1

1083

6511

6513

6514

6541

6549

669

6635

6643

6645

6648

6649

663

665

6668

67

67 12

67 15

DOCKET NUMBERS OF CASES REPORTED

1095

Page

R A Eastman Co v Matson Navigation 00

134

Investigation of Rates in the Hong Kong United States Atlantic and

Gulf Trade 168

In the Matter of Modification of the Self Policing Provisions of

Agreements No 150 and

3103

434

International Packers Ltd v North Pier Terminal 00 525

Rates on U S Government Cargoes 263

In the Matter of Free Time and Demurrage Practices on Inbound

Cargo at New York Harbor 238

In the Matter of Discounting Contract Noncontract Rates Pur

suant to the Provisions of Item 735 Note 2 of the India Pakistan

Ceylon Burma Outward Freight Conference Tariff No 10 418

Pacific Far East Lines lleged Rebates to Foremost Dairies Inc

Connell Bros Co Ltd and Advance Mill Supply Corp 357

Interconference Agreements United States Mediterranean Trades 183

In the Matter of Agreement No T 1870 Terminal Lease Agreement

at Long Beach California 12

The Boston Shipping Assn Inc et al v Port of Boston Marine

Terminal Assn and Massachusetts Port Authority 1

Investigation of Minimum Oharges and Terminal Delivery

ServicesAtlantic Gulf Puerto Rico Trades 222

Agreement for Consolidation or Merger Between American Mail

Line Ltd American President Lines Ltd and Pacific Far

Elast Line Inc 53 81

Rates and Practices of the Pacific Northwest Tidewater Elevators

Assn 369

North Atlantic Mediterranean Freight Conference Rates on

Household Goods 202

United States Borax Chemical Corp v Pacific Coast European

Oonference 451

Ballmill Lumber Sales Corp v Port of New York Authority

Weyerhaeuser Co Atlantic Terminals Inc and Maher Lumber

Terminal Corp 494

In the Matter of Agreements Nos T 1953 and T 1953A Terminal

Lease Agreements Between the City of Oakland and Matson

avigationCo 156

American Union Transport InC Increased Rates and Charges

on Iron and Steel New York to Puerto Rico 149

United States of America v American Oriental Lines Inc 33

Maddock Miller Inc v United States Lines Co Mayer Ohina

Co Fine China Associates Inc Bart Miller William P C

Adams Schmid Bros Inc Paul A Schmid Littlefield Inc 28

VlI

6534
VIII

67 18

67 26

67 27

6730

67 33

67 37

6741

6743

6745

6746

6748

67 51

6752

DOCKET NUMBERS OF CASES REPORTED

67 59

Agreements Nos T 1985 and T 1986 Lease Agreements at Long

Beach California

US Great Lakes South and East Africa Rate Agreement Exclusive

Patronage Dual Rate System

Pacific Coast European Conf v United States Borax Chemical

COrp

United States of America v American Export Isbrandtsen Lines

Ine

Calcutta East Coast of India and East Bakistan U S A Conference

United States of America v Gulf South American Steamship

Co Inc

Special Rates to Alexandria and Port Said North Atlantic

Mediterranean Freight Conference

Sea Land Service Inc Cancellation of FMO Port to Port Rates

VVest Ooast Alaska Trade

United States of America v American Export Isbrandtsen Lines

Inc

United States of America v Hellenic Lines Ltd

Inter American Freight Conference Agreements Nos 9648 and

9649 and Other Related Agreements

United States of America v American Export Isbrandtsen Lines

Ine

Alaska Steamship CO Cancellation of FMC Port to Port Rates

VVestCoast AlaskaTrade

United States of America v American Export Isbrandtsen Lines

Inc

Disposition of Container Marine Lines Through Intermodal

Container Freigbt Tariffs Nos 1 and 2 FMC Nos 10 and 11

688

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j




Approval of Agreement No 8785 the basic agreement under which the ter

minals operate assumed that the various costs of providing terminal services

would be allocated as between users of those services The authority granted un

der the agreement to jointly fix charges carried with it the continued authority

to properly allocate those charges and while a particular change in allocation

may be an unreasonable practice under section 17 or some other section of the

Act it does not constitute a new agreement or a modification to the existing

agreement calling for a new anticompetitive monopolistic or ratefixing scheme

not contemplated in the original agreement Citations omitted

This

finding that

is dispositive

a shift

of

in

the

the

Complainant s

wharfage charge

exception

was a

to

routine

the Examiner s

change

within the terms of Agreement No 8785

Secondly the action of the Port Authority with respect to a re

vision in the wharfage charges only at its piers is clearly sanctioned

by the language of the agreement Agreement No 8785 contemplated

that any of the parties might take independent action provided that

party followed certain established procedures Article Sixth of that

agreement expressly provides that the party proposing a change

reserves the right to make it effective at its own wharves or piers re

gardless of the action of the other terminal operators The only

limitation on this right of independent action is the requirement of

adequate notice to the other members of the Terminal Association so

that there might be an opportunity for consultation Here the

Port Authority complied with all the procedures embodied in the

basic agreement and the wharfage change was effectuated at its termi

nals The Port Authority sexercise of its right of independent action

was taken pursuant to the provisions of Agreement No 8785 Con

sequently the Port Authority saction with regard to the issuance of

Item 2Ato the extent that it resulted from the exercise of a right

As to the inclusion of the right of independent action in agreements of terminal con

ferences we recently stated that the right of independent action reserved by the

parties provides e safety value to Insure that the interest of each port area will be

protected Agreement No 9025 Middle Atlantic Porte Dockage Agreement supra at

P 385

11 FMC
jj
is to require those subject to the statute to accord like treatment 

shippers who apply for and receive the same service Am To

Co v Compagnie Generale Transatlantique 1 USB53 56 1

It is undisputed that the Port Authority has afforded equal treat

to all carriers since Item 2A was put into effect Item 2Ahas 

assessed equally against all users of Commonwealth and Hoosac M

over there has been no showing of any competitive disadva

injurious to any vessels using the Port Authorityoperated 

The Examiner was wholly justified in concluding on the basis o

present record that the effectuation of Item 2Ahad not been s

to be unjustly discriminatory or unduly prejudicial in violatio

section 16 of the Act

Section 17

Finally we consider the allegation that Item 2A violates sectio

Complainant sposition is that the shift of the wharfage charge t

vessel is unreasonable in that it will increase the cost of vessels 

ing at the Port of Boston thereby driving ships away from that 

It concludes that the charge is thereby detrimental to comm

and clearly against public interest as it contributes substantially t

destruction of the port Complainant sposition must be reje

No evidence has been presented nor any showing been made to 

stantiate the claim that the tariff revision results in an unreaso

practice Indeed it would appear that Complainant is laboring u

a serious misconception about just what constitutes unreasonable

within the meaning of section 17

Even assuming aguendo that a showing that a terminal practice resulted 

diversion of traffic from a port without more was sufficient to substantiate a cla

unreasonableness under section 17 Complainant would not be in a better posit

has wholly failed to demonstrate on the basis of the present record that any carg

been diverted from the Port of Boston as a result of Item 2A Quite to the contr

is undisputed that the cargo which was lost to Commonwealth and Eoosac Pier

diverted to and discharged at other piers In Boston Moreover the record shows 

steamship lines remaining at the Port Authorityoperated piers do not wish to leave 

even though they are paying wharfage further that those lines that did leave 

wished to continue calling at Boston were able to find piers elsewhere In the Port of B

11 FMC
jj
Boston public piers in contrast with an across theboard assessment

of wharfage against all truck traffic In the words of respondents

This situation has been a competitive handicap to the Port of Boston and has

had the effect of diverting truck traffic from Boston because truck shippers and

consignees pay no wharfage charge at the competing ports of New York

Philadelphia and Baltimore

The Port Authority envisions that the lowering of costs to the truck

shipper and consignee will increase the movement of cargo over its

piers Since the availability of cargo is an important factor in steam

ship routings the Port Authority also expects that the increase in

cargo will result in an increase in the number of ships calling at

Boston

Furthermore the Port Authority anticipates that the introduction

of a tariff change will encourage more efficient pier utilization by

creating an incentive for shippers to use unitization palletization

and containerization Under present Item 2Aa half wharfage charge

is assessed on palletized unitized and containerized cargoes

The Port Authority is charged with the public duty of promoting

andprotecting the commerce of the Port of Boston it is a public body

experienced in port and terminal management Its decision to revise

its wharfage charge appears to be in keeping with American business

initiative and competitive methods

The Commission is fully aware that there was a drop in tonnage

at Commonwealth and Hoosac Piers for the months of June July

August and September 1966 as compared with thesalve months of

1965 But as the Examiner succuntly stated

It is unimportant that the plan ben success or failure so long as is does not

violate the statute Similar weight applies to the intent methods and causes

leading to the initiation of the change It is the reasonableness of Item 2A and

the contemplated practice under it that must be considered not the motivating

factors cf Lopez Trucking Inc et al v Wiggin Terminals Inc 5 FMB3 17

1956

The record shows that the Port of Boston Is 10 to 15 years behind other world ports

In the area of palletization

11 FMC





346 630 51

Additional cost of wharf construction Berth 233 69 000 00

Additional cost of electrical system Berth 233 66 000 00

135 000 00

In the event the total actual cost of construction shall differ from

the estimated costs the minimummaximum annual compensation

figures shall be increased or decreased by 861 percent of the difference

between actual and estimated costs As of May 18 1966 there have

been changes in the actual and estimated costs resulting in an adjusted

minimum annual compensation of 2960006 and an adjusted

maximum annual compensation of 339000 26

BACKGROUND OF THIS PROCEEDING

Marine terminals in California have conducted their operations by

charging wharfage as early as the turn of the century and dockage

has been assessed on the Pacific Coast for the same period of time

California area terminals have operated under tariffs for 40 or 50

years Apart from the proposed agreement Long Beach has no agree

ments involving wharfinger facilities used for loading and unloading

common carrier vessels which have a maximum limit on the tariff

charges assessed

The only general cargo marine terminal facilities in California at

the present time which are furnished to a carrier on a flat rental basis

or on a minimummaximum arrangement are those which Sea Land

has obtained from the ports of Oakland and Long Beach

In 1963 SeaLand entered into terminal lease agreements with both

We take notice however that on August 23 1966 Long Beach died for approval Of

Agreement No 1935 a marine terminal lease with Evans Products Company whereby

Evans will conduct a public wharfloger business at a rental based on Long Beach stariff

charges but limited to a minimum maximum payment

Matson Navigation Company has proposed however to transfer its container operations

from Enclnal terminals to Oakland where it has negotiated a Sat ren lease agreement

11 FMC

The Examiner concluded that Agreement T1870 between the C

of Long Beath and SeaLand 1 is not unjustly discriminatory 

unfair as between carriers shippers exporters importers or po

or between exporters from the United States and their foreign co

petitors 2 does not operate to the detriment of the commerce 

the United States 3 is not contrary to the public interest and 

does not violate the Shipping Act 1916 and it should therefore 

approved pursuant to section 15 of that Act The Examiner sc

clusions were based on his determination that there is no substan

competitor of SeaLand at Long Beach and therefore neither S

Land nor its shippers are favored over competitive carriers or shippe

He also found that the maximum return under the agreements w

compensatory and therefore would not burden other users of the Lo

Beach facility He concludes that since no one is injured by the 

rangement it cannot have the allegedly discriminatory or preferent

effects

The agreement may be regarded as one by which Long Beach f

nishes terminal facilities to SeaLand which compensates Long Bea

according to the agreement sterms Briefly it provides that if p

ments at tariff rates are less than 30300 per year SeaLand w

nevertheless pay Long Beach 30300 per year and if payments 

tariff rates would total more than 346000 per year SeaLand w

nevertheless pay only 346000 This agreementas distinguished fro

the published tariffs of Long Beach Oakland and other major C

fornia terminalswas worked out between Long Beach and Sea La

to secure terminal service for less than SeaLand would pay at ta

rates The result is that Sea Land may use the terminal facilities mo

cheaply than other terminal users can

The SeaLand agreements with Long Beach and Oakland are 

innovation in California and a radical departure from a system 

terminal ratemaking laboriously built up by California termina

Long Beach and Oakland included and the Commission sregu

11 FMC
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11 FMC

gpy 

operations or facilities which would require or readily lend themselves

to such an arrangement SeaLand because of the size and characte

of its operations is somewhat unique among the carriers serving Long

Beach inasmuch as it is capable of operating under such a lease This

does not mean that Sea Land is being preferred or that others are su

fering from discrimination

We turn then to a discussion of whether the return on the agreemen

to Long Beach is compensatory It must be compensatory to suppor

our conclusion that other users of facilities at Long Beach are no

burdened by the Long Beach SeaLand arrangement

There has been much discussion of what need be considered to de

termine whether the return is compensatory Throughout the proceed

ing the opponents of the agreement have sought to establish a require

ment that the rate of return be based upon the socalled Freas formula

The Freas formula utilizes cost and expense of the whole termina

area including nonrevenue producing facilities such as roads bridges

and administration buildings

Long Beach and SeaLand on the other hand have argued that they

need only show that the return realized covers cost and expenses o

the particular facility to he used by the carrier and in addition returns

a reasonable profit

It is quite true that in valuing the terminal property for the rate

making which resulted in the maximum annual payment figure

346000 in the lease Long Beach did not employ the Freas formula

but it was not and is not compelled to do so The Commission and its

predecessors have sanctioned but have never required its use Long

Beach used a method now known as the stand on its own fee

method The basic difference between Freas and stand on its own

feet is that the former utilizes cost and expense of the whole termina

as its beginning point whereas the latter uses the estimated cost and

expense of the facility to be used by the carrier Both methods have

been approved the former in Terminal Rate Structure California
j
pp

was provided

It does not appear that the failure to provide for a return on 

lands will result in other users bearing costs which should have 

allocated to SeaLand The lands in question were acquired by L

Beach by means of a grant from the State of California Long B

therefore has incurred no original cost in acquiring these lands 

thermore it is questionable whether any costs are incurred to main

these lands considering the use to which they are put The lands 

porting bridges and the administration building would appear t

quire little or no maintenance It might be said that the lands sup

ing the roads require maintenance inasmuch as the roads thems

need to be maintained However the record shows that petitio

cost revision did include Fan allocation of expenses for street and 

way maintenance The record also shows that the cost revision prov

for maintenance of the actual bridges and administration buil

In view of these circumstances we conclude that there is no ne

provide for a return on these lands and therefore the failure to 

vide for a return on such non revenue producing lands will not r

in a non compensatory rate of return for the Long BeachSeaL

agreement Neither will it cause other users of the Long Beach f

ties to bear expenses which should have been allocated to SeaL

Petitioners also maintain on exception that Long Beach did 

provide sufficient data so that the actual rate of return on the in

ment can be determined It may be that Long Beach did not pro

enough information to determine what would be the rate of re

under the Freas formula method Nevertheless we are satisfied 

the information available supports our conclusion that the rat

return will provide a reasonable profit for the use of the partic

facility Such information has been supplied by Long Beach Not

more is required

11 FMC






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While admitting their many advantages the Committee is not disposed to 

nize steamship agreements and conferences unless the same are brought 

some form of effective government supervision To permit such agreements 

out government supervision would mean giving the parties thereto unres

right of action p417

The Committee further stated

the purpose of the law should be to protect the shipper against an

reasonably high rate which the lines may have within their power by vir

their agreements and conference arrangements arbitrarily to impose 

absence of governmental supervision and control

The Alexander Report spronouncements on the need for governm

regulation of the conference system have been continually reaffir

As recently as 1961 Congress in enacting certain amendments to 

Shipping Act said

The Shipping Act of 1916 recognized the need for selfregulation of in

tional shipping through steamship conferences and in an attempt to reconc

concept of free competition that act provided an exemption from the an

laws provided that there was effective governmental supervision of confe

activities HRRep No 498 87th Cong 1st Sess 1961 p 2

One of the 1961 amendments to the Shipping Act clearly expr

Congress renewed concern with unreasonably high freight rates T

section 18b5 added to the Act by Public Law 87346 authoriz

to disapprove any rate which we find is so unreasonably high o

as to be detrimental to the commerce of the United States 

present controversy settles upon the efforts of a shipper Ludlow C

ration to secure information relevant to his charge that the rat

the respondent conference are in violation of section 18 b 5 

relevance of the subpoenaed documents to the complaint of Ludl

now settled The courts have held the documents necessary to the p

determination of the validity of the disputed rates under that se

Federal Maritime Cornoninion v DeSmedt 366 F 2d 464 468 

11 FMC
j
powerstorequire productionof documentslocatedabroad toextendhoweve

the courts might decide under the existing statute neither adding thereto 

subtracting therefrom the lack of intention to renounce power to obtain 

ments from abroad is implicit in the recognition that the courts of appea

already upheld the actions taken by the agency under 21 id at 224 an

refusal to overrule these decisions by amendment The Supreme Cour

warned against drawing an inference that an agency admits that it is a

upon a wrong construction by seeking ratification from Congress Public p

requires that agencies feel free to ask legislation which will terminate or 

adverse contentions and litigations Wong Yang Sung v McGrath 339 US 

47 modified 339 US 908 1950 This is a fortiori true when all that has 

pened is that at the request of the Department of State to preserve the status 

a committee of one house has rejected an amendment passed by the other w

exceeded the clarification the agency bad sought Id 473

We obviously agree with the court sinterpretation of this b

legislative history and we find nothing that indicates any intent o

part of Congress to alter or withdraw our power of cancellation u

section 15 but respondents would have us withhold the exercise of 

power in this case

First it is urged that cancellation would be based upon the erron

fact that some demand had been made upon the conference i

and not as was actually done upon the individual members 

ond cancellation would punish all members for circumstances 

yond their controlthe members offering full compliance for 

actions of those refusing full compliance and those refusing full 

pliance for the actions of their respective governments Finally 

perhaps not separately from the second argument it is urged 

cancellation would result in our interfering in the internal activ

and affairs of foreign nations a course not permitted by the Ship

Act

In arguing that dissolution of the conference is uncalled for s

no demand was made upon the conference respondents attemp

draw a distinction which does not exist The conference is and can 

11 FMC

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But is it to be concluded from this that the Commission which wa

to control all other anticompetitive combinations was not to apply

the same transportation expertise to the control of mergers or con

solidations We think not Rather it is clear that the Committee and

Congress recognized that it could not legislatively control totally

foreign mergers any more than it could effectively legislate agains

rate wars And it would seem to us that the same considerations whic

led Congress to grant this Commission the power to exempt ant

competitive rate fixing and pooling agreements from the stricture

of the antitrust laws would apply to a grant of the same power ove

agreements among domestic carriers to merge

But say the parties therein lies the fatal flaw in our reasonin

because the language of section 15 makes no distinction by flag o

nationality among carriers subject to its requirements and if w

read into it such a distinction we are doing violence to its very lan

guage and to our own principle that we regulate without regard t

flag

Section 17 from whence we draw our power to regulate the prac

tices of terminals makes no distinction between domestic terminal

and foreign terminals and a literal reading of the section would

apply it to both Yet it has never been applied to a foreign termina

to exercise regulatory supervision over that terminal spractices No

is it likely that it would be A reasonable construction of section 1

would normally exclude foreign mergers from the coverage of it

provisions just as it would include domestic mergers

In this same vein Hearing Counsel have expressed grave concer

that the assertion of merger jurisdiction would present the Commissio

with insurmountable difficulties in the case for example of a merge

agreement between a USflag carrier and a foreign flag carrie

Difficulties there may be but no more than there would be under th

antitrust laws were business entities other than common carriers b

water involved in the hypothetical merger

We have on many occasions stated our abiding concern with equality

of treatment regardless of flag muter the Shipping Act Our concer

11 FM0
pggpy y p

and Federal Aviation Acts 49 USC5a and 1378 in which the

word merger appears and it is urged that the absence of any refer

ence to mergers in section 15 clearly demonstrates that Congress never

intended mergers to be covered by that section This argument ignores

chronology and history

While many of the provisions of the Shipping Act were copied from

or patterned after the Interstate Commerce Act there was in 1916

no provision comparable to section 15 in the Interstate Commerce Act

It went only so far as to prevent the pooling of traffic or revenues 24

Stat 380 Section 15 of course applies to these kinds of agreements

but also extends to many many more It is clear that section 15 was

intended to expand the Shipping Board sjurisdiction over water

carrier agreements beyond the then existing jurisdiction of the Inter

state Commerce Commission over railroad agreements Section 5b the

section which is now comparable to section 15 and which grants the

Commerce Commission general jurisdiction over anticompetitive

agreements was not enacted until 1948 Again in 1938 Congress

enacted the Civil Aeronautics Act section 412 49 USC 1382 of

which was admittedly patterned after section 15 and in addition to

section 412 Congress included another provision section 408 49USC

1378 which specifically dealt with mergers

It follows from all this say the protestants that since section 15

does not specifically provide for the inclusion of merger agreements

within its coverage that merger agreements are not included It seems

to us that this argument would have merit if the chronology of the

several statutes was reversed If Congress having once distinguished

between merger agreements and other anticompetitive agreements and

separately and specifically provided for both failed to do so in a

later statute to the exclusion of one or the other it would make sense

to construe this failure as an intention not to grant the excluded

authority But does the reverse of this follow Having once granted

the broadest possible authority over anticompetitive agreements in

11 FMC
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Other Transportation Agencies

When Congress has intended to extend agency control it has shown

this intent clearly and precisely The CAB and the ICC have in

their laws express language covering merger jurisdiction We do not

The scope of CAB and ICC authority extends beyond the limited

authority the majority claims here With respect to mergers submitted

for approval these other agencies have quite precise criteria or guide

lines more so than those of section 15 The majority is guessing at

guidelines Better that clearcut direction from the Congress would

be provided22 Under section 11 of the Clayton Act other agencies

can order divestiture of mergers We cannot Inconsistency abounds

when we compare the claimed jurisdiction of this agency and those

agencies controlling the other modes of transportation

Comnnission Statements and Administrative Actions

The majority make much of the AEIL decision which approved

a transaction involving a covenant not to compete This is not the

situation here The cursory and only rationale concerning jurisdiction

in AEIL is contained in a footnote in that opinion Let us also re

member that AEIL was decided prior to the Supreme Court spro

See US v Philadelphia Nat Bank 374 US 321 1963 for further discussion

Other agencies regulating transportation but not this Commission have expressed

power under section 11 to order divestitures

v In addition to statutory language criteria President Kennedy smessage in 1962 before

Congress asked that an Interagency committee be established to prescribe additional criteria

that CAB and ICC might utilize in merger cases The Committee Issued later a release

specifying these additional criteria

The majority has speckled certain Information it desires but as Commissioner Hearn

says The items mentioned below are Intended to be indicative of the type of additional

Information I require The statement of items 1s not exhaustive and I hope the parties to

the agreement will take this opportunity to make a complete divulgence of their contem

plated activities

Cf the Federal Aviation Act and the Interstate Commerce Act

11 FM0
u See Initial Decision

No attempt is here made to detail them and at best the totality 

the examples offered can only demonstrate a tendency to vacilla

between jurisdiction and no jurisdiction They are certainly not 

demonstration of that sufficiently consistent and traditional agen

interpretation which the courts have said is entitled to great weig

in construing the agency sstatute

In conclusion it indeed may well be that this Commission with 

inherent expertise should have the power to regulate USflag c

porate unifications But I can only state that in the absence of expre

guidance from the Congress the language of section 15 the legis

tive history of section 15 and Congressional treatment of other tran

port regulatory agencies all lead to one resultno jurisdiction

I join my brethren in continuing our approval of Agreement N

8485 and its modification Agreement No 8485

Dissenting and concurring opinion of Commissioner JAMES 

FANSEEN

The threshold issue with which we are confronted here in m

opinion should be dispositive of the case The question is

whether an agreement to merge among carriers covered by the Act 

an agreement with respect to a subject mentioned in section 15 of the A

which the statute authorizes and directs the Commission to approve or d

approve depending on its findings with respect to certain matters specif

therein

The agreement in question is Agreement No 9551 The major

holds section 15 of the Shipping Act to be sufficiently definite to allo

our jurisdiction to encompass this agreement

I disagree as I see no basis for the majority decision either in t

statute or in our prior decisions Section 15 of the Shipping Act 19

is unclear as to whether agreements to merge among competing c

riers are within the purview of our control Unless it is clear a

explicit that Congress intended to subject mergers to our regulati

we ha e no jurisdiction over such matters

11 FMC
py p

conclusion The whole thrust of the first paragraph of section 15 is di

rected to working agreements among separate steamship companies

Therefore the seventh phrase of the first paragraph of section 15 or

in any manner providing for an exclusive preferential or cooperative

working arrangement appears to characterize the first six phrases

In the instances where Congress has wished a regulatory agency

to exercise jurisdiction over mergers it has done so in clear and

specific language The Interstate Commerce Commission 49 USC

5 2 the Civil Aeronautics Board 49 USC 1378 and the

Federal Communications Commission 47 USC 222 are each au

thorized in clear and unambiguous language to approve the acquisition

of one regulated carrier by another by merger stock acquisition

consolidation or othewise The Shipping Act 1916 contains no such

language The care with which Congress has circumscribed the merger

jurisdictions of the ICC the CAB and the FCC stands in stark con

trast to the attempt of the majority to carve out an attenuated merger

jurisdiction by dmpldcation where none is expressly provided

Moreover the legislative history of section 15 does not support an

implied merger jurisdiction The whole thrust of the Alexander Re

port HRDoc No 805 63d Cong 2d Sess 1914 was that the

various operating arrangements which had grown up in the interna

tional shipping community were necessary to prevent the eruption of

destructive competition and wholesale mergers Any attempt to apply

the full scope of the antitrust laws to the shipping industry would be

disastrous The solution suggested was government regulation of

operating agreements and working arrangements among steamship

companies coupled with limited exemption from the antitrust

laws While there was some discussion in the Report respecting the

24 It Is of course a fundamental rule of statutory construction that the various parts

of a statute must be considered together Federnt Power Commission v Panhpndte Eastern

Pipe Line Co 337 US49 514 1949

For an illustration of this point see the Alexander Repor pp 4156

11 FMC
interpretation to its statute However this approach is not prop

when the statute must be accommodated with another Federal statu

which has specific application to a class of transactions and the e

tension of the regulatory agency sauthority would result to abrog

ing the other statute with respect to those transactions approved 

the agency Congress has repeatedly so held with respect to regulato

schemes and the antitrust laws the antitrust laws are not to be repea

by implication and only clear and explicit authority given to a regu

tory body may allow that body to immunize from the antitrust la

transactions otherwise subject to the reach of such laws Carnat

Co v Pacific Westbound Conference 383 US 213 217220 196

California v Federal Power Commission 369 US482 485 196

United States v Borden Co 308 US 188 200201 1939

The majority places substantial reliance upon Agreement No 85

Between Isbrandtsen Steamship Company Inc Issbrandtsen Co

pany Inc and American Export Lines Inc 7 FMC 125 196

AEIL for the proposition that we have already determined that 

have merger jurisdiction as such as well as the power to immun

such mergers from the antitrust laws

I submit that the AEIL case is distinguishable from the insta

case It is conceded that we had jurisdiction over the covenant 

to compete at least to some extent and that our approval of th

agreement was not nugatory However although we approved 

Isbrandtsen Export agreement there is doubt whether we were act

only on the ancillary covenant not to compete or were purporting 

exercise jurisdiction over the ultimate merger The AEIL decis

nowhere makes reference to an agreement to merge or to a mer

as such2 Although the jurisdictional issue was clearly raised in 

proceeding we neither met nor articulated in detail the jurisdictio

basis for our action I believe that the AEIL case is not a persuass

e We merely characterized Agreement No 8555 ae such agreements No 8555 

agreements such as those before ue See ARIL case supra at 12831

11 FMC
in any way offends the Shipping Act I submit that if mergers of

carriers should be subject to the Shipping Act and upon our approval

immunized from the antitrust laws Congress can enact legislation

clearly directed to this end

Since I believe that we do not have jurisdiction over Agreement

No 9551 I respectfully dissent

I join my fellow Commissioners in continuing approval of Agree

ments No 8485 and No 848503

These precedents take the form of case citations and presumed advises to Congress

that section 15 applies to mergers

11 FMC

355 301 0 69 7
pg g y 

Commission and the Commission having fully considered the m

and having this date made and entered of record a Report cont

its findings and conclusions thereon which Report is hereby ref

to and made a part hereof

It is ordered That this proceeding is remanded to the Examin

the purpose of taking further evidence upon the completion of 

the Examiner is to certify the record to the Commission for de

Briefing dates will be fixed by the Commission upon certificati

the record

80

THOMAS LISI

Secret

11 FMC
Decision Adopted December 21 1967

Agreement to merge approved pursuant to section 15 of the Act where substantial

administrative and operating economies and improved operational and

transportation service will result merger will not have destructive or stifling

effect upon competition or competitors or lessen competition except for

elimination of service competition among merging carriers adequate competi

tion will remain and benefits of merger will outweigh any potential injury

Warner W Gardner and Benjamin W Raley for respondents

Alvin J Rockwell John E Sparks Thomas A Welch Willis R

Deming and David F Anderson for Matson Navigation Company

intervener James L Adams and R Frederic Fisher for States Steam

ship Company intervener Donald F Turner Joseph J Saunders and

Miles Ryan Jr for the Department of Justice intervener

Donald J Brunner and Paul J Fitzpatrick Hearing Counsel

SUPPLEMENTAL REPORT ON RECONSIDERATION

By John Herllee Chairman and Ashton C Barrett Commissioner

This proceeding involves section 15 approval of Agreement 9551

under which respondents American President Lines Ltd American

Mail Line Ltd and Pacific Far East Line Inc would merge their

respective companies It is before us now on respondents petition for

reconsideration granted October 13 1967 On October 3 1967 we

served our report an which we found jurisdiction over Agreement 9551

continued approval of Agreement 8485C3 and joined our brother

Vice Chairman Hearn in remanding the proceeding to Examiner

Southworth for taking of further evidence on the matters set out in the

Vice Chairman sseparate opinion In voting to remand we said

we consider that the record in this proceeding now affords a sufficient

11 FMC

81
affected employees and potential local labor problems How subs

recapture will be affected by the merger and whether the merger w

result in greater value for the subsidy dollar are it seems to us clea

and exclusively questions for resolution by the Maritime Adminis

tion under the specific provisions of the Merchant Marine Act of 1

Employee protection and the prevention of local labor problems 

peculiarly within that area of labor management relations which h

insofar as we are aware been considered to be a part of manage

discretion beyond regulatory intervention by this Commission a

its predecessors

The remainder of the Vice Chairman sconcerns are with serv

integration and other operational problems As to these we think 

record is as complete as it need be

Finally we think Agreement 9551 is more than a mere agreem

to agree In our view the agreement is sufficient for approval a

should be approved

No exceptions were taken to the findings of fact upon which 

Examiner based his conclusion to approve Agreement 9551 Furth

more a careful analysis and consideration of the exceptions of p

testants Matson and States to the conclusion that Agreement 9

be approved reveals nothing not argued to and disposed of by 

Examiner We have reviewed the Examiner sdisposition of th

arguments and we are of the opinion that they are well founded a

proper Accordingly we adopt the Examiner sfindings and conclusi

as our own only omitting quotation marks and renumbering footno

No other changes have been made and the Examiner sappendices h

been retained

r The only other parties filing exceptions were the Department of Justice end Hea

Counsel As we pointed out In our report of October 3 1967 Justice excepted only to 

conclusion that the Commission bad Jurisdiction over the agreement and that Hea

Council Joined Justice In excepting to Jurisdiction but urged that should we find Juri

tion that Agreement 9551 be approved

The Examiner sultimate conclusions concerning Jurisdiction over Agreement 9551 

the continued approval of Agreement 8485 have been eliminated since they 

dealt with In our report of October 3 1967

11 FMC
stock was offered at public sale the proceeds to be split between the

Government and the Dollar interests Ralph K Davies who was then

a director of APL formed a group which was incorporated under the

name of APL Associates Inc hereinafter Associates to bid for

the stock in conjunction with Signal Oil and Gas Company The bid

was successful Associates and Signal acquired over 90 percent of

the voting stock of APL and Davies who had been an APL director

since 1948 was made Chairman of the Board of APL

The Murchison interests of Texas had bid unsuccessfully for the

APL stock In 1954 they offered for sale their controlling interest

in AML a Delaware corporation incorporated in 1930 chose prede

cessors had been in the steamship business since 1850 and operated a

trans Pacific service begun in 1917 Davies negotiated the purchase of

the Murchison sAML stock about twothirds of its outstanding

shares by APL and APL has since continued to purchase additional

shares as they became available APL now owns 92 percent of the out

standing stock of AML Its purchases required MARAD approval as

substantial asset acquisitions by a subsidized carrier and such approval

was obtained as required

In 1956 Associates transferred its APL stock to Natomas Company

in return for stock of Natomas a corporation which had not thereto

fore been connected with the shipping business Associates was there

upon liquidated it distributed its Natomas stock to its stockholders

and was dissolved As a result of this transaction and subsequent

acquisitions of APL stock by Natomas and Signal the outstanding

Mr Davies wee President of American Independent 011 Company from 1947 to 1962

Previously he had been Deputy Petroleum Administrator under Secretary of the Interior

Ickes from 1942 to 1946 and before that Senior Vice President of Standard 011 Company

of California

11 FMC
percent of its outstanding shares and he was then elected Chairm

of its Board of Directors a post which he still holds He now o

about 28 percent of the outstanding stock of Natomas

During the same year of 1956 Natomas purchased large blocks 

PFEL stock owned by Chicago Corporation and Foremost Dai

PFEL a Delaware corporation organized in 1946 had conduc

various trans Pacific services as well as other services which had b

abandoned in 1952 the company was doing well and Natomas con

ered it an attractive investment The two 1956 purchases aggrega

about 29 percent of PFEL soutstanding shares Subsequent purcha

have brought the Natomas holdings up to 391 percent In addit

Davies now owns 41 percent and AML owns 15 percent of PFs

stock giving an aggregate affiliated ownership of 447percent O

ership of the remaining 553 percent of PFEL sstock is distribu

widely among some 1700 stockholders as far as Natomas knows 

only large stockholder among these is the APLAMLCMINatom

Retirement Trust which owns 32571 shares or about 35 percen

the total outstanding

Prior to its acquisition of APL stock which brought with 

majority interest in AML and PFEL stock the principal busin

of Natomas had been gold mining by the dredging process in wh

Natomas owns 50 percent of the Claes B 56 percent of the Class A and 45 perce

the 5 percent Preferred Signal owns 50 percent of the Class B 35 percent of the Cla

and 33 percent of the Preferred stock Together they own all the Class 8 91 percent o

Class A and 78 percent of the Preferred stock The Class A shares are entitled to any 

mon dividends declared and to remaining assets on dissolution at five times the rate 

share paid on the Class 8 stock Each share of each of the three classes of stock Is en

to one vote in terms of voting control therefore they may be lumped together

11 FMC
Signal Oil Gas 01

11 FMC

1

APL

93

AML

48

Natomas Co

51

President Chairman Natomas

15

128

39

41

135

PEEL I

1

APLAMLCMINatomas

Retirement Trust

Signal Oil Gas Co has entered into a Stock Voting Agreement

with Bank of America under which the Bank is appointed Signal s

proxy to vote its APL stock in the Bank ssole discretion and judg

ment subject to certain limitations Neither the Bank nor Signal may
It is apparent from the foregoing that Natomas has the power 

direct or cause the direction of the management and policies of A

and PFEL and through APL of AML See Willheisn v Murchis

231 F Supp 142 145SDNY1964

Under section 253 of the Delaware Corporation Law APL a

corporation owning 93 percent of the shares of stock of AML m

merge AML into itself by filing a certificate of ownership and mer

setting forth among other things the securities cash or other c

sideration to be paid upon surrender of shares of the subsidiary U

der this short merger procedure applicable where a corporat

owns at least 90 percent of a subsidiary sstock the right of the par

is unilateral in nature and in no sense dependent upon any action 

the board of directors of the subsidiary and while minority sto

holders of the subsidiary may challenge the adequacy of the value p

on their shares through an appraisal proceeding they cannot sue 

set aside the merger Stauffer v Standard Brands Inc 178 A 2d 3

312316 Thus Agreement No 9551 is not essential to the merger 

AML into APL since the merger can be accomplished unilatera

without agreement or understanding between the two carriers

The Steamship Services of Respondents

I APL Services

APL operates four services all of which are subsidized under 

Merchant Marine Act 1936 411 the services touch at California po

and Far East ports however only one of these services the tra

Pacific Freighter Service is devoted exclusively to carrying ca

between California and the Far East in the relatively high volu

11 FMC
ygyp

vessel which would carry either lighters loaded and off loaded by

shipboard equipment or containers in any desired proportion

2 The RoundtheWorld RW Service Westbound from North

Atlantic United States ports through the Panama Canal calling at

California ports usually Los Angeles and San Francisco Honolulu

occasionally Japan Okinawa Taiwan Hong Kong South East

Asia Singapore West Coast of India to the Mediterranean via Suez

Canal Italy and every other voyage Spain and on to the North

Atlantic Coast of the United States

The RW service is maintained with eight 20knot Mariner vessels

built 19521954 The ODS contract calls for 24 minimum 28 maximum

sailings annually

3 The AtlanticStraits AS service North Atlantic United

States ports through Panama Canal calling at California ports

principally San Francisco Guam the Philippines Vietnam Indo

nesia Malaysia and return via the Philippines Hong Kong Okinawa

and Japan to Los Angeles and back to the Atlantic Coast

The ASservice now uses eight 165knot C3 vessels built 1943

1946 but APL has five 23knot C1Sea masters under construction

for the service The ODS contract calls for 24 minimum and 28 maxi

mum sailings per annum

r Pursuant to section 211 of the Merchant Marine Act 1936 the Maritime Administra

tion has determined ocean routes Trade Routes and services which are essential to the

foreign commerce of the United States Trade Route 29USPacificFar Eastls defined

as Between US Pacific ports Alaska Washington Oregon California United States

Islands lying between continental Pacific Coast United States and the Far East and ports

in the Far East continent of Asia from the Union of Soviet Socialist Republics to Thai

land inclusive Japan Formosa Philippines and other Pacific Islands lying between

continental Pacific Coast United States and the continent of Asia as heretofore described

11 FMC
ports and that only inbound with certain restrictions in the OD

contract as to commodities permitted to be carried to California p

titularly from Japan

The two services are described generally as follows

1 The socalled Short Run service Pacific Northwest Washin

ton Oregon British Columbia to Japan Korea Okinawa Taiw

the Philippines Hong Kong and return via Japan to the Pac

Northwest

This service uses five 20knot Marinertype vessels

2 The Bay of Bengal service Pacific Northwest to Japan Yok

hama SingaporeMalaysia West Coast of India Bay of Bengal ba

to Singapore touching at Japan to the Pacific Northwest v

California

This service uses four 165knot C3type vessels Three 201 kn

vessels are under construction

AML sODS contract calls for minimum 36 and maximum 48 ann

sailings of which 12 are allotted to the Bay of Bengal service and t

remaining 2436are in the ShortRun service

III PFEL Services

PFEL operates a subsidized trans Pacific service between C

fornia and the Far East and an unsubsidized service to Guam 

scribed generally as follows

1 The Trans Pacific Service Between California and Japan 

Philippines Hong Kong Korea Taiwan Thailand Vietnam a

Okinawa

This service is maintained with nine 20knot C4 Mariners b

19521962 and a 17knot Victory built in 1945 The subsidy contr

calls for 5363 sailings annually PFEL has been allocated subs

funds for the construction of three 221 knot LASH vessels with 

option to construct three additional vessels The company estima

that six such vessels could take the place of the nine Mariners a

one Victory now in the subsidized service Under present arrang

11 FMC
ports while AML sservices originate and terminate at Pacific North

west ports with only occasional calls inbound in its Bay of Bengal

service at a California port Except for these California calls AML

is competitive with the CaliforniaFar East services of APL and

PFEL only to the extent that under existing inland and ocean rate

structures inland shippers and consignees in certain parts of the coun

try may use either California or Pacific Northwest ports and it may

be noted that Gulf or Atlantic Coast ports or both provide additional

competitive services for many of these inland shippers and consignees

Where APL and AML both operate in a trade other than TR 29 there

are additional differences in their services which further reduce such

competition as exists between them This appears from the above de

scriptions of APL s RoundtheWorld and AtlanticStraits services

compared with AML sBay of Bengal service Thus AML sservice

is primarily an extension of APL sservice AML s direct portto

port competition with either APL or PFEL is minimal

PFEL service in foreign commerce is limited to TR 29 with all

voyages originating and terminating at California ports and no calls

at Pacific Northwest ports It competes directly with APL sTR 29

services and indirectly with AML sto the same extent as does APL

The only trade within which the proposed merger would have a di

rect and immediate effect upon competition among respondents is the

portion of TR 29 between California and the Far East Details con

cerning such competition in TR 29 and the California portion thereof

are set forth in appendices D E and G they will be considered sub

sequently in connection with discussion of the effect of the merger

upon protestants and competition generally

APL s passenger service does not show a profit after subsidy over and above allocated

overhead although It contributes to overall profit through absorption of administrative

overhead The Atlantic Straits service after subsidy overhead and depreciation makes a

net contribution to profit before taxes but is closer to the break even polot than the Round

theworld service The Trans Pacific Freighter Service Is the most profitable on a per diem

vessel earnings basis and overall It makes more than any of the other three services

although there are fewer ships in the service

11 FMC
Mr Ickes who eventually was made president of PFEL and continu

as such until he was made president of APL in 1966 Notwithstandi

the obvious fact of Mr Davies control over these toplevel moves t

record does not suggest that Davies and Natomas had ever exercis

their power of control to lessen competition among APL AML a

PFEL on the contrary the operating managements have been left 

compete with each other vigorously within the limits of their respecti

services In the case of APL and PFEL the area of such serv

competition covers the entire scope of PFEL strans Pacific operatio

Pursuant to filed agreements approved by the Commission howev

the three lines have investigated the possibility of joint efforts 

eliminate wasteful competition and have undertaken certain 

operative activities as set forth infra

Financial Facts the Effect of Merger upon Subsidy Recapture

Appendix B sets forth income statements of APL AML and PFE

consolidated income statement of APL and AML and a combin

income statement of the three lines for the year 1965 Income sta

ments of protestants States and Matson are also shown in comparab

detail for the same year

Appendix C contains balance sheets as of December 31 1965 cor

sponding to the respective income statements in Appendix B

Under applicable law and their ODS contracts subsidized ope

tors are required to deposit in statutory reserve funds certain amou

which include depreciation on subsidized vessels proceeds of sale 

other disposition of such vessels and earnings in excess of 10 perce

per annum of capital necessarily employed in contract operatio

Earnings deposited or required to be deposited in the statutory rese

funds are not subject to Federal income taxes unless withdrawn f

general purposes or unless contract operations are terminated T

balance sheets and income statements of APL AML and PFEL a

likewise of States and of Matson whose consolidated subsidiary is 

11 FMC
pg y jpy 

to the extent of onehalf of the amount by which earnings from con

tract operations during each 10year accounting period under the

agreement exceeds 10 percent per annum of capital necessarily em

ployed in such operations as defined by MARAD APL and AML

have not incurred recapture in their current 10year accounting peri

ods which began January 1 1958 for APL and January 1 1961 for

AMLPFEL has accrued 3465000for the first 3 years of its current

10year accounting period which began January 1 1963

Upon a simple combination of figures as of December 31 1965 or

as projected to December 31 1966 a merger of the three companies

would wash out any accrued recapture since the aggregate amount by

which APL and AML earnings fell short of recapture would exceed

the amount of PFEL earnings subject to recapture The overall effect

which merger ultimately might have either to decrease or increase re

capture from the three lines would depend upon speculative factors

such as the amount by which overall net earnings might increase by

reason of the merger versus the relative earnings of the individual

companies to the end of their respective accounting periods if they

were not merged Most important however would be the treatment

of the three separate ODS contracts upon merger and presumably

MARAD would stipulate such terms as it deemed appropriate to pro

tect the public interest against any forseeable adverse effect upon re

capture Protestants contentions of probable detriment to the public

interest in connection with the ODS contracts of respondents are with

out substantial merit

Benefits of the Merger

As might have been expected in view of the inter corporate relation

described above Natomas and particularly Mr Davies have from

time to time considered merging the three companies The possibility

of savings through combined operations was obvious but through

11 FMC
strengthened management administrative economies more regul

service and reduced turnaround time with better vessel utilizatio

through coordination of sailings increased financial strength a

flexibility greater ability to meet and take advantage of immine

changes in ocean transport methods growing out of containerizatio

and increased ability to meet the impact of stronger Japanese compe

tion resulting from recent combinations and mergers of Japanesefla

lines It is found that to a greater or lesser degree such benefits w

result they will be discussed briefly seriatim

1 ManagementIn the opinion of an experienced manageme

consultant who had surveyed the management structure of the thr

lines a real benefit of the merger would be an improvement in t

managerial capacity of the three companies He was not spec

but it was not in the best interests of the companies to be specific und

the circumstances The record indicates that the three companies ha

been and are now well managed although as noted APL spreside

was recently replaced by the former president of PFEL whose pla

was taken by PFEL sfinancial vice president The overall top mana

ment of all three companies is controlled by or is subject to control 

Mr Davies through Natomas There is no evidence of any manageme

problem which might be magnified by merger A complete unificati

of the companies would permit optimum utilization of the best m

agerial talent of all three companies and thereby strength

management

2 Ad ainistrative economiesEstimated administrative savings 

about17000 per year are not seriously challenged by protesta

and are accepted by the Examiner The amount it may be noted 

more than 10 percent of the combined earnings before Federal inco

tax of the three respondents in 1965 and more than 14 per cent of th

combined aftertax earnings These savings would result from s

things as centralized electronic data processing making common use 

more sophisticated equipment streamlining of accounting pro

11 FM C
gg

theoretical use of the coordinating committee procedures

3 Sailing coordination elimination of duplicated calls at minor

portsThis would affect only the trans Pacific services of APL and

PEEL except for the possibility of some improved flexibility in ad

justing schedules of inbound AtlanticStraits vessels In the trans

Pacific services the sailing schedules of the six APL vessels and 10

PFEL vessels would be coordinated to provide sailings at regular

intervals and to avoid as far as possible having two APLPFEL ves

sels on the same berth at the same time Ninety sailings per year would

be within the combined minimum maximum ranges of the APL and

PFEL subsidy contracts and with 16 vessels would make it possible

to have a vessel on the San Francisco and Los Angeles loading berths

every day of the year APL considers that this would be attractive to

some shippers because they would be able to move their cargo directly

to shipside at any time although most cargo is booked for a particular

sailing date before the ship comes to port Alternating some of the

minor ports among vessels of the combined fleet would according to

company estimates eliminate as many as two ports per voyage with a

consequent saving in turnaround time while still giving adequate serv

ice to such ports

With the flexibility provided by a larger fleet schedules could be

more readily and effectively adjusted to compensate for delays caused

by wind and weather port congestion labor difficulties breakdowns

and the like While the advantages of sailing coordination could

theoretically be brought about through approved agreements they

could not be fully realized in practice since that would often require

that the earning power of a particular ship be sacrificed for the overall

benefit of the entire enterprise This would present practical difficulties

in the absence of an integrated enterprise

As Matson says there can be no doubt that the merged company

would gain considerable flexibility and would become in many ways a

11 FMC
jpp

new vessel construction

Respondents point out that a large portion of their current ass

particularly in the case of APL is represented by operating dif

ential subsidy receivables and that where payment thereof is held 

as has occurred APL has had to borrow from banks If all funds w

in a common trill such exigencies affecting only a part of the en

prise could more readily be met without outside financing Witho

subsidy receivables the combined balance sheets as of December 

196 5show a slightly better current ratio than APL alone

Variations in annual earnings of the three companies have not b

uniform in degree or direction so that the merger would tend to 

bilize earnings

With net current assets of over 21 million and shareholders eq

in excess of 113 million the combined company would undoubte

have greater financial strength and flexibility than the three compan

separately In this connection it should be noted that the abnorm

demands of Vietnam which we may hope will not continue indefinit

contribute to the present prosperity of respondents and that respo

ents are no exception to the general rule that shipping compan

historically have not been attractive to investors That the three 

spondents separately are not in evident financial straits at the mom

is not reason to discount the benefit of improved financial stren

which the merger would produce

5 Enhanced ability to meet expected changes in ocean transp

methodsThe record demonstrates that containerization in one fo

or another is already at hand in the Pacific CoastFar East trade 

opinions differ as to the timing and probable extent of its developm

and how to meet or take advantage of the trend It will in any case 

quire expenditures for equipment and facilities which a strengthe

financial position would facilitate It appears that there may be so

advantage to a larger operator in acquiring through lease or otherw

11 FMC
from Appendix I each of these lines is Larger in tonnage and five of

them are much larger in number of vessels than APL AML and PFEL

together Only parts of their respective fleets are employed on TR 29

however a substantial part of respondents combined fleet will also

operate in other trades in addition to TR 29 The 1964 mergers were

brought about by the Japanese government which arranged for a

moratorium on mortgage indebtedness and the reduction of manda

tory interest payments as part of the plan of amalgamation

Japanese shipping lines had been in financial difficulties having

overextended themselves in the postwar construction race to the extent

that they were unable to discharge indebtedness incurred at high

interest rates In 1963 Japan enacted a law for the reconstuction and

reorganization of shipping enterprises which provide for the amal

gamation of the lines into prescribed groups a moratorium on mort

gage indebtedness and reduction of mandatory interest payments By

the end of 1965 the financial condition of all the lines had improved

very substantially and most of them were well on the way of dis

charging overdue indebtedness and accrued depreciation NYKhad

resumed dividend payments after a 13 year suspension

Also the Japanese Minister of Transportation caused the five corn

panics operating between the Atlantic Coast and Japan to enter into

an arrangement to adjust the number of sailings and take various

measures for rationalization of the services through the New York

Liner Administration Company established in 1964

The Japanese lines have been materially strengthened as well as

increased in size as a result of the mergers cooperative sailing arrange

ment and financial relief brought about by Japanese government

action The record does not indicate that any respondent or other

Americanflag carrier has been affected as a result except perhaps as

it may have failed to gain any advantage from what appears to have

been the imminent financial collapse of Japanese competition and that

11 FMC

35501 0 69 8
and the Far East In the latter service there were in addition to th

159 outbound and 133 inbound sailings of respondents 692 outboun

and 652 inbound sailings among 26 lines including some with very fe

sailings and some with sailings in only one direction

Appendix E shows comparative volume in tons and percentages 

cargo carried on TR 29 between the Pacific Coast and the Far Ea

during 1964 by respondents States all other USflag lines and fo

eign flag lines as well as by nonliners Appendix G shows comparativ

volume in percentages on the CaliforniaFar East portion of TR 2

during 1964 it shows percentages of liner as well as nonliner line

totals separately as to commercial and commercial plus militar

cargo In order to show comparatively a greater number of pertine

percentages without unduly complicating the table tonnage figure

have been omitted in Appendix G Overall tonnage figures for th

CaliforniaFar East portion of TR 29 in 1964 are shown in Append

F broken down as to commercial bulk commercial general and defens

cargo liner and nonliner

Opposition to the Merger

There was no shipper or port testimony or argument for or again

the merger States a major competitor on TR 29 alleges that it wou

be adversely affected Matson which is not now a competitor but e

pects to be one also opposes the merger and alleges that it would hav

an adverse impact upon its planned TR 29 operation as well as i

existing Pacific Coast Hawaii service There isno other oppositio

to the approval of Agreement No 9551 other than the objections o

jurisdictional grounds discussed above

The Business of Protestant States and the Impact of the

Merger upon it

States is a subsidized operator in the Pacific CoastFar East trad

TR 29 Its corporate history is complicated involving mergers an

11 RMC
subsidized

A service2C3sPacific NorthwestJapanKorea OkinawaFor

mosa

rea Okinawa Formosa

131 service3C3sPacific Northwest and California Japan Ko

B2 service3 Mariners Pacific Northwest and Californiasouth

ern area of TR 29 Hong Kong Manila Saigon Bangkok

C service5 Mariners California classCalifornia and Hawaii

Japan Okinawa ManilaHong Kong

Between California and the Far East States thus competes directly

with APL and PEEL between the Pacific Northwest and the Far

East it competes directly with AML States has incorporated special

features in its vessels calculated to make them serviceable for a vessel

life of 25 years regardless of the rate of growth of containerization

Besides providing for increasing numbers of containers including

reefers States has developed advanced methods of handling cargo in

conventional stow It is improving handling through such devices as

unitization egcombining eight or more separate packages into one

large unit for handling by mechanical means palletization and the

use of slings and other aids to rapid handling which stay with the cargo

from loading until discharge It believes that containerization is the

coming thing but will not develop as fast in the Far East as in other

trades and that it will not be desirable in the foreseeable future at

least for all cargo or in all ports in TR 29 It is somewhat skeptical

of the proposed LASH vessels

States is in good financial condition Appendices B and 0 contain

1965 income statement and balance sheet as of December 31 1965

c At the request of States attorneys the Board by letter confirmed States understanding

that on the same date August 23 1957 the Federal Maritime Board granted its prior or

simultaneous approval if necessary under section 15 of the Shipping Act 1916 as

amended in connection with the merger of Pacific Transport Lines Inc and the new States

Steamship Company

11 FMC
under the United States flag with the bestequipped and most suitab

types of modern vessels constructed in the United States it exemplifi

the American merchant marine that the Merchant Marine Act 19

was designed to foster and encourage The Examiner adopts the p

posed finding of States that it has an important competitive positi

as aUSflag carrier on TR 29 and that its effectiveness as such 

carrier should not be weakened or jeopardized

States claim of probable injury is concerned principally with t

expected coordination of sailings of APL and PFEL in the Calif

niaFar East trade and consequent advantages to the merged compa

It also alleges probable injury from predatory pricing in connecti

with MSTS cargo

The predatory pricing prediction arose out of testimony adduc

by respondents with the evident purpose of suggesting that the merg

might save the government money in connection with a system 

competitive bidding which it has inaugurated for MSTS cargo Th

procurement program as originally proposed is described in In t

Matter of the Carriage of Military Cargo Docket No 664

10 FMC 69 It appears that sealed bids are solicited for t

quotation of rates guaranteed for one year The low bidder gets fi

refusal on each booking if he does not offer suitable space and delive

schedule the cargo is booked with the next highest bidder Respo

ents counsel undertook to show that the merged company sbids wou

tend to be lower rather than higher after the merger The witness 

officer with traffic experience said that in bidding for the merg

company he would take into account the circumstances prevailing 

any given time as would with any one of the separate compani

but that with the larger fleet his responsibility would be towar

being lower rather than higher with the larger number of shi

because of the greater impo lance of a guarantee of available ba

cargo he would be inclined towards being a little tighter with m

See Title IDeclaration of Polley40D9C1 1101

11 FMC
violations Predatory pricing may be defined as selling at a lower

price than customary profit maximizing considerations would dictate

for the purpose of driving equally or more efficient competitors out of

all or the greater part of the market e The practice is indeed a plain

violation of the Sherman Act and would not be immunized by Com

mission approval of the merger since it would not be any part of that

transaction But there is nothing in the record to indicate that preda

tory pricing is a reasonable probability much less a planned practice

as a result of the proposed merger The concept of predatory pricing

is inconsistent with the sealed bid system described in Docket No

66 supra under which it would seem likely that no one would be

hurt by attempted predatory pricing as much as the predator himself

Furthermore as thereinafter mentioned it appears that the govern

ment will continue to determine conditions of competition with respect

to government cargoes beyond any power of the merged respondents

to do so It is concluded upon the record that there is no probability

that States or any other competitors would be adversely affected by

the proposed merger with respect to MSTS or other government cargo

With respect to coordination of sailings of the PFEL and APL

trans Pacific fleets the president of States confirmed respondents

testimony to the effect that it would permit the merged company to

cover major and minor ports more frequently while calling at fewer

ports on each sailing For example States might call five minor ports

on a sailing while the merged company with two sailings could cover

three of those ports on one sailing and the other two on one sailing

resulting in faster turnaround With a larger fleet it would have

greater flexibility and better opportunity for specialized vessel opera

tions Apart from or in connection with these efficiencies of scale

however Mr Dant was concerned over the blanketing 10 of States

Donald F Turner Conglomerate Mergers and Section 7 of the Clayton Act 78 Harvard

Law Rev 1313 1340

10 Blanketing as defined by Mr Dant means that a eompetltor has Killings perhaps the

day before you are sailing and the day after you are sailing In other words be practically

puts a blanket over your sailing date

11 FMC
company I am not so sure that we will be as successful Mr Das

concern is consistent with Mr Ickes testimony that for a single c

pany to have a ship on berth at all times is attractive to shippers a

a help to the company sfreight solicitorsthatis to say a selling po

However the net effect of Mr Dant stestimony is simply that 

merged company will present tougher competition not that it w

present any clear danger to States ability to compete Mr Das

attitude is perhaps summed up best in this statement of his

I would like to convey this thought that I think the consolidation of the c

panies will affect States Steamship Company and take more cargo away f

it than the companies are now taking away as a single entity Now 

how they are going to do this is for them to design I don tintend to 

up as far as we are concerned in trying to develop cargo for States s

whether the companies are combined or not

States concern comes down to the straightforward proposition t

the merger will present it with stronger service competition in 

CaliforniaFar East trade as a result of which it might lose m

cargo to respondents than it is now losing However States 

complishments of the past decade its modern fleet and equipm

and its plans for the future suggest that it is not likely to lose m

if any of its cargo expectancy to respondents merged or not 

a During the 1Smonth period January 1 1965 to June 30 1966 out of 31 States sa

from Yokohama to San Francisco over 60 percent were on the same day the day be

or tbe day after a PFEL or APL sailing Out of 55 States mailings westbound to Japan 

San Francisco tbe same was true as to 64 percent

12 Re also testified that the combined company might not be as aggressive in se

cargo if the competition between them were eliminated and that it might lose some c

because some shippers allocate their cargo among American lines so respondents m

get one instead of two shares of such cargo Also States in Its brief disparages 

benefits of regularly spaced millings on a 4day headway pointing out that respond

vessels are now sailing full westbound and arguing that free space eastbound Is no

and not due to lack of coordinated eailings that most cargo is booked in advance b

the sbip arrives eo it doesn tmatter that the merged company might have a ship on 

at all times at San Francisco and Los Angeles and that respondents coordination pla

rudimentary at beat and will be of short duration anyhow because things will be cha

when the new LASH abips are delivered While these arguments and speculations 

counter to States conjectures about Its loss of cargo they do not detract from 

proposition that improved operating efficiencies would result from Beet coordination

11 FMC
1964 it carried 98 percent westbound and 99 percent eastbound of

all cargo carried between California and Hawaii in dry cargo self

propelled vessels Of all cargo of every description between Hawaii

and the Pacific Coast including petroleum products carried in tankers

and all other proprietary cargo Matson carried about 48 percent west

bound and 84 percent eastbound tankers carried 436percent west

bound and 149percent eastbound the balances not carried by Matson

were 85 percent westbound and 08 percent eastbound It operates 14

cargo vessels all 16 to 162 Imot vessels built 19441946 seven of them

were converted 19601965 into specialized container ships combina

tion containerbulk cargo ships or automobile carriers Matson pio

neered in the development of containerization after some years re

search it started a container service in August 1958 and now owns or

leases500 containers It took about 7 years to get full shipper accept

ance of the container principle Although containers are used in other

services including Pacific CoastJapan Matson feels that there is still

no container service comparable to its own Matson has been able to

maintain rates at or below 1961 levels

Matson emphasizes that it receives no subsidy construction or

operating in its domestic Pacific CoastHawaii service However such

subsidies which are designed to compensate USflag operators for

the additional cost of constructing and maintaining vessels in US

yards and of manning them with US citizens are not available to

operators in the domestic trades for the logical reason that such opera

tors are protected by our cabotage laws against the competition of low

cost foreignflag operators In addition to its domestic Hawaiian serv

ice Matson operates through a wholly owned subsidiary a service

from the Pacific Coast to New Zealand and Australia That operation

is subsidized In 1965 the subsidiary received more operating differ

ential subsidy than PFEL and nearly as much as AML though only

11 FMC
trucking and terminal services and merchandising in wholesale a

retail fields Its portfolio of investment securities excluding stock 

subsidiaries had a market value of 30 million

Matson alleges that at would be injured not only in its Pacific Coa

Hawaii service but also in a new service which it proposes to inau

rate in October 1967 on TR 29

The alleged injury to its domestic Hawaiian service is concern

with an agreement among APL Isthmian Lines Inc and Castle

Cooke Inc a conglomerate corporation whose interests include H

waiian operations similar to some of Alexander Baldwin s

establish a new USflag steamship company to be called Hawaii

Lines Inc to provide a service between the mainland and Haw

APL and Isthmian would each have a 40percent stock interest a

Castle Cooke a 20percent stock interest in the new company whi

would compete directly with Matson sHawaii service The agreeme

has been filed for Commission approval and upon Matson spetiti

the Commission has since the conclusion of the hearing herein issu

its Order of Investigation and Hearing in Docket No 67 25 to 

termine whether the agreement should be approved The merits of t

agreement are not within the scope of this proceeding although c

siderable evidence relating thereto was adduced upon Matson scla

of background relevancy The only effect of the merger allegedly 

lated to Matson sHawaiian service however is the adverse impact

not otherwise specifiedof the increased financial strength of t

merged company which would take APL splace as a 40percent sto

holder in the Hawaiian Lines ventures There is no evidence that t

combined available resources of the three stockholders absent t

merger would not be adequate for that venture in fact Castle

Although the subsidiary acquired In 1925 has never paid a dividend to its par

15 million of the 43 million retained earnings shown in Matson sconsolidated bala

sheets at December 31 1965 were retained earnings of the subsidiary Restrictions in l

agreements and the subsidiary ssubsidy agreement left65000 of consolidated retai

earnings available for dividends of which 17000 was the unrestricted portion of 

subsidiary sretained earnings

Order of Discontinuance July 14 1967

11 FMC
sidized freight service carrying cargo in containers and in conventional

stowage between the Pacific Coast or Hawaii and the Far East such

approval being required because of what Matson scontroller realisti

cally referred to as Matson ssubsidized operations MARAD approved

the application in February 1966 Matson plans to start operations in

October 1967 with a service between Los Angeles San Francisco

and Seattle or Portland and a Tokyo Bay port and Kobe in Japan

Using two vessels there would be about 19 voyages annually on a

36 day turn Matson is proceeding to have two of its C3 vessels con

verted to full containerships with the installation of new 52foot

midsections in a Japanese yard It plans also to have two new 24knot

33000ton containerships built in Japan after receipt of these pos

sibly in 1968 the 16knot C3s would be used in a feeder service

between Japan and ports elsewhere in the Far East and the trans

Pacific service performed by the two new foreign built ships Discus

sions with NYK a Japanese line are in progress looking toward the

establishment of adequate container terminal and drayage facilities

in Japan Matson has made careful studies to ascertain the cargo

potential for its containership service applying its experience to data

concerning the trade It considers that the attractions of its container

service should give it a proportionately greater share of available

cargo than simply a sailing basis It expects to be able to fill as many

containers eastbound as westbound Its plans were formally announced

while the hearing herein was in progress it has been proceeding with

its planning as fast as it could and the planning has not been affected

by the present merger proposal

Matson asserts that the merger would be harmful to its proposed

service because of the merged line s ability to schedule the 90 sailings

of

approach

its trans

to

Pacific

the asserted

vecals

blanketing

so as to blanket

hazard

Matson s

was quite

sailings

different

Matson s

from

States Whereas States was concerned about a regular service on a 4

11 PMC
gg p p

Scott was probably right in his contention that the ability to blan

deliberately while making it appear to be the result of normal sch

uling increases with the number of sailings under the scheduler sc

trol The suspicion that a company might resort to illegal activ

because of the difficulty of detection does not however permit 

conclusion that it would probably do so With the large number 

sailings on TR 29851 outbound and 785 inbound between Califor

and the Far East in 1964 Appendix Dit cannot be assumed t

respondents would find it worthwhile to compound their normal sch

uling problems to give special attention to Matson Assumption 

no substitute for reasonable probability as a measure of illega

FTC v Proctor Gamble Co 386 US568 1967 concurring opin

of Mr Justice Harlan at 584 citing Brown Shoe Co v United Sta

370 US294 323 1962

The record shows that Matson sproposal to enter the TR 29 mar

with a container service has been planned carefully with due regard 

competitive conditions in the trade and without any real anxiety 

reason of the proposed merger IC will apparently be the only serv

designed to take full advantage of the containerization technique to 

so it will not attempt to provide an across the board service but w

depend on containerizable cargo in the concentrated United Stat

Japan portion of the trade route with a feeder service later fr

other areas turning its vessels much faster than other operators 

foresees a proportionally greater share of the available containeriza

cargo per sailing because of the special attractions of its operation 

undertaking what may be called a specialty service it will exploit 

containership experience without committing itself to a full li

service such as respondents and States offer By using foreignb

See Turner Conglomerate Mergers and section 7 of the Clayton Act 78 Marv L 

1313 1344 and Of Stockton Port District v Pacific Westbound Con 9 FMC 12 

1966

11 FMC
service Matson plans to inaugurate

The Standards for Decision Discussion and Conclusions

Section 15 of the Act authorizes carriers subject to the Act to enter

into agreements of the kind described therein subject to the approval of

the Commission

When such an agreement is Sled the Commission must approve unless after

notice and hearing it finds that it would be unjustly discriminatory or unfair

operate to the detriment of the foreign commerce of the United States be contrary

to the public interest or be in violation of the Act Agreement No 9481 Hong Hong

Tonnage Ceiling Agreement FMC Docket No 66 10 FMC 134 and see

Aktiebolaget Svenska Amerika L v Federal Maritime Com n351 F 2d 756 758

DC Cir 1965

States and Matson contend that respondents have the burden of

justifying their proposed merger by showing that it is necessary to

produce important public benefits and is based upon a serious trans

portation need citing Mediterranean Pools Investigation 9 FMC 264

1966 and Investigation of Passenger Steamship Conferences Regard

ing Travel Agents the Travel Agents case Docket No 873 10

FMC 27 This is inconsistent with the plain words of section 15 as well

as such Commission and court decisions as Hong Kong Tonnage Ceiling

Agreement quoted above and Aktiebologet Svenska Amerika which

was the Travel Agents case on appeal from the Commission soriginal

report In Mediterranean Pools and Travel Agents the Commission

was talking about the burden of going forward which falls upon re

spondents who propose an agreement that is on its face a per se viola

tion of the antitrust laws in itself contrary to the public interest and

detrimental to the commerce of the United States Where such a prima

facie case for disapproval is presented to the Commission it is for the

respondents

a

to come forward with the necessary facts which are

lmost uniformly in the hands of those seeking approval

of the agreement Mediterranean Pools supra at 290 toshow that

11 FMC
eliminate outside competition was of the same nature In those cas

the Commission found that some serious transportation need or imp

tant public benefits must be shown to overcome the prima facie invas

of the public interest in competition Those cases must not be read ho

ever to mean that such a showing is necessary where it does not app

that an agreement would otherwise be contrary to the public inter

or detrimental to commerce The latter standards together with 

others mentioned in section 15 are the ultimate and only bases 

disapproval

The Commission is not to measure proposed agreements by 

standards of the antitrust laws and in fact cannot decide definit

whether a contemplated transaction is forbidden under any of 

ramifications of those laws nevertheless it may not ignore their pol

Isbrandtsen Co v United States 211 F 2d 51 57 DCCir 195

McLean Trucking Co v US321 US 68 79 85 86 1944 M

neapolis c6 St Laois R Co v US361 US17386 1959 The pu

lic interest within the meaning of section 15 includes the natio

policy embodied in the antitrust laws Theproblem is one of acc

modation of section 15 and the antitrust laws Mediterranean Po

supra at 289 290 and Cf Minneapolis St Louis R supra at 1

The policy of the antitrust laws concerning mergers is set forth 

section 7 of the Clayton Act 15 USC18 Under the Sherman A

of 1890 a merger violated the antitrust laws only if it constitute

substantial restraint of trade The Clayton Act enacted in 1914 sou

to reach agreements and practices substantially lessening competit

in their incipiency when they merely may become substantial 

straints Section 7 was originally directed to acquisitions of the st

of competing corporations where the effect might be substantially 

lessen competition between the competing corporations In 1950 s

tion 7 was amended to cover the entire range of corporate amalga

tions from pure stock acquisitions to pure asset acquisitions incl

ing mergers although they are not specifically mentioned USv P

nFMC
Although it has been said that the dominant theme pervading con

gressional consideration of the 1950 amendments was a fear of what

was considered to be a rising tide of economic concentration in the

American economy section 7 is not an anticoncentration statute as

such concentration is to be viewed in the context of a particular indus

try in making a determination under the tests set forth in the statute

whether the merger substantially lessens competition or tends to create

a monopoly Brown Shoe Co v United States 370 US294 315 321

322 n 36 1962 Monopoly power is the power to control prices or

exclude competition and price and competition are so intimately

entwined that any discussion of theory must treat them as one

United States v du Pont ce Co 351 US377 391392 1956 Taken

as a whole the legislative history of section 7 illuminates congres

sional concern with the protection of competition not competitors

and its desire to restrain mergers only to the extent that such combina

tions may tend to lessen competition Brown Shoe supra p 320

The courts have developed market analysis principles for determin

ing the probable effect of a merger to lessen competition or tend to

create a monopoly Under the antitrust laws this effect must be meas

ured within a definite area of effective competition or relevant mar

ket as to product or services and also as to geographical boundaries

the section of the country

As to geographical market the question

is not where the parties to the merger do business or even where they com

pete but where within the area of competitive overlap the effect of the merger

or competition will be direct and immediate United States v Phila Nat Bank

supra at 357

Thus if this were an antitrust proceeding as the parties briefs would

sometimes suggest the relevant geographical market would appro

priately be that portion of the United States which utilizes ocean

transportation of freight between California and the Far East that

11 FMC
trust purposes Broom Shoe supra at 325 citing du Pont supra at 593595

But the boundaries of the relevant market must be drawn with sufficie

breadth to recognize competition where in fact competition exists Brow

Shoe at 328

Under these principles the outer boundary of the relevant servi

market would be transportation between the Far East and Californi

in dry cargo vessels The parties contend variously that the releva

service market should be further restricted to such transportation b

liners only or byUSliners only or even by subsidized US

flag liners only The last mentioned subdivision is clearly artifici

arbitrarily tailored to the dimensions of respondents it is not base

upon the needs or settled consumer preferences of the market C

United States v Grinnell Corp 384 US 563 dissenting opinion 

Mr Justice Fortas 590591 1966 The slightly broader classific

tion of all USflag liners is subject to similar criticism USflag

liners on TR 29 subsidized or not are in direct competition with fo

eignflag liners A division of types of service to exclude this compe

tion would be unrealistic Cf Brown Shoe supra at 326

In this connection the argument is advanced that USflag line

are a relevant market because of the priority given by law to USfla

vessels with respect to MSTS and other government or preferenc

cargo which practically excludes the competition of foreignflag line

Most of such cargo moves or in future will move under MSTS auspice

This basis for designating USflag liners as the relevant market thu

takes into account in substantial effect only one customer theUS

Government a customer not noted for its subservience to noncompe

tive pricing or other attributes of monopoly At the time of the hea

ing a new system of competitive bidding decreed by MSTShad

just been inaugurated for MSTS cargoes to take the place of th

former MSTS system of allocation based upon number of sailing

and it appears that the Government will continue to determine cond

1 Military Sea Transportation Service Department of the Navy

Cf United States v Philadelphia Not Bonk supra 374 US 381

11 FMC
the services of nonliner vessels should be considered Respondents

do not urge that nonliners and liners are interchangeable vessels nor

do they deny that their liners are in closer competition with other

liners than with nonliners Nevertheless the record indicates a sub

stantial cross elasticity of demand between liners and nonliners

Appendix F shows that in 1964 in the CaliforniaFar East trade

nonliners carried about onehalf as much commercial general cargo

package as opposed to bulk cargo as did liners inbound they

carried over 80 percent of the amount carried by liners Liners carried

nearly 15 percent as much bulk cargo as did nonliners the traditional

bulk cargo carriers inbound liners carried over 95 percent as much

bulk cargo as nonliners Nonliner rates are lower than liner rates as

a rule while liners provide greater speed generally with regularly

scheduled service The record shows that the services are interchange

able to a very substantial extent The decrease since 1954 in the

USflag share of all cargo from 56 to 10 percent versus a decrease

from 74 to 43 percent in the case of liner cargo only suggests that inter

changeability has increased since 1954 since USflag liners which

are the principal USflag vessels have evidently lost increasing

amountsofto nonliners Appendix H

Appendix G shows percentages of both marketsliner and nonliner

in the CaliforniaFar East trade carried by respondents in 1964

APL and PFEL together carried about 261 percent of liner com

mercial cargo and 78 percent of all liner plus nonliner cargo

AML scarryings were negligible Appendix G also shows percentages

of commercial and commercial plus defense cargo liner and nonliner

carried by protestant States and by all other USflag liners by

Japanese and by other foreign flag liners and by USflag and

foreignflag nonliners the figures for USflag nonliners being

negligible

An aggregate market share of 261percent of the liner business rep

resents a high degree of concentration although the liner trades are

11 FMC
of Seaboard Air Line Railway and Atlantic Coast Line Railro

as consistent with the public interest although it recognized that t

merger would eliminate competition and create a rail monopoly 

parts of Florida Seaboard Air Line R CoMergerAtlantic Co

Line 320 ICC 122 1963 Upon review the court remarked th

alltoo much time has been consumed in showing a violation of t

antitrust laws and too little time devoted to assessing the pub

interest as expressed in the Interstate Commerce Act It noted th

the market analysis techniques of the antitrust laws are useful 

discover the danger areas where monopoly or substantial lessen

of competition in a given line of commerce may be found but that th

do not tell us whether it is good or bad since Congress has determin

that not all restraints and monopolies which violate the antitrust la

are bad for the purposes of the national transportation policy

Our task is at an end when we satisfy ourselves that the Interstate Commer

Commission has perceived the danger areas and judging by the statuto

standards has concluded that the public interest is best served by allowing t

merger Florida East Coast Ry Co v United States 259 F Sapp 993 10

MDFla 1966

So although the court had absolutely no doubt that judged by t

standards of the antitrust laws the instant merger would fail at ea

as to Florida it sustained the merger since the ICC had recognize

and considered the danger areas in finding it consistent with t

public interest The ICC had found that sufficient outside competitio

intermodal or intramlodal would remain and that economies a

efciencies would result from combined administration from th

See Marx international Shipping Cartels 1953 P 10 Oligopoly fe an econom

term denoting a relatively small number of sellers Id p 10 u 6

Section 52 of the Interstate Commerce Act directs the ICC to approve voluntary r

mergers which It finds to be consistent with the public Interest a test which is s

stantially the same as the public interest teat applicable to agreements under section 15 

the Shipping Act 1916 Like section 15 the Interstate Commerce Act doe not expres

require that the antitrust laws be considered a factor In the public interest but since 

exempts parties to an approved merger from the antitrust laws the ICC like this Comm

elon with respect to section 13 agreements has long been required to give weight to t

antitrust laws to approving mergers

11 FMC
by the nature of the shipping industry Although rates charged the

public in the foreign commerce of the United States are not as strictly

regulated and supervised as in domestic transportation ocean carriers

in our foreign commerce are subject to regulation by the Commission

and the Act provides an effective safeguard against the evils attending

monopoly Cf McLean Trucking Co v United States supra at 85

Concerted rata fixing exists legally through Commissionapproved

conference rate agreements so that control of cargo rates and practices

by a single carrier no matter how large is virtually impossible No

one has suggested the possibility here Respondents are members of the

conference covering each trade which they serve in common and in

the five conferences of which two or more of the respondents ate mem

bers there are 9 19 20 23 and 30 members respectively In the small

0Upon suit to enjoin the merger after It bad been approved by the ICC the District

Court first set aside the ICC sorder and remanded the case to the ICC concluding that the

ICC s analysts of the competitive effect of the merger was fatally defective because It had

not determined whether tbe merger violated section 7 of the Clayton Act The Supreme

Court vacated the District Court sorder Seaboard Air Line R Ca v United States 382

UB154 and remanded the case to the District Court for a full review of the administra

tive order and findings pursuant to the standards enumerated by this Court saying pp

156We157believe that the District Court erred In its interpretation of the directions this Court

set forth In McLean Trucking Co v United States 331 067 1944 aad Minneapolis d

St Loais R Co v United States 361 UB 173 1959 As we aid In Minneapolis at 186

Although 4511 does not authorize the Commission to ignore tbe antitrust laws

McLean Trucking Co v United States 321 US 67 80 there can be little doubt that the

Commission Is not to measure proposals for acquisitions by the standards of the antl

trust laws 321 U8 at 856 The problem is one of accommodation of g 52 and the

antltrust legislation The Commission remains obligated to estimate tbe scope and ap

pcsise the effects of the curtailment of competition which will result from the proposed

acquisition and consider them along with the advantages of Improved service and other

matters to tbe public interest to determine whether the acquisition will assist In effectu

ating the overall transportation policy 321 OSat 87

The same criteria should be applied here to the proposed merger It matters not that the

merger might otherwise violate the antltrust laws the Commission bas been authorized by

the Congress to approve the merger of railroads If It maims adequate findings in accordance

with the criteria quoted above that such a merger would be consistent with the public

interest 49 USC1 52b 1984 ed

Upon full review pursuant to the Supreme Court sorder the District Court sustained the

ICC s order approving the merger and denied an injunction Florida East Coast Ry Co v

United States 259 F Supp 993 MD Fla 1866 and the Supreme Court granted a

motion to amrm 388 US 8 1967

11 FM0
in support of the steamship conference system 20

Freedom of the seas permits any ship to enter any trade at any time subj

only to minimal limitations imposed by certain nations as safety requireme

or military precautions In ocean shipping no certificate of convenience a

necessity need be obtained The mobility and interchangeability of drycargo v

sels is of great competitive significance A tramp carrying bulk grain today m

be on the liner berth the next day carrying many types of packaged car

Whereas it costs a great deal to set up and operate a regularly scheduled lin

service in comparison it costs very little to charter 8 vessel advertise in 

port strade paper hire a broker or agent on a commission basis and wh

business is good operate a regular service

Add to such considerations the existence of interflag competiti

and it is apparent that for a single ocean carrier even with what mig

be considered in some industries a disproportionate share of t

market to control prices or exclude competition is not practically p

sible at least in a trade such as TR 29

No substantial increase in economic concentration will result fro

the merger of APL and its 93percentowned subsidiary AML T

concentration resulting from the merger of PFEL is somewhat dilut

by the affiliation through common ownership of stock which h

existed for more than 10 years In any event Congress has not m

dated the Interstate Commerce Commission or the courts to ca

paign against super concentration in the absence of harm to com

tition FTC v Procter Gamble Co 386 US568 April 11 19

concurring opinion of Mr Justice Harlan p 3 of slip opinion citi

Turner 78 Hare L Rev 1313 at 1395

Nevertheless it is appropriate in view of protestant Matson sstr

on concentration to point out that Congress sconcern with concen

tion as such is directed to economic concentration in the Americ

economy Brown Shoe supra at 315 United States v Von sGroc

Co 384 US270471966USowned carriers in foreign co

w 87th Cong 1st Sess Report No 860 p b Reprinted at 200 of the Index to the Le

tative History of the Steamship ConferenceDual Rate Law 87th Congress 2d Sese Se

Document No 100

11 FMC
In this connection the declining share of cargoes carried by US

flag vessels on TR 29 cannot be ignored Appendix H From 1954

through 1964 the percentage of liner commercial cargo carried by

USflag vessels between California and the foreign area of TR 29

decreased steadily from 74 to 43 percent outbound and from 60

of 37 percent inbound Of total commercial cargo carried in dry

cargo vessels between the same areas the share carried by USflag

vessels decreased steadily from 56 percent in 1954 to 10 percent in

1964 outbound and from 59 percent in 1954 to 20 percent in 1984

inbound Under such circumstances it would serve the public inter

est of the United States to permit a merger that would improve the

efficiency and ability to compete of USflag vessels serving this

as

US

well as Less profitable trades without stifling or excluding either

flag or foreignflag competition just as the merger of the

Japanese lines has evidently served the public interest of Japan It

is recognized that the Commission has no promotional responsibility

under the law and that its aim is and should be to administer the

regdlatory provisions of the Act without discrimination among car

riers regardless of flag The immediate discussion is not inconsist

ent with the scope of the Commission sresponsibility however it is

concerned solely with the weight to be given a facet of domestic anti

trust policy which has been invoked against USflag carriers and

would not logically apply to foreign carriers in determining whether

the merger of suchUSflagcarriers is contrary to the public interest

The record establishes that substantial economies and efficiencies

of scale will result from the proposed merger as they appear to have

This is not to suggest tbat the policy of the antitrust laws is not required to be con

sidered by the Commission to matters Involving foreign Hag carriers to the same extent as

in the case of USflag carriers

v In number of vessels and deadweight tonnage the merged line would rank 15th among

major steamship lines of the world and 3d among USHag carriers Appendix I One or

more of respondents compete on one trade route or more with all but one Argentine Gov

ernment Line of the 11 foreign Hag lines all of which greatly exceed the combined

respondents In number of vessels and tonnage

11
operational efficiency and economy and improved transportatio

service to minor ports in particular through coordination of sailing

On the other hand the merger will not tend to create a monopo

or lessen competition except for the elimination of such service co

petition as exists among APL and PFEL and AML in the California

Far East portion of TR 29 Ample competition will remain in th

service however as appears from Appendices D F and G Liner co

petition in TR 29 is about to be increased by the entry of Matson wit

a new kind of operation which as Matson proudly and with som

justification says promises to be an inspiring example of the app

cation of American knowhow and resourcefulness to the hazardo

business of oceanborne commerce

The presence of AML as a separate party to the merger agreeme

is of little practical significance under the Act APL has owned a su

stantial majority for more than 12 years and over 90 percent f

more than 10 years of AML soutstanding stock all acquired by AP

with prior MARAD approval The minority interest is so small th

under Delaware law it could be eliminated by unilateral action 

APL at any time therefore a section 15 agreement would not 

necessary to accomplish a merger between APL and AML alon

Competition between AML and PFEL however while not exte

sive is deemed sufficient to make AML a proper party to Agreeme

No 9551 under section 15 of the Act since AML is in fact a separa

corporation and it is desired to consolidate the operations of t

three corporations simultaneously It is not necessary to deci

whether under certain circumstances a merger agreement betwe

a parent and its wholly owned or nearly so subsidiary might 

rejected by the Commission as not constituting a genuine section 

agreement and perhaps stultifying the function of the Commissio

a The Federal Trade Commission opened out this fact of life In its Report on Corpor

Mergers and Acquisitions May 1855 stating p 5 The first step 1a a corpor

acquisition Is discovery by an enterpriser of an opportunity whereby an apparent advanta

may be gained It one firm Joins with or acquires all or part of another

11 FMC
provement principally if not entirely and will be neither unfair nor

anti competitive in nature In this connection it should be borne in

mind that APL operates extensively outside TR 29 in services which

are substantially less profitable than the trans Pacific service and one

of which operates at a loss

The contractual and legal obligations of respondents as subsidized

carriers and resulting control through MARAD over respondents

maximum and minimum sailings and their trading areas have been

considered It is not found necessary to rely upon these and thus to pass

on to MARAD the responsibility for preventing any injurious effects

of

US

the merger nevertheless it is recognized that as among subsidized

flag carriers the existing power of government control would

make destructive competition impossible in practice even if there

were any theoretical probability thereof

It is by no means certain that the proposed transaction under all the

circumstances set forth above would violate the antitrust laws but

under the Supreme Court sdecisions cited above the Commission need

not determine whether it would or not and in fact cannot definitively

do so To the extent that it does touch upon the policy of the antitrust

laws however it is found that the benefits of the merger will outweigh

any potential injury After giving full consideration to the policy of

the antitrust laws as well as the record herein it is concluded that

Agreement No 9551 is not and the consummation of the transactions

contemplated thereby will not be contrary to the public interest detri

mental to the commerce of the United States or in violation of any

provision of the Act

Ultimate Conclusion

Upon the record in this proceeding it is concluded and found that

Agreement No 9551 is not unjustly discriminatory or unfair as be

tween carriers shippers exporters importers or ports or between

exporters from the United States and their foreign competitors and

would not operate to the detriment of the commerce of the United

11 FMC
or not to approve the merger agreement

In answer to the first question the Commission by majority vote he

section 15 of the Shipping Act to be sufficiently definite to allow o

jurisdiction to encompass thesubject agreement

The question on the merits was considered in our initial Report b

those Commissioners voting in the majority on the threshold questio

Chairman Marilee Vice Chairman Hearn Commissioner Barre

Subsequent to the issuance of our decision the Commission receive

a petition for reconsideration Although there is no legal requireme

to reconsider this case the unusual posture of the decision compels m

reexamination of the matter

Preliminary indications point to a substantially more involved pr

ceeding on remand than I had originally envisioned My initial obs

vation was that further taking of evidence would involve neither 

great imposition on the parties nor an unreasonable length of tim

However this does not seem to be the case Because of this change 

circumstances I am impelled to participate at this point in order 

express my views

This involves no retreat from or qualification of my position on th

threshold question My participation at this point is an expression 

my opinion solely on the merits

Since the Commission by majority vote has resolved the question 

jurisdiction thus placing the question on the merits before the Co

mission as an entity and not just those voting in the majority my r

consideration and participation at this point is not improper Mo

over my participation in a decision on the merits after the jurisd

tional question has been affirmatively decided enhances the effectiv

ness of the administrative process

In addition Congress has charged me as a Commissioner with s

cific duties and my participation in a CARP raising important questio

Report of the Commission In Docket No 664511 FMC 56

11 FMC
Itis in the interest of maintaining the integrity of the administrative

process that the litigation before us now be terminated The initial

Commission decision would not have produced such a result Our

reconsideration and resulting opinion will produce the best course of

action

Although Chairman Marilee and Commissioner Barrett joined in

the remand decision it was their stated position that the record in

this proceeding now affords a sufficient basis upon which to take action

arlagree

Therefore and for the reasons set forth in the foregoing opinion

of Chairman Harllee and Commissioner Barrett I would approve

Agreement No 9551

Commissional JAMES V DAs dissenting

I would deny the petition for reconsideration

With reference to my prior opinion in this case wherein I decided

that the Commission does not have jurisdiction I noted that the

Alexander Report which Congress considered and relied upon in

passing section 15 stated that rate fixing and pooling agreements

should be regulated to deter mergers Congress then would hardly have

encouraged merger agreements by including them within those agree

ments which could be granted immunity from the antitrust laws

pursuant to section 15 I further noted that Congress in granting

as l In the matter or Agreement No 13421 Oul Mediterranean Porte Conertwee e

FMC 459 460 1965 which Involved the question of approval or disapproval of a section

15 agreement we said

Were possible contrariness to the statute alone sufficient reason for disapproval of an

agreement under section 15 it would be hard to conceive of an approvable agreement For

as we said in Agreement 849241 F Coihnar Inc and Wagner Tug Boat Co 7 FMC 511

1963 We should not disapprove the agreement on the bare possibility that the parties

to it could violate the Act At least there ought to be a substantial likelihood of such

conduct

a Report of the Commission In Docket No 889511 FMC 53

nAlt I stand firm on the issue of Jurisdiction I nevertheless bave stated that

I do not think that the merger agreement before ns nnw in any way offends the Shipping

Act Id at p 35

11 FMC
evidence e has been brought to our attention and no new light hasbe

cast on the record already before us Consequently in my opinion 

intelligent determination can be made on the merits of the merger

I wish to emphasize that last point because I have not prejudg

this case The request for further evidence was not the practic

equivalent of a decision disapproving the merger agreement 31 M

request for additional information is not inspired by a wish to frustra

the merger by indecision When a member of the Commission deems 

necessary that the record be expanded no motive should be imput

other than a desire for an adequate record from which to draw c

clusions

In this case the jurisdiction issue overshadowed that of the mer

consequently the record is not full enough on the merger issue 

therefore the respondents would wish to rest their case on the prese

record the conclusion would be compelling that there is insufficie

evidence to warrant approval If however the respondents would 

willing to present some further evidence and sufficient justificati

why more is unavailable or unnecessary the Commission might th

be able to give the merits of the case their deserved evaluation I a

therefore taken somewhat aback by the seeming equivocality of 

spondents petition At first we are told that of the evidence soug

most is difficult or impossible to produce irrelevant or immaterial 

yet in the next breath respondents seem to concur in my view that t

Tbe pertinence of this is underscored by President Kennedy smessage In 1962 bef

Congress silted that an interagency committee be established to prescribe additional crite

that CAB and ICC might utilize In merger uses and the committee issued later a rele

specifying these additional criteria

ie While I cannot page upon the merits of the subject merger agreement it would 

appear to violate the actual language of section 15 Insofar as this L determined un

present circumstances

w The only new matter presented by respondents is the final status of AML Petiti

P 6 and information as to subsidy Petition p 7

ei Petition for Reconsideration p 1

n Ibid pp 6 It is not the parties but the Commission which decides what needs to 

filed and it le for us to decide went can reasonably be expected toinfluence o

decision one way or the other Petition p 6

11 PMO
y pq

other large scale measure can be taken without exhaustive presenta

tions to underwriters banks etc Thus should it be in this case before

the Federal Maritime Commission The public interest in common car

riage should receive no less attention than commercial or economic

institutions

Agreement 9551 is not of the same genre as most section 15 agree

ments Its primary distinguishing characteristic is the relative finality

of possible Commission approval It would be very difficult for the

Commission to subsequently dissolve a merged company or even to

require changes in its structure in the same manner as it continually

reevaluates other approved section 15 agreements

In view of the respondents startled reply to our order of remand

I will make it plainer as to the type of record which should be de

veloped in this case It is well put by Hearing Counsel in opposing

reconsideration and supporting our remand order that the Commis

sion must be able to fully determine the optimum effect of the pro

posed merger After the decision herein there will be little latitude

for revaluation and it is incumbent upon the parties to present the

Commission with a completely formulated and thoroughly analyzed

merger agreement The Commission has always required all section 15

agreements to include specifics sufficient for a thorough analysis of the

agreement and any lesser requirement is partictijarly undesirable in

this case se

We have before us an agreement the approval of which will immu

nize the respondents from the reach of the antitrust laws We also

must consider that it is no ordinary agreement as is usually filed for

approval It is thus hardly fitting that we should demand a lesser pro

duction of supporting evidence than in other cases In fact it is a

it bid Petition p 11

el Ibid Petition pp 11 12

a Hearing Counsels Reply to Petltton tor Reconsideration p 4

de See egJoint dgreement ParEast Conl and Pacific WB Conn 8 FMC 553 558

7 Ibid 8 FMC 558

11 FMC
interfering with interstate or foreign commerce fThus under sectio

511 of the Interstate Commerce Act the jurisdiction of the Inte

state Commerce Commision with respect to combinations is exclusiv

and plenary Similarly the Federal Maritime Commission canno

be ousted from its jurisdiction nor the exercise thereof usurped

It is not sufficient for approval that the parties willingly and pu

posefully enter into an agreement nor does it suffice that there will b

great benefits to the parties Proponents of an agreement must sho

more

More specifically the parties decided to merge because inter allo

sizeable administrative economies could be realized sailing coord

nation could be achieved expensive terminals and shore fac

ties are more effectively used by joint operations 

there are economies inherent in large scal operation 44 and 

sum because the merging companies can do better through bignes

Congress saw fit to permit one form of anti competitive measur

the conference system to forestall another mergers eIt is not the

for us to gainsay Congress by condoning restrictions on competitio

without sufficient reason

True it might have been thought adequate to condemn only those monopoli

which could not show that they had exercised the highest possible ingenuity h

adopted every possible economy had anticipated every conceivable improveme

stimulated every possible dimand No doubt that would be one way of deali

with the matter e but that was not the way Congress chose it did n

condone good trusts and condemn bad ones it forbad all US v Aluminu

Co of America 148 F 2d 416 427

See eg 49 USCpreceding 1 5 49 CFR 52252 3

m US v Food Q Grocery Buremt of S Cali 43 F Supp 974 add 139 F 2d 973

to Sancho v Bacardi Corp of America 109 F 23 57 rev don other grounds Bacardi Co

of America v Domench 342 US415

Schwabcher v US334 US182

o dfediterraneen Pools Investigation 9 FMC 264 290 California Stevedore A Balla

Co et al v Stockton Port District et al 7 FMC 75 84

wA substantial number of such arrangements exist between port facilities and sing

carriers See Termrnai Agreements Catalog March 1967 American Association of Po

Authorities

e Proposed Findings of Fact Opening Brier for Respondents pp 2931

vv HR Doc 805 63d Cong 2d Sess p 416r

11 FMC
y 

from Malaysia and Singapore to California is impossible of coordi

nation and that This leaves as susceptible to close sailing coordina

tion only the trans Pacific Freighter service of APL and PFEL 47

As to those services it is stated that PFEL and APL sail inbound

with free space available and that by coordinating the services more

voyages can be made full and down It is agreed to by States that their

vessels also have free space available 4s The conclusion suggested there

fore is that all competition in a trade should be eliminated if the

availability of free space can be prevented

It cannot be overemphasized that the agreement was presented to us

with no view as to its final form and substance There is no commit

ment to a type of merger plan final corporate structure or any of the

other necessary components of a corporate agglomeration Certain

events add force to this conclusion as to LASH operations APL has

now foregone its plans for new LASH ships APL has decided to idd

a new liner service to the picture by resuming its monthly Indonesia

service after a threeyear lapse and even respondents Coordinating

Committee was unable to propose anything in regard to container iza

tion The doubts and fears of my previous opinion have materialized

and my queries have for the most part gone unanswered They are 61

What measures will the parties to the merger and the merged com

pany take to prevent an adverse effect of the merger on subsidy recap

ture This question cannot be avoided by saying the effect would de

pend upon speculative factors

Also will the proposed merger result in greater value for the sub

sidy dollar

The Shipping Act was designed to do a minimum of violence to the well established

American antitrust concept 13 Rep No 498 87th Cong let Sess

n Proposed Findings of Fact and Opening Brief for Respondents pp 357

Mid pp 3840

a See footnote 4 supra

e Exhibit 50

N For an exposition of these points see my separate opinion in the Commission sprior

report in this case 11 FMC 723

11 FMC 91

11 FMC
The service description of the merged company should be present

especially asto the effect on itineraries due to LASH operations a

including for example any proposed change in AML sshortru

service

On what basis will the merged company have greater access to sho

facilities in Japan Bigness of the new company does not see

enough

What specifically will be the benefits to commerce to be derived fro

decreased competition for MSTS cargo The record admittedly fa

to prove this point

How will LASH operations be integrated into the merged compa

and what will be the benefits therefrom

In my opinion the Commission is no further along in seeing eg

the final form of the merger the new operational structure or t

procedures by which these andother ends will be reached

As to the matter of the merger seffect on subsidy and recapture 

fail to understand the worry over conflicting jurisdiction The parti

went to no mean effort on this point to make it part of the record a

must indeed have considered it relevant to the Commission sdecisio

I therefore repeat that we are bound to consider the effect on o

Shipping Act responsibilities of all the ramifications of the merg

I am also constrained to say again that it is for this commission 

decide what is relevant to the issues posed for our decision and it 

within the realm of propriety to request those who we think posse

such information to come forward with it

There is no intended incursion on the jurisdiction of the Maritim

Administration or possible conflict of policy In fact it is unfortuna

that the agency did not intervene in this case The Commission wou

thus have been aided in considering the merger seffect on the subsid

issue The Commission is well aware of the issues properly before 

See opinion of Chairman Harllee and Commissioner Barrett to the previous report 

this case 11 FMC 67 wherein my fellow Commissioners concurred in my view In th

They now consider the matter entirely beyond the scope of this proceeding

11 FMC
y pg y 

cause an imposition on the parties are not reasons for closing a case

and avoiding our responsibility to reach decisions based on all the

facts Speedy action is no substitute for reasoned decisions

Only with a more complete record in this case can the Commission

decide whether the results forecast can be attained by alternatives

more readily revocable and of comparable effectiveness and only then

could we judge whether the benefits of the merger and its cost will

be evident in benefits to the public

For the aforestated reasons I would not reconsider our original de

cision herein and would not alter our decision to remand the case to the

Examiner

v Petition to Reconsider p 4 that the Court takes meaningful action 1s

applicable here with doubled force

a See concurring opinion of Commissioner Fennel hereto

11 FMC
This proceeding having been instituted by the Federal Maritim

Commission and the Commission having fully considered the matt

and having this date made and entered of record a Report containi

its findings and conclusions thereon vahic hReport is hereby referr

to and made a parthereof

Itis ordered That Agreement No 9551 is hereby approved and th

proceeding is hereby discontinued

By the Commission

124

Signed Thomas Liar

Secretary

11 FMC
imperative shipping industry is on threshold of major modernization require

ing maximum financial strength and operational flexibility coordination con

templated by Agreement No 8485 is not fully effective to eliminate unnecessary

expense and wasteful competition necessary that USflag lines in trans

Pacific trades do everything feasible to improve efficiency etc this Agreement

has been approved by parties boards of directors

Now therefore It ss as of May 20 1966 agreed by and between AML APL

and PFEL as follows

Al Agreements

1 ConditionsParagraphs 2 5 and 6 are subject to conditions in Part B

and are of no force or effect if any applicable condition fails

2 Merger or ConsolidationAML APL and PFEL recognize that a large

variety of corporate financial and governmental issues remain to be resolved

but do not consider those to affect their basic conclusion that their steamship

operations should be unified into a single operation of API and PFEL with

such integration of AML operations as is consistent with its separate routes

AML APL and PFEL accordingly hereby agree either to merge or consolidate

into a single corporation of which at least AML would be a separate division

for steamship operations or to merge or consolidate APL and PFEL into a

single corporation with AML as a subsidiary in the form and by the procedures

as the directors and stockholders of the three companies should approve

Simply for purposes of identification in this agreement the merged or con

solidated company or such company and its subsidiary shall herein be described

as APFEML

3 Planning Groupa Mr Raymond W Ickes shall be director of interim

planning Ile shall designate n group or groups drawn from the three lines

to consult with him in the development of organizational and operational plans

for APFEML

b Mr Chandler Ide shall be director of interim corporate reorganization

He shall designate a group drawn from the three lines to consult with him in the

development of reorganization and financial procedures for the formation of

APFEML which shall be consistent with the organizational and operational

plans developed under subparagraph a above He shall develop data indicating

the book value and the earning records of the three companies and shall recom

11 FMC

125
te Cossoad by te ate dstatoudetce 8 ot

respective operating differential subsidy contracts the Presidents of AM

APL and PFEL or their designees shall meet and promptly develop procedure

by which to accomplish the maximum degree of coordination of sailings and join

traffic solicitation which may immediately be feasible In the trades which ar

served by APL and PFEL and to the extent appropriate by AML These pr

cedures shall be put into effect upon their approval by each of the three lines an

shall govern until the formation and activation of APFEML If APFEM

should not because of the failure of any of the conditions of Part B hereof b

formed and activated the coordination of sa flings and joint solicitation here

provided shall terminate within 90 days after the failure of such conditio

6 Agreement No 8485Tbe agreement of AML APL and PFEL of April 1

1960 approved as Agreement No FMB 8485 on August 11 1960 is upon the a

complishment of all the conditions specified in Part 13 hereof thereupon cancelle

R Conditions

No part of Agreement shall be effective except as noted until after

Par 7Section 15 approval by FMC except par 3 4

Par 8Stockholder approval of appropriate plan of merger except pa

845

Par 9 MARAD approval except par 3 4 under sec 608 of Merchan

Marine Act 1936 and parties subsidy contracts Including requisite permission

satisfactory assignment of subsidy rights to the surviving corporation Par 

to be effective after approval under contracts and FMC approval

Par 10Satisfactory arrangement of certain tax matters closing agre

ments by Treasury Department except par 3 4 5

Par 11Conditions may be accomplished in any sequence

Par 12Agreement terminable after two years on 30 days notice if a

conditions have not been accomplished

Par 13Any amendment supplement or cancellation to be Bled immediate

with FMC

Signed for each party by its president attested by its secretary

11 FMC
jjjj

j
Japan Line 46 69 37 

K Line 42 72 42 

Mitsui

NYK

OSKLines Ltd 81 88 6I 

Line 64 72 57 

Showa Line 12 12

YamashitaShinnlhon Line 63 71 39 

Other foreignflag Lines 239 219 230 

Barber Line 44 44

BarberWilhelmsen Line 25 

Fernvillo Line 24 24 24 

China Merchants Steam Navigation Co 9 1 9 

Klaveness Line 12 12 12 

Knutsen Line 18 20 18 

Maorsk Line 51 33 51 

Maritime Co of the Philippines 21 19 20 

Nedlloyd Hoegh Lines 10 12 10 

P O Orient Lines 4 5 4 

Philippine National Lines 7 7 7 

Scandia Pacific Line 8 8 8 

United Philippine Lines 31 32 23 

Splosna Plovba 12 

Taiwan Navigation Co Ltd 9 

Total sailings 991 968 851 

AML APL PFEL sallings 195 159 159 

AML AFL PFEL as percent USflag 44 44 41 

AML APL PFEL as percent total 20 16 19 

i SadNgs m the CaliforniaFar East column are included m the Pacific Coast Far East column

2 Used U S and foreignOag ships

Nora Includes APL passenger vessels about 24 sailings wblch averaged about 15 percent as 

cargo per sailing as cargo vessels tn APL trans Pacific service also sailings in roundtheworld and Atl

Straitsservices which averaged about 25 percent as much TR 29 cargo as cargo vessels In APL tranPac

service Excludes ballast sailings

11 FMC
11 FMC

Total foreign dog liner 154 517 830 941 539 3641 20963 12 71

Total liner cargo 3027969 2177 149990 5799 4527318 2745

Nonliner

US

cargo

flag 09754 50 0 0 69754 42

Foreign flag 10809495 77 73 1086350 4201 118954 7213

Total nonhuer 1087994 7823 1086350 4201 11965599 7255

Total Cargo 1390758 100 00 2395759 100 00 16492917 100 00

APPENDIX F

Trade route 99 Between California and Far East only long tons of general bulk and

defense cargo carried by liners and nonliners 1964

Commercial Commercial Total Total Total

general bulk commercial defense all cargo

long tons long tons long tons long tons long tons

Liner outbound 871943 595828 1467771 476742 1994 513

Liner inbound 879 238 161 019 1 040 257 16 021 1 056 278

Total liner 17518 756847 2505028 492763 3000791

Nonliner outbound 159231 4848939 5008170 5008170

Nonliner inbound 717 172 186 930 884102 384102

Total nonliner 876403 5015869 589227 6892 272

Total Hoer and nonliner 2627584 577216 8400 402863 89306
4H

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Fr
1964 1468 624 43 1040 381 37

Year

II Total liner plus nonliner commercial cargo

From California To California

Total tons USflag tons Percent Total tons USOag tons Percent

1954 1735 964 56 599 356 59

1955 254 110 49 79D 482 65

1956 3561 1550 44 840 518 62

1957 3947 1480 38 807 407 50

1958 2690 070 36 967 437 45

1959 2878 623 22 167 542 46

1960 4341 723 17 155 474 41

1961 5169 714 14 178 329 28

1962 4033 502 12 1502 365 24

1963 5933 753 13 1692 434 26

1964 6476 642 10 1924 381 20

APPENDIX I

Major steamship lines of the world

Deadweight

Line or group Flag Vessels tons

1 PRO British 297 104500

2 NYK Japanese 110 207900

3 Barber Norwegian 130 1754000

4 Alaersk Danish 58 1732000

5 Kawasaki Japanese 73 1549000

G Japan Japanese 65 1418 000

7 Nedlloyd Hoogh Dutch Nord man 50 1232000

8 Mitsui 08K Japanese 9n 114000

9 Yaumshita Shmmhon Japanese 36 10200

10 Argentine Government Argentine 113 963000

11 Show Japanese 37 916000

12 British Commonwealth British 75 851000

13 Lykes United State 5y 65000

14 States Marine and affiliates United State 53 ON 000

15 APLPFE 1Aal 1 25149 United St nes 43 02200

16 United States lanes United States 46 56000

17 A ineric in Et port lsbr mdtscn United States 46 50400

18 Moore McCormack United Stites 42 50800

11 FMC
NOSrate on furniture in containers resulting in charge of1861 20found u

reasonable under section 18a of the Shipping Act 1916 and section 

of the Intercoastal Shipping Act 1933 where the charges would only hav

been 1430 had the shipper not brought the containers to the carries

assembly point

David F Anderson appeared for respondent and claimant appeared pro s

DECISION AND ORDER OF E RODERT SEAVER HEARING EXAMINER

R A Eastman and Company makes claim against Matson Nav

gation Company employing the Commission snew Small Claims Pro

cedure Rule 19a46 CFR50231 under section 18a of th

Shipping Act 1916 and section 4 of the Intercoastal Shipping Ac

1933 excessive freight charges in the amount of 480 672 arisin

out of the following transaction

On or about April 28 1967 Eastman caused two containers loade

with furniture to be delivered to Matson by rail to the latter sCo

tainer Freight Station CFSat Los Angeles for ocean shipme

to Hawaii Matson is a common carrier by water subject to sectio

18a of the Shipping Act 1916 and to the Intercoastal Shippin

Act 1933 as amended It is engaged in the transportation of propert

between the United States mainland and the State of Hawaii Th

said furniture was transported by Matson under bill of lading date

Both parties having consented to the informal procedure under Rule 1aCFR

502 301 notice is given that the Commission on October 17 1967 determined not 

review the Decision and Order of the Examiner in this proceeding

The claim includes an item of 497 for car unloading under the Matson tariff 

cannot be considered as part of the excess charge because It is payable on shipments su

as claimant s

134

11 FMC
p

A rate of 715 per container was applicable at the time of the East

man shipment where Matson itself picked up the containers within

a prescribed pickup area The charges for claimant sshipment would

have been 1480 at that rate if Matson had been required to pick

up the containers anywhere within the area It is readily seen that

the total carrier service is no greater when the shipper delivers the con

tainers to the CFSby rail than when Matson picks up the containers

and brings them to the CFSWhen it learned of this situation Mat

son corrected its oversight by revising its tariff on April 17 1967

effective May 20 1967 so that the 715 container rate now applies

when the shipper delivers the container by rail at the Matson CFS

The circumstances of this case fall squarely within the rule of Sea

Land Service IncApplication to Waite Undercharges 8 FMC

641 where relief in a situation like the present one was granted As

stated in the decision in that case and cases cited therein the long

standing rate of 715 per container must be presumed to be a reason

able rate Similarly the higher rate of 72 cents per cubic foot charged

claimant is patently unreasonable within the meaning of section 1Sa

of the Shipping Act and section 4 of the Intercoastal Shipping Act

1933 because of the lesser service provided under that rate and for

the further reason that the rate was deleted after being in effect for

only a very short period of time For these reasons the rate is hereby

disapproved It is further determined that the 715 per container

rate would have been reasonable where the containers were delivered to

the CFSby rail as was done by Eastman The charge of1861 20

for the Eastman shipment resulted in an excessive charge of 431 20

Matson does not object to refunding the excess and even desires to

do so if so directed or authorized The decision in Ludwig Mueller

Co v Peralta Shipping Corp 8FMC361 does not require a differ

ent result That case involved the foreign commerce and was governed

by a different provision of the statute The Commission stated ex

U1 FMC
Eastman and Company the sum of Four Hundred and Thirty One

Dollars and Twenty Cents 431 20 representing excess freight

charges found herein to have been made for shipments covered by

Matson sbill of lading number R4065268 dated April 28 1967

Signed E ROBERT SEAVER

Searing Examiner

WASHINGTON DC October 10 1967

ai seta
ping Act 1938 Congress vested in the Federal Maritime Commission juris

diction over common carriers by water in the Alaska trade The Alaska State

hood Act specifically reserved this jurisdiction to the Federal Maritime

Commission Congress enacted an exception to this regulatory scheme in

Public Law 87595 in which it granted to the Interstate Commerce Coro

mission jurisdiction over through routes and joint rates Congress intended

Public Law 87595 to apply to a combination of line haul rates not to a local

pickup and delivery service included in a porttoport rate

SeaLand Service which has not changed the physical elements of its porttoport

service including local pickup and delivery but has merely changed certain

tariff nomenclature has not converted its service to a through route and

joint rate arrangement contemplated by Public Law 87 595 Consequently

the service remains subject to the jurisdiction of the Federal Maritime

Commission

Hugh H Shull Jr J Scot Provan and Warren Price for respond

ent SeaLand Service Inc

Stanley B Long Arthur G Grunke and John Robert Ewers for

intervener Alaska Steamship Co

Donald J Brunner and Norman D Kline Hearing Counsel

REPORT

Br min COMMISSION JOHN HARLLEE Chairman GEORGE H IIERN

Vice Chairman JAMES V DAs JAMES F FANSEEN Co2n772

6ioners

The Commission instituted is proceeding on July 211967 in order

to resolve the question of jurisdiction over the rates of Sea Land s

operation between west coast ports and Alaska Since no factual is

Commissloner Barrett did not participate

11 FMC 137
Freight Tariff No 116 FMC No 5 and ICC No 23 The format of

this tariff has not changed substantially since initial publication Item

101 of the tariff provides

the rotes between points in Oregon and Washington ma Id ng reference to

this Item and points in Alaska taking Rate Croup A are porttoport rates subject

to the jurisdiction of the Federal Maritime Commission

Item 102 provides that other rates covering movements to and from

interior points are subject to the jurisdiction of the Interstate Com

merce Commission Rate group A referred to in item 101 contains

singlefactor rates between Seattle and Anchorage These rates include

storedoor pickup and delivery service The remainder of the rates in

Freight Tariff No 116 are joint water and motor rates which are filed

with the Interstate Commerce Commission

In the past Sea Land filed the rates for the SeattleAnchorage

service with the Federal Maritime Commission on their assumption

that these rates were under FMC jurisdiction even though storedoor

pickup and delivery service was included in the rates This was in

accordance with the official position of the FMC staff as expressed in

a notice circularized by the FMC Bureau of Domestic Regulation in

February 1966 to all carriers in the domestic offshore trades

SeaLand also assumed that FDIC jurisdiction attached to local

port trates applying between Seattle and other ports in Alaska

served by Sea Land scompetitors in direct vessel service On this

Item 102 rends

Except as otherwise provided in Item 1411 rates inibil 114441 in this tariff arc joint rates

subject to the jurisdiction of the Intel tale Concoerce C it ti oiou

3 Rate group A also Includes Anchorage International Airport Elmendorf Air Force

133 se Ft Richardson Mountain View and Speuard Alaska Bellevue Kirkland Renton

Tukerila Andover Industrial Park and Tacoma wash and Portland Oreg via direct

water service of SeaLand only

The notice provided in part

Water carriers may publish single factor rates which Include services such as 

pickup and delivery services in port terminal areas even though the carrier per forming such services is not subject to the shipping acts Such tariffs however must be 

filed with the Federal Maritime Commission In accordance with the Shipping Act

1916 and the Intercoastal Shipping Act 1933

11 FMC
jjjjjjj
SeaLand argues that as a matter of law the rates in question a

solely within the jurisdiction of the ICC Although the Alaska Sta

hood Act 48 USC21488 July 7 1958 reserved to the FMC t

jurisdiction over Alaska trades which had existed before stateho

Congress subsequently granted jurisdiction over the establishment 

through routes and joint rates to the ICC through Public Law 875

49 USC 316 c Since SeaLand has changed its pickup a

delivery rates to joint rates SeaLand asserts that jurisdiction ov

such rates is vested in the ICC as provided in Public Law 87595

Alaska Steam which has on file with the ICC tariffs contain

joint rates some of which cover local store door delivery as is t

case of SeaLand supports the position of SeaLand Alaska Stea

argues that the FMC jurisdiction in the Alaska trade is an except

to the general pattern established by Congress which provides for r

ulation of rail motor and water transportation in interstate co

merce When Alaska statehood was enacted Congress reserved t

question of jurisdiction over water carriers pending further study a

legislation Public Law 87595 followed In enacting Public Law 

595 Congress intended to grant to shippers and consignees in Alas

the same transportation advantages available in the other States a

to restore jurisdiction which had been previously excepted Therefo

Alaska Steam argues that joint rates comprising a linehaul mo

ment and pickup and delivery were vested in the ICC

Hearing Counsel argue that Public Law 87595 was never intend

to divorce the FMC from jurisdiction over the type of operation 

volved here Hearing Counsel contend that the legislative history 

Public Law 87595 shows that the law was limited to a combination 

motor linehaul and water line haul routes The statute was design

to allow shippers to deal with a single carrier consult a single tar

and enjoy the benefits of joint rates which are generally lower th

a combination of local rates Thus Sea Land under the tariff ra

it now wishes to cancel was already achieving the benefits of t

itFMC
Subsection c of section 216 of the Interstate Commerce Act as amended

49 USC 316 c dealing with intermodal through routes and joint rates

is amended by adding at the end thereof the following new sentence As used

in this subsection the term common carriers by water includes water common

carriers subject to the Shipping Act 1916 as amended or the Intercoastal Ship

ping Act of 1933 as amended including persons who hold themselves out to

transport goods by water but who do not own or operate vessels engaged in the

transportation of property in interstate or foreign commerce between Alaska

or Hawaii on the one hand and on the other the other States of the Union and

through routes and joint rates so established and all classifications regula

tions and practices in Connection therewith shall be subject to the provisions of

this part

Specifically we must deride whether Sea Land sservice is a through

route and joint rate within the meaning of the statute We read the

statute as not explicitly inclnding or excluding the service in question

Consequently it is necessary to examine the congressional purpose in

enacting the section as well as the regulatory framework of which it is

a part

tinder section 18aof the Shipping Act 1916 46USC817 the

FMC originally regulated common carriers by water in interstate com

merce in the Alaska trade This authority was expanded under the

Intercoastal Shipping Act 1933 46 USC84348 With the admis

sion of Alaska and Hawaii into the Union jurisdiction over water

transportation between those States and the contiguous 48 States

would have automatically devolved upon the ICC but for a specific

provision in the statehood acts which preserved jurisdiction in the

FMC Thus section 27 b of the Alaska Statehood Act provides

b Nothing contained in this or any other act shall be construed as depriving

the Federal Maritime Board of the exclusive jurisdiction heretofore conferred

on it over common carriers engaged in transportation by water between any

port in the State of Alaska and other ports in the United States its territories

or possessions or as conferring upon the Interstate Commerce Commission juris

diction over transportation by water between any such ports

11 FMO
freight rates from or to interior points in the United States and H

waii The long linehaul transportation overland was clearly subj

to ICC jurisdiction however it was impossible to determine from 

singlefactor rates in the tariff where FMC or ICC jurisdiction beg

and ended

Following rejecting of its tariffs Consolidated republished them 

a form acceptable to the FMC The carrier deleted the joint rates fro

inland points and replaced them with rates between the San Fra

cisco Bay port area and points in Hawaiian port area which rates 

cluded pickup and delivery service The tariffs published in t

fashion were kept on file with the Commission until the service w

discontinued on November 241961

Meanwhile Consolidated cited the rejection of its joint tariff 

Congress as proof that remedial legislation was needed in order 

establish the type of joint motorwater rates which the carrier h

attempted to create originally In pursuing this objective the v

president of Consolidated testified before the House committee w

respect to the rejection of the joint tariff and stated that the pend

bills which led to final enactment of Public Law 87595 would 

enacted into law not only permit joint rates between points such 

Seattle and points within Alaska but would also permit joint ra

between points within the contiguous 48 States and points with

Alaska The proponents of Public Law 87595 several times referr

to Consolidated sdilemmas Congress could not have contemplated t

Sea Land type operation since Public Law 87595 was designed 

See hearing before a subcommittee of the House Committee on Interstate and Fore

Commerce on HR 7297 and H R 7343 87th Congress 2d sess p 19 1962

The position of the FMC In rejecting the tariff was sound although section 2 of 

nntercoastnl Shipping Act 1933 requires carriers to file with the FMC all Its rates 

connection with the establishment of a through route the provision applies only If 

other carrier to the arrangement Is a water carrier There Is no provision in the net giv

the FMC jurisdiction over motor carriers such as Consolidated operating from inland 13

points to Hawall in conjunction with water carriers

See note 4 supra

See H Rept No 1769 87th Cong 2d sess 1962 2 105 Cong Rec House 

1141921 1962

11 FM C
Thus it is the Consolidated not the Sea Land type of operation

which Public Law 87595 contemplated Moreover Congressman

Rivers corroborated this view stating as follows on the floor of the

House

This bill merely enables all surface carriers involved in the

transportation of cargo to Alaska from points of origin in the 48 States to enter

into the through route and joint rate agreements I have mentioned and only to

the extent that through routes and joint rates are involved would the ICC attain

any jurisdiction over the vessels plying in the Alaskan trade Emphasis added

108 Cong Rec House p 11420 1962

We therefore conclude that Congress intended Public Law 87595 to

apply to a combination of linehaul inotor and water routes such as had

appeared in the rejected Consolidated tariff and not to a pickup and

delivery service included in a port toport rate such as Sea Land s

The purpose of the legislation was to confer the benefits of through

routes and joint rates on the users of motorwater services between

Alaska and Hawaii and the other 48 States tinder such a through

route and joint rate shippers would enjoy considerable benefits

shippers would be able to make one contract with the originating

carrier ascertain the rate by consulting a single tariff instead of many

and enjoy the economy of joint rates Sea Land scustomers presently

enjoy these benefits

Additional statements of Congressman Rivers show that he could not have had in mind

the Sea Land type operation when proposing his hill because he again referred to the

different situation such as Consolldated swhere no agency would accept regulation Thus

he stated

By virtue of the general rule carried out under existing law common carriers subject

to the jurisdiction of different Federal regulatory agencies respectively may not In the

absence of specific statutory authority establish through routes and joint rates with

each other 108 Cong Rec Rouse p 11920 1962

10 As the Rouse Report states

The purpose of this hill is exceedingly simple It 1s merely to clarify the Interstate

Commerce Act so that the users of motorwater services between Alaska and Hawaii and

the other 93 States may have the same benefits of through routes and joint rates which

are enjoyed by users of motor wae services among the other 46 States and by users of

rail water services or of any combinations of service with air services among all of the

50 States H Rept No 1769 87th Cong 2d sess p 1 See also S Rept No 1799 87th

Cong 2d seas p 1 and H Rept No 1769 at 2 3

11 FMC
j
pppg

Inc v Federal Power Commission 317 F 2d 796 10th cir 1963 cert

denied 377 US 922 Therefore in the enactment of Public Law

87595 Congress knew of the many FMC decisions under section 2

of the 1933 act whereby single factor rates including pickup and

delivery services such as provided by SeaLand had been for many

years filed with the FMC We therefore conclude that Congress

intended to leave the SeaLandtype operation under the jurisdiction

of the FMC where it has always been and apply Public Law 87595

to a bona fide through route and joint rate situation such as that

attempted by Consolidated Freightways

The scheme of regulation which SeaLand and Alaska Steam advo

cate in mistaken reliance on Public Law 87595 is contrary to tradi

tional principles of transportation regulation If their contentions

were correct then Congress intended that transportation covering

over 1000 miles by water in connection with an incidental motor por

tion in a port area is no longer water transportation insofar as regula

tion is concerned In other words the relatively minute motor pickup

and delivery service is the sole determinant in establishing regulatory

jurisdiction This amounts to the tail wagging the dog

Congress and the courts as well as regulatory agencies have long

considered incidental transportation service rendered in conjunction

with the major linehaul to be part of the overall dominant service

even if the dominant service were provided by a different mode of con

veyance The ICC for instance regulated motor carrier pickup trans

portation as a terminal service rendered in conjunction with rail car

riage even before the Commission had been granted jurisdiction over

motor carriers as such Tariffs Embracing MotorTruck or Wagon

Transfer Service 91 IC539 1924 In that case the ICC said

While motortruck or wagon transfer companies are not common carriers sub

ject to the Act truck or wagon transfer services performed in connection with

terminal services of a common carrier subject to the Act or with transfer of

12 We also tike official notice of Consolidated Freightways Local and Joint Container

Freight Tariff No 1 FMCF No 2

11 FMO
The Transportation Act of 1940 further emphasized the con

gressional scheme to confer jurisdiction over incidental modes of trans

portation on the agency regulating the linehaul carriage to which the

other mode is ancillary Thus section 202 c2 of the Interstate Com

merce Act added by the 1940 act exempted certain terminal services

including pickup and delivery from otherwise applicable regulation

and directed that these incidental services should be regulated in con

junction with the regulation of the Linehaul carrier

A similar pattern of congressional intent that incidental motor serv

ices are to be regulated as part of the dominant linehaul transporta

tion appears in the Civil Aeronautics Act of 1938 52 Stat 973

Section 1107 jof that act 49 USC303 b 7a amended the Inter

state Commerce Act so as to oust the ICC from jurisdiction over motor

transportation when incidental to air transportation The Federal

Aviation Act also authorizes air carriers to enter into joint rates with

and carriers and defines air transport to include carriage partly by air

and partly by some other mode 49 USC 1483 Pursuant to this

legislative scheme and the analysis of incidental transportation seg

ments on which it is based the ICC has relinquished regulation of

subsidiary motor carriage to the Civil Aeronautics Board which now

exercises full economic regulation as an incidental service performed

in conjunction with line haul air carriage SeeGolembiewski Common

Carrier Application 48 MC1 1948

The fact that the motor segment incidental to the air transportation

is itself sizable does not thereby change its incidental nature In City

of Philadelphia v Civil Aeronautics Board 289 F 2d 770 DC Cir

1961 the court ruled that a pickup ancl delivery service between

Philadelphia and Newark Airport 90 iniles away in connection with a

transcontinental air freight service was air transportation within the

n The ICC considered see 202 x2 to be essentially 8 codification of Its post juris

dictional policy with respect to regulation of Incidental terminal operations See Move j

mcnt of Highway Trotters by Rog 293 t C 93 102 1904

dlFMO
11 FMC

points out that the ICC accepts for filing tariffs similar to its own

Certainly a motor carrier in Alaska may enter into a true through

route and joint rate arrangement such as contemplated by Public

Law 87595 The cases cited by SeaLand especially the Lindstrom

case supra relied upon so heavily establish this nothing store These

eases are not even pertinent to this inquiry whether Sea Land s

porttoport service with pickup and delivery is a through route and

joint rate

As the Interstate Commerce Commission said in Lindstrom

There is also the possibility that the porttoport service of the Alaska State

Ferry System or of applicants motor common carriers or both may be found

by the Federal Maritime Commission which is responsible for administering the

Shipping Acts to be those of a common carrier subject to the Shipping Act 1916

Although such a finding might result in some duplication of regulation we do not

perceive any conflict arising therefrom 98 MCat 653

We conclude therefore that our interpretation of Public Law 87595

and our decision here is not inconsistent with Lindstrom

The ICC recognizes that through routes and joint rates could be

established between motor and water carriers IIowever prior to the

time SeaLand changed the nomenclature in its tariff and transmitted

the newly styled document to the ICC that Commission had spe

cifically considered the Sea Land operation not to be subject to its

jurisdiction Thus on April31967 the ICC stated

On May 3 1984 SeaLand Service inaugurated a water carrier service between

Seattle and Anchorage and Kodiak Alaska which is not an operation subject to

this Commission sjurisdiction SeaLand Freight Service Inc Purchase Alaska

Freight Lines Inc 104 MC28 31 1967

Citing Tracking L0 L Freight in Licu of Roil Service 185 10 C 71 193

Lindstrom Extension Southeast Alaska 98 M C C 647 1965

According to Sea Land the ICC s construction is entitled to great weight 10 v

Memphis Union Station Oo 360 F 2d 44 6th Cir 1966
ORDER

This proceeding having been instituted by the Federal Maritim

Commission and the Commission having fully considered the matt

and having this date made and entered of record a report containin

its findings and conclusions thereon which report is hereby referred 

and made a part hereof

Therefore it is ordered That pursuant to the Commission sautho

ity ender section 18aof the Shipping Act 1916 and the Intercoast

Shipping Act 1933 respondent Sea Land Service shall within 

days of the date of this order or November 30 1967 whichever 

sooner strike from its tariff a publication designated Supplement o

9 to Fright Tariff No 116 FMC No5

It is further ordered That respondent Sea Land Service Inc sha

continue to meet the requirements of section 18 a and the Intercoast

Shipping Act with respect to the service which was found in the repo

herein to be subject to the jurisdiction of the Federal Maritim

Commission

It is farther ordered That the consecutively numbered suppleme

to the aforesaid tariff filed by SeaLand Service as required by o

Order of Suspension and Investigation of July 21 1967 may be r

moved from said tariff

By the Commission

S FRINCIS C HDRNEY

Assistant Secretary

11 FMC
DECIDED OCTOBER 23 1967

The following rates and charges of American Union Transport Inc on iron and

steel found just and reasonable

1 Extralength charge of 065 per foot per ton weight or measurement

justified because of difficulty and expense in loading extra4ength steel

2 Latedelivery charge of 5 a ton weight or measurment justified be

cause it assures compliance with prearranged delivery time and partially

compensates carrier for costs resulting from delay

3 Rates of 26 a ton weight or measurement on piling shells nested and

30 a ton weight or measurement on iron and steel NOBtall within

zone of reasonableness and no reason appears for requiring change in these

rates

4 Rate 3 above NOBrate 33 a ton weight or measurement on cast

iron justified beoause frailty of commodity subjects it to higher claim

potential

Method of computation of stevedoring extras expense as a percentage of steve

doring contract rate on general cargo found not unreasonable

Amy Soupi for respondent

Howard L Cassard for Raymond International Inc and Paed V

Miller for Bethlehem Steel Export Corporation Steamship Service

Corporation interveners

Donald J Brunner and Robert P Watkins as Hearing Counsel

REPORT

BY THE COMMISSION Join HARLLEE Chairman GEORGE H HEARN

Vice Chairman ASHTON C BARRETT JAMES V DAY JAMES F

FANsEEN Co77v7i98 ionera

This proceeding was instituted on our own motion on January 20

1967 to determine the lawfulness of new rates and charges of re

spondent American Union Transport Inc ALT on iron and steel

11 FMC

149
A General

Respondent has furnished the only regular breakbulk service from

the North Atlantic to Puerto Rico since September 1966 Prior to the

publication of the rates rules and regulations underlying this

investigation respondent stariff contained 105 commodity rates for

and 125 commodity descriptions of iron and steel products The

rates thereon ranged from 96 cents a 100 pounds for bolts to 298

a 100 pounds for piling shells most of the rates ranging between

125 and 161

The tariff revision effective January 19 1967 lumped all iron and

steel into two classifications namely 1 cast iron and 2 iron and

steel NOS Not Otherwise Specified The rate for the former 33

a ton weight 2000 pounds or measurement 40 cubic feet and

the rate for the latter was 30 weight or measurement WM

Tied to the rates were two qualifications first heavy lift cargoes

were required to be delivered to respondent at a prearranged place and

time and if not were subject to an extra charge of 5 a ton WM

and second pieces in excess of 30 feet long were to be charged an addi

tional 1 a foot per ton W M Just before the hearing the late

delivery charge was changed to make it applicable to all iron and

steel instead of heavy lift cargo only In addition instead of assessing

the late delivery charge where cargo was not loaded on the vessel for

which it was booked demurrage charges were to be assessed against

the cargo pending arrival of the next vessel

Effective in early June the extra length charge was reduced from

1 to 65 cents a foot per ton WM and a rate of 2600 a ton WIM

was published for piling shells nested which had preciously been in

cluded in the category of iron and steelNOS

t Prior to this Iron and steel had moved on a weight basis of 240 pounds

The order of investigation provides that In the event the matter hereby placed under

investigation Is changed or amended before this investigation has been concluded such

changed or amended matter will be included to this tnvestigatton

11 FMC
basis

AUT stariff modification represents a rate increase on about 90

percent of all items that will continue to move on a weight basis and

the rates on over half of the iron and steel tonnage carried for the

periods of record have been increased Of the iron and steel commodi

ties carried by AUT in the latter half of 1966 only four have stowage

factors substantially in excess of 40 cubic feet one measurement ton

and of these only one moved in a volume exceeding 500 tons

The Stevedoring Problem

The contract rate for AUT sNew York stevedores is 925 per pay

able ton On December 8 1966 AUT s New York stevedores wrote

AUT that the rate of 925 received for handling steel products

freighted on a weight basis of 240 pounds cost the stevedore 128

per ton for stevedoring only and that expenses for wharfage and

other items brought the total gross cost to 1672 per weight ton

Relief from this situation was requested This letter was followed by

another dated January 3 1967 informing AUT that the stevedore

could no longer continue to handle steel cargoes under the then present

procedure as the loss has been far too exorbitant for us to absorb it

was agreed however to continue the existing rate on steel not over 30

feet in length with the exception of hollow steel piling

The contract rate for the stevedore in Puerto Rico is 450 per pay

able ton A letter from AUT sPuerto Rican stevedores dated Decem

ber 30 1966 stated that they were losing 6324 per hour on hollow

steel pipe they also agreed to handle steel in lengths not over 30 feet

at the existing rate with the exception of hollow steel pipe

It Is uncertain whether these figures relate to all Iron and steel or lust certain eom

moditles It Is clear that they refer at least to extra length steel and piling shells nested

11 FMC
the Puerto Rican stevedores served notice on AUT that they would

no longer handle steel over 30 feet in length at the then current con

tract rates stevedoring contract rates for all extra length steel will be

renegotiated Respondent has been unable to verify its exact cost for

handling extralength iron and steel It estimates however based upon

evidence of the cost to the stevedores of handling extra length steel

and estimates of the revenue which would have been earned if the

065 charge had been in effect that the 065 charge will be sufficient

to enable AUT to compensate the stevedores for the cost of handling

this cargo

2 LateDelivery Charge Because steel must be loaded in the bot

tom of the ship for reasons of stability failure to have it delivered on

time would either hold up loading of other cargo or result in the shut

ting out of the steel after the other cargo is loaded Steel comes to the

terminal in rail cars and frequently does not arrive at the appointed

time between December 1966 and April 1967 21 shipments2355728

pounds were latedelivered and loaded on subsequent ships there

were other ate shipments which held up loading The latedelivery

charge is justified as it more nearly assures compliance by the shipper

with prearranged delivery time and partially compensates AUT for

costs resulting from the delay in delivery and loading The reason

ableness of the charge is further supported because it is not assessed

if the ship is not held for cargo but rather demurrage is assessed

against the cargo pending arrival of the next ship

3 Piing Shells Nested Thiscommodity has a stowage factor of 90

ratio of one weight ton to 218 measurement tons For this reason it

is expensive to handle The New York stevedore estimates loading at

the rate of 123 long tons an hour Of the iron and steel commodities

handled by AUT in the second half of 1966 only piling shells exceeded

500 tons furthermore this commodity was one of only four whose

stowage factors exceeded to any great extent 40 cubic feet to the ton

During that period piling shells totaled about 42 percent of all steel

11 FMC
y g

Counsel except is his finding with respect to the justness and reason

ableness of the 30 rate for iron and steelNOScontending that all

iron and steel rates should be 26 per short ton Hearing Counsel do

not except to a 3 differential above these rates for cast iron because

of the susceptibility of this commodity to breakage and increased

claims

In support of its 26 figure Hearing Counsel contend that fully

distributed costs when properly computed should not exceed 30

ATJT scosts they contend have been overstated because one of the

items of expense the socalled stevedoring extras a was improperly

computed AUT had computed this extra charge which experience had

shown to be 369 percent of the stevedoring contract in New York

and 997 percent of the stevedoring contract rate in San Juan as a

percentage of the stevedore contract rate on general cargo Hearing

Counsel contend that beoause the contract rate on general cargo is

higher than the contract rate on vehicles which are the highest revenue

producers for AUT and account for its greatest tonnage the use of

a percentage of the contract rate on general cargo to compute the extra

charges inflates and distorts the dollar amount of extras They contend

that the proper method of determining the figure for extras per pay

able ton would be to divide the total dollar amount of extras by the

counsel

6 Hearing

stating

Counsel

that

except

Raymond

to

was

the Examiner s

constrained

quotation

to withdraw

from

from

n letter

the proceedings

from Raymond s

with

regret that the applicable law does not lend support to our grounds for intervention

arguing that the letter was not subject to cross examination and argument to discover the

soundness of the baste for its opinion The letter is a part of this proceeding but only for

the purpose of showing the opinion of its writer It appears that the Examiner squotation

was Intended only for this purpose At any rate the letter Is neither competent evidence

nor testimony on the propriety of the rate on piling shells nested and no reliance is

placed on it herein

a The differential of course should establish a rate of 29 rather than 33 Insofar as

Hearing Counsel are concerned

6 This Stem Includes overtime extra labor detention penalty time carpentry and dun

nage lashing and unlashing in New York and clerks checkers and watchmen in addition

to the factors just enumerated at San Juan

Rearing Counsel ask the Commission to take official notice of these facts which are

contained in AUT sGeneral Order 11 submission for 1966

11 FMC
We agree with the Examiner that the 30 rate on iron and steel

NOSis just and reasonable We cannot say that the method of cal

culating the extras employed by AUT is unreasonable The compu

tation of extras as a percentage of the stevedoring rate on the

commodity under investigation is supported by the record in this pro

ceeding which indicates that at least some of the extra expense items

have a relation to the commodities involved inasmuch as they are func

tions of productivity and the contract rate paid the stevedore depends

upon his produotivity

Most iron and steel commodities transported at the lesser 26 rate

contended for by Hearing Counsel would not realize a return above

AUT sfullydistributed eosts Revenue on iron and steel stowing 40

cubic feet per ton would fall short of fully distributed costs by 683

Nearly 58 percent of all iron and steel carried during the second half

of 1966 was other than piling shells and with the exception of three

commodities all stowed less than 40 cubic feet to the ton There are no

protests extant to the 30 rate and no reason appears which would re

quire a 26 rate Indeed as noted above AUT anticipates that under

its 30 rate there will be a loss of283on cargo shipped on a measure

ment basis

We concur with the Examiner and the parties that the rate on cast

iron 3 higher than the rate on iron and steel NOSis justified by

the frailty of this commodity which subjects it to a higher claim

potential

Hearing Counsel except to the Examiner sstatement that inasmuch

as the subject rates and charges had not been suspended the burden of

b mathematical rrpretat ion of the methods of computing extras ts

Nearing Counsel

Total amount of extras extras per payable ton Total number of payable tons

4UT Total extras

Total straight time 1 I Xetexedorutg contract rate on general cargo extras per payable ton

11 FMC

MATSON NAVIGATION COMPANY

INITIAL DECISION ADOPTED OCTOBER 27 1967

A lease of land from a port for a marine terminal and freight station to a c

mon carrier by water at a fixed term and rent may be approved witho

the inclusion of review provisions since section 15 of the Shipping A

1916 requires continuing agency scrutiny of such agreements

J Kerwin Rooney for the Port of Oakland

David F Anderson for Matson Navigation Co

RogerArnebergh Edward C Farrell and Waiter C Foster for c

of Los Angeles

Donald J Brunner and Roger A McSlaea 111 Hearing Coun

REPORT

BY THE COMMISSION JOHN HARLLEE Chairman GEORGE H HEAN

Vice Chairman ASHTON C BARRETT JAMES V DAY JAMES F FA

SEEN Commissioners

The Commission instituted this proceeding on December 14 19

to determine whether Agreement No T1953 a lease of land for 

as a terminal from the city of Oakland to Matson Navigation Co a

agreement No T1953A a lease of land between the same parties f

use as a freight station should be approved pursuant to section 15 

the Shipping Act 1916 Examiner Herbert K Greer served an init

decision on July 24 1967 We heard oral argument on October 

1967

156 11 SMC
viewing these exceptions we concluded that the Examiner sfindings

and conclusions on the issues presented are correct Accordingly we

hereby adopt the Examiner sdecision as amended a copy of which

is attached hereto and made a part hereof as our own and for reasons

set forth in the decision

It is ordered That agreements Nos T1953 andT1958 Aare

hereby approved and this proceeding is discontinued

By the Commission

11 FMQ

Morass Lisa

Secretary
















dgs udesecto8 5 ee oe caeocoeece s a

leging that the rates of another carrier or conference are so unreaso

ably low as to be detrimental to the confnerce of the United State

The first principle which we will follow is that a rate which fails 

meet outofpocket costs of the carrier quoting the rate is unreaso

ably low By outofpocket costs we mean cost of handling the carg

into and out of the vessel plus any directly assignable costs such 

brokerage etc The problem is how a complaining carrier would esta

lish the outofpocket costs ofhisA complaining carrie

most certainly can demonstrate its own outofpocket costs incurred 

carrying a particular commodity We believe that such a showing e

tablishes a presumption of the prevailing outofpocket costs on a pa

ticular commodity in a particular trade It would then be incumbe

upon the carrier whose rate has been challenged to rebut the presum

tion created by showing that his actual outf pocket costs and othe

rate factors vary materially from those developed by the complainin

carrier

This approach takes care of one aspect of such a proceeding A com

plaining carrier in order to make out a case under section 18b5

must also establish a prima facie showing of detriment to commerc

If the complaining carrier can demonstrate an adverse economic im

pact upon itself the carrier has made out a prima facie case of det

ment to commerce Again such proof would be subject to rebuttal b

the carrier whose rates have been complained of

In summary a carrier may by proving its own outofpocket cos

establish a rebuttable presumption of the outofpocket costs preva

ing generally in the trade Secondly a carrier may show detriment t

commerce by proof of some measurable adverse economic impact 

self In establishing these standards we hopefully have avoided th

pitfalls of protracted litigation which were demonstrated in this pr

ceeding This procedure should also place the burdens of proving fac

upon those persons most capable and most readily able to prove suc

facts

11 FMC
355 301 0 69 13

such a way as to permit the giving of a more favorable rate to shippers

and consignees of Chinese descent we find nothing in the record that

such a construction was in fact made

Although we do not hold that actual episodes of discrimination must

be shown in all instances in order to find a violation of sections 16 and

17 it seems to us that where a tariff provision is only potentially capa

ble of resulting in discrimination and where not even an allegation of

actual resulting discrimination has been made let alone any evidence

of such discrimination presented the role of the Commission should

be remedial and not punitive

The tariff rule referring to Chinese merchandise used by the

New York Freight Bureau Hong Kong in 1962 provided as

follows

C3 CHINESE MEROHANDISE

1 Chinese merchandise comprises all commodities essentially used by Chinese

which are below ad valorem valuation and which are not specified in the tariff

2 On shipments of Chinese merchandise where a freight forwarding service

is performed by a Chinese shipper for a Chinese consignee and the carrier is

so advised by the shipper the following fees will be applicable and will be

shown on thhe carrier sbiti of lading as a separate item

Payment of freight and freight forwarding fee will be collected by the

carrier in accordance with tariff note B1 2 Payment of freight forwarding

fee will be paid to the shipper in local currency at official rate of exchange

in effect on date of shipment

On rates assessed on a tonnage basis2per revenue ton

On rates assessed on a 100pound basis on silk piecegoods and spun silk

yarn silk pongee raw silk10cents per 100 pounds

On dumber and logs2per1000 board feet

On rubber2per 50 cubic feat

No such fees will be applicable on charges assessed on an ad valorem basis

or on rates assessed on a per package basis or on minimum bill of lading

charges

Other respondent carriers had substantially similar provisions or

rules in their respective tariffs with the exception of China Union

Lines Ltd which never had such a rule

11 FMC
gg g

account of the shipper who according to time honored custom among

the Chinese was generally a compradore This compradore system

according to the somewhat scanty testimony is used almost exclusively

by persons of Chinese descent Thus it is not surprising that the rules

in the respective tariffs of the parties governing the collection of thes

fees were written in such a way that the service is available only to

Chinese shippers performing a freight forwarding service on beha

of a Chinese consignee Nevertheless any privilege a facility or serv

ice which is available only to certain persons based solely upon thei

race nationality or ethnic origin constitutes an unjust and unreason

able practice which is forbidden by section 17 of the act Where suc

a practice is codified into a rule the existence of the rule itself const

tutes the violation There is no need to show any actual discrimina

tions under it

Section 17 of the Shipping Act provides in pertinent part that

Every carrier and every other person subject to this act shall estab

lish observe and enforce just and reasonable regulations and practices relating

to or connected with the receiving handling storing orof property

Whenever the board finds that any such regulation or practice is unjust or un

reasonable it may determine prescribe and order enforced a just and reason

able regulation or practice

Several respondents argue that there must be a showing of an ac

tual discrimination to support a finding of violation of section 17 The

plain Language of the second paragraph of section 17 dictates a con

trary conclusion This paragraph of the act is directed at unjust or un

reasonable regulations as well as improper practices

There is no substantial evidence of record to support any finding

other than that the terms Chinese merchandise or Chinese prov

sions refer to a commodity grouping embracing Chinesetype food

stuffs

It is a common practice to use a generic term as a commodity item

where that term includes a number of related and similar commodities

11 FMC
y py g 

Chinese wherever it formerly appeared thus making this service

available to all shippers on an equal basis

We find that rule 10 of the New York Freight Bureau Hong Kong

and rule 28 a of Orient Overseas Line are unjust or unreasonable in

violation of the second paragraph of section 17 of the act in that they

provide for the granting of a valuable serviceviz the collection of

freight forwarding fees only to shippers of Chinese descent when

shipping to consignees of Chinese descent

THE ASSOCIATED LINES

Nine of the carriers which were named parties repondent in this

proceeding 7 have never operated in the Hong Kong United States

Atlantic and Gulf trade All of these carriers are members of the

Trans Pacific Freight Conference 6 which operates from Hong Kong

to United States West Coast ports This conference and the New York

Freight Bureau Hong Kong are joint signatories to the Hong Kong

North Atlantic and Gulf Joint Agreement FMB No 4379 This joint

agreement provided inter alia that one conference could veto a rate

action of the other and provided for transshipment arrangements

among themselves These nine lines did not participate in the hearings

nor were they asked to furnish any witnesses or documentary evidence

There is no record showing of any transactions involving these car

riers in the Hong KongUnited States Atlantic and Gulf trade Thus

while the initial determination to name these earners as respondents

was justified on the basis of their close working relationship through

the interconference agreement supra clearly there is no reason now

why they should not be dismissed as respondents

646 CFR 536g30 Federal Register 7141 May 27 1065

7 American Mail Line Ltd Java Pacific Hoegh Line Klaveness LineJoint Service

Knntsen LineJoint Service National Development Co Nissan Eisen Kaisha Ltd

P 0Orient LinesJoint Service Pacific Far East Line Inc and States Steamship Co

8 The conference itself was not joined as a party respondent

11 FMC
Only two of the five lines found by the examiner to have violated

this section excepted to the findings Isbrandtsen and China Union

Lines and their exceptions are by way of confession and avoidance

ie that the incidents found to have violated section 18b3 were

isolated and inadvertent occurrences

We have no authority under section 18b3 to dismiss a charge

simply because it may have been an isolated violation or an honest mis

take though we nifty couple our finding of violation with such other

factual determinations as may tend to mitigate the seriousness of the

offense We see no reason to disturb the examiner sfinding with respect

to the section 18 b 3 violations and they are therefore incorporated

below in substantially the same form as found in the examiner sinitial

decision

China Union Lines

China Union charged rates Less than those on file on three shipments

loaded September 5 1962 Each shipment involved rubber shoes which

due to language difficulties the carrier miselassified as rubber prod

ucts The former was rated at 30 and the latter at 25 The total

undercharges amounted to 256 50 While this was clearly an inad

vertent mistake it was nonetheless a violation of section 18b3 of

the act and it is so found

Eddie Steamship Co

Eddie charged rates less than those on file with respect to four ship

ments loaded February 15 1963 Undercharges totaled 1777 It is

of

found

the act

that these undercharges were in violation of section 18b3

11 FMC
1 hetiLines Ltd

Evidence introduced by Hearing Counsel not contested by Thai

lows that during the period July 17 196 2May271963 Thai charged

and collected rates less than those on file with the Commission on 265

hipments in the subject trade with total undercharges amounting to

824130 31 It is accordingly fount that Illai thus violated section

18 b 3 of the act

REBATING BY THAI LINES LTD

There is conclusive evidence that Thai as a constant practice

granted rebates on shipments in this trade On June 28 1962 Oceanic

Lloyd wrote Motorships Inc Thai s general agent in the United

States requesting appointment as Thais Hong Kong agent It en

closed a list of its standard agency fees which included a fee on general

cargo of 5 percent The appointment was agreed to and Oceanic Lloyd

prepared a written agreement and sent it to Motorships for execution

This provided that Oceanic Lloyd would receive an agency fee on gen

eral cargo of 10 percent No explanation was offered and the agree

ment was not executed but Oceanic Lloyd did thereafter receive a

10percent fee on general cargo However subsequent correspondence

from Oceanic Lloyd to Motorships leaves no question as to why the

fee was increased In a letter dated November 3 1962 Oceanic Lloyd

stated

To do this get additional cargo for a lightly loaded vessel we had to give

away 7y percent of our total commission in the form of rebates

We have a much better canvassing organization and are therefore able to

obtain between 800 and 1000 tons of cargo comprising smaller shipments We

must point out however that we cannot substantially exceed this figure with

This portion of the report substantially adopts the conclusions and language of the

examiner sinitial decision except as to the see 17 violation

11 FMC
The reason for our requesting this increase at short notice is that other no

conference lines are no longer giving up to 15percent rebates on this commodi

but are only offering 10 percent Their nett sic rate is now 1620 1S les

10 percent end 1625 17 less 5 percent sic is consequently practicabl

In a letter dated September 4 1963 addressed to the residence o

Nils O Seim president of Motorships Inc Oceanic Lloyd stated

As you probably know there are a number of conference signatories wh

ship under names of convenience in order to take advantage of the nonconferenc

rates You probably also know that our freight agent 1r L C Yew has o

many instances found it necessary to hand back certain percentages of the freigh

to the actual shipper These rebates are untraceable and negotiations of thi

sort are made from hand to hand and there is no possibility of anything bein

proved as there is nothing in writing This is the custom of the trade in Hon

Kong and applies equally to outelves as ro conference members

Seim testified as follows with regard to the general subject o

rebating

Q Getting back to your belief as to what is practiced in the Far East base

upon your own experience I take it you made the observation that you would

expect that rebates were paid over there as part of this squeeze system which

is a way of life

A Yes

Q Based upon this observation would it he reasonable to assume that a

great many of the Thai Lines shipments had been charged for at a net rate

which was leas than the rate on file

A I think it is reasonable to assume that all shipments to Hong Kong are

charged that way whether it be Thai Lines or any other line To this part of the

world or any part of the world

It is found that by granting rebates Thai violated sections 16

Second and 18b3 of the act

Co vcr Fslozr s

In summary we conclude

1 The nine carriers which are members of the TransPacific

Freight Conference and which did not operate in the llong Kong

11 FMC
and consignees of Chinese descent in violation of the second para

graph of section 17 of the ShippingAct 1916

4 That the members of the New York Freight Bureau Hong

Kong and Orient Overseas Line still have rules in their respec

tive tariffs which are unjust or unreasonable in violation of the

second paragraph of section 17

5 That the following carriers have violated section 18 b3 of

the Shipping Act 1916 by charging a rate less than that legally

on file with the Commission China Union Lines Eddie Steam

ship Co Isbrandtsen Steamship Co now American Export

Isbrandtsen Lines and Thai Lines Ltd

6 That Thai Lines Ltd has violated section 16 Second and

18 b 3 of the aetby making illegal rebates

An appropriate order will be entered

ORDER

The Federal Maritime Commission instituted this proceeding to

determine whether certain rates in the Hong Kong United States

Atlantic and Gulf trade should be disapproved under the authority of

section 18b5 of the Shipping Act 1916 on the ground that they

were so unreasonably low as to be detrimental to the commerce of the

United States The investigation was subsequently expanded to deter

mine whether any of the respondents had violated sections 14 16 17

or 18b3 of said act The Commission having this date made and

entered its report stating its findings and conclusions which report

is made a part hereof by reference

Therefore it is ordered

1 That respondents American Mail Line Ltd Java Pacific

Hoegh Lines Klaveness Line Joint Service Knutsen LineJoint

Service National Development Co Nissan Kisen Kaisha Ltd P

11 FMC
Forwarding Service

b That rule 28aof tariff FMC 12of Orient Overseas Line 

and the same hereby is modified by deleting the word Chinese ea

time it appears in the second line of said rule

c That respondents the members of the New York Freight Burea

Hong Kong and Orient Overseas Line cease and desist from esta

lishing observing or enforcing any regulation or practice relating 

or connected with the handling storing or receiving of property whic

grants or allows the granting of any preference to any person on th

basis of such person srace nationality or ethnic origin

By the Commission

scar Signed Tncn List

Secretary

11 FMC
Initial Decision Adopted Abcea ber 7 1967

Agreement No 9413 between the GulfMediterranean Conference and the North

AtlanticMediterranean Freight Conference permitting consultation between

these Conferences through their respective chairmen with respect to freight

rates and practices not found to be unjustly discriminatory or unfair or

detrimental to the commerce of the United States or contrary to the public

interest in violation of section 15 of the Shipping Act 1916 Accordingly

Agreement No 9413 is approved 

Uniformity of rate action by respondent Conferences is insufficient to establish

the existence of an unfiled section 15 agreement where there are 13 car

rier lines which are common to both Conferences and which constitute a

voting majority in both Conferences

Burton H White and Elliott B Nixon for respondent North At

lantieMediterranean Freight Conference and its member lines Ed

ward 8 Bagley for respondent GulfMediterranean Ports Conference

and its member Iines

John A McWilliam for intervenor International Association of

Great Lakes Ports Arthur W Jaeocks for intervenor North Atlantic

Ports Association Philip J Kraemer for intervenor Maryland Port

Authority

Donald J Brunner H Stanley Harsh and Robert P JVatkin e

Hearing Counsel

REPORT

BY THE COMMISSION John Harllee Chairman Ashton C Barrett

James V Day and James F Fanseen Commissionesw

The Commission instituted this investigation on December 17 1965

to determine 1 Whether Agreement No 9413 between the North

AtlanticMediterranean Freight Conference and the GulfMediter

ranean Ports Conference permitting consultation between the two

11 FMC 183
ment of the commerce of the United States or be contrary to the public

interest in violation of section 15 of the Act Hearing Counsel filed

exceptions to the examiner sdecision to which respondents replied

Oral argument was heard on October 18 1967

Hearing Counsel in their exceptions argued that the examiner erred

in not concluding that the proponents of Agreement No 9413 must

demonstrate that the agreement will meet a serious transportation

need or secure important public benefits that he further erred in not

finding that the proposed agreement will lessen competition between

the competing conferences to the detriment of the commerce and con

trary to the public interest acid finally that he erred in not finding

the existence of an unfiled agreement between the respondents in vio

lation of section 15 of the Act Upon reviewing Hearing Counsel s

exceptions we conclude that they are but a restatement of the conten

findings

tions already

and conclusions on

advanced before

these

the examiner

contentions

and

were

that

proper

the examiner s

and well

founded Accordingly we hereby adopt the initial decision Ca copy of

which is attached hereto and made a part hereof as our own

Therefore it is ordered That Agreement No 9413 is hereby ap

proved and that this proceeding is hereby discontinued

VICE CHAIRMAN GEORGE H HEARN concurring and dissenting

I concur in the finding of my colleagues that there was no unfiled

agreement between the parties

I dissent from the majority view in that I find approval of Agree

ment 9413 will be contrary to the public interest and detrimental to

the commerce of the United States

One of the basic pillars of our economy is the promotion of compet i

tion and the fostering of market rivalry as a means of insuring eco

11 FMC
statute

It is incumbent upon this Commission to evaluate every proposed

agreement in the light of this standard and it should not be forsaken

even though only a simple and innocuous agreement is involved We

are here presented with an agreement which does not qualify for

approval under our congressional mandate or under the guidelines we

have set heretofore

The time an agreement is presented for initial approval is when we

must evaluate it thoroughly and determine the anticompetitive scope

it is to possess We are not soothsayers We cannot predict what in fact

will happen as a result of approval We can however predict the

probable consequences of approval That is our expertise When ap

proving an agreement we should understand the gamut of activity in

herently concomitant to the specific conduct as set forth in the agree

ment We should not grant antitrust immunity to agreements which

are overbearing or unnecessary and which thereby might contain lati

tude for unauthorized actions within the approved area of conduct

It is an undesirable situation when we must call upon hindsight to

uncover the pitfalls of an agreement which may trap a conference in

violations of the law

As I said in docket 6615 thedesire of the parties to enter into

agreements alone is not considered sufficient to warrant approval

For presumptively all anticompetitive combinations run counter to the public

interest in free and open competition and it is incumbent upon those who seek

exemption of anticompetitive combinations under section 15 to demonstrate that

the combinations seek to eliminate or remedy conditions which preclude or hinder

the achievement of the regulatory purpose of the Shipping Act

i Mediterranean Pools Investigation 9 FMC 264 at 288

s Isbrandtsen Co Inc v United States et al 211 F 2d 61 at 57

s Transcript Oral Argument p 20

Agreement for Consolidation or Merger Between American Mail Line Ltd American

President Lines Ltd and Pacific Far East Lines Inc

Mediterranean Pools Investigation 9 FMC 264 290

11 FMC




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230 FEDERAL MARITIME COMMISSION

The second paragraph of that section provides for the 

such rates pending such leaning and decision thereon 

paragraph further provides

At any hearing under this paragraph the burden of proof to 

rate fare charge classification regulation or practice is just 

shall be upon the carrier or carriers

While the paragraph referred to in the quoted senten

to suspension rate cases hearing counsel argue that Co

not have intended to place the burden of proof on the c

suspension cases

Hearing counsel argue that nonsuspension rate cases 

mentioned nor alluded to in the legislative history of s

predecessors

ther that no

prior

nonsuspension

to the above

rate

mentioned

case was decided by

amendment

the

H

sel feel that this compels a conclusion that Congress did 

nonsuspension rate cases and the only distinction they 

make was between suspension cases and ordinary compla

between suspension and nonsuspension cases

Hearing counsel quote legislative history passages 2 in

in suspension cases the carrier has the burden of pro

rule were otherwise the carrier might remain mute an

Commission to present evidence the bulk of which may 

session of the carrier Hearing counsel submit that th

should apply in nonsuspension cases since Congress 

distinction between the two

rules

Hearing

of practice

counsel

and

further

procechlre

state that

which

rule

also

10o

would

of the

plac

Hearing counsel quote the following passages

1 Fr all the H Rept 824 of tune 12 193 and the S Rept 724 of J

titled Amending Certain Provisions of the Merchant Marine and Shippi

Section 2 clarifies section 3 Interconstat Shipping Act 1933 to esta

words the rule believed to he applicable under existing law that in ca

suspension of rates the burden of proof is on the carrier to show that th

etc are just and reasonable If the rule were otherwise the carrier mi

and require the Complainant or the Maritime Commission to present ev

most situations the bulk of such evidence is in the possession of the ca

that Congress when it established the existing law did not intend to perm

Under the section as amended the burden of proof will not he placed 

ordinary complaint proceedings taut only in suspension proceedings

2 From the H Doc 20S Letter from the Chairman of the United 

Commission Transmitting the Maritime Commission Recommendation 

It Is suggested that section 3 Intercoastal Shipping Act 1933 be am

that in cases involving the suspension of rates the burden of proof is on 

Commission believes this to be the case under present law as has been 

decisions of the Commission spredecessors If the rule was otherwise 

remain mute and require the Commission or the complainant to present 

of which may be in the possession of the carrier a situation evidently 

Congress when it established the law
j
232 FEDERAL MARITIME COMMISSION

docket 1182 we required the carrier to show that cost or o

portation conditions justify a rate policy which on its fa

a preference to a particular port served by that carrier T

question had not been suspended In 1182 the rate policy w

ential on its face and therefore can be differentiated from 

proceeding In such a case we require the carrier to go fo

show why the prima facie preference should not be fatal 

proval of the rate policy in question

The instant proceeding does not involve a rate change w

its face preferential prejudicial or unreasonable It invo

increase The increased rate was investigated but was not 

Section 3 of the Intercoastal Act and rule 10 o of FM

practice and procedure place the burden of proof on heari

Hearing counsel have not demonstrated the increase to be 

able We can only conclude that it is not

Delivery Rule

Respondents mandatory delivery rule on minimum 

provides that consignees must accept delivery at their 

Respondents have an agreement with truckers in Puerto 

furnish delivery of the cargo The rule does not permit 

of minimum shipments to pick up cargo at the termin

Respondents feel the mandatory delivery is necessary a

fied because it relieves the congestion at the terminals a

adds to the general operating efficiency of the terminals

Hearing counsel opposed the rule They feel that the gai

tional efficiency does not justify violations of the Shipping 

ing counsel maintained the rule was violative of sections 

of the act in that it denies free time and an option to hav

pickup on minimum shipments

The examiner concluded that the mandatory delivery 

unjust and unreasonable practice in violation of section 1a

act and subjects cargo moving at minimum rates to undue 

sonable prejudice and disadvantage in violation of section 

act The examiner sconclusions are based on his finding th

strips minimum shipments of 5 days free storage to whic

entitled and also strips them of the option to pick up th

the dock while allowing other LTL shipments to continue 

these two advantages The examiner states that before the 

this rule minimum shipments paid for these two items in th

and that they continue to pay for them now in view of th

crease but do not receive them
CHARGES DELIVEORY ATLANTIC GULFPUERTO RICO TRADES 23

Respondents have excepted to the examiners findings both th

the mandatory delivery rules constitute unjust and unreasonable pra

tices in violation of section 18aof the act and that such rules viola

section 16 of the act

We are compelled to agree with respondents and reverse the exa

iner on these points

The record is abundant with evidence indicating that congestion w

a problem at the terminals in Puerto Rico and that the congestion w

actually affecting SeaLand soverall service The congestion problem

are largely due to the restricted space available at these termina

Respondents instituted the mandatory delivery rule in an attem

to alleviate the congestion Under the rule respondents effect stor

door delivery of minimum shipments

Minimum shipments were selected for the mandatory delivery ru

for several reasons Minimum shipments are loaded onto spac

consuming pallets and since the number of minimum shipments 

Puerto Rico is quite large 800 per week for Sea Land they make 

sizable contribution to congestion Congestion is further caused 

the large number of trucks required to pick up the minimum sh

ments A large number of trucks is required since an individual co

signee is generally picking up either a single or just a few minimu

shipment parcels There is the further matter of loss and dama

claims Minimum shipments are generally relatively high valued sh

ments and are particularly susceptible to theft when stored in t

terminals The loss and damage problem was the primary reason GPR

instituted the delivery rule While congestion is also a problem f

GPRL the extent of congestion at its terminals is not as great as 

SeaLand s

Respondents have indicated that the reason all LTL consignees we

not similarly made subject to these delivery rules was simply th

there is not enough LTL equipment available to respondents to perm

them to perform delivery for all this class of traffic

The record also shows that the mandatory delivery rule has produce

highly satisfactory results This was conceded by hearing couns

and by the examiner

It becomes apparent that respondents reasons for instituting t

rule are valid The rule is shown to accomplish the purpose for which 

was instituted It will also be shown that the rule does not result 

the violations of the Shipping Act alleged by hearing counsel a

found by the examiner

The examiner found that the rule violated sections 16 and 18 

the act in that it denied minimum shipments a reasonable amount 

free time which carriers have always been required to furnish to carg

11 FMC
234 FEDERAL MARITIME COMMISSION

It cannot be denied that respondents rule deprives m

ments of free Mime Nevertheless it will be shown that 

nates the need for free time and thereby results in no los

shipments

Our predecessor and the courts have had occasion to 

time and have as the examiner here found recogniz

carriers

are required by their transportation obligation abse

tract to unload the cargo onto the dock segregate it by bill of 

put It in a place of rest on the pier so it is accessible to the cons

the consignee a reasonable opportunity to come and get it Am

Lines Ltd v FMB 317 F 2d 887 DCCir 1962

The purpose of free time however is to offer consig

able time to pick up cargo without being assessed demu

Free time is not designed to allow free storage of cargo 

Import Property 1USMC676 at 682 1937 our pred

that

As a proper part of their transportation service respondents s

such free time as may be reasonably required for the removal of 

from their premises based on transportation necessity and no

convenience

Under respondents mandatory delivery rule there is n

time Delivery is made by respondents They need allow 

removal of property when they take it upon themselve

livery And as previously indicated since free time is n

permit free storage minimum shipments are denied n

the concept of free time typically includes No finding of 

either sections 16 or 18 of the act can be based on this 

time

The second basis for the examiner sfinding of sectio

tion 18 violations is the fact that respondents delivery 

afford minimum shipment consignees an option to pick 

Hearing counsel suggest that the delivery rule is vi

act for the same reason Hearing counsel point out tha

shippers have expressed a desire to perform their own pi

that they could perform it at a cost less than that whic

charge and further that they often have to come to th

make other LTL spick ups and could pick up the minimu

at the same time Hearing counsel feel it is unreasona

to refuse a pickup option

The shipper sentiment was received by bearing counsel by means o

sent by hearing counsel to approximately 900 shippers Respondents hav

use of this evidence inasmuch as it is largely heresay and respondent








j
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248 FEDERAL MARITIME COMMISSION

4 A change should be made in the section 526 1dsit

is the situation involving consignee disability either by a m

of that section or the addition of a new section providing 

portwide strike of longshoremen for 25 calendar days o

normal first period demurrage of five clays will be cha

days This provision would only apply to import cargo 

loaded on the piers prior to the strike or unloaded on the 

the five days after termination of the strike The Exami

modification would have the advantage of helping to cle

after a strike while at the same time compensating car

use of the pier The importer who was diligent and remov

promptly would not be subjected to penalty demurrage c

early a time as a consignee who was less diligent Th

picked 25 days as the minimum time period for the applic

modification because he felt a strike of that length would c

congestion and he picked five extra days as the amount fo

sion of first period demurrage because he felt consignees 

a sincere effort could remove their cargo during that extra 

The Examiner excluded Seatrain Lines from his recom

inasmuch as he found that Seatrain scontainer opera

domestic offshore trades were not within the scope of this 

The Examiner found that no special relief should be gra

porters of tea spices coffee food and other products w

are subject to United States Government inspection inasm

ditions had not changed since 1948 when these importer

quests were considered and rejected in Free Time and 

ChargesNew York supra Finally the Examiner stres

for cooperative efforts by all concerned and voluntary ado

proved procedures relating to free time and demurrage 

inbound cargo at New York

DISCUSSION AND CONCLUSIONS

1 The Lawfulness of Free Time and Demurrage Pract

and Immediately After the Strike Under Section 17 

Order 8 Part I

Only AIIS 4 excepts to the Examiner sconclusion that th

no demonstration of unlawfulness with respect to the fr

demurrage practices during and after the strike It a

Commission rule that the practices of the carriers during t

abnormal pier congestion following the longshoremen s

unreasonable within the meaning of section 17 as unlawfu

tions or enforcements of General Order 8 Part Ito the 

resulted in the assessment of penalty demurrage in situati

4 American Institute for Imported Steel Inc
FREE TIME AND DEMURRAGE PRACTICES AT NY HARBOR 

consignees were unable to pick up cargo because of factors bey

their control It also asks that if such findings of unlawfulness 

made they be applied retroactively to allow cancellation of such p

alty charges

Although the record in this proceeding is replete with reference

the difficulty truckers experienced in picking up cargo after term

tion of the strike there are of record no instances of the assessm

of penalty demurrage in situations in which proof was submitted 

ACIC or the carriers that a trucker had appeared at a pier but 

unsuccessful in attempting to pickup cargo Furthermore ther

evidence of record that trucks were logged in as soon as they go

line at the piers In other words the record does not contain evide

that cargo was actually assessed penalty demurrage in situation

which a bona fide attempt was made to pick up cargo

We agree with the Examiner that the practices engaged in at 

Port of New Yorlc respecting free time and demurrage during 

immediately after the strike of 1965 were not unjust and unreason

within the meaning of section 17 in light of the facts that the st

appeared to have been settled in advance and the then existing 

time practices had worked well in the past including post strike 

uations We also agree that the various free time and demurrage p

tices were in compliance with reasonable interpretations of Gen

Order 8 Part I as it was then worded

However knowing through the benefit of hindsight of the difficu

experienced during and after longshoremen sstrikes like the one 

volved in this proceeding we are in accord with the Examiner 

certain practices will be unjust and unreasonable though we d

to some extent as to what those practices are if engaged in in 

future and that certain amendments are necessary to General O

I8

Part I to insure that reasonable practices are observed

2 Amendments to General Order 8 Part I Ordered for the Fut

a The inclusion of the words longshoremen sstrikes in sec

561d

The parties to Calcutta East Coast of India East PakistanU

Conference Agreement No 7555 and the West Coast of India Pa

tanUSA Conference urge that the words longshoremen sstri

are unnecessary and should not be added contending that if Gen

Order No 8 is amended to include all events to which it is applic

it will soon resemble a laundry list rather than the General Order 

intended to be No other party excepts to this suggested modifica

and Hearing Counsel and Port of New York Authority maintain 

11 FMC
j
FREE TIME AND DEMURRAGE PRACTICES AT NY HARBOR 

complish this obiective They maintain that there is legal autho

for requiring that free time be made available to cargo already on 

murrage when it cannot be picked up because of carrier disab

and contend that once free time has expired carriers become w

housemen with respect to property in their keeping and have a 

to make it available for delivery when demand is made within a 

sonable time The Interstate Commerce Commission they point 

allows or prohibits demurrage on an individual casebycase b

denying it in cases where shippers had exercised due diligence 

allowing it in cases where they had not

Finally Hearing Counsel contend that American President L

et al vFJLBsupra does not stand for the proposition that it w

be confiscatory and unconstitutional to require free time when a 

rier refusual or disability arose after the expiration of the normal 

time period In that case the Commission then Board had attemp

by publication of an interpretation to amend what is now Gen

Order 8 Part I to forbid the assessment of any demurrage du

pendency of a longshoremen sstrike That case they maintain me

held that the Commission could not amend General Order 8 with

complying with certain procedural requirements including a st

ment of the amendment sbasis and purpose as required by the Adm

istrative Procedure Act Although the Court s opinion did con

language indicating that a carrier sduty with respect to cargo 

been fulfilled after the expiration of free time and that to deny 

murrage once free time had expired would be unlawful this langu

they argue is not relevant to the present proceeding because of the 

ferent applications of the proposed amendment in that proceed

and Hearing Counsel ssuggested modification In the American Pr

dent Lines case the Commission had amended the General Orde

prohibit carriers from assessing any demurrage during a longsh

men sstrike regardless of whether cargo was in free time or a dem

rage period at the commencement of the strike Hearing Counsel po

out that their proposal on the other hand does not deprive carr

of demurrage during a longshoremen sstrike if free time has expi

The carrier is still entitled to firstperiod demurrage during t

period with respect to cargo on which free time had expired at 

commencement of the strike The proposed modification in the Am

an President Line case is also distinguishable Hearing Counsel 

lege from that suggested by them in the instant proceeding in that 

free time extension in the American President Line case applied to 

As noted above a longshoremen sstrike occurring after the expiration of free tim

riot viewed as a carrier disability

11 FMC
252 FEDERAL MARITIIVIO COMMISSION

cargo alike whereas the proposed modification in this 

would allow the granting of additional free time once the 

period had expired only in those situations where cargo c

made available because of carrier disability

Hearing Counsel are correct insofar as they mainta

American President Line case is not dispositive of the pro

propriety of the collection of demurrage at first period com

rates when a carrier disability arises after termination o

As Hearing Counsel point out the regulation involved 

dealt with the assessment of demurrage during a consig

than a carrier disability and would have forbidden jus

tion to a carrier during a time when free time had expire

signees through no fault of the carrier could not pick up 

Hearing Counsel would require an extension of free ti

would normally have expired only during periods other 

of consignee disability and only when in fact a carrier 

to make the cargo available for pickup

Here we are faced squarely with the problem of preci

carrier sduty is with respect to cargo once free time has e

it is in this regard that both Hearing Counsel and the Exam

to be in error A carrier has certain obligations origina

status as a carrier for the performance of which he ma

greater compensation than that required by his contract 

These obligations are correctly identified in America Pres

et al vFMBsupra at 888 The carrier must unload 

onto a dock segregate it by bill of lading and count 

place of rest on the pier so that it is accessible to the con

afford the consignee a reasonable opportunity to come 

The Court further observed at 889 that the carrier t

delivery it does not deliver It makes a valid and com

when it puts the cargo on the dock reasonably accessib

segregated and marked and leaves it there for five days 

of course The reasonable opportunity was translated 

days because the Commission in General Order 8 Par

the Court observed determined that under conditions 

in New York five days is the shortest time that affords to 

a reasonable opportunity to take delivery of imports an

a tariff which failed to assure to consignees a minimum 

of free time wouldbe unjust and unreasonable

A carrier has certain duties with respect to cargo no

within the free time period such as the duty to exercise 

care but the Commission having defined the minimum 
FREE TIME AND DEMURRAGE PRACTICES