremerhaven Federal Republic of Germany to Se

attle Washington At the time ofshipment USL had on file a tariff covering

exclusively the transportation of military and United States Government

household goods and personal effects and in its commercial tariff a rate

for household goods unrestricted against military household goods AABCO

paid ocean freight charges predicated on the military rate It then filed

the present Petition requesting that the Commission declare which rate

applies when ocean carriers publish simultaneously both a rate for military

household goods and a different rate for commercial household goods

The existing dual tariff situation allegedly creates an uncertainty as to

whether AABCO paid the proper charges or whether it can rely on com

mercial rates for future bids and for seeking refunds from USL Subse

quently AABCO specially requested the Commission to prohibit the applica

tion of unrestricted commercial rates on household goods to shipments

of household goods for the account of 000 when the ocean carrier

also keeps on file with the Commission separate rates or tariffs for military

household goods

I By Order served September 28 1983 the Commission directed Bureau of Hearing Counsel to file a

reply

10 the Pelition and address among other matlers the authority of ocean carriers subject to the Commission s

jurisdiction to publ ish two separate tariffs applicable to the carriage of household goods

250 26 F M C
RATES APPLICABLE TO OCEAN SHIPMENT OF AABCO INC 251

FILING OF PETITION FOR DECLARATORY ORDER

DISCUSSION

Rule 68 of the Commission s Rules of Practice and Procedure provides

that the Commission may in its discretion issue a declaratory order to

terminate a controversy or to remove uncertainty 46 C F R 502 68 a

The Rule s procedures are to be invoked solely for the purpose of obtain

ing declaratory rulings which will allow persons to act without peril upon

their own view 46 C F R 502 68 b In this instance the transportation

service on the two shipments which constitute the stated basis for the

Petition has been completed both tariffs at issue have been cancelled

and freight charges have been paid Furthermore to the extent the order

sought by AABCO is intended as a basis for a claim of reparation it

is not a proper subject for a declaratory order 2

Consequently AABCO s

Petition for Declaratory Order will be denied

However because valid and significant issues have been raised concerning

the practice of certain vessel operating common carriers by water ofpublish

ing and maintaining separate tariffs and rates for the transportation of

household goods for the account of DOD and other U S Government

agencies the Commission by separate order intends to institute a nonadju

dicatory investigation pursuant to Subpart R of the Commission s Rules

46 CF R 502 281 et seq

THEREFORE IT IS ORDERED That the Petition for Declaratory Order

filed by AABCO Inc is denied and the proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

2Rule 68 reads in part

Controversies involving an allegation of violation by another person of statutes administered by the

Commission for which coercive rulings such as payment of reparation or cease and desist orders

are sought are not proper subjects of petitions under this section Such matters must be adjudicated

either by filing of a complaint under section 22 of the Shipping Act 1916 and 502 62 or by

filing of apetition for investigation under 502 69 46 C F R 502 68 b
FEDERAL MARITIME COMMISSION

DOCKET NO 8342

JONES WASHINGTON STEVEDORING CO INC

v

PORT OF SEATTLE

NOTICE

March 22 1984

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

mine to review the February 14 1984 discontinuance of the complaint

in this proceeding has expired No such determination has been made

and accordingly the discontinuance has become administratively final

FRANCIS C HURNEY

Secretary

252 26 EM C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 42

JONES WASHINGTON STEVEDORING CO INC

v

PORT OF SEATILE

COMPLAINT WITHDRAWN PROCEEDING DISCONTINUED

Finalized March 22 1984

On Wednesday February 1 1984 counsel for the complainant telephoned

the Presiding Administrative Law Judge and advised of plans to withdraw

the complaint in this proceeding Under date of February 3 1984 received

February 9 1984 counsel sent the following Notice of Withdrawal of

Complaint

The complainant Jones Washington Stevedoring Co Inc here

inafter Jones filed a complaint against the Port of Seattle

on September 19 1983 regarding the indemnity provision of the

Port of Seattle s tariff for use of Port of Seattle equipment Jones

withdraws the said complaint

A complainant may withdraw its complaint Thus the complaint is with

drawn This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

26 F M C 253
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1119

APPLICATION OF LYKES BROS STEAMSHIP CO INC FOR THE

BENEFIT OF ADM MILLING COMPANY

Application for permission to refund a portion of freight charges in the amount of 2 129 206 77

granted

An application for waiver under section l8 b 3 of the Shipping Act is appropriate where

the agreed upon rate was filed after the date shown on the bill of lading for the shipment

in question

i Wayne E Wegman for Lykes Bros Steamship Co Inc

REPORT AND ORDER

March 27 1984

BY THE COMMISSION Alan Green Chairman James J Carey Vice

Chairman James V Day Thomas F Moakleyand Roeert Setrakian

Commissioners

This proc ing is before the Commission upon Exceptions of Lykes

Bros Steamship Co Inc to the Initial Decision of Administrative Law

Judge William Beasley Harris discontinuing the proceeding on the grounds

that there was no error in tariff filing which required the filing of an

application for refund or waiver under section 18b 3 of the Shipping

Act 1916 46 U S C 817

BACKGROUND

Lykes filed the subject special docket application dated December 16

1983 on behalf of ADM Milling Company ADM to waive collection

of 2 129 206 77 in freight charges The application alleges the following

facts On June 7 1983 Lykes verbally reached an agreement with ADM

on a rate of 103 75 per metric ton 2204 6 lbs the agreed upon rate

for a shipment of 11 531 932 lbs of bagged flour moving from Lake

Providence Louisiana to AlexandriaPort Said Egypt The agreed upon rate

was filed and became effective on June 22 1983 On June 16 1983

the bagged flour was loaded aboard seven Seabee barges at Lake Provi

dence On the same date a bill of lading for the shipment was prepared

in New Orleans showing Lake Providence as the port of loading The

applicable rate on June 16 1983 was the General Cargo N O S rate of

51900 WM 2240 lbs or 40 cubic feet 4th Revised Page 53 After

I The rate appears on 20th Revised Page 53A7 of Lykes Bros Steamship Co Inc World Wide Freight

Tariff No I FMC 87

4 IiP M
APPLICATION OF LYKES BROS STEAMSHIP CO INC FOR 255

THE BENEFIT OF ADM MILLING COMPANY

moving from Lake Providence to New Orleans the Seabee barges were

placed aboard the TILLIE LYKES for ocean transportation to Alexandria

Port Said The TILLIE LYKES sailed on June 23 1983

The Presiding Officer concluded that the agreed upon rate was applicable

to the shipment because it became effective prior to June 23 1983 the

sailing date of the TILLIE LYKES Finding no error in tariff filing he

discontinued the proceeding

DISCUSSION

Tariff Rule 3 of Lykes World Wide Freight Tariff No 1 FMC 87

3rd Rev Page 6 provides that in the case of a rate decrease the rate

shall be calculated as of the date shown on the bill of lading issued

at the port of loading 2 While the bill of lading here was not strictly

speaking issued at Lake Providence it shows Lake Providence as the

port ofloading Lykes explains that the bill of lading was actually prepared

in New Orleans because Lake Providence has no facilities for the preparation

of shipping documents and New Orleans is the closest port having such

facilities Under the circumstances it appears that the bill of lading here

could properly be construed as having been issued at the port of loading

as that phrase is used in Rule 3 Applying Rule 3 the rate must be

calculated as of June 16 1983 the date on the bill of lading

Because Lykes failed to file the agreed upon rate prior to June 16

it could not properly apply the rate to the shipment in question This

is the sort of clerical or administrative error that the waiver provisions

of section 18 b 3 of the Shipping Act 1916 were intended to remedy

Accordingly the Commission will reverse the Presiding Officer s discontinu

ance of the proceeding However rather than remanding the case to the

Presiding Officer for further proceedings the Commission will itself address

the merits of the application

Although there is no written agreement between the parties the facts

surrounding the shipment indicate that the parties intended that the agreed

upon rate would be filed in time to be applied to the shipment at issue

here Moreover it is inconceivable that the parties intended for a shipment

of some 11 million pounds to move under the Cargo N O S rate which

is typically one of the highest rates in the tariff In view of the foregoing

the Commission has determined to grant the application

2

The text of Rule 3 is as follows

Unless otherwise specified in the event that arate is increase sic the rate in effect the date the

cargo is delivered to the vessel s including Seabee Barge loading benh at any loading pan either

alongside or on dock shall be applicable provided that documentary evidence is supplied to substan

tiate cargo wa delivered in shipable form In the event that arate is decreased the rateor amended

rule or regulation in effect on the dateBill of Ladings issued at the port of loading will be applica

ble Emphasis added

As indicated above Rule 3 in addressing situations where a rate is increa ed defines the loading

pan as including the pan at which the cargo is placed aboard a Seabee barge Although pon of loading

is not defined in connection with rate decreases it is reasonable to asume that the term was intended to

have the same meaning

IiPMC
256 FEDERAL MARITIME COMMISSION

TIIEREFORE IT IS ORDERED That the Initial Decision served in

this proceeding is vacated and

IT IS FURTIIER ORDERED That Lykes Bros Steamship Co Inc

is granted pennission to waive freight charges as requested in its special

docket application on the condition that Lykes publish the following as

a supplement to its tariff

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1119 that subject

to all applicable regulations tenns and conditions of this tariff

the matter contained on 20th Revised Page 53 A7 is effective

June 16 1983 and continuing through June 22 1983

This notice is effective for purposes of refund or waiver of freight

charges on any shipments of the commodities described on 20th

Revised Page S3 A7 which may have been shipped during the

specified period of time

and that Lykes shall file with the Secretary within 60 days of the date

of this Order a

copy of the tariff so amended and

IT IS FURTIIER ORDERED That Lykes Bros Steamship Co Inc

notify the Commission of the actual waiver or refund of charges within

five days of said waiver or refund and

IT IS FURTIIER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

fJ1Ur
FEDERAL MARITIME COMMISSION

DOCKET NO 83 7

ATLANTIC GULF WEST COAST OF SOUTH AMERICA

CONFERENCE ET AL

v

EMPRESA MARITIMA DEL ESTADO

Nathan J Bayer for Complainants

Zoe P Hopkins for Respondent

ORDER ADOPTING INITIAL DECISION

April 18 1984

BY THE COMMISSION Alan Green Jr Chairman James J Carey

Vice Chairman James V Day Thomas F Moakley and Robert

Setrakian Commissioners

This proceeding was initiated by a complaint filed by the Atlantic

Gulf West Coast ofSouth America Conference Conference and its member

lines 1 alleging that Respondent Empresa Maritima Del Estado Empremar

violated sections 15 and 18 b l of the Shipping Act 1916 46 US C

814 and 817 b I and regulations contained in 46 C F R Part 524

by initiating a service in the U SSouth America trade without first obtaining

approval for its arrangement with other carriers Subsequently Complainants

were granted an opportunity to amend their complaint to include allegations

of violations of sections 17 and 18 b 4 of the Shipping Act 46 U S C

816 and 817 b 4 and 46 C FR Part 536 based on the contention

that Empremar transported cargo between the U S and Chile pursuant to

a transshipment arrangement yet failed to have a proper transshipment

rule in its tariff Administrative Law Judge William Beasley Harris served

an Initial Decision JD on November 14 1983 finding no violations

Complainants have filed Exceptions to this decision to which Respondent

has filed aReply

BACKGROUND

Empremar the national flag line of Chile sought to establish a direct

all water service between the United States and the West Coast of South

I The Conference serves the trade between United States Atlantic and Gulf Coast ports and ports and points

on the Wesl Coast of Colombia Peru and Chile pursuant to F M C Agreement No 7590 lis members are

Compania Sud Americana de Vapores Compania Peruana de Vapores Delta Steamship Lines Inc FiOla

Mercante Grancolombiana S A Lykes Bros Sleamship Co Inc and Transportes Navieros Equatorianos

7ft F M r 257
258 FEDERAL MARITIME COMMISSION

America Because of market conditions it was unable to effectuate this

plan on its own and instead devised a service which would rely on trans

shipment at Puerto Rico with the U S to Puerto Rico carriage being

accomplished by Puerto Rico Maritime Shipping Authority PRMSA pursu

ant to a non exclusive transshipment arrangement Because Empremar did

not have enough vessels of its own it attempted to engage the members

of the Euroandino Group which served the EuropeSouth America trade

and of which Empremar was a member to assist it in the carriage of

cargo from Puerto Rico to South America Empremar initially proposed

the concept to these other carriers in August of 1982 at which time

they agreed in principle to such an arrangement During the course of

further negotiations between Empremar and these carriers Empremar s U S

agent published an advertisement in the Journal of Commerce which listed

vessels other than those solely belonging to Empremar Empremar also

carried cargo on three voyages between the United States and Chile without

a

routing section in its tariff indicating its transshipment arrangement

with PRMSA

DISCUSSION

After a recitation of the respective positions of the parties the Presiding

Officer concluded that there was no agreement or understanding between

Empremar and any other person which would have been subject to the

filing and approval requirements of section 15 of the Shipping Act2 He

did note that Empremar engaged in negotiations with several other carriers

concerning a portion of its proposed service He concluded however that

the negotiations never reached the stage of an agreement and that in

fact the prospective co venturers all rejected Empremar s entreaties He

found that the only agreement reached between Empremar and any other

carrier was the one with PRMSA for transshipment between the United

States and Puerto Rico and that that agreement had been properly filed

with the Commission for informational purposes only since it was a non

exclusive transshipment arrangement exempt from section IS s approval

requirements The Presiding Officer refused to accord much significance

to Empremar s series of advertisements which included sailings of vessels

other than its own He concluded that these advertisements alone could

not justify a finding that action was taken by the involved parties pursuant

to an unfiled section 15 agreement Ultimately the Presiding Officer found

2

The Presiding Officer initially found as facts II stipulations to which the parties had agreed He further

found that Empremar was a member of a

joint service the Euroandino Agreement which operates arational

ized service between Europe and the West Coast of South America Ecuador Peru Bolivia and Chile that

Empremar s agent Omnium distributed apress releaIe describing Empremar s new service between the Unit

ed States and South America which release was erroneously printed by the Journal of Commerce prior to

Empremar sprospective partners agreeing to participate that two Euroandino partners chose not to partici

pate and that Empremar entered into a non exclusive connecting carrier agreement with PRMSA for that

portion of its service between the United States and Puerto Rico and that that agreement was properly filed

with the Commission
ATLANTIC GULF WEST COAST OF SOUTH AMERICA 259

CONFERENCE ET AL V EMPRESA MARITIMA DEL ESTADO

that Complainants had not met their burden of proof and thus denied

their requested relief After consideration of the respective positions of

the parties and a review of the record the Commission has decided to

adopt the Initial Decision except to the extent modified by the discussion

which follows

Without alleging any specific errors Complainants essentially disagree

with the Presiding Officer s ultimate conclusion of law that they had

not met their burden of establishing the existence of an agreement subject

to the requirements of section 15 In so doing Complainants misconstrue

the basis upon which the Presiding Officer ruled They contend that he

stated that if there was no written agreement there was no agreement

ofany kind which would require filing and approval However the Presiding

Officer nowhere stated that a written agreement was necessary before an

agreement became subject to the Act In fact he specifically found as

noted by Respondent that no agreement or understanding was reached

between Empremar and any carrier other than PRMSA ID at 10 There

is considerable evidence of record which supports this finding

The most fundamental requirement for jurisdiction under section 15 is

the requirement that there be an actual viable agreement to which

all of the parties have given and continue to give their assent until approval

is had Hong Kong Tonnage Ceiling Agreement 10 F MC 134 140

1966 Such does not appear to be the case here A review of the telexes

included in Respondent s Appendix indicates that between August 11 1982

and February 28 1983 Empremar conducted negotiations with three other

carriers in an attempt to work out an arrangement whereby they would

carry some of Empremar s cargo from Puerto Rico to Chile These other

carriers were already serving the Europe South America trade together with

Empremar as members ofthe Euroandino Agreement and could conceivably

divert their vessels to Puerto Rico to assist in Empremar s service between

the United States and South America Though various of these carriers

agreed in principle with Empremar s initial proposal there does not

appear to have been any firm agreement by any of them at any time

during the course of subsequent negotiations For a period of five months

various proposals and counter proposals went back and forth between

Empremar and these other carriers However because of its inability to

get any agreement from these carriers Empremar eventually abandoned

its attempts to engage these carriers in its U SlChile service

The only troublesome element in this scenario is the series of advertise

ments published in the Journal of Commerce on January 7 10 12 13

and 14 1983 soliciting cargo for Empremar s new service These advertise

ments included the names of vessels not owned or operated by Empremar

and taken at face value might indicate the existence of some kind of

arrangement between Empremar and the other carriers mentioned therein

However the contemporaneous negotiations among these parties indicate

that no such arrangement had yet been reached In fact at least one prospec
260 FEDERAL MARITIME COMMISSION

tive coventurer wired Empremar for an explanation upon learning of the

publication ofthe advertisements

Empremar offered unrebutted testimony which explained the cir

cumstances surrounding the advertisements Empremar s vessel MV

ALTAVIA was scheduled to arrive in San Juan on January 28 1983

and Empremar was anxious to inaugurate its new service The advertisement

had been prepared some months before in anticipation that the other carriers

would have reached an arrangement with Empremar Empremar s agent

in New York mistakenly released the advertisement which included the

other carriers Upon learning of this error Empremar stopped the advertise

ments and inaugurated its service using only its own vessels There is

nothing in the record to indicate that the other carriers reviewed and con

curred in these advertisements or were otherwise involved in their prepara

tion More than the mere publication of the advertisements would be needed

to establish the existence of an unfiled section 15 agreement among these

carriers The Presiding Officer was therefore justified in concluding that

Complainants had not met their burden ofproof on this issue

The Commission s tariff filing rules require tariffs of carriers which

have entered into transshipment arrangements to contain a routing sec

tion which includes 1 a description of the routing additional charges

if any and the participating carriers and 2 a statement to the effect

that participating carriers agree to observe the rules regulations rates and

routings established in the tariff 46 C P R 536 d13 Por a period

of approximately three months Empremar conducted three sailings under

its transshipment arrangement with PRMSA but during that time did not

have the requisite routing section in its tariff Complainants raised this

as an issue in their amended complaint alleging that it resulted in violations

of section 17 18 b 1 and 18 b 4

Empremar has explained its failure to include the transshipment rule

as being the result of its original intention to provide a direct all water

service between the United States and South America At that time a

tariff was prepared and filed by its tariff filing agent reflecting this service

When Empremar later entered into a transshipment arrangement with

PRMSA Empremar claims that its agent erroneously neglected to include

a proper transshipment rule Empremar further claims that once it learned

of its omission it immediately amended its tariff to include such a rule

In addition Empremar notes that its bills of lading for each shipment

indicated a transshipment service as did its press release and some of

its advertisements

Empremar s conduct concerning its transshipment tariff did result in a

technical violation ofthe Commission s tariff filing rules However notwith

standing Complainants allegations it does not appear that anyone was

adversely affected by this omission Moreover the offense does not

appear to have been intentional but rather to have occurred due to the
ATLANTIC GULF WEST COAST OF SOUTH AMERICA 261

CONFERENCE ET AL V EMPRESA MARITIMA DEL ESTADO

negligence of Empremar s tariff filing agent Therefore the Commission

will impose no penalty upon Empremar for this technical violation

THEREFORE IT IS ORDERED That the Initial Decision ofAdministra

tive Law Judge William Beasley Harris served in this proceeding on No

vember 14 1983 is adopted as modified by the above discussion and

IT IS FURTHER ORDERED That the Exceptions to the Initial Decision

are denied except to the extent noted herein and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 7

ATLANTIC AND GULF WEST COAST OF SOUTII AMERICA

CONFERENCE ET AL l

v

EMPRESA MARITIMA DEL ESTADO

Allegations of violation of Shipping Act not proved

Proceeding discontinued

Nathan J Bayer of Freehill Hogan Mahar for complainants

ZoeP Hopkins of Zelby Burstein forrespondent and

Donald C Greenman of Ober Grimes Shriver as co counsel

INITIAL DECISION2 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Adopted April 18 1984

The complainants in this proceeding on March 4 1983 served received

March 8 1983 a motion seeking permission to amend the original com

plaint served January 20 1983 which had alleged the respondent had

undertaken activities and entered into arrangements with other carriers re

garding transportation of cargo from the United States to Chile in violation

of sections 15 and 18 b 1 ofthe Shipping Act 1916

At the prehearing conference herein on March 8 1983 the respondent

agreed to accept the amended complaint and to the respondent having

ten 10 days in which to reply Reply received March 17 1983 The

complainants seek an order finding the respondent violated sections 15

17 18 b 1 and 18 b 4 of the Shipping Act 1916 and 46 CFR Part

524 and 536 they requested an order be entered imposing a civil penalty

on respondent and to award reparation to the complainants in an amount

equal to the freight charges allegedly unlawfully collected by respondent

requested an order enjoining respondent from continuing to operate in viola

tion of the Act and for such other relief as the Commission shall deem

just and proper

I Member Lines of Conference are six I Compania Sud Americana de Vapores 2 Delta Steamship

Lines

Inc

3 Flota Mercante Grancolombiana SA 4 Lykes Bros Steamship Co Inc 5 Compania

Peruana de Vapores 6 Transportes Navieros Equalorianos

2

This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

262 26 F M C
ATLANTIC AND GULF WEST COAST OF SOUTH AMERICA 263

CONFERENCE ET AL V EMPRESA MARITIMA DEL ESTADO

Save for the prehearing conferences on March 8 1983 and June 21

1983 this proceeding was conducted without oral hearing 3

The Commission s Office of Energy and Environmental Impact examined

this Docket No 83 7 and determined under date of March 24 1983

that section 547 4 a of the Commission s Procedures for Environmental

Analysis applies No environmental analysis need to be undertaken nor

environmental documents prepared in connection with this docket

PRESENTATIONS OF THE PARTIES

The complainants presented received July 25 1983 as their direct case

the testimony of E W Norberg Chairman of the Atlantic GulfWest

Coast of South America Conference He has been Chairman of the Con

ference for nine years Mr Norberg s

testimony consists of 80 numbered

paragraphs on 23 pages and 12 attachments in addition Among the attach

ments is a

copy of the Empremar advertisements in the Journal of Com

merce of January 7 1983 announcing the inauguration of a New Independ

ent Intermodal Liner Service between USA and Chile Five ships are listed

the Altavia Monfort Soflot Lago Lanalhue and the Houssmann

On or about January 14 1983 the Conference sought in the United

States District Court Southern District of New York 83 Civil 0466 a

temporary restraining order enjoining Empremar from implementation of

alleged unfiled agreement with members of the Eurandino group Before

U S District Judge Charles E Brieant the matter was resolved by stipulation

The respondent presented received July 25 1983 as its case the affidavit

of Attorney Hopkins and an appendix of 372 pages including June 7

1983 deposition taken by complainants of Laurence C Rogers copy of

transcript Page A 195 A 443 June 9 1983 deposition taken by complain

ants Attorney Karem of Rodolfo A Catinchi copy of transcript Page

A 240 A 302 and June 4 1983 deposition of Rodrigo Alloa taken by

complainants copy of transcript Page A 307 A 364

Rebuttal Statements were presented The respondent s statement was re

ceived August 8 1983 consisting of 17 pages and attachments A E Inc

The complainants statement was received August 9 1983 consisting of

10 pages and exhibit the rebuttal testimony ofE W Norberg

Complainants Opening Brief received August 22 1983 consisted of

28 pages Respondent s Opening Brief received August 22 1983 consisted

of 29 pages Complainants Reply Brief received September 6 1983 con

sisted of 5 pages Respondent s Reply Brief received September 7 1983

consisted of 5 pages

3

Excerpt from July 28 1983 leller to Presiding Judge from Allomey Hopkins for respondent At the

prehearing conference in the FMC proceeding No 837 it was agreed that an oral hearing would be held

on Wednesday August 3 1983 After reviewing the wrillen direct testimony submilled simultaneously on

July 21 1983 Nathan Bayer allomey for the Complainants and I have agreed that rebullaJ to the wrillen

direct testimony can be accomplished through funher wrillen statements without the requirement of an oral

hearing

26 F M C
264 FEDERAL MARITIME COMMISSION

In their opening brief received August 22 1983 the complainants pro

posed 34 findings of fact pages 6 to 14 inc The respondent in its

opening brief received August 22 1983 proposed 6 findings of fact pages

11 and 12 Total 40 proposed findings of fact Both sides precede the

request for findings of fact with the Nature and Background of the case

by the complainants covering pages 1 to 6 inc and the respondent

the Nature of the Case pages I to 3 inc and Statement of Facts pages

3 to 11 inc

In their reply brief the complainants argued as to jurisdiction of the

Commission in this proceeding and application of section IS of the Act

to this proceeding while the respondent argued there was no agreement

and that the tariff for Empremar s

transshipment of cargo at San Juan

Puerto Rico pursuant to a non exclusive connecting carrier agreement with

Puerto Rico Maritime Shipping Authority PRMSA does not violate

the intent of the Act

FACTS

The parties joint prehearing statement received June 21 1983 contains

11 stipulations to which they agreed The Presiding Administrative Law

Judge accepts the stipulations and finds them as facts The stipulations

are

I Empremar is a member of the EuropeanSouth Pacific and Magellan

Conference the Europeast Coast of South America Third Pool Agreement

Europac III and the Eurandino Agreement

2 On or about January 7 1983 Empremar advertised the inauguration

of its service between the United States and the West Coast of South

America

3 Empremar advertised and solicited cargo for vessels owned or operated

by itself and other members ofthe Eurandino Group

4 At the time those advertisements were placed Empremar had not

filed any agreements with the FMC concerning the chartering of space

from or transshipment on vessels owned or operated by other members

of the Eurandino Group

S On or about January 14 1983 complainants through an Order to

Show Cause filed in the United States District Court Southern District

of New York 83 Civ 0466 sought a temporary injunction enjoining re

spondent from implementation of the alleged unfiled agreements with the

members of the Eurandino Group

6 At an oral hearing held January 18 1983 before the Hon Charles

E Brieant U S DJ Empremar entered into a stipulation by which it caused

further advertising of vessels other than those owned or operated by it

7 Judge Brieant ordered that said stipulation had the same force and

effect as if it were a preliminary injunction

8 At a further oral hearing before Judge Brieant held March 3 1983

Empremar agreed to stipulate that it would not implement any agreements

26 F M C
ATLANTIC AND GULF WEST COAST OF SOUTH AMERICA 265

CONFERENCE ET AL V EMPRESA MARITIMA DEL ESTADO

without first filing them with the FMC and providing a

copy to complainants

two weeks prior to filing with the FMC

9 Judge Briant ordered that said stipulation had the same force and

effect as if it were a temporary injunction

10 Complainants and respondent have agreed to stipulate as to the au

thenticity and admissibility of all documents provided by respondent during

discovery

11 Complainants and respondent have agreed to the authenticity and

admissibility of the transcript of the oral hearings before Judge Brieant

and the transcripts of the oral deposition ofrespondent s witnesses

Zelby Burstein

By Zoe P Hopkins

Attorneys for the respondent

Respectfully Submitted

Freehill Hogan Mahar

By Nathan J Bayer

Attorneys for the complainants

FACTS CONTINUED

Empremar is an organization owned by the Government of the Republic

of Chile

Empremar as a member of the South America Third Pool Agreement

Europac III shares in the net pool freight earnings derived from carrying

pool cargo which is all cargo in the trade

Empremar is a party to Eurandino Agreement which is a joint service

of Armement Deppe SA Compagnie Generale Maritime Companie Peruana

de Vapores Consorcio Naviero Peruano and Empresa Maritima del Estado

trading under the name Eurandino between ports of the HamburgBordeaux

range and the West Coast of South America Ecuador Peru Bolivia and

Chile

Pursuant to the Eurandino agreement the parties coordinate and rationalize

their sailings employ common booking and loading procedures and utilize

the same berths in European ports The parties establish a rationalized

sailing schedule a year in advance

In September of 1982 Empremar s coordinating agent in the United

States Omnium Agencies Inc Omnium prepared a press release de

scribing Empremar s new service which it distributed to the Journal of

Commerce

The Journal of Commerce without Omnium s permission printed the

press release The Journal of Commerce acknowledged that they issued

the release in error

Empremar communicated its concern to Omnium over the premature

release because the Eurandino partners had not been signed

26 F M C
i

I

266 FEDERAL MARITIME COMMISSION

Two Eurandino partners Compania Peruana de Vapores and Consorcio

Naviero Peruano by telex of December 23 1982 only elected not to

participate in the venture

Empremar entered into a non exclusive connecting carrier agreement with

PRMSA which was filed with the Commission as required by its regulation

at 46 CFR Part 524 and assigned FMC No 81972

The transshipment at San Juan Puerto Rico was disclosed to the Com

mission and to the general shipping public by the filing of the PRMSA

agreements in bills of lading issued for each voyage and in the press

releases and advertisements ofthe service

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

The complainants contend that an unfiled unapproved illegal agreement

existed among Empremar Compagnie Generale Maritime CGM and

Armement Deppe SA Deppe Reply Brief p

2 The respondent says

the complainants are unable to cite one telex in support of the contention

that an agreement or understanding was reached with either COM or Deppe

at any time Reply Brief p5 The respondent contends the key element

necessary for Commission jurisdiction in this matter an agreement is lack

ing There is no agreement respondent s brief received AUi lst 22 1983

page IS The complainants counter that the respondent s contention is

specious Reply Brief p I And respondent s attempts to support this

theory with language from Hong Kong Tonnage Ceiling Agreement Docket

No 66 29 10 F M C 134 1966 demonstrates its inapplicability to the

instant situation In that case say the complainants the Commission issued

an Order to Show Cause why a certain filed document should not be

rejected as failing to constitute a section 15 agreement All members of

the purported agreement save one argued that an agreement did exist

and should be approved The party challenging this position was one of

the signatories contending that it would not subscribe to the agreement

even though earlier signing it The Commission held that the later repudi

ation of the agreement after it was filed with the Commission resulted

in the absence of an agreement Reply Brief pp I and 2

The respondent had argued Brief received August 22 1983 p14

that in Hong Kong Tonnage Celing Agreementthe Commission established

three elements necessary for jurisdiction pursuant to section IS of the

Act There must be 1 an agreement among 2 common carriers by

water or other persons subject to the Act 3 to engage in anticompetitive

or cooperative activity of the types specified in section 15 If one or

more of the elements is lacking there is no jurisdiction to consider the

matter under section IS In considering each of those elements the Commis

sion has determined that the most fundamental of all is the requirement

that there be an actual viable agreement to which all of the parties have

given and continue to give their assent until approval is had Citing

Hong Kong Tonnage Ceiling Agreement supra

26 FM C
ATLANTIC AND GULF WEST COAST OF SOUTH AMERICA 267

CONFERENCE ET AL V EMPRESA MARITIMA DEL ESTADO

The complainants assert the documentary evidence presented in this matter

could hardly be more supportive of a finding that an agreement final

or otherwise existed within the meaning of section 15 Numerous telexes

and other communications sent by and between Empremar and the

Eurandino members refer to the agreement a desire to participate

an agreement in principal and intercarriage agreement and similar

language which the Commission has on previous occasions found to be

entitled to great weight far greater than the oral testimony by persons

under investigation trying to explain away such references Opening Brief

page 20 The respondent responds that the complainants attempt to mis

construe the nature of the negotiations by citing key words and phrases

taken from the telexes out of context and sequence A careful examination

of the telexes in sequence and in their entirety reveals that no agreement

or understanding was reached between Empremar and any other carrier

Reply Brief p

3

The complainants argue however that it is irrelevant that Empremar

never actually signed any agreement with the Eurandino members The

mere fact that the carriers agreed to and did cooperate in attempting

to reach an agreement is sufficient to find conduct prescribed in section

15 citing Unapproved Section 15 Agreements South African Trade Docket

No 882 7 F M C 159 1962 Opening Brief Page 19 The complainants

say the fact that some Eurandino members subsequently withdrew all partici

pation in finalizing the agreement is likewise immaterial Ibid page 20

The Presiding Administrative Law Judge made a careful examination

of the 41 telexes herein covering from August 11 1982 to August 26

1982 November 16 1982 to February 24 1983 in sequence and their

entirety He found present the references made by the complainant to lan

guage He also found that there was imploring by Empremar for acceptance

ofthe proposal but there was refusal instead He agrees with the respondent

that no agreement or understanding was reached between Empremar and

any other carrier than PRMSA which is covered by FMC No 81972

The complainants refer to the repeated appearance of Empremar s adver

tisement in the Journal of Commerce listing ports of call and sailing

schedules for non Empremar vessels and referring interested shippers to

Empremar agents for freight rates and other information regarding any

of the vessels or schedules as documentary evidence that work involved

in preparing Empremar advertisements and schedule bespeaks mutual un

derstanding among the participating lines Ibid pages 20 21 citing

Maatschappij Zeetransport N V Oranje Line v Anchor Line Limited

Docket No 833 6 F M C 199 1961 Ibid The complainants assert

that Empremar s contention that the publication of these advertisements

wasa mistake is unsupportable on any factual ground

Complainants would have action taken in this proceeding on tacit agree

ments and advertising Joint advertising by itself does not justify finding

that the action was taken pursuant to agreement Other than inferences

26 F M C
268 FEDERAL MARITIME COMMISSION

of conspiring sought to be drawn from advertising and partial pattern of

the respondents no proof of conspiracy and actions against the complainants

was produced More than this is needed and such complaint is found

to be unproved

Upon consideration of the above and the record herein the Presiding

Administrative Law Judge in addition to the findings and conclusions here

tofore made finds and concludes that the complainants have not proved

the violations alleged

Wherefore it is ordered

A The requested order finding that the respondent violated sections

15 17 18b l 18b 4 46 CPR Part 524 and 46 CPR Part 536 is

Denied

B This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

26 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 536 DOCKET NO 843

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN

THE FOREIGN COMMERCE OF THE UNITED STATES

INTERMODAL TARIFF FILING REQUIREMENTS EXEMPTION

FROM CERTAIN STATUTORY REQUIREMENTS AND AMENDMENT

OF TARIFF FILING REGULATIONS

April 23 1984

Discontinuance of Proceeding

The Federal Maritime Commission has determined to

discontinue this proceeding in light of the recent passage

of the Shipping Act of 1984 Rules governing tariff

filing requirements for intermodal rates will be addressed

in future proceedings

DATES Effective April 27 1984

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on March 1 1984 49

FR 7609 the Commission proposed various amendments to its rules gov

erning the filing of intermodal rates Time within which comments on

the proposal may be made has not yet expired

The recently enacted Shipping Act of 1984 requires the Commission

to conduct a comprehensive review of its tariff filing regulations Continu

ation ofthis proceeding therefore is not warranted

Accordingly this proceeding is discontinued

ACTION

SUMMARY

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C 269
FEDERAL MARITIME COMMISSION

46 CPR PART 536 DOCKET NO 81 50

PER CONTAINER RATES TARIFF FILING REQUIREMENTS

APPLICABLE TO CARRIERS AND CONFERENCES IN THE

FOREIGN COMMERCE OF THE UNITED STATES

April 24 1984

Discontinuance ofProceeding

The Federal Maritime Commission has determined to

discontinue this proceeding in light of the recent passage

of the Shipping Act of 1984 Rules governing filing

requirements for per container rates wilI be addressed

in a future proceeding

DATES Effective April 27 1984

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on August 28 1981 46

FR 43474 the Commission instituted this proceeding to prescribe proce

dures for filing of per container rates by carriers and conferences in the

foreign commerce of the United States After receipt and consideration

of comments the Commission published final rules on June 14 1982

24 F M C 1087 1982 Subsequently the effective date of the rules was

postponed pending decision on various petitions for reconsideration 47

FR 45883

The recently enacted Shipping Act of 1984 has made it necessary for

the Commission to review aU of its tariff filing requirements The issues

raised herein therefore are better addressed in a future rulemaking proceed

ing

Accordingly this proceeding is discontinued

ACTION

SUMMARY

By the Commission

S FRANCIS C HURNEY

Secretary

270 26 FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 16

TERRY MARLER AND JAMES BEASLEY D B A TITANIC

STEAMSHIP LINE POSSIBLE VIOLATIONS OF SECTION 3 A OF

PUBLIC LAW 89777

ORDER ADOPTING INITIAL DECISION

April 24 1984

This proceeding was instituted by Order of Investigation and Hearing

issued on March 16 1982 to detennine whether Terry Marler and James

Beasley D B A Titanic Steamship Line Respondents violated section 3 a

of Public Law 89777 4 USC 1817e by advertising or offering passage

from United States ports on a vessel having accommodations for fifty

or more passengers without having first obtained a certificate of financial

responsibility from the Commission

Chief Administrative Law Judge John E Cograve Presiding Officer

issued an Initial Decision finding that no violations of P L 89777 had

been proven

I

Exceptions to the Initial Decision have been filed by the

Commission s Bureau ofHearing Counsel

BACKGROUND

The facts as set forth in the Initial Decision may be summarized as

follows

In January of 1981 Respondents registered the Titanic Steamship Line

Inc as the fictitious business name of a general partnership in San

Diego County California On February 3 1981 Federal Maritime Commis

sion FMC personnel were provided an unsigned letter which had been

sent to a travel agent in Palm Springs California announcing plans to

build a new American flag passenger ship called the Titanic II The

letter advised of a maiden voyage date of April 10 1985 and a

starting

price of 1 000 per day per person double occupancy with reservations

to be taken commencing September 19 1981 No mention was made of

advance payment or deposits

On March 16 1981 an editor of a travel magazine forwarded to FMC

personnel a copy of a press release announcing that reservations on

the Titanic II were being accepted The press release contained the

same basic infonnation as the letter provided to FMC personnel on February

I Because no party made a showing that oral testimony and cross examination were neassary the Presiding

Officerlimited the hearing to memoranda of law and affidavits of fact

26 F M C 271
272 FEDERAL MARITIME COMMISSION

3 1981 as well as further infonnation on the ship and future sailing

schedules

On March 17 1981 FMC personnel were provided another letter ad

dressed to Dear Travel Agent advising that reservations were being

accepted on the Titanic II This notice specifically stated that deposits

would not be accepted until 1984 FMC investigators then called the res

ervation number stated on the notice and spoke with one of the Respond

ents who confinned that reservations were being accepted but not deposits

On June 26 1981 Commission investigators placed another call to the

Titanic II reservation number and under an alias asked for printed

materials These materials were received on July 1 1981 They generally

promoted the Titanic II venture and stated the need to make reserva

tions but made no mention of accepting deposits or other payments

DISCUSSION

The Presiding Officer concluded that Respondents had not violated P L

89 777 or Commission regulations because it was not proven that they

had advertised cruises aboard the Titanic II He based this conclusion

partly on the finding that Respondents promotional materials did not con

template the payment of deposits and Respondents had not otherwise at

tempted to collect or accept any money from interested persons

Hearing Counsel excepts to the Presiding Officer construction of the

tenn advertising in P L 89777 but does not except to his ultimate

finding or insist on the assessment of civil penalties Hearing Counsel

submits that the statute s ban on advertising was intended to be absolute

Hearing Counsel argues that the decision of the Presiding Officer on this

essential issue if upheld would significantly erode the effectiveness of

the statute Hearing Counsel concede however that Respondents have dis

continued their activities It therefore advises that the Commission could

discontinue the proceeding without further action

The Commission will adopt the Initial Decision issued by the Presiding

Officer and dismiss this proceeding However we wish to make clear

that this detennination is strictly limited to the particular facts of this

case We find no violation in this case on the basis of the objective

content of the promotional materials at issue and the maMer in which

they were published Respondents activities simply do not rise to the

level of advertising within the meaning of P L 89777 In our opinion

they were only intended to gauge the traveling public s interest in the

Titanic project

Hearing Counsel advances the position that virtually any public pro

motional activities regardless of surrounding circumstances constitute ad

vertising citing Wall Street Cruises Inc 15 F M C 140 1972 We

find however that Wall Street Cruises Inc is not only distinguishable

from this case but generally supports the Presiding Officer s decision

26 F M C
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECTION 273

3 a OF PUBLIC LAW 89777

The respondent in Wall Street Cruises Inc argued that its notices

in the New York Times were only a market test and because it collected

no money as a result thereof P L 89 777 had not been violated The

Commission rejected this argument and found that the notices which

respondent had caused to appear in the Sunday editions of the New York

Times on several occasions during the months of May June and July

1971 constituted advertisements within the real meaning of the word

rather than merely reflecting a market test 15 F M C at 142 The

Commission explained

At the outset we find Respondents characterization of the adver

tisements in question as market tests to be unconvincing As

Hearing Counsel have pointed out the advertisements which ap

peared in the New York Times quote specific fares and name

specific dates and purport to solicit business for actual cruises

These advertisements are similar to regular advertisements pub

lished by established passenger lines and clearly invite response

by the public to either Respondent or travel agents The advertise

ments which Respondent published in the New York Times do

not indicate that their purpose was merely to determine the poten

tial traveling public s reaction to the proposed cruise program

Id

Thus while Wall Street Cruises Inc indicates that the collection of money

is not essential to finding a violation of the statute it also recognizes

that market tests might not violate P L 89 777 if conducted in a manner

that does not do violence to the statute slegislative purposes

The Initial Decision here holds that Respondents promotional publications

do not constitute advertising within the meaning of P L 89 777 because

based on all the circumstances of the case they do not convey to

the public an immediate intent to book passage or collect money

2

This

finding is supported by the totality of circumstances presented by the record

These include the fact that Respondents did not place standard ads in

newspapers and trade publications and only circulated brochures to travel

agents and issued press releases to trade publications the fact that the

materials were interpreted by a trade publication as a form of a market

test LD at 25 and the disclaimer concerning the collection of deposits

in the March 17 1981 letter to travel agents While Respondents might

have more clearly indicated that they were conducting a market test

their promotional efforts do not do violence to the legislative purpose

of PL89 777

2

Although the Presiding Officer failed to rule on whether the activities engaged in by these Respondents

constituted arranging or offering passage pursuant to P L89777 we also find based upon the totality

of thecircumstances that these activities didno violence to legislative intent

26 F M C
274 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That the Initial Decision issued in

this proceeding is adopted and

IT IS FURTHER ORDERED That the Exceptions to the Initial Decision

filed by the Commission s Bureau of Hearing Counsel are denied and

IT IS FURTHER ORDERED That this proceeding is dismissed

By the Commission

S FRANCIS C HURNEY

Secretary

j

26 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 83 16

TERRY MARLER AND JAMES BEASLEY D B A TITANIC

STEAMSHIP LINE POSSIBLE VIOLATIONS OF SECTION 3 A OF

PUBLIC LAW 89777

James M Beasley and Terry E Marler pro se

John Robert Ewers and Janet Katz as Hearing Counsel

INITIAL DECISION I OF JOHN E COGRAVE ADMINISTRATIVE LAW

JUDGE

Adopted April 24 1984

This is the story of two very unfortunate gentlemen who would return

to those glorious days of yesteryear when beautiful goddesses of the

ocean carried the very best people between one side of the world

and another It begins in San Diego California at a meeting of the

Board ofDirectors of Transit Risk Corporation The Chairman of the Board

James M Beasley was complaining of the lack of superior first class

accommodations and first class passenger ships and about the lack of

speed and beauty The Board having heard all this before suggested

that if Chairman Beasley thought he could do better he should build

a ship and operate it 2 With this the Titanic Project was born and

in January 1981 the Titanic Steamship Line Inc was registered by

Mr Terry E Marler and Beasley as a fictitious business name with

the San Diego County Clerk It was registered as a General Partnership

The registration form contains no information on the kind of business

to be conducted by the partnership or its purpose

The Titanic project came to the Commission s attention just a few weeks

later on March 17 1981 when Lyndon Berezowsky then a District Inves

tigator with the Commission s Pacific District Office was given a

copy

of a letter announcing plans to build a seventy five thousand ton liner

with three hundred suites and a crew of twelve hundred 3

The ship was

to fly the American flag and be called the Titanic 11 The letter was

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2

The membership of the Board is not identified by name number or otherwise Its role here appears some

what akin to that of the chorus in the plays of Aristophanes

3

The letter was addressed to Ms Ellen Matthews of Gadabout Tours Palm Springs California and was

unsigned The letter was given to Berezowsky by Ron Lord General Manager of the Pacific Cruise Con

ference

26 F M C 275
i

J

4

j

276 FEDERAL MARITIME COMMISSION

unsigned but bore the heading SS Titanic 11 The virtues of the new

Titanic were extolled in a series of one sentence paragraphs such as

Not deluxe but elegant grand and graceful

No disco no junk no ugly people pretending they are

in their backyard standing overtheir barbecue pit

A liner

Average voyage twenty eight days nine voyages a

year one

ofthem around the world

The Titanic 11 was to be built by Harland Wolff of Belfast Ireland

at an expected cost of Four hundred and Ninety Five million Dollars 4

The ship would cruise at thirty one knots and be one thousand eighty

three feet in length with a one hundred foot beam There were to be

ten passenger decks and like the original theTitanic II was to be crowned

with four stacks The starting price for the three hundred passenger

suites was one thousand dollars a day per person double occupancy

The maiden voyage was some four years away scheduled for April

10 1985 but reservations could be made for itbesinning September 19

1981 No mention was made of any requirement for any advance payment

or deposit ofany kind l

Mr Berezowsky s reaction to the letter was that Since no mention

was made of sailings from United States ports and given the tone and

content of the letter the matter was treated as a crank letter by the Pacific

District Office and no official action was taken About a month later

however two new documents surfaced

On March 16 1981 Ms Barbara Sturken Associate Editor of Travel

Magazine a Division of the Official Airlines Guide sent to Mr Frank

Bartak Chief Office of Certification and Licensing a copy of a press

release under cover of a note

Dear Mr Bartak

Here s the release on the Titanic I told you about This has

to be one of the weirder things to come out of California in

a long time

Ill call you later so we can compare notes on this mysterious

company

The release announced that the Super Deluxe passenger Liner S S

Titanic 11 is now accepting reservations for space on Maiden Voyage

April 10 1985 as well as regular Trans Atlantic crossings Caribbean

Cruises and WORLD CRUISE A number was given to call for booking

We have found that the original builders of the Titanic Harland Wolff in Belfast Ireland are alive

and well and fully capable of building three more FItaRlca Considering that the original 71tanic went doWn

in 1912 it seemsa minor medical miracle that the original builders arealive

5

Except for a telephone number appearing in the letterhead as a pan of the business address no reference

was made as to how one would obtain a resctvalion Subsequently it was announced that deposits would

be asked for beglMing sometime In 1984

26 F M C
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECTION 277

3 a OF PUBLIC LAW 89777

information and sailing dates for the ship that was already being called

the Wonder Liner of the FutureProspective passengers were advised

to be sure and start saving your pennies as suites start out at 1 000

per day per person double occupancy and go skyward

In a letter which accompanied the release the Titanic II showed a tend

ency which if protracted could prove alarming a tendency to shrink in

length and beam but grow in height The Titanic II was now to be 943

feet in length down from 1 083 feet 94 feet in the beam down from

100 feet but it was to have 12 passenger decks up from 10

Other noteworthy features of the Wonder Liner of the Future were

listed as fully air conditioned individual cabin controls 10 elevators

1 indoor 1 outdoor swimming pool 8 cocktail lounges Specialty shops

Beauty Barber shops men s and women s health club laundry valet service

1

library medical and dental services 20 public rooms Two other

matters were thought worthy ofmention

Dining 1 dining room All one sitting Reservations when booking

recommended Continental Gounnet Cuisine and very lavish

Tipping This liner is super deluxe and passengers are expected

to tip accordingly as they would in any first class hotel

Finally the whole thing was summed up as

Titanic II is unique in every aspect Super Glamorous Breath

takingly beautiful both inside and out Extremely fast cruising

at 33 knots 6

Per square inch the most expensive passenger liner ever

7

Under the enclosed sailing schedule the maiden voyage was scheduled

to leave Southampton on April 10 1985 and arrive in New York on

April 14 1985 8

The schedule began with the maiden voyage and ended

with a New Y ork Bermuda Le Havre Southampton voyage in March of

1986 Included in the schedule was a World Cruise which was to begin

on January 1 1986 and end on February 28 1986 9

Of the 42 voyages

listed in the schedule only four appear to be cruises as they are generally

understood These four leave New York go to Bermuda and return to

New York The remainder of the voyages except for the World Cruise

6Along with the addition of two more passenger decks the Titanic picked up two more knots of cruising

speed

7

In view of the daily rates for the suites I am not sure whether this refers to the cost of building the

Titanic IIorthe expense of passage aboard her

8

The daily rates for the maiden voyage were 2000 3000 and 5 000 per day per person double occu

pancy

A couple going first class on this one could look forward to spending about a quarter of amillion

doIlars jf one allowed for generous tips

Mr
i

278 FEDERAL MARITIME COMMISSION

are one way passages from New York to Southampton by way of Le

Havre or from Southampton to New York by way of Le Havre 1o

The day after Barbara Sturken sent Mr Bartak the press release Ron

Lord gave Lyndon Berezowsky a second letter which read

Dear Travel Agent

Enclosed is information on the flfSt of three ships of our line

Titanic II

Our reservation lines are now open and a first year schedule

and reservation form is enclosed

No deposit telephone reservations are being taken on all sailings

listed Deposits will not be required until 1984 but space is

limited and going fast

Among the hitherto unmentioned amenities putative passengers could look

forward to 4 orchestras first run movies daily Cabaret shows casinos

On the same day that Ron Lord gave Lyndon Berezowsky copies of

the second letter March 17 1981 Berezowsky called the reservation

number for the Titanic and spoke to Mr Terry Marler who confirmed

that the line was accepting reservations but said that deposits were not

required at this time

The record contains no evidence of any further investigation or contact

with respondents until a month later on April 17 1981 when the Commis

sion s Director of the Bureau of Certification and Licensing informed

Messrs Marler and Beasley that their advertising and promotion were

in violation of section 3 of P L 89777 and section 540 3 of General

Order 20 11 The respondents were urgently advised to discontinue their

activities and comply with P L 89 777 and General Order 20 The Bureau

offered aid in helping the respondents obtain the necessary Certificate of

Financial Responsibility for Indemnification of Passengers for Non perform

ance of Transportation On April 27 1981 Messrs Marler and Beasley

by telex to the Assistant Secretary ofthe Commission advised that

the Board of Directors of the Titanic Steamship Line have

decided that no vessel of the line shall for any reason embark

any passengers at any United States Port

Messrs Marler and Beasley went on to deny the allegations contained

in the letter from the Bureau and said that th action of the Board of

Directors was taken because the moral conscience of the line would

prohibit it from agreeing to your gag order regarding the press of the

world 12

IOThroulhout the shon life of the Titanic project the respondents could not lleem to make up their mind

whether it was going to be a cruise operation or a transatlantic passenpuervice

IIP L 89777 makes it unlawful for any per8OIIto advenise or offer passage on cenain vessels embarking

passengers from U S pons unless the operator bas established financial responsibility wilh the Commission

121be gag order apparently refers to the Bureau s advice that the respondents cease all advenising

and promotional activities which respondents apparently thought included interviews with reporters

26 F M C
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECTION 279

3 a OF PUBLIC LAW 89777

On June 26 1981 Lyndon Berezowsky placed a second call to the

Titanic Steamship Line Inc and a woman answered as Titanic

Berezowsky told the woman

13 that he was interested in taking a cruise

on the Titanic According to Berezowsky The woman told me that the

company was still going forward with plans to begin cruise service in

1985 Berezowsky then requested that he be mailed copies of all printed

materials describing the proposed service Berezowsky gave the name of

Dave Wilson and his real home address Dave Wilson AKALyndon

Berezowsky received the requested material on July 1 1981

The material received by Berezowsky revealed that putative Titanic II

had spawned a couple of offspring After tedious examination of current

so called first class ships and evaluation and financial studies and

studies regarding the travel industry it was decided that three of the

fastest most glamorous most beautiful liners ever sent to sea would

be built These ships would win prizes for speed be talked about

and become legends in their own timePassengers would return in

time back to the days when crossing an ocean was an event of excitement

and social prestige excepting perhaps any immigrants in steerage a thrilling

interlude between one side of the world and another

Seen in the moonlight the ships would look like the Titanic of

bygone daysHowever lest the identification with the Titanic of bygone

days become too complete the literature goes on to point out behind

the beauty lie the most modem safety devices that any liner has ever

possessed These are to be more than just the electronic toys of today

and tomorrow but the design of the human beings who will backstop

every safety device As but an example every deck will be served

by a constantly walking human being who will 24 hours a day examine

every space for the slightest possibility of fire14 Also four human

beings will be in the galley 24 hours a day and armed with fire extinguish

ers15

As one might surmise a good deal of money would be involved in

realizing the Titanic Project Indeed then current estimates put the cost

at a billion and a half dollars However if the three vessels were

to sail regularly at close to capacity an expected gross of one billion

per operating year would be realized The dream was not of cruise

shipsOh no It was of fast and sleek liners for the very best

people who are able to afford these very beautiful goddesses of the ocean

On June 29 1981 some three days before Berezowsky received the

material requested in his phone call the then Bureau of Investigation and

13 Apparently Districl Investigator Berezowsky either failed to ask the woman s

name or if he did he

failed to make arecord of it and could not recall it when he gave his affidavit

I This constantly walking human being is either possessed of truly extraordinary stamina or more than

one human is contemplated forthe duty

No mention is made of any special equipment for the detection of hazardous objects which might cross

the path of the Titanic 11

26 F M C
280 FEDERAL MARITIME COMMISSION

Enforcement sent the respondents a Notice of Claim for Civil Penalty

The claim for 5 00016 was based upon the assertion that

Titanic Steamship Line Inc Titanic advertised passage on a

vessel without first having been issued a Certificate Performance

by the Commission Titanic sent letters along with sailing sched

ules and reservation forms to travel agents to describe a new

ship the Titanic 11 that would begin service on April 10 1985

The Commission s rules for the compromise of claims were sent along

with the letter and the respondents were told that Failure to respond

or to settle this claim will result in consideration of other courses of

action by this Commission including but not limited to the institution

of formal proceedings

On July 8 1981 in letter addressed to the Bureau Attn Janet F

Katz Mr Terry E Marler responded to the Notice of Claim in part

as follows

I No such ship Titanic 11 currently exists

II No deposits funds or any other consideration has ever been

asked or collected by Titanic Steamship Line

III The Titanic Steamship Line has no bank account

IV As per our April 20 1981 Telex to the Federal Maritime

Commission copy attached NO VESSEL OF THE LINE

SHALL FOR ANY REASON EMBARK ANY PASSENGER

ATANY UNITED STATES PORT

V Furthermore Titanic Steamship Line has not arranged of

fered advertised or provided passage for any person only

taken names and addresses for future reservation lists

VI All claimed advertising material was withdrawn pursuant

to the request ofthe Federal Maritime Commission

VII All radio interviews national or international were refused

even though not initiated by this line pursuant to the instruc

tions of the Federal Maritime Commission

VIII Notice has been sent to every and all known persons through

out the world who have contacted this line for information

regarding the Titanic Jl that pursuant to the wishes of the

Federal Maritime Commission no further information will be

made available regarding the projected liner

IX At the present time Titanic Steamship Line is a dormant

entity and has no ongoing program of any kind and does

not anticipate any for the next five years

PETITION Due to the above nine statements and due to the

fact that this projected liner will not embark or project embarkation

16 Five thousand dollars is the maximum penalty provided in section 3 c unless therespondent has BClually

collected fares in which case there is apenalty of 200 foreach passage sold

26 F M C
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECfION 281

3 a OF PUBLIC LAW 89777

of passengers at United States ports petition is made for Notice

ofClaim dated June 29 1981 be withdrawn

Some five months later on December 3 1981 the Bureau by letter

told respondents that a review of its files revealed that the claim had

not been resolved The Bureau said it would not withdraw its claim but

was willing to pursue negotiations adding that it would like to hear

from the respondents in 30 days

On December 11 1981 after a phone conversation with Mr Marler

the Bureau again declined to withdraw the claim and indicated its willing

ness to negotiate The Bureau went on to add that refusal to negotiate

would require the Commission to resort to formal proceedings which

would include an Order of Investigation and a possible hearing before

an Administrative Law Judge In a letter dated December 15 1981 Mr

Marler replied to the Bureau suggesting among other things that the Bureau

Commission if it were interested in settling the matter should decide

on the dollar value that they wish to negotiate

The Bureau replied on January 27 1982 that the amount of the claim

5 000 was the maximum specified by statute and it was up to respondents

to explain any mitigating or extenuating circumstances and that the

information supplied would be considered in determining the amount for

which the claim may be settled Apparently nothing more was heard

from respondents and on AprilS 1982 the Bureau told the respondents

that unless something was forthcoming by April 23 1982 they would

be forced to institute a proceeding

In a letter received on April 19 1982 Mr Marler told the Bureau

that from his review of the correspondence to the Bureau it appeared

to him that a rather thorough explanation of why the alleged violation

was in actuality no violation at all has been forwarded in this matter 17

Mr Marler however offered to supply any additional information the Bu

reau would need to clear up this matter On April 23 1982 the Bureau

notified the respondents that it remained firm in its belief that they had

violated the law but that it was still willing to negotiate the amount of

the claim

At this point something seems to have snapped In a

rambling reply

to the Bureau Mr Beasley speaks of the Commission s threats and

finds the papers in his file on the Titanic II identical to the pieces

of paper issued by the McCarthy Commission Threats and more

threats With allusions to penalties such as forty years at hard labor

and loss of citizenship Mr Beasley decries the attempts to abridge the

freedom of the press and the right of free enterprise and says it

is now time to allow private citizens in open court to make a judgement

17 From the letters of Beasley and Marler to the Bureau the argument is that no deposits for passenger

fares were accepted that any interviews given the media were at the request of reporters and were not ar

ranged by the respondents and that on the mailer of the printed material that went to a few travel agents

again we are talking about requested information

26 F M C
1

282 FEDERAL MARITIME COMMISSION

on this matter On this note the cOlTespondence ends and the order institut

ing this proceeding was issued on March 16 1983

DISCUSSION AND CONCLUSIONS

Before dealing with the merits of this case it is necessary to dispose

of Hearing Counsel s pending Motion to Have Evidence Withheld from

Public Disclosure The evidence which Hearing Counsel would with

hold from the public was submitted in compliance with my order of June

23 1983 Some review of the course of this proceeding is necessary to

place the order and motion in their proper context

The Commission s order instituting this proceeding called for an oral

or full trial type hearing only if there were presented genuine issues

of fact which could not be resolved upon the basis of sworn statements

affidavits depositions or other documents On March 21 1983 Irequired

the parties to tell me whether they wanted an oral hearing Any party

requesting such a hearing had to provide I a clear statement of the

issues involved 2 an explanation of the need for an oral hearing to

resolve those issues and 3 the names of the witnesses to be called

and an outline of their testimony Hearing Counsel in a letter dated March

31 1983 stated that they were not yet in a position to determine whether

there are contested material facts and we need discovery to determine

whether Respondents collected any fares which fact will bear upon the

amount ofcivil penalties to be assessed 18

Pursuant to my order of April 6 1983 Hearing Counsel submitted their

discovery requests for my approva1 19 In a cover letter accompanying their

discovery requests Hearing Counsel said We believe it is our duty to

develop facts in support of mitigation and aggravation in addition to the

facts we already have 20 The interrogatories demanded among other things

identification of all persons the respondents dealt with concerning the 5S

Titanic II whether in writing by phone or in person No time period

is specified for these interrogatories In addition respondents were to iden

tify all documents discussions andor meetings which related to any

passenger vessel they had planned to purchase charter or build The period

covered by this request was June 1981 through the present In their cover

letter Hearing Counsel also said It is possible on the basis of the answers

181t would appear that in the two yem since the Titanic 11 first came to the attention of Lyndon

Berezowsky no investigation was conclucted to establish with any relIIlOlIIble degree of certainty jll3l what

the respclDdents had been doinl The Bureau did 110 seem interested in whether any fares had been collected

when the claim letter was sent to respondents See JllIae 9 supra

19 My order was prompted by an inability to understanclwhy Hearins Counsel after the Institution of a

formal Proceedinl in which their role is that of a prosecutor should find it necessary to enlale in what

can only be called preliminary investllation Whether the respondents had in fact collected plISSage money

is il seems to me one of the first inquiries 10 be made in any investilalion leadinl to a prosecution under

this statule

20This Is in contraslto Hearlnl Counsel s unwaverinl insisle throulhoultheir correspondence with reo

spondents that it was up to therespondents to submit any mailers In mitilation

26 F M C
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECTION 283

3 a OF PUBLIC LAW 89777

received to these interrogatories we will need a second round ofdiscovery

not excluding the possibility ofdepositions

The breadth and scope of these discovery requests led me to the conclu

sion stated in my order of April 21 1983 that the discovery was not

concerned only or even primarily with the amount of civil penalties or

mitigation but rather they were designed to supply the prima facie case

which should have been in hand prior to the institution ofthis proceeding

I

then withheld my ruling on the discovery requests pending Hearing Coun

sels submission of a statement of the specific violations they intend

to prove together with a

summary of the supporting evidence in their

possession

Hearing Counsel s

response stated that they intended to prove that re

spondents advertised or offered passage from United States ports on a

600 passenger vessel in violation of section 3 a of Public Law 89 777

and section 540 3 of the Commission s General Order No 20

According to Hearing Counsel their evidence included a letter sent to

a travel agent with a reservation fonn and a sailing schedule They also

intended to introduce an affidavit from an investigator Berezowsky show

ing that in response to a telephone call information on the Titanic

was sent which also included a reservations number 21 Hearing Counsel

also expanded on their need for discovery

The evidence we have now or that we could get through discov

ery would stilI only equal one violation of section 3 a for a

maximum penalty of 5 000 The responses to our discovery

however would give a picture ofthe current status of the project

and because under oath would be more probative It would also

provide us with evidence that could bear on aggravation or mitiga

tion of the penalty We would also intend to introduce the re

sponses into evidence which if there were nothing more could

institute sic the entire record for adjudication

Hearing Counsel have now dropped the amount of civil penalty as a jus

tification for their discovery requests This left only I a suggested need

to know the current status of the project and 2 the duty to provide

evidence in mitigation and aggravation 22

I denied Hearing Counsel s

request because as Hearing Counsel them

selves had earlier maintained matters in mitigation were the special province

of the respondents and the question of the aggravation of any penalties

was ancillary to the primary question of whether the Act had been violated

I set a procedural schedule and Hearing Counsel filed their opening brief

and a set of exhibits The respondents did not file an answering brief

2

Hearing Counsel also indicated that they would ask for judicial notice or introduce evidence of previous

selllemenl s of civil penally claims forsimilar violations

22 Hearing Counsel did not at any time say that the documents sought by discovery were needed to estab

lish the violation itself Had they done so a quile different question would have been presented

26 EM C
284 FEDERAL MARITIME COMMISSION

so there was no need for a

reply brief by Hearing Counsel The case

was then before me for decision on Hearing Counsels brief and exhibits

On June 7 1983 Idirected Hearing Counsel to submit certain documents

which although referred to in the exhibits offered as evidence by Hearing

Counsel had not themselves been submitted for inclusion in the record

For example one of the exhibits offered by Hearing Counsel was a letter

from Mr Marler entitled In Response To Notice of Claim The Notice

of Claim was not however offered by Hearing Counsel as an exhibit

for the record Still further review of the record led me on June 23

1983 to order Hearing Counsel to submit other documents which I

felt

necessary to afford a complete record for decision The documents submitted

in response to my June 23rd order are the subject of Hearing Counsel s

Motion To Withhold Evidence From Public Disclosure

The documents are according to Hearing Counsel all ofthe correspond

ence from their files between Hearing Counsel and Respondents during

the period June 29 1981 through May 3 1982 It is Hearing Coun

sel s position that because the documents contain offers of compromise

from Hearing Counsel to the respondents certain portions ofthe documents

should be kept confidential Hearing Counsel argues

Contained in these documents are offers of compromise to the

respondents and their responses We believe that besides inhibiting

compromise negotiations under Part 505 of 46 C F R disclosure

of amounts in this case would impede our flexibility in future

cases At the conclusion of this proceeding Hearing Counsel will

make available for release under the Freedom of Information Act

copies of the documents with the confidential portions excised 23

A careful review of the documents in issue fails to reveal a single

amount assuming that Hearing Counsel is using that word in its gen

erallyaccepted sense and which in this case can only refer to the amount

of the penalty suggested or offered as a compromise to the original claim

There are simply no such amounts anywhere mentioned in the documents

Hearing Counsel seeks to withhold from the public 24 The most charitable

view that can be taken of this argument is that it is the result of a

lapse of memory In any event it is argument on a nonexistent ground

Iam not sure whether the offers of compromise referred to by Hearing

Counsel in the quote above are different from amounts If they are

not then the offers of compromise can only refer to those statements

of Hearing Counsel in which they express a willingness to negotiate the

amount of the penalty Just how making these statements of willingness

public would either inhibit compromise negotiations under Part 50S or

23Hearin Counsel did not afford the courtesy of specifyin those portions of the documents they consid

ered inhibitin or impediments and which they wOIIld excise if forced to release the documents under the

FOIA

24The 55 000 penalty amount appears only in the Notice of Claim for which Hearin Council sou ht no

confidentiality

26 FM C
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECTION 285

3 a OF PUBLIC LAW 89777

would impede their flexibility in future cases is never explained Not

a single example in which such a disclosure could work either result

is offered by Hearing Counsel Contrary to Hearing Counsels belief

I can find nothing in the documents in question which would in any

way hinder future negotiations for compromise The motion is denied

The denial of the motion does not however lay the matter completely

to rest In a cover letter to the motion Hearing Counsel says that they

did not submit the correspondence with respondent because they believed

that either they were inadmissible under Rule 408 of the Federal Rules

of Evidence or they were irrelevant Rule 408 provides basically that

evidence of attempts to compromise a claim which is disputed as to either

validity or amount is not admissable to prove liability for or invalidity

of the claim or its amount The rule is intended primarily to protect the

respondent in a

proceeding to impose a penalty The documents which

I ordered Hearing Counsel to produce were needed to explain a hiatus

in the proceeding ie the period between June 26 1981 and May 2

1982 A period during which it appeared from the record before me that

the matter had just languished or found its way into some sort ofadministra

tive limbo As already explained there is nothing in the documents which

could be used to prove or invalidate the claim with perhaps the possible

exception of two exhibits which Hearing Counsel argues contain evidence

of conduct a ground for exclusion under 408 25 Hearing Counsel did

not cast their discussion of Rule 408 in the form of a motion so no

ruling is needed However it may be necessary to make note of the fact

that nothing contained in the material submitted pursuant to my order

has been used to dispose ofthe merits ofthis case

Section 3 a of Public Law 89 777 makes it unlawful for any person

to arrange offer advertise or provide passage on a vessel having

accommodations for fifty or more passengers and which is to embark

passengers from United States ports without first having established his

financial responsibility with the Commission Once this financial respon

sibility has been established under the requirements of the Commission s

General Order 20 46 C F R 540 a Certificate Performance is issued

by the Commission Respondents are charged by Hearing Counsel with

having advertised cruises aboard the Titanic II without having established

their financial responsibility or obtaining the required Certificate Perform

ance

25An indication of the care and attention given to the drafting of the motion is found in the specific ref

erence to Exhibits 16 and 22 as containing evidence of conduct by respondents which Hearing Counsel

believe would warrant the exclusion of those exhibits under Rule 408 The reference to Exhibit 22 is surpris

ing to say the least for it is the same document that Hearing Counsel designated Exhibit 10 and submitted

as evidence in support of its brief and for which Hearing Counsel claimed no confidentiality Either Hearing

Counsel was unaware that they had already submitted the letter now designated Exhibit 22 or they came

late to the idea that Rule 400 presented problems for its admission in evidence But in neither event have

they explained the discrepancy
286 FEDERAL MARITIME COMMISSION

To Hearing Counsel it is clear that the two letters given to the Pacific

Investigator Lyndon Berezowsky and the press release sent to Mr Frank

Bartak were advertisements designed to draw attention to the Titanic

1 so that respondents could sell cruises 26 They were sent to travel

agents who would be selling cruises to the public As for the press

release Hearing Counsel says it was not just about the building of a

new ship but about cruises on this ship All of this according to Hearing

Counsel is compatible with the definition ofadvertising drawing attention

to something to be sold

Advertising is one of those words the meaning of which we are

all comfortably certain until called upon to define it A price tag on

an article ofclothing a notice nailed to a tree and the fondly remembered

sandwich board are and have all been found to be advertisements There

is no prescribed fonn language or content for an ad Advertisement

is a word the definition of which is peculiarly dependent upon the context

and situation in which it is used

Hearing Counsel approves of one of the Supreme Court s definitions

ofadvertising as merely identification and description apprising of quality

and place It has no other object than to draw attention to the article

to be sold and the acquisition of the article to be sold constitutes the

only inducement to its purchase Rast v Van Deman Lewis 240 U S

342 365 1911 Equally appealing to Hearing Counsel are definitions

like to give notice to infonn to make known to Bissell Carpet Sweeper

Co v Masters Mail Order Co 140 F Supp 165 173 D Md 1956

Finally Hearing Counsel urges the advertisement need only include the

traditional notice for the selling of goods and services designed and gen

erally circulated to attract public attention Garza v Chicago Health Clubs

329 F Supp 936 N D Ill 1971 That the actions of Messrs Marler

and Beasley constituted advertising Hearing Counsel says

It is clear that Titanic was sending letters and press releases

to draw attention to the Titanic 1 so that they could sell cruises

The infonnation was disseminated to travel agents who would

be selling cruises to the public The press release was not just

about the building of the new ship but about the cruises that

could be taken and paid for

From the definitions quoted by Hearing Counsel and from the argument

quoted above it is clear that Hearing Counsel defines the general purpose

of an advertisement as being the sale of a specified commodity or service

An advertisement calls one s attention to an item that is for sale tells

one how much it will cost and tells the prospective purchaser where he

can find the item As an abstract proposition and with some very important

26These three exhibits constitute Hearing Counsel s case on the merits There is afourth exhibit comprising

the material which Lyndon Berezowsky received as aresult of his phone call to Titanic s office which is

discussed later

E
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECTION 287

3 a OF PUBLIC LAW 89777

qualifications the material on the Titanic IIcan be called advertisements

The letters and the press release identified described and apprised

of the quality of the Titanic Project Indeed it did all of these with

unequaled panache But we are dealing with a statute not an abstraction

and it is from the purpose and context of the statute that the meaning

must be drawn The operative language is

No person shall arrange offer advertise or provide passage on

a vessel having berth or stateroom accommodations for fifty or

more passengers and which is to embark passengers at United

States ports without first having filed with the Federal Maritime

Commission such information as the Commission may deem nec

essary to establish financial responsibility ofthe Person arranging

offering advertising or providing such transportation Public

Law 89 777 sec 3 a

The purpose of section 3 a is to prevent financial loss and hardship

to the American traveling public who after payment of cruise passage

money are stranded by the abandonment or cancellation of a cruise Clearly

within the ambit of the statute then is that kind of advertisement with

which we are all familiar An ad which offers for reasonably immediate

sale a particular thing or service and for which payment is expected at

purchase If the advertisement specifies the price for a specific cruise to

take place at a certain time and place and the manner or method of

booking passage is explained then the chances are that the advertiser or

cruise operator will expect to collect the passage money or a deposit

at the first response to the ad And the prospective passenger will in

all probability read the ad in just that way If an operator runs this kind

of ad before he obtains a Certificate from the Commission then he will

be in a position to collect money without first establishing his financial

ability to make any refunds necessary And this the statute is designed

to prevent But what if no money is actually collected or if the

advertisement specifies that no payment is to be made by the prospective

buyer or passenger Hearing Counsel says that the Commission has dealt

with just this situation in Wall Street Cruises Inc 15 F M C 140 142

1972 where Hearing Counsel says the Commission held that the statute

is preventative in nature and bars all advertising prior to the establishment

of a person s financial responsibility

In Wall Street the respondent ran notices in Sunday editions of The

New York Times on several occasions during the months of May June

and July These notices quoted specific fares gave specific dates and

the Commission found were designed to solicit business for actual

cruises The Commission rejected the respondent s argument that the no

tices were market tests This argument was based upon the inclusion

in the notices of a statement that the offer of the above program is

based on an Option Agreement The Commission concluded that the no

tices did not clearly condition the sailing of the cruises offered upon
288 FEDERAL MARITIME COMMISSION

the exercise of the option agreement or otherwise effectively serve notice

on prospective passengers of the uncertain status of the cruises From

this it would seem to follow that where the prospective passengers are

clearly informed of the existence of a condition precedent to a cruise

the notice would not have been an advertisement within the meaning

of section 3 a It could have then been the market test argued for

by respondent It is clear from Wall Street that not all material caIling

the public s attention to a commercial cruise need be deemed advertise

ments within the ambit of section 3 a For example if there were an

association of cruise operators and the association took a page in the

Sunday Travel Section and filled the page with pictures of tropical isles

but included only the message Take a cruise for health or some equally

moving non sequitur this would not constitute an advertisement prohibited

by section 3 a even though its ultimate aim is to sell cruises

Ifthe purpose of section 3 a is to prevent potential financial loss and

hardship to the traveling public who have paid passage money only to

have the cruise cancelled advertise as used in that section must refer

to those advertisements which solicit or contemplate even if only by silence

the payment of money by the traveling public when it responds to the

advertisement This squares with the rationale of Wall Street Cruises where

respondent s failure to clearly inform prospective passengers of the uncer

tain status of the cruises left no doubt that the notices in question

were advertisements within the meaning of section 3 a Such a construction

of the statutory language would in my view be in furtherance of the

purposes of the Act The advertisements banned by section 3 a are those

which seek or contemplate the reasonably immediate payment of money

the kind at issue in the Wall Street case A very different situation is

presented here

The respondents did not use the newspaper or any of the other mass

media The ads were not generally circulated to attract the attention

of the public Garza v Chicago Health Club supra The letters were

as far as this record shows sent only to travel agents a particular class

of persons knowledgeable in the cruise business 27 The press release

was sent by respondents to Don Langley of Travel Age West self styled

as The weekly newspaper of the travel agency sales forces in the West

the world s fastest growing travel market Travel Age West did indeed

run a story on the Titanic II in March of 1981 in which interestingly

enough it specifically referred to the company s statement that it was

accepting reservations for the maiden voyage from Southampton to New

York on April 10 1985 About these reservations the story said The

271be record contains only two lellers sent by respondents to travel agents Exhibit 3 is the leller sent

to Ellen Mallhews of Gadabout Tours This leller was given Lyndon Berezowsky by Ron Lord Exhibit 4

is a leller also given Berezowsky by Lord but the addressee is not shown in the record It might have been

sent to Ellen Mallhews The record does not show how many travel agents respondents sent their mlllerial

to Indeed both Iellers in the record couldhave been sent to BlIen Mallhews
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECTION 289

3 a OF PUBLIC LAW 89777

reservations are really only a show of interest since the company does

not have a performance bond filed with the Federal Maritime Commission

it does not have a certificate and cannot accept money Indeed the record

establishes that throughout their endeavors on behalf of the Titanic Project

the respondents made it clear that they would not accept deposits or passage

money And of course no money was collected 28

Since advertise advertisement and advertising are susceptible

to such a wide range of definitions or meanings a decision under section

3 a must depend upon all the circumstances surrounding the alleged viola

tion For example the act of advertising contemplates some distribution

of the material to the people from whom a reaction to the material is

sought 29 Respondents sent the letters in the record to travel agents only

None were sent to the traveling public The only other document said

to be an advertisement the press release was sent to a magazine for

travel agents The material stated that if the travel agents took reserva

tions for the cruises no deposits were to be taken It is clear that respond

ents were not at this time attempting to sell cruises to the traveling

public the people protected by the statute Just as the article in Travel

Age West said the reservations were no more than expressions of

interest

Whether you call respondents efforts test marketing interest sampling

or merely testing the waters 30 I don t think you can call it advertising

within the meaning of section 3 a My conclusion that the respondents

did not advertise cruises within the meaning of the statute is based on

all of the circumstances of the case and not just the content of the docu

ments in question

But even if the respondents actions were found to be in violation of

the law I cannot agree with Hearing Counsel that the maximum penalty

is called for here Hearing Counsels case for the imposition of the full

5 000 penalty rests not on the extent or gravity of respondents total

conduct but on the single allegation that respondents continued to adver

tise the passenger vessel S S Titanic 1 after receiving a letter telling

them to stop Hearing Counsel s argument is best presented in their own

words

Since the evidence shows that the respondents violated section

3 a of Public Law 89 777 and 46 C F R sec 540 3 Hearing

Counsel submit that the statutory penalty of 5 000 be assessed

28 Hearing Counsel is correct when they say that respondents failure to collect money does not of itself

relieve them of liability under section 3a And WallStreet is quite clear on this point However my reading

of Wall Street leads me to the view that the Commission s

holding in that case was based upon the fact

that the notices published by respondent clearly contemplated the collection of passage money and the

fact that none had been collected was therefore irrelevant

29 IfI were to draft a

proposal offering a sensational new mousetrap for sale and then show it only to

afriend whose reaction prompts me to tear it up it certainly can t be said that I had advertised my mouse

trap

30Some temptations are simply irresistible
290 FEDERAL MARITIME COMMISSION

The maximum penalty should be assessed against the respondents

since they continued to advertise the passenger vessel SS Titanic

II after receiving a letter from the Commission telling them that

their actions could be in violation of Public Law 89777 The

only possible evidence of mitigation are the letters the respondents

to sic potential customers and the Commission in early July

asserting that there would no longer be any communication regard

ing the SS Titanic II Hearing Counsel has no verification of

these statements but even if they were true the aggravation of

the penalty through the continued violation after a warning would

negate any mitigation available to the Respondents For these

reasons we believe 5 000 is a proper penalty and would deter

the respondents from engaging in any schemes without establishing

the necessary financial responsibility

Since Hearing Counsel did not choose to specify which acts of record

by respondents constitute this continued advertising after theCommis

sian s warning reconstruction of the chronology of events is necessary

There are only four exhibits to which Hearing Counsel would characterize

advertising 1 Exhibit 3 the January 23 1981 letter to Ellen Matthews

2 Exhibit 4 the undated letter addressed Dear Travel Agent which

was given to Lyndon Berezowsky by Ron Lord on March 17 1981 3

Exhibit 7 the undated Press Release which was sent to Travel Age

West on or prior to March 16 1981 and 4 Exhibit 5 the material

sent to Dave Wilson a k a Lyndon Berezowsky as a result of his

phone call to Titanic This material was received by WilsonBerezowsky

on July 1 1981 Since the Commission s letter telling them respondents

that their actions could be in violation of Public Law 89777 was dated

April 17 1981 the only evidence Hearing Counsel can support their allega

tion of continued violation with is the material received by Berezowsky

on July 1 1981 In an affidavit prepared for this case Lyndon Berezowsky

te1s how he obtained this advertising material

5 On June 26 1981 I called the reservation number of the

Titanic Steamship Line Inc and a woman answered as Titanic

I told this person that I was interested in taking a cruise on

the Titanic II

6 The woman told me that the company was still going forward

with plans to begin the cruise service in 1985 I

requested that

Titanic mail copies ofall printed materials describing the proposed

service and she agreed I

gave the name Dave Wilson and my

real home address

7 I

received the requested material on July 1 1981

Thus Hearing Counsel s case for respondents continued advertising after

they had been warned to stop is based solely upon actions of some unidenti

fied woman who at the specific request of a Commission investigator
TERRY MARLER ET AL POSSIBLE VIOLATIONS OF SECfION 291

3 a OF PUBLIC LAW 89777

using a phony name mailed him some printed material 31 Questions

of the law of agency aside for the moment the record fails to establish

the identity of the woman her position in the company or her authority

to act in any capacity for the company Moreover Hearing Counsel offers

no argument on the basic question of whether this response to a specific

request as distinguished from the unsolicited dissemination of material

itself constitutes advertising Finally Hearing Counsel after raising the

question of mitigation immediately dismiss it because they have no ver

ification of these statements by respondents concerning the alleged

mititgating circumstances The statements by respondents referred to by

Hearing Counsel are found in the letter of July 3 1981 from Terry Marler

to Hearing Counsel paragraph VIII ofwhich states

Notice has been sent to every and all known persons throughout

the world who have contacted this line for information regarding

the Titanic ll that pursuant to the wishes of the Federal Maritime

Commission no further information will be made available regard

ing the projected liner

That Hearing Counsel say they have no verification of these statements

emphasis mine I

find ingenuous at best The affidavit of Lyndon

Berezowsky submitted by Hearing Counsel concludes

8 On July 8 1981 I received a letter from Titanic addressed

to Dave Wilson which stated that there would be no further

announcements regarding the Titanic II until such permission had

been granted by the United States Government

A copy of the letter referred to Berezowsky is included in the record

as Exhibit 6

32 Presumably it is the one sent to Dave Wilson In view

of this Hearing Counsels lack of verification must go to the assertion

that the same letter was sent to every and all known persons IfHearing

Counsel challenges that statement it is up to them to prove it false Absent

that proof the inference to be drawn from the record is that respondents

statement is correct

But Hearing Counsel believe that even if the statements of respondents

were true the aggravation of the penalty through the continued violation

after a warning would negate any mitigation of the penalty available to

31 At my direction Hearing Counsel briefed the question of whether Berezowsky s actions constituted en

trapment They have convinced me that technically they do nol

32 The leUerreads

To Whom It May Concern

Please be advised that incompliance with United States Government regulations there will

be no further announcements regarding the proposed liner Titanic ll until such time a

permission ha been granted by the United States Government in this mailer

We regret any inconvenience or any confusion in this maller and ak your understanding

forour ignorance

Ifand when the liner should everbe constructed you will be advised in the proper approved

fashion
292 FEDERAL MARITIME COMMISSION

Respondents and that the maximum penalty of 5 000 is proper and

would deter the Respondents from engaging in any schemes to advertise

a vessel without establishing the necessary financial responsibility Despite

the fact that the record affords no basis for it Hearing Counsel do not

believe respondents when they say that they will not revive the Titanic

Project until they have the required governmental approval Ido not share

this disbelief and had the actions of respondents in fact constituted a

violation Iwould not find grounds for the imposition of any money penalty

let alone the maximum of 5 000

The case is dismissed

5 JOHN E COORAVE

Administrative Law Judge
FEDERAL MARITIME COMMISSION

46 CFR PART 510 DOCKET NO 83 35

LICENSING OF INDEPENDENT OCEAN FREIGHT FORWARDERS

April 24 1984

Discontinuance ofProceeding

The Federal Maritime Commission has determined to

discontinue this proceeding in light ofthe recent passage

ofthe Shipping Act of 1984 Rules governing the licens

ing of independent ocean freight forwarders will be ad

dressed in a future proceeding

DATES Effective April 27 1984

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on August 26 1983 46

FR 38856 the Commission instituted this proceeding to prescribe certain

rules governing the licensing of independent ocean freight forwarders Com

ments have been received in response to the Notice

The recently enacted Shipping Act of 1984 has made it necessary for

the Commission to review all of its rules pertaining to freight forwarders

The issues raised herein therefore are better addressed in a future rule

making proceeding

Accordingly this proceeding is discontinued

ACTION

SUMMARY

By the Commission

5 FRANCIS C HURNEY

Secretary

26 F M C 293
FEDERAL MARmME COMMISSION

c

j

46 CPR PARTS 524 531 536 DOCKET NO 834

EXEMPTION OF NONEXCLUSIVE TRANSSHIPMENT AGREEMENTS

FROM THE FILING REQUIREMENTS OF SECTION 15 OF THE

SHIPPING ACT 1916 AND CLARIFICATION OF PART 524

I

i

April 24 1984

Discontinuance ofProceeding

The Federal Maritime Commission has determined to

discontinue this proceeding in light ofthe recent passage

ofthe Shipping Act of 1984 Rules governing exemptions

of agreements will be addressed in future proceedings

DATES Effective April 27 1984

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on October 4 1983 48

FR 45270 the Commission proposed to exempt nonexclusive transshipment

agreements from the filing requirements of section IS of the Shipping

Act 1916 In addition the Notice contained a clarification of the scope

of existing exemptions

The recently enacted Shipping Act of 1984 has made it necessary for

the Commission to review all of its existing exemptions inasmuch as the

new statute s treatment ofexemptions is somewhat different from the 1916

Act The issues in this proceeding therefore are better addressed in a

further rulemaking proceeding

Accordingly this proceeding is discontinued

ACTION

SUMMARY

j

By the Commission

S FRANCIS C HURNEY

Secretary

294 26 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 528 DOCKET NO 83 55

MODIFICATION OF SELF POLICING REQUIREMENTS FOR SECTION

15 AGREEMENTS

April 24 1984

Discontinuance ofProceeding

The Federal Maritime Commission has determined to

discontinue this proceeding in light of the recent passage

of the Shipping Act of 1984 Rules governing self polic

ing ofagreements will be addressed in a future proceed

ing

DATES Effective April 27 1984

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on December 9 1983 48

FR 55144 the Commission proposed to amend its procedures with respect

to self policing under section IS of the Shipping Act 1916 In response

to numerous requests the Commission stayed this proceeding indefinitely

before the date of submission of comments 49 FR 3838

The recently enacted Shipping Act of 1984 alters radically the statutory

scheme with respect to self policing Continuation of this proceeding there

fore is not warranted

Accordingly this proceeding is discontinued

ACTION

SUMMARY

By the Commission

S FRANCIS C HURNEY

Secretary

26 EM C 295
FEDERAL MARITIME COMMISSION

DOCKET NO 83 23

CENTRAL NATIONAL CORPORATION NANTUCKET NAVIGATION

INC AND T SMITH SON TEXAS INC

v

PORT OF HOUSTON AUTHORITY

ORDER ADOPTING INITIAL DECISION

April 30 1984

This is a complaint proceeding initiated by Central National Corporation

Nantucket Navigation Inc and T Smith Son Texas Inc Complainants

against the Port of Houston Authority Respondent or Port alleging that

certain exculpatory provisions in the Port s tariff are unjust and unreasonable

in violation of section 17 of the Shipping Act 1916 46 U S C 816

The complaint was filed pursuant to an order of the U S District Court

for the Southern District of Texas Houston Division staying its proceeding

involving the same parties in order for them to obtain a

ruling from

the Commission on the validity of the tariff provisions in question Central

National Corporation v 88 HOLSTENBEK her engines appurtenances

etc and Nantucket Navigation Inc her charterers and or owners and

Port of Houston Authority C A No H 801362 S D Tex The Commis

sion s Bureau of Hearing Counsel intervened in the proceeding before this

Commission The parties agreed to the use of the Commission s shortened

procedure 46 C F R 502 181 et seq

Chief Administrative Law Judge John E Cograve Presiding Officer

issued an Initial Decision finding the chaUenged Port tariff provisions in

violation of the Shipping Act 1916 as aUeged Respondent filed Exceptions

to the Initial Decision to which Hearing Counsel and Complainants replied

We find the Initial Decision to be weU reasoned and comprehensive in

its disposition of the issues We therefore adopt the Initial Decision with

one minor correction

BACKGROUND

This case arose as a result of water damage to a

cargo of newsprint

belonging to Central National Corporation which allegedly occurred while

the cargo was in the Port warehouse or terminal facilities Complainants

Nantucket Navigation Inc and T Smith Son Texas Inc are the operator

of the vessel which delivered the cargo and the stevedoring company

respectively and are parties in the District Court litigation against whom

296 26 F M C
CENTRAL NATIONAL CORPORATION ET AL V PORT OF 297

HOUSTON AUTHORITY

the Port filed counterclaims for indemnification and costs based upon its

tariff

Respondent pleaded the terms of its tariff in its defense and counterclaims

in the District Court litigation The specific terminal tariff provision relied

upon by Respondent is Item No 4 of the Port s FMC Tariff No 8 which

provides in pertinent part

a The Port Authority shall not be responsible for injury to

or loss of any freight being loaded or unloaded at the public

wharves nor for injury to or loss of freight on its wharves or

in its sheds by fire leakage or discharge of water from fire

protection sprinkler system

d Users of its facilities agree to indemnify and save harmless

the Port Authority from and against all losses claims demands

and suits for damages including court costs and attorneys

fees incident to or resulting from their operation on the property

ofthe Port Authority

The complaint alleges that Tariff Item Nos 4 a and d constitute

unjust or unreasonable regulations or practices in violation of section 17

of the Shipping Act 916

DISCUSSION

The Presiding Officer concluded that the Port s Tariff Item 4 a is viola

tive of section 17 to the extent that it would relieve Respondent of liability

for its own negligence He found this provision to be similar to that

determined to be un awful in Lucidi Packing Co v Stockton Port District

22 F M C 9 1979 The Presiding Officer further found tariff Item 4 d

the indemnity provision similar to that held unlawful in West Gulf Maritime

Association v The City of Galveston 22 F M C 101 1979 He noted

that the fact that the Port of Galveston is a political subdivision of

the State of Texas does not exempt the Port from regulation by the Commis

sion under the Shipping Act I

The Initial Decision is well reasoned and fully dispositive of the issues

in this proceeding The language of the challenged tariff provisions is

broad and can be read to apply to exculpate the Port even in situations

in which damage may result from its own negligence To the extent that

these provisions may be read to exculpate the Port from liability for its

own negligence we agree with the Presiding Officer that they are unreason

able within the meaning of section 17 of the Shipping Act Respondent s

Exceptions object to the Initia Decision s characterization of its arguments

and ask that its tariff provisions be found lawful Respondent s Exceptions

I As discussed below this reference to the Port of Galveston appears to have been inadvertent

ItPM
298 FEDERAL MARITIME COMMISSION

are for the most part re arguments of points properly and correctly decided

by the Presiding Officer

Respondent s ftrSt exception is devoted to argument concerning the

political status of the Port of Galveston apparently in response to the

reference to that port in the Initial Decision Respondent notes both

that the Port of Galveston is not a political subdivision of the State

of Texas but a creature of the City of Galveston which is a political

subdivision and that the decision wrongly infers that the Port of Houston

claims that it is not subject to the Act because it is a political subdivision

Respondent specifically acknowledges that it is an other person under

the Shipping Act Respondent s Exceptions at 4

The reference in the Initial Decision to the Port of Galveston appears

to have been inadvertent and should have been a reference to the Port

of Houston Authority respondent here The reference to the Port of Gal

veston in the Initial Decision washarmless error

The discussion in the Initial Decision of the political status of the Port

of Galveston was obviously meant to respond to Respondent s argument

before the Presiding Officer that the Port of Houston Authority is a

political subdivision of the state acting only in a governmental capacity

and unless specifically excepted is immune from liability resulting from

its operations footnotes omitted Respondent s Memorandum of Law

at 4 This argument may be a matter for determination by the District

Court in the proceeding before it but has no bearing on the question

of the lawfulness of the Port s tariff provisions under the Shipping Act

The latter is the sole question raised in the complaint before the Commis

sion The Presiding Officer correctly ruled that the Port is not exempt

from regulation by the Commission under the Shipping Act by reason

of its status as a political subdivision citing West Gulf Maritime Association

v Port of Houston Authority 21 F M C 244 1978

Respondent s argument that the reasonableness of its tariff provisions

should be judged on the basis of its practices in implementation of those

provisions is also without merit That argument was adequately dealt with

in the Initial Decision Respondent cites language from Investigation of

Free Time Practices supra 9 F M C at 547 that

it is by application to the particular situation or subject matter

that words such as reasonable take on concrete and specific

meaning As used in section 17 and as applied to terminal prac

tices we think that just and reasonable practice most appro

priately means a practice otherwise lawful but not excessive and

which is fit and appropriate to the end in view

The only question raised and ruled on here is the validity of the Port s

tariff provisions Its practices in implementation of those provisions cannot

validate tariff provisions which are otherwise unlawful Investigation of

Free Time Practices supra 9F M C at 543

26 F M C
CENTRAL NATIONAL CORPORATION ET AL V PORT OF 299

HOUSTON AUTHORITY

The fact that the Port s practices do not comport with the description

set forth in its tariff is moreover as the Presiding Officer found not

evidence of the reasonableness of the tariff provisions but might well

be taken as an indication of their unreasonableness

Respondent expresses the belief that its practices with regard to the

exculpatory and indemnity provisions ofits tariff would be better memori

alized in its tariff if Items 4 a and d were prefaced with language

excepting their application in instances where damage or injury results

from negligence of the Port which could be established as a matter

of Law Respondent s Exceptions at 6 The Port s tariff provisions cannot

be found lawful on the basis of such an amended reading

As Hearing Counsel points out in its Reply to Exceptions Respondents

arguments are inconsistent with its counterclaims for indemnity filed in

the District Court In response to the complaint in the District Court

the Port in its answer and counterclaim to the original complaint cited

Items 4 a and d of its tariff and alleged that it has been sued

in the above entitled and numbered cause contrary to the provisions of

its tariff It further sought to recover from cross plaintiff Nantucket Navi

gation Inc all costs of the litigation incurred or to be incurred by the

Port which it claimed it is entitled to recover from Cross Plaintiff the

Cross Plaintiff being a user of the facilities of the Port of Houston and

accordingly governed by the tariff quoted above 2Contrary to its state

ments regarding its practices the Port thus sought to rely upon the terms

of its tariff to avoid and to indemnify itself against liability for damages

and costs of litigation based upon its tariff without regard to its own

possible negligence or non liability therefore under state law

Respondent also argues as it did below that the Commission s cases

finding similar exculpatory and indemnity provisions unlawful should not

apply in this case because it does not perform the functions of handling

storing or delivering of property Respondent objects to characterization

of its arguments as being based on a distinction between operating ports

and non operating ports but states that

when respondent is not performing the receiving handling

storing andor delivering of cargo and promulgates tariff provi

sions which govern those particular non performing situations

said tariff items should not be compared with those governing

situations in which receiving handling storing andor delivering

does occur Footnotes omitted Respondents Exceptions at 5

Respondent s charge that the Presiding Officer s distinction between operat

ing and non operating ports mischaracterizes its argument appears to us

2

Pleadings in the District Court filed in this proceeding pursuant to the Presiding Officer s Procedural No

tice of May 27 1983 are I Answer and Counter Claim of the Port of Houston Authority to the Original

Complaint and 2 Answer and Counter Claim of the Port of Houston Authority to the Cross Claim of Nan

tucket Navigation Inc

J C l r1
300 FEDERAL MARITIME COMMISSION

to be a distinction without a difference The Port is involved in those

functions by virtue of the fact that it furnishes the facilities at which

such functions may be performed by others

THEREFORE IT IS ORDERED That the Exceptions of Respondent

are denied and

IT IS FURTHER ORDERED That the Initial Decision served November

28 1983 is adopted except to the extent indicated above

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 23

CENTRAL NATIONAL CORPORATION NANTUCKET NAVIGATION

INC AND T SMITH SON TEXAS INC

v

PORT OF HOUSTON AUTHORITY

Exculpatory provisions of respondent s tariff found unjust and unreasonable under section

17 of the Shipping Act 1916

Douglas R Wight for Central Navigation Corporation

StUQrt B Collins for Nantucket Navigation Inc

James B Warren for T Smith Son Texas Inc

A genita Scott Davis for Port of Houston Authority

Aaron W Reese and JohnRobert Ewers for Hearing Counsel

INITIAL DECISION 1 OF JOHN E COGRAVE ADMINISTRATIVE LAW

JUDGE

Adopted April 30 1984

The United States District Court for the Southern District of Texas

Houston has stayed its proceedings involving the parties here 2

to afford

the Commission an opportunity to rule on the validity of two provisions

of the Port of Houston Authority Tariff No 8

3

The following findings

of fact proposed by Hearing Counsel are fully supported by the record

and are adopted for the purposes of the decision in this case

1 Respondent Port of Houston Authority carries on the business

of furnishing wharfage dock warehouse or other terminal facilities

in connection with a common carrier by water

2 Complainants are users of the Port of Houston Authority marine

terminal facilities

3 Item No 4 of Port of Houston Authority Tariff No 8 as filed

with the Commission contains the following provisions

a The Port Authority shall not be responsible for injury

to or loss of any freight being loaded or unloaded at the

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2Central National Corporation v S S Holstenbeck her engines and appurtenances etc and Nantucket

Navigation Inc her charterers and orowners and Port of Houston Autharity CA H 801362

3

The parties agreed to try this case under the Shortened Procedure of Subpart K 46 CFR 502181 et

seq

hl 1Mr 1
302 FEDERAL MARITIME COMMISSION

public wharves nor for injury to or loss of freight on

its wharves or in its sheds by fire leakage or discharge

of water from fire protection sprinkler system

d Users of its facilities agree to indemnify and save harmless

the Port Authority from and against all losses claims de

mands and suits for damages including court costs and

attorney s fees incident to or resulting from their operation

on the property ofthe Port Authority

4 A lawsuit styled Central National Corporation v S S Holstenbek

her engines appurtenances etc and Nantuckect Navigation Inc

her charterers andor owners and Port of Houston Authority

C A No H 801362 is currently pending in the United States

District Court for the Southern District of Texas Houston Division

Proceedings in that action have been stayed pursuant to Court

Order pending a detennination by the Commission of the validity

of Item 4 paragraphs a and d of the Port of Houston Authority

tariff

5 In the U S District Court proceeding The Port of Houston Author

ity has pleaded the tariff provisions at issue here as a defense

and as a basis for affinnative relief Specifically Respondent con

tends

The Port Authority has been sued in the above entitled case

contrary to the provisions of its tariff

all of which constitute costs and expense which the

Port Authority is entitled to recover from Cross Plaintiff the

Cross Complainant being a user of the facilities of the Port

of Houston and accordingly governed by the tariff quoted

above

6 Over the past ten years approximately twenty percent of all prop

erty andor damage claims were resolved by payment of appro

priate sums ofmoney to claimants Vhere there was some appear

ance ofresponsibility for damage by the Port Authority

The issue presented here is whether the following provisions of Item

No 4 in the Port of Houston s tariff are just and reasonable as required

by section 17 of the Shipping Act 1916 4

Item No 4

a The Port Authority shall not be responsible for injury to

or loss of any freight being loaded or unloaded at the public

wharves nor for injury to or loss of freight on its wharves

or in its sheds by fire leakage or discharge of water from fire

protection sprinkler system

4 Section 17 Shipping Act 1916 46 U S C 816 provides inpertinent part

Every such carrier and every other person subject to this act shall establish observe and enforce

just and reasonable regulations and practices relating to or connected with the receiving handling

storing ordelivering of property
CENTRAL NATIONAL CORPORATION ET AL V PORT OF 303

HOUSTON AUTHORITY

d Users of its facilities agree to indemnify and save harmless

the Port Authority from and against all losses claims demands

and suits for damages including court costs and attorneys

fees incident to or resulting from their operation on the property

ofthe Port Authority

Exculpatory clauses which purport to relieve a port ofliability for damage

or injury to property which is caused in whole or in part by the negligence

of the port are unjust and unreasonable in violation of section 17 of

the Act I Charles Lucidi v The Stockton Port District 22 EM C 19

1979 5The Commission stated the rationale against such clauses saying

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

Port from damage for liability sic to property caused in whole

or in part by fault of the Port and without a quid pro quo

ofany kind such provisions are unjust and unreasonable in viola

tion of section 17 of the Act

The provIsions of Item 85 are against public policy insofar as

such policy required businesses affected with public interest be

precluded from taking unfair advantage of those who by necessity

must use the facilities of such businesses To permit the Port

to isolate itself from liability if such liability accrued by reason

of the Port s negligence by the mere publication of an exculpatory

provision is unjust and unreasonable in violation of section 17

ofthe Act 22 F M C at 27

The language of Item 4a attempts to relieve the respondent of all

liability for damage or injury to cargo and to the extent that 4 a would

relieve respondent of liability for its own negligence it is an unjust and

unreasonable regulation and in violation of section 17 of the Shipping

Act

The other provision in issue Item 4 d is an indemnity provision of

the kind already found unlawful by the Commission In West Gulf Maritime

Assn v The City of Galveston 22 F MC 101 1979 the Commission

struck down a provision of the Port of Galveston s tariff which sought

to indemnify the Port against all claims actions damages liability and

expense including attorneys and litigation expenses in connection

The tariff provision at issue in the Lucidi case was quite similar and of the same import a Houston s

Item 4a It provided

The Port of Stockton shall not be responsible for any injury to freight on or in its facilities by

fire leakage evaporation natural shrinkage watage decay animals rats mice other rodents

moths weevils other insects weather conditions sweat moisture the elements or discharge of water

from breakdown of plant machinery other equipment collapse of building or structure insurrec

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

disturbances of any persons orof any characterbeyond the control of the Port of Stockton
304 FEDERAL MARITIME COMMISSION

with loss of life bodily injury or property damage 6 An indemnification

clause which would relieve respondent from all liability in situations even

where it was partly responsible is unlawful under section 17 See West

Gulf supra at 104

Respondent would distinguish its situation from those that the Commis

sion has condemned on several grounds none of which withstand analysis

The fact that the Port of Galveston is a political subdivision of the

State of Texas does not exempt the Port from regulation by the Commission

under the Shipping Act See West Gulf Maritime Assn v Port of Houston

Authority 21 F M C 244 1978 Respondent says that a review of claims

related to the operation of its public wharves revealed that it had consistently

paid claims for which it appeared negligent From this respondent argues

that there are no regulations or practices that can be deemed unjust or

unreasonable AU that this shows is that respondent does not adhere to

its own rules and regulations It does not show that the tariff provisions

at issue are valid

Respondents would first set up a distinction between operating ports

and non operating ports Then respondents argue that as a non operating

port a different standard should be applied to its tariff Neither the statute

nor the Commission has made such a distinction It is the act offurnishing

terminal facilities which makes one an other person subject to the Ship

ping Act And as an other person furnishing terminal facilities respond

ent is required to establish just and reasonable regulations for the receiving

handling storing or delivering of property So long as the regulations

established would avoid liability even for the Port s own negligence or

seek to indemnify the Port against claims based on its own negligence

they are unlawful under section 17 of the Act

6

The Galveston tariffprovided

INDEMNITY Each User of the facilities of the Board of Trustees of the Galveston Wharves shall

indemnify and save harmless the Board of Trustees of the Galveston Wharves and the City of Gal

veston from and against any and all claims actions damages liability and expense including rea

sonable Attorneys fees and litigation expenses in connection with loss of life bodily injury and

damage to property including the property of such User occurring in connection with the use of

or arising from the use of any of the facilities of the Board of Trustees of the Galveston Wharves

caused in whole or in part by any such User such User s employees including loaned employees

agents contractors and invitees other than those steamship agencies and stevedoring companies

subject to Item No 98 3 or arising from or incidental to such User s operations on the facilities

of the Board of Trustees of the Galveston Wharves Each User of the facilities of the Board of

Trustees of the Galveston Wharves waives all claims such User may have against the Board of

Trustees of the Galveston Wharves andor the City of Galveston for loss or damage covered by

any insurance policy or policies covering in whole or in part such Users doing business on or

inconnection withthe facilities of the Galveston Wharves and each such User shall cause its insur

ance carrier or carriers to waive any right of subrogation with respect thereto and to so notify the

Board of Trustees of the Galveston Wharves of such waiver

7

At operating ports terminal services are performed by the ports employees Non operating ports do not

perform terminal services but furnish terminal services for users such as stevedores vessels etc

26 F M C
S JOHN E COORAVE

Administrative Law Judge

CENTRAL NATIONAL CORPORATION ET AL V PORT OF 305

HOUSTON AUTHORITY

Item 4a and d ofrespondent s tariff are found unjust and unreasonable

under section 17 of the Shipping Act 1916

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 31

VOLUME INCENTIVE PROGRAM POSSIBLE VIOLATIONS OF THE

SHIPPING ACT 1916

NOTICE

May 7 1984

Notice is given that no exceptions have been filed to the March 28

1984 initial decision on the rulemaking portion of this proceeding and

the time within which the Commission could determine to review that

decision has expired No such determination has been made and accordingly

that decision has become administratively final

S FRANCIS C HURNEY

Secretary

I

F J1 14 r
FEDERAL MARITIME COMMISSION

DOCKET NO 83 31

VOLUME INCENTIVE PROGRAM POSSIBLE VIOLAnONS OF THE

SHIPPING ACT 1916

Charles F Warren George A Quadrino David N Dunn and Benjamin K Trogdon

for Respondents New York Freight Bureau and Trans Pacific Freight Conference Hong

Kong

Robert T Basseches Timothy K Shuba and David B Cook for Respondent American

President Lines

Edward M Shea John E Vargo and Linda J Gyrsting for Respondent Sea Land Service

Inc

Raymond P DeMember forIntervnor International Association of NVQCCs

Howard A Levy for Intervenor North European Conferences

Wade S Hooker Jr for Intervenors Atlantic and Gulf Indonesia Conference Atlantic

and Gulf Singapore Malaysia and Thailand Conference and Inter American Freight Con

ference

Nathan J Bayer for Intervenors United States Atlantic Gulf Southeastern Caribbean

Conference and United States Atlantic Gulf Jamaica and Hispaniola Steamship Conference

Elmer C Maddy forIntervenor Westwood Shipping Lines Inc

John Robert Ewers and Stuart James for Bureau of Hearing Counsel

INITIAL DECISION I OF JOSEPH N INGOLIA ADMINISTRATIVE

LAW JUDGE

Finalized May 7 1984

This decision is issued in accordance with and should be read in conjunc

tion with the Initial Decision served on January 19 1984 which is incor

porated herein by reference regarding the adjudicatory aspects of this pro

ceeding There were no exceptions filed to the aforementioned Initial Deci

sion and by Notice served on February 29 1984 the Federal Maritime

Commission the Commission declined to review the decision so that

it became administratively final

In the previous Initial Decision it was noted that the issues were being

bifurcated so that the issue regarding rulemaking would be deferred until

the other issues had been decided It was stated that there would be sched

uled hearings on the rulemaking phase as soon as possible wherein we

will consider whether or not rulemaking is appropriate in the first instance

and if it is what provisions the rule should contain

On March 6 1984 a Procedural Order was served wherein all the

parties including those who had been allowed to intervene regarding the

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

f

l Mr 107
308 FEDERAL MARITIME COMMISSION

rolemaking aspects of this proceeding were directed to file a

report as

soon as possible but no later than March 19 1984 as to whether or

not they believe rolemaking is necessary in light of the holding in the

Initial Decision 2All of the parties have responded either in writing

or orally and each agrees that rolemaking is not warranted or necessary

within the ambit of this proceeding While some believe rulernaking is

not necessary or is premature or have simply withdrawn from the proceed

ing and others believe there should be rulemaking all agree that if there

is rulemaking it should be broad enough to encompass consideration of

pertinent provisions ofthe Shipping Act of 1984

We believe and hold that given the limited parameters of this proceeding

and the likelihood that broader and more comprehensive regulations may

be required by the Shipping Act of 1984 there is no need for ru1emaking

in this proceeding However we respectfully suggest to the Commission

that rolemaking is in order regarding the operation of Volume Incentive

Programs generally and call attention to the Time Volume regulations that

are now in effect 3as well as to the provision of the Shipping Act of

1984 that allows for the use of service contracts 4

Such rulemaking

would best be accomplished in accordance with the Commission s rules

than are now in effect S rather than by rulemaking arrived at from consider

ation of the narrow issues presented in this proceeding In this way the

Commission will have the flexibility time and broad input necessary to

the promulgation of a good practical rule perhaps of broader application

and scope

In light of the above it is held that no rulemaking is necessary in

this proceeding and it is therefore discontinued Further we would be

remiss if we did not compliment all the parties involved in this proceeding

for their diligence and cooperation which allowed an expeditious and rea

soned disposition of the issues involved

S JOSEPH N INGOLlA

Administrative Law Judge

21l1e parties are

I New York Freight Bureau and Trans Pacific Freight Conference Hong Kong

2 American President Lines

3 Sea Land Service Inc

4 International Association of NVOCCs

S Bureau of Hearing Counsel

6 U S Atlantic GulfSoutheastern Caribbean Conference et aI

7 Atlantic Gulf Indonesia Conference et al

8 Westwood Shipping Lines Inc

9 North European Conferences

346 CPR 536 7

4

Section 8c of the Act

46 CPR 502 51 et seq
FEDERAL MARITIME COMMISSION

DOCKET NO 82 57

CLARK INTERNATIONAL MARKETING S A A DIVISION OF

CLARK EQUIPMENT COMPANY

v

VENEZUELAN LINE

NOTICE

May 21 1984

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

mine to review the April 11 1984 ruling in this proceeding styled Ruling

on Receipt of Affidavit Filed March 15 1984 which approved the pro

posed settlement has expired No such determination has been made and

accordingly that ruling has become administratively final

S FRANCIS C HURNEY

Secretary

26 F M C 309
FEDERAL MARITIME COMMISSION

DOCKET NO 82 57

CLARK INTERNATIONAL MARKETING S A A DIVISION OF

CLARK EQUIPMENT COMPANY

v

VENEZUELAN LINE

RULING ON RECEIPT OF AFFIDAVIT FILED MARCH 15 1984

Finalized May 21 1984

By order of the Commission served October 5 1983 in this proceeding

it was ordered that the June 24 1983 Order approving settlement and

granting the motion to dismiss and discontinuing the proceeding be vacated

It was further ordered that the proceeding be remanded t

the Presiding

Officer for further action and for supplemental ruling within 60 days

By Ruling on Remand served November 14 1983 it was concluded

that the parties had not answered certain questions posed by the Commis

sion and therefore that the proposed settlement could not be approved

on the existing record Further the parties were advised that an oral hearing

would be necessary to resolve the matter

At the request of the parties the oral hearing set for December IS

1983 was converted to a fUrtlter prehearing conference at which the parties

requested time to submit an affidavit to answer the questions posed by

the Commission in its order of remand The time for submission of such

affidavit was extended to March IS 1984 and such affidavit now has

been submitted This affidavit hereby is received as part of the record

in this proceeding

In the complaint the complainant had alleged that there were overcharges

on cargo carried under 58 bills of 1 ading dated from December 10 1980

through July 27 1981 The respondent charged the shipments at the rate

for Road Machinery N O S whereas the complainant sought the rate for

Tractors N O S

The Tractors N O S class 19 rate was 63 per ton of 40 cubic feet

M or per ton of 2 000 pounds W and the Road Making Machinery

N O S class 9 rate was 99 per ton of 40 cubic feet M or per ton

of 2 000 pounds W both ratings effective August 18 1980 The affiant

respondent s traffic manager states that these were the applicable rates

for the period in issue herein and that there were no changes in these

rates for the carriage of either tractors or road making machinery from

December 1980 through July 1981

310 26 F M C
CLARK INTERNATIONAL MARKETING S A A DIVISION OF 311

CLARK EQUIPMENT COMPANY V VENEZUELAN LINE

Effective August 15 1981 there were increases of 10 per ton in the

above class 19 and class 9 rates respectively making such increased rates

73 and 109 per ton Exhibits 1 and 2 and attachments to the March

15 1984 affidavit show all the above rates The above increased rates

were effective after the shipments in issue were made

The shipments actually consisted of Bobcat skid steer machines or

the attachments for such machines which attachments were the dirt digging

buckets loaders etc for such machines These buckets etc were front

loader attachments to the steer machines which essentially were tractors

when viewed without their attachments

The pertinent applicable tariff did not prescribe a specific rate for skid

steer machines The respondent assessed the 99 rate for Road Making

Machinery N O S believing that the articles shipped were mechanical

shovels or excavating machinery Respondent further believed that when

the attachments like buckets are attached to a tractor the tractor changes

its characteristic and falls within the category of road building machinery

The major portion of the commodities shipped were skid steer machines

with attachments such as dirt buckets The complainant itself in its advertis

ing brochures consisting of 111 pages used the word tractor in only

two instances

On September 28 1982 the complainant requested the United States

Atlantic and Gulf Venezuela Conference to insert in the tariff a separate

and new classification and description under the heading of Road Making

Machinery N O S namely skid steer 19

Complainant s position was that the commodities shipped were tractors

and not road making machinery that the basic Bobcat series machine

is a tractor and that when attachments such as buckets are attached to

the Bobcat machine it then can perform various functions as a loader

drill or roller

The bills of lading show that the attachments were shipped a separately

and b with the Bobcat machines

Respondent believed that in all instances the attachments were shipped

independently or were shipped separately from the steer machine This

fact remains in dispute between the parties

Respondent relied on the export declarations and other documents then

available in rating the shipments as Road Making Machinery N O S

Nevertheless both complainant and respondent now feel that in order

to reach a reasonable accommodation in this matter that a settlement could

be reached thereby eliminating a protracted hearing at a great cost and

expense to the parties and to the government

The settlement agreed on is the payment of 35 000 by the respondent

to the complainant in view of the fact that the alleged overcharge was

54 650 57 which amount was computed by classifying the majority of

the shipments as tractors but classifying the attachments buckets and load

26F M C
312 FEDERAL MARITIME COMMISSION

ers etc as road building equipment When shipped separately the attach

ments were viewed by respondent as road building machinery only

In all of the circumstances above including the explanation in the affida

vit received March 15 1984 it appears that the proposed settlement is

reasonable based on the further statement in the affidavit that the parties

agreed to the proposed settlement by following the guidelines laid down

by the Commission in Docket No 78 3 Organic Chemicals Glidden

Durkee Division of SCM Corp v Farrell Lines Inc 18 SRR 1536a

January 25 1979 21 F M C 859 March 14 1959

The proposed settlement is approved

S CHARLES E MORGAN

Administrative lAw Judge
FEDERAL MARITIME COMMISSION

DOCKET NO 78 32

PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND

ABSORPTION RULES AND PRACTICES

ORDER ADOPTING INITIAL DECISION

May 25 1984

The Commission instituted this proceeding to determine whether the

equalization and absorption practices of the Pacific Westbound Conference

PWC insofar as they affect the Port of Portland are lawful under section

205 of the Merchant Marine Act of 1936 46 VS C IllS and sections

IS 16 and 17 of the Shipping Act 1916 46 V S C 814816 In addition

to the specific issues relevant to Portland certain of the parties before

us have raised important questions regarding the general status of port

equalization practices and the continued viability of the concept of natu

rally tributary cargo under the statutes enforced by the Commission

The PWC practices take the form of tariff rules that are designed to

allow the Conference member lines that call at Seattle 1 but not at Portland

to compete for cargo with carriers that do call at Portland including other

PWC lines In the context of this case equalization is the practice

whereby a shipper with a smaller inland transportation cost to Portland

than to Seattle trucks his cargo to Seattle and a PWC line refunds to

him the verified difference between the Seattle and Portland trucking costs

Absorption occurs when a shipper pays the cost of moving his cargo

from its origin point to Portland and a PWC line then pays the cost

of moving the cargo from Portland to Seattle 2

The two terms were used

interchangeably by the parties and as in past Commission cases involving

such practices there appears to be no legal significance in the choice

of terminology E g North Carolina State Ports Authority v Dart

Containerline Company Ltd 21 F M C 1125 1128 n 13 1979 afJ d

sub nom Dart Containerline Company Ltd v FMC 639 F 2d 808 D C

Cir 1981 Dart

Administrative Law Judge Seymour Glanzer Presiding Officer served

an Initial Decision 10 on April 22 1983 finding no violation of law

Portland filed Exceptions to the IDos conclusions concerning sections 15

16 and 17 of the Shipping Act 1916 3

to which other parties replied

I TI1ere is some evidence in the record of cargo being equalized to Oakland but the amount is very slight

2

Exhibit Ex I

3

Portland did not except to the I Ds conclusion that there wa no showing of violation of section 205

of the Merchant Marine Act of 1936 which prohibits collective action by ocean carriers preventing service

Continued

F 1Mf 1
J

I

314 FEDERAL MARITIME COMMISSION

Certain parties led by American President Lines Ltd a PWC member

filed self styled conditional exceptions that raise the broad issues men

tioned above The Commission heard oral argument

THE PROCEEDINGS

The history of this proceeding is exceptionally long and complex and

can best be described by dividing it into two distinct parts

I Preliminary Proceedings

On February 21 1975 Portland petitioned the Commission to conduct

an investigation into PWC s absorption and equalization practices complain

ing that those practices constituted an unlawful diversion to Seattle of

cargo naturally tributary to Portland PWC is a steamship conference

acting pursuant toFMC approved Agreement No 57 The geographic scope

of the trade served by PWC s member lines is from U S and Canadian

Pacific Coast ports westward to Japan Korea Taiwan and other Far East

destinations

In addition to its general allegation against PWC s absorption and equali

zation practices Portland s petition contended that those practices were

unlawful in certain particulars i e that the PWC Agreement was limited

in its application to rail or coastal steamer movements and that motor

carrier absorptions were not authorized motor carriage was the inland

transportation mode primarily attacked by Portland that the equalization

rules in PWC s tariff should be construed to bar their application to ship

ments carried by motor carriers exempt from the jurisdiction of the Interstate

Commerce Commission and that PWC s rules were per se unlawful because

they permitted equalization and absorption of cargo away from Portland

where there was direct ocean carrier service sufficient to handle that cargo

Portland s petition engendered a series of informal and formal under

section 21 of the Shipping Act 46 U S C 820 procedures intended

to resolve the issues raised without the necessity of a formal proceeding 4

When those procedures failed to accomplish their purpose the Commission

instituted this proceeding by Order of Investigation and Hearing served

September 11 1978

The Order of Investigation directed that the proceeding would be governed

by the precedents then recently established in Council of North Atlantic

Shipping Associations v American Mail Lines Ltd 21 F M C 91 1978

CONASA and Board of Directors of the Port of New Orleans v

Seatrain International SA 21 F M C 147 1978 Port of New Orle

ans Under the authority ofthose decisions the Order rejected Portland s

to aport at the same rates as those applicable to the next regularly served pan Portland apparently did not

actively pursue this question during theevidentiary hearings

See Pacific Westbound Conferen uallzation Rilles and Practices 21 F M C 937 938 n 2 1979

These decisions were issued simultaneously on August 8 1978 long after Ponland s petition was first

filed They upheld the lawfulness of through intennodal services offered by ocean carriers The port and labor

interests protesting those services had contended as POt lland does here that they were being deprived of

cargo naturally tributary to their geographic bases The Commission emphasized its obligation to regulate

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 315

ABSORPTION RULES AND PRACTICES

request that section 8 of the Merchant Marine Act of 1920 46 D S C

867 be included in the proceeding 6

The Commission stated that section

8

does not require the Commission to incorporate any specific

concept of naturally tributary cargo into its Shipping Act consider

ations nor does it otherwise create substantive rights in Shipping

Act proceedings 7

The Order contemplated that trial type proceedings would be avoided

if possible and that the record for decision would consist of new affidavits

and memoranda of law as well as the material submitted under the earlier

procedures In addition to Portland PWC and the Commission s Bureau

of Hearing Counsel various ports participated as intervenors on a limited

basis S

Following the submission by the parties of new material as directed

by the Order of Investigation the Commission served on March 30 1979

a Report and Order of Further Investigation and Hearing Interim Report

Pacific Westbound ConferenceEqualization Rules and Practices 21

F MC 937 1979

II The Commission s Interim Report

The Commission concluded that the submissions by the parties had not

resulted in a fully developed record on all the issues and that a further

in an enlightened and progressive manner so as to encourage modernization of shipping services and expan

sion of transportation alternatives for shippers CONASA 21 F M C at 135 136 It concluded that the ports

and labor unions had failed to show that the cargo in question had originated in locally tributary areas or

that the ports viability wa threatened by the carriers practices dat 138

That statute states

It shall be the duty of the Secretary of Commerce in cooperation with the Secretary of the Army

with the object of promoting encouraging and developing ports and transportation facilities incon

nection with water commerce over which he has jurisdiction to investigate territorial regions and

wnes tributary to such ports taking into consideration the economies of transportation by rail

water and highway and the natural direction of the flow of commerce to investigate the causes

of the congestion of commerce at ports and the remedies applicable thereto to investigate the sub

ject of water terminals including the necessary docks warehouses apparatus equipment and appli

ances in connection therewith with aview to devising and suggesting the types most appropriate

for different locations and for the most expeditious and economical transfer or interchange of pa

sengers or property between carriers by water and carriers by rail to advise with communities re

garding the appropriate location and plan of construction of wharves piers and water terminals

to investigate the practicability and advantages of harbor river and port improvements in connec

tion with foreign and coastwise trade and to investigate any other matter that may tend to promote

and encourage the use by vessels of ports adequate to care for the freight which would naturally

pass through such ports Provided That if after such investigation the Secretary of Commerce shall

be of the opinion that rates charges rules or regulations of common carriers by rail subject to

the jurisdiction of the Interstate Commerce Commission are detrimental to the declared object of

this section or that new rates charges rules or regulations new or additional port terminal facili

ties or affirmative action on the part of such common carriers by rail is necessary to promote the

objects of this section the Secretary may submit his findings to the Interstate Commerce Commis

sion forsuch action as such commission may considerproper under existing law

7

As discussed infra that action by the Commission is relevant to the conditional exceptions filed by

APL

The U S Department of Transportation intervened but did not participate

26 EM C
316 FEDERAL MARITIME COMMISSION

hearing therefore was necessary

9

The Commission could only resolve as

a matter of law certain of the particular issues raised by Portland We

held that the PWC Agreement did allow equalization or absorption of

inland motor carrier rates and cargo that the rules in PWC s tariffs could

apply to transportation of cargo by ICC exempt motor carriers and that

such rules were not unlawful per se

10

Portland had argued that any absorption of inland freight charges on

cargo that would move more cheaply to Portland than to any other port

constituted an illegal diversion of cargo naturally tributary to Portland

unless it could be shown that Portland s facilities or level of direct ocean

service were inadequate I I In response the Commission stated that Portland

was relying too heavily on lntermodal Service to Portland Oregon 17

F M C 106 1973 and ignoring the more expansive guidelines enunciated

in the 1978 CONASA decision l2 The Commission reemphasized that the

following principles first stated in CONASA would control the disposition

of the general issue ofthe lawfulness ofPWC s practices

1 Certain cargo may be naturally tributary to a port but any

naturally tributary zone surrounding a port is constantly chang

ing In a particular case this zone is determined by consideration

of a the flow of traffic through the port prior to the conduct

in question ihcluding points of cargo origin or destination b

relevant inland transportation rates c natural or geographical

transportation patterns and efficiencies and d shipper needs and

cargo characteristics

2 A carrier or port may not unreasonably divert cargo which

is naturally tributary to another port When diversion of naturally

tributary cargo occurs the reasonableness of the practice must

be determined The reasonableness of the particular practice is

determined by consideration of a the quantity and quality of

cargo being diverted is there substantial injury b the cost

to the carrier of providing direct service to the port c any

operational difficulties or other transportation factors that bear

9Most significantly Portland failed to describe the wea it considered to be naturally tributary to it

21 F M C at 938 n 3

IOWe slated 21 F M C at 941

Equalization as such is not illegal and a tariff that allows for equalization therefore is not per

se illegal It is only the application of the tariff in a particular manner that can be illegal The

legality of PWC s Tariff No 3 apart from its application does not present a separate legal issue

in this case Additionally the question of adequacy of Portland s service is only one of the factors

to be considered under the CONASA guidelines and is not dispositive by itself of the legality of

an equalization For the foregoing reasons the Commission concludes that PWC s Rule 16 Tariff

No 3 does not in and of itself violate sections IS 16 or 17 of the Shipping Act 1916 or con

travene section 205 of the Merchant Marine Act of 1936 The question of the legal application of

theRule still remains emphases in original footnote omilled

IIIn the subsequent proceedings before thePresiding Officer Portland continued to define naturally tribu

tary by acomparison of inland freight rates

12 In the 1973 Portland decision the Commission relied primarily on acomparison of inland mileages in

determining that certain cargo was naturally tributary to Portland 17 F M C at 127 To asignificant de

gree the Commission based its resolution of the issues before it in that case on section 8 of the Merchant

Marine Act of 1920 rd at 12527 13335

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 317

ABSORPTION RULES AND PRACTICES

upon the carrier s ability to provide direct service e

g

lack of

cargo volume inadequate facilities d the competitive conditions

existing in the trade and e the fairness of the diversionary

method or methods employed e g absorption solicitation 21

F M C at 939 40 13

The Commission restricted the further hearing to consideration of the

following components of the ultimate issue 21 F M C at 942

1 Whether and to what extent the equalization and absorption prac

tices of the Pacific Westbound Conference cause cargo which

would ordinarily move through the Port of Portland to move

through ports other than Portland

2 Does the diversion of cargo described in issue 1 if any cause

significant economic harm to the Port and the local economy

of Portland and

3 If the equalization and absorption practices of the Pacific

Westbound Conference do cause significant economic harm to

Portland are they nonetheless reasonable and justified Emphasis

in original

Acknowledging that the evidentiary record could become unmanageably

large without further guidelines the Commission structured the proceeding

by limiting the introduction of additional evidence primarily to information

regarding the ten most important cargo commodities measured in terms

of gross revenue to the Port of Portland carried by PWC in 1977 and

1978

Portland did not seek court review of the conclusions of law stated

in the Interim Report Also Portland did not and does not take exception

to the Report s limitation of the scope of the further proceedings as de

scribed above

Altogether there were 39 days of hearings that produced 5 374 pages

of transcript and 161 exhibits There were 25 witnesses including three

economists Briefs were filed by Portland PWC Hearing Counsel APL

and Sea Land Service Inc which are members ofPWC and by intervenors

Delaware River Port Authority the Port Authority of New York and New

Jersey and the Port of Seattle Seattle

III The Initial Decision

A

Findings of Fact

The Initial Decision examined 214 findings of fact proposed jointly by

PWC and Seattle In all important respects the Presiding Officer found

that those findings were supported by the record and should be adopted

Some of the most critical findings are as follows

13The Commission also rejected the argument that the CONASA guidelines should be restricted to through

intermodal movements such a minibridge and were not applicable to movements between adjacent ports

through absorption

26 F M C
318 FEDERAL MARITIME COMMISSION

The ten most important commodities equalized or absorbed by PWC

member lines in 1977 and 1978 were apples canned com dried peas

and beans frozen com hides lumber meat and bone meal metal scrap

onions and wastepaper In 1977 these commodities accounted for 87

of the total tonnage equalized by PWC carriers All of this cargo was

containerized 14

Between 1977 and 1979 Portland was susceptible to shortages in both

refrigerated and dry cargo containers because of an imbalance in its inbound

outbound container trade Far fewer containers were received at Portland

inbound than were needed for outboWld movements

Bulk and bulk type cargo such as grain lumber steel and automobiles

make up most of Portland s

tonnage both inbound and outbound The

tonnage volume at Portland increased steadily since fiscal 1971 72 Fiscal

1978 79 was the best year in Portland s history with non grain cargo

tonnage exceeding mid range forecasted tonnage for 1980 and 1985 15

Portland did not enter the container business until 1971 16 well after

Seattle had already become established as the leading container port in

the Pacific Northwest and a container load center Seattle made the

decision in the 1960 s anticipating the growth of containerization to make

the necessary investments 17 As a result Seattle handled 2 400 000 short

tons of containerized cargo in 1977 and 2 774 000 short tons of such

cargo in 1978 which figures represent ratios of better than 4 to 1 and

3 6 to lover Portland s results IS Nevertheless despite its late start Port

land s container business improved substantially during the period of record

Export container tonnage increased from 381 000 in 1975 to 639 000 in

1979 an increase of 68 and total container tonnage increased from

521 000 in 1975 to 867 000 in 1979 an increase of67 9

To a greater extent than was true of the PWC trade in general or

the PWC Pacific Northwest trade in particular vessels sailing from Portland

to PWC destinations reached operating weight capacity before exhausting

their TEU or container capacity Thus the existence of unused TEU

capacity on ships leaving Portland for PWC destinations in 1977 and 1918

does not mean that those ships could have carried any additional cargoes

20

On the contrary PWC s chief witness with respect to the capacity of

the Japanese Six member lines testified that in 1977 and 1978 those

lines vessels calling at Portland operated at or near their actual carrying

capacities even though design capacity may not have been reached This

testimony was credible and significant

14 Ex 95 8chs I and 3

I Ex 46 p 68Ex 54 Ex 72 Tr 1315 16

16Tr 1202

Ex 134 p2 11 16

IBId p3 Ex 54

19 Ex 54 Ex 46 p

9

20 Ex 139 p 18 Ex 142 Ex 143 Tr 489495

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 319

ABSORPTION RULES AND PRACTICES

Portland engaged in various competitive pricing activities designed to

attract cargo to it and away from competing ports such as Seattle Portland

attributed its growth in container cargo from 1977 79 in part to these

practices 21 Portland s witness Mowat could offer no economic or policy

reason why these practices should be distinguished from PWC lines compet

ing for cargo via Seattle by equalizing or absorbing inland transportation

costS 22

Portland is closer than Seattle to the inland origin points places of

most if not all of the equalized top ten commodities But via ocean

navigation routes Seattle is closer than Portland to many of the principal

PWC destinations particularly Japan 23 Existing trade routes and traffic

patterns make Portland even more distant from PWC destinations Carriers

considering calls at other ports such as Portland in the same region as

Seattle the load center must view the call as an additional port call

with the attendant additional expenses and scheduling problems An addi

tional call at Portland would require a vessel to travel many more water

miles including more than 200 miles up and down the Columbia River

than the mere difference in ocean distances or the overland motor carrier

distance from Portland to Seattle about 172 miles 24

It is unlikely that any of the equalizing PWC carriers could have earned

a profit by adding a Portland call instead of equalizing 25

A

port s longshore labor productivity in handling containers is measured

by the number of containers that can be loaded per crane per hour For

a carrier this productivity affects the unit cost per container and the carrier s

ability to adhere to fixed scheduling Compared to other West Coast ports

including Seattle Portland was the lowest labor productive port in 1978

and 1979 26 As late as October 1979 Portland recognized that berth con

flicts and ship queuing were significant problems at its major container

terminalP

During 1977 and 1978 export shippers of the top ten commodities

using Portland encountered recurrent difficulty in obtaining cargo space

on vessels making direct calls particularly during fall and winter months

when seasonal cargo flow is high

A fast transit time and sailing frequency is important to shippers of

refrigerated or perishable cargo as well as to shippers of high value cargo

where the daily interest charge has significance 28 and for shippers of

spot market cargo such as wastepaper and metal scrap

29 The fastest

21 Tr 1191 92 1195

22Tr 157980

23 See Tr 705

24Ex 136 p12 13 18

25 Ex 139 p

2333

26Tr 499497

27 Ex 45

2

Ex 136 p 6

29Tr 262a21 43044305

26 EM C
320 FEDERAL MARITIME COMMISSION

transit times measured by sailing days to PWC destinations from Portland

and Seattle in 1978 were as follows

Seattle Portland

Japan 9 II

Korea II 15

Taiwan 12 18

Hong Kong 15 19

Philippines 21 21

Portland s definition of its naturally tributary territory was based almost

exclusively on comparative inland freight rates 30 Since inland freight rates

change constantly so would Portland s naturally tributary territory as Port

land defines it 3 Portland acknowledged that it was obliged to provide

adequate service and facilities for shippers and carriers However Portland

also took the position that adequacy of service for any shipper of a particular

commodity was established by a showing that some quantity of that com

modity had at some time been loaded aboard a vessel sailing from Port

land 32

All three economists who testified in the proceeding including Portland s

witness Krekorianagreed that equalization and absorption were market

enhancing not market distorting practices Krekorian testified that such

carrier practices were equivalent to price competition among ports and

thus normal marketplace behavior 33

Based on exporters testimony as to their transportation needs the routing

they would apply and their inability to obtain service from Portland Hearing

Counsel s economist Copan concluded that the least costly and most efficient

system for ocean carriage of the top ten commodities was the movement

of those cargoes pursuant to equalized service through Seattle He concluded

that none of the top ten commodities was naturally tributary to Portland

because each moves with greater transportation efficiency through Seattle

There is no showing that any of the top ten commodities which

were shipped from Seattle pursuant to equalized service would otherwise

have been loaded aboard vessels at Portland No shipper witness was called

by Portland 34 The shipper witnesses who testified were called by Hearing

Counsel Many were Oregonians who expressed a preference out of loyalty

to their state to ship from Portland Nevertheless they used equalized

service out of Seattle because that was the only way they could effectively

compete with other shippers foreign and domestic and get their goods

to the marketplace The other shipper witnesses gave the same or similar

reasons for using Seattle If PWC equalized service were not available

30 Ex 79 Tr 1250 1252

3

Tr 39597

32Tr 175051 1759 63

33Tr 219299

34 See Tr 1100 1101 1728

C A
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 321

ABSORPTION RULES AND PRACTICES

some shippers would be shut out of export markets 35some would have

used non conference equalized service out of Seattle 36 and others would

have paid the inland charges to Seattle without equalization or absorption 37

Portland s evidence purporting to show the extent of the economic harm

suffered by it due to diversion of cargo to Seattle was based on an assump

tion that all of the PWC equalized cargo in 1977 78 would otherwise

have been loaded at Portland 38 There is no basis in the record for that

assumption

Even assuming that all of the PWC equalized cargo in 1977 78 would

otherwise have moved through Portland the economic harm to Portland

and its metropolitan area was not significant

PWC equalized service provides the means for Conference members to

be price competitive at rate levels which enhance the ability of the cargo

to be exported 39 The PWC lines would be at a competitive disadvantage

with independent carriers were it not for the PWC equalization and absorp

tion practices The non conference carriers could continue to compete for

Oregon Washington and Idaho cargo without calling at Portland by means

of substituted service or other pricing mechanisms

The PWC equalization and absorption practices promote transportation

efficiency by enhancing both shipper transportation alternatives and carrier

competition

B Ultimate Findings and Conclusions

In light of the findings of fact summarized above the Presiding Officer

concluded under the CONASA standards that none of the top ten com

modities were naturally tributary to Portland He found that Portland

which bore the burden of proof on this issue failed to show that those

commodities moved primarily through it prior to the institution of PWC s

equalization and absorption rules or prior to the key years of 1977 and

1978 While inland transportation rates obviously favor Portland or there

would be no equalization and absorption the Presiding Officer held that

ocean distances and routes generally favor Seattle Shipper needs and the

special characteristics of the cargo e g the importance of quick and regular

service for time sensitive commodities such as agricultural products and

those sold in spot markets also were found to weigh against any finding

that the commodities were tributary to Portland

Although his conclusion that none of the commodities in issue was

naturally tributary to Portland essentially ends the inquiry the Presiding

Officer also found that PWC s practices did not harm Portland or its

local economy that PWC s practices were justified by any reasonable oper

3

See Tr 2309231l

36Tr 821 22

37Tr 2387 2390 4381 82

38Tr 949 171415

WTr 1605 2195 99
322 FEDERAL MARITIME COMMISSION

ational or economic test and that there was no showing of violation of

sections 15 16 First or 17 of the Shipping Act

POSITIONS OF THE PARTIES

IExceptions

APortland

With respect to the naturally tributary issue Portland reiterates that

if a commodity moved through a port in any quantity in spite of practices

intended to direct the commodity elsewhere then it is reasonable to infer

that the commodity is naturally tributary to that port Portland concedes

that one of the top ten commodities apples has not moved through

it but contends that the other nine commodities regularly moved through

Portland in significant volumes prior to and including 1977 and 1978 40

It argues that the Presiding Officer should have ended his analysis after

considering inland distances and routes in weighing geographic and transpor

tation efficiencies and erred in proceeding to consider also Seattle s advan

tage in ocean distances and routes Portland also claims that Seattle s advan

tage is not significant particularly when the inland distance from Portland

to Seattle is factored into the equation and that in any event Portland

had equal or faster transit times to most of the PWC destinations during

the period of record 41 though this is based on the same vessel calling

at Portland after calling at Seattle

Portland asserts that it meets shipper needs by virtue of its competitive

terminal charges and facilities equal ocean rates 42 efficient inland transpor

tation and other services 43 It takes exception to the Presiding Officer s

focus on whether there was sufficient cargo space available at Portland

to accept the tonnage actually equalized and claims that its ability to

meet shipper needs is proven by the continued large volumes of the

commodities that move through Portland to PWC destinations 44

Portland also argues that unused capacity allegedly experienced by the

Japanese Six lines calling at Portland and the entry of other carriers

into the Portland market show that market forces when unimpaired by

such devices as equalization and aQsorption have and will continue to

respond to shipper needs 4s It protests the Presiding Officer s

findings con

cerning berth congestion and labor inefficiency contending that these prob

lems have been alleviated With regard to the issue of economic harm

Portland abandons its previous attempt to quantify the monetary loss it

40 Portland Exceplions at 7

41 Id at 1 12

42 This confinns the I Ds conclusion that no issue remains regarding section 205 of the Merchant Marine

Act of 1936

43Portland Exceptions at 1314

44 d at 7

40 Portland does not state when the specified carriers began service from Portland but we assume that it

took place after theclose of the record

26 F M c
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 323

ABSORPTION RULES AND PRACTICES

allegedly suffered but instead claims that it lost ten percent of its total

export container tons in 1978 and that the diversion of such a percentage

threatens its viability as a container port and justifies remedial action by

the Commission 46

Portland contends that the I Ds

findings that an additional call at Port

land would be unprofitable is in error and that the real choice confronting

carriers such as APL and Sea Land is between the profitable service they

offered from Seattle and a somewhat less but still profitable service

featuring an additional call at Portland Having so phrased the options

Portland states that the carriers refusal to serve Portland is inherently

unreasonable 47 It further states that the question of fair competition be

tween PWC lines and non conference independents is less important than

fairness to ports such as itself Portland also accuses the PWC lines of

concentrating their equalized service on high rated cargoes that prejudices

shippers and carriers alike that would attempt to move these higher rated

commodities through Portland 48 Portland admits that the applicable PWC

tariff rule makes no distinction between high rated and low rated commod

ities but insists that the rule is applied in a discriminatory manner

B APL S Conditional Exceptions

APL s Exceptions are to the Presiding Officer s refusal to consider its

arguments that equalization and absorption practices cannot in themselves

violate sections 16 First or 17 of the Shipping Act 49 The Presiding Officer

considered himself bound by the CONASA standards and the Commission s

Interim Report in this case

APL looks first to the language of sections 16 and 17 which forbid

a carrier from creating undue or unjust preference advantage prejudice

or discrimination The statutes do not forbid the carrier according to APL

from creating equality by eliminating the inequality of transport cost

otherwise giving advantage to the port geographically closer to the ship

per50 The carrier asserts that the legislative history of the Shipping

Act shows that Congress was at least aware of port equalization practices

by carriers and did nothing to condemn them APL traces the development

of the naturally tributary doctrine from section 8 of the Merchant Marine

Act of 1920 to the CONASA guidelines It then argues that the CONASA

rules are wrong because a there is no true statutory basis for the naturally

tributary doctrine b the easy interrnodal movement of containerized

cargo means that it is tributary to no port c the CONASA factor of

shipper needs and cargo characteristics is contrary to the notion behind

the naturally tributary doctrine that a port has an inherent right to

46Portland Exceptions at 27 28

47 d at 31

48 d at 33

49APL s Exceptions are conditional in that the carrier wished the Commissiori to consider them only

ifthe JD wa reviewed on themerits APL is joined by Sea Land and PWC

50 APL Exceptions at 4 emphasis in original

C A r
324 FEDERAL MARITIME COMMISSION

certain cargo d the CONASA test of the reasonableness of the carrier

practice requires the Commission to intrude to an unlawful degree into

carrier and shipper business decisions e there is no statutory foundation

for protection by the Commission of ports from competition and f

rather

than providing clear decisional guidelines the CONASA rules have caused

only further contradictions and anomalies St

APL also contends that section 205 of the Merchant Marine Act of

1936 and Commission decisions thereunder require conferences to maintain

port equality in constructing their tariffs and that a conference cannot

at the same time be forbidden to publish a tariff rule that allegedly creates

such equality Finally APL summarizes various aspects of transportation

policy that support the result it urges including the avoidance of enforced

port monopolies widening of transportation flexibility and encouragement

of intermodalism and containerization s2

C The PortAuthority ofNew York and New Jersey

The Port Authority of New York and New Jersey Port Authority

filedExceptions similar to APL s The Port Authority argues that

W hether or not traffic is being diverted from a particular port s

naturally tributary area begs the question The real question

is whether or not a particular carrier s equalizationabsorption prac

tices are reasonable under the relevant circumstances In other

words the normal analysis under sections 16 First and 17 should

be employed without reference to a doctrine of naturally tribu

tary traffic s3

The Port Authority interprets the CONASA decision as recognizing that

a case involving equalization and absorption practices is really no different

from any other case arising under sections 16 First and 17 S4 However

it then says that the Commission resurrected the naturally tributary doc

trine in the subsequent Dart decision and eased the burden of proof

for complaining port interests ss The Port Authority urges that the doctrine

of naturally tributary cargo be abandoned and the Commission hold

that equalization and absorption practices cannot by themselves violate

the Shipping Act

II Replies to Exceptions

Replies to Exceptions were filed by PWC the Port Authority Seattle

Hearing Counsel and APL The Port Authority s Reply restates the argu

ments made in its Exceptions and will not be discussed further

The alleged contradictions and anomalies are recited at page 17 of APL s Exceptions n 42

2 d at 2324

3

Port Authority Exceptions at 4

d at 11 12

d at 12

l ur
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 325

ABSORPTION RULES AND PRACTICES

A Seattle

Seattle s Reply is an amalgam in that in great part it attacks the natu

rally tributary doctrine essentially as APL did and only in minor part

discusses the CONASA standards and the lawfulness of the PWC practices

Seattle distinguishes its position from APL by stating that it does not

contend that equalization and absorption can never violate the Shipping

Act56 It contends that the record in this case demonstrates that the Commis

sion should abandon the naturally tributary concept as applied to contain

erized cargo Seattle argues that if any geographic area or cargoes could

at one time have been considered naturally tributary to a port

containerization and an everchanging inland transportation infrastructure

have resulted in a continuous change in those areas and cargoes

57 Refer

ring to Portland s claim before the Presiding Officer that it could have

as many as 60 naturally tributary territories for the top ten commodities

at anyone time Seattle states that the actual number could be as high

as 240 territories depending on the number of different inland rates avail

able per commodity and that these zones could change as often as the

rates did perhaps daily Seattle contends that it is impossible to base

a meaningful regulatory regime on such a malleable concept

B PWC

PWC first points out that while Portland took exception to 24 findings

of fact and 12 conclusions stated by the Presiding Officer in the

10 11 of those findings refer to proposed findings submitted jointly by

PWC and Seattle but adopted by the Presiding Officer only insofar as

they are supportive of other findings PWC notes that in substance then

Portland has excepted to only 14 of the 184 findings contained in the

10 PWC states that the remaining undisputed 170 findings are more

than sufficient to compel adoption of the ALJ s decision 58

With respect to Portland s specific exceptions PWC argues that there

is no evidence that supports Portland s contention that actual vessel capacity

existed to move the cargoes at issue from Portland during the times the

cargoes actually moved during 1977 and 1978 According to PWC the

record shows instead that what little annual capacity may have existed

among the Japanese Six lines was not available at the times and in

the amount needed by the shippers of the equalized cargoes and could

not have accommodated the tonnages in question With regard to the issue

of relative transportation efficiencies PWC stresses that any carrier consider

ing adding a Portland call to pick up the potential additional cargo rep

resented by the top ten commodities would face incremental and highly

expensive vessel miles including but not limited to 200 miles of the

56 Seallle Reply at 3

57 d at 37

5 PWC Reply at I footnotes omilled The same argument is made by APL at p

1 3 and 10 of its Reply

to Exceptions The remainder of APL s Reply makes no arguments not also made by PWc

J Uf
326 FEDERAL MARITIME COMMISSION

Columbia River which would exceed substantially the total overland dis

tance under the equalizationabsorption alternative The Presiding Officer s

consideration of the entire efficiency equation including relative ocean

transit miles was in PWC s view proper and required by the Commission s

Interim Report

PWC states that Portland s contentions that it has cured its labor produc

tivity and congestion problems are either irrelevant to the test years of

1977 and 1978 or were not raised below and are thus improper now 9

It notes Portland s failure to challenge the IDos

finding regarding a struc

tural shortage of containers at the port PWC defends as fully supported

by the record the ID s

finding that a weekly service interval by carriers

calling at Seattle which makes an additional call at Portland unfeasible

is necessary to permit them to compete It attacks as unsupported by the

record Portland s attempts to create a new test of historical cargo flow

by the standard of whether a

commodity has ever passed through the

port to any destination under any conditions 60 and Portland s similar conten

tion that because it has provided service to other shippers at other times

it presumably could have served also the needs of the shippers of record

regardless of the shippers testimony to the contrary With regard to the

question of economic harm PWC terms Portland s claim of a ten percent

loss of containerized cargo as a straw man and points out that Portland

failed to except to the IDos

finding that even under Portland s definition

of diversion i e that the equalized cargo would have and could have

moved via direct service at Portland there was in fact no evidence of

such diversion 61 PWC states that if the correct comparison is made between

the equalized tonnages and Portland s overall export tonnages then the

equalized tonnage in 1978 the year of the largest movement of such

tonnage amounted to less than one percent of Portland s export tonnage 62

Concerning the effect on carrier profitability of a direct call at Portland

PWC contends that the analysis accepted by the I D assumed that all

the equalized cargo moved through Portland and found that even in such

theoretiaal circumstances losses to the carriers nevertheless would occur 63

Finally PWC states that Portland s charge of discriminatory application

of PWC s equalization rule is unsupported by the record and directly

contrary to the Port s own voluntary withdrawal of any allegations of

unlawful implementation of the PWC tariff 64

5 PWC Reply at 2S26

rd at 42 PWC notes that Seaule historically has handled far greater volumes of the commodities in

issue than Portland rd at 64

61 d at 54 52

62 d at 56

6

rd at 70

64rd at 74

Ii JIM
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 327

ABSORPTION RULES AND PRACTICES

C Hearing Counsel

Hearing Counsel s Reply focuses primarily on the broad legal arguments

made by APL and the Port Authority of New York and New Jersey

They stress that the language of the Shipping Act forbids only unreasonable

discrimination and consequently requires an examination of the particular

circumstances under which equalization or absorption is employed before

a determination can be made as to the lawfulness of the practice Hearing

Counsel state that APL s

request for blanket preapproval for all port

equalization schemes would preclude the Commission from judging each

particular practice on its own merits 65

DISCUSSION

IThe Initial Decision

The ID is fully supported by the record and applicable case law and

except as indicated in our discussion below is hereby adopted PWC and

APL are correct in their claim that the Presiding Officer s findings of

fact that have gone unchallenged by Portland are entirely sufficient by

themselves to support a conclusion that the PWC practices are lawful

under the CONASA standards To make this clear it is worth summarizing

some of those findings During the period of record Portland experienced

recurrent shortages of containers available for export cargo During 1977

and 1978 shippers of the top ten commodities encountered recurrent

difficulty in obtaining cargo space on vessels calling at Portland particularly

during fall and winter months when seasonal cargo flow is high It is

unlikely that any of the equalizing PWC lines could have earned a profit

by adding a Portland call instead of equalizing There is no difference

in economic terms between Portland s pricing practices that are designed

to draw cargo away from Seattle and the equalization practices of the

PWC lines both are normal competitive behavior and thus are market

enhancing rather than market distorting Despite Portland s late entry into

the container business the amount of container tonnage it handled increased

substantially during the period of record Even assuming that all of the

PWC equalized cargo in 1977 and 1978 would otherwise have moved

through Portland there was no significant economic harm caused to Portland

and its local economy by the PWC practices The PWC equalization and

absorption practices promote transportation efficiency by enhancing both

shipper transportation and carrier competition

When these and other findings are integrated into the CONASA standards

they compel a conclusion that the PWC equalization practices do not violate

the Shipping Act Portland failed to show that the top ten commodities

were naturally tributary to it The concept of naturally tributary has

been applied in Commission case law to both geographic territory 66 and

65 Hearing Counsel Reply al 3

Eg Stockton Port District v Pacific Westbound Conference 9 F M C 2 1965

J Mr
328 FEDERAL MARITIME COMMISSION

to particular commodities 67 The broad notion of a

geographic territory

tributary to a particular port clearly implies that all commodities exported

from or imported to that territory are also tributary to the port Throughout

this proceeding Portland has declined to define the boundaries of the terri

tory that it claimed as tributary to it on any basis other than that area

in which any inland freight rate was lower to Portland than to Seattle

Such an area is virtually limitless in size and can certainly include the

Middle West of the United States as easily as it does Portland s immediate

neighborhood This approach was specifically rejected in Port of New Orle

ans the companion case to CONASA for reasons equally applicable to

the present case

Naturally tributary cargo is basically cargo from a geographic

area local to a given port A naturally tributary zone does not

describe a general territory which may be served competitively

by a range of ports and it specifically does not include cargo

originating from or destined to the central United States

Regardless of historical movement patterns and comparative geo

graphic proximity the term naturally tributary cargo cannot

be extended to the point where a port or range of ports can

claim a multi state inland region as its exclusive territory 21

F M C at 153

Although it claimed to rely on inland freight rates Portland offered

virtually no evidence of any actual freight rates because it assumed that

if there was equalization or absorption then the rates favored Portland

and no further inquiry with respect to the naturally tributary issue was

necessary In other words Portland s position is that once it has been

found that freight rate differentials are being reimbursed by the PWC carriers

pursuant to the conference tariffs then the commodities carried come from

within Portland s

tributary but undefined territory 68 This is essentially

a

repetition of Portland s argument during the preliminary stage of this

proceeding that any absorption or equalization of inland freight charges

on cargo that would move most cheaply to Portland constituted illegal

diversion unless the defending carriers could show that Portland s shoreside

facilities or level ofdirect ocean service were inadequate 69 Again however

Portland s position is contradicted by established precedent In the Commis

sion s Interim Report which Portland has never challenged we found that

argument to be inconsistent with the CONASA principles which state clearly

that inland rates are only one of several factors that must be considered

in resolving the naturally tributary issue As discussed below the factor

67E g ProportioT Q

Rates on Cigarettes and Tobacco 6 F M B 48 1960

6lIThis is the gist of Portland s

argument in its Exceptions that the Presiding Officer was not required

to go further than determining that inland rates were lower to Portland than to Seattle Portland Exceptions

at to

69Text accompanying n II supra

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 329

ABSORPTION RULES AND PRACTICES

of inland rates may favor Portland but the other CONASA factors most

notably shipper needs strongly disfavor it

Thus Portland s efforts to define its naturally tributary territory failed

on the evidence the law and as a matter of logic When the focus is

narrowed to the specific commodities in issue in this case the top ten

commodities equalized in 1977 and 1978 the weakness of Portland s case

becomes even more obvious

It must first be stated that the literal letter of the CONASA test i e

how the commodities were exported before the carriers began equalizing

or absorbing cannot be followed in this case because the PWC practices

have been in place for as long as any witness could remember Under

such circumstances Portland s resort to a test of whether the commodities

have continued to pass through Portland in some quantity during the period

of record is not in itself unreasonable However such an argument must

be supported by evidence that the commodities continued to pass through

Portland despite the availability of equalized service through Seattle

because of some cargo characteristic or transportation factor that made

Portland the natural port of exit for those commodities But Portland

failed to adduce such evidence Despite the fact that the investigative focus

on the top ten commodities made specific shipper testimony vitally

important to the naturally tributary issue Portland made no effort to

produce any such testimony The shipper testimony in this case was brought

forward by Hearing Counsel Collectively that testimony is the most com

pelling evidence in the record before us The shippers testified and Port

land does not challenge their statements that were it not for the equalized

service from Seattle offered by the PWC carriers they would not have

been able to export their goods It should be noted that the shippers did

not emphasize inland rates more significantly than other factors the evidence

revealed in fact that even without equalization and absorption some ship

pers were prepared to pay the inland freight cost themselves in order

to ship through Seattle In the face of such testimony we have no basis

for accepting Portland s assertion that those shippers could use Portland

because Portland has sometimes been used by shipperS of the same commod

ities and further that because those shippers could use Portland then

they must use Portland regardless of the impact on their ability to enter

export markets On this record an order by the Commission forbidding

or substantially altering the PWC service could be harmful to U S foreign

commerce

In sum there is no reliable evidence that any of the top ten commod

ities equalized by the PWC carriers in 1977 and 1978 were naturally

tributary to Portland That conclusion essentially disposes of this case

However it should be noted that Portland s contentions regarding adequacy

of service and facilities are contradicted by the Presiding Officer s unchal

lenged finding that it suffered recurrent shortages of export containers during

1977 and 1978 we also agree with PWC that Portland s attempt to rebut

26 F M C
i

330 FEDERAL MARITIME COMMISSION

the Presiding Officer s

findings regarding poor labor productivity and berth

congestion is irrelevant to the test years It is clear that requiring the

equalizing PWC carriers instead to add a direct call at Portland after calling

at Seattle would be unreasonable Portland offers no evidence against the

Presiding Officer sfinding that it is unlikely that any of the PWC carriers

could earn a profit by adding a Portland call 70 Further there is no substan

tial evidence that Portland has been significantly hanned by PWC s prac

tices on the contrary it is more likely that the increased motor carrier

and export activity caused by the PWC service resulted in a net gain

for Portland 7

Only one small part of the ID appears to be unsubstantiated by the

record In dictum the Presiding Officer suggests that the Commission con

sider requiring an amendment to the PWC Agreement andor to the PWC

dual rate contract to excuse shipper obligations under the contract if there

should be no PWC direct service available at Portland or other Columbia

River ports in the future The Presiding Officer states without citation

to the record 72 that t hereis evidence that PWC contract shippers

did not consider utilizing independent liner services which might have

been available at Portland out of fear of being deemed in violation of

their contracts 73 One shipper apparently so testified but even that frag

ment of evidence is unclear 74 The Presiding Officer s concern about a

possibility of substantial harm to Portland is based on an elaborate set

o of hypothetical circumstances none of which are present here If present

shippers it should be borne in mind that this record is nearly three years

old are experiencing difficulties with the PWC dual te contract they

are free to pursue a remedy under Shipping Act complaint procedures

or otherwise bring the matter directly to the Commission s attention

Any arguments advanced by Portlandcbut not specifically discussed above

have been considered and rejected

II The Broader Legal Issues

As APL recognizes the Commission is under no obligation to go beyond

the facts of this case and address the broader legal issues the carrier

poses in its Exceptions Although the Commission may fashion broad new

rules in adjudicatory proceedings SEC v Chenery Corp 318 U S 80

1943 a revision as radical and broad as that requested by APL might

have been more suitable for a

rulemaking in which all affected interests

10Portland s argument in its Exceptions that an additional call al Portland would be profitable has no sup

port inthe record The relevant testimony assumed that 01 the equalized cargo moved through Portland de

spite shipper testimony to the contrary and found that even in such theoretical circumstances losses to the

carriers nevertheless would occur Ex 139 p 2333 Ex 136 p1020 Portland also suggests that there

would be addl Ional container traffic in the absence of equalization but there is no evidence on this point

11 Ex 139 p 6873

12The I D makes no findings of fact relevanlto this discussion

13The Presiding Officer also states that there is no evidence that PWC or any of its members caused this

concern in any way

14Tr 4261 62

t 0
PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 331

ABSORPTION RULES AND PRACTICES

including federal agencies had an opportunity to participate APL requests

a

ruling that would be of considerable importance to all U S ports Although

Seattle and New York generally support APL there might well be other

ports besides Portland that did not participate in this case but would

have opposed APL s position Notice and comment procedures are

especially suited to determining legislative facts and policy of general

prospective applicability National Small Shipments Traffic Conference

Inc et al v ICC 725 F 2d 1442 1447 48 D C Cir 1984 See also

Intermodal Service to Portland Oregon 17 F M C 106 125 n 10 1973

Nevertheless APL s arguments have considerable force and to the extent

appropriate deserve a response One matter can be addressed specifically

APL and Seattle attack the role of section 8 of the Merchant Marine

Act of 1920 in the development of the naturally tributary doctrine

The Commission at one time explicitly stated that the doctrine is based

on section 8

Investigation of Overland OCP Rates and Absorptions 12

F M C 184 224 1969 However in recent years the Commission has

moved away from section 8 to the point of explicitly refusing to include

it in orders of investigation This was done even in cases where the Com

mission ultimately found in favor of the complaining port North Carolina

State Ports Authority v Dart Containerline Company Ltd 21 EM C

1125 1126 n 3 1979 affd sub nom Dart Containerline Company

Ltd v FMC 639 F 2d 808 D C Cir 1981 As previously mentioned

in this Order that approach was taken in this case 75 We reiterate now

that section 8 will not be the basis for Commission investigations of carrier

equalization practices

APL faults the naturally tributary doctrine for its implication that

ports have a natural right to certain cargo But ports are a class specifi

cally protected by sections 16 and 17 of the Shipping Act 1916 and

those sections prohibitions against unreasonable preference and discrimina

tion are carried forward in essentially identical terms in subsections b

6 10 11 and 12 of section 10 Prohibited Acts of the Shipping

Act of 1984 Pub L No 98 237 Under those circumstances the Commis

sion is constrained from concluding on this adjudicative record that ports

do not have a natural right to certain cargo For the same reason

we decline to adopt APL s argument that equalization practices can never

be illega176 Our further comments perforce must be restricted to generalized

guidance for the shipping industry

Like most recent cases involving port challenges to equalized service

this investigation involved containerized cargo In the 1978 Port of New

Orleans decision the Commission discussed at length the possible impact

75 P 56supra

76That argument was opposed by Hearing Counsel in their Exceptions and during the Oral Argument

where they suggested factual situations in which equalization could be unjustly discriminatory Oral Argument

Tr 625 Seattle also opposed APL in part Seattle Reply to Exceptions at 36 footnote marked by aterisk

seeOral Argument Tr 5859
332 FEDERAL MARITIME COMMISSION

of containerization and intennodalism on historical traffic patterns We rec

ognized that the container revolution might mean the development of re

gional port load centers that would minimize time in port for large

containerships and enhance frequency and regularity of service for shippers

21 F M C at 174 This in turn might cause a territory that had been

naturally tributary to a

port for breakbulk cargo to not be tributary for

containerized cargo ld at 17475 We emphasized the Commission s re

sponsibility to avoid rigid regulation based on outmoded concepts that

would stifle advances in ocean transportation to the detriment of the public

interest ld at 175

In examining the record of this case six years after CONASA and Port

of New Orleans were decided it is clear that the regulatory approach

taken in those cases and followed again now was and is appropriate The

expert testimony in this case is unanimous that the equalization practices

of the PWC carriers are identical in economic tenns to price and service

competition between Portland and Seattle or any other two points In the

absence of substantial evidence that such practices are unjustly discrimina

tory they should be encouraged rather than discouraged Ifports as well

as carriers are obliged to compete then the competition must necessarily

redound in improved service to shippers and U S foreign commerce If

a port directs its energies to attracting shippers and carriers by improved

facilities and services and by reduced traffic congestionin short by mak

ing it desirable to utilize that port then the public interest as well as

the port s are advanced On the other hand if the port s interest is artificially

protected by unnecessary regulation so that competition and alternative serv

ices are eliminated the port may benefit temporarily but the public interest

wilI surely suffer

Given Portland s complete failure of proof as described in this Order

the lesson of this case may be that the naturally tributary doctrine

has become obsolete insofar as it would apply to a geographic territory

surrounding a

port The development of containerization and the related

phenomena of intennodal services and load centers may mean that no

particular geographic point is always tributary to a

particular port no matter

how close the port and the point may be 77 Concomitantly it may also

be that broad investigations like this one into general tariff provisions

providing for facially nondiscriminatory equalized service have become ob

solete That situation however should be distinguished from one involving

a specific commodity that appears to have been targeted by a carrier

Simply because a commodity can be placed in a container it nevertheless

may remain best suited to a particular port lntermodal Service to Portland

77The Commission is aware that the concept of a

regional load cenler is controversial and still in its

developing stage See Is Superport Needed for Atlantic Coast Journal of Commerce April 23 1984

p 1 A Superport for Conlainers Handling and Shipping Management February 1984 P 54 Seattle has

no righl in law to be the load center in the Pacific Northwest and Portland must have every fair opportunity

to continue thegrowth incontainer traffic that the record here shows it achieved in the 1970 s

C r
S FRANCIS C HURNEY

Secretary

PACIFIC WESTBOUND CONFERENCE EQUALIZATION AND 333

ABSORPTION RULES AND PRACTICES

Oregon supra 17 F MC at 127 In at least such a case the naturally

tributary doctrine could apply

In that regard the Commission wishes to address the suggestion of

the Port Authority of New York and New Jersey that our 1979 Dart

decision represented a retreat from CONASA Dart represented an appli

cation of CONASA principles to specific factual circumstances The true

significance of the Commission s decision lies in two facts First the car

rier s practice of avoiding a direct call at Wilmington and instead moving

the tobacco overland to Norfolk was held operationally and economically

inefficient 21 F MC at 1129 30 see Dart Containerline Co Ltd v

F MC 639 F 2d at 817 18 In the present case there is overwhelming

evidence that the carrier practices represent economic efficiency Second

Dart s practices were targeted at a single commodity tobacco and thereby

raised the issue of whether the equalized service was unjustly discriminatory

as between shippers as well as ports No evidence of such discrimination

exists in this record Application of the Dart rationale to this record must

therefore lead to a result preserving PWC s practice 78

THEREFORE IT IS ORDERED That the Initial Decision is hereby

adopted except to the extent indicated

IT IS FURTHER ORDERED That Portland s Exceptions are denied

and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

7811 should be nOled that APL agrees that Dart was correctly decided Oral Argument Tr 7374

Chairman Alan Green Jr and Commissioner James V Day did not participate

a26

C
FEDERAL MARITIME COMMISSION

DOCKET NO 7832

PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES

AND PRACTICES

Pacific Westbound Conference s equalization and absorption rules and practices to the extent

they affect the Port of Portland Oregon found not to be in violation of sections IS

16 First or 17 of the Shipping Act 1916 or section 20S of the Merchant Marine

Act of 1936

The top ten commodities equalized and absorbed by members of the Pacific Westbound

Conference during the period from January I 1977 through December 21 1978 found

not to be naturally tributary to the Port of Portland

Equalization and absorption as practiced by members of the Pacific Westbound Conference

found not to have resulted in substantial ham to the Port of Portland or the Portland

community

The practice of serving the Port of Portland indirectly by substituted service and not by

direct call by members of the PWC found to be reasonable and justified

Patrick F Boileau Norman E Sutherland Marybeth Ormsby and Thomas P White

for Petitioner Port of Portland

R Frederic Fisher Eric C Benelheim and Harry Pfeifer for Respondent Pacific

Westbound Conference

Warner W Gardner for Respondent American President Lines Ltd

Edward M Shea for Respondent Sea Land Service Inc

Jonathan Blank Carol Doherty and John W Angus Ill for Intervenor The Port of

Seattle

Patrick J Falvey FA Mulhern Arthur L Winn Jr Samuel H Moerman Paul M

Donovan and Gerald L Richman for Intervenor The Port Authority of New York and

New Jersey

MartinA Heckscher forIntervenor Delaware River Port Authority

John Robert Ewers and Paul J KaUer for Bureau of Hearings and Field Operations

Alan J Jacobson for Hearing Counsel

INITIAL DECISION 1 OF SEYMOUR GLANZER ADMINISTRATIVE

LAW JUDGE

Adopted May 25 1984

This is an investigation into the equalization and absorption practices

of the Pacific Westbound Conference The legality of those practices only

insofar as they affect the Port of Portland Oregon is to be determined

under the provisions of section 205 of the Merchant Marine Act of 1936

t

IThis decision willbecome thedecision of theCommission intheabsence of review thereof by the

Com mission Rule 227 Rules ofPractice and Procedure 46 CPR 502

227 334 26 F

C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 335

AND PRACTICES

46 U S C 1115 and sections 15 16 and 17 of the Shipping Act 1916

46 U S C 814 815 and 816

THE NATURE AND BACKGROUND OF THE PROCEEDING

On February 21 1975 the Port of Portland hereafter The Port or

POP an Oregon municipal corporation petitioned the Federal Maritime

Commission to conduct an investigation into the equalization and absorption

rules and practices of the Pacific Westbound Conference PWC or the

Conference claiming and complaining that those practices did constitute

an unlawful diversion of naturally tributary freight traffic from The

Port in violation of sections IS 16 and 17 of the Shipping Act and

were contrary to the policy expressed in section 205 of the Merchant

Marine Act

The respondent PWC is a steamship conference acting pursuant to

Agreement No 57 an agreement approved by the Commission under section

IS of the Shipping Act The geographic scope of the traffic served by

PWC and its carrier member lines is from United States and Canadian

Pacific Coast ports to Japan Korea Taiwan Siberia China Hong Kong

Thailand Indo China and the Philippines PWC relies upon Article 3 of

Agreement No 57 as its authorization to equalize and absorb As relevant

Article 3 provides

There shall be no absorption at loading or discharging ports

of rail or coastal steamer freights or other charges except

as may be agreed to

The petition focused on PWC s authority to engage in equalization and

absorption practices in particular and the manner in which PWC conducted

those practices in general

In particular POP contended that Article 3 is limited in its application

to rail or coastal steamer absorptions and that motor carrier absorptions

are not authorized an important distinction because motor carriage is the

inland transportation mode under primary attack by The Port the equali

zation rules in PWC s tariff should be construed to bar their application

to shipments carried by motor carriers exempt from the jurisdiction

of the Interstate Commerce Commission and that such equalization rules

are in effect per se unlawful because they permit equalization and absorp

tion of cargo away from POP where there is direct service adequate to

handle that cargo Generally POP alleged that PWC s equalization and

absorption practices cause an unlawful and harmful diversion of traffic

that would normally move through The Port to other ports in California

and Washington 2

2pop raised another facet of unlawful implementation at the hearing It contended that PWC was imple

menting the equalization rules of the Conference s tariff improperly either by way of making overpayments

Continued

26 F M C
336 FEDERAL MARITIME COMMISSION

j

PWC s tariff rules generally provide for equalization and absorption of

inland freight costs by PWC s member lines The rulespermit those mem

bers which do not serve a port either on a particular voyage or at all

to compete with other members and independent liMsproviding direct

service to that port and with independent lines which equalize and absorb

in like manner When transportation costs from an inland point to a port

not directly served by a member line are less than the costs of carriage

from the inland point to the port at which the member line calls the

equalization rules are likely to come into play

A typical equalization rule in PWC s tariffs contained the following

language 3

Equalization is the absorption by the ocean carrier ofthe difference

between the shipper s cost of delivery to the ship s tackle at

dock and port at which the lowest applicable common carrier

or contract carrier Rates excluding rates on any time basis apply

and cost of delivery to ship s tackle at termi al dock and port

of equalizing line Shipper s cost for inland transportation is to

be an amount that is not in excess of the cost computed at

the lowest applicable common carrier or contract carrier rates

Before going on with the narrative of events I believe it will be helpful

to pause as briefly as clarity permits to make some observations concerning

terms which are central to the issues in the proceeding Those terms

of course are equalization and its other forms equalize equalized

equalizing and absorption and similarly its oilier forms

In the past when there was no need to distinguish between those terms

both the Commission and the Courts used one to mean the other or to

include the other See eg North Carolina State Ports Authority v Dart

Containerline Company Limited 21 F MC 1125 1128 n 13 1979 afld

sub nom Dart Containerline Co v Federal Maritime Cmmission 639

F 2d 808 D C Cir 1981 hereafter Dart where the Commission said

The terms absorption and equalization tend to be used inter

changeably to describe diversionary activities The choice of termi

nology has little if any substantive significance in such matters

for equalization orby other noncompliance with those rules thus further Influencing the flow of traffic away

from The Port POP asked for a continued hearing to be devoted especially to the introduction of eviclence

of this malptl1Clice Althoulh not entirely free from doubt I construed the order instituting this proc ecding

to allow POP to address lhal Issue and authorized POP to take depositions and examine PWC documents

by way of additional discovery well after thehearing commenced After itconducted the additional discovery

POP orally requested that the special hearinl be canceled I Informed POP that if it forma1ly mlde tllre

quest in writing I would issue an order ruling that the question of PWC s

compliance with Its tarifrs equali

zation rules was no longer an issue to be litigated in this proceeding Aware of my intent Pop made the

request formally My order containing the indicated ruling ensued See Hearing Canceled Other Matters

served July II 1980

3The language appeared in Rule 16 of PWC s Freight Tariff No 3 Virtually the same rule appears in

PWC s Local and Overland Freight Tariff No II F M C No 19 which superseded and canceled Freight

Tariff No 3 effective January I 1979 at p 69 Rule 13 33 See also Rule 13 32 relating to transshipment

26 F M C
26 F M C

PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 337

AND PRACTICES

each of which must be examined on its own particular facts

See Intermodal Service to Portland Oregon 17 F M C lO6 132

1973

However in Intermodal Service to Portland Oregon at p132 there

is no reference to absorption vis a vis equalization Instead of ab

sorption another term is introduced transshipment In describing the

relationship of those two terms the Commission said

The distinction between transshipment and equalization is

one without a difference insofar as this proceeding is concerned

As we observed in Sea Land Service Inc v S Atlantic Carib

bean Line Inc 9 F M C 338 344346 1966equalization

and transshipment are merely variations on the common theme

of serving a port without directly calling there

It seems clear then that the Commission considers absorption trans

shipment and equalization to be mutually interchangeable terms Yet

there are distinctions as the Commission noted in Sea Land Service Inc

v S Atlantic Caribbean Line Inc hereafter SACL supra at p

345

Port equalization is accomplished in various ways In its simplist

form sometimes called equalization in contradistinction to

transshipment the carrier pays to the shipper or sometimes

to the inland carrier directly the amount by which the cost to

the shipper of overland transportation to the port of loading ex

ceeds the cost of overland transportation from the same point

of origin to the nearest port

Port equalization may also be effected through transshipment

marginal note omitted As used here transshipment refers to

the movement of cargo usually by land carrier in the water

carrier s name and at its expense from a dock or terminal at

the port where it is originally delivered by the shipper to the

water carrier to the dock or terminal at another port where it

is loaded aboard a vessel of the water carrier

Heretofore in the narrative I used the terms equalization and absorp

tion equalization and absorption interchangeably For the most part

and except where otherwise specified I will continue using those words

and another term substituted service synonymously 4

But this expla

nation does not exhaust the digression from the narrative because along

the way further refinements in terminology were introduced in the record

It became apparent at the outset of testimony at the hearing that without

a working definition distinguishing the terms equalization absorption

and transshipment the record would become a mass of confusion There

fore I

required POP to furnish an exhibit showing how it meant those

Also previously I used the tenns rules and practices interchangeably Inasmuch as PWC sprac

tices followits tariff rules see n 2 supra this usage will continue
338 FEDERAL MARITIME COMMISSION

tenns to be understood when they were used in testimony and exhibits

proffered by The Port Exhibit Ex 1 contains POP s definitions and

illustrations of the application of those tenns Although PWC was not

entirely satisfied with the accuracy of Ex I it abided by the contents

and the hearing proceeded on that basis These then are the working

definitions of those tenns when technical distinctions are made S

Equalization is defined as the process whereby the ocean carrier as

sumes the difference in the shipper s inland transportation cost from the

origin of the cargo to the port where the lowest common or contract

carrier rates apply and the ocean carrier s port of loading Equalization

is illustrated in this way

Seattle

Portland HOod River

5

Shipper pays inland carrier freight charges of 50 for actual transportation

to Seattle from Hood River Ocean carrier remits 45the difference be

tween the amount the shipper paid and the amount the shipper would

have paid 5 had the shipper used an inland carrier to carry the cargo

to Portland

Transshipment is defined as the assumption by an ocean carrier of

the inland transportation cost from the port the shipper has delivered his

cargo which is served directly by the ocean carrier to another port due

to an unusual occurrence requiring the ocean carrier to deviate from the

originally scheduled route which would have included the direct vessel

call to the first port Illustration

Seattle

1 50

Portland Hood River

5

Shipper pays 5 for inland transportation from Hood River to Portland

Ocean carrier which makes direct vessel calls at Portland elects not to

do so because of operational or other difficulty and transships the cargo

overland via inland carrier from Portland to Seattle at its own expense

instead

Note Transshipment is not under attack by POP in this proceeding

Absorption is defined as the assumption by an ocean carrier of the

inland transportation cost from the port area the shipper delivered his cargo

I have not altered the language of the definitions but I have made some editorial and other changes in

the illustrations Por example I have substituted Seallle for Oakland Nb the dollar amounts in the illustra

tions are arbilrary and do not purporlto show actual orproponionate values

26 FM C
26 EM C

PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 339

AND PRACTICES

which is not served directly by the absorbing ocean carrier to a port

the ocean carrier does serve directly IIIustration

Seattle

1 50

Portland Hood River

5

Shipper pays 5 for inland transportation from Hood River to Portland

Ocean carrier which does not make direct vessel calls at Portland has

inland carrier transport cargo to Seattle where it does call Ocean carrier

pays inland freight charges from Portland to Seattle

The petition engendered a series of informal and formal under section

21 orders procedures intended to resolve the issues raised by POP without

the necessity of a formal proceeding When those procedures failed to

accomplish their purpose the Commission instituted this proceeding by

Order of Investigation and Hearing Order served September 11 1978

Among other things the Order directed that the proceeding will be

governed by the precedents and guidelines established and set forth in

Council of North Atlantic Shipping Associations v American Mail Lines

Ltd 21 F M C 91 1978 hereafter CONASA and Board of Commissioners

of the Port of New Orleans v Seatrain International Port of New Orleans

21 F M C 147 1978 Under the authority ofthose decisions the Order

rejected POP s suggestion that section 8 of the Merchant Marine Act of

1920 46 U S C 867 be specified as a statutory section the violation

of which would be made an issue in the proceeding 6 The Order con

templated a hearing but without the necessity of a trial type hearing Instead

the record for decision would consist of new affidavits and memoranda

of law as well as the material submitted earlier under the informal and

formal procedures

The Order designated the following as the issues under investigation

1 Whether article 3 of PWC s basic agreement No 57 permits

equalization and absorption of motor carrier inland freight rates

and charges

2 whether PWC s equalization and absorption practices as they af

fect Portland are unlawful and detrimental to the commerce of

the United States and the general public interest or unduly preju

6The Commission explained its action as follows

While certain cargo may be naturally tributary to aport any naturally tributary zone surrounding

the Port is constantly changing and is determined by various factors including shipper needs and

cargo characteristics CONASA supra 21 F M C 94 But 8 does not require the Commis

sion to incorporate any specific concept of naturally tributary cargo into its Shipping Act consider

ations nor does it otherwise create substantive rights in Shipping Act proceedings Port of New

Orleans supra 21 F M C 152
340 FEDERAL MARITIME COMMISSION

dicial or unjustly discriminatory to Portland or to businesses and

individuals which depend on Portland s economic viability pursu

ant to section 205 of the Merchant Marine Act 1936 and sections

15 16 and 17 of the Shipping Act 1916

3 whether PWC freight tariff No 3 rule 16 violates section 205

of the Merchant Marine Act of 1936 and sections 15 16 and

17 of the Shipping Act 1916 by permitting equalization and

absorption of cargo away from Portland where direct service is

adequate to handle such cargo and

4 Whether pwe freight tariff No 3 rule 16 permits cargo being

equalized and absorbed to move on ICe exempt carriers

The Order designated POP as Petitioner PWC and its member lines

as Respondents and Hearing Counsel as a party Pursuant to provision

therefor in the Order Massachusetts Port Authority Delaware River Port

Authority Board of Commissioners of the Port of New Orleans and New

Orleans Traffic and Transportation Bureau Inc became intervenors on

a limited basis 7

Pursuant to the Order affidavits and memoranda of law were filed

After examining the new documents and reviewing the earlier submissions

the Commission issued a Report and Order of Further Investigation and

Hearing 8Further Order In it the Commission concluded that the record

was not fully developed on all the issues and that a further hearing was

necessary

The particular issues raised by POP were resolved by the Further Order

as amatter oflaw The Commission detennined that Article 3 ofAgreement

No 57 does allow equalization of inland motor carrier rates and cargo

9

that the equalization rules in PWC s tariffs are not unlawful per se 10

and that such equalization rules do authorize the transportation of equalized

cargo by Interstate Commerce Commission exempt motor carriers I I

The general ultimate issue expressed as a question Do PWC s Equali

zation and Absorption Practices as Applied to Portland Violate Sections

7

The Department ofTransportation of the United States intervened but did notparticipate

Paclfic Westbormd C01iference Equallllltlon Rules and Practices 21 F M C 937 1979

9Id 21 F M C 939 942

IOld 21 F M C 940941 942 The Commission explained at 941

Equalization 88 such is not illegal IIand a tariffthat allows for equalization therefore is not per

se illegal It is only the application of the tariff in a

particular manner that can be illegal The

legality of PWC s Tariff No 3 apart from its application does not present a separate legal issue

in this case Additionally the question of adequacy of Portland s serviceiot only one of the factors

to be considered under the CONASAguidelines and is not dispositive by itself of the legality of

an equalization For the foregoing reasons the Commission concludes that PWC s Rule 16 Tariff

No 3 does not in and of itself violate sections IS 16 or 17 of the Shipping Act 1916 or con

travene section 205 of the Merchant Marine Act of 1936 The question of the legal application

of the Rule still remains within Issue 8 supra If an illegal implementation of PWC s tariff were

proved then modification of the tariffto prohibit such implementation could be required

IISee CONASA 18 S R R at 779 Port of New OrleaRS 18 S R R at 770772 Stocbon

POri District v Pacific Westbound C01iference 9 F M C 12 20 1965 and Beall11lont Port

Commission v Sea rain Lines Inc WS M C 500 S04 1941

ld 21 F M C 941 942

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 341

AND PRACTICES

IS 16 or 17 of the Shipping Act 1916 or Section 205 of the Merchant

Marine Act of 19361 12 could not be resolved on the existing limited

record

From the outset POP s position on this issue was that any cargo as

to which The Port becomes the base port for an equalization to a more

distant port is naturally tributary to POP 13 Thus relying upon its percep

tion of an earlier Commission decision lntermodal Service to Portland

Oregon 17 F M C 106 1973 POP contended that any absorption of

inland freight charges on cargo which would otherwise move more cheaply

to POP than to any other port constitutes an unlawful diversion per se

unless it can be shown that The Port s facilities or service are inadequate 14

Although the order instituting this proceeding specifically directed POP

to describe the area which should be considered naturally tributary to POP IS

POP s submission in the form of an affidavitmemorandum from Mr

Mowat again did not address this question POP maintained instead that

PWC has the burden of proving its practices to be legal I6

Recognizing that POP was taking its position on very narrow ground

in relying on lntermodal Service to Portland Oregon supra and was

ignoring the fact that this case was substantially expanded in the Commis

sion s CONASA decision 17 the Commission stressed that the ultimate

issue would continue to be governed by the concept of naturally tributary

cargo which the Commission enunciated in CONASA supra and Port of

New Orleans supra

IS Accordingly the Further Order restricted the hearing

to consideration of the following components of the ultimate issue 19

I Whether and to what extent the equalization and absorption prac

tices of the Pacific Westbound Conference cause cargo which

would ordinarily move through the Port of Portland to move

through ports other than Portland

2 Does the diversion of cargo described in issue 1 if any cause

significant economic harm to the Port and the local economy

ofPortland and

d 21 F M C 939 940 In n 10 supra this issue was identified in shortened fonn as Issue B

supra

t

13ld 21 F M C 939 n 4 pop was required by asection 21 Order issued after POP s petition was filed

to describe in detail the area it believed to be naturally tributary POP did not describe aspecific area

but made the assertion that naturally tributary usually was a function of distance instead Under POP s

theory see n 14 infra the function of distance is reflected by the difference between the lower cost of

inland transportation from point of origin to base port on the one hand and the higher cost of that transpor

tation from point of origin to port of loading on the other hand See e

g Transcript Tr p

1106

d 21 F M C 939 See Testimony of Milton A Mowat POP s Traffic and Regulatory Affairs Manager

at Tr 395 There Mr Mowat defined nalurally tributary territory a the territory or area where the

inland freight rates from origin to Portland are less than the inland freight rates from origin to where the

equalization orabsorption is being made and see also POP opening brief at p 13 for areaffinnation

by POP of the contention referred 10 in the lext above

Order p 6 par I ltem No I

I Further Order 21 F M C 938 n 3

d 21 F M C 939

81d 21 EM C 938 939940

191d 21 EM C 942
342 FEDERAL MARITIME COMMISSION

J

3 If the equalization and absorption practices of the Pacific

Westbound Conference do cause significant economic hann to

Portland are they nonetheless reasonable and justified

Acknowledging that these elements could result in a massive record

which might become unmanageable unless further perimeters were estab

lished the Commission structured the proceeding by limiting the 201 intro

duction of additional evidence to the following 20

A For the years 1977 marginal note omitted and 1978 the informa

tion described in the first ordering paragraph of the Commission s

April 14 1978 section 21 order but only as to the ten most

important cargo commodities in terms of gross revenue to the

Port of Portland carried by the Pacific Westbound Conference

in 1978

B For the years 1977 and 1978 as to the ten commodities described

in paragraph A the amount of equalization paid by the Pacific

Westbound Conference and the basis for such equalization pay

ments marginal note omitted and

C Affidavits or if considered necessary by the Administrative Law

Judge depositions concerning the following matters but only

to the extent that these affidavits or depositions relate to the

ten commodities described in paragraph A and then only to the

extent that they relate to shipments occurring in 1977 or 1978

I Natural geographical or economic conditions of inland trans

portation which favor or impede movements through the Port

ofPortland

2 The ability of the Port of Portland to meet the needs of

shippers such as timeliness of shipments and special cargo

handling facilities

3 The extent to which equalization payments as opposed to

other factors induced shippers to move their cargo through

a port other than Portland

4 The extent if any to which Portland s ability to meet shipper

demand was limited by the level of port calls of members

ofthe Pacific Westbound Conference

5 The amount of net revenue lost by the Port of Portland

as a result of cargo diversion caused by equalization pay

ments and the effect of such loss on the local economy

ofPortland and

6 The methods and scope of cargo solicita i n employed by

Portland Seattle Los AngelesLong Beach and the Pacific

Westbound Conference to the extent considered relevant by

the Administrative Law Judge

Z021 F M C 942 943

T
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 343

AND PRACTICES

D Affidavits or if considered necessary by the Administrative Law

Judge depositions concerning the following matters but only to

the extent that they address time periods after Dece ber 31 1976

1 The cost to member lines or the Pacific Westbound Con

ference as a whole of providing direct service to Portland

with various amounts offrequency

2 Operational difficulties or other transportation factors bearing

upon the ability of the Pacific Westbound Conference to

provide increased direct service to Portland

3 Competitive conditions of carriers in the westbound trade

affecting the ability of the Pacific Westbound Conference

to increase its direct service to Portland and

4 The economic feasibility to the Pacific Westbound Conference

of serving Portland via feeder vessels to other ports

In addition the Further Order continued to limit intervenors to the submis

sion of memoranda of law at the close of the evidentiary hearing The

Port Authority of New York and New Jersey intervened on this basis

However another intervenor the Port of Seattle POS was given permis

sion to participate fully

After extensive prehearing discovery and after a twoday prehearing con

ference at Washington D C on June 19 and 20 1979 the hearing com

menced in Portland Oregon on January 22 1980 and it continued until

adjournment on February 1 1980 The hearing resumed at Portland and

continued there from March 11 through March 27 1980 when it adjourned

again Thereafter there were sessions at Washington D C from May 13

through May 22 1980 at San Francisco California from October 14

through October 22 1980 and again at Portland on March 24 and March

25 1981 Altogether there were 39 days ofhearing The hearing produced

5 374 pages of transcript Tr and 161 numbered exhibits 21 There were

twenty five witnesses 22

The briefing schedule called for the filing of opening and reply briefs

by POP and Hearing Counsel and opening briefs memoranda of law

by all intervenors except POS Answering briefs were to be filed by re

spondents and POS Under that schedule POP filed an opening brief of

194 pages and a reply brief of 11 pages Hearing Counsel filed an opening

brief of 63 pages and a

reply brief of 18 pages Delaware River Port

Authority filed a brief of 5

pages The Port Authority of New York and

New Jersey filed a brief of 16 pages PWC filed a brief of 339 pages

American President Lines Ltd APL a member of PWC filed a brief

of 66 pages Sea Land Service Inc another PWC member filed a brief

of 16 pages POS filed a brief of 64 pages

2 Not all numbered exhibits were received in evidence E g Ex 133 for identification was rejected See

Hearing Canceled Other Mailers supra at n I

22A list and description of witnesses appears in Appendix A

l t 1 r
344 FEDERAL MARITIME COMMISSION

FACTS

Separate proposed findings of fact were submitted by POP and Hearing

Counsel in their opening briefs and by APL and Sea Land in their answering

briefs PWC s answering brief contains its own and POS joint proposed

findings of fact Generally my findings have been organized to follow

the numerical sequence of the PWcPOS joint proposa123 To the extent

that the findings do not explicitly incorporate particular proposed findings

the latter have been rejected as incorrect immaterial argumentative or

conclusory or otherwise not required for full consideration and complete

disposition ofthis case 24

A GENERAL

1 The trade served by PWC is served also by independent nonconference

lines which compete in the trades with each other and with PWC members

According to a United States Department of Commerce statistical study

of all the regions examined the North Pacific Region trade of which

the PWC trade is a part shows the most significant overall growth in

recent years and this growth is expected to increase 2S To meet this antici

pated growth at least one carrier Sea Land intends to increase its 1981

and 1983 carrying capacity by 20 over 1979 levels The competition

in the PWC trade continues to be as intense as it was in 1977 and 1978

although some carriers have left the trade26 while others have curtailed

service as of the close ofthe record 27

2 Using POP as the basing port for the application of equalization

or absorption the ten most important commodities equalized or absorbed

by PWC members in 1977 and 1978 were apples canned com dried

peas and beans frozen com hides lumber meat and bone meal metal

scrap onions and wastepaper In 1977 these commodities accounted for

87 of the total tonnage equalized by PWC carriers All of this cargo

was containerized See Appendix C showing the number of tons and the

23The joint proposa1 is the most extensive and detailed numberins 214 items spread over 206 pases

APL s has 71 items contained in 20 pases of type smaller in size than the type used by the other panies

Sea land s 7 items appear on 7 pases Hearins Counsel s number 103 coverina 27 pases pop presented

22 proposals in 13 pases preceded by 136 pases of a Summary of Evidence The process must sian

somewhere and thejoint proposal is the mostuseful tool for the task

24PWC requests that each of the joint PWClPOS proposed findinss be adopted or that a reason be siven

and record references cited as to why a proposal is not adopted or why it is amended It invokes the Adminis

trative Procedure Act S U S C SS7 c and the Commission s Rules of Practice and Procedure 46 C P R

S02 22S as authority for their request Neither of those authorities support PWC s broad assenion PWC does

not sunest that the sameconsideration be siven to the proposals of the other panies Even if they had good

decision makinS scarcely requires a

srain by srain siftins of so massive a record as exists inthis proceedins

All that is required is adetermination unmistakeably informins the panies of the rulinss See Mediterranean

Pools Investgatlon 9 P M C 264 267 1966

2STonnase is expected to increase from 70 million in I97S 10 199 million in 1990

26 States Steamship Co Knutsen Line Phoenix Container Line PCL RoLa Pacific and Asia America

Line

2

Par Bast Shippins Co FESCO YanS MinS Line and Eversreen Marine Line

aCC l
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 345

AND PRACTICES

number of containers equalized and absorbed by PWC members in 1977

and 1978

3 Whatever may have been the case in the past 28 the PWC trade

is a weight trade rather than a measurement trade In a measurement trade

vessels tend to exhaust their cubic capacity before reaching their deadweight

limit Because it is just the opposite in a weight trade weight capacity

of a vessel is usually of more concern than space utilization As a general

rule then container slot capacity is not the appropriate yardstick for actual

vessel carrying capacity in the PWC trade This means that a carrier which

is engaged in a weight trade may have actual carrying capacity lower

than the designed container slot capacity Each of the ten most important

commodities except onions runs to weight rather than measurement

4 A vast number of commodities are carried outbound from the Pacific

Northwest in breakbulk or quasi breakbulk vessels Nevertheless some of

these low rated commodities like woodpulp lumber and woodchips are

capable of being containerized Consequently container ship operators view

these commodities as being opportunity cargo and will compete for them

if their ships have not reached capacity Most outbound container cargo

is carried in 35 or 4O foot containers Very little of the ten most important

commodities is carried in 20 foot containers 29

5 Agricultural cargos moving from Southern Washington and from Or

egon are subject to seasonal variations causing peaks and valleys in shipper

demand for cargo space This is mostly true for onions 30 and apples

but there are also cyclical movements of wastepaper metal scrap and

dried peas and beans Because apples require refrigerated containers the

seasonal demands 31 strain the supply of available containers and shortages

result throughout the Pacific Northwest POP is particularly susceptible

to shortages in both refrigerated and dry cargo containers because of an

imbalance in its inboundoutbound container trade Far fewer containers

are received at POP inbound than are needed for outbound movements

28Cf Pacific Westbound ConferenceWastepaper and Woodpulp From United States West Coast to Far

East 17 SRR 929 959960 J D 1977 rev 21 F M C 834 1979 rev sub nom National Associotion

of Recycling Industries Inc v Federal Maritime Commission 658 F 2d 816 D C Cir 1980

29 Hearing Counsel s witness Mr Jay Copan showed that of the 4855 containers equalizers by PWC mem

bers in 1977 and 1978 only 121 were 20 footers Of that number 44 carried peas and beans and 77 carried

hides See Ex 37 rev identical to Ex 95 sehed 3 Mr Copan is an economist on the Commission s staff

30 In 1977 and 1978 the Japanese Six Lines were forced to refuse cargo because of extensive onion car

riage

31 Improving technology has extended the apple shipping season but because the earliest shipments after

harvesl command the highest prices shippers try to rush to market causing apeak demand for space

f FMr
346 FEDERAL MARITIME COMMISSION

B THE PARTIES

IPOP

a Geographic and Physical Details

6 POP s municipal district is comprised of Oregon s Multnomah

Clackamas and Washington Counties In addition to marine terminals The

Port operates Portland International Airport a commercial airport two

general aviation airports a ship repair yard a dredge a tugboat and two

industrial parks as a single integrated economic unit32

7 POP is located geographically at the confluence of the Columbia

and Willamette Rivers about 101 miles upstream from the Columbia River

bar near Astoria Oregon

8 POP operates five marine terminals which in 1978 had twenty

nine berths perhaps thirty but a tally of those shown in Ex 23 pp

610 comes to twenty nine including seven container berths The principal

container terminal is the John M Fulton Terminal 6 which is situated

on the Columbia River 33 It has three berths two for containers and one

for automobiles Terminal 6 is a sixty six acre facility with an 1800 foot

dock housing the two container berths Supporting equipment includes three

50 ton capacity container cranes four 45 ton capacity transtainers sixteen

tractors forty eight chassis one 40 ton top loader mobile container handler

and one 15 ton mobile empty container side loader Terminal 6 has a

60 000 square foot container freight station and immediately adjacent to

this terminal is a 200 000 square foot warehouse One fifth of the ware

house s space is available for United States Customs bonding Plans to

expand Terminal 6 to include a 1050 foot berth extension additional paving

in the container yard and additional support equipment were approved by

The Port s Commission Completion was scheduled for October 1981

Terminal 1 is a six berth complex on the west bank of the Willamette

designed primarily for breakbulk container combination vessels and ocean

barges It has more than 200 000 square feet of warehouse space for storage

of breakbulk cargo

Terminal 2 lies on the west bank downstream from Terminal 1 It

has six berths two for container vessesl one for ro ro ships and three

for breakbulk and combination vessels It has a 450 000 cubic foot cold

storage warehouse which can hold 50000 boxes of fresh fruits and vegeta

bles at 32 OF Support for the container ship operation includes two Hitachi

container cranes of 40 and 50 ton capacity a 50 ton capacity gate truck

scale a 90 651 square foot container freight station and 15 acres of container

yard area

32B g funding for POP s John M Fulton Terminal 6 a recently built marine container complex came

from airport revenues

33The Japanese Six Lines operate from Terminal 6

26 FM C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 347

AND PRACTICES

Terminal 4 has thirteen berths It is located on the east bank of the

Willamette five miles downstream from Terminal 2 Terminal 4 has a

two berth container facility preferentially assigned 34 equipped with a 33

ton capacity Hitachi container crane and 109 921 square feet of intransit

space The other berths are for automobile grain breakbu1k ships and

tankers

Terminal 5 is POP s newest one and is located on the east bank of

the Willamette two miles downstream from Terminal 4 It has one berth

to service a grain elevator

POP is served by three railroads about 34 motor carriers and by Colum

bia River barges

b Traffic and Cargo at POP

9 Measured by tonnage short tons moving through United States West

Coast ports annually POP is the third largest Pacific Coast port and the

largest in the Pacific Northwest In export tonnage POP is the largest

port handling about one third more than its nearest competitor As is true

of the entire Portland harbor area including facilities other than POP

bulk and bulk type cargo make up most of paP s tonnage both inbound

and outbound Grain automobiles steel and lumber are some of the leading

examples of bulk and bulktype cargo moving through POP

The tonnage volume at POP has been increasing since POP s fiscal

year 1971 1972 In that year 1456 917 tons of commodities other than

grain were handled in fiscal 1978 1979 2 57941 tons were handled

In the earlier fiscal year grain 35 tonnage was 956 948 and in 1978

1979 grain tonnage reached 2 691 932 tons 36 In 1978 overall tonnage

was the greatest in paP s history until that time even exceeding mid

range forecasts made by POP through 1985

10 The other facilities in the Portland harbor area combined handle

far more tonnage than does POP individually

II A comparison of statistics compiled by the Bureau ofCensus shows

that in 1978 foreign commerce dry tonnage moving through Portland harbor

area facilities exceeded similar tonnage moving through Seattle harbor area

including paS facilities by more than 4 000 000 tons

12 Export grain tonnage at POP shows an increase from 1 169 000

tons in 1975 to 3 526 000 tons in 1979 paP s 1978 grain tonnage was

about half of that flowing through the other Portland harbor area ports

13 POP handles almost all the import automobile tonnage in the Portland

harbor area From 63 000 tons in 1975 and 254 000 tons in 1978 automobile

3

1t is assigned to Matson Navigation Co acarrier primarily engaged in the Pacific Coast Hawaii Trade

POP intends to have Matson use Terminal 6 when the planned expansion is completed

3SGrain includes wheat and barley

36Portland harbor area tonnage in that year was nearly double that of POP

PMC
348 FEDERAL MARITIME COMMISSION

tonnage increased to 274 000 tons in 1979 POP forecasts still more in

creases by 1985

14 POP is a major forestry product 37 export port Two of those products

lumber and logs are expected to decline markedly in tonnage in the 1980 s

because of a variety of economic competitive and regulatory reasons Ton

nage declined from 1975 to 1978 but increased in 1979 above 1975 s

level

15 POP s

import steel tonnage increased from 263 000 in 1975 to

431 000 in 1978 and 443 000 in 1979 This amounted to about 80 percent

of Portland harbor area tonnage

16 Non grain bulk dry and liquid tonnage increased from 346 000 tons

in 1975 to 389 000 tons in 1978 and 542 000 in 1979 POP forecasts

further increases in this tonnage by 1985

17 POP is a major breakbulk general cargo port 38 Despite the trend

to containerization of many commodities formerly carried as breakbulk

cargo by common carriers by water inbound and outbound breakbulk ton

nage increased at POP from 1975 to 1979 by about one third but there

wasan outbound tonnage decrease below 1975 levels in 1978

18 This finding merits emphasis POP did not enter the container busi

ness to any great extent until about 19701971 well after POP s Northwest

rival port POS had established itself as that region s container load

center In stressing this finding I am mindful that in Dart supra the

Court of Appeals criticized the finding of the Administrative Law Judge

which focused upon a commodity movement prior to the institution of

container service at Wilmington the complaining port in that case The

historical details in the case at bar are much different than those in Dart

involving as they do the traffic patterns of inland and ocean carriers

which load centers spawn rather than the movement of a single commodity

at a

relatively small port Anticipating the growth potential of containers

POS committed itself to make the investments in capital improvements

necessary for container operation in the 1960 s As a result Seattle which

in 1959 was handling half the tonnage which flowed through that port

37 Porestry products include lumber logs and plywood among other commodities

38 In its Overview of This Proceeding PWC s answering brief pp 12 26 PWC warns of factual errors

in POP s opening brief which PWC characterizes as lacking in integrity In the same breath PWC assures

that its own brief does nOl distort therecord Unque8tionably the process of fact finding is aided measurably

by particularizing errors to be found in 8tatements made by anOlher party It i8 regretlable that POP disdained

from doing so although it was given the opportunity by way of reply brief POP preferred instead to ex

cept generally to the proposed findings and conclusions opposed to those enunciated in its opening brief

POP reply brief p 2 Nevertheless PWC s characterization serves no useful purpose in the process More

over despite finical attention to detail PWC is not itself immune from making factual mistakes Por exam

ple in its proposed finding 17 PWC says Portland is the largest breakbulk general cargo port on the West

Coast Mowat Tr 1189 This may be true of POP but the testimony at Tr 1189 does not support the

PWC claim Tr 1189 shows this

Line 16 Q by PWC Is Port of Portland the biggest breakbulk port on the U S West Coast

Line 18 A Mowat I don t know

Line 19 Q Do you know of any port with a

larger breakbulk tonnage

Line 21 A I don t know

I Cur
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 349

AND PRACTICES

in the 1920 s handled 2 400 000 short tons of container cargo in 1977

and 2 774000 tons of such cargo in 1978 This was a proportion of more

than 4 to 1 and 3 6 to 1 better than POP in those respective years

Nevertheless as that ratio shows despite its late entry into the field

paP s container operations are increasing absolutely as well as relatively

From its infancy in 19701971 POP s container business was described

by POP witnesses as a banner year in 1979 and as a thriving business

These figures show why

POP Container Tonnage

975 977 978 979

Outbound 380 940 486 557 558 886 639 366

Inbound 139 867 176 825 210 761 228 043

Total 520 807 663 382 769 647 867 409

19 PWC s proposed finding 19 is rejected Without belaboring the accu

racy of some of the statistics therein most of what PWC says is strained

speculation A conclusion which PWC proposes that 19 1 percent is about

the same proportion as 14 6 percent is unacceptable

20 The value of cargo moving across POP docks increased by 44 8

percent in fiscal 1978 1979 over the previous fiscal year This was the

greatest dollar value increase among the nation s

leading ports

c Service at POP in the Trade Served by PWC

21 At varying times and with varying frequency in 1977 ten PWC

carriers 39 and three non conference independents loaded outbound containers

at POP Similarly in 1978 ten PWC carriers and six independents per

fonned that service at POP Of the PWC members only the Japanese

Six and of the independents only Far East Shipping Co FESCO and

Orient Overseas Container Line OOCL were major container carriers in

the export trade 40

In 1977 the Janese Six made 71 vessel calls at POP loading 21 750

TEUs of which 18 639 were full or loaded In that year FESCO made

36 calls loading 2 661 TEUs 2 535 loaded and OOCL made 27 calls

loading 3 557 TEUs 3 176 loaded In 1978 the Japanese Six made 70

calls loading 23 258 TEUs 22 210 loaded FESCO made 44 calls loading

4 160 TEUs 4 109 loaded OOCL made 23 calls loading 2 848 containers

2 822 loaded 41

39 Six of the ten were the Japanese Six Lines made up of Kawasaki Kisen Kaisha K Line Japan Line

Yama hita Shinnihon Y S Mitsui OS K OSK Showa Line and Nippon Yusen Kaisha NYK

4OContainer carriage is often measured by TEUs TEU is an acronym for trailer container equivalent

units The basic unit is a20 foot container A 4O foot container is counted as 2 TEUs

41 Comparable statistics for other carriers during those years were

1977 For PWC APL made 5 vessel calls loading 12 TEUs Ea t Asiatic Company EAC made

II calls loading 334 TEUs including some empty containers Knutsen made 23 calls loading 127

Continued

f PMr
i

350 FEDERAL MARITIME COMMISSION

Altogether in 1977 339 056 container tons of cargo were loaded at

POP The PWC carriers loaded 262 464 tons including the Japanese Six s

229 992 tons FESCO carried 34 130 tons and OOCL carried 40 884 tons

In 1978 the total tonnage at POP was 371 759 The Japanese Six carried

265 555 of the 277 666 loaded by PWC members FESCO carried 50 101

tons and OOCL carried 33 931 tons

The Japanese Six call at POS and Vancouver before they call at Portland

in the outbound PWC trade 42 The Japanese Six ships are full containerships

which sail about every 4 or 5 days and call directly at Japanese ports

only They do provide transshipment or feeder services on other vessels

to Hong Kong Manila Busan and Taiwan They averaged 319 TEUs

loaded and unloaded per vessel call for the years 1977 1978 The Japanese

Six provided virtually all of the refrigerated container service at POP in

1978 Neither Evergreen OOCL nor FESCO carried refrigerated containers

in that year However the Japanese Six provided basically no refrigerated

service between Portland and Hong Kong via their feeder services 43

EAC PWC member called at both POP and POS every 14 days during

1978 serving Manila and Bangkok Its vessels are semi containerships hav

ing a slot capacity of 4006 TEUs including 88 refrigerated TEUs per

vessel

Knutsen PWC member also served POP and POS fortnightly calling

at Hong Kong and Manila with semi containerships having TEU capacities

ranging from 276 to 804 44

States Line PWC member until June 20 1978 independent thereafter

called at POS and POP providing 3 sailings a month to Keelung and

Manila in semi containerships with a capacity of 214 TEUs each It also

served POS with rolro vessels having capacities of 830 TEUs The rot

ro vessels off loaded at Kobe Kaohsiung Hong Kong and Busan

Among the independents in 1978 FESCO provided two 10 day services

from POP and POS to Japan and Hong Kong loading first at POS

Its vessels were semi containerships 368 TEUs or full containerships 800

TEUs

TEUs including empties and Stales Line made 24 calls loading 353 mus including empties the

other independent Scindia made 12 calls loading 10 mus

1978 For PWC APL made 3 calls loading 29 mus EAC made 19 calls loading 406 TEUs

including empties Knutsen made 24 calls loading 5SS TEUs including empties and States Line

first half of year made 12 calls loading 25 I mus mostly empties for the independents Bver

green made 6 clllls loading 689 TEUs 68S loaded while the remainder Scindia Shipping Cor

poration of India SCI and States Line second half of year made atotal of 18 calls and loaded

203 containers

Note The containers lifted by BAC in 1977 and 1978 went to non PWC as well as PWC destina

tions

42pop in its proposed finding 7 states that most of the carriers serving both POS and pop had faster

transit times crossing the Pacific to the Far Bast as POP was the last pan of call for those carriers To

the extent that POP implies that direct transit time to Far Bast destinations is less from POP than from POS

POP s

proposed finding is misleading To most Far Bast pans the transit time directly from POS is less

than it is directly from POP

43Copano Bx 95 p 46

44 Knutsen also served non PWC destinations withthese vessels

PM
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 351

AND PRACTICES

OOCL in 1978 had fortnightly sailings from pas and POP to Japan

Taiwan Korea Manila and Hong Kong Its vessels had a capacity of

373 TEUs each 45

Evergreen which was serving pas started to serve POP in October

1978 making six sailings that year Its 866 TEU capacity vessels called

at Osaka Busan Keelung Kaohsiung and Hong Kong

For FESCO and the Japanese Six POP was the last West Coast port

of call for vessels going to the Far East

22 To a greater extent than is true of the PWC trade in general 46

or the PWC Northwest trade in particular ships sailing from POP to

PWC destinations tend to reach operating weight capacity before exhausting

their TEU or slot capacity For example APL s Pacesetter class of

containerships which operate between pas and the Far East 47 have a

design capacity of 1 482 TEUs Yet their average inbound capacity was

about 1 364 TEUs and their average outbound capacity was only about

1 016 TEUs because of stowage and other limitations and factors weight

usually being the primary one Sea Land s experience is similar Its contain

erships call at pas and Oakland on Far East voyages

48 and reached inbound

capacity at 1 184 TEUs and outbound capacity at 1 050 TEUs Thus the

mere fact that some vessels including those of the Japanese Six Lines

may sail from POP to PWC destinations with unused slot capacity fails

to establish that additional containers could have been carried on those

vessels

paP s Summary of Facts at p

103 et seq contains an extended

presentation concerning the Japanese Consortium Capacity at Portland

presumably as support for POP s proposed finding No 8 Together the

presentation and proposed finding imply that but for equalization and ab

sorption by Sea Land and APL via pas e g

in 1977 and 1978 of 69 000

tons of top ten cargo equalized away from the POP base by APL

all but 550 tons of apples sailed from paS most if not all of the

equalized cargo would have been accommodated at POP by vessels mainly

those of the Japanese Six Lines sailing from there with unused TEU

capacity This finding rejects paP s suggestion

Mr Seiichi Hirano was PWC s chief witness with respect to the cargo

carrying capacity of the Japanese Six Lines He is the West Coast genera

manager of one of those lines and testified on behalf of all of them

Mr Hirano is a well qualified witness with many years of experience

in managing and supervising carrier operations The upshot of his testimony

is that during the years 1977 and 1978 even though design capacity may

not have been reached the Japanese Six Lines vessels operated at or

near their actual carrying capacities giving consideration to the various

OOCL wa providing substituted service from pop to POS when Mr Copan testified

46 See No 3 supra

47 APL has other services inthe PWC trade which operate between California ports and the Far Ea t

Sea Land also has anotherservice solely between Calfiornia ports and the Far East

7 PM r
352 FEDERAL MARITIME COMMISSION

factors affecting the relationship between design and realistic capacity In

cluded in this consideration in addition to the weight factor were matters

of cyclical and peak demand deck stowage trim and stability overstowage

equipment availability booking and cargo readiness and transshipment

On cross examination and through its own witnesses Mr Mowat and

an employee supervised by him a transportation and pricing specialist

pop sought to discredit Mr Hirano and his testimony POP succeeded

in showing that on occasion hatch cover limitations may have been exceeded

by a Japanese carrier and it made some other minor points in regard

to Mr Hirano s

testimony but neither on crossexamination nor through

its own witnesses who were not qualified in vessel operation and stowage

did POP succeed in detracting from Mr Hirano s credibility or the worth

of his testimony

d POP s Revenues

23 The following shows POP s gross revenues from all operations con

ducted by the Port and from marine operations only during recent fiscal

years

49

1974 so 1976

Marine 000 omitted

All 000 omitted

18 596

27 580

1975

18 698

29 617

24736

36 522

1977

26 533

39 133

1978

26 704

40 224

Correspondingly gross revenues from marine terminal operations a part

of marine operations also increased during those years as follows

1974 1975 1976 1977 1978

Marine Tenninal

000 omitted 11 686 12 115 16 651 18 147 20 486

24 The portion of marine terminal revenues derived by POP from con

tainer operations from available full fiscal year statistics were

1976 1977 1978

Container operation revenues

000 omitted 6956 6 332 8212

49The Pon s fiscal year belins on July I and ends on June 30 E Ifiscal year 1974 belins July I 1974

and ends June 30 1975

50PWC POS proposed findinl No 23 cites Eu 5661 as authority They propose that for 1974 pop

had lross marine revenues of 18 596 825 and sross revenues from all operations of 32 100 710 PWCIPOS

are inconsistent in their references Ex 57 shows the comparable respective figures to be 20 701 394 and

32 100 710 Ex 58 shows them to be 18596 825 and 27 580 144 I have relied on Ex 58 the Pon s

annual repon because all other statistics in this findinl came from other pop annual reports

Cl r
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 353

AND PRACTICES

25 and 26 Through fiscal 1978 POP s gross revenues from all operations

from all marine operations from marine terminal operations and from

marine terminal container operations were on the increase

e The Impact of POP s Marine Terminals on the Portland Economic

Community

27 Back in 1976 POP was considering additional improvements to

insure maintenance of a competitive position with respect to other West

Coast ports To assist it in the overall evaluation of proposed capital

projects POP retained an economic consulting firm Economic Research

Associates ERA to analyze the community economic impact of the Port s

marine terminals ERA described the analysis it performed in these terms

The intent of the impact analysis has been to quantitatively as well

as qualitatively assess the importance ofthe Port s Marine Terminals oper

ations to the Portland region during 1975 51 The area under study included

all of the State of Oregon but it also focused on the Portland Vancouver

Standard Metropolitan Statistical Area SMSA comprised of Clark County

Washington and the Oregon Counties ofClackamas Multnomah and Wash

ington

The testimony of Messrs Lyon and Krekorian including an updated

version of the ERA analysis prepared for this proceeding and testimony

given by Dr Ernest Nadel of Manalytics Inc an economic consulting

firm hired by PWC and POS constitute the expert evidence concerning

the economic effects of the PWC equalization and absorption rules on

the business community and economy ofthe Portland area

28 ERA s analysis is based upon the concept that there are three types

of economic impact on the community due to marine terminal operations

The three are direct indirect and induced impact Generally despite wide

disagreement concerning methods details omissions and the like the PWC

POS economic exercise utilizes ERA s assumptions about impact although

it reaches different conclusions It would be helpful to explain certain

aspects of the three types

29 Under the ERA analysis direct impact consists of the value added

portion of gross revenues directly generated in the study area Gross reve

nues include those received by POP other vessel expenditures and gross

revenues paid to inland carriers moving cargo to and from the Port Value

added consists of those gross revenues less the cost of goods sold federal

taxes and savings 52 The shipping activity related categories included in

the 1976 study were vessel disbursement crew expenditures marine insur

ance and international banking inland transportation and miscellaneous port

SIEx 90 Community Economic Impact Of The Marine Terminals Of The Port Of Portland Volume I

Impact Analysis Prepared For The Port Of Portland May 1976 Forward p ii The analysis was conducted

under the supervision of Messrs Richard K Lyon and Gene P Krekorian They were assisted by aPOP

coordinator Donald Grigg on a

day to day basis

52This is asimplified picture according to Mr Lyon Tr 2076
i

i

J

354 FEDERAL MARmME COMMISSION

services The vessel disbursement category is the one which covers POP s

claim of lost revenues due to PWC s tariff rules Overall vessel disburse

ments constituted 43 percent of direct economic impact Inland transportation

accounted for 39 percent of economic impact But those two percentages

concern all kinds of cargo For containerized cargo vessel disbursements

amounted to 29 percent of direct economic impact while inland transpor

tation amounted to 50 percent ofdirect economic impact 53

It is fair to mention at this time that in preparing its updated analysis

for this proceeding ERA was instructed by Mr Grigg to factor out

inland transportation and other items which POP considered to be eco

nomic impacts not applicable in this case 54 ERA s witnesses complied

with POP s instructions

30 55 The 1976 analysis showed the direct impact on the entire study

area Oregon and Clark County Washington to be 47 586 000 It would

be consistent with Mr KrekOl ian s

testimony to update that amount for

1978 by reflecting a66 percent cargo increase and a 25 percent inflation

increase Thus in 1978 the direct impawt for the entire study area would

be 98 740 000 of which 38 508 000 39 percent would constitute the

direct impact of inland transportation for all cargo moving through the

Port But because ERA allocated only 85 3 percent of direct impact to

SMSA the impact on the SMSA would be 84 225 000 of which

32 848 000 would be attributed to inland transportation for all cargo

31 The second type of impact is indirect and is measured by two

components One is represented by port UsefS and is expressed in terms

of value added employment and payroll Value added is defined by ERA

as the difference between the value of goods and the cost of materials

necessary to produce them The other component is represented by govern

ment agencies whose services are port related Unlike value added the

level of the government agencies component dqes not vary with tonnages

handled by the Port According to the 1976 study 98 percent of indirect

impact is attributable to the first component In 1975 130 190 000 was

apportioned to value added and the total was 133 070 000 Using the

same updating factors applied in No 30 supra for 1978 indirect impact

would amount to 276 120 000 In 1975 ERA allocated 504 percent to

SMSA or 67 060 000 The comparable SMSA amount for 1978 would

then be 139 164 000 By applying the 98 percent factor port user value

added indirect impact for 1978 would be 136 381 000

53 PWC implies that all of the 50 percent derives from motor carrier operations citing Ell 90 Table 11I

12 My own calculations of relevant material in Chapter III of that exhibit lead me to find that motor carrier

revenues are 84 percent of inland transportation Thus motor carrier revenues would constitute 42 percent

of direct economic impact

54 Ex 77 Letter dated December 18 1979 from Mr Grigg to Mr Lyon

In thilt finding I substituted the amount shown in Ex 90 p VI 3 Table VI I

forthe amount proposed

by PWClPOS 88 the base figure to be U8ed in making calculalions Thus I U8ed 47 586 000 instead of

65 344 000
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 355

AND PRACTICES

32 The third type is induced impact It is a calculation based upon

a mathematical technique designed to approximate the effects of secondary

tertiary and further rounds of spending respending in the stuoy area

and the SMSA of portions of gross revenue in determining direct and

indirect economic impact The 1976 study found the induced impact to

be 229706 000 in 1975

33 For the Port s marine terminal activities asa whole the total of

the three types of economic impact on the entire study area for 1975

was found by ERA to be 410 400 000 of which 233 800 000 was alloca

ble to SMSA56 Updating these figures to 1978 to reflect cargo growth

of 66 percent and inflation of 25 percent the total 1978 economic impact

of the Port s marine terminal activities under the ERA methodology would

be 485 135 000 for SMSA and 851 580 000 for the entire study area

The application of the ERA economic impact analysis to the findings in

this proceeding will appear later

34 For 1978 the total gross personal income for SMSA was

10 420 000 000

f Pricing of POP s Services

35 POP is an operating port This means that it does not allow others

to perform port services as a landlord port would but performs those

services such as stevedoring terminal services container freight station

operations and the like itself POP performs those services under rates

and charges contained in tariffs which it files with the Commission As

pertinent those tariffs are the Port of Portland Portland Oregon Container

Tariff No 1 and the Port of Portland Portland Oregon Terminal Tariff

No 3 A57

POP s tariff charges which bear on this inquiry are those for throughput

extra ins and outs and wharfage The throughput charge is a per container

charge While the rate may vary under differing conditions it applies against

any container regardless of size It covers container movements from termi

nal gate to vessel stowage 58 As the name implies the extra ins and

outs charges also assessed against containers cover movement of containers

over and above those included in the throughput charge These charges

apply almost entirely to movements of a full or loaded container between

POP s container yard and its container freight station 59 Wharfage is levied

The portion of the lotal impact allocable to SMSA is 56 9 percent of the total under ERA s methodology

But there has been a certain amount of rounding off which must yield to the actual figure shown in Ex

90 p

VI IO Table VI 4

7

Ex 33 contains relevant excerpts from those tariffs hereafter referred to individually as Container Tariff

and Terminal Tariff

8Container Tariff pp 13 14 15 I5A B

59 Container Tariff pp 10 15 A B
356 FEDERAL MARITIME COMMISSION

against all cargo passing over the wharf and is based on the weight of

the cargo

6O

36 Under an Agreement approved by the Commission pursuant to section

15 of the Shipping Act various competing Pacific Northwest ports which

are members of the Agreement are permitted to discuss and agree on

port charges and tariff rates POP like POS is amember of that Agreement

The Agreement authorizes independent action

Either by way of independent action or because certain rates and charges

are not within the coverage ofthe agreement POP has engaged in competi

tive pricing actions designed to attract cargo from competing ports to the

Port POP has been successful in attracting cargo by means of competitive

pricing although not in every case For example in 1978 POP established

a lower throughput rate for minilandbridge containers than the rate applica

ble to other containers This tariff action did not succeed in its purpose

In principle however there is no difference between this type of pricing

practice and PWC s equalizing and absorption practices For another exam

ple POP works with inland carriers to create lower combinations of inland

freight rates to POP than to other ports For yet another example POP

absorbs Columbia River barge unloading costs on through shipments to

attract traffic from Idaho and Washington There is no difference in prin

ciple between this pricing practice and PWC s practices

The following exchange sums up Mr Mowat s views concerning the

difference between what POP does to meet competition and what PWC

may do to meet competition 61

Q BY MR ANGUS Mr Mowat this morning I believe it

was your testimony that itis the Port of Portland s position that

it is not unlawful for ports to engage in price competition and

in that fashion divert cargo from its normal routing patterns to

a new normal pattern a new routing pattern is that correct

A Yes

Q By the same token when an ocean carrier or conference of

ocean carriers engages in similar pricing practices that does result

in diversion of naturally tributary cargo from a port and should

be declared unlawful is that correct

A That is what we propose today

Q What is your basis either in policy or as a transportation

man to justify such a distinction

A It would be the history ofregulatory law insofar as the Federal

Maritime Commission is concerned the cases that bave dealt with

tributary areas that pertain to steamship lines and conferences

and not the port although the tributary area would be a tributary

area to a port

Q My question was what is your basis in policy or in a transpor

tation sense so that it can make sense to us as operators in

Terminal Tariff pp 700A AA B

61 Tr 1579 1580
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 357

AND PRACTICES

the transportation field Your answer seems to indicate that you

rely exclusively on legal precedent is that correct

AYes

Q SO you have no either economic policy or rationale or transpor

tation policy or rationale for the Maritime Commission to declare

that carriers cannot do certain things but ports can is that correct

A Yes

g Advantages and Disadvantages of Location

37 paP s geographical location is both beneficial and detrimental to

the Port in its quest for cargo It has the obvious advantage of being

nearer than pas to the inland places of origin of most if not all of

the equalized commodities But via great circle ocean navigation routes

POP is further than pas from many of the principal PWC destinations

For example Yokohama is about 165 nautical miles 189 linear miles

closer to pas than to POP 62

Existing trade routes and traffic patterns make POP even more distant

from PWC destinations All common carriers PWC members and independ

ents in the NorthwestlPWC trade call at pas but not one calls only

at POP Thus an additional call at POP would require a vessel to travel

many more water miles than the mere difference in great circle distances

roughly 400 miles in the case of Yokohama 63

The overland motor carrier distance between POP and pas is about

172 miles

38 POP was the beneficiary of navigational improvements which opened

up the upper reaches of the Columbia River and tributaries in Washington

and Idaho to barge traffic In 1977 and 1978 respectively POP handled

8419 TEUs and 14 411 TEUs of barged container cargo

64

39 The degree of POP s inland transportation advantage diminishes as

the disparity between the distance from origin and POP on the one hand

and the distance from origin and pas on the other hand decreases Usually

that decrease occurs insofar as motor carrier transportation is concerned

as the origin point moves northerly toward the approximate line Raymond

62 However pop may be closer to some southern PWC destinations such as Manila

63 My calculation is based on these factors one of which is inexact as follows

I Great circle difference inexact because it does not measure Puget Sound mileage

to POS 189 miles

2 Cape F attery at head of straits leading to Puget Sound to Columbia River

Lightship at mouth of that River 113 miles

3 Columbia River Bar to pop 101 miles

64 Cf the barged TEUs in 1977 78 with the equalized and absorbed TEUs of the top ten commodities

during those two years by the three PWC members which participated in that practice from Ex 37 Rev

1977 1978

2708 3709

1180 1072

370 550

APL

Sea Land

Pacific Container Line PeL

Total 4258 533

26 EM C
358 FEDERAL MARITIME COMMISSION

Washington Toppenish Washington Lewiston IdahoDrummond Idaho

See Ex 13 It costs only 17 00 mote to move a container of canned

com from Toppenish to POS than from Toppenish to POP

40 It is evident from PWC s equalization and absorption practices and

POP s absorption practices that common cll1ier rates are not necessarily

proportionate to common carrier costs Competition is not the only reason

for this anomaly Sometimes rate levels are influenced by laws designed

to relieve perceived inequality of the effect of other laws A pertinent

illustration is section 205 of the Merchant Marine Act of 1936 which

in effect has been interpreted by the Commission to prohibit conferences

to set rates and charges at one port which vary from equivalent rates

and charges at neighboring ports 65 Applied to the facts of this case this

means that PWC carriers calling at POS and POP cannot charge more

for containers lifted at POP even though there may be far greater operational

and overhead costs involved in the additional call at POP

41 The record is sparse with respect to evidence of rail rates pertinent

to this inquiry

42 and 43 Ocean containership common carriers which do not make

calls at POP but which do so at POS regard the additional expense

of making a POP call as one of the two most important factors militating

against the call The cost of an additional call will of course vary from

operation to operation depending upon amix of factors 66

Dr Nadel presented an analysis based on 1978 costs of the cost of

an additional POP call for three PWC members and one independent opera

tor in the PWC trade The study took into account direct costs analogous

to out of pocket costs and opportunity costs which he defined broad

ly as those costs incurred by a carrier in making ship capacity available

for a call The analysis was not contradicted or challenged and correlates

well with cost estimates testified to by Douglas A Pfaff an APL witness

As set forth herein I find it to be accurate

Dr Nadel determined that the individual carrier s total cost direct and

opportunity for an additional POP call would be as follows

Sea Land APL OSK OOCL

44 338 46265 38 940 15 397

On a projected basis assuming Sea Land and APL made one call a

week it would mean additional annual costs of 2305 576 and 2 405 780

respectively For OOCL on a projected biweekly service its annual cost

would be an additional 400 322

65 See Far East Co1fference Amended TariffRule 20 F M C 772 774 1978 Wld cases cited therein

66 E g

Sea land s Nonhwest service includes calls at POS and California pons Thus apop call would

not be proportionately as great forSea Land as it would be to APL orHapag L1oyd a GermWl flag independ

ent which do not steam soulh along thecoast but go directly to the Far East

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 359

AND PRACTICES

44 Dr Nadel s analysis also considered the additional cost to APL

due to lost revenue arising from the fact that if a POP ca1l were not

made a vessel would have been otherwise productively employed He

calculated the loss to be 83 000 per day per ca1l 67 This cost could

be lessened by speeding up the vessels However the increased fuel costs

associated with higher speeds would cost an additional 19 000 per day 68

45 A vessel calling at POP is required to engage a bar pilot to cross

the sandy bar at the mouth of the Columbia and a river pilot to navigate

that river and the Willamette In aqverse weather the bar cannot be crossed

On the rivers fog may cause delay and sometimes groundings Delays

in crossing the bar or on the rivers are costly in their own right but

they may become even more costly if they result in schedule disruption

Although carrier concerns about Columbia River and bar delays are legiti

mate factors to be considered by management in determining whether to

serve POP the quantification of the delay factor is too speculative to

deal with on this record 69

h The Effect of POP s Belated Decision to Compete for Container Vessel

Traffic

Capital intensive containership operations have high fixed costs When

prevailing rates are highly competitive as they are in the PWC trade

these high costs can be recouped and a profit turned only if sailings

are kept at or near optimum level In order to maintain that level turn

arounds must be of short duration and must be kept to a minimum These

needs led to load centers a load center being a single regional port

of ca1l to meet those needs

POS much the sma1ler port and one that was in the decline in the

1950 s invested heavily in containerization in the early 1960 s and as

a container port leaped ahead of POP which did not commit to

containerization until late 1970 or 1971 Thus POS became the Pacific

Northwest Region s load center and it continues to maintain that position

as is evidenced by the fact that a1l the containership carriers serving the

Pacific Northwest call at POS 70

It fo1lows that in considering whether to retain or add another load

center in the same region carrier management must weigh the additional

vessel costs and scheduling problems associated with another port of call

67There are 15 days per call additional assuming no delays

68This figure does not include some of the other debits of high speed such as more maintenance and

less cargo space because of the additional fuel weight

69See e

g Ex 136 prepared testimony of Mr Pfaff at p 13 Ifwe had aweekly service to Portland

afew of our ships would on an unpredictable basis be held up at the bar by weather PWC POS references

to the Ml Sl Helen s

eruption and silting of the river channel as disadvantages to POP seem to me to be

overreaching particularly as the likelihood of the occurrence was not shown to have been a management

consideration when years before that unique event APL and Sea Land decided not to call at POP

70For these purposes it is appropriate to include the proximate Pugel Sound port of Tacoma aseparate

port within the POS load center complex

26 F M C
360 FEDERAL MARITIME COMMISSION

against the potential for additional cargo at the second port in order to

maintain or ensure a profit balance in the ratio that optimum vessel utiliza

tion bears to high fixed vessel costs The major carriers in the trade consider

a weekly northwest sailing essential OOCL which had biweekly sailings

recognized that its frequency was inadequate

47 It is evident that the various carrier decisions not to add a POP

call were based on those criteria For APL and Sea Land among others

the cost of making the additional call see Nos 42 and 43 supra compared

unfavorably to the revenues to be gained from carrying additional cargo

inbound and outbound Equally and perhaps more important were the

scheduling problems occasioned by the additional distance and time spent

both in traveling that distance and in protracted stays at POP s docks 71

Given the carriers need for optimum voyages and the shippers need for

regular rapid service neither APL s nor Sea Land s management could

justify the additional call for the limited number of containers available

at POP 72 see infra

i Availability ofContainer Cargo at POP and Its Effect on POP s Ability

to Meet Shippers and Carriers Needs

48 In examining port usage it is essential to consider the relationship

between outbound and inbound movements At POP for all trades outbound

container cargo movements outweigh inbound movements by about 2 76

to 1 The ratio for the pertinent transpacific movements is about 4 to

1

73 APL s experience ofequalized cargo was that it vreighed out heavier

than other cargo at POS because it amounted to 6 percent of weight

capacity but provided only 412 percent of gross revenues One of those

weight commodities is lumber which tends to move via bulk carrier It

is opportunity cargo for containership carriage Consequently this cargo

is economically attractive only when there is excess or otherwise unused

vessel capacity because as opportunity cargo it is low rated due to com

petition

49 On this record it is hardly likely that any of the equalizing PWC

carriers could have earned a profit by adding a POP call during 1977

or 1978 instead of equalizing Mr Mowat understood this to be true from

his own experience Mr Mowat maintained that POP was not trying to

attract those equalizing carriers to call at POP In Intermodal Service

to Portland Oregon supra 17 F M C at 129 the Commission made it

71 APL s experience in 1974 and 1975 when it called at POP shows that lhe average time at the dock

was 13V2 hours The minimum was 6 hours and the maximum was 39 hours

72Another PWC carrier Knutsen Line could no longer justify serving POP and transferred its Columbia

River service to Longview about 4S miles closer to the coast An independent carrier OOCL dropped POP

in favor of acall at Oakland

BThis finding is based upon Mr Mowat s informed guess Contrary to what PWClPOS propose Captain

Paul Mead a former OOCL employee did nOl teslify that it was 4 to I He testified that the proportion

of inbound POP to inbound POS container traffic was one quarter He did add however that the amount

of inbound to POP was nOl sufficient to justify OOCL vessel calls at POP

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 361

AND PRACTICES

clear that it is not empowered to require a carrier to call or to continue

to call at a particular port He recognized that POP calls by the PWC

equalizing carriers would not create a greater flow of cargo at POP except

for equalized cargo which he believes would otherwise sail from POP

Thus the introduction of additional direct call carrier competition at POP

could give impetus to a struggle for existing container cargo In the opinion

of the major containership operators at POP the Japanese Six Sea Land

or APL would not compete at POP because even if they made some

market penetration they could not get sufficient shipper support to draw

cargo away from the Japanese Six and thus couldn tjustify a call There

is then sufficient record support to find that at least through March

980 when the above testimony was given by Mr Mowat there was

no likelihood of additional container traffic moving through POP were

APL Sea Land or PCL to have called there 74

In 978 PWC carriers equalized an average of 17 5 containers per vessel

call at pas APL had the highest average 36 8 and PCL the lowest

5 3 At POP PWC carriers averaged 313 per call independents averaged

574 The average for all carriers was 354 OOCL had the highest average

83 7 and Scindia the lowest 10 But these figures are based on a container

count not a TED count Those averages are based upon the following

totals of loaded containers of all sizes handled during 1978 by the leading

carriers

Containers Loaded to

PWC Destination

At POP

PWC

Japanese Six

Independent

FESCO

OOCL

Evergreen

Total of all carriers

including those shown

14 309

2 598

1 924

374

19 976

Equalized and Absorbed

APL

Sea Land

PCL

Total

Does not include independents

1 915

536

275

2 726

74 Mr Mowat an experienced practitioner before this Commission and an extremely cautious witness he

protested giving yes or no answers to questions calling for either response because of connotations he

perceived also recognized that had they called at POP neither of those equalizing PWC carriers could have

attracted the containerized cargo equalized by independent carriers to any appreciable extent

26 F M C
362 FEDERAL MARITIME COMMISSION

50 In 1978 FESCO OOCL and Evergreen the leading independents

serving POP that year averaged 70 westbound containers per call to PWC

destinations 7but none of them continues to serve POP by direct call

51 In 1978 APL paid out 505 18276 to motor carriers by way of

equalization and absorption or an average of 269 00 per container Inas

much as it would have cost APL about 46 000 to make an additional

POP call and that about 20 percent of that cost may be attributable to

inbound containers APL s allocation for outbound containers would be

about 37 000 Thus APL would have needed about 137 containers per

call weekly to make POP calls less costly than equalization in 1978

Assuming APL would have been able to load all 2 665 containers equalized

by PWC carriers in 1978 77 it could have loaded only 5125 containers

per call

It should be noted again that POP neither encourages nor insists upon

equalizing PWC carriers calling at POP POP simply wants them to forego

equalization so that carriers calling at POP will handl that cargo But

it has already been seen that the Japanese Six could not have carried

any appreciable amount of additional containers from POP in 1978 and

POP made no valid showing that other PWC carriers or independents

serving POP by direct call could have carried additional outbound contain

ers in 1978 It is left to speculation whether but for APL s Sea Land s

and PCL s equalization another carrier would have tested POP s competitive

waters On the other hand as will be seen infra there is a good deal

of evidence that but for equalization shippers might not have been able

to get their goods and wares to market

52 OOCL which except for the Japanese Six had the largest market

share of POP cargo in 1977 and vessel costs per Portland call about

one third those of APL withdrew from direct service at POP in 1978

Withdrawal was due to scheduling problems OOCL had to choose between

an Oakland call and a POP call It chose Oakland because there was

a lack of sufficient cargo at POP and what was available was mainly

low rated cargo

53 Sea Land had from time to time considered POP calls and had

in the past called at Portland in its Alaska and Puerto Rico service Sea

Land still has an unused leased facility at POP Nevertheless Sea Land

cannot justify a business decision to serve POP The amount of available

cargo does not warrant the capital and other expenditures needed to re

institute a service at this facility

54 In 1979 APL had gross revenues of 1 329 per equalized container

carrying an average of 27 such containers per voyage Therefore it received

35 883 gross revenues per 1979 voyage from equalized containers At

7S Per No 48 supra inbound is estimated 81 17 containers

76This figure does nOl include apple shipments which in 1978 amounted 10 37 containers

77The 121 2OfOOl containers were treated as 60 fony footers Thus calculated there were 2665 containers

equalized in 1978 by PWC carriers

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 363

AND PRACTICES

the indicated cost of 46 000 per additional call at POP APL would have

lost 10 000 per voyage had it made that call 78

55 A port s longshore labor productivity in handling containers is meas

ured by the number of containers which can be loaded per crane per

hour In terms of cost to a carrier this productivity not only affects the

unit cost per container it affects the ability to adhere to fixed scheduling

The evidence shows that compared to other West Coast ports Oakland

and POS POP was the least efficient labor productive port in 1978 and

1979 79

56 As late as October 25 1979 POP recognized that berth conflicts

and ship queuing were an immediate problem at POP s major container

terminal Terminal 6and that additional construction would be needed

to alleviate that problem This recognition is contained in a study undertaken

by POP It is sufficient to note only this one conclusion from the study

based upon simulations made by the Port if one new line were added

to those then serving POP the equivalent of a

replacement for OOCL

with 13 day service it would result in queuing about 15 ships a year

80

This congestion factor was exclusive of the total congestion problem

compounded by labor gang shortages 81

57 The imbalance 4 to 1 ratio of outbound to inbound container

cargo at POP creates equipment shortage problems at that Port causing

carriers to turn away cargo or undergo the additional expense of reposition

ing equipment to serve its shippers 82

j

POP s Ability to Meet Shipper Needs

58 The primary market for Hood River Oregon apples one of the

top ten commodities is Hong Kong Shipments are seasonal and are made

in 4O foot refrigerated containers There is virtually no scheduled direct

liner refrigerated container service from POP to Hong Kong

59 Hood River grown apples might not move at all to PWC destinations

were it not for equalization Without equalization Hood River shippers

could experience a decline in exports because of competition from foreign

and domestic growers in other states Prior to the growth of containerization

there was less than half the current demand for these apples at PWC

destinations Volume apple movements coincided with both the expansion

78 For this finding I do not find it necessary to take into account other expenses which APL would incur

such as greater fuel costs occasioned by the need to maintain APL s schedule of calling once a week at

Northwest ports This finding subsumes that APL s loadings would have remained nearly constant whether

it called at pop orequalized

7

ln 1978 OOCL averaged 8 TEUs per hour at pop 12 TEUs at POS and 20 TEUs at Oakland The

1979 figures were 10 at pop 13 at POS and 20 at Oakland

80 Ex 45 p

I

81

d

Table 2

82Japanese Six Lines turned away about 50 containers per month during the winter months of 1978 Repo

sitioning costs in 1980 no earlier figures were furnished cost the Japanese Six Lines between 150 00

200 00 per container

26 EM C
j

1

1

c

i

364 FEDERAL MARITIME COMMISSION

of refrigerated containerization and the emergence of POS as a load center

and were aided by equalization In 1977 and 1978 respectively apples

constituted about 12 1 percent 5 257 tons and 4 8 percent 2 745 tons

of equalized cargo

83 With respect to apples historical events which dictated

the traffic pattern through POS overtook the desirability of a competing

service from POP Moreover a shift to POP solely because it is closer

to the orchards did not occur when POP improved its container facilities

because the inadequate refrigerated container capacity at POP was a deter

rent

60 through 62 From an industry economist s standpoint the preferred

method to be used to determine adequacy of service of a port which

in turn is used to resolve the question ofwhether cargo is naturally tributary

is not an aggregate capacity analysis broadly slot capacity but an analysis

seeking to ascertain whether a

commodity would have entered the export

market if a

shipper only had the options of shipping through a nearby

port or paying the additional cost ofinland transportation to a more distant

port Using the preferred analysis if the commodity would not have moved

under either of those options but would have moved by equalizing the

inland transportation costs to the more distant port then the nearby port

is an inefficient port and consequently not a naturally tributary port for

that commodity Under the preferred test particular shipper experience in

getting goods to a market may be used in reasoning to the genera1 84

63 PWCOS proposed finding No 63 is rejected except as otherwise

specifically found elsewhere herein

64 Yuasa Trading Company was the shipper of 75 percent of the equal

ized frozen com shipments made in 1978 Yuasa experienced difficulties

in getting the needed refrigerated containers from the Japanese Six Lines

at POP at POS as well at times and in getting vessel space at POP

In that year at least 30 percent of the equalized frozen com shipped

by Yuasa came from the area of Salem Oregon Salem is located about

47 miles south of POP and is about 219 miles from POS Because Yuasa

must meet shipping date requirements established by the overseas customer

if it cannot ship from POP it must ship from POS pursuant to equalization

or not at all because growers in the Salem area will permanently lose

the chance to sell their products if we are forced to pay transportation

charges from here to Seattle 85 In 1977 and 1978 respectively there

83During IhOBe years only 16 lon8 of apples moved oUlbound from pop to a PWC destination Thailand

in liner service During lhe years 1974 Ihrough 1978 inclusive only aboul 600 Ions of apples left pop for

PWC destinations Assuming thaI one 4Ofoot COntainer will hold 40 000 pounds only 30 confainers of apples

were handled at pop in those five years

8

Copan Ex 102 Tr 32383253 He explained why he was compelled to use the aggregate melhod in

lhe testimony he prepared before the hearing began but later was able 10 make the transition to the preferred

method Under the preferred method not one of the top len commodities is naturally tributary 10 POP

85 Tr 2324 In facl forreasons immaterial to this proceeding Yuasa stopped selling Salem com and began

10 sell Central Washington com to its customers in 1979 It was shipped via POS without equalization

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 365

AND PRACTICES

were 26 TEUs and 134 TEUs of frozen com equalized by APL 158

TEUs and Sea Land 2 TEUs

65 Historically lumber destined for Japan the major importing nation

of that commodity has moved via POP and pas By far the larger volume

has moved and still moves through POP But the POP movements are

primarily bulk shipments on non liner vessels For example in the years

1974 through 1978 non liner movements from POP accounted for 93 5

to 98 8

percent of the tonnage In 1977 and 1978 respectively there

were 15 296 tons and 19 671 tons of liner shipments compared to 713 630

tons and 1 687 261 tons of non liner shipments At pas in 1974 non

liner shipments accounted for 78 2 percent of lumber shipments This dwin

dled to 10 percent in 1977 and rose from there to 218

percent in

1978 On the basis of available data Mr Copan correctly reasoned In

the export of lumber therefore there are factors other than geographical

proximity and inland freight costs that are causing most shippers seeking

a liner service to Japan to utilize Seattle rather than Portland 86

Virtually all of the equalized lumber originates in the Willamette Valley

from POP south to Eugene Oregon about 110 miles from POP Caffall

Bros Forest Products is a major lumber exporter shipping both breakbulk

and in containers In 1977 and 1978 respectively Caffall s shipments to

Japan constituted 39 percent and 52 2 percent of all equalized lumber

Most of these shipments originated at Molalla and Estacada Oregon about

35 miles southeast and 25 miles east of POP respectively The lumber

is trucked to a container freight station in the Portland area not a POP

facility where it is containerized and sent overland by truck to POS 87

Based on 1979 rates the cost of inland transportation to pas was almost

four times greater than the cost to POP 88 Caffall also used State Line s

roll onroll off service at POP but primarily it used APL at pas

There were several reasons for Caffall to ship via APL out of pas

In 1977 and 1978 the APL rate was lower than the rate of any carrier

serving POP The rate was then so much lower that Caffall would have

paid the entire cost of inland transportation rather than ship via POP

Although neither Caffall nor another Oregon lumber shipper Avison Lumber

Company now use APL they still ship out of pas via Lykes Bros

roll onroll off and pay the entire cost of inland transportation because

the sum of the inland and ocean charges is less than the cost of shipping

by liner from POP Moreover Caffall and Avison from 1977 on have

had difficulty in obtaining vessel space and 4O foot containers at POP

The export of lumber is a substantial portion of Caffall s and Avison s

business Together they ship about 15 to 20 percent of Pacific Northwest

86Ex 95 p 2L

87This was true of APL shipments Sea Land shipments were sent to POS to be containerized More than

99 percent went via APL

88The 1979 cost to pop was 88 00 to POS it was 340 00 These figures and the ratio mentioned in

the text above correlate well with APL s equalization average of 254 00 per container in 1977 and of

269 00 per container in 1978

f PMr
366 FEDERAL MARITIME COMMISSION

lumber to Japan Canadian shippers are extremely competitive If the cost

of inland transportation had increased because equalization had not been

permitted sales would have been lost to the Canadian shippers in 1977

and 1978

There were 7 342 tons of equalized lumber in 1977 amounting to about

17 percent of the top ten in that year and 21 641 tons in 1978 or about

38 percent of the top ten equalized commodities in the latter year

66 There were 11 462 tons of wastepaper absorbed in 1977 and 11 015

tons in 1978 Respectively those tonnages amounted to 26 percent and

19 percent of equalized cargo in those years

The experience of two wastepaper shippers were similar in that both

had difficulty in obtaining space on carriers calling at POP

Most of the equalized paper is collected in the POP SMSA area and

is exported to Korea Vessel space at POP is never certain because waste

paper is lower rated than many other commodities carried to Korea For

example Evergreen Line canceled a shipper s confirmed wastepaper book

ings at POP in favor of cotton a higher rated cargo which it loaded

at Oakland Wastepaper moves most efficiently in 4O foot containers but

these are generally in short supply or simply not available at POP Shippers

are unable to wait for containers or vessel space because wastepaper is

a time and price sensitive commodity and it must move rapidly from

collection point to the dock Therefore without equalization it is likely

that export sales could not be consummated and this means that wastepaper

collected in the POP area would not be exported

The problem of container shortage is particularly acUte for one shipper

which must coordinate multiple container shipments on a single bill of

lading with wastepaper containers exported from Long Beach California

There is no PWC carrier which provides the direct service to Korea from

both POP and Long Beach 89 although there are carriers that stop at both

POS and Long Beach One of the latter is PeL which was frequently

used by this shipper for that reason

67 Historically dried peas and beans referred to in the trade as

pulses have moved through both POP ano POS Although some pulses

originate at Salem Oregon the most significant volume comes from the

Palouse area of Washington Pasco which may be considered in this area

is just about equidistant from POP 211 miles and POS 215 miles

There is no intramodal rail or motor carrier freight rate difference

to the two ports from Moscow Idaho or Spokane Washington both of

which are in the Palouse area

89Evergreen an independent once provided that service but it no longer serves POP As seen it was

nOl a reliable carrier for that shipper Moreover the use of an independent such as Evergreen might have

affected the shipper s right to ship via PWC carriers at low contract rates under applicable provisions of

exclusive patronage contracts Several shippers feared that their use of an equalizing PWC carrier might pre

clude them from using non conference carriers at POP In its opening brief at p 174 POP expressed a

par

ticular concern about the fairness of this practice with respect to equalized cargo See discussion infra

I ur
FoPMr

PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 367

AND PRACTICES

For example according to a September 1979 study submitted by Mr

Mowat 90 it would cost 497 25 by truck from Spokane or Moscow to

either port By rail depending upon the number of containers which could

be loaded on a flat car the charges would range from a low of 333 25

to a high of 428 50 per container But the per container charge would

be the same to either port in the same circumstances By barge however

the charge to POP91 would be 206 24 from Moscow and 344 40 from

Spokane However in 1977 and 1978 barging was not an effective mode

ofexport transportation for pulses and was not widely used

Why then were pulses equalized in 1977 and 1978 when the cost

of intramodal rail or truck carriage to POS and POP was equal In 1977

and 1978 respectively there were 158 containers 3 284 tons and 363

containers 7 660 tons of pulses equalized 92 North Pacific International

a shipper of 39 percent of pulses equalized in 1977 and 31 percent in

1978 93 explained that for quality control purposes the shipments were

routed from Palouse through the Portland area to POS Pulses are not

containerized at the point of origin They are either bagged or placed

in hopper cars or trucks at origin and sent to a container loading facility

The shipper found that an off dock facility in the Portland area was more

efficient than the one in Seattle This off dock facility was also closer

to the shipper s offices making it easier for officials to oversee the loading

process from time to time to make certain that the commodity was not

damaged

However service from POP was inadequate A Taiwanese customer need

ed a direct service The Japanese Six provided a transshipment service

which was unsatisfactory Evergreen did have a direct service but space

was often difficult to get from Evergreen This shipper was closed out

when Evergreen was transporting cotton out of California ports This ship

per would have lost its customer in Taiwan to foreign competitors had

it not been for equalization in 1977 and 1978

68 Metal scrap includes both ferrous and non ferrous metals In 1977

and 1978 respectively 3 228 tons 171 containers and 2 777 tons 154

containers were equalized 94 Most were carried by Sea Land to Taiwan

A major shipper Cascade generated about one fourth of all equalized con

tainers in those years The shipments originated in the Portland SMSA

9OEx 14

91 There is no comparable service to POS However barging in 1he export trades is commercially prohibi

tive Tr 2744 This is so because pulses cannot be booked out of pop due to lack of available service

Yet if barged the containers would be subject to POP s port charges even if they had to be sent on to

another port for loading pop absorbs port charges for barged containers only if the containers are loaded

on outbound vessels at POP

92 The containers were 35 and 40 footers All but two containers were carried by APL Almost all went

to Taiwan

93 Ex 95 schedule 15

94Cascade Steel Metal Scrap prefers to ship this high density cargo in the more economical 20 foot con

tainers but all the equalized containers in 1977 and 1978 were 35 and 40 footers
368 FEDERAL MARITIME COMMISSION

and the McMinnville Oregon area McMinnville is about 35 miles south

of pop and 210 miles from POS

Historically beginning in 1974 POS has been the major export port

to PWC destinations for metal scrap For destination Taiwan the ratio

was almost 6 to 1 in favor of POS By 1978 the ratio dwindled to 3 6

to 1 These statistics correlate with Cascade s use during the critical two

years ofEvergreen from POP and Sea Land from POS

Metal scrap is a time sensitive spot market commodity This means

that Cascade customers which in 1977 and 1978 controlled the transpor

tation beyond Portland needed to c

get the cargo to destination rapidly

without transshipment through Japan 9S During peak periods roughly for

half the shipments it is difficult if not impossible to obtain direct service

to Kaohsiung the preferred Taiwanese port because vessel space is inad

equate at POP It is Cascade s business judgment that absent equalization

it could very easily be relegated to the domestic market and it would

have to forego the more profitable export market for metal scrap

69 Onions accounted for about 2 percent of all equalized cargo in

1977 and 1978 These onions originate at Brooks Oregon 96 about 35

miles from POP and 210 miles from POS Fast and specialized handling

ventilation 97 are essential to prevent spoilage while the onions are in

route in 4foot containers The shipping season extends primarily from

October through February

Most of these onions are loaded at POP During the peak season it

is not unusual for the Japanese Six Lines to carry between 500 to 1 000

tons per vessel notein all of 1977 and 1978 less than 2 100 tons

were equalized often displacing other cargo such as wastepaper metal

scrap and lumber Yet there was insufficient space on vessels calling at

POP even with this displacement to transport all the onions during peak

season In the main it was this overflow which was equalized Without

PWC equalization one onion shipper had excess spoilage on two independ

ents and could no longer use them the overflow would not have entered

the stream of foreign commerce to PWC destinations

70 In 1977 and 1978 respectively 2 243 tons 121 containers and

121 tons 6 containers of canned com were equalized 98 Most of the

9SThe Japanese Six transship to Taiwan via Japan N b however that in 1977 of 9 960 tons of metal

scrap destined forTaiwan only 1 730 tons were shipped direct Nevertheless lending credibility to the Cas

cade witness testimony is the fact that this was greatly altered in 1978 when 7 7SO tons out of 992S tons

went direct

96Some onions came from Sherwood Oregon about 16 miles from POP The Brooks and Sherwood on

ions are of a variety particularly favored in the Far East primarily Japan and Hong Kong where most are

shipped This variety does not compete with onions grown inWashington

97Onions are shipped in containers from which the rear door is removed They are carried above deck

if possible although some shippers pnlfer below deck stowage especially inthe colder months

98 Mr Copan performed the research which yielded the statistics accepted as accurate by all parties for

tonnage and containers which were equalized by PWC Appendix C annexed hereto is a restatement of Ex

hibits 16 revised and 37 revised which he pnlpared Table I Ex 16 revised Table II Ex 37 revised

Mr Copan believes however that the 1978 canned com statistics may be understated due to possible

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 369

AND PRACTICES

1977 movements went to Hong Kong In 1978 most moved to Japan

Del Monte Corporation is the major shipper of canned com The com

is packed in Toppenish Washington a site about equidistant from POP

and pas There is no historical data concerning the movement of the

co modity

Del Monte ships canned com from both POP and pas Truck charges

to POP were about 17 00 less than they were to POS in 1977 and

1978 Consequently Del Monte prefers to ship from POP to 1ost destina

tions However the APL service from pas to Hong Kong was more

desirable because it was conducted as part of a

relay system direct transfer

between two line haul type vessels and not as part of a feeder system

used by the Japanese Six Lines from Japan to Hong Kong Del Monte

found the relay to be more efficient and safer than the feeder service

The 17 00 difference is considered to be a

very significant factor

by Del Monte Thus despite its belief that the APLPOS service to Hong

Kong was more desirable than the feeder service from POP if absorption

were not available Del Monte would ship from POP

71 There is very little evidence of probative value concerning the trans

portation of meat and bone meal other than the facts that 4 924 tons

225 containers and 3 786 tons 178 containers were equalized in 1977

and 1978 respectively From the fact that equalization took place it must

be assumed that this commodity which is a

by product of packing plants

originated at locations nearer to POP than to pas Most of this equalized

cargo was carried by APL to Taiwan The commodity was used there

as a high protein feed additive There is no evidence that any amount

of this commodity was shipped from POP to PWC destinations 99

Similarly there is scant evidence of cattlehide movements In 1977 and

1978 respectively 4 619 tons 474 TEUs and 4 823 tons 419 TEUs

were equalized This cargo originates at slaughterhouses mostly in Texas

and the Midwest but some cattlehides originate at Yakima and Boise

The product is usually salt cured and containerized at the point of origin

Yakima hides move through pas and Boise hides move through POP

both without equalization It is assumed that because equalized hides were

loaded at pas they originated at locations nearer to POP Hides histori

cally have moved in quantity from both POP and pas pas hides usually

go to Korea directly or by a transshipment service from Japan Most

of the equalized hides more than 80 percent had a Korean destination

This product is used in the manufacture of footwear

misclassification of canned com under the description canned goods This belief does not rule out other

causes

99Ex 83 shows that in the two critical years about 1 100 tons of aproduct described as Meat N OS

was exported from POP Assuming that Meat NO S may be included in the description meat and bone meal

there is no evidence 10 indicate the destination of the former

F M c
370 FEDERAL MARITIME COMMISSION

72 PWC POS proposed finding No 72 is not rejected It is essentially

accurate but because it represents a

recapitulation of findings previously

proposed and accepted Ineed not include it here

73 In detennining the capacity of a liner service to carry cargo theoreti

cal capacity based on design concepts is not the proper standard in this

proceeding The criteria to be used is the service s actual ability slot

to handle cargo at a particular time voyage at a particular port with

the particular container equipment required to move the cargo to destination

at the time the shipper requires the cargo to be so moved 1oo

74 The Japanese qarriers allocated deadweight capacity limitation is

an operational guideline It may be exceeded only with the master s pennis

sion The master s detennination is based on the particular circumstances

ofthe sailing such as where the weight cargo is loaded anticipated weather

conditions etc The master also may exercise discretion to accept less

weight than the guidelines depending on the same circumstances In 1977

21 of the Japanese Six Lines 72 voyages from the Pacific Northwest

sailed at 90 percent or more of the guideline limit including 8 sailings

above the guideline limit In 1978 55 of their 72 voyages sailed at

90 percent or more of the limit including 34 sailings above the limit 101

75 PWCOS proposed finding No 75 is not rejected It is generally

accurate Boiled down it proposes a finding that POP did not meet its

burden of persuasion which it needed to overcome the testimony of Mr

Hirano concerning the individual voyage capacity of the Japanese Six Lines

Imade this finding earlier

76 By 1980 the Japanese Six Lines made hatch corrections to some

of their vessels and substituted one vessel for another which had stabiliti

problems These changes increased the services actual carrying capacity

Yet by the end of 1980 the Japanese Six Lines were sailing to PWC

destinations with capacity loadS 102

77 PWC POS proposed conjectural finding No 77 is rejected

78 In 1977 a total of 339 056 tons of containerized cargo in 17 098

containers was loaded at POP on vessels engaged in whole or in part

in service to PWC destinations Most of this cargo was carried to PWC

destination ports although some of the vessels in question also served

and carried cargo to non PWC destinations in Australia Singapore Malay

sia India and Indonesia The chart below summarizes the 1977 tonnage

percentage and number of TEUs carried by carrier

JXlSee Tr 48525

101 Ex 142

I02POP itself is the source of this data Because the Japanese Six lifted about 71 percent of the container

cargo going from pop to PWC destinations in 1978 and because the carriers which lifted most of the remain

der had left the trade from POP PWClPOS posit that from this fact the I 979 1980 actual vessel capacity

at pop to handle export needs on cargo equalized orabsorbed via Seattle at the time the shippers needed

to ship the cargo

was below 1977 1978 levels Contrary to PWClPOS belief this fact alone does not

make the proposed conclusion inevitable

I JlMr
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 371

AND PRACTICES

Percent

Carrier By TEUs

Tons

OOCL Ind 12 1 3 176

Japanese Six PWC 67 7 18 639

FESCO Ind 10 1 2535

States PWC 48 202

Knutsen PWC 2 2 115

EAC PWC 15 297

APL PWC 1 12

Scindia Ind 5 10

Indicates carrier which withdrew from direct

pop service at time hearing ended EAC added

about 10 pop vessel calls per annum but its vessel

calls now include Australia

Indicates primarily a breakbulk bulk or neo

bulk service

79 In 1978 a total of 37 759 tons of containerized cargo in 19 976

containers was loaded at POP on vessels engaged in whole or in part

in service to PWC destinations The chart below summarizes the 978

tonnage percentage and number of TElls carried by carrier

Percent

Carrier By TEUs

Tons

FESCO Ind 135 4 109

Japanese Six PWC 714 22 210

OOCL Ind 9 1 2 822

Evergreen Ind 2 2 685

Knutsen PWC 18 533

EAC PWC 9 288

States PWC Ind 7 160

APL PWC 2 29

SCI Ind 2 31

Scindia Ind 0 4

Indicates carrier which withdrew from direct

POP service at time hearing ended EAC added

about 10 POP vessel calls per annum but its vessel

calls now include Australia

Indicates primarily a breakbulk bulk or neo

bulk service

80 and 81 The only carrier adding a POP call to PWC destinations

after 978 was Lykes Lykes was using breakbu k vessels which had a

small capacity for containers It is not possible to determine what portion

of the cargo previously lifted by carriers who stopped calling at POP

devolved upon the Japanese Six Lines As of the close of hearings the

only carriers serving POP directly in the PWC trade with full container

service were the Japanese Six Lines even though overall export movements

from POP were increasing

f PMr
372 FEDERAL MARITIME COMMISSION

82 In 1977 and 1978 APL carried the largest quantity ofPWC equalized

or absorbed cargo In 1979 APL s volume of equalized cargo decreased

below 1978 levels

II POS 103

83 POS is a municipal corporation organized and existing under the

laws of the State of Washington It is an all weather deep harbor port

which serves virtually all classes of ocean carriers POS owns substantial

marine terminal facilities and warehouses which it either operates or leases

to ocean carriers

84 POS is a member of the same rate agreement as POP Rates for

services at POS are established to generate sufficient revenue to cover

operating costs but those rates need to be competitive with other ports

offering the same services POS POP and other ports on the West Coast

have competed keenly over the years in terms of rates and service and

continue to do so There is some evidence to indicate that in 1977 and

1978 containership stevedoring and terminal service rates at POS were

lower than those at POP Ex 109 pp 4 5

85 POS is a container load center in competition with all other ports

in the United States but mostly with West Coast particularly Northwest

ports in the Far East trade 104 It maintains fully staffed marketing offices

at many cities foreign and domestic and it solicits cargo wherever it

can including the Willamette Valley and Hood River areas There is no

evidence in the record to support a finding that POS solicitation of cargo

in Oregon includes an explanation of the equalization and absorption prac

tices of PWC It is not a selling tool that we can use to get

cargo out ofthe Portland area McQuigg Tr 4119

86 POS enjoys a geographical advantage in the Far East container trade

because it is the closest port in terms of distance and sailing time to

Japanese Taiwanese Korean and other ports served by the PWC

87 POS invested early in containerization and is heavily dependent on

container cargo moving in the Far East trade Exports to nations served

by the PWC represented 75 percent of the export containerized cargo han

dled by POS in 1977 and 1978 Cargo carried to PWC destinations by

the PWC carriers represented a substantial portion of all the export cargo

which moved through POS in those years POS has served as an historical

port of export for many of the top ten commodities

POS 1978 volume of more than half a million tons of PWC top

ten commodities including equalized and non equalized cargo represented

103 PWCIPOS proposed findings 8394 relate to POS My findings do not include the vast array of detail

proposed by PWClPOS not because of inaccuracy but because so much is irrelevant to the issue of PWC s

absorption practices Only by broadening the scope of Ihis proceeding would any of that irrelevant detail

hecome germane

104 POS also competes intermodally with East Coast and Gulf Coast ports for cargo destined to the Far

Easl

J M r
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 373

AND PRACTICES

about 19 percent of all the containerized cargo handled by POS 105 Contain

erized cargo represented about 31 percent of POS foreign dry cargo tonnage

for that year By contrast containerized cargo amounted to less than 7

percent of POP s similar tonnage for that year

POS is the third largest American container port On the West Coast

it is second to Los Angeles but it is the dominant container load center

in the Northwest where in 1978 it handled about 650 000 containers

compared to POP s 80 000

88 POS is perceived as a container load center in the trade POP is

not so regarded POS position as a load center arose out of its capital

investment program in the 1960 s which was designed specifically to attract

container vessel traffic 106 As found earlier calling at a single regional

load center is a far more efficient operation for containerships The load

center also makes for an efficient interchange of cargo between inland

carriers and ocean carriers 107

89 See Appendix D for a description of the extensive facilities at POS

and Seattle harbor

90 The Seattle area is served by two major railroads and 37 motor

carriers It is also served by the various ancillary services and businesses

associated with a major port There are foreign and domestic freight for

warders customhouse brokers stevedoring contractors marine employees

adjusters and insurance brokers ship chandlers and suppliers bankers for

eign consulates public warehouses cold storage plants etc The availability

of these services influences the decision of shippers as to cargo routing

In this respect POS is not appreciably different than POP which also

has ancillary services available

91 As found earlier all liner services calling at POP in 1977 and

1978 also called at POS or nearby Tacoma PWC carriers calling only

at the latter were Sea Land APL Knutsen Korea Marine Transport Gal

leon PCL and Hanjin Independents calling only at the latter were OOCL

FESCO Hapag Lloyd Neptune Orient Evergreen Ro Lo Pacific Korea

Shipping and Yang Ming

92 From POS APL s container vessels have the shortest advertised

transit time from the Pacific Coast to Japan and Taiwan of any similar

IOS In 1977 POS handled 2 143 000 tons of containerized cargo In 1978 it handled 2477 000 tons an

increase of 16 percent overthe previous year pop showed a 12 percent increase forthe same period

106 POS seeks a finding that A loss of volume of cargo would affect the ability of the port to amortize

its facilities Assuming but not finding this to be true how could this fact affect any of the enumerated

issues in this proceeding To deal with the effect on POS of a finding or conclusion concerning the lawful

ness of PWG equalization and absorption tariff provisions would be to expand the investigation far beyond

the terms of theOrder and Further Order

107 Because of the high cost of serving a second port in a

region both in terms of the expense of an

additional sailing and the effect upon maintaining an optimum voyage schedule two carriers APL and Sea

Land testified that regardless of the outcome of this proceeding they would not add a pop call A former

OOCL employee who testified indicated that this would be OOCL s decision also I can find only that they

so testified but I also find that on this record their managements could not justify an additional call at

POP
374 FEDERAL MARITIME COMMISSION

service though Lykes irregularly scheduled Ro Ro service from POS is

a

day faster to Japan APL s days in transit from POS and the two

shortest times days advertised by its competitors as well as the shortest

time from POS as of 1980 were

To APL Advertised in Pac Shipper

Japan 10 Neptune 10 POS

Hapag L1oyd 12 POS

Japanese Six 13 POP

Taiwan 13 Neptune 16 POS

Hapag L1oyd 17 POS

Japanese Six 21 POP

Korea 19 Neptune 13 POS

Japanese Six 17 POP

Hapag L1oyd 17 POS

Hong Kong 25 Neptune 18 POS

Sea Land 19 POS

Hapag L1oyd 19 POS

Phoenix 19 POS

Japanese Six 21 POP

Philippines 29 Sea Land 24 POS

Hapag L1oyd 26 POS

Japanese Six 23 POP

In 1980 service by the above carriers was faster from POS than from

POP to all PWC destinations except the Philippines A fast transit time

and sailing frequency is important to shippers of refrigerated or perishable

cargo as well as to shippers of high value cargo where the daily interest

charge has significance and for shippers of spot market cargo such

as wastepaper and metal scrap The fastest transit times measured by

sailing days to PWC destinations from POP and POS in 1978 were as

follows

POS POP

Japan 9 II

Korea II IS

Taiwan 12 18

Hong Kong 15 19

Philippines 21 21

93 In 1980 the fifteen conference and independent carriers serving PWC

destinations from POS offered 440 more sailings to PWC destinations than

were available at POP

94 During 1978 among the independent carriers FESCO provided two

regular services from POP and POS to the Far East These services called

directly at ports in Japan and Hong Kong Hapag Lloyd which offers

a substituted service from POP provided a

regular independent container

service between POS and the Far East Hapag Lloyd calls directly at Tokyo

C A
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULE 375

AND PRACTICES

Kobe Taiwan and Hong Kong and provides feeder services to Korea

the Philippines and Thailand

III APL and Sea Land 108

The emergence of POS as a container load center before POP made

its commitment to container terminals had far reaching effects upon the

operations of ocean carriers APL and Sea Land in particular had to make

arrangements and undertakings which tied them to POS as a single regional

port of call lest they fall by the competitive wayside In so doing they

opened up previously unpenetrated export markets which could be exploited

by shippers only if those and similarly situated carriers could employ inland

substituted service through equalization and absorption

95 APL operates four individual transpacific services with 17 line

haul containerships and five combination breakbulklcontainer shippers All

the ships receive operating differential subsidy under the Merchant Marine

Act 1936 46 U S C 1101 et seq The five breakbulk ships are in an

irregular service with flexible itineraries between the U S Pacific Coast

the Far East Southeast Asia and IndiaPakistan They occasionally call

at POP

APL s service from POS to the Far East is weekly calling POS Japan

TaiwanJapanPOS Each port city is served on the same day of every

week APL s weekly service from POS to the Far East uses an integrated

relay system with APL vessels in the Far East This requires an exact

28 day turnaround 109 and coordination in the Far East with APL s California

service vessels with which the Northwest service vessels exchange cargo

Hong Kong Korea and Taiwan containers are relayed at Kobe but APL

sometimes uses a feeder service to Korea APL now conducts its Northwest

service 110 with the Pacesetter class of vessels the SS Presidents Jeffer

son Madison Pierce and Johnson They were built in 1973 74 and have

a design speed of 23 knots and design capacity of 1482 TEUs excluding

nonrevenue slots used for the convenience of the vessel of which 174

slots are usable only for 20 foot boxes Reefer capacity is 150 TEUs

96 In 1978 Sea Land provided an almost weekly service from POS

The full containerships utilized by Sea Land have a capacity of about

2 000 TEUs and a

refrigerated capacity of 315 TEUs each Sea Land is

a U S flag ocean common carrier with worldwide operations serving 130

ports throughout the world with 51 container vessels Sixty to seventy

of the ports are served by direct vessel call the remainder are served

108 PeL another PWC carrier offered fortnightly sailings from POS to Busan Korea Hong Kong

Keelung and Kaohsiung Taiwan The record does not require adetailed examination of PeL

109During the fish and crab seasons aggregating about twothirds of the year APL calls inthe Aleutians

for westbound cargo The Aleutian ports are so close to the great circle route that very liule time is wasted

on the voyage to Yokohama

I 10The Northwest service is the only APL container service which has the necessary subsidy contract au

thority to serve POP

1l 4 1J r
376 FEDERAL MARITIME COMMISSION

by land transportation or local ferry Five linehaul vessels provide a weekly

service between the California ports of Long Beach and Oakland and the

Far East and five other linehaul vessels provide a separate weekly service

between POS and Oakland and the Far East In 1980 Sea Land s mini

bridge service was conducted half from Oakland and half from POS In

1979 Sea Land handled 18 086 containers from POS They were laden

with cargo from the Seattle Portland and Vancouver British Columbia

area a small proportion was land bridge cargo from the northeast United

States Sea Land anticipates that in 1981 the 18 000 figure will increase

to 29 000 containers with the bulk being land bridge and increased penetra

tion of the Canadian market Sea Land s land bridge service from the East

Coast is based on railroad service which goes directly to POS and does

not pass through Portland Sea Land s weekly services are necessary in

terms of making connections with other Sea Land vessels in the Far East

and connecting with the United States railroads used for connecting its

mini landbridge and micro landbridge services to ports and points allover

the continental United States

97 APL s Linertrain has for the past five years been very heavily engaged

in the intermodal movement of Far East cargo to and from the Atlantic

Coast ports and for the last three years in such movement to and from

the interior points of the United States In October 1979 APL inaugurated

its weekly Linertrain service which operates with precision APL by agree

ment with Burlington Northern railroad has two flatcar trains of 50 cars

each which are in constant movement over the circuit Seattle New York

OaklandSeattle In effect if not in fact APL has a guaranteed schedule

under this arrangement

The Linertrain 111 arrives in Seattle every Friday the same day as APL s

inbound vessel It leaves on Saturday with the eastbound cargo for New

York and the vessel sails on Sunday with the westbound cargo for the

Far East Thus a

regular vessel arrival at Seattle is essential lest APL s

precision service between the Far East and New York be impaired Ex

136 p9 In addition this arrangement enables APL to locate any container

consigned to it whether in transit or at rest in one minute or less

98 APL acknowledges that although POp may be a difficult port for

a

large containership to serve there is no physical barrier to service It

couches its inability to serve POP in more realistic and valid managerial

concerns The incapacity of APL arises from the impact upon its regular

weekly service of the length and unpredictability of the time required

for a Portland call 112

The overriding objective of APL s and Sea Land s managements is to

have their respective containership services operate with a fixed day of

the week regularity like most of their competitors Regularity of service

IIIAPL also moves a block train from POS each weekend to deliver APL containers to sites other

than New York Unlike the Linertrains schedule this schedule is not guaranteed by the railroad

112 APL s

proposed finding No 43
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 377

AND PRACTICES

and in the case of the PWC trade weekly service is of paramount impor

tance to many shippers and to carriers Shippers can manage production

schedules warehouse space letters of credit financing and drayage and

consignees who know that cargo will be unloaded on a day certain can

similarly manage their own reciprocal affairs on fixed schedules when

service is regular Weekly service is necessary for carriers to compete

with other lines

99 113 As found earlier containership operations are expensive In addi

tion to the cost of the vessel 114 APL maintains an 800 unit inventory

of on board containers per ship They are valued at 6 855 000 per

ship 27422 OOO for the four Pacesetter vessels For the service there

is an additional pool of containers valued at about 12 000000 APL has

invested another 22 000000 in support equipment Pier rental at POS

based on use averages about 2 000 000 per year

100 Sea Land also has a high capital investment in the transpacific

trade I IS For similar reasons to those applicable to APL Sea Land must

also operate on a weekly schedule It estimates that its break even point

may be achieved on a round trip voyage space utilization rate of75 percent

to 80 percent To do this Sea Land must limit the number of Northwest

calls to POS

101 through 103 PWC POS proposed findings 101 102 and 103 are

not adopted because of redundancy a ilack of materiality or relevancy

104 PWC POS proposed finding 104 is rejected

c NATURALLY TRIBUTARY TERRITORY

IDEFINmONS OR DESCRIPTION

a POP s Description

105 As noted earlier from the beginning of this proceeding the Commis

sion viewed POP s perception of its naturally tributary territory to be a

factual issue 116 To find out what POP considered its proprietary territory

to be the Commission asked this question of POP in the section 21 Order

5 Describe in detail the area you believe is naturally tributary

to the Port of Portland Explain If you believe that the area

naturally tributary to the Port of Portland changes depending

upon a comparison to other ports e g

Seattle Oakland explain

in detail 117

113 PWClPOS proposed finding No 99 is not rejecled bUl parts are duplicative of other findings herein

114 An APL vessel then in construction was expected to cost about 113 million 57 million after sub

sidy

lIS It was expected to reach 672 000 000 by 1982

116 See THE NATURE AND BACKGROUNDOF THE PROCEEDING n 13 and related text supra

117 Ex 79 par 5

Ulfr
378 FEDERAL MARITIME COMMISSION

POP gave this answer

The simplest and most direct test to detennine whether a particular

cargo movement is naturally tributary to Portland is to ask this

question Was Portland the basis for the equalization on the move

ment to a more distant port If the answer is yes the cargo

is obviously tributary to Portland

Inland freight rates by the various modes of inland transportation

rail truck and barge are not constant and in fact change periodi

cally To establish and maintain a map or maps showing the

geographical boundaries of the interior area naturally tributary

to Portland as compared to other Pacific Northwest and California

ports for each commodity shipped would be a Herculean task

The subject of the existence of Portland s naturally tributary area

was discussed by the Commission on pages 30 through 32 in

the mimeo order on F M C Docket No 7019 Intennodal Serv

ice to Portland Oregon served on October 29 1973 118

Later on during direct examination Mr Mowat amplified POP s descrip

tion ofits perceived proprietary territory as follows 119

Q Mr Boileau Can you describe Portland s Natural Tributary

Territory

A Mr Mowat Yes

Q Would you describe Portland s Natural Tributary Territory

A It is at the territory or area where the inland freight rates

from origin to Portland are less than the inland freight rates

from origin to the Port to where the equalization or absorption

is being made

Q Are you saying that inland freight rate is the only consider

ation

A No It would be incumbent upon in this case Portland to

have adequate steamship service for the needs of the shippers

and adequate marine terminal facilities and services for the ocean

carriers and the shippers

Q With reference to your definition of the Portland Natural Tribu

tary Territory would you be able to define that on a map

A That would be most difficult in that it is a constantly changing

thing insofar as inland freight rates change

Q Have you attempted to define Portland s Tributary Territories

on a map

A I attempted to but gave up the effort in that insofar as I

realized that a map woyld be required for each commodity that

has is or could be equalized or absorbed and it would be a

separate map for the Puget Sound area and Portland versus the

San Francisco Bay area and Portland and for each mode of trans

portation rail truck and truck barge

118 d

119Tr 395 397

liJ Mr
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 379

AND PRACTICES

Q Just concerning the 10 top commodities principally considered

here could you estimate how many possible tributary territories

Portland has

A I would say 60

THE WITNESS Yes ten times three times two It would be

ten times three modes

JUDGE Now ten stands for what

THE WITNESS The 10 would be for the 10 top commodities

JUDGE And the three stands for

THE WITNESS The three major modes of transportation rail

truck and truck barge

JUDGE And the two stands for Seattle and Oakland and San

Francisco

THE WITNESS Seattle Tacoma Puget Sound

106 Although Mr Mowat on direct examination I20 amplified the de

scription of naturally tributary territory areas of ambiguity remained In

order to meet the charges levied against them the respondents sought

more particulars from Mr Mowat during extensive cross examination 12J

Before going forward with the information elicited I believe that in

addition to those comments which appear in the marginal notes accompany

ing this finding and n 74 supra some other observations concerning

Mr Mowat are appropriate It should be made clear at the outset that

none of these comments is intended to reflect adversely on Mr Mowats

competence or credibility Mr Mowat is an intelligent and skillful witness

It is fair to find that the position taken by POP with respect to the

critical issue in this proceeding is derived from Mr Mowat sthoughts

120When appearances were made at the hearing I ruled that Mr Mowat who was scheduled to testify

a a witness could not occupy the roles of witness and practitioner He was authorized except when on

the witness stand to remain at counsel table and to asist poP s counsel but he was restricted from asking

questions of witnesses and from participating in colloquies and motions except as a witness under oath Tr

7 8

121 At its request at the prehearing conference POP was given the option of serving prepared testimony

of witnesses in advance of the hearing or proceeding by question and answer at the hearing For its economic

witnesses POP opted for prepared testimony but it elected to have Mr Mowat testify by way of Q and

A Early on at the hearing this presented aproblem Mr Mowat took the stand with ahandful of papers

referring to some of them as he answered some initial questions posed by POP s counsel At first when

the mailer of these papers wa brought to my allention I assumed that the papers simply contained material

to refresh Mr Mowat s recollection I was wrong Mr Mowat was holding 27 pages in fact 28 pages in

cluding insen p

20A of typewrillen questions organized according to subject mailer In the space provided

after each question there were handwrillen answers 10 all save the ones on p

20A Those papers became

Ex 2 See Tr 96107 I refrained at the time from calling Ex 2 prepared testimony Tr 101 Nevenhe

less it did smack of just that I mention this sequence of events not as abelated rebuke but to explain

why PWC was placed at a disadvantage in organizing its defense and why the record contains what otherwise

might be considered repetitious references to POP s definition of naturally tributary territory and other mat

lers

26 F M C
380 FEDERAL MARITIME COMMISSION

on the subject It is evident that he has a preoccupied conception of what

constitutes naturally tributary territory Consequently despite acknowledging

some of CONASA s criteria see Finding No 105 Mr Mowat obstinately

returns to another more simplistic test to describe what he and POP consider

to be proprietary territory 122 ie if the cargo which sailed from another

port was equalized or absorbed over POP as the base port then there

was an unlawful diversion from POP s naturally tributary territory

On cross examination Mr Mowat again eJlphasized that the primary

test to determine naturally tributary territory invoked by him and therefore

the test which he believed the Commission should apply is whether the

inland freight was equalized or absorbed Under this test Mr Mowat claimed

for POP all cargo originating at any point in Idaho Washington or Or

egon

123 for which there was a lower inland freight rate to POP than

to POS I24 Mr Mowat also reiterated on cross examination that adequacy

of facilities and service was a factor to be considered but when pressed

he returned to his primary test as the sole test because he deemed adequacy

of service to be conclusively established by a showing that a quantity

of a particular commodity had been loaded aboard a vessel sailing from

POP Examples abound in the record These are a few

Q Mr Fisher Can you give me an instance Mr Mowat of

a situation in which the inland freight rate differential favored

Portland where the origin point and commodity would be outside

Portland s naturally tributary territory as you define it You can

refer to any exhibit all those cargo statistics you have there

Just give me one

Objection Overruled

A No we haven t developed that type of evidence

JUDGE Well isn t

your evidence in this case of the top ten

commodities that you claim are naturally tributary to Portland

simply the fact that movement of this particular cargo took place

through Portland and the fact that there was a diversion that

was paid for by way of equalization or absorption Isn t that

really the only evidence you have concerning why the cargo

moving from the various points shown on Exhibit 13 are naturally

to the Port ofPortland

122I do not mean to imply that these views or the views of any pany concerning naturally tributary terri

tory may substitute for the Commission sjudgment My putpOSe is to place my findings in perspective in

the light of POP s

theory of the case and the evidence as presented

123Some cargo may have originated in other states but sites in these three are the only ones that are perti

nent on this record

124There is some evidence of equalized cargo sailing from Oakland but the amount is too slight 10 be

considered on this record

IiP M
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 381

AND PRACTICES

THE WITNESS Yes 125

After admitting that he had no knowledge of apple shippers transportation

requirements in the PWC trade or whether the Japanese Six Lines serving

POP held out a service to carry apples to Hong Kong or why apples

that are shipped to PWC destinations do not sail from POP this occurred 126

JUDGE You have answered a prior question of Mr Fisher s

to the effect that you do not know whether it is the equalization

and absorption rules or some other reason why the apples do

not go through the apples that go to PWC destinations do not

originate at the Port of Portland Are you suggesting that insofar

as apples alone are concerned that it may not be the equalization

and absorption that causes the movement of apples through the

Port of Seattle

THE WITNESS No I am not suggesting that

JUDGE You are suggesting that you don t know why it is

THE WITNESS That is correct Ido not know

JUDGE If you do not know does that mean you do not know

whether or not these apples are naturally tributary to the Port

of Portland under your own view of what naturally tributary

means

THE WITNESS Yes they are naturally tributary to Portland

JUDGE Under what definition

THE WITNESS That the freight costs to Portland are less than

the freight costs to Puget Sound or to Oakland

When Mr Mowat testified he offered no evidence of probative value

concerning the adequacy of carrier service at POP Indeed POP would

offer none on its direct case At the time he testified Mr Mowat had

no knowledge of shipper needs a reciprocal of adequacy of service The

importance which POP attached to adequacy of service may be seen from

the following 127

Q Mr Fisher Can you give us from any source your

own knowledge an instance actual location actual commodity

in which freight rate differential as between Portland and Seattle

favored Portland inland freight rate differential favored Portland

as to which that commodity and origin point fell outside Portland s

naturally tributary territory

A No I know of no instance

Q Could there even be such an instance

A Possibly

Q But you can t

think of one

A No I cannot

I25Tr 175175J

126Tr 1105 1106

127Tr 1759 1763

26 F M C
382 FEDERAL MARITIME COMMISSION

Q As to any commodity

A Correct

Q And that s because as to most commodities you can show

as a result of the Port of Portland s considerable success some

movement through the port can t

you

A That and that there is unused capacity among your member

vessels to the Orient

Q SO we re down to adequacy of service and facilities at Portland

inland freight rates favoring Portland as compared to the other

port Seattle and some cargo moving via Portland from the origin

point isn t that it

A And then of course we must have covered the shipper s

needs or he wouldn t have shipped through Portland

Q Yes but Im saying that the shipper s needs under your theory

are wrapped into the fact that some cargo of that particular com

modity classification is moving from the origin point through

Portland

A Yes in part

JUDGE Aren t

you saying then that if you can establish that

Portland handled a shipment for a particular shipper out of Port

land wherever it went that establishes the shipper s need is ful

filled by the Port ofPortland for all time

THE WITNESS No Your Honor Ithink Imentioned there should

be a preponderance of movement to a large movement not just

one shipment I don t think one shipment will do the job

JUDGE But if we had shown that 100 containers of apples

from that particular shipper went to Hong Kong through the Port

of Portland would that establish that every shipment of that ship

per if there were 1 000 of them would have to go through

the Port of Portland to Hong Kong

THE WITNESS No

JUDGE Why

THE WITNESS There may be reasons why they would want

to use a different port that that other port might fulfill their

needs better

JUDGE interrupting Suppose there s no other evidence in the

case

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 383

AND PRACTICES

THE WITNESS Oh then it s Portland because there s every op

portunity to bring that evidence into the case 128

107 through Ill PWC POS proposed findings Nos 107 through Ill

inclusive are not rejected They are however largely redundant and need

not be included herein

b CONASA Guidelines

The CONASA guidelines are set forth in the Further Order and appear

in detail infra 129

112 POP did not apply the historical flow test in any way in attempting

to prove that the commodities are naturally tributary to POP It offered

no evidence concerning movements of any of the top ten commodities

prior to the first usage of equalization and absorption by PWC members 130

Neither did Hearing Counsel although it did introduce some historical

evidence of cargo movements before 1977 It is clear from the testimony

of Mr Mowat that POP is well aware of this criterion as one of CONASA s

standards 131

c Transportation Efficiency The Economist s Approach

113 and 114 Economists agree generally that pursuant to sound prin

ciples of economics a definition of naturally tributary territory must be

derived from an analysis of economic efficiency among many alternatives

including substituted service Under this theory the relative cost of inland

transport is only one of the elements to be considered Thus to measure

transportation efficiency and costs in the system the cost applicable to

each land and water portion from origin to destination should be examined

and compared Mr Copan paraphrased the process this way

132

Theoretically in analyzing various courses ofaction an economist

is essentially concerned that the optimal solution be one that

results in the most efficient allocation of scarce resources The

general well being of the public is maximized if resources are

allocated most efficiently

Each of the economists Mr Copan for Hearing Counsel Dr Nadel

for PWCOS and Mr Krekorian for POP agreed that substituted service

was a market enhancing but not market distorting practice Market distorting

practices create inefficiencies whereas market enhancing practices promote

efficiency

128 N b pop failed to meet its burden of persuasion irrespective of whether vel non it had the burden

of proof to show adequacy of service pop simply offered little or no worthwhile evidence beyond the fact

that the top ten commodities were carried insubstituted service

129 Further Order supra 21 F M C at 940 see Discussion and Conclusion B

l30The PWC rules predate Mr Mowatsexperience at POP

131 Tr 17561757

132 Ex 95 p

5

f

F M
ci

i

j

384 FEDERAL MARITIME COMMISSION

115 through 123 Applying that economic approach to the evidence of

record including the testimony of export shippers concerning the transpor

tation requirements routings and adequacy of service Mr Copan offered

his opinion that the least costly and most efficient of the available transpor

tation systems for ocean carriage of the top ten commodities was the

movement of those cargoes pursuant to substituted service through POS

He concluded that under this approach and the preferred methodology

none of the top ten commodities was naturally tributary to POP because

each moves with greater transportation efficiency through POS via sub

stituted service 133 He based this upon the evidence of record which showed

that a wide variety of market factors testified to by shipper witnesses

outweighed both geographical proximity of POP to the port of origin and

lower rated freight rates to POP in the selection of carriers and the port

of export 134

Among the reasons given by the shippers for using substituted service

out of POS were these 13 a they could not obtain space or equipment

from carriers calling at POP b they were required to ship from POS

in order to avoid transshipment by water in the Far East c on open

rated cargo the rates and capacity were more favorable at POS d there

was greater frequency of service at POS e sales would have been lost

with the substituted service at POS t Oregon and Southern Washington

and Idaho products could not have been sold in the export market

124 A study of transport effiency must also include cost factors relevant

to carriers Substituted service saves the cost ofadditional fuel expenditures

and those other costs associated with scheduling cparges arising from an

additional call But because section 205 of the Merchant Marine Act of

1936 has been interpreted to require equality of rates for adjoining West

Coast ports these additional costs may not be reflected in the carrier s

charges under PWC s tariffs

II Shippers and Their Requirements

125 through 135 The twenty four pages of PWC POS proposed findings

Nos 125 through 135 are not rejected for reasons of accuracy relevancy

or materiality They contain extensive evidentiary record references support

ing a showing that each of the top ten equalized commodities either would

not have moved at all in the export market from POP or would have

moved through another port with or without equalization aboard the vessels

of PWC members or independents However I believe that the findings

made or yet to be made primarily those appearing in Part B Lj generally

133 Mr Krekorian viewed substituted service as equivalent to competition between ports and thus as nor

mal competitive marketplace behavior

134 Predictably Dr Nadel came to the same conclusion as Mr Copanbased upon the same and other con

siderations

135 This finding is somewhat redundant However I repeat some of the reasons given by shippers merely

to place the parenthetical reference inthe previous paragraph in context

J C1f r
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 385

AND PRACTICES

and Nos 58 through 71 in particular sufficiently show the gist of what

PWC POS propose in their Nos 125 through 135 Le that POP could

not meet the ocean transportation needs of the shippers of the top ten

commodities who availed themselves of substituted service

D DIVERSION FROM OR HARM TO POP AND ITS SMSA

136 through 139 There is no clear showing that any of the commodities

which were shipped from pas pursuant to substituted service would have

been loaded aboard vessels at POP No shipper witness was called by

POP The shipper witnesses who testified were called by Hearing Counsel

Many were Oregonians who expressed a preference out of loyalty to their

state to ship from POP Nevertheless they used substituted service out

of pas because that was the only way they could effectively compete

with other shippers foreign and domestic and get their goods to the market

place The other shipper witnesses gave the same or similar reasons for

using PWC substituted service out of pas If PWC substituted service

were not available some shippers could not have shipped at all from

POP some would have used non conference substituted service out of

pas and others would have paid the inland charges to pas without equali

zation or absorption There is some evidence that on occasion there was

unused capacity on Japanese Six Lines vessels when they sailed from

POP but there has been no showing that this unused capacity was available

or if available was relevant to satisfy the needs of any of the shippers

who testified Indeed Mr Mowat testified that POP had no evidence to

present concerning the needs of any shippers of the equalized ten commod

ities 136 However it is fair to find there is some indication that some

of the equalized cargo would or could have been loaded at POP in the

absence of PWC substituted service Yet there is no evidence of record

to permit a more specific quantification other than that the amount which

could have been accommodated at POP was slight

140 through 142 POP presented evidence purporting to show the extent

of its harm and the extent of harm to its SMSA due to diversion of

cargo to pas The presentation which underwent several revisions 137

was

based on an unfounded assumption that all of the PWC equalized cargo

would have been loaded at POP

143 PWC POS proposed finding No 143 is adopted It appears as Appen

dix C Tables Iand II

144 In its brief POP uses the word diversion to mean that the

cargo which moved pursuant to PWC substituted service would have and

I36Tr 1100 1101 1728

37 See e

g Exs 29 29 revised 29 2nd revised 88 and 89 The several Exs 29 represent POP s calcula

tion of revenues lost due to PWC s substituted service Ex 89 is in effect arevision of Ex 88 Both 88

and 89 were prepared by POP s economic witnesses They purport to calculate the Direct Revenue and Total

Value Impact of Diversions on the SMSA see Nos 27 34 supra and are based upon figures shown in

Exs 29 and 29 revised When offered for identification Ex 89 did not reflect changes shown in Ex 29

2nd revised The fast named exhibit itself reflects changes made in Ex 16 by Ex 16 revised
i

386 FEDERAL MARITIME COMMISSION

could have been shipped aboard vessels calling at POP I

find there has

been no evidence of diversion from POP under that definition except

for the indication mentioned in the last two sentences of Nos 136 through

139 above

145 through 149 PWcPOS proposed findings 145 through 149 are

not rejected The material contained therein is generally accurate but it

involves matters concerning shippers and cargo movements previously ex

plicitly found or inherent in earlier fmdings

E QUANTIFYING THE LOSS TO POP AND TO PORTLAND S

SMSA

IHarm to POP

150 through 155 Despite the title of this portion of my findings I

must caution that having found there was a failure of proof to establish

that the top ten commodities would have sailed from POP absent PWC

substituted service Imust find perforce there was no showing of monetary

harm to The Port 138

Nevertheless it is useful to examine POP s contention that it was harmed

because the evidence discloses how grossly overstated was POP s claim

of harm

Manifestly POP s contention that it suffered harm is grounded on the

assumption that all the equalized containers would have sailed from POP

and would have generated revenues for The Port under tariff provisions

calling for uwharfage uthroughput and Uextra ins and outs charges

From the beginning of this proceeding even before the hearing com

menced POP exaggerated the claim ofmonetary harm Whatever the under

lying reasons for hyperbole Mr Mowat s affidavit of October 31 1978 139

and other nearly contemporaneous writings l40 claimed revenue losses Of

858 225 00 for 1977 By January 1980 when Mr Mowat testified POP s

claim was reduced to 536 686 00 for 1977 and its revenue loss for 1978

was stated to be 603 198 00 By the time Mr Mowat left the stand

POP s supportable claim was revised downward to 300 785 00 for 1977

and to 390 462 00 for 1978 141

To be sure the Further Order directed POP to furnish additional evidence

of Unet revenue lost by POP as a result of cargo diversion caused by

equalization payments This POP did not do It furnished no evidence

138lnasmuch 88 this decision also determines that the top ten commodities are not naturally tributary to

pop and that there W88 no diversion of cargo away from POP this finding should not be construed 88 being

limited to thecited failure of proof

139Bx 34

14OBxs 35 and 36

141 For the chronology of downward revision see Bxs 29 revised 29 2nd revised 48 and 49 and related

testimony PWCIPOS would reduce the claim still more by deletin extra ins and outs amounting to about

3000 00 in 1977 and 8000 00 in 1978 contending there is no support therefor in the record However

forthe stated purpose of this finding it is nol necessary to rule on those relatively minor adjustments
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 387

AND PRACTICES

of variable costs let alone fully distributed costs needed to produce the

gross revenues to which it laid claim

II Harm to SMSA

155 through 16942 For background see Findings Nos 27 through 34

inclusive in which I

explained some of the theories employed by expert

economic witnesses to determine the impact of PWC substituted service

on the SMSA composed of Clark County Vancouver Washington and

Clackamas Multnomah and Washington Counties Oregon

The ERA witnesses proffered by POP were directed to make certain

assumptions in preparing for this proceeding As pertinent they were told

to assume that all the cargo equalized or absorbed would have sailed

from POP absent PWC s rules to assume the accuracy of POP s calcula

tions of the amount of revenues which The Port would have collected

if the cargo had sailed from POP and to factor out any offsetting economic

impact on SMSA of motor carrier revenues connected with inland move

ments to other ports Consequently their critical conclusions suffer not

only from the same impairments found in Nos 150155 inclusive but

the additional infirmity of factoring out a significant positive economic

impact on SMSA

Nevertheless I will go through the economists exercises in an abbre

viated way to determine a worst case scenario I start by assuming that

POP would have received all the traffic that was carried by PWC members

by way of substituted service I also assume the accuracy of Exs 48

and 49 with respect to POP s claim of lost revenues ie 300 785 00

in 1977 and 390 462 00 in 1978 143 Applying ERA s approach to these

figures the total value added impact on SMSA was 337 678 00 in 1977

and 438 354 00 in 1978 Based on undisputed evidence l44 provided by

Dr Nadel concerning the positive impact of inland motor carriers it is

fair to conclude that the residual impact a balance of the positive and

negative impacts upon SMSA was about 66 000 00 in 1977 and

57 000 00 in 1978 145

A factor not included in the ERA analysis was the potential impact

on SMSA due to the inability of some shippers within that SMSA to

export at all because PWC substituted service was denied to them Without

attempting to quantify this impact the very fact that exporting did occur

must be viewed as a positive impact and a further dilution of the residual

142 PWC POS proposed finding No 165 is rejected as it involves mailers beyond the scope of this proceed

ing

143 According to economic theory direct impact is asubset of lost gross revenues and should not be count

ed twice by adding total economic impact on SMSA to thegross losses claimed by POP

144 Although seeking and being given the opportunity POP chose not to rebut Dr Nadel s

testimony be

cause it was mutually agreed between POP and Gene Krekorian of ERA that the things that he could

allest 10 were probably not worth the effort involved Tr 5086

145 In arriving at those results it was assumed that apples would not have moved through POP Virtually

all apple shipments were equalized and nol absorbed

1L n lAro
388 FEDERAL MARITIME COMMISSION

impact on the SMSA to a level lower than the figures shown in the

preceding paragraph

Accordingly Ifind that even if all of the cargo were wrongfully diverted

away from POP there would have been a negligible negative impact harm

to the SMSA

F JUSTIFICATION OF PWC SUBSTITUTED SERVICE 146

ICarrier Competition

170 through 184 The two principal American flag carriers in the PWC

trade are APL and Sea Land In the aggregate they carried from pas

about 90 percent of the cargo equalized or absorbed over the base of

POP

After studying theprobiem of serving POP directly the respective man

agements of Sea Land and APL determined that they cannot call at POP

as a matter of good business practice An additional call at POP would

disrupt their vessel schedules on which their entire transpacific service

depends For example APL s weekly pas service is integrated into domes

tic rail movements between pas and East Coast and Midwest points

its Far East relay system requires coordination for a

cargo exchange in

Japan between the POP service and the California service vessels In addi

tion both Sea Land and APL must provide a weekly regularity of service

to be competitive with other carriers but a POP call would either preclude

that regularity or would make a

regular service unprofitable

These facts are recognized by POP which is not seeking to induce

Sea Land or APL to call at POP Indeed Mr Mowat is aware how point

less it would be for either of them to call there 147

In the PWC trade APL competes with Hapag Lloyd s weekly non con

ference service Like APL Hapag Lloyd makes pas its last West Coast

port of call for Tokyo Kobe Hong Kong and Taiwan Hapag Lloyd aI

German flag containership carrier commenced its service in the trade in

1978 It does not call at POP but it also serves POP by substituted

service Also like APL Hapag Lloyd coordinates its Puget Sound sailings

with railroad timetables

In October 1980 ten foreign flag non conference containership operators

competed in the trade with PWC carriers Each of them offered similar

substituted service for the same Oregon Washington and Idaho area to

pas Among them were OOCL Evergreen Neptune Orient Korea Shipping

and PESCO

I The justification of PWC s practice was made an enumerated component of the ultimate issue by the

Funher Order Therefore in this ponion of the findinlls it is necessary to reiterate some earlier findinlls in

order to provide continuity of context In proceedinll in this way I do not intend to exclude other earlier

findinlls which bear on this component

147 Mr Mowat testified at Tr 731 They would nOlllenerate any sreater carlO than the equalized or ab

sorbed amount probably
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 389

AND PRACTICES

Obviously those non conference carriers would not be subject to any

order issued in this proceeding But even if they were ordered to stop

providing equalization and absorption they would still be able to attract

cargo from POP to pas by means of competitive devices not available

to PWC e g special commodity rates applicable to pas

The primary reason for PWC substituted service is that equalization

and absorption provide the means for Conference members to be price

competitive at rate levels which enhance the ability of the cargo to be

exported

Clearly APL and Sea Land or any other PWC member would be at

a competitive disadvantage with independent carriers were it not for the

PWC equalization and absorption practices This disability would not affect

non conference carriers which could continue to compete for Oregon Wash

ington and Idaho cargo without calling at POP by means of substituted

service or other pricing mechanisms Non conference carriers may compete

for cargo of the Conference s domestic contract shippers as well because

the designation of carrier is often made by a foreign non contract consignee

II Effect of Substituted Service on Shippers

185 through 194 It is useful to preface the findings in this portion

with the following responses of Mr Mowat to hypothetical questions asked

of him 148

Q Mr Fisher Let s assume there were no steamship lines pro

viding refrigerated containers in adequate numbers or of adequate

size or whatever out of the Port of Portland to Hongkong There

are slots on the vessel in this hypothetical but no refrigerated

containers which the carriers would be willing to supply Are

you saying under those circumstances that equalization or absorp

tion of Hood River apples up to the Port of Seattle where they

are carried by Sea Land and APL to Hongkong should be out

lawed

A Yes

Q And that means in turn that the shippers under my hypothetical

would have to pay the inland freight charges right

AThe additional inland freight charges yes

Despite these answers and the leading role played by Mr Mowat in

this proceeding I am reluctant to find that POP shares the punitive to

shippers views expressed by him in his replies to the hypotheticals His

answers however do reinforce the findings in Nos 105 and 106 supra

because they are further evidence that Mr Mowat perceives APL s and

Sea Land s substituted service to be unlawful under his theory of the law

a theory which begins and ends with a comparison of inland freight rates

I48Tr 82S829

26 F M C
390 FEDERAL MARITIME COMMISSION

and rejects shippers needs and transportation efficiencies and other compo

nents of CONASA s guidelines

In 1977 the Japanese Six Lines carried more than two thirds of their

container tonnage lifted at POP to the Far East In 1977 that proportion

rose to more than 70 percent Thereafter when the non conference lines

stopped calling at POP the proportion rose to about 95 percent The Japa

nese Six Lines do not provide a sufficient service for all of the shippers

of the top ten commodities which xport their cargo to the Far East

Substituted service gives the exporters in Oregon Washington and Idaho

the necessary expanded transportation alternatives to market their products

without extra inland transportation costs See Appendix E for a calculation

of additional sailings available to shippers because of equalization and

absorption in 1977 A further advantage of substituted service is that on

occasions it offers total transit time savings to shippers which in turn

serves to reduce the inventory cost to shippers 149

But those benefits are incidental The primary benefit to shippers is

that substituted service provides them with the means to place their goods

in the export trade to the Far East The evidence of record is massive

in showing that but for the economics of substituted service many of

the shippers could not sell to Far East consignees lso The loss to shippers

and to the four county SMSA were the shippers unable to export to

the Far East cannot be calculated with accuracy on this record but it

is fair to find that if only a tiny portion could not reach the overseas

market that loss would be greater than all of the revenues which might

have been gained by POP had all of the top ten commodities been lifted

at The Port

III Transportation Efficiency

195 through 202 The essence of substituted serVice is that in terms

of transportation costs it is not more expensive for shippers to use than

a transportation system which does not incorporate equalization and absorp

tion From the shippers standpoint it is more efficient to have a system

which permits substituted service because of beneficial elements other than

the fact that it costs no more As seen substituted service allows shippers

to get their goods to market and on time results which were not always

1 9On cross examination by PWC Mr Copan agreed that some of his initial prepared lestimony concern

ing transportation efficiencies might have been deficient in that it compared only inland transportation costs

from point of origin to export ports and ignored other costs at destination The cross questioning implied

that PWC would show that the overall cost from point of origin to point of destination was lower because

the cargo sailed from POS rather than from POP With due regard for the finding that PWC must charge

the same for ocean freight from POS as it does from POP I note that PWC does not propose a finding

matching the implied promise to performance Nevertheless I do not believe this omission detracts from the

showing that overall transportation efficiency is served by substituted service

ISoThe fact that some shippers would or did pay the cost of inland transportation to POS without reim

bursement from APL or PWC in order to get their goods to market not only shows benefits from substituted

service it is strong evidence of inadequate service or facilities at POP

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 391

AND PRACTICES

possible without substituted service Substituted service also permits shippers

to get their goods to market quicker due to the availability offaster transits

a result which may actually save money for shippers in the form of reduced

financing charges warehouse charges etc

Manifestly substituted service is a more efficient system for APL and

Sea Land It enables them to compete with non conference carriers which

also offer substituted service for Oregon Washington and Idaho traffic

Without substituted service neither APL nor Sea Land could engage in

such competition because there is on this record simply not enough con

tainer traffic available at POP to warrant the enormous expense of an

additional call there The cargo obtained by Sea Land and APL which

is only a small proportion of the cargo they load at pas helps to make

their overall operations more cost efficient

IV Effect on Trade Stability and Flag Vessels

203 Clearly if substituted service is available to non conference carriers

but is forbidden to conference carriers this would tend to destabilize the

conference system in two ways It could constitute a disincentive for non

conference carriers to join conferences and it could act as an incentive

for conference carriers to withdraw from conferences

On this record the prohibition of substituted service to PWC would

impair the ability of APL and Sea Land American flag carriers to compete

against non conference foreign flag carriers 151

V Economic Feasiblity to PWC ofServing POP Via Feeder Vessels

205 through 214 152 Feeder vessel service from POP to Oakland or

POP to pas is economically not feasible Without considering other costs

which may be attendant upon a feeder service it is certain that the charges

to shippers for loading and unloading containers at two ports would be

nearly triple what they are when only one port is involved E g

there

would be throughput and wharfage at POP throughput and wharfage in

bOund at pas and throughput and wharfage outbound at POS Inasmuch

as those charges are about the same at the two ports this would mean

that the charges for a loaded container would increase from about 140 00

POP s charges 153 to about 425 00 Subtracting the cost of loading at

pas a charge that would be incurred in any event this would result

51 I have made this finding that the two are American flag carriers because the record warrants it and

PWC POS Sea Land and APL have requested that it be made However I have not treated it as acompelling

factor in arriving at the conclusions reached in this decision Neither have I given weight to evidence that

some shippers prefer to useUnited States flag carriers

152 PWC POS request that official notice be taken of a

voluntary petition forbankruptcy filed by American

Pacific Container Line Inc Am Pac in October 1980 a carrier which had just commenced acoastwise

container service between California and Northwest ports including one stop at POP The request is denied

on the grounds of relevancy and materiality

153 POP would not be inclined to reduce its charge to provide encouragement for afeeder service Tr 694

26 F MC
392 FEDERAL MARITIME COMMISSION

in extra costs of about 285 00 or about 1100 more than the cost of

substituted inland carrier service about 274 0

Evidence of the actual cost of establishing a feeder service is sparse

as is any evidence of an existing service 1S4 However it would be foolish

to expect that if APL or Sea Land were to establish a feeder service

there would be no cost at all Given the reality that the carriers out

of pocket costs for port charges must be about the same for a feeder

service as for substituted motor carrier service it is evident that the nec

essary capital outlays and ordinary expenses attendant upon a water feeder

service would make such service economically unfeasible

THE STATUTES INVOLVED

Section 205 of the Merchant Marine Act of 1936 provides

Without limiting the power and authority otherwise vested in the

Commission it shall be unlawful for any common carrier by

water either directly or indirectly through the medium of an

agreement conference association understanding or otherwise

to prevent or attempt to prevent any other such carrier from

serving any port designed for the accommodation of ocean going

vessels located on any improvement project authorized by the

Congress or through it by any other agency of the Federal Govern

ment lying within the continental limits of the United States

at the same rates which it charges at the nearest port already

regularly served by it

Section 15 of the Shipping Act 1916 provides in pertinent part

The Commission shall by order after notice and hearing dis

approve cancel or modify any agreement or any modification

or cancellation thereof whether or not previously approved by

it that it finds to be unjustly discriminatory or unfair as between

carriers shippers exporters importers or ports or between export

ers from the United States and their foreign competitors or to

operate to the detriment of the commerce of the United States

or to be contrary to the public interest or to be in violation

of this Act and shall approve all other agreements modifications

or cancellations No such agreement shall be approved nor shall

continued

Section 16 of the Shipping Act 1916 provides in pertinent part

That it shall be unlawful for any common carrier by water or

other person subject to this Act either alone or in conjunction

with any other person directly or indirectly

First To make or give any undue or unreasonable preference

or advantage to any particular person locality or description or

traffic in any respect whatsoever or to subject any particular

154 A single call by Am Pac at pop can hardly be viewed as an existing service

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 393

AND PRACTICES

person locality or description of traffic to any undue or unreason

able prejudice or disadvantage in any respect whatsoever

Section 17 ofthe Shipping Act 1916 provides in pertinent part

That no common carrier by water in foreign commerce shall

demand charge or collect any rate fare or charge which is

unjustly discriminatory between shippers or ports or unjustly prej

udicial to exporters of the United States as compared with their

foreign competitors

DISCUSSION AND CONCLUSIONS

A Preliminary Matter

One thing needs to be set at rest before I can proceed to the issues

placed under investigation by the Order and Further Order

For its first point of argument APL advances the proposition that

Equalization or absorption as between ports cannot violate sections 16

First or 17 of the Shipping Act 155 Underlying this elaborate argument

is APL s conviction that the CONASA decision is wrong and CONASA s

guidelines are defective APL concedes that this issue the validity of

CONASA and its guidelines was not specifically set for hearing in this

case Consequently APL reasons that it is incumbent upon me to

decide this issue 156 Having instructed me in my duties APL urges

me to reexamine CONASA s foundations find them to be flawed and

deny the application of CONASA s guidelines to the facts of this case l57

The portion of the first point which seeks to confer upon me the authority

to revisit CONASA tantalizes and the portion allotted to CONASA s sub

stantive underpinnings is alluring but I must decline APL s seductive invita

tion to enter upon and explore the exotic terrain because acceptance would

be improper Briefly my reasons follow

APL is right in saying that the Commission did not specifically set

the issue of CONASA s validity for hearing in this case But it is absurd

to reason that this means the issue is now before me Contrary to what

APL says the omission implies the Order and Further Order directing

that this case be tried under CONASA s precedents and guidelines barred

my reentry into CONASA and its guidelines Ido not construe Rule 147 a

of the Commission s Rules ofPractice and Procedure 46 CFR 502147 a

158

to have the meaning which APL ascribes to it That rule simply does

not explicitly or even implicitly empower me to overrule the Commission

15

APL Brief p 21

IS6 d p22

IS7 d

1S8As pertinent Rule 147 a

provides

The officer designated to hear acase shall have authority to delineate the scope of aproceeding

instituted by order of the Commission by amending modifying clarifying or interpreting said

order

26 F M C
394 FEDERAL MARITIME COMMISSION

by restructuring an investigation ordered by the Commission to include

issues wall ed off from me under the precise terms of a Commission

order

Moreover I do not interpret n 13 in Dart 639 F 2d at 813 to have

the effect of placing the validity of CONASA before me That note was

inserted at the request of APL and Sea Land in the memorandum they

filed with the court as amici curiae in February 1980 1 9 N 13 states

Amici curiae have summarily urged that the CONASA guidelines

are not within the Commission s statutory authority Such a con

tention has not been briefed or argued by the parties and we

therefore intimate no view on its merits

As Iread the memorandum amici curiae advised the court that the issue

was being raised before the Commission in Docket No 78 32 160 I

am certain that this may well have been what APL and Sea Land intended

The infirmity of APL s first point is that APL failed to carry out this

intent by requesting an enabling amendment to the Order before the hearing

was closed and before briefs were filed Elsewhere in brief APL shows

an awareness that its initial argument does not lie before me for this

precise reason 161

Accordingly APL s first point ofargument is rejected 162

B CONASA S GUIDELINES

The CONASA guidelines are not precise rules of conduct under which

a particular practice may be judged valid or invalid by the simple process

of matching a particular practice against the language of a rule Nevertheless

the Commission enunciated and established the following standards as the

general principles to be considered in all future proceedings in which viola

tion of sections 16 First and 17 of the Shipping Act are alleged based

upon diversion of cargo from a port 163

1 Certain cargo may be naturally tributary to a port but any

naturally tributary zone surrounding a port is constantly chang

159 The memorandum was distribuled to the parties to this proceeding and to me about that time

160 Memorandum amici curioe p

4

161 SeeAPL Brief p

48 n 55 where APL tomments

If the CONASA and Dart cases were as opposed as Hearing Counsel sometimes believes the presid

ing officer would still have to look to CONASA alone The Commission s 1979 direttion in this

proceeding to apply the CONASA standards is the law of the tase the tonlrOlIlng legal rule of

detision between the same parties in the same tase 21 CJS fi 195 a p 330 While the Commis

sion itself could thange the law of the tase it is the prattice of rourts generally to refuse to

reopen what has already been detided Messenger v Anderson 225 U S 436 444 1912

What APL sees as governing in its n 5S also rontrols its opening argument

162The Port Authority of New York and New Jersey made asimilar argument independent of APL POS

PWC and Sea Land inone way or another adopted APL s first point of argument All of those arguments

whith state that equalization and absorption tBnnot violate sections 16 First or 17 of the Shipping Att are

rejected

163CONASA 21 F M C at 9394

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 395

AND PRACTICES

ing In aparticular case this zone is determined by consideration

of a the flow of traffic through the port prior to the conduct

in question including points of cargo origin or destination b

relevant inland transportation rates c natural or geographical

transportation patterns and efficiencies and d shipper needs and

cargo characteristics

2 A carrier or port may not unreasonably divert cargo which

is naturally tributary to another port When diversion of naturally

tributary cargo occurs the reasonableness of the practice must

be determined The reasonableness of the particular practice is

determined by consideration of a the quantity and quality of

cargo being diverted is there substantial injury b the cost

to the carrier of providing direct service to the port c any

operational difficulties or other transportation factors that bear

upon the carrier s ability to provide direct service e g lack of

cargo volume inadequate facilities d the competitive conditions

existing in the trade and e the fairness of the diversionary

method or methods employed e

g absorption solicitation

IIA port s locally tributary zone will not only vary over time but with the nature of the

commodity shipped The tributary zone for colton may differ from that for apples or for com

puter parts

In order to keep these guidelines in proper perspective it is important

to recalI some aspects of their development procedures application and

areas of impact

The guidelines do not treat the concept of naturally tributary territory

in the abstract They are to be considered in all future proceedings wherein

violations of sections 16 First and 17 of the Act are alleged based upon

the diversion of cargo from a port CONASA 21 FM C at 94 The

reason for this as Chief Judge John E Cograve explained in his initial

decision which the Commission adopted in CONASA is the fact that

the sections of the Shipping Act alleged to have been violated are sections

16 First and 17 and that it is undue preference or prejudice to ports

and unjust discrimination against ports not diversion of cargo which those

sections proscribe CONASA 21 F M C at 122 Section 15 ofthe Shipping

Act was not at issue in CONASA but remedies thereunder may be available

in appropriate circumstances in cases involving such things as adequacy

of carrier service CONASA 21 F M C at 122

In establishing CONASA s guidelines the Commission assigned no rel

ative weight to any of the individual components making up those guide

lines They are general principles of future decision making pursuant to

which the Commission will undertake to strike the delicate balance between

shippers carriers and ports needs and benefits in a given factual context

Dart represents a particular application of that weighing process Dart is

not in conflict with CONASA it is entirely compatible for in Dart the

Commission weighed the competing interests under CONASA s principles

and on the discrete facts of that case found the diversion of traffic to

f PMr
396 FEDERAL MARITIME COMMISSION

be unlawful Dart 639 F 2d at 814 This process of weighing competing

interests and arriving at a balance in judging and applying terms not defined

by statute as is true of naturally tributary has often met with approval

by the Supreme Court See Bowman Transportation Inc v Arkansas

Best Freight System Inc 419 U S 281 293 1974 That precept is fitting

where Congress has entrusted this Commission with the power to determine

whether certain conduct conforms to or is in violation of sections 16

First or 17 of the Shipping Act a delegation which affords administrative

discretion to the Commission to draw its conclusion from the infinite

variety of circumstances which may occur in specific instances Cf Inter

state Commerce Commission v Parker 326 U S 60 65 1945

The allocation of evidentiary burdens falls on the competing parties to

the dispute seriatim First the complaining party here in effect Hearing

Counsel 164 and POP may be so considered has the particularized burden

of proof of establishing that the diverted cargo originated in territory natu

rally tributary to it Second the complaining port must show it was harmed

The respondent then assumes the burden of establishing the reasonableness

or justification of the practice Dart 639 F 2d at 814815

The particularized burden of the complaining party needs some clarifica

tion because its meaning seems to have been blurred during the proceeding

by loose usage of key terms For example diversion of traffic was

occasionally used as a code word substitute for equalization or absorption

in order to symbolize unlawful conduct 16 For the purposes of the particu

larized burden it should be emphasized that the burden cannot be met

by a mere showing that the cargo originates at a point nearer to the

basing port or that the inland rates to the basing port are lower or both

and that there is adequate service at the basing port CONASA stands

for the proposition that there can be no culpable diversion unless it has

been established that the cargo originated in a naturally tributary rone

This zone in turn cannot be determined until all of the components set

forth in I a through I d of the guidelines are measured

With those principles in mind Iturn to the issues under investigation

beginning with the seminal question whether any ofthe top ten commodities

is naturally tributary to POP under CONASA s guidelines

c THE TOP TEN COMMOOmES ARE NOT NATURALLY

TRIBUTARY TO pop

In my judgment none of the top ten commodities has been shown

to be naturally tributary to POP The reasons follow

164 Of course in urging on brief that there be no finding of violation of sections 16 First or 17 Hearing

Counsel later departed from the role of complainant

65 Diversion meaning substituted service is not synonymous with wrongdoing What is unlawful is undue

preference or prejudice to a port caused by diversion

ft F M r
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 397

AND PRACTICES

The first of CONASA s standards to be considered is the flow of traffic

through the port prior to the conduct in question including points of cargo

origin and destination

It is undisputed that the practices under investigation have been going

on for a

very long time For at least as far back as Mr Mowat can

remember in 1969 or 1970 166 PWC had equalization and absorption rules

in its tariff and it applied those rules to POP base cargo transported

inland to POS and other ports in substituted service

There is a paucity of evidence concerning movements of any of the

top ten commodities except for apples to PWC destinations prior to the

events of 1977 1978 167

Apples never moved in substantial quantities from POP The burgeoning

export market for Hood River apples was occasioned by the development

of direct refrigerated container service from POS to Hong Kong There

is even now no scheduled direct liner refrigerated container service to

Hong Kong 168

With respect to the other five commodities which POP contends histori

cally flowed through the Port POP relies on Mr Copan stestimony 169

But Mr Copan s

testimony is not helpful to POP s position For example

POP says that metal scrap historically moved through POP However Mr

Copan demonstrated that while metal scrap moved through POP it also

moved through POS More to the point Mr Copan showed that historically

POS was the major PWC export port for metal scrap Neither historically

nor through 1978 did scrap metal destined for Taiwan move through POP

except for avery limited amount 170 In 1977 more than 75 percent

of equalized scrap metal went to Taiwan In 1978 that figure rose to

nearly 90 percent

For another example POP claims that the evidence shows that historically

lumber was shipped from POP This is true but it is also true that histori

cally lumber was shipped from POS as well In addition there are other

166 Mr Mowat wa employed by pop before then but his memory of PWC s equalization and absorption

practices does not antedate that period

167 pop concedes that there is scant evidence of record concerning historical movements And most of

that was introduced through Mr Copan To compensate for this inattention to its burden and concomitant

lack of proof pop asks that it be inferred from the tonnage figures of what was equalized and absorbed

and what went out of Portland to the PWC destinations in 1977 and 1978 that there was an historical

flow through POP for five of those commodities An inference drawn from evidence so meager would be

unreasonable

168POP contends that cargo does not cease to be naturally tributary to an area merely because it is contain

erized It cites no authority for this proposition Nevertheless a statement to that effect does appear in the

Commission decision in Intermodal Service to Portland 17 F M C 106 127 1973 Yet having made this

point POP rests on it and offers nothing more perhaps in recognition that the statement can have only lim

ited application and is generally inapposite to the facts of this case Obviously it cannot apply to apples

or other commodities whose transportation characteristics are altered by containerizing See eg Pacific

Westbound Conference Wastepaper and Woodpulp etc supra In any event that statement cannot substitute

for poP s failure to introduce any evidence of historical flow

169POP concedes there is no historical evidence in the record with respect to canned or frozen com onions

or meat and bone meal

70BI 95 p37
398 FEDERAL MARITIME COMMISSION

historical facts which POP s claim ignores Most of the POP exported lum

ber a constant ofabout 95 percent was and is carried in non liner service

On the other hand since 1974 POS exported lumber carried in non liner

service declined from about 78 percent to about 22 percent in 1978 171

In 1974 only slightly more liner borne lumber was carried from POP than

from POS to PWC destinations POP s

tonnage of liner carried lumber

has remained nearly constant but POS tonnage has increased substantially

Equalized lumber amounted to less than 10 percent of the liner lumber

exported from POS in 1977 and 1978 Therefore separate and apart from

equalization it is apparent that insofar as containerized liner carriage of

lumber is concerned history and trend favor POS over POP I72

In the past both POP and POS were exporters of wastepaper to Korea

where most of the equalized wastepaper goes

Historically POP and POS were large exporters of pulses to Taiwan

the destination of most of the equalized pulses although in 1974 more

was shipped from POS In 1978 POP s share was only about 20 percent

of what it was in 1974 73 POS exports of pulses to Taiwan increased

tenfold in that same period Only a tiny fraction of 1 percent of POS

exports of pulses to Taiwan wasequalized in 1978

Historically cattlehides moved to Korea from both POS and POP al

though the greater proportion about 41 2 to I was shipped from POS

POP s share of this market has been increasing since 1974 Equalized

cattlehides are a minute fraction of the exports of this commodity from

either port

To summarize POP failed to meet its burden of proof with respect

to the historical flow of any of the top ten commodities although this

infirmity was partially remedied by evidence adduced by Hearing Counsel

But this evidence establishes that with respect to the particular predominant

destinations of equalized apples metal scrap and lumber POP was not

the historical port of export With respect to the major destinations of

equalized pulses wastepaper and cattle hides there is insufficient evidence

to show that historically POP was favored over POS as the principal

port of export With respect to the remaining commodities there was a

failure of proof Over and above the evidence concerning particular com

modities it is manifest that with the advent of containerization in the

1960 s POS emerged as the container load center in the Pacific Northwest

and as a consequence it attracted a great deal of cargo which in the

past was not exported to PWC destinations from POP POS s eminence

as a container load center has resulted in the continuance of the flow

pattern which began in the 1960 s

171 In 1976 only 7 percent was carried by non liners Ex 95 pp 1920

1121be total tonnage of lumber exported from pop far exceeds the total for POS

173 Apparenlly al least forTaiwan bound pulses the Columbia River barge service is not attractive 10 ship

pers even though il may be less expensive than other modes of carriage This is due to the fact that the

lackof adequate service at pop makes the slower moving barge service more costly in the long run because

thecontainers would still have to be moved inland 10 POS after having incurred POP s charges
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 399

AND PRACTICES

Relevant inland transportation rates is the second of the CONASA factors

to be considered in determining whether cargo is naturally tributary to

a particular point As seen the substituted service in this case is provided

almost exclusively by inland motor carriers Obviously those inland motor

carrier rates favor POP or there would have been no equalization or absorp

tion The evidence of inland rate disparity between the two ports is not

very specific but this is no great defect It is sufficient to note that

generally the difference ranges from about 17 00 to about 270 00 per

truckload depending on the commodity and point of origin Overwhelm

ingly except for instances of slight difference in rates this factor must

be balanced on the side of POP Note however the Del Monte witness

did not consider 17 00 to be slight

Geographical or natural transportation patterns and efficiencies is the

next factor An analysis of this factor as the case was presented is more

complicated than measuring distances or drawing lines through contour

maps to determine the shortest or fastest inland routes Of course the

shortest or fastest inland routes as reflected by the freight rates are those

which go to POP However this reckoning does not take into account

the transpacific or Far East geographical and natural transportation patterns

and efficiencies Neither does it measure the effect of the load center

on those patterns and efficiencies

The transpacific elements are not favorable to POP First measured by

way of time or distance most of the more significant PWC destinations

are nearer to pas than to POP Second because POS became the load

center the more numerous transportation options and liner services are

available there Those elements together make it more natural and efficient

to coordinate the several requisite transshipment services in the Far East

with the liners which sail from pas Were APL or Sea Land to call

at POP either as a sole or supplemental port of call these efficiencies

would be lost and the ability of those carriers to compete in the trade

would be adversely affected

Moreover because it is the Pacific Northwest load center 174 pas is

the more natural and efficient of the two ports in terms of least costly

availability of containers and least expensive container support activity

It is also the naturally more efficient port of the two because there is

no river bar to cross and no narrow river channel to navigate

Thus a balancing ofthose natural and geographic patterns and efficiencies

leaves the two ports nearly even POP has the advantage at origin of

inland distances and routes but the oceanic and Far East distances and

routes are more ad antageous to pas The latter advantage and the derived

benefits from being the container load center make POS a more efficient

port in terms of options available to shippers whose shipments originate

1741t Should be recognized that POS is the load center for hoth local and intermodal movements and the

enhanced activity of the whole benefits the efficiencies of the component parts

1 F M
400 FEDERAL MARmME COMMISSION

at points more proximate to POP Although the balance is about even

Ibelieve the scales tilt slightly toward POS because more and better tailored

service is available there

The final factor to be considered involves shipper needs and cargo charac

teristicS 17S It will be recalled that POP offered no proof concerning the

transportation requirements of shippers and perceived no effect of cargo

characteristics upon those requirements The evidence concerning those

needs and characteristics was elicited from witnesses produced by Hearing

Counsel Their testimony clearly and convincingly established that sub

stituted service was a sine qua non for them to stay in the export ball

game because of disincentives or disadvantages of various kinds at POP

Those shippers found the options and efficiencies of substituted service

essential for them to get their goods to market in a timely manner without

damage and in accordance with their special needs including special charac

teristics of certain cargo e g

need for refrigerated containers for apples

Overwhelmingly those shippers established that if not for substituted serv

ice they could not compete against foreign or domestic competitors in

the export trade 176

Weighing the four factors Ifind that the 1

alance lies heavily in favor

of the conclusion that none of the top ten commodities is naturally tributary

to POP I deem the factors of historical flow transportation efficiencies

shippers needs and cargo characteristics to be controlling When POS

got the jump on POP first as a container facility port and then as a

container load center it created export markets not previously available

to shippers As POP s role of load center enlarged it drew more container

traffic going from east to west and west to east APL and Sea Land ex

panded their operations because of the increased options and efficiencies

created by POS as a local and intermodalport of choice in the Pacific

Northwest In turn those carriers were able to pass on the efficiencies 177

175 The inclusion of the tenn cargo characteristics in the CONASA guidelines would indicate aretreat from

the statement which appeared inIntermodal Service to Portland Oregon supra Cf n 168 supra

176 pop makes an argument in its brief p 155 that It was not required to prove that the traffIC which

was diverted from Portland to Seattle and California ports would have moved through Portland butfor the

Respondents having equalized and absorbed the Inland freight differential citing theCommission s rejection

of the but for test in Sea Land Services Inc v South Atlantic 4 Caribbean Line

Ine

9 F M C 338

350 1966 POP misses the mark with this argument It was proved here that the vast mlljority of the equal

ized shipments would not have moved In the export trade at all If substituted service did not exist as an

available option

177Although adequacy of service is not explicitly mentioned In the CONASA guidelines it does survive

See Further Order supra 21 F M C at 941 943 DJut 21 F M C 1129 n 16 Dart 639 F 2d 817 Briefly

insofar as the issue of naturally tributary territory was concerned in pre CONASA days the adequacy of serv

ice test meant this acargo diversion could be justified only if there was inadequate service at the complain

ing port Heretofore I found that there was inadequate service at POP ahistorically in the development

of container transport it did not provide the necessary facilities for container service b afterwards when

it was expanding its container facilities it could not attract orkeep the liner services Clearly those compo

nents of adequacy of service are subsumed in the findings and discussion of historical flow efficiencies ship

per needs and cargo characteristics

26 F M C
n FM r

PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 401

AND PRACTICES

and options to the shippers who thereby found new or greater markets

for their goods

I am unable to find on this record what POP implies in claiming that

the top ten commodities are naturally tributary to it It is POP s

implicit

suggestion that PWC and its equalizing member lines together or in com

bination with POS are stealing traffic from POP There is no evidence

to support that kind of conclusion I do find that even though POP is

steadily improving its facilities and is becoming a more significant container

port on the basis of their requirements in 1977 and 1978 shippers needed

the options and efficiencies of substituted service to reach their overseas

markets 178

D NEITHER POP NOR POP S SMSA HAVE BEEN HARMED BY

SUBSTITUTED SERVICE

Having found that the top ten commodities are not naturally tributary

to POP I must find that neither POP nor POP s SMSA was harmed

by PWC s equalization rules and practices 179

Assuming however that all of that cargo was naturally tributary to

POP I must still find that the harm to POP was insubstantial and the

harm to SMSA was imperceptible

At best POP would have received about 300 000 more in 1977 and

390 000 more in 1978 if all of the equalized cargo had been loaded

at the Port Those figures represent less than 5 percent per each of those

years of POP s total container revenues and less than 2

percent for

each of those years of POP s total marine terminal operation N b no

one of the top ten commodities would contribute to more than 371 2

percent

of the 5

percent or 2percent in either of those two years The 37V2

percent figure is not a refined estimate It is based solely upon the particular

1978 statistics for lumber which appear in Appendix C Table II On

this record I can find no basis for concluding that these small percentages

of revenue which POP did not earn in 1977 and 1978 would have caused

substantial injury to POP in 1977 and 1978 180

As seen the residual impact to SMSA from equalization was about

66 000 and 57 000 in the years 1977 and 1978 respectively In a commu

nity which had gross personal income of more than 10 billion this was

infinitesimal Itcertainly cannot be regarded as substantial harm

178 In the discussion leading to my conclusion that the top ten commodilies are nOl naturally tributary to

POP I allempted to avoid a duplication of the detailed findings of fact For example I made no further

mention of the queuing delays at pop afacl which goes to adequacy of service transportation efficiency

and shipper needs and cargo characteristics In addition except where I believed it to be appropriate I

tried

not to rely on facts not specifically found in the Fact section of Ihis decision 1bese approaches will apply

10 other portions of the discussion which follow

179See Finding Nos 150 through 55

180 I might add that pop offers nothing in its brief to aid in the process of quantifying the extent of harm

Indeed it cannot on Ihis record which is lacking inprobalive evidence of both the cosl to service the addi

lional conlainers and the real a

opposed to imagined repercussions of losing Ihem 10 substituted service
402 FEDERAL MARITIME COMMISSION

I

E PWC S SUBSTITUTED SERVICE IS JUSTIFIED

Having found that the traffic was not naturally tributary to POP and

that neither POP nor its SMSA was hanned it would seem to follow

that the issue of justification is moot But this would be an oversimplifica

tion

Under CONASA s guidelines the issue of justification like the issue

of hann seems to come into play only when a diversion of naturally

tributary traffic is established However there is an obvious overlap between

the issues of diversion from a tributary zone and justification at least

to the extent that evidence relevant to one issue may also be germane

to the other For example evidence of the extra time and expenses caused

by queuing delays and gang deficiencies at POP serves to justify APLs

and Sea Land s decisions not to call at POP and also establishes certain

inadequacies of service and inefficiencies at POP

Whether in recognition ofthis overlap or out of an abundance of caution

the respondents introduced evidence which establishes clearly and convinc

ingly that the cost to APL and Sea Land severally of providing direct

service at POP was not warranted by any transportation need or by any

operational or economic test An examination of all the evidence plainly

shows that the cost of making a call at POP 181 would far exceed the

revenue that could be expected or received from the amount of cargo

available at POP

Another factor involved in the question of reasonableness is the fairness

of the methods employed in obtaining the equalized cargo Before dealing

with this factor directly a separate aspect of fairness should be explained

It should be manifest that despite comparisons necessarily made between

POP and POS this case is not a contest between those ports nor was

it my intention in this judgmental exercise to compare their relative values

Any findings in this respect are intended solely for the purpose of making

a determination of the issues with which this investigation is concerned

A further indication of the fact that this is not a challenge between two

ports lies in the fairness of their competition POS does not use equalization

or absorption as an inducement in its solicitation of traffic in the Hood

River or Willamette Valley areas

There are two aspects to the question of the fairness of the equalization

and absorption methods employed by Sea Land and APL First it is evident

that they are not drawing any substantial amount of traffic away from

POP that would otherwise have been shipped from there and there is

no indication that they are doing anything different in providing substituted

service than the independent liner services are doing in providing a similar

and competing service Indeed it would be unfair to permit the non

conference competition to continue to provide substituted service and at

the same time to proscribe such activity by members of PWC Viewed

IKllncluding afeeder service

Mr
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 403

AND PRACTICES

in this light and there is no evidence to the contrary Ifind that PWC s

methods comport with acceptable standards of fairness

There is another approach to fairness and that is the relationship between

substituted service and the PWC exclusive patronage agreement and the

effect thereof on POP

There is evidence that PWC contract shippers who used Sea Land s

or APL s substituted service did not consider utilizing independent liner

services which might have been available at POP out of fear of being

deemed in violation of their contracts 182

On the basis of that evidence I am unable to conclude or even infer

that this represents an unfair practice by PWC or its members Nevertheless

I do foresee a potential for harm to POP 183 if in fact PWC would

under its approved section 15 agreement be authorized to deem a contract

shipper to have acted in contravention thereof and be authorized to take

appropriate action against that shipper because it used a non conference

carrier serving POP directly when the only other PWC service available

was substituted service at another port

During the critical years scrutinized in this proceeding POP did not

have sufficient traffic or adequacy of service to warrant more calls by

PWC members or by independents in the PWC trades However POP

did have more nearby cargo than could be handled by the PWC carriers

which did call there Should that nearby container traffic increase under

ordinary marketplace conditions a currently disinterested liner operator

might reconsider and wish to institute or reinstate a direct service at POP

However should that operator be an independent the fear of a threatened

contract violation might serve as a disincentive to the shipper and con

sequently a disincentive to the independent operator This inhibiting factor

could prove harmful to POP s growth as a container port as its facilities

are expanded and improved

Because I do not find a violation of law in these circumstances rather

a possibility of substantial harm to POP I am not certain that the Order

or Further Order empowers me to issue an order under section 15 requiring

a modification of Agreement No 57 On the assumption that I am not

authorized to do so in lieu of an order I do recommend that the Commis

sion consider a modification of the PWC agreement to remove the potential

for harm to POP This kind of modification would enhance the transportation

options available to shippers a cause fervently espoused by respondents

182There is no evidence that this concern was occasioned by any warning from PWc

It is asumed that none of the Japanese Six Lines offered the particular service which the shipper

needed or had space available on its vessels at that time

183Dart 639 F 2d at 817 teaches that after a

complaining port has established a diversion of naturally

tributary cargo it need only show the possibility of substantial harm rather than loss of cargo to place the

burden of demonstrating rea onableness upon the offending carrier Although the complaining port has not

made the requisite showing in this ca it is nevertheless appropriate to consider the question of fairness

to determine whether a

remedy may lie under section 15 CONASA 21 F M C at 122 Unlike Dart this

proceeding is conducted in part under section 15
404 FEDERAL MARITIME COMMISSION

throughout this proceeding without interfering with the ability of PWC

members to compete with independents which also offer substituted serv

ice 184

With respect to section 15 I find that PWC s substituted service rules

and practices are required by and meet a serious transportation need nec

essary to secure important public benefits and are in furtherance of a

valid regulatory purpose of the Shipping Act See Federal Maritime Com

mission v Aktiebolaget Svenska Amerika Linien Swedish American Line

390 U S 238 243 246 1968 Ialso find on balance that future public

benefits and transportation needs would be better served by the kind of

modification proposed in n 184

This modification would also comport with the concept that naturally

tributary territory may vary over time I do not construe this to mean

that the tributary zone may change from week to week or necessarily

from year to year or with any pendulum like precision Iinterpret it to

mean that as reality requires and the efficiencies of transportation dictate

cargo will tend to go through the port which offers the most efficient

service witness POS resurgence as a port of choice when it created

a climate favorable to container traffic

Accordingly for all of the foregoing reasons I

find that there has been

no showing of violation of sections 15 16 First or 17 of the Shipping

Act 1916 and there has been no showing of violation of section 205

of the Merchant Marine Act of 1936 185

ORDER

It is ordered that the above proceeding be discontinued

S SEYMOUR GLANZER

Administrative Law Judge

8

td not recommend that the modification permit shippers the option pf using nononference substituted

service I do suggest aclause in the exclusive patronage contract which provides that a shipper is not in

violation only Ifit uses a nononference carrier offering direct service at pop when there Isno PWC direct

service available at POP or another pori which may be considered an integral pan of the Columbia River

Basin complex See Stockton Port District v Pacific Westbound Conference supra 9 P M C at 21

111 Other than making passing reference to it in the conclusionary ponion of Its brief pop does not deal

with section 205 in this proceeding at all The purpose of section 205 was explained by the Commission

in Pacific Coast European Conference Rules 10 and 12 14 P M C 266 284 1971 Itis to

prevent collective action designed to create discrimination in the form of a difference in rates at

which federally improved ports are served but more imporlBlltly to forbid conferences to impose

restrictions on their member lines which would interfere with the free exercise of the lines discre

tion inthe determination of which pons they choose to serve

Section 205 absolutely prohibits collective action preventing service to apon at the same rates as those

applicable to the next regularly served pori Intermodal Service to Portland Oregon supra 17 F M C at

135 This kind of situation might occur if there were a conference imposed rate differential between direct

water service and indirect overland service There is no evidence of that or of anything else which might

invoke the reach of section 205 inthis proceeding
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 405

AND PRACTICES

APPENDIX A

LIST OF WITNESSES

A Called by POP

1 Milton A Mowat Manager Traffic and Regulatory Affairs POP

2 Doris Elaine Lycan Transportation Pricing Specialist POP

3 Glenn Russell Morris Senior Dispatcher POP

4 Richard K Lyon Senior Vice President Economics Research As

sociates

5 Gene P Krekorian Principal Economist Economics Research As

sociates

B Called by Hearing Counsel

6 Jay Copan Industry Economist Office of Economic Analysis

Federal Maritime Commission

7 Shigeto Uchida Yuasa Trading Company Inc a shipper offrozen

com

8 Laurence Arthur Kromer Avison Lumber Co a shipper oflumber

9 Emil Cahen Cahen Trading Co a shipper of hides and onions

10 Harriet Clothier K C International Ltd a shipper of wastepaper

11 Ron Hendrick Phil A

Livesley Co a shipper of onions

12 Carroll Kirk Cascade Steel Rolling Mills Inc a shipper of metal

scrap

13 Allan Spencer Gordon North Pacific International a shipper of

dried peas and beans

14 William B Wagstaffe Del Monte Corporation a shipper of canned

com

15 George Hajime Noda Kasho Company a shipper of wastepaper

16 Franklin Battat Liberty Gold Fruit Co a shipper of apples

17 Ted IColeman W M Dickerson Co a shipper ofapples

18 Delbert Larry Pearson Manager of Marketing Projects POP

C Called by PWC or its member lines

19 Dr Ernest Nadel Economist Senior Analyst Manalytics Inc

20 Seiichi Hirano General Manager Pacific Coast U S A and Can

ada Yamashita Shinnihon Steamship Company on behalf of all

six Japanese containership operators

21 Ronald B Gottshall Director of Pricing Sea Land Service Inc

22 Douglas A Pfaff Managing Director Pacific Northwest Region

American President Lines

Dr Nadel was co sponsored by POS

26 F M C
406 FEDERAL MARITIME COMMISSION

23 Capt Herman Tobiassen Vice President Operation Bakke Steam

ship Corporation agent for Knutsen Line

24 Capt Paul Sather Mead former Vice President of Eckert Overseas

Agency Inc a subsidiary of Orient Overseas Container Line

D Called by POS

25 Robert C McQuigg Director of Marketing Department POS

APPENDIX B

CARRIERS IN THE PWC mADE

1

d

I A

PWC Member Lines 1977

American President Lines Ltd APL R

1

East Asiatic Company Inc EAC R

Japan Line Ltd R

Kawasaki Kisen Kaisha Ltd K Line R

Knutsen Line R

Maritime Company of the Philippines Inc R

Mitsui O S KLines Ltd OSK R

MoUer Maersk Line R

Nippon Yusen Kaisha NYK R

Pacific Far East Line Inc PFEL

Phoenix Container Lines 1976 Ltd PCL R

Sea Land Service Inc R

Seatrain International S A

Showa Line Ltd R

States Steamship Co

United States Lines Inc R

Yamashita Shinnihon Steamship Company Ltd Y S R

Zim Container Service R

I B

PWC Associate Members

Barber Blue Sea Line R

Waterman Steamship Corporation R

I R stands for a linenamed as aRespondent in theOrder of Investigation and Hearing

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 407

AND PRACTICES

II A

Changes in PWC Membership During 1978

Withdrawn

States Steamship Co

Seatrain International S A

Pacific Far East Line Inc

New Members

Korea Maritime Transport Co Ltd

Seatrain Pacific Services S A R

Galleon Shipping Corporation R

III

Non Conference Lines in the PWC Trade 1977 1980

Hapag Lloyd AG

Orient Overseas Container Line Inc OOCL

Evergreen Marine Line

Far Eastern Shipping Co FESCO

Yang Ming Line

Neptune Orient Lines

Asia America Line

Ro Lo Pacific Lines

Korea Shipping Corp

Lykes Bros Steamship Co Inc

States Steamship Co last half 1978

Scindia Steam Navigation Co R2

N

When the record was closed in 1981 neither Evergreen FESCO nor

OOCL was serving POP directly

2

The Order of Investigation and Hearing names Scindia and the Shipping Corporation of India SCI as

PWC members and respondents Marginal note No I of PWC s proposed findings of fact shows Scindia as

an independent during 977 1980 and does not mention SCI as aPWC member or as having been in the

trade at all poP s proposed finding of fact No 6 states only that Scindia was a member of PWC when

POP s petition was filed in 975 However POP agrees that from 1977 through 1980 neither of them was

a container carrier or a PWC member See Tr 401 There is some testimony that in 981 Scindia might

have converted to containerships which call at Portland but the testimony was sketchy and inconclusive Tr

5331 5339
408 FEDERAL MARITIME COMMISSION
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 409

AND PRACTICES

TABLE IlQUANTITY ONTAINERS

APL Sea Land PeL Total

20 40 20 35 40 20 40 20 35 40

Apples 77 III 96 67 45 96 223

78 37 132 I 132 38

Wastepaper 77 156 85 135 132 85 423

78 62 22 134 275 22 471

Onions 77 5 42 7

78 II 49 60

Cattlehides 77 223 4 4 223

78 77 164 7 77 7 164

Canned Corn 77 115 5 5 116

78 5 I

I 5

Meat Bone Meal 77 213 12 5 116

78 178 1 5

Lumber 77 327 3 3 327

78 951 28 18 28 969

Metal Scrap 77 26 71 66 8 71 100

78 69 75 69 75

Dried Peas Beans 77 156 2 2 156

78 44 319 44 319

Frozen Corn 77 12 12

78 67 67

Total These Commodities 77 1 354 279 311 185 279 1 850

78 1 794 259 277 275 121 259 2 346

I c T rl
410 FEDERAL MARITIME COMMISSION

APPENDIX D

Finding No 89

The facilities of the Seattle harbor include 16 modem terminals and

46 berths ranging from 350 to 1 000 feet in length with a MLLW depth

ranging from 18 to 73 feet There are over 1 066 000 square feet of transit

shed space In terms of container facilities POS currently operates 11

berths with over 10 000 feet of berthage space and with the completion

of another terminal Terminal 37 will have 14 containership berths served

by 17 container cranes At present nearly 300 acres at POS are committed

to container facilities at a total initial investment cost of 150 million

In comparison in 1978 POP possessed facilities covering about 100 acres

approximately 5 000 continuous feet of container berths and 7 container

cranes POS owns 17 container cranes 11 of 45 ton lifting capacity and

six of 33 ton capacity Additionally there are eight Whirley cranes five

of which are 50 ton capacity one of 45 ton capacity and two of 35

ton capacity There are two 25 OOn mobile truck mounted cranes and ten

45 ton container yard cranes POS also has available one shearleg derrick

heavy lift crane with a 2oo ton lifting capacity There are currently five

container freight stations located at POS There are seven public warehouse

facilities available in the Seattle metropolitan area and two private container

storage companies There are six private packing crating and lashing serv

ice companies and three private enterprises which provide container repair

services The warehouse space available at Terminals 25 and 91 can accom

modate over 290 000 cases of fresh fruit and at Terminals 20 and 91

POS operates 275 000 cubic feet of transit freezer facilities The chill

facilities are used predominantly for apples pears and a small percentage

of cherries and citrus fruit An additional 6 800 000 cubic feet of privately

operated general purpose cold storage facilities are available on POS prop

erty as well There are about 850 plug in spaces available for reefer

containers POS has the largest amount of freeze and chill space in the

Northwest and its reefer plug in spaces exceed those ofPOP The Terminal

106 complex includes 56 6 acres with a total space for warehouseoffice

buildings of 1 222 427 square feet This area is used primarily for the

short term storage of container cargo destined for OCP inland territory

Eight acres at Terminal 102 W are allocated for the storage of empty

containers POS has a new export tracing system which enables exporters

to track their cargo from points of inland origin to loading on the vessel

at POS

fi PM
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 411

AND PRACTICES

APPENDIX E

ADDITIONAL SAILINGS CONTRIBUfED BY 1

EQUALIZATION AND ABSORPTION

Direct Service Substitute Service

Via Portland Via Seattle

Destination Total Total Increase

Japan

Direct 12 8 67

Korea

Direct 0 3 cannot be

calculated

arithmetically

Transshipped 7 8 114

Total Korea 7 II 157

Taiwan

Direct 6 5 83

Transshipped 6 6 100

Total Taiwan 12 II 92

Hong Kong

Direct 13 7 54

Transshipped 6 4 67

Total Hong Kong 19 11 58

Manila

Direct 8 0 0

Transshipped 6 4 67

Total Manila 14 4 29

Bangkok

Direct 2 0 0

Transshipped 1 6 600

Total Bangkok 3 6 200

I Ex 139 Table 1

APPENDIX F

CONTENTIONS OF THE PARTIES

A POP

I Opening Brief

Under CONASA s guidelines and the particular adoption of those guide

lines to the practice of absorption of inland freight rates to divert local

traffic from a port in Dart it should be found that POP has assumed

and carried the burden of proving that by the practice of absorbing inland

freight charges respondents diverted cargo which originated from points

within POP s naturally tributary territory to its damage and prejudice

26 EM C
412 FEDERAL MARITIME COMMISSION

and that respondents failed to carry their burden of proving that the diversion

under their practices is reasonable under the circumstances the ten commod

ities which respondents diverted from Portland by equalization and absorp

tion of inland freight rates all originated in a zone naturally tributary

to POP there is substantial harm to POP and Portland s SMSA arising

from respondents diversionary practices and respondents did not prove

otherwise respondents did not prove the existence of any operational dif

ficulties precluding direct service respondents did not prove the fairness

of their diversionary practices respondents have failed to prove the reason

ableness of their practices through preference of customers for certain car

riers respondents did not prove that the port facilities or steamship service

at POP were inadequate respondents have failed to prove that POP provided

inadequate steamship service and that PWC s agreement and rules and

practices violate the following Acts and declared policies of the Congress

sections IS 16 and 17 ofthe Shipping Act 1916 section 8 of the Merchant

Marine Act 1920 and section 205 of the Merchant Marine Act 1936

II Reply Brief

The concept of naturally tributary territory has not been abandoned

reasonableness is not shown by analysis of costs to serve POP and existing

precedent for decision has not and should not be abandoned

i

B HEARING COUNSEL

I Opening Brief

PWC s equalization and absorption practices as they affect POP are

not unlawful and detrimental to the commerce of the United States and

the general public interest or unduly prejudicial or unjustly discriminatory

to POP or to business and individuals which depend on POP s economic

viability pursuant to section 205 of the Merchant Marine Act 1936 and

sections 15 16 and 17 of the Shipping Act 1916 the equalization and

absorption practices of the PWC do not cause cargo which would ordinarily

move through the POP to move through ports other than POP if the

Commission determines that PWC carriers are diverting cargo away from

POP that diversion causes significant economic harm to the Port and the

local economy of Portland if the Commission determines that PWC carriers

are diverting cargo away from POP and that diversion has caused substantial

harm the equalization and absorption practices of the PWC have not been

shown to be reasonable and justified

1

II Reply Brief

Equalization and absorption as between ports may violate sections 16

First and 17 of the Shipping Act 1916 the Commission should not prohibit

PWC equalization and absorption while allowing non conference lines to

26 F M C
PACIFIC WESTBOUND CONFERENCE EQUALIZATION RULES 413

AND PRACTICES

equalize and absorb PWC overstretched their arguments concerning com

petition and the distinctions which respondents draw between the facts

in Dart and those present here are not significant but Dart does not

compel a finding against respondents

C PWC

Equalization or absorption as between ports cannot violate sections 16

First or 17 of the Shipping Act cargo was not shown to be naturally

tributary to POP there was no diversion there was no harm and therefore

no significant harm competitive considerations give PWC the right to equal

ize and absorb POP s proposed relief would constitute severe flag discrimi

nation containership service patterns and elementary economics justify

equalization and absorption water feeder service is utterly uneconomic

adequacy of service must be shown by POP as part of POP s burden

of proof that cargo is naturally tributary and Dart does not overrule

CONASA but it is factually distinguishable from the present case

D pas

The Shipping Act has been interpreted to imply that a port has aright

to naturally tributary cargo that interpretation results from section 8

of the Merchant Marine Act 1920 section 8 was not intended to build

walls between ports but rather to encourage the flow of commerce the

CONASA standard is based on a misinterpretation of section 8 and thus

should be abandoned containerization has rendered the concept of natu

rally tributary meaningless the development and maintenance of POP

does not depend upon traffic from inland areas naturally tributary

to the Port because POP is a large business enterprise with various functions

and POP uses revenues from other business activities for the maintenance

and development of marine facilities and POP does not depend on local

cargoes for its maintenance and development if guidelines must be applied

the CONASA guidelines are applicable and the record shows the practices

of the PWC are lawful under CONASA standard

E APL

Equalization or absorption as between ports cannot violate sections 16

First or 17 of the Shipping Act APL s absorption practices are valid

under the CONASA guidelines Dart and CONASA are compatible there

is no naturally tributary zone and POP has shown none absorption practices

are of long standing shippers need substituted service shipper preferences

are relevant the boundaries of a naturally tributary zone cannot be deter

mined by inland freight costs alone container transport is tributary to

no port the criteria of inadequacy of service is not among the CONASA

standards the substituted service practices are reasonable because APL

26 F M C
414 FEDERAL MARITIME COMMISSION

cannot call at POP APL must compete for cargo shippers need it and

water feeder service feasibility evidence was not required to be addressed

by APL in the absence of some showing by proponent or Hearing Counsel

F SEA LAND

Neither equalization nor absorption as between ports can be found to

violate sections 16 First or 17 competitive conditions in the trade would

make a finding of unlawfulness discriminatory and that feeder service

to POP is not feasible

G DELAWARE RIVER PORT AUTHORITY

POP should be protected against diversion of cargo because if it is

not other carriers will be encouraged to divert other cargo from other

ports by the same means as those used by PWC

H THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

The doctrine of naturally tributary traffic should be abandoned as a

rationale for invalidating carrier absorption and equalization practices and

the sole inquiry in any case should be whether those practices are unduly

preferential or unjustly discriminatory and absorption or equalization of

inland rates by an ocean carrier does not standing alone constitute undue

prejudice preference or unjust discrimination among ports

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 8412

CERES GULF INC

v

BATON ROUGE MARINE CONTRACTORS INC ET AL

ORDER

May 25 1984

By ruling served May 10 1984 Administrative Law Judge Charles Mor

gan granted complainant srequest to withdraw complaint and motion to

dismiss with prejudice in this proceeding The Commission s 30 day period

to request review of this ruling pursuant to 46 CFR 502 227 is currently

scheduled to expire with June 11 1984

Complainant has now filed a motion to reduce the Commission s 30

day review period so as to permit Judge Morgan sruling to become effective

immediately This immediate effectiveness is sought to hasten the dismissal

of a court proceeding whose dismissal will become effective only after

this Commission proceeding is dismissed with prejudice and to expedite

implementation of a terminal lease between complainant and the Port of

New Orleans Complainant states that respondent will not appeal Judge

Morgan sruling and concurs in complainant s motion

Complainant has established just cause for the requested reduction of

time in this instance The subject proceeding is only in its initial stages

the motion is unopposed and granting it will facilitate resolution of the

disputed issues without adversely affecting any party Therefore the Com

mission has determined to grant this motion and also has determined that

it will not review Judge Morgan s May 10 1984 ruling

TIiEREFORE IT IS ORDERED that the motion of Ceres Gulf Inc

to reduce time is granted and

IT IS FURTIiER ORDERED that the May 10 1984 ruling in this

proceeding styled Withdrawal of Complaint and Dismissal with Prejudice

has become administratively final

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C 415
FEDERAL MARITIME COMMISSION

DOCKET NO 8412

CERES GULF INC

v

BATON ROUGE MARINE CONTRACTORS INC ET AL

WITHDRAWAL OF COMPLAINT AND DISMISSAL WITH

PREJUDICE

Finalized May 25 1984

On May 4 1984 the complainant submitted the withdrawal of its com

plaint in the above proceeding and requested the dismissal of its complaint

with prejudice

The respondents do not oppose this withdrawal and motion to dismiss

There are no other parties to the proceeding

On May 2 1984 Judge Thomas A Early Jr Civil District Court for

the Parish of Orleans State of Lousiana Division A in Case No 84

3462 entitled Baton Rouge Marine Contractors Inc v The Board of

Commissioners of the Port of New Orleans in which Ceres Gulf Inc

had been admitted as a party intervener issued an order providing

that upon the dismissal with prejudice and at its cost by

intervener Ceres Gulf Inc of its complaint in the proceeding

entitled Ceres Gulf Inc v Baton Rouge Marine Contractors

Inc et a1 No 8412 on the docket of the Federal Maritime

Commission the petition herein of plaintiff Baton Rouge Marine

Contractors Inc shall without further action by this Court be

dismissed with prejudice and at plaintiff s cost Also that upon

dismissal of the said FMC proceeding Baton Rouge Marine Con

tractors Inc its officers directors shareholders agents and em

ployees be and they are directed not to oppose the implementation

of the lease agreement between Ceres Gulf Inc and the Board

of Commissioners of the Port of New Orleans pertaining to the

Jourdan Road Terminal Berths 4 and 5

Based solely upon the terms of the said Court Order the complainant

now seeks withdrawal of its complaint and its dismissal with prejudice

in No 8412

416 26 F M C
CERES GULF INC V BATON ROUGE MARINE CONTRACTORS 417

INC ET AL

Good cause appearing the request to withdraw the complaint in No

8412 and motion to dismiss it with prejudice hereby are granted

8 CHARLES E MORGAN

Administrative Law Judge
FEDERAL MARITIME COMMISSION

DOCKET NO 792

AGREEMENT NO 10293

DOCKET NO 793

AGREEMENT NO 10295

ORDER PARTIALLY ADOPTING INITIAL DECISION

May 30 1984

These proceedings were initiated by separate Orders of Investigation and

Hearing I

to detennine whether Agreement No 10293 a

space chartering

agreement between FIota Mercante Grancolombiana S A FIota and

Andino Chemical Shipping Company Andino in the United States Gulf

Atlantic Coast of Colombia trade and Agreement No 10295 between

FIota and Maritima Transligra S A Transligra a similar space chartering

arrangement in the United States Gulf Pacific Coast of Colombia trade 2

should be approved disapproved or modified pursuant to section 15 Ship

ping Act 1916 46 U S C 814 3

The Orders of Investigation were subse

quently amended to include two private agreements between FIota and

Andino and Flota and Transligra supplementing the Agreements 4

On May 27 1983 Administrative Law Judge Charles E Morgan issued

an Initial Decision 10 finding that 1

Andino Transligra and Flota

Proponents are common carriers by water within the meaning of section

1 of the Shipping Act 1916 46 U S C 801 2 the Agreements includ

ing the private agreements had been implemented prior to Commission

approval and 3 the Agreements are now presently contrary to the public

interest and detrimental to the commerce of the United States and should

therefore be disapproved s

Exceptions to the Initial Decision and Replies

to Exceptions were filed by the Commission s Bureau of Hearing Counsel 6

I Although these proceedings were not fonnally consolidated they were considered together at the parties

request This Order addresses both proceedings

2

The space chartering authority in both agreements is limited to liquid bulk commodities such as chemi

calsand fats

3

Agreement No 10293 and Agreement No 10295 are collectively referred to herein as the Agreements

4These private agreements were filed for approval on May 20 1980 and designated as Agreement No

10293 Sub I and Agreement No 10295 Sub I respectively hereinafter the private agreements will be

included in the term the Agreements unless otherwise specified Notice of their filing inthe Federal Reg

Ister elicited no protest or comment

Although the Presiding Officer found that the Agreemenls had been implemented prior to the Commis

sion s approval he funher found that the Agreements had been in the public interest 10 at I 75

76

6

Hearing Counsel s Exception challenge only the finding that the Agreements were previously inthe pub

lic interest See Note 4 supra

418 26 F M C
AGREEMENT NOS 10293 AND 10295

Flota Andino and Transligra O NE Shipping Company Ltd a party

opposed to the Agreements filed a Reply to Proponents Exceptions The

Commission heard oral argument

BACKGROUND

This section summarizes the facts relevant to the disposition of the issues

raised on exception A more thorough factual exposition is set out in

the Initial Decision which we incorporate by reference

Flota is a Colombian corporation that provides regular liner service for

general cargo in Colombia simport and export trades Flota does not own

or operate any specially equipped parcel tankers designed for the carriage

of liquid bulk cargoes

8 On occasion Flota carries liquid bulk cargoes

in the deep tanks of its general cargo vessels Transcript TR at 419

420 and 569 Exhibit Ex 20 at 3

Andino charters and operates parcel tankers for the carriage of liquid

bulk commodities Andino uses these vessels to meet its obligations to

Flota under Agreement No 10293 and to provide liquid bulk service in

its own name to other South American ports Andino is a wholly owned

subsidiary of Holland Chemical International HCI a

holding company

that purchases chemicals and resells them to HCI affiliated companies and

other companies in South America Ex 61 at 3 9 Ex 14 18 Tr at

486 711 1712 1713 1760

Transligra an Ecuadorian company is owned by HCI Flota and Ecua

dorian interests Transligra owns and charters parcel tankers for the carriage

of liquid bulk commodities in the United States GulfPacific Coast of

Colombian trade Transligra also offers liquid bulk service to other South

American Pacific Coast ports Tr at 427 433 962 1659 1698

O N E Shipping Company Ltd offers a liquid bulk service from the

United States Gulf to Venezuela Ecuador and other Caribbean Central

and South American ports O NE also makes occasional calls to Colombian

ports for liquid bulk commodities O NE which was established in 1973

is the successor of Overseas Liquid Gas Inc a liquid bulk carrier that

began to serve the Colombian market in 1963 Ex 79 at 2 Ex 85

at 3 and Tr at 1062 and 1072

The Agreements provide that Andino and Transligra will make available

to Flota the necessary space on vessels owned or operated by them in

their respective trade areas Flota agrees to commit itself to a service

7

Esso Chemical Supply Co Inc Dow Chemical International of Delaware and Shell Chemical Company

aDivision of Shell Oil Company were named Protestants in the Order of Investigation in Docket No 79

2 However these parties withdrew prior to the hearing

On August 12 1982 the Commission granted the Government of the Republic of Colombia leave

to file an amicus curiae statement on the operation of its Colombia s maritime laws and the pol

icy underlying them See Order of August 12 1982

8

Parcel tanker vessels generally contain several tanks that are lined with either epoxy

or zinc or are made

of stainless steel The tanks can be heated to facilitate discharge and with the exception of older vessels

each tank generally has its own pump

nFMC

419
420 FEDERAL MARITIME COMMISSION

frequency of 15 days in the Colombia Atlantic trade and to a 35 day

service frequency in the Colombia Pacific trade FIota fixes the freight

rate to the shipper and contracts for the cargo while Andino and Transligra

quote the space charter hire to FIota

Andino and Transligra also signed individual so called private agree

ments with Flota that supplement their basic Agreements These private

agreements provide that the shippers will be issued FIota s bills of lading

that Flota will canvass and contract in Colombia for the movement of

bulk liquid cargo that AndinolTransligra will be the sole coordinator of

all shipments originating in the United States Gulf that Andinoffransligra

will take responsibility for the freight in accordance with the Tanker Bills

of Lading or other contracts and that AndinoTransligra will supply FIota

with itineraries for regular shipments and establish the space charter

hire for various liquid bulk commodities 9

DISCUSSION

The Exceptions 10 and Replies to Exceptions raise two major issues

1 Whether Andino and Transligra act as common carriers by water

within the meaning of section 1 Shipping Act 1916 by carrying

liquid bulk commodities in the United StatesColombian trades

pursuant to their arrangements with FIota Ifso

2 Should Andino s and Transligra s

respective arrangements with

Flota be approved disapproved or modified pursuant to section

IS Shipping Act 1916

Jurisdiction

Proponents except to the Presiding Officer s common carrier finding

They argue that the Agreements are essentially arrangements between a

vessel owner and a charterer wherein the owner furnishes the vessel and

the charterer attends to all details in connection with obtaining cargo issuing

bills of lading and collecting freight Proponents maintain that Andino and

Transligra themselves lack any of the characteristics that are generally

attributable to common carriers by water They point out that Andino and

Transligra do not offer or advertise aregular service for the carriage of

bulk liquid commodities in the trade between the United States Gulf and

9

The Agreements lire successors to a 1973 arrangement between Flota and Andino The 1973 arrangement

established a space chanering arrangement for the transportation of liquid bulk commodities between the

United States Gulf Coa t and the AtlantIc and Pacific Coast of Colombia Ex 26 27 1 0 at 10

10 Andino and Flota without explanation seek to have their Exceptions afforded confidential treatment

Andino likewise labels its Reply to Exceptions as confidential These pleadings for the most pan contain

arguments of counsel without direct reference to the confidential business data included within Ihe Presiding

Officer s Confidentiality Order Order of Confidentiality served June 22 1981 Legal argument is not enti

tled to confidentialtrealmenl under the Commission s Rules of Practice and Procedure 46 C F R S02 l67

1983 Accordingly the requests for confidential treatment lire therefore denied The pleadings for which

confidentiality was sought will be included in the public docket book but the Commission Secretary is di

rected to sanitize the few pages that refer directly to sensitive business data

JlUr
AGREEMENT NOS 10293 AND 10295 421

Colombia I I Andino and Transligra have allegedly agreed only to offer

Flota their sole Colombian customer space on their vessels for the carriage

of liquid bulk commodities 12 Proponents point out that since 1973 they

have not carried any commodity in the Colombia trades for their own

account but rather only have carried cargo in the trade pursuant to the

Agreements with Flota Accordingly the Commission is urged to reverse

the Presiding Officer s jurisdictional finding

The Commission finds that the Presiding Officer properly decided the

jurisdictional issue Section 1 of the Shipping Act 1916 defines a common

carrier by water in the foreign commerce of the United States as a

common carrier running on regular routes engaged

in the transportation by water of passengers or property between

the United States and a foreign country in the import or

export trade

The Commission has determined that the common carrier described in

section 1 is one that

holds himself out to accept goods from whomever offered

to the extent of his ability to carry Activities Tariff Filing Prac

tices and Carrier Status of Containerships Inc 9 EM C 56

62 1965 Containerships

It is not necessary however for a carrier to hold himself out to transport

all commodities for all shippers A line may be a common carrier of

certain commodities as long as it is willing to carry those commodities

for all who wish to ship with them Other indicia of common carrier

status are regularity of service solicitation of cargo advertised sailings

issuance of bills of lading responsibility of the carrier toward the cargo

establishment of rates and charges and the number of shippers served

per voyage Containerships supra The absence of one or more of these

factors does not however negate common carrier status As the Commission

explained in Puget Sound Tug and Barge v Foss Launch and Tug Co

7 F MC 43 48 1962 the term common carrier is not a rigid and

unyielding dictionary definition but rather a flexible regulatory concept 13

When this regulatory concept is applied to the facts presented here

there can be little if any doubt that the parties to the Agreements are

IIAndino and Transligrd do not dispute that they carry bulk liquid commodities under their own bills of

lading from U S Gulf Coast ports to countries adjacent to Colombia

12 The Agreements commit Andino and Transligra to provide Flota with all its space requirements Exs

2 2A 28 and 29

The facts in Pugel Sound are nearly identical to those present in these proceedings In Pugel Sound

Foss acontract barge operator entered into an arrangement with Northland for the transportation of cargoes

between Alaska and Washington Northland a non vessel operating common carrier NVOCC did not own

or have an interest in the cargo but rather solicited it from the general shipping public which received a

Northland bill of lading The goods tendered by Northland were towed by Foss in the same tow as its contract

cargo The Commission rejected Foss claim that it was not acommon carrier with regard to the cargo ten

dered by Northland See infra at 913
422 FEDERAL MARITIME COMMISSION

acting as common carriers by water with regard to liquid bulk commodities

in the United States Gulf Colombia trades Andino and Transligra take

responsibility for the cargo and its transportation provide the ship control

the loading and navigation publish sailing schedules in conjunction with

FIota provide regular service at regular intervals from the United States

Gulf to Colombia and in general serve the entire shipping public in the

trade 14

Some of the evidence disputing Proponents arguments to the contrary

is contained in Exhibits 30 through 40 and Exhibit 76 These documents

which are captioned respectively Sailing Schedule and Fleet Information

Ex 304 and Weekly Vessel Position Schedule Ex 76 are regularly

published and distributed to the liquid bulk shipping public at large They

clearly indicate that Flota Andino and Transligra are offering regular liquid

bulk service For example Exhibit 37 dated February 1977 describes

a

regular service of approximately 15 days frequency from the United

States Gulf to Colombia or Venezuela with a range of loading dates for

each voyage

The record indicates further that Andino and Transligra are in fact carry

ing cargoes belonging to more than one shipper per voyage

IS Although

the cargo is carried for FIota s account pursuant to Andino s and Transligra s

respective arrangements with FIota the individual parcels are actually owned

by the manufacturer or purchaser of the liquid bulk commodity These

cargo interests must because of the restrictions of Colombia s cargo pref

erence laws I6 book their shipments with Plota which in turn has pre

arranged with Andino and Transligra for the ocean transportation to Colom

bia Because Colombian law prevents the actual shipper from negotiating

freely for ocean transportation the Commission believes it particularly inap

propriate to view Plota as an ordinary shipper vis a vis Andino and

Transligra as Proponents argue On the contrary the Commission believes

that the common carrier responsibilities that Flota has assumed should

be imputed to Transligra and Andino who actually provide the ocean trans

portation and are ultimately responsible for cargo losses 17

As the Commission explained in Puget Sound

W here as here the holding out to carry cargo for the public

is indirect this holding out will nevertheless be attributed to the

actual carrier and considered to bring it within the scope of

14 JD at 69 Ex 2 28 See also Confidential Ex 2B 29 Confidential Exhibits 2B and 29 are the private

agreements Because they are pan of the Agreements which have been found subject to the Shipping Act

1916 these private agreements must be made available to the public pursuant to 46 C F R Pan503 1983

Andino and Transligra also appear to carry Venezuelan and Ecuadorian cargoes respectively on their

voyages from the United States Gulf to Colombia Ex 119 Tr at 998

I The Colombian carge preference laws require that at least the first 50 of a shipment be transported

by aColombian flag vessel Exs 3 4 20 41 Tr at 45 404 406 J D at 1012 2832 Because liquid

bulk commodities in the Colombian trades are shipped in small lots it is not efficient to divide a

shipment

among two or more lines

17 FiOlapays cargo claims forAndino s and Transligra s account after obtaining their approval of the claim

Ex 2B Article II Ex 29 Article 8

t
AGREEMENT NOS 10293 AND 10295 423

the ancient phrase saying that a common carrier is a carrier which

holds itself out as willing to carry for the public T he Supreme

Court has held that common carrier status cannot be avoided

by the device of acting as agent for a common carrier Where

the service is essentially the carriage of cargo for the general

public it is nonetheless common carriage because the actual

carrier adopts a device to make it appear that the vessels

are serving one shipper whereas they actually are serving many

7 F M C at 48 Emphasis in original citations omitted I8

The rationale expressed in Puget Sound has been followed by the Interstate

Commerce Commission in Transamerica Freight Line IncPetition For

Declaratory Order 335 IC C 46 1969 affd sub nom Locust Cartaqe

Company v Transamerica Freight Lines Inc 430 F 2d 334 1st Cir 1970

In Transamerica the ICC determined that a motor common carrier acting

as an agent for another common carrier does not lose its status nor

can it avoid its common carrier obligations by virtue of its agency arrange

ment with that other carrier

Transamerica had an arrangement with Locust Cartage CO 19 which re

quired Locust to perform certain transportation services on Transamerica s

behalf Transamerica solicited the cargoes collected the freight and issued

its own bill of lading to the shippers but tendered the cargo to Locust

for delivery Transamerica paid Locust a fixed fee for its transportation

services The court affirmed the ICC s

finding that Locust was a common

carrier vis a vis Transamerica In so doing the court agreed with the ICC

that Locusts

independent control of the handling and the routing of

the cargo its overall responsibility for safe delivery as well as the

carriage of other shippers cargoes on the same truck supported the Commis

sion s

finding that Locust was a common carrier in its relationship with

Transamerica

Andino and Transligra like Locust Cartage serve more than one shipper

per voyage control the routing manning and operation of their vessels

and assume through their respective agreements the ultimate financial re

sponsibility for any shipper claims against F1ota In addition as noted

above Andino and Transligra hold themselves out to the public by publish

ing and distributing their sailing schedules to liquid bulk shippers and

brokers All of these factors support the Presiding Officer s finding that

both are common carriers by water within the meaning of section 1 of

the Act

This finding is not undermined as Proponents argue by the fact that

the Agreements do not require F10ta to share its freight receipts with

8

See also Agreement No 9597 Between Fiola Mercante Gran Centroamericana SA Continental Lines

S A andJan C Uiterwyk Co 12 F M C 87 1968

19 Locust did not have operating authority as acommon carrier when it originally entered into its arrange

ment withTransamerica Locust subsequently purchased common carrier operating authority from another car

rjer

26 EM C
424 FEDERAL MARITIME COMMISSION

Andino and Transligra 20 The Transamerica decision makes clear that a

division of fees is not determinative of common carrier status The parties

there were held to be common carriers even though Locust Cartage was

being paid a fixed fee as are Andino and Transligra for its transportation

services While the fee splitting arrangement in Puget Sound was a factor

which the Commission considered the Commission s

jurisdictional finding

there was not premised on the fee arrangement The Commission found

the underlying vessel operator in Puget Sound to be a common carrier

because it was holding itself out albeit indirectly to carry cargoes for

the general shipping public Puget Sound supra at 48 There is nothing

in the Puget Sound decision to suggest that the Commission s holding

turned on the fee splitting provision The absence of a fee sharing provision

here does not therefore mandate a different result Accordingly Proponents

exceptions are denied and the Commission adopts with the explanation

provided above the Presiding Officer s

jurisdictional finding 21

Merits ofAgreements Nos 10293 and 10295

Should jurisdiction be found Proponents urge the Agreements approva122

Proponents take exception to the finding that the Agreements in combina

tion with Colombia s preference laws have resulted in a monopoly in

the trade to the exclusion of other carriers and that this monopoly has

caused Colombian freight rates to be higher than the rates for comparable

transportation to countries adjacent to Colombia First Proponents point

out that Colombia s preference laws restrict only the shipment of the first

fifty percent of a consignment shippers are free to offer and other carriers

are free to carry the remaining fifty percent of a consignment They also

note that Colombian law allows waivers from its cargo reservation require

ments when a Colombian flag vessel is unable to lift the cargo or when

the Colombian flag freight rate is not competitive

Proponents argue further that the parcel carriers which had operated

in the trade prior to 1973 Stolt Nielsen Vee Marine O N E and AS

Rederiet Odfjell were no longer interested in serving the trade for commer

cial or operational reasons Proponents allege that these parties are only

interested in serving the trade on a spot basis because ofother commitments

and the limited draft that is available in some Colombian ports 23

20 Proponents argue that because Flota sets and collects for itself the freight rate to the underlying shipper

the Presiding Officer should not have applied the rationale expressed in Puget Sound Tug Barge v Foss

Launch and Tug Company 7 F M C 43 1962

21 This determination also disposes of Proponents argument on exception that the Presiding Officer erred

in findiJ gthat the Agreements had been implemented prior to approval because the Commission has no juris

diction overthe Agreements

22 Proponents also except to the Presiding Officer s

finding that the Agreements are cooperative working

arrangements within the meaning of section IS They argue that the Agreements do not obligate Flota to

charter space on their vessels The Agreements they contend merely offer FIOla the right to charter space

if Flota is satisfied with the cost of the charter hire We disagree The Agreements clearly provide for a

cooperative working arrangement between two common carriers by water by allocating inter alia Flota s

service between the Atlantic and Pacific Coasts coordinating sailing and commiuing cargo space to Flota

23 See Flota s Exceptions at 32 Exs 96 99

26 F M C
AGREEMENT NOS 10293 AND 10295 425

Proponents also contend that the Agreements have not resulted in higher

freight rates They point out that the trade is essentially a drug store

trade where the shipments are in smaller lots These small shipments

allegedly do not qualify for the lower rates that are available to volume

shippers under contracts of affreightment As a result Proponents explain

that Flota generally offers rates on a per shipment basis which are higher

than the rates available to high volume shippers in adjacent trades under

contracts of affreightment Proponents state that if their rates are not com

petitive shippers could take advantage of lower rates offered by other

carriers by seeking a waiver from Colombia s cargo preference laws

Proponents believe that the Agreements are in the public interest and

should be approved Proponents explain that prior to 1973 the liquid bulk

trade between the United States and Colombia was served sporadically

by tramp carriers Since that time Flota through its arrangements with

Andino and subsequently Transligra has allegedly provided regular efficient

service which has resulted in a significant increase in the movement of

liquid bulk commodities between the United States and Colombia Moreover

the Agreements are said to be in the public interest because they avoid

international conflict between United States and Colombian law and there

fore should be approved under the rationale expressed in Agreement No

JOO66 Cooperative Working Arrangement 21 F MC 462 1978

Finally Proponents argue that Hearing Counsel has failed to prove that

the Agreements are per se violative of the antitrust laws or otherwise

have significant anticompetitive effects so as to trigger the Svenska doc

trine 24 They therefore submit that Hearing Counsel had the burden of

establishing and proving a basis for the Agreements disapproval Proponents

conclude that they have failed to do so

The Commission finds that the Presiding Officer s disapproval of the

Agreements is supportable both in law and fact25 Section 15 requires

the Commission to

disapprove cancel or modify any agreement that it

finds to be unjustly discriminatory or unfair as between carriers

shippers exporters importers or ports or between exporters from

the United States and their foreign competitors or to operate

to the detriment of the commerce of the United States or to

be contrary to the public interest or to be in violation of this

241be Svenska doctrine is the proposition affirmed in Federal Maritime Commission v Akliebolagel

Svenska Amerika Unien 390 U S 238 1968 whereby section 15 agreements which interfere with the poli

cies of the antitrust laws will be disapproved as contrary to the public interest unless justified by evidence

establishing that the agreement ifapproved will meet aserious transportation need secure an important pub

lic benefit or further avalid regulatory purpose of the Shipping Act 1916 1be burden is on proponents

of such agreements to come forward with the necessary evidence

25 We do not however adopt the Presiding Officer s

finding that the Agreements were previously in the

public interest Section 15 makes clear that an agreement is not lawful unless it has been approved by the

Commission An unlawful agreement cannot therefore be in the public interest within the meaning of section

15 Accordingly we will grant Hearing Counsel s exception and vacate the Presiding Officer s

finding to

the contrary

26 F M C
426 FEDERAL MARITIME COMMISSION

Act and approve all other agreements modifications or

cancellations

Agreements that are per se violative of the antitrust laws or which have

been shown to have significant anticompetitive effects must be disapproved

under the standards of section 15 unless the agreements proponents dem

onstrate that the agreements are required by serious transportation needs

necessary to secure important public benefits or serve valid regulatory pur

poses The burden is on the proponents of such agreements to come forward

with the supporting evidence 26

The Commission agrees with the Presiding Officer that the Agreements

have significant anticompetitive effects and as a result are not only contrary

to the public interest but also detrimental to the commerce of the United

States The Presiding Officer also correctly found that Proponents have

failed to demonstrate any benefits flowing from the Agreements that out

weigh these adverse consequences

Because the Agreements or their predecessor have been implemented

since 1973 the Commission need not speculate about their effect The

impact of these Agreements on the United StatesColombian liquid bulk

trade was fully developed on the record in these proceedings That record

clearly establishes that the implementation of these Agreements under the

restrictive umbrella of Colombia s cargo preference system has resulted

in a restraint of trade that has led to Plota s near monopolization of the

United StatesColombia liquid bulk market 27

Prior to the application of Colombia s preference laws to the liquid

bulk trade and Plota s 1973 arrangement with Andino at least four other

carriers including Andino seI Vd the United States Gulf Colombian market

These carriers all withdrew after Plota executed its frrst agreement with

Andino Although Proponents argoe that these withdrawals were by choice

and for commercial reasons the record suggests that the reservation laws

and the Agreements were a major consideration First the record establishes

that at least 50 of the trade is reserved to Colombian flag vessels and

that it is inefficient to divide the small lots that are characteristic in the

trade Second the record demonstrates that these factors enabled the Plota

Andino Transligra service to capture 83 of the market in 1977 the first

full year the Agreements were implemented 28 Andino admitted that without

its chartering arrangement it could not move reserved cargo on its own

behalf in this trade 29 In addition although Plota s

arrangements are char

acterized by Proponents as being non exclusive Plota with very few excep

26Federal Maritime Commission v Aktlebolaget Svensko Ameriko Linien 390 U S 238 1968 United

States Lines v FederalMaritime Commission 584 F 2d 519 D C Cir 1978 Agreement No JOO66 Coop

erative Working Arrangement 21 F M C 462 1978

27The Shennan Antitrust Act 15 U S C I makes e

very contract combination in the form of trust

in restraint of trade or commerce among theseveral states orwith foreign nations illegal

28 The record indicates amarket share of 83 in 1977 78 in 1978 and 89 in 1979 the most recent

years for which statistics are available Ex 148 Table I Ex 168

29 Andino s Exceptions at 43 55

26 F M C
AGREEMENT NOS 10293 AND 10295 427

tions has shipped exclusively with Andino and Transligra The anticompeti

tive nature of these Agreements under the Colombian cargo reservation

scheme is further evidenced by Andino s and Transligra s unwillingness

or inability to independently solicit and carry Colombian cargoes for their

own account in the space that is not committed to Flota In short the

substantial market power exercised by Flota gives it as well as Transligra

and Andino the leverage to induce if not compel shippers to give them

preference to the exclusion of other competitors in the transportation of

liquid bulk commodities 30 Although there is a procedure for obtaining

waivers from the effects of Colombia s cargo reservation laws that proce

dure has not prevented the Flota service from dominating the trade insofar

as the carriage of liquid bulk commodities are concerned

This restraint on competition also appears to have artificially increased

transportation rates in the trade to the detriment of the commerce of the

United States Liquid bulk commodities destined for South America gen

erally move under contracts of affreightment These contracts which are

offered by the carriers that serve countries adjacent to Colombia generally

provide a lower rate than the spot rates that Flota offers its shippers 31

Because the carriers that provide liquid bulk service to other South American

trades cannot freely compete in the Colombian trade shippers which move

similar liquid bulk commodities to South America have higher transportation

costs for their cargoes destined for Colombia This results from the shippers

inability to use a contract rate to move the same product from the United

States Gulf to Colombia and other South American countries on the same

movement 32 For instance Shell which in 1980 had a contract of affreight

ment with a carrier to move certain liquid bulk chemicals from the United

States Gulf to Venezuela paid Flota a much higher amount for moving

the same commodity to Colombia which is closer than Venezuela to the

Gulf

Proponents have argued that the adverse consequences flowing from the

Agreements are justified by the Commission s international harmony

policy 33 and evidence of increased cargo tonnage and service regularity

This argument is without merit First the Commission s international har

mony policy would not appear to apply here That policy has only been

applied to agreements that ameliorate the restrictive features of cargo pref

30See Northern Pacific Railway Co et al v United States 356 U S I 1957 Coleman Motor Co v

Chrysler Corp 525 F 2d 1338 3rd Cir 1975

31 Ex 149

32 Shell Dew and Esso which ship liquid bulk commodities to Colombia also ship the same or similar

commodities to other South American countries

33 Agreement No 9939 I Modification and Extension of a Pooling Sailing and Equal Access Agreement

21 F M C 702 18 S R R 1623 1979 Agreement No 9932 Equal Access to Government Controlled Cargo

and Interim Cooperative Working Arrangement 16 F M C 293 1973 Agreement Nos 10386 as Amended

and 10382 as Amended Cargo Revenue Pooling Equal Access Agreements in the United States Argentine

Trade 24 F M C 660 1982 Agreements Nos 10349 and 10346Cargo Revenue Pooling Agreements in

the United States Argentine Trade 21 F M C 1100 1979 Agreement Nos 9847 and 9848 Revenue Pools

U S Brazil Trade 14 F M C 149 1970 Malpractices BrazillUnited States Trade 15 F M C 55 1970
428 FEDERAL MARITIME COMMISSION

erence laws by granting carriers equal access to government reserved cargo

The Agreements do not provide for Andino s or Transligra s equal access

to liquid bulk cargoes reserved by Colombian law nor do these parties

independently compete for uch cargoes In fact because Andino discon

tinued its independent Colombian service when FIota entered the trade

the Agreements appear to restrict Andino s ability to compete or have

access to reserved commodities

Secondly there is no support in the record for Proponents argument

that the Agreements disapproval would frustrate the intent of the sovereign

state of Colombia by preventing FIota from providing a Colombian flag

liquid bulk service Clearly disapproval would not preclude FIota from

making ad hoc arrangements with any carrier or vessel owner desiring

to compete for FIota s cargo

Finally while the evidence does indicate that cargo tonnages have in

creased since the Agreements were first implemented this increase can

not clearly and solely be attributed to the Agreements operation Economic

progress and industrial growth would appear to be responsible for at least

some of the increase The Commission therefore believes that Proponents

have failed to demonstrate a sufficient nexus between the increased cargo

tonnages and the Agreements to justify their approval given the anticompeti

tive effects flowing from the Agreements under Colombian law

THEREFORE IT IS ORDERED That the Initial Decision served in

these proceedings is adopted except to the extent indicated above and

IT IS FURTHER ORDERED That Andino s and Transligra s Exceptions

are denied and

IT IS FURTHER ORDERED That Hearing Counsel s Exception is grant

ed and

IT IS FURTHER ORDERED That Agreement Nos 10293 and 0295

as supplemented by their respective private agreements are disapproved

pursuant to section 5 of the Shipping Act 1916 and

IT IS FURTHER ORDERED That FIota Andino and Transligra shall

within 30 days of the date of this Order cease and desist implementing

Agreement Nos 0293 and 0295 as supplemented by their respective

private agreements 34 and

To avoid the disruption to shippers and the trade that the abrupt cessation of theservice provided for

by these Agreements might occasion the Commission is allowing the parties 30 days to fulfrll existing trans

portation obligations and wind down their operations
AGREEMENT NOS 10293 AND 10295 429

FINALLY IT IS ORDERED That these proceedings are discontinued

S FRANCIS C HURNEY

Secretary

By the Commission

Commissioner Moakley dissenting

I do not concur with the majority s conclusion that Agreements No

10293 and No 10295 are subject to our jurisdiction under section 15

of the Shipping Act 1916 because I cannot find that Andino and Transligra

are operating as common carriers in this trade

The facts that I

rely upon in arriving at this position are as follows

1 Andino and Transligra hold themselves out to no one except

FIota in the Colombian trade

2 FIota alone issues the bills of lading to shippers

3 FIota alone establishes the rates paid by shippers

4 FIota alone solicits the cargo from shippers in the Colombian

trade Iand

5 Andino and Transligra are paid in accordance with their contractual

arrangements with Flota The freight revenues collected by Flota

are not shared

Under this set of facts it seems clear to me that FIota is the only

common carrier to be found in these arrangements Andino and Transligra

are contracting their services solely to FIota and do not hold themselves

out to perform services for the general public in the Colombian trade

This conclusion requires the perception of the Colombian trade as separate

and legally distinct from other South American Trades Otherwise the

apparent status of Andino and Transligra as common carriers in trades

between the United States and other South American countries would require

finding that they are common carriers for the purpose of these agreements

The Commission and the industry have traditionally viewed each South

American country as a separate trade destination and there doesn t appear

to be anything in this record that would warrant a departure from that

approach Colombia like most South American nations has its own unique

set of cargo preference laws and its own national flag carrier who is

the primary beneficiary of those laws Equal access andor pooling agree

ments exist in most of these trades which tend to reenforce the distinctions

established by the various cargo preference laws There are even separate

Commissioner Thomas F Moakley s dissenting opinion is attached

1 The record does contain joint advertisements by Fiola and Andino and Transligra of the sailing schedules

of the relevant bulk vessels in this trade but these sailing schedules apply to other South American trades

also where Andino and Transligra are dealing directly with the shipping public It is clear that liquid bulk

shippers in theColombian trade must tender their cargo only to Flota

f PMr
430 FEDERAL MARITIME COMMISSION

government to government agreements relating to the carriage of bilateral

cargo in two of the South American trades 2

These distinct laws and related government and commercial agreements

combine to establish different sets of rules for trade with each South

American country which tend to prevent a carrier from freely moving

from one trade to another The record in this case supports the conclusion

that Colombia is no exception to this rule For these reasons I would

continue to treat the Colombian trade separately from other South American

trades and would not stretch the long arm of regulation to impute any

common carrier status that Andino or Transligra may have in other trades

to their liquid bulk activities in the Colombian trade

Without jurisdiction over Andino and Transligra there is no jurisdiction

over the agreements under investigation here Iwould therefore discontinue

these proceedings for lack of jurisdiction

I

1

2

Argentina and Brazil

APMr
FEDERAL MARITIME COMMISSION

DOCKET NO 792

AGREEMENT NO 10293

DOCKET NO 793

AGREEMENT NO 10295

Found Ithat FIola Mercante Grancolombiana S A Andino Chemical Shipping Co Inc

and Maritima Transligra S A are common carriers by water subject to section 15

of the Shipping Act 2 that Agreement Nos 10293 and 10293 SubI are the complete

agreement of FIola and Andino that Agreements Nos 10295 and 10295 Sub I are

the complete agreement of FIola and Transligra and that these four agreements were

implemented without Commission approval 3 that these agreements are unlawful not

in the past but for the present and the future under section IS of the Shipping Act

because they are cooperative working arrangements which control regulate prevent and

destroy competition in the two trades herein U S Gulf Atlantic Colombia and U S

Gulf Pacific Colombia because these agreements operate to the detriment of the com

merce of the United States and because these agreements are contrary to the public

interest and 4 that the proponents of these agreements have failed to demonstrate

that the benefits of these agreements outweigh their anticompetitive consequences

Agreements disapproved

Renato C Giallorenzi for proponents FIola Mercante Grancolombiana S A in No 79

2 and for proponents Maritima Transligra S A and FIola Mercante Grancolombiana S A

in No 793

Zachary B Schwal Myra Platt and Neal R Platt for proponent Andino Chemical Shipping

Co Inc in No 79 2

Caspar F Ewig for intervener O N E Shipping Ltd

Laurence G Cohen for protestant Esso Chemical Supply Company Inc

Pedro A Freyre for protestant Dow Chemical International Inc of Delaware

Alan M Grimaldi for protestant Shell Chemical Company a division of Shell Oil Com

pany

Edward Schmeltzer and George Weiner forthe Government of the Republic of Colombia

as amicus curiae

John Robert Ewers Joseph B Slunt and Deana E Rose as Hearing Counsel

26 F M C 431
432 FEDERAL MARITIME COMMISSION

INITIAL DECISION 1 OF CHARLES E MORGAN ADMINISTRATIVE

LAW JUDGE

Partially adopted May 30 1984

THE ISSUES AND ORDERS OF INVESTIGATION

The subject two proceedings are concerned with agreements establishing

space chartering arrangements for the transportation of liquid bulk cargoes

in two trades one trade between the United States Gulf ports and ports

of Colombia on the Atlantic coast of Colombia Atlantic trade or A trade

and the other trade between the United States Gulf ports and ports of

Colombia on the Pacific coast of Colombia Pacific trade or P trade

Transit through the Panama Canal is necessary in the P trade

The space chartering arrangements are between FIota Mercante

Grancolombiana FIota or Granco a non vessel operating common carrier

in these two trades on the one hand and on the other vessel operating

common carriers Andino Chemical Shipping Co Inc Andino in the

A trade and Maritime Transligra S A Transligra in the P trade

Briefly under the agreements in issue FIota offers regular services in

the two trades solicits cargoes from any shipper or consignee and issues

the bills of lading in its name Andino and Transligra provide the ships

crews control the navigation and charter parts of their ships spaces to

FIota Andino and Transligra attempt to fill out or succeed in filling

out the rest of their ships spaces not chartered to FIota by soliciting

and carrying liquid bulk cargoes destined to non Colombian ports

At the agreement of and for the convenience of the parties these

two proceedings were heard together Docket No 79 2 concerns the A

trade Docket No 79 3 concerns the P trade Principal Colombian ports

are Barranquilla and Cartagena in the A trade and Buenaventura in the

P trade

The two original orders served January 4 1979 placed under investigation

Agreement No 10293 A trade and Agreement No 10295 P trade so

called Public Agreements

Two subsequent orders of the Commission both served September 26

1980 amended the original orders to include the two so called Private

Agreements i e Agreement No 10293 Sub l in the A trade and Agree

ment No 10295 Sub l in the P trade respectively Docket Nos 79 2

and 79 3

The original public agreements both dated and signed December 22

1976 were filed with the Commission in April 1977 No 10293 April

4 1977 and No 10295 April 25 1977

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

1 1Jur
AGREEMENT NOS 10293 AND 10295 433

The above two Private Agreements were filed with the Commission

on May 20 1980 These two private agreements were produced as a result

of the discovery process relative to the original orders of investigation

Agreement No 10293 Sub I the Private Agreement between Flota

and Andino signed on December 22 1976 incorporates certain annexes

and addendums thereto Included as addendum No 2 is a reference to

an agreement between these parties signed February 16 1973

This 1973 agreement between Flota and Andino covered the trade between

the U S Gulf ports and all Colombian ports both Atlantic and Pacific

As in the case of the 1976 agreements also in 1973 there were both

a public and a Private agreement of the same date

In other words by the 1973 agreements Flota chartered space on Andino s

ships both in the A and P trades But by the 1976 agreements here

in issue Andino s operations were reduced to the A trade only as of

January 1 1977 This was aconsequence of the agreement of Flota with

Transligra for Transligra s operation in the P trade beginning in 1977

Generally the respondents have produced numerous statistics referring

to the 10293 trade A trade and to the 10295 trade P trade but the

captions on these statistics sometimes are not literally true insofar as they

refer to the years 1973 1974 and 1975 because Agreement Nos 10293

and 10295 were not filed and numbered until April 1977 For example

Exhibit No 168 Table 0

page 18 lists the years 1974 1975 and 1976

but the freight revenues collected for those years covered both the A

and P trades in total For the years 1977 1978 1979 and 1980 the

freight revenues collected for these years are for the Atrade only

All tonnage figures set out in this decision are metric tons

To recap by the combination of the original orders served on January

4 1979 and the amended orders served on September 26 1980 the Com

mission instituted these two investigations pursuant to sections 15 and

22 of the Shipping Act 1916 the Act to determine whether in No

79 2 Agreement No 10293 and Agreement No 10293 Sub I and in

No 79 3 Agreement No 10295 and Agreement No 10295 Sub I shall

be approved disapproved or modified under the provisions of section

15 of the Act

COMMODITIES CARRIED IN THE TRADES

Liquid bulk cargoes in the two trades herein consist of two general

categories one category being chemicals and the other category being

vegetable oils and animal fats

Major commodities carried in the trade to and from Colombian Atlantic

coast ports have included vegetable oils and fats such as soybean oil

cottonseed oil fish oil hog greases lard tallow and pig fat and chemicals

such as phosphoric acid styrene caustic soda vinyl acetate monomer

and monoethylene glycol

F J M r
434 FEDERAL MARITIME COMMISSION

Major commodities in the trade to and from Colombian Pacific coast

ports have included vegetable oils animal fats caustic soda methanol and

vinyl acetate monomer

Specially equipped parcel tankers generally are required to handle these

chemicals and fats and oils

Most of the liquid bulk cargoes in the trades herein are carried southbound

from u S Gulf ports to Colombian ports The agreements in issue also

cover backhaul or northbound movements from Colombian ports to U S

Gulf ports Since 1971 the backhaul movement peaked in 1973 with 44 331

tons and steadily declined until 1979 with 2 681 tons Over 90 percent

of the backhaul tonnage carried since 1971 was loaded in Barranquilla

with the rest loaded in Cartagena Aromatics accounted for about 92 percent

of the backhaul tonnage from 1971 to 1979 and the backhaul dwindled

to practically zero when local Colombian consumption could absorb the

aromatics Presently from the West Coast of Colombia the Plota Transligra

service backhauls some molasses

The record statistics and this decision relate primarily to the southbound

trade to Colombia

TARIFFS NOT REQUIRED FOR THESE TRADES

Section 18 b 1 of the Act provides for the filing of tariffs of rates

and charges of common carriers by water in the foreign commerce This

section provides in part that this section shall not be applicable to

cargo loaded and carried in bulk without mark or count Thus the liquid

bulk carriers in this trade are notrequired to file tariffs

TWO METHODS OF SETIING FREIGHT CHARGES

In practice there are two methods of setting freight charges in these

trades One there are long term usually one year contracts ofaffreightment

c o aos entered into between the carrier and a Colombian importer and

two there are published freight rates which may be used for single ship

ments or otherwise

The parties stipulated that Rates under contracts of affreightment are

usually lower than the published rates of Plota Mercante Grancolombiana

THE AGREEMENTS

Agreements Nos 10293 and Sub 1 in No 79 2 provide for the establish

ment of a

space chartering arrangement for the transportation of liquid

bulk cargo in the A trade whereby Andino would provide Flota with

the necessary space on vessels owned or operated by Andino

The issues in No 79 2 include whether Agreements 10293 and Sub

I should be approved disapproved or modified whether section 15 of

the Act has been violated by the implementation of an unapproved agree

llicur
AGREEMENT NOS 10293 AND 10295 435

ment or agreements whether the Private Agreement No 10293 Sub

I

represents the true agreement of the parties and whether Agreement

No 10293 represents the complete agreement

An order served February I 1980 issued in response to the motion

of Hearing Counsel provided for the addition of certain of the above

issues to the proceeding in No 79 2 A similar order in No 79 3 also

similarly expanded the issues in that proceeding

The agreements in No 79 3 are similar to those in No 792 except

that Agreements Nos 10295 and Sub I in No 79 3 provide for the estab

lishment of a

space chartering arrangement for the transportation of liquid

bulk cargo in the P trade whereby Transligra would provide FIota with

the necessary space on vessels owned or operated by Transligra

The issues in No 79 3 similar to those in No 79 2 include whether

Agreements Nos 10295 and Sub 1 should be approved disapproved or

modified whether section 15 of the Act has been violated by the implemen

tation of an unapproved agreement or agreements whether the Private

Agreement No 10295 Sub Irepresents the true agreement of the parties

and whether Agreement No 10295 represents the complete agreement

In addition to the above issues the proponents raise the issue ofjurisdic

tion ofthe Federal Maritime Commission

Agreement No 10293 Exhibit No 2 A was signed in Bogota Colombia

on December 22 1976 providing FIota s intention to open its service

for the transportation of liquid bulk cargo between the ports of the U S

Gulf and the ports of the Colombia Atlantic With service provided in

the name of Flota and with vessels provided by Andino space on these

vessels would be chartered by FIota Andino committed itself to providing

such space to FIota as of January 1 1977 as FIota would require in

the trade Andino would provide space to FIota for a quoted space charter

hire FIota would fix the rates charged to importers and exporters FIota

would contract the cargo with the consignees in Colombia and exporters

from Colombia FIota can make long term contracts with its clients import

ers and exporters

FIota expressed its intent to give a

regular service with an approximate

frequency of 15 days this frequency could be increased according

to the volume of cargo available The agreement could be terminated

by either party on not less than 90 days notice

Agreement No 10293 Sub I besides incorporating the 1973 agreements

also covers various matters governing the operation of the charter arrange

ment which are not contained in Agreement No 10293 In other words

this private Sub I agreement is an essential part of the entire agreement

between FIota and Andino

This Sub 1 Private Agreement provides that FIota will canvass and

contract in Colombia for the movement of liquid bulk cargo in the Atlantic

Colombia ports trade that Andino will be the sole coordinator of all ship

ments originating in U S Gulf ports that Andino will execute transportation

I C16r
436 FEDERAL MARITIME COMMISSION

contracts will take responsibility in accordance with Tanker Bills of Lading

or contracts and will be responsible for the carrying of the cargo to

Colombian ports Andino will supply FIota with itineraries for regular

shipments for which FIota will canvass and contract the cargo to use

at a maximum the carrying capacity of Andino For sporadic shipments

FIota will try to use the regular vessels of Andino and will communicate

with Andino to obtain additional capacity In case Andino cannot provide

the additional capacity or tonnage required FIota will be free to look

for other transportation

FIota s tanker bills of lading will be issued and signed by Andino as

FIota s agent in the New Orleans and Baton Rouge areas In the Houston

and Galveston area FIota s bills of lading are signed by the Texas Star

Shipping Company acting for Andino as FIota s agent

FIota will collect the freight and other charges in Colombia Andino

as agents ofFIota at U S Gulf ports will be responsible for the operations

of the vessels and for all commercial matters which derive from the agree

ment FIota will take care ofall agency matters regarding Andino s vessels

in Colombia

The Private Agreement No 10293 Sub also provides that Andino

will pay FIota as Andino s agent in Colombia 2 5 percent on space charter

hire of import cargo and 5 0 percent of total freight on export cargo

to U S Gulf ports except on molasses or export products of Ecopetrol

or Holland Chemical International FIota would receive a commission of

25 percent of the total freight to U S Gulf ports and destinations other

than to Europe

Many other details are provided in this Private Agreement including

payments by Andino to FIota of Colombian port fees telex mail local

telephone calls crew repatriation and demurrage collection fees FIota will

receive all claim notices make investigations and process the claims

Claims will be paid by FIota for the account ofAndino only after authoriza

tion by Andino If FIota were to use its own specialized vessels in the

trade or charter vessels not from Andino FIota and Andino will decide

jointly the participation of Andino in those activities for the coordination

of the shipments

The 1973 agreements between FIota and Andino differed somewhat from

the 1976 agreements in that Andino not FIota set the ocean freight rates

and FIota contracted with the Colombian importers and exporters at the

rates set by Andino The 1973 agreements between FIota and Andino were

the same as the 1976 agreements in that Andino agreed to provide vessel

space to FIota

Agreement No 10295 Exhibit 28 was signed in Bogota on December

22 1976 providing FIota s intention to open its services for the transpor

tation of liquid bulk cargo between the ports of the U S Gulf and ports

of the West Pacific Coast of Colombia With service provided in the

name of Flota and with vessels provided by Transligra space on the

lAr
AGREEMENT NOS 10293 AND 10295 437

vessels would be chartered by FIota Transligra committed itself to providing

such space to Flota as of January 26 1977 with the first sailing of

the MT Thomona estimated time of leaving the US Gulf as would be

required by FIota in the trade Transligra will quote to FIota the space

charter hire FIota will fix the rates charged to importers and exporters

FIota would contract the cargo with the consignees in Colombia and the

exporters from Colombia FIota can make long term contracts with its

clients importers and exporters

Flota expressed its intent to give a

regular service with an approximate

frequency of 35 days this frequency could be increased according

to the volume of cargo The agreement could be terminated by

either party on not less than 90 days notice

Agreement No 10295 Sub I

the Private Agreement between FIota

and Transligra Exhibit No 29 was signed on December 22 1976 It

has one addendum This 10295 Sub l Private Agreement provides that

FIota will canvass and contract in Colombia for the movement of liquid

bulk cargo in the Pacific Colombia ports trade that Transligra through

its U S Gulf agents will be the sole coordinator of all shipments originating

in the U S Gulf ports that Transligra will execute transportation contracts

will take responsibility in accordance with Tanker Bills of Lading or con

tracts and will be responsible for the carrying of the cargo to Colombian

ports Transligra will provide FIota with itineraries for regular shipments

for which Flota will canvass and contract the cargo to use at a maximum

the carrying capacity of Transligra For sporadic shipments FIota will

try to use the regular vessels of Transligra and will communicate with

Transligra to obtain additional capacity In case Transligra cannot provide

the additional capacity or tonnage required FIota will be free to carry

the goods with other carriers on its own risk

Transligra will give FIota the space charter hire and FIota will fix

the rates charged Colombian importers and exporters When the space char

ter hire given by Transligra does not correspond to levels applied by

the competition Flota will be free to carry goods with other carriers at

its own risk FIota s bills of lading will be used FIota will collect the

freight and other charges in Colombia Transligra s agents will be Flota s

agent in the U S Gulf ports and will be responsible for the operation

of the vessels and all commercial matters FIota s agents in Colombia

will take care of all agency matters regarding Transligra s vessels in Colom

bian Pacific ports Fees and commission arrangements provide that

Transligra will pay Flota similarly to the FIota Andino Agreement No

10293 Sub I

As in the case of the A trade so also in the P trade the so called

Private Agreement 10295 Sub I is an essential part ofthe entire agree

ment between Flota and Transligra
438 FEDERAL MARITIME COMMISSION

SHIPPER TESTIMONY AND LETIERS

The two major importers of phosphoric acid Abocol and Monomeros

whose plants are in Cartagena and Barranquilla respectively have found

the service of FlotaAndino to be satisfactory

Certain other shippers and importers by letter support the continuance

of the Flota services from the U S Gulf to both Atlantic and Pacific

ports of Colombia One of these letters is from Union Carbide Colombia

S A an importer of substantial amounts of liquid chemical bulk products

into Colombia Another letter is from a group offive Colombian companies

Grasco Gracetales Progral Detergentes and Jaboneria Central which to

gether import a total of about 30 000 tons of edible oils and tallows

yearly

THE PARTIES AND A NON PARTY LYKES

The parties to these proceedings include the three proponents an inter

vener the Colombian government as amicus curiae and Hearing Counsel

The proponent Flota is a Colombian corporation established in 1946

to provide regular liner service for general cargo in the Colombian import

and export trades Flota is owned by the Colombian Coffee Growers Asso

ciation 78 percent by Banco de Fomento of Ecuador 20 percent and

by other Colombians 2 percent Flota operates 29 owned vessels and

about 30 to 40 chartered vessels monthly in its general cargo and dry

bulk cargo services Occasiomilly Flota has carried liquid bulk cargo in

the deep tanks of its general cargo vessels However Flota does not own

nor operate any specialty parcel tankers designed for the carriage of liquid

bulk cargoes in the trades herein

Specialty parcel tankers or chemical parcel tankers usually contain several

lined tanks Some tanks are stainless steel others are lined with epoxy

zinc or other coatings Generally each tank can be heated and has its

own pump Older tankers may have common pumps which makes the

possibility of accident or contamination more likely

The proponent Andino is a

company incorporated in Panama It is engaged

in the chartering and operation of parcel tankers for the carriage of liquid

bulk cargo The vessels operated by Andino fly third flags i e neither

Colombian flag nor American flag Such flags include Liberian Japanese

British Panamanian Singapore Panamanian and Norwegian Andino used

some 19 vessels during the years 1976 through 1979 in the U S Gulf

Atlantic ports of Colombia trade serving the ports of Barranquilla and

Cartagena Colombia For 1976 Andino lists 31 voyages from Houston

Texas City Baton Rouge Beaumont Uncle Sam and New Orleans Other

listed origins include Bayport Freeport Taft and Baytown which are some

times grouped with Houston or with Texas City also Plaquemines is some

times grouped with Baton Rouge For 1977 Andino lists 35 voyages from

U S Gulf ports to Atlantic Colombian ports For 1978 Andino lists 34

I
AGREEMENT NOS 10293 AND 10295 439

such voyages Exhibit No 61C The Fuji Andina Japanese flag and

the Chemie Carrier Liberian flag were used in all of the years 1976

through 1979 by Andino

Andino is a wholly owned subsidiary of Holland Chemical International

HCI a holding company which buys chemicals and sells them to HCI

affiliates and to other companies in South America The president and

vice president of HCI are president and vice president respectively of

Andino

The proponent Transligra is a

company incorporated in Ecuador

Transligra is owned by FIota 331 3 percent by Holland Chemical Inter

national 3313 percent and by Ecuadorian interests 331 3 percent FIota

is Transligra s agent in Colombia Andino is Transligra s agent in the

U S Gulf Transligra owns the parcel tanker Chimborazo formerly named

the Thomona then an Andino operated vessel registered under the Ecua

dorian flag Transligra operates additional vessels not owned in the U S

Gulf Pacific Colombia trade Transligra serves Buenaventura on the Pacific

West Coast of Colombia in the trade in No 79 3 Transligra usually

operates two vessels in this trade sailing twice a month Transligra s statis

tics and other documents including bills of lading are maintained by Andino

Intervener O N E Shipping Ltd O N E is the successor company to

Overseas Liquid Gas Inc The latter offered regular service from the United

States to Colombia and Venezuela since 1963 and O N E was established

in 1973 to continue the prior service of Overseas Liquid Gas O N E

presently serves U S ports and ports in the Caribbean Central and South

America in the liquid bulk trades Due to the proximity of Colombia

and Venezuela the ability of O N E to carry cargoes to Atlantic Colombia

would be a natural addition to O N Es present regular service to Venezuela

The major shippers of liquid bulk cargoes in the U S Venezuela trade

are the same in the U SlColombia trade O N E also now serves the

U S Gulf Ecuador liquid bulk trade and the ability of O N E to carry

cargoes to Buenaventura Colombia would be a natural adjunct of O N Es

service to Guayaquil Ecuador

Since the implementation of the 1973 FIotaAndino agreements despite

the fact that O N E continued to advertise its U S Gulf Colombia service

and continued to contact brokers and agents for the solicitation of cargo

O N E found that it could no longer call at Colombian ports

O N E sought to provide service to Colombia through arrangements with

FIota and with Lykes Bros Steamship Co Inc Lykes O N E also had

some preliminary discussions with NAVENAL another Colombian line

which is no longer in business

Andino and FIota stress that O N E sought to take Andino s place in

its agreement with FIota But regardless of this effort by O N E and

regardless of O N Es later position that the FIotaAndino agreement is

unlawful these two circumstances have no bearing on the lawfulness of

the FlotaAndino agreements

JM r
I

440 FEDERAL MARITIME COMMISSION

Lykes sought to enter the U S Gulf Colombia liquid bulk trades herein

by certain proposed arrangements with O N E similar to those between

Flota and Andino

The LykesO N E agreement No 10183 was approved by the Federal

Maritime Commission Exhibit No 44 on June 2 1976 Thereby Lykes

would have issued its bills of lading for cargo transported on vessels

owned or controlled by O N E Ostensibly this agreement would have par

alleled the agreement between Flota and Andino

O N E understood and agreed that Lykes by entering this agreement

would have exerted its best efforts to make its present equal access agree

ment with Flota available to O NE but Lykes offered no guarantee on

which O N E relied

Lykes and Flota made an agreement which is still in effect No 10064

approved by the Federal Maritime Commission Exhibit No 43 on January

24 1974 which granted Lykes and Flata free access to total import and

export cargoes available without restrictions as a result of any governmental

regulations with regard to the trade between U S Gulf ports and ports

in Colombia

Flota objected to the LykesO N E agreement and opposed the entry

of O N E into the trade upon the ground that such entry was in violation

of Colombian law Article 80 of Colombian Decree 2349 of 1971 stated

It is understood that the associated flags may have at their services

ships of its own flags and third country flags Exhibit No

4A English translation

Flota s

interpretation of the law was that it did not extend to Lykes

the benefit of using foreign flag vessels in the liquid bulk trade herein

unless Lykes placed at least one American flag parcel tanker in this service

By contrast Flota has no Colombian flag parcel tanker in the trades and

by its agreement with Andino uses third flag vessels exclusively

No explanation was given by Flota why Lykes vessels in the liner

trade capable of carrying liquid bulk cargoes in these vessels deep tanks

would not qualify as American flag vessels for the purposes of Lykes

agreement with O N E in this liquid bulk trade

In any event Lykes did not pursue the matter of its agreement with

O N E presumably in deference to its relations with Flota with regard

to the general cargo liner trade Lykes filed comments on both Agreements

No 10293 and No 10295 but was not named a party to either of these

proceedings Such comments of Lykes occurred prior to the institution

of the two subject proceedings and have not been entered into the present

record

Hearing Counsel contend that the agreements in issue are unlawful in

that the proponents have not shown a need for their agreements which

outweighs their anticompetitive consequences that the proponents are com

mon carriers that the agreements are exclusive preferential cooperative

l

t U
AGREEMENT NOS 10293 AND 10295

working arrangements subject to section 15 of the Act that both the

agreements and the sub agreements private agreements when taken

together constitute the complete agreements of the proponents and that

the agreements have been implemented without Commission approval in

violation of section 15

THE GOVERNMENT OF COLOMBIA

The Government of the Republic of Colombia was denied permIssIon

to intervene after the close of the hearings as a party to these proceedings

but was granted leave to proceed as amicus curiae to the extent that

certain pages of its brief were accepted to explain the operation of the

national maritime laws of Colombia and the policy underlying them

THE FORMER PROTESTANTS

The background of these proceedings is not complete without the story

of the former protestants who have since withdrawn from the proceedings

Hearing Counsel by subpoenas obtained the testimony of two witnesses

for Esso or Exxon and one witness for Shell In addition there are exhibits

in the record resulting from responses to discovery requests which relate

to the problems which beset the three protestants in these trades

In No 79 2 Vow Chemical International Inc of Delaware Dow

and Shell Chemical Company a division of Shell Oil Company Shell

protested Agreement No 10293 and requested that a hearing be held

Esso Chemical Supply Company Inc Esso filed general comments and

later advised that it supported Dow s and Shell s

requests for a hearing

These three Dow Shell and Esso were named protestants in the Commis

sion s original order in No 79 2 In time these protestants withdrew from

this proceeding These same three Dow Shell and Esso also filed com

ments in No 79 3 but were not named parties therein The most detailed

comments of these three in No 79 3 came from Esso which stated that

it was dissatisfied with the quality ofthe service offered by FIotaTransligra

and that it feared the Loss of its markets in Colombia should Agreement

No 10295 be approved

Esso by notice of withdrawal in No 792 dated October 10 1979

moved to withdraw from that proceeding Previously in Esso s view the

defacto implementation ofAgreement No 10293 since 1973 the Colombian

Cargo Reserve Law Decree 1208 of July 21 1969 and the interpretation

of said Law precluded shippers from transporting liquid bulk chemicaV

specialty cargoes from the U S Gulf to Colombia on any vessels other

than those of FlotaAndino and that FIota s

freight rates were not competi

tive with rates being offered by other carriers which could not be used

because of the Colombian Laws and regulations Esso also objected to

Agreement No 10293 because of its dissatisfaction with the quality and

nature of the FIota Andino service

1ft F M C

441
442 FEDERAL MARITIME COMMISSION

Esso in its withdrawal notice pointed out that FlotaAndino improved

the quality of their service to a minimally acceptable basis and was advised

that Flota would not object to the shipment by Esso and will facilitate

Esso in obtaining the waivers required to permit unrestricted shipment

by Esso on United States or Third Nation Flag vessels of certain cargoes

originating from Baton Rouge Louisiana and further because the Republic

of Colombia on August 29 1979 substantially increased the number of

Liquid chemicaVspecialty products on the Free Import List which Esso

and others import from the U S Gulf into Colombia Esso said the effect

of this amendment of the Free Import List was to enable Esso and others

to ship about 50 percent of their customers semi annual requirements of

said products on U S flag or third nation flag liquid bulk product carriers

In addition said Esso the Republic of Colombia which had previously

required import licenses issued for all imports to be stamped requiring

shipment of 100 percent of said imports on Colombian flag or associated

vessels had recently amended its stamp to require shipment of only 50

percent of said imports on Colombian flag or associated vessels

Esso also referred to Diplomatic Note No 3211 E 179 dated July 6

1979 by which the Republic of Colombia guarantees that 50 percent of

all liquid bulk products may be carried to Colombia without any vessel

flag restrictions

Esso reserved the right among others to reenter this proceeding should

the conditions assurances or guarantees above be rescinded or modified

to affect Esso detrimentally 2

The overall impression received from studying the record and listening

to the oral testimony leads to the conclusion that these trades between

U S Gulf ports and ports in Colombia for the carriage of liquid bulk

cargoes in parcel tankers were and most likely remain in near monopoly

situations with the FlotaAndino and the FlotalTransligra services enjoying

the near monopolies and the further related conclusion is reached that

to any extent that these services may not be complete monopoly situations

this is in large part due to the institution and pendency ofthese proceedings

with the regulation of agreements of the nature of those herein by the

Federal Maritime Commission

Under such circumstances whatever conclusions are reached by the Fed

eral Maritime Commission it is believed that it would be well to continue

to monitor the trades herein and should the subject agreements be approved

it appears advisable that time limits be placed on the duration of these

agreements Thereby if and when renewals of the agreements are sought

it would be incumbent on the proponents to state how the agreements

are affecting the ability of Colombian importers to obtain competitive serv

ices consistent with the public interest

2

Esso s withdrawal notice is Exhibit No 89 copy of which is appended to thisdecision

26 F M C
AGREEMENT NOS 10293 AND 10295 443

Dow based its protest on its view that the Flota Andino space chartering

agreement in conjunction with existing Colombian flag restrictions provi

sions would result in a monopoly position for Flota Andino in the Colom

bian Atlantic trade herein Dow stated in a motion to withdraw dated

November 21 1979 that starting in 1979 there was a change in the

implementation of the Colombian Flag Restrictions Provisions and that

there was a Diplomatic Note from the Republic of Colombia dated July

6 1979 which changed Dow s views Accordingly subject to the right

to re enter the proceeding should the Colombian governmental positions

be changed Dow moved to withdraw

Hearing Counsel submitted statistics prepared by Esso regarding its ship

ments of liquid bulk cargoes from the U S Gulf to Colombia for the

years 1970 through 1980 inclusive with a projection for all of 1980

based upon statistics through December I 1980 These statistics Exhibit

110 show that in each of the years 1970 1971 and 1972 prior to the

subject agreements Esso s shipments far exceeded Esso s

tonnages for cer

tain of the years 1974 through 1980 when Esso used only the services

of Flota years 1974 1975 1976 1978 1979 In 1977 Flota handled

3 792 tons and Odfjell 388 tons in 1980 Flota handled 3173 tons and

O N E 394 tons For 1973 Stolt Nielsen handled 2 894 tons Andino han

dled 149 tons on its own and the FlotaAndino service handled 975 tons

These Esso statistics show 5 465 tons in 1970 6 079 tons in 1971

and 6 153 tons in 1972 all handled by Stolt Nielsen Compared with the

above are the lesser tonnages ranging from a low of 1 753 tons in 1976

to a high of 3 978 tons in 1975 handled by Flota during the years 1974

to 1980

These statistics clearly refute the contentions of Flota and Andino that

only irregular or tramp parcel tanker carriers served the trade from

the U S Gulf to Colombia prior to the 1973 agreements In other words

if Stolt Nielsen were to be considered only a tramp service in 1970

1971 and 1972 then so would the Flota service in 1973 to 1980 inclusive

also be considered only a tramp service based on its lesser yearly

tonnages transported for Esso

Esso made a cost comparison Exhibit 109 showing the differences

between its freight costs comparing what its Colombia affiliates were

charged by the FlotaAndino service with the charges which Esso s affiliates

might have been assessed by O N E if O N E had been able to provide

the same services for the years 1973 to 1980 inclusive

Flota s rates for the years 1974 through 1980 ranged from 24 56 to

53 30 a metric ton or an average of 35 33 a ton for the years 1973

1980 The year 1973 is not shown but by deduction it would be 19 00

a ton for the 975 tons handled by Flota in that year for Esso

The deemed freight costs to Esso from O N E based upon Esso s c o

as

for the same type ships used by Flota average 25 50 per metric ton

fiFMr
444 FEDERAL MARITIME COMMISSION

for the years 1973 through 1980 or a cost difference under FIota s average

of 9 83 per ton

Based upon a total of 23 105 metric tons for the years 1973 1980 inclu

sive handled by Flota Esso computes total cost savings of 226 861 if

it had used O N E rather than FIotaAndino

Because FIota at times had not offered service from origins such as

Baton Rouge resulting in Esso paying inland U S charges from Baton

Rouge to Houston where FIota picked up the cargoes Esso estimates

that it paid additional inland freight costs for 1978 1979 and 1980

of 38 942

Adding the above 226 861 computed extra cost plus the inland extra

cost of 38 942 Esso computes a grand total of extra costs of 265 803

ENVIRONMENTAL ANALYSIS AND CONSOLIDATED RECORD

The Commission s Office of Environmental Analysis has determined that

the environmental issues herein do not constitute a major Federal action

significantly affecting the quality of the humal environment within the

meaning of the National Environmental Policy Act of 1969 and that prepa

ration of an environmental impact statement is not required

In accordance with the parties wishes the two subject proceedings were

not requested to be consolidated under Rule 148 of the Commission s

Rules of Practice and Procedure 46 CFR 502 148 Nevertheless at the

behest of the parties a consolidated evidentiary hearing procedure was

followed and the parties stipulated that the testimony and data developed

in the hearing for the No 79 2 Colombian Atlantic trade where applicable

also would be applied and considered as evidence in No 79 3 for the

Colombian Pacific trade Consolidated briefs covering both Nos 79 2 and

79 3 were filed by the parties except that Andino is not a party to

the agreements in the Pacific Coast Colombia trade No 79 3 and its

briefs relate only to the Atlantic Coast Colombia trade No 79 2

IMPORT LICENSES

All imports into Colombia need a license Licenses are issued by the

Colombian Institute of Foreign Trade known as lncomex

lncomex stamps the import licenses with appropriate stamps reserving

the cargo in whole or in part to Colombian ocean carrier lines and

orassociated lines

Colombian cargo reservation laws discussed in detail below apply on

all imported cargoes At the time of the hearing the general practice was

to use the Incomex import stamp covering the first 50 percent of the

cargo specified in the license

Ex 89 Attachment B 1 Incomex Import Register No G069017 A

shows that on occasion as late as February 14 1979 one of Incomex s

F 1 M r
AGREEMENT NOS 10293 AND 10295 445

stamps showed 100 percent of the total of 150 tons of cargo licensed

was reserved as follows English translation

Assets or goods covered by this Register must only be transported

on vessels or ships of Colombian registry or on vessels of United

States of America registry belonging to firms affiliated with Co

lombian registry or on other vessels of lines affiliated with our

registry flag Decree 1208 ofJuly 21 1969

At times a stamp such as the above lOO percenter might have been

placed in error Witness Dowling for Esso stated that mistakes are made

down there and even now December 1980 some of them are stamped

100 percent and Esso goes back and asks Incomex to stamp them 50

percent for liquid bulk

Exhibit 89 Attachment B 2 Incomex Import Register No G 104549

A shows that as of March 21 1979 an Incomex stamp showed the first

50 of the total of 150 tons of cargo licensed was reserved as follows

English translation

First shipments corresponding to 50 the equivalent of 75 tons

of the goods covered by this Register must be transported on

vessels or ships of Colombian or Ecuadorian registry or on other

vessels of lines affiliated with our registry when dealing with

bulk liquid or solid cargo Decree 1208 of July 21 1969 Once

the foregoing has been complied with the remaining 50 may

be transported on board vessels of independent registry

COLOMBIAN LAWS DECREES ETC

Colombian cargo reservation laws and procedures are set largely by

certain decrees and resolutions

Decree 994 dated April 29 1966 provided that the Colombian Govern

ment could fix the percentage of import and export cargo reserved for

vessels of Colombian flag

Decree 1208 dated July 21 1969 implemented Decree 994 and pro

vided that no less than 50 percent of import and export cargo was reserved

to vessels of Colombian registry on trade routes served by these vessels

Under this decree it was clear that if Colombia desired it could reserve

100 percent of import and export cargoes for vessels of Colombian flag

Decree 2349 dated December 3 1971 allowed foreign flag companies

to participate in the carrying of cargo reserved for the Colombian flag

As shown in Exhibit 4 Article 3 paragraph 12 the Colombian Director

General of Maritime and Port Matters could authorize Colombian ship

owners to obtain under lease or charge temporarily vessels of Colombian

and foreign flag Under paragraph 13 of that article the Director General

could approve or disapprove agreements between Colombian shipowners

and transportation associations and agreements based on equality or reci

procity of treatment for Colombian shipowners etc

F M r
1

I

446 FEDERAL MARITIME COMMISSION

Resolution 0097 of June 8 1973 recites that Flota requested authoriza

tion to apply the cargo reserve law to liquid bulk cargo in special ships

from U S Gulf ports to Colombian ports and Flota was so authorized

as of March I 1973 to sail and to apply the reserve law

Decree 1208 of July 21 1969 has been interpreted by Incomex the

Colombian Institute of Foreign Trade as follows as shown in Exhibit

19 page 2

The goods or merchandise covered by this Registration must be

transported on vessels flying the Colombian flag or on vessels

of the Ecuadorian flag or the flag of the USA belonging to

companies associated with the Colombian flag or on vessels of

other lines associated with our flag Decree 1208 of July 21

1968

As seen the cargo reservation decrees date back to 1966 1969 and

1971 whereas it was not until later that is sometime late in 1973 that

Flota began its service which resulted in due time in these proceedings

So it was not the Colombian decrees or laws alone which caused the

problem or main issue herein but rather these decrees and laws together

with the implementation of the FlotaAndino and Flota Transligra services

resulted in the virtual de facto shut out of independent liquid bulk carriers

from these trades from about late in 1973 until about late in 1979 and

maybe or likely even later than 1979 Statistics below for 1980 show

the continued growth of the Flota services in the two trades herein

ANDINO S SERVICES PRIOR TO AND AFTER 1973

Prior to initiating service in the trades herein pursuant to the 1973

Flota Andino agreement Andino independently provided service in the

trades beginning in 1971 using Andino bills of lading Following its agree

ment with Flota Andino ceased offering services to Colombian importers

and exporters under Andino s own bills of lading and then transported

such Colombian cargo only under Flota s bills of lading

Since February 16 1973 when the first FlotaAndino agreement was

signed Flota and Andino have implemented the tenns of the 1973 and

1976 agreements in the same manner that is in the Atlantic trade Flota

has chartered space only from Andino except in one instance in early

October 1980 or just prior thereto Flota chartered space on a Colombian

flag barge to carry lubricant bases to an Atlantic Colombian port for Esso

This was done simply because Flota wanted to help a small Colombian

company to get into business

In the Pacific Colombia trade from 1973 through 1976 Flota chartered

space only from Andino and from 1977 onward Flota chartered space

only from Transligra

26 F M C
AGREEMENT NOS 10293 AND 10295 447

CONFLICfING PROPOSED FINDINGS

There is considerable conflicting testimony in this proceeding and as

a result opposing counsel come up with considerable conflicting proposed

findings of facts or interpretations of what the record shows Also some

counsel have accused others ofretroactively bringing in alleged evidence

not found in the record nor supported by the record Some of the witnesses

were fluent in both the Spanish and English languages but at times experi

enced troubles in converting Spanish to English

For example one proposed finding of fact concerns whether or not

a Colombian importer obtains a license for each shipment Hearing Counsel

correctly conclude that this is the procedure used by the Colombian

importer Counsel for Andino argues otherwise Perhaps the parties dif

ferences lie in the differences between the practices actually extant and

the procedures which technically may be possible under Colombian laws

and decrees Pertinent record facts follow

Carlos Lleras De La Fuente the Managing Director of F10ta Mercante

Grancolombiana S A F1ota for many years and also an attorney licensed

in Colombia submitted his direct testimony in the form of an exhibit

No 20

Witness Lleras stated in paragraph 25 of Exhibit 20 If the license

covers several shipments the first 50 are required to be carried by a

Colombian company and the remainder is free and available to other car

riers

On cross examination at page 404 of the transcript Lleras testified

Q Now the license is valid for you say six to nine months

If I take out a license for argument s sake of vegetable oils

for a thousand tons is it your testimony that I can make the

first and I take this out let s say on October 1st Is it your

testimony now that I can ship the first shipment of let s say

300 tons on October 10th the next shipment of let s say 200

tons on February 2nd and the third shipment of the balance

500 tons on March 5th

A Yes

On page 410 Lleras testified

Q Was that always the case that an import license was valid

for any number of shipments made during a six month period

now or nine month period or is even the six month period a

recent development

A I think I cannot answer very precisely your question But

I think six months has been the time or the valid period for

quite some time

At page 406 Lleras explained that we meaning F1ota are not involved

in imports but in transportation that F10ta transports imports but does

26 F M C
448 FEDERAL MARITIME COMMISSION

not import In other words Lleras appears to say that the Colombian

importer is the expert on obtaining licenses for imports into that country

Also on further cross examination transcript page 413 witness Lleras

amended his statement in Exhibit 20 as follows

Q No Im just asking you your use of the word shipments

Forget the license for a moment

A Oh no no no I cannot I am sorry I cannot forget it

because probably Iexpressed wrongly myself in this statement

The license covers cargo The license is for allowing an importer

to bringing certain tonnage into the country The license doesn t

mention shipments Probably Im sorry I made a mistake in

the use of the English language when writing this statement Ex

hibit 20

The importer is the one to decide if he loads in one ship or

in several

Q Then he also gets a license when he decides to put all his

tonnage on one ship

A Correct

Q Now in the event he puts all his tonnage on one ship its

obvious that the whole 100 percent has to go via Colombian

flag is it not

A If he decides to put all his cargo on one ship and having

to ship the first 50 percent with a Colombian company of course

100 percent will be shipped with a Colombian company

Elisso Restreppo General Manager ofMonomeros Colombo Venezolanos

S A also known as Monomeros a corporation producing fertilizers and

importing raw materials into Colombia including phosphoric acid from

the United States Gulf ports testified

Q Now is it your understanding that for obtaining an import

license for phosphoric acid that you have to obtain a separate

import license for each shipment of each parcel of 3 000 tons

or that you could obtain one license to cover the entire 6 000

tons 10 000 tons or whatever number oftons you want

A The procedure we use in Colombia is that we have a license

for each shipment Emphasis supplied

Q And each shipment you re talking about each amount of cargo

that arrives on one ship

Do you understand what Im

saying In other words if I do

a purchase of let s say 6 000 tons but I have it brought in by

three ships over 2 000 tons each ship and your use of the word

shipment are we talking about one shipment or two shipments

A Again Im not an expert on these matters but as I understand

it it would have been per shipment in other words that one

has to obtain an import license for each load simply because

it is easier in terms of the import taxes that we must pay the

26 F M r
AGREEMENT NOS 10293 AND 10295 449

tariffs the documents bills of lading and the overall movement

Emphasis supplied Transcript pages 160 161

Ivan Amaya formerly president of Abonos Colombianos S A also

known as Abocol another Colombian corporation which manufactures fer

tilizer and imports phosphoric acid testified on page 75

Q Now how many import licenses do you file during the course

of a

year in importing phosphoric acid Do you file one covering

the entire year do you file one for each shipment one for each

six months each two months

A In practice in generally this is what is done is that one

obtains an import license for each shipment In other words

that is what happens in practice However you can obtain licenses

import licenses for more than one shipment Emphasis supplied

Q Is there any particular reason that you only get one license

for each shipment rather than a license to cover a number of

shipments

A Yes it has to do with a

problem of red tape To obtain

a license of a larger amount of phosphoric acid might take a

longer period than it would to get a normal shipment in other

words a

shipment for a smaller amount Emphasis supplied

Q When you say a normal shipment you are talking about this

quantity of approximately 2 300 metric tons that would come

on board one ship arriving at Cartagena

A Correct

Counsel for Andino in his reply brief refers to Exhibit 113 as showing

an import license for two products ie 150 tons of Solvesso 100 Nafta

Disolvente a granel and 150 tons of Solvesso 150 Nafta Disolvente

a granel in support of his argument that Hearing Counsel are incorrect

in proposing a finding that the procedure used is for the Colombian

importer to request and obtain a license for each shipment Exhibit 113

merely shows that Productor Quimicos Esso Inc a Colombian importer

got one import license covering two similar products both carrying the

same import classification number 27 07 02 03

Exhibit 113 shows little to establish what was the actual practice regard

ing the issuance of import licenses particularly as to whether anyone

license in practice covered shipments made on two or more ships No

example was shown or testimony given naming two or more ships used

for one licen e In other words all the evidence shows is that all cargo

on one license went on one ship and such licensed cargo was not split

between two or more ships

Counsel for Andino also in reply brief refer to the testimony ofWilliam

G Dowling Vice President of Exxon Chemical International Supply S A

a shipper of chemicals from the U S Gulf ports to Colombia This compa

ny s affiliate in Colombia is Productos Quimicos Esso Inc and the latter

is responsible for obtaining import licenses At page 1541 of the transcript

T
450 FEDERAL MARITIME COMMISSION

Mr Dowling speculated that if two products MEK and MBIK came

under the same import license authorizing 250 tons of MEK and 250

tons of MBIK then you might be able to ship 250 tons of MEK first

apparently meaning on a Colombian associated ship and then the 250

tons of the MBIK second apparently meaning on a third flag ship This

speculative statement does nothing to show what the actual practice was

or is

FINDING MADE AS TO TIlE ACTUAL PRACTICE USED IN

OBTAINING IMPORT LICENSES

From the above facts of record and from the overall entire record

including the nature of the trade referred to as a drug store trade

requiring a continuing supply ofrelatively small tonnages because of storage

problems in Colombia as well as because of storage problems of at least

one supplier in the United States it is concluded and found that the actual

practice used was for the consignee importer to obtain one license for

each shipment and that each lot of licensed cargo would be loaded and

brought to Colombia on a single ship under a separate license

The significance of the above finding relates to the fact that in the

Atlantic trade the FlotaAndino serviCe had a near monopoly since late

in 1973 when the FlotaAndino agreement was effectuated Similarly in

the Pacific trade FlotalTransligrahad a near monopoly since its service

was instituted in early 1977 following the discontinuance of the Flota

Andino service to the Pacific West Coast Colombian ports It also appears

that FlotaAndino had a nearrilonopoly in the service to the Pacific Coast

Colombian ports from some time in 1973 through the end of 1976

SERVICES OF PARCEL TANK CARRIERS OTHER THAN PLOTA

Prior to 1973 the foremost carrier in the United States Gulf Colombia

trade was Stolt Nielsen Since the implementation of the agreements here

in issue Stolt Nielsen withdrew from the trade AS Rederiet Odfjell

Odfjell and Vee Marine served the trade prior to 1973 but subsequent

to the agreements herein discontinued that service O N E offered a

regular

service prior to 1973 but discontinued that service subsequently Presently

O N E has four vessels devoted to the movement of liquid bulk cargo

from the U S Gulf to the Atlantic Coast of South America and it appears

that O N E could if conditions permitted offer service to Colombia in

conjunction with its U S Gulf South American service

J Currently Shell has a two year contract with Vee Marine for the transpor

tation of chemicals from the U S Gulf to Brazil Shell has a contract

with Pan American Tankers for the transportation of liquid bulk chemicals

from the U S Gulf to Venezuela Shell has a contract with Stolt Nielsen

for the transportation of chemicals to Chile and Peru

lllVlr
AGREEMENT NOS 10293 AND 10295 451

During the period November 1977 through October 1978 Odfjell a

Norwegian Flag line transported 100 percent of the imports of phosphoric

acid from the us Gulf to Cartagena for ABOCOL a fertilizer manufac

turer This service was very satisfactory The FlotaAndino service was

equally satisfactory in Abocols view to that of Odfjell Odfjell contracted

with NAVENAL a Colombian shipping company in order to provide its

service to Abacol Odfjell during the above 1977 to 1978 period had

offered 3 00 per metric ton lower than the rate offered by FlotaAndino

Both Abocol and its phosphoric acid supplier Freeport Chemical and Min

erals Company have storage problems for phosphoric acid and therefore

shipments of parcels of 1 800 to 2 300 tons must be made to Abocol

on a

regular basis Abocol simports between 1973 and 1980 were between

about 15 000 to 25 000 tons of phosphoric acid a

year

Odfjell proposed to Abocol to continue its c o a from November 1978

through October 1979 but the rate offered by Odfjell was too high in

Abocol s view Flota then provided the service During 1977 Odfjell also

transported 7 000 metric tons of phosphoric acid for Monomeros another

manufacturer of fertilizer and the only other Colombian importer of phos

phoric acid

Odfjell was able to transport these cargoes because it entered into an

arrangement with Navenal a Colombian shipping company Navenal had

obtained permission to serve the U S Gulf Colombian trade herein through

an agreement with Flota approved by the Colombian Maritime Administra

tion In time Navenal went out of business

Monomeros arranged for 1980 with Pan American Tankers for it to

carry 6 000 to 12 000 metric tons of phosphoric acid from the U S Gulf

to BarranquiIla The same contract also considers the transportation of

cyc10hexane from the U S Gulf or from Puerto Rico This 1980 contract

between Monomeros and Pan American Tankers is for 50 percent of

Monomeros 1980 tonnage of phosphoric acid to be carried by Pan Amer

ican Tankers with the other 50 percent to be carried by FlotaAndino

The 50 percent allocated to Pan American was because its bid was better

than the bids of other parcel tanker carriers

The above 50 percent Flota 50 percent Pan American arrangement

for 1980 is consistent with the changes in the Colombian cargo reservation

laws said to have been implemented sometime in 1979

Prior to 1973 there were several major parcel tank operators which

served the liquid bulk cargo trades herein These were Stolt Nielsen

VeeMarine Odfjell Andino O N E and Bamar Marine Since February

1973 generally the only liquid bulk service offered US shippers in these

trades has been the FlotalAndino service and the Flota Transligra service

bearing in mind that Abocol and Monomeros Colombian fertilizer manufac

turers are not considered to be U S shippers
452 FEDERAL MARITIME COMMISSION

j

4

FLOTA S MONOPOLY SHARES

In 1977 FIota attained an 83 percent market share in the movement

of liquid bulk cargoes from the U S Gulf to Colombia total A and P

trades In 1978 FIota had a 78 percent share The liquid bulk cargoes

transported by other carriers in these years Exhibit 58 include commodities

such as anhydrous ammonia which cannot be transported in vessels owned

or operated by Andino or Transligra In 1979 FIota had an 89 percent

market share as listed in Exhibit 148 Table I That is out of a total

of 318 347 metric tons handled by all carriers in 1979 FIota carried 283 300

tons to Colombian A and P ports It is not clear from Exhibit 148 where

the 1979 figures were obtained but they were referred to in testimony

and are generally confirmed by Exhibit 168 Exhibit 168 Table U shows

a slightly different figure of 286458 tons asFIota s share for 1979 total

of the A and P trades There are no figures in Exhibit 168 for the total

metric tons carried in 1979 by all carriers in the A and P trades

A copy of Exhibit 168 Table U is attached as an appendix to this

decision

CONTRACTS OF AFFREIGHTMENT AND RATES IN THE TRADES

Rates of FIota under contracts of affreightment were and are lower than

the published rates of Flota FIota has c o a s with Abacol and with

Monomeros the only two Colombian importers of phosphoric acid fr01ll

the U S Gulf For all other importers including the Dow Shell and Esso

customers or affiliates in Colombia cFlota does not enter into c o as but

its rates on liquid bulk cargoes are assessed on a shipment by shipment

basis according to circulated rate schedules

U S shippers prefer entering into c oa s with carriers because the car

riers then can assure the U S shippers of service on a regular continuing

and efficient basis U S shippers also prefer c o

as because one shipper

can arrange with one carrier to cover all its transportation needs over

a

large geographic area

Contracts of affreightment covering the carriage of liquid bulk cargoes

from the U S Gulf to Colombia and other Latin American countries are

general characteristics of these other trades

Prior to 1973 Esso freely made arrangements for the delivery of liquid

bulk cargoes to Esso s tenninals in Cartagena From 1969 to 1973 Esso

had a c o a with Stolt Nielsen for the transpo tion ofliquid bulk chemicals

from the U S Gulf to the Colombian ports of Barranquilla Cartagena

and Buenaventura This contract included various Latin American ports

including Venezuela and others From about March 1974 when the Stolt

Nielsen contract tenninated Esso has had a contract with O N E for the

transportation ofliquid bulk chemicals from the U S Gulf to the Caribbean

area including the north coast of South America the west coast of South

1

I

ooi
AGREEMENT NOS 10293 AND 10295 453

America including as far south as Peru and the west coast of Central

America

Esso s contract with O N E has included optional discharge at ports

in Colombia but from 1974 through 1979 O N E did not discharge Esso s

cargo in Colombia In 980 O N E made one discharge of Esso s cargo

in Colombia From 1974 to 1979 nearly 100 percent of Esso s cargo

from the U S Gulf to Colombia was carried by PlotaAndino

Shell Chemical Company exports liquid bulk chemicals to South Amer

ican countries including Colombia Venezuela Peru Chile and Brazil Prior

to the PlotaAndino agreement Shell had a c o a with Vee Marine for

carriage of liquid bulk chemicals to Colombia and to other South American

countries

Colombian importer consignees of liquid bulk cargoes such as Shell s

customer or affiliate usually purchase in large quantities but take delivery

in numerous small parcel quantities precluding full shipload shipments

Most parcels are in the range of 200 metric tons but even a shipment

of 400 to 600 metric tons represents a small parcel

When Vee Marine carried such parcels to Colombia for Shell Vee Marine

also carried the same generic chemicals to importers in other South Amer

ican countries Shell exports several of the same generic chemicals to

Colombia which Shell also exports to Brazil Venezuela and Chile

It is more economical to a parcel carrier to carry large quantities of

cargo on the same southbound voyage to both Colombia and its neighbors

Because other parcel tanker operators such as Vee Marine no longer

carry chemicals to Colombia for Shell these other operators are unable

as previously to carry as many parcels on the same voyage thus resulting

in Shell s paying higher overall freight charges than before the implementa

tion of the FlotaAndino agreement

When Vee Marine carried chemicals for Shell it loaded in the U S

Gulf for discharge in Colombia used the same space in Loading again

at Curacao discharged again in Venezuela returned to Curacao to use

the same space for Brazil and on the northbound leg again loaded in

Curacao for discharge in the U S Gulf Vee Marine s

inability to call

in Colombia prevents it from making the above efficient use of its space

which ultimately influence the rates Vee Marine must charge for non Co

lombian shipments

Shell now has a two year contract with Vee Marine to transport Shell s

chemicals from the U S Gulf to Brazil Prior to 1975 Shell s contract

with Vee Marine combined transportation of liquid bulk chemicals from

the U S Gulf to Colombia and Brazil

The service offered by Vee Marine to Shell has been excellent for the

8 or 9 years up to about November 15 1980 when witness Gallagher

prepared his written statement

flFM C
j

I

I

454 FEDERAL MARITIME COMMISSION

In November 1980 Shell also had a contract with Pan American Tankers

for the transportation of liquid bulk chemicals from the U S Gulf to Ven

ezuela

The same generic chemicals carried by FlotaAndino for Shell from the

U S Gulf to Colombia bear a rate of from 40 to 45 a metric ton

plus bunker surcharge Although Venezuela is further distant from the U S

Gulf the rate charged by FlotaAndino to Colombia is much higher than

the comparable rate charged to Shell by Pan American Tankers to Ven

ezue a

Shell also at the same time as above had a contract with Stolt Nielsen

for the carriage of Shell s

liquid bulk chemicals to Chile and Peru The

chemicals to Peru are the same as those to Colombia but Stolt Nielsen

is or was unable to call at Colombia

Although Shell s Colombian imports have increased Shell Chemical s

exports from the U S Gulf to Colombia have decreased significantly in

the eighteen months prior to November IS 1980

Stolt Nielsen Vee Marine and Odfjell all have expressed their interests

in carrying liquid bulk chemicals from the U S Gulf to Colombia for

Shell but in Shell s opinion the Colombian laws in conjunction with the

FlotaAndino service have precluded these three carriers from transporting

Shell s cargo in the trade

Shell insists that Colombian importers must request an import license

to cover each individual shipment for the U S Gulf to Colombia and

that the requirement that the first 50 percent of a shipment must be carried

on a Colombian line or associated line dictates that Flota get the whole

of each shipment because it is not economically feasible to split a small

parcel of a few metric tons between Flota and another parcel tanker operator

From 1973 through the fUSt quarter of 1979 Exhibit 47 as far as

the statistics offered go the Flota service transported all of Shell s

liquid

bulk cargo from the U S Gulf to Colombia Similar statistics showed the

same for Dow s

liquid bulk cargo

FLOTA S ANDINO S AND TRANSLIGRA S OPERATIONS

On a nonnal voyage Andino carries parcels belonging to four to sixteen

different shippers On the same southbound voyage Andino loads liquid

bulk cargoes at U S Gulf ports and discharges in the Caribbean area

en route to Colombia The same vessel after calling at Atlantic Colombian

ports on an unspecified number of occasions also discharges cargo at Ven

ezuela and then returns northbound to the U S Gulf

For cargo carried by Andino pursuant to the FlotaAndino agreements

and solicited by Flota Flota issues the bills of lading

But for cargo destined to other Caribbean or South American ports

Andino issues the bills of lading For example Andino issues the bills

of lading on cargoes to Venezuela

26 F M C
AGREEMENT NOS 10293 AND 10295 455

Andino s witness admitted on crossexamination that serving Venezuela

in the trade from U S Gulf ports would help in the flexibility of serving

the Colombian trade

Andino carries cargo in its vessels in the space not chartered by Flota

In 1977 out of 35 voyages in the U S Gulf Colombia trade Flota chartered

the full vessel for 23 voyages On a 24th voyage Flota space chartered

92 percent of the vessel On the other 11 voyages Flota chartered only

a part of the vessel space Andino s other shippers using the excess space

not chartered by Flota have included Dow prior to July 25 1979 but

to a port not in Colombia Andino and Dow entered into a c oa with

regard to this cargo of Dow

The space on Andino s vessels not chartered by Flota is on a first

come first served basis subject to the proviso that the products transported

outside of Colombia be compatible with those destined to Colombia Andino

adheres to U S Coast Guard and IMCO 3

regulations for the carriage of

dangerous liquid bulk chemicals Andino always tries and usually succeeds

in having its vessels leave U S Gulf ports fully loaded subject of course

to deadweight and stowage limitations

FIota issues bills of lading for more than one shipper for each voyage

in which Flota charters space from Andino or Transligra in the trade

herein There appears to be no question that Flota acts as a common

carrier by water in the foreign commerce of the United States considering

FIota s issuance of bills of lading and other facts of record including

its regularly scheduled service solicitation of cargoes number of shippers

served and variety of cargo transported Flota also circulates advertising

schedules listing dates on which vessels call at specified ports Flota also

distributes published rate circulars setting forth freight rates to be paid

depending upon the sizes of the parcels shipped

FIota exercises no control over the vessels navigation FIota does not

hire the crews nor pay the crews nor arrange the vessels stowage These

functions are those of Andino in the Atlantic Colombia trade and Transligra

in the Pacific Colombia trade

FIota more precisely is a non vessel operating common carrier NVOCC

in these trades for the transportation of liquid bulk cargoes

Andino and Transligra carry liquid bulk cargoes belonging to the general

public but tendered to Andino and Transligra by FIota

Andino publishes and circulates sailing schedules advertising its service

between the U S Gulf and Latin America including Colombia

Andino regularly serves the Caribbean area Venezuela Chile and Ecua

dor

FIota and Andino jointly circulate advertising schedules listing dates on

which vessels call at specified ports

3Inler Governmental Marilime Consultative Organization

26 F M C
456 FEDERAL MARITIME COMMISSION

Flota Andino and Transligra jointly circulate advertising schedules listing

dates on which vessels call at specified ports Exhibit 40 with Andino

acting as agent for the FlotaAndino and Flotaffransligra cargoes destined

respectively to the Atlantic coast of Colombia and the Pacific coast of

Colombia after loading in the U S Gulf

Transligra and Andino both in connection with Flota provide regularly

scheduled services

Andino and Transligra are the underlying vessel operating common car

riers VOCC s in the trades herein Andino and Transligra carry cargo

for the shipping public after such cargo is assembled by Flota and with

the agreements of Andino and Transligra to carry such cargoes as Flota

may obtain from the shipping public

ACS Andino will be the sole coordinator of shipments of all cargo

shipped from U S Gulf ports and consequently takes over the execution

of transportation contracts and the corresponding responsibility in accordance

with Tanker Bills of Lading andor contracts that cover the shipments

and will be responsible for the carrying of such cargo from the above

mentioned ports to Colombian ports Such ports are defined as Atlantic

Colombian ports in the public agreement which the private agreement

implements Private Agreement December 22 1976 between Flota and

Andino Exhibit 2B

A like provision sets out Transligra s undertaking to be sole coordinator

of all cargo etc in connection with the U S GulfColombian Pacific ports

Exhibit 29

WAIVERS OF DECREE 1208

A procedure exists for obtaining waivers from the requirements of Decree

1208 When a trade route is not covered by a Colombian company the

Incomex stamp is not applied to import licenses Where as in the present

proceedings Flota a Colombian company serves the trades waivers may

be granted when Flota or its foreign associates Andino or Transligra

in these trades cannot provide vessels or space on the vessels used in

the trades

To obtain a waiver the Colombian consignee importer must address

a letter to the Colombian shipping company holding the right to serve

the trades Flota in the present proceedings asking Flota to certify whether

it has a vessel in position for a certain period of time and has enough

space to accommodate the cargo If the shipping company FIota cannot

carry the cargo Flota will issue a letter to Incomex certifying the fact

and Incomex will issue the waiver

Exhibit 11 contains twelve waivers all that were found by Flota purport

edly granted for the transportation of liquid bulk cargo shipments between

the period March 23 1976 to about July 15 1980 In fact Exhibit 11

contains another waiver but it is not for liquids and relates in large

part to origins in foreign countries such as Urea in bulk in sacks 20 000

26 FM C
AGREEMENT NOS 10293 AND 10295 457

30 000 tons to be loaded in the Black Sea or Baltic Insofar as this

waiver for Monomeros Colombo Venezolanos is concerned with the United

States it refers to solids such as potash salts and phosphates

In each of the above twelve instances FIota gave consent to the waiver

requests on the basis that FIota did not have a vessel available to carry

the tonnage At the time of the hearing Flota was the only Colombian

carrier with the right to carry liquid bulk cargoes in the trades herein

Navenal once had such rights but never got established in the trades

and went bankrupt on or about June of 1980 Navenal was owned by

the Colombian government and had attempted to serve the trade with

chartered vessels and by agreement with FIota When FIota signed the

agreement with Navenal FIota intended that Navenal only have rights for

dry bulk cargoes

The above twelve Flota waivers induded waivers for phenol fish oil

monoethylene glycol monomere acetate vinyl hog grease caustic soda

styrene monomere cottonseed oil and soybean oil in lots as small as

178 tons monomere acetate vinyl and as large as 4 000 tons caustic

soda

In reference to the years 1976 1977 and 1978 Dow responded to

discovery requests that only one formal written application for waiver

was made during this period by its customer in Colombia with the result

that such waiver was granted in December 1978 also Dow stated that

to its best knowledge formal waiver applications have never been refused

and that Dow itself never has officially applied for a waiver Dow also

responded that it lost local sales to its Colombian customers because of

delays of vessel arrival and that a plant was shut down again March

13 1979 due to delay of La Selva 7 vessel from ETA end February

to ETA March 20 This situation meaning again Dow loss of local

sales of Styrene Exhibit No 107 Exhibit No 6OC shows that the

La Selva apparently sailed from the US Gulf coast loading ports on

February 19 1979 and returned on April 7 1979 taking much longer

than its usual 4 weeks or so round trip

From the above information on Exhibit No 107 it is apparent that

at least some waiver requests are made orally or informally whereas other

waiver requests are made in writing or officially or formally It is fair

to assume at least in some instances that if a waiver request is refused

informally that in such instance or instances no written or official request

is made because it would be vain to do so

Witness Terence A Gallagher International Distribution Manager for

Shell Chemical Company stated Exhibit No 96 that it is common knowl

edge that it would be futile at least up until this proceeding was brought

to the attention of the Federal Maritime Commission to make a request

for waivers to permit the carriage of liquid bulk chemicals on non Colom

bian flag vessels In 1973 Shell was advised by Bruno Le Hocque in

his then capacity as general manager of Flota that Shell would have to

t

Jur
458 FEDERAL MARITIME COMMISSION

use Flota s service to ship 100 percent of Shell s

liquid bulk chemicals

out of the U S Gulf to Colombia using Andino s vessels Mr Le Hocque

further advised Shell in 1973 that waivers would be granted if the Flota

Andino service did not have space on its vessels

Shell reached the conclusion on August 29 1973 that Mr Le Hocque

was evasive at times using veiled thre ats regarding his influence over

import licensing and stalling for time in order that Andino could bring

in enough tonnage to handle virtually all liquid bulk cargo into Colombia

and Granc04 would be in a position to get a lock on all inbound cargo

Exhibit No 99

At the same time August 29 1973 a Mr Parody of Cia Transportada

S A shipping agents for both Flota and Shell Colombia stated that he

could obtain waivers for Shell within 24 hours whenever needed However

a group of Shell representatives concluded that comments made by

Lehoucq and Parody must be taken with a grain of salt until experience

if any proves otherwise

In response to discovery requests propounded by Andino Esso Chemical

Supply Company Inc responded on March 30 1979 in part Exhibit

No 116

The cooperative working agreement contemplated by Agreement

No 10293 could operate to the detriment of the commerce of

the United States in general due to the artifically hiah freight

rates for carriage of bulk liquid chemical cargoes the cost of

which must be reflected in the price of the products exported

to Colombia thereby making them less competitive with the same

products exported from areas not subject to the effect of Agree

ment No 10293 Secondly the refusal of proponents to load

at ports where Esso s shipper has cargo for shIpment causes extra

expense in transporting the products to alternate ports Such ex

pense must necessarily be reflected in the priee of the products

thereby providing a competitive edge to producers who are not

under the restraints of said Agreemmt Finally the scheduling

of proponents vessel often does not coincide with the requirements

of Esso s customers and thus such customers often do not receive

product at the desired time

Mr Andres Umana of Produetos Chemicos Esso was informed

by Mr Bruno Le Hocque of Flotathat no waivers would be

granted The statement is also based upon trade rumors that Dow

Chemical and Shell Chemical were never granted any waivers

and Union Carbide ColombianaS A was granted only one waiver

since 1973

Esso has not applied for such waivers because of the Colombian

law which requires a letter from the Colombian shipping

company Flota to accompany said application indicating that

said company can not carry the product in question

1

FIOla

26 P M l
AGREEMENT NOS 10293 AND 10295 459

P E Productos Quimicos Esso made one application for waiver

in January 1979 Said waiver was granted but there was no carrier

available to transport the product

Said tanker operators Parcel Tankers Inc and O N E Enterprises

Ltd do not maintain a

regular service between the U S Gulf

and Atlantic ports of Colombia because of the Colombian Cargo

Reserve Law and its present interpretation However O N E Enter

prises Ltd is presently capable of carrying Esso s products to

Colombia at substantially lower rates and is presently carrying

similar bulk liquid chemical products to the adjacent countries

ofPanama and Venezuela at such lower rates

IMPORTERS SELECT CARRIERS

The Colombian importer consignee buys the liquid bulk cargo which

it imports from the U S Gulf on a F O B basis at the U S Gulf port

Thus the ocean freight charges are paid by the importer consignee and

he determines and controls which liquid parcel tanker will be selected

In other words the shipper located in the United States when shipping

via a U S Gulf port in the trades herein has no say so and no control

over the selection of the liquid bulk carrier used to carry his cargo to

Colombia This requirement is by Colombian law and decree which also

requires the Colombian importer consignee to obtain import licenses for

the cargo in these trades

BARRANQUILLA S SAND BAR

There was some testimony in the record that a sand bar in the River

Magdalena impeded the safe delivery of liquid bulk cargo at the port

of Barranquilla Exhibits 61 and 99 The statement in one letter gives

the superficial impression that only Andino s vessels were small enough

to cross the sand bar The facts are that Andino s vessels have a draft

of about 21 feet and O N Es vessels the Onestar Onesky Broad Atlantic

Broad Pacific have the same draft and can pass the same sand bar

Vee Marine s vessels in 1973 had drafts of more than 28 feet and con

sequently at that time were willing to unload only into barges outside

the sand bar From time to time other shipping companies have served

Colombia since 1973 and in more recent years Andino for one has

upgraded the quality of its parcel tankers Presumably other carriers have

done the same over the passing years In any event the sand bar near

Barranquilla has little relevance to the merits of the proceeding in No

79 2

VESSEL PUMPS

Prior to 1979 and 1980 Andino chartered quite a number of vessels

with common pumps for more than one tank which vessels were used

1M r
460 FEDERAL MARITIME COMMISSION

in the trade herein It is preferable to have one pump per tank When

one pump services more than one tank on a vessel the risk of accidents

or contamination is greater and there is more expense in cleaning the

lines handling the cargoes

Apparently from at least 1980 on Andino has chartered modem vessels

with separate pumps for separate tanks The record does not disclose wheth

er other parcel tank carriers also have chartered or owned modern parcel

tankers but various other such carriers are active in serving countries

other than Colombia and presumably also have used modern style tankers

GENERAL STATISTICS

In the year 1971 Andino on its own made six voyages carrying 7 590

metric tons of cargo in the Atlantic trade In 1972 Andino on its own

made eleven voyages carrying 10 560 metric tons in this trade Exhibits

64 and 78

The year 1973 totalled 25 voyages in this trade with Andino on its

own making four of these voyages and PlotaAndino making 21 voyages

after the PlotaAndino agreement was made Total cargo carried by Andino

alone 4 voyages end by PlotaAndino 21 voyages in 1973 was 55 195

metric tons in this A trade

The tonnage figures for the PlotaAndino service were 96 633 tons in

1974 85 319 in 1975 86 139 in 1976 121 013 in 1977 13747 in 1978

187 379 in 1979 and 127 789 for the first half of 1980 as shown in

Exhibits 78 and 64

In the years 1971 1972 1973 there were other carriers in the U S

Gulf Colombia trades besides Andino and AndinolFlota The tonnages of

these other carriers are not shown in Exhibits 78 and 64 which are limited

to tonnages carried on Andino s vessels

Andino carried additional cargo besides that destined to Atlantic Colom

bian ports on the same vessels which additional cargo was destined to

other ports en route to Atlantic Colombian ports None of such additional

cargo as shown in Exhibit No 78 was destined to Pacific ColombIan

ports For instance for the year 1973 44 018 tons went to these other

ports en route For 1974 the cargo to such other ports was 28 498 tons

for 1975 it was 41 879 tons for 1976 it was 40069 tons for 1977 it

was 28 507 tons for 1978 it was 25 818 tons

Andino issued its own bill of lading to these other ports such as ports

in Venezuela showing together with its regular service sailing schedules

etc that Andino was providing common carrier service to the Latin Amer

ican area generally Exhibit 37 for example lists Sailing Schedule

Pleet Information showing three voyages in February three in March

and two in April 1977 from the U S Gulf to the North Coast of South

America with some voyages showing the discharging area of Colombia

only but with other voyages showing the discharging area of Colombia

CaribbeanMexico orColombiaVenezuela

Ii P M
AGREEMENT NOS 10293 AND 10295 461

Exhibit 47 pages 4 and 5 lists Graneles Liquidos liquid bulk ship

ments of Dow Shell and Esso imported from the US Gulf into Colombia

for the years 1971 through 1978 separating tonnages handled by FIota

from tonnages handled by other liquid bulk carriers The information in

Exhibit 47 was obtained by counsel for FIota and was received without

objection by the counsel for the other parties Somewhat different figures

are shown for these three importers in Confidential Exhibit No 70 data

provided by Andino limited to the years 1976 1977 and 1978 To get

a complete picture of the trade it is advisable to use the figures for more

years 1970 through 1978 found in Exhibit No 47

Exhibit 47 shows for Dow 4602 tons in 1970 3 818 tons in 1971

and 5 553 tons in 1972 all handled by carriers other than FIota For

Dow in 1973 there were 5 157 tons by FIota and 2 595 tons by other

carriers From 1974 through 1978 the carriage was all by FIota being

13 228 tons in 1974 5 828 tons in 1975 8 004 tons in 1976 12 304

tons in 1977 and 16 460 tons in 1978 These figures appear to show

that Dow generally enjoyed increased tonnages in the trade with the use

of the FIota service but other factors than the use of FIota s service

may have affected these tonnages

Exhibit 47 shows for Shell 7 507 tons in 1970 2 257 tons in 1971

5 572 tons in 1972 all handled by carriers other than FIota In 1973

for Shell there were 3 963 tons by FIota and 3 593 tons by other carriers

For 1974 through 1978 all Shell s

liquid bulk cargo in this U S Gulf

Colombia trade was carried by FIota There were 4 468 tons in 1974

1 594 tons in 1975 1 990 tons in 1976 2 406 tons in 1977 and 4 180

tons in 1978

For Shell for the period 1970 through 1978 the total handled by other

carriers was 18 929 tons 19701973 which slightly exceeded the total

handled by FIota of 18 601 tons 1973 1978 Of course these figures

do not include imports by Shell from Europe However even if one adds

the 2 890 tons shipped from Europe in 1978 to the 4 180 tons shipped

from the United States the total for 1978 of 7 070 tons remains less

than the total imported by Shell from the United States in 1970 of 7 507

tons using carriers other than FIota Of course there can be many reasons

for changes in tonnages imported into Colombia other than the carriers

used such as competition with other importers

From the above figures one can see that Shell had reason to protest

Exhibit 47 shows for Esso 1 469 tons in 1970 1 922 tons in 1971

and 1 267 fans in 1973 all handled by carriers other than FIota For the

years following through 1978 FIota handled most of Esso s cargo in this

trade including 497 tons in 1974 3 347 tons in 1975 384 tons in 1976

7 112 tons in 1977 and 9 220 tons in 1978 Other carriers handled for

Esso 388 tons in 1977 and 500 tons in 1978 according to Exhibit No

47

lIur
462 FEDERAL MARITIME COMMISSION

From all of the above figures shown in Exhibit 47 for Dow Shell

and Esso no clear conclusions are evident as to the effects of FIota s

service on the businesses of Dow Shell and Esso in regard to the U S

Gulf Colombia trade Thus one must turn to the testimony of the witnesses

No witness for Dow testified but those for Shell and Esso clearly favored

having the ability to be served by at least two or more liquid bulk parcel

carriers in this trade

In the U S Gulf to the west Pacific coast of Colombia trade FIota

Transligra made about two trips a month using two vessels regularly At

times Transligra has used a third vessel in this trade Each vessel completes

a round trip in about a month Andino kept records for Transligra in

this trade and Exhibit 75 shows tonnages from January 1 1976 through

June 30 1980 which were compiled from bills of ladings The leading

category of liquid bulk cargoes in this trade was vegetable oils and animal

fats and caustic soda was the principal chemical transported Total metric

tons were 16 174 in 1976 19 879 tons in 1977 45 597 tons in 1978

91 219 tons in 1979 and 56 198 tons for six months of 1980 These

figures show a steady and substantial increase over the years from 1976

to 1980

These figures apparently have been updated by those found in Exhibit

168 Table U which is attached as an appendix to this decision

Exhibit 168 Table 0 page 18 states C For the years 197476

Agreement 10293 between FIota Mercante Grancolombiana S A and

Andino Chemical Shipping Company Inc covered the trade in liquid bulk

chemicals and fats and oils between the U S Gulf and both the Atlantic

and Pacific Coasts of Colombia Emphasis supplied

That was not literally true since Agreement 1 0293 was not filed until

April 1977 but apparently it was the intent of the respondents witness

in compiling his statistics to treat Agreement 10293 as if it had been

effective prior to 1977

In any event where there are conflicts in the statistics in the various

exhibits such as between those in Exhibit 149 and Exhibit 168 the statistics

in the latter were prepared last and should be used

Also some statistics of record were based on the records of FIota

and some on the records of Andino and they differ in some instances

even though ostensibly both records cover shipments of the same cargoes

for the same periods Exhibit 58 compiled from Flota s records shows

tonnages for 1977 and 1978 which differ from the tonnages shown in

Table U ofExhibit 168 compiled from Andino s records

However all the statistics are useful in showing general trends in the

trades here in issue

Exhibit 168 Table U page 24 gives a broad picture of Flota s participa

tion in these U S Gulf Colombian liquid bulk cargoes trades for the years

19741980 inclusive Table U is a significant presentation of data
AGREEMENT NOS 10293 AND 10295 463

Total cargoes grew from 98 789 tons in 1974 to 204 067 tons in 1980

in the Atlantic trade Total cargoes grew from 15 409 tons in 1974 to

101 926 tons in 1980 in the Pacific trade

Grand totals for these two trades grew from 114 198 tons in 1974 to

305 993 tons in 1980 In other words the total tonnage in 1980 was

more than two and two thirds as much as it was in 1974

Cargoes in 1980 were 66 7percent in the Atlantic trade and 33 3percent

in the Pacific trade

Respondents general1y attribute the growth in tonnages in the two trades

to the quality and regularity of the Flota services but this is only specula

tion One may speculate also that these growths in tonnage were the

result in the growths of the businesses of Colombian industries during

the seven year period 19741980 In other words did the ships bring the

tons or did the tons bring the ships

Table U shows 305 993 tons of liquid bulk cargoes were handled by

Flota in 1980 and Table A of Exhibit 168 page 3 and Table 1 of

Exhibit 149 together show a total of 592 parcels for both trades in 1980

Dividing the above figures shows an average parcel size for the two trades

combined of about 524 tons per parcel in 1980 handled by Flota In

1977 total cargoes in both trades were 154634 tons Total parcels in

both trades in 1977 were 324

In 1977 in the Atlantic trade there were 268 parcels total of chemicals

and of fats and oils This total grew to 368 in 1980 for the Atlantic

trade

In 1977 in the Pacific trade there were 56 parcels total of chemicals

and of fats and oils This total grew to 124 in 1980 for the Pacific

trade

With a total of 592 parcels for both trades in 1980 and with 305 993

tons the question remains is there only enough business essential1y for

one principal carrier in each trade Or is there enough business for more

carriers

Exhibit 168 Table 0 page 18 shows the col1ected freight revenues

paid by importer consignees the so cal1ed cancel1ed freight revenues

the amounts paid by Flota to Andino for chartered space and the gross

profits of Flota the differences between the first two figures for the

years 19741976 inclusive for both the Atlantic 79 2 and Pacific 79

3 trades and for the years 1977 1980 inclusive for the Atlantic 79

2 trade only

Flota s col1ected freight revenues in the A trade grew from 4 301 059

in 1977 to 7 299 032 in 1980 and Flota s gross profits before taxes

grew in the same years from 467 151 to 687 207

Exhibit 168 Table P page 19 shows similar col1ected freight revenues

cancel1ed freight revenues paid to Transligra and gross profits of Flota

for the years 1977 1980 inclusive for the Pacific 79 3 trade only Can

celled freight revenues in this table are those paid by Flota to Transligra
i

l

464 FEDERAL MARITIME COMMISSION

Flota s collected freight revenues in the P trade grew from 1 24 603

in 1977 to 4515 294 in 1980 and Flota s gross profits grew in the

same years from 184 735 to 550 777 in 1980

For the years prior to 1971 Flota s collected freight revenues and gross

profits are shown as combinations of its services in both the A and P

trades in Table O

A compilation of Flota s total yearly collected freight revenues obtained

from data in Exhibit 168 Tables 0 and P and Exhibit 149 Table 20

shows how Flota s cargo carryings in the trades herein grew greatly from

1974 through 1980 with a 7 inserted where the tables do not show

data broken down as between the Atlantic and Pacific trades

Years

From Exhibit 168 From Exhibit 168 From Exhibit 149

Table 0 Alantic Table P Pacific Table 20 Totals

Alantlc and Pa Trade Trade ciflc Trades

1974 3 736 895

1975 3 271 142

1976 l 3 779 104

1977 4301 059 25 1 245 603 25 5 546 663

1978 4332 035 04 1 823 872 07 6 155 907

1979 5 843 632 41 4070 969 17 9914 602

1980 7299 032 62 4515 294 09 11 814 327

As seen from the above compilation Flota s

freight revenues as a

total of both the Atlantic and Pacific trades much more than tripled from

1974 3 736 895 to 1980 11 814 327

The individual trades also greatly increased from 1977 to 1980 for

the Atlantic from 43 million to 7 3 million and for the Pacific frODL

12 million to 45 million

Both the Atlantic and Pacific trades of Flota increased in 1979 over

1978 and in 1980 over 1979 leading to the conclusion that the Colombian

diplomatic note of July 6 1979 and the change in the Incomex stamp

in the same year from 100 to 50 percent did not result in inhibiting

the growth of Flota s cargoes in these trades

The record as seen discloses the cancelled freight revenues paid

by Flota to Andino in the A trade 1977 1980 and in the A and P

trades totals 19741976 as well as paid by Flota to Transligra in the

P trade 1977 1980

What is not shown are the gross profits of Andino and Transligra

From this record it cannot be determined whether Andino and Transligra

profited or lost in these trades nor the extent nor the reasonableness

of such profits if they profited

While Flota s rates may have been reasonable in relation to what Flota

paid Andino and Transligra the record as a whole indicates that Flota s

rates were high in view of comparable rates to Venezuela and in view

of the testimony of a witness for Esso that over the years from 1973

through 1980 Flota s charges were higher than those Esso could have

ti P M
AGREEMENT NOS 10293 AND 10295 465

provided to its Colombian importer affiliate under existing contracts of af

freightment with the parcel tank carriers including Stolt Nielsen and O N E

Esso believes that it suffered additional costs totalling about 266 000 for

these years because of Esso s being compel1ed to use FIota s service in

the A trade including costs of inland freight caused by FIotaAndino in

declining to load IPA a liquid bulk chemical at Baton Rouge

FIota s charges to Esso Exhibit 109 increased from 19 a ton in 1973

18 525 for 975 tons to 5330 a ton in 1980 169 113 for 3 173 tons

For the years 1974 through 1980 in the U S Gulf Atlantic trade No

79 2 FIotalAndino transported a total of 690 132 tons of chemicals and

239 304 tons of fats and oils or a grand total of 929 436 tons Of this

amount a total of 237 484 tons or 255 percent was handled under con

tracts ofaffreightment Such c o a shipments total1ed 187 276 tons of chemi

cals or 27 14 percent of the chemical total and 50 208 tons of fats

and oils or 20 98 percent of the fats and oils total Exhibit 149 tables

8 and 9

For the same years 502 856 tons of chemicals or 72 86 percent of

the chemical total were handled by FIotalAndino in this Atlantic trade

as non c o a shipments Also 189 096 tons of fats and oils or 79 02 percent

of the fats and oils total were handled by FIotaAndino as non c oa ship

ments

Non c oa rates often apply to smaller parcels under single voyage ar

rangements whereas c o

a

s apply for multiple voyages The smal1er the

pfcel general1y the higher is the non c o a rate FIota s non c o a rates

of course were higher than its terms under c o as

Exhibit 149 Table 1 shows that FIotalAndino s cargo in the Atlantic

trade chemicals plus fats and oils total1ed 98 861 tons in 1974 and grew

to 204 240 tons in 1980 Computed by multiplying average parcel size

by number of parcels

Average parcel sizes were 487 tons in 1974 and 555 tons in 1980

Average chemical parcel sizes were 458 tons in 1974 and 487 tons in

1980 and average fats and oil parcel sizes were 800 tons in 1974 and

847 tons in 1980

Table 2 of Exhibit 149 shows that for the years 19741980 inclusive

the average parcel size for al1 chemicals was 464 tons but for c o a

shipments of chemicals was 2 256 tons and for non c o a shipments of

chemicals was 358 tons

The similar story for fats and oils for 19741980 shows an average

parcel size of 652 tons for al1 fats and oils 688 tons for c o as and

643 tons for non c o as

Table 3 of Exhibit 149 breaks down the number of parcels by parcel

size again for the years 19741980 For chemicals out of a total of

1487 parcels in the 150 ton or less category were 463 parcels or 31 1

percent and in the 151 250 ton category were 429 parcels or 28 9 percent

26 F M C
1

1

I

4

466 FEDERAL MARITIME COMMISSION

These two categories total 60 percent indicating the drug store nature

of the chemical trade

Exhibit 149 table 4 shows parcel sizes for fats and oils shipped by

FlotaAndino in this Atlantic trade Out of a total of 367 parcels of fats

and oils 168 parcels or 45 8 percent were in the 300500 ton category

and 138 parcels or 37 6 percent were in the 501 1 000 ton category These

two categories together made up 83 4 percent of the fats and oils total

As seen there were fewer total parcels of fats and oils 367 than

parcels of chemicals 1 487 but the fats and oils parcels generally were

larger mostly 301 1000 tons than the chemical parcels mostly 250 tons

or less

The average number of parcels including chemicals and fats and oils

for FlotaAndino for 19741980 table 5 was seven parcels per voyage

Over these years 265 voyages were made or an average of nearly 38

per year Table 6 ofthe same exhibit shows the average number of shippers

was 42 per voyage

Andino found it necessary to carry cargo for other parties than Flota

on the above voyages and the statistics for these other shippers and

how many other shippers there were are not included in the above tables

which were derived from Flota s bills of lading and did not include

Andino s bills of lading for these other shippers to other destinations such

as to Venezuela

In other words the tables in Exhibit 149 referred to above pertained

only to cargo shipped on Andino vessels under its Agreements with Flota

Table 7 in the above category shows that the number of U S Customs

Districts port areas in the U S Gulf called on by the FlotaAndino service

in the years 19741980 averaged 2 2 per voyage This number would

add to vessel time and vessel c

expenses depending upon how many port

areas of origin of the shipments in excess of one were involved in a

voyage

The statistics in tables 1 to 7 above generally confino the drug store

nature ofthe trade

Table 1 on page 17 of Exhibit 148 shows Flota s shares of liquid

bulk cargoes from the U S Gulf to Colombia for the years 1977 1978

and 1979

Out of a total of 199 056 tons in 1977 Flota carried 165 561 tons

or 83 percent

Out of a total of 206320 tons in 1978 Flota carried 160426 tons

or 78 percent

Out of a total of 318 347 tons in 1979 Flota carried 283 300 tons

or 89 percent

The latter figure is significant in that it shows Flota s

large share per

sisted even following the guarantee dated July 6 1979 by the Government

of the Republic of Colombia that 50 percent of all liquid bulk products

or u
AGREEMENT NOS 10293 AND 10295 467

may be carried to Colombia without any vessel flag restrictions Diplomatic

Note No 321 liE 179

Witness Schmitt called by Hearing Counsel concluded that the anti

competitive impact of the subject agreements is large He also concluded

that Flota s overwhelming market share occurred in these trades since the

inception of FIota s space chartered services between the U S Gulf and

Colombia

When queried about whether FIota s high rate of participation in the

trades in 1977 1978 and 1979 would carry over to 1980 1981 and

1982 witness Schmitt said he had no reason to think such participation

would not carry over

Mr Schmitt on crossexamination transcript 2066 stated that the total

cargo carried by all parcel tanker carriers from the U S Gulf to Colombian

ports in 1977 was roughly 200 000 tons 199 056 tons in Exhibit 148

table 1 and went to 318 000 tons 318 347 tons in Exhibit 148 table

1 in 1979 and that where an outsider Pan American Tankers had a

contract to move 6 000 to 12 000 tons in 1980 transcript 129 that isolated

amount of tonnage did not indicate that there was no monopoly in the

trade

According to respondents witness French the Pacific trade yet does

not have a sufficient volume of cargo to utilize fully the chemical parcel

tankers operated by Transligra under the FIotalTransligra agreement 10295

Exhibit 168 Table Y shows an average vessel percentage of utilization

to capacity over the years 1974 through 1980 FIotaAndino 19741976

and FlotalTransligra 1977 1980 in the Pacific trade of 40 9 percent for

a total of 102 voyages The remaining cargo capacity of the vessels was

used largely to transport parcels to Ecuador

Exhibit 168 Table Y does not break down the statistics year by year

and no doubt the vessel utilization to capacity percentage in 1980 was

much higher than the comparable percentage for 1974 This conclusion

is reached of necessity from the tonnages shown in Exhibit 168 Table

U That table shows 15 409 tons of cargo in 1974 and 101 926 tons of

cargo in 1980 in this U S Gulf Pacific Colombia trade Exhibit 168 Table

E shows 9 voyages in 1974 and 27 voyages in 1980 in this Pacific

trade which equate to about averages of 1 712 tons per voyage in 1974

and 3 775 tons per voyage in 1980 for cargo to Pacific Colombia

Buenaventura

Of course the percentage of utilization depends upon the sizes of the

vessels used The vessels used in the Pacific trade from 1974 through

1980 ranged in cargo capacity from 2 900 tons Chemie Carrier to 14 000

tons Espoir each of which made only three voyages in the Pacific trade

in these years Exhibit 168 Table Y The four vessels which made the

most voyages were the Chimborazo cargo capacity 7 200 tons and 17

voyages the Fuji Andina 7 200 tons and 16 voyages the Silver Magpie

1 CAAr
468 FEDERAL MARITIME COMMISSION

10 500 tons and 16 voyages and the Thomona 6 900 tons and 27 voyages

Exhibit 168 Table Y

Exhibit 168 Table A shows 22 parcels were shipped on the nine voyages

in 1974 in the Pacific trade compared with 124 parcels on 27 voyages

in 1980 For all of the years 19741980 together in the Pacific trade

the average number of parcels per voyage was 3 8 and the average number

of shippers per voyage was 3 3 Exhibit 168 Tables E and F For 1980

as seen there was an average of 46 parcels per voyage and the same

or less of an average of shippers per voyage for cargo in the Pacific

trade compared with 24 parcels per voyage in 1974 and that number

or less average shippers in 1974

Overall from the statistics above it is clear that the Atlantic is a larger

volume trade than the Pacific but the latter trade has been growing at

a greater rate Exhibit 168 Table U

Further it is clear that FIota has profited from these trades having

gross profits exclusive of agency and port fees of 467 151 in the A

trade and of 184 735 in the P trade in 1977 These gross profits of

FIota grew to 687 207 in the A trade and to 550 777 in the P trade

in 1980

The gross profits of the underlying vessel operating common carriers

Andino and Transligra are not shown but presumably they would have

tenninated their agreements with FIota sometime between 1973 and 1980

Andino or sometime between 1977 and 1980 Transligra if these agree

ments were either unprofitable or showed little likelihood ofprofits

Witness Cina for intervener O N E made a total market analysis for

the liquid bulk cargo in these A and P trades from the U S Gulf to

Colombia for the years from 1974 through the first six months of 1980

Exhibit 81 A He detennined the total profit potential for ON E based

on a total capture of the market by O N E

He uses an average freight rate for the years 19741980 of 38 74

a ton and an average O N E operating cost of 27 35 a ton For a total

of 1 176 795 tons of cargo for these years Mr Cina computes gross reve

nues of 45 586 487 for O N E and O N E operating costs df 32 181 236

The difference would have been 13 405 251 of net potential revenue for

O N E total for 1974 through first six months of 1980 Exhibit 81 A

page 118

Witness French for the respondents criticizes the Cina study for a number

of reasons including that O N E in no way is entitled to capture the

entire market in these A and P trades because the Colombian cargo reserva

tion law ostensibly would pennit O N E to compete only for 50 percent

of the tonnage in the trades and that the only way O N E would be

able to capture the market would be for O N E to displace Andino and

Transligra as parties to the space chartering agreements with FIota

Mr French criticizes Cina s use of average freight rates each for all

chemicals and for all fats and oils without allegedly proper reference

I ur
AGREEMENT NOS 10293 AND 10295 469

to the variances of rates by parcel sizes Mr French cntlclzes the use

by Cina of the costs of the vessels Onesky and Onestar because of their

design and capabilities the failure to include downtime of vessels for repairs

delays because of heavy weather and port congestion and the charter hire

rate not stated for O N Es two newer vessels the Brage Atlantic and

the Brage Pacific

Mr French points out that Andino cannot always make full use of

its vessels in the A trade with only Colombian cargo that on an average

for 19741980 about 205 percent of the Andino vessels capacities had

cargoes bound for destinations other than Colombian ports Also that if

cargo destined to ports in Venezuela were added to the Cina voyage pat

terns there would be more voyage time and resulting increased operating

costs Andino is able to fill its ships only through aggressive efforts to

obtain cargo other than cargo carried under Agreement No 10293

Mr Cina used as a typical voyage in his calculations the route New

Orleans Houston Barranquilla Cartagena New Orleans Mr French insists

that this is not typical of Andino s voyages and rather that this Cina

voyage pattern is based on the cream of the A trade and that the

addition of other ports and their berths would increase voyage time and

port costs Mr French also insists that the Cina calculations contain errors

regarding commissions and errors regarding the P trade including transit

time of the Panama Canal

Mr French contends that Mr Cina overestimated gross revenues and

underestimated operating costs in both the A and P trades

In lieu of the Cina calculations Mr French refers to his Exhibit 149

table 11 where he computes that the weighted average of Flota s rates

for chemicals increased from 27 03 per ton on July 1 1975 to 45 28

per ton on July 1 1980 Tables 12 and 13 of the same Exhibit 149

show Flota s weighted average rate for fats and oils increased from 42 37

per ton on July 1 1975 to 49 85 on July 1 1980 Excluded from Mr

French s analysis were rates charged under contracts of affreightment which

c oa rates are negotiated individually with a few large volume shippers

Mr French also points out that besides the factors considered by Mr

Cina consideration also must be given to such factors as gross national

product in Colombia relative prices in Colombia and the United States

and other variables which may influence the demand side of the trades

as opposed to the supply and costs side of the market

Mr French states that an inescapable conclusion from the statistics

of record is that the demand for liquid bulk cargo imports in Colombia

has increased

Any rates of Flota in the trades it is concluded by Mr French must

consider both the demand for and supply of transportation services in

the market

Without the costs of Andino and Transligra there is no way of

ascertaining whether the rates published in tariff style or in contracts of
470 FEDERAL MARITIME COMMISSION

affreightment were reasonably related to the costs of the services in the

A and P trades At least some of the shippers in the trades believed

that the Flota near monopolies resulted in higher costs to them than would

have obtained if other carrierS could have operated in the trades These

shippers views are bolstered by the rates available to Venezuela which

were lower than those to Colombia

GENERAL DISCUSSION AND CONCLUSIONS

1 JURISDICTION OVER THE PARTIES

Are Andino and Transligra common carriers by water subject to the

jurisdiction of the Commission

Andino argues that while its service in the A trade is frequent that

its service is not regular because its vessel schedules change according

to the requirements of its sole customer Flota and the composition

of the cargo Also Andino argues that while it constantly serves Cartagena

and Barranquilla the precise point of loading at the U S Gulf is not

specified in Andino s statements of sailing positions Andino concludes

therefrom that its service is irregular between unspecified ports

Andino also argues that it does not solicit cargo in the A trade does

not advertise sailings and does not carry general cargo but instead carries

specialized bulk parcel tanker cargoes Andino says it serves only one

shipper in the A trade does not issue bills of lading and that without

the charter of Andino s space by Flota Andino could not move reserved

cargo in this trade

Exhibits 37 38 and 39 show Sailing Schedules Fleet Information

listing Andino Chemical Shipping Co Inc Flota Mercante Grancolombiana

S A Maritima Transligra S A and others Pages 2 of these exhibits shows

4

sailing schedules one of which is U S Gulf North Coast South America

Service listing Sailing Schedules for three month periods The loading

Area is Gulf the Loading Date is a range of dates and the Discharging

Area is Colombia or Colombia Venezuela Another sailing schedule on

pages 2 lists U S Gulf West Coast South American Service showing

the discharging area of ColombialEcuador These schedules are specific

enough to show a

regularly scheduled service These schedules were regu

larly sent to shipping brokers for the U S Gulf ColombianVenezuelan

Caribbean trade In addition Exhibit 76 shows Andino s Weekly Vessel

Position Schedules and these were sent to shipping brokers For example

one small part of the first page of some 284 pages of Exhibit 76 shows

the vessel Fuji Andina voyage 42 in 1979 as follows

New Orleans Houston

Cartagena

Barranquilla

Gulf

October 30 November S

November 11 12

November 13

November 18

1
AGREEMENT NOS 10293 AND 10295 471

The same page shows for the

Gulf

Colombia

Venezuela

Gulf

vessel La Selva

November 20 25

December 2 4

December 7 9

December 16117

voyage 45 in 1979

The same page of Exhibit 76 shows the vessel Chimborazo voyage

420 in 1979 in the P trade as follows

New Orleans October 3

Buenaventura October 12113

Manta October 15

Guayaquil October 16120

Gulf October 29 31

Andino is the agent for Transligra in this service in the P trade Exhibit

76 shows that the public was given notice of Andino s and Transligra s

services from the U S Gulf to Colombia and to other South American

and Caribbean destinations

Andino does not charter its entire vessel space to FIota in the A trade

nor does Transligra charter it entire vessel space to FIota in the P trade

Andino solicits and carries cargo in spaces not used by FIota to fill up

its vessels There is no doubt at all that Andino acts as a common carrier

by water to destinations such as Venezuela in connection with its service

in the A trade and the same is true for Transligra in its services to

Ecuador in the P trade

FIota exercises no control over the navigation ofthe vessels Such control

is exercised by Andino in the A trade and by Transligra in the P trade

Both Andino and Transligra provide regularly scheduled services between

specified ports which are more particularly named in Exhibit 76 the weekly

position schedules

It is true that Andino and Transligra in their services to Colombia only

do not issue bills of lading in their own names but this fact alone does

not negate their status as common carriers respectively in the A and P

trades to Colombia where any and all shippers are served by the FIota

Andino and FIotalTransligra services

FIota in these trades operates no vessels itself and must be classed

as a non vessel operating common carrier

Further Agreement No 10293 Sub l between FIota and Andino provides

that Andino will take responsibility in accordance with Tanker Bills of

Lading andor contracts that cover the shipments and will be responsible

for the carrying of such cargo to Colombian ports The claims will

be paid by FMG5

for the account of ACS 5

only after duly 5 authorization

by ACS Exhibit 2B Agreement No 10295 Sub l between FIota and

Transligra similarly to the agreement of FIota and Andino provides that

FMG is FIOla and ACS is Andino Duly is the language of Exhibit 28

llur
472 FEDERAL MARITIME COMMISSION

Transligra will take responsibility in accordance with Tanker Bills of

Lading andor contracts that cover the shipments and will be responsible

for the carrying of such cargo to Colombian ports

As seen Andino and Transligra take the responsibility for the shipping

contracts they provide the ships control the loading navigation etc issue

sailing schedules provide regular service at regular intervals and in general

serve the entire shipping public in the A and P trades Accordingly it

is concluded and found that Andino and Transligra are common carriers

by water in the foreign commerce of the United States in the A and

P trades respectively

2 JURISDICTION UNDER SECTION 15 NOT AFFECTED BY

SECTIONS 18b 1 AND 14b 8 OF THE ACT

As discussed previously liquid bulk cargo rates are not required to

be filed Section 18 b 1 of the Act provides an exemption for cargo

carried in bulk without mark or count Legislative history suggests that

it was intended that common carriers be free to change their rates on

bulk cargoes so as to compete for such cargoes with unregulated tramp

carriers in the foreign commerce Section 18b 1 so far as here pertinent

provided a tariff exemption but did not give up jurisdiction over common

carriers of liquid bulk cargoes under other provisions of the Shipping Act

FIota contends that the liquid bulk parcel tanker industry is not within

the reach of section 15 of the Act as a

consequence of section 14b 8

of the Act which provides that approved dual rate contracts of common

carriers or conferences of such carriers must exclude cargo of the contract

shippers which is loaded and carried in bulk without mark or count except

liquid bulk cargoes other than chemicals in less than full shipload lots

In other words a dual rate contract may include some liquid bulk cargoes

in less than full shipload lots but not liquid bulk chemical cargoes in

less than full shipload lots

Again as in the case of the provisions of section 18 b 1 the provisions

of section 14b 8 do not affect the jurisdiction over common carriers in

the foreign commerce of the United States of liquid bulk cargoes under

other provisions of the Act such as section 15 If such carriers are to

be exempted from the provisions of section 15 of the Act that section

must so provide and it does not

3 THE SUBJECT AGREEMENTS AS COOPERATE WORKING

AGREEMENTS

Andino once operated on its own in the A and P trades prior to its

1973 agreement with FIota Transligra might very well operate on its own

in the P trade were it not for its agreement with FIota The subject agree

ments surely limit competition between Andino and FIota and between

Transligra and Flota and even also between Transligra and Andino
AGREEMENT NOS 10293 AND 10295 473

The main question under section 15 is whether the agreements in issue

herein are cooperative working arrangements It must be concluded that

they are They have allocated the U S Gulf Colombia liquid bulk cargo

trade into two services the FlotaAndino service in the A trade and the

FlotalTransligra service in the P trade The agreements dictate the frequency

and number of sailings in these two trades The agreements have resulted

in Flota s obtaining near monopolies in these two trades since 1973 through

Flota s space charters with Andino and Transligra

Andino and Transligra have committed themselves to provide Flota with

all the vessel space needed to serve both trades Flota will space charter

only from Andino and Transligra except when Andino and Transligra can

not provide the necessary space to Flota in which event Flota will be

free to use other carriers to transport the cargoes In fact Flota has not

obtained vessel space on any carriers other than Andino and Transligra

In sum the subject agreements control nearly all of the freight carried

in these two trades and they provide for two exclusive preferential working

arrangements within the language of section 15 of the Act Such agreements

require approval by the Commission

In general section 15 of the Act requires common carriers by water

in the foreign commerce of the United States to obtain Commission approval

of any agreements limiting competition between such carriers

4 THE LAWFULNESS OF THE NEAR MONOPOLIES

Flota admits or concedes that it has a dominant position in these A

and P trades but argues that such position cannot be attributed to the

subject agreements and that its position cannot be attributed to anything

done by Flota itself or by Andino or by Transligra Rather Flota argues

that its dominant position results from the Colombian Cargo Reservation

Decrees which reserve to Flota or to other Colombian or to U S flag

vessels the first fifty percent of the cargo to be moved under each import

license Flota argues that should the subject agreements be disapproved

the Commission would involve itself in the exercise of assuming to overrule

the lawful and valid acts of a friendly sovereign foreign government

Flot insists that if the subject agreements were to be canceled Flota s

dominant share of the trade would remain the same This may be true

in theory but would not be true in practice because Flota has no liquid

parcel tank carriers of its own and has not shown that it can serve these

trades on its own Without the subject agreements it appears that there

would be no near monopolies or dominant position of Flota in these

trades This would remain true unless for example Flota were to make

similar exclusive agreements with some other carrier or carriers such as

O N E to take the place of its exclusive agreements with Andino and

Transligra Of course Flota conceivably might acquire its own vessels
474 FEDERAL MARITIME COMMISSION

The Colombian Cargo Reservation decrees preceded the subject agree

ments herein Decree 994 was dated April 29 1966 Decree 1208 was

dated July 21 1969 and Decree 2349 was dated December 3 1971

Prior to March I 1973 although these Colombian decrees authorized

the fixing of import and export cargo reserved to Colombian flag vessels

in actual practice there were no restrictions on the entry of independent

carriers of any flag in these trades Numerous foreign flag carriers plied

these trades prior to 1973 This was true because there was no Colombian

flag carrier in these trades

So it must be concluded that the decrees alone did not cause the

near monopoly situations in these trades

Nor did the subject agreements alone cause the near monopoly situations

It is the combination of the Colombian Cargo Reservation decrees and

the subject agreements which has caused the near monopoly situation in

these trades

All parties agree that the lawfulness of the Cargo Reservation decrees

is not in issue herein But in issue is the lawfulness of the subject agree

ments

Not all monopolies are unlawful A trade may be of such a nature

that its economic features may justify only one dominant carrier or only

one carrier with a near monopoly

Flota contends that the subject agreements have been most beneficial

to the public interest of the United States and have caused no detriment

to its foreign commerce

Respondents witness French stated that the absence ofpurely competitive

conditions may be in the public interest in some situations and that if

more than one carrier were in a trade shippers may have to pay a higher

price than if one principal carrier operated in the trade He stated that

the trade in question is characterized by decreasing average costs and

so can best be served by once principal carrier

Mr French believes that one principal carrier Flota can provide fre

quently scheduled service at a lower cost than two or more competing

carriers because of the one carrier s ability to place and commingle cargoes

and use its capacity more efficiently

But the question remains would not some competition stimulate im

proved services and more competitive and thus lower rates in these trades

5 THE PUBLIC INTEREST IN THE AVAILABILITY OF THE

SERVICES OF TWO OR MORE PARCEL CARRIERS IN THESE

TRADES

The only certain way to find out what would best serve the public

interest of the shippers consignees carriers and others concerned with

these A and P trades is to provide a way that permits the services of

two or more parcel tank carriers in each of these trades

F 11M
AGREEMENT NOS 10293 AND 10295 475

It may be true that the near monopoly services of FIota have been

in the public interest but that is less likely now than it may have been

in 1973 or 1974 or in 1976

The statistics of record show very substantial growths in both the A

and P trades between 1974 and 1980 Exhibit 168 Table U attached

to this decision

The statistics from 1977 through 1980 as to freight revenues and gross

profits show the true picture as to these elements trade by trade because

in 1976 and prior thereto these statistics were a combination of both

trades because Andino together with FIota then served both trades

From 1977 to 1980 FIota s collected revenues in the A trade grew

from 43 million to 7 3 million and its gross profits grew from 467

thousand to 687 thousand Exhibit 168 Table 0

From 1977 to 1980 FIota s collected revenues in the P trade grew

from 1 2 million to 4 5 million and its gross profits grew from 185

thousand to 551 000 Exhibit 168 Table P

The above growths in these A P trades no doubt resulted at least

in part from the very satisfactory services of FIotaAndino and FIota

Transligra Many shippers attested to their services

The above growths in these two trades also no doubt resulted from

the general progress and growth of the industries of Colombia

It is conduded and found principally from the above statistics that

there is enough business and industry in Colombia to support at least

two or more principal parcel tankers in each of these two A and P trades

and that it is in the public interest to provide a way that permits such

services The testimony of record is that shippers would welcome the intro

duction of more principal carriers and that some believe their shipping

costs would be less as a result of more competition in the trades

ULTIMATE CONCLUSIONS AND FINDINGS

It is conduded and found that generally in the past the services of

FlotaAndino and FlotaTransligra have been near monopolies but have

been largely in the public interest particularly in earlier years

But it is conduded and found also that for the present and for the

future these near monopoly services are contrary to the public interest

In view of the record as a whole and in particular the growths of

the tonnages in these trades and the growths of the gross profits of FIota

it further is conduded and found that for the present and foreseeable

future the subject agreements herein between FIotaAndino in No 79

2 and between FlotaTransligra in No 79 3 are unlawful under section

15 of the Shipping Act because they are cooperative working arrangements

which control regulate prevent and destroy competition in these A and

P trades because these agreements now operate and will operate to the

detriment of the commerce of the United States and because these agree

ments are contrary to the public interest

26 F M C
476 FEDERAL MARITIME COMMISSION

It is further concluded and found that Flota Andino and Transligra

are common carriers by water subject to section 15 of the Act

It is further concluded and found that Agreement No 10293 and Agree

ment No 10293 Sub l constitute the complete agreement of Flota and

Andino that Agreement No 10295 and Agreement No 10295 Snb l con

stitute the complete agreement of Flota and Transligra that these agreements

were implemented without Commission approval

It is further concluded and found that the proponents of these agreements

have failed to demonstrate that the benefits of these agreements outweigh

their anticompetitive consequences

These subject agreements are disapproved

S CHARLES E MORGAN

Administrative Law Judge

Attachments 2

Notice of withdrawal of Esso

Exhibit No 168 Table U

ft 1 M
AGREEMENT NOS 10293 AND 10295 477

APPENDIX I

BEFORE THE FEDERAL MARITIME COMMISSION

AGREEMENT NO 10293

DOCKET NO 79 2

NOTICE OF WITHDRAWAL

Pursuant to Rule 5 m of the Commission s Rules ofPractice and Proce

dure 46 CFR 502 73 Esso Chemical Supply Company Inc hereby moves

to withdraw from this proceeding for the reasons set forth hereunder

On or about June 7 1977 Esso Chemical Supply Company Inc herein

after Esso filed with the Federal Maritime Commission a letter setting

forth its reasons for protesting the approval of Agreement No 10293

submitted to the Federal Maritime Commission on April 14 1977 by

FIota Mercante Grancolombiana S A hereinafter FIota and Andino

Chemical Shipping Inc hereinafter Andino A copy of said letter is

attached hereto as Exhibit A

The primary objection of Esso to Agreement No 10293 focused upon

the fact that the Agreement did not reflect that under Colombian law

United States shippers had the unconditional right to transport a minimum

of 50 percent of bulk liquid chemicals specialty cargoes from the United

States Gulf to Colombia on chemicaVspecialty tankers registered under Unit

ed States or Third Nation flags

Further objection to Agreement No 10293 was raised by Esso on the

ground that the de facto implementation of Agreement No 10293 since

1973 the Colombian Cargo Reserve Law Decree 1208 of July 21 1969

and the interpretation of said law precluded shippers from transporting

bulk liquid chemical specialty cargoes from the U S Gulf to Colombia

on any vessels other than those of FIotaAndino at freight rates which

were not competitive with rates being offered by other carriers who could

not be used because of the aforesaid laws and regulations

Esso raised further objections to Agreement No 10293 on the grounds

that the quality of the FIotaAndino service had been unsatisfactory FIota

Andino vessels often being incapable of carrying Esso s products in tanks

separate from those of other shippers and often being unable to heat

Esso s cargoes sufficiently to permit efficient discharge Esso also objected

to the fact that FlotaAndino vessels were not willing to call at all ports

where Esso had cargoes for transport thereby requiring Esso to incur sub

stantial additional costs to transport these products overland to ports where

FIotaAndino vessels would call in order to obtain transport of its cargoes

from the U S Gulf to Colombia In addition Esso objected to FlotaAndino s

f FMr
I

478 FEDERAL MARITIME COMMISSION

inefficient scheduling of vessels which prevented Esso from providing an

orderly supply of products to its customers

In the penultimate paragraph of its letter to the Federal Maritime Commis

sion dated June 7 1977 Esso however stated that it would take no excep

tion to Agreement No 10293 if suitable guarantees were presented enabling

any interested party to import a minimum of SO percent of its bulk liquid

chemicalspecialty cargoes from the U S Gulf to Colombia on chemicaV

specialty tankers having United States or Third Nation flags as provided

in Decree 1208

During the pendency of these proceedings before the Federal Maritime

Commission FlotaAndino have improved the quality of their transport

to a level which Esso presently deems minimally acceptable Further Esso

has recently been advised by Flota that Flota will not object to the shipment

by Esso and will facilitate Esso in obtaining waivers required to permit

unrestricted shipment by Esso on United States or Third Nation flag vessels

of IPA cargoes originating from Baton Rouge Louisiana

Furthermore the Republic ofColombia has on August 29 1979 substan

tially increased the number of liquid chemicaVspecialty products on the

Free Import List which Esso and others import from the U S Gulf into

Colombia The effect of this amendment of the Free Import List is to

enable Esso and others to ship approximately SO percent oftheir customers

semi annual requirements of said products on United States flag or Third

Nation flag bulk liquid chemicalspecialty product carriers

In addition the Republic of Colombia which had previously required

import licenses issued for all imports to be stamped requiring shipment

of 100 percent of said imports on Colombian flag or associated vessels

See Exhibit Bl recently amended its stamp to require shipment of

only SO percent of said imports on Colombian flag or associated vessels

See Exhibit B 2 A translation of the INCOMEX stamp is attached as

Exhibit B 3

Moreover it now appears that by virtue of Diplomatic Note No 32111

E179 dated July 6 1979 attached hereto as Exhibit C the Government

of the Republic of Colombia guarantees that 50 of all bulk liquid products

may be carried to Colombia without any vessel flag restrictions

Given the conditions assurances and guarantees aforementioned which

are the material and sole inducement for this Notice of Withdrawal Esso

respectfully advises the Federal Maritime Commission and the parties to

Federal Maritime Commission Docket No 792 of its withdrawal from

said proceedings the objections set forth in its letter dated June 7 1977

having been substantially eliminated In the event however that any of

the conditions assurances or guarantees described herein should be re

scinded modified or in any way altered to detrimentally effect Esso or

other shippers front the U S Gulf to Colombia Esso reserves its right

to take such measures as it deems necessary including but not limited

to the right to reenter the aforesaid proceeding

26 P M C
AGREEMENT NOS 10293 AND 10295 479

Furthennore said withdrawal is without prejudice to Esso s right to com

mence a new proceeding before the Federal Maritime Commission pursuant

to Sections 15 andor 17 of the Shipping Act 1916 46 USC 814 816

should the facts and circumstances at any time so warrant for example

on the grounds that the rates charged by FlotaAndino are unjustly preju

dicial to exporters of the United States as compared with their foreign

competitors or on the grounds that Agreement No 10293 is unfair as

between exporters from the United States and their foreign competitors

or detrimental to the commerce of the United States or contrary to the

public interest

In view of all of the foregoing Esso respectfully requests this Court

to issue its Order approving Esso s withdrawal from the proceeding herein

Dated New York New York October 10 1979

ESSO CHEMICAL SUPPLY COMPANY INC

S

KIRLIN CAMPBELL KEATING

S LAWRENCE G COHEN

Attorneysfor Protestant Esso Chemical Supply Company Inc

fiFMC
480 FEDERAL MARITIME COMMISSION

APPENDIX II

EXHIBIT NO 168

TABLE U ILU S GULF COLOMBIAN CARGO 79 2 ATCOL

CARGO AND 793 PACOL CARGO TRANSPORTED BY PLOTA

MERCANTE GRANCOLOMBIANA 1974 80

Atlantic Colombia Pacific Colombia

Year

Total 792

792 cargo as

79 3 cargo as

and 793 792 cargo

a percent of

793 cargo a percent of

cargo metric metric tons total cargo

metric tons total cargo

tons metric tons

1974 114 198 98 789 865 15 409 13 5

1975 109042 92 752 851 16 290 14 9

1976 108 462 86 751 80 0 21 711 20 0

1977 154 634 122 589 79 3 32 045 20 7

1978 178 350 137473 771 40 877 22 9

1979 286 458 187 015 65 3 99 443 347

1980 305 993 204 067 66 7 101 926 33 3

Total 1 257 137 929436 73 9 327 701 261

So Replaces Exhibit 165 and Table 26 Exhibit 149

Source Bill of lading data compiled by Andino Chemical Shipping Company Inc

6 r
FEDERAL MARITIME COMMISSION

DOCKET NO 7983

INVESTIGATION OF UNPILED AGREEMENTS IN THE

U S NORTH ATLANTIC TRADES

ORDER OF CONDITIONAL DISCONTINUANCE

May 30 1984

This proceeding was instituted by Order of Investigation served August

14 1979 August 1979 Order On December 30 1983 Respondents I

filed a Motion to Dismiss the proceeding on the ground that no useful

regulatory purpose would be served by continuing it The Commission s

Bureau of Hearing Counsel filed a Reply supporting the Motion On March

14 1984 Administrative Law Judge Seymour N Glanzer Presiding Officer

certified the Motion and Reply to the Commission

BACKGROUND

The August 1979 Order noted the filing by the Department of Justice

on June I 1979 of criminal antitrust indictments in U S District Court

in Washington D C The indictments charged certain ocean common carriers

in the North Atlantic foreign trades with conspiring to fix rates outside

the scope of agreements approved by the Commission pursuant to section

15 of the Shipping Act 1916 46 U S C 814 The charges concerned

events that allegedly occurred from 1971 to 1975 The Order further noted

the acceptance by a United States District Judge of nolo contendere pleas

to those charges

The August 1970 Order pointed out that if the allegations in the indict

ments were accurate the defendants had also violated section 15 and were

subject to civil penalties The Order further stressed that the Commission

is required by section 15 to oversee the operation ofagreements previously

approved by it and to disapprove cancel or modify agreements that it

finds to be operating in a manner contrary to the public interest or in

violation of the Shipping Act The Commission stated that

I Atlantic Container Line Ltd Dart Containerline Company Limited Hapag L1oyd A G Sea Land Service

Inc United States Lines Inc Continental North Atlantic Westbound Freight Conference Germany North

Atlantic Port Rate Agreement North Atlantic Baltic Freight conference North Atlantic Continental Freight

Conference North Atlantic French Atlantic Freight Conference North Atlantic United Kingdom Freight Con

ference North Atlantic Westbound Freight Associalion North AtlanticWest Europe Rate Agreement Scan

dinavia Baltic U S North Atlantic Westbound Freighl Conference South Atlantic North Europe Rate Agree

ment and Associated North Atlantic Freight Conferences Certain other respondents were dismissed during

the proceeding

1 111 r 4Rl
482 FEDERAL MARITIME COMMISSION

i

In the fulfillment of its statutory responsibilities the Commission

must focus its attention on remedial matters raised by the indict

ments and subsequent nolo contendere pleas in order to insure

that the actions alleged in the indictments will not and cannot

occur in the future Accordingly the Commission believes an

investigation is necessary both to adjudicate past violations

while at the same time to develop an evidentiary basis for remedial

action to prevent such occurrences in the future

Because the Commission was attempting to obtain from the District Court

the record of the grand jury proceedings further proceedings in Docket

No 79 83 were deferred

On May 26 1982 the Commission issued a second Order of Investigation

May 1982 Order which recited that following the entry of the nolo

contendere pleas a private treble damage action was brought on behalf

of a class of shippers against the major carriers operating in the North

Atlantic trades The parties to that action had recently entered into a settle

ment agreement that provided for a total payment of over 50 million

to the shippers The Order also noted that the Commission s efforts to

obtain the record of the grand jury proceedings had been unsuccessfu12

Recognizing that the monies paid under the settlement and the fines pre

viously imposed by the District Court in the criminal proceedings were

likely to provide sufficient deterrence the Commission deleted civil penalties

as an issue to be considered in this proceeding The other issues described

by the August 1979 Order remained intact In this regard the May 1992

Order reaffirmed the Commission s

responsibility to monitor the implemen

tation of agreements to investigate alleged violations of the Shipping Act

and to take remedial action as warranted

Following the issuance of the May 1982 Order and pursuant to discovery

procedures negotiated by Hearing Counsel and Respondents and approved

by the Presiding Officer Respondents made available to Hearing Counsel

several hundred thousand pages of documents that had been produced pursu

ant to grand jury subpoenas Hearing Counsel with the assistance of the

Commission s Bureau of Investigations 3 reviewed the material supplied

to determine whether a formal hearing was necessary Those prehearing

procedures culminated in Respondent s Motion to Dismiss and Hearing

Counsel s Reply in support ofthe Motion

DISCUSSION

The only remedy now possible in this proceeding assuming violations

were found is the cancellation or modification of relevant section 15 agree

ments The alleged activities that led to the indictments were primarily

unapproved inter conference rate fixing Respondents point out that many

of the inter conference discussion agreements approved by the Commission

2United States v Bates 627 P 2d 349 D C Cir 1980 per curiam

3

At that time the Office of Investigations of the Bureau of Hearings and Field Operations

D fr
INVESTIGATION OF UNFILED AGREEMENTS IN THE U S 483

NORTH ATLANTIC TRADES

that arguendo facilitated Respondents alleged unlawful rate fixing already

have been cancelled voluntarily by the parties4 Other discussion agreements

that were in effect during the relevant period have been modified substan

tially to limit their scope to matters such as self policing

In addition since 1975 procedures for the conduct of conference business

have been restructured in each of the seven North Atlantic conferences

on the basis of advice from special antitrust counsel in order to insure

strict compliance with all requirements of law These procedures are de

scribed in detail by Bruce A McAllister chief officer of the seven con

ferences in an affidavit attached to Respondents Motion s

They include

l Strict demarcation of business conducted within anyone con

ference from that conducted in any other conference

2 Monitoring of conference activities by conference and carrier coun

sel

3 Promulgation and implementation of guidelines for the preparation

and conducting of conference meetings

4 Review of minutes of conference meetings to insure their accuracy

before they are filed with the Commission and

5 Adoption and filing with the Commission of guidelines for dealing

with shippers and shipper groups

In their Reply to Respondents Motion Hearing Counsel state that the

Commission s staff now has sufficient information regarding the activities

of Respondents to meet any regulatory need Obviously it is impossible

to be certain that Respondents will never engage in unlawful concerted

activity in the future However given the substantial monetary fines and

settlements already paid by Respondents the cancellation or modification

of most of the discussion agreements previously in effect the adoption

of the new conference procedures described above the information obtained

by the Commission s staff and the renewed emphasis by the staff on

trade monitoring we believe that the original purposes of this investigation

have been substantially achieved and that the cost of further proceedings

would not be justified

An evidentiary hearing would be exceptionally costly and time consuming

given that the unlawful rate fixing described in the indictments allegedly

occurred from nine to thirteen years ago The age of the alleged violations

also makes it unlikely that even assuming the Commission could determine

the precise extent of Respondents malfeasance such information would

be useful in constructing a

remedy relevant to present day conference oper

411tose include the North Atlantic Discussion Agreement FMC No 9899 the North Atlantic Talking

Agreement FMC No 9R09 the All Coasts Agreement FMC No 10022 the Canadian American Discussion

Agreement FMC No 10057 the Canadian American Working Agreement FMC No 10090 and the South

Atlantic North Europe Rate Agreement FMC No 9984

In addition to his affidavit Mr McAllister was interviewed concerning conference procedures by rep

resentatives of the Commission s staff including the Director Bureau of Agreements and T ade Monitoring
484 FEDERAL MARITIME COMMISSION

ations which as noted above are substantially different from their prede

cessors

Respondent s Motion therefore will be granted However the Commis

sion s action is conditioned upon the resignations of the Continental North

Atlantic Westbound Freight Conference from Agreement No 9427 and

the North Atlantic Continental Freight Conference from Agreement No

9552 These Agreements are 48 hour rate agreements between the Con

ferences and independent lines While the Agreements currently have only

one independent party Polish Ocean Line other independents are free

to apply for membership Because these Agreements provide the means

by which the Conference lines may meet with and engage in limited rate

collaboration with independent lines it is at least arguable that if the

Conference lines did in fact engage in rate fixing outside the bounds of

their approved authority these Agreements may have also facilitated such

activities For that reason the Commission is unwilling to discontinue this

investigation unless the Conferences resign from Agreements Nos 9427

and 9552 and thereby render them nullities

THEREFORE IT IS ORDERED That Respondents Motion to Dismiss

this proceeding is hereby granted on condition that within 30 days from

the date of this Order Respondents Continental North Atlantic Westbound

Freight Conference and North Atlantic Continental Freight Conference sub

mit to the Commission appropriate notices ofresignation from Agreements

Nos 9427 and 9552 respectively

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 8354

PETITION FOR EXEMPTION FROM TARIFF FILING

REQUIREMENTS PREVIOUSLY GRANTED BY COMMISSION ORDER

AND CROSS PETITION FOR REVOCATION OF EXEMPTION

ORDER GRANTING TRADE WIDE EXEMPTION

June 5 1984

Kugkaktlik Ltd Kugkaktlik or Proponent petitioned the Federal Mari

time Commission Commission or FMC for a declaratory order extending

the exemption from the tariff filing requirements of the Shipping Act

1916 46 V S C 80l et seq and the Intercoastal Shipping Act of 1933

46 V S C 843 et seq granted it in Docket No 8030 In The Matter

of Exemption of Kugkaktlik Limited From Tariff Filing Requirements 23

F MC 70 1980 In its petition Kugkaktlik requested that the geographic

scope and operating limits of the previously granted exemption be expanded

A reply to the petition and cross petition for revocation of the exemption

was filed by Kuskokwim Transportation Company Kuskokwim or Protes

tant Kugkaktlik filed a

reply to the cross petition

Vpon consideration of the petition and cross petition the Commission

by Order served November 25 1983 November Order instituted an inves

tigation and hearing pursuant to section 35 of the Shipping Act 1916

the Act 1

to determine whether the existing exemption and the requested

expansion should be allowed or denied or whether all common carrier

service to the area of Western Alaska surrounding the Kuskokwim River

should generally be exempt from the tariff filing requirements of the Ship

ping Acts 2

The November Order also noted other material issues of fact

raised by the petition and cross petition the degree of actual competition

between Kugkaktlik and Kuskokwim the relative size of the two operations

the existence and degree of integration between Kuskokwim and Crowley

Maritime Corporation Crowley and the level of common carrier service

in the Kuskokwim Bay area

I Section 35 of the Act 46 U S c 833a provides in relevant part that

The Federal Maritime Commission upon application oron its own motion may by order or rule

exempt for the future any class of agreements between persons subject to this Act or any specified

activity of such persons from any requirement of the Shipping Act 1916 or Intercoastal Shipping

Act 1933 where it finds that such exemption will not substantially impair effective regulation by

theFederal Maritime Commission be unjustly discriminatory orbe detrimenlalto commerce

In its November Order the Commission treated Kugkaktlik s Petition for Declaratory Order as ageneral

petition pursuant to Rule 69 46 C F R 502 69

26 EM C 485
486 FEDERAL MARITIME COMMISSION

The hearing was limited to simultaneous filing of affidavits memoranda

of law and replies Intervention was sought by and granted to Tariff

and Printing Services Inc Memoranda of law and affidavits were filed

by Proponent and the Commission s Bureau of Hearing Counsel Protestant

filed an opening statement and a

reply Hearing Counsel filed areply

memorandum Tariff and Printing Services Inc did not participate in the

proceeding

BACKGROUND

Kugkaktik is a native corporation organized under the Alaska Native

Claims Settlement Act 43 U S C 1601 et seq It operates a tugboat

and barge service from Bethel Alaska to eight native villages in Western

Alaska north of the Kuskokwim River In 1980 the Commission exempted

Kugkaktlik from the tariff filing requirements at Kugkaktlik s

request

Docket No 8 30 supra The Commission found that the exemption would

not be detrimental to commerce or unjustly discriminatory in view of the

limited size and geographically remote nature of Kugkaktlik s services

the relatively large expense of filing a tariff and the absence of protest

from the only known competitor serving the area United Transportation

Inc The exemption granted was limited to service from Bethel to the

eight villages named by a tug and barge of a specified size 3Kugkaktlik

now requests expansion of the exemption to include four additional villages

and service by two additional vessels 4

Protestant Kuskokwim fonnerly United Transportation Inc serves West

ern Alaska under tariffs filed with the FMC and the Interstate Commerce

Commission Kuskokwim operates six tugs and eight barges Its tariff ap

plies to all of the villages which Kugkaktlik presently serves and proposes

to serve and the two carriers a1le edly compete to carry the Same type

of cargo Opening Statement of Kuskokwim Transportation Company I

Kuskokwim slCC Certificates of Convenience and Necessity cover a broad

er area covering the Kuskokwim River its tributaries from its mouth

to Tuluksak and continuing north inclUding the villages of Medfra and

Nikolai Kuskokwim s service to the twelve villages within the requested

exemption totalled I 260 short tons of dry cargo and 1 577 short tons

of bulk petroleum in 1983 d 1 2

Kuskokwim is a joint venture of Kuskokwim Transportation Services

Corporation a wholly owned subsidiary of The Kuskokwim Corporation

lThe eight villages are Tuntutulillk Kongiganak KwigiUingok Kipnuk Kugakaktlik s home village

Chefomak Tooksook Bay Nightmute and TUnunak The vessels specified are a sixty fOOl all sleeltugboal

with tonnage 73 8fOlls and 49 nel and two 500 horsepower diesel engines and a steel combination deck

cargo and oil barge wllh dimensions of 120 x 30x 7 and a cargo fuel capacity of approximately 3000

barrels

4

Kugkaktlik wishes 10 add service to lhe villages of Quinahagak Goodnews Bay Platinum and Mekoryuk

as well as use of a steel oil tanker barge with dimensions of 80 feet by 30 by 6 5 with a

cargo fuel capacity

of approximately 71 000 gallons and a power barge LCM type with dimensions 68 by 20 by 55 gross

lonnage 107 4 and net tonnage 36 9

26 F M r
PETITION FOR EXEMPTION FROM TARIFF FILING 487

REQUIREMENTS

and Puget Sound Tug and Barge Company a wholly owned subsidiary

of Crowley A majority interest in Kuskokwim 51 percent is owned by

Kuskokwim Transportation Services Corporation Its parent company is

like KugkaktIik a native corporation organized under the Alaska Native

Claims Settlement Act supra The Crowley subsidiary was responsible

for daily operations of the joint venture at start up but such responsibility

now rests with an employee ofKuskokwim 5

The Kuskokwim Bay area is apparently served by three carriers 6

in

addition to those serving Bethel from the Pacific Northwest

DISCUSSION

Proponent requests that the Commission extend the existing exemption

from the tariff filing requirements to permit service to four additional

villages with two additional vessels or in the alternative grant a trade

wide exemption for all common carrier service to villages in Western

Alaska from Platinum to Mekoryuk

Protestant opposes the requested extension of Kugkaktlik s exemption

and asks that the existing exemption be revoked Kuskokwim also opposes

a trade wide exemption

Section 35 of the Act requires the Commission to determine after oppor

tunity for hearing that an exemption of a specified activity will not substan

tially impair effective regulation be unjustly discriminatory or be detrimen

tal to commerce

The trade factors which underlay the Commission s decision in Docket

No 8030 have not changed substantially since KugkaktIik was granted

an exemption in that proceeding The area served by Kugkaktlik is geo

graphically remote and limited in scope the four additional villages

Kugkaktlik proposes to serve are within the same Kuskokwim River area

and are all within 100 miles of the area presently being served

Proponent states that only a small portion of its tug and barge business

is common carriage involving only 240 900 gallons of fuel and deck

cargo freight gross receipts of 71 065 in 1983 Proponent s Memorandum

2 Most of its operation involves transport of fuel oil which it owns for

itself and for sale to the other native village corporations Kugkaktlik is

a Native Corporation providing services to other Native village corporations

and Native individuals in addition to serving the needs of its own Native

stockholders

In an Amendment to its opening statement Protestant advises that its opening statement correctly de

scribed Puget Sound Tug Barge as being responsible for Kuskokwim s daily operations but goes on

to say that Puget Sound s responsibility was on an interim basis that Puget Sound has no management

responsibilities and that responsibility fordaily operations rests with an employee of Kuskokwim its general

manager

In addition to Kugkaktlik and Kuskokwim Protestant identified Northwest Navigation as serving the area

Kuskokwim Opening Statement 2 While the Commission s files do not reflect atariff on file for Northwest

Navigation they do reflect one for Arctic Lighterage Company for service from Bethel to points on the

Kuskokwim River Affidavit of Mamie H Black FMC Transportation Industry Analyst

JU
488 FEDERAL MARITIME COMMISSION

The affidavit of FMC Transportation Industry Analyst Mamie H Black

of the Bureau of Tariffs and Maritime Administration statistics for the

Alaska trade submitted by Hearing Counsel indicate that the number of

carriers serving the Kuskokwim Bay region is limited and the volume

of cargo moving in the trade is small The cost of preparing and filing

a tariff is disproportionate to the amount of revenue which may be earned

in the trade The size of KugkaktIik s operation despite a 100 percent

increase in vessels employed remains very small The addition of four

villages of a similar nature in the same area and two additional barges

will not substantially affect the size or nature of Kugkaktlik s operation

Protestant has brought forth no evidence which shows substantial change

in any of these factors Protestant argues that circumstances in the trade

have substantially changed since 1980 in that it now offers services com

parable to Kugkaktlik s it opposes continuation or expansion of the exemp

tion and Kugkaktlik has made no present showing of strong customer

support and has increased the number of vessels it employs Kuskokwim s

arguments that circumstances have changed substantially are not persuasive

The mere existence of opposition by a competitor without specific aUega

tion of commercial harm does not indicate that the exemption would be

detrimental to commerce or impair effective regulation Protestant has of

fered no evidence that its own operations are adversely affected by

Kugkaktlik s exemption In fact although the Commission requested infor

mation as to the level of service being offered in the area and the degree

of competition between Proponent and Protestant Kuskokwim s submissions

indicate only that its tariff applies to the villages Kugkaktlik serves

and proposes to serve and that it carried a specific tonnage to those villages

no evidence as to the number or frequency of calls has been provided

by either party On this record neither continuation of the existing exemp

tion or grant of the requested expansion appears to be detrimental to

commerce

Protestant s al1egation that the exemption will impair effective regulation

is based solely on its assertion that serious danger ofundetectable rebating

exists This allegation is speculative and is totally unsupported by any

evidence or even allegation that Kugkaktlik has engaged in rebating since

the original exemption was granted in 1980 or will do so in the future

It does not appear that continuation of the existing exemption or grant

of the requested expansion will substantially impair effective regulation

Protestant argues that continued exemption of Kugkaktlik from the tariff

filing requirements is discriminatory because Kuskokwim and Northwest

Navigation file tariffs and because the exemption makes it possible for

Kugkaktlik to engage in unlawful rebating without a means of detection

No other competitor has commented on the requested exemption and no

finding ofpossible discriminatory impact as to other competitors is justified

on this record

26 F M C
PETITION FOR EXEMPTION FROM TARIFF FILING 489

REQUIREMENTS

Protestant s operation of six tugs and eight barges over a wider area

of Western Alaska than that served by Kugkaktlik does not alone appear

to be sufficiently dissimilar in size or nature to Kugkaktlik s operation

to justify requiring one to file tariffs while the other does not Protestant s

cargo statistics for the villages in question would seem to indicate that

it is also a small operation Kuskokwim Opening Statement at 1 Although

no cargo figures are provided for the remainder of its service in the region

we see no reason to suppose that Protestant s operation is substantially

larger than Kugkaktlik s so as to render the two operations dissimilar

in nature To the contrary the Maritime Administration cargo statistics

indicate that cargo volume for the entire region is small Protestant is

affiliated with a much larger common carrier operator Crowley parent

company of one of the joint venturers with a 49 percent interest in

Kuskokwim Some 40 of Kuskokwim s 1983 cargo was transshipped to

or from other points via other Crowley subsidiaries This relationship renders

it dissimilar to Proponent We believe that they are nevertheless both

Native corporations serving Native villages with operations having minimal

common carrier impact

Grant of a trade wide exemption obviates the possibility of any discrimi

natory impact on Kuskokwim of an exemption for Kugkaktlik Moreover

a trade wide exemption appears to be justified by the small total volume

of common carrier business available and the personal relationships between

the present carriers and their customers Protestant s sole basis for vigor

ously opposing a trade wide exemption is its allegation that serious danger

of undetectable rebating exists Reply of Kuskokwim Transportation Com

pany 2 This allegation is as speculative and unsupported with respect

to a trade wide exemption as it is with respect to the exemption of

Kugkaktlik

THEREFORE IT IS ORDERED That a trade wide exemption from

the tariff filing requirements of section 18 a of the Shipping Act 1916

46 U S C 817 a and section 2 of the Intercoastal Shipping Act of

1933 46 U S C 844 is granted to all common carriers by water for

service between Bethel Alaska and villages in the Kuskokwim Bay region

in the range from Platinum to Mekoryuk and

IT IS FURTHER ORDERED That The Petition for Exemption From

Tariff Filing Requirements is granted to the extent indicated above and

IT IS FURTHER ORDERED That the Cross Petition for Revocation

ofExemption is denied and

IT IS FURTHER ORDERED That 46 C F R Part 531 Publishing

Filing and Posting of Tariffs In Domestic Offshore Commerce is amended

to add a new paragraph g

to section 531 1 Exemptions to read as

follows

Part 531 is being redesignated as Part 550 as of June 18 1984

26 F M C
490 FEDERAL MARITIME COMMISSION

g Transportation between Bethel Alaska and points in the Kuskowim

Bay region in the range from Platinum to Mekoryuk and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

i

r

J Mr
FEDERAL MARITIME COMMISSION

DOCKET NO 83 53

U S ATLANTIC GULF AUSTRALIA

NEW ZEALAND CONFERENCE

AGREEMENT NO 620024APPLICATION

FOR U S INTERMODAL AUTHORITY

ORDER

June 6 1984

By Order served November 15 1983 November Order the Commission

instituted this proceeding to detennine whether Agreement No 620024

an application for U S intennodal authority filed by the U S Atlantic

Gulf Australia New Zealand Conference Conference should be ap

proved disapproved or modified pursuant to section 15 of the Shipping

Act 1916 46 U S C 814 Proponents of Agreement No 620024 had

submitted substantial supporting infonnation which specifically addressed

the Commission s standards applicable to requests for intennodal ratemaking

authority Nevertheless a protest filed by KKL Kangaroo Line Pty

Ltd KKL an independent competitor in the trade was deemed by the

Commission to require further hearing under Marine Space Enclosures 2

Among other arguments KKL alleged that the Conference s purpose for

obtaining intennodal authority was to engage in collective action to eliminate

KKL as a competitor The principal issue as set forth in the November

Order was whether the Commission s standards applicable to requests for

intennodal ratemaking authority have been met 3

Included within the general

inquiry under the Agreement No 620020 standards was the issue of preda

tion raised by KKL The November Order urged the Presiding Officer

to use all appropriate procedures to direct this proceeding to an expeditious

conclusion

Subsequently the Conference and KKL undertook efforts to resolve their

differences which resulted in the filing of a proposed settlement agreement

I See us Atlantic GulflAustralia New Zealand Conference Agreement No 6200 20lntermodal Au

thority 21 S R R 89 1981 Agreement No 620020

2Marine Space Enclosures Inc v FederalMaritime Commission 420 F 2d 577 DC Cir 1969

3Two other issues were noted in the November Order Article 2 c of the proposed agreement would re

quire Conference members to give the Conference 15 days advance notice before offering an intermodal

service that is within the scope of the agreement but is not covered by aConference tariff The November

Order stated that Proponents must explain why some period of notice is necessary with respect to such offer

ings In addition the November Order noted a technical deficiency in the proposed agreement s use of the

term point which required clarification

26 F M C 491
492 FEDERAL MARITIME COMMISSION

Agreement No 620024A 4 The settlement agreement provides that KKL

shall withdraw its protest and all objections to the approval of Agreement

No 620024 and that the Conference shall refrain from utilizing a dual

rate or loyalty contract for a period offive years with respect to whatever

intermodal service which it might be authorized to provide SThe parties

filed a joint letter dated December 9 1983 in support of Agreement

No 620024A Because Agreement No 620024A related directly to and

arose out of the subject matter of this proceeding the Commission on

February 6 1984 amended its November Order to include as an issue

whether Agreement No 620024A should be approved disapproved or

modified pursuant to section 15

On March 8 1984 the Presiding Officer in a

ruling entitled A Proce

dural Schedule B Restatement of Ruling Concerning Severance of Settle

ment Agreement From Application For Intermodal Authority For Purposes

of Initial Decision Ruling held that the settlement agreement embodied

in Agreement No 620024A could not be considered apart from Agreement

No 620024 The effect ofthe ruling would have been to postpone consid

eration of the settlement agreement until further hearing was conducted

on Agreement No 620024

On March 14 1984 KKL filed a document entitled Motion For Waiver

of Rule 73 and Amendment or Revocation of Commission Order Dated

February 6 1984 Motion 6Hearing Counsel filed a Reply to the Motion 7

The Conference filed a Reply and a Supplemental Reply to the Motion s

4Notice of filing of Agreement No 620024A was published in the Federal Register on December 20

1983 48 Fed Reg 56272 56273

As originally filed Agreement No 620024A also contained a

provision authorizing each party to the

settlement agreement to enforce its provisions in a court of competent jurisdiction The Presiding Officer

questioned this provision and the panies subsequently deleted it

6

KKL argued that the Presiding Officer s

Ruling was inconsistent with the Commission s policy favoring

settlement of litigation and did not observe the specific suggestion in the November Order that the Presiding

Officer use all appropriate procedures to bring thisproceeding to an expeditious conclusion KKL also argued

that the reasons advanced in the Ruling did not support the refusal to decide a selllement agreement prior

to further hearing KKL stated that the settlement agreement had a different purpose than the underlying inter

modal agreement Agreement No 620024 and may be considered apart from it KKL asked the Commis

sion to waive Rule 73 to consider its Motion and either to amend the Order of February 6 1984 February

Order and instruct the Presiding Officer to issue an Initial Decision on Agreement No 620024A prior 10

further hearing or to revoke its February Order and approve Agreement No 620024A

7

Hearing Counsel stated thaI the purpose of Agreement No 620024A is not to avoid litigation but to

prevent the Conference from implementing a dual rate contract system Hearing Counsel stated that there

is not asufficient factual basis for separate consideration of Agreement No 620024A and that Agreement

No 620024A is linked to Agreement No 620024 Considering Agreement No 620024A alone Hearing

Counsel opposed approval of the agreement absent additional justification However if considered inconnec

tion with Agreement No 620024 Hearing Counsel stated that i did not support or oppose approval of

Agreement No 620024A

8

The Conference filed aReply to the Motion which merely stated that lhe Conference is a proponent of

Agreement No 620024A and supports its approval Subsequently the Conference filed a

Supplemental

Reply in which it supported KKL s second option i e that the Commission revoke its February Order and

grant approval of Agreement No 620024A The Conference stated that no further evidence regarding Agree

ment No 620024A would be presented and that no purpose would be served by referring Agreement No

620024A to the Presiding Officer for disposition The Conference contended that the selllement agreement

is rea onable and that a grant of approval had been justified

l ur
U S ATLANTIC GULF AUSTRALIA NEW ZEALAND 493

CONFERENCE

Prior to the filing of the various replies the Presiding Officer certified

the KKL Motion to the Commission

Upon consideration of the KKL Motion the Commission on April II

1984 decided to set aside its February Order and approve the settlement

agreement Agreement No 620024A The Commission also determined

to have the entire record certified to the Commission by the Presiding

Officer On April 16 1984 the Commission received a letter from counsel

for KKL in which KKL withdrew its protest On May II 1984 the

Commission directed the Presiding Officer to certify the record in this

proceeding to the Commission On May 14 1984 the record was certified

to the Commission The Commission has now considered the entire record

in this proceeding and for reasons set forth below determined to approve

Agreement No 620024 subject to certain conditions

DISCUSSION

A Agreement No 620024A Settlement Agreement

The Ruling of the Presiding Officer raises a question as to whether

Agreement No 620024A may be considered apart from and prior to

further hearing on Agreement No 620024 The Ruling interpreted the

November Order as not permitting a separate consideration of the settlement

agreement because it raised a question ofpredation

The purpose of the November Order was to define the scope of this

proceeding as clearly and narrowly as possible and thereby avoid protracted

hearing The November Order stated that a full exploration of tangentially

related issues would be unduly burdensome and was unnecessary inasmuch

as the dispositive question was whether Agreement No 620024 had been

justified under the Agreement No 6200 20 standards The November Order

further explained that a separate inquiry into issues of predation would

not be necessary because this factor is already included in the criteria

to be considered under the Agreement No 620020 standards It was not

the intention of the November Order to preclude consideration of any

settlement agreement which might be entered into by the parties Agreement

No 620024A therefore may be considered on its own merits apart from

any further hearing on Agreement No 620024

The Commission concludes that the restriction on the use of a dual

rate contract on intermodal services for a five year period is not violative

of the antitrust laws or otherwise anticompetitive so as to invoke the

application of the Svenska standard 9Agreement No 620024A would not

for that reason appear to be contrary to the public interest within the

9The Svenska doctrine is the proposition affirmed in FederalMaritime Commission v Aktiebolaget Svenska

Amerika Linien 390 U S 238 1968 whereby section 15 agreements which interfere with the policies of

the antitrust laws will be disapproved as contrary to the public interest unless justified by evidence estab

lishing that the agreement if approved will meet aserious transportation need secure an important public

benefit or further a valid regulatory purpose of the Shipping Act 1916 The burden is on proponents of such

agreements to come forward with the necessary evidence
494 FEDERAL MARITIME COMMISSION

meaning of section 15 Nor does the agreement otherwise appear to con

travene the standards of section 15 Moreover the benefits of settlement

are supportive of approval of Agreement No 620024A The Commission

will therefore approve Agreement No 620024A

B Agreement 620024 U S Intermodal Authority

The remaining issue to be resolved is whether Agreement No 6200

24 an application for U S intermodal authority should be approved dis

approved or modified pursuant to section 15 of the Shipping Act 1916

46 U S C 814 Proponents of Agreement No 620024 in their original

submission provided trade data and other information which specifically

addressed the Agreement No 620020 standards Agreement No 6200

24 was set down for investigation and hearing because of a protest filed

by KKL KKL has now withdrawn its protest The question therefore

is whether the record established by the Conference is sufficient to meet

the Agreement No 620020 standards The Commission concludes that

approval of Agreement No 620024 is warranted Such approval however

is conditioned upon three modifications to Agreement No 620024

First as noted in the Order of Investigation and Hearing Article 2 c

contains language which requires a Conference member to give the Con

ference 15 days advance notice before offering an intermodal service that

is within the scope of the Agreement but is not covered by a Conference

tariff Such a provision is contrary to current Commission policy unless

adequately explained or justified to Proponents have provided no explanation

as to why some period of notice is necessary Approval of Agreement

No 620024 therefore shall be conditioned upon the addition of language

which clearly indicates that the advance notice provision does not apply

to such intermodal offerings

Second as indicated in the Order of Investigation and Hearing the

use of the term points in the Preamble does not accurately reflect

the authority actually sought by Proponents and is not consistent with

the Commission s use of that term A technical amendment to the Preamble

changing the term points to inland points will remove any ambiguity

as to the intended geographic scope of Agreement No 620024 and would

be consistent with Proponents use of the term inland points in Article

2 The Commission therefore will require such a change as a condition

of approval ofAgreement No 620024

Third Article 2 b of Agreement No 620024 contains language which

would authorize the parties collectively to make arrangements with other

modes of transportation for the movement of cargo to andor from inland

points moving in the trade covered by the agreement It is questionable

whether such language could be approved under the 1916 Shipping Act

10 Pacific Coast European Conference Agreement No 5200 26 f M C 172 l984 Application for Ap

proval of an Amendment to the American West African Freight C01iference Agreement No 768036 18

S R R 339 l978

26 F M C
U S ATLANTIC GULF AUSTRALIA NEW ZEALAND 495

CONFERENCE

even if the Proponents had offered justification for this provision I I No

such justification however has been provided by the Proponents in this

proceeding The Commission therefore shall require as a further condition

of approval that the cited language in Article 2 b be deleted from the

Agreement

THEREFORE IT IS ORDERED That the relief requested in KKL s

Motion is granted and the Commission hereby sets aside its Order of

February 6 1984 in Docket No 83 53 and

IT IS FURTHER ORDERED That Agreement No 620024A is approved

pursuant to section 15 of the Shipping Act 1916 and

IT IS FURTHER ORDERED That Agreement No 620024 is approved

on the conditions that

1 Article 2 c of Agreement No 620024 be amended by adding the

following language

And provided further that nothing in this Article shall be con

strued to require any period of notice by a member line which

desires to offer an intennodal service within the scope of this

Agreement but not being offered by the Conference

2 The Preamble of Agreement No 620024 be amended by deleting

the word points and in its place inserting the words inland points

3 Article 2 b of Agreement No 620024 be amended by deleting

the following language

1 with other modes of transportation for the movement of

cargo to andor from inland points moving in the trade covered

by this agreement whether moving under through bills of lading

or otherwise

4 The Commission receives on or before June 15 1984 a complete

accurate copy of Agreement No 620024 modified in accordance with

the above ordering language and signed by the parties or their duly author

ized representatives and

IT IS FURTHER ORDERED That the approval of Agreement No 6200

24 shall be effective on the date all of the above conditions are met

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

IISuch activity is specifically prohibited under the Shipping Act of 1984 See section IOc 4 of the 1984

Act 46 U S C app 1709 c4 In addition section 7 b of that Act 46 U S c

app 1706 b specifically

exempts from antitrust immunity such agreements with inland carriers and any discussions or agreements

among ocean carriers regarding the amounts paid to inland carriers for the inland U S portion of a through

jntermodaJ service

1 J Mr
FEDERAL MARITIME COMMISSION

DOCKET NO 83 14

PRUDENTIAL LINES INC

v

FARRELL LINES INC ZIM CONTAINER SERVICE AND

ZIM ISRAEL NAVIGATION CO LTD

NOTICE

June 7 1984

Notice is given that no exceptions were filed to the April 30 1984

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

could determine to review that decision has expired No such determination

has been made and accordingly that decision has become administratively

final

S BRUCE A DOMBROWSKI

Assistant Secretary

496 26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 14

PRUDENTIAL LINES INC

v

FARRELL LINES INC

ZIM CONTAINER SERVICE AND

ZIM ISRAEL NAVIGATION CO LTD

Complainant a US flag carrier alleges that respondent Farrell Lines Inc another U S

flag carrier and Zim Israel Navigation Co Ltd an Israeli carrier entered into and

carried out a transshipment agreement whereby Zim provided Farrell with a feeder service

at Haifa Israel for on carriage of Farrell s cargo to Alexandria Egypt Complainant

alleges that the agreement was not approved by the Commission nor timely filed under

General Order 23 46 CFR 524 and that respondents have therefore violated section

IS of the Shipping Act 1916 Complainant seeks damages for alleged injury resulting

from the unfiled agreement penalties and a cease and desist order It isheld

1

The arrangement between respondents is not a simple booking arrangement but a

type of non exclusive transshipment agreement which was not filed under General Order

23 until long after the agreement was carried out and respondents have therefore violated

section IS of the 1916 Act

2 The arrangement by which Zim gave Farrell fixed rates to enable Farrell to complete

its through service to Alexandria Egypt gave special advantages to Farrell and constituted

a cooperative working arrangement under section IS of the 1916 Act

3 The agreement may have been pro competitive by enabling Farrell to reenter the trade

and may have had minimal anticompetitive consequences but these facts are relevant

to its approvability not to jurisdiction under section IS

4 Although respondents delayed in filing a memorandum of their agreement under General

Order 23 the nature of the violation of law the doubtful existence of legal and equitable

factors warranting an award of reparation under section 22 of the 1916 Act such as

a reasonable relationship between the type of violation and the damages alleged and

furthermore serious legal deficiencies in complainants theories of recovery indicate that

further proceedings forthe purpose of determining whether complainant should be awarded

reparation would not be warranted

T rence J

Ingrao for complainant

Edward Aptaker forrespondent Farrell Lines Inc

William Karas and Dale C Andrews for respondent Zim Israel Navigation Co Ltd

26 F M C 497
498 FEDERAL MARITIME COMMISSION

INITIAL DECISION J OF NORMAN D KLINE ADMINISTRATIVE

LAW JUDGE

Finalized June 7 1984

This proceeding began with the filing of a complaint by Prudential Lines

Inc on March 8 1983 which complaint was served on the following

day Complainant is a U S flag vessel operating common carrier providing

service from U S Atlantic ports to ports in the Mediterranean Sea Com

plainant alleged that two vessel operating carriers respondents Farrell Lines

Inc and Zim Israel Navigation Co Ltd 2 who had operated from U S

Atlantic ports to ports in the Mediterranean had entered into a cooperative

working agreement in the form of a transshipment agreement by which

cargo carried by respondent Farrell and restricted by law to U S flag

vessels would be transported from U S ports to Haifa Israel and thence

by Zim feeder vessel to ports not directly served by Farrell s vessels

Complainant alleged that respondents had entered into such an agreement

without obtaining approval of the Commission in violation of section 15

of the Shipping Act 1916 46 U S C 814 asked for an order directing

respondents to cease and desist from carrying out the alleged agreement

and for an award of 1 000 000 or such other sum as the Commission

might determine as reparation for alleged injury suffered by Prudential

Furthermore complainant alleged that respondents had engaged in other

unlawful practices allegedly by agreeing to rates rules and other terms

for the carriage of cargo via transshipment while participating as members

in various agreements approved by the Commission by engaging in preda

tory pricing by allocating regulating or pooling their services and by

utilizing misleading advertisements to shippers

On July 25 1983 after the parties had been engaging in the Commis

sion s prehearing inspection and discovery processes commencing in March

and after several prehearing conferences had been conducted the issues

in the proceeding were narrowed by the filing of an amended complaint

by Prudential In this complaint Prudential confined its allegations to those

alleging that respondents Farrell and Zim had enteg nto and carried

out a transshipment agreement by which cargo including U S flag pref

erence cargo was carried from U S East Coast ports to Mediterranean

ports more specifically to the port of Alexandria Egypt via Haifa or

Ashdod Israel by means of Zim feeder vessels This alleged agreement

described as a transshipment agreement cooperative arrangement or under

standing was entered into and carried out without requisite approval as

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Pnlctice and Procedure 46 CPR 502 227

2

Prudential named Zim Container Service as a respondent in addition to Farrell and Zim Israel Navigation

Co LId However as respondent Zim Israel stated several times Zim Container Service is merely a division

of Zim Israel and is not aseparate legal entity subject to acomplaint proceeding under the Commission

Rule 62 46 CFR 502 62 or section 22 a of the Shipping Act 1916 46 V S C 821 a I will therefore

treat only Farrell and Zim Israel as thejlJoper respondents

Cl r
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 499

required by section 15 of the Act and without complying with the filing

requirements of the Commission sregulation General Order 23 46 CFR

524 Prudential further alleged that by reason of the violation of section

15 and the regulation respondents had captured certain U S flag preference

cargo and had thereby caused Prudential to sustain damages Prudential

therefore asked for the issuance of a cease and desist order sanctions

against respondents and reparations in an amount equivalent to the

quantum of damages which Prudential allegedly sustained and for any other

relief which the Commission might deem just and proper

Respondents while admitting certain facts regarding their services denied

the material allegations regarding violations of section 15 or General Order

23

As mentioned the parties utilized the Commission s discovery devices

i e depositions interrogatories and requests for production of documents

from the inception of the proceeding and several conferences were held

in an effort to obtain evidence and bring the proceeding to as prompt

a conclusion as possible A final prehearing conference was held tele

phonically on October 12 1983 and discovery concluded the following

month An oral hearing was held in New York City on January 4 1984

during which two witnesses testified Mr John L Morris Prudential s

Director of Marketing and Pricing and Mr Thomas R Tarbox Farrell s

Senior Vice President in charge of Farrell s Mediterranean and West African

Services Their testimony plus various documents obtained during discovery

Farrell and Zim bills of lading correspondence of Farrell and Zim relating

to the Farre11lZim arrangement various tariffs of Farrell or Zim and

Farrell s

filing under General Order 23 constitute the evidentiary record

Because of the undue length of time which was consumed during the

prehearing phase of the proceeding caused by complications arising out

of the discovery process the complaints of respondents regarding the unnec

essary complexity of the litigation and complainant s own request I ruled

that the issue of reparation Le damages would be deferred until the

question of violations had been determined See Notice of Rulings Made

at Informal Conference October 17 1983 pp 3 4 Confirmation of Ruling

on Bifurcation of the Issue of Reparation November 29 1983 This ruling

was made in order to move the proceeding along to a prompt determination

of the question of violations and to save litigation expenses in the event

that complainant could not prove its allegations regarding the issue of

violations However if complainant were to succeed in proving its allega

tions complainant not having abandoned its claim to reparation would

normally be entitled to an opportunity to prove its entitlement and the

extent of its damages Because of the possibility that violations of the

kind involved in this case especially a violation of General Order 23

might not entitle a complainant to an award of reparation because of

equitable considerations or the absence of a nexus between the type of

violation and the injury alleged I invited the parties to present arguments

26 F M C
500 FEDERAL MARITIME COMMISSION

in their briefs on these questions The purpose obviously was to avoid

an unnecessary remand and further litigation if it appeared that there was

an insurmountable legal impediment to an award of reparation even if

violations were proven As I discuss below I

find that complainant has

proven that respondents have violated section 15 and General Order 23

by entering into and carrying out a cooperative working transshipment

arrangement However even the limited record developed indicates serious

deficiencies in Prudential s claim for reparation because of an indication

that the requisite factors warranting the exercise of the Commission s discre

tion to award monetary damages enunciated by the courts and the Commis

sion are lacking More significantly however Prudential s inconsistent and

confusing theories of recovery of damages appear to suffer from insuperable

legal infirmities Therefore I conclude that a remand for the purpose of

taking evidence on the question of Prudential s alleged financial injury

would lead to an inexcusable waste of time and money for all parties

involved

BASIC FACTUAL FINDINGS

The basic facts relating to the origin and carrying out ofthe arrangement

between respondents Farrell and Zim and the competitive status of each

of the three carriers Prudential Farrell and Zim are essentially not in

dispute since the issues concerning respondents alleged violations of sec

tion 15 and General Order 23 turn on interpretations of these facts The

following basic findings therefore are drawn mainly from those submitted

by respondents in their brief with certain supplementations When appro

priate furthermore additional factual findings appear in the following sec

tions of this decision pertinent to the discussion of applicable law

I Complainant is Prudential Lines Inc which provides common carrier

service operating U S Flag LASH Lighter Aboard Ship vessels between

certain U S Atlantic Ports and certain ports in the Mediterranean including

Alexandria Egypt

2 Respondent Farrell provides common carrier service operating U S

Flag container ships between U S North Atlantic and South Atlantic ports

and ports in the Mediterranean Respondent Zim offers a service from

North Atlantic ports to ports in the Mediterranean

3 Until December of 1981 Farreil called directly at Alexandria with

vessels equipped with cargo gear ThereafterFarrell discontinued operation

of vessels equipped with cargo gear in its Mediterranean service and instead

performed its Mediterranean service only with non self sustaining container

ships ie containerships not carrying cargo gear and therefore dependent

upon shore based container cranes

4 Shore based container cranes are not available at the Port of Alexan

dria In consequence Farrell s Mediterranean service discontinued its direct

calls at Alexandria
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 501

5 In the spring of 1982 Farrell concluded that cargo offerings justified

the resumption of service to Alexandria Farrell instructed its office in

Genoa to investigate the availability of feeder services which Farrell could

use to reestablish a service to Alexandria

6 After evaluating several possible feeder services Farrell s Genoa office

concluded that the best proposal for feeder service was that of ZEMS

an intra Mediterranean service which is a division of respondent Zim

ZEMS quotation to Farrell of its rate for the carriage of full containers

from Haifa to Alexandria and returned empty from Alexandria to Haifa

was 850 per 20 foot container and 1 600 per 4O foot container

7 Farrell s New York office then advised the Genoa office that the

ZEMS feeder rate of 850 per 20 foot container could be utilized to solicit

cargo on a pre paid basis On June 17 1982 Farrell s Genoa office advised

ZEMS in Haifa of the acceptance of its feeder service quotation of 850

per 20 foot container and 1 600 per 4O foot container full from Haifa

to Alexandria and return of empty from Alexandria to Haifa on liner

terms at both ports At the same time Farrell s Genoa office advised

its agents in Alexandria that Farrell would re commence service to Alexan

dria with Farrell shipping its containers from Haifa to Alexandria aboard

ZEMS feeder vessels

8 On July 19 1982 Farrell accepted ZEMS quotation of rates of

1 250 for 20 foot and 2 200 for 40 foot containers where carriage was

to be of full containers in both directions between Haifa and Alexandria

9 Farrell advised all its branch offices that commencing with sailing

of the EXPORT FREEDOM Voyage 94 full container cargo for Alexandria

would be acceptable for delivery via feeder from Haifa to Alexandria

with a total transit of 21 days that only freight pre paid cargo would

be accepted and that any cargo from ports other than New York Baltimore

Philadelphia and Norfolk would have to be cleared by Farrell s New York

office prior to booking

10 With respect to each shipment made by Farrell using the ZEMS

feeder service Farrell s Haifa agents Aaron Rosenfeld and Sons Ltd

were named as shipper and Farrell s Alexandria agents Memphis Shipping

Agency were named as consignee on the ZEMS bills of lading

11 In accepting cargo from Farrell s Haifa agent for carriage to Alexan

dria ZEMS undertook no obligation vis a vis Farrell s underlying shippers

It had no way in the normal course of business of knowing who such

shipper might be or what rate might be paid by such shipper to Farrell

for the transportation from U S ports of origin to Alexandria undertaken

by Farrell

12 The rates charged to shippers by Farrell for transportation from

U S to Alexandria were those in Farrell s published tariff either as a

participant in the North Atlantic Mediterranean Freight Conference Freight

Tariff No 13 FMC No 8 through February 8 1983 when Farrell was

a member of that conference and thereafter in Farrell s Freight Tariff

ro
502 FEDERAL MARITIME COMMISSION

Na I FMC Na 135 The rates which Farrell s Genaa Italy office had

negatiated with ZEMS in June and July 1982 which Farrell wauld pay

ta ZEMS far the use of the ZEMS feeder service between Haifa and

Alexandria were lump sum rates per cantainer regardless of cammodities

carried These rates remained canstant fram the inceptian of the arrangement

through at least April 1983

13 The terms of the arrangement between Farrell and ZEMS which

had been negatiated between Farrell s Genaa office and ZEMS in Haifa

during June and July 1982 were later in effect reduced ta writing when

Farrell as a precautianary measure filed a memarandum with the Cammis

sian s Secretary by letter dated September 12 1983 The dnly feature

in this memarandum which did nat reflect the terms of the arrangement

related ta a pravisian that either party cauld terminate the arrangement

by giving the ather party thirty day s natice Farrell alsa filed a natatian

cancerning the feeder service arrangement with ZEMS and with anather

carrier aut of Naples in its Narth Atlantic tariff FMC 135 effective

Octaber 27 1983 and filed a similar natatian in its Sauth Atlantic tariff

FMC 136 an January 10 1984 effective February 8 1984 3

14 The FarreWZEMS arrangement when it was used was nanexclusive

bath with respect ta Farrell and ZEMS i e Farrell was free ta emplay

ather feeder services during the period of time when it was shipping via

ZEMS and ZEMS was free ta carry carga far shippers ather than Farrell

Farrell s use of the ZEMS feeder service was an a

space available basis

On occasian Farrell was unable ta ship via ZEMS because its vessels

were already full but Farrell s cantainers were carried an later sailings

an ZEMS vessels

15 Since April 1983 Farrell has utilized a feeder service ather than

that of ZEMS That service operates from Italy ta Alexandria and is mare

suitable ta Farrell s needs than was the ZEMS service

16 Farrell s failure ta file any memarandum cancerning its acceptance

of ZEMS quatatian of feeder service rates was based upon Farrell s belief

that a carrier s use of a feeder service does nat canstit Jte a transshipment

agreement within the scape of 46 CPR 524 and that a carrier s use of

anather carrier s feeder service does nat canstitute any ather type of agree

ment within the scape of sectian 15 ofthe Shipping Act 1916

17 While Farrell was using the ZEMS feeder service via Haifa ta Alexan

dria an or after August 1982 thraughApril 1983 it carried at least 45

shipments of variaus cammodities far variaus shippers The recard does

J 3

These filings appear to have been made as precautionary measures to comply with the Commission s

rei

ulatlon General Order 23 46 CPR 524 although respondents do ndt concede that the regulation applied toethe

8ernent The filing in the South Atlantic tariff incidentally can be verified byinspection ofthat tariff

inthe Commission stariff filing office and Itake offICial notice of the filing 46 CPR 502 226 aThe

notations inthe tariff donot show an agreement numberas is customary withsuch filings nor does the

record show how the Commission staff may have processed thefiling of the memorandum underGen eral

Order 23Tr 145 146
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 503

not show how many of these shipments were required by law to move

on U S flag vessels

DISCUSSION AND CONCLUSIONS

The issue to be determined is simply whether the evidence presented

shows that respondents Farrell and Zim entered into and carried out a

transshipment or other type ofagreement subject to the provisions of section

15 of the Act without filing that agreement for approval as required by

that law or at least without filing that agreement with the Commission

and obtaining exemption from the approval requirement as provided by

General Order 23 46 CFR 524 The second basic issue is whether if

it is found that there has been a violation of section 15 or General Order

23 there is any legal impediment to an award of reparation to Prudential

so that a remand or other proceeding designed to augment the record

on the question of Prudential s alleged financial injuries would not be

warranted

CONTENTIONS OF THE PARTIES

Prudential contends that the evidence presented shows that Farrell and

Zim entered into and carried out a cooperative working arrangement some

time after June 1982 by which Farrell would tender cargo carried on

Farrell s vessels from U S East Coast ports to ZEMS at the port of Haifa

Israel where the cargo would be transshipped onto ZEMS feeder vessels

for subsequent carriage to Alexandria Egypt Prudential contends that the

correspondence between Farrell and ZEMS and relevant bills of lading

show at least 45 instances of transshipment at Haifa pursuant to an agree

ment between Farrell and ZEMS under which agreement rates charged

by ZEMS to Farrell for the oncarriage of Farrell s containers remained

constant throughout the entire period of approximately ten months Pruden

tial further contends that both Farrell and Zim published their own independ

ent tariffs as of February 8 1983 offering service from U S Atlantic

Coast ports to Mediterranean ports in Egypt and are thus in competition

with each other as well as with Prudential and that both resigned from

various conferences prior to filing their independent tariffs Prudential con

tends that this evidence shows contrary to respondents contentions that

ZEMS had merely quoted rates to Farrell upon Farrell sinquiry to ZEMS

in the event Farrell wished to book cargo on ZEMS feeder vessels that

Farre l and ZEMS had an understanding that ZEMS would complete

Farrell s service from U S East Coast ports to Alexandria by a trans

shipment arrangement at Haifa at agreed upon rates Prudential cites several

leading decisions holding that section 15 is to be broadly construed that

carriers must file memoranda of agreements reached with other carriers

that a transshipment agreement is well recognized as falling within the

scope of section 15 and that section 15 includes a variety of relatively
j

504 FEDERAL MARITIME COMMISSION

informal arrangements whether oral or written 4

Prudential argues that the

FarrelllZEMS agreement constitutes one fixing or regulating rates control

ling or regulating competition or at the very least a cooperative working

arrangement which are three of the seven types of agreements specified

by section 15 Even if the agreement were not one subject to section

15 as an understanding between two competing carriers falling under one

of the three specified categories set forth in that law Prudential argues

that the agreement was at the very least a non exclusive transshipment

agreement which is required to be filed with the Commission in order

to be exempted from the normal approval requirements applicable to most

other agreements between carriers The filing requirement is set forth in

General Order 23 46 CPR 524 but according to Prudential no such

filing was made until September 12 1983 although Farrell and ZEMS

were transshipping Egypt bound cargo in July of 1982 Accordingly since

the filing requirement is made mandatory if the exemption is to be granted

under the regulation 46 CPR 524 1 b Prudential argues that respondents

have violated both the regulation and the underlying statute section 15

Therefore Prudential argues that since respondents only filed their memoran

dum in an attempt to comply with the regulation after having carried

out their agreement without approval the Commission should subject the

agreement to the approval process under section 15 and declare the filing

and exemption to be nullities

On the question of Prudential s entitlement to reparation ie damages

for loss of net revenue which it would have earned on the 45 shipments

carried by respondents under the alleged agreement Prudential argues that

there is no legal impediment precluding it from proving their injury Pruden

tial cites Saipan Shipping Co Inc v Island Navigation Co 24 F M C

934 1982 a case in which reparation was awarded for injuries arising

out of violations of section 15 and ether decisions recognizing that carriers

have standing to seek reparation under the Shipping Act 1916 if injured

by other carriers who have violated that Act Prudential argues that but

for the alleged agreement Zim and consequently Farrell would not have

been able to carry the 45 shipments of record to Alexandria because Zim

an Israeli carrier would have been barred frem carrying U S flag preference

cargo and Farrell without a direct vessel call at Alexandria would not

have been able to carry the cargo Therefore argues Prudential Prudential

was deprived of an opportunity to participate in the transportation of U S

flag preference cargo and was directly affected by the alleged violation

Furthermore it argues an award of reparation is within the discretion

4

Prudential cites amonll OIhel l VolkswaR nw rk v F M C 390 U S 261 1968 American Export

Isbrandts n Lin s Inc 14 F M C 82 1970 seaion ISis to be broadly construed memoranda and informal

oral agreements are to be filed for approval Tra1JSsh pm nt Alreem nt B tween S Tha land and Us 10

F M C 199 1966 transshipment agreements have long been held to require filing under section 15 Unap

proved Sect em 15 Asre mentaSouth African Trad 7 F M C 159 1962 Spanish PortuRues Trade Un

approved See ion 15 Alreements 8 F M C 596 1965 section 15 applies to informal oral arranllements and

understandings
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 505

of the Commission which can consider factors such as culpability of re

spondents enforcement of the Act whether there was compensable injury

and whether an award of reparation would be consistent with previous

application of the Act citing Consolo v FMC 383 U S 607 1966

and U S Navigation Co v Cunard SS Co 284 U S 474 486 1932

Finally Prudential asks the Commission to assess penalties against respond

ents

Respondents counter the above arguments as follows Essentially they

argue that there was no agreement between Farrell and Zim but merely

a request for and receipt of a rate quotation in the event that Farrell

wished to book cargo on ZEMS feeder vessels operating between Haifa

and Alexandria Thus they argue that Farrell merely constituted a shipper

when it booked cargo at Haifa on ZEMS feeder vessels or a bailee

of the cargo when it tendered it to ZEMS at Haifa and the only agree

ment consisted of ZEMS bill of lading which it issued to Farrell at

Haifa as it would do for any shipper Thus the booking of cargo carried

by Farrell to Haifa on ZEMS feeder vessels was merely a contract of

affreightment shown in the ZEMS bills of lading and ZEMS had no under

taking toward Farrell s original shippers nor did ZEMS hold out in any

way to those shippers regarding this transportation Respondents argue that

a simple booking by one carrier or another cannot rise to the level of

a section 5 agreement citing lsbrandtsen Co v States Marine 6 F M B

422 196 and as the second carrier ZEMS has no responsibility under

Farrell s bill of lading as regards Farrell s shippers there was no joint

undertaking between the two carriers and no joint through service 5 Re

spondents also argue that there was no special treatment accorded to Farrell

by ZEMS thereby taking the arrangement out of any ofthe seven categories

set forth in section 5 that the arrangement between the two carriers

promoted competition rather than destroyed it by making possible Farrell s

reentry into the trade and that there would be no regulatory purpose in

requiring containerized carriers to file non exclusive booking arrangements

with feeder vessels a

requirement which would subject containership oper

ations to unnecessary burdens when they were attempting to promote effi

ciencies by limiting port calls for oceangoing vessels

As to the possibility that their arrangement might have constituted a

non exclusive transshipment agreement within the scope of General Order

23 respondents argue that even if it was such these types of agreements

are considered to be de minimis by the Commission which exempts them

from approval if they are filed with the Commission because of their

minima anticompetitive effects Furthermore the subject agreement is so

S Respondents distinguish their arrangement from the joint holding out by the carriers in Sea Land Service

Inc v F M C 404 F 2d 824 D C Cir 1968 and Alaska Steamship Co v F M C 399 F 2d 623 9th

Cir 1968 Respondents also cite IML Sea Transit Ltd v U S 343 F Supp 32 N D CaI 1972 affd

409 U S 1002 1973 a

ca e

involving an F M C non vessel operating common carrier utilizing the services

of avessel operating carrier that held that the former carrier was not subject to the Interstate Commerce Act

although indireclly utilizing motor carriers certificated by the ICC
i

506 FEDERAL MARITIME COMMISSION

inconsequential argue respondents that respondents had difficulty even fil

ing a memorandum with the Commission under the regulation because

their arrangement was too simple to be included in the form set forth

in the regulation which required explanations of apportionments of rates

and other features of intercarrier cooperation which are missing from the

subject arrangement between respondents

Finally respondents argue that even if it could be found that respondents

have technically violated the informational filing requirements of General

Order 23 which they stoutly deny there would nevertheless be no need

for further evidentiary proceedings because reparation could not be awarded

as a result of such a violation This is because reparation can be awarded

only if I there is shown to be a violation of law 2 the violation

caused direct injury and 3 the equities of the case supported the exercise

of the Commission s discretion in making suchan award But respondents

argue that there has been no violation of law and even if there occurred

a technical failure to file under General Order 23 that would not constitute

a violation of law under section 22 of the Act Next respondents argue

that if Prudential has been harmed at all it is because of Farrell s reentry

as a competing carrier in the U S Alexandria trade not because of a

failure to file an agreement or a memorandum of such agreement comparing

this situation to that in Puget Sound Tug Barge Co v Foss Launch

Tug Co 5 SRR 67 77 JD 1964 in which the presiding officer

had found that complainant had suffered as a result of respondents rates

which were found to be lawful not because of respondents failure to

file their agreement Respondents contend that their failure to file an infor

mational memorandum about a feeder service did not cause Prudential

to lose business because Farrell s service would have operated with or

without the filing The cause of Prudential s losses if any would be that

carrier s lack of ability to compete successfully If complainant in Puget

Sound was found not entitled to reparation when respondents had failed

to file and obtain approval of their agreement for 21 2 years then there

is even less reason to consider awarding reparation to Prudential on account

of an innocuous non exclusive transshipment agreement which does not

even need approval to go into effect Respondents cite a decision of the

Supreme Court in Brunswick Corp v Pueblo Bowl O Mat Inc 429 U S

477 1977 in which plaintiffs alleging antitrust violations were held not

entitled to damages on account of antitrust violations which had resulted

in increased competition Respondents analogize that case to the present

one in which they view their arrangement as restoring Farrell to the trade

and providing additional service in competition with Prudential Respondents

contend further that Prudential s reliance on decisions holding that carriers

have standing to seek reparation or to file complaints fails to acknowledge

that there are stringent requirements of proof in reparation cases and that

the decision to award reparation in Saipan Shipping Co Inc v Island

Navigation Co cited by Prudential wasbased upon an incredibly intricate

U1
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 507

and convoluted network of conspiracies and unfiled agreements aimed di

rectly at making it impossible for the complainant to serve the relevant

trade Respondents brief p26 That case in no way resembles the

relatively simple one here argue respondents and furthermore awarding

reparation in a case of this kind would lack equity and not be supportable

under the criteria enunciated by the Supreme Court in Consolo v F MC

383 U S 607 cited above This is so say respondents because awarding

reparation for failure to file a memorandum of a non exclusive transshipment

agreement which their arrangement does not even constitute which agree

ments are considered to be competitively inconsequential not even requiring

approval by the Commission would not enhance enforcement of the Act

there is no compensable injury to Prudential its injury if any being caused

by Farrell s open competition an award would not be consistent with

previous application of the Act and there is lacking culpability on the

part ofrespondents in regard to their simple arrangement

In its final brief Prudential counters the above arguments Prudential

sees no merit to the contention that Farrell is merely a shipper vis a

vis ZEMS since the question is whether there is an agreement between

the carrier Farrell and the carrier ZEMS which Prudential claims to be

the case as shown by telexes between the two carriers prior to the first

sailing which included transshipment at Haifa Prudential sees no relevance

to the arguments regarding ZEMS privity of contract or lack of same

with Farrells shippers or merit to any suggestion that ZEMS might be

immune from some type of liability for its carriage of cargo for Farrell

if shippers sued Farrell for loss or damage Prudential contends again that

competition was reduced not increased because instead of having three

carriers competing Farrell Zim and Prudential the agreement resulted

in only two Farrell and Prudential competing Prudential replies further

that even if the agreement was merely a non exclusive transshipment agree

ment of less regulatory significance it still was required to be filed under

the Commission s

regulation in order to enjoy the exemption from the

approval requirement Prudential argues again that the inability of respond

ents to comply with the form prescribed in General Order 23 only illustrates

their failure to comply with that regulation in a timely fashion and further

underscores a violation of section 15 Prudential counters respondents argu

ments that they did not hold out jointly by contending that they had

established in effect a through route and through rate albeit not a joint

rate and agreed to share the revenue by allocating fixed payments to

Zim s feeder service

As to the question of its entitlement to reparation Prudential refutes

respondents contentions that Prudential is precluded by various legal im

pedimenta Prudential cites the Saipan Shipping case once again as showing

that an award of reparation is permissible for violations of section 15

and distinguishes the decision in Puget Sound 5 SRR 67 cited by respond

ents as denying reparation only after all the peculiar facts were considered
508 FEDERAL MARITIME COMMISSION

not as a matter of per se denial of such an award Prudential also sees

no bar to an award because of antitrust doctrines enunciated in Brunswick

Corp v Pueblo Bowl O Mat Inc cited above 429 U S 477 and indeed

quotes language from the Court s decision which it believes supports its

contention that respondents committed acts which caused Prudential injury

which acts were made possible by respondents violations of section 15

and General Order 23 Prudential sees no legal impediment to its seeking

to prove its entitlement to damages based upon any case cited by respond

ents and does not read the decision in Consolo v F MC cited above

as denying its entitlement on equitable grounds especially if Prudential

can show loss of its expected profits resulting from violations of law

Nor does Prudential see that respondents were unaware of their status

as competing carriers subject to filing requirements or that they had no

way of knowing that they should have filed their transshipment agreement

especially in view of a previous transshipment agreement which Farrell s

predecessor carrier AEL had filed with Zim which agreement Prudential

states to be similar to the alleged unfiled agreement in this case Therefore

Prudential concludes that there is no automatic bar preventing it from

proving its quantum of damages on account of respondents confusion

or their good faith misunderstandings as to the filing requirements estab

lished by law

APPLICABLE PRINCIPLES OF LAW

Since the basic issue to be determined is whether a particular agreement

understanding or arrangement between respondents Farrell and Zim whether

substantial or inconsequential is subject to the requirements of section

15 of the Act I begin by quoting the statute by which such agreement

must be evaluated In pertinent part section 15 of the Act states

Every common carrier by water or other person subject to this

Act shall file immediately with the Commission a true copy

or if oral a true and complete memorandum of every agreement

with another such carrier or other person subject to this Act

or modification or cancellation thereof to which it may be a

party or conform in whole or in part 1 fixing or regulating

transportation rates or fares 2 giving or receiving special rates

accommodations or other special privileges or advantages 3

controlling regulating preventing or destroying competition 4

pooling or apportioning earnings losses or traffic 5 allotting

ports or restricting or otherwise regulating the number and char

acter of sailings between ports 6 limiting or regulating in any

way the volume or character of freight or passenger traffic to

be carried 7 or in any manner providing for an exclusive

preferential or cooperative working arrangement The term agree

ment in this section includes understandings conferences and

other arrangements arabic numerals added

26 F M C
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 509

The above statute has been held to be broadly drafted and therefore

not to be given unduly narrow interpretations Volkswagenwerk v F M C

390 U S 261 273 1968 The Commission thus took an extremely narrow

view of a statute that uses expansive language Federal Maritime Com

mission v Pacific Maritime Association 435 U S 40 54 1978 It is

appropriate therefore that the Court has recognized the broad reach of

section 15 and resisted improvident attempts to narrow it d at 55

56 but the Court in Volkswagenwerk did emphasize the breadth

of the statutory language and the determination of Congress reflected in

section 15 to subject to the scrutiny of a specialized governmental agency

the myriad ofrestrictive agreements in the maritime industry

In evaluating agreements under the broadly drafted expansive statute

quoted above furthermore the Commission is not strictly bound by what

the parties claim to be their intent any ambiguities in agreements are

construed against the parties who drafted them and the Commission looks

to the effects and consequences of such agreements not merely the words

which the parties insert into them See discussion in Armada GLTL East

Africa Service 26 F MC 147 1984 and cases cited therein

Clearly the scope of section 15 extends beyond written agreements and

covers oral informal tacit or general agreements understandings and ar

rangements This is seen by the language of the statute itself as well

as by previous decisions of the Commission See e g Unapproved Section

15 Agreements South African Trade 7 F MC 159 182 188 1962 Fur

thermore the reach of section 15 into such informal agreements or under

standings does not depend upon how detailed and explicit an agreement

is Informal agreements sometimes may have greater anticompetitive effects

than those reduced to detailed written instruments In Unapproved Section

15 Agreements South African Trade cited above the Commission went

to great pains to explain that oral tacit or general agreements understand

ings and arrangements are within the scope of section 15 and that Section

15 is not concerned with formality but with the actual effect of the arrange

ment 7 F M C at 188 189 The Commission stated that oral informal

tacit or general arrangements or understandings may be even more effec

tive anti competitive vehicles than formal detailed and legally binding

agreements 7 F M C at 188 The Commission stated that Congress had

enacted section 15 with provisions for exemptions from antitrust laws but

with the understanding that the Commission would maintain some form

of effective government supervision which objective would be frustrated

unless the Act were made broadly applicable to an agreements understand

ings and arrangements including particularly the kind of informal arrange

ment which existed among the respondents here 7 EM C at 189 190

The Commission cited the Alexander Report the basic document to the

legislative history of the 1916 Act which commented on the tendency

toward oral understandings instead of written agreements between the lines

operating to and from ports of the United States which oral understandings

26 F M C
510 FEDERAL MARITIME COMMISSION

were utilized by carriers because they were considered to be safer than

written agreements and could be concealed from the public 7 F M C

at 190 The Commission emphasized the broad scope of section 15 as

follows

Accordingly section 15 requires as it has for the 45 years since

enacted the filing of a

copy or if oral a true and complete

memorandum of every agreement covering any of the wide

range of anticompetitive activities therein mentioned or in any

manner providing for an exclusive preferential or cooperative

working arrangement The word agreement is specifically de

fined to include conferences understandings and other arrange

ments footnote omitted The language of the section thus clear

ly embraces every agreement understanding or arrangement

whether formal or informal written or oral detailed or general

The section has been applied in other cases to informal working

arrangements not nearly so conspicuous as this one 7 F M C

at 190191

The importance of filing memoranda of agreements or understandings

was also emphasized by the Commission which stated that failure imme

diately to file an anticompetitive agreement was intended by Congress

to be a distinct violation of section 15 7 F M C at 191 192 The Commis

sion stated that as to the language of section 15 that t here is nothing

perfunctory about the language in question It does not say file if and

when you plan to effectuate nor does it indulge in the fantasy that an

anticompetitive arrangement will be kept on ice and not effectuated

Effective government supervision which was the cornerstone of the whole

regulatory plan Congress embodied in section 15 would be greatly handi

capped if not defeated were parties to anticompetitive agreements allowed

to file them at their convenience which could be never Supervision cannot

be effective and may well be nonexistent if the supervisor is uninformed

7 F MC at 192

The Commission commented on respondents arguments which had been

raised as defenses or contentions favoring extenuation or mitigation of

the violations of section 15 To respondents contentions that their unfiled

agreements promoted stability aided the subsidy program were in the

public interest and were not objectionable under section 15 the Commission

responded that all of these arguments were quite beside the point This

was because s uch matters were for the Commission the agency admin

istering the Shipping Act to weigh and determine before and during the

time the anticompetitive activities occurred They were not for the respond

ents to decide themselves Respondents prevented any Commission consid

eration by ignoring the eminently clear requirements of section 15 and

thus frustrated it for years We think it impossible for anyone now to

state that what transpired between respondents was all well and good but

even if this were not so the impact of the statute manifestly cannot be
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 511

made to depend on the ex post facto chance that the violation was not

hannful Section 15 may as well be scrapped as to attempt to administer

it in this fashion 7 F M C at 196197

Section 15 is therefore broadly drafted it covers oral informal under

standings and arrangements and it is not an excuse for failure to file

that the agreement was beneficial approvable or not hannful under the

standards of section 15 These matters may bear upon the approvability

of such agreements or perhaps on the question of assessing penalties but

the violation of section 15 for failure to file stands 6

As for proving the existence of an agreement understanding or arrange

ment the Commission has recognized that it is not necessary to pile up

clear and convincing documentary evidence and testimony By the nature

of many such agreements they often are created in secrecy with no intention

of public disclosure Thus an agreement may be proven merely by a

few contemporaneous documents notwithstanding later oral testimony dis

avowing any such agreement As the Commission stated in Unapproved

Section 15 Agreement North Atlantic Spanish Trade 7 FM C 337 342

343 1962

Considering the penalty prescribed by law for illicit anticompeti

tive activity it is not to be expected that proof of such activity

will be obtained either easily or in abundance In such cases

the solid evidence may consist of no more than a few contempora

neous memoranda or other documents These however are and

of necessity must be entitled weight and far greater weight than

oral testimony given at some later date by those who are under

investigation and whose explanations of the documents simply

cannot be squared with their contents In two other recent

cases involving unlawful section 15 activity we have had occasion

to rule on the acceptance of testimony which is contradicted by

contemporaneous documents or by logic Case citations omitted

We cannot regard such testimony as credible

Proof of an unfiled agreement may sometimes require the putting to

gether of numerous individual evidentiary items so as to construct an inte

grated whole that will provide the basis for a conclusion Unapproved

Section 15 Agreements South African Trade cited above 7 F M C at

182 183 1962 Actual conduct may also be used to prove the existence

of an underlying or preceding agreement or understanding Maatschappij

Zeetransport N V Oranje Line v Anchor Line Limited 6 F M C 199

6Similarly it is no excuse for failure to file to contend that the violation was merely a technical one

or that respondents motives were good The Commission has often held that section 15 affords lillle room

for so called technical violations and that it is not necessary under section 15 to impute an evil motive

For the purposes of this statute nonfeasance is as objectionable as malfeasance There is Iillle ifany excuse

for failing to file We cannot view such failure lightly no mailer what the parties state of mind might

have been especially when easy and safe courses are available to them Unapproved Section 15 Agree

menlCoal to Japan Korea 7 F M C 295 303304 1962 Investigation Practices Etc N Atlantic Range

Trade 10 F M C 95 110 111 1966

oil nJ lr
512 FEDERAL MARITIME COMMISSION

207 210 1961 Proof of the existence of an unfiled agreement may be

shown by circumstantial evidence and reasonable inferences to be drawn

therefrom Saipan Shipping Co Inc v Island Navigation Co Ltd cited

above 24 F M C at 980 The existence and the substance of an agreement

may be proven through inferences from circumstantial evidence that are

reasonable in light of human experience generally or when based on the

Commission s special familiarity with the shipping industry Indeed

the Commission has even found the existence of an agreement on the

basis of two interoffice memoranda and surrounding circumstances e g

resignation of a carrier from a conference which continued to consult with

the carrier on rate changes notwithstanding testimony denying the existence

of any such agreement Unapproved Section 15 Agreemenl North Atlantic

Spanish Trade cited above 7 F M C at 340341 Interestingly the same

standards regarding use of circumstantial evidence and inferences to be

drawn therefrom prevails in the antitrust field to prove the existence of

concerted action See II Kintner Federal Antitrust Law section 917 Inter

state Circuit Inc v U S 306 U S 208 1939 American Tobacco Co

v U S 328 U S 781 809 810 1946

It cannot be seriously disputed that the evidence in this case shows

that respondents Farrell and Zim had discussions leading to an arrangement

by which Farrell would book cargo for re loading at Haifa on Zim s feeder

service known as ZEMS for subsequent carriage to Alexandria Contempora

neous telexes between Farrell s New York and Genoa offices and between

Farrell and ZEMS show that negotiations with Zim began in the spring

of 1982 and culminated in an arrangement The contemporaneous cor

respondence shows that on June 17 1982 there had been an acceptance

by Farrell of ZEMS offer to carry Farrell s containers at the lumpsum

rates of 850 per 20 foot container and 1 600 per 4O foot container full

from Haifa to Alexandria and return of empty containers from Alexandria

to Haifa on liner terms at both ports At the same time furthermore

Farrell s Genoa office advised its agents in Alexandria that Farrell would

re commence service to Alexandria with Farrell shipping its containers from

Haifa to Alexandria aboard ZEMS feeder vessels On July 19 1982 more

over Farrell accepted ZEMS quotation of rates of 1 250 for 20 foot

and 2 200 for 4O foot containers where carriage was to be of full containers

in both directions between Haifa and Alexandria The record also shows

that following the consummation of the negotiations Farrell advised all

its branch offices that commencing with the sailing of the EXPORT FREE

DOM Voyage 94 full container cargo for Alexandria would be acceptable

for delivery via feeder vessels from Haifa to Alexandria that only freight

pre paid cargo would be accepted and that cargo from ports other than

New York Baltimore Philadelphia and Norfolk would have to be cleared

by Farrell s New York office prior to booking Thereafter the record shows

at least 45 shipments to Alexandria carried by Farrell with re loading at

Haifa and at the rates quoted and accepted by Farrell for a period of
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 513

10 months or so The record also shows that Farrells agents were shown

on ZEMS bills of lading whenever Farrell s cargoes were re loaded at

Haifa for carriage to Alexandria and there is no evidence that ZEMS

undertook any obligation directly with Farrell s shippers or that ZEMS

ever knew in advance who Farrell s American shippers might be or what

rates Farrell would be charging those shippers under Farrell s tariff which

offered the through service from U S ports to Alexandria This arrangement

was also nonexclusive ie Farrell was not required to employ ZEMS

exclusively and ZEMS was similarly free to carry cargo for shippers other

than Farrell Furthermore Farrell s use of ZEMS feeder vessels appears

to have been on a

space available basis and on occasion Farrell s cargo

might not have been carried on a particular ZEMS vessel which was

full Since April 1983 furthermore Farrell has utilized a feeder service

other than ZEMS which service operates from Italy to Alexandria and

is considered more suitable to Farrell s needs than was the ZEMS service

The record also shows that the purpose of the arrangement with ZEMS

was to enable Farrell to return to the U S to Alexandria trade after Farrell

had been forced to discontinue service to Alexandria after December 1981

when Farrell ceased using self sustaining containerships i e ships which

could load and unload containers at ports like Alexandria which did not

possess shore based container cranes There is no evidence that either re

spondent Farrell or Zim intentionally conspired to violate either section

15 of the Act or the requirements of General Order 23 requiring an informa

tional filing of non exclusive transshipment agreements Farrell and Zim

apparently believed that a carrier s use of another carrier s feeder service

did not constitute a transshipment agreement under General Order 23 or

any other type of agreement within the scope of section 15 However

after this litigation was underway for some time on September 12 1983

Farrell did file a

copy of a Memorandum of Rates and Terms regarding

the non exclusive feeder service arrangement with ZEMS as compliance

with General Order 23 46 CFR 524 b and inserted a notice concerning

the feeder service with ZEMS and another carrier in its North Atlantic

tariff effective October 27 1983

Very basically to constitute an agreement falling within the scope of

section 15 the above agreement understanding or arrangement needs three

elements 1 an agreement among 2 common carriers by water or

other persons subject to the Act 3 to engage in anticompetitive or coopera

tive activity of the types specified in section 15 Hong Kong Tonnage

Ceiling Agreement 10 F M C 134 140 1966

In this case the focus of contention appears to be not so much on

the parties to the above understanding or arrangement between Farrell and

ZEMS but on the type of activity involved Thus there appears to have

been some type of agreement whether it is characterized as informal under

standing a non exclusive feeder service or merely a series of contracts

of affreightment by which Farrell merely booked cargo onZEMS Neverthe
514 FEDERAL MARITIME COMMISSION

less respondents suggest that their arrangement is simply one of booking

in which Farrell acts as a shipper vis a vis ZEMS feeder service and

thus lies outside the scope of section 15

As I explain more fully below I find the arrangement to be a non

exclusive transshipment agreement and furthermore one that is even less

complicated than the relatively innocuous agreements defined by General

Order 23 which merely requires informational filing and exempts such

agreements from the normal approval requirements of section 15 As the

Commission s discussions in Transshipment Agreement Between S Thailand

and U S 10 F M C 199 1966 and Transshipment Agreement Indonesia

United States 10 F M C 183 1966 show transshipment agreements have

long been held to be subject to the requirements of section 15 Moreover

even though the cited cases involved transshipment agreements with exclu

sivity features unlike the one in this case the Commission made clear

that such agreements have always been subject to section 15 even if they

are non exclusive citing a decision of the Commission in 1935 Intercoastal

Rates From Berkeley 1 U S S B B 365 367 cited in 10 F M C at 211

The Commission specifically rejected the arguments of one carrier which

had contended that no transshipment agreement is a section 15 agreement

commenting that t he transportation of property to and from the United

States by means of transshipment arrangements is in fact a major element

in the foreign commerce of the United States and t o remove it from

regulatory control would obviously have a profound impact on our foreign

commerce 10 F M C at 211 Furthermore the Commission stated that

although some transshipment agreements contain exclusive features which

prohibit either side dealing with other carriers in through shipments in

the particular trade o thers do not contain the exclusive feature

and c ontrary to the contention of Holland America all such agreements

have been held to fall within section 15 since such agreements are

invariably cooperative working arrangements under section IS which

frequently deal with rate fixing and exclusive dealings 10 F M C at 211

The answer to the contention that some transshipment agreements have

minimal competitive impacts such as non exclusive agreements was pro

vided in the same decision Thus the Commission suggested that although

the innocuous types of agreements might fall under section 15 they could

enioy some type of exemption or exclusion from the normal requirements

following an appropriate rulemaking proceeding 10 F M C at 221 The

Commission followed this suggestion with justT such a

rulemaking proceed

ing Docket No 684 Exemption of Nonexclusive Transshipment Agree

ments From the Approval Requirements of Section 15 Shipping Act 1916

10 SRR 148 1968 Of course the very issuance of General Order 23

which relaxed requirements for non exclusive transshipment agreements from

full filing and approval to informational filing in a memorandum and in

tariffs only illustrates that the Commission has jurisdiction over such agree

ments under section 15
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 515

It is clear then that the statute is broadly drafted and that if the subject

agreement falls within one of the seven enumerated categories set forth

in section 15 as quoted above it is subject to the requirements of that

law Furthermore it is clear that a nonexclusive transshipment agreement

is at the very least considered to be a cooperative working arrangement

category number 7 in the statutory list This is not to say that every

agreement between carriers falls within section 15 For example the Com

mission has found simple landlord tenant leases occasional bookings by

one carrier with others joint sharing of office space one shot settlements

and strictly routine day to day transactions among carrier members of con

ferences not to be subject to section 157 However transshipment agree

ments even non exclusive ones have been held subject to that law regard

less of their minimal anticompetitive effects although because of such

slight effects they are relieved of the normal approval requirements

Faced with a history of regulation and filing of non exclusive trans

shipment agreements under section 15 and General Order 23 respondents

present arguments which I have summarized above attempting to distin

guish their agreement from other non exclusive transshipment agreements

by describing it as merely a booking arrangement in which Farrell was

the shipper or bailee of cargo and ZEMS the carrier the latter having

no privity with or responsibility to Farrell s American shippers and therefore

no joint undertaking toward Farrell s shippers Respondents go on to argue

furthermore that their arrangement gave no special privileges to Farrell

was pro competitive had little impact on competition and that even if

it should have been filed under General Order 23 it is so simple an

agreement that respondents had trouble completing the informational filing

form set forth in that regulation I find these arguments to be rather weak

and non persuasive

As to the argument that as to ZEMS Farrell was merely a shipper

or bailee of cargo and that the bills of lading issued by ZEMS reflect

this situation this argument fails to impress for a number of reasons

In other contexts carriers attempt to find their operations exempt from

regulation by calling themselves by other names For example non vessel

operating common carriers by water have designated themselves as shippers

agents rather than carriers and have even disavowed cargo liability for

cargo loss or damage or they have called themselves some other thing

rather than what they truly are The reason for these erroneous self designa

7

See Levatino Sons Inc v Prudentiai Grace Lines Inc 18 F M C 82 108112 1984 carrier s sim

ple lea orother arrangement with warehouse company for additional terminal space Agreement No 9955

I 18 F M C 426 483 1975 occasional ad hoc bookings by one carrier on vessels of another without

repetitive through movement patterns Crown Steel Sales Inc et al v Port of Chicago 12 F M C 353

359 376377 1967 sharing of office space and administrative services Continental Nut Company v Pa

cific Coast River Plate Brazil Conference 9 F M C 563 570 1966 routine day today rate adjustments

orother transactions by conference members do not require separate approval under section 15 Docket No

8328 In Re Agreement Nos 10457 etc Order Partially Adopting Initial Decision 26 F M C 191 February

29 J 984 modifications of proposed agreement in response to protests in formal proceeding not a section

15 agreement
i

l

1

1

j

516 FEDERAL MARITIME COMMISSION

tions is usually to avoid some requirement of law e g tariff filing avoid

ance of liability as a carrier or amenability to suit under section 22 of

the 1916 Act or avoidance of section 15 consequences Thus in Possible

Violations of Section 18 ajofthe Shipping Act 1916 19 F M C 44 1975

respondent claimed that it was not a carrier but a

shipper s agent not

subject to tariff filing requirements However respondent was found to

be a carrier by virtue of what it actually did not what it named itself

and liability as a carrier was found to be imposed on respondent as a

matter of law Similarly in Capitol Transportation Inc v United States

612 F 2d 1312 1st Cir 197 Capitol a nonvessel operating common

carrier argued that it was not amenable to suit under section 22 of the

Act and that it was really only a trucker and household mover

rather than a consignee vis a vis the underlying vessel operating carriers

who were holding Capitol liable for unpaid demurrage bills The Court

upheld the Commission s decision that Capitol was a carrier as well as

a consignee subject to liability for payment of demurrage under the underly

ing vessel operating carriers tariffs This case illustrates not only that a

carrier s status is determined by what it does and how it holds itself

out and not by what it claims to be or names itself but also that a

common carrier may be a common carrier for some purposes and a shipper

or consi8Dee for other limited purposes In this regard it has long been

recognized that a non vessel operating common carrier by water and some

times a vessel operating carrier may take the position of shipper vis a

vis another carrier although maintaining its basic nature as a common

carrier towards its own shippers See eg Puget Sound Tug and Barge

v Foss LAUGh and Tug Co 7 F M C 43 47 1962 Bernhard Ulmann

Co Inc v Porto Rican Pl eSS Co 3 F M B 771 775776 l9S2

cf Chicago Milwaukee St Paul and Pacific Railroad Co v Acme Fast

Freit Inc 336 U S 465 468 47 77 1949for similar holdings as

to comparable non equipment operating carriers under the Interstate Com

merce Act see also Isbrandtsen Co v States Marine 6 FM B 4 22196 1

a case illustrating how a vessel operating carrier needing space to carry

out its carrier obligations to its own shippers can become a shipper itself

whe it books cargo on another carrier s vessels The fact that a carrier

may be shown as shipper or consianee on another carrier s bill of lading

may detem1ine the relationship between the two carriers but does not change

the first carrier s status as a commoncanier vis a vis the first carrier s

shippers Indeed in some transshipment agreements one of the carriers

transporting the through movement on arelatively short leg of the through

transportation route may not even issue a bill of lading Transshipment

Agreement Between S Thailand and U S cited above 10 F M C at 205

209

Nevertheless respondents maintain that Farrell was merely a

shipper

or bailee of its shipper s cargo when it tendered the shipment to ZEMS

at Haifa an argument which I find does not render Farrell something
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 517

other than a common carrier as regards its own shippers to whom it

holds out to provide through transportation from U S ports to Alexandria

under Farrell s own bill of lading and rates However respondents also

contend that ZEMS has no privity with Farrell s shippers and has no

joint undertaking with Farrell toward Farrell s shippers This argument

too fails to persuade In some transshipment agreements one of the carriers

handling a short leg of the voyage issues no bill of lading at all merely

some type of dock receipt The only bill of lading issued to cover the

through transportation and to establish the carrier s

through liability as

a carrier is that of the carrier transporting the cargo over the longer leg

of the through route That is precisely what happened in Transshipment

Agreement Between S Thailand and U S cited above 10 EM C at 205

209 As the Commission stated

In most if not all transshipment agreements either the originating

carrier or the oncarrier issues a through bill of 1 ading for the

whole trip but this has never been held to prevent the agreement

being subject to section 15 10 F M C at 209

So too the arguments that Farrell is somehow only a shipper or bailee

of cargo in its relationship with ZEMS and that therefore there is no

transshipment agreement between two carriers as far as Farrell s shippers

are concerned is extremely unpersuasive Not only is the through transpor

tation from U S East Coast ports to Alexandria carried under Farrell s

bills of lading and under Farrell s rates but respondents themselves proclaim

that their agreement was beneficial because it restored Farrell to the Alexan

dria trade obviously not as a shipper or bailee but as a carrier Thus

in their own brief respondents refer to Farrell s use of ZEMS feeder

vessels to complete its undertaking to shippers brief p

2 state that

the simple arrangement promoted competition by making possible Farrell s

reentry into the relevant trade brief p

7 reiterate that Farrell s use

of ZEMS feeder service increased competition by bringing Farrell back

into the Alexandria trade a

year after it had discontinued its direct service

brief p11 that Farrell alone assumed the sole responsibility for the

carriage of the subject shipments from U S ports of origin to Alexandria

brief pp 11 and 15 and that Farrell has every right to compete with

Prudential in the U S to Alexandria trades and that Farrell has the right

if it chooses to compete by serving Alexandria by feeder vessels brief

p

20 All of these arguments would seem to indicate that it is a carrier

not a shipper or bailee which has reentered the Alexandria trade and

that it has done so by means of an arrangement entered into with ZEMS

making use of the ZEMS feeder vessels 8

8Nor does respondents argument that Farrell became a mere bailee of cargo when it tendered the cargo

to ZEMS feeder vessels at Haifa sound plausible in view of respondent s reiteration of the point that Farrell

reentered the trade to provide services to Alexandria and undertook sole responsibility for the carriage of

Continued
518 FEDERAL MARITIME COMMISSION

Similarly respondents argument that Farrell had no joint undertaking

with ZEMS joint rate or joint through service because ZEMS acted merely

as a carrier toward Farrell shipper on the Haifa to Alexandria leg of

the transportation doesn t persuade As seen in Transshipment Agreement

Between S Thailand and U S cited above 10 F M C at 205 209 one

carrier to a transshipment arrangement may not even issue a bill of lading

and it may operate solely between two foreign ports as part of its contribu

tion toward the other carrier s holding out to provide a through service

yet the foreign carrier has been found to be a carrier operating in U S

foreign commerce and to be a party to a transshipment agreement The

determination that two carriers had entered into an agreement that a second

carrier would complete the service and voyage of the first carrier does

not rest on the need to find that the second carrier has direct obligations

under a bill of lading or otherwise towards the first carrier s shippers

Nor does respondents contention that there was no through route joint

through service or joint rate show that respondents had no agreement

subject to section 15 Carriers may enter into a variety of arrangements

establishing joint rates explicit through routes single factor rates or make

other arrangements Thus in the cases cited by respondents Sea Land Serv

ice Inc v F MC 404 F 2d 824 D C Cir 1968 and Alaska Steamship

Co v F MC 399 F 2d 623 9th Cir 1968 the courts held that two

carriers had lawfully established through routes and joint rates under the

Interstate Commerce Act and could therefore file their tariffs with the

IC C under a particular section of that Act dealing with Alaska The

case had nothing to do with section 1 S of the Shipping Act and in each

instance one of the carriers was a motor carrier In another case cited

by respondents IML Sea Transit Ltd v U S 343 F Supp 32 N D

Cal 1972 affd 409 U S 1002 1973 an F M C regulated non vessel

operating common carrier NVOCC chose to utilize an underlying service

provided by a water carrier which included inland pickup and delivery

The court found that the NVOCC was not subject to the Interstate Com

merce Act The point is that two carriers may establish a

through service

directly or indirectly expressly or impliedly and may offer shippers joint

rates single factor rates or combinations oflocal rates See e g

discussion

in U SA v F MC Gulf U K Rate Agreement et al J 15 SRR 851 875

877 D C Cir 1980 Intercoastal Investiation 1 U S S B B 400 445

446 1935 Inland Waterways Corp 2 U S M C 458 463 1940 Thomp

oi

the subject shipments from U S ports of orillin to Alexandria One wonders what Farrell s American ship

pers would think if in ca e of loss or damaBe between Haifa and Alexandria they were told by Farrell that

Farrell had acted only as another shipper or a bailee for their carllo and could only be held liable if found

nelllillent under the law of bailments As I note later furthermore Farrell has published notice in both its

Nonh Atlantic and So th Atlantic tariffs FMC 13S and 136 that it has an arrBnllement with ZBMS for

a feeder service out of Haifa as well as an arrBnllement with another carrier out of Naples Such tariff pub

lishinll constitutes apublic holdinll out as a carrier providinll a throullh service withthroullh liability to Alex

andria If Farrell believed it really was only a shipper out of Haifa and ZEMS had no allreement under

Farrell s tariff perhaps it would have been beller not to file the notice in Farrell s tariff section entitled

Transshipment Allfeements since a carrier is supposed to publish accurate information in its tariff

26 F M C
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 519

son v U S 343 U S 549 557 1952 A through route is a continuous

line of carriage formed by an arrangement express or implied between

connecting carriers

Finally although respondents contend that their filing of a memorandum

of their arrangement and a notation in Farrell s tariff was done as a pre

cautionary measure without conceding that the arrangement constituted a

non exclusive transshipment agreement within the meaning of General Order

23 as of October 27 1983 Farrell s North Atlantic tariff FMC 135

contains the standard language concerning transshipment agreements set

forth in the regulation and refers to its feeder services with ZEMS out

of Haifa and another carrier out of Naples Ex 4 The language in

the tariff states

The rules regulations and rates in this tariff apply to all trans

shipment arrangements between the publishing carrier or carriers

and the participating connecting or feeder carrier Participating

connecting or feeder carriers party to transshipment arrangements

have agreed to observe the rules regulations rates and routings

established herein as evidenced by a connecting carrier agreement

on file with the Federal Maritime Commission Tariff 1 st rev

page 22 A

Similar language and reference to the two carriers appear in Farrell s

South Atlantic tariff FMC 136 effective February 8 1984 filed January

10 1984 a fact of which I take official notice 46 CPR 502 226 a

Whether filed as a precautionary measure or without prejudice to respond

ents position the fact is that a tariff represents a public holding out

and it has long been considered to have the force and effect of law

Penna R R Co v International Coal Co 213 U S 184 187 1913

Farr Co v Seatrain 20 F MC 411 414 417 n 8 1978 Thus although

normally a belated compliance with law or similar adjustment is not taken

as evidence of guilt a filing in a tariff has special significance Thus

it is difficult to argue that there is no transshipment agreement involving

ZEMS participation and willingness to observe rules and routings estab

lished in Farrell s tariffs while at the same time Farrell publicly announces

an agreement in its tariffs on which shippers are entitled to rely Ifrespond

ents really believed that their arrangement did not constitute a nonexclusive

transshipment agreement perhaps it would have been better for them not

to file tariff notations and references so that the public would not be

misled If proven wrong they would be no worse off since they did

not file anything under General Order 23 anyway until September 12

1983 apparently and have in any case operated without filing or approval

But argue respondents their agreement confers no special privileges

or advantages is non exclusive and pro competitive and has little outside

anticompetitive impact These arguments fail to persuade that respondents

had no agreement In reality they bear more on the question of approvability

of their agreement rather than on jurisdiction over the agreement under

26 F M C
520 FEDERAL MARITIME COMMISSION

section 15 It would be well to recall briefly what I discussed earlier

about section IS namely that it is a

broadly drafted statute that should

not be narrowly construed Moreover as the Supreme Court admonished

the Commission in Volkswagenwerk v F M C cited above 390 U S at

276 Congress intended the Commission to scrutinize a myriad of restric

tive agreements in the maritime industry and also cautioned the Commis

sion not to read into the statute language that these agreements must some

how always affect competition In other words one determines whether

an agreement falls within the scope of section 15 by evaluating that agree

ment under the seven categories set forth in that law and not by determining

that the agreement is anticompetitive or violates antitrust laws etc As

the Court stated 390 U S at 275

To limit section 15 to agreements that affect competition as

the Commission used that phrase in the present case simply does

not square with the structure of the statute

Furthermore the Court quoted language from the legislative history to

the 1916 Act the Alexander Report as I have previously noted showing

that Congress was motivated in enacting section 15 by the near unanimous

support for the idea that the Commission would be maintaining supervision

of contracts agreements and arrangements and the general supervision

of all conditions of water transportation which vitally affect the interests

of shippers 390 U S at 275 Similarly it has been recognized that al

though there are many agreements subject to section 15 which obviously

violate antitrust laws e grate fixing pooling restricting service and in

deed may be per se violations of those laws section 15 stands on its

own feet and must he read in the light of its own words and purposes

See e g Transshipment Agreement Between S Thailand and U S cited

above 10 F M C at 213 n 8 To the extent that the antitrust laws

might not be applicable to certain described conduct Ifthey are considered

to be applicable this does not solve the problem since Congress intended

the section 15 standards to apply to situations falling within its coverage

rather than the antitrust laws Agreement Nos 971l r3 and 9731 5 16

SRR 1087 1112 1113 n 26 1 0 reversed on other grounds 19 F M C

351 1976 The question of how anticompetitive an agreement may be

or how serious are the inroads made upon antitrust laws may however

be relevant to the question of the degree ofproof and justification necessary

for approval See Agreement 9951 1 cited above 18 F M C at 462

In any event the point here is that it does not matter for purposes

of determining whether respondents non exclusive transshipment agreement

is a cooperative working arrangement falling within section 15 of the Act

that the purpose or effect of the agreement was pro competitive That

fact may be relevant to the question of approvability however Moreover

as discussed earlier the Commission has already found that even non

exclusive transshipment agreements fall under section 15 innocuous though

26 F M C
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 521

some of them may be and that the proper course for carriers is not

to ignore the jurisdiction of section 15 but to take advantage of any relax

ation in law which the Commission may grant and has granted under

General Order 23 as regards such agreements Transshipment Agreement

Between S Thailand and U S cited above 10 F M C at 211 2219Indeed

following the decision in the case cited the Commission did issue the

regulation which relaxed the requirements of section 15 as to non exclusive

transshipment agreements Significantly in the rulemaking proceeding which

culminated in the issuance of General Order 23 46 CFR 524 the Commis

sion specifically rejected arguments similar to those now made by respond

ents namely that the Commission lacks jurisdiction over non exclusive

transshipment agreements because they are Qot anticompetitive The

Commission responded by finding that these agreements while not anti

competitive in the same sense as exclusive transshipment agreements never

theless conferred an advantage on carriers entering into them because

the agreements if approved enabled the carriers to provide a service that

they would not otherwise be able to provide lawfully In this regard the

Commission stated 10

Although nonexclusive transshipment agreements may not be

anticompetitive in the same sense as exclusive transshipment

agreements they nevertheless have an impact upon competition

to the extent that those entering into such agreements have an

advantage inasmuch as they are able to provide a service which

those not entering into such agreements could not lawfully provide

in the absence of an approved agreement The Supreme Court

of the United States has recently stated that the Commission s

scope of authority under section 15 of the Shipping Act extends

to all agreements between carriers falling within the literal lan

guage of section 15 and not exempted by the Commission see

Volkswagenwerk v FMC decided March 6 1968 slip opinion

pages 11 15

Therefore the suggestion by the parties of the deletion of language

in section 524 1 which indicates that nonexclusive transshipment

agreements are subject to section 15 unless exempted must be

rejected

This refutes another argument of respondents namely that to require carriers to file non exclusive trans

shipment agreements which may include arrangements with feeder vessels assisting containerized lines to

offer efficient services from certain ports designated load centers would seriously hamper the development

of modem services All that the carriers need do under the present regulation is file memoranda and notices

in their tariffs The Commission is even considering relaxing that requirement further under current law See

Docket No 834 Exemption of Nonexclusive Transshipment Agreements etc Notice of Proposed Rule

making 48 Fed Reg 45270 October 4 1983 The Commission may

even consider exempting such agree

ments from informational filing under the new Shipping Act of 1984 Incidentally I may officially notice

that there are well over 1 000 non exclusive transshipment agreements filed with the Commission under Gen

eral Order 23 Apparently these filings have not prevented carriers from improving their services

IODocket No 684Exemption of Nonexclusive Transshipment Agreements From the Approval Require

mentsof Section 5 Shipping Act 916 33 Fed Reg 7116 May 14 1968 10 SRR 148 149

26 F M C
522 FEDERAL MARITIME COMMISSION

Therefore respondents argument that their agreement is procompetitive

is irrelevant to the question of jurisdiction under section 15 Moreover

their argument that the agreement confers no special privileges or advantages

because it is non exclusive and because Farrell was treated like any other

shipper by ZEMS on aspace available basis would seem to have been

refuted by the Commission in the many decisions cited above However

regardless of those decisions examination of the subject agreement reveals

special privileges or advantages category no 2 in the list of the types

of agreements set forth in section 15 That is because Farrell and ZEMS

negotiated special lumpsum rates per container and Farrell enjoyed the

benefit of those rates for a considerable length of time 10 months or

more of actual shipments without change Not only did the rates remain

constant but they did so regardless of the commodities involved a situation

that one knowledgeable witness Morris of Prudential considered to be

unusual in the subject trade Tr 53 54 11 Indeed in a non exclusive

transshipment agreement once in effect between Zim and a predecessor

carrier of Farrell s American Export Lines Inc by which AEL offered

service from U S ports to ports in Italy and Yugoslavia via transshipment

at Israeli ports on Zim vessels which agreement was filed for approval

by the parties AEL did not even enjoy the right to have fixed rates

during the life of the agreement but paid Zim at rates to be agreed

upon by the parties 12

I conclude therefore that the subject agreement is at least a cooperative

working arrangement category no 7 and that it confers special privileges

or advantages category no 2 as the Commission has held in its rulemaking

proceeding leading to the issuance of General Order 23 and on the basis

of evidence showing that Farrell enjoyed fixed lumpsum rates which ZEMS

had charged it over a considerable length of time

Finally respondents contend that even though they ultimately filed a

memorandum of their arrangement and a notation in the Farrell tariff

as required by General Order 23 this was done only as a precautionary

step and not because they believed that their agreement really constituted

a non exclusive transshipment agreement within the meaning of that regula

tion Respondents point out the difficulty they encountered in trying to

comply with the reporting form set forth in the regulation For example

the form requires that the connecting carrier must concur in the publishing

carrier s tariff and calls for an explanation of how the through rate is

apportioned or shared between the publishing and connecting carrier As

II Tr refers to the pages of the stenographic lrIIn8Cript of the hearing

12 The agreement wa designated as No 10254 and was designated a Slot CharterAgreement In addi

tion to providing for rates to be negotiated from time to time it did not require Zim or AEL to use each

other s services and Zim would carry for AEL only on a space available basis Itspecified that cargo moving

under the agreement wa to be carried pursuant to ABL s tariffs and bills of lading but that Zim would be

responsible for loss or damage for such cargo occurring on Zim s vessels Agreement No 10254 was ap

proved by the Commission on January 25 1977 and was cancelled by Farrell on Augu t 27 1982 47 Fed

Reg 39612 September 8 1982 A copy of the agreement is allached as an appendix to this decision

fi F M
26 F M C

PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 523

mentioned earlier furthermore respondents claim that they had established

no through route or joint responsibility anyway so that there was not

even an agreement under section 15 at all only a single responsibility

by Farrell to carry to Alexandria with the use of ZEMS feeder vessels

to complete Farrell s

through undertaking Prudential on the other hand

as discussed earlier contends that respondents difficulties in complying

with the regulation only illustrate their violation of that regulation and

hence a violation of section 15 since they operated without even filing

anything with the Commission and therefore could not enjoy the exemption

from the normal approval requirements granted to parties complying with

General Order 23

I have already found that an agreement existed between Farrell and

ZEMS which is generically a non exclusive transshipment agreement even

if it does not have all the classic features set forth in General Order

23 and that the agreement by Zim to assist Farrell by completing its

service to Alexandria and charging Farrell unchanging lumpsum rates con

stitutes a transshipment agreement notwithstanding Zim s remoteness from

Farrells American shippers It does not really matter whether the subject

agreement qualified under General Order 23 as a classic agreement with

all the features set forth in that regulation for purposes of determining

past violations of law by respondents If their agreement did not have

all the features of General Order 23 agreements then respondents should

have filed it for approval under section 15 as did AFL and Zim with

respect to Agreement No 10254 Not having done so and having carried

out this agreement respondents have therefore violated section 15 If their

agreement did qualify under General Order 23 then that regulation makes

it mandatory that they file it for informational purposes in order to obtain

the exemption from the normal approval requirements of section 15 As

the regulation states in no uncertain terms

Compliance is mandatory and failure to meet these filing require

ments will result in the party desiring exemption remaining bound

by the approval requirements of section 15 of the Shipping Act

1916 46 CFR 524 1 b

Prudential is therefore correct in arguing that failure to file the agreement

under the regulation subjects the agreement to the same standard as any

other unfiled agreement i e it must be filed for approval and the parties

cannot carry it out prior to obtaining approval Hence whether the subject

agreement was or was not subject to General Order 23 the failure to

file anything until September 12 1983 when respondents filed an informa

tional memorandum with the Commission s Secretary constituted a violation

of section 15 Furthermore it is not strictly correct to argue as do respond

ents that a violation of a

regulation cannot constitute a violation of the

Act for purposes of reparation The Commission has held to the contrary

in Tractor and Farm Equipment Ltd v Waterman Steamship Corp and
524 FEDERAL MARITIME COMMISSION

Cosmos Shipping Co Order on Appeal 25 F M C 375 1982 That

the subject agreement might not have qualified for exemption from approval

requirements under General Order 23 because it was even simpler than

the type of agreements defined in that regulation does not mean that the

agreement assumed significantly more anticompetitive consequences and that

it was more likely to cause greater injury to Prudential in its operation

It might have been even less consequential than the typical General Order

23 agreement The only practical significance to a detennination whether

respondents have now met the requirements of General Order 23 is whether

they should be allowed to carry out their agreement even after making

their infonnation filing in an attempt to satisfy that regulation without

seeking fonnal approval of their agreement now However there is a pend

ing proposal to relax General Order 23 and a new regulation to supplant

General Order 23 will no doubt be forthcoming in the very near future

pursuant to the new law sees 16 17 and 21 Shipping Act of 1984 13

It is possible therefore that parties may be able to carry out such agreements

as the one in question by simple informational filing in tariffs as the

proposed revision to current General Order 23 would require or perhaps

by no filing at all under a new interim regulation issued under the new

law Or if the agreement is not deemed to fall under the present or interim

regulation dealing with non exclusive transshipment agreements the parties

may simply effectuate the agreement within 45 days after filing pursuant

to section 6 of the new law However the question of past violations

and reparation for such violations will not disappear 14

The Reparation Issue and Subsequent Proceedings

As I mentioned earlier Iattempted 1shorten thili proceeding by avoiding

what might have been unnecessary litigation I did this by confining the

hearing to the question of whether respondents have violated law so that

if no violations were proven by Prudential there would be no need to

i

13 According to arecent press release 8422 April 9 1984 the Commission plans to issue interim regula

tions concerning exemptions of agreements from lhe filing requirements not later than mid May

I Prudential argues that if the subject agreement is a non exclll8ive transshipmen1 agreement respondents

still violated law by failing to file something under General Order 23 until September 12 1983 when it

appears that amemorandum was mailed to the Commission sSecretary Ex 7 Prudential argues however

that t

filing should be regarded as a nullity and that theagreement should 80 throujh the approval process

anyway Prudential Opening Brief p

25 This argument would be valid if Prudential had proven that re

spondents had not complied with General Order 23 or that General Order 23 did not cover the subjectllgree

mental all However a memorandum does appear to JUlVe been mailed and a nOlalion was made in I arrell s

tariff Me 135 from North Atlantic ports in lhe U S regal lling the subject feeder service with ZEMS as

well as with another carrier via Naples effective October 27 1983 Ex 4 I offiCially notice that in Iarrell s

South Atlantic tariff IMC 136 such a notation was not filed until January 10 1984 effectivec February

8 1984 1st Rev page 30 The melllOl lllldum does not strictly 1onform to the form set forth in General

Order 23 since it appears to be Iess complicated lhan the form This does not necessarily prove that the

subject agreemenl does not fall within the scope of General Order 23 Incidentally the tariffnotations cited

comply with the regulation and expressly state that p articipating eonnecting or feeder carriers party to

transshipment arrangements have agreed to observe the rules regulations rates and roulings established here

in as evidenced by a connecting carrier agreemenl on file with the Federal Maritime Commission
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 525

fill the record with evidence as to Prudential s alleged financial injury

In addition because of the possibility now the reality that Prudential

could prove violations I again attempted to avoid unnecessary expense

of litigation by having the parties in their briefs focus on the question

of Prudential s entitlement to prove injury on the basis of such violations

as had been alleged and proven If as a matter of law there would

be no way in which Prudential could recover money damages as a result

of the violations in question it would obviously be a monumental waste

of time and money to remand this proceeding for the purpose of hearing

evidence on this matter

As discussed above respondents argue that Prudential is barred as a

matter of law from seeking to prove damages in this type of case essentially

because any violation was merely technical it caused no direct injury

to Prudential and there were no equities in favor of awarding damages

to Prudential Respondents argue that if Prudential suffered any financial

losses they were not caused by respondents technical failure to file informa

tional memoranda of a non exclusive transshipment agreement if respond

ents arrangement could even be considered to be such an agreement

but rather by Prudentials own lack of ability to compete successfully

with Farrell Respondents see no nexus between the failure to file an

informational memorandum and tariff notation and Prudential s lost profits

and distinguish the one case in which respondents who had operated under

section 15 agreements without approval of the Commission were ordered

to pay reparation by contending that the case involved intricate conspiracies

deliberately designed to harm the competing carrier Finally respondents

do not believe that the factors which the court in Consolo v F M C

cited above 383 U S 607 authorized the Commission to consider before

awarding reparation under section 22 of the Act are present in this case

and cite a leading case in the antitrust law of damages Brunswick Corp

v Pueblo Bowl O Matic cited above 429 U S 477 holding that the mere

unlawful market presence of a competitor is not enough to support an

award of damages under antitrust law

Prudential of course argues that there is no legal impediment barring

it from an opportunity to prove the extent of its alleged monetary losses

caused by the violations of section 15 and argues that equities do not

lie with respondents who knew or should have known that they had to

file their agreement with the Commission before carrying it out

I conclude that the present record is understandably incomplete as to

the factors which the Commission may consider according to the decision

of the Supreme Court in Consolo v F MC cited above 383 U S 607

I find also that I have considerable doubt that as a matter of law the

nature of the violations shown meets the requirements of proximate cause

and essential relationship to the type of injury claimed to justify an award

of reparation For these reasons and others I cannot recommend a remand

to develop full evidence on these matters Although the record being con

26 F M C
J

526 FEDERAL MARITIME COMMISSION

fined almost exclusively to the question of whether violation of section

15 or General Order 23 had occurred may be incomplete on these matters

it is nevertheless important not to prolong a proceeding and inflict on

parties unnecessary expenses of continued litigation if as a matter of law

there is no basis on which the Commission could award reparation On

this latter point in view of the somewhat inconsistent theories of recovery

which Prudential has confmned only recently in its last brief reply brief

p

24 it appears that as a matter of law its theories of recovery have

no validity and I cannot recommend a remand on such theories I now

explain

Applicable Principles of Law

There is nothing in section 22 of the 1916 Act which sets a violation

of section 15 apart from any other violation of that Act and states that

reparation cannot be awarded Section 22 a simply states

That any person may file with the Commission a sworn complaint

setting forth any violation of this Act by a common carrier by

water and asking reparation for the injury if any caused

thereby The Commission if the complaint is filed within

two years after the cause of action accrued may direct the pay

ment of full reparation to the cQmplainant for the injury

caused by such violation 46 U S C sec 821 a

Although not common the CommissiOn has awarded reparation in a

case involving respondents carrying out of unfiled agreements in violation

of section 15 This was Saipan Shipping Co Inc v Island Navigation

Co 24 F M C 934 614 ID F M C notice of finality May 5 1982

That the decision to awMd reparation in cases involving violations of section

15 turns on the facts of eaeh case is illustrated by another case involving

violation of section 15 Puget Sound Tug Barge Co v Foss Launch

Tug Co 5 SRR 67 1 0 1964 subsequently discontinlled following

withdrawal of complaint In the latter case reparation was not awarded

because it was found that respondents lower rates not the fact that they

had failed to file tQeir agreement had been the proximate eause of complain

ant s injury and furthermore because the equities favored respondents who

had relied on decisions later reversed and otherwise had operated in good

faith 5 SRR at 75 77

The decision to award reparation is discretionary with the Commission

and concerns not only considerations of proximate causation and traditional

evaluationSo utilized by courts of law in damage cases but peculiar equitable

and other factors Thus the Supreme CoUrt in Consolo v F tI C cited

above 383 U S at 622 identified certain factors for 1M Commission to

consider when determining whether to grant reparation as follows

1 whether a

reparation award would enhance the enforcement

of the Act 2 whether the shipper had suffered compensable

6RMC
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 527

injury and 3 whether the award of reparations would be consist

ent with the previous application of the Act as well as the factors

of culpability of the carriers

In addition to considering these factors the Commission has also held

that more traditional concepts of proximate cause and other such doctrines

utilized by courts of law must also be considered Thus although the

Commission s authority to award reparation for financial injury is discre

tionary the Commission does operate under certain limiting standards and

it has been held that something more than a finding of violation of the

Act is necessary before the Commission will exercise its discretion Consolo

v FM C cited above 383 U S at 621 Ballmill Lumber Sales Corp

v The Port of New York Authority et aI 11 F M C 494 510511 1968

Parson and Whittemore Inc v Fred Olsen Co 7 F MC 721 731

1964

More specifically an award of reparation in many respects follows the

law of damages in court cases and restricts damages to those which are

reasonably foreseeable or proximately caused by the violation proven not

to remote consequential damages The Commission has stated furthermore

that a complainant must show actual injury and show that such injury

is essentially related to the type of violation proven For example the

Commission has stated

It has long been established by the courts and Government agen

cies having jurisdiction in such matters that a damages must

be the proximate result of violations of the statute in question

b there is no presumption of damage and c the violation

in and of itself without proof of pecuniary loss resulting from

the unlawful act does not afford a basis for reparation Citations

omitted West Indies Fruit Co v Flota Mercante

Grancolombiana 7 F M C 66 70 1962

Even if a complainant shows that it has been injured by a

respondent s

violations of the Act the Commission has refused to award reparation

if the above principles have not been found to apply Thus in Ballmill

Lumber Sales Corp v The Port of New York Authority et al cited

above 11 F M C at 510511 despite finding violations the Commission

declined to award reparation stating

As the Examiner correctly pointed out the awarding of reparation

is a matter of discretion by the Commission Section 22 of this

Act states that we may direct the payment of reparation The

language is permissive and hence the mere fact of a violation

of the statute does not necessitate the grant of a

reparation award

Citation omitted In the instant proceeding we feed that a repara

tion award is unwarranted We have recognized that Ballmill has

been disadvantaged However we are not convinced that

the nature of the violations is such as would warrant the requested

reparation award Furthermore we are not satisfied that the dam

T rl
1

528 FEDERAL MARmME COMMISSION

ages alleged by Ballmill are real or whether the alleged damages

are sufficiently related to the violations of the Act T o

award damages alleged to have been incurred by reason of unjust

discrimination there must be that degree of certainty andsatisfac

tory conviction in the mind and judgment of the Board as would

be deemed necessary under the well established principles of law

in such cases as a basis for a judgment in Court

In addition to the above considerations respondents have called my atten

tion to a leading case in the field of antitrust damages namely Brunswick

Corp v Pueblo Bowl O Matic cited above 429 U S 477 This case is

worth considering not only because the Commission in the above quotation

stated that it would be guided by principles similar to those followed

by courts of law in damages cases but also because section 15 has an

obvious relationship to antitrust laws See e g

Carnation Co v Pacific

Westbound Conference et al 383 U S 213 1966 FM C v Pacific

Maritime Association et al 435 U S 40 1978 Indeed as the Court

stated in Carnation the 1916 Act was the end product of an extensive

investigation of the shipping industry that was conducted by the Congress

which enacted the Clayton Act 383 U S at 218 the latter Act being

the very law involved in the Brunswick case and further held that plaintiff

in Carnation had rights under the Shipping Act which were collateral

to those under the antitrust laws and could have sought damages under

either the Shipping Act or the antitrust laws but not both 383 U S at

224 In PMA furthermore the Court described the duty ofthe Commission

to consider antitrust implications under section 15 of the 1916 Act 435

U S at 53 Furthermore in FMC v SeatrainLines Inc 411 U S 726

737 738 1973 the Court specifically recited legislative history to the

1916 Act showing that Congress enacted section IS in order to forestall

the development of monopolies which would result from open competition

in the shipping industry Therefore I commend the Brunswick Corp deci

sion to the Commission s attention

In Brunswick plaintiffs who operated bowling centers sought treble

damages for injuries allegedly resulting from Brunswick s acquisition of

bowling centers that would have gone out of business absent Brunswick s

acquisitions The acquisitions were held to have violated section 7 of the

Clayton Act under the socalled deep pocket theory enunciated in pre

vious decisions Plaintiffs argued that but for Brunswick s acquisitions

the acquired centers would have gone out of business and the plaintiffs

would have gained customers and increased profits Hence plaintiffs claimed

that they were injured by reason of Brunswick s section 7 acquisitions

However the Supreme Court rejected this theory of recovery holding that

plaintiffs must prove more than a section 7 violation and a causal link

between that violation and theaUeged injury The Court noted that plaintiffs

real complaint was that Brunswick s acquisitions of the bowling centers

preserved competition thereby depriving plaintiffs of the increased profits

26 F M C
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 529

they would have realized had the acquired bowling centers gone out of

business The Court stated

Plaintiffs must prove antitrust injury which is to say injury of

the type the antitrust laws were intended to prevent and that

flows from that which makes defendants acts unlawful The injury

should reflect the anticompetitive effect either of the violation

or of anticompetitive acts made possible by the violations It

should in short be the type of loss that the claimed violations

would be likely to cause Case citation omitted 429 U S

at 489

Elsewhere the Court commented on plaintiffs theory of recovery in

Brunswick namely that increased competition resulting from the acquisi

tions by the financially sound Brunswick Corporation deprived plaintiffs

of benefits they expected would result to them if the acquired competitors

had been allowed to go out of business The Court rejected the theory

stating

The antitrust laws however were enacted for the protection

of competition not competitors It is inimical to the purposes

of these laws to award damages for the type of injury claimed

here 429 U S at 488

Since the plaintiffs in Brunswick had offered no alternative theory to

support their damage award the Court directed judgment in favor of defend

ant Brunswick notwithstanding the verdict in the lower court in favor of

plaintiffs 429 U S at 490 The Brunswick doctrine has been extended

to other provisions ofthe antitrust laws See e g Chrysler Corp v Fedders

Corp 643 F 2d 1229 6th Cir 1981 Shepard s Antitrust Adviser 2nd

Ed Carla Anderson Hills Ed 1983 cumulative supplement section

1 49A

As to the factors to be considered by the Commission according to

Consolo v F MC cited above 383 U S 607 namely enhancement of

enforcement of the Act compensable injury consistency with previous appli

cation of the Act and culpability the record leans toward respondents

Thus the type of agreement which respondents carried out is not the

classic non exclusive transshipment agreement as defined in General Order

23 but is of a type that is even less complicated than the classic type

which the regulation determined to have inconsequential effect s upon

the commerce of the United States when determining to exempt them

from the normal approval requirements of section 15 Docket No 68

4 Exemption of Nonexclusive Transshipment Agreements cited above 10

SRR at 150 The Commission is even considering relaxing the already

relaxed filing requirements as to non exclusive transshipment agreements

as noted earlier a further indication that such agreements are considered

to have minimal anticompetitive consequences See Docket No 834

Exemption of Nonexclusive Transshipment Agreements etc cited above

26 F M C
530 FEDERAL MARITIME COMMISSION

48 Fed Reg 45270 It is difficult to see how the Commission could

award substantial reparation as a result of the failure to file a memorandum

of such agreement on a finding that the agreement directly caused significant

financial injury to a competitor after the Commission has for years deter

mined that such agreements have minimal effects It is also difficult to

see how such an award would be consistent with previous application

of the Act when the Commission had never awarded reparation merely

on the basis of a technical lack of filing as opposed to the carrying

out of a section 15 agreement specifically designed to eliminate competition

as was the case in Saipan Shipping Co Inc v Island Navigation Co

cited above 24 F M C 934 There is also doubt as to the effectiveness

of such an award for a technical type of violation when the parties involved

had no clear precedent that the type of agreement they had carried out

did in fact qualify under General Order 23 and may not have even risen

to the level of a simple non exclusive transshipment agreement since the

agreement did not even have all the features of the simple agreement

defined in that regulation

As to the question of compensable injury there is no doubt that a

violation of section 15 such as that which occurred in Saipan Shipping

cited above i e forced elimination from a trade or destruction of competi

tion by concerted design has such a nexus with the victim carrier that

the injury the victim s loss of profits is cornpensable But this is not

a Saipan Shipping type of case Instead there are indications that any

harm suffered by Prudential was only the result of Farrell s

reentry into

the trade and the open competition offered by Farrell

Finally as to the question of culpability on the part of respondents

there is no indication on the record that respondents entered into their

arrangement with nefarious plans to eliminate Prudential or that they be

lieved that their otherwise innocuous looking transshipment agreement at

Haifa would have substantial anticompetitive consequences All that the

record indicates thus far is that Farrell wished to reenter the Alexandria

trade after having been forced to leave it temporarily because of a change

in the ships it operated Tr 107 134136 156

Admittedly the record may not be as fully developed on these Consolo

factors as it could be However even the limited record tends in a direction

hich does not favor Prudential as far as seeking a

reparation award

is concerned and because of the nature of the type of violation involved

01 a remand would not be warranted for other asons

As I stated I have serious doubts as to whether as a matter of law

Prudential would be able to justify an award ofreparation for other reasons

ISIt perhaps bears noting that Prudential s witness Morris testified that Prudential had acquired notice some

time ago of the subject agreement of which they complain even though it had not been filed Tr 22 Fur

thermore it nowhere appears that Prudential was driven from the trade as was Saipan Shipping but rather

it appears that Prudential remained as an active competitor against Farrell and had Itself unsuccessfully nego

tiated with the shipper of bakery equipment which Farrell attracted for its through service to Alexandria Tr

23 7380
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 531

These have to do with the question of proximate cause and the essential

relationship of the type of injury alleged to the type of violation involved

This is because the type of damages alleged does not appear to be suffi

ciently related to the violations of the Act Ballmill Lumber Sales

Corp v The Port of New York Authority et al cited above II F MC

at 510 This is another way of saying that the failure to file a memorandum

of an agreement was not the proximate cause of Prudential s loss of business

but rather the cause was Farrell s competition as assisted by ZEMS feeder

service Because the failure to file and obtain approval was not the proxi

mate cause of damage to complainant but it was rather respondent s lower

rates which caused the complainant to lose business no reparation was

found to be warranted despite a section 15 violation in Puget Sound Tug

Barge Co v Foss Launch Tug Co cited above 5 SRR 67

But even if a remand for the purpose of taking further evidence could

somehow show that an award of substantial moneys to Prudential would

enhance enforcement of the 1916 Act would relate to compensable injury

would be consistent with previous application of the Act and deal with

culpability and even if such further evidence could show a reasonable

nexus between the failure to file a memorandum and Prudential s loss

of business Prudential s inconsistent theories of recovery seem to present

an insuperable obstacle as a matter of law Although not always clear

and seemingly inconsistent Prudential s

arguments seem to run as follows

Prudential was the only other U S flag carrier operating from Atlantic

Coast ports to Alexandria in addition to Farrell and thus was eligible

to carry U S flag preference cargo Prudential would have carried the 45

shipments of record but for the subject transshipment agreement which

enabled Farrell to carry the shipments instead 16 The other respondent

Zim being an Israeli carrier was not eligible to carry such cargo from

U S ports at least This argument can only mean that Prudential contends

that the failure to file a memorandum of the agreement and the unapproved

carrying out of the transshipment agreement enabled Farrell to take business

away from Prudential which no other competitor was eligible to carry

Prudentials Opening Brief pp 29 30 As Prudential states w ithout

the agreement or arrangement Farrell would not be able to provide a

service of any kind to Alexandria although entitled to carry the cargo

Since PLI operated the only alternative ocean service between U S Atlantic

coast ports and Alexandria it was deprived of an opportunity to participate

in the transportation of this cargo Prudential s Opening Brief p

30

I leave aside the question of whether it was Farrell s failure to file a

memorandum or Farrell s open competition and possibly preferable rates

which caused Prudential to lose the shipments and whether Prudential

which had the right to compete with Farrell could really have been deprived

16This assumes that all 45 shipments were required to be carried by U S flag vessels afact not established

on the present record

F M r
532 FEDERAL MARITIME COMMISSION

of any opportunity to bid for the cargo since Prudential nowhere alleges

that Prudential was forced to leave the marketplace because of the resump

tion of Farrell s service However after seemingly arguing that the restora

tion of Farrell to the trade by means of the unfiled agreement took business

away from Prudential Prudential confuses the argument by also contending

that it was not increased competition that caused its injury but reduced

competition Thus Prudential argues that the transshipment agreement re

duced the number of competing carriers from three Farrell Zim and

Prudential to two Farrell and Prudential This seemingly inconsistent

argument is perplexing It is difficult to discern how Prudential could suffer

harm if the number of its competitors was reduced from three to two

One would assume that Prudential facing only one competitor would be

in a better position to gain business at least by attracting the business

abandoned by the departed carrier What makes the argument even more

inscrutable is the fact that Prudential itself contends that Zim the supposed

third competing carrier was presumably never eligible to carry the 45

shipments in the first place not being U S flag Thus in reality it appears

that at one time there were two carriers competing for U S flag preference

cargo in the subject trade Farrell and Prudential that Farrell left for a

while at the end of 1981 leaving only Prudential and that Farrell returned

in the summer of 1982 restoring the number of competing carriers to

two Therefore Prudential has merely returned to a previous situation where

in it apparently faces Farrell as its only competitor for U S flag preference

cargo in the subject trade

Hence while Prudential seems partially to argue increased competition

of Farrell resulting from the unapproved agreement as the cause of its

injury it nevertheless later seems to argue that reduced competition caused

its injury In reality however it appears that it began with one competitor

and ended with the same one competitor Farrell However as a matter

of law neither the increased competition argument nor the reduced competi

tion argument seems to have merit In Brunswick Corp v Pueblo Bowl

O Matic cited above 429 U S 477 the Court held that increased competi

tion resulting from the preservation of competitors in the marketplace ac

complished by Brunswick through illegal means did not justify an award

of damages to the plaintiff competitors who had hoped to face fewer

competitors prior to the Brunswick acquisitions The Court in Brunswick

found that awarding damages on plaintiffs theory that the violations had

increased competition and deprived plaintiffs of anticipated benefits which

would have flowed from the departure of their competitors was inimical

to the purposes of the antitrust laws 429 U S at 488P

171n previous decisions under section 15 the Commission has held that it is not grounds to disapprove

an agreement under the standards of section 15 merely because protesting carriers face greater competition

for cargo than they would in the absence of an agreement ThIs standing alone is not grounds fordisapprov

ing the agreements Agreements Nos 10186 10332 25 F M C 538 548 1983 and cases cited therein

If the Commission cannot find that an agreement would harm competing carriers merely because it creates

more competition it is difficult to see how the Commission would exercise its discretion to award money

F IlMl
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 533

On the other hand if Prudential is claiming that the subject agreement

resulted in the departure of a competing line ie Zim from the marketplace

although as regards U S flag preference cargo it does not appear that

Zim was really in the marketplace the courts reject this theory of recovery

as well Thus in California Computer Products v IBM 613 F 2d 727

9th Cir 1979 the Court followed the Brunswick decision in holding

that the injury complained of must be some type of antitrust injury ie

an injury which the antitrust laws were enacted to prevent but also held

that to obtain an award of damages plaintiffs must show more than loss

of business or departure of a competitor from the marketplace In this

regard the court stated as to antitrust injury

Satisfying the latter burden is dependent on a showing that the

injury was caused by a reduction rather than an increase in com

petition flowing from the defendant s acts since t he antitrust

laws were enacted for the protection of competition not

competitors Citations omitted Accordingly the plaintiff must

demonstrate that the defendant s conduct was intended to or did

have some anticompetitive effect beyond his own loss of business

or the market s loss of a competitor 613 F 2d at 732 Emphasis

added

I conclude therefore that if Prudential s

theory of recovery is that the

subject agreement enabled Farrell to compete with Prudential and deprive

Prudential of business there could be no recovery as a matter of law

since neither the antitrust laws nor the Shipping Act were designed to

stifle competition and something more such as intention to monopolize

or destroy competition would be necessary to warrant an award of repara

tion as in Saipan Shipping Co Inc v Island Navigation Co cited above

However if Prudential s

theory of recovery is that the subject agreement

reduced competition from three to two this is incorrect on the facts since

as Prudential itself asserts one competitor Zim was not eligible for the

cargo in question But even if so mere loss of business or the departure

of another competitor from the marketplace is insufficient to justify an

award of damages absent some type of predatory monopolistic or other

objectionable intent or effect cognizable under the antitrust laws and the

Shipping Act as found in Saipan Shipping The latter type of situation

is not involved in this case

I therefore conclude that although respondents violated section 15 and

General Order 23 by failing to file their memorandum of agreement and

appropriate tariff notations the violation was technical and inconsequential

and that there is no basis to prolong the proceeding and expend time

and money in further litigation by remanding for the purpose ofdeveloping

damages to competing carriers when operation under the agreement had not been preceded by the filing of

amemorandum and tariff notation the competing carriers had become aware of the operation notwithstanding

the failure to file and there was neither allegation nor evidence of deliberate evasion of the filing requirement

for the purpose of harming compelilors
534 FEDERAL MARITIME COMMISSION

evidence on the question of reparation for Prudential As to the question

of assessment of penalties for the violation which Prudential also requests

the Commission has recently held that this is a matter solely for the

Commission to decide and that private complainants have no standing in

the matter See East Coast Colombia Conference and Agropecuaria y

Maritima etc Petition for Investigation 22 SRR 723 1984 18

ULTIMATE CONCLUSIONS

In conclusion I find that Prudential has shown that respondents Farrell

and Zim carried out a

cooperative working arrangement sometime after

June 1982 through April 1983 by which ZEMS a division of Zim trans

shipped Farrell s cargo at Haifa to enable Farrell to restore a through

service from U S ports to Alexandria that Farrell had temporarily discon

tinued The arrangement constituted a type of nonexclusive transshipment

agreement and a memorandum and tariff notation should have been filed

with the Commission under General Order 23 but were not until September

12 1983 and thereafter I find however that although a violation of

the regulation and underlying statute such failure to file a memorandum

and tariff notation is not the type of violation inherently likely to be

the direct cause of substantial financial injury to a competing carrier like

Prudential Unlike a case in which an unfiled agreement is deliberately

designed to eliminate competition and succeeds in that objective the facts

in this case shows that the non exclusive transshipment merely enabled

a U S flag carrier Farrell to return to the marketplace and compete with

the only other U S flag carrier there and that the other carrier Prudential

although it again faced competition was not disabled from competing

Prudential s argument that three competing carriers Prudential Farrell

Zim were reduced to two Prudential Farrell and that this caused Pruden

tial harm makes little sense since the facts show that as far as U S

flag preference cargo is concerned the non exclusive transshipment agree

ment re established the status quo by re enabling a second U S flag carrier

Farrell to compete with the only other such carrier Prudential Prudential s

argument that the number of competing carriers was reduced as far as

any cargo is concerned presumably by Zim s departure from the trade

is also not supported by the facts since Prudential has furnished no probative

evidence that Zim ceased competing from U S ports to Alexandria for

any cargo it could carry before during and after its local division ZEMS

carried Farrell s cargo from Haifa to Alexandria pursuant to the subject

transshipment agreement

Given the type of case that this is as outlined above a remand for

the purpose of developing evidence on the quantum of Prudential s alleged

n Docket No 837 Atlantic GuljlWest Coast of South America Conference et al v Empresa Mari

time del Estado 26 F M C 258 April 18 1984 the Commission found a technical failure to file a tariff

notation of a transshipment agreement and discontinued the proceeding without assessing penalties or remand

ing to determine damages
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 535

injury would be a wasteful and costly exercise of the resources of all

parties since it appears by the very nature of this case that an award

of reparation would not enhance enforcement of the Act be consistent

with previous application of the Act or be based upon a violation as

to which there was any significant degree of culpability or any meaningful

relationship or nexus between the type of technical violation involved and

any loss of business in the marketplace by a competing carrier

S NORMAN D KLINE

Administrative Law Judge
536 FEDERAL MARITIME COMMISSION

APPENDIX

cj

SLOT CHARTER AGREEMENT

THIS AGREEMENT is entered into this 6th day of January 1976 be

tween AMERICAN EXPORT LINES INC AEL ZIM ISRAEL NAVI

GATION CO LIMITED Zim both of whom are common carriers

by water offering services between the United States and the Mediterranean

ports Trade

The parties agree as follows

1 From time to time AEL shall for its cargo moving in the Trade

charter space on vessels owned or operated by Zim or related entities

for carriage of AEL containers between Israeli ports on the one hand

and Koper Trieste and Venice on the other i e eastbound and westbound

provided that transshipment shall take place only at Israeli ports AEL

shall compensate Zim for each TEU carried at liner terms at rate s to

be agreed upon by the parties All transshipment expenses including delivery

to andor removal of said containers from Zim s terminal facilities shall

be borne by AEL

2 AEL shall be under no obligation to use Zim s service as described

in paragraph in 1 above and Zim shall be under no obligation to offer

such service or to reserve space for AEL s cargo It is the intent of

the parties that AEL shall from time to time use such service but only

to the extent it desires to do so and that Zim shall carry such cargo

to the extent it offers such service and has space available but shall

be under no obligation to offer such service or reserve space for AEL

3 Zim shall be responsible for any loss or damage for such cargo

occurring from the time it is loaded aboard its vessels until discharged

4 AEL shall file semi annual reports with the Federal Maritime Commis

sion during the months of July and January covering the preceding six

month period or fraction thereof for the duration of the agreement showing

with respect to each instance cargo moves pursuant to this agreement

the voyage number the date of sailing the origin and destination ports

and the number of containers transported in 20 foot equivalents

5 Cargo moving under this Agreement shall be carried pursuant to

AEL s applicable tariffs and bills oflading on file with the Federal Maritime

Commission
PRUDENTIAL LINES INC V FARRELL LINES INC ET AL 537

6 AEL shall immediately notify the Federal Maritime Commission of

the cessation of further operations under this Agreement

AMERICAN EXPORT LINES INC

S

JOHN A SMITH

Director ofConferences

ZIM ISRAEL NAVIGATION CO LIMITED

Re executed January 3 1977

to Comply with FMC Order of 122276
FEDERAL MARITIME COMMISSION

DOCKET NO 8347

AGREEMENT NO 10467 LATIN AMERICAN CHARTER

AGREEMENT AGREEMENT NO 10468 LATIN AMERICAN

DISCUSSION AGREEMENT

NOTICE

June 12 1984

Notice is given that no exceptions were filed to the May 10 1984

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

could determine to review that decision has expired No such determination

has been made and accordingly that decision has become administratively

final

Proponents of Agreement No 10467 shall amend this agreement as set

forth in the initial decision and shall ensure that the Commission receives

this modified agreement appropriately signed by all parties no later than

June 15 1984 The modified agreement will be deemed approved as of

the date the agreement appropriately modified is received by the Commis

sion

S FRANCIS C HURNEY

Secretary

538 26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 47

AGREEMENT NO 10467 LATIN AMERICAN CHARTER

AGREEMENT AGREEMENT NO 10468 LATIN AMERICAN

DISCUSSION AGREEMENT

Five earners operating between U S Atlantic and Gulf ports and ports and points in five

South American countries filed a space charter Agreement and a discussion Agreement

seeking approval under section 15 of the Shipping Act 1916 The Agreements generated

four protests on the grounds that they were not necessary and were not justified and

could be harmful in connection with South American cargo reservation laws Proponents

withdrew the discussion Agreement but contended that the space charter Agreement was

justified by trade conditions and would benefit shippers and carriers Proponents also

agreed to amend the space charter Agreement by adding certain clarifying language

following which all active protests were withdrawn and Hearing Counsel expressed support

for the Agreement It is held

1 The space charter Agreement is a simple voluntary open arrangement which does not

authorize rate fixing or jointactivities of any kind and would have minimal anticompetitive

effects

2 There is evidence that the Agreement would benefit shippers and carriers by enabling

the parties to provide service to shippers which would otherwise be disrupted and by

enabling carriers to make better utilization of unused vessel space

3 There is no countervailing evidence showing that the Agreement would harm any interest

or would work in conjunction with South American cargo reservation laws to harm

anyone and it appears that the protests were based upon misunderstandings and fears

that the Agreement would operate with the withdrawn discussion Agreement to cause

harm

4 The Agreement is approved provided that proponents file certain clarifying amendments

and fumish periodic reports which they have already agreed to do

Nathan J Bayer for proponents

Richard W Kurrus and Paul G Kirchner for protestants Ecuadorian Line and CCT

Andrew M Parish and Beth Ring for protestant Florida Customs Brokers and Forwarders

Association Inc

Arturo J Abascal for protestant Navicon

John Robert Ewers and William D Weiswasser for Hearing Counsel

26 F M C 539
540 FEDERAL MARITIME COMMISSION

INITIAL DECISION I OF NORMAN D KLINE ADMINISTRATIVE

LAW JUDGE

Adopted June 12 1984

This proceeding began with the issuance of an Order of Investigation

and Hearing by the Commission on October 5 1983 in order to determine

whether two agreements should be approved under the standards of section

15 of the Shipping Act 1916 46 U S C 814 Both agreements had

originally been filed with the Commission on January 31 1983 The first

agreement No 10467 was arelatively simple space charter arrangement

among five carriers operating in the trade between U S Atlantic Gulf ports

and U S points and ports and points in Bolivia Chile Peru Ecuador

and Columbia The five carriers were prominent operators in the trade

consisting of two U S flag carriers Delta Steamship Lines Inc Delta

and Lykes Bros Steamship Co Inc Lykes and three leading national

flag carriers of the South American countries involved Compania Peruana

de Vapores Peruvian flag Transportes Navieros Equatorianos Ecuadorian

flag and Compania Sud Americana de Vapores Chilean flag The purpose

of the Agreement was to authorize each of the carriers to charter space

to each other on vessels operated by them when needed on a space

available basis with no requirement that any party request space or reserve

space for any other party It was characterized by proponents of the Agree

ment as casual space charter arrangement without any fixed require

ments and was compared to another such arrangment albeit one more

complicated Agreement No 10420 the American Flag Common Carrier

Charter Agreement approved by the Commission The subject Agreement

would expire on June 30 1987 unless four members withdrew earlier

Proponents of this space charter Agreement maintained that the Agreement

was required by a serious transportation need would secure important public

benefits and was in furtherance of a valid regulatory purpose Specifically

proponents argued and presented evidence in support of their contentions

that the subject trade was seriously overtonnaged that cargo had declined

that severe rate instability existed in the trade that costs of providing

service had increased that some carriers had suffered bankruptcies and

had to withdraw from the trade and that certain excessive competitive

practices had severely destabilized the trade Proponents contended that

their Agreement would benefit the trade by allowing for maximum equip

ment utilization conserve energy maintain the quality and quantity of

service that shippers had come to expect add to stability in the trade

and have little anticompetitive effect since participation in the arrangement

wasentirely voluntary

At the same time that the above five proponents filed their space charter

agreement No 10467 with the Commission the same five carriers plus

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227
LATIN AMERICAN CHARTERDISCUSSION AGREEMENTS NOS 541

10467 AND 10468

a sixth carrier Flota Mercante Grancolombia S A filed a so called discus

sion agreement No 10468 by which the six carriers would confer for

the purpose of developing exchanging and discussing trade data and infor

mation The six carriers believed that this latter Agreement would serve

as a forum to discuss the problems affecting the trade adversely mentioned

above and would enhance their ability to reach helpful economic decisions

on modernization and fleet deployment as well as commercial solutions

to conflicting cargo promotion laws and policies

The filing of the two Agreements generated four protests filed by three

carriers and an association of customs brokers and freight forwarders name

ly Naviera Continental NAVICON C A Navicon Ecuadorian Line Inc

Ecuadorian Coordinated Caribbean Transport Inc CCT and the Florida

Customs Brokers and Forwarders Association Brokers and Forwarders As

sociation These protestants disputed proponents contentions that the trade

was overtonnaged contended that the space charter Agreement was unjusti

fied extremely anticompetitive and was a first step towards a consortium

and raised the question of possible impact of the cargo reservation laws

in the various South American countries on the subject Agreement Two

of the protesting parties CCT and the Brokers and Forwarders Association

also protested approval of the discussion Agreement No 10468 reiterating

similar objections

After consideration of the proponents submissions seeking approval the

protests and proponents replies to the protests the Commission determined

that the nature of the contentions and factual disputes required that the

Commission institute a formal proceeding in which these issues could be

determined properly consistent with the Commission s duty to examine

competitive consequences of agreements weigh the purported benefits

against possible competitive harm and determine whether the Agreements

served needs or purposes which would offset their inroads on antitrust

policies as required by principles of law prevailing under the 1916 Act

See Federal Maritime Commission v Aktiebolaget Svenska Amerika Linien

390 U S 238 1968 United States Lines v FMC 584 F 2d 519 D C

Cir 1978 Marine Space Enclosures Inc v F MC 420 F 2d 577 D C

Cir 1969

The formal proceeding was launched as noted above by the service

of the Commission s order on October 5 1983 The Commission set forth

the basic issue as to whether the two Agreements should be approved

disapproved or modified under the standards of section 15 of the 1916

Act In addition the Commission framed three specific issues for determina

tion relating to the competitive effects of the Agreements either alone

or together the effects of South American cargo preference laws the inter
542 FEDERAL MARITIME COMMISSION

action of the two Agreements and the scope of the second Agreement

No 10268 2

Developments Following Issuance of the Commission s Order

The first major development Occurring after institution of the formal

proceeding wu the withdrawal of Agreement No 10468 the discussion

agreement by the parties thereto This withdrawal was effectuated by letter

of counsel dated November 3 1983 and was confirmed by my ruling

on November 7 1983 The withdrawal of the discussion Agreement served

to remove from the proceeding all issues pertaining solely to that Agree

ment specifically an issue pertaining to joint competitive effects resulting

from the interplay of the two Agreements trade conditions and problems

which might be alleviated by the discussion Agreement interaction of the

two Agreements and the scope and membership limitations of the discussion

Agreement Justification for the remaining space charter Agreement No

10467 of course remained to be shown under the standards of section

15 of the 1916 Act

Shortly after withdrawal of the discussion Agreement the parties com

menced to utilize the Commission s prehearing discovery precesses Pro

ponents of the space charter Agreement served interrogatories and requests

for production of documents on protestants and Hearing Counsel and Hear

ing Counsel served corresponding materials on proponents In addition

proponents took the deposition of the President of Protestant Ecuadorian

Line Several prehearing conferences were conducted in an effort to bring

the proceeding to a prompt conclusion

During the course of this preheating activity discussions beJanbetween

proponents and the three active protestants Ecuadorian Line CCT and

the Brokers and Forwarders Association in an effort to narrow or eliminate

issues among these parties The remaining protestant Navicon although

kept apprised of developments by counsel for proponents by Hearing Coun

sel and by notices which I issued took no part in preheating activity

did not appear at any of the prehearing conferences or at the hearing

and notified Hearing Counsel that it was declining participation because

2The specific issues framed in the Commission senter p 4 were as follows

IWhat competitive effect will the Agreements either individually or toaether have on the trade

and what conditions in the trade footnote omitted would justify any anticompetitive effect the

A8reements may be found to have

2 What are the terms of the South American carso preference laws that apply to the trades within

the 8oo8raphic scope off the Asreements and what effect will these laws have on the imp1emenla

tion of the A8reements and the trade

3 How will A8reement Nos 1046 7 and 10468 illleracl with each other and other approved section

IS a8reements in the trade Why shouldA8reement No 10468 membership be limited to the na

tional flag carriers of the countries involved and why should lhat aareement include matters that

are within the scope of other approved section IS asreements to which Proponents arepany

In the footnote to issue no I omilled above the Commission instructed proponents to submit evidence

supponin8 their a1le8ations that trade conditions were unstable and other mailers and to show how the Agree

ments would alleviate such conditions

fiPM C
LATIN AMERICAN CHARTERDISCUSSION AGREEMENTS NOS 543

10467 AND 10468

it was being purchased by an Ecuadorian concern and had no instructions

I issued no sanctions against Navicon but noted its absence and cautioned

that the proceeding could not be delayed and its allegations would not

be proven by its continued lack ofparticipation 3

The result of the discovery and discussions among the parties concerned

was the withdrawal of two protests those by CCT and the Ecuadorian

Line in return for certain amendatory or clarifying language which pro

ponents agreed to insert in their Agreement Later as I discuss a third

protestant the Brokers and Forwarders Association also withdrew their

protest in return for certain clarifying statements by proponents and Hearing

Counsel expressed support for approval of the Agreement on certain condi

tions relating to reporting requirements and minor language changes

Both CCT and the Ecuadorian Line had protested approval of the subject

Agreement contending that proponents had not shown the requisite need

or justification for such an Agreement They disputed proponents conten

tions that there was an overtonnaging problem in the trade that cargo

had declined and that severe rate instability existed and disputed pro

ponents contentions that activities at the Port of Miami causing shift of

cargo to that port required any remedial action and were concerned that

the subject Agreement might be aimed at diverting cargo away from Miami

and harming carriers serving that port such as CCT and Ecuadorian Line

CCT was especially concerned that the subject space charter Agreement

might work in conjunction with the now withdrawn discussion Agreement

to create a consortium with monopolistic effects and both CCT and Ecua

dorian Line were worried about any possible effects of the subject Agree

ment on South American cargo reservation laws See affidavits of Vlada

and Calderon Attachments G and H to Ex I Furthermore according

to a deposition taken of Mr Dennis A Meenan President Ecuadorian

Line that Line also feared that the subject space charter Agreement author

ized joint rationalization of sailings coordination of sailings possible elimi

nation of some ports of direct call joint advertising and joint cargo solicita

tion and did not provide for other carriers serving the trade to become

parties to the Agreement Exs 2 and 3

Whatever the concerns of the two protestants CCT and Ecuadorian Line

they appear to have been alleviated considerably by a further understanding

of the Agreement which resulted from discussions with proponents and

by proponents willingness to amend the original Agreement with clarifying

language Specifically to remove any ambiguity as to the meaning and

intention of the parties to the Agreement proponents submitted the following

3See letter dated November 15 1983 from Mr Arturo J Abascal Marketing Manager of Navicon to

Hearing Counsel Notice of Further Prehearing Conference and Related Rulings March 2 1984 p 3 n I

transcript of prehearing conference March I 1984 pp 510 I note that the Commission has made clear

that it expects parties protesting approval of agreements to come forward with information in support of the

allegations in their protests and that failure to do so may result in approval of an agreement notwithstanding

the protest See e

g Agreement No 9955 1 18 F M C 426 470 1975 Agreement No 9905 14 F M C

163 165 1970

f FMr
544 FEDERAL MARITIME COMMISSION

clarifying language adding new paragraphs d and e to Article

I of the Agreement and a new paragraph 21 Ex IA The new language

reads as follows

d Carriers shall not agree among themselves nor jointly coordi

nate vessel sailings nor shall they arrange except on a vessel

by vessel basis for the charter of space

e A Carrier seeking to charter space from another carrier party

to this agreement at a particular port must serve that port through

cargo solicitation and regular vessel calls at that port in order

to charter space on the vessel of a carrier party calling at that

port

21 Any common carrier by water operating vessels in the Trade

may become a party to this agreement by signing a counterpart

signature page to this agreement Changes in membership shall

be reported to the Federal Maritime Commission 4

As explained by Mr David Flint Director of Pricing for Delta a party

to the Agreement parties to the Agreement met with representatives of

protestants CCT and Ecuadorian Line in order to explain the proposed

operation of the Agreement with the hope that the protestants would perhaps

join the Agreement themselves or at least withdraw their protests Pro

ponents discussed the various concerns expressed by protestants explained

that the Agreement was not intended to operate in the manner feared

by protestants and agreed to furnish amendatory or clarifying language

to the Agreement to make clear that protestants should no longer be con

cerned about the Agreement Ex 2 Thus the clarifying language quoted

above is designed to answer and satisfy the various concerns As seen

by paragraph d the proponents specifically disable themselves from

coordinating vessel sailings or engaging in joint activities Ex 2 p

4

Furthermore to emphasize the fact that the Agreement is intended to be

merely a casual space charter arrangement when the need arises for a

carrier to utilize space of another carrier s vessel calling at a particular

port when the fJ1St carrier s vessel for some reason cannot call at that

port paragraph e specifically requires that the flFSt carrier must regu

larly serve the port through solicitation and regular vessel calls in order

to be able to charter space on another carrier s vessel In order to allay

any fears that the Agreement would be anticompetitive new Article 21

4

This last sentence regarding reporting of changes In mem1lenhip to the Commission was added to the

original amendatory language at the hearing held on April 19 19B4 at the request of Hearing Counsel to

which request counsel forproponents had IO objection IrQponents aareed to certain othtr clarifying amend

ments to the language of the Agreement at the hearillJ on April 19 1984 Thus they agreed to delete the

words U S Plaaand reciprocal national flag from the preamble to the Agreement qualifying the parties

so that the Agreement would ensure that it Is open to all C8ITiers serving th trade In addition in Article

17 of the Agreement Reporting Requirements proponents agreed to minor wordchanges 10 clarify the fact

that they would be submilllng periodic reports detailing rather than sunvnarizing their carryings and would

submit those reports in the form set forth by the Federal Maritime Commission Proponents agreed to

amend theirAgreement to insert these quoted words and phrases inArticle 17
LATIN AMERICAN CHARTERDISCUSSION AGREEMENTS NOS 545

10467 AND 10468

to the Agreement specifically provides that membership in the Agreement

is open to any carrier serving the trade

After discussing their Agreement with the two protesting carriers pro

ponents believed that they had satisfied those carriers concerns and expected

the two carriers to withdraw their protests provided that the amendatory

language quoted above would be included in the Agreement Ex 2 pp

34 Ex IA Counsel for the two lines thereafter notified me that the

amending language satisfied many of the major concerns of the Ecua

dorian Line Ex 2A or the major concerns of CCT as to the possible

injurious consequences of the Agreement Ex 2B Accordingly both

of these lines withdrew their protests although not supporting approval

of the Agreement and still questioning some of proponents arguments

in favor of approval Exs 2A 2B 5

In addition to satisfying many or all of the major concerns of the two

lines and of the Brokers and Forwarders Association proponents made

an effort to answer Hearing Counsel s concerns as well Hearing Counsel s

concern was that somehow the space chartering Agreement could reduce

the amount of cargo available to carriers not parties to the Agreement

in conjunction with cargo reservation laws of the destination countries

in South America and expressed certain other concerns about how the

Agreement would operate as to compensation to the carrier leasing space

to another carrier as to reporting requirements and as to explicit reference

to the rights of other carriers to join the Agreement These concerns were

satisfied in the following manner

As to clarification of the rights of other carriers to join the Agreement

as seen new Article 21 makes clear that any common carrier operating

vessels in the trade may become a party Furthermore in response

to Hearing Counsel s

request that the Commission be informed of changes

in membership proponents agreed at the hearing on April 19 to add

language to Article 21 requiring the parties to notify the Commission of

any such changes Mr Flint of Delta furthermore explained how the

compensation provision of the Agreement was intended to operate As

explained by him a carrier who charters space from another carrier under

the Agreement will carry the cargo under the first carrier s bill of lading

S Ecuadorian Line stated that it was withdrawing as a

protestant because the potential negative con

sequences of the Agreement for Ecuadorian do not justify the time and expense of further participation in

this proceeding Ex 2A Ecuadorian expressed confidence that the Commission would review the Agree

ment and its justification under the Commission s statutory responsibilities and questioned proponents con

tentions that c ain activities at the Port of Miami justified approval of the Agreement Similarly ccr with

drew its protest but also questioned proponents arguments that certain activities at the Port of Miami justified

approval of the Agreement Ex 2B It is understandable why these two carriers which serve Miami would

take exception to any aspersions cast upon that port Another protestant the Brokers and Forwarders Associa

tion also serving Miami took similar exception to proponents adverse comments upon practices at that port

Later however at the hearing in this proceeding counsel for proponents explained that proponents had no

intention of singling out or criticizing law abiding forwarders operating at Miami Furthermore since there

is sufficient justification for the Agreement without casting aspersions at practices at Miami it is not nec

essary to utilize any evidence relating to alleged practices at Miami to which any of these parties excepted

in finding that the Agreement warrants approval
546 FEDERAL MARITIME COMMISSION

and tariff rates Furthermore the carrier seeking the space on the other

carrier s vessel will negotiate compensation with the carrier offering the

space and the amount of compensation which the latter carrier will require

will vary depending upon loading costs to the vessel operating carrier at

the particular port and other cost factors including the cost of shifting

other cargo to accommodate the cargo booked by the carrier which obtained

the space and any costs relating to the nature of the cargo itself Ex

2 pp 56

The major concern of Hearing Counsel and it was a concern of all

the protestants including the two carriers and Association who withdrew

their protests was that the cargo reservation laws of the five South Amer

ican countries involved Bolivia Chile Peru Ecuador Colombia would

somehow work in conjunction with the Agreement to oust non member

carriers from cargo carryings Proponents have throughout the proceeding

consistently and vehemently denied that their spacechartering Agreement

had any relationship to cargo reservation laws or that the parties to the

Agreement had any intention or any thought of using the Agreement to

benefit themselves by means of rights granted under those laws Neverthe

less because protestants had expressed concern over possible interrelation

ships between those laws and the subject Agreement the Commission in

structed the parties to address the issue namely what are the terms of

the various laws and what effect will they have on the implementation

of the subject Agreements one of which the discussion Agreement as

I have mentioned above has been withdrawn

Whatever the concerns of the original protesting parties and of the Com

mission regarding these laws there is absolutely no evidence that the subject

Agreement was designed to benefit from those laws would benefit by

them or would give the parties to the Agreement any special privileges

or advantages compared to carriers not parties to the Agreement After

several months were expended by Hearing Counsel in prehearing discovery

in an effort to determine if these laws had any bearing on the subject

Agreement Hearing Counsel concluded that the laws in question are a

veritable maze of confusion and inconsistent and uncertain application and

that further time and effort in seeking to translate and analyze those laws

in detail would be unwarranted 6 Furthermore not only is there no evidence

whatsoever that the subject Agreement has anything to do with South

American cargo reservation laws but the record shows that all the carriers

6

A list of the various decrees and laws was provided by Hearing Counsel Ex 5 Hearing Counsel who

is fluent in Spanish stated that he could not justify consuming more time inlitigation to furnish the translated

texts of all of these laws and decrees in view of proponents willingness to furnish periodic reporting of

their activities under the Agreement It was also Hearing Counsel s understanding that the various laws and

decrees were not administered consistently There is no evidence that these laws and decrees have anything

to do with the subject space charter Agreement The evidence especially that of Mr Flint of Delta who

is experienced in the subject trade area amply confirms this conclusion Under the authority given me by

the Commission to alter or delete issues that proved to be irrelevant or immaterial to the ultimate questipn

presented Order p 3 n 7 as requested by Hearing Counsel I ruled that the issue concerning cargo res

ervation laws would accordingly be considered to be deleted

141 1 11 r
LATIN AMERICAN CHARTERDISCUSSION AGREEMENTS NOS 547

10467 AND 10468

serving the subject trade areas are either national flag carriers or associates

so that they are all generally eligible to carry cargo to particular South

American countries involved and there is no basis to fear that a carrier

member of the Agreement would waive cargo to another carrier member

of the Agreement to the detriment of outside non member carriers Ex

2 pp 5 6 Certainly the Agreement nowhere authorizes any such pref

erential treatment to carrier members the parties stoutly deny that they

ever intended any such thing and any carrier member as well as non

member carrier has rights to carry cargo to the South American countries

depending upon its flag or associate status and not by anything in the

subject Agreement In short as Mr Flint states

With respect to the cargo reservation law issue it is my under

standing of these laws based on my personal experience in each

country involved in the trade that this Agreement is neutral with

respect to those laws By that I mean that it neither enlarges

nor restricts the rights of any carrier to serve any country in

the trade Ex 2 p6

In lieu of pursuing the issue in further detail fruitlessly Hearing Counsel

stated that the Commission s time could be spent much more profitably

by monitoring the Agreement to determine if any trends could be discerned

in cargo carryings in the trade Therefore Hearing Counsel urged and

proponents agreed that the parties should furnish periodic reports of utiliza

tion and bookings which reports are almost identical to reports which

carrier members of other spacecharter agreements have been required to

furnish to the Commission on a semi annual basis 7After proponents agreed

to filethe clarifying language to their Agreement as quoted above furnished

explanations as to the operations of the Agreement furnished additional

evidence showing that the Agreement had nothing to do with South Amer

ican cargo reservation laws and agreed to provide the Commission with

semiannual reports very similar to reports which members of other agree

ments have been furnishing so that the Commission can monitor operations

under the Agreement Hearing Counsel stated at the hearing on April 19

that they supported approval ofthe Agreement

7The semi annual reports of utilization and capacity Ex 4 are adopled almost verbalim from reports

which the Commission has required to be filed by lhe carriers who are members of the American Flag Com

mon Carrier Charter Agreement No 10420 a five party space chartering arrangement approved by the Com

mission on December I I 1981 Ulilization reports have also been required in much less complicated agree

ments such as Agreement No 10254 asimple non xcJusive transshipmenl and chartering agreement between

American Export Lines Inc and Zim Israel Navigation Co Ltd approved January 25 1977 agreement can

celed AuguSl 27 1982 See also the reports in Agreement No 0364 19 SRR 1323 1327 1980 Such

reporting should enable lhe Commission to determine if overtonnaging or underutilization conlinues 10 be

a

problem since proponents offer overtonnaging as one of lhe reasons for the need for their Agreement The

reports especially Table No 3 which deals with a report of cargoes booked by one member with another

member should help indicale whelher the Agreement is being used casually as proponents stale is intended

rather than as a

means for a

particular party to ceaeserving aparticular port Thus the reporting serves

useful purposes
548 FEDERAL MARITIME COMMISSION

The only other active party to the proceeding the Brokers and Forwarders

Association as I briefly mentioned above withdrew their protest although

they did not withdraw from the proceeding after counsel for proponents

had assured the Association on the record at the hearing that proponents

had no intention of questioning the reputation or impugning the valuable

contributions of the law abiding licensed forwarders serving the Port of

Miami As I mentioned above furthermore I find enough justification

on the record for approval of the Agreement without having to evaluate

proponents original evidentiary submissions concerning alleged questionable

practices at the Port of Miami and determining whether any such practices

even if they existed were relevant to the question of approvability of

the subject space chartering Agreement especially since that evidence seems

far more relevant to the now withdrawn discussion Agreement No 10468

Suffice it to say that the record shows benefits that may reasonably be

expected to flow from the space chartering Agreement which outweigh

any hannful effects as to which the evidence of record is essentially

speculative as I briefly discuss below Consequently with no active protests

with the support of Hearing Counsel and with the evidence of justification

present in the record which evidence is not refuted I find the subject

Agreement should be approved provided that the clarifying language quoted

above is filed with the Commission and subject to the reporting requirements

discussed

j

DISCUSSION AND CONCLUSIONS

The ultimate issue to be determined is whether the space chartering

Agreement No 10467 meets the standards of approvability under section

15 of the Shipping Act 1916 Subsidiary issues framed by the Commission

are to determine what competitive effects the Agreement will have whether

there are any conditions in the trade which would justify any anticompetitive

effects and whether South American cargo preference or reservation laws

have any effects on the space chartering Agreement 8

As discussed above proponents of the subject Agreement contended that

their Agreement was justified because of problems in the trade relating

to overtonnaging unstable rates decline in cargo and purported questionable

activities at the Port of Miami and submitted that the Agreement was

minimally anticompetitive and would produce benefits to the trade As

also discussed four protestants three who have withdrawn their protests

and one of whom has been totally inactive in the proceeding contended

that the Agreement wa unjustified extrerne1y anticompetitive and of uncer

tain relationship with South American cargo reservation laws They con

tested proponents evidence concerning overtonnaging cargo decline rate

instability and other matters and feared that the Agreement would harm

8Withdrawal of Agreement No 10468 the discussion Agreement removes a third issue framed by the

Commission from the proceeding conceming how the two Agreements would interact with themselves and

other agreements and why the discussion Agreement was limited inmembership and scope
LATIN AMERICAN CHARTERDISCUSSION AGREEMENTS NOS 549

10467 AND 10468

them or the Port of Miami and would authorize joint activities that would

enhance the anticompetitive effects of the Agreement Hearing Counsel

also expressed some concern that the space chartering Agreement might

be used in conjunction with cargo reservation laws to give parties to the

Agreement an advantage over non parties

As I discussed above most of the concerns of the protestants and of

Hearing Counsel were ameliorated or eliminated by clarifying language

which proponents agreed to insert in their Agreement by a better under

standing of the intended operations of the Agreement by the total lack

of evidence that parties to the Agreement would enjoy any special privilege

or advantage over any outside carrier because of cargo reservation laws

and finally by the proponents agreeing to furnish reports periodically

so that the Commission could monitor the operations under the Agreement

which reporting is customary in agreements of this type and is patterned

after similar reporting required by the Commission in other such agreements

Consequently as I discuss below I find justification for the Agreement

no countervailing probative evidence of harm and recommend approval

provided that the clarifying language quoted above is filed with the Commis

sion and that as agreed proponents furnish periodic reports to the Commis

sion Inow explain

Applicable Principles of Law

Under the standards of section 15 of the 1916 Act proponents of agree

ments seeking approval must come forward with evidence of needs benefits

or regulatory purposes which their agreements provide or serve and the

Commission essentially weighs the potential benefits against possible harm

ful effects of the agreements considering in addition the extent to which

the proffered agreements violate the policies of the antitrust laws See

Federal Maritime Commission v Aktiebolaget Svenska Amerika Linien cited

above 390 U S 238 United States Lines v FMC cited above 584

F 2d 519 Marine Space Enclosures Inc v FM C cited above 420

F 2d 577 Isbrandtsen Co Inc v United States 211 F 2d 51 57 D C

Cir 1954 Agreement Nos 97183 9731 5 19 F M C 351 371 1976

Although proponents of agreements submitted under the 1916 Act are

supposed to bring forward evidence justifying approval of their agreements

in order to offset the fact that their agreements are normally contrary

to the policies of the antitrust laws favoring free and open competition

the Commission has held that the degree and extent of their proof varies

depending upon the extent to which the agreement invades those policies

In other words a minimally anticompetitive agreement may require less

proof than one which contains substantial anticompetitive or monopolistic

effects See e g Agreement No 9955 1 18 F M C 426 462 1975

Agreement No 87605 17 F MC 61 62 1973 Finally the Commission

expects parties protesting agreements to come forward with evidence sup

porting their allegations and will not decide cases on the basis of specula

26 EMC
550 FEDERAL MARITIME COMMISSION

1

tive possibilities i e in the absence of facts and reasonable deductions

to be drawn therefrom Agreement No 9955 1 cited above 18F M C

at 470 Alcoa SS Co Inc v Cia Anonima Venezolana 7 F M C 345

361 1962

j

The Evidence Favoring Approval

In the present case I note at the outset that there are no active protests

to the Agreement and that Hearing Counsel after examining the various

South American cargo reservation laws and obtaining clarifications to the

Agreement and proponents expression of willingness to furnish customary

periodic reports of operations under the Agreement support approval Fur

thennore in the absenee of viable protests or evidence tending to show

that the Agreement would have harmful effects there is little or nothing

to offset eviden e of expected benefits Furthennore the Agreement appears

to be what its proponel lts state it to be namely a simple casual space

charter arrangement open to any carrier serving the trade with no fixed

minimum or maximum requirements or obligations of a carrier to make

space available if the carrier s vessel does not have available space Ex

1 Attachment D Affidavit of Joseph T Lykes pp 9 10 It has nothing

to do with rate fixing joint solicitation or joint activities of any kind

Very simply if a carrier who isa party to the Agreement books cargo

at a

port but for some operational reason 9 its vessel cannot call at the

port the carrier can seek to carry the cargo on another carrier s vessel

caning at the port if space is available on that vessel Thus the shipper s

cargo need not be left at the pier Furthemore rather tl1an abandoning

a particular port if a carrier books cargo at that port but its vessel cannot

call there the carrier will arrange to carry it under its own booking and

bill of lading on the space of another carrier patty s vessel which can

call at the port if space is available Since the Agreemant is open to

any carrier who wishes to join and enables any party to provide service

which it might not otherwise be able to provide if its vessel cannot make

a direct call at a particular port and since there is no joint activity ie

no joint soli itation advertising coordination or rationalization of sailings

it is difficult to see how the effects of the Agreement on competition

are more than minimal or how the policies ofthe antitrust laws are signifi

cantly contravened to Furthermore there is no evidence which would SUppGrt

9

Aecording to Joseph T Lykes Vice Presklent PrIcillJ of Lykes Bros a party to the Agreement cancella

tions or delllfs of vessel sailings occurfor relllO l8sllh as severe we8lher during the hUlricane season causing

vessel deviation or beca lse of conacation at the which may require a1teJ lPtion of sailinll sc

ules Such CllllCelJallollS or s1teralions em hllveadVerlle effec14 ot1 tM businesses of shippers and cOlisianees

who book cargo long in advance of the sailings The Agreement however would enable the plll lies to it

to secure vtssel space and serve the shippers or consignees who millht otherwise be adversely affected Ex

I Attachment D pp 78

IOTo show how little the anticompetitive effects on the trade should be evidence submitted by proponents

showing ovenonnaging also shows thai there are 19 carriersservinll the subject trade area nine of whom

26 F M C
LATIN AMERICAN CHARTERDISCUSSION AGREEMENTS NOS 551

10467 AND 10468

any of the apprehensions of any of the protestants concerning possible

harmful effects of the Agreement on any particular port or carrier or as

to special privileges or advantages to parties to the Agreement that might

arise under South American cargo reservation laws as to which the Agree

ment is strictly neutral

The record shows that there are operational benefits and that there is

no probative evidence of harmful effects It also indicates that the fears

of possible harm are essentially speculative or are based largely upon

previous misunderstandings of the intentions of the parties to the Agreement

and upon misunderstandings as to how the Agreement is to operate as

well as concern that the Agreement would work in conjunction with the

now withdrawn discussion Agreement No 10468 to lead to a consor

tium or other harmful entity in the trade Significantly once these mis

understandings were eliminated the discussion Agreement was withdrawn

and proponents submitted clarifying language and other explanations all

the active protestants withdrew their protests Thus it would appear that

there is as much or even more reason to approve this simple space charter

Agreement than there was in Agreement Nos 10186 et aI 25 F MC

538 1982 in which the Commission approved a more complicated space

charter agreement No 10364 which was also a chartering arrangement

on a

space available basis without provision for rate fixing coordination

of sailings or joint solicitation but with a maximum limitation which is

not present in the subject Agreement No 10467 As the Commission stated

in Agreement Nos 10186 et aI 25 F M C at 547

Agreement No 10364 is nothing more than an arrangement where

by the parties charter space on each other s vessels on aspace

available basis subject to a maximum There is no provision au

thorizing the fixing of rates coordination of sailings joint solicita

tion of cargo or joint bills of lading The vessel owner retains

full control over the vessel In short the space charter places

little or no restriction on the competition between the parties

Nor has it been shown to the extent it was even argued footnote

omitted that the agreement will adversely affect other operators

in the trade competitively

On the other hand proponents of Agreement No 10364 have

come forward with evidence indicating that the agreement will

allow for more direct calls prevent the introduction of additional

tonnage to the trade and result in a generally more efficient trans

portation service to the shipping public The Commission is satis

fied that these benefits outweigh any anticompetitive features of

the agreement Itwill accordingly be approved

Even if the operational benefits enabling parties to serve shippers and

ports under the Agreement when they would otherwise be disabled from

entered the trade within the last four years The subject Agreement however consists of only five carriers

Ex J AlIachmenls A C pp 2 3 and table mentioned therein

pur
552 FEDERAL MARITIME COMMISSION

doing so were not shown however there are other benefits and purposes

of the Agreement which would justify approval as proponents have shown

Thus if a vessel sailing is cancelled for some operational reason as men

tioned above a carrier party to the Agreement may still be able to carry

the cargo under its own bill of lading on another carrier s vessel Because

the evidence shows significant overtonnaging a fact to which the parties

at the April 19 hearing stipulated II

space on a vessel that might otherwise

be unused could be utilized by a carrier whose vessel sailing at the port

had to be cancelled Ex 1 Attachment C p5 Affidavit of John M

Dillon The Agreement will therefore help promote better utilization of

vessel space while at the same time providing service to shippers whose

businesses might otherwise be disrupted because of vessel cancellation or

delays Furthermore unrefuted evidence shows overtonnaging the presence

of numerous independent carriers a certain degree of trade instability and

increased costs for carriers wishing to provide a high quality of liner

services The space charter Agreement however will provide a greater

degree of operating flexibility and enhance the capability of each party

to the Agreement to satisfy the requirements of shippers and consignees

without diminishing competition among carriers Ex 1 Attachment C

p

5 Thus while the space charter Agreement may not be the answer

to all the problems besetting the trade which problems it appears that

the withdrawn discussion Agreement No 10468 was also intended to

addreSs the voluntary space chartering arrangement can help a member

carrier s utilization and reduce costs by avoiding the need to reschedule

a vessel to call at a particular port for relatively small amounts of cargo

when the vessel has otherwise been delayed or its itinerary has had to

be changed In such instances the carrier party to the Agreement can book

the cargo on another carrier member s vessel calling at the particular port

if space is available

ULTIMATE CONCLUSIONS

The space charter Agreement appears to have negligible anticompetitive

effects and there is no evidence that it was intended to or would harm

any port shipper or carrier or confer any special privilege or advantage

on parties to it because of South American cargo reservation laws Opposi

IIProponenls furnished aconsiderable body of evidence showing overtonnaging inthe trade area and other

conditions tending to promote unstable conditions As noted earlier 19 carriers serve the trade area Other

carriers have been forced to leave the trade for financial reasons Southbound evidence shows that 12 of

the 19 carriers alone offer an aggregate capacity of approximately 224 2 million cubic feel whereas cargo

moving comprises only 120 million cubic feet If the remaining seven carriers capacities were known and

added obviously the aggregate utilization factor would be considerably less than 50 percent Northbound the

situation is even worse only approximately 36 million cubic feet of cargo moving compared to the same

aggregate vessel capacity of 224 2 million cubic feet Ex I Attachment C and tables mentioned therein

Allachment D Evidence concerning capacity utilization for the five parties to the Agreement was also fur

nished on aconfidential basis and tends to confinn significant underutilization of vessel capacity Confiden

tial Ex I On the basis of such evidence the parties at the hearing Hearing Counsel proponents and the

Brokers and Forwarders Association stipulated that considerable overtonnaging exists

26 FM C
LATIN AMERICAN CHARTERDISCUSSION AGREEMENTS NOS 553

10467 AND 10468

tion to the Agreement has virtually disappeared now that the intentions

of the parties to it have been clarified a companion discussion Agreement

has been withdrawn and they have agreed to furnish the customary reports

to the Commission to ensure that the authority conferred under it will

be used as intended Under such circumstances applicable principles of

law under the 1916 Act do not require an inordinate amount of evidence

showing benefits to be gained by approval of the Agreement However

the record does show benefits to shippers and ports which would result

when a carrier member of the Agreement could serve the port even when

its vessel could not call at the port and further benefits in the form of

cost reductions and efficiencies derived from greater flexibility in vessel

deployment The space chartering Agreement is extremely simple and vol

untary among the parties and does not authorize joint solicitation advertis

ing coordination or rationalization of sailings It is thus less restrictive

than or similar to numerous other space chartering agreements which the

Commission has approved after finding that expected benefits would out

weigh any possible harmful effects See e g Agreement No 101863

19 SRR 1611 1980 Agreement Nos 10186 et ai cited above 25 F MC

538 Agreement No 10364 19 SRR 1323 1980

Agreement No 10467 is therefore approved provided that proponents

file with the Commission and the Commission receives the amendatory

language discussed above signed by the parties or their duly authorized

representatives within 30 days of the date of service of the Commission s

notice rendering this Initial Decision administratively final or such other

time as the Commission may direct upon review ofthis Decision

S NORMAN D KLINE

Administrative Law Judge

26 F M C
FEDERAL MARITIME COMMISSION

DO KET NO 82 3

SOUTH ATLANTIC NORTH EUROPE RATE AGREEMENT

AGREEMENT NO 998423

GULF EUROPEAN FREIGHT ASSOCIATION AGREEMENT NO

102702

ORDER

June 15 1984

On February 28 1984 the Commission served an Order Reopening The

Record in the above captioned proceeding in order to provide the parties

to the Gulf European Freight Association GEFA with an opportunity to

supplement the record in support of the agreement s microbridge authority

The Commission indicated in its Order that information concerning actual

operations under the GEFA microbridge tariff would be relevant to a deter

mination as to whether GEFA s U S microbridge authority had been ade

quately justified under the standards set forth in U S Atlantic Gulf

Australia New Zealand Conference Agreement No 6200 20lntermodal

Authority 21 S R R 89 1981 Agreement No 620020 The Order also

stated that GEFA might submit any other information which it believed

would be relevant to the issue of whether continuation of GEFA s U S

microbridge authority had been justified

On March 28 1984 Proponents filed a four volume submission together

with a confidential exhibit a timevolume contract with a shipper These

documents provide the following information concerning U S microbridge

service under the GEFA tariff Approximately 98 commodities have been

shipped under the tariff An additional 18 commodities have moved at

open rates Approximately 125 points are served under the microbridge

tariff GEFA has made a cumulative total of 240 separate arrangements

with 24 different railroad companies and 78 different trucking companies

to operate as participating U S inland carriers in connection which ship

ments moving under GEFA s microbridge tariff In addition data provided

by GEFA show that the demand for GEFA s microbridge service is increas

ing During the first quarter of 1984 12 000 tons of cargo were carried

as compared to 4000 tons in the final quarter of 1983 Finally GEFA

has submitted as a confidential exhibit a currently effective time volume

contract with amajor shipper

This information concerning GEFA microbridge service increases in

GEFA microbridge cargo and a GEFA contract commitment would appear

to indicate that GEFA now has in operation a viable microbridge service

554 26 F M C
AGREEMENT NOS 998423 AND 102702 555

that is meeting an actual although limited demand by shippers Based

on the additional information provided upon reopening the record and

the relevant information previously introduced into the record in this pro

ceeding the Commission concludes that continued approval of GEFA micro

bridge authority is warranted

Approval of Agreement No 102702 however shall be subject to modi

fications to the Preamble and to Article 5 3 of Agreement No 10270

which were adopted by the members of Agreement No 10270 during

the course of the proceeding These modifications were required to define

more precisely the scope of Agreement No 10270 in response to the

Commission s Order of Investigation which noted certain deficiencies in

the Agreement s definitions In addition the approval granted here is also

subject to the deletion of GEFA s minibridge authority which GEFA has

advised its members no longer seek Agreement No 10270 is deemed

to be amended to incorporate these modifications as of the date of approval

These modifications shall be included in the Agreement at the time that

GEFA next files an amendment to Agreement No 10270 as stated below

THEREFORE IT IS ORDERED That Agreement No 102702 is ap

proved

IT IS FURTHER ORDERED That the parties to Agreement No 10270

shall include in the Agreement the following modifications at the time

that they next file an amendment to Agreement No 10270

1 The Preamble of Agreement No 10270 shall be amended to read

as follows

The undersigned common carriers by water the Members

regularly operating trans Atlantic vessels hereby associate them

selves in a cooperative arrangement known as the GulfEuropean

Freight Association GEFA for the purpose of establishing

maintaining and enforcing agreed and otherwise lawful tariffs or

rates charges and rules governing the transportation of cargo

whether moving in all water or intermodal service or under

through bills of lading or otherwise in the trade by water from

or via U S Gulf coast ports except as excluded under Article

5 3 of this Agreement to European Continental ports in the Bor

deauxHamburg range and to ports in Scandinavia and on the

Baltic Sea and to interior and coastal points via such Continental

Scandinavian and Baltic ports the trade As used in this Pre

amble the term ports includes ports and points on inland water

ways tributary to all U S Gulf and European ports within the

above described trade

For the purposes of this Agreement the term points means

coastal points i e points in port communities and interior

points i e all points other than coastal points and the terms

coastal points and interior points are mutually exclusive

Also for the purposes of this Agreement the term intermodal

service means service 1 from U S points via U S Gulf ports

fi FM r
556 FEDERAL MARITIME COMMISSION

to European ports or via such ports to European points all within

the scope of this Agreement and 2 from U S Gulf ports to

European points via European ports all within said scope Pro

vided further that transport by SeabeeILash barge operated by

members constitutes all water service

2 Article 5 3 of Agreement No 10270 be amended to read as follows

5 3 Notwithstanding any other provisions hereof the intermodal

authority established by this agreement shall not extend to any

joint Motor or RaiVOcean minibridge service from U S Pacific

or Atlantic Coastal port cities via U S Gulf ports and operated

by any Member Line under tariffs naming through single factor

Motor or RaiVOcean rates filed with the Federal Maritime Com

mission and Interstate Commerce Commission This agreement

does not cover cargo moving on a through bill of lading which

is transshipped at a port within the scope of the agreement and

which has a prior or subsequent movement by water from or

to a port not within the scope ofthis agreement

By the Commission

S FRANCIS C HURNEY

Secretary

1

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 54

AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7

101164 AND 102741 SPACE CHARTER AND CARGO REVENUE

POOLING AGREEMENTS IN THE UNITED STATES JAPAN TRADES

NOTICE

June 15 1984

The initial decision in this proceeding was served June 1 1984 This

decision ordered all parties to advise the Commission within five days

of that date whether or not they intended to file exceptions This action

was taken to facilitate final disposition of the proceeding prior to the

effective date of the Shipping Act of 1984 ie June 18 1984 All parties

advised the Commission that they would not be filing exceptions

The Commission s 30 day period to request review of this decision

pursuant to 46 CPR 502 227 is currently scheduled to expire on July

2 1984 However given the Commission s objective to finalize as many

formal proceedings as possible and feasible prior to June 18 1984 the

Commission has considered the involved initial decision and has determined

that it will not review it Accordingly the initial decision in this proceeding

has become administratively final

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C 557
FEDERAL MARITIME COMMISSION

DOCKET NO 82 54

AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7

101164 AND 102741 SPACE CHARTER AND CARGO REVENUE

POOLING AGREEMENTS IN THE UNITED STATES JAPAN

TRADES 1

I Where four space charter agreements have been amended and filed as a result of settlement

negotiations between the Proponents and the Protestants as well as the Hearing Counsel

of the Federal Maritime Commission and where the record evidences that such agreements

are required by a serious transportation need are necessary to secure public benefits

and are in furtherance of a valid regulatory purpose the requirements of section 15

of the Shipping Act have been satisfied and the agreements must be approved

2 Where four space charter agreements have been amended and filed and two pooling

agreements have been withdrawn as a result of settlement negotiations between the parties

in a fonnal proceeding originating in the Federal Maritime Commission and where

their negotiations are on the record and the filed agreements fully reflect what the

parties agreed to and intended there are no other agreements which are required to

be filed with the Federal Maritime Commission within the ambit of section 15

3 Where a fonnal proceeding is begun as a result of a remand from a Circuit Court

of Appeals which directs that a hearing be conducted on the disputed material issues

of fact raised by the Protestants in this proceeding and where the parties have agreed

that there are no longer any disputed issues of material fact insofar as the amended

agreements are concerned and Hearing Counsel also agrees the specific issues on remand

and in the Commission s Order of Investigation and Hearing need not be considered

from the aspect of disputed issues of material fact Instead the provisions of the

agreements must generally satisfy the requirements of section I 5 and the applicable

case law

Charles Warren George A Quadrino and David M Dunn for Proponents Edward M

Shea and John E Vargo for Protestant Sea Land Service Inc Kevin O Rourke Daniel W

Lenehan Russell T Weil and James W Pewett for Protestant United States Lines Inc

Robert Basseches David B Cook and I Michael Greenberger for Protestant American

President Lines Ltd

William H Fort and J Alton Boyer for Protestant Lykes Bros Steamship Co Inc

George F Mohr forIntervenor Delaware River Port Authority

R Moriconi forIntervenor Massachusetts Port Authority

J Robert Ewers Alan Jacobson and Stuart James as Hearing Counsel

I The Commission s Order of Investigation and Hearing on Remand originally related to the seven agree

ments that are enumerated in the caption in this case As will be seen as aresult of settlement negotiations

the Proponents of these agreements withdrew them from consideration Two were not resubmitted at all and

the others were proffered as amended agreements The two agreements which were withdrawn are Agreement

Nos 10116 4and 102741 respectively The remaining agreements were revised to become 971810 9731

10 98357 and 99759

558 26 F M C
AGREEMENTS NOS 9718 7 97188 9731 8 9835 5 9975 7 559

101164 10271 UNlTED STATES JAPAN TRADES

INITIAL DECISION 2 OF JOSEPH N INGOLIA ADMINISTRATIVE

LAW JUDGE

Finalized June 15 1984

BACKGROUND INFORMATION

This proceeding began as an Investigation and hearing on remand insti

tuted under the provisions of sections 15 and 22 of the Shipping Act

1916 46 U S C 814 and 821 to determine whether Agreement Nos

9718 7 9718 8 9731 8 9835 5 9975 7 1011Cr 4and 102741 should

be approved disapproved or modified 3The pertinent parts of the Order

of Investigation and Hearing on Remand are set forth in the Findings

of Fact The Order listed the Proponents and Protestants as follows

Proponents Protestants

Japan Line Ltd

Kawasaki Kisen Kaisha Ltd

Mitsui O S K Lines Ltd

Yamashita Shinnihon Steamship Co Ltd

Nippon Yusen Kaisha

Showa Shipping Co Ltd

After the Commission s Order was served there were two Motions to

Intervene As a result the Delaware River Port Authority and the Massachu

setts Port Authority were allowed to intervene for limited purposes subject

to the discretion of the Administrative Law Judge 4Also one of the original

protestants United States Lines Inc was allowed to withdraw as a party s

Once the case was docketed there was extensive discovery There were

several motions filed regarding discovery which resulted in prehearing con

ferences that disposed of discovery problems and allowed for certain proce

dural scheduling to move the case forward Also there were several motions

and much discussion regarding confidentiality which resulted in the adoption

of an Order Regarding Confidential Materials 6The parties throughout the

pendancy of this proceeding have designated certain material as being con

fidential in accordance with the order of confidentiality

Finally after several prehearing conferences this proceeding was set down

for hearing on December 6 1983 at which time the parties indicated

Sea Land Service Inc

United States Lines Inc

American President Lines Ltd

Lykes Bros Steamship Co Inc

2

This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Prdctice and Procedure 46 CPR 502 227

JAil of the agreements except 9718 8were published in the Federal Register on April 29 1980 45 Fed

Reg 28 487 1980 Agreement No 9718 8 was filed because the Commission Order of January 16 1981

limited the tolal container capacity sought in Agreement No 9718 7 Agreement No 97188 sought to raise

that capacity and was published in the Federal Register on July 8 1981 It became the subject of the Com

mission s Order of Investigation served on December 14 1981 FMC Docket No 81 74 Agreement No

97 8California JapanIKorea Space Charter Agreement 46 Fed Reg 61723 1981

4The Orders granting the motions to intervene were served on March II 1983 and April 14 1983 respec

tively

The Proceduml Order was served on April 26 1983

6The Order was served on May 2 1983

26 F M C
560 FEDERAL MARITIME COMMISSION

a basis of settlement had been reached Their subsequent actions were

in furtherance of that settlement

Findings of Fact

It is appropriate to note that the references to Exhibits I 2 and 3

in the following portions of these findings refer to the written testimony

ofKKawamura Seiichi Hirano and Douglas C Tucker respectively which

is attached to the Brief of Proponents filed on March 7 1984 and

which is hereby made a part of the evidentiary record of this proceeding

IOn November 19 1982 the Federal Maritime Commission the Com

mission served an Order of Investigation on Remand which reads in

pertinent part as follows

On July 13 1982 the U S Court of Appeals for the District

of Columbia Circuit remanded the Commission s order of January

16 1981 January Order conditionally approving pursuant to sec

tion 15 of the Shipping Act 1916 46 U S C 814 a series

of space charter and revenue pooling agreements among Japanese

flag lines in the United StatesJapan trades Sea Land Service

Inc v United States 683 F 2d 491 D C Cir 1982 The Court

directed the Commission to conduct further evidentiary hearings

on certain issues raised by four U S flag carriers who had pro

tested the agreements This Order of Investigation and Hearing

is issued in compliance with the Court s decision

The Order in pertinent part directs that

THEREFORE IT IS ORDERED That pursuant to sections 15

and 22 of the Shipping Act 1916 46 U S C 814 and 821

a proceeding is hereby instituted to determine whether Agreements

Nos 9718 7 9718 8 9731 8 9835 5 9975 7 10116 4and

102741 are unjustly discriminatory or unfair as between carriers

shippers exporters importers or ports or between exporters from

the United States and their foreign competitors detrimental to

the commerce of the United States contrary to the public interest

or violative of the Shipping Act 1916 and therefore whether

they should be approved disapproved or modified and

IT IS FURTHER ORDERED That the parties in addressing

the approvability of the Agreements under the standards of section

IS shall specifically address the following issues consistent with

the discussion of them in this Order

1 whether the Japanese lines have engaged in bloc voting within

the shipping conferences to which they belong and if so

a the extent of such bloc voting

b whether such bloc voting occurred on significant conference

matters

c whether such bloc voting was caused directly or indirectly

by actions of the Japanese government

26 F M C
26 F M C

AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 561

101164 102741 UNlTED STATES JAPAN TRADES

d whether such bloc voting was caused in whole or in part

by economic relationships between the Japanese lines on the

one hand and Japanese trading companies and other shipping

interests on the other hand and

e the effects of such bloc voting on the trades and other

carriers

2 whether the Japanese lines should be considered to operate

as a joint service or joint services in some or all of the trades

which they serve

3 whether the Japanese lines have economic relationships with

Japanese trading companies and other shipping interests which

when coupled with the Agreements under investigation render

the Agreements unjustly discriminatory or unfair between carriers

or contrary to other section 15 standards

4 whether the service market areas served by the Japanese

lines should be measured by

a each agreement considered individually

b each of the four space charter agreements

c each of the two pooling agreements

d all six agreements considered collectively or

e some variation ofthe above

5 Whether the service market areas served by the Japanese

lines should be measured in terms of

a ports served

b actual points of cargo origin and destination or

c some combination thereof

6 The market share held by the Japanese lines in those market

areas

7 The vessel utilization factors experienced by both the Japa

nese lines and the protestants in those market areas

8 whether those market areas are overtonnaged and the poten

tial impact of these Agreements on any such overtonnaging

9 the projected rates of cargo growth over calendar years

1983 1984 and 1985 in those market areas

10 whether the geographic scope pooling limits and reporting

requirements in the Agreements are adequate and have been com

plied with

11 whether provisions of the Agreements are unacceptably

vague and

12 whether there is inadequate forty foot and reefer container

service in the market area served by Agreements Nos 9718

7 and 9718 8 and if so the potential impact of Agreement No

9718 8 on this problem

IT IS FURTHER ORDERED That the record developed in

FMC Docket No 81 74 Agreement No 9718 8California
562 FEDERAL MARITIME COMMISSION

Japan Korea Space Charter Agreement is made a part of the

record in this proceeding and

2 The Commission Order originally related to the seven agreements

that are enumerated in the caption of this case As a result of settlement

negotiations between the parties Agreement Nos 10116 and 10274 respec

tively which are pooling agreements were completely withdrawn The other

agreements which are space charter agreements were proffered as new

agreements numbered 9718 10 973110 9835 1 and 9975 9 respectively 7

3 The remand mentioned in the Commission s November 19 1982

Order is from the United States Court of Appeals for the District of

Columbia Circuit It is reported as Sea Land Service Inc et ai v United

States 683 F 2d 491 D C Cir 1982 In reviewing the Commission s

Order of January 16 1981 wherein the Commission extended the agree

ments involved here through August 22 1983 and concluded that a hearing

was not necessary the Circuit Court stated

We disagree with the Commission s characterization of the is

sues here as questions of law or policy Our review of the record

convinces us that a number of issues raised by petitioners clearly

involve questions of fact which require an evidentiary hearing

To illustrate this point we will briefly detail the material disputes

presented by the parties

and further

Accordingly we remand to the Commission with directions to

conduct a hearing on the disputed material issues of fact raised

by the petitioners including the following 1 the occurrence

and effects of bloc voting within conferences that include signato

ries to the agreements 2 potential anticompetitive effects of

the agreements resulting from preexisting economic relationships

among the signatories 3 the observance by the signatories of

the geographic limitations pooling limits and reporting require

ments specified in the agreements 4 the occurrence and effects

of overtonnaging in the trades covered by the agreements and

the potential impact the agreements will have on this problem

and 5 the extent and significance of any involvement of the

Japanese government in formulating the policies and practices of

the signatories The Commission should also consider any other

material issues ofdisputed fact raised by petitioners that constitute

more than bare allegations

4 On August 19 1983 the Commission served an Order Amending

Order of Investigation and Conditionally Approving Certain Agreements

7

The old and new agreements have been filed withthe Commission s Secretary and have also been submit

ted by the Proponents as appendices to various documents They are incorporated herein by reference

26 F M C
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 563

101164 102741 UNITED STATES JAPAN TRADES

Pendente Lite wherein it approved the agreements in issue subject to

certain conditions 8

5 Following many months of intensive litigative efforts and after several

pretrial hearings the case came on for hearing on December 6 1983

At that time counsel for the Proponents indicated that the parties on

both sides are in a position at this time to resolve their differences The

proponents accordingly have made the decision to revise their agreements

forthwith being of the view that if these revisions are appropriately made

that they will satisfy the objections of the protestants The Protestants

agreed that the statement was correct

6 In accordance with the agreement of the parties in this proceeding

the Proponents filed four amended space charter agreements designated

respectively as Nos 9718 10 9731 10 9835 7 and 9975 9 Also in

accordance with the agreement of the parties the Proponents withdrew

their two revenue pooling agreements Also on January 16 1984 the

Proponents filed a motion in the United States Circuit Court of Appeals

for the District of Columbia to dismiss their Petition for Review of the

Commission s August 19 1983 Order The Proponents Motion was granted

by the Appeals Court on January 27 1984 Finally on February 13 1984

the Proponents further amended their space charter agreements at the behest

of Hearing Counsel The agreements were not renumbered as a result of

these further changes

7 On February 22 1984 the Proponents filed a motion with the Commis

sion entitled Motion to Amend Order of Conditional Approval Pendente

Lite and to Expedite Consideration Thereof In the motion the Proponents

requested that the Commission increase pending final resolution of this

proceeding the limitations on total fleet capacities placed on them in the

Commission s August 19th Order At the same time Proponents withdrew

various other motions that were then pending with the Commission

8 On May 1 1984 the Commission issued an Order Further Amending

Order of Investigation and Conditionally Approving Certain Agreements

Pendente Lite In its order the Commission terminated its prior pendente

lite approval of Agreements Nos 9718 9 9731 9 9835 6 and 9975 8

respectively and then approved pendente lite Agreements Nos 9718 10

9731 10 9835 7 and 9975 9 respectively subject to certain conditions

including specific limitations on total liner container vessel capacities de

ployed in each trade By amendments received on May 3 1984 the Pro

ponents complied with the conditions set down in the Commission Order

regarding total liner container vessel capacities

9 Agreement Nos 9718 10 9731 10 9835 7 and 9975 9 collectively

the Agreements are space chartering and vessel coordination arrange

ments which provide for the employment of containership vessels in the

Japan United States trades In the case of Agreement No 9718 10 vessels

8

Reported at 22 Pike Fischer Shipping Regulation Reports SRR 307

1

1D l f r
564 FEDERAL MARITIME COMMISSION

may also be employed in the Korean U S trade Ex 1 para 7 Ex 2

paras 7 8

10 The Agreements contain virtually the same provisions their earlier

prototypes having been sequentially filed with and approved by the Com

mission over a period of years Once the structure was devised for the

first of the agreements in 1968 the basic format of that agreement was

thereafter followed Ex 1 para 8 Ex 2 para 6

11 The article entitled Sailings authorizes the coordinated scheduling

and advertising of sailings as to promote optimum utilization The article

entitled Containerized Cargo clarifies that only container cargo is the

cargo subject to the Agreements but that the parties are not precluded

from carrying on their agreement vessels other available cargo The article

entitled Solicitation assures that the parties will solicit cargo only for

their own separate accounts and not jointly The article entitled Bills

of Lading assures that bills of lading will be issued separately by each

of the parties and not on a common basis The article entitled Charterage

authorizes the shipment of loaded and empty containers on each other s

vessels and the chartering to and from each other equal blocks of space

in the case of Agreement No 9731 certain blocks of space on terms

as the parties may agree The article also authorizes the chartering to

one another of additional space should a party need more space than

the space it has on a particular vessel The article entitled Accountings

prohibits the pooling of revenues or sharing ofoperational expenses except

in the case of jointly owned vessels operational expenses may be shared

The article permits the sparing of administrative expenses In view of

the exchange of containers in equal blocks no accountings are contemplated

Accountings are contemplated in respect to the chartering of additional

space Adjustments in accounts are also contemplated in the case of force

majeure situations The article entitled Container Interchange permits

the interchange of empty containers andor related equipment on terms

as may be agreed In addition there are articles entitled Modifications

Withdrawal and Duration which allow changes in the Agreement

terms withdrawal on 90 day s prior notice and provide for a five year

term effective to and including August 22 1988 Ex 1 paras 1016

18 19 App 1 Ex 2 paras 8 13 15 App 1

12 A final article entitled Conditions imposes maximum capacity

levels transshipment levels except under Agreement No 9975 and com

prehensive reporting requirements Paragraph A of the article sets forth

the total annual capacity of the vessels which are to be operated in any

calendar year all of which maybe cross chartered among the parties

Beyond this space which is based upon standard operating capacities addi

tional space may be used when operating conditions permit Paragraph

A also allows the parties in their non agreement containership services

to call at Japan and thus to compete to a limited extent with their Agreement

services Paragraph B explicitly clarifies what has long been an accepted

26 F M C
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 565

101164 102741 UNlTED STATES JAPAN TRADES

practice the loading and discharging of transshipmertt cargo irrespective

of its origin or destination The paragraph imposes limitations on the

parties carryings however in respect to cargo originating or terminating

only in Indonesia Malaysia Singapore or Thailand except under Agreement

No 9975 Paragraph C of the article imposes a comprehensive reporting

requirement to be accomplished semiannual1y in accordance with an attached

format Ex 1 paras 17 21 Ex 2

paras 14 15

13 Japan Line K Line Mitsui aSK and Y S Line are parties to

Agreement No 9718 10 NYK and Showa are parties to Agreement No

9731 10 al1 six Japanese lines are parties to Agreement No 9835 7

and all but Showa are parties to Agreement No 9975 9 Ex 1 paras

29 34 Ex 2

para 5

14 Agreement No 9718 10 permits the employment of the parties

vessels in the trades between ports in Japan and Korea and California

Agreement No 9731 10 permits the employment of the parties vessels

in the trade between Japan and California Hawaii and Alaska Agreement

No 9835 7 permits employment of the parties vessels in the trade between

Japan and Oregon and Washington ports and Agreement No 9975 9 per

mits the employment of the parties vessels between ports in Japan and

ports on the U S Atlantic Coast of North America Additional1y it author

izes the utilization of U S documented feeder vessels andor barges at

U S Atlantic ports Ex 1 paras 20 29 34 Ex 2

paras 7 8

15 The sense of each Agreement is that the parties may agree to operate

utilize or substitute such vessels as they may see fit but within and

not in excess of the capacity levels as the particular Agreement sets forth

Ex 1 paras 21 7476 App 1 Ex 2 paras 16 41 42 App 1

16 As far back as 1968 the Agreements have been the subject of

continuing governmental direction by the Japanese Ministry of Transport

The Ministry s role has been limited to assuring that its broad policy

objectives are carried out the basic objective relating to the achievement

of stable trading conditions in the relevant Agreement trades Ex 1 paras

55 57 Ex 2 para

34

17 Original1y the Commission s approvals limited the number of vessels

which could be operated on a coordinated basis By order of January

16 1981 the Commission discontinued this limitation on vessels and sub

stituted a limitation on the TEU space which could be cooperatively char

tered Under the Commission s pendente lite order of August 19 1983

an additional limitation was temporarily imposed on the parties total vessel

capacities sized to the total capacities which had at the time been em

ployed on the vessels operated under each Agreement The latest agreements

would in lieu thereof impose limits on the annual TEU capacity which

could be operated under each Agreement during a calendar year Ex 1

para 21 App 1 Ex 2

para 6 App 1

18 The Agreements as revised differ from those which the parties

initially filed in the following manner A third Whereas Clause clarifies
j

566 FEDERAL MARITIME COMMISSION

that the vessels which may be operated are those which the parties may

agree upon subject to the annual TEU capacity levels as stated in each

Agreement A fourth Whereas Clause provides that the services offered

will be the parties exclusive services in the Japan trade subject to certain

limited independent vessel callings at Japan The group concept under

Agreement Nos 9718 and 9835 has been deleted The authority under

Agreement Nos 9731 and 9835 reposed in NYK and Showa to share

agents has been deleted The authority to share operational expenses in

the case of jointly owned vessels has been clarified and such authority

has been added as a clarification under Agreement No 9975 A requirement

to report the essential terms of space chartering and if requested the

level of compensation has been added The authority to substitute vessels

in the event of labor disturbances has been deleted as unnecessary A

requirement to report the essential terms of interchanges has been added

A new provision entitled Conditions has been added specifying annual

capacity levels under the Agreements and of Japan cargo which may be

carried outside the Agreements calling at Japan Also under the provision

explicit clarifying authority to carry transshipment cargo has been provided

together with certain limits on the parties transshipment carryings to or

from certain named countries Finally the provision adds new comprehen

sive reporting requirements Ex 1 paras 11 121 App 1 Ex 2 paras

16 App 1

19 Some ofthe aforementioned revisions were prompted upon the parties

own initiative Others were included upon the instance of the Commission s

staff including the Office of Hearing Counsel And still others were adopt

ed by the parties in deference to the concerns of one or more of the

protestants The latter category of revisions followed informal discussions

among the attorneys for proponents and protestants held for the purpose

of identifying each party s particular concerns in the proceeding As it

consequence of revising the Agreements each of the protestants no longer

opposes the Agreements and therefore does not contest the issues specifi

calIy assigned by the Commission for investigation resulting from the re

mand by the U S Court of Appeals for the District of Columbia Circuit

these being issues which had been raised by the protestants Moreover

as proponents revisions have also operated to satisfy the concerns of Hear

ing Counsel the parties have agreed that other issues raised by the Commis

sion are now moot Ex 1 paras 22 23 Ex 2 para 17

20 Although proponents have adopted revisions to the Agreements as

initialIy filed and although each protestant has elected not to oppose the

revised Agreements alI parties to this proceeding agree that there is no

continuing agreement among them which would prevent the proponents

from further modifying the agreements or from seeking authority to operate

under new and different arrangements in the future Ex 1 para 23 Ex

2 paras 17 43

JIIf
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 567

10116 4 102741 UNlTED STATES JAPAN TRADES

21 Under Agreement No 9718 the parties operate an eight vessel con

tainer service under Agreement No 9731 they operate a four vessel service

under Agreement No 9835 they operate a six vessel service and under

Agreement No 9975 they operate an eight vessel service a total of 26

Agreement vessels in the U S trades Ex 1 paras 2425 27 29 Ex

2 para 18

22 Under their Government s 38th and 39th Shipbuilding Programs

the parties considered it essential to replace a number of their older vessels

which were between 10 and 15 years old and which had been overtaken

by technological advances and were no longer cost competitive in the

trade with their major competitors Plans were made and approvals and

financing were obtained from our Government through the Japan Develop

ment Bank to replace a total of 10 vessels between 1981 and 1985

Five vessels were planned for Agreement No 9718 two for Agreement

No 9731 and three for Agreement No 9835 Subsequent review of capacity

requirements and utilizations however have shown there is now a greater

need for additional capacity under Agreement No 9835 Hence the present

deployment calIs for only three vessels for Agreement No 9718 only

one vessel for Agreement No 9731 and a total of six for Agreement

No 9835 where current capacity is already fully utilized

23 The capacity increases which arise as a result of the replacement

of larger more economical vessels and which are the first significant

increase since 1974 are as folIows

Agreement No 9718 2 815 TED s

Agreement No 9731 971 TEU s

Agreement No 9835 2 982 TEU s

Although no replacements have been carried out in the case of Agreement

No 9975 operations the capacity level stated in Article 14 of that Agree

ment represents a 15 percent increase over the current annual capacity

level Overall capacity under the four Agreements will increase by approxi

mately 30 percent by 1985 more than half of which is already in service

pendente lite Ex 1 paras 7477 Ex 2 paras 36 43

24 By space chartering and vessel coordination competitive service is

made possible under each Agreement which would not be possible with

the limited number of vessels absent the Agreements The service frequency

is as follows

Agreement No 9718 semiweekly

Agreement No 9731 weekly

Agreement No 9835 five days

Agreement No 9975 weekly

Ex I paras 24 32 33 37 Ex 2 para 24

25 The Agreements have materially reduced the need for adding addi

tional vessels Since 1974 no vessels have been added under the Pacific
I

1

568 FEDERAL MARITIME COMMISSION

Coast space charter operations and only one vessel was added in 1976

for their Atlantic Coast operations although older vessels have been and

are being replaced from time to time Service to shippers under the Agree

ments has been stable and unvarying since the parties fleets were completed

in the mid 1970 s the parties having uniformly provided reliable service

levels to their customers

Agreement No 9718 89 93 annual sailings

Agreement No 9731 469 annual sailings

Agreement No 9835 67 73 annual sailings

Agreement No 9975 4852 annual sailings

Ex 1 paras 31 32 34 401 74 Ex 2 paras 18 21 23

26 The space chartering and vessel coordination features of the Agree

ments have also enabled the parties using a limited number of vessels

to serve a large number of ports Ports which have been served regularly

and occasionally include

Agreement No 9718 Oakland Los AngelesLong BeachKobe

Tokyo Nagoya Shimizu Busan

Agreement No 9731 Oakland Los AngelesKobe Tokyo

Nagoya Shimizu

Agreement No 9835 Portland Seattle Vancouver Kobe Tokyo

or Yokohama Nagoya Shimizu

Agreement No 9975 Kobe Tokyo Nagoya Shimizu Baltimore

Boston Jacksonville New York Norfolk Philadelphia Savannah

Wilmington

Ex 1 para 29 App 3

Ex 2 para 20 App 3

27 The ability to charter a predetermined amount of space on one

another s vessels under the Agreements produces a larger number of ship

ping opportunities with the deployment of a minimum of capital resources

For example by space chartering the individual carrier parties are thereby

placed in a position to offer a frequency of service which they could

not offer absent the introduction of a substantially greater number ofvessels

This conservation of resources and offering of competitive service by six

individual carriers is beneficial to the trade as a whole Similarly the

ability to coordinate the sailing schedules of the parties vessels is indispen

sable to assuring regular and evenly spaced competitive service frequency

upon which shippers rely These are the principles which underlie the

chartering and vessel coordination provisions of the Agreements Ex 1

paras 31 33 35 37 40 Ex 2 paras 23 26 28

28 Experience over many years in implementing the current and earlier

prototypes of the Agreements shows that under tift provisions the parties

have had a high degree of frequent and regular sailings and without major

service interruptions thereby holding any inconvenience to shippers at a
AGREEMENTS NOS 9718 7 97188 9731 8 98355 9975 7 569

101164 102741 UNITED STATES JAPAN TRADES

minimum Efficient frequent and regular service has thus been provided

under the Agreements Ex I

paras 31 34 3637 paras 22 24

29 Without the Agreements many of the benefits efficient reliable and

regular competitive service could not be achieved absent the development

of individual fleets sized to produce individual competitive services As

the parties cannot be expected to abandon their national trade with the

United States if the Agreements were not approved more ships would

be added and this would produce more tonnage in the trade Ex 1 paras

38 2 Ex 2 paras 21 22 26

30 Despite a mild down turn in cargo in 1982 and a temporary decline

in utilizations the ability to rationalize through space chartering and vessel

coordination has enabled the parties to remain committed to offering full

service at a broad range of ports Despite the ups and downs the

Agreements help to provide a reliable service commitment This is particu

larly made possible by the ability to schedule and coordinate sailings

as shippers can rely on fixed arrivals and departures thus allowing them

flexibility in planning their future transportation needs The ability just

to space charter is not enough as there could be no assurance when

a ship would arrive or depart In these circumstances the parties would

be disadvantaged in competing against other carriers Ex 1 paras

36

38 5960 App 13 Ex 2 paras 28 34

31 Without vessel coordinating authority a natural decision of a vessel

owner would be to schedule its vessel late in the month at Japanese

ports thus causing a bunching of sailings with wide gaps at other times

This is because there is an established tendency of cargo from Japan

to increase near the end of the month as letters of credit expire Ex

1 para 39 Ex 2 para 28

32 As Japan is an island nation with limited resources the nation is

extremely dependent on its national flag ocean liner services to assure

that the lines of commerce will remain open Therefore any disruption

in proponents space chartering and vessel coordination would impact ad

versely upon these channels of commerce Ex 2 para 33

33 With fewer vessels operations under the Agreements require less

fuel to serve the same routes with the same schedules Fuel savings are

believed to be very substantial The ability to utilize fewer vessels also

serves to reduce marine and air pollution Ex 1 paras 43 46 Ex 2

paras 22 3032

34 The ability to coordinate sailings under the Agreements has served

and will serve to reduce port and terminal congestion as departures and

arrivals at or about the same time would be eliminated Terminal congestion

has been and will continue to be reduced as space chartering enables

the use of a single terminal facility Even if the same terminal facility

were used the impact on terminal use would be negative if there were

no vessel coordination In such a case schedules would conflict and overlap

leading to delays in berthing and at other times the idleness of port
570 FEDERAL MARITIME COMMISSION

facilities Reducing tenninal and port congestion also decreases the risks

of marine collisions Under the Agreements Portland and Oakland tenninal

facilities have experienced less congestion and greater efficiencies Ex 1

paras 47 52 Apps 9 10 lOA Ex 2 paras 22 31 32

35 Not only have and will the Agreements enhance the efficient deploy

ment of vessels and the use of resources the regularity and dependability

of service they provide enable shippers to reduce their equipment inventory

requirement thus reducing the time that cargo sits idle while awaiting

shipment This in turn reduces problems with cash flow which shippers

may experience while cargo remains idle Ex 1 para 53 Ex 2 para

22 32

36 As a general principle reducing capital expenditures encourages high

er quality service and technological innovations Ex 1 para 54 Ex 22

para 32

37 The nature of U S ocean shipping is that from time to time the

foreign waterborne trades are subject to overtonnaging in one degree or

another This is true in the case of the Japan U S trade and the Far

East U S trade The Far East U S Pacific Coast trade is a

very cyclical

trade particularly Eastbound Beginning with 1979 and into 1980 declining

cargoes coupled with capacity expansions resulted in depressed utilizations

and serious overtonnaging By late 1980 and through 1981 cargoes re

bounded capacity stabilized and utilizations improved The second half

of 1982 then witnessed more capacity increases and a slowing of growth

By 1983 however strong cargo growth had again produced an equilibrium

of capacity and cargo availability Ex 1 paras 5961 Ex 2 paras 34

39 Affidavit of Mr Tucker hereafter Ex 3

pages 22 24

38 The nature of the trade is such that shipowners must size their

operations in a manner which will enable them to accommodate peak

cargo situations as well as foreseeable market growth In this regard all

carriers including parties operating under section 15 agreements must be

in a position to respond to trade fluctuations and improvements brought

on by economic uprisings in the market The parties current inability

under Agreement No 9835 to meet the capacity needs of PNW Pacific

Northwest shippers is a case in point Ex 1 paras 61 62 Apps 11

12 Ex 2 paras 34 43 App 7 Ex 3 pp 4 19

39 Currently 1983 second halt the parties Eastbound carryings have

strongly rebounded with the worldwide recovery
AGREEMENTS NOS 9718 7 97188 9731 8 9835 5 9975 7 571

101164 102741 UNlTED STATES JAPAN TRADES

when the parties began their replacement program in 1981 Had the vessels

not been introduced the parties would have been close to overbooked

Even so by the second half of 1983 the parties utilizations were strongly

up although five of their ten replacement vessels were already in place

Agreement Utilization

9718 85

9731 80

9835 98

The remammg replacements will increase total Pacific Coast capacity by

only 13 7 percent Ex Iparas 60 75 App 2 5 Ex 2 para 36 Ex

3 p19

41 A further factor in adjudging utilizations relates to the volume of

cargo which may be carried on a particular leg of the movement While

in the California trades Westbound utilizations have remained in the 60

70 percent range the parties Eastbound utilizations have as indicated

been considerably higher This is because there is a traditionally higher

volume of cargo which moves from the Far East encouraged by the contin

ued strength of the U S dollar In considering utilizations and the need

for replacing capacity carryings on the dominant leg must be the controlling

consideration although this is moderated somewhat by the preponderance

of heavy dense cargoes Westbound which cause the parties vessels to

Weigh out prior to reaching their standard TEU capacity In the PNW

trade Westbound utilizations have remained at 90 percent for the past

four years despite the dollar s strength and the parties replacement of

two vessels under Agreement No 9835 Ex 1 para 61 Ex 2 para

36 Ex 3 p20

42 In the period 19801982 APL Sea Land and U S Lines have all

experienced relatively high utilizations in the Pacific trades and with the

current cargo recovery it is probable they and other carriers are continuing

to enjoy increased carryings Further confidence in trade growth has been

shown over the past year by several new carriers entering the trades and

by a number of existing carriers including APL Lykes U S Lines Ever

green Maersk and Zim expanding their capacity or announcing plans short

ly to do so Ex 1 paras 66 76 Ex 2 para 34 Ex 3

p

23

43 As there has been less fluctuation in the Atlantic Coast trade under

Agreement No 9975 and as there are fewer carriers offering a direct

all water service to the Atlantic the parties over many years have consist

ently been in a position to achieve Eastbound utilizations approaching 100

percent Ex 1 para 65

44 According to U S Maritime Administration statistics Far East U S

cargo growth for 1983 should total between 1015 percent For 1984

85 Mr Tucker proponents economist has predicted 9 percent growth

for the Far East Eastbound trades as a whole but with Japan growth

after 1984 leveling off a 3 5 percent annually After 1985 Far East origin

26 EM C
572 FEDERAL MARITIME COMMISSION

cargoes other than Japan cargo are expected to return to past growth

factors or approximately 6 percent annually Throughout Pacific Coast car

goes are expected to outperform the Atlantic as they have over the last

decade Comparing the cargo predictions of Mr Tucker with the remaining

capacity increases under the revised agreements there is every indication

proponents utilizations should continue to improve in both the Eastbound

and Westbound directions and that a return to serious overtonnaging is

not expectable Ex I para 64 Ex 2 paras 38 40 Ex 3 pp 5

19

45 There is no overall coordination among the parties to the various

Agreements and so far as the record in this proceeding shows the decisions

that affect anyone Agreement are made only by the parties to that particular

Agreement each Agreement involving different operational considerations

different trades for the most part and not all of the same parties For

market purposes therefore each Agreement must be viewed individually

Ex I para 69 Ex 2 para 40

46 As much as one third of the cargo moving Eastbound under the

Agreements originates in the Far East other than Japan This trend is

expected to continue as non Japanese Far East cargo develops This non

Japanese cargo is carried on Agreement vessels on a transshipment basis

as has been the practice since inauguration of operations These countries

include Hong Kong Taiwan the Philippines and other Far East and South

east countries The relevant market to measure the Agreements is therefore

the entire Far East trading area which is served by the parties and which

is the trading area of their competitors As the parties compete in that

trade not only with conference carriers but with other competitors who

operate outside of conferences the relevant Far East market necessarily

includes the tradewide liner market Ex I paras 7072 Ex 2 paras

48 49 Ex 3 p5 7

47 As is shown in the Affidavit of Mr Tucker the Eastbound Far

East United States Pacific Coast market share of the parties under the

Agreements steadily declined through 1981 as third flag and developing

national flag fleets have emerged but has stabilized since that time at

2425 percent Ex 2 paras 40 Ex 3 pp 2022

48 The primary purpose of the Agreements is to enable the parties

to charter space on each other s vessels This is how the Agreements

were permitfed to operate in the beginning before the Commission s January

16 1981 order freezing the space which could be chartered at levels which

had prevailed since 1974 in the Pacific and 1976 in the Atlantic The

replacement of Agreement vessels with larger vessels starting in 1981

however and the inability to charter their full capacity has created oper

ational problems for the individual vessel owners and has served to deny

the parties the right to rationalize the full capacity of their vessels The

annual capacity levels under the Agreements are based upon the maximum

number of sailings contemplated times the capacities of the vessels now
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 573

1011 r4 102741 UNITED STATES JAPAN TRADES

in operation taking into consideration the vessels being replaced This

in a

very practical sense may render it unnecessary to place limitations

upon the space which can be chartered Ex 1 para 78 Ex 2 paras

41

49 The capacities of the vessels upon which the annual capacity levels

are based are stated on the basis ofthe vessels standard operating capacities

which normally means loading up to the third tier The Agreements permit

the parties to use however the space above the third tier when operating

conditions permit This will enable an efficient use of the full capacity

of the vessels As the space above the third tier fluctuates from sailing

to sailing depending upon operational considerations it is not practical

to include it in the annual capacity levels named in the Agreements It

is moreover an accepted industry practice to size the capacity of a vessel

on the basis of its standard operating capacity as it is to calculate utiliza

tions on the basis of the containers which are loaded aboard a vessel

as a percentage of the vessel s standard operating capacity Ex 1 paras

81 85 App IS Ex 2

paras 4446 App 7

50 During the period the space charter program has been in operation

no party has had a serious need to operate a containership in the Japan

trade independent of the coordinated services although several lines have

introduced separate Far East U S Pacific Coast services For the future

however one or more of the parties will call at Japan on an individual

basis However in order to safeguard the benefits derived from space

chartering the parties have restricted the cargo which is carried outside

of the Agreements to 3 percent of the capacity authorized under their

space charter operations Ex 1 para 86 Ex 2 para 47

51 Although there is no TEU limitation on transshipment cargo carried

to or from other Far East countries the Pacific Coast Agreements limit

such carryings of the parties in the Indonesia Malaysia Singapore and

Thailand trades The limits are based upon the parties historical carryings

and Mr Tucker s projections of market growth in those trades The parties

decided to impose the limits in these trades because of the concerns identi

fied by one of the protestants which actively serves these trades Ex

1 paras 17 21 88 89 App 1 Ex 2

paras 14 16 49 App 1 Ex

3

pp 11 12 13 14 1619

52 Only a few Agreement vessels are jointly owned by some of the

parties Certain instances of joint ownerships arose early in the formation

of the Agreements and represented an effort to conserve capital resources

When other vessels were added and it became possible for each party

to operate its own vessel most of the joint ownerships were abandoned

There remain at present only six jointly owned vessels four under Agree

ment No 9731 one under Agreement No 9835 and the other under Agree

ment No 9975 Accordingly clarifying authority to share operational ex

penses between the owning parties has been included under each Agreement

although the parties consider such expenses necessarily may be appropriately
574 FEDERAL MARITIME COMMISSION

shared between joint owners Ex 1 paras 21 87 Ex 2

paras 12 16

50

Ultimate Findings of Fact

53 On the basis of the record in this proceeding the Proponents have

sustained their burden ofproof that the space charter and vessel coordination

provisions of the agreements in issue will provide substantial public benefits

which outweigh any possible negative antitrust considerations

54 The discussions among Proponents and Protestants counsel whose

purpose was to reach a basis of settlement on the issues involved in

this proceeding do not require a separate section 15 filing Such discussions

do not constitute new agreements within the meaning of section 15

of the Shipping Act and are adequately explained in the record of this

case

55 Since the parties have agreed that there are no disputed material

issues of fact the specific areas set forth on remand and in the Commission s

Order of Investigation and Hearing need not be considered from the specific

points of view set forth in the remand Instead the issue involved is

whether or not on the record made the requirements of section 15 and

the pertinent case law have been satisfied so as to warrant approval of

the agreements

Discussion and Conclusions

IPreliminary Matters

It should be noted at the outset that throughout the pendancy of this

proceeding both in the Commission and in the Circuit Court of Appeals

there have been many actions of an interim nature such as pendente lite

orders oral argument before the Commission etc To the extent we deemed

them material and relevant to the decision made here we have included

them in the findings of fact However we chose not to chronicle every

action taken since to do so would unduly burden the record and was

not necessary to the decision itself

It is also important to note that on May 10 1984 a Procedural Order

was promulgated by the Administrative Law Judge wherein he ordered

that the latest agreements filed by the Proponents in this proceeding be

published in the Federal Register so as to allow within 10 days any

comments protests and requests for hearing relating to those portions of

the agreements which represent an expansion of the authority sought in

the prior agreements filed by the Proponents This was done as a precaution

to forestall any questions which might arise because of the holding in

Sea Land Service Inc v Federal Maritime Commission 653 F 2d 544

26 EM C
AGREEMENTS NOS 9718 7 9718 8 9731 8 98355 9975 7 575

10 64 102741 UNITED STATES JAPAN TRADES

D C Cir 1981 9 There the Court held that where changes expand the

authority sought notice is necessary but where changes restrict rather than

expand additional notice is not necessary In ordering the 10 day Federal

Register notice we sought to avoid any potential problems that might later

arise and to expedite this Initial Decision Our action should not be contrued

as a detennination that the new agreements represent an enlargement of

the authority sought in the old agreements That question only need be

addressed if it arises within the 10 day notice period

II Filing ofAgreements Under Section 15

Section 15 provides that

Every common carrier by water or other person subject to

this Act shall file immediately with the Commission a true copy

or if oral a true and complete memorandum of every agreement

with another such carrier or other person subject to this Act

or modification or cancellation thereof to which it may be a

party or confonn in whole or in part fixing or regulating transpor

tation rates or fares giving or receiving special rates accommoda

tions or other special privileges or advantages controlling regulat

ing preventing or destroying competition pooling or apportioning

earnings losses or traffic allotting ports or restricting or otherwise

regulating the number and character of sailings between ports

limiting or regulating in any way the volume or character of

freight or passenger traffic to be carried or in any manner provid

ing for an exclusive preferential or cooperative working arrange

ment The tenn agreement in this section includes understand

ings conferences and other arrangements

We hold that in this proceeding there are no agreements other than

those already on file which need to be filed within the ambit of section

15 Specifically we hold that the decision in American Export Isbrandtsen

Lines Inc 14 F MC 82 1970 is inapplicable to this proceeding because

the record in the instant case is materially distinguishable from Isbrandtsen

on the facts In Isbrandtsen supra the Commission held that where parties

to a case brought before the Maritime Subsidy Board of the Maritime

Administration entered into a settlement agreement the agreement was sub

ject to section 15 jurisdiction because it provided for a cooperative working

arrangement constituted a special privilege or advantage and controlled

or regulated competition Here unlike Isbrandtsen the litigation originated

in the Commission precisely because the original agreements were filed

with the Commission and other parties protested their implementation While

the agreements have been amended since they were originally filed the

latest agreements reflect a settlement of a fonnal docketed Commission

While the new agreements generally represent adiminution of requested authority establishing capacity

levels on an annual fEU basis which total capacity limitations were required by the Commission in its

pendente lite orders does have theeffect of increasing previous space charter capacities
576 FEDERAL MARITIME COMMISSION

proceeding resulting from negotiations amongst counsel for the litigating

parties We hold that given those facts and the record in this proceeding

the agreements which are subject to section 15 scrutiny here are the

written agreements which already have been filed and not the discussions

engaged in by counse1 1O

III The Remand From the D C Circuit Court of Appeals and the Order

ofInvestigation and Hearing

As is set forth in the Findings of Fact this proceeding originated on

remand from the Court of Appeals 11 In its decision the Appeals Court

listed a series of disputed factual issues on which it directed the Commission

to conduct hearings The Commission in turn ordered that hearings be

held by the Administrative Law Judge on specific issues which it felt

were relevant to the disposition of the disputed factual issues raised by

the Appeals Court Of course underlying any action was the Appeals

Court s direction to conduct a hearing on the disputed material issues

offact raised by the petitioners Emphasis supplied

The present state of the record in this proceeding is that the Proponents

of both pooling agreements Nos 10116 and 10274 respectively have

withdrawn them so as to make unnecessary determination of several of

the disputed material issues referred to by the Appeals Court Further

and more importantly all of the Protestants have withdrawn any objection

to the four space charter agreements now on file and Hearing Counsel

raises no objection to them so that there are no disputed material

issues remaining We hold therefore that the issues raised on remand

need not be specifically determined Further we hold that since the Circuit

Court did not remand the record in the case to the Commission it did

not retain jurisdiction over the case 12 In essence the settlement amongst

the parties and the filing of the new agreements renders inapplicable the

issues raised in the remand from the District of Columbia Circuit Court

of Appeals and the related issues contained in the Commission s Order

of Investigation and Hearing Such holding of course does not obviate

the need to determine whether or not the agreements in question are approv

able within the general standards set forth in section 15 and the applicable

case law

IV The Svenska Criteria

Section 15 of the Shipping Act 1916 requires the Commission to dis

approve agreements which are found contrary to the public interest

OSee the Commission s Order Partially Adopting Initial Decision served on February 29 1984 in

Docket No 8328 In Re Agreement Nos 10457 et 01 26 F M C 191

IISea Land Service Inc v USA and FMC et 01 683 F 2d 491 D C Cir 1982

12See Rule 13 d U S Court of Appeals forthe District of Columbia Circuit Further the pertinent parties

have indicated they did not dismiss the Circuit Court aclion as part of the overall seUlement because they

believed the Circuit Court didnot retain jurisdiction over the maller
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 577

101164 10274I UNlTED STATES JAPAN TRADES

In FMC v Aktiebolaget Svenska Amerika Linien 389 U S 816 1967

the Supreme Court stated

The antitrust standard imposed by the Commission in Svenska

required the carriers to justify an anticompetitive agreement which

was a per se violation of the anti trust laws by demonstrating

that it was required by a serious transportation need necessary

to secure important public benefits or in the furtherance of a

valid regulatory purpose of the Shipping Act U S Lines v

FMC 584 F 2d 519 528 n 28 D C Cir 1978 Citations omit

ted

Once the proponents of agreements seeking approval do come forward

with evidence to support their burden of proof the Commission generally

weighs the potential benefits against the possible harmful effects of the

agreements and in the process must consider the extent to which the

agreements violate anti trust laws and policies In weighing the pros and

cons of agreements the Commission recognizes that the extent of the pro

ponents burden will vary in accordance with the type and scope of the

agreement under consideration In Agreement No 57 96 Pacific Westbound

Conference Extension ofAuthority for Intermodal Services 19 F MC 289

300 1976 the Commission stated

T he extent of the justification that need be shown for such

approval will of course vary from case to case with the intensity

of the otherwise illegal restraint involved Thus the legitimate

commercial objectives which the Commission will accept as evi

dencing the necessity for restraint will generally be determined

by the type and scope of the agreement under consideration

See also Agreement No 87605Modification of the East Coast United

States and Canada India Pakistan Burma and Ceylon Rate Agreement

17 F MC 61 62 1973

In applying the above criteria to the instant proceeding we begin by

disregarding both pooling agreements which have been withdrawn Their

withdrawal removes the most objectionable and anti competitive arrange

ments from our consideration altogether What remains are four space char

tering agreements which limit total capacity by inclusion of annual TED

capacity levels and which impose other limits on transshipment and non

agreement carryings eliminate sub groups within an agreement delete the

right to share agents in certain cases and require comprehensive semi

annual reporting

The benefits accruing from the four agreements have been found as

fact from the uncontroverted evidence submitted by Messrs Kawamura

Ex 1 Hirano Ex 2 and Tucker Ex 3 For example by space chartering

and vessel coordination competitive service is made available which service

would not be possible with the limited number of vessels absent the agree

ments the need for additional vessels has been reduced and service to
578 FEDERAL MARITIME COMMISSION

i

shippers under the agreements has been stable since reliable service levels

have been provided the parties have been able to serve a large number

of ports using a limited number of vessels despite normal ups and

downs the agreements help provide a reliable service commitment Fur

ther the ability to coordinate sailings reduces port and terminal congestion

and because fewer vessels are needed under the agreements less fuel is

required to service the same routes The regularity df service also enables

shippers to reduce their equipment inventory and capital expenditures

Finally with respect to overtonnaging it is true that the nature of U S

ocean shipping is that from time to time declining cargoes coupled with

capacity expansion result in overtonnaging This was true in the case of

the Japan U S trade and the Far East U S trade in the 19791980 period

Since 1981 however cargoes rebounded capacity stabilized and utilizations

improved By 1983 strong cargo growth had again produced an equilibrium

of capacity and cargo availability Given the cargo predictions of the Pro

ponents witness it is likely that their utilizations should continue to improve

in both the Eastbound and Westbound directions and that a return to

serious overtonnaging will not occur

In the face of the above as well as many other factors which lead

one to conclude the public benefits from these agreements far outweigh

any anticompetitive consequences which might violate anti trust laws or

policies the record in this case is devoid of any evidence which would

justify any other conclusion Indeed all of the primary Protestants who

presumably are also the Proponents major competitors agree hat the latest

agreements should be approved Sea Land in its legal memorandum states

The actions which Proponents took to satisfy the concerns of

Sea Land andlor other Protestants were detailed in Proponents

filing and they need not be detailed again here Briefly stated

those actions consisted of the following

imposition of effective and realistic capacity limitations upon

each of the four space charter agreements

designation of the space charter agreement services as essentially

Proponents sole containership services in the Japan U S trades

establishment of a limitation on the carriage of transshipment

cargo tofrom four important Far East markets in the three

West Coast space charter agreements and

elimination of the revenue pooling agreements

In making the determination not to oppose the amended agree

ments the key considerations for Sea Land were quite obviously

1 the fact that the actions taken by Proponents will serve to

diminish their competitive impact upon Sea Land and 2 the

fact that continuing to oppose the agreements would involve a

further expenditure of time money and effort in a proceeding

which has already been a lengthy and expensive one and the

j
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 579

JOJ Jr4 J0274J UNITED STATES JAPAN TRADES

outcome of which is by no means certain The first of these

considerations was by far the more important of the two and

it should be elaborated upon particularly from the point of view

of how the actions taken by Proponents address Sea Land s past

concerns regarding their agreements

b Actions of Proponents Addressing Specific Sea Land Con

cerns

First the prior filings of Sea Land regarding Proponents agree

ments are permeated with concern over overtonnaging in the

Transpacific trades and the fact that the space charter agreements

under which Proponents had been operating did not contain any

provision effectively limiting the amount of vessel capacity which

Proponents could deploy thereunder 8

The annual capacity limita

tions which Proponents have decided to include in each of their

amended space charter agreements are real and effective ones

and thus they go a long way toward satisfying those concerns

The further step taken by Proponents of designating their agree

ment services as essential1y their exclusive containership services

in the Japan U S trades serves to ensure that the capacity limita

tions wi11 not be undermined by the initiation of non agreement

services in those trades Carriage of smal1 amounts of cargo

to from Japan by non agreement containerships is permitted to

enable Proponents to meet extraordinary situations

While the capacity limitations included in the agreements would

permit Proponents to deploy more capacity than they are now

deploying it must be kept in mind that the agreements have

a five year term through August 22 1988 To be realistic the

limitations must take into account the amount by which cargo

is expected to grow during the period that the agreements are

in effect In this connection the affidavits submitted by Pro

ponents witnesses establish that the limitations are indeed realistic

ones when their own forecasts of cargo growth are taken into

account Thus Mr Kawamura one of Proponents company wit

nesses states at 1177 p44 of this affidavit

Based on our assessment of current and foreseeable market

conditions we anticipate these planned increases in capacity

under Agreement Nos 9731 9835 and 9975 wi11 be sufficient

to enable us to carry our existing market share for the duration

of the Agreements

The affidavit of Mr Hirano Proponents other company witness

includes a similar statement at 1143 p

24 Those statements

are fuBy confirmed by the comparison of projected cargo growth

and the growth in Proponents capacity done by Mr Tucker

Capacity limitations of this nature were however required by the Commission s Order of August 19

1983 inthis proceeding aa condition of pendente lite approval of the space charter agreements Those Com

mission mandated limitations are currently in effect

Jl Ar
580 FEDERAL MARITIME COMMISSION

Proponents economic witness which appears at page 19 of his

affidavit

That testimony ofProponents witnesses establishes in our view

that Proponents will not have any need to seek any increase

in the capacity limitations during the term of the agreements

unless cargo growth is greater than Mr Tucker forecasts or there

is some other unforeseen change in market conditions To be

sure as Messrs Kawamura and Hirano also state in the above

cited paragraphs the parties have made no commitment not to

seek further revisions in their capacities Be that as it may the

addition of unwarranted capacity to the trades by Proponents would

be contrary to their own and the trades interests and we expect

the Commission would not countenance such significantly anti

competitive activity To reiterate Sea Land s position in this regard

is based on what Proponents have themselves said in their affida

vits as cited above

The capacity limitations in addition to serving to mitigate

overtonnaging also provide Sea Land with a benchmark by which

it can plan its own operations in the Transpacific trades Consider

ing the highly influential role which Proponents collectively play

in the Transpacific trades the importance to other carriers of

having this benchmark should not be understated Put another

way the capacity limitations provide an important measure of

certainty in an area in which there was none before and thus

they will also further stability in the Transpacific trades

Another longstanding concern of Sea Land has been Proponents

carriage in their space charter agreement operations of cargo to

and from Far Eastern countries other than Japan Because those

operations are essentially limited to calls at Japan in the Far

East 9

nearly all of this carriage is done on a transshipment basis

Proponents decision to amend their West Coast space charter

agreements to include limitations on the carriage of transshipment

cargo tofrom Indonesia Malaysia Singapore and Thailand ad

dresses this concern While the limitations apply only with regard

to those four Far Eastern countries those countries are rapidly

growing markets and are also ones which Proponents serve on

a non conference basis Eastbound Also those limitations like

the overall capacity limitations provide Sea Land with an impor

tant benchmark by which it can plan its own operations

In the memorandum ofAmerican President Lines it states

Capacity limitations The limitations on agreement capacity and

non agreement Japan calls were central to APL s decision in that

regard APL believes that it would be clearly inconsistent with

the stated purpose of restraining overtonnaging if proponents were

to seek to amend their agreements during their five year terms

9

Only Agreement 9718 authorizes calls at a Far East country other than Japan its scope having been ex

panded to include calls at Korea on a limited basis
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 581

101164 102741 UNITED STATES JAPAN TRADES

to allow the operation of greater capacity unless actual trade

growth exceeds their expert economists projections which show

a correlation between the capacity increases allowed under the

revised agreements and trade growth through 1988 5 As to the

capacity increases authorized under the revised agreements APL

has in contemplation of the following determined that non objec

tion at this time is preferable to continuation of the litigation

i Each of the three Pacific agreements has an annualized

capacity limitation that is clearly derived from a maximum

number of annual sailings by specifically identified vessels al

beit there is no prohibition on varying vessels or sailings within

the annual limit

ii Each of the vessels so identified is already in service in

the Pacific or already under construction or firm order pursuant

to the previously announced Japanese Government shipbuilding

program

iii While the identified vessels include all ten of the announced

larger replacement vessels for the Pacific the operation of half

of those ships was allowed by the Commission s August 19

1983 pendente lite Order and hence is for practical purposes

afait accompli

iv The agreements have five year terms of which about four

and one half years remain

v Proponents expert economist has forecast that given his

projections concerning market growth and assuming no increase

in proponents market share the allowed capacity should be

sufficient through the end of the agreements terms See Pro

ponents Exhibit No 3 at 18 19

vi Proponents designated spokesmen have similarly stated

that based on their assessment of current and foreseeable market

conditions the allowed capacity should be sufficient for the

full term of the agreements again assuming no increase in

market share See Proponents Exhibits Nos 1 1177 and 2

1143

vii The capacity limitations apply to all standard operating

capacity on the vessels i ethey apply to space allocated to

the vessel owner as well as to space allocated to other agreement

parties

viii There is a requirement that space in excess of standard

operating capacity be identified for each vessel

Other factors In addition to the above noted factors concerning

agreement capacity the following factors also were important to

APL s determination that non objection to the revised agreements

is preferable to continuation of the litigation i

the limitation

of non agreement containership Japan cargo to 3 of allowed

agreement capacity ii the withdrawal of the pooling agreements

See Proponents Exhibit No 3 at 19

26 F M C
582 FEDERAL MARITIME COMMISSION

thus to some extent lessening the unitary tendencies ofthe arrange

ments Hi a desire to avoid the costs burdens risks and friction

of further litigation and iv the uncertainties created by the pros

pect and now the eventuality of new legislation governing fu

ture agreements among carriers

In the Lykes Bros Steamship Co Inc memorandum it is stated

Among the important considerations which led Lykes to oppose

the now withdrawn agreements was Lyke s position that agree

ments of this nature had not in the past always served to amelio

rate overtonnage a principal justification advanced by proponents

in support and that for this and other reasons the Commission

should adopt certain policies in approving such agreements includ

ing 1 placing limits on the trade areas served and the capacity

which may be offered under such agreements 2 approving such

agreements for limited durations 3 imposing detailed reporting

requirements on the parties and 4 conditioning further extension

of such agreements upon a demonstration that the trade served

will grow sufficiently to absorb any proposed capacity increases

Lykes notes that the amended agreements are in some measure

responsive to each of these concerns It notes particularly pro

ponents statements eg Kawamura Affidavit lI s 76 and 77

Tucker Affidavit pp 18 19 and Proposed Finding No 36 to

the effect that the capacity increases provided in the amended

agreements compare favorably with proponents projections of ex

pected increases in the liner trade over the term of the amended

agreements The amended agreements thus provide a capacity limit

for an extended period consistent with proponents planned vessel

replacement program and expectations of trade growth Lykes

would regard with very serious concern any proposed increases

in capacity beyond those currently provided and would regard

as objectionable future capacity increases under the agreements

inconsistent with actual trade growth

In arriving at its position on the amended agreements Lykes

has also considered the existence of independent i e non agree

ment services operated by proponents in some of the same trade

areas covered by the amended agreements see e

g Proposed

Finding No 42 Lykes s position of non opposition to the amend

ed agreements has been formulated in consideration of the present

deployment and capacity offered in these non agreement services

and on limitations in the amended agreements upon employment

of these vessels in the JapanlU S trades Should changes in these

services occur or should new or different services be commenced

by proponents such action could significantly alter the competitive

environment in the trade and would be cause for reassessment

of Lykes s views on the amended agreements

Finally in its memorandum reply Hearing Counsel stated

PUr
AGREEMENTS NOS 9718 7 9718 8 9731 8 9835 5 9975 7 583

101164 102741 UNlTED STATES JAPAN TRADES

With the withdrawal of the two pooling agreements and the

substantial modifications made to the space charter agreements

the agreements currently before the Commission are significantly

different than those agreements remanded to the Commission So

different in fact that the very Protestants on whose behalf the

court acted have now announced they will not oppose the current

agreements Thus Protestants are no longer pressing the issues

they raised before the Court of Appeals

Indeed many of the issues listed on pages 1618 of the Order

of Investigation and Hearing on Remand have been rendered moot

by Proponents pooling agreement withdrawals and space charter

agreement modifications Thus issues 1 bloc voting 2 Uoint

service and 3 trading house relations relate more to the agree

ments as previously existed Issues 10 and 11 relating to the

terms of the agreements have also been resolved by Proponents

modifications and extensive reporting provisions

Now that new agreements are before the Commission and the

Protestants do not press the issues they raised regarding the prede

cessor agreements it only remains for Proponents to justify the

new agreements under Svenska type standards This Hearing

Counsel submit Proponents have done in their March 6 1984

Brief

Accordingly Hearing Counsel support approval of Agreements

Nos 9718 10 9731 10 9835 7 and 9975 9 as now on file

In view of the above we hold that the Proponents have sustained the

burden that is theirs under Svenska supra of justifying the agreements

involved here as required by a serious transportation need necessary to

secure important public benefits and in furtherance of valid regulatory pur

poses 13 Since the record is devoid of any evidence to the contrary the

agreements are approved

V Miscellaneous Conclusions

The parties in this proceeding have all expressed the view that despite

their settlement of the issues in this proceeding as reflected in the filing

of the latest agreements there is no tacit or express agreement among

them as to future conduct or positions The Proponents have made no

commitment of any kind to refrain from seeking to amend their agreements

in the future and the Protestants would be entirely free to oppose any

such amendments in whatever manner it chooses to do so We so hold

The Protestants in this proceeding have also expressed some concern

as to the application of the doctrine of res judicata or collateral estoppel

to each or all of them While the record in the case does not contain

See Agreement No 9835 14 F M C 203 1971 Agreement Nos 97183 973 5 19 F M C 351 365

1976 Agreement No 10422 United States East Asia Space Charier Agreement 21 SRR 686 691 FMC

1982 for ca es where the Commission approved space charter and vessel coordination agreements becauseythey

afforded transportation benefits interms ofcost as well as ameliorating overtonnaging 26

EM C
584 FEDERAL MARITIME COMMISSION

any written agreement to that effect the Proponents have orally agreed

that in any future proceeding they would not invoke the doctrine of res

judicata or collateral estoppel against any ofthe Protestants in this proceed

ing

During the pendency of this proceeding certain intervenors were allowed

to intervene for limited purposes subject to the discretion of the Administra

tive Law Judge As the case progressed toward settlement they did not

appear at the prehearing conference or at the hearing itself However

they did speak with the Administrative Law Judge by telephone and it

is his understanding they have no objection to any of the latest agreements

filed 14 In any event should that not be the case it is hereby held that

any objection made by any intervenor is untimely and in the discretion

of the Administrative Law Judge such intervenor will no longer be allowed

to intervene for that purpose

With respect to the fact that the parties have expressed a desire to

expedite this proceeding and to allow the Commission discretion in its

review of the Initial Decision and related matters it is hereby ordered

that the parties to this proceeding advise the Commission in writing whether

or not they intend to file any exceptions to the Initial Decision within

five days of the date of service of the decision Of course since the

parties have withdrawn their objections to the agreements it is hoped that

no exceptions will be filed in which case the Commission may approve

the agreements before June 18 1984 which is the effective date of the

Shipping Act of 1984 if it so desires

Finally in view of all of the above and the holding in this proceeding

it is hereby discontinued

S JOSEPH N INOOLlA

Administrative Law Judge

14The Delaware River Pon Authority so indicated by leller dated March 23 1984

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 1

TRANSEUROPE SHIPPING INC

NOTICE

June 15 1984

Notice is given that no exceptions were filed to the May 9 1984

initial decision in this proceeding andthe time within which the Commission

could determine to review that decision has expired No such determination

has been made and accordingly that decision has become administratively

final

S BRUCE A DOMBROWSKI

Assistant Secretary

26 F M C 585
FEDERAL MARITIME COMMISSION

DOCKET NO 831

TRANSEUROPE SHIPPING INC

Held

I Where the Respondent Transeurope Shipping Inc was in the business of freight forwarding

and where overcharges occurred regarding eight outbound shipments in 1979 1980 such

overcharges were the responsibility of Transeurope for which It might be held liable

and subject to penalty under the provisions of the Shipping Act 1916 as amended

and the provisions of the Federal Maritime Commission s General Order 4 46 CPR

510 1 et seq

2 Where Transeurope contended the wrongdoing Vas the fault of disloyal and dishonest

former employees and Hearing Counsel asserted It was engaged In at the behest of

Transeurope s owner the trial hazard related to a determination of the factual discrepancy

as well as other surrounding circumstances justifies a settlement setting a penalty of

5 000 00 Such a penalty gives due consideration to mitigating circumstances and Is

within that reasonable area of settlement and compromise which lends Itself to the

deterrence of future similar conduct by the respondent and others and which will secure

compliance with the law and the Commission s rules and policies

3 Where the Respondent as well as Its affiliates owner and directors surrenders Its freight

forwarder license and agrees not to reapply for such license for a period of three

years the Issue regarding revocation of the respondent s freight forwarder license raised

in the Commission s Order of Investigation becomes moot

R Frederic Fisher Charles L Coleman and Laurence N Minch for respondent

Transeurope Shipping Inc

Joseph B Slunt James S Oneto and John Robert Ewers Hearing Counsel

INITIAL DECISION 1 OF JOSEPH N INGOLIA ADMINISTRATIVE

LAW JUDGE

Finalized June 15 1984

PRELIMINARY MATTERS

By Order of Investigation and Hearing served on January 14 1983

the Commission ordered that pursuant to sections 22 32 and 44 of the

Shipping Act 1916 as amended 46 U S C 821 831 and 841 b a pro

ceeding be instituted to determine

1 Whether Transeurope Shipping Inc violated the Commission s

General Order 4 46 CPR 510 1980 section 51O 23 e withhold

ing information section 51023 d due diligence section 510 23j

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

586 26 F M C
TRANSEUROPE SHIPPING INC 587

invoices section 51O 23 k records required to be kept andor

section 510 231 failure to make records available

2 Whether civil penalties should be assessed against Transeurope

Shipping Inc pursuant to section 32 of the Shipping Act 1916

46 U S C 831 e if found to be in violation ofthe Commission s

regulations and if so the amount of any such penalty which

should be imposed taking into consideration factors in possible

mitigation of such a penalty and

3 Whether the license of Transeurope Shipping Inc to act as an

independent ocean freight forwarder should be revoked or sus

pended pursuant to Section 44d Shipping Act 1916 andor

section 510 17 of Revised General Order 4 46 CPR 510 17

1981 for

a willfully violating section 51O 23 e 51O 23 d 51O 23j

510 23 k andor 510 231 of General Order 4 46 CPR 510

1980 or

b conduct which the Commission determines renders the licensee

unfit or unable to carry on the business of forwarding

As a result of the above Order the parties initially began discovery

and then asked for time to settle the issues involved The settlement negotia

tions were protracted and involved several proposals none of which were

acceptable to the undersigned Ultimately the matter was set for trial at

which time the parties submitted the joint settlement proposal which is

attached

Findings of Fact

The parties in this proceeding never submitted a stipulation of facts

Instead in making their settlement proposal they did submit what they

termed Proposed Stipulations and Statements of Position which together

with other documentary evidence contained in the record serves as a basis

for the following findings of fact

I By letter dated April 23 1980 the Federal Maritime Commission

the Commission was informed by the former New Jersey Office traffic

manager of Transeurope Shipping Inc Transeurope that he was fired

because I

complained constantly of the unfair practive of over charging

on Ocean Freight The letter enclosed photostats given to me by the

former Traffic Manager who had also been fired because of the

same reasons

2 By letter dated May 2 1980 the Commission was informed by a

former employee of Transeurope that he left the Carson California Office

of the company because

In order to keep my job with this Company I was forced to

continuously increase the measurements billed to our customers
588 FEDERAL MARITIME COMMISSION

even though Transworld Shipping GMBH in Hamburg had in

creasedthe measurements already up to 13 CBM

Due to this fact more and more customers complained or discon

tinued our service The general practi e was to declare minimum

measurements to the shipping lines and to charge out maximum

rates to our customers It also was common practice to charge

conference rates while shipping with non conference vessels

Since this business practice came to this extent I saw no other

way but to leave this Company in order not to destroy my own

reputation which I built up in the last few years

3 The receipt of the above letters was predated by a routine postlicensing

compliance check commenced by the Commission s Los Angeles Office

in February of 1980 The check related to the freight forwarder operations

of Transeurope License Number 2064 which was issued on April 3 1978

The check involved the interview of Transeurope s Vice President who

sent the letter referred to in paragraph 2 above No questionable practices

were noted during the compliance check

4 On June 2 1980 Commission investigators interviewed Transeurope s

Vice President referred to in paragraph 3 above At the interview Mr

2

explained that on inbound shipments Transworld would

instruct Transeurope how much to collect from consignees on

its behalf The amount to be collected would sometimes be inflated

by increasing the cubic measurement of the freight shipped more

than that declared to the ocean carrier Transworld would send

Transeurope a handwritten worksheet indicating the true cube

shipped as well as the amount of the increased cube Transeurope

would also increase the freight charges to be collected from the

consignees in order to further overcharge the consignees Mr

stated that the increase to the consignee

on the part of Transeurope was not a set amount of percentage

but just what he thQught the traffic would bear Mr

also stated that Mr

the owner of Transeurope and Transworld had instructed him

to also start increasing the costs on Transeurope s outbound ship

ments sometime in June or July of 1979 He ignored this instruc

tion until late 1979 when Mr demanded

that he start increasing the charges on outbound shipments He

increased the amount of ocean freight bunker surcharges and

currency adjustment factor charges in fear of being fired by Mr

He stated that to the best of his knowledge

there were approximately eight or ten outbound shipments where

the ocean freight charges were increased from a total of twenty

five outbound shipments handled by Transeurope Since the com

pliance check of February 1980 had shown no discrepancies in

2

Specific nll11es of the partie involved are being deleted herein ince they are not necessary to the deci

ion

26 F M C
TRANSEUROPE SHIPPING INC 589

Transeurope s records regarding the increase in ocean freight Mr

was asked to explain the reason these in

creases did not appear in Transeurope s records Mr

stated that false invoices and false ledger

sheets were provided to the Commission investigator during the

compliance check The true invoices were kept in a notebook

marked TWS Mr informed the inves

tigators of the location of the notebook within Transeurope s of

fice

5 The allegations noted in paragraph 4 above were investigated by

the Commission staff which found that in eight instances Transeurope

had billed its forwarding clients inflated ocean freight charges bunker sur

charges and currency adjustment factor charges Hearing Counsel was pre

pared to present evidence to show that the records for six of the eight

shipments supported the statement regarding the two sets of invoices on

outbound shipments and that Transeurope would also sometimes increase

the cube itself Hearing Counsel alleges that the evidence would show

that Transworld apparently a subsidiary of Transeurope or in some way

a related foreign company also misdescribed the goods being shipped

to ocean carriers in order to obtain lower freight charges Hearing Counsel

further alleges that Transeurope purged its files in an attempt to cover

up the above practice

6 On December I 1981 Commission investigators interviewed the new

Qualifying Officer for Transeurope Ten current outbound shipments were

reviewed with no violations noted Copies of Transeurope s balance sheet

as of 10 31 81 were also obtained It indicated current assets of 141 180 92

and liabilities of 127 620 74

7 Transeurope alleges it did not commit the violations alleged by Hearing

Counsel except for the eight instances occurring in 1979 and January of

1980 which it believed were technical violations It alleges the violations

were committed by a disloyal dishonest former employee without the com

pany s or its owner s knowledge Further it alleges two of its employees

the authors of the letters referred to in paragraphs 1 and 2 above

were secretly involved in the unauthorized diversion of the respondent s

assets to a business or businesses of their own which included the setting

up of a competing concern aimed at respondent s customers

8 Transeurope admits that the letters referred to in paragraphs 1 and

2 above were written by its former employees It alleges that before

the letters were written both employees had been fired and that criminal

complaints had been filed against them for the unlawful diversion of com

pany assets It asserts that except for the eight export shipment violations

none of the violations alleged by Hearing Counsel occurred and in any

event the alleged violations were part of its employees own mismanagement

of the business not known or condoned by its owner

26 EM C
590 FEDERAL MARITIME COMMISSION

9 The respondent alleges that one of its former employees admitted

the improper use of its funds and entered into a promise to repay the

respondent on which promise he defaulted

10 The respondent denies that there was an increase in cube or

any misdescription to ocean carriers and points out that there is no such

showing after its employee was fired It also denies any purging of

documents

11 The respondent alleges that in inbound trades it is not acting as

a freight forwarder and has not acted in any trades as an NVOCC and

further that all actions of Transeurope and its affiliates in inbound trades

were at all times lawful and proper

12 The respondent notes that its files have always been available to

the Commission except for the 1979 and 1980 shipments handled by its

fired former employee It asserts it is involved in freight forwarding on

a

very small scale that it lost 1476100 in 1982 and 15 686 00 in

the first seven months of 1983 and was in a negative working capital

posture

13 The respondent alleges that in 1979 80 its owner spent substantial

time outside of the United States and left the day to day management

of Transeurope to its former employee who was responsible for any wrong

doing that may have occurred

14 During the pendency of this proceeding several joint settlement pro

posals were offered by the parties In those proposals a sum of 1 00000

was offered in settlement of the penalty provisions of the Shipping Act

1916 The proposed settlements were justified in part by citing the financial

statements of the respondent and its inability to pay any more than the

1 000 00 The proposed settlements were ejected by the Administrative

Law Judge and subsequently the respondent s financial statement was re

viewed by the Commission s staff which concluded

We have reviewed the financial data on the subject company

accompanying your memorandum to the Chief Office of Financial

Analysis dated November 3 1983 This review was conducted

with a view towards determining Transeurope s ability to pay

a penalty in excess of 1 000

Although the financial information submitted was not prepared

by independent auditors and does not constitute financial state

ments in conformance with generalIy accepted accounting prin

ciples we were able to reach certain conclusions regarding the

company s operations According to data submitted Transeurope

had cash in the bank in excess of 20000 on August 31 1983

Its working capital current assets less current liabilities was al

most 3 000 on that date This calculation was made exeluding

a loan to one of the owners which in our opinion cannot be

properly classified as a current liability The company s net worth

total assets less total liabilities was approximately 700 on
TRANSEUROPE SHIPPING INC 591

August 31 1983 It is also notable that the company has no

long term debt other than the loan from the owner

Included in the information furnished your Bureau was a

summary

of income losses for the twelve months ending August 31 1983

This summary showed that operations during the period resulted

in a net loss of more than 17 000 However an income statement

covering seven months ending on that date showed legal expense

of more than 13 000 It is our understanding that this expense

is directly related to the matter before the Commission and should

not be considered an expense incurred in the ordinary course

of business

Taking into account an of the foregoing it is our opinion that

Transeurope has the ability to pay a fine in excess of 1 000

A penalty of 5 000 would not be unreasonable We do not feel

that an on site review of Transeurope s accounting records would

serve a useful purpose

15 When this proceeding was caned for hearing the parties presented

an offer in settlement wherein the respondent agreed to pay 5 000 00

on the installment basis in settlement of the pertinent penalty provisions

of the Shipping Act 1916 3In return the Commission among other things

released the respondent from any claims penalties or liability for any

penalties or sanctions under the Shipping Act 1916 or any other pertinent

statute in connection with any of the activities described in the Order

of Investigation and Hearing occurring prior to December 31 1981

Ultimate Facts

16 The eight violations which occurred in 1979 1980 were not merely

technical in nature but were material violations of the Shipping Act 1916

for which the respondent was responsible and might be held liable and

subject to penalty

17 The record in this proceeding justifies a settlement whereby the

respondent pays 5 000 00 to the Commission Such a settlement takes

into consideration relevant mitigating circumstances and is within the param

eters of that reasonable area of settlement and compromise which lends

itself to the deterrence of future similar conduct by the respondent and

others and which will secure compliance with the law and the Commis

sion s rules and policies

Discussion and Conclusions

I Settlement ofCivil Penalties

3

The seulement agreement also contains a

provision that neither Transeurope nor its affiliates owners

or directors shall apply to the Commission for an ocean freight forwarder s license within three years after

this agreement becomes final This provision is in furtherance of revocation of the respondent s license to

which it agreed thereby making the fitness issue raised in the Orderof Investigation and Hearing moot

26 F M C
592 FEDERAL MARITIME COMMISSION

It is well settled that the law generally as well as the Federal Maritime

Commission encourages settlements and that there is a presumption that

settlements are fair correct and valid Section 5 b I of the Administrative

Procedure Act S U S C 554c l provides

The agency shall give all interested parties opportunity for

1 The submission and consideration of facts arguments offers of

settlement or proposals of adjustments when time the nature

of the proceedings and the public interest permit

In Pennsylvania Gas Water Co v Federal Power Commission 463

F 2d 1242 1247 D C Cir 1972 the Court noting its legislative history 4

referred to the above provision as being of the greatest importance

to the functioning of the administrative process and stated

The whole purpose of the informal settlement provision is to

eliminate the need for often costly and lengthy formal hearings

in those cases where the parties are able to reach a result of

their own which the appropriate agency finds compatible with

the public interest

Further the Commission has by rule encouraged settlement 5and has often

favorably looked upon them as a matter of policy 6

4

Senate Judiciary Comm Administrative Procedure Act Legislative History S Doc No 248 79th

Cong 2d Sess 203 1945 In considering the settlement provision in S 7 79th Cong 1st Sess 1945

which ultimately became Section 554c of the Administrative Procedure Act see note 5 supra the Senate

Judiciary Committee stated

Subsection b now Section 554c of the Administrative Procedure Act provides that even where

formal hearing and decision procedures are available to parties the agencies and parties are author

ized to undenake the informal settlement of cases in whole or in part before undenaking the more

formal hearing procedure Bven couns through pretrial proceedings dispose of much of their busi

ness in that fashion There is much more reason to do so in the administrative process for informal

procedures constitute the vast bulk of administrative adjudication and are truly the lifeblood of the

Administrative process The statutory recognition of such informal methods should both

strengthen the administrative arm and serve to advise private parties that they may legitimately at

temptto dispose of cases at least in part throulh conferences agreements orstipulations It should

be noted that the precise nature of informal procedures is left to development by the agencies them

selves

S Doc No 248 Supra at 24

5Rule 91 of the Commission s Rules of Practice and Procedure 46 CFR 502 91 provides in peninent part

Where time the nature of the Proceedinl and the public interest permit all interested parties shall have

t

opponunity r the submission and consideration of facts argument offers of settlement or proposal of

adJustment

See also Rule 505 46 CPR 505 where in General Order 30 the Commission provides for com

promise assessment settlement and collection of civil penalties under the Shipping Act 1916 and

the Intercoastal Shipping Act 1933 and the criterion contained in the government wide Stand

ards for the Compromise of Claims where in section 103 5 under the heading Bnforcement Pol

icy 4CPR 103 5 it is stated that

Statutory penalties forfeitures or debts established as an aid to enforcement and to compel

compliance may be compromised pursuant to this part if the agency s enforcement policy in

terms of deterrence and securing compliance both present and future will be adequately served

by acceptance of thesum to be agreed upon

See Perry Crane Service v Port of Houston Authority of Port of Houston Texas Approval of Settle

ment FMC Docket No 7S51 served June 21 1979 Administratively Finalized July 27 1979 22 F M C

31 Del Monte Corp v Matson Navigation Co Approval of Settlement FMC Docket No 7911 served

26 F M C
TRANSEUROPE SHIPPING INC 593

As to the propriety of the settlement itself in this case there is no

question that at least eight violations were involved respecting overcharges

in outbound shipments We do not believe those overcharges were merely

technical in nature This is especially so since the facts in the record

established that they were serious enough that Hearing Counsel alleges

former employees quit Transeurope because they were forced to engage

in the wrongdoing and the respondent argues they were part of a scheme

by the former employees to enrich themselves Under either premise the

violations can hardly be termed technical Further there are allegations

of a cover up by way of maintaining a set of duplicate records

It is clear from the record in this case that the single most important

aspect of it is the discrepancy in facts There is a direct conflict between

Hearing Counsels position that the wrongdoing was ordered by and known

to Transeurope s President and the respondent s position that its former

employees engaged in the wrongful acts and that Transeurope s owner

neither asked them to commit the wrongs nor even knew of them At

first the trial hazard described above was not really addressed in terms

of settlement Instead 1 000 00 was offered on the basis of inability to

pay This was rejected when the Commission s staff reviewed the respond

ent s financial statements and called into question the conclusions made

from those statements However the present offer of 5 000 00 represents

a substantial increase over the original offer and given the trial hazard

previously described is a fair and reasonable figure considering further

the cost of trial and the likelihood of a judgment for a higher monetary

figure

Therefore it is held that the settlement of the civil penalties proposed

by the parties is fair and equitable and in light of the facts and circumstances

involved is in the public interest and is approved A copy of the settlement

agreement is attached

2 Fitness

The respondent has surrendered its freight forwarder license It has agreed

not to reapply for at least three years as have its affiliates officers and

directors The respondent s actions make moot the fitness issue raised in

the Commission s Order of Investigation and therefore no decision relating

to sUfh issue is warranted here

8 JOSEPH N INGOLIA

Administrative Law Judge

November 20 1979 Administratively Finalized December 27 1979 22 F M C 364 Merck Sharp

Dohme v Atlantic Lines 17 FMC 244 l973

26 EM C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 1

TRANSEUROPE SHIPPING INC

PROPOSED SETTLEMENT

This Proposed Settlement has been entered into between the Bureau

of Hearing Counsel Federal Maritime Commission and Respondent

Transeurope Shipping Inc an ocean freight forwarder It is submitted

to the Presiding Administrative Law Judge for approval pursuant to Rule

162 of the Commission s Rules of Practice and Procedure 46 C F R

50216 and section 503 3 of the Commission s General Order 30 46

C F R 505 3 and is to be incorporated into the Final Order in this proceed

ing if so approved

WHEREAS by Order of Investigation and Hearing served January 14

1983 the Federal Maritime Commission instituted the present proceeding

to determine whether Transeurope Shipping Inc Respondent violated

the Commission s general Order 4 46 C F R 510 1980 section

51O 23 e withholding information section 510 23 d due diligence section

51O 23jinvoices section 510 23 k records required to be kept and

or section 510 231 failure to make records available and whether civil

penalties should be assessed against the Respondent pursuant to section

32 of the Shipping Act 1916 46 U S C 83 I e if found to be in

violation of the Commission s

regulations and if so the amount of any

such penalty which should be imposed taking into consideration factors

in possible mitigation of such a penalty and whether the license of

the Respondent to act as an independent ocean freight forwarder should

be revoked or suspended pursuant to section 44d Shipping Act 1916

andor section 510 17 of Revised General Order 4 46 C F R 510 17

1981 for willfully violating section 510 23 e 51O 23 d 51O 23j

51O 23 k andor 510 23 1 of General Order 4 46 C F R 510 1980

or conduct which the Commission determines renders the licensee unfit

or unable to carry on the business of forwarding and

WHEREAS Hearing Counsel have identified eight shipments in U S

outbound trades and nine shipments in U S inbound trades during 1979

and early 1980 which Hearing Counsel allege involve violations of Com

mission regulations and

WHEREAS the Respondent denies such allegations but is unwilling

to expend the sum necessary to continue with discovery proceedings and

the cost of litigating its defenses and

WHEREAS Hearing Counsel and the Respondent in order to avoid

the delays and expense which would be occasioned by litigation of the

issues specified in the Order of Investigation and Hearing are desirous

594 26 F M C
TRANSEUROPE SHIPPING INC 595

of settling expeditiously the issues of violations and the appropriate amount

to be paid by the Respondent in accordance with the tenns and conditions

of this Agreement and

WHEREAS section 32 e of the Shipping Act 1916 46 U S c

831 e authorizes the Commission to assess or compromise all civil

penalty claims under the Shipping Act 1916

NOW THEREFORE in consideration of the premises set forth herein

and in compromise of all civil claims set forth herein the parties agree

as a condition of this settlement to comply with all the requirements set

forth hereinafter subject to the stipulations conditions and tenns of settle

ment contained herein

1 Within fifteen I5 days of the date this Agreement becomes final

by final Commission Order in this proceeding Transeurope Shipping Inc

will voluntarily surrender to the Commission its freight forwarder s license

No 2064 and pay the sum of one thousand dollars 1 000 00 to the

Commission and tender to the Commission a duly executed promissory

note in the amount of four thousand dollars 4000 plus simple interest

at 12 percent per annum payable to the Commission in two installments

of two thousand dollars 2 000 on July 1 1984 and two thousand dollars

2 000 on December 31 1984

2 Neither Transeurope Shipping Inc nor its affiliates owners or direc

tors shall apply to the Commission for an ocean freight forwarder s license

within three years after this Agreement becomes final

3 Upon satisfaction of the undertakings in paragraph 1 Transeurope

Shipping Inc is released from any claims penalties or liability for sanc

tions or penalties of any kind under the Shipping Act 1916 or any other

statute administered by the Commission in connection with any of the

activities or subject matter described in the Commission s Order of Inves

tigation and Hearing instituting this Docket No 83 1 which occurred

prior to December 31 1981 or as to which evidence had as of the date

of the settlement agreement been brought to the Commission s attention

in the course of its administrative investigation herein

4 This Agreement shall not constitute an admission by Transeurope

Shipping Inc or any affiliate owner officer director or employee of

Transeurope Shipping Inc that any of the allegations set forth in the

Order of Investigation and Hearing are true Except as provided in paragraph

3 it is understood by the Respondent that this Agreement shall not serve

as a bar or defense to any criminal prosecution or civil litigation by

the Commission or by any other department or agency of the United

States Government for conduct engaged in by the Respondent However

based on infonnation available to the Commission as of September 20

1983 the Commission has no evidence of violations of the Shipping Act

1916 by Respondent that are not released under paragraph 3 and no inten

tions as to further enforcement actions as to Respondent
596 FEDERAL MARITIME COMMISSION

Respondent acknowledges that it has voluntarily entered into this Agree

ment and states that no promises or representations have been made to

it other than the agreements and consideration herein expressed

In the event of changes of law or other circumstances at any time

during the term of this Agreement that the Respondent believes warrants

modification or mitigation of any of the requirements imposed on it by

this Agreement the Commission agrees as an inherent part of this Agree

ment to the Respondent s

right to petition the Commission to this end

5 This Agreement becomes final on the service date of the Order in

which the Commission declines to review the order of the Presiding Admin

istrative Law Judge approving the Agreement or on the service date of

the final Order of the Commission whichever is later If for any reason

this Agreement is not approved as provided above it shall be of no force

and effect and may not be used by any person for any purpose

Transeurope Shipping Inc Federal Maritime Commission

By

Peter K Laser President Joseph B Slunt Hearing Counsel

Date January 19 1984

James S Oneto for Hearing Counsel

R Frederic Fisher

Lillick McHose Charles

Counsel for Respondent

John Robert Ewers Director

Bureau of Hearing Counsel

Date January 17 1984

26 F M C
FEDERAL MARITIME COMMISSION

DOCKET NOS 83 9 AND 83 12

PRUDENTIAL LINES INC

v

FARRELL LINES INC

Respondent Farrell Lines Inc found to have operated a service beyond the scope of its

agreement authority and thus in violation of the tariff requirements of section 18 b

I and 3 of the Shipping Act 1916

Complainant Prudential Lines Inc denied reparation for failure to show causal connection

between violation and alleged injury or injury in fact caused by Farrell Lines Incs

violation of the statute

Cease and desist order denied as moot

Terrance J

Ingrao Assistant General Counsel Prudential Lines Inc John L Morris

Prudential Lines Inc Director of Traffic Mark E Schaefer Prudential Lines Inc Pricing

Manager for Complainant

Edward Aptaker Lynn Kormondy of Schmeltzer Aptaker and Sheppard for Respondent

REPORT AND ORDER

June 15 1984

BY THE COMMISSION Alan Green Jr Chairman James J Carey

Vice Chairman James V Day Thomas F Moakley and Robert

Setrakian Commissioners

These consolidated proceedings I

came before the Commission on Excep

tions from Complainant Prudential Lines Inc PU to the Initial Decision

of Administrative Law Judge William Beasley Harris Presiding Officer

finding that a service of Farrell Lines Inc Farrell whereby Farrell trans

ported cargo overland from South Atlantic ports for ocean carriage from

North Atlantic ports had not been shown to violate the Shipping Act

1916 46 U S C 801 et seq He therefore denied reparation and discon

tinued the proceeding Farrell filed a Reply to PLI s Exceptions The Initial

Decision of the Presiding Officer is reversed insofar as the finding of

violation is concerned but reparation is denied for failure to show either

a causal connection between the violation and the alleged injury or injury

in fact

I The complaints in Docket 839 and Docket 8312 filed on February 9 and February 25 1983 respec

tively involve the same parties and substantially the same issues The Presiding Officer consolidated the two

proceedings and subsequently permitted thefiling of an amended complaint

U

Aro Q7
598 FEDERAL MARITIME COMMISSION

BACKGROUND

The material facts are not in dispute PLI and Farrell are U S flag

common carriers by water operating in the foreign commerce of the United

States between U S Atlantic Coast ports and ports in the Mediterranean

Both participate in the carriage of United States preference cargo

Both carriers were members of the U S South Atlantic Spanish Por

tuguese Moroccan and Mediterranean Rate Agreement No 10261 Agree

ment The Agreement had on file with the FMC its Agreement No

10261 Freight Tariff No I FMC No 1 applicable to transportation of

cargo between South Atlantic ports south of Cape Hatteras and Mediterra

nean ports Tr 119 132 PLI withdrew from the Agreement in 1981

Tr 20

Agreement No 10261 s tariff is a port toport tariff Tr 120 The Agree

ment has only authority to fix rates from port to port and has no intermodal

authority Tr 41 43

Prior to February 1982 Farrell s vessels called regularly at Savannah

Georgia and Charleston South Carolina and less frequently at other U S

South Atlantic ports Tr 20

Between February 1983 and April 1983 Farrell vessels did not call at

South Atlantic ports Ex 7 Claiming authority under the Agreement and

the Agreement s tariff Farrell accepted cargo for shipment to Mediterranean

ports at Savannah Georgia Charleston South Carolina and other South

Atlantic ports and transported it overland by rail and truck at its own

expense to Norfolk or Newport News Virginia North Atlantic ports not

within the origin ports of the Agreement Farrell issued port to port bills

of lading at the South Atlantic ports which were stamped on board

when the cargo had been loaded onto vessels at North Atlantic ports

Exs 7 8 II Tr 19 20 35 117 119 132 133 Effective April 30

1983 Farrell withdrew from the Agreement Tr 47

Farrell has on file with the Commission an independent tariff Farrell

Tariff No I FMC No 136 which became effective May I 1983 upon

Farrell s withdrawal from the Agreement 2

It contains rules and rates for

port to port transportation of cargo between South Atlantic ports and Medi

terranean ports by direct or transshipment service Farrell also has on file

Eastbound Intermodal Freight Tariff No 302 FMC No 46 pursuant to

which since May I 1983 it has transported cargo which it has received

at Charleston and Savannah for overland transportation to Norfolk and

ocean transport to Mediterranean ports by Farrell vessels

PLI alleges that Farrell s above described operation between February

1982 and April 1983 was unauthorized by the applicable tariff and thus

was in violation of sections 16 17 and 18b 1 and 3 of the Shipping

2

PLI and the Initial Decision erroneously state that Farrell s independent port toport tariff became effec

tive on February 8 1984 The Commission s tariff filings show that the tariff was several times postponed

so as not to become effective prior to Farrell s withdrawal from the Agreement

26 F M C
PRUDENTIAL LINES INC V FARRELL LINES INC 599

Act 1916 as well as the Commission s tariff filing rules PLI asks that

Farrell be ordered to cease and desist from operating the described service

and that sanctions be imposed against it It also seeks cancellation of

Farrell s

independent tariff and reparation for injury caused by Farrell s

alleged violations

Farrell admits that it carried cargo from South Atlantic ports in the

manner described by PLI but maintains it did so under the authority of

the Agreement and the Agreement Tariff

DISCUSSION

The Presiding Officer discontinued the proceeding for PLI s failure to

prove by a preponderance of the evidence that Farrell had violated the

Shipping Act The Presiding Officer also found that PLI had not proven

that it is entitled to reparation and concluded that the reparation issue

had been abandoned since PLI had not pressed it after the first prehearing

conference on April 21 1983

PLI excepts to the Initial Decision insofar as it finds that no evidence

exists that Farrell operated without vessels calling at South Atlantic ports

PLI maintains that record evidence both documentary and testimonial is

to the contrary PLI points to Journal of Commerce printouts showing

cargo moved by Farrell from Hampton Roads and Lloyd Register sum

maries showing no Farrell vessel calls at South Atlantic ports as well

as a bill of lading which shows receipt by Farrell of cargo at Savannah

for transportation overland to Norfolk for loading on a Farrell ship for

carriage to the Mediterranean PLI points out that Farrell admits that this

was not an isolated incident but rather represents the manner in which

all shipments delivered to South Atlantic ports were carried by Farrell

during the February 1982 April 1983 period

PLI also excepts to the Presiding Officer s conclusion that it is not

entitled to reparation PLI maintains it is legally entitled to reparation

because it would have carried the shipments complained of had not Farrell

transported those shipments by rail or truck from South Atlantic ports

for loading in North Atlantic ports PLI expresses uncertainty as to whether

the Presiding Officer s

finding on the lack of evidence to support an order

granting reparation refers to PLI s entitlement to reparation or to the exact

quantum of PLI s damages If the Presiding Officer s finding addresses

the exact quantum of damages PLI sustained PLI asserts that the lack

ofevidence on this issue results from his refusal to order Farrell to produce

documents identifying the shipments in question In support of this conten

tion PLI excepts to certain rulings of the Presiding Officer i e

a The denial of PLI s Motion to Compel Production of Documents

or Answers to Interrogatories dated June 23 1983

b The denial of PLIs Motion to modify the July 26 1983 Order

to Produce Documents dated August 10 1983
600 FEDERAL MARITIME COMMISSION

c The denial of PU s Motion to Postpone the Hearing also dated

August 10 1983

d The denial of PU s Motion for Sanctions dated August 16 1983

Lastly PU excepts to the limitation placed on cross examination of Farrell s

witness at the hearing held August 16 1983 with respect to Farrell s

independent port to port tariff

Farrell maintains that both the Agreement and Agreement tariff provide

for transportation either direct or by transshipment which term has

been construed to comprise the transfer of cargo in the manner utilized

by Farrell here It also asserts that the Alternate Port service provision

of the agreement authorizes its service Because Farrell admits that from

February 1982 through March 30 1983 it made no direct calls with its

vessels at any ports on the U S South Atlantic Coast range south of

Cape Hatteras the question before the Commission is whether the overland

carriage of cargo from the South Atlantic to the ports of Norfolk and

Newport News in the North Atlantic range was lawful

There is nothing in the Agreement that authorizes Farrell s service here

in issue Article 1 which defines the scope of the trade covered by the

Agreement provides for transportation either direct or by transshipment

to the extent cargo moves through ports covered by this agreement

Emphasis supplied Under its service however Farrell moves the cargo

overland to ports in the North Atlantic range not covered by the Agreement

Farrell s position is that the limitation in the Agreement refers to ports

of origin only and not to intermediate ports of transshipment The Agree

ment however contains no language to that effect The words either

direct or by transshipment in Article 1 of the Agreement are conditioned

by the words to the extent cargo actually moves through ports covered

by this agreement 3

The Agreement tariff could not lawfully expand this

scope because the Agreement s approval limits trading to the area specified

in the Agreement 4The argument therefore that the either direct or

by transshipment provision of Rule 1A authorizes any transshipment is

without merit S

especially in light of the Agreement tariff Rule 13 which

3

Article I in full provides

The said parties intend under this agreement to confer with each other through their representatives

and to discuss together in meetings by telephone conversations orpolls or by correspondence from

time to time all mailers pertaining to rates and charges for the carriage of cargo and rules and

regulations governing the application lhereof and defining the service to be rendered therefor all

in connection with such carriage of cargo either direct orby transshipment by the parties in the

trade from the U S South Atlantic ports including all ports south of Cape Hatteras and including

Key West Florida to Spanish Portuguese and Moroccan Atlantic Ports and to ports on the Medi

terranean Sea Black Sea Sea of Marmara Adriatic Sea and Gulf of Taranto and to all points in

Europe Morocco and all points in all countries bordering the Mediterranean Sea Sea of Marmara

Adriatic Sea and Gulf of Taranto whether moving on a lhrough bill of lading or otherwise to the

extent cargo actually moves through ports covered by this agreement

Swift Co v FMC 306 F 2d 277 280281 DC Cir 1962 Disposition o Container Marine Lines II

F M C 476 48592 1968 See also Baton Rouge Marine Contractors v FMC 530 F 2d 1062 1066

1068 D C Cir 19 6

Rule I A of the Agreementtanff reads
PRUDENTIAL LINES INC V FARRELL LINES INC 601

precludes the application of the Tariff to shipments from ports of

call outside the scope of this tariff 6

Farrell concedes that with respect

to the trade in question its vessel actually calls only at North Atlantic

ports outside the scope of the Agreement

Moreover Farrell s service does not appear to be the Alternate Port

service contemplated in Article 3 2 of the Agreement because the clear

language of that agreement authorizes such service only between ports

of discharge and only if a tariff establishing such service has been adopted

by the members and published 7

Any Alternate Port service here takes

place between origin not discharge ports and at any rate no tariff

authorizing any such service has been approved by the members or pub

lished

Because the Agreement did not authorize Farrell s service the service

could not be supported by the Agreement tariff To the extent that Farrell s

service however described was not lawfully set forth in a tariff on file

with the Commission at the time of the shipments the proper definition

of the service as transshipment or Alternate Port service is irrelevant

Consequently Farrell s operation of a transportation service between Feb

ruary 1982 and April 1983 without a proper tariff on file with the Commis

sion and the collection of freight charges on shipments carried without

a tariff so on file was in violation of section 18 b 1 and 3 of the

Shipping Act 1916 46 V S C 817 8 See lntermodal Service to Portland

Rates and conditions herein named apply only to shipments from South Atlantic Ports of the United

States including all ports south of Cape Hatteras to and including Key West Florida either direct

or via transshipment to all ports served in Spain Portugual Morocco and on the Mediterranean

Sea of the Sea of Marmara and the Black Sea

6Rule 13 of the Tariff states that

Unless otherwise agreed rates in this tariffdo not apply on shipments moving under thru bills of

lading from or to ports of call outside the scope of this tariff

7

Article 32 of the Agreement provides

The parties may by majority vote agree upon and file cancel ormodify tariff provisions permitting

prohibiting or limiting Alternate Port Service by Land As used herein Altemate Port Service by

Land shall mean the movement of cargo by land at the party s

expense from aport within the

scope of this Agreement at which the cargo is discharged from avessel to aport within the scope

of this Agreement named as the port of discharge in the bill of lading Not withstanding any provi

sion of this Agreement including Article 2 no party to this Agreement shall perform Alternate Port

Service by Land between ports located indifferent countries Rules governing Alternate Port Service

by Land and the ports at which it is authorized shall be published in the Rate Agreement tariff

There is no substituted service rule as such in Farrell s independent port toport tariff

Section 18 b I

requires

Every common carrier by water in foreign commerce and every conference of such carriers shall

file with the Commission tariffs showing all the rates and charges of such carrier or conference

of carriers for transportation to and from United States ports and foreign ports between all points

on its own route Such tariffs shall plainly show the places between which freight will be car

ried

Section 18 b 3 states in part

No common carrier by water in foreign commerce shall charge ordemand orcollect or receive

agreater or less or different compensation for the transportation of property than the rates

and charges which are specified in its tariffs on file with the Commission and duly published and

ineffect at the time
602 FEDERAL MARmME COMMISSION

Oregon 17 F M C 106 118119 137 1973 Cj Disposition of Container

Marine Lines supra 11 F M C at 4856

PLIs contentions under sections 16 and 17 of the Shipping Act 1916

46 U S C 815 816 appear to have been abandoned See Transcript

of Prehearing Conference July 26 1983 14 where PLIs counsel stated

The allegations in the amended complaint are confined to the 18 b 1

and b 3 violations At any rate its Exceptions to the Initial Decision

make no arguments based on any section other than section 18 and the

record contains no evidence of anything other than simple tariff violations

PLI has not been prejudiced by the Presiding Officer s refusal to permit

it to cross examine Farrell s witness with respect to Farrell s service under

its independent port t port tariff Farrell represents that it purported to

operate during the entire period here in issue under authority of the Agree

ment tariff and the record shows that such authority did not exist

The complainant in a proceeding before the Commission has the burden

of proof with respect to each element of its case See 46 C F R 502 155

1982 Boston Shipping Ass n v FMC 706 F 2d 1231 1239 1st Cir

1983 Moreover an essential element in a complaint s case for reparation

is a demonstration of injury and the statutory violation as proximate cause

of such injury See e q West Indies Fruit Co v Flota Mercante

Grancolombiana 7 F M C 66 70 1962 Ballmill Lumber Sales Corp

v The Port ofNew York Authority 11 F M C 494 510511 1968

PLI bases its claim for reparation solely on its assertion that Farrell s

service was unlawful and that but for Farrell s service it would have carried

the cargo which Farrell carried But by PLI s own admission whether

or not PLI would have carried the cargo depended upon what other carriers

operated competitive services what the frequency of those services was

and what PLI s rates were on the particular cargo involved See Transcript

of Prehearing Conference April 21 1983 45 55

PLI was specifically advised at the first preheating conference that it

would have to establish its entitlement to reparation Tr 49 56 PLI knew

that it would be difficult for it to establish such entitlement and indicated

what was necessary to show that entitlement Ste Transcript of Prehearing

Conference April 21 1983 45 55 PLI had access to the relevant data

with respect to its own operations and the extent to which they competed

with those ofFarrell but failed to produce them

Although Farrell was less than cooperative in furnishing information to

PLI PLI has not been injured by this lack of cooperation The sole purpose

for the information which PLI requested was to prove the extent of the

violation See Motion for Certification and Appeal to the Federal Maritime

Commission August 25 1983 34 PLI recognized that the materials

it requested even if produced by Farrell would only have shown the

extent of the violation which we have found to have existed over the

entire period in question See Transcript of Prehearing Conference April
PRUDENTIAL LINES INC V FARRELL LINES INC 603

21 1983 45 55 Transcript of Prehearing Conference July 26 1983 14

15

Untariffed carriage alone does not create injury See e

g

Genstar Chemi

cal Ltd v ICC 665 F 2d 1304 1308 1310 D C Cir 1981 cert denied

sub nom Nitrochem Inc v ICC 456 U S 905 1982 Southern Transpor

tation Co v Norfolk W Ry Co 147 LC C 29 3637 1928 Increase

In Freight Rates and Charge 1973 365 LCC 426 428 1981 Lowe

Paper Co v Kaydeross R Corp 167 LC C 700 701 1930 To establish

injury at the very least PU would have to show that it would have

carried the cargo The record does not show this to be true In fact

the record indicates the existence of other carriers who may have been

able to carry the cargo see e g

Tr 87 93 95 98 There is moreover

no necessary causal relationship between a failure to have a lawful tariff

on file and a failure of a competitor to carry cargo Here it is conceded

that transportation was carried out at the rates in the Agreement tariff

which although not legally applicable was on file with the Commission

and known to all competing carriers It is difficult to see how there is

any causal connection between the failure to have a valid tariff on file

in this instance and PU s failure to carry the cargo and PU must bear

the consequences of the failure to show such connection Cf Puget Sound

Tug Barge Co v Foss Launch Tug Co 5 S R R 67 75 77 LD

1964 subsequently discontinued following withdrawal of complaint Pru

dential Lines Inc v Farrell Lines Inc et az 26 F M C 497 1984

Had PU at least established that it would have carried the cargo absent

Farrell s tariff violations further inquiry might have been warranted As

provided by our Rules of Practice and Procedure an opportunity is to

be given a complainant to show the extent of reparation to which he

is entitled if he has established violations injury and right to reparation 9

Here however despite adequate opportunity such proof is lacking and

reparation is denied 10

CONCLUSION

I Farrell s service here in issue is found to have violated sections

18 b 1 and 3 of the Shipping Act 1916

9

Title 46 CFR 11502 251 Proof on Award of Reparation provides

If many shipments or points of origin or destination are involved in aproceeding in which repara

tion is sought the Commission will determine in its decision the issues as to violations injury to

complainant and right to reparation If complainant is found entitled to reparation the parties there

after will be given an opportunity to agree or make proof respecting the shipments and pecuniary

amount of reparation due before the order of the Commission awarding reparation is entered In

such cases freight bills and other exhibits bearing on the details of all shipments and the amount

of reparation on each need not be produced at the original hearing unless called for or needed

to develop other pertinent facts Rule 251

10 Section 22 of the Shipping Act 1916 46 U S c11821 provides inpart

a That any person may file with the board asworn complaint selling forth any violation of this

Act by a common carrier by water and asking reparation forthe injury ifany caused thereby

The board may direct the payment of full reparation to the complainant for the injury

caused by such violation Emphasis added

26 F M C
604 FEDERAL MARITIME COMMISSION

2 The present record does not show that PLI is entitled to reparation

Although Farrell is found to have violated section 18 of the Shipping

Act 1916 there has been no showing that there was a causal connection

between that violation and any injury PLI may have suffered thereby

There is no showing that Farrell s failure to have a lawful tariff on file

prevented PLI from carrying the cargo nor that PLI would have carried

the cargo in any case

3 No order to cease and desist need be issued Farrell has withdrawn

from the Agreement and no longer utilizes the Agreement tariff As far

as appears from the record herein it has never utilized its port to port

tariff and the service which Farrell presently performs pursuant to its

intermodal tariff is not challenged Farrell is cautioned however that its

independent port to port tariff which still appears to be in effect should

not be used for services covered by its intermodal tariff or vice versa

The type of tariff applied in any particular instance will of course depend

upon the contractual arrangements between Farrell and inland carriers See

e g Alaska SS Co v FMC 399 F 2d 623 9th Cir 1968 Sea Land

Service Inc v FMC 404 F 2d 824 D C Cir 1968 IML Sea Transit

Ltd v U S 343 F Supp 32 ND Ca 1972 affd 404 U S 1002 1972

THEREFORE IT IS ORDERED That Prudential Lines Inc is denied

reparation

IT IS FURTHER ORDERED That the issuance of a cease and desist

order is denied as moot

FINALLY IT IS ORDERED That these proceedings are discontinued

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1102

APPLICATION OF UNITED STATES ATLANTIC GULF JAMAICA

AND HISPANIOLA STEAMSHIP FREIGHT ASSOCIATION AND SEA

LAND SERVICE INC FOR THE BENEFIT OF UNITED BRANDS

FOR CHIQUITA INTERNATIONAL TRADING CO

ORDER PARTIALLY ADOPTING INITIAL DECISION

June 15 1984

This proceeding is before the Commission pursuant to Rule 227 d of

the Commission s Rules of Practice and Procedure 46 C FR 502 227 d

upon its own motion to review the Initial Decision of Administrative Law

Judge Charles E Morgan granting an application to refund freight charges

pursuant to section 18 b 3 of the Shipping Act 1916 46 U S c

817 b 3

BACKGROUND

On November 9 1983 Sea Land Service Inc Sea Land as a member

of the United States Atlantic Gulf Jamaica and Hispaniola Steamship

Freight Association Freight Association filed an application pursuant to

Rule 92 a of the Commission s Rules of Practice and Procedure 46 C F R

502 92 a on behalf of United Brands of Chiquita International Trading

Co requesting permission to refund 6 181 50 in freight charges on 38

shipments of pineapples The shipments departed Elizabeth New Jersey

on April 9 April 30 May 7 and May 14 1983 for Haina Dominican

Republic Only five of these shipments those on May 14 1983 occurred

within 180 days of the filing of the petition

Based upon an alleged mistaken assumption that Sea Land s 35 foot

containers had a maximum capacity of 27 000 pounds the Freight Associa

tion established a rate on pineapples of 101 per ton 27 000 pound mini

mum plus ancillary charges This replaced rates of 130 per ton any

quantity and 115 per ton 30 000 pound minimum These earlier rates

included most ancillary charges and were subject to a maximum charge

limit of 1 463 per 35 foot container Because the maximum loadability

of the 35 foot containers is actually over 30 000 pounds the new rate

method resulted in an increase in the shipper s total costs On May 15

1983 the base rate was reduced to 91 per ton The aggregated difference

in freight charges on all 38 shipments is 6 181 50

fi FM r 605
606 FEDERAL MARITIME COMMISSION

DISCUSSION

Jurisdiction

The Presiding Officer permitted applicant Sea Land to refund freight

charges on shipments which occurred more than 180 days prior to the

filing of the application for refund He held that such relief is proper

on a stream of shipments provided that some of the later shipments

fall within the 180 day period The Presiding Officer s stated reason for

allowing this relation back is to prevent discrimination among ship

ments citing PWC for the Benefit of Minnesota Mining Manufacturing

Co 21 S R R 793 1982

In Minnesota Mining it was held that section 18 b 3 special docket

relief can be afforded to shipments occurring more than 180 days prior

to the filing of an application in order to prevent discrimination among

similarly situated shipments While that case did address a stream of

shipments the out oftime shipments also involved charges due for a

general rate increase that was imposed without the required 30 day statutory

notice Accordingly relief was technically granted only for the four ship

ments falling within that 180 day period of time 21 S RR at 798

In pwc for the Benefit of Mitsui and Co 21 S R R 1275 1982

the Commission allowed the intended rate to relate back beyond

180 days prior to the filing of the application to a date when the rate

should have been filed to avoid any discriminatory treatment of other

shippers of the same commodity shipped after the intended filing date

The Commission cited Minnesota Mining in support of its decision

The relation back theory expressed in Minnesota Mining and applied

in Mitsui Co must be limited to preventing discrimination among ship

pers

J The Initial Decision here would extend the 180 day period stated

in section 18 b 3 unreasonably Because the 180 day limit is jurisdictional

relief in this case will be granted only on the five shipments made on

May 14 1983

Administrative Clerical Error

The Presiding Officer held that a mistaken assumption as to the

maximum loadability of a 35 foot container is an administrative error con

templated by section 18 b 3 citing Schenectady Midland Ltd v Gulf

United Kingdom Conference 21 F MC 459 1978 In that case the carrier

had deleted a tariff item covering a chemical commodity under the mis

taken assumption that it was covered by another tariff item The retained

tariff item was limited to the chemical shipped in drums while the

actual shipment was made in bags An administrative error contemplated

by section 18 b 3 was found to exist

I A8 noted by the Pre8iding Officer here section 18 b 3 prohibit8 di8Criminatory treatment among 8hip

per8 and not among 8hipment8

26 F M C
APPLICATION OF U S ATLANTIC GULF JAMAICA ET AL 607

FOR CHIQUITA INTERNATIONAL TRADING CO

Whether the mistaken assumption relating to the stowage capacity

of Sea Land s 35 foot container is the type of administrative or clerical

error contemplated by section 18 b 3 is a close question 2

Although the

Commission has reservations concerning the alleged error in this case

the Presiding Officer s determination that there was a bona fide administra

tive error will be adopted in light of the liberal interpretation generally

accorded special docket cases

THEREFORE IT IS ORDERED That the Initial Decision is reversed

with respect to the refund of freight charges on the shipments on April

9 April 30 and May 7 1983 and adopted in all other respects and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

2In South African Marine Corp for the Benefit of Valmom Im l Inc 20 S R R 4 1980 it wa held

that whenconverting from imperial to metric meaure arounding off of the metric meaurement that inad

vertently resulted in ahigher rate is not an administmtive error upon which reliefcould be granted The

asertion of inadvertence wa determined to be contrary to the long lerm tariff practices of the carrier

in rounding off meaurement conversions The Commission could on the ba is of Valmonl find that Sea

Land s

prior experience with 35 fOOl conlainers militales against finding such an error here

411 T 1 ro
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1102

APPLICATION OF UNITED STATES ATLANTIC GULF JAMAICA

AND HISPANIOLA STEAMSHIP FREIGHT ASSOCIATION AND SEA

LAND SERVICE INC FOR THE BENEFIT OF UNITED BRANDS

FOR CHIQUITA INTERNATIONAL TRADING CO

Application for pennission to refund a total of 6 18150 of the applicable freight charges

on 38 shipments granted

INITIAL DECISION t OF CHARLES E MORGAN ADMINISTRATIVE

LAW JUDGE

Partially Adopted June 15 1984

By application mailed on November 9 1983 the applicant Sea Land

Service Inc for the benefit of United Brands for Chiquita Int l Trading

Co seeks permission pursuant to Rule 92 a of the Commission s Rules

of Practice and Procedure 46 CPR 502 92 a and section 18 b 3 of

the Shipping Act 1916 the Act to refund a total of 6 18150 of the

applicable freight charges on 38 shipments of pineapples N O S fresh

from Haina Dominican Republic to Elizabeth New Jersey sailing dates

April 9 1983 five shipments April 30 1983 thirteen shipments May

7 1983 fifteen shipments and May 14 1983 five shipments

Most of the above shipments occurred more than 180 days prior to

the mailing date of this application Only the last five shipments of the

38 are within the statutory 180 day period However the Commission has

found to prevent discrimination among shipments that relief is proper

on a stream of shipments provided that some of the later shipments faU

within the 180 day period Pacific Westbound Conference for the Benefit

of Minnesota Mining Mfg Co Special Docket Nos 890 and 893

initial decision served April 7 1982 finalized May 14 1982 21 SRR

793

In both the above cited cases and in the present case al1 of the shipments

were made by one shipper whereas the first proviso of the special docket

provision of section 18 b 3 of the Act refers to refunds or waivers which

wi11 not result in discrimination among shippers Emphasis supplied

FoUowing the reasoning in Special Dockets 890 and 893 above aU

38 of the present shipments wi11 be considered as subject to the granting

of relief under section 18 b 3 ofthe Act

I This decision will become the decision of the Commission in the absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

m J C
APPLICATION OF U S ATLANTIC GULF JAMAICA ET AL 609

FOR CHIQUITA INTERNATIONAL TRADING CO

The United States At antic Gu fJamaica Hispanio a Steamship

Freight Association the Association joins in the present application

The applicab e rate on the 38 shipments was 101 per ton of 2 000

pounds TL minimum 27 000 pounds plus ancillary charges

These additional charges include a terminal delivery charge of 4

per

ton W an arrimo charge in the Dominican Repub ic of 1 50 per 1 000

kilos a customs charge of 19 75 per shipment a Dominican documentation

charge of 5per shipment and a CFS cargo handling charge of 5 per

shipment These ancillary charges listed next above are not in issue that

is these ancillary charges are the same as originally billed and as sought

under this application All of the shipments weighed either 30 888 pounds

or 27 896 pounds each Thus the terminal delivery charges were based

on either 1544 tons or 13 94 tons The shipments weighed either 14 01

kilo tons or 12 65 kilo tons for the computation of arrimo charges

Another ancillary charge was a gross receipts surcharge of 5 7 percent

of the basic freight charges This charge varies between the charges billed

and the charges sought inasmuch as the sought basic freight rate is 91

per ton of 2 000 pounds TL minimum 27 000 pounds plus ancillary

charges

The charges as originally billed and as sought are shown in detail

for the 38 shipments on Exhibit No 8 The aggregate charges originally

billed and collected on the 38 shipments based on the basic freight rate

of 101 a ton were 66 467 76 and the aggregate charges sought based

on the lower basic freight rate of 91 a ton are 60 286 26 Thus 6 18150

is sought to be refunded by this application

Sea Land Service is a member of the Association and participates in

the Association s tariff No 4 N B SDM 19 F M C No 4 for shipments

from ports in the Dominican Repub ic to U S Atlantic and Gu f Coastal

Ports

Prior to Apri 8 1983 the applicab e rates on fresh pineapples were

139 per ton W any quantity and 115 per ton W in minimum lots

of 30 000 pounds inclusive of all other charges except arrimo and gross

receipts surcharge

At the April 6 1983 meeting of the Association the members agreed

to convert the then applicab e maximum charges of 1 463 per 35 foot

container and 1 776 per 4O foot container both subject to specified addi

tiona charges to a revenue tonTL minimum based on the maximum

oadability in a 35 foot container said rate to be published subject to

all additional charges

The maximum oadability for a 35 foot container was stated as 27 000

pounds and the members approved a rate of 101 on fresh pineapples

minimum 27 000 pounds

Shortly thereafter the Association s members realized the maximum

loadability of a 35 foot container was 30 888 pounds not 27 000 pounds

which resulted in an unintentional increase in the shipper s cost
610 FEDERAL MARITIME COMMISSION

At the May 5 1983 meeting the Association s members rectified their

mistaken assumption by agreeing to reduce the rate to 91 a ton W

minimum 27 000 pounds This 91 rate was made effective May 15 1983

During the period from April 9 1983 through May 14 1983 the period

in issue herein the 38 shipments herein sailed

It is the position of Sea Land Service and the Association that the mem

bers mistaken assumption as to the maximum loadability of pineapples

in a 35 foot container is the type of administrative error contemplated

by section 18 b 3 of the Act They cite Schenectady Midland Ltd v

GulfUnited Kingdom Conference 21 F M C 459 1978 which dealt with

the mistaken assumption that a tariff covered butyl in bags as well

as in drums

Accordingly Sea Land Service and the Association request for the mis

taken assumption above that the rate of 91 a ton W TL minimum

27 000 pounds be allowed to be assessed on all 38 shipments herein

and that permission be granted to refund a total of 6 181 50

The application contains the statement that there were no other shipments

of the same or similar commodity moved by members of the Association

during the period in issue herein

The statutory requirements have been met It is concluded and found

that there was an error of administrative or clerical nature made by the

members of the Association in calculating and publishing the applicable

rate of 101 for the shipments herein whereas their true intention was

to calculate and publish the rate of 91 that their intended rate of 91

was published to be effective after the shipments herein moved and prior

to this application that the application was timely mailed as to five of

the 38 shipments and that the application constructively is considered as

timely filed for the other 33 shipments in this continuous stream of ship

ments herein and that the authorization of a refund will not result in

discrimination among shippers

The applicant Sea Land Service Inc is authorized to refund a total

of 6 18150 of the applicable charges on these 38 shipments An appro

priate notice of this matter and of the details ofthe refund shall be published

in the pertinent tariff of the Association

S CHARLES E MORGAN

Administrative Law Judge
FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING OCEAN FREIGHT

FORWARDERS TERMINAL OPERATIONS AND PASSENGER

VESSELS

46 CFR PARTS 526 533 540 550 AND 551

DOCKET NO 8418

INTERIM RULES TO IMPLEMENT THE SHIPPING ACT OF 1984

AGENCY Federal Maritime Commission

ACTION Interim Rules and Request for Comments

SUMMARY On March 20 1984 the President signed the Shipping

Act of 1984 which will become effective on June 18

1984 The Commission hereby issues interim rules to

implement the Shipping Act of 1984 by its effective

date and requests public comment on these rules for

the purpose of their potential revision as final rules su

perseding the interim rules by December 15 1984 The

parts amended and redesignated by this rulemaking

are Part 526 free time and demurrage new part 525

Part 533 filing of tariffs by terminal operators new

part 515 Part 540 security for the protection of the

public on passenger vessels Part 550 filing of tariffs

by terminal barge operators in Pacific Slope States

new part 520 and Part 551 truck detention at New

York new part 530

DATES Interim Rules effective on June 18 1984 Comments

at any time but no later than June 4 1984

SUPPLEMENTARY INFORMATION

The following summarizes the background for this rulemaking sets forth

the intended structure of the subchapter in which these rules will be in

cluded and analyzes related proceedings and the interim rules themselves

The Shipping Act of 1984 interim authority request for comments

The Commission is issuing these interim rules to implement the Shipping

Act of 1984 Pub L 98 237 98 Stat 67 46 D S C app 1701 1720

which was signed on March 20 1984 and becomes effective on June

18 1984 In order that the Commission can properly implement this major

legislation Congress provided interim rulemaking authority under section

17 b of that statute which is effective immediately These rules are issued

pursuant to that section in order that the Commission can perform its

essential regulatory functions on and after June 18

26 F M C 611
612 FEDERAL MARITIME COMMISSION

The interim authority provided under section 17 b of the 1984 Act

exempts the Commission from compliance with the notice and comment

requirements of section 553 of Title 5 United States Code In order to

have its essential regulations in place by June 18 the Commission must

utilize this authority bestowed by Congress

At the same time however section 17 b provides that all rules and

regulations issued under the interim authority shall expire no later than

270 days after enactment i e December 15 1984 unless superseded by

final rules which are not exempt from the requirements of 5 U S C 553

To provide for the basic notice and comment provisions of the Adminis

trative Procedure Act therefore the Commission requests comments on

these interim rules to assist it in developing final rules to supersede and

where necessary modify these interim rules by December 15 1984 Accord

ingly the public is provided with thirty days within which to comment

on the interim rules but if anyone believes that there are serious problems

created by these rules which should be addressed immediately the Commis

sion urges them to bring their concerns to the attention of the Commission

without prejudice to subsequently filing additional comments within the

thirty day comment period

Structure Terminal operations passenger vessels and freight forwarders

The implementation of the Shipping Act of 1984 requires the Commission

to develop new parts to the CPR The Commission retains however regu

latory functions under the revised Shipping Act 1916 the Intercoastal

Shipping Act 1933 and other statutes which also must continue to be

implemented by regulations In order to synthesize all of its regulations

into a more coherent and usable format and to correct style and typo

graphical errors the Commission is taking this opportunity to review all

of its regulations and to restructure and improve them

The entire intended reorganization has been set forth in the previous

rulemaking for Subchapter A Parts 500 501 502 503 504 Old 547

and 505 as well as in the Commission s press release NR 8422 Briefly

however it provides for all administrative matters to go into Subchapter

A all purely domestic regulations into Subchapter C all purely foreign

matters into Subchapter D and the rules here into Subchapter B Regula

tions Affecting Ocean Freight Forwarders Terminal Operations and Pas

senger Vessels

An interim rule amending Part 510 Licensing of Ocean Freight For

warders is being published separately

This rulemaking provides full coverage of Subchapter P except for

other rulemakings that may be necessary from time to time by providing

the Commission with interim rules in place by June 18 1984 for the

following new parts listed in the intended structural organization for Sub

chapter B

Part 510 Licensing of Ocean Freight Forwarders separate rulemaking
INTERIM RULES TO IMPLEMENT THE SHIPPING ACf OF 1984 613

Part 515 Filing of Tariffs by Terminal Operators Old part 533

Part 520 Filing ofTariffs by Terminal Barge Operators in Pacific Slope

States Old part 550

Part 525 Free Time and Demurrage Charges on Import Property appli

cable to all Common Carriers by Water Old part 526

Part 530 Truck Detention at the Port of New York Old part 551

Part 540 Security for the Protection of the Public

The rules in these listed parts attempt to put into place all the Commis

sion s basic regulations for freight forwarders passenger vessel operators

and terminal operations except for agreements which will be issued later

under Subchapter C andor D

The Port Inquiry Docket 83 38

Oral hearings in various port cities have recently been held in Docket

No 83 38 Notice of Inquiry and Intent to Review Regulations of Ports

and Marine Terminal Operators presided over by Commissioner Robert

Setrakian

The issues in that proceeding may eventually affect marine terminal

operations both tariffs and agreements as well as other matters within

the Commission s

jurisdiction

At this time however the Commission is issuing these interim rules

to ensure that existing Commission surveillance over marine terminal related

practices continues to the extent necessary Any changes resulting from

the marine terminal inquiry will be the subject of later rulemaking s

Analysis of the Interim Rules

While the new organization has been set forth above the order of the

rule changes herein follows current numbering in the CFR October 1

1983 edition

The major change intended to be effectuated by this rulemaking is to

provide the Commission with the necessary statutory authority to continue

its regulation of terminal related practices under the Shipping Act of 1984

This we have done in these rules by adding the pertinent provisions of

that statute to the Authority sections of parts 526 533 540 550 and

551 This results in dual authority for these parts i e the Shipping Act

1916 46 V S C app 801 et seq for the domestic aspect and the Shipping

Act of 1984 for the foreign aspect

In providing for the new statute penalty provisions and other technical

language have also been conformed in sections 533 1 533 2 533 4 533

and 550 1 c

For terminal tariffs part 533 the Commission is continuing to require

the filing of such tariffs but has excluded from this requirement the filing

of tariffs on forest products bulk cargo and recyclable metal scrap waste

paper and paper waste part 533 amendment 5 consistent with sections

26 EM C
614 FEDERAL MARITIME COMMISSION

8 a 1 and 8 c of the Shipping Act of 1984 and the Conference Report

on this statute See H R Rep No 98600 98th Cong 2nd Sess

Other amendments herein involve nomenclature changes resulting from

reorganizations Part 533amendment 2 part 540amendments s 2

3 4 5 6 7 and 8

In part 540 the forms in Appendixes A and B have been slightly revised

to reflect organization changes and current language usage

All other changes in this rulemaking involve minor corrections or redes

ignations resulting from the reorganization ofTitle 46 Chapter IV

The Federal Maritime Commission has determined that this interim rule

is not a major rule as defined in Executive Order 12291 dated February

17 1981 because it will not result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

The Federal Maritime Commission certifies that this interim rule will

not have a significant economic impact on a substantial number of small

entities including small businesses small organizational units and small

governmental jurisdictions

LIST OF SUBJECfS

46 CFR Parts 526 533 550 551

Barges Cargo Cargo vessels Harbors Imports Maritime carriers Motor

carriers Ports Rates and fares Trucks Water carriers Waterfront facilities

Water transportation

46 CFR Part 540

Rates and fares Passenger vessels Surety bonds

For the reasons set out in the preamble Parts 526 533 540 550 and

551 of Title 46 of the Code of Federal Regulations are amended as follows

1 Revise the title of Subchapter B to read SUBCHAPTER B REGU

LATIONS AFFECTING OCEAN FREIGHT FORWARDERS TERMINAL

OPERATIONS AND PASSENGER VESSELS

Amend and redesignate the following parts in Subchapter B as follows

PART 526FREE TIME AND DEMURRAGE CHARGES ON IMPORT

PROPERTY APPLICABLE TO ALL COMMON CARRIERS BY WATER

1 In Part 526 the authority citation appearing after the table of contents

is revised to read as follows and all other authority citations are removed

AUTHORITY 5 U S C 553 sees 17 and 43 of the Shipping

Act 1916 46 U S C app 816 841a secs 10 and 17 of the

Shipping Act of 1984 46 U S C app 1709 and 1716
INTERIM RULES TO IMPLEMENT THE SHIPPING Acr OF 1984 615

2 In 526 1 c remove 5513 e 2 5514e and 5514g

of Part

55I and insert 530 3 e 2 530 4e and 530 4

g

of this Chapter

3 Part 526 of 46 CFR Chapter IV is redesignated as Part 525 and

all internal references are changed

PART 533 FILING OF TARIFFS BY TERMINAL OPERATORS

I In Part 533 add O M B clearance numbers and revise the authority

section to read as follows

AUTHORITY 5 U S C 553 sees 17 21 43 of the Shipping

Act 1916 46 U S C app 816 820 841a secs 10 15 17

of the Shipping Act of 1984 46 U S c app 1709 1714 1716

The Information collection requirements contained in this part

have been approved under O M B number 307200

2 In Part 533 remove Bureau of Domestic Regulation everywhere

it appears and Insert Bureau of Tariffs

3 Amend 533 1 by removing in the foreign commerce ofthe United

States or in interstate commerce on the high seas or the Great Lakes

and inserting

in the foreign or domestic offshore commerce of the United States

4 533 2 is revised to read

533 2 Purpose

The purpose of this part is to enable the Commission to discharge

its responsibilities under section 17 of the Shipping Act 1916

and section 10 of the Shipping Act of 1984 by keeping informed

of practices rates and charges related thereto instituted and to

be instituted by terminals and by keeping the public informed

of such practices Compliance is mandatory and failure to file

the required tariffs may result in a penalty of not more than

5 000 for each day such violation continues Additionally if

willful and knowing the Shipping Act of 1984 provides a civil

penalty of not more than 25 000 for each day a violation contin

ues

5 In 533 3 add at the beginning the following

Except with regard to bulk cargo forest products recycled metal

scrap waste paper and paper waste

6 Amend 533 4by removing agreements approved pursuant to section

15 and inserting

agreements approved pursuant to section 15 of the Shipping

Act 1916 andor effective under section 6 of the Shipping Act

of 1984

26 EM C
616 FEDERAL MARITIME COMMISSION

7 Amend 533 5 by removing approved section 15 agreements and

inserting

agreements approved under section 15 ofthe Shipping Act 1916

andor effective under section 6 of the Shipping Act of 1984

8 Part 533 of 46 CPR Chapter IV is redesisnated as Part 515

9 Redesignate all internal cross references to sections of present part

533 as cross references to the same numbered sections of new part 515

Such cross references are found in 533 3 and 533 4

PART 540SECURITY FOR THE PROTECTION OF THE PUBLIC

1 In Part 540 add O MB clearance numbers and the authority citation

appearing after the table of contents is to read as follows and all other

authority citations are removed

AUTHORITY 5 U S C 552 553 secs 2 and 3 Pub L 89

777 80 Stat 13561358 46 U S C app 817e 817d sec 43

of the Shipping Act 1916 46 U S C app 841a sec 17 of

the Shipping Act of 1984 46 U S C app 1716

The information collection requirements contained in this part

have been approved under O M B numbers 3072011 and 3072

0012

2 In Part 540 Remove Bureau of Investigation and Enforcement

everywhere it appears and insert Bureau of Hearing Counsel

3 In 54O 4a in the last sentence remove and and the period

and add at the end

Miami Fla Los Angeles Calif Hato Rey P R and Chicago

Ill

4 In 54O 5 a 1 remove 1321 H Street N W and insert 1100

L Street N W

5 Remove paragraph 54O 9 i

6 In 54O 23 a in the last sentence remove and and the period

and add at the end

Miami Fla Los Angeles Calif Hato Rey P R and Chicago

Ill

7 In 54O 24a 1 remove 1321 H Street N W and insert 1100

L Street N W

8 Remove paragraph 54O 27 i

9 Part 540 APPENDIX A is revised to read

26 F M C
INTERIM RULES TO IMPLEMENT THE SHIPPING ACT OF 1984 617

APPENDIX A EXAMPLE OF SETILEMENTAGREEMENf TO BE

USED UNDER 46 CFR 540 30 540 36

SETILEMENT AGREEMENT FMC FILE NO

This Agreement is entered into between

1 the Federal Maritime Commission and

2 hereinafter referred to as respondent

WHEREAS the Commission is considering the institution of an assess

ment proceeding against respondent for the recovery of civil penalties pro

vided under the Act for alleged viola

tion s of Section s

WHEREAS this course of action is the result of practices believed

by the Commission to have been engaged in by respondent to wit

WHEREAS the parties are desirous of expeditiously settling the matter

according to the conditions and terms of this Agreement and wish to

avoid the delays and expense which would accompany agency litigation

concerning these penalty claims and

WHEREAS Section of the Act

authorizes the Commission to collect and compromise civil

penalties arising from the alleged violation s set forth and described above

and

WHEREAS the respondent has terminated the practices which are the

basis of the alleged violation s set forth herein and has instituted and

indicated its willingness to maintain measures designed to eliminate discour

age and prevent these practices by respondent or its officers employees

and agents

NOW THEREFORE in consideration of the premises herein and in

compromise of all civil penalties arising from the violation s set forth

and described herein that may have occurred between date

and date the undersigned respondent herewith tenders to

the Federal Maritime Commission a bank cashier s check in the sum of

upon the following terms of settlement

1 Upon acceptance of this agreement of settlement in writing by the

Director ofthe Bureau ofHearing Counsel of the Federal Maritime Commis

sion this instrument shall forever bar the commencement or institution

of any assessment proceeding or other claims for recovery of civil penalties

from respondent arising from the alleged violations set forth and described

herein that have been disclosed by respondent to the Commission and

that occurred between date and date

2 The undersigned voluntarily signs this instrument and states that no

promises or representations have been made to the respondent other than

the agreements and consideration herein expressed

26 F M C
618 FEDERAL MARmME COMMISSION

3 It is expressly understood and agreed that this Agreement is not

to be construed as an admission of guilt by undersigned respondent to

the alleged violations set forth above

4 Insofar as this agreement may be inconsistent with Commission proce

dures for compromise and settlement ofviolations the parties hereby waive

application of such proeedures

S By

Title

Date

Approval and Acceptance

The above Terms and Conditions and Amount ofConsideration are hereby

Approved and Accepted

By the Federal Maritime Commission

S

Hearing Counsel

Director Bureau ofHearing Counsel

Date

10 Part 540 Appendix B is revised to read

APPENDIX B EXAMPLE OF PROMISSORY NOTE TO BE USED

UNDER 46 CPR 540 36

PROMISSORY NOTE CONTAINING AGREEMENT FOR JUDGMENT

FMC PILE NO

For value received promises to pay to the Federal

Maritime Commission the Commission the principal sum of

to be paid at the offices of the Com

mission in Washington D C by bank cashier s or certified check in the

following installments

within months of execution

of the settlement agreement by the Director of the Bureau of Hearing

Counsel

within months of execution

of the agreement

within months of execution

of the agreement

26 F M C
Title

INTERIM RULES TO IMPLEMENT THE SHIPPING ACT OF 1984 619

Further payments if necessary

In addition to the principal amount payable hereunder interest on the

unpaid balance thereof shall be paid with each installment Such interest

shall accrue from the date of this execution of this Promissory Note by

the Director of the Bureau of Hearing Counsel and be computed at the

rate of r percent per annum

If any payment of principal or interest shall remain unpaid for a period

of ten 10 days after becoming due and payable the entire unpaid principal

amount of this Promissory Note together with interest thereon shall become

immediately due and payable at the option of the Commission without

demand or notice said demand and notice being hereby expressly waived

If a default shall occur in the payment of principal or interest under

this Promissory Note Respondent does hereby au

thorize and empower any U S attorney any of his assistants or any attorney

of any court of record Federal or State to appear for him and to enter

and confess judgment against Respondent for the

entire unpaid principal amount of this Promissory Note together with inter

est in any court of record Federal or State to waive the issuance and

service of process upon Respondent in any suit

on this Promissory Note to waive any venue requirement in such suit

to release all errors which may intervene in entering up such judgment

or in issuing any execution thereon and to consent to immediate execution

on said judgment

Respondent hereby ratifies and confirms all that

said attorney may do by virtue thereof

This Promissory Note may be prepaid in whole or in part by Respondent

by bank cashier s or certified check at any time provided that approved

interest on the principal amount prepaid shall be paid at the time of the

prepayment

S By

Date

PART 55 FILING OF TARIFFS BY TERMINAL BARGE OPERATORS

IN PACIFIC SLOPE STATES

1 From table of contents remove 550 3 Effective Date

2 In Part 550 the authority citation appearing after the table of contents

is revised to read as follows and all other authority citations are removed
620 FEDERAL MARITIME COMMISSION

AUTHORITY 5 U S C 553 secs 18 a and 43 of the Shipping

Act 1916 46 U S C app 817 a and 841 a sec 2 of the

Intercoastal Shipping Act 1933 46 U S C app 844 and secs

8 and 17 of the Shipping Act of 1984 46 U S C app 1707

and 1716

3 In 550 1 c remove the period and add at the end

andlor the Shipping Act of 1984

4 In 550 2 a remove General Order 13 46 CFR Part 536 and

insert part 580 of this Chapter

5 In 550 2 b remove Tariff Circular 3 46 CFR Part 531 and

insert part 550 of this Chapter

6 Remove 550 3

7 In 550 2 c remove 5502 a and insert 520 2 a

8 Part 550 of 46 CFR Chapter IV is redesignated as Part 520 and

all internal references are changed

PART 551 TRUCK DETENTION AT THE PORT OF NEW YORK

1 In part 551 add O M B clearance numbers and revise the authority

section to read as follows

AUTHORITY 5 U S C 553 secs 17 and 43 of the Shipping

Act 1916 46 U S C app 816 and 841a secs 10 and 17 of

the Shipping Act of 1984 46 U S C app 1709 and 1716

The information collection requirements contained in this part

have been approved under O M B number 3072010

2 In 5513 e 1 remove General Order 8 526 1 c and insert

525 1 c of this Chapter

3 In 5517 e remov 5514 1 and insert 5514 i

4 Part 551 of 46 CFR Chapter IV is redesignated as Part 530

5 Redesignate all internal cross references to sections of old part 551

as cross references to the same numbered sections of new part 530 Such

cross references are found in 551 1m 5512 b 11 5512 c 14

5512 g5513 c 2 5513 d 1 5513 d 2 5514c 5514 d 5515 b

5516 a two references 5517 b 5517 c 5517 d 5517 e two ref

erences 5517 gand 5518 e 1 three references

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 510

GENERAL ORDER 4 REVISED DOCKET NO 8419

LICENSING OF OCEAN FREIGHT FORWARDERS

AGENCY Federal Maritime Commission

ACTION Interim Rules and Request for Comments

SUMMARY On March 20 1984 the President signed the Shipping

Act of 1984 which will become effective June 18 1984

The Commission hereby issues interim rules and requests

comments on those changes to its General Order 4 46

C F R Part 510 that are required by the new legislation

Also included herein are interim rules revising certain

other sections of General Order 4 which the Commission

had under consideration at the time the Shipping Act

of 1984 was signed

DATES Effective Date Interim Rules effective June 18 1984

Comments due on or before June 4 1984

SUPPLEMENTARY INFORMATION

On March 20 1984 the President signed the Shipping Act of 1984

which will become effective June 18 1984 This legislation substantially

alters the regulatory responsibilities of the Commission and directly impacts

on the Commission s

regulations pertaining to the ocean freight forwarding

industry General Order 4 A number of changes to General Order 4 are

required by this new legislation While most of the changes are technical

in nature some will have a significant impact on the industry

Last August the Commission issued a notice of proposed rulemaking

in the Federal Register 48 F R 167 at p

38856 Docket No 83 35

proposing to revise certain provisions of General Order 4 In response

to that notice comments were received and evaluated by the staff In

view of the new legislation recently signed the Commission has withheld

adoption of final rules concerning those proposed changes noticed last

August and the Commission will again notice them as interim rules as

amended herein for additional possible comment along with the changes

required by the new legislation It should be noted that the comments

submitted in Docket No 83 35 Proposed Revisions to General Order 4

will be incorporated into the record of this proceeding and it will not

be necessary for commenters to submit their previous comments again

in connection with this rulemaking proceeding

The Commission s ultimate goal will be a single comprehensive rule

which will include all amendments required by new legislation as well

as the changes noticed lastAugust

26 F M C 621
622 FEDERAL MARITIME COMMISSION

So as not to confuse issues we discuss the changes to General order

4 required by new legislation under Part A Legislative Changes of

the Supplementary Information In Part B Other Changes we discuss

the proposals previously noticed last August

These interim rules will take effect on June 18 1984 the effective

date of the Shipping Act of 1984 If individuals believe that there are

serious problems created by these interim rules which should be addressed

immediately they are free to bring their concerns to the attention of the

Commission without prejudice to subsequently filing additional comments

within the thirty day comment period In any event all interested parties

have been provided thirty days to comment on the interim rules

PART A LEGISLATIVE CHANGES

The Shipping Act of 1984 has made several substantial changes in the

regulation of the forwarding industry The definition of an ocean freight

forwarder is changed to mean any person in the United States who dis

patches shipments from the United States via a common carrier and books

or otherwise arranges space for those shipments on behalf of shippers

and processes the documentation or performs related activities incident to

those shipments Thus there will be no prohibition against export shippers

sellers consignees and purchasers of goods from the United States obtaining

an ocean freight forwarder license as there currently is Any class of person

can obtain a license as an ocean freight forwarder if found qualified

The qualifications for licensing will be changed from a fit willing and

able standard to an experience and character standard We see however

no great difference between the two standards It appears that someone

found unfit under the old standard would not possess the proper character

to be licensed under the new standard

The Commission will be able to revoke or suspend a license after

notice and hearing where it finds that an ocean freight forwarder is not

qualified to render forwarding services or that it willfully failed to comply

with a provision of the new Act or with a lawful order rule or regulation

of the Commission this would also include failure to honor financial obliga

tions to the Commission such as for civil penalties The Commission

may also revoke a license for failure to maintain a surety bond Again

we see no drastic differences between the old law and the new law in

this area

The payment of ocean freight forwarder compensation is still the preroga

tive of the carrier although no conference or group of two or more carriers

may deny in the export foreign commerce of the United States compensation

to a forwarder or limit that compensation to less than a reasonable amount

On the issue of what is reasonable the Conferees report accompanying

the new legislation states

J1 M r
LICENSING OF OCEAN FREIGHT FORWARDERS 623

Rather than specify the limitation at 11 4 percent of the freight

charge as was done in the Senate version the Conferees agree

to proscribe any denial of compensation at less than a reasonable

amount Reasonable has been determined by the Federal Mari

time Commission in those cases at which limitation of compensa

tion was at issue to be no less than 11 4 percent The Conferees

view the approach taken by the Federal Maritime Commission

as consistent with their continuing regulatory responsibility and

assume that the Commission will be guided by its past actions

when determining what a reasonable amount will be

An ocean freight forwarder is still required to provide the carrier with

a certification that it is entitled to the payment of compensation However

the form of the certification has been changed to require that the forwarder

1 engage book secure reserve or contract directly with the carrier or

its agent for space aboard a vessel or confirm the availability of that

space and 2 prepare and process the ocean bill of lading dock receipt

or other similar document with respect to the shipment Carriers may not

pay compensation for services described above more than once on the

same shipment Compensation may only be paid in accordance with the

carrier s tariff provisions No ocean freight forwarder may receive com

pensation on a shipment on which the ocean freight forwarder has a direct

or indirect beneficial interest

Section 20 of the new legislation Repeals and Conforming Amendments

does not provide for the licensing of forwarders in the US domestic

off shore trades Hence a person engaging in the business of ocean freight

forwarding in the U S domestic off shore trades will not be required to

obtain a license from the Commission Furthermore General Order 4 Part

510 will not apply to such activity

The foregoing briefly outlines how the new legislation will impact on

the forwarding industry The Commission s

regulations require changes to

implement the new legislation What follows is identification of the changes

section by section required in General Order 4 to conform it with the

new legislation There are however several changes which occur throughout

the rule that are better dealt with apart from the section by section analysis

These are

1 Reference to Independent Ocean Freight Forwarder shall be

changed to Ocean Freight Forwarder

2 Reference to the Shipping Act 1916 shall be changed to the

Shipping Act of 1984

3 References to specific sections of the Shipping Act 1916 shall

be changed to the appropriate sections of the Shipping Act of

1984

4 Reference to oceangoing common carrier shall be changed to

common carrier
624 FEDERAL MARITIME COMMISSION

5 Reference to Bureau of Certification and Licensing shall be

changed to Bureau of Tariffs This is required by internal

reorganization and not by new legislation

6 Any reference to the U S domestic off shore trades shall be de

leted

7 The Authority shall be The Shipping Act of 1984

Section 510 1 Scope

In paragraph b add language indicating that if a violation is willfully

and knowingly committed the amount of the civil penalty may not exceed

25 000 for each violation Also revise the lower range of penalties to

specify such penalty may not exceed 5 000 instead of 1 000

Add language to provide that each day of a continuing violation shall

constitute a separate offense

Section 510 2 Definitions

Add a definition for common carrier as defined in the Shipping Act

of 1984 The Act This term will include both vessel operating common

carriers and non vessel operating common carriers

Delete the definition for freight forwarder as it is not necessary

Amend paragraph i by eliminating reference to the domestic trades

Delete the language in paragraph 0 and replace it with the definition

of ocean freight forwarder contained in The Act

Amend paragraph 1 so it comports with the definition of a non vessel

operating common carrier contained in The Act

Substitute the definition for ocean common carrier in The Act for

the language contained in paragraph n

Add the definition for shipment in The Act

Add the definition for shipper in The Act

Substitute the definition of the United States in The Act for the

language contained in paragraph s

Section 510 11 Basic requirements for licensing eligibility

Amend paragraph a to indicate that the basic requirement will now

be experience and character of the applicant and the filing of an appropriate

bond

Section 510 12 Persons not eligible

Delete the entire section as it is no longer necessary

Section 510 14 Investigation ofapplicants

Delete the phrase and independence in paragraph c

Delete paragraph e

I

u

r
LICENSING OF OCEAN FREIGHT FORWARDERS 625

Section 510 15 Surety bond requirements

Delete the language contained in the third sentence in paragraph a

and substitute statutory language that the surety company be acceptable

by the Secretary of the Treasury

Section 510 16 Denial oflicense

Amend the language so that the grounds will now be

1 does not possess the necessary experience or character to render

forwarding services

2 has failed to respond to any lawful inquiry of the Commission

or

3 has made any willfully false or misleading statement to the Com

mission in connection with its application

Section 510 17 Revocation orsuspension oflicense

In subparagraphs a l and a 2 add order of the Commission

In subparagraph a 4 amend the language to indicate that a ground for

revocation or suspension shall be where the Commission finds the licensee

is no longer qualified to render freight forwarding services Delete language

in subparagraph a

5 and substitute language regarding a licensee s finan

cial obligations to the Commission

Section 510 18 Application after revocation or denial

Delete any reference to unfit or lack of fitness contained in this

section and substitute not qualified or some variations thereof

Section 510 19 Issuance and use oflicense

Amend language of this section by deleting references to fit willing

and able and substitute the necessary experience and character criteria

Also add language concerning the filing of the required surety bond

Section 510 20 Changes in organization

Delete reference to see section 15 of the Act contained in paragraph

a 6

Section 510 21 Branch offices interim operation

Although not affected by the new legislation this section is no longer

necessary thus it will be deleted

Section 510 32 Forwarder and principal fees

Paragraph a is deleted as under the new legislation this prohibition

will no longer be applicable

1 J1ur
626 FEDERAL MARITIME COMMISSION

Section 510 33 Forwarder and carrier compensation

In paragraph a delete the first sentence Amend the remaining language

to clarify that the identity of the actual shipper must be disclosed on

the bill of lading and in instances where the licensee is not also the

actual shipper the licensee s name may appear after the shipper s name

In paragraph c amend the language of the certification to comply with

the language contained in the new legislation

In paragraph d add language that conferences or groups of carriers

shall not deny compensation or limit the level to less than a reasonable

amount

In paragraph famend language so it comports with the language con

tained in the new legislation

In paragraph 9 make several technical changes to clarify that it applies

only to non vessel operating carriers

Section 510 35 Reports required to befiled

Paragraph acurrently requires each licensee to file copies of its office

stationery and invoice forms within sixty days of licensing Although not

affected by the new legislation we do not believe that this requirement

is necessary and in order to reduce the burden on the industry we are

deleting the requirement

In view of the proposed deletion of section 510 36 see below paragraph

b of section 510 35 is deleted as it contains reference to section 510 36

Section 510 36 Section 15 Agreements

Under the new legislation forwarders are not required to file any of

their agreements in the U S foreign commerce with the Commission Thus

this section is deleted in its entirety

PART B OTHER CHANGES

As indicated earlier the changes discussed under this part were originally

noticed for comment last August In its notice of proposed rulemaking

the Commission had proposed nine areas of change to the current rules

Our discussion addresses the comments on each area of change separately

and in accordance therewith we are adopting interim rules along with

the changes discussed under Part A that are required by new legislation

1 Protecting the Shipping Public

The language changes for the specific rules addressed under this topic

appear in Amendments Nos 11 section 510 13 e and 20 section

51O 31 b

The Commission proposed that forwarders who are affiliated with export

shippers or sellers of goods from the United States be required to give

notice on their office stationery and billing invoices that they are affiliated

with one or more shippers or sellers of goods from the United States
LICENSING OF OCEAN FREIGHT FORWARDERS 627

and upon request the forwarder would be required to identify such affili

ations in writing It was the Commission s belief that such notification

would give potential clients the opportunity to choose whether or not to

employ certain forwarders who may be controlled by or otherwise affiliated

with a potential competitor of the client

The comments generally favor the proposal and support the intent of

the Commission in proposing the change Two forwarders however oppose

the proposal Davidson Forwarding Company FMC License No 1086

believes that the proposal would harm small forwarders which have no

shipper affiliations This forwarder feels that shippers would lean more

toward forwarders that are affiliated It suggests that forwarders be required

to make annual certifications stating their affiliations similar to the annual

anti rebate certification NAVTRANS International Freight Forwarding Inc

FMC License No 2522 argues that the prohibition contained in section

20 ofthe Shipping Act 1916 which prohibits the disclosure of any informa

tion concerning a shipment which may be used to the detriment of the

shipper consignee or may improperly disclose the business transaction to

a competitor is sufficient and in the absence of any showing to the

contrary it would seem somewhat capricious at best to simply dismiss

section 20 of that Act as ineffectual or insufficient It sees the proposal

as an attempt to artificially restrain competition among freight forwarders

With respect to NAVTRANS argument that section 20 of the 1916

Act is sufficient to protect the shipping public we would point out that

the Shipping Act of 1984 contains no counterpart for section 20 of the

1916 Act which pertains to ocean freight forwarders Hence the notification

of shipper affiliations becomes all that more important in alerting unknowing

shippers that the forwarder they deal with may be a potential competitor

Furthermore in light of the removal of the prohibition against shippers

obtaining an ocean freight forwarder license by the new legislation we

are modifying our proposal to require notification of the fact that the

forwarder is an export shipper

The National Customs Brokers Forwarders Association of America

Inc hereinafter referred to as the National Association has suggested

a further revision to the notice requirement proposal It recommends that

the Commission require that the type size for the notice be the same

as other portions of the forwarder s stationery It fears that forwarders

will put the notice in the smallest type possible We do not believe the

National Association s suggestion is practical as a forwarder s stationery

may contain several different type sizes Thus we will not adopt the

suggestion in our revised rule

Also in this area the Commission proposed to amend the rules to require

forwarders to report to the Commission any changes in fact contained

in the forwarder s original application form within thirty days This rule

is meant to rectify an oversight that occurred when the rules were revised

in 1981 No commenter objected to the proposal

f PMr
628 FEDERAL MARITIME COMMISSION

In view of the favorable comments submitted regarding the proposals

in this area we will adopt the proposals as modified above

2 The Invoicing Rules

See Amendments Nos 21 section 510 32 h and 23 section 510 34b

With regard to the invoicing rules the Commission proposed three alter

natives a retain the current rules with no change b delete the rules

entirely or c any modification falling between alternatives a and b

including a rule that would allow a forwarder to provide a lump sum

invoice but at the same time require the forwarder upon request of its

principal to provide copies of any or all pertinent documents such as

invoices for trucking warehousing insurance etc pertaining to the for

warder s invoice

No commenter supported alternative a i e make no change The over

whelming sentiment was that the Commission should delete all requirements

pertaining to how forwarders should invoice their clients Given the possibil

ity that the Commission probably would not adopt final rules which would

eliminate the invoicing rule the commenters generally support changes

in the current rules which would allow forwarders to provide lump sum

billing with no breakout of costs Further it is suggested by the commenters

that where a forwarder chooses to utilize an itemized invoice the forwarder

be allowed to show only the total cost to the client for accessorial services

such as inland freight insurance warehousing etc instead of having to

break out the forwarder s cost for the accessorial service and its markup

on the accessorial service

We are amending the current invoicing rule to permit forwarders to

provide lump sum billing on their invoices to their shipper clients without

breaking out specific costs

However the rule will require that the forwarder upon request of its

shipper client must provide a break out of costs and acopy of any pertinent

document relating to the invoice for example invoices from third parties

We also are requiring a notice to this effect be placed on each invoice

the forwarder renders to its shipper clients We believe the shipper client

should have a way of determining for itself whether the charges billed

by the forwarder are reasonable and acceptable to it

Additionally to make it clear which particular documents a forwarder

is required to retain in its files we are amending section 51 034b to

identify more specifically the types of documents such as invoices for

any service arranged by the forwarder and performed by others that are

to be retained by the forwarder

3 Sale orTransfer of Stock

See Amendment No 18 section 510 20 a 5

Section 51O 20 a 5 currently requires the Commission s prior approval

of the sale or transfer of five percent or more of a forwarder s stock

l ur
LICENSING OF OCEAN FREIGHT FORWARDERS 629

to ensure that licensees remain independent of shipper connections With

the passage of the Shipping Act of 1984 the need for the prior approval

of sale transfer of stock in a forwarder no longer exists as forwarders

are allowed by law to be shippers or shipper connected Therefore we

are deleting this requirement

We would point out that forwarders will still be required to notify

the Commission of any stock sale or transfer for our information under

the adopted revision discussed earlier See revised section 51O 13 e

4 Arrangements with Unauthorized Persons

See Amendment No 20 section 510 31 e

It was proposed to clarify section 51O 31 e to allow forwarders to hire

and compensate bona fide sales agents for services rendered provided that

such services are restricted to soliciting and obtaining business for the

forwarder and are not otherwise prohibited by law or regulation Also

the Commission wished to clarify that the rule s intent is that when a

forwarder is employed for the transaction of forwarding business by a

person who is not the person responsible for paying the forwarding charges

the forwarder shall transmit to the person paying the forwarding charges

a

copy of its invoice for services rendered

Comments received on the proposed clarifications were favorable Hence

we adopt these clarifications as interim rules

5 Anti Rebate Certification

See Amendments Nos 20 section 51O 3l h and 22 section 510 33 c

To obtain as much comment as possible the Commission proposed two

alternatives dealing with the issue of requiring forwarders to place an

anti rebate policy declaration on each invoice to a shipper client and on

each certification for freight forwarder compensation to an oceangoing com

mon carrier First that no change be made in the current rule as it serves

to reinforce the Commission s policy against rebates among carriers for

warders and shippers and second that the rule be deleted leaving only

the annual certification as suggested by the National Association

Comments on the proposals support the deletion of the rule as it is

perceived as burdensome to stamp each such document The National Asso

ciatioq further argues that Shipping Act 1916 does not require forwarders

to continuously certify an anti rebate policy It is generally felt by the

commenters that the annual certification is sufficient One forwarder how

ever did suggest that the annual certification requirement be deleted and

that the supposed burden of stamping each document can be alleviated

by simply having documents preprinted with the required statement

We agree with the one forwarder s comment that if the notice is

preprinted there is no continual burden and we would urge all forwarders

to have their documents preprinted This policy declaration is but one

means of insuring that the Commission s policy against rebates is dissemi
630 FEDERAL MARITIME COMMISSION

nated to unknowing shippers and it is consistent with the intent of section

15 of the new legislation However we do not believe it is necessary

for forwarders to declare this policy to carriers as the carriers are fully

aware of the Commission s policy in fact carriers file annual certifications

similar to those filed by forwarders Therefore we are amending section

51O 31 h to the extent that forwarders now be required to provide the

anti rebate policy declaration only to their shipper clients and not addition

ally to carriers We would point out that in view ofthe foregoing rule

a confonning amendment to section 510 33 c will be necessary to delete

the reference to section 510 31 h contained therein and it is therefore

included

We would emphasize that the change h re would not in any way affect

the annual anti rebate certification as each forwarder will still be required

to file its annual certification of its policies against rebating as required

by section 51O 35 c ofGeneral Order 4

6 Accounting to Principal

See Amendment No 21 section 510 32 k

In lieu of requiring forwarders to obtain written consent to offset funds

on each and every shipment the Commission proposed that the forwarder

either execute a written agreement with its principal which would allow

the forWarder to offset funds on all of the principal s shipments or obtain

oral consent on each shipment

The general view of the comments on this issue is best expressed by

the comments of the National Association It is argued that the licensing

statute did not create a fiduciary relationship with the exporter and that

the forwarder should not be considered as an agent of the shipper but

rather as an independent contractor The forwarder should be allowed to

offset funds without the principal s consent just like other business persons

It adds however that if the Commission does not agree with its position

it would support the proposed changes

We see the interim rules here as a compromise between retaining the

current rule and doing away with the requirement entirely As such we

believe that the changes will benefit all parties involved as they provide

the forwarder with an option that can be employed as conditions dictate

and in the case of a written agreement they leave no doubt between

a forwarder and its client of what can be expected in situations concerning

offsetting obligations

7 Section 15 Agreements Exemptions

See Amendment No 27 section 510 36

The Commission had earlier proposed to amend the rules to delete the

requirement that non exclusive cooperative working agreements between for

warders be reduced to writing
LICENSING OF OCEAN FREIGHT FORWARDERS 631

In view of the fact that agreements between forwarders are not required

to be filed with the Commission under the new legislation we have decided

earlier to delete section 510 36 in its entirety

8 Port Wide Exemptions

See Amendment No 22 section 51O 33 e

The Commission proposed to modify section 51O 33 e to allow com

pensation to be paid to a forwarder who requests that the carrier or its

agent perform some of the forwarding functions if such carrier or agent

is a licensed independent ocean freight forwarder or if no other licensee

is willing and able to perform such services With this allowance the

current port wide exemption provision contained in the section would be

unnecessary and hence would be deleted

Comments directly addressing this issue favor the proposed changes

Several commenters apparently did not understand completely the intent

of the current rule and they strayed off onto a discussion of why carriers

and agents should not be licensed

In view of the favorable comments we are adopting the proposed

changes

9 Publication of Orders ofRevocations

See Amendment No 15 section 51O 17 c

The Commission proposed that instead of publishing the entire order

of revocation in the Federal Register a simple notice of such action be

published

The comments support this change Therefore we adopt the proposal

Pursuant to 5 U S c 601 et seq the Commission certifies that the

interim rules published herein will not have a significant economic impact

on a substantial number of small entities The interim rules are intended

to bring the Commission s

regulations in line with new legislation Further

they tend to lessen the regulatory burden upon the forwarding industry

and they should have a cost saving impact on daily operations

Collection of information requirements contained in this regulation have

been approved by the Office of Management and Budget under provisions

of the Paperwork Reduction Act of 1980 P L 96511 and have been

assigned control numbers 3072004 and 3072 0018

List of Subjects in 46 CFR part 510

Freight forwarders Maritime carriers Rates Surety bonds Exports

THEREFORE pursuant to 5 U S c 553 sections 8 10 15 17 and

19 of the Shipping Act of 1984 46 U S c app 1707 1709 1714 1716

and 1718 the Commission is amending 46 CFR Part 510 as follows

1 In part 510 add O M B clearance numbers and the authority citation

appearing after the table of contents is revised to read as follows and

all other authority citations are removed
632 FEDERAL MARITIME COMMISSION

AUTHORITY 5 U S C 553 secs 8 10 15 17 and 19 of the

Shipping Act of 1984 46 U S C app 1707 1709 1714 1716

and 1718

The infonnation collecti n

requirements contained in this part

have been approved under O M B numbers 3072004 and 3072

0018

2 References to Independent Ocean Freight Forwarder wherever they

appear shall be changed to Ocean Freight Forwarder

3 References to Shipping Act 1916 wherever they appear shall

be changed to Shipping Act of 1984

4 References to Oceangoing Common Carrier wherever they appear

shall be changed to Common Carrier

5 References to Bureau of Certification and Licensing wherever they

appear shall be changed to Bureau ofTariffs

6 In 510 1 paragraph b is revised to read as follows

510 1 Scope

b Infonnation obtained under this part is used to detennine

the qualifications of freight forwarders and their compliance with

shipping statutes and regulations Failure to follow the provisions

of this part may result in denial revocation or suspension of

a license for freight forwarding Persons operating without the

proper license may be subject to civil penalties not to exceed

5 000 for each violation unless the violation is willfully and

knowingly committed in which case the amount of the civil

penalty may not exceed 25 000 for each violation for other

violations of the provisions of this part the civil penalties range

from 5 000 to 25 000 for each violation Each day of a continu

ing violation shall constitute a separate violation

7 In 51O 2 remove paragraphs t

i

j 1 n and s In

51O 2 d remove 51O 2 m of this part and insert the definition

of Ocean freight broker in this section In 51O 2 g

remove freight

forwarding services as specified in 51 0 2h of this part and insert

freight forwarding services

8 In 510 2 remove paragraph designations appearing before each defini

tion arrange definitions in alphabetical order In definition of freight

forwarding services redesignate paragraphs 1 13 as paragraphs a

m and add the following definitions in alphabetical order to read as

follows

510 2 Definitions

Common Carrier means any person holding itself out to

the general public to provide transportation by water of passengers
LICENSING OF OCEAN FREIGHT FORWARDERS 633

or cargo between the United States and a foreign country for

compensation that

a Assumes responsibility for the transportation from the

port or point of receipt to the port or point of destination

and

b Utilizes for all or part of that transportation a vessel

operating on the high seas or the Great Lakes between a port in the United States and a

port in a foreign country

From the United States means oceanborne export commerce

from the United States its territories or possessions to foreign

countries

Non Vessel Operating Common Carrier means a common

carrier that does not operate the vessels by which the ocean

transportation is provided and is a shipper in its relationship

with an ocean common carrier

Ocean Common Carrier means a vessel operating common

carrier but the term does not include one engaged in ocean trans

portation by ferry boat or ocean tramp

Ocean Freight Forwarder means a person in the United States

that

a Dispatches shipments from the United States via common

carriers and books or otherwise arranges space for those ship

ments on behalf ofshippers and

b Processes the documentation or performs related activities

incident to those shipments

Shipment means all of the cargo carried under the terms

of a single bilI oflading

Shipper means an owner or person for whose account the

ocean transportation of cargo is provided or the person to whom

delivery is to be made

United States includes the several States the District of

Columbia the Commonwealth ofPuerto Rico the Commonwealth

of the Northern Marianas and all other United States territories

and possessions

9 In 510 Il revise paragraph a to read as follows

51O 11 Basic requirements for licensing eligibility

t J f
634 FEDERAL MARITIME COMMISSION

a Necessary qualifications To be eligible for an ocean freight forwarder s license the applicant must demonstrate to the Commis

sion that

I Itpossesses the necessary experience that is its qualifying

individual has a minimum of three 3 years experience in

ocean freight forwarding duties in the United States and the

necessary character to render forwarding services and

2 It has obtained and filed with the Commission a valid

surety bond in confonnance with 510 15

10 510 12 is removed

11 In 51O 13 revise paragraph e to read as follows

510 13 Application for license

e Changes in acts Each applicant and each licensee shall

submit to the Commission in duplicate an amended Fonn FMC

18 Rev advising of any changes in the facts submitted in the

original application within thirty 30 days after suchchange s

occur In the case of an application for a license any unreported

change may delay the processing and investigation of the applica

tion and may result in rejection or denial of the application

No fee is required when reporting changes to an application for

initial license under this section

12 In 510 14 remove the phrase and independence in paragraph

c and remove paragraph e

13 51O 15 is amended by revising paragraph a Introductory text

to read as follows

510 15 Surety bond requirements

a Form and amount No license shall be issued to an applicant

who does not have a valid surety bond FMC 59 Rev on file

with the Commission in the amount of 30000 The amount

of such bond shall be increased by 10000 for each of the

applicant s unincorporated branch offices Bonds must be issued

by a surety company found acceptable by the Secretary of the

Treasury Surety Bond Form FMC 59 Rev can be obtained in

the same manner as Form FMC 18 Rev under 5t13 a and

shall read as follows

I

I

14 510 16 is revised to read as follows

510 16 Denial of license

If the Commission detennines as a result of its investigation that the

applicant

a Does not possess the necessary experience or character

to render forwarding services

11
LICENSING OF OCEAN FREIGHT FORWARDERS 635

b Has failed to respond to any lawful inquiry of the Com

mission or

c Has made any willfully false or misleading statement

to the Commission in connection with its application

a letter of intent to deny the application shall be sent to the

applicant by certified U S mail stating the reason s why the

Commission intends to deny the application Ifthe applicant sub

mits a written request for hearing on the proposed denial within

twenty 20 days after receipt of notification such hearing shall

be granted by the Commission pursuant to its Rules of Practice

and Procedure contained in Part 502 of this chapter Otherwise

denial of the application will become effective and the applicant

shall be so notified by certified U S mail Civil penalties for

violations of the Act or any Commission order rule or regulation

may be assessed in any proceeding on the proposed denial of

a license or may be compromised for any such violation when

a proceeding has not been instituted in accordance with Part 505

of this chapter

15 In 510 17 paragraphs a introductory text and a l

a 2 a 4

a 5 and c are revised to read as follows

510 17 Revocation or suspension of license

a Grounds for revocation Except for the automatic revocation

for termination of a surety bond under 51O 15 d or as provided

in 51O 15 c a license shall be revoked or suspended after notice

and hearing for any of the following reasons

l Violation of any provision of the Act as amended or

any other statute or Commission order or regulation related

to carrying on the business offorwarding

2 Failure to respond to any lawful order of or inquiry

by the Commission

4 Where the Commission determines that the licensee is

not qualified to render freight forwarding services or

5 Failure to honor the licensee s financial obligations to

the Commission such as for civil penalties assessed or agreed

to in a settlement agreement under Part 505 of this chapter

c Notice of Revocation The Commission shall publish in the

Federal Register a notice of each revocation

16 510 18 is revised to read as follows

510 18 Application after revocation or denial

Whenever a license has been revoked or an application has

been denied because the Commission has found the licensee or

applicant to be not qualified to render forwarding services any

C uf r
636 FEDERAL MARITIME COMMISSION

further application within 3 years of the date of the most recent

conduct on which the Commission s notice of revocation or denial

was based made by such former licensee or applicant or by

another applicant employing the same qualifying individual or

controlled by persons on whose conduct the Commission based

its determination for revocation or denial shall be reviewed di

rectly by the Commission

17 In 51O 19 paragraph a is revised to read as follows

510 19 Issuance and use of license

a Qualification necessary for issuance The Commission will

issue a license if it determines as a result of its investigation

that the applicant possesses the necessary experience and character

to render forwarding services and has filed the required surety

bond

18 In 51O 20 remove paragraph a 5 and in paragraph a 6 remove

the phrase see section 15 of the Act

19 Remove 510 21

20 In 51O 31 paragraphs b e and h are revised to read as follows

51O 31 General duties

b Stationery and billing forms notice of shipper affiliation

1 The name and license number of each licensee shall

be permanently imprinted on the licensee s office stationery

and billing forms The Commission may temporarily waive this

requirement for good cause shown if the licensee rubber stamps

or types its name and FMC license number on all papers and

invoices concerned with any forwarding transaction

2 When a licensee is a shipper or seller ofgoods exported from the United States or affiliated with such an entity the

licensee shall have the option of either identifying itself as

such or its affiliations on its office stationery and billing forms

or including the following notice on such items

This company is a shipper or seller of goods exported from

the United States or affiliated with such an entity Upon

request a

general statement of its business activities or that

of its affiliations along with a written list of the names

of such affiliates will be provided

e Arrangement with unlicensed persons No licensee shall enter

into an agreement or other arrangement excluding sales agency

arrangements not prohibited by law or this part with an unlicensed

person so that any resulting freight forwarding fee compensation

or other benefit inures to the benefit of the unlicensed person
LICENSING OF OCEAN FREIGHT FORWARDERS 637

When a licensee is employed for the transaction of forwarding

business by a person who is not the person responsible for paying

the forwarding charges the licensee shall transmit to the person

paying the forwarding charges a

copy of its invoice for the services

rendered

h Policy against rebates The following declaration shall ap

pear on all invoices under 51 0 32 h

Name of firm has a policy against payment solicitation

or receipt of any rebate directly or indirectly which would

be unlawful under the United States Shipping Act of 1984

21 In 51O 32 paragraph a is removed and paragraphs h and k

are revised to read as follows

51 0 32 Forwarder and principal fees

a Reserved

h Invoice documents available upon request Licensees shall

not be required to itemize the components of charges on ship

ments However upon request of its principal each licensee shall

provide a complete breakout of such components of its charges

and a true copy of any underlying document or bill of charges

pertaining to the licensee s invoice The following notice shall

appear on each invoice to a principal

Charges indicated herein may include a markup Upon re

quest we shall provide a detailed list of the components of

these charges and a true copy of any pertinent document relating

to the charges contained in this invoice

k Accounting to principal Each licensee shall account to its

principal s for overpayments adjustments of charges reductions

in rates insurance refunds insurance monies received for claims

proceeds of c o d shipments drafts letters of credit and any

other sums due such principal s These sums shall be forwarded

promptly to the principal or with the principals consent may

be used to offset the licensee s outstanding receivables due from

such principal A memorandum of such consent shall be retained

by the licensee in each shipment file Alternatively the licensee

may execute a written agreement with its principal which would

authorize the licensee to offset funds on all the principals ship

ments handled by the licensee

22 In 51O 33 paragraphs a c d e tand g are revised

to read

510 33 Forwarder and carrier compensation

T AA
638 FEDERAL MARITIME COMMISSION

a Disclosure of principal The identity of the actual shipper

must always be disclosed on the bill of lading The licensee s

name may appear after the name of the actual shipper but the

licensee must be identified as the shipper s agent

c Form of certification Prior to receipt of compensation the

licensee shall file with the carrier a signed certification as set

forth below on one copy of the relevant ocean bill of lading

which indicates performance of the listed services

The undersigned hereby certifies that neither it nor any hold

ing company subsidiary affiliate officer director agent or

executive of the undersigned has a beneficial interest in this

shipment that it is the holder of valid FMC license No

issued by the Federal Maritime Commission and has performed

the following services

1 Engaged booked secured reserved or contracted di

rectly with the carrier or its agent for space aboard a vessel

or confirmed the availability of that space and

2 Prepared and processed the ocean bill of lading dock

receipt or other similar dOCument with respect to the ship

ment

A copy of such certificate shall be retained by the licensee

pursuant to 510 34

d Compensation pursuant to tariff provisions No licensee

or employee thereof shall accept compensation from an ocean

going common carrier which is different than that specifically

provided for in the carrier s effective tariff s

lawfully on file

with the Commission No conference or group of common carriers

shall deny in the export commerce of the United States compensa

tion to an ocean freight forwarder or limit that compensation

to less than a reasonable amount

e Compensation for services performed by underlying carrier

No licensee shall charge or collect compensation in the event

the underlying common carrier or its agent has at the request

of such licensee performed any of the forwarding services set

forth in 510 2h unless such carrier or agent is also a licensee

or unless no other licensee is willing and able to perform such

services

t Duplicative compensation A common carrier shall not pay

compensation for the services described in 510 33 c more than

once on the same shipment

g

Licensed nonvessel operating common carriers compensa

tion A nonvessel operating common carrier by water or person

related thereto licensed under this part may collect compensation

when and only when the following certification is made on the

line copy of the underlying ocean common carrier s bill of

lading in addition to all other certifications required by this part

11RM r
LICENSING OF OCEAN FREIGHT FORWARDERS 639

The undersigned certifies that neither it nor any related person

has issued a bill of lading or otherwise undertaken common

carrier responsibility as a nonvessel operating common carrier

for the ocean transportation of the shipment covered by this

bill of lading

Whenever a person acts in the capacity of a nonvessel operating

common carrier by water as to any shipment such person shall

not collect compensation nor shall any underlying ocean common

carrier pay compensation to such person for such shipment

23 In g518 34 paragraphs b and e are revised to read as follows

S 510 34 Records required to be kept

b Types of services by shipment A separate file shall be

maintained for each shipment Each file shall include a

copy

ofeach document prepared processed or obtained by the licensee

including each invoice for any service arranged by the licensee

and performed by others with respect to such shipment

e Agreements to offset funds Any written agreement or a

memorandum of any oral agreement with a principal to offset

funds as provided in 51O 32 k shall be retained by the licensee

24 In g 510 35 remove paragraphs a and b

25 In 51O 35 c remove section 21 b of the Shipping Act 1916

and insert section 15 b of the Shipping Act of 1984

26 In g510 35 c remove 46 CFR parts 510 and 552 and insert

46 CFR parts 510 and 582

27 Remove 510 36

By the Commission

S FRANCIS C HURNEY

Secretary

f FMr
FEDERAL MARITIME COMMISSION

46 CPR PART 536

DOCKET NO 8421

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN

THE FOREIGN COMMERCE OF THE UNITED STATES SERVICE

CONTRACTS AND TIMEVOLUME CONTRACTS

AGENCY Federal Maritime Commission

ACTION Interim Rule and Request for Comments

SUMMARY This rule governs the fonn and use of service contracts

authorized by the Shipping Act of 1984 as well as

the use of time volume contracts It is proposed that

both types of contracts be accorded similar regulatory

treatment and be integrated with existing regulations re

lating to time volume rates The existing time volume

rules would also be expanded to pennit time revenue

contracts

DATES Interim Rule effective on June 18 1984 except paragraph

f of 536 7 which is under OMB review Comments

on Interim Rule due within 90 days after publication

in the Federal Register

SUPPLEMENTARY INFORMATION

This rule is intended to implement the provisions of the Shipping Act

of 1984 the Act relating to service contracts between shippers or shippers

associations and ocean common carriers or conferences The relevant statu

tory provisions relating to service contracts appear at sections 3 21 4a 7

and 8 c of the Act 46 D S C app 1702 21 1703 a 7 and 1707 c

Section 3 21 defines a service contract as an agreement between a shipper

and a carrier or conference wherein the shipper makes a commitment to

provide a certain minimum quantity of cargo over a fixed time period

and the carrier commits to a certain rate or rate schedule and a defined

service level Section 4a 7 brings conference agreements to regulate or

prohibit service contracts within the scope of the Act Section 8 c provides

that service contracts that are not otherwise exempted must be filed in

confidence with the Commission and that their essential tenns must be

filed with the Commission and made available in tariff fonnat to all simi

larly situated shippers The exclusive remedy for a breach of a service

contract is an action in an appropriate court unless the parties agree other

wise

In light of the similarity between service contracts authorized by the

Act and time volume rate contracts provided for in the Commission s exist

ing regulations 46 CPR 536 7 the Commission believes that these two

640 26 F M C
PUBLISHING FILING TARIFFS BY COMMON CARRIERS IN 641

THE FOR COMM OF THE U S

types of rate contracts should be accorded similar treatment The Commis

sion therefore proposes to carry forward most of its existing requirements

relating to time volume contracts and apply them to service contracts It

should be noted however that because ofthe statutory definition of serv

ice contract such contracts have been restricted to ocean common car

riers while time volume contracts are available to all common carriers

including as a result non vessel operating common carriers

In addition it is proposed that volume incentive arrangements such

as the ones recently investigated by the Commission in Docket No 83

31 be considered as a type of time volume contract wherein freight reve

nues rather than volume of cargo are used as the basis for a discount

and treated accordingly under the rule 1

This rule covers the use of time volume contracts although the Act

expressly provides only for service contracts and addresses time volume

only in terms of rates 2

Time volume contracts are a traditional form of

shipper carrier cargo transportation arrangement presently authorized by the

Commission s rules and actively engaged in by the ocean shipping industry 3

They have not been expressly precluded by the Act In fact the definition

of loyalty contract clearly recognizes the concept of a contract based

upon time volume rates section 314 Moreover the legislative history

of the Act indicates that Congress was aware that time volume rates have

historically been predicated upon underlying contract commitments 4 We

presume that Congress also recognized that these contracts are presently

sanctioned by the Commission Finally timevolume contracts differ from

service contracts in that the former do not contractually obligate the carrier

conference to any particular level of service or by their terms otherwise

impose any other service commitment The rule therefore provides for the

filing of both time volume and service contracts In the event however

that a carrier or conference chooses to offer a time volume rate in its

tariff without basing that rate on an underlying contractual arrangement

the provisions of the rule would not apply Offerings of time volume rates

not based upon contracts are governed by section 8 a ofthe Act

The Act requires that service contracts be filed in confidence with the

Commission and that their essential terms be published in tariff format

J The volume incentive arrangemenls under review in Docket No 8331 provided discounts orrefunds to

shippers iftheir freight revenues exceeded astated minimum over afixed time Administrative Law Judge

Joseph N Ingolia Presiding Officer found that these volume incentive arrangemenls did not violate certain

proviSions of the Shipping Act 1916 Volume Incentive Program Possible Violations of the Shipping Act

1916 26 F M C 219 1984 In a related malter the Presiding Officer concluded Ihat although rulemaking

may be advisable with respect to volume incentive programs no rulemaking wa necessary in that particular

proceeding especially in light of the enactment of the Shipping Act of 1984 Volume Incentive Progra

Possible Violations of the Shipping Act 1916 26 F M C 307 1984

2

Section 8b of the Act slates

Time Volume Rates Rates shown in tariffs filed under subsection a may vary with the volume

of cargo offered overaspecified period of time

See TimelVolume Rate COlltracts 25 EM C I 1982 46 CPR 536 7

4H R Rep No 53 Part I 98th Cong ISI Sess 34 1983
642 FEDERAL MARITIME COMMISSION

It appears that there is no regulatory purpose to be served by treating

timevolume contracts any differently The rule therefore accords similar

treatment to timevolume contracts i e they must be filed with the Commis

sion on a confidential basis with their essential terms made available to

similarly situated shippers

The Act does not specifically require that the essential terms of service

contracts be set forth in tariffs filed with the agency but rather states

only that they be published in tariff format However the legislative

history of the Act does indicate that Congress contemplated that the essential

terms of service contracts would be published in tariffs The Senate Commit

tee on Commerce Science and Transportation in commenting on a provision

identical to section 8 c noted

For public information however all essential terms as specifi

cally enumerated shall be published and filed in tariffs to ensure

that such essential terms shall be available to all shippers similarly

situated This objective is consistent with the rationale for tariff

publication and accordingly the essential terms must be stated

with sufficient specificity to serve that purpose

S Rep No 3 98th Cong Ist Sess 31 l9g3 This is further supported

by the statement of the House Merchant Marine and Fisheries Committee

that It is hoped that the requirement that a service contract s essential

terms befiled publicly so that those terms are available to all other shippers

who may wish to use them will preserve an important element of the

common carriage concept that the bill is based on HR Rep No 53

at 17 and 34 emphasis added The Conference Report H R Rep No

600 98th Cong 2nd Sess 1984does not contradict the House and

Senate Committees stated intention that the essential terms of service con

tracts be publicly available in tariffs It would appear therefore that a

public filing appended to a tariff is not only consistent with the relevant

legislative history but also may be the only practical method by which

the Commission can ensure that the Congressional objective is met and

that service contracts are in fact offered to all similarly situated shippers

The rule therefore requires that the essential terms of service and time

volume contracts be published in a special appendix to tariffs on file

with the Commission

The requirement that a service contract s essential terms be appended

to a conference s tariff should not suggest the application of independent

action required by section 5 b 8 to such contracts Conferences have spe

cifically been provided the authority to regulate or prohibit the use of

service contracts section 4a 7 Moreover the Conference Report makes

it clear that independent action was not meant to apply to service contracts

by stating

Section 8 a does not require that service contracts be filed in

a tariff Consequently section 5 b 8 does not require conferences

C l 1I r
PUBLISHING FILING TARIFFS BY COMMON CARRIERS IN 643

THE FOR COMM OF THE U S

to permit their members a

right of independent action on service

contracts The conferees agree that section 8 c of the bill which

authorizes the use of service contracts cannot be read as under

mining the authority of a conference to limit or prohibit a con

ference member s exercise of a

right of independent action on

service contracts However conference agreements must permit

independent action on time volume rates in section 8 b since

time volume rates must be filed under section 8 a

H R Rep No 600 at 29 5

The rule may in certain circumstances result in the publication of con

tract terms beyond those delineated as essential in the statute Essential

terms numbered d 1 through d 7 are the basic essential terms listed

in the Act The additional terms numbered d 8 and d 9 are further

elaborations on these essential terms They are not however mandatory

in all contracts but rather mayor may not apply depending on the agree

ment reached between the initial contracting parties These additional terms

are based upon experience gained in the administration of time volume

contracts which contained similar provisions and to the extent they are

part of the contract they should be made available to all other similarly

situated shippers

It should also be noted that rather than require a statement of the

linehaul rate the rule requires a statement of the contract rate rates

or rate schedule including whether any ancillary charges shaIl apply

This is consistent with Congress intent that the essential terms include

all compensation to be paid S Rep No 3 at 31 32

It is proposed that time volume and service contract terms be located

in a special appendix to a tariff so that the essential terms of the time

volume and service contracts will be readily available and identifiable to

all shippers The rule will also require that tariffs specify in the Index

of Commodities the existence of any time volume or service contract

applicable to any commodity listed In addition the rule will require that

contracts both time volume and service be assigned a number and bear

a cross reference to the applicable tariffs to which the essential terms

are attached so that a comparison can be made between the terms in

the confidential contracts and those published in the appendix

In the past the Commission has rejected amendments to time volume

contracts in instances where the amendment would have resulted in a retro

active adjustment in the original contract terms The rule continues this

policy Once a time volume or service contract is effective any modification

of its terms is treated as a new contract subject to the filing and publication

requirements of this regulation and is limited to prospective application

Carriers and conferences should draft their contract terms accordingly Fail

This rule does not address the issue of how the Act s mandatory independent action requirement affects

time volume rates and time volume contracts These matters will be considered in the Commission s

rule

making governing agreements subject to the Act which will be published soon after this rule
644 FEDERAL MARITIME COMMISSION

ure to adhere to the terms of a service or timevolume contract could

violate some of the prohibited acts set forth in section 10 of the Act

46 U S C app 1709

The record keeping requirement contained in paragraph tof the rule

contemplates a retention of shipping documents such as bills of lading

and disability notices and the designation of a resident agent as a

repository

The designation of an agent and the retention of records are designed

to allow ready access to carrier records to ensure that contract rate defi

ciencies can be promptly addressed These requirements have proven to

be a minimal burden under the existing time volume contract regulation

We believe that they are necessary to enable the Commission to adequately

carry out its policing and surveillance functions under the new Act particu

larly as it relates to ensuring that the essence of shipper carrier contracts

are made available to all shippers similarly situated In addition the records

retained under this section should assist the Commission to carry out its

obligations under section 18 ofthe Act 46 U S C app 1717

The Commission has had no prior experience dealing with service con

tracts since such arrangements have only recently been legitimized by

the new Act This rule is therefore based in large part on the Commission s

experience with timevolume contracts a shipper carrier arrangement with

which the Commission is more familiar This approach is intended to reflect

the Congressional concern that the use of service contracts not be

employed so as to discriminate against all who rely upon the common

carrier tradition of the liner system and the expectation that the

FMC be cognizant of the effects of common carriage that abuse

of service contracting may occasion H R Rep No 53 at 17 The Com

mission recognizes that some adjustments in the rule may have to be

made and accordingly seeks guidance from all interested persons

This rule is being published as an interim rule with opportunity for

comment It will serve as an interim rule until such time as a final rule

is adopted 6This interim rule will take effect on June 18 1984 the effective

date of the Shipping Act of 1984 unless otherwise modified All interested

persons have been provided 90 days to comment on the proposed rule

This interim rule and all comments filed within the 90 day period will

be used as the basis for a final rule pursuant to the requirements of

the Administrative Procedure Act 5 U S C 553 If individuals believe

that there are serious problems created by this interim rule which should

be addressed immediately they should submit these concerns in writing

to the Commission without prejudice to subsequently filing additional com

ments within the 9O day comment period

This interim rule is being added to current Part 536 the rest of which

will be the subject of a separate rulemaking which will result in the

The Commission was given the authority to prescribe interim rules without adhering 10 notice and com

ment requirements by section 17 b of the Shipping Act of 1984
PUBLISHING FILING TARIFFS BY COMMON CARRIERS IN 645

THE FOR COMM OF THE U S

redesignation of Part 536 as Part 580 in Subchapter D Regulations Affect

ing Maritime Carriers and Related Activities in Foreign Commerce When

all the separate rulemakings affecting current Part 536 are finalized it

may be necessary to reorganize that Part so that the definitions appearing

in paragraph a of the attached section 536 7 are worked into the defini

tions section of current Part 536 i e section 536 2 and are renumbered

appropriately

The Commission finds that this amendment to its rules is exempt from

the requirements of the Regulatory Flexibility Act 5 U S c 601 et seq

Section 601 2 of the Act excepts from its coverage any rule of particular

applicability relating to rates or practices relating to such rates

As the instant rule relates to particular applications of rates and rate prac

tices the Regulatory Flexibility Act requirements are inapplicable

The collection of information requirements contained in this rule have

been submitted to the Office of Management and Budget for review under

section 3504 h of the Paperwork Reduction Act 44 D S C 3504 h

Comments on the information collection aspects of this rule should be

submitted to the Office of Information and Regulatory Affairs of OMB

Attention Desk Officer for the Federal Maritime Commission List of sub

jects in 46 CFR Part 536

Maritime Carriers Rates

Therefore pursuant to 5 U S C 553 and sections 8 and 17 of the Shipping

Act of 1984 46 D S C app 1707 and 1716 the Federal Maritime Commis

sion proposes to amend Title 46 CFR Part 536 as follows

1 Remove paragraph p

of 536 2

2 Revise 536 7 to read as follows

536 7 SERVICE CONTRACTS AND TIME VOLUME CONTRACTS

a Definitions The following definitions shall apply for purposes

of this section

1 contract party means aparty signing a contract as shipper

or carrier and any parent subsidiary or other related company

or entity including the membership of any shippers associa

tion conference or agreement who may engage in the ship

ment of commodities in the trade covered by the contract

2 geographic area means the general location from which

or to which contract cargo will move in intermodal service

the scope of which will vary depending on the size of a

particular country

3

port range means those ports in the countries of loading

or unloading of the contract cargo that are regularly served

by the contracting carrier or conference as specified in the

tariff applicable to the service in which the contract is to

be employed even if the contract itself contemplates use

of but a single port within that range

26 F M C
646 FEDERAL MARITIME COMMISSION

4 service contract means a contract between a shipper or

shippers association and an ocean common carrier or con

ference in which the shipper makes a commitment to provide

a certain minimum quantity of cargo over a fixed time period

and the ocean common carrier or conference commits to

a certain rate or rate schedule as well as a defined service

level such as assured space transit time port rotation or

similar service features the contract may also specify provi

sions in the event of nonpetformance on the part of either

party

5 shipper means an owner or person for whose account

the ocean transportation of cargo is provided or the person

to whom delivery is to be made

6 time volume rate means a freight rate which varies with

the volume of cargo offered or freight revenues received

over a specified period oftime

7 time volume contract means a contract between a shipper

or shippers association and a common carrier or conference

in which the shipper makes a commitment to provide a certain

minimum quantity of cargo or freight revenues over a fixed

time period and the common carrier or conference commits

to a certain rate or rate schedule

b Filing Requirements Except for contracts relating to bulk cargo

forest products recycled metal scrap waste paper or paper waste

every ocean common carrier or conference which enters into a

service contract or every common carrier or conference which

enters into a timevolume contract with a shipper or shippers

association shall file with the Director Bureau of Tariffs a true

and complete copy of each contract prior to its effective date

Such contract shall clearly state

1 the contract parties

2 the essential terms

3 a contract number bearing the prefix SC for service con

tract or TV for time volume contract and

4 the applicable tariff identified by its Commission tariff num

ber to which the essential terms have been appended

c Confidentiality All service contracts and time volume contracts

filed with the Commission will to the full extent permitted by

law be held in confidence

d Publication of Essential Terms The essential terms of all service

and time volume contracts required to be filed with the Commis

sion shall be made available to all shippers or shippers associa

tions under the same terms and conditions for a period of at

least thirty 30 days from filing The essential terms for service

and time volume contracts shall be located in a separate appendix

to tariffs on file with the Commission and shall bear a reference

26 F M C
PUBLISHING FILING TARIFFS BY COMMON CARRIERS IN 647

THE FOR COMM OF THE U S

to their respective contract numbers Every commodity listed in

the Index of Commodities section of each tariff to which a

time volume or service contract applies shall be annotated to indi

cate the existence of such contract The essential terms shall in

clude where applicable the following

1 the origin and destination port ranges in the case of port

to port movements and the origin and destination geographic

areas in the case of through intermodal movements

2 the commodity or commodities involved

3 the minimum quantity of cargo or freight revenue necessary

to obtain the rate or rate schedule

4 the contract rate rates or rate schedule including whether

any ancillary charges shall apply

5 the effective time period ofthe contract

6 carrier or conference service commitments

7

liquidated damages for nonperformance if any or where the

volume requirement will not be met during the contract period

in situations other than those described in paragraph d 9

below the rate charge or rate basis which will be applied

8 an identification of the shipment records which will be main

tained to support the contract and

9 a clear description of any circumstance which will permit

i

a reduction in the quantity of cargo or amount of reve

nues required under the contract

ii an extension of the contract period without any change

in the contract rate or rate schedule

iii a discontinuance of the contract or

iv other deviations from the terms of the contract

e Contract Modifications Amendments to contracts on file with

the Commission shall be treated as new contracts subject to the

filing and publication requirements of this section No new contract

or contract modification may retroactively modify the terms or

effects of a previously filed contract

D Resident Agent Every common carrier and conference shall des

ignate a resident representative in the United States who shall

maintain contract shipment records for a period of five years

from the completion of each contract

h JHAr
648 FEDERAL MARITIME COMMISSION

g Rejection of Essential Terms Within 15 days of filing the Com

mission may reject the statement of essential tenns for any service

or time volume contract for failure to confonn to the requirements

of this section

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

46 CPR PART 587

DOCKET NO 8422

ACTIONS TO ADDRESS CONDITIONS UNDULY IMPAIRING

ACCESS OF U S FLAG VESSELS TO OCEAN TRADE BETWEEN

FOREIGN PORTS

Federal Maritime Commission

Interim Rule and Request for Comments

This rule implements section 13 b 5 of the Shipping

Act of 1984 The Shipping Act of 1984 will become

effective on June 18 1984 The rule describes the proce

dures to be followed when undue impairment of the

access of a vessel documented under the laws of the

United States US flag vessel to an ocean trade be

tween foreign ports is alleged to exist and the actions

which the Commission may take to address such condi

tions

Interim Rule effective June 18 1984 Comments on In

terim Rule due August 14 1984

SUPPLEMENTARY INFORMATION

The Shipping Act of 1984 the Act was enacted on March 20 1984

with an effective date of June 18 1984 Section 13 b 5 46 U S c app

1712 b 5 of the Act provides that

AGENCY

ACTION

SUMMARY

DATES

If after notice and hearing the Commission finds that the action

of a common carrier acting alone or in concert with any person

or a foreign government has unduly impaired access of a vessel

documented under the laws of the United States to ocean trade

between foreign ports the Commission shall take action that it

finds appropriate including the imposition of any of the penalties

authorized under paragraphs 1 2 and 3 of this subsection

13 b I

This rule will implement section 13 b 5 of the Act and will constitute

a new part 46 CFR Part 587 entitled Actions to Address Conditions

Unduly Impairing Access of U S Flag Vessels to Ocean Trade Between

Foreign Ports which will be included in new SUBCHAPTER DREGULA

I These penalties include suspension of the tariffs of acommon carrier or that common carrier s right to

use any or all tariffs of conferences of which it is amember and the imposition of a civil penalty of not

more than 50 000 per shipment for the acceptance or handling of cargo for carriage under a tariff that has

been suspended orafter the common carrier s right to utilize that tariff has been suspended See 46 V S C

app

1712 bI2 3

26 F M C 649
650 FEDERAL MARITIME COMMISSION

TIONS AFFECTING MARITIME CARRIERS AND RELATED ACTIVITIES

IN FOREIGN COMMERCE

Section 13b 5 derives in part from section 14a of the Shipping Act

of 1916 46 U S C 813 which empowered the Commission to investigate

arrangements which unfairly excluded U S flag carriers in foreign to foreign

trades 2 Section 14a was not considered adequate to protect U S flag carriers

in the new international ocean shipping environment Section 13 b 5 is

intended to provide this needed protection and more specifically to address

situations that may arise when contracting parties implement the United

Nations Conference on Trade and Development Code of Conduct for Liner

Conferences UNCTAD Code The UNCTAD Code among other things

provides for acargo sharing framework for conferences between contracting

nations Because the United States is not a contracting party to this Code

protecting the right of access of Us flag carriers to trades where the

UNCTAD Code will apply has been a central issue in maritime discussions

with other nations of the Organization for Economic Cooperation and Devel

opment3 Section 13 b S protects such rights in all cross trades on a

basis of reciprocity and thereby is consistent with one of the stated goals

of the Act to encourage the development of an economically sound and

efficient U S flag liner fleet

This rule delineates the procedures to be followed when an allegation

of undue impairment of the access of a U S flag vessel to a cross trade

is made It describes the kinds ofinformation deemed relevant to a decision

concerning such allegations and the ilCtions which the Commission may

take in response should it determine that conditions unduly impairing access

of a U S flag vessel to a trade between foreign ports exist

In some respects the section 13 b 5 rule is similar to that implementing

section 19 of the Merchant Marine Act of 1920 46 U S C 876 1 b

4

Section 13 b 5 however specifically requires that notice and opportunity

for hearing be afforded The proposed rule fashions a procedure which

is intended to fulfill this requirement and at the same time preserve the

flexibility of the Commission to act expeditiously to address conditions

of unduly impaired access Such flexibility is necessary in order to assure

that a U S flag carrier does not suffer harm before remedial action is

taken

The Commission anticipates that problems relating to alleged impairment

of U S flag vessel access to cross trades will arise primarily in connection

with foreign government laws and practices However section 13 b 5

also empowers the Commission to take action where such undue impairment

stems from commercial practices The Commission does not propose to

See H R Rep No 53 98th Cong 1st Sess 22 23 hereinafter referred to as House Report S Rep

No 3 98th Cong 1st Sess 38 I983 hereinafter referred to as Senate Report

3

See House Report at 23 and Senate Report at 38

4The Commission s rules implementing section 19 presently may be found at 46 CPR Part 506 Part 506

is to be redesignated as 46 CPR Part 585 and transferred to new Subchapter D of the Commission s

rules

i 1IA r
ACTIONS TO ADDRESS CONDo UNDULY IMPAIRING ACCESS 651

OF U S FLAG VESSELS

exclude alleged impaired access due to foreign government implementation

of bilateral or multilateral treaties or other international agreements from

its consideration under this rule The Commission interprets the phrase

ocean trade between foreign ports in section 13 b 5 to include foreign

toforeign ocean trade involving intermodal movements

Section by Section Discussion

Section 587 1 states the purpose of this part which is to protect US

flag carriers from being excluded or denied reasonable access to trades

between foreign countries The rule preserves the Commission s

flexibility

to act swiftly when harm to a U S flag carrier is imminent This rule

however is not intended to interfere with the normal forces of competition

in the marketplace This section therefore states that a condition of unduly

impaired access will be found only where it is shown that a U S flag

carrier has the ability to enter a particular trade or where actual participation

in a trade by a U S flag carrier is being eroded for reasons other than

its commercial ability to compete Finally this section recognizes that U S

maritime policy U S Government shipping arrangements with other nations

and the degree of reciprocal access afforded in U S foreign trades to

the carriers of the countries against whom action is contemplated must

be weighed when the Commission considers action under section 13 b 5

Section 587 2 sets forth those factors which would indicate the existence

of conditions of unduly impaired access This section makes clear that

it is not necessary for a U S flag carrier to suffer irreparable harm before

relief under section 13 b 5 may be granted Such relief is available where

it is shown that impairment of access is presently occurring or will likely

occur because of existing or proposed government or commercial actions

Section 587 3 identifies those persons who may file a petition for relief

under section 13 b 5 and provides for the filing of such a petition with

supporting affidavits of fact and memoranda of law with the Commission

Secretary This section also describes the contents of a petition for relief

Petitions which are deficient shall be returned with an explanation of the

reason for rejection Only petitions which meet these requirements will

be noticed in the Federal Register to ensure the consideration of only

bona fide petitions This procedure is intended to discourage the filing

of frivolous petitions and the abuse of these procedures for competitive

and other reasons

Section 587 4 is intended to provide further guidance as to the kind

of information which the Commission regards as relevant to its consideration

of matters arising under section 13 b 5 The Commission may receive

such relevant information from any reliable source Such information shall

be made part of the record and may be commented upon by any interested

persons Petitions and responses thereto and any accompanying affidavits

and documents shall also be part of the record The record established

fi FM C
652 FEDERAL MARITIME COMMISSION

in a proceeding may provide the basis for Commission decision including

the imposition of sanctions

Section 587 5 provides for notice to the Secretary of State of pending

section 13 b 5 matters The Commission may at its discretion simulta

neously initiate a proceeding under this part Alternatively the Commission

may allow diplomatic negotiations to proceed or be completed before initiat

ing any proceeding under this part

Section 587 6 establishes procedures for hearing either upon the filing

of a petition which meets the requirements of section 587 3 or by the

Commission upon its own motion The Act does not specify any particular

hearing procedure to be followed in section 13b 5 proceedings Such

proceedings could depending on the circumstances be limited to written

submissions The Commission may also undertake more formal procedures

Adversely affected parties will however be provided an opportunity to

respond to any allegations of unduly impaired access under whatever proce

dure is used in a particular situation

Section 587 7 enumerates sanctions which the Commission may impose

when and where conditions of unduly impaired access of a U S flag vessel

are determined to exist The Act gives the Commission broad authority

in this regard In addition to the specific penalties authorized under section

13 b 1 2 and 3 the Act empowers the Commission to take other

action that it considers appropriate This section provides for publication

in the Federal Register of any decision imposing sanctions issued under

this part This order will generally be made effective 30 days after publica

tion This period is intended to accommodate the 10 day statutory review

period provided the President and allow a final opportunity for diplomatic

resolution of the matter prior to the imposition of sanctions

Section 587 8 implements the requirement under section 13 b 6 of the

Act that any order under section 13b be submitted to the President

Section 587 9 makes explicit the Commission s power to suspend dis

continue or postpone proceedings under section 13 b 5 This section also

recognizes the importance of national defense and foreign policy concerns

and provides for postponement discontinuance or suspension if the President

informs the Commission that such actions are required for reasons of na

tional defense or the foreign policy of the United States

This rule is being published as an interim rule with opportunity for

comment It will serve as an interim rule until such time as a final rule

is adopted s

This interim rule will take effect on June 18 1984 the effective

date of the Shipping Act of 1984 unless otherwise modified All interested

persons have been provided 90 days to comment on the proposed rule

This interim rule and all comments filed within the 9O day period will

be used as the basis for a final rule pursuant to the requirements of

TIle Commission was given the authority to prescribe interim rules without adhering to notice and com

ment requirements by section 17 b of the Shipping Act of 1984

26 F M C
ACTIONS TO ADDRESS CONDo UNDULY IMPAIRING ACCESS 653

OF U S FLAG VESSELS

the Administrative Procedure Act 5 U S c 553 If individuals believe

that there are serious problems created by this interim rule which should

be addressed immediately they should submit these concerns in writing

to the Commission without prejudice to subsequently filing additional com

ments within the 90 day comment period

The Commission certifies pursuant to section 605 b of the Regulatory

Flexibility Act 5 V S C 601 et seq that the proposed rule will not

if promulgated have a significant economic impact on a substantial number

of small entities within the meaning of that Act The primary economic

impact of the proposed rule would affect common carriers by water which

generally are not small entities A

secondary impact may fall on shippers

some of which may be small entities but that impact is not considered

to be significant

LIST OF SUBJECTS IN 46 CFR PART 587

Foreign relations Foreign trade Maritime carriers Rates and fares

Therefore pursuant to section 4 of the Administrative Procedure Act

5 V S C 553 and sections 13 b 5 15 and 17 of the Shipping Act

of 1984 46 U S C app 1712 b 5 1714 and 1716 the Federal Maritime

Commission hereby proposes to amend Title 46 Code of Federal Regula

tions by adding new Part 587 to Subchapter D to read as follows

PART 587 ACTIONS TO ADDRESS CONDITIONS UNDULY

IMPAIRING ACCESS OF U S FLAG VESSELS TO OCEAN TRADE

BETWEEN FOREIGN PORTS

Sec

587 1 PUlpose

587 2 Factors Indicating Conditions Unduly Impairing Access

587 3 Petitions for Relief

587 4 Receipt ofRelevant Information

587 5 Notice to Secretary of State

587 6 Hearing

587 7 Decision Sanctions Effective Date

587 8 Submission ofOrders to the President

587 9 Postponement Discontinuance or Suspension ofAction

AUTHORITY 5 U S c 553 sees 13 b 5 15 and 17 of the

Shipping Act of 1984 46 U S c

app 1712 b 5 1714 and

1716

587 1 Purpose

a It is the pUlpose of the regulations of this part to enumerate certain

conditions resulting from the action of a common carrier acting alone

or in concert with any person or a foreign government which unduly

impair the access of a vessel documented under the laws of the United

States hereinafter U S flag vessel to ocean trade between foreign ports

and to establish procedures by which the owner or operator of a U S

26 EM C
654 FEDERAL MARITIME COMMISSION

flag vessel hereinafter U S flag carrier may petition the Federal Mari

time Commission for relief under the authority of section 13 b 5 of the

Shipping Act of 1984 46 U S C app 1712 b 5 It is the further purpose

of the regulations of this part to indicate the general circumstances under

which the authority granted to the Commission under section 13 b 5 may

be invoked and the nature of the subsequent actions contemplated by

the Commission This part also furthers the goals of the Act with respect

to encouraging the development of an economically sound and efficient

U S flag liner fleet as stated in section 2 46 U S C app 1701

b The rules of this part implement the statutory notice and hearing

requirement and ensure that due process is afforded to all affected parties

At the same time the rules allow for flexibility in structuring proceedings

so that the Commission may act with expedition whenever harm to a

U S flag carrier resulting from impaired access to cross trades has been

demonstrated The provisions of 46 CFR Part 502 shall not apply to this

part except for those provisions governing ex parte contacts and as the

Commission may otherwise determine by order

c The condition of unduly impaired access will be found only where

a U S flag carrier is fit willing and able to enter a trade in which its

access is being unduly impaired or where actual participation in a trade

by a U S flag carrier is being eroded for reasons other than its commercial

ability or competitiveness However the procedures of this part are not

an instrument for harassment of foreign flag carriers operating in the U S

foreign trades

d In examining conditions in a trade between foreign ports and in

considering appropriateact on the Commission will give due regard to

U S maritime policy and U S Government shipping arrangements with

other nations as well as the degree of reciprocal access afforded in U S

foreign trades to the carriers of the countries against whom Commission

action is contemplated

587 2 Factors Indicating Conditions Unduly Impairing Access

For the purpose of this part factors which would indicate the existence

of conditions created by foreign government action or action of a common

carrier acting alone or in concert with any person which unduly impair

access of a U S flag vessel engaged in or seeking access to ocean trade

between foreign ports include but are not limited to

a Imposition upon U S flag vessels of fees charges requirements or

restrictions different from those imposed on other vessels or which preclude

or tend to preclude U S flag vessels from competing in the trade on the

same basis as any other vessel

b Reservation of a substantial portion of the total cargo in the trade

to national flag or other vessels which results in failure to provide reasonable

competitive access to cargoes by U S flag vessels

26 F M C
ACTIONS TO ADDRESS CONDo UNDULY IMPAIRING ACCESS 655

OF U S FLAG VESSELS

c Use of predatory practices including but not limited to closed con

ferences employing fighting ships or deferred rebates which unduly impair

access of a U S flag vessel to the trade

d Any government or commercial practice that results in or may result

in unequal and unfair opportunity for U S flag vessel access to port or

intermodal facilities or services related to the carriage of cargo inland

to or from ports in the trade

e Any other practice which unduly impairs access of a U S flag vessel

to trade between foreign ports

587 3 Petitions for Relief

a Filing Any owner or operator of a liner bulk tramp or other vessel

documented under the laws of the United States who believes that its

access to ocean trade between foreign ports has been or will be unduly

impaired may file a written petition for relief under the provisions of

this part An original and fifteen copies of such a petition shall be filed

with the Secretary Federal Maritime Commission Washington D C 20573

b Contents Petitions for relief shall include the following

1 The name and address of the petitioner

2 The name and address of each party carrier person or foreign

government agency against whom the petition is made

3 A concise description and citation of the foreign law rule or govern

ment or commercial practice complained of

4 A certified copy of any law rule regulation or other document

concerned and if not in English a certified English translation thereof

5 Any other evidence of the existence of such government or commer

cial practice

6 A description of the service offered or proposed to which petitioner

is alleging harm supported by affidavits of fact including information

which indicates the ability of the petitioner to participate in the trade

7 A clear description in detail supported by affidavits of fact of

the harm already caused or which may reasonably be expected to be

caused to the petitioner for a

representative period including

i statistics documenting present or prospective cargo loss due

to discriminatory government or commercial practices if harm is

alleged on that basis such statistics shall include figures for the

total cargo carried or projected to be carried by petitioner in

the trade for the period and the sources ofthe statistics

ii evidence documenting how the petitioner is being prevented

from entering a trade if injury is claimed on that basis

Hi statistics or other evidence documenting the impact of dis

criminatory government or commercial practices resulting in an

increase in costs service restrictions or other harm on the basis

of which injury is claimed and the sources of the statistics and

iv a statement as to why the period is representative

8 A memorandum of law addressing relevant legal issues and

ur
656 FEDERAL MARITIME COMMISSION

9 A recommended action rule or regulation the result of which will

in the view ofthe petitioner address the alleged conditions unduly impairing

the access ofpetitioner to the affected trade

c Deficient petition A petition which substantially fails to comply

with the requirements of paragraph b of this section shall be rejected

and the person filing the petition shall be notified of the reasons for

such rejection Rejection is without prejudice to filing of an amended peti

tion

587 4 Receipt of Relevant Information

a In making its decision on matters anslOg under section 13 b 5

the Commission may receive and consider relevant information from any

owner or operator or conference in an affected trade or from any foreign

government either directly or through the Department of State or from

any other reliable source Relevant information may include but is not

limited to

l statistics with sources or if unavailable the best estimates

pertaining to

i the total cargo carried in the affected liner or bulk trade

by type source value tonnage and direction

ii cargo carried in the affected trade on vessels owned

or operated by any person or conference by type source value

tonnage and direction

Hi the percentage such cargo carried is of the total affected

liner or bulk trade on a tonnage and value basis

iv the amount of cargo reserved by a

foreign government

for national flag or other vessels in the affected trade on a

tonnage and value basis and a listing of the types of cargo

and specific commodities which are reserved for national flag

or other vessels

2 information on the operations of vessels of any party serving

the affected trade including sailings to and from ports in the

trade taxes or other charges paid to foreign authorities and sub

sidies or other payments received from foreign authorities

3 information clarifying the meaning of the foreign law rule

regulation or practice complained of and a description of its

implementation

4 complete copies of all conference and other agreements

including amendments and related documents which apply in the

trade

b Once introduced or adduced information of the character described

in paragraph a and bona fide petitions and responses thereto shall be

made part of the record for decision and may provide the basis for Commis

sion findings of fact and conclusions of law and for the imposition of

sanctions under this part

1A
JM r

ACTIONS TO ADDRESS CONDo UNDULY IMPAIRING ACCESS 657

OF U S FLAG VESSELS

587 Notice to Secretary of State

When there are indications that conditions unduly impamng the access

of a U S flag vessel to trade between foreign ports may exist the Commis

sion shall so notify the Secretary of State and may request that the Secretary

of State seek resolution of the matter through diplomatic channels If request

is made the Commission will give every assistance in such efforts and

the Commission may request the Secretary to report the results of such

efforts within a specified time period

587 6 Hearing

a Upon the filing of a petition which meets the requirements of section

587 3 or upon the Commission s own motion when there are indications

that conditions unduly impairing the access of a U S flag vessel to trade

between foreign ports may exist the Commission shall institute a proceeding

pursuant to this part

b Notice of the institution of any such proceeding shall be published

in the Federal Register and interested or adversely affected persons will

be allowed a period of time to reply to the petition by the submission

of written data views or legal arguments Factual submissions shall be

supported by affidavits and sworn documents

c Following the close of the initial response period the Commission

may issue a final determination or order further hearings if warranted

Iffurther hearings are ordered they shall be conducted pursuant to proce

dures to be outlined by the Commission in its order

587 7 Decision Sanctions Effective Date

a Upon completion of any proceeding conducted under this part the

Commission may issue a decision containing its findings and conclusions

b If the Commission finds that conditions unduly impairing access

of a U S flag vessel to ocean trade between foreign ports do exist the

following actions may be taken

1 Imposition of equalizing fees or charges applied in the

foreign trade of the United States

2 Limitation of sailings to and from United States ports or

of amount or type of cargo carried during a specified period

3 Suspension in whole or in part of any or all tariffs filed

with the Commission for carriage to or from United States ports

including the carrier s

right to use any or all tariffs of conferences

of which it is a member for any period the Commission specifies

or until such time as unimpaired access is secured for U S

flag carriers in the affected trade Acceptance or handling of cargo

for carriage under a tariff that has been suspended or after a

common carrier s

right to utilize that tariff has been suspendedipursuant

torules ofthis part will subject acarrier tothe imposition of

a civil penalty as provided under the Act 46 U S c app 1712

b3 of not more than 50 000 per shipment
658 FEDERAL MARITIME COMMISSION

4 Any other action the Commission finds necessary and appro

priate to address conditions unduly impairing access of a U S

flag vessel to trade between foreign ports

c A decision imposing sanctions shall be published in the Federal

Register and except where conditions warrant and for good cause shall

become effective 30 days after the date of publication

587 8 Submission of Decision to the President

Concurrently with the submission of a decision for publication in the

Federal Register pursuant to section 587 7 the Commission shall transmit

that decision to the President who may within ten days after receiving

the decision disapprove it if the President finds that disapproval is required

for reasons of the national defense or the foreign policy of the United

States

587 9 Postponement Discontinuance or Suspension ofAction

The Commission may on its own motion or upon petition postpone

discontinue or suspend any and all actions taken by it under the provisions

of this part The Commission shall postpone discontinue or suspend any

or all such actions if the President informs the Commission that postpone

ment discontinuance or suspension is required for reasons of the national

defense or the foreign policy of the United States

By the Commission

S FRANCIS C HURNEY

Secretary

C
FEDERAL MARITIME COMMISSION

46 CFR PARTS 536 538

DOCKET NO 8423

FILING OF TARIFFS AND DUAL RATE CONTRACT SYSTEMS IN

THE FOREIGN COMMERCE OF THE UNITED STATES

ACTION Interim Rule and Request for Comment

SUMMARY This implements the Shipping Act of 1984 as it applies

to loyalty dual rate contracts by removing regulations

contained in Part 538 governing the present use of such

contracts and by amending the regulations contained in

Part 536 governing the filing of tariffs by carriers and

conferences of carriers by 1 providing that any new

loyalty contract will be permitted to be included in tariffs

after June 18 1984 only to the extent supported by

a Business Review Letter issued by the Department of

Justice and 2 prohibiting the use of an existing loyalty

contract after September 18 1984 unless likewise sup

ported by such aBusiness Review Letter

DATES Interim rule effective on June 18 1984 Comments on

Interim Rule due July 16 1984

SUPPLEMENTARY INFORMATION

Section 14b of the Shipping Act 1916 46 U S C 813a permits the

use of contracts which provide for lower rates to a shipper or consignee

who agrees to give all or a fixed portion of its patronage to a carrier

or conference of carriers In addition section 14b sets forth certain require

ments applicable to such contracts The Shipping Act of 1984 46 U S C

app 1701 1720 et seq which will become effective on June 18 1984

repeals section 14b See section 20a 46 U S C app 1719 a

The provisions of the Shipping Act of 1984 the Act relating to loyalty

contracts or dual rate contracts as they are referred to in the Shipping

Act 1916 were the result of a compromise between the House Merchant

Marine and Fisheries Committee and the House Judiciary Committee As

part of the compromise section 6 of H R 1878 as reported out of the

House Merchant Marine and Fisheries Committee which was similar to

section 14b of the Shipping Act 1916 was deleted from the bill which

eventually passed the House Section 10 Prohibited Acts was amended

to provide that no carrier may use a loyalty contract except in conformity

with the antitrust laws See section 10 9 a now found at 46 U S c

app 1709 b 9 I The antitrust immunity for loyalty contracts which

appeared in section 7 a 3 of H R 1878 as reported out by the Merchant

Marine and Fisheries Committee was also deleted from the final version

26 F M C 659
660 FEDERAL MARITIME COMMISSION

of the bill in view of the broader proscription on the use of loyalty

contracts in section 9 b 9 Now section 10 b 9 Explanation of the

Changes in the Amendment to H R 1878 the Shipping Act of 1983

129 Congo Rec H8125 daily ed October 6 1983

Section 20 d of the Shipping Act of 1984 46 U S C app 1719 d

continues contracts previously approved under the Shipping Act 1916 as

if approved or issued under this Act Although there is no antitrust immu

nity for new loyalty contracts it appears that existing loyalty contracts

have antitrust immunity by virtue of section 7 a 6 of the Act 46 U S C

app 1706 a 6 which states that the antitrust laws do not apply to

6 any agreement modification or cancellation approved

by the Commission before the effective date of this Act under

section 15 of the Shipping Act 1916 or permitted under section

14b thereof and any properly published tariff rate fare or charge

classification rule or regulation explanatory thereof implementing

that agreement modification or cancellation

Notwithstanding section 7 a 6 the Commission has the authority to

disapprove cancel or modify such contracts to assure compliance with

section 1O b 9 under procedures provided in section II c of the Act

The House Judiciary Committee observed that section 7 a 7 now section

7 a 6 which extends antitrust immunity to agreements previously ap

proved under sections 15 and 14b of the Shipping Act 1916

must be read in light of the continuing authority of the

Commission to disapprove cancel or modify an agreement pursu

ant to Section 11 or to seek an injunction against operation

of an agreement pursuant to section 5 g

The antitrust immunity

extended by subsection a 7 does not run beyond the validity

of the agreement itself

H R REP No 53 98th Cong 1st Sess 33 1983

Within the context of section IOb 9 of the Shipping Act of 1984

the question then becomes whether and to what extent the use of loyalty

contracts violates the antitrust laws The explanation on the floor of the

House indicates that while loyalty contracts involving a single carrier

would probably be lawful any concerted use of loyalty contracts by

carriers is likely to violate the antitrust laws 129 Congo Rec at H8125

This rule therefore provides that existing loyalty contracts will be prohib

ited after September 18 1984 I

unless the carrier or conference can dem

onstrate to the Commission that use of its loyalty contract will not violate

the antitrust laws A Business Review Letter from the Department of Justice

DOJ stating that the DOJ does not intend to challenge the use of a

I The Commission is allowing this9Oday grace period beyond June 18 1984 to accommodate the shipperl

consignee termination notice requirement embodied in existing conlracts and to permit an orderly pha ing

OUI of such contracts where necessary

26 F M C
FILING OF TARIFFS AND DUAL RATE CONTRACT SYSTEMS IN 661

THE FOREIGN COMMERCE OF THE UNITED STATES

loyalty contract will create a presumption that the use of that contract

is in compliance with the antitrust laws i

This is without regard to the

legality of such loyalty contracts under any other prohibited act listed

in section 10 of the Shipping Act of 1984 See Federal Maritime Board

v lsbrandtsen Co 354 U S 481 1958

By separate rulemaking the Commission is making other changes to

its foreign tariff rules Part 536 to be included in subchapter D and

redesignated as Part 580 That rule governs the filing and form of tariffs

generally and will contain the definition of Loyalty Contract in section

536 2 k as follows

k Loyalty contract A contract with an ocean common carrier

or conference by which lower rates are obtained in exchange

for a commitment of all or a fixed portion of a shipper s cargoes

A loyalty contract does not require a specific quantity of cargo

to be shipped over a stated period of time nor does it commit

a common carrier or conference to a given or specific level of

service or performance

In this rulemaking we are providing for the rejection of any new1y

filed loyalty contract for failure to include in the contract itself and in

the tariff rules governing the availability of contract rates the required

reference to a DOJ issued Business Review Letter Additionally new para

graph c of section 536 16 provides that any loyalty contract in effect

on June 18 1984 must similarly be justified or be prohibited after Septem

ber 18 1984

The Federal Maritime Commission has determined that this interim rule

is not a major rule as defined in Executive Order 12291 dated February

17 1984 because it will not result in

1 An annual effect on the economy of 100 million or more

2 amajor increase in costs or prices for consumers individual industries

Federal State or local government agencies or geographic regions or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

The Federal Maritime Commission certifies that this interim rule will

not have a significant economic impact on a substantial number of small

entities including small businesses small organizational units and small

governmental jurisdictions

2

See 28 CFR 50 6 Only the Department of Justice which is charged with the enforcement of the anti

trust laws can provide carriers with some assurance that they will not be prosecuted under the antitrust laws

for use of a loyalty contldCt In this regard it should be noted that private suits for damages under the anti

trust laws will no longer be permitted when the injury is the result of conduct prohibited by the Shipping

Act of 1984 see section 7 c 2 46 U S c

app 1706 c 2 H R REP No 600 98th Cong 2d Sess 40

1984
662 FEDERAL MARITIME COMMISSION

This rulemaking contains no additional infonnation collections require

ments requiring approval by the Office of Management and Budget under

44 U S C 3501 et seq

List of Subjects 46 CPR Parts 536 and 538 Antitrust Contracts Mari

time Carriers Rates

For the reasons set out in the preamble Parts 536 and 538 of Title

46 of the Code of Federal Regulations are amended as follows

1 Part 536 is amended by adding 536 16 to read as follows

536 16 Loyalty Contracts

a A sample of any loyalty contract as defined in this part must

be filed in the applicable tariff together with rules which set forth the

scope and application of the contract system

b Every sample loyalty contract and applicable rule filed for inclusion

in a tariff under paragraph a of this section shall make specific reference

to a Business Review Letter issued pursuant to 28 CPR 50 6 indicating

no objection to the use of that contract A copy of the Business Review

Letter shall be simultaneously furnished to the Commission s Director Bu

reau of Tariffs Failure to comply with these requirements wiII result in

the rejection of the contract and the applicable rules pursuant to 536 10 d

c The use of any loyalty contract in effect prior to June 18 1984

shaH be prohibited after September 18 1984 unless supported by a Business

Review Letter issued pursuant to 28 CPR 50 6 Such Business Review

Letter shall be furnished to the Director Bureau of Tariffs

2 Part 538 is removed

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

46 CFR PART 536 AND PART 580

GENERAL ORDER 13 REVISED DOCKET NO 8424

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN

THE FOREIGN COMMERCE OF THE UNITED STATES

ACTION Interim Rules and Request for Comments

SUMMARY The Commission is revising its foreign tariff filing rules

to bring them into conformity with the Shipping Act

of 1984 and contemporary tariff filing practices These

interim new rules modify and add to definitions con

tained in the existing tariff filing rules amend rules

governing the filing of intermodal tariffs delete ref

erences to dual rate contracts make provision for time

volume and related contracts and implement the statutory

exemptions Additionally the tariff rules reflect pre

viously applicable interpretations of the Shipping Act

1916 as they pertain to tariffs filed pursuant to the

Shipping Act of 1984

DATES Interim Rules effective June 18 1984 Comments due

on or before June 22 1984

SUPPLEMENTARY INFORMATION

The Shipping Act of 1984 1984 Act was enacted on March 20 1984

and becomes effective on June 18 1984 except for sections 17 and 18

thereof which became effective on enactment Section 17 authorizes the

Federal Maritime Commission to prescribe rules and regulations and interim

rules and regulations to carry out the 1984 Act

The 1984 Act requires both substantive and technical modifications to

the Commission s tariff filing regulations contained in 46 CPR Part 536

These modifications require revision of various other provisions of the

Commission s rules and interpretations such as the Commission s Interpreta

tions and Statements ofPolicy 46 CPR Part 530

The Commission is therefore issuing these interim rules to implement

the Shipping Act of 1984 Pub L 98 237 98 Stat 67 46 D S C app

1701 1720 These rules are issued pursuant to section 17 b of the 1984

Act in order that the Commission can perform its essential regulatory

functions on and after June 18

The Commission is requesting comments on these interim rules to assist

it in developing final rules to supersede and where necessary modify these

interim rules Accordingly the public is provided with thirty days within

which to comment on the interim rules but if anyone believes that there

are serious problems created by these rules which should be addressed

26 F M C 663
664 FEDERAL MARITIME COMMISSION

immediately the Commission urges them to bring their concerns to the

attention of the Commission in writing without prejudice to subsequently

filing additional comments within the thirty day comment period

The 1984 Act has made several substantial changes in the regulation

of the oceanborne foreign commerce of the United States The most sub

stantive changes insofar as they relate to tariff filing involve through

and exempt transportation service and time volume arrangements loyalty

contracts penalty provisions and the statute of limitations for filing claims

or complaints

The filing of service contracts time volume contracts time revenue con

tracts is the subject of a separate rulemaking proceeding Likewise although

this rule contains a definition of loyalty contract a rule pertaining to

the use and filing of such loyalty contracts is the subject of a separate

rulemaking proceeding This proceeding will focus on the balance of the

tariff filing rules

The 1984 Act contains definitions for common carrier forest products

nonvessel operating common carrier ocean common carrier person ship

ment shipper through rate and through transportation These definitions

as appropriate are being added to the Commission s tariff filing rules

Subtantial modifications to the intermodal tariff filing rules have been

made to accommodate the statutory scheme Eliminated are any provisions

which required a tariff to breakout or disclose the charge rate or division

for the inland transportation portion of a through intermodal or joint through

rate or service These proposals were previously advanced by the Commis

sion in the now discontinued proceeding Docket No 843 Publishing

and Filing Tariffs by Common Carriers in the Foreign Commerce of the

United States Intermodal Tariff Filing Requirements Exemption From Cer

tain Statutory Requirements and Amendment of Tariff Filing Regulations

49 F R 7609 March 1 1984 which should be referred to for further

information

The 1984 Act contains an exemption from tariff filing for cargo loaded

and carried in bulk without mark or count These provisions are identical

to the exemption from tariff filing formerly contained in section 18 b 1

of the Shipping Act 1916 1916 Act The Commission has previously

interpreted these provisions insofar as they apply to bulk cargo loaded

into and carried in intermodal equipment see 46 CFR 530 15 This

interpretation has been incorporated into this rule

Section 8 a 1 of the 1980 Act expands the current tarifffiling exemption

for softwood lumber to include the broader category of forest products

as defined in the statute and adds a new exemption for recyclable metal

scrap waste paper and paper waste These changes have been incorporated

into the rules

The revised tariff filing rules also preserve previous exemptions granted

from time to time by the Commission pursuant to section 35 of the 1916

Act These exemptions were previously contained in 536 1 and covered
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 665

THE FOREIGN COMMERCE OF THE UNITED STATES

foreign transshipped cargo 536 1 a carriage of vehicles passengers

buses and personal effects on vessels operated by the State of Alaska

536 I b l2 transportation of mail 536 1 b 3

transportation by

Incan Superior Ltd of cargo moving in railroad cars 536 1 b 4 trans

portation by water of cargo moving in rail cars between British Columbia

and United States ports and points 536 I b 5 transportation by water

of cargo moving in bulk with count in rail cars between British Columbia

Canada and United States ports on Puget Sound 563 1 b 6 transpor

tation of used military household goods by non vessel operating common

carriers 536 1 b 7 and controlled carriers when specific conditions are

met 536 l d To these previous exemptions the Commission is proposing

to add an exemption to permit points to be added to intermodal tariffs

without providing the otherwise required thirty day notice The new exemp

tion will also be available to controlled carriers on a limited basis

The Commission notes the similarity between sections 35 of the 1916

Act and section 16 of the 1984 Act Section 16 contains all of the former

criteria of section 35 and adds the requirement that any exemption will

not result in a substantial reduction in competition The 1984 Act criteria

are met with respect to all of these exemptions The removal of the require

ment that carriers or conferences provide thirty days notice prior to naming

new intermodal points in their tariffs will enable such carriers and con

ferences to promptly address changing transportation conditions without

delay

A number of technical modifications have been made in the tariff filing

rules to conform them to either the new statutory provisions or to contem

porary tariff filing practices The modifications include elimination of all

references to temporary tariff amendments which have been abolished elimi

nation of the requirement for tariffs to contain a check sheet a check

sheet serves no regulatory purpose deletion of the project rate provisions

they are now subsumed in either service or time volume arrangements

and the elimination of any references to the 1916 Act In addition rules

pertaining to the filing of per container rates which were promulgated and

subsequently suspended in Docket No 81 50 Per Container Rates Tariff

Filing Requirements Applicable to Carriers and Conferences in the Foreign

Commerce of the United States have been removed inasmuch as that pro

ceeding has been discontinued

This rule also reflects certain interpretations and clarifications contained

in 46 CFR Part 530 The affected CFR provisions are sections 530 7

carrier admission to a conference new initial rates 530 14 disputes

regarding the exercise of the right of independent action in tariff filing

and 530 15 bulk cargo in intermodal equipment

The 1984 Act also increases the time period for filing complaints or

overcharge claims with the Commission from two to three years These

changes are also reflected in the rules

U A r
666 FEDERAL MARITIME COMMISSION

A new 580 91 has been added to display the Office of Management

and Budget s clearance numbers for information collection requirements

These are currently displayed in tabular form in 503 91 of Title 46

Code ofFederal Regulations but the new separate section should be conven

ient especially after the part is redesignated

The Commission has determined that this interim rule is not a major

rule as defined in Executive Order 12291 dated February 17 1981 because

it will not result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability ofUnited States based enterprises

to compete with Foreign based enterprises in domestic or export markets

The Commission certifies that this interim rule will not have a significant

economic impact on a substantial number of small entities including small

businesses small organizational units and small governmental jurisdictions

The collection of information requirements contained in paragraphs

580 8b and 8 c ofthis rule have been submitted to the Office of Manage

ment and Budget for review under section 3504 b ofthe Paperwork Reduc

tion Act 44 U S C 3504 h

Comments on the information collection

aspects of this rule should be submitted to the Office of Information and

Regulatory Affairs of OMB Attention Desk Officer for the Federal Mari

time Commission

List ofSubjects in 46 CFR Part 536

Cargo Cargo vessels Exports Harbors Imports Maritime carriers Rates

and fares Reporting and record keeping requirements Water carriers Water

transportation

For the reasons set out in the Supplementary Information Part 536 of

Title 46 of the Code of Federal Regulations is transferred to Subchapter

0 redesignated and amended as follows

PART 536PUBLlSHING AND FILING TARIFFS BY COMMON

CARRIERS IN THE FOREIGN COMMERCE OF THE UNITED

STATES

1 Part 536 of 46 CFR Chapter IV is redesignated as Part 580

and added to Subchapter D and all internal references are changed

2 In Part 580 revise the authority citation to read as follows and

remove all other authority sections

Authority 5 U S C 553 secs 4 5 6 8 9 10 15 16 and

17 of the Shipping Act of 1984 46 U S C app 1703 1705

1707 1708 1709 and 17141716

3 Insert the word common before the word carrier or car

riers wherever it appears in part 580
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 667

THE FOREIGN COMMERCE OF THE UNITED STATES

4 In 580 0a remove Shipping Act 1916 and insert Shipping

Act of 1984

5 In 580 0 b

a Remove Section 18 b of the Shipping Act and insert sec

tion 8 of the Shipping Act of 1984

b Remove sections 14 b and 18 c and insert sections 9

10 and 16

c Remove reasonable and insert unreasonab e and

d Remove Shipping Act sections 15 16 and 17 and insert

section 10 of the Shipping Act of 984

6 In 580 0 c remove day the violation continues 46 V S C

817 b 4 b 6 and insert vio ation unless the violation was

willfully and knowingly committed in which case the amount

of civil penalty may not exceed 25 000 for each violation Each

day of a continuing violation constitutes a separate offense Addi

tionally the Commission may suspend any or all tariffs of the

common carrier or that common carrier s

right to use any or

all tariffs of conferences of which it is a member for a period

not to exceed 12 months

7 In 580 redesignate paragraphs a d as paragraphs b e

and add a new paragraph a to read as follows

580 1 Exemptions and exclusions

a This part does not apply to bulk cargo forest products recycla

b e meta scrap waste paper and paperwaste

8 In 580 I b 6 remove Shipping Act 1916 and insert Ship

ping Act of 1984

9 In 580 1 d 1 iii remove Shipping Act section 18 b and

insert the Shipping Act of 1984

10 In 580 1 e 1 iii remove approved under section 5 of the

Act

I Revise 580 2 to read as follows
668 FEDERAL MARITIME COMMISSION

580 2 Definitions

The following definitions of terms shall apply unless otherwise

indicated by the context of this part

a Act The Shipping Act of 1984

b Bulk cargo Cargo that is loaded and carried in bulk without

mark or count Bulk cargo loaded into intermodal equipment is

subject to mark and count and is therefore subject to the tariff

filing requirements of this part

c Class rates Rates applicable to all articles which have been

grouped or classified together in a classification tariff or a

classification section of a rate tariff

d Commodity rates Rates applying on a commodity or commod

ities specifically named or described in the tariff in which the

rate or rates are published

e Common carrier A person holding itself out to the general

public to provide transportation by water of passengers or cargo

between the United States and a foreign country for compensation

that

I assumes responsibility for the transportation from the

port or point of receipt to the port or point ofdestination

and

2 utilizes for all or part of that transportation a vessel

operating on the high seas or the Great Lakes between

a port in the United States and a port in a foreign

country

t Conference An association of ocean common carriers per

mitted pursuant to an approved or effective agreement to engage

in concerted activity and to utilize a common tariff but the term

does not include a joint service consortium pooling sailing or

transshipment arrangement

g Controlled carrier An ocean common carrier that is or whose

operating assets are directly or indirectly owned or controlled

by the government under whose registry the vessels of the carrier

operate ownership or control by a government shall be deemed

to exist with respect to any carrier if

1 a majority portion of the interest in the carrier is owned

or controlled in any manner by that government by

any agency thereof or by any public or private person

controlled by that government or

2 that government has the right to appoint or disapprove

the appointment of a majority of the directors the chief

operating officer or the chief executive officer of the

carrier
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 669

THE FOREIGN COMMERCE OF THE UNITED STATES

h Forest products Forest products in an unfinished or semi

finished state that require special handling moving in lot sizes

too large for a container including but not limited to lumber

in bundles rough timber ties poles piling laminated beams

bundled siding bundled plywood bundled core stock or veneers

bundled particle or fiber boards bundled hardwood wood pulp

in rolls wood pulp in unitized bales paper board in rol1s and

paper in rol1s

iJoint rates Rates or charges established by two or more com

mon carriers for ocean transportation over the combined routes

of such carriers

U Local rates Rates or charges for transportation over the route

of a single common carrier or anyone common carrier participat

ing in a conference tarift the application of which is not contin

gent upon a prior or subsequent movement

k Loyalty contract A contract with an ocean common carrier

or conference by which lower rates are obtained in exchange

for a commitment of al1 or a fixed portion of a shipper s cargoes

A loyalty contract does not require a specific quantity of cargo

to be shipped over a stated period of time nor does it commit

a common carrier or conference to a given or specific level of

service or performance

I Nonvessel operating common carrier A common carrier that

does not operate the vessels by which the ocean transportation

is provided and is a shipper in its relationship with an ocean

common carrier

m Ocean common carrier A vessel operating common carrier

but the term does not include one engaged in ocean transportation

by ferry boat or ocean tramp

n Ocean freight forwarder A person in the United States that

1 dispatches shipments from the United States via common

carriers and books or otherwise arranges space for those
670 FEDERAL MARITIME COMMISSION

0 Open rate A rate on a specified commodity or commodities

over which a conference suspends its rate making authority there

by permitting each individual common carrier member of the con

ference to fix its own rates on such commodity or commodities

p Open for public inspection The maintenance of a complete

and current set of the tariffs used by a common carrier or to

which it is a party in each of its offices and those of its agent

in any city where it transacts business involving such tariffs

q

Person Includes individuals corporations partnerships and

associations existing under or authorized by the laws ofthe United

States or of a foreign country

r Proportional rates Rates or charges assessed by a common

carrier for transportation services the application of which are

conditioned upon a prior or subsequent movement

s Shipment All ofthe cargo carried under the terms of a single

bill of lading

t Shipper An owner or person for whose account the ocean

transportation of cargo is provided or the person to whom delivery

is to be made

u Tariff Apublication containing the actual rates charges classi

fications rules regulations and practices of a common carrier

or conference of carriers For the purposes of this part the term

practice refers to those usages customs or modes of operation

which in any way affect determine or change the transportation

rates charges or services provided by a common carrier and

in the case of conferences must be restricted to activities author

ized by the basic conference agreement

v Tarifffiling Any tariff or modification thereto which is re

ceived by the Commission as filed pursuant to these rules

w Tarifffiling Electronic The transmission of tariff filings to

the Commission through the use of commercial data processing

tenninals The data processing receiving tenninal s are to be lo

cated in the Commission s Washington D C offices Tariff mate

rial filed electronically must conform to all the regulations applica

ble to pennanent tariff filings except as follows

1 Electronically filed tariff pages received from data proc

essing tenninals may be used for filing with the Commis

sion and

2 Electronically filed tariff matter shall be accompanied

by an electronically filed letter of transmittal

12 r
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 671

THE FOREIGN COMMERCE OF THE UNITED STATES

X Through rate The single amount charged by a common carrier

in connection with through transportation

y Through transportation Continuous transportation between ori

gin and destination for which a through rate is assessed and

which is offered or performed by one or more carriers at least

one of which is a common carrier between a United States point

or port and a foreign point or port

12 In 580 3 e remove except temporary filings as permitted here

inafter in 580 1O c 1

13 In 580 3 t remove including temporary filings by mail pursuant

to 580 1O c 1 of this part and Provided however that

temporary filings made by telegraph or cable pursuant to

580 l0 c 1 need not be submitted in duplicate or triplicate

and remove the semicolon at the end of triplicate and insert

a

period

14 In 580 3i

remove section 18 b and insert section 8 a 1

15 In 580 3jremove section 18 b and insert section 8 a

and remove approved wherever it appears

16 In 580 3jremove the last sentence

17 In 580 31 remove sections 14b 18 b or 18 c of

18 In 580 4 e remove each vessel operating common carrier s

and insert the

19 In 580 4e remove United States Shipping Act 1916 and

Shipping Act Amendments of 1979 Pub L 9625 93 Stat

71 and the regulations of the Commission set forth in 46 CPR

Part 552 and insert Shipping Act of 1984

20 Amend 580 4f by removing Check Sheet and adding at

the end of the paragraph Appendices of Essential Terms for

Service Contracts Time Volume Contracts

21 Amend 580 a 1 by removing approved under section 15

of the Act and in the third sentence removing section 18 c

and inserting section 9

22 Amend 580 5 c 2 by removing United States Shipping Act

1916 and Shipping Act Amendments of 1979 Public Law

9625 93 Stat 71 and the regulations of the Commission set

forth in 46 CPR 552 and inserting Shipping Act of 1984

23 Remove 580 5 d 13 and d 14

24 In 580 paragraph d redesignate d 15 d 18 as paragraphs

d 13d 16

25 Amend 580 5 d 19 as follows

t

Jur
672 FEDERAL MARITIME COMMISSION

a Revise the heading to read Shippers requests consultations

and complaints

b Remove with S27 6 of the Commission s rules and insert

with the effective agreement s provisions

c Add after complaints the phrase and so they may engage

in consultation under section 5 b 6 of the Act

d Redesignate 580 5 d 19 as 580 5 d 17

26 Redesignate 5805 d 20 as 580 d 18 and remove in the

first sentence of the introductory text two years and insert

three years

27 Amend 580 5 d 18 i by removing section 22 of the Shipping

Act 1916 46 U S C 821 and inserting section II gof the

Shipping Act of 1984 in the first sentence and by removing

two and inserting three in the second sentence

28 Amend 580 5 d 18 ii by removing Shipping Act 1916 and

inserting Shipping Act of 1984

29 Amend 580 5 e by removing commencing with number 21

and inserting a period

30 Amend 580 6 n by removing section 18 c of the Shipping

Act 1916 and inserting section 9 of the Shipping Act of

1984 in the last sentence

31 Amend 580 6 0 by removing the word Temporary and cap

italizing Special in the introductory text

32 Remove 580 6 0 2

33 Revise 580 8 to read as follows

580 8 Intermodal Tariffs

a Definitions The following definitions shall apply for purposes

of this section

1 Contracting Carrier A carrier which performs part of

a through intermodal service in the capacity of a sub

contractor on behalf of and in the name of a common

carrier which is subject to the Act

2 Joint through inteimodal rate A single charge jointly

established by two or more carriers one of which is

a common carrier subject to the Act for through trans

portation over the combined routes of such carriers be

tween i

points in the United States and ports in a

foreign country ii points in the United States and

points in a

foreign country or iii ports in the United

States and points in a foreign country Tariffs which

name joint rates must also list the participating carriers

3 Participating Carrier A carrier that holds itself out to

perform a portion of a joint through intermodal service

c
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 673

THE FOREIGN COMMERCE OF THE UNiTED STATES

4 Through intermodal rate A

single charge established

by a common carrier s subject to the Act which covers

a through service part of which is performed by a con

tracting carrier or carriers for through transportation over

the combined routes of such carriers between i points

in the United States and ports in a foreign country

ii points in the United States and points in a foreign

country or iii ports in the United States and points

in a foreign country

5 Through route An arrangement for the continuous car

riage of goods between points of origin and destination

either or both of which lie beyond port terminal areas

b Intermodal tariff filing requirements Every common carrier

and conference subject to the Act which establishes through inter

modal rates andor joint through intermodal rates shall file tariffs

stating all such rates and related charges rules regulations privi

leges or facilities granted or allowed Such tariffs shall be filed

and maintained in the manner set out in the Act and in accordance

with the rules of this part Intermodal tariffs shall be filed in

the name of the common carrier or conference subject to the

Act Intermodal tariffs shall be initially filed on thirty days notice

as provided by section 8 or 9 of the Act unless a shorter notice

is permitted pursuant to special permission In addition such tariffs

shall contain the following provisions

1 A notation on the Title Page that the publication contains

through intermodal rates andor joint through intermodal

rates Also an identification of the modes of service

Le rail water water motor etc shall be shown

2 A list either on the Title Page or on an interior page

referenced on the Title Page of all ports or points to

from and between which the rates apply and the ports

through which cargo originating or terminating in such

places shall move Each port or point served shall be

described by its commonly used geographic name When

rates are established which apply from to or between

all points within a named region for example a county

township parish or province such region must be identi

fied with the state province and country in which the

region is located

3 A contract of affreightment clearly setting forth through

liability which is consistent with the holding out provided

by the application of the rates and conditions of the

tariff

4 In the case of joint through intermodal rates the names

of all participating carriers and a clear description of

the services performed by such participating carriers

which are included in the through rates Points served

by each participating carrier must be so specified
674 FEDERAL MARITIME COMMISSION

c Amendments to intermodal tariffs Common carriers and con

ferences of such carriers publishing amendments to intennodal

tariffs which provide for new or initial joint through intennodal

rates andor through intennodal rates are exempt from the 30

day filing notice requirements of sections 8 or 9 of the Shipping

Act of 1984 Provided however that amendments filed pursuant

to dlis exemption shall not become effective earlier than upon

publication and filing or some time interval less than 30 days

Provided further that amendments filed by controlled carriers

subject to section 9 Shipping Act of 1984 may be filed only

when such amendments provide for rates which meet but do not

go below those previously established by non controlled carriers

Each amendment filed by a controlled carrier under authority of

this exemption shall bear the following notation Filed pursuant

to 16 CPR 580 8 c

34 Amend 58o lo a 2 by removing its second sentence

35 Amend 58o 10 a 3 by removing section 18 c of the Shipping

Act 1916 in the last sentence and inserting section 9 of the

Shipping Act of 1984

36 Amend 58o lob 4 by removing section 18 b and 18 c

and inserting sections 8 and 9

37 Remove 58o1ob 1o

38 Amend 58o lo d1 and d 2 in the introductory text by remov

ing sections 18 b 18 c and 14b of

39 Remove 58o 12

40 Amend 580 15 a by removing in the first sentence section

18b and inserting section 8 d

41 Amend 580 15 a by removing in the second sentence Section

18 c 3 and inserting Section 9 c

42 Add S8o 91 to read as follows

580 91 OMB control numbers assigned pursuant to the Paper

work Reduction Act

This section displays the control numbers assigned to infonna

tion collection requirements of the Commission in this part by

the Office of Management and Budget pursuant to the Paperwork
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 675

THE FOREIGN COMMERCE OF THE UNITED STATES

Reduction Act of 1980 Pub L 96511 The Commission intends

that this section comply with the requirements of section 3507 t

of the Paperwork Reduction Act which requires that agencies

display a current control number assigned by the Director of

the Office of Management and Budget OMB for each agency

information collection requirement

Section

Current OMB

Control No

580 3

580 8 through 580 15

3072 0009

3072 0009

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

46 CPR PARTS 552 AND 582

DOCKET NO 8425

CERTIFICATION OF COMPANY POLICIES AND EFFORTS TO

COMBAT REBATING IN THE FOREIGN COMMERCE OF THE

UNITED STATES

Interim Rule and Request for Comments

The Commission is modifying its rules on the filing

of certifications of company practices to combat rebating

in the foreign commerce of the United States to bring

them into conformity with the Shipping Act of 1984

The modification expands the application of the annual

certification requirement from vessel operating common

carriers to all common carriers

Interim Rule effective on June 18 1984 Comments at

any time but no later than July 30 1984

SUPPLEMENTARY INFORMATION

The Shipping Act of 1984 1984 Act 46 U S C app 1701 1720 was

enacted on March 20 1984 and becomes effective on June 18 1984

except for sections 17 and 18 thereof which became effective on enactment

Section 17 b authorizes the Federal Maritime Commission to prescribe

interim rules and regulations to carry out the Act which rules can become

effective notwithstanding the nature and comment provisions of the Adminis

trative Procedure Act 5 U S C 553 but must be superseded by final

rules subject to the AP A

Section 15b ofthe 1984 Act 46 U S C app 1714b makes substantive

changes to the previous requirements of section 21 b of the Shipping

Act 1916 1916 Act 46 U S C app 820 b regarding the certification

of company policies and efforts to combat rebating in the foreign commerce

of the United States The fundamental change is the expansion to all com

mon carriers from the former limited application to vessel operating common

carriers only Although the statute imposes a new and mandatory reporting

requirement for domestic as well as foreign NVOCCs the Commission

is allowing for comments from this affected class to determine the best

method and procedure for assuring compliance

These rules contain tech cal amendments to reflect certain changes in

definitions and application contained in the 1984 Act For instance the

1916 Act permits the Commission to require an anti rebating certification

from any consignor consignee forwarder broker other carrier or other

person subject to the Shipping Act 1916 Section 15 b of the 1984

Act alters the statutory scheme to permit the Commission to require certifi

ACTION

SUMMARY

DATES

L L
CERTIFICATION OF CO POLICIES EFFORTS TO COMBAT 677

REBATING IN THE FOREIGN COMMERCE OF THE U S

cation from any shipper shippers assocation marine terminal operator

ocean freight forwarder or broker This rule does not however require

certifications from entities other than those mandated by statute The require

ment for certifications from ocean freight forwarders is continued in Docket

No 8419 Licensing of Ocean Freight Forwarders

Other amendments to the required certification are of the same genus

such as the amendments to the statutory references and Code of Federal

Regulations citations

To provide for the basic notice and comment provisions of the Adminis

trative Procedure Act therefore the Commission requests comments on

these interim rules to assist it in developing final rules to supersede and

where necessary modify these interim rules by December 15 1984 Accord

ingly the public is provided with sixty days within which to comment

on the interim rules but if anyone believes that there are serious problems

created by these rules which should be addressed immediately the Commis

sion urges them to bring their concerns to the attention of the Commission

without prejudice to subsequently filing additional comments within the

sixty day comment period

A new 582 91 is being added to display the Office of Management

and Budget s clearance number for information collection requirements

These are currently displayed in tabular form in 503 91 of Title 46

Code of Federal Regulations but the new separate section should be conven

ient especially after the part is redesignated

The Federal Maritime Commission has determined that this interim rule

is not a major rule as defined in Executive Order 12291 dated February

17 1981 because it will not result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies that this

final rule will not have a significant economic impact on a substantial

number of small entities including small businesses small organizational

units and small governmental jurisdictions

List of Subjects in Parts 552 and 582 Cargo Cargo vessels Exports

Foreign relations Freight forwarders Imports Maritime carriers Rates and

fares Reporting and recordkeeping requirements Water carriers Water

transportation

For the reasons set out in the preamble Part 552 of Title 46 of the

Code of Federal Regulations is redesignated as Part 582 included in Sub

chapter D and is revised to read as follows

26 F M C
678 FEDERAL MARITIME COMMISSION

PART 582 CERTIFICATION OF COMPANY POLICIES AND

EFFORTS TO COMBAT REBATING IN THE FOREIGN COMMERCE

OF THE UNITED STATES

Sec

582 1

582 2

582 3

582 4

582 5

582 91

Scope

Fonn of certification

Tariff notification

Change of Chief Executive Officer

Reporting requirements

OMB control numbers assigned pursuant to the Paperwork Re

duction Act

APPENDIX A NAME OF FILING COMPANY CERTIFICATION OF

COMPANY POLICIES AND EFFORTS TO COMBAT REBATING IN

THE FOREIGN COMMERCE OF THE UNITED STATES

Authority 5 U S C 553 sees 2 3 8 10 13 15 16 and 17 of the

Shipping Act of 1984 46 U S C app 1701 1702 1707 1709 1712

1714 1715 and 1716

582 1 Scope

a The requirements set forth in this part are binding upon every common

carrier and at the discretion of the Commission will be applicable to

any shipper shippers association marine terminal operator ocean freight

forwarder or broker

b Infonnation obtained under this part will be used to maintain continu

ous surveillance over common carrier activities and to provide a deterrent

against rebating practices Failure to file the required reports may result

in a civil penalty of not more than 5 000 or if willfully and knowingly

committed not more than 25 000 for each day such violation continues

582 2 Fonn of certification

The Chief Executive Officer defined as the most senior officer within

the company designated by the board of directors owners stockholders

or controlling body as responsible for the direction and management of

the company of each common carrier and when required at the discretion

of the Commission the Chief Executive Officer of any shipper shippers

association marine terminal operator ocean freight forwarder or broker

shall file a written certification under oath as set forth in the format

in Appendix A attesting to the following

a 1 That it is the stated policy of the filing company that the payment

solicitation or receipt of any rebate by the company which is unlawful

under the provisions of the Shipping Act of 1984 is prohibited and

2 That such company policy was promulgated recently together with

the date of such promulgation to each owner officer employee and agent

thereof and

26 F M C
CERTIFICATION OF CO POLICIES EFFORTS TO COMBAT 679

REBATING IN THE FOREIGN COMMERCE OF THE U S

b The details of the efforts made within the company or otherwise

to prevent or correct illegal rebating and

c That the filing company will fully cooperate with the Commission

in its efforts to end those illegal practices

582 3 Tariff notification

a Each common carrier shall file a provision in each of its tariffs

that shall read substantially as follows

Name of Company has a policy against the payment of any

rebate by the company or by any officer employee or agent

which payment would be unlawful under the Shipping Act of

1984 Such policy has been certified to the Federal Maritime

Commission in accordance with the Shipping Act of 1984 and

the regulations of the Commission set forth in 46 CFR Part 582

b When the common carrier s tariff is a conference rate agreement

tariff the common carrier shall ensure that the conference or rate agreement

publishes the common carrier s tariff provision set forth in 582 3 a in

the conference rate agreement tariff

c The anti rebate tariff provision as set forth in 582 3 a shall be

effective upon filing

d Every common carrier tariff must contain the anti rebate tariff provi

sion set forth in 582 3 a by September 18 1984

582 4 Change of ChiefExecutive Officer

Every common carrier and any other person required by the Commission

to file a certification in accordance with 582 2 shall notify the Secretary

Federal Maritime Commission of the identity of any new Chief Executive

Officer within thirty 30 days of such appointment Each new Chief Execu

tive Officer shall file a certification as required by 582 2 of this part

within thirty 30 days ofappointment

582 Reporting requirements

a Every common carrier required by this part to submit a written

certification as provided for in 582 2 to the Secretary Federal Maritime

Commission shall submit such certification on or before May 15 of each

year

b Every person other than a common carrier who is required by the

Commission to submit a written certification under 582 2 of this part

shall submit the initial certification to the Secretary Federal Maritime Com

mission on the date designated by the Commission and thereafter as

the Commission may direct

582 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control numbers assigned to information collec

tion requirements of the Commission in this part by the Office ofManage

ment and Budget pursuant to the Paperwork Reduction Act of 1980

7ft FM r
680 FEDERAL MARITIME COMMISSION

Pub L 96511 The Commission intends that this section comply with

the requirements of section 3507 tof the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

Director ofthe Office ofManagement and Budget OMB for each agency

infonnation collection requirement

Section

Current OMS

Control No

5 22

through 582 5 3072028

APPENDIX A TO 46 CPR S82 3 NAME OF FILING COMPANY

CERTIFICATION OF COMPANY POLICIES AND EFFORTS TO

COMBAT REBATING IN THE FOREIGN COMMERCE OF THE

UNITED STATES

Pursuant to the requirements of section 15b of the Shipping Act of

1984 and Federal Maritime Commission regulations promulgated pursuant

thereto 46 CPR 582 I Chief Executive Officer of name of

company state under oath that

I It is the policy of name of company that the payment solicitation

or receipt of any rebate which is unlawful under the provisions of the

Shipping Act of 1984 is prohibited

2 On or before 19 such company policy was promulgated to each

owner officer employee and agent of name of company who is directly

or indirectly connected with commercial ocean shipping import or export

sales or purchasing

3 Set forth the details of measures instituted by the filing company

or otherwise to eliminate r prevent the payment of illegal rebates in

the foreign commerce of the United States

4 Name of company affinns it will fully cooperate with the Federal

Maritime Commission in any investigation of illegal rebating and with

the Commission s efforts to end such illegal practices

Signature

Subscribed and sworn before me this day of

19

Notary Public

By the Commission

S FRANCIS C HURNEY

Secretary

26 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 572

DOCKET NO 8426

RULES GOVERNING AGREEMENTS BY OCEAN COMMON

CARRIERS AND OTHER PERSONS SUBJECT TO THE SHIPPING

ACT OF 1984

Interim Rules With Request For Comments

These rules implement those provisions of the Shipping

Act of 1984 which govern agreements by or among

ocean common carriers and other persons in the foreign

commerce of the United States The statute authorizes

the Commission to prescribe rules as necessary to effec

tuate the Act including the issuance of interim rules

The Commission is also authorized to prescribe by rule

the form and manner in which an agreement shall be

filed and to obtain information needed to evaluate agree

ments These rules set forth those agreements which are

subject to the requirements of the Act enumerate those

agreements which are exempt from certain requirements

of the Act prescribe the form of agreements and the

information which shall be filed establish procedures

for processing agreements set forth record retention and

reporting requirements and establish certain transitional

rules for existing agreements

Interim Rule effective on June 18 1984 Comments on

or before August 27 1984

SUPPLEMENTARY INFORMATION

IBackground

On March 20 1984 President Ronald Reagan signed into law the Ship

ping Act of 1984 Public Law 98237 98 Stat 67 46 U S C app 1701

1720 hereinafter referred to as the Act or the 1984 Act The Act

among other things establishes a new regulatory regime governing agree

ments by or among ocean common carriers and other persons subject to

the Act in the foreign oceanborne commerce of the United States Section

3 of the Act 46 U S C app 1702 defines an agreement and certain

other terms Section 4 46 U S C app 1703 sets forth those types of

agreements that are within the scope of the Act Section 5 46 U S C

app 1704 requires parties to an agreement to file a true copy of the

agreement together with relevant information and specifies certain provisions

which must be contained in particular types of agreements Section 6 46

U S C app 1705 establishes procedures under which the Commission shall

ACTION

oSUMMARY

DATES

26 F M C 681
682 FEDERAL MARITIME COMMISSION

review and take action upon an agreement Section 16 46 U S C app

1715 establishes the authority of the Commission to exempt any class

of agreements from any requirement of the Act Under section 7 of the

Act 46 U S C app 1706 agreements which have been filed and become

effective or which are exempt from filing are not subject to the federal

antitrust laws Section 15 46 U S C app 1714 authorizes the Commission

to require periodical or special reports as well as the filing of conference

minutes

The purpose of these rules is to implement those sections of the Act

that govern agreements These rules are being issued pursuant to the general

rulemaking authority provided under section 17 a of the Act 46 U S C

app 1716 a Certain sections of these rules are also issued pursuant to

the Commission s specific authority under section 5 a of the Act to pre

scribe the form and manner in which an agreement shall be filed and

to obtain the infonnation and documents necessary to evaluate an agreement

46 U SC app 1704a The rules are also issued pursuant to the Adminis

trative Procedure Act APA and thereby are subject to the nonnal notice

and comment procedures of the APA 5 U S C 553 These rules are

intended to serve as interim rules until such time as final rules are adopted

Specific authority to prescribe interim rules without adhering to notice

and comment requirements is contained in section 17 b of the Act 46

U S C app 17 6b These interim rules will take effect on June 8

984 the effective date of the Shipping Act of 1984 If persons believe

that there are serious problems created by these interim rules which should

be addressed immediately they may bring their concerns to the attention

of the Commission in writing without prejudice to subsequently filing addi

tional comments within the 90 day comment period In any event all inter

ested persons have been provided 90 days to comment on these rules

These rules are organized as a single Part 572 of Title 46 of the Code

of Federal Regulations Subpart A states the authority purpose and policies

of these rules and defines certain tenns used in the Act and these rules

Subpart B sets forth those types of agreements which are within the scope

of the Act as well as those categories of agreements to which these rules

do not apply Subpart C contains procedures for requesting and graDting

exemptions for agreements from any requirement of the Act lists certain

kinds of agreements which are excluded by statute from filing requirements

and enumerates certain classes of agreements which the Commission pro

poses to exempt from certain requirements of the Act Subpart D states

rules for filing the fonn in which agreements shall be filed and the

infonnation which shall be submitted with certain agreements Subpart E

sets forth requirements as to organization and content of agreements and

includes mandatory provisions for conference agreements Subpart F estab

lishes procedures for action on agreements prior to implementation Subpart

G contains rules setting forth certain reporting and record retention require

ments Subpart H contains transitional rules affecting existing agreements

2 F M t
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 683

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Subpart I states penalty rules An Information Form to be completed and

filed with certain agreements subject to the Act is attached as an Appendix

A to Part 572 The following is a section by section discussion of proposed

Part 572 of the Code of Federal Regulations which is to be included

in new Subchapter DRegulations Affecting Maritime Carriers and Relat

ed Activities in Foreign Commerce

II Section By Section Discussion of Part 572 and the Information Form

SUBPART A OF THE RULES GENERAL PROVISIONS

This subpart contains provisions which apply generally to the rules

throughout Part 572

Section 572 10 I Authority

This section recites the statutory authority for the rules of Part 572

Section 572 1 02 Purpose

This section states the purpose of the rules of this part namely to

implement those provisions of the Act which govern or affect agreements

Section 572 103 Policies

The policies underlying the rules of this part are set forth in this section

Section 572 1 04Definitions

This section includes definitions of terms used in the Act and those

rules which are relevant to agreements

Section 572 104 a

Agreement

The definition of the term agreement is based on the definition con

tained in section 3 1 of the Act

Section 572 1 04b Antitrust Laws

The teQ1l antitrust laws is defined in section 3 2 ofthe Act

Section 572 1 04c Appendix

The definition of the term appendix is new

Section 572 1 04 d Assessment Agreement

The term assessment agreement is defined in section 3 3 of the

Act

26 F M C
684 FEDERAL MARITIME COMMISSION

Section 572 104 eCommon Carrier

The term common carrier is defined in section 3 6 of the Act

Section 572 104fConference Agreement

The definition of the term conference agreement is based upon and

further clarifies the definition contained in section 3 7 of the Act

Section 572 104 gConsultation

The definition of the term consultation is new

Section 572 104 hCooperative Working Agreement

The definition of the term cooperative working agreement is new

Section 572 104iEffective Agreement

The definition of the term effective agreement is new

Section 572 104 jEqual Access Agreement

The definition of the term equal access agreement is new

Section 572 104 k Independent Neutral Body

The definition of the term independent neutral body is new

Section 572 104 I Information Form

The definition of the term Information Form is new

Section 572 104 m Interconference Agreement

The definition of the term interconference agreement is based on

section 5 c of the Act

Section 572 104 nJoint Service Consortium Agreement

The definition of the term joint serviceconsortium agreement is new

Section 572 104 o Marine Terminal Facilities

The definition of the term marine terminal facilities is new

Section 572 104p Marine Terminal Operator

The term Marine Terminal Operator is defined in section 315 of

the Act The term includes any person firm company corporation or

26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 685

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

government subdivision furnishing marine terminal facilities or marine termi

nal services or which owns leases or operates property used as a marine

terminal facility The term marine terminal operator includes but is

not limited to

i Ports

ii Commercial operator s of public general cargo marine terminal facili

ties

iii Operators of shipside grain elevators bulk loaders tank farms and

lumberyard facilities handling cargo in connection with ocean common

carriers

iv Stevedores when engaged in performing any of the duties of a

marine terminal operator

v Operators of off dock container freight stations handling cargo in

connection with ocean common carriers even when such facilities are not

located at or proximate to the waterfront

vi Carloaders and unloaders truckloaders and unloaders when furnishing

equipment or labor

vii Railroads which provide marine terminal facilities

viii Any other person subject to the Commission s marine terminal

tariff filing requirements

The term marine terminal operator does not include persons engaged

solely in the business of stevedoring and which furnish no marine terminal

facilities or services

Section 572 104 q Maritime Labor Agreement

The term maritime labor agreement is defined in section 316 of

the Act

Section 572 1 04r Modification

The definition of the term modification is new

Section 572 l04 s Nonvessel Operating Common Carrier

The term nonvessel operating common carrier is defined in section

317 of the Act

Section 572 l04 tOcean Common Carrier

The term ocean common carrier is defined in section 318 of the

Act

Section 572 104 uOcean Freight Forwarder

The term ocean freight forwarder is defined in section 319 of the

Act

f

F M
686 FEDERAL MARITIME COMMISSION

Section 572 104 v Person

The tenn person is defined in section 3 20 of the Act

Section 572 104 w Pooling Agreement

The definition of the tenn pooling agreement Is based on the definition

in the Commission s current agreement regulations at 46 CPR 522 2a 3

Section 572 1 04 x Port

The definition of the tenn port is new

Section 572 104 ySailing Agreement

The definition of the tenn sailing agreement is new

Section 572 104 zService Contract

The tenn service contract is defined in section 3 21 of the Act

Section 572 104 aaShipper

The tenn shipper is defined in section 3 23 of the Act The tenn

is inclusive ofthe ordinarily used tenns consignee and cargo interest

and is used interchangeably

Section 572 1 02 bbShippers Association

The tenn shippers association is defined in section 3 24 of the

Act

Section 572 104 ccShippers Requests and Complaints

The definition of the tenn shippers requests and complaints is new

Section 572 1 04 dd Space Charter Agreement

The definition of the tenn space charter agreement is new

Section 572 1 04 ee Through Transportation

The tenn through transportation is defined in section 3 26 of the

Act

Section 572 1 04 ftTransshipment Agreement

The definition of the tenn transshipment agreement is new

f R1VI
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 687

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

SUBPART B OF THE RULES SCOPE

Subpart B contains rules defining scope which are based on sections

3 4 5 and 7 of the Act It recites the language of the Act regarding

agreements by or among ocean common carriers Agreements which fall

within anyone of seven designated categories are subject to the Act

These categories generally derive from section 15 of the Shipping Act

1916 46 U S C 814 One new category of agreement Le an agreement

that regulates or prohibits the use of service contracts is created under

the 1984 Act

Subpart B sets forth the Commission sInterpretation of the scope of

the 1984 Act insofar as marine terminal operator agreements involving

foreign commerce are concerned The Commission interprets the language

of sections 4b and 5 a of the 1984 Act when read in conjunction

with the Act s

legislative history as reflecting clear Congressional intent

to carry forward under the 1984 Act the same areas of concerted marine

terminal activity previously covered under the 1916 Act with three excep

tions First marine terminal agreements involving ocean transportation strict

ly in United States interstate commerce which remain under the jurisdiction

of the 1916 Act are outside the scope of the 1984 Act Second agreements

among common carriers subject to the 1984 Act to establish operate or

maintain a marine terminal in the United States are not subject to the

1984 Act Third pooling agreements between marine terminal operators

are not included but marine terminal operators are permitted to enter into

arrangements with vessel operators which vary rates with the volume of

cargo offered See 129 Congo Record 51782 daily ed Feb 28 1983

statement of Mr Gorton Most marine terminal operators and therefore

the involved facility or service agreements and terminal conferences simul

taneously handle cargo moving in both interstate and foreign commerce

Indeed the terminal facilities and services furnished to cargo and vessels

are generally indistinguishable on the basis of the ultimate i

e foreign

or domestic origin or destination of the cargo or vessel concerned In

short marine terminal operations are one area in the maritime industry

wherein a virtually seamless operational interface exists between U S for

eign commerce and interstate commerce

The Commission has given careful consideration to formulating an inter

pretation of the relationship between the scopes of the two Shipping Acts

in a practical manner insofar as marine terminal operator agreements are

concerned Certainly the legislative history of the 1984 Act does not support

a conclusion that Congress intended that marine terminal operator agree

ments which involve both streams of commerce be simultaneously subjected

to the regulatory regimes of both the 1916 and 1984 Acts Consequently

the Commission is adopting the position set forth in sections 572 202 and

572 203 of this part whereby it interprets the 1984 Act as extending

to marine terminal operator agreements which relate to terminal facilities

andor services which either wholly or in part handle or are held out

ft F M
688 FEDERAL MARITIME COMMISSION

to handle foreign commerce either directly or by transshipment including

l agreements involving both foreign and interstate commerce and 2

agreements relating to facilities andor services dedicated to interstate com

merce which handle transshipment cargo moving under a through bill of

lading to or from foreign ports or points

Finally in the interest of clarity Subpart 9 explicitly states certain cat

egories of agreements which are wholly outside the scope of these rules

Section 4 of the Act places acquisitions of voting securities or assets

outside the scope of the Act as does section 5 e of the Act with regard

to maritime labor agreements In addition Subpart 9 recognizes that two

categories of agreements those involving nonvessel operating common car

riers and those involving ocean freight forwarders which were formerly

within the jurisdiction of the 1916 Act are not covered by the 1984

Act

Section 572 201 Agreements by orAmong Ocean Common Carriers

This section recites the language of section 4 a of the Act regarding

agreements by or among ocean common carriers Agreements which em

brace any of the seven categories of activities enumerated here are subject

to the requirements of these rules

Section 572 202 Marine Terminal Operator Agreements Involving Foreign

Commerce

This section recites the language of section 4b of the Act with regard

to agreements involving marine terminal operators The Commission inter

prets section 4 b to include all marine terminal operator agreements which

involve foreign commerce of the United States

Section 572 203 Marine Terminal Operator Agreements Exclusively in

Interstate Commerce

This section is intended to further clarify the Commission s

jurisdiction

under the Act Where a marine terminal operator agreement involves inter

state commerce exclusively these rules do not apply

Section 572 204 Common Carrier Terminal Agreements

Agreements between common carriers to operate marine terminals in

the United States are outside the scope of these rules Under section 5 a

of the Act such agreements do not have to be filed Moreover such agree

ments do not have antitrust immunity as indicated in section 7b 3 of

the Act The effect of these statutory provisions is to remove these agree

ments from the scope of the Act

fP M
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 689

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Section 572 205 Nonvessel Operating Common Carrier Agreements

The purpose of this section is to make clear that such agreements are

outside the scope of these rules

Section 572 206 0cean Freight Forwarder Agreements

The purpose of this section is to make clear that such agreements are

outside the scope of these rules

Section 572 207 Maritime Labor Agreements

This section recites the language of section 5 e of the Act The Act

excludes maritime labor agreements from filing requirements and from re

view by the Commission Consequently the Part 572 rules do not apply

to maritime labor agreements However while a maritime labor agreement

itself is outside the scope of these rules activities pursuant to a maritime

labor agreement are subject to other provisions of the Act and other statutes

administered by the Commission Thus rates charges regulations or prac

tices of a common carrier that are required to be set forth in a tariff

whether or not those rates charges regulations or practices arise out of

or are otherwise related to a maritime labor agreement will nevertheless

be subject to scrutiny under other provisions of the Act

Section 572 208 Acquisitions

This section recites the language of section 4c of the Act Such trans

actions are outside the scope of these rules

SUBPART C OF THE RULES EXEMPTIONS AND EXCLUSIONS

Subpart C contains rules which partially implement the Commission s

exemption authority under section 16 This subpart establishes general proce

dures for granting or revoking an exemption for an agreement or class

of agreements The formalization of these procedures by rule is new but

is based on past Commission practice in considering exemption matters

In addition to formalizing exemption procedures by rule Subpart C would

continue to exempt under the 1984 Act certain classes of agreements which

are presently exempt under the 1916 Act The substantive standard for

granting lP1 exemption under section 16 of the Act has been expanded

slightly from the section 35 standard of the 1916 Act to include a finding

that the exemption does not result in a substantial reduction in competition

Moreover the effect of an exemption under the 1984 Act differs from

an exemption under the 1916 Act inasmuch as an exemption under the

new statute confers antitrust immunity The Commission has evaluated the

current exemptions under the 1916 Act and believes that continuation of

certain of these existing exemptions under the new Act is warranted The

current exemption for military household goods agreements however is

f JlMr
690 FEDERAL MARITIME COMMISSION

not continued because such agreements between nonvessel operating com

mon carriers are outside the scope of the 1984 Act Interested persons

will have an opportunity to comment on the continuation discontinuation

or modification of the exemptions

Sections 7 a 4 and 7 a 5 of the 1984 Act exclude foreign inland

transportation agreements and foreign marine terminal agreements from the

filing requirements of the Act and extends antitrust immunity to these

agreements For the purposes of clarity Subpart C includes sections which

restate these statutory exclusions

Subpart C rules should be consulted to determine whether an agreement

falls into a class which is excluded by statute or exempt by rule from

filing or other requirements However in order to remove any uncertainty

which a party may have as to the applicability of an exemption to an

agreement the rules of Subpart C allow for the optional filing of an

exempt agreement

Subpart C is organized so that the general procedures for applying for

and granting exemptions are stated first This is followed by a separate

section for each exclusion or exemption Organizing all exclusions and

exemptions under a single subpart eliminate some redundancy in the current

rules and provides for the orderly addition of any new class of agreements

which may be exempt in the future The purpose of this subpart is to

remove or minimize the delay in implementation of routine agreements

and to avoid unnecessary costs

Section 572 301 a

Authority

This section of the rules is based on section 16 of the Act and recites

the language of the Act which authorizes the Commission to exempt certain

classes of agreements from any requirement of the Act This section imple

ments only the authority to exempt any class of agreements and does

not implement the Commission s authority to exempt any specific activity

of persons subject to the Act This section recites the finding which the

Commission must make in order to grant an exemption namely that the

exemption will not substantially impair effective regulation be unjustly

discriminatory result in a substantial reduction in competition or be det

rimental to commerce

Section 572 301 bOptional Filing

Section 572 301 b provides for the optional filing of an exempt agree

ment The purpose of this paragraph is to enable parties who are uncertain

of the application of an exemption to their agreement to file the agreement

and thereby remove that uncertainty Such optional filing of an exempt

agreement however must be accompanied by the Information Form

t1U r
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 691

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Section 572 301 c Application for Exemption

Section 16 of the Act provides that persons may apply for an exemption

of any agreement or class of agreement from any requirement of the Act

or may seek revocation of an existing exemption Section 572 301 c restates

that right to file such an application Section 572301 c specifies the particu

lar requirements of such an application including a

requirement that informa

tion provided be relevant to the finding which must be made in order

to grant or continue an exemption

Section 572 301 d Participation by Interested Persons

This section restates the language of section 16 which affords interested

persons an opportunity for hearing regarding any proposal to adopt or

revoke an exemption The Act does not define the meaning of opportunity

for hearing The appropriate opportunity for hearing will be decided

on a case by case basis In some cases the opportunity to comment on

an exemption proposal in response to Federal Register notification may

be sufficient

Section 572 301 e Federal Register Notice

Section 16 of the Act provides that no exemption may be adopted or

revoked in whole or in part by the Commission unless opportunity for

hearing has been afforded interested persons and departments and agencies

of the United States This section establishes notice in the Federal Register

as the means for informing interested persons The Federal Register notice

shall contain sufficient information concerning the exemption to enable

interested persons to submit relevant comment

Section 572 301 fRetention of Agreement by Parties

Under this section parties are not required to file a

copy of an exempt

agreement but merely to retain acopy of the agreement and make it

available upon request by the Commission This requirement is necessary

in order to ensure that the Commission fulfills its monitoring responsibilities

with regard to such agreements

Section 572 302 Foreign Inland Transportation Agreements Exclusion

Section 5 a of the Act states in part that agreements related to transpor

tation to be performed within foreign countries are not required to be

filed with the Commission Section 7 a 4 provides that the antitrust laws

do not apply to any agreement or activity concerning the foreign inland

segment of through transportation that is part of transportation provided

in a United States import or export trade The effect of these provisions

is to extend antitrust immunity to a class of agreements that is excluded

t Mr
692 FEDERAL MARITIME COMMISSION

by statute from filing rquirements This section restates this statutory exclu

sion

Section 572 303 Foreign Marine Tenninal Agreements Exclusion

This section makes explicit the exclusion of foreign marine tenninal

agreements from the filing and Infonnation Fonn requirements of the Act

and these rules Such agreements may be viewed as a specific type of

foreign transportation agreement and thereby excluded from filing by section

5 a of the Act Foreign marine tenninal agreements are specifically referred

to and given antitrust immunity in section 7 a 5

Section 572 304Non substantive Modification to Existing Agreements

Exemption

This section continues in a modified fonn the present exemption of

non substantive agreements contained in 46 CFR 524 2 and exempts such

agreements pursuant to section 16 of the 1984 Act Paragraphs d l and

d 2 ofthe current exemption are removed

Section 572 305 Husbanding AgreementsExemption

This section clarifies and continues the exemption of husbanding agree

ments presently contained in 46 CPR 520 and exempts such agreements

pursuant to section 16 of the 1984 Act

Section 572 30 Agency AgreementsExemption

This section clarifies and continues the present exemption for agency

agreements contained in 46 CPR 520 and exempts such agreements pursuant

to section 16 of the 1984 Act

Section 572 307 Equipment Interchange AgreementsExemption

This section continues the present exemption of equipment interchange

agreements contained in 46 CPR 524 and exempts such agreements pursuant

to section 16 of the 1984 Act

Section 572 308Joint Policing AgreementsExemption

This section continues on an interim basis the present exemption of

joint policing agreements contained in 46 CPR 524 The Commission how

ever proposes to tenninate this exemption 30 days from the issuance of

a final rule The Commission believes that such agreements should be

filed and reviewed because of their potential for adverse effects upon ship

pers

F JlM r
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 693

CARRlERS ET AL SUBJ TO THE SHlPPING ACT OF 1984

Section 572 309 Credit Infonnation Agreements Exemption

This section continues on an interim basis the present exemption for

credit infonnation agreements contained in 46 CFR 524 The Commission

however proposes to tenninate this exemption 30 days from the issuance

of a final rule The Commission believes that such agreements should

be filed and reviewed because credit is an important factor in price competi

tion and should be placed under regulatory scrutiny

Section 572 310Non Exclusive Transshipment AgreementsExemption

This section continues in a modified fonn the present exemption for

non exclusive transshipment agreements contained in 46 CPR 524 The

modifications refine the description of the type of agreement which is

exempt This will pennit inclusion of matters in the agreement which

are more fully representative of the usual actual arrangement of the parties

for the conduct of commercial transshipment activities The modifications

pennit inclusion in the arrangement of any specifics of equipment inter

change service rationalization and agency arrangements as may be necessary

to complete the contemplated carriage Additionally these agreements now

will be exempt from filing but only if limited in scope to the provisions

set forth The exemption from filing eliminates the need to continue the

requirement of a specified fonn of agreement

SUBPART D OF THE RULES FILING AND FORM OF

AGREEMENTS

Section 5 of the Act establishes a requirement that every agreement

subject to the Act shall be filed with the Commission A

special provision

makes assessment agreements effective upon filing The Commission is

empowered under section 5 a to prescribe by rule the fonn and manner

in which an agreement shall be filed and the additional infonnation and

documents necessary to evaluate an agreement

Subpart D contains rules implementing section 5 filing requirements

These rules contemplate that new agreements and modifications to existing

agreements shall be filed in looseleaf notebook style fonnat These require

ments are designed To facilitate the necessary expedited processing of

agreements upgrade the Commission s agreement record keeping process

and enhance its data retrieval ability The requirements are developed from

and based upon past Commission experience in these areas and the recogni

tion of the difficulties encountered under fonner procedures

The establishment of a loose leaf notebook style requirement for filing

of agreements is considered necessary for standardization and maintenance

of the agency s record systems and their ultimate conversion to more auto

mated storage and retrieval It will also facilitate expedited review of agree

ments The loose leaf fonn is not a new notion with respect to agreement

filings It is presently used by some major conference agreements on their
694 FEDERAL MARITIME COMMISSION

own initiative Its convenience of use and maintenance should he apparent

to the parties

Subpart D also implements the infonnation requirements under section

5 by requiring the filing of an Infonnation Fonn with certain agreements

The purpose of the Fonn is to provide the Commission with the infonnation

needed to evaluate an agreement Only that infonnation which is needed

for the Commission s initial substantive review shall be required A more

complete discussion of the basis and purpose of the Infonnation Fonn

appears below The Infonnation Fonn requirement is not being imposed

on assessment or tenninal agreements

Section 572 401 Filing ofAgreements

All agreements shall be filed with the Secretary of the Commission

The Commission will require a true copy and 15 additional copies of

an agreement and the Infonnation Fonn This number of copies will be

needed to enable the various involved offices of the Commission to review

a filed agreement The requirements specifying who may file an agreement

and how it is transmitted are designed to avoid delays in the agreement

reception process and to minimize the number of rejections This section

shall apply to all agreements and modifications filed on or after June

18 1984

Section 572 402 Fonn ofAgreements

This section states certain technical requirements as to fonn The purpose

of the proposed loose leaf style filing is to ensure compatability of agree

ments documents with the Commission s records systems and to ensure

the legibility and durability of these documents The specifications are

modeled on those used in tariff publication This system should also facili

tate the modification of agreements and reduce the burden on parties filing

modifications to their agreements This section shall apply to all new agree

ments other than assessment or marine tenninal agreements filed on or

after June 18 1984 It is not mandatory that modifications of existing

agreements filed during the pendency of this rulemaking meet these require

merits but the parties may do so if the modifications are incorporated

in a restatement of the entire agreement Upon completion of this rulemaking

proceeding and final issuance of these provisions all existing agreements

will be required within a reasonable period of time to be specified to

be refiled to meet the fonn requirements then imposed Parties are invited

to comment on the period of time to be specified
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 695

CARRIERS ET AL SUB TO THE SHIPPING ACT OF 1984

Section 572 403 Modification of Agreements

This section provides guidance for the filing of modifications to agree

ments Modifications to agreements must include an Information Form where

the modification may result in a reduction in competition

Section 572 404Application for Waiver

This section provides procedures for the waiver of the form requirements

of this subpart upon a showing of good cause

Section 572 405 Information Form

Section 5 a of the Act authorizes the Commission to prescribe by rule

the additional information and documents necessary to evaluate an agree

ment The legislative history to section 6 of the Act H R Rep No 98

600 98th Cong 2d Sess 30 1984 indicates that the agreement review

procedure established under the Act is modeled upon the Hart Scott Rodino

procedures governing clearance of proposed acquisitions and mergers Hart

Scott Rodino Antitrust Improvements Act of 1976 15 U S C 18a Pursuant

to its Hart Scott Rodino authority the Federal Trade Commission has devel

oped a

reporting form to aid its review of proposed mergers Section

572 401 of these rules implements the Commission s authority under section

5 a of the Act by requiring the filing of an Information Form with certain

agreements The Information Form is intended to enable the Commission

to obtain the information needed to carry out its responsibility to review

an agreement under the substantive standard set forth in section 6 g

The

information requested on the Form does not seek all information which

may be relevant to an agreement Rather it requires only that information

which would enable the Commission to expeditiously perform its respon

sibilities under section 6 g

of the Act Parties to an agreement will therefore

not be burdened with supplying any more information than is necessary

for the Commission to conduct its initial substantive review Use of the

Form should also benefit the parties by removing any uncertainty about

the depth of information which the Commission believes is necessary and

relevant to its initial substantive review of an agreement Only agreements

here some further need for information is warranted would therefore be

subject to a request for additional information Parties also have the option

of filing any additional information and documents which they believe

may be relevant to the Commission s review of an agreement

This section provides that where parties are unable to complete a particu

lar item on the Form they will not be deemed to be in non compliance

with these rules provided that an adequate explanation for the incomplete

item is submitted This procedure is intended to fulfill the directives of

the legislative history that information requirements should not be unduly

burdensome and should be within the parties grasp The explanation of
696 FEDERAL MARITIME COMMISSION

an incomplete item is intended to enable the Commission to determine

whether compliance would be unduly burdensome or unreasonably beyond

the information available to the parties This procedure applies to each

incomplete response on the Form

SUBPART E OF THE RULES CONTNT AND ORGANIZATION OF

AGREEMENTS

Sections 5 b and c of the Act require certain mandatory provisions

in conference and interconference agreements Subpart E implements these

requirements and contains certain rules which establish a standard organiza

tion for agreements Specific language is not required by these rules Parties

to agreements will retain the full measure of flexibility in fashioning their

commercial arrangements The purpose of these minimal organizational re

quirements is to facilitate the Commission s preliminary review to determine

whether an agreement meets technical filing requirements and the substantive

review of an agreement under the general standard set forth in section

6 gand the prohibited acts listed in section 10 Moreover as with the

Subpart D requirements regarding form these content and organization re

quirements will enhance the Commission s data retrieval capabilities without

imposing any significant burden on parties to agreements In fact these

minimal requirements as to agreement organization may be of assistance

to the parties in preparing their agreements

As in the case of Subpart D form requirements the organization and

content requirements of Subpart E will apply immediately to all new agree

ments filed on or after June 18 19 4 except assessment or marine terminal

agreements Parties filing modifications to existing agreements may restate

their agreemen to conform to Subpart E requirements Upon completion

of this proceeding parties to existing agreements will be given a reasonable

period of time in which to meet the requirements of this subpart

Section 572 501 Agreement Provisions Organization

This section sets forth certain basic articles which are required in most

agreements The purpose of this requirement is to facilitate review of the

essential terms of an agreement This section does not require specific

language The parties therefore are not restricted in establishing their com

mercial relationships Since each of these nine articles may be found in

virtually all agreements and since the articles are limited to what may

be considered the essential terms of any agreement the burden on agreement

parties is minimal Persons are encouraged to comment on the desirability

of including additional specified provisions in the standardized organization

set forth in this section In the case of conference agreements certain

additional provisions are required by section 5 b of the Act
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 697

CARRIERS ET AL SUB TO THE SHIPPING ACT OF 1984

Section 572 502 0rganization of Conference and Interconference

Agreements

This section specifies certain additional provisions required of conference

interconference freight conference and passenger conference agreements

SUBPART F OF THE RULES ACTION ON AGREEMENTS

Section 6 of the Act establishes procedures under which agreements

shall be reviewed and acted upon by the Commission A strict schedule

for processing agreements is mandated Section 6 provides for public notice

of filed agreements and for rejection of agreements that fail to meet tech

nical filing requirements Filed agreements will go into effect in 45 days

unless a request for expedited approval is granted or the Commission seeks

additional information or injunctive relief Section 6 contains the substantive

standard under which agreements are reviewed and authorizes the Commis

sion to bring suit to enjoin an agreement and to seek court enforcement

of its information requests Section 6 also preserves the confidentiality

of information submitted with agreements

Subpart F contains rules implementing the provisions of section 6 A

fundamental purpose of section 6 is to streamline the processing of agree

ments filed with the Commission and to ensure that agreements will be

acted upon in an expeditious manner The model for Commission review

of agreements is that portion of the Hart Scott Rodino Antitrust Improve

ments Act of 1976 Pub L 94435 90 Stat 1390 governing premerger

clearance of proposed acquisitions and mergers In most cases agreements

will become effective following the observance of a 45 day waiting period

The rules in Subpart F are intended to establish clear procedures for the

processing of agreements so that the Commission may be able to review

agreements based on necessary and relevant information within the time

allowed by the statute

Section 572 60l Preliminary Review Rejection of Agreement

Section 6 a of the Act provides that any filed agreement which fails

to meet the requirements of section 5 of the Act shall be rejected The

first step in the processing of an agreement is a preliminary review to

determine whether the agreement and accompanying Information Form meet

the technical filing requirements of the Act and these rules Where an

agreement fails to provide for required statutory provisions or to meet

the requirements ofthese rules or where the Information Form is incomplete

and an adequate explanation is not provided the agreement shall be rejected

Parties will be notified in writing of the rejection of an agreement and

the reasons for rejection Along with the notice of rejection the agreement

the Form and all accompanying materials shall be returned to the parties

When an agreement is rejected the running of the waiting period terminates
698 FEDERAL MARITIME COMMISSION

Should the parties refile the refiled agreement would be subject to the

full waiting period required under the Act

Section 572 602 Federal Register Notice

Section 6 a of the Act requires the Commission to transmit notice of

the filing of an agreement to the Federal Register within sev n days of

receipt This section implements that requirement The Commission will

transmit such notice immediately upon completion of its preliminary review

The content of the Federal Register Notice is based on the Commission s

current rule at 46 CFR 522 6

Section 572 603 Comment

This section provides for comment by any interested person on an agree

ment Comments may include documentary or other information Such com

ments and infonnation shall be accorded the full measure of confidentiality

pennitted by law

Section 572 604Waiting Period

Section 6 requires that parties to agreements observe a waiting period

usually 45 days prior to implementing a filed agreement This section

sets forth certain technical provisions which make clear when the waiting

period commences when it may be tolled when it is resumed and when

it tenninates

Section 572 605 Requests for Expedited Approval

Section 6 of the Act allows parties to an agreement to request expedited

approval of an agreement Section 572 605 sets forth grounds and procedures

for applying for and granting expedited approval The rule makes clear

that such requests will generally be granted only in exceptional cir

cumstances

Section 572 606Requests for Additional Infonnation

Section 6d of the Act authorizes the Commission to issue requests

for additional infonnation Section 572 507 implements that section of the

Act

Section 572 607 Failure to Comply With Requests for Additional

Infonnation

Section 6 i of the Act authorizes the Commission to seek court enforce

ment of its infonnation requests This section is based on that provision

of the Act
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 699

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Section 572 608 Confidentiality of Submitted Material

Section 60 of the Act provides that all information submitted by a

filing party other than the agreement itself shall be exempt from disclosure

under the Freedom of Information Act 5 U S C 552 This section of

the rules implements the Acts confidentiality provision

Section 572 609 Negotiations

The section makes clear that the negotiation process may take place

at any time after the filing of an agreement up to the conclusion of

an injunctive proceeding The negotiation process will thus be available

throughout the pendency of an agreement to resolve differences over an

agreement Where more expeditious alternative solutions may be found

the parties and the Commission may avoid the cost of litigation The

negotiation process is limited to the filing party and Commission personnel

Shippers other government departments or agencies and other third parties

may not participate in negotiations

SUBPART G OF THE RULES REPORTING AND RECORD

RETENTION REQUIREMENTS

Section 15 of the Act authorizes the Commission to obtain reports from

any common carrier subject to the Act The Commission may also require

a conference to file conference minutes with the Commission Subpart

G contains rules which implement the various record retention and reporting

requirements under the Act Some types of data such as conference minutes

must be submitted directly to the Commission Other Information is required

to be kept by the carrier and an index of the records is required to

be filed with the Commission The Commission seeks to ensure that suffi

cient information is available to satisfy its statutory responsibility to ade

quately monitor the concerted activities of regulated parties

Section 572 701 General Requirements

This section contains certain general requirements which apply to all

reports required by this subpart

Section 572 702 Filing ofReports Related to Shippers Requests and

Complaints and Consultations

The Act requires conferences to provide for a consultation process and

to establish procedures for considering shippers requests and complaints

This section requires the filing of annual reports which will enable the

Commission to determine whether conferences are fulfilling their responsibil

ities under the Act This section reduces current requirements for shipper
700 FEDERAL MARITIME COMMISSION

requests and complaints and establishes new requirements for reporting

on consultations

Section 572 703 Filing of Minutes

This section requires certain agreements to file minutes of meetings

Discussions of certain matters however are exempt from the filing require

ment of this section This section is essentially a continuation of current

requirements

Section 572 704Index of Documents

This section requires that certain agreements maintain an index of certain

documents distributed to member lines Its purpose is to further assist

the Commission in fulfilling its monitoring responsibilities under the Act

The index of documents is essential to the maintenance of effective surveil

lance over concerted ocean carrier activities The Commission merely seeks

the identity of the documents rather than copies of the documents them

selves

Section 572 705 Waiver ofReporting and Record Retention

This section provides for waiver of any of the provisions ofthis subpart

SUBPART H OF THE RULES TRANSmON RULES

This subpart establishes rules dealing with certain transitional matters

involving agreements in existence prior to the effective date of the 1984

Act One purpose of this subpart is to bring existing conference agreements

into conformance with the mandatory provisions for conference agreements

set forth in section 5b of the Act Section 20 d of the Shipping Act

of 1984 46 U S C app 1719 d continues conference agreements pre

viously approved under section 15 of the Shipping Act 1916 as if ap

proved or issued under this Act Even though conference agreements

remain in effect and retain antitrust immunity the legislative history of

the Act supports Commission action to assure that such agreements meet

certain requirements of the Shipping Act of 1984 H R REP No 53

Part 2 98th Cong 1st Sess 33 1983

Conference agreements already contain provisions relating to their purpose

and the admission readmission and withdrawal of members which meet

or may even exceed the requirements of section 5 b in these areas Model

provisions implementing these statutory requirements therefore are not nec

essary However no conference agreement approved under section 15 of

the Shipping Act 1916 fully complies with all of the requirements of

section 5 b Although conferences are free after June 18 1984 to file

amendments in order to comply with section 5 b and implementing rules

issued by the Commission any amendment will only become effective
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 701

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

45 days after filing See section 6 46 U S C app 1705 During the

interim conferences could be in violation of section 5 b In order to

alleviate this potential problem the Commission is prescribing model provi

sions to be incorporated in existing conference agreements during this in

terim period Rather than requiring conferences to file an amendment con

taining the model provisions the Commission is permitting conferences

simply to file a telex followed by a letter or a letter signed by all

parties or their duly authorized representatives evidencing the adoption

of the mandatory provisions contained herein It is not necessary for the

parties to recite verbatim the mandatory provisions contained in

572 801 a through 572 801 e It is sufficient to state that the conference

adopts as a modification to its agreement 572 801 a through 572 801 e

The deadline for adoption is June 18 1984

Section 572 801 Mandatory Provisions in Existing Conference Agreements

Section 5 b of the Act sets forth certain required provisions for all

conference agreements This section provides certain model mandatory pro

visions which if adopted assure that existing conference agreements shall

be fully in conformance with the Act on June 18 1984 and will continue

to remain in effect pursuant to section 20 d ofthe Act

Section 5 b 4 of the Act requires conferences at the request of any

member to require an independent neutral body to police the obligations

of the conference and its members Section 572 801 a assures compliance

with this statutory requirement by including such a provision in a conference

agreement The Commission is removing its current self policing regulations

contained in 46 CFR Part 528 from application to agreements subject

to the 1984 Act and is merely requiring the statement in section 572 801 a

to assure compliance with the 1984 Act To the extent that conferences

do have neutral body policing those provisions are integral to the agreement

and such authority and procedures must be included in the agreement

Section 5 b 5 of the Act requires conferences to contain a provision

which states that the conference is prohibited from engaging in conduct

prohibited by section 10 c 1 or 3 of the Act Section 572 801 b assures

compliance with this requirement

Sections 5 b 6 and 7 of the Act require conferences to provide for

consultation procedures and procedures dealing with shipper s requests and

complaints Sections 572 801 c and 572 801 d assure compliance with this

requirement

Section 5 b 8 of the Act requires every conference agreement to contain

a provision permitting any member to take independent action on any

rate or service item in the conference tariff on not more than 10 days

notice to the conference Section 572 801 e of the rules implements the

independent action requirement of the statute by mandating an independent

action provision The provision makes it clear that once proper notice

is received the conference must include the new rate or service item
702 FEDERAL MARITIME COMMISSION

in its tariff within 10 days or a lesser time if the conference so decides

Other conference members must then be provided the opportunity to adopt

the independent rate or service item on or after its effective date The

provision also prohibits a conference member from taking independent action

on a conference service contract or timevolume contract unless the con

ference agreement specifically provides otherwise Unless otherwise provided

in its agreement the conference may regulate or prohibit its members

from unilaterally entering into such contracts and may also prevent any

member from taking independent action on any service contract and any

time volume contract offered by the conference Section 5b 8

requires

a

right ofindependent action only as to those rate or service items required

to be filed in a tariff under section 8 a of the Act Since service

contracts are governed by section 8 c of the Act and are not required

to be filed in tariffs conference members need not be provided the right

to take action independent of them Consequently the Commission has

accorded the same treatment to timevolume contracts because they are

conceptually so similar to service contracts and to do otherwise might

frustrate the compromise apparent in the statute concerning conference con

trol over the use of service contracts The Commission s interim rule on

contract arrangements does not require time volume contracts to be published

in tariffs and this rule does not require independent action on a conference

timevolume contract unless otherwise provided by the conference Time

volume rates published in tariffs without any underlying contract are subject

to the independent action requirements of the rule

Section 572 802 Mandatory Provision in Existing Interconference

Agreements

This section recites the requirement of section 5 c of the Act that

all interconference agreements must provide for the right of independent

action However given the fact that existing interconference agreements

contain such a provision such agreements are in conformance with the

1984 Act and do not require any modification in order to conform to

section 20 d of the Act

Section 572 803Expiration Dates in Existing Agreements

Existing agreements with specified terms either agreed to by the parties

or previously required by the Commission shall remain in effect after

the effective date of the Act June 18 1984 Action to renew or eliminate

the termination date is subject to the waiting period required in section

6 c of the Act Parties are advised to file modifications for renewal or

elimination of a termination date sufficiently in advance to guarantee expira

tion of the waiting period during the term of the existing agreement in

order to avoid any lapse in authority

tIn
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 703

CARRIERS ET AL SUB TO THE SHIPpiNG ACT OF 984

SUBPART I OF THE RULES PENALTIES

This subpart provides for the application ofpenalties for certain violations

of the rules of this part pursuant to section 13 a ofthe Act

Section 572 901 Failure to File

Failure to file an agreement is a violation of section 5 a of the Act

and the rules of Subpart C Such failure is subject to the penalties of

section 13 a of the Act Maximum penalties are 5 000 for each violation

unless the violation was willfully and knowingly committed in which case

the maximum penalty is 25 000 for each violation

Section 572 902 Falsification of Reports

Falsification of any report required by the Act and these rules including

falsification of any item on the Information Form will be subject to the

civil penalties set forth in section 13 a of the Act Such violations may

also be subject to criminal sanctions under 18 D S C 1001

APPENDIX A TO THE RULES INFORMATION FORM

Parties to agreements referenced in Section 572 201 excluding assess

ment agreements marine terminal agreements and those agreements exempt

ed from the filing of the Information Form pursuant to Subpart C of

these rules by or among ocean common carriers shall be required to

file with each agreement an Information Form Form The Information

Form is attached as Appendix A to Part 572

Section 6 gof the Act states that the Commission may file suit to

enjoin an agreement if it determines that the agreement is likely by

a reduction in competition to produce an unreasonable reduction in transpor

tation service or an unreasonable increase in transportation costs The

legislative history provides guidance on the kind ofanalysis which Congress

expected the Commission to make under the general standard H R Rep

No 98600 98th Cong 2d Sess 33 37 1984 Such an analysis may

include a consideration of the relevant market including all competitive

transportation alternatives and the share of that market possessed by the

parties The Commission is required to consider the likely impact of the

agreement on costs and services to shippers and to ports and to weigh

any negative impact on costs or services against other offsetting benefits

such as any efficiency creating aspects of the agreement and the ability

of a conference to address problems of overcapacity and rate instability

In general Congressional intent is clear that before the Commission inter

cedes under the general standard the likely reduction in competition result

ing from the agreement should be substantial

The Information Form is intended to furnish the Commission with the

information necessary to make the initial substantive review of an agreement

under the general standard Given the statutory 45 day period before a
704 FEDERAL MARITIME COMMISSION

filed agreement becomes effective and limited Commission resources the

Form was designed to capture information that would enable the Commis

sion to perform its responsibilities expeditiously under section 6 g

of the

Act The Form is not intended to elicit all potentially relevant information

concerning an agreement but only that information which is necessary

limited to the issues at hand and not unduly burdensome The nature

of a particular agreement will determine the extent of information required

Relevant information not specifically requested by any part of the Form

may be obtained where necessary by a request for additional information

under section 6d of the Act The Commission recognizes that the amount

of information requested on the Information Form is significant These

information needs may be refined as the Commission gains experience

under the general standard and determines what is relevant and essential

to that review In addition the Commission plans to develop its own

internal sources of trade information and as this information becomes avail

able may be able to reduce the amount of information required on the

Form The Commission wishes to emphasize that the quantum of informa

tion required on the Form is not meant to shift the burden of proof to

the parties to an agreement The Commission fully recognizes that the

statute places the burden of proof on the Commission in any injunctive

proceeding under the general standard At this point the Form reflects

the Commission s preliminary determination as to the information it will

need to carry out the review functions under the Act Finally it should

be noted that where the parties are unable to complete a particular item

the rules provide that completion of that item will not be required provided

that an adequate explanation is given

A completed Form must accompany all agreements referenced in Section

572 201 excluding assessment agreements marine terminal agreements and

those agreements exempted from the filing of the Information Fonn pursuant

to Subpart C of these rules by or among ocean common carriers that

are required to be filed with the Commission Agreements that do not

provide for rate fixing ie concerted actions fixing or agreeing on rates

pooling or joint servicesconsortia are not required to complete Parts III

and IV which seek information on market shares and market competition

These three types of agreements of all agreements historically filed with

the Commission are the most likely to trigger the 6 gstandard because

of their potential to create excessive market power Market power is the

ability to set and maintain prices that yield above normal profits over

a sustained period of time Where new IiUld evolving forms of cooperative

conduct cause substantial anticompetitive effects that exceed their benefits

it is believed that either rate fixing pooling or a joint serviceconsortium

or some combination thereof will be involved This does not however

preclude the Commission from assessing the anticompetitive consequences

of other types of agreements and taking the appropriate action under the

general standard
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 705

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

While there may be occasions when rate fixing pooling joint service

consortium or other types of agreements may lead to excessive market

power raising substantial issues of unreasonably anticompetitive effects

excessive market power is most likely to occur in trades where foreign

governments restrict entry to the trade or access to cargoes Given the

contestability of markets in the liner shipping Industry where contestability

in the liner industry is indicated by the industry s history of frequent

entry and exit and the mobility of its resources from one trade to another

in all but the rarest cases only government laws decrees rules regulations

or other governmental actions can effectively block entry to a trade Accord

ingly Part VI of the Form requests information that would permit the

Commission to assess the extent of foreign government involvement in

the liner market

Part V requests information about U S ports proposed to be served

under the agreement and any reduction in service frequency or the elimi

nation of service to certain U S ports Part V is intended to address

that aspect of the section 6 g general standard concerning certain agree

ments that might produce an unreasonable reduction in transportation serv

ice

Part VII of the Form requests information on any benefits resulting

from the agreement that may accrue to the parties the shipping public

or to U S commerce generally This part is included in the Form in

response to congressional intent that the Commission in its review of

an agreement under the section 6 g general standard should consider that

increases in efficiency may offset a reduction in competition

III Conclusion

The rules contained in Part 572 and the accompanying Information Form

are intended to establish a comprehensive regulatory framework which ful

fills the purposes of the Shipping Act of 1984 The rules are intended

to facilitate the filing of agreements by parties and the review of agreements

by the Commission with a minimum of government intervention and regu

latory cost

The Chairman of the Commission certifies pursuant to section 605 b

of the Regulatory Flexibility Act 5 U S c 601 et seq that these rules

will not have a significant economic impact on a substantial number of

small entities within the meaning of that Act The primary economic impact

of these rules would be on ocean common carriers which generally are

not small entities A

secondary impact may fall on shippers some of

whom may be small entities but that impact is not considered to be signifi

cant

The collection ofinformation requirements in these rules and the Informa

tion Form have been submitted to the Office of Management and Budget

OMB for review under section 3504 h of the Paperwork Reduction Act

of 1980 44 U S C 3504 h Comments on the information collection as
706 FEDERAL MARITIME COMMISSION

pects of the rules should be submitted to the Office of Information and

Regulatory Affairs Office of Management and Budget Washington D C

20503 Attention Desk Officer for the Federal Maritime Commission

List of subjects in 46 CPR Part 572 Antitrust ContraCts Maritime

carriers Administrative practice and procedure Rates and fares Reporting

and recordkeeping requirements

THEREFORE pursuant to section 4 of the Administrative Procedure

Act 5 U S C 553 and sections 2 3 4 5 6 7 8 10 II 13 15

16 17 and 18 of the Shipping Act of 1984 46 U S C app 1701 1702

1703 1704 1705 1706 1707 1709 1710 1712 1714 1715 1716 and

1717 the Federal Maritime Commission hereby amends Title 46 Code

of Federal Regulations by adding new Part 472 to Subchapter D to read

as follows

PART 572 AGREEMENTS BY OCEAN COMMON CARRIERS AND

OTHER PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

Sec

572101

572 102

572 103

572 104

572 201

572 202

572 203

572 204

572 205

572 206

572 207

572 208

572 301

572 302

572 303

572 304

572 305

Subpart AGeneral Provisions

Authority

PUrpose

Policies

Definitions

Subpart BScope

Agreements By or Among Ocean Common Carriers

Marine Terminal Operator Agreements Involving Foreign Com

merce

Marine Terminal Operator Agreements Exclusively in Interstate

Commerce

Common Carrier Terminal Agreements

Non Vessel Operating Common Carrier Agreements

Ocean Freight Forwarder Agreements

Maritime LaborAgreements

Acquisitions

Subpart C Exemptions and Exclusions

Exemption Procedures

Foreign Inland Transportation AgreementsExclusion

Foreign Marine Terminal AgreementsExclusion

Non Substantive Modifications to Existing Agreements Exemp

tion

Husbanding AgreementsExemption
572 306

572 307

572308

572 309

572 310

572 401

572 402

572 403

572 404

572 405

57201

5720

572 1

572 602

572 603

572 604

572 605

572 606

572 607

572 608

572 609

572 701

572 702

572 703

572 104

572 705

572 801

572 802

572 803

RULES GOVERNING AGREEMENTS BY OCEAN COMMON 707

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Agency Agreements Exemption

Equipment Interchange Agreements Exemption

Joint Policing Agreements Exemption

Credit Information Agreements Exemption

Nonexclusive Transshipment Agreements Exemption

Subpart DFiling and Form of Agreements

Filing of Agreements

Form ofAgreements

Modification of Agreements

Application for Waiver

Information Form

Subpart E Content and Organization of Agreements

Agreement Provisions Organization

Organization ofConference and Interconference Agreements

Subpart F Action on Agreements

Preliminary Review Rejection of Agreements

Federal Register Notice

Comment

Waiting Period

Requests For Expedited Approval

Requests For Additional Information

Failure To Comply With Requests for Additional Information

Confidentiality of Submitted Material

Negotiations

Subpart G Reporting and Record Retention Requirements

General Requirements

Filing of Reports Related to Shippers Requests and Complaints

and Consultations

Filing of Minutes

Index of Documents

Waiver ofReporting and Record Retention

Subpart H Transitional Rules

Mandatory Provisions in Existing Conference Agreements

Mandatory Provision in Existing Interconference Agreements

Expiration Dates in Existing Agreements
708 FEDERAL MARITIME COMMISSION

Subpart I Penalties

572 901

572 902

Failure to File

Falsification of Reports

Appendix Ato Part 572

Infonnation Fonn and Instructions

Authority Sections 2 3 4 5 6 7 8 10 11 13 15 16 17 and

18 of the Shipping Act of 1984 46 U S C app 1701 1702 1703 1704

1705 1706 1707 1709 1710 1712 1714 1715 1716 and 1717

Subpart AGeneral Provisions

572 101 Authority

The rules in this part are issued pursuant to the authority of section

4 of the Administrative Procedure Act 5 U S C 553 and sections 2

3 4 5 6 7 8 10 11 13 15 16 17 and 18 of the Shipping Act

of 1984 the Act

572 102 Purpose

These rules implement those provisions of the Act which govern agree

ments by or among ocean common carriers and other entities subject to

the filing requirements of the Act and set forth more specifically certain

procedures provided for in the Act

572 103 Policies

a The Shipping Act of 1984 requires that agreements be processed

and reviewed according to strict statutory deadlines These rules are intended

to establish procedures for the orderly and expeditious review of filed

agreements in accordance with the statutory requirements

b The Act requires that agreements be reviewed in accordance with

a general standard as set forth in section 6

g

of the Act and empowers

the Commission to obtain certain infonnation to conduct that review These

rules set forth the kind of infonnation for particular types of agreements

which the Commission believes relevant to that review Only that infonna

tion which is relevant to a 6

g

review is requested It is the policy

of the Commission to keep the costs of regulation to a minimum and

at the same time obtain infonnation needed to fulfill its statutory responsibil

ity

c In order to further the goal of expedited processing and review

agreements are required to meet certain minimum requirements as to fonn

These requirements are intended to ensure expedited review and should

assist parties in preparing agreements These requirements as to fonn do

not affect the subtance of an agreement and are intended to allow parties

the freedom to develop innovative commercial relationships and provide

efficient and economic transportation systems
RULES GOVERNING AGREEMENTS BY qCEAN COMMON 709

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

d The Act itself excludes certain agreements from filing requirements

and authorizes the Commission to exempt other classes of agreements from

any requirement of the Act or these rules In order to minimize delay

in implementation of routine agreements and to avoid the private and public

cost of unnecessary regulation the Commission is exempting certain classes

of agreements from the filing or information requirements of these rules

e Under the new regulatory framework established by the Act the

role of the Commission as a monitoring and surveillance agency has been

enhanced The Act favors greater freedom in allowing parties to form

their commercial arrangements This however requires greater monitoring

of agreements after they have become effective The Act empowers the

Commission to impose certain recordkeeping and reporting requirements

These rules identify those classes of agreements which require specific

record retention and reporting to the Commission and prescribe the applica

ble period of record retention the form and content of such reporting

and the applicable time periods for filing with the Commission These

rules assure that Commission monitoring responsibilities will be fulfilled

f The Act requires that conference agreements must contain certain

mandatory provisions These rules provide a means for immediate compli

ance and grandfathering of existing agreements on the effective date of

the new statute by a simple acceptance of model provisions by letter

or telex on or before June 18 1984 These rules also provide that con

ferences may file their own modifications to meet these statutorily man

dated provisions on or after June 18 1984 As the conference sponsored

modifications or agreements become effective after the statutory review

period the model provisions would be superseded

572 104 Definitions

When used in this part

a Agreement The term agreement means an understanding arrange

ment or association written or oral including any modification or appendix

entered into by or among ocean common carriers andor marine terminal

operators but does not include amaritime labor agreement

b Antitrust Laws The term antitrust laws means the Act of July

2 1890 ch 647 26 Stat 209 as amended the Act of October 15

1914 ch 323 38 Stat 730 as amended the Federal Trade Commission

Act 38 Stat 717 as amended sections 73 and 74 of the Act of August

27 1894 28 Stat 570 as amended the Act of June 19 1936 ch

592 49 Stat 1526 as amended the Antitrust Civil Process Act 76 Stat

548 as amended and amendments and Acts supplementary thereto

c Appendix The term appendix means a document containing addi

tional material of limited application and appended to an agreement dis

tinctly differentiated from the main body of the basic agreement

d Assessment Agreement The term assessment agreement means

an agreement whether part of a collective bargaining agreement or nego

tiated separately to the extent that it provides for the funding of collectively

26 F M C
710 FEDERAL MARITIME COMMISSION

bargained fringe benefit obligations on other than a unifonn man hour

basis regardless of the cargo handled or type of vessel or equipment

utilized

e Common Carrier The tenn common carrier means a person hold

ing itself out to the general public to provide transportation by water

of passengers or cargo between the United States and a foreign country

for compensation that lassumes responsibility for the transportation from

the port or point of receipt to the port or point of destination and 2

utilizes for all or part of that transportation a vessel operating on the

high seas or the Great Lakes between a port in the United States and

a port in a foreign country

t Conference Agreement The tenn conference agreement means an

agreement between or among two or more ocean common carriers or be

tween or among two or more marine tenninal operators for the conduct

or facilitation of ocean common carriage and which provides for I

the

fixing and adherence to unifonn rates charges practices and conditions

of service relating to the receipt carriage handling andor delivery of

passengers or cargo for all members 2 the establishment of a central

organization to conduct the collective administrative affairs of the group

and may include 3 the filing of a common tariff in the name of the

group and in which all the members participate or in the event of multiple

tariffs each member must participate in at least one such tariff The tenn

does not include consortium joint service pooling sailing or transshipment

agreements

g Consultation The tenn consultation means a process whereby

a conference and a shipper confer for the purpose of resolving commercial

disputes or preventing and eliminating the occurrence ofmalpractices

h Cooperative Working Agreement The tenn cooperative working

agreement means an agreement which establishes exclusive preferential

or cooperative working relationships which are subject to the Shipping

Act of 1984 but which do not fall precisely within the arrangements

of any specifically defined agreement

i Effective Agreement The tenn effective agreement means an agree

ment approved pursuant to section 15 of the Shipping Act 1916 or filed

and effective pursuant to sections 5 and 6 ofthe Act

jEqual Access Agreement The tenn equal access agreement means

an agreement between ocean common carriers of different nationalities

as detennined by the incorporation or domicile of the carriers operating

companies whereby such common carriers associate for the purpose of

gaining reciprocal access to cargo which is ltherwise reserved by national

decree legislation statute or regulation to carriage by the merchant marine

of the carriers respective nations

k Independent Neutral Body The tenn independent neutral body

means a disinterested third party authorized by a conference and its mem

bers to review examine and investigate alleged breaches or violations by

26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 711

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

any agreement member of the conference agreement and or the agreement s

properly promulgated tariffs rules or regulations

1 Information Form The term Information Form means the form

containing economic information which must accompany the filing of certain

kinds of agreements

m Interconference Agreement The term interconference agreement

means an agreement between conferences serving different trades

n Joint Service Consortium Agreement The term joint service consor

tium agreement means an agreement between ocean common carriers oper

ating as a joint venture whereby a separate service is established which

1 holds itself out in its own distinct operating name 2 fixes its own

rates charges practices and conditions of service 3 publishes its own

tariff s in its own operating name 4 issues its own bills of lading

and 5 acts generally as a single carrier The common use of facilities

may occur and there is no competition between members for traffic in

the agreement trade but they otherwise maintain their separate identities

0 Marine Terminal Facilities The term marine terminal facilities

means one or more structures and services connected therewith comprising

a terminal unit including but not limited to docks berths piers aprons

wharves warehouses covered andor open storage space cold storage plants

grain elevators andor bulk cargo loading andor unloading structures land

ings and receiving stations used for the transmission care and convenience

of cargo andor passengers or the interchange of same between land and

ocean common carriers or between two ocean common carriers This term

is not limited to waterfront or port facilities and includes so called off

dock container freight stations at inland locations and any other facility

from which inbound waterborne cargo may be tendered to the consignee

or outbound cargo is received from shippers for vessel or container loading

p Marine Terminal Operator The term marine terminal operator

means a person engaged in the United States in the business of furnishing

wharfage dock warehouse or other terminal facilities in connection with

a common carrier

q

Maritime Labor Agreement The term maritime labor agreement

means a collective bargaining agreement between an employer subject to

this Act or group of such employers and a labor organization representing

employees in the maritime or stevedoring industry or an agreement pre

paratory to such a collective bargaining agreement among members of a

multiemployer bargaining group or an agreement specifically implementing

provisions of such a collective bargaining agreement or providing for the

formation financing or administration of a multiemployer bargaining group

but the term does not include an assessment agreement

r Modification The term modification means any change alteration

correction addition deletion cancellation or revision of an existing effective

agreement including such changes to appendices to an agreement

26 FM C
712 FEDERAL MARITIME COMMISSION

s Non VesseL Operating Common Ca ier The term non vessel operat

ing common carrier means a common carrier that does not operate the

vessels by which the ocean transportation portion is provided and is a

shipper in its relationship with an ocean common carrier

t Ocean Common Carrier The term ocean common carrier means

a vessel operating common carrier but the term does not include one en

gaged in ocean transportation by ferry boat or an ocean tramp

u Ocean Freight Forwarder The term ocean freight forwarder means

a person in the United States that I dispatches shipments from the United

States via common carriers and books or otherwise arranges space for

those shipments on behalf of shippers and 2 processes the documentation

or performs related activities incident to those shipments

v Person The term person means individuals corporations partner

ships and associations existing under or authorized by the laws of the

United States or of a foreign country

w Pooling Agreement The term pooling agreement means an agree

ment between ocean common carriers which provides for the division of

cargo carryings earnings or revenue andor losses between the members

in accordance with an established formula or scheme

x Port The term port means the place at which an ocean common

carrier originates or terminates andor transships its actual ocean carriage

of cargo or passengers as to any particular transportation movement

y Sailing Agreement The term sailing agreement means an agreement

between ocean common carriers which provides for the rationalization of

service by establishing a schedule of ports which each carrier will serve

andor the frequency of each carrier s calls at those ports

z Service Contract The term service contract means a contract be

tween a shipper and an ocean common carrier or conference in which

the shipper makes a commitment to provide a certain minimum quantity

of cargo over a fixed time period and the ocean common carrier or con

ference commits to a certain rate or rate schedule as well as a defined

service level such as assured space transit time port rotation or similar

service features the contract may also specify provisions in the event

of nonperformance on the part ofeither party

aa Shipper The term shipper means an owner or person for whose

account the ocean transportation of cargo is provided or the person to

whom delivery is to be made

bb Shippers Association The term shippers association means a

group of shippers that consolidates or distributes freight on a nonprofit

basis for the members of the group in order to secure carload truckload

or other volume rates or service contracts

cc Shippers Requests and Complaints The term shippers requests

and complaints means a communication from a shipper to a conference

requesting a change in tariff rates rules regulations or service protesting

or objecting to existing rates rules regulations or service objecting to

26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 713

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

rate increases or other tariff changes andor protests against allegedly erro

neous tariff implementation Routine information r quests are not included

in the term

dd Space Charter Agreement The term space charter agreement

means an agreement between ocean common carriers whereby a carrier

or carriers agrees to provide vessel capacity for the use of another carrier

or carriers in exchange for compensation or services The arrangement

may include arrangements for equipment interchange and receiptdelivery

of cargo

ee Through Transportation The term through transportation means

continuous transportation between origin and destination for which a through

rate is assessed and which is offered or performed by one or more carriers

at least one of which is an ocean common carrier between a United

States point or port and a foreign point or port

ft Transshipment Agreement The term transshipment agreement

means an agreement between an ocean common carrier serving a port

or point of origin and another such carrier serving a port or point of

destination whereby cargo is transferred from one carrier to another carrier

at an intermediate port served by direct vessel call of both such carriers

in the conduct of through transportation Such an agreement does not pro

vide for the concerted discussion publication or otherwise fixing of rates

for the account of the cargo interests conditions of service or other tariff

matters other than the tariff description ofthe transshipment service offered

the port of transshipment and the participation of the nonpublishing carrier

Subpart B Scope

572 201 Agreements By or Among Ocean Common Carriers

These rules apply to agreements by or among ocean common carriers

to

a Discuss fix or regulate transportation rates including through rates

cargo space accommodations and other conditions of service

b Pool or apportion traffic revenues earnings or losses

c Allot ports or restrict or otherwise regulate the number and character

of sailings between ports

d Limit or regulate the volume or character of cargo or passenger

traffic to be carried

e Engage in exclusive preferential or cooperative working arrangements

among themselves or with one or more marine terminal operators or non

vessel operating common carriers

t

Control regulate or prevent competition in International ocean trans

portation and

g Regulate or prohibit their use of service contracts

f F M r
714 FEDERAL MARITIME COMMISSION

572 202 Marine Terminal Operator Agreements Involving Foreign Com

merce

These rules apply to agreements to the extent the agreements involve

ocean transportation in the foreign commerce of the United States among

marine terminal operators and among one or more marine terminal operators

and one or more ocean common carriers to

a Discuss fix or regulate rates or other conditions of service and

b Engage in exclusive preferential or cooperative working arrange

ments

572 203 Marine Terminal Operator Agreements Exclusively in Interstate

Commerce

These rules do not apply to agreements by or among marine terminal

operators which exclusively and solely involve transportation in the interstate

commerce of the United States

572 204 Common Carrier Terminal Agreements

These rules do not apply to agreements among common carriers to estab

lish operate or maintain a terminal in the United States

572 205 Nonvessel Operating Common Carrier Agreements

These rules do not apply to agreements by or among non vessel operating

common carriers

572 206 Ocean Freight Forwarder Agreements

These rules do not apply to agreements by or among ocean freight

forwarders

572 207 Maritime Labor Agreements

These rules do not apply to maritime labor agreements

572 208 Acquisitions

These rules do not apply to an acquisition by any person directly or

indirectly of any voting security or assets of any other person

Subpart C Exemptions and Exclusions

572 301 Exemption Procedures

a Authority The Commission upon application or on its own motion

may by order or rule exempt for the future any class of agreements between

persons subject to this Act from any requirement of the Act if it finds

that the exemption will not substantially impair effective regulation by

the Commission be unjustly discriminatory result in substantial reduction

in competition or be detrimental to commerce The antitrust laws do not

apply to any agreement exempted from any requirement of the Act includ

ing filing and Information Form requirements

b Optional Filing Notwithstanding any exemption from filing Informa

tion Form or other requirements of the Act and these rules any party

to an exempt agreement may file such an agreement with the Commission

26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 715

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

C Application for Exemption Any person may apply for an exemption

or revocation of any class of agreements or an individual agreement pursuant

to section 16 of the Act and the rules of this subpart An application

for exemption shall state the particular requirement of the Act for which

exemption is sought The application shall also include a statement of

the reasons why an exemption should be granted or revoked and shall

provide information relevant to any finding required by the Act Where

an application for exemption of an individual agreement is made the appli

cation shall include a

copy of the agreement

d Participation by Interested Persons No order or rule of exemption

or revocation of exemption may be issued unless opportunity for hearing

has been afforded interested persons and departments and agencies of the

United States

e Federal Register Notice Notice of any proposed exemption or revoca

tion of exemption whether upon application or upon the Commission s

own motion shall be published in the Federal Register The notice shall

include

1 A short title for the proposed exemption or the title of

the existing exemption

2 The identity of the party proposing the exemption or seeking

revocation

3 A concise summary of the agreement or class of agreements

for which exemption is sought or the exemption which is to

be revoked

4 A statement that the application and any accompanying

information are available for inspection in the Commission s of

fices in Washington D C and

5 The final date for filing comments regarding the application

f

Retention of Agreement by Parties Any agreement which has been

exempted by the Commission pursuant to section 16 of the Act and any

agreement excluded from filing by the Act shall be retained by the parties

and shall be available upon request by the Bureau of Agreements and

Trade Monitoring for inspection during the term of the agreement and

for a period of three years after its termination

572 302 Foreign Inland Transportation Agreements Exclusion

a A foreign inland transportation agreement is any agreement concerning

the foreign inland segment of through transportation that is part of transpor

tation provided in aUnited States import or export trade

b A foreign inland transportation agreement is excluded from the filing

and Information Form requirements of the Act and these rules

572 303 Foreign Marine Terminal Agreements Exclusion

a A foreign marine terminal agreement is any agreement to provide

or furnish wharfage dock warehouse or other terminal facilities outside

the United States

D AA r
716 FEDERAL MARITIME COMMISSION

b A foreign marine terminal agreement is excluded from the filing

and Information Form requirements of the Act and these rules

572 304 Non substantive Modifications to Existing AgreementsExemp

tion

a A non substantive modification to an existing agreement is an agree

ment between ocean common carriers andor marine terminal operators

acting individually or through approved agreements which concerns the

procurement maintenance or sharing of office facilities furnishings equip

ment and supplies the allocation and assessment of the costs thereof or

the provisions for the administration and management of such agreements

by duly appointed individuals

b A copy of the non substantive modification shall be submitted for

information purposes in the proper format but is otherwise exempt from

the Information Form notice and waiting period requirements of these

rules

572 305 Husbanding AgreementsExemption

a A husbanding agreement is an agreement between a principal and

an agent both of which are subject to the Act which provides for the

agent s handling of routine vessel operating activities in port such as notify

ing port officials of vessel arrivals and departures ordering pilots tugs

and linehandlers delivering mail transmitting reports and requests from

the Master to the owner operator dealing with passenger and crew matters

and providing similar services related to the above activities The term

does not include an agreement which provides for the solicitation or booking

of cargoes signing contracts or bills of lading and other related matters

nor does it include an agreement that prohibits the agent from entering

into similar agreements with other carriers

b A husbanding agreement is exempt from the filing and Information

Form requirements of the Act and these rules

572 306 Agency Agreements Exemption

a An agency agreement is an agreement between a principal and an

agent both of which are subject to the Act which provides for the agent s

solicitation and booking of cargoes and signing contracts of affreightment

and bills of lading on behalf of an ocean common carrier Such an agree

ment mayor may not also include husbanding service functions and other

functions incidental to the performance of duties by agents including proc

essing of claims maintenance of a container equipment inventory control

system collection and remittance of freight and reporting functions

b An agency agreement between persons subject to the Act except

those I where a common carrier is to be the agent for a competing

carrier in the same trade or 2 which permit an agent to enter into

similar agreements with more than one carrier in a trade is exempt from

the filing and Information Form requirements of the Act and these rules

26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 717

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 984

572 307 Equipment Interchange Agreements Exemption

a An equipment interchange agreement is an agreement between two

or more ocean common carriers for the exchange of empty containers

chassis empty LASH SEABEE barges and related equipment and for the

transportation of the equipment as required payment therefor management

of the logistics of transferring handling and positioning equipment its

use by the receiving carrier its repair and maintenance damages thereto

and liability incidental to the interchange of equipment

b An equipment interchange agreement is exempt from the filing and

Information Form requirements of the Act and these rules

572 308 Joint Policing Agreement Exemption

a A joint policing agreement is an agreement

1 Between or among i

two or more common carriers by

water ii two or more associations of common carriers by water

each operating pursuant to an effective agreement subject to the

Act or iii one or more common carriers by water and one

or more such associations and

2 Which provides that its parties may discuss and agree upon any

of the following i the employment of cargo inspection andor self policing

services ii the establishment of rules and procedures relating thereto

including the collection of delinquent freight and other tariff charges

iii the allocation of the costs of such services and iv the administration

and management of cargo inspection andor self policing

b Ajoint policing agreement is exempt from the filing and Information

Form requirements ofthe Act and these rules

c This exemption shall expire 30 days from the issuance of the final

rule which supersedes this interim rule

572 309 Credit Information Agreements Exemption

a A credit information agreement is an agreement between ocean com

mon carriers or their duly appointed representatives which provides for

the collection compilation and exchange of credit experience information

b A credit information agreement is exempt from the filing and Informa

tion Form requirements of the Act and these rules subject to the condition

contained in 572 309 c

c Under such an agreement the parties cannot discuss or agree on

any matter which is required to be published in a tariff pursuant to the

Shipping Act of 1984 or any rule published pursuant thereto

d This exemption shall expire 30 days from the issuance of the final

rule which supersedes this interim rule

572 3I0 Nonexclusive Transshipment Agreements Exemption

a A nonexclusive transshipment agreement is an agreement by which

one ocean common carrier serving a

port of origin by direct vessel call

and another such carrier serving a port of destination by direct vessel
718 FEDERAL MARITIME COMMISSION

call provide transportation between such ports via an intennediate port

served by direct vessel call of both such carriers and at which cargo

will be transferred from one to the other and which agreement does not

1 prohibit either carrier from entering into similar agreements with other

carriers 2 guarantee any particular volume oftraffic or available capacity

or 3 provide for the discussion or fixing of rates for the account of

the cargo interests conditions of service or other tariff matters other than

the tariff description of the service offered as being by means of trans

shipment the port of transshipment and the participation of the nonpublish

ing carrier

b A nonexclusive transshipment agreement is exempt from the filing

and Infonnation Fonn requirements of the Act and these rules provided

that the tariff provisions set forth in 572 310 c and the content require

ments of 572 31O d are met

c The applicable tariff or tariffs shall provide

1 The through rate

2 The routings origin transshipment and destination ports

additional charges if any i e port arbitrary andor additional trans

shipment charges and participating carriers and

3 A tariff provision substantially as follows The rules regula

tions and rates in this tariff apply to all transshipment arrange

ments between the publishing carrier or carriers and the participat

ing connecting or feeder carrier Every participating connecting

or feeder carrier which is a party to transshipment arrangements

has agreed to observe the rules regulations rates and routings

established herein as evidenced by a connecting carrier agreement

between the parties

d Nonexclusive transshipment agreements must contain the entire ar

rangement between the parties must contain a declaration of the nonexclu

sive character of the arrangement and may provide for

1 the identification of the Parties and the specification of

their respective roles in the arrangement

2 a specification of the governed cargo

3 the specification of responsibility for the issuance of bills

of lading and the assumption of common carriage associated li

abilities to the cargo interests

4 the specification of the origin transshipment and destination

ports

5 the specification of the governing tariff s and provision

for their succession

6 the specification of the particulars of the nonpublishing

carrier s concurrence participation in the tariff of the publishing

carrier

7 the division of revenues earned as a

consequence of the

described carriage
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 719

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

8 the division of expenses incurred as a

consequence of the

described carriage

9 termination andor duration of the agreement

10 intercarrier indemnification or provision for intercarrier li

abilities consequential to the contemplated carriage and such docu

mentation as may be necessary to evidence the involved obliga

tions

1 I the care handling and liabilities for the interchange of

such carrier equipment as may be consequential to the involved

carriage

12 such rationalization of services as may be necessary to

ensure the cost effective performance of the contemplated carriage

and

13 such agency relationships as may be necessary to provide

for the pickup andor delivery of the cargo

e No subject other than as listed in paragraph d of this section

may be included in exempted nonexclusive transshipment agreements

Subpart DFiling and Form ofAgreements

572 401 Filing ofAgreements

a All agreements subject to these rules shall be submitted during regular

business hours to the Secretary Federal Maritime Commission Washington

D C 20573 Such filing shall consist of a true copy and 15 additional

copies ofthe agreement and where applicable the accompanying completed

Information Form Agreements must be filed by a

responsible official whose

authority is expressly provided for in the agreement or by an agent appointed

by the agreement When an agent is employed an appropriate delegation

of authority must either be on file with the Commission or be submitted

with the agreement matter being tendered for filing

b A filing shall also include a letter of transmittal which summarizes

the agreement s contents In the case of a modification to an existing

basic agreement the letter shall include the full name of the agreement

and Commission assigned number of the basic agreement and the revision

page or appendix number The letter of transmittal shall be signed by

the filing party and shall show immediately below the signature the name

position business address and telephone number ofthe filing party

c Any agreement and accompanying Information Form which does not

meet the requirements of filing shall be rejected in accordance with 572 601

d Assessment agreements shall be filed and shall become effective

upon filing Assessment agreements need not be accompanied by an Infor

mation Form

572 40 Form of Agreements

The requirements of this section apply to all agreements except for

marine terminal agreements and assessment agreements

t r r
720 FEDERAL MARITIME COMMISSION

a Agreements shall be clearly and legibly typewritten on one side

only of 81f2 inch by 11 inch durable white loose leaf paper providing

a margin of not less than three quarters of an inch on all edges

b The first page of every agreement andor appendix shall be the

Title Page and all pages subsequent to the Title Page shall be consecutively

numbered beginning with Page 1 The first edition of anyone page shall

be designated in the upper right hand comer as Original Page No

The Title Page shall contain

1 the full name of the agreement

2 once assigned the Commission assigned agreement number

3 the generic classification of the agreement in confonnity

with the definitions in 572 104

4 the date on which the entire agreement was last republished

as required by 572 403 g

5 if applicable the currently effective expiration date of the

agreement andor any specific provision

c Face agreement page including appendices shall be identified by

printing the agreement s doing business as name and once assigned

the applicable Commission assigned agreement number at the top of the

page

d Each agreement appendix andor modification filed will be accom

panied by a separate signature page appended as the last page of the

item which is signed in the original by each of the parties personally

or by an authorized representative providing immediately below each such

signature the typewritten full name of the signing party and their position

including organizational affiliation

e The body of the agreement shall contain

1 Immediately following the Title Page a Table of Contents

providing for the location of all agreement provisions

2 Following the Table of Contents the body of the agreement

setting forth the operative provisions of the agreement in the

order prescribed by 572 502 Any additional materiaVprovisions

shall be set forth as consecutively numbered articles

t Any nonsubstantive provisions as defined in 572 304 of this part

may be separated from the main body of the agreement text by the inclusion

of an Appendix to the agreement Such appendices must comply with

the fonnat requirements of paragraphs a and c of this section Such

appendices are to be serialized alphabetically with the first such Appendix

being designated on its first page as Appendix A

572 403 Modification ofAgreements

The requirements of this section apply to all agreements except for

marine tenninal agreements and assessment agreements
RULES GOVERNING AGREEMENTS y OCEAN COMMON 721

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

a Agreement modifications shall be filed in accordance with the provi

sions of 572 40 I in the format specified in 572 402 and this section

and accompanied by an Information Form The Information Form shall

be completed as it pertains to significant modifications of the agreement

Significant modifications for the purposes of this section are those that

may result in a reduction in competition Such modifications include but

are not limited to changes in geographic scope additions to the number

of parties reductions in service levels changes in the allocation of pooled

revenues or cargoes or changes in pool penalty provisions or carrying

charges

b Agreement modifications shall be made by reprinting the entire page

on which the matter being changed is published Such modified pages

shall be designated as revised pages and shall publish in the upper

right hand corner of the new page the consecutive denomination of the

revision e gIst Revised Page 5

c If a modification exceeds the page being modified and the parties

do not wish to modify the entire agreement the additional material may

be published on an original page designated with the same number as

the page being modified and an alphabetical suffix ie Original Page

5a

d The language being modified shall be indicated as follows

1 language being deleted or replaced shall be indicated by

being struck through and

2 new and initial or replacement language shall immediately

follow the language being superseded and be underlined

e When a revised or new page is revised or the entire agreement

is reissued the change indications in paragraphs d 1 and 2 of this

section are to be deleted from the republished pages

f

If a modification requires the relocation of the provisions of the

agreement such modification shall be accompanied by a revised Table

of Contents page which shall report the new location of the agreement s

provisions

g Not later than two years after the last modification to the agreement

the entire agreement shall be republished incorporating such modifications

as have been made and superseding the previous edition of the agreement

Such republished agreement will be filed with the Commission in accordance

with the filing except as hereinafter noted format and content requirements

of this part and shall contain nothing other than the previously effective

language and such nonsubstantive modifications as are necessary to accom

plish the republication It is not required that the filing of such republished

agreements be accompanied by the Information Form or that they be filed

in more than an executed original true copy
722 FEDERAL MARITIME COMMISSION

572 404 Application for Waiver

a Upon a showing of good cause the Commission may waive the

form requirements of 572 401 572 407 and 572 403

b Requests for permission to depart from the form requirements of

this subpart must be submitted in advance of the filing or submission

of the materials to which the requested waiver would apply and must

state the specific regulation from which relief is sought the special cir

cumstances requiring the requested relief and the beneficial results antici

pated to be obtained from the requested waiver

572 405 Information Form

a Except for marine terminal agreements and assessment agreements

the information required by the Commission for review of an agreement

shall be provided in the Information Form set forth in the Appendix to

this part The filing party to an agreement subject to the Act shall complete

and submit the Information Form or a photostatic or equivalent reproduction

thereof at the time that an agreement is filed The Information Form

shall be completed in accordance with the instructions therein and these

rules Copies of the Form may be obtained in person at the Office of

the Secretary or by writing to the Secretary ofthe Commission

b A complete response shall be supplied to each item on the Information

Form Whenever the party completing the Information Form is unable to

supply a complete response that party shall provide for each item for

which less than a complete response has been supplied either estimated

data with an explanation of why precise data are not available or a

detailed statement of reasons for noncompliance and the efforts made to

obtain the required information

c Any party filing the Information Form may supplement that Form

with any other information or documentary material

d The Information Form and any additional information submitted by

a filing party under this section shall not be disclosed except as provided

in 572 608

SubpartEContent and Organization ofAgreements

572 501 Agreement Provisions Organization

a All agreements except for marine terminal agreements and assessment

agreements shall be organized and shall include the content as provided

by this section Article numbers are reserved for the particular provision

or authority as indicated in this section

b All agreements shall organize and number the following articles in

the following order and shall observe the guidelines as to content as pro

vided in this section

1

Article I Full Name of the Agreement

2 Article 2 Purpose of the Agreement State the objectives

or ends to be attained through the conduct of the agreement

c T
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 723

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

3 Article 3 Parties to the Agreement List the current parties

to the agreement to include for each participant i the full legal

name of the party ii the address of its principal office to

the exclusion of the address of any agent or representative not

an employee of the participating carrier or association and iii

nationality as determined by the incorporation or domicile of the

carrier s operating companies

4 Article 4Geographic Scope of the Agreement State all

U S and foreign port ranges served by the membership pursuant

to the authority of the agreement In the event of an inland

scope state the points or geographic areas of origin and destination

together with the ports or ranges or ports at which the ocean

transportation begins and ends

5 Article 5 Agreement Authority State the authority of the

parties pursuant to the agreement to engage in the joint activities

set forth in 572 201 and 572 202 of this part E g Article

5 of a conference agreement shall include a statement of authority

of the conference to establish rates service contracts practices

terms and conditions of service credit terms freight forwarder

compensation etc

6 Article 6Officials of the Agreement and Delegations of

Authority Indicate the administrative and executive officials and

those persons with authority to file or to delegate such authority

to file agreements or modifications to agreements This article

shall also specify any designated U S representative s of the

agreement required by this chapter

7 Article 7 Membership Withdrawal Readmission and Ex

pulsion Specify the terms and conditions for admission with

drawal readmission and expulsion to or from membership in the

agreement including membership fees refundable deposits and

other fees or charges associated with membership

8 Article 8 Voting Specify the procedures including quorum

requirements by which the agreement membership exercises its

collective authority to choose endorse decide the disposition of

defeat or authorize any particular matter issue or activity

9 Article 9 Duration and Termination of the Agreement

Specify where applicable the date on which the agreement termi

nates and describe the procedures to be followed to terminate

the agreement

5720 Organization of Conference and Interconference Agreements

a Each conference freight conference or passenger conference agreement

filed on or after June 18 1984 in addition to Articles 1

through 9 contained

in 5720 I shall include the following articles

1 Article 100Neutral Body Policing State that at the request

of any member the conference shall engage the services of an

independent neutral body to fully police the obligations of the
724 FEDERAL MARITIME COMMISSION

conference and its members Include a description of any such

neutral body authority and procedures related thereto

2 Article II Prohibited Acts State affirmatively that the con

ference shall not engage in conduct prohibited by section 10 c 1

or 10 c 3 of the Act

3 Article 12Consultation Shippers Requests and Com

plaints Specify the procedures for consultation with shippers and

for handling shippers requests and complaints

4 Article 13lndependent Action Specify the independent

action procedures ofthe conference Such procedures shall provide

that any conference member may take independent action on any

rate or service item required to be filed in a tariff under section

8 a of the Act upon not more than 10 calendar days notice

to the conference and shall otherwise be in conformance with

section 5b 8 ofthe Act

b Each interconference agreement filed on or after June 18 1984

in addition to Articles 1 through 9 contained in 572 50I and Articles

10 11 and 12 contained in 572 502 a shall include the following article

Article 13 lndependent Action which specifies the independent action

procedures of the agreement

Subpart F Action on Agreements

572 601 Preliminary Review Rejection ofAgreements

a The Commission shall make a preliminary review of each filed agree

ment to determine whether the agreement is in compliance with the filing

requirements of the Act and these rules and whether the Information Form

is complete or where not complete the deficiency is adequately explained

b The Commission shall reject any agreement that fails to comply

with the filing and information requirements under the Act and these rules

The Commission shall notify in writing the person filing the agreement

of the reason for rejection of the agreement The entire filing including

the agreement the Information Form and any other information or docu

ments submitted shall be returned to the filing party Should the agreement

be refiled the full waiting period must be observed

572 602 Federal Register Notice

a Any filed agreement which is not rejected pursuant to 572 601

will be transmitted to the Federal Register within seven days of the date

of filing

b The notice will include

1 A short title for the agreement

2 The identity ofthe parties

3 The Federal Maritime Commission agreement number

4 Aconcise summary of the agreement s contents
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 725

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

5 A statement that the agreement is available for inspection

at the Commission s offices and

6 The final date for filing comments regarding the agreement

572603 Comment

a Persons may file with the Secretary a written statement regarding

a filed agreement Such comments are not subject to any limitations except

the time limits provided in the Federal Register notice Ifrequested com

ments and any accompanying material shall be accorded confidential treat

ment to the fullest extent permitted by law

b The filing of a comment does not entitle a person to 1

reply

to the comment by the Commission 2 institution of any Commission

or court proceeding 3 discussion of the comment in any Commission

or court proceeding concerning the filed agreement or 4 participation

in any proceeding which may be instituted

572 604 Waiting Period

a The waiting period before an agreement becomes effective shall com

mence on the date that an agreement is filed with the Commission

b Unless tolled by a request for additional information or extended

by court order the waiting period terminates and an agreement becomes

effective on the later of the 45th day after the filing of the agreement

with the Commission or on the 30th day after publication of notice of

the filing in the Federal Register

c The waiting period is tolled on the date when the Commission

either orally or in writing requests additional information or documentary

materials pursuant to section 6 d of the Act The waiting period resumes

on the date of receipt of the additional material or an adequate statement

of the reasons for noncompliance and the agreement becomes effective

in 45 days unless the waiting period is further extended by court order

572 605 Requests for Expedited Approval

Upon written request of the filing party the Commission may shorten

the review period Accompanying the request the filing party should provide

a full explanation with reference to specific facts and circumstances of

the necessity for a shortened waiting period If the Commission decides

to approve an abbreviated waiting period the term will be decided after

consideration of the parties needs and the Commission s ability to perform

its review functions under a reduced time schedule In no event however

may the period be shortened to less than fourteen days after the publication

of the notice of the filing of the agreement in the Federal Register When

a request for expedited approval is denied by the Commission the normal

waiting period specified in 572 604 will apply Such expedition will not

be granted routinely and will be granted only in exceptional circumstances

which include but are not limited to the impending expiration of the

agreement operational urgency Federal or State imposed time limitations
726 FEDERAL MARITIME COMMISSION

or other reasons which in the Commission s discretion constitute grounds

for granting the request

572 606 Requests for Additional Information

a The Commission may request from the filing party any additional

information and documentary material necessary to complete the statutory

review required by section 6 of the Act The request shall be made prior

to the expiration of the waiting period All additional information and

documentary material shall be submitted to the Director Bureau of Agree

ments and Trade Monitoring Federal Maritime Commission Washington

D C 20573 If the request is not fully complied with a statement of

reasons for noncompliance shall be provided for each item or portion of

such request which is not fully answered

b Where the Commission has made a request for additional information

material the effective date is 45 days after receipt of the additional material

In the event all material is not submitted the effective date will be 45

days after receipt of both the documents and information which are submit

ted if any and the statement indicating the reasons for noncompliance

The Commission may upon notice to the Attorney General and pursuant

to sections 6 i and 6 k of the Act request the United States District

Court for the District of Columbia to further extend the effective date

until there has been substantial compliance

c A request for additional information may be made orally or in writing

In the case of an oral request a written confirmation of the request shall

be mailed to the filing party within seven days of the communication

d The party upon whom a request for additional information is made

wilI have a reasonable time to respond as specified by the Commission

The test of reasonableness shall be based on the particular circumstances

of the request and shall be determined on a case by case basis

572 607 Failure to Comply with Requests for Additional Information

a A failure to comply with a request for additional information results

when the party responsible for filing the request fails to substantially respond

to the request or does not file a satisfactory statement of reasons for

noncompliance An adequate response is one which directly addresses the

Commission s

request When a

response is not received by the Commission

within a specified time failure to comply wilI have occurred

b The Commission may pursuant to section 6i

of the Act request

relief from the United States District Court for the District of Columbia

where there has been a failure to substantially comply with a request

for additional information The Commission may request that the court

I

Order compliance with the request and

2 At its discretion grant other equitable relief which under

the circumstances seems necessary or appropriate
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 727

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

C Where there has been a failure to substantially comply section 6 i

2 of the Act provides that the court shall extend the review period

until there has been substantial compliance

572 608 Confidentiality ofSubmitted Material

a Except for an agreement filed under section 5 of the Act all informa

tion submitted to the Commission by the filing party will be exempt from

disclosure under 5 U S C 552 Included in this disclosure exemption is

information provided in the Information Form voluntary submissions of

additional information reasons for noncompliance and replies to requests

for additional information

b Information which is confidential pursuant to paragraph a of this

section may be disclosed however to the extent

l

It is relevant to an administrative or judicial action or

proceeding or

2 It is in response to a request from either body of Congress

or to a duly authorized committee or subcommittee of Congress

572 609 Negotiations

At any time after the filing of an agreement and prior to the conclusion

of judicial injunctive proceedings the filing party or an authorized represent

ative may submit additional factual or legal support for an agreement or

may propose modifications of an agreement Such negotiations between

Commission personnel and filing parties may continue during the pendency

of injunctive proceedings Shippers other government departments or agen

cies and other third parties may not participate in negotiations

Subpart G Reporting and Record Retention Requirements

572 701 General Requirements

a Address All reports required by this subpart should be addressed

to the Commission as follows

Director

Bureau ofAgreements and Trade Monitoring

Federal Maritime Commission

Washington D C 20573

The lower left hand comer of the envelope in which each report is for

warded should indicate the subject of the report and the related agreement

number For example Minutes Agreement 5000

b Serial Numbers of Reports Each report filed with the Commission

should be assigned a number for each subject For example a conference

filing minutes of its first meeting upon the effective date of this rule

should assign Meeting No I to its Minutes the next meeting will

be assigned Meeting No 2 and so on The first Shippers Request

and Complaint report should be designated Shippers Request and Com
728 FEDERAL MARITIME COMMISSION

i

plaint Report No I

the next report would be Shippers Request and

Complaint Report No 2 and so on

c Retention of Records Each agreement required to file an index of

documents pursuant to this subpart shall retain a

copy of each document

listed for a minimum period of 3 years after the date the document is

distributed to the members and shall make it available to the Commission

upon written request

d Request for Documents Documents may be requested by the Director

Bureau of Agreements and Trade Monitoring in writing by reference to

a specific minute or index and shall indicate that the documents will

be received in confidence Requested documents shall be furnished by the

parties within the time specified

e Time for Filing Documents filed on an annual calendar year basis

shall be filed by February 15 of the foJlowing year Other documents

shall be filed within 30 days of the end of a quarter year a meeting

or the receipt of a request for documents

t Confidentiality All information submitted to the Commission under

this subpart shall be accorded confidential treatment to the fullest extent

permitted by law

572 702 Filing of Reports Related to Shippers Requests and Complaints

and Consultations

a Shippers Requests and Complaints Each conference shall file with

the Commission an annual report setting forth a statistical summary showing

the total number of shippers requests and complaints received the total

number which were fully granted the total number which were partially

granted and the total number which were denied during each calendar

year under the established shippers requests and complaints procedures

Each report shall also show the total number of requests or complaints

which were pending disposition at the start and at the end of the report

period Each of the totals which are reported to the Commission shall

be divided into three categories those involving rates or charges those

involving transportation services and those involving other matters

b Consultations Each conference shall file with the Commission an

annual report setting forth a statistical summary showing the total number

of requests for consultations and the total number of consultations during

each calendar year under established consultation procedures Each of the

totals which are reported to the Commission shall be divided into two

categories consultations involving commercial disputes and consultations

involving cooperation with shippers in preventing and eliminating mal

practices

572 703 Filing of Minutes

a Meetings For purposes of this subpart the term meeting shall

include any meeting of the parties to the agreement including meetings

of their agents principals owners committees or subcommittees of the

parties authorized to act in any capacity under the agreement and if the

c
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 729

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

agreement authorizes other action such as telephonic or polls of the mem

bership etc

b Content of Minutes Conferences interconference agreements agree

ments between a conference and one or more ocean common carriers

pooling agreements equal access agreements discussion agreements marine

terminal conferences and marine terminal rate fixing agreements shall

through a designated official file with the Commission a report of each

meeting describing all matters within the scope of the agreement which

are discussed or considered at any such meeting shall specify any docu

ments distributed by the conference or other agreement to inform or assist

the members on such matters and shall indicate the action taken These

reports need not disclose the identity of parties that participated in discus

sions or the votes taken

c Exemption No minutes need be filed under paragraph b of this

section with respect to any discussion of or action taken with regard to

1 rates that if adopted would be required to be published in the Commod

ity Rate Section Class Rate Section or Open Rate Section of the pertinent

tariff on file with the Commission this exemption does not apply to discus

sions involving general rate policy general rate changes the opening or

closing of rates or service or time volume contracts or 2 purely adminis

trative matters

572 704 Index of Documents

a Each agreement required to file minutes pursuant to 572 703 shall

maintain an index of all reports circulars notices statistics analytical

studies or other documents not otherwise filed with the Commission pursu

ant to this subpart which are distributed to the member lines

b Each index required by paragraph a of this section shall be filed

with the Commission on a quarterly basis the first to be filed for the

period ending September 30 1984 and for each succeeding quarterly period

thereafter Each index must be certified by an official of the agreement

as true and correct

572 705 Waiver ofReporting and Record Retention

Upon a showing of good cause the Commission may waive any of

the provisions of this subpart

Subpart H Transitional Rules

572 801 Mandatory Provisions in Existing Conference Agreements

As of June 18 1984 all existing conference agreements must be in

compliance with the requirements set forth in section 5 b of the Act

Conferences shall achieve compliance with the Act by submitting to the

Commission on or before June 18 1984 either a telex to be followed

by a letter or a letter evidencing the adoption by the conference of the

mandatory provisions contained in this section To the extent that any

f M r
730 FEDERAL MARITIME COMMISSION

provision in an existing agreement is inconsistent with a particular manda

tory provision the mandatory provision shall govern

a Neutral Body Policing Upon written request of one conference

member submitted to the chief executive officer of the con

ference the conference shall engage the services of an independent

neutral body to police fully the obligations of the conference

and its members

b Prohibited Acts The conference shall not engage in any boy

cott or take any other concerted action resulting in an unreasonable

refusal to deal or engage in any predatory practice designed

to eliminate the participation or deny the entry in a particular

trade of a common carrier not a member of the conference

a group of common carriers an ocean tramp or a bulk carrier

c Consultation In the event of a controversy claim or dispute

of a commercial nature arising out of or relating to this agreement

or efforts to reduce or eliminate malpractices the conference

its chief executive officer or other designee shall attempt to

resolve the dispute in an amicable manner through direct discus

sions with the disputant The services of third parties may be

drawn from members of the conference or impartial outsiders

including use of the Commission s conciliation service provided

for at 46 CPR 502 401 502 406 The means of invoking con

sultation shall be set forth in the conference tariff

d Shippers Requests and Complaints

1 Shippers requests and complaints may be made by filing

a statement thereof with the chief executive officer or in the

case of an executive domiciled outside the United States the

designated U S representative Such statement shall be accom

panied by a completed information sheet prescribed by the con

ference chief executive officer The statement and infonnation

sheet shall be submitted promptly to each member of the con

ference

2 The shipper s

request or complaint shall be considered by

the conference at its next meeting following its submission

to the conference members Written notice of the scheduling

of consideration of the request or complaint shall be served

on the shipper at the time of scheduling The shipper shall

be granted the opportunity to be heard at such Conference

meeting upon written request

3 Conference discussion and action on the shippers request

or complaint need not be restricted to the exact scope of the

request or complaint and may include other matters varying

from but related thereto However all such discussion and action

must be authorized by the conference agreement

4 The conference shall render a decision on the request or

complaint promptly after its initial submission to the conference

membership Such decision shall be in writing signed by the

conference chief executive officer and served upon the shipper

I M
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 731

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Such decision shall include a notice to the shipper that it may

file a complaint with the Federal Maritime Commission if the

matter is not resolved to the shipper s satisfaction and if the

matter is one which may be subject to the Shipping Act of

1984

5 The procedures for filing shippers requests and complaints

shall be set forth in the conference tariff

e Independent Action Any party to this agreement may take

independent action on any rate or service item required to be

filed in a tariff pursuant to section 8 a of the Shipping Act

of 1984 46 U S c app 1707 a upon not more than 10 calendar

days notice to the conference The time period shall commence

upon receipt by the conference during normal business hours

of a written notice of a member s intention to exercise independent

action Within 10 calendar days of the receipt of such notice

the conference shall file the rate or service item in its tariff

for use by the member The conference or any other conference

member may elect to adopt the independent rate or service item

on or after its effective date by providing written notice of such

intention If another member decides to adopt the independent

rate then the conference shall file the rate immediately on behalf

of that member Unless otherwise provided in this agreement

conference members may regulate or prohibit its member lines

from unilaterally entering into service or time volume contracts

and may also regulate or prohibit any conference member from

taking independent action on any service contract or time volume

contract offered by the conference

572 802 Mandatory Provision in Existing Interconference Agreements

Each agreement between carriers not members of the same conference

must provide the right of independent action for each carrier Each agree

ment between conferences must provide the right of independent action

for each conference

572 803 Expiration Dates in Existing Agreements

a Expiration dates to existing agreements or specific provisions thereof

shall remain in effect on and after June 18 1984

b Parties to agreements with expiration dates have the obligation to

file any modification seeking renewal for a specific term or elimination

of a termination date in sufficient time to accommodate the waiting period

requir ed under the Act

Subpart I Penalties

572 901 Failure to File

Any person operating under an agreement involving actIvItIes subject

to the Act which has not been filed is in violation of the Act and the

rules of this part and is subject to the civil penalties set forth in section

13 a of the Act

J 11IIr
732 FEDERAL MARITIME COMMISSION

572 902 Falsification of Reports

Falsification of any report required by the Act or these rules including

falsification of any item on the Information Form is a violation of the

rules of this part and is subject to the civil penalties set forth in section

13 a of the Act and may be subject to the criminal penalties provided

for in 18 U S C 1001

Appendix A to Part 572 lnformation Form and Instructions

Explanation and Instructions for Information Form

The following explanation and instructions accompany the Information

Form Form and are intended to facilitate the completion of the Form

The explanations and instructions should be read in conjunction with the

Shipping Act of 1984 Act and with 46 CPR Part 572

All agreements by or among ocean common carriers referenced in 572 201

excluding assessment agreements marine terminal agreements and those

agreements exempted from the filing of the Information Form pursuant

to Subpart C of the rules filed with the Commission must be accompanied

by a completed Information Form which in all cases necessitates the com

pletion of Parts I II V VI VII VIII and IX

Because of their potential substantial anticompetitive implications parties

filing c rtain types of agreements namely rate fixing including for exam

ple agreements authorizing conferences interconference agreements and

agreements between a conference and one or more ocean common carriers

pooling and joint service and consortium agreements are required to com

plete Parts III and IV of the Form in addition to the above specified

parts required to be completed by all filing parties

Certain parts of the Form request information that may not be readily

available to the filing party Where precise information is not available

best estimates may be supplied Where estimates are made they should

be identified by the use of the notation est Furnishing an estimate

requires a clear explanation of why the precise information is not available

Where such an explanation is provided the use of estimates will not ordi

narily be regarded as a failure to supply a

complete response as specified

in 572 607 and does not require a separate statement of reasons for non

compliance

In all parts of the Form where data are requested the filing party is

required to indicate all sources used to obtain such data Sources should

also be specified where estimates have been made by the filing party

PART BY PART EXPLANATION

Part I

Part I

requires the filing party to state the full name of the agreement

as also provided under 572 501

J er
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 733

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Part I1 A

Part IIA requires the filing party to indicate whether or not the agree

ment authorizes the parties to collectively fix rates Rate fixing may be

authorized by a conference agreement 572 104f

an interconference

agreement 572 104 m or an agreement between a conference and one

or more ocean common carriers

Part II B

Part II B requires the filing party to indicate whether or not the agree

ment authorizes the parties to pool cargoes or revenues 572 104 w

Part IIC

Part II C requires the filing party to indicate whether or not the agree

ment authorizes the parties to establish a joint service or consortium

572104 n

Background Information to Parts III and IV

If any question in Part II was answered YES the filing party is

required to complete Parts III and IV in addition to completing Parts

I II V VI VII VIII and IX which are required to be completed by

all filing parties

The amount of cargo is to be given on both a weight ton specify

long metric or short ton whichever is used and a dollar value basis

The dollar value of cargo is measured according to Bureau of Census

practices The value of export cargo is taken to be equivalent to the

fa s free alongside ship value at the U S port of export based on

the transaction price including inland freight insurance and other charges

incurred in placing the merchandise alongside the carrier at the U S port

of exportation The value of import cargo is defined as the price actually

paid or payable for merchandise when sold for exportation to the United

States excluding U S import duties freight insurance and other charges

incurred in bringing the merchandise to the United States

Sub trade is defined as the scope of all liner movements between each

foreign country and each U S port range within the scope of the agreement

Each foreign country US port range pair should be shown separately Where

the agreement covers both U S inbound and outbound liner movements

inbound and outbound liner movements should be shown separately

U S port ranges are defined by using the Bureau of Census classification

of U S Coastal Districts Thus the U S port ranges are defined as follows

North Atlantic Includes ports along the eastern seaboard from

the northern boundary of Maine to the southern boundary of Vir

ginia

f P lAr
734 FEDERAL MARITIME COMMISSION

South Atlanti lncludes ports along the eastern seaboard from

the northern boundary of North Carolina to but not including

Key West Florida Also included are all ports in Puerto Rico

and the U S Virgin Islands

Gu f

Includes all ports along the Gulf of Mexico from Key West

Florida to Brownsville Texas inclusive

South Pacifi lncludes all ports in the States of California and

Hawaii

North Pacific Includes all ports in the states of Oregon Washing

ton and Alaska

Great LakesIncludes all ports bordering upon the Great Lakes

and their connecting waterways as well as all ports in the State

of New York on the St Lawrence River

Liner service refers to a definite advertised schedule giving relatively

frequent sailings at regular intervals between specific U S ports or port

ranges and designated foreign ports or port ranges Liner vessels are defined

as those vessels used in a liner service Liner cargoes are cargoes carried

on liner vessels in a liner service A liner operator is a vessel operating

ocean common carrier engaged in liner service Liner movement is the

carriage ofliner cargo by liner operators

Market share information should be provided using data for the most

recent twelve 12 month period for which data are available State the

period used Identify all sources of the data

Alternative liner routing is defined as liner service between the foreign

country specified in the sub trade and any North American port s other

than those located within the port range covered by the sub trade The

alternative liner routing may serve the sub trade s port s and interior

point s by way of feeder service transshipment surface carriage such

as mini Iandbridge or some other form of substituted transport Alternative

liner routing includes only those liner services which compete for cargoes

carried in the sub trade

Part III A

Part III A requires the filing party to provide the total amount of cargo

carried on all parties liner vessels in each sub trade within the scope

of the agreement over the most recent twelve 12 month period for which

data are available

Part III B

Part III B requires the filing party to provide the total amount of cargo

carried on all liner vessels i e both party and non party carriers operating

in each sub trade within the scope of the agreement for the most recent

twelve 12 month period for which data are available

26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 735

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Part III C

Part III C requires the filing party to provide the combined market

share of all parties operating in each sub trade within the scope of the

agreement The market share provided in Part III C is the quotient multi

plied by 1 0 of the total derived in Part III A divided by the total

derived in Part III B The formula for calculating market share is as

follows

The total amount of cargo carried on all parties liner vessels

in each sub trade within the scope of the agreement over the

most recent twelve month period for which data are available

divided by the total amount of cargo carried on all liner vessels

in each sub trade within the scope of the agreement over the

same twelve month period which quotient is multiplied by 100

The most recent twelve month period for which data are available is to

be the same period of time used both in the calculation of the parties

total sub trade liner cargo movements Part IV A and in the calculation

of the total sub trade liner cargo movements for all liner operators Part

IV B

Part IV A

Part IV A 1 requires the filing party to provide for each sub trade

within the scope of the agreement the names of all liner operators who

are not parties to the agreement and who were offering liner service

in that sub trade at the time the agreement was filed with the Commission

Part IV A 2 requires the filing party to provide for each sub trade

the names of all liner operators serving alternative liner routings who com

pete for the cargoes carried by the parties

Part IV A 3 requires the filing party to describe the extent of the

competition offered by all non party liner operators including liner operators

directly serving the sub trade and liner operators serving alternative liner

routings A description of the extent of competition should include estimates

or precise information where available of non party liner operator market

share shown either for each individual operator or for all operators collec

tively and calculated on the basis either of height tons value of cargo

or capacity and any evidence of underutilized capacity in the alternative

liner routings Explain how the non party market share was derived Specify

the units of measurement used in the calculations Indicate the source s

used to provide data or estimates

Part IV B

Part IV B 1 requires the filing party to identify all non liner competitive

substitutes that are available to shippers of commodities historically trans

ported by liner service within the scope of the agreement Non liner com

F M r
736 FEDERAL MARITIME COMMISSION

petitive substitutes may include carriage on a charter or contract basis

or on an infrequent irregular basis by bulk mix container bulk breakbulk

or other vessel type operators Such substitutes may also include carriage

by air freight operators or air passenger operators with available belly

space for air freight Such substitutes may provide service to a sub

trade through some form of substituted service e g mini Iandbridge trans

shipment or feeder service by way of ports within an alternative North

American port range s

Part IV B 2 requires the filing party to estimate the percentage of

the total amount of cargo historically carried in the trade on liner vessels

that has been carried by non liner competitive substitutes over the most

recent twelve 12 month period for which data are available The intent

of Part IV B 2 is to determine the amount of liner cargo historically

carried in the trade that has been lost to non liner operators Identify

all units of measurement and describe how the percentage was derived

Identify the sources used

Part V A

Part V A requires the filing party to identify all U S ports expected

to be served under this agreement Include all U S ports expected to

receive direct liner service port calls by a party and indirect liner service

port calls by way of some form of substituted service such as trans

shipment feeder or surface carriage

Part V B

Part V B 1 requires the filing party to specify any party s reduction

in frequency of service to any U S port within the scope of the agreement

Reductions in frequency are determined as follows 1 for each party

and for each U S port within the scope of the agreement served by that

party determine total number of port calls over the most recent twelve

12 month period for which data are available historical port call calcula

tion 2 for each party and for each U S Port within the scope of the

agreement served by that party estimate the total number of port calls

for the twelve 12 month period immediately following implementation

of the agreement expected port call calculation 3 calculate the difference

between the historical port call calculation and the expected port call

calculation Provide for each party and for each U S port the following

calculations the historical port call calculation the expected port call

c culation and the difference between those calculations

Part V B 2 requires the filing party to specify any elimination of service

to any U S port within the scope of the agreement that is currently at

the time the agreement is filed receiving liner service front any party

to the agreement where the elimination of that port occurs as a result

of the implementation of the agreement The term service to any U S

26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 737

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

port includes direct service by the parties and indirect service by way

of for example transshipment feeder service or alternate or substitute

port service

Part VI A

Part VI A requires the filing party to indicate whether or not the agree

ment was entered into as a direct or indirect response to any law decree

rule regulation or any other governmental action promulgated or otherwise

implemented by a foreign government The agreement may for example

operate in a context where a foreign government has promulgated or imple

mented certain cargo reservation cargo preference or other cargo sharing

schemes that favor national flag lines and that require these national lines

to be members of a conference A direct response to such governmental

action would be the creation of a conference agreement An indirect re

sponse to such governmental action would be the creation of apool that

facilitates cargo sharing within a conference even though the pool was

not per se required by such governmental action

Part VI B

Part VI B requires the filing party to identify all such laws decrees

rules regulations or any other foreign governmental actions that have led

to the agreement All such governmental actions should be identified by

the type of governmental action e ga law decree memorandum order

etc the full legal title of the governmental action the date that the

governmental action became or will become effective and the date if

specified the governmental action will terminate Part VI B also requires

a detailed description of the purpose and the nature of the governmental

action including all requirements imposed on the parties by the govern

mental action and the specification of each provision in the agreement

that is a direct or indirect response to each such governmental action

Part VI C

Part VI C requires the filing party to indicate whether or not any law

decree rule regulation or any other foreign governmental action identified

in Part II B limits access to the carriage of liner cargoes within the

scope of the agreement Limited access to the carriage of liner cargoes

may be effected by excluding certain liner operators or classes of liner

operators e g by national flag or carrier nationality from the trade entirely

or by reserving certain cargoes for carriage by certain liner operators or

classes of liner operators e g by national flag or carrier nationality

or by limiting the ports at which liner operators may call or by restricting

the frequency of scheduled port calls or by other such measures that

T
738 FEDERAL MARITIME COMMISSION

restrict the open competition for liner cargoes within the scope of the

agreement by liner operators

Part VI D

Part VI D requires the filing party to explain how access to cargoes

carried by liner operators is limited by the actions of a

foreign government

as identified in Part VI B See Part VI C for examples of how access

to cargoes can be limited by the actions of a government

Part VI E

Part VI E requires the filing party to provide the percentage of the

total amount of cargo carried on all liner vessels in the trade to which

access is limited by a foreign government The percentage is derived by

dividing the amount of cargo in the trade to which access is limited

by a foreign government by the total amount of cargo carried on all

liner vessels in the trade and multiplying the quotient by 100 The trade

is defined as the scope of the agreement that is all foreign and domestic

ports or port ranges served under the agreement The amount of cargo

can be measured in weight tons or dollar value of cargo Specify which

unit of measurement is used The amount of cargo should be provided

on the basis of the most recent twelve 12 month period for which data

are available Where precise information is not available best estimates

may be supplied Identify estimates by the use of the notation est

Indicate the sources of such estimates

Part VII A

Part VII A requires the filing party to indicate all benefits resulting

from the agreement that will accrue principally to the parties as a result

of the operation of the agreement Such benefits may include increased

operational efficiencies or other reductions in costs that result from the

implementation of the agreement Data that are necessary to substantiate

the specified benefits should be submitted

Part VII B

Part VII B requires the filing party to indicate all benefits resulting

from the agreement that will accrue to shippers and to U S commerce

generally Such benefits may include reduced rate levels or improved quality

or frequency of service that result from the operation of the agreement

Data that are necessary to substantiate the specified benefits should be

submitted
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 739

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 984

Part VIII

Part VIII requires the filing party to identify any reports studies or

other research that were prepared by or for the parties severally or collec

tively for the purpose of analyzing formulating or assessing the need for

the proposed agreement or the activities contemplated therein

Part IX A

Part IX A requires the filing party to provide the name title address

telephone number and cable address of a person the Commission may

contact regarding the Information Form and any information provided there

in

Part IX B

Part IX B requires the filing party to provide the name title address

telephone number and cable address of a person the Commission may

contact regarding a request for additional information or documents

Part IX C

Part IX C requires generally that the filing party sign and certify before

a Notary Public that the information in the form and all attachments and

appendices were in fact prepared under the supervision of the filing party

and that all information so provided is to the best of the filing party s

knowledge true correct and complete The filing party is also required

to indicate his or her relationship with the parties to the agreement

FEDERAL MARITIME COMMISSION INFORMATION

FORM

For Certain Agreements by or Among Ocean Common Carriers

Agreement Number Assigned by FMC

PART IAgreement Name

PART IIAgreement Type

A Rate Fixing Agreements

Does the agreement authorize the parties

to collectively fix rates

B Pooling Agreements

Does the agreement authorize the parties

to pool cargoes or revenues

YES NO
740 FEDERAL MARITIME COMMISSION

FEDERAL MARITIME COMMISSION INFORMATION

FORM Continued

For Certain Agreements by or Among Ocean Common Carriers

C Joint Service Agreements

Does the agreement authorize a joint

serviceconsortium arrangement

If any question in PART II is answered

YES complete PARTS III and IV

in addition to PARTS I II V VI

VII VIII and IX that are required to

be completed by all filing parties

PART III Market Share Information

A Provide the total amount of cargo meas

ured in both weight tons and dollar value

carried on all parties liner vessels in each

sub trade within the scope of the agree

ment over the most recent twelve 12

month period for which data are available

B Provide the total amount of cargo meas

ured in both weight tons and dollar value

carried on all liner vessels in each sub

trade within the scope of the agreement

over the most recent twelve 12 month pe

riod for which data are available

C Provide the market share of all parties in

each sub trade within the scope of the

agreement over the most recent twelve 12

month period for which data are available

PART IV Market Competition

A Liner Competition

I For each sub trade provide the

names of all liner operators not parties

to the agreement currently offering

service in that sub trade

2 Provide the names of all liner opera

tors serving alternative liner routings

where those operators compete for

cargoes carried by the parties in the

sub trade
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 741

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

FEDERAL MARITIME COMMISSION INFORMATION

FORM Continued

For Certain Agreements by orAmong Ocean Common Carriers

3 Describe the nature and extent of the

competition from the liner operators

listed in A l and A 2 above

B Non Liner Competition

1 Identify all competitive substitute

forms of transport other than liner

service that are available to shippers

of commodities historically trans

ported by liner service in each sub

trade including for example bulk

carriers charter operators or air

freight carriers

2 Estimate the percentage of the total

amount of liner cargoes in each sub

trade measured in weight tons and in

dollar value traditionally carried on

liner vessels that has been carried by

non liner substitute forms of transport

over the most recent twelve 12

month period for which data are avail

able

PART V Service to the Shipping Public Under the

Agreement

A Proposed Service

Identify all U S ports to be served by

the parties under this agreement

B Reduced Sailings

I Estimate the parties reductions in

frequency of calls at each U S port

within the scope of the agreement

2 Specify the parties elimination of

service to any U S port within the

scope of the agreement currently

served by any party

f PMf
742 FEDERAL MARITIME COMMISSION

FEDERAL MARmME COMMISSION INFORMATION

FORM Continued

For Certain Agreements by or Among Ocean Common Carriers

PART VI Foreign Government Involvement in the

Liner Market

A Was this agreement entered into as a di

rect or indirect response to any law de

cree rule regulation or other govern

mental action promulgated or implemented

by a foreign government

B Ifthe answer to A is YES identify

all such laws decrees rules regulations or

other governmental actions and specify all

provisions in the agreement that stem from

these factors

C Ifthe answer to A is YES do any

of the above identified governmental ac

tions limit access to the carriage of liner

cargoes within the scope of the agreement

D Ifthe answer to C is YES explain

how access to liner cargoes is limited by

the foreign government

E Ifthe answer to C is YES provide

the percentage of the total liner cargo in

the trade to which access is limited by a

foreign government Explain the method by

which the percentage was derived

PART VII Benefits ofthe Agreement

A Indicate any benefits such as improved

efficiencies or other reductions in transpor

tation costs that will accrue principally to

the parties as a result of the operation of

the agreement Provide the data necessary

to substantiate the above specified benefits

B Indicate any benefits such as lower rate

levels or improved service levels that will

accrue to shippers and to U S commerce

generally as a result of the operation of the

agreement Provide the data necessary to

substantiate the above specified benefits

26 F M C

YES NO
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 743

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

FEDERAL MARITIME COMMISSION INFORMATION

FORM Continued

For Certain Agreements by orAmong Ocean Common Carriers

PART VIII Reports Studies orOther Research

Identify any reports studies or other research

that were prepared by or for the parties

severally or collectively for the purpose of

analyzing formulating or assessing the

need for the proposed agreement or the ac

tivities contemplated therein

PART IX Identification of Person s to Contact

Regarding the Information Form and Certifi

cation ofAuthenticity

A Identification ofContact Person

1 Name of Contact Person

2 Title of Contact Person

3 Firm Name and Business

4 Business Telephone Number

5 Cable Address

B Identification of an Individual Located in

the United States Designated for the Lim

ited Purpose of Receiving Notice of an Is

suance of a Request for Additional Infor

mation or Documents see 572 407

1 Name

2 Title

3 Address

4 Telephone

5 Cable Address

26 F M C
744 FEDERAL MARITIME COMMISSION

FEDERAL MARmME COMMISSION INFORMATION

FORM Continued

For Certain Agreements by or Among Ocean Common Carriers

C Certification

This Supplemental Agreement Filing Information

Form together with any and all appendices and at

tachments thereto was prepared and assembled

under my supervision in accordance with instruc

tions issued by the Federal Maritime Commission

Subject to the recognition that where so indicated

reasonable estimates have been made because

books and records do not provide the required

data the information is to the best of my knowl

edge true correct and complete in accordance

with the statute and rules

Name please print or type

Title

Relationship with parties to agreement

Signature

Date

f

l Mr
RULES GOVERNING AGREEMENTS BY OEAN COMMON 745

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Subscribed and sworn to me at the

City of State of

This day of

Signature

My Commission expires

19

By the Commission S FRANCIS C HURNEY

Secretary

f J Mr
FEDERAL MARITIME COMMISSION

46 CPR PART 572

DOCKET NO 8426

RULES GOVERNING AGREEMENTS BY OCEAN COMMON

CARRIERS AND OTHER PERSONS SUBJECT TO THE SHIPPING

ACT OF 1984

Interim Rule

The Commission instituted this proceeding by Federal

Register notice of May 29 1984 49 FR 2229622318

in order to issue rules implementing those sections of

the Shipping Act of 1984 that govern agreements The

collection of information requirements of these interim

rules have been granted interim clearance by the Office

of Management and Budget OMB and are therefore

effective on June 18 1984 to the same extent as the

balance of the interim rules A new section has been

added to reflect the interim control number assigned by

OMB to these information collection requirements

Interim Rule effective June 18 1984

ACTION

SUMMARY

DATES

SUPPLEMENTARY INFORMATION

The Federal Maritime Commission is amending these interim rules by

adding a new section which reflects the interim control number assigned

by OMB to the information collection requirements of the rules

List of subjects in 46 CFR Part 572 Antitrust Contracts Maritime

carriers Administrative practice and procedure Rates and fares Reporting

and recordkeeping requirements

Therefore Part 572 of Title 46 of the Code of Federal Regulations

is amended as follows

Add 572 991 to read as follows

572 991 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control number assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980 Pub

L 96511 The Commission intends that this section comply with the

requirements of section 3507 f

of the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

Director of the Office of Management and Budget OMB for each agency

information collection requirement

746 26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 747

CARRIERS AND OTHER PERSONS SUBJECT TO THE SHIPPING

ACT OF 1984

Current OMB

Section Control No

572 101 through 572 902 3072045

Sections 2 3 4 5 6 7 8 10 11 13 15 16 17 and 18 of the

Shipping Act of 1984 46 D S C app 1701 1702 1703 1704 1705

1706 1707 1709 1710 1712 1714 1715 1716 and 1717

By the Commission

S FRANCIS C HURNEY

Secretary

lJCAr
FEDERAL MARITIME COMMISSION

46 CFR PART 572

DOCKET NO 8426

RULES GOVERNING AGREEMENTS BY OCEAN COMMON

CARRIERS AND OTHER PERSONS SUBJECT TO THE SHIPPING

ACT OF 1984

Interim Rules

The Commission amends its interim rules governing

agreements by ocean common carriers and other persons

subject to the Shipping Act of 1984 These amendments

are issued pursuant to the interim rulemaking authority

provided in the Act These amendments make changes

in Subpart D with respect to those modifications to

agreements which must be accompanied by the Infonna

tion Fonn The purpose of these amendments to Subpart

D is to ensure that only those modifications to agree

ments which significantly reduce competition will be

subject to the infonnation requirements These amend

ments make adjustments in several of the mandatory

provisions of Subpart H The purpose of these changes

is to clarify the mandatory provisions These amendments

also make the completion of Part VII of the Infonnation

Fonn optional for the filing party Finally these amend

ments make certain technical corrections in the rules

and Infonnation Fonn

Interim Rule amendments listed in this document are

effective on June 18 1984

ACTION

SUMMARY

DATES

SUPPLEMENTARY INFORMATION

The Shipping Act of 1984 Public Law 98 237 98 Stat 67 46 U S C

app 1701 1720 hereinafter referred to as the Act or the 1984 Act

was signed into law on March 20 1984 with an effective date of June

18 1984 Section 17b of the Act 46 U S C app 1716 b authorizes

the Commission to prescribe interim rules without adhering to the nonnal

notice and comment procedures under the Administrative Procedure Act

5 U S C 553 On May 29 1984 pursuant to the authority under section

17 b the Commission published interim rules implementing those provi

sions of the Act which govern agreements by ocean common carriers and

other persons subject to the Act 49 Fed Reg 2229611318 These interim

agreements rules become effective on June 18 1984 Interested persons

were given 90 days from the date of publication in the Federal Register

in which to comment on the interim rules In addition the supplementary

748 26 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 749

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

information to the interim rules invited persons who believed that the

interim rules created a serious problem which should be addressed prior

to the effective date to bring their concern to the attention of the Commis

sion in writing without prejudice to subsequently filing additional comments

within the 90 day comment period

The Commission has received a number of comments on the interim

rules and has carefu yreviewed alI of these comments Some address

matters which do not require attention at this time The absence of discus

sion of any particular comment in connection with these amendments should

not in any way be construed as a determination as to the merits of the

comment It merely reflects the Commission s

judgment that the comment

did not raise a matter of such urgency as to require immediate action

Consideration of these comments not of an emergency nature will be de

ferred until final rules are issued and the Commission has the benefit

of a furecord developed during the course ofthis proceeding

Other comments either in whole or in part do raise questions which

require clarification prior to June 18 1984 Based on the comments received

the Commission has determined that certain adjustments to Subparts D

and H of the interim rules and to Part VII of the Information Form

are warranted at this time These adjustments affect the information require

ments for agreement modifications certain mandatory provisions and the

agreement benefits section ofthe Form and are discussed more fulIy below

In addition certain technical corrections are being made in the interim

rules and the Form Interested persons will have the opportunity to comment

on these amendments to the interim rules as weas the interim rules

themselves within the original 90 day comment period Comments on the

interim rules as amended should be received on or before August 27

1984

A Amendments to Subpart D

1 Section 572 402 e 2 Section 572 402 generalIy sets forth the require

ments as to form for a

agreements except for marine terminal agreements

and assessment agreements Paragraph e 2 however presently refers only

to 572 502 in prescribing format rules for the body of an agreement

In order to provide direction to aclasses of agreements subject to format

requirements paragraph e 2 should also refer to 572 501 This section

therefore is being amended by adding a reference to 572 501

2 Section 572403 a Subpart D of the interim rules among other things

implements the information requirements under section 5 of the Act by

requiring the filing of an information Form with certain agreements Section

572 403 a provides that the Information Form must accompany a significant

modification to certain agreements Significant modifications for the purpose

of section 572 403 a are those that may result in a reduction in competi

tion Section 572 403 a

presently states that
J

l

750 FEDERAL MARITIME COMMISSION

Such modifications include but are not limited to changes in

geographic scope additions to the number of parties reductions

in service levels changes in the allocations of pooled revenues

or cargoes or changes in pool penalty provisions or carrying

charges

All such modifications must be accompanied by the Infonnation Fonn

One comment refers to the definition of a significant modification in

this section and contends among other arguments that the requirement

that every significant modification to an existing agreement be accompanied

by the Infonnation Fonn is unduly burdensome

One purpose of section 572 403 a is to obtain needed infonnation to

review a modification to an agreement where such a modification may

result in a significant reduction in competition This purpose is clearly

related to the standard of review set forth in section 6 g

of the Act

The Infonnation Fonn would not be required where the competitive con

sequences of an agreement modification are minor For example the addition

of a single port to an agreement s geographic scope would not in most

cases be likely to have a significant impact on competition On the other

hand expansion of geographic scope to include an entire new port range

may have such competitive impact as to be a significant modification

The Commission therefore is amending section 572 403 a to clarify

that its purpose is to apply only to significant modifications Agreements

which would not generally be likely to have a significant competitive

impact will thereby not be required to file the Infonnation Fonn In the

case of those modifications where the Form is not required and an issue

under the general standard is raised the Commission would be able to

obtain information through the request for additional infonnation procedures

as set forth in section 572 606 The Commission has not attempted to

address all cases in which a modification would require the filing of the

Infonnation Form If a filing party is uncertain as to whether a modification

is significant within the meaning of this section they may contact the

Director Bureau of Agreements and Trade Monitoring for clarification

B Amendments to Subpart H

Subpart H of the interim rules deals with certain transitional matters

affecting existing agreements In particular section 572 801 of Subpart H

establishes rules for assuring that existing agreements comply with the

requirements for conference agreements set forth in section 5 b of the

Act The mechanism for achieving compliance is the submission to the

Commission of a telex followed by a letter or a letter evidencing the

adoption by the conference of the mandatory provisions contained in this

section 572 801 a through 572 801 e A number of the comments

recommended changes to the mandatory provisions of paragraphs c d

and e of section 572 801 dealing respectively with consultation shipper s

requests and complaints and independent action As indicated in the follow
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 751

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

ing discussion the Commission has determined to adopt some of the rec

ommended changes or otherwise to make adjustments in the rules to accom

modate concerns expressed in the comments

1 Section 572 801 c This section sets forth a mandatory consultation

provision for conference agreements as required by section 5 b 6 of the

Act One comment suggests that the phrase direct discussions be deleted

and replaced with the phrase direct communications The reason offered

for this change appears to be that a

requirement of direct discussions

is unduly burdensome on the conference The Commission believes that

there is merit in direct discussions between conferences and shippers and

that such discussions are beneficial to the consultation process The term

direct discussions need not be limited to face to face meetings Nor

are such direct discussions intended to be the only means of consultation

Rather it is intended that the consultation process shall provide an oppor

tunity for such discussions The Commission therefore is amending the

first sentence of section 572 801 c to state that the conference shall attempt

to resolve the dispute in an amicable manner with the opportunity for

direct discussions with the disputant

2 Section 572 801 d This section sets forth a mandatory provision

establishing conference procedures for handling shippers requests and com

plaints as required under section 5 b 7 of the Act A number of comments

recommend changes to various aspects of this mandatory provision

Section 572 80l d 2 presently states that upon submission a complaint

will be considered at the next conference meeting Written notice is to

be sent to the shipper who will have an opportunity to be heard at a

conference meeting

One comment states that the requirement for consideration of a request

or complaint at the next conference meeting is unworkable because of

the large number of complaints received and because requests are often

submitted in incomplete form and require investigation before they may

be properly considered For the same reasons the comment argues that

granting a shipper a hearing before the conference would not be feasible

The comment also states that it is inefficient and burdensome to require

the entire conference to consider a request or complaint

The Commission believes that there are benefits in having shipper requests

and complaints considered at a conference meeting and in providing shippers

with an opportunity to be heard Nevertheless the Commission does not

wish to unduly burden conference deliberations or impose inflexible require

ments as to when a shipper matter must be considered

The Commission therefore is amending the first sentence of section

572 801 d 2 by deleting the requirement that these matters be considered

at the next meeting and stating that such matters shall be considered prompt

ly The Commission will also amend the third sentence of section

572 801 d 2 to provide for an opportunity for hearing of a shipper matter

by the chief executive officer of the conference if the shippers request
752 FEDERAL MARITIME COMMISSION

1

or complaint is denied This provision will be relocated in section

S72 801 d 4 of this section Finally sentence two is being deleted in

light of the other changes to this provision

Section 572 80l d 4 provides that conference decisions on shipper mat

ters shall include a notice that the shipper may file a complaint with

the Federal Maritime Commission One comment on this provision states

that such a notification requirement would change the nature of the process

from commercial consultation to an adversarial proceeding The Commission

does not wish to require procedures which could have an adverse impact

on the successful resolution of requests or complaints Moreover in the

absence of such a notice shippers would still be likely to be aware of

their rights under the 1984 Act The Commission therefore is amending

section 572 801 d 4 by deleting the third sentence

3 Section 572 80J e This section implements the statutory requirement

specified in section 5 b 8 of the Act through a mandatory independent

action provision A number of the comments recommend changes in this

provision Several of these recommended changes have merit in that they

clarify the purpose of this provision or avoid results which were not intended

by the Commission

The first sentence of 572 801 e states that a party may take independent

action upon not more than 10 calendar days notice to the conference

Several comments note that this language could be interpreted to allow

independent action at any time less than I0 days The comments note

that the statute allows a conference to fix a specific notice period as

long as it does not exceed 10 days It was not the Commission s intention

to preclude a conference from selecting any period of notice up to 1 0

days Therefore the Commission is amending the first sentence of

572 801 e to permit conferences to insert a specific number of days

not to exceed 10 calendar days for notice of independent action

The third sentence of 572 801 e states that the conference shall file

the rate or service item in its tariff for use by the member Within

I0 calendar days of the receipt of such notice One comment notes that

this language could have the effect of extending the notice period beyond

the statutory limit The introductory clause in this sentence will therefore

be deleted in order to remove this ambiguity

The fourth sentence of 572 80I e provides for the adoption of an

independent action rate or service item by other conference members One

comment suggests that this sentence could be construed as preventing an

other member from adopting an independent rate until the date the independ

ent action becomes effective This was not the Commission s intention

The Commission therefore will delete sentence four and replace it with

a sentence which indicates that a member may adopt an independent rate

or service item at any time following its announcement effective on or

after the effective date announced by the party taking independent action
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 753

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

The sixth sentence of 572 80I e

presently provides that a conference

may regulate or prohibit member lines from unilateraIly entering into service

or time volume contracts and may also regulate or prohibit a conference

member from taking independent action on any service contract or time

volume contract offered by a conference A number of the comments rec

ommended changes in this sentence One comment notes that the phrase

conference members should read the conference The Commission

agrees Another comment suggested that this sentence should make clear

the authority of the conference itself to enter into service contracts with

shippers and shippers associations Sentence six shaIl be revised to clearly

state the conference s authority in this regard while retaining the concept

that the negotiating and providing of service contracts is a matter which

is exclusively within the conference s authority to control The Commission

is also deleting the rfference to time volume contracts in sentence six

This change is made necessary because in a separate rulemaking proceeding

the Commission is no longer treating time volume contracts as a separate

category FinaIly the Commission is deleting the introductory clause of

sentence six which states Unless otherwise provided in this agreement

because it is unnecessary

C Amendments to the Information Form

I

Information Form Part VII Benefits of the Agreement Part VII of

the Information Form contains questions which seek to elicit information

regarding the benefits that may be expected to accrue to the parties to

shippers or to U S commerce generaIly from the operation of the agree

ment This part included in the Form so that the Commission in its review

of an agreement under the section 6 g general standard may consider

increases in efficiency that may offset a reduction in competition One

comment objects to Part VII of the Information Form as an attempt to

re establish the public interest standard which was specificaIly removed

by the 1984 Act The Commission continues to believe that its interpretation

of the Act and its legislative history supports the inclusion of Part VII

in the Information Form Assessment of such benefits is one element of

a fuIl analysis of an agreement under the general standard Such an assess

ment however would come into play and would only be reached if it

were first determined that the agreement would be likely to result in a

substantial reduction in competition Parties to agreements should certainly

be able to demonstrate benefits to themselves and in most instances there

would likely be benefit to shippers or to commerce generaIly It would

appear therefore that completion of Part VII of the Information Form would

generally be to the advantage of parties filing agreements Nevertheless

the Commission has determined to make completion of Part VII of the

Form optional during the period of these interim rules and to defer a

determination as to whether Part VII should be made mandatory or optional

after the full comment period and an opportunity to gain operational experi
754 FEDERAL MARITIME COMMISSION

ence with the Infonnation Fonn Should theinfonnation in Part VII be

necessary in a particular case the Commission may obtain it through a

request for additional infonnation Parties of course should be aware that

this procedure would extend the waiting period before an agreement be

comes effective Appropriate changes are being made in the Infonnation

Fonn and accompanying instructions in order to indicate that completion

of Part VII is optional

2 Information Form Part lX C The first sentence of this part refers

to a Supplemental Agreement Filing Infonnation Form The correct tenn

is Information Fonn This incorrect tenn is being deleted and replaced

with the correct tenn in sentence one

The rules of this part as amended herein become effective on June

18 1984 Existing conference agreements subject to the Act shall achieve

compliance with the requirements of section 5 b of the Act by indicating

their adoption of the mandatory provisions specified in 572 801 as amend

ed herein in the mannerprovided for in these rules

List of subjects in 46 CPR Part 572

Antitrust Contracts Maritime carriers Administrative practice and proce

dure Rates and fares Reporting and recordkeeping requirements

Therefore pursuant to section 4 of the Administrative Procedure Act

5 U S C 553 and sections 5 6 and 17 of the Shipping Act of 1984

46 U S C app 1704 1705 and 1716 the Federal Maritime Commission

hereby amends Title 46 Code of Federal Regulations Part 572 Subchapter

D as follows

1 In 572 402 revise paragraph e 2 to read as follows

572 402 Fonn ofAgreements

e

2 Following the Table of Contents the body of the agreement setting

forth the operative provisions of the agreement in the order prescribed

by 572 501 and 572 502 Any additional material provisions shall be

set forth as consecutively numbered articles

2 In 572 403 revise paragraph a to read as follows

572 403 Modification of Agreements

The requirements of this section apply to all agreements except

for marine tenninal agreements and assessment agreements

a Agreement modifications shall be filed in accordance with

the provisions of 572 401 in the fonnat specified in 572 402

and this section and accompanied by an Information Fonn The

Information Fonn shall be completed as it pertains to significant

modifications of the agreement Significant modifications for the

purposes of this section are those that may result in a significant

reduction in competition Such modifications include but are not
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 755

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 984

limited to significant changes in the geographic scope of con

ference pooling or joint service agreements which expand the

scope to cover additional foreign countries or U S port ranges

additions to the number of parties in pooling or joint service

agreements significant reductions in service levels significant

changes in pool penalty provisions or carrying charges

3 572 801 is amended by revising paragraphs c d and e to read

as follows

572 801 Mandatory Provisions in Existing Conference Agreements

c Consultation In the event of a controversy claim or dispute

of a commercial nature arising out of or relating to this agreement

or efforts to reduce or eliminate malpractices the conference

its chief executive officer or other designee shall attempt to

resolve the dispute in an amicable manner with the opportunity

for direct discussions with the disputant The services of third

parties may be drawn from members of the conference or impartial

outsiders including use of the Commission s conciliation service

provided for at 46 CPR 502 401 502 406 The means of invok

ing consultation shall be set forth in the conference tariff

d Shippers Requests and Complaints

I Shippers requests and complaints may be made by filing

a statement thereof with the chief executive officer or in the

case of an executive domiciled outside the United States the

designated U S representative Such statement shall be accom

panied by a completed information sheet prescribed by the con

ference chief executive officer The statement and information

sheet shall be submitted promptly to each member of the con

ference

2 The shipper s

request or complaint shall be promptly

considered by the conference

3 Conference discussion and action on the shippers request

or complaint need not be restricted to the exact scope of the

request or complaint and may include other matters varying

from but related thereto However all such discussion and action

must be authorized by the conference agreement

4 The conference shall render a decision on the request

or complaint promptly after its initial submission to the con

ference membership Such decision shall be in writing signed

by the conference chief executive officer and served upon

the shipper If the shipper s

request or complaint is denied

the shipper shall be granted an early opportunity to be heard

by the chief executive officer

5 The procedures for filing shippers requests and com

plaints shall be set forth in the conference tariff
756 FEDERAL MARITIME COMMISSION

e Independent Action

1 Any party to this agreement may take independent action

on any rate or service item required to be filed in a tariff

pursuant to section 8 a of the Shipping Act of 1984 46 U S C

app 1707 a upon 10 or such lesser period as the conference

may elect calendar days notice to the conference The time

period shall commence upon receipt by the conference during

normal business hours of a written notice of a member s inten

tion to exercise independent action The conference shall file

the rate or service item in its tariff for use by the member

At any time following the announcement of an independent

action by a party to this agreement any other conference mem

ber may elect to adopt the independent rate or service item

effective on or after the effective date announced by the party

taking independent action by providing written notice of such

intention If another member decides to adopt the independent

rate then the conference shall file the rate immediately on

behalf of that member

2 The conference may enter into service contracts with

shippers and shippers associations and may regulate or prohibit

its member lines from unilaterally entering into service contracts

and may also regulate or prohibit any conference member from

taking independent action on any service contract offered by

the conference

4 Appendix A of Part 572 is amended as follows

a In Part VII of the Information Form after the title Benefits

ofthe Agreement insert the following Optional

b In the Explanation and Instructions for Information Form revise

the second paragraph to read as follows

All agreements by or among ocean common carriers referenced

in 572 201 excluding assessment agreements marine terminal

agreements and those agreements exempted from the filing of

the Information Form pursuant to Subpart C of the rules filed

with the Commission must be accompanied by a completed Infor

mation Form which in all cases necessitates the completion of

Parts I II V VI VIII and IX Completion ofPart VII is optional

c In the Part by Part Explanation of the Information Form revise

Parts VII A and B to read as follows
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 757

CARRIERS ET AL SUBJ TO THE SHIPPING ACT OF 1984

Part VII A

Part VII A permits the filing party to indicate all benefits

resulting from the agreement that will accrue principally to the

parties as a result of the operation of the agreement Such benefits

may include increased operational efficiencies or other reductions

in costs that result from the implementation of the agreement

Data that are necessary to substantiate the specified benefits should

be submitted

Part VII B

Part VII B permits the filing party to indicate all benefits

resulting from the agreement that will accrue to shippers and

to u S commerce generally Such benefits may include reduced

rate levels or improved quality or frequency of service that result

from the operation of the agreement Data that are necessary

to substantiate the specified benefits should be submitted

d In Part IXC of the Information Form remove the words

Supplemental Agreement Filing Information Form and in their

place insert the words Information Form

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 83 56

JOSE BUENAVENTURA OIBIA PHILIPPINE EXPRESS POSSIBLE

VIOLATION OF SECTIONS 16 INITIAL PARAGRAPH AND 44A

SHIPPING ACT 1916

NOTICE

June 20 1984

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

mine to review the May 10 1984 order in this proceeding styled Approval

of William Beasley Harris Administrative Law Judge of Agreement of

Settlement which approved the settlement and discontinued the proceeding

has expired No such determination has been made and accordingly that

order has become administratively final

In accordance with the terms of the Agreement of Settlement Respondent

shall

a Cease and desist from misdeclaring the weight of shipments

to ocean carriers and obtaining or attempting to obtain transpor

tation by water of property at less than rates and charges which

would otherwise be applicable and

b Cease and desist from refusing to pay applicable ocean carrier

tariff rates

S FRANCIS C HURNEY

Secretary

0
FEDERAL MARITIME COMMISSION

DOCKET NO 83 56

JOSE BUENAVENTURA D B A PHILIPPINE EXPRESS 1

POSSIBLE

VIOLATION OF SECTIONS 16 INITIAL PARAGRAPH AND 44A

SHIPPING ACf 1916

Alan J Jacobson Hearing Counsel John Robert Ewers Director Bureau of Hearing

Counsel

Bernard Ferrera attorney forrespondent

APPROVAL BY WILLIAM BEASLEY HARRIS ADMINISTRATIVE

LAW JUDGE OF AGREEMENT OF SETTLEMENT

Finalized June 20 1984

The Order of Investigation and Hearing in this proceeding was served

December 8 1983 it was published in the Federal Register Vol 48

No 240 on Tuesday December 13 1983 pages 5551055511

A prehearing conference was held in the proceeding on Tuesday January

31 1984

In a letter dated February 29 1984 Hearing Counsel requested that

April 19 1984 be set as the date for submission of a joint stipulation

of facts a proposed settlement and a memorandum in support thereof

The respondent supported the request The request was granted

The parties entered into the following stipulation

STIPULATION

Pursuant to Rule 162 of the Federal Maritime Commission s

Rules of Practice and Procedure 46 C F R 502 162 the Com

mission s Bureau of Hearing Counsel and Respondent Philippine

Express Corp and Jose Buenaventura hereby respectfully submit

this stipulation offacts to the presiding Administrative Law Judge

and request that he include the facts so agreed upon in the record

in the instant proceeding

I Title change from Philippine Express Corp used in Order of Investigation and Hearing served December

8 1983 for purpose of clarification Rule 147 46 CPR 502147 This is in response to motion of Hearing

Counsel served April 19 1984 to delete the words Philippine Express Corp wherever they appear in

the Order of Investigation and Hearing and substitute the words Jose Buenaventura d1lJ1a Philippine Ex

press The reason for the change is simple The Commission thinking Philippine Corporation was indeed

a

corporation inexistence named it as respondent Mr Buenaventura informed Hearing Counsel and Hearing

Counsel confirmed through the New York Secretary of Slate Office that he had not incorporated Therefore

the true pany at interest in this proceeding is Mr Buenaventura

ftL en
760 FEDERAL MARITIME COMMISSION

1 Philippine Express fonnerly located at 467 Tenth Avenue

New York New York was started in 1977 as an importer exporter

of general merchandise It is no longer operating

2 Mr Jose Buenaventura at all times relevant was the Presi

dent of Philippine Express and is responsible for the activities

described herein

3 During the course of 1980 Mr Buenaventura as Philippine

Express knowingly engaged in a scheme involving six shipments

of Cocoa Beans from New York to Manila the Philippines to

obtain transportation by water at less than the applicable ocean

carrier tariff rates

4 The six shipments of cocoa beans were all carried aboard

Maersk Line vessels and are represented by the following

Bill of

Vessel Bill of Lading Lading Date

ALBERT NYCY 11969 1 11 80

AXEL NYCY 14824 2 880

ARILD NYCY 16976 2 27 80

ANDERS NYCY 17858 3 7 80

ADRIAN NYCY 19048 321 80

ALVA NYCY 20121 32880

5 On these shipments Mr Buenaventura first billed for and

collected the proper freight charges from the underlying shippers

Balfour Maclaine International Ltd was the underlying shipper

for the first five shipments listed in 4 above Warren G Harting

Co Inc was the underlying shipper for the last shipment

6 Then by using inaccurate dock receipts substituted in the

carrier s files for the actual dock receipts Mr Buenaventura made

it appear to the carrier that the shipments weighted approximately

one half oftheir actual weight

7 Maersk Line rated these shipment based upon the false weight

declarations on the dock receipts and on the corresponding bills

of lading also prepared by Philippine Express

8 Relying on the in ccurate weight declarations Maersk Line

billed and Philippine Express paid approximately one half the

proper freight charges and approximately one half the amount

paid to Philippine Express by the underlying shippers

9 Philippine Express did not reimburse its underlying shippers

for the difference between the amount they paid to Philippine

Express and the amount Philippine Express paid to Maersk Line

10 The total monetary difference on these shipments between

the amount Philippine Express collected from the underlying ship

pers and the amount Philippine Express paid Maersk Line is

14716 00

11 On July 27 1981 Mr Buenaventura of Philippine Express

entered an Affidavit ofConfession of Judgement in 80 Civ 3830

United States District Court Southern District of New York a

case initiated by complaint filed by Maersk Line to recover monies
PHILIPPINE EXPRESS POSSIBLE VIOLATION OF SEes 16 761

INITIAL PARA 44A SHIPPING ACT 1916

owed it by Philippine Express in connection with the above de

scribed facts

12 In said Confession of Judgment Mr Buenaventura acknowl

edged the facts as alleged in the complaint and agreed to pay

Maersk Line the sum of Thirty Thousand Dollars 30 000

13 During the period beginning on December 27 1978 and

running at least through April 18 1980 Philippine Express carried

on the business of ocean freight forwarding without an independent

ocean freight forwarder s license issued to it by the Commission

14 These freight forwarding activities were in connection with

the six shipments described above as well as at least 97 other

shipments

15 Philippine Express performed the freight forwarding func

tions on these shipments but pursuant to an arrangement with

a licensed forwarder that is no longer in business listed that

forwarder s license number in the forwarder block of the ocean

carriers bill of lading

Is Bernard Ferrera

Bernard Ferrara

Attorney for Respondent

April 18 1984

New York City N Y

Respectfully submitted

Isl John Robert Ewers 419 84

John Robert Ewers Director

Bureau ofHearing Counsel

Is Alan J Jacobson

Hearing Counsel

The parties entered into the following proposed settlement of Civil Pen

alties and Promissory Note Containing Agreement for Judgment

PROPOSED SETTLEMENT OF CIVIL PENALTIES

This Proposed Settlement has been entered into between the

Bureau of Hearing Counsel Hearing Counsel and Philippine Ex

press Corp and Jose Buenaventura Respondent It is submitted

to the presiding Administrative Law Judge for approval pursuant

to Rule 162 of the Commission s Rules ofPractice and Procedure

46 C F R 502 162 and section 505 3 of the Commission s

General Order 30 46 C F R 5053 and is to be incorporated

into the Final Order in the instant proceeding if so approved

WHEREAS by Order of Investigation and Hearing served De

cember 8 1983 the Commission instituted the present investiga

tion to determine whether Respondent had violated sections 16

Initial Paragraph and 44 a of the Shipping Act 1916 46 V S C

815 and 841 b during the period December 29 1978 through

April 18 1980 and whereas that Order includes the issue of

whether civil penalties should be assessed for any violations of

sections 16 Initial Paragraph and 44 a of the Shipping Act

1916 so found
762 FEDERAL MARITIME COMMISSION

WHEREAS Hearing Counsel believe that the facts as described

in the Stipulation submitted in this proceeding indicate that Re

spondent engaged in specific conduct violative of sections 16

Initial Paragraph and 44a of the Shipping Act 1916 and Re

spondent chooses not to contest the question of violative conduct

WHEREAS Respondent has tenninated the practices which are

the basis of the Commission s allegations in this proceeding and

has indicated its willingness and commitment to maintain measures

designed to eliminate discourage and prevent such practices in

the future

WHEREAS the parties in order to avoid the delays and ex

pense that would be occasioned by further litigation ofthe issues

specified in the Order of Investigation and Hearing are desirous

of settling expeditiously the issues of alleged violation and civil

penalties in accordance with the tenns and conditions of this

Agreement and

WHEREAS Section 32 e of the Shipping Act 1916 46 D S C

831 e authorizes the Commission to assess or compromise

all civil penalty claims under the Shipping Act 1916

NOW THEREFORE in consideration of the premises set forth

herein and in compromise ofall civil penalty claims arising from

conduct set forth in the factual record submitted in the present

proceeding Respondent agrees as a condition of this Agreement

to comply with all the requirements set forth hereinafter subject

to the stipulations conditions and tenns of settlement contained

herein

1 Respondent hereby agrees as a condition of this Agreement

to pay the Federal Maritime Commission the monetary amount

of Ten Thousand Dollars 10 000 which shall be payable accord

ing to the tenns ofthe Promissory Note attached hereto as Appen

dix 1

2 Respondent consents as a condition of this settlement agree

ment to the entry of an Order directing it to cease and desist

from practices which have resulted in the alleged violations de

scribed above This Order shall expressly require the Respondent

to

a Cease and desist from misdeclaring the weight ofshipments

to ocean carriers and obtaining or attempting to obtain transpor

tation by water ofproperty at less than rates and charges which

would otherwise be applicable and

b Cease and desist from refusing to pay applicable ocean

carrier tariff rates

3 Except as provided in paragraph five 5 below this Agree

ment shall forever bar the commencement or institution by the

Commission of any assessment proceeding or other claims for

recovery of civil penalties from Respondent arising from the con

duct set forth and described in the factual record submitted in

the present proceeding
PHILIPPINE EXPRESS POSSIBLE VIOLATION OF SEes 16 763

INITIAL PARA 44 A SHIPPING ACT 1916

4 Respondent agrees to take all reasonable measures designed

to discourage prevent and eliminate the conduct that may be

violative of sections 16 Initial Paragraph and 44 a of the Ship

ping Act 1916

5 Respondent hereby agrees as a condition of this Agreement

that if it breaches this Agreement it will not interpose the Statute

of Limitations as a bar or a defense in any action or proceeding

instituted prior to December 8 1988 by or on behalf of the

Commission to recover civil penalties for violations of sections

16 Initial Paragraph and 44a of the Shipping Act 1916 arising

out of the conduct set forth in the factual record submitted in

the instant proceeding In the event of such a breach by Respond

ent if such noncompliance shall not have been cured or explained

to the Commission s satisfaction within thirty 30 days after writ

ten notice to Respondent by the Commission the Commission

shall have the option to seek enforcement of all terms and condi

tions of this Agreement or to declare this Agreement null and

void provided however that Respondent s waiver of the Statute

of Limitations under this paragraph shall remain in full force

and effect In the event the Commission declares this Agreement

null and void and such determination is not reversed by a court

of competent jurisdiction any monies paid to the Commission

shall remain the property of the United States and Respondent

will not impose any defense based on the Statute of Limitations

in any action which the Commission may institute to recover

civil penalties arising out of the conduct set forth in the factual

record submitted in the present proceeding

6 In the event of changes of law or other circumstances at

any time during the term of this Agreement that Respondent be

lieves warrant modification or mitigation of any of the require

ments imposed on Respondent by this Agreement the Commission

agrees as an inherent part of this Agreement to Respondents

right to petition the Commission to this end

7 It is expressly understood and agreed that this Agreement

and final approval hereof is not to be construed as an admission

by Respondent or its owners officers directors employers or

affiliates of the violations alleged in the Order of Investigation

and Hearing by which this proceeding was instituted

8 Respondent acknowledges that it has voluntarily signed this

Agreement and states that no promises or representations have

been made to it other than the agreements and the consideration

herein expressed

The undersigned represents that he is properly authorized to

execute this Agreement on behalf of Respondent and to fully
764 FEDERAL MARITIME COMMISSION

bind Respondent to all of the tenns and conditions set forth

herein

Philippine Express

Jose Buenaventura

By

April 18 1984

John Robert Ewers 41984

John Robert Ewers Director

Bureau ofHearing Counsel

Is Alan J Jacobson

Alan J Jacobson

Hearing Counsel

PROMISSORY NOTE CONTAINING AGREEMENT FOR JUDGMENT

For value received Jose Buenaventura promises to pay to the Federal

Maritime Commission the Commission the principal sum of Ten Thousand

Dollars 10 000 to be paid at the offices of the Commission in Washing

ton D C by bank cashier s or certified check in the following installments

One Thousand Dollars 1 000 on or before ten 10 days follow

ing the approval by the Commission of the Proposed Settlement

in FMC No 83 56

One Thousand One Hundred Twenty Five Dollars 1 125 00 on

or before three 3 months following the approval by the Commis

sion of the Proposed Settlement in FMC No 83 56

One Thousand One Hundred Twenty Five Dollars 1 125 00

on or before six 6 months following the approval by the Com

mission of the Proposed Settlement in FMC No 8356

One Thousand One Hundred Twenty Five Dollars 1 125 00

on or before nine 9 months following the approval by the Com

mission of the Proposed Settlement in FMC No 83 56

One Thousand One Hundred Twenty Five Dollars 1 125 00

on or before twelve 12 months following the approval by the

Commission of the Proposed Settlement in FMC No 83 56

One Thousand One Hundred Twenty Five Dollars 1 125 00

on or before fifteen 15 months following the approval by the

Commission of the Proposed Settlement in FMC No 83 56

One Thousand One Hundred Twenty Five Dollars 1 125 00

on or before eighteen 18 months following the approval by

the Commission of the Proposed Settlement in FMC No 83

56

One Thousand One Hundred Twenty Five Dollars 1 125 00

on or before twenty one 21 months following the approval by

the Commission of the Proposed Settlement in FMC No 83

56

One Thousand One Hundred Twenty Five Dollars 1 125 00

on or before twenty four 24 months following the approval
PHILIPPINE EXPRESS POSSIBLE VIOLATION OF SEes 16 765

INITIAL PARA 44A SHIPPING ACT 1916

by the Commission of the Proposed Settlement in FMC No 83

56

In addition to the principal amount payable hereunder interest on lhe unpaid

balance thereof shall be paid with each installment Such interest shall

accrue from the date of the approval of the Commission of the Proposed

Settlement in No 83 56 and be computed at the rate of twelve percent

12 per annum

If any payment of principal or interest shall remain unpaid for a period

of ten 10 days after becoming due and payable the Commission shall

give Respondent written notice of the amount unpaid Respondent shan

have five 5 days thereafter to pay all unpaid principal and interest If

any payment of principal and interest shall remain unpaid following this

five 5 day period then the entire unpaid principal amount of this Promis

sory Note together with interest thereon shall become immediately due

and payable at the option of the Commission without demand or notice

said demand and notice being hereby expressly waived

If a default shall occur in the payment of principal or interest under

this Promissory Note Jose Buenaventura does hereby authorize and em

power any U S attorney any of his assistants or any attorney of any

court of record Federal or State to appear for him and to enter and

confess judgment against Jose Buenaventura for lhe entire unpaid principal

amount of this Promissory Note together with interest in any court of

record Federal or State to waive the issuance and service of process

upon Jose Buenaventura in any suit on this Promissory Note to waive

any venue requirement in such suit to release all errors which may intervene

in entering up such judgment or in issuing any execution thereon and

to consent to immediate execution on said judgment Jose Buenaventura

hereby ratifies and confirms an that said attorney may do by virtue thereof

This Promissory Note may be prepaid in whole or in part by Jose

Buenaventura by bank cashier s or certified check at any time provided

that accrued interest on the principal amount prepaid shall be paid at

the time of the prepayment

By

Jose Buenaventura

Date April 18 1984

ft r ro l
766 FEDERAL MARITIME COMMISSION

Hearing Counsel submitted the following memorandum in support of

the proposed settlement

MEMORANDUM IN SUPPORT OF PROPOSED SETTLEMENT

IINTRODUCTION

The Federal Maritime Commission began this proceeding by an Order

of Investigation and Hearing served December 8 1983 The Order alleged

that Philippine Express may have violated sections 16 Initial Paragraph

and 44a of the Shipping Act 1916 Specifically the Commission ordered

that the following issues be resolved in this proceeding

1 Whether Philippine Express Corp violated sections 16 Initial Para

graph andor 44a of the Shipping Act 1916 during the period De

cember 29 1978 through April 18 1980

2 Whether civil penalties should be assessed against Philippine Express

Corp for violations of section 16 Initial Paragraph andor 44a and

if so the amount of any such penalty which should be imposed

taking into consideration factors in possible aggravation and mitigation

of such penalty

3 Whether the Commission should order Philippine Express Corp to

cease and desist from carrying on the business of forwarding without

a license obtained pursuant to section 44 of the Shipping Act 1916

By Notice of March 1 1984 the presiding Administrative Law Judge

granted the parties request to submit a

proposed settlement agreement

with supporting memoranda and record on or before April 19 1984 The

record in this proceeding consists of a

stipulation offacts submitted herein

In this memorandum Hearing Counsel explain the proposed settlement

offered by the parties and we indicate the reasons we believe support

acceptance of the settlement

II THE PROPOSED SETTLEMENT SHOULD BE APPROVED

A Authority for Settlement

It is well established that settlement is an acceptable means of terminating

an administrative proceeding The Administrative Procedure Act APA

provides in part that t he agency shall give all interested parties oppor

tunity for the submission and consideration of offers of settlement

when time the nature of the proceeding and the public interest permit

5 U S C 554c 1 The actual authority however to use settlement

as a means to terminate a proceeding comes from judicial precedent and

the agency s rules See Pennsylvania Gas Water Co v FPC 463 F 2d

1242 1247 n 17 D C Cir 1972 The Court of Appeals for the District

of Columbia in that case noted that the purpose of the informal settlement

provisions in the APA is to eliminate the need for often costly and

lengthy formal hearings in those cases where the parties are able to reach

cUr
PHILIPPINE EXPRESS POSSIBLE VIOLATION OF SEes 16 767

INITIAL PARA 44A SHIPPING ACT 1916

a result of their own which the appropriate agency finds compatible with

the public interest and that settlement should not be discouraged ld

The Commission s rules provide authority for settlement of penalties

for violations which are the subject of a formal proceeding stating that

Hearing Counsel shall have full authority to enter into stipulations and

settlements 46 C F R 505 3 1980

The Commission has thus approved settlements under this authority for

violations of many different sections of the Shipping Act 1916 which

fact indicates that there is a

very strong policy favoring settlements in

lieu of needless expensive litigation and the Commission has been

following this policy frequently especially in most recent years Kuehne

Nagel lnc lndependent Ocean Freight Forwarder License No II62

24 F M C 316 322 1981

Section 505 3 of the Commission s Rules for Compromise Assessment

Settlement and Collection of Civil Penalties also requires that settlements

be submitted for approval to the presiding officer 46 C F R 505 3

The presiding Administrative Law Judge in his determination has to follow

the stricture that the settlement must not contravene any law or public

policy Old Ben Coal Company v Sea Land Service 21 EM C 506

512 1978 Ifthe settlement is not invalid under this principle the presiding

Administrative Law Judge may look to other criteria to decide whether

the settlement is fair reasonable and adequate ld

In determining whether the settlement amount is sufficient to warrant

approval of proposed settlements the presiding Administrative Law Judge

is assisted by the standards set forth in 4 C F R Parts 101 105 which

are referred to in section 505 1 of the Commission s Rules and Regulations

46 C F R 505 These standards under Part 03 of Chapter 4 provide

criteria that can be considered in settling a case Among those mentioned

are ability of the respondent to pay and furtherance of enforcement policy

4 C F R 103

B Proposed Settlement Agreement and Stipulation

The proposed settlement agreement provides for Jose Buenaventura to

pay a civil penalty in the amount of 10 000 This penalty is to be paid

over a period of two years with interest according to a promissory note

In addition as part of the settlement Respondent agrees to the entry of

an Order directing it to cease and desist from practices which have resulted

in those complained of here

Philippine Express knowingly obtained transportation by water ofproperty

at less than the applicable ocean carrier tariff rates This involved six

shipments of cocoa beans from New York to the Philippines all during

the first three months of 980 See Stipulation Nos 3 12 In addition

during the period beginning on December 27 1979 and running through

April 18 1980 Philippine Express carried on the business of ocean freight
768 FEDERAL MARITIME COMMISSION

forwarding without an independent ocean freight forwarder s license issued

to it by the Commission SeeStipulation Nos 13 15

Rather than fully litigate the issues raised in the Order of Investigation

and Hearing Respondent and Hearing Counsel entered into the proposed

settlement and agreed upon a stipulated record

C Criteria For Settlement

The proposed settlement meets the criteria established by the Commission

as set out in 4 C F R parts 101 105 1980 Part 103 of that Title includes

standards to be used as guidelines in settling claims Relevant to this

proceeding are the factors mentioned previously ability to pay and further

ance of agency enforcement policy

Both of these factors figured prominently in Hearing Counsel s decision

to enter into the settlement in this proceeding In the first instance a

payment of 10000 is a significant amount which will serve to emphasize

the Commission s determination to eliminate practices such as those in

volved here

It is also a penalty reasonable in light of Respondent s status as an

individual and his agreement to pay Maersk Line the sum of Thirty Thou

sand dollars as compensation for the complained of practices as well as

other matters

Further support of the settlement amount is found in Respondent s finan

cial status Mr Buenaventura is personally responsible for payment of the

promissory note His business Philippine Express is no longer functioning

and he was evicted from his office space He has no business assets

at all He has also stated that he is personally without sufficient funds

to pay a

large penalty He indicates however that he is trying to get

back on his feet and recognizing his obligation in this matter will try

to pay the lO ooo settlement amount

Hearing Counsel believe the factors outlined above should be given con

siderable weight by the Administrative Law Judge in reviewing the settle

ment proposal The settlement amount should operate to prevent recurrence

of the practices upon which the proceeding was predicated and thereby

serve the Commission s enforcement policy It will also serve the Commis

sion policy of favoring settlements in lieu of needless expensive litigation

lll CONCLUSION
PHILIPPINE EXPRESS POSSIBLE VIOLA1 ION OF SEes 16 769

INITIAL PARA 44A SHIPPING ACT 19 6

DISCUSSION

Upon review of the above and the entire record in this presiding the

Presiding Administrative Law Judge is satisfied that the settlement is fair

and reasonable and should be approved The Judge finds and concludes

that the parties have made out a proper case for settlement and supplied

stipulations and reasons in support which are found acceptable

Wherefore it is ordered subject to approval by the Commission as

provided in its Rules of Practice and Procedure

A The settlement is approved pursuant to the proposed settlement and

promissory note containing Agreement for Judgment

B The parties shall notify the Commission promptly upon their carrying

out the terms of the settlement

C The case name shall be clarified as noted herein above

D This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge
FEDERAL MARITIME COMMISSION

46 CPR PART 502

GENERAL ORDER 16 DOCKET NO 8417

INTEREST IN REPARATION PROCEEDINGS

ACTION

SUMMARY

June 20 1984

Fina Ru e

This rule changes the method of assessment from simple

to compound interest calculated on U S Treasury obliga

tions The rule implements section gof the Shipping

Act of 984 but would be equally applicable to proceed

ings under the Shipping Act 9 6 and the Intercoasta

Shipping Act 933 initiated on or after June 8 984

Effective 30 days from publication in the Federal Reg

ister

DATES

SUPPLEMENTARY INFORMATION

IBACKGROUND

This proceeding was instituted by a Notice of Proposed Rulemaking

published in the Federal Register on April 23 984 49 FR 7044 for

the purpose of conforming the Commission s current rule on the award

of interest in reparations proceedings to Section g

ofthe recently enacted

Shipping Act of 1984 Section 11 g

of the Act requires that interest as

sessed in reparations proceedings be at commercial rates compounded

from the date of injury The current Commission rule on the assessment

of interest in reparations proceedings specifies that Interest simple will

accrue from the date of payment of freight charges to the date reparations

are paid

The proposed rule would make two modifications to the current rule

The first modification changes the period during which interest accrues

The period in the current rule extends from the date the freight charges

are paid until the date reparations are paid The period in the proposed

rule would extend from the date the injury occurred until the date specified

in the Commission Order awarding reparations

The second modification changes the manner in which interest is accrued

In the current rule simple interest is assessed on reparations awards while

in the proposed rule interest is compounded on a daily basis

The comment period on the proposed rule was 30 days after publication

in the Federal Register Comments were received from Traffic Service

Bureau Inc United States Lines Inc and United States Lines S A

770 C 6
INTEREST IN REPARATION PROCEEDINGS 771

Inc together U SL and two Trans Pacific conferences These comments

are discussed below

The Period of Time During Which Interest Accrues

The proposed rule states that Interest awarded in reparations proceedings

will accrue from the date of injury to the date specified in the Commission

Order awarding reparations Traffic Service Bureau Inc suggests that

interest should accrue from the date of injury to the date reparations are

paid It points out that l

this is the policy of the current rule and

2 it encourages the timely payment ofreparations

U S L

suggests that a mechanism should be developed whereby payment

may be made in the discretion of the Respondent after service of the

Recommended Decision of the Administrative Law Judge or the Settlement

Officer They argue that lthe rule provides a disincentive for earlier

payment because once a date is specified in the Commission Order there

will be no incentive to pay before that date and 2 the respondent

is forced to pay interest during comment or Commission review periods

subsequent to the date of recommended decisions by Administrative Law

Judges or Settlement Officers U SL

suggests that in the event that a

party wishes to object to the decision of the Administrative Law Judge

or of the Settlement Officer that party should be required to file a notice

of intention to object prior to the date specified for payment and a failure

to file such a notice would be deemed a waiver of its right to file objections

U S L adds that interest on any additional amount only as determined

by the Commission to be owed could then be calculated in the same

manner as the previous award

The Commission in enforcing the current rule determines the relevant

rate of interest to be assessed on reparations awards The current rule

also specifies that this relevant rate of interest is to be assessed on a

simple basis Le it is not compounded The Commission however does

not compute the actual interest amount but leaves this to the respondent

Under the proposed rule not only would the Commission determine the

relevant rate of interest but it would also calculate the actual amount

of interest to be paid This involves l

a determination of the relevant

rate of interest in the regard the current and the proposed rules are iden

tical and 2 the daily compounding of this rate of interest via a

compounding formula in order to determine the precise interest payment

to be made

The proposed rule in responding to a Congressional mandate to

compound interest requires the use of several involved calculations in

order to compute the actual interest payments While the least complicated

compounding formula is used it nevertheless lends itself to easy error

either in misapplication or simple arithmetic mistakes It is thus believed

that if such calculations are made in all cases by the Commission not

only will there be a uniform application of the rule but also there will
772 FEDERAL MARITIME COMMISSION

be a minimal number of errors because of a developed in house expertise

due to repetitive calculations in the application ofthe formula as opposed

to occasional use by outside parties

In order to include the amount of the interest payments in the Commission

Orders awarding reparations it is necessary to know the specific termination

date ofthe reparations period Under the current rule where interest accrues

until the date reparations are paid such a date is unknown at the time

of the commission Order Hence the proposed rule in order to identify

a specific termination date for the reparations period recommends that

the reparations period terminate on the date specified in the Commission

Order awarding reparations The proposed rule also states that Normally

the date specified within which payment must be made will be 15 days

subsequent to the date of service of the Commission Order The amount

of lost interest which would accrue during the 1 S day period would be

negligible

With respect to U S Ls argument that some mechanism should be estab

lished to toll the time for payment of interest this flies in the face of

the theory underlying interest No matter how long a proceeding may con

tinue the offender still has the use of the illegally obtained monies

It should also be mentioned at this point that carriers as well as shippers

benefit from this rule inasmuch as the 1984 Act permits carriers to proceed

against shippers for underpayment

In response to Traffic Service Bureau Inc s concern about timely pay

ment of reparations it should be noted that in those instances of delinquent

payments the complainant may seek enforcement of the Commission Order

in the United States District Court having jurisdiction over the parties

as well as petition the Commission for relief

The Compounding ofInterest on aDaily Basis

The proposed rule specifies that interest will be compounded on a daily

basis U SL argues against daily compounding and suggests that

compounding occur every six months because this is the same maturity

period as for six month Treasury bills which are the benchmark on which

the reparations rate ofinterest is based

There is an important conceptual point that should be made concerning

the above issue The intent behind the proposed rule was to establish

a benchmark interest rate that would produce a reasonable result for the

reparations process The Commission is not attempting to look behind a

particular entity s uses of working capital to reveal in each case where

the monies at issue were actually invested The fungibility ofmoney would

make such an exercise impossible because the funds could have been placed

in numerous alternative forms of investments These alternatives include

certificates of deposit Treasury bills and bonds money market funds long

term corporate debentures and literally hundreds of other instruments of

varying risk and maturity Thus the linkage between the use of six month
INTEREST IN REPARATION PROCEEDINGS

Treasury bill yields and a compounding of interest every six months is

spurious The interest rate factor determined by evaluating the monthly

yields on six month Treasury bills is simply a

representation of what the

Commission believes to be a fair rate ofinterest

Daily compounding is recommended in the proposed rule because it

is the most precise and least complicated compounding formula which

can be used Perhaps of more importance daily compounding is now used

in the commercial sector by most major money market funds

Furthermore if six month compounding were adopted by the Commission

there would still be a residual daily compounding computation necessary

in those instances when the reparation period did not precisely terminate

at the beginning or the end of a six month interval This would unnecessarily

complicate the proposed rule s compounding formula Finally the difference

in the amount of reparations between six month compounding as rec

ommended by U SL and daily compounding as used in the proposed

rule is not very large For example at 10 daily compounding over

5 years a dollar would grow to 1 648 whereas with semiannual

compounding the amount would be 1629

The Use of the Six Month Treasury BillRate

The Trans Pacific Freight Conference of Japan Korea and JapanlKorea

Atlantic and Gulf Freight Conference and their member lines have argued

against the proposed rule s use of the interest rates on six month Treasury

bills They point out that six month Treasury bills are available only in

minimum 10 000 denominations and consequently suggest that it would

be inappropriate to assess interest rates beyond those available in commercial

passbook accounts for reparation awards before the Commission U S L

on the other hand stated that While it can be argued that some index

other than secondary market interest rates on six month Treasury Bills

may be more valid since not all claims will involve 10000 or more

U S Lines is satisfied that this index represents a

readily ascertainable

rate and a rate that is adequately reflective ofthe statutory intent

This issue was raised in Docket 81 22 the rulemaking for the current

reparation rule In its Final Order in that proceeding the Commission

upheld the use of six month Treasury bills as a basis for calculating a

reparations rate of interest and stated that While most reparation amounts

by themselves would probably not be large enough to invest in Treasury

bills there are a myriad of investment opportunities at rates approximating

the Treasury bill rate which are available to the small investor The

Commission thus concluded that the use of an average Treasury bilI

rate as opposed to a fixed statutory rate or passbook rate is a valid

exercise of agency discretion As such the six month Treasury bill rate

fully meets the benchmark standard contemplated in this rule

To reiterate the six month Treasury bilI rate represents a benchmark

interest rate that establishes a reasonable level of compensation The Com

1 JM r

773
774 FEDERAL MARITIME COMMISSION

mIssIon is not attempting to identify the actual investment instroments

used in each instance It should be pointed out however that a hypothetical

investor with less than 10 000 could obtain a return that would closely

approximate the six month Treasury bill rate by investing in a money

market fund which invested solely in Treasury bills As previously stated

most major money market funds compound interest on a daily basis

All other comments have been considered and have been found to be

without merit

In view of the foregoing the Commission is adopting the proposed

rule as final without change

List of subjects in 46 CPR Part 502

Administrative Practice and Procedure

Therefore pursuant to 5 U S C 553 sections 22 and 43 of the Shipping

Act 1916 46 U S C app 821 and 841a and sections l1 g

and 17 a

of the Shipping Act of 1984 46 U S C app 1710 g

and 1716 a the

Commission is revising 46 CPR 502 253 to read as follows

502 253 Interest in reparation proceedings

Interest awarded in reparation proceedings will accrue from the date

of injury to the date specified in the Commission Order awarding repara

tions Normally the date specified within which payment must be made

will be 15 days subsequent to the date of service of the Commission

Order The rate of interest will be derived from the average monthly rates

on six month U S Treasury bills commencing with the rate for the month

that the injury occurred and concluding with the latest available monthly

Treasury bill rate at the date of the Commission Order awarding reparations

Compounding will be daily from the date of injury to the date specified

in the Commission Order awarding reparations The monthly rates on six

month U S Treasury bills for the reparation period will be summed and

divided by the number of months for which interest rates are available

in the reparation period to determine the average interest rate applicable

during the period

By the Commission

S FRANCIS C HURNEY

Secretary

I 1

t
FEDERAL MARITIME COMMISSION

DOCKET NO 8413

IN THE MATTER OF THE AUTHORITY OF THE MALAYSIA

PACIFIC RATE AGREEMENT TO SERVE ALASKA

ORDER DENYING PETITION FOR DECLARATORY ORDER

June 28 1984

The members of the Malaysia Pacific Rate Agreement Agreement No

9836 Petitioners have petitioned the Commission pursuant to Rule 68

of the Commission s Rules of Practice and Procedure 46 C F R S502 68

for a declaratory order to remove uncertainties concerning the geographic

scope of their agreement Notice of the Petition was served on April 3

1984 In response to the Notice the Commission s Bureau of Hearing

Counsel Hearing Counsel has requested leave to intervene and file a

reply to the Petition The intervention of Hearing Counsel wi11 be granted

and its reply considered herein

DISCUSSION

Agreement No 9836 authorizes its members to agree upon rates and

practices for the trades from Malaysia Singapore and Brunei to ports

on the West Coast of the United States including the State of Hawaii

and Canada Petitioners wish to provide service to Alaska and seek to

have the Commission declare that Alaskan ports are included within the

phrase ports on the West Coast of the United States

The Petition advises that Alaska is not mentioned in the memoranda

and orders contemporaneous with the original approval of Agreement No

9836 in 1970 and the subsequent modification in 1975 of the Agreement

to include Hawaii Agreement No 98364 Petitioners go on to state

that they have discovered no Commission or court case which construes

the phrase West Coast of the United States or any analogous term

Despite the lack of legal authority on the question Petitioners believe

that the plain and ordinary meaning of West Coast of the United

States includes Alaska Petitioners argue that Alaska unlike Hawaii is

on the West Coast of the United States

Hearing Counsel opposes the Petition arguing that agreements must be

clear and explicit particularly with respect to the limits on the scope

of authority It cites Commission precedent to the effect that agreements

should be complete especial1y as to matters of substance and the language

used should be so clear as to eliminate all necessity for the interpretation

as to the intent of the parties In the Matter of Agreement No 6510

26 F M C 775
776 FEDERAL MARITIMa COMMISSION

1 U S M C 775 778 1938 and Agree ent No 1 1685 et al 19 F M C

440 445 n 8 1977 Hearing Counsel believes that to avoid ambiguity

the Agreement should be modified to e pressly include service to Alaska

As the parties point out the phrase West Coast of the United States

as used in Agreement No 9836 is n t a term of art nor has it been

construed by the Commission or the couIis This being the case the question

becomes whether or not the Commission in this case should construe

the phrase broadly so as to include Alask

There is nothing to indicate that at e time Agreement No 9836 was

originally submitted to the Commissio transportation circumstances in

Alaska were relied on by the Agreem nt s proponents or considered by

the Commission Moreover it appears ti m the Petition that after obtaining

approval the parties operated under A ement No 9836 for fourteen years

before expressing a desire to extend its c

verage to Alaska The Commission

is therefore unable to grant the relief requested If Petitioners wish to

include Alaska within the geographic scdpe oftheir agreement they should

file an appropriate amendment to their agreement For the Commission

to decide otherwise would be to permit Petitioners to avoid the requirements

of section 15 ofthe Shipping Act 1916146 U S C app 814 and section

6 ofthe Shipping Act of 1984 46 U SC lapp 1705

THEREFORE IT IS ORDERED daat the Petition of the Malaysia

Pacific Rate Agreement for Declaratory er is denied

I

I

j By the Commission

1

1

26 F M n

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

46 CFR 502

GENERAL ORDER 16 DOCKET NO 8416

ENFORCEMENT OF ORDERS AND SUBPOENAS IN FORMAL

PROCEEDINGS

ACTION

SUMMARY

DATES

June 29 1984

Final Rule

This revises the Commission s Rules of Practice and

Procedure with respect to enforcement in the event of

a party s refusal to obey an order or to comply with

a subpoena The revised procedures provide for court

enforcement by the Attorney General on behalf of the

Commission or private parties injured by the violation

or refusal Advance notice to the Commission is required

of a private party s intention to seek court enforcement

of subpoenas and discovery orders The purpose of the

revision is to clarify existing procedures and implement

the statutory provisions of the Shipping Act of 1984

Effective 30 days after publication in the Federal Reg

ister

SUPPLEMENTARY INFORMATION

On April 23 1984 the Commission published in the Federal Register

49 Fed Reg 17043 a proposed amendment to the Commission s Rules

of Practice and Procedure 46 CFR 502 et seq to clarify procedures

for enforcement of Commission orders and subpoenas and to require advance

notice to the Commission in cases of private party enforcement Specifically

it was proposed that 46 CFR 502 21O b be revised as follows

b Enforcement of orders and subpoenas In the event of refusal

to obey a Commission order or failure to comply with a Commis

sion subpoena the Attorney General at the request of the Commis

sion or any party injured thereby may seek enforcement by a

United States district court having jurisdiction over the parties

Such action shall be taken within twenty 20 days of the date

of refusal to obey or failure to comply A private party shall

advise the Commission five 5 days excluding Saturdays Sun

days and legal holidays before applying to the court of its intent

to seek enforcement

26 F M C 777
778 FEDERAL MARITIME COMMISSION

Comments to the proposed rule were filed on behalf of the Chemical

Manufacturers Association CMA and the non governmental members of

the Maritime Administrative Bar Association MABA

CMA and MABA question the Commission s authority to place limita

tions on the three year statute of limitations for enforcement of Commission

orders contained in section 14e of the Shipping Act of 1984 1984 Act

46 V S C app 1713 e with respect to matters other than subpoenas

and discovery orders Additionally while acknowledging the need for

prompt action with respect to subpoenas and discovery orders and the

propriety of advance notice to the Commission in the event of private

party enforcement of such directives MABA feels that the time for enforce

ment should be increased to 120 days to conform with the time during

which discovery must be completed under the Commission s Rules of Prac

tice and Procedure Lastly CMA asks that the proposed rule be modified

to show that it is applicable to subpoenas and discovery orders of the

Commission s Administrative Law Judges ALJs as well as to orders of

the Commission itself

It was not the Commission s intention to apply the time limitations

on enforcement to directives other than subpoenas and discovery orders

and the language of the rule will be modified to ensure that the time

limitations on enforcement contained therein apply only to subpoenas and

orders related to discovery

We do not agree however that the 20day period during which subpoenas

and discovery orders must be enforced should be increased The 1984

Act as MABA acknowledges is designed to foster prompt determination

of Commission proceedings see section II c e 46 V S C app 1710 c

e and should not be read to thwart this objective The legislative history

moreover indicates that the three year limitation was designed to relate

not to interim procedural orders but to orders relating to findings of sub

stantive violations of the Act See e g Ocean Shipping Act of 1983 Hearing

on S 47 Before the Subcommittee on Merchant Marine of the Senate

Committee on Commerce Science and Transportation 98th Cong 1st

Sess 130 February 2 1983 Comments ofChemical Manufacturers Assn

The 20 day period provided in the present rule has been in effect since

1974 and no adverse consequences have been shown to flow from it

In fact MABA does not contend that the present 20 day period has created

any problems On the other hand the 120 day discovery period referred

to by MABA is an outside limit which may often prove too lengthy

as an enforcement period in particular cases such as actions with respect

to assessment agreements Fifth paragraph section IS Shipping Act 1916

46 U S C app 814 section 5 d Shipping Act of 1984 46 U S C app

1704 and rate investigations in the domestic offshore trades section 3 b

Intercoastal Shipping Act 1933 46 U S C 845 which must be completed

within one year Of course the 20 day provision can be waived in any

case in which it has an unreasonably limiting effect

IF II IIr
ENFORCEMENT OF ORDERS AND SUBPOENAS IN FORMAL 779

PROCEEDINGS

In response to CMA s comments and to preserve present practice the

rule will be modified to ensure that it will apply to subpenas and discovery

orders of ALJs as well as to orders ofthe Commission itself This objective

will be accomplished by deleting the word Commission before the words

order and subpena in the first sentence of the rule

List of Subjects in 46 CPR Par t502 Administrative Practice and Proce

dure

Therefore pursuant to 5 U S c 553 sections 27 29 and 43 of the

Shipping Act 1916 46 U S c app 826 828 and 841 a and sections

12 a 14c and 17 of the Shipping Act of 1984 46 U S C app 1711 a

1713 c and 1716 section 502 21O b of 46 CPR is revised as follows

502 210 Refusal to comply with orders to answer or produce documents

sanctions enforcement

b Enforcement of orders and subpenas In the event of refusal

to obey an order or failure to comply with a subpena the Attorney

General at the request of the Commission or any party injured

thereby may seek enforcement by a United States district court

having jurisdiction over the parties Any action with respect to

enforcement of subpenas or orders relating to depositions written

interrogatories or other discovery matters shall be taken within

twenty 20 days of the date of refusal to obey or failure to

comply A private party shall advise the Commission five 5 days

excluding Saturdays Sundays and legal holidays before applying

to the court of its intent to seek enforcement of such subpenas

and discovery orders

By the Commission

S FRANCIS C HURNEY

Secretary

t T llA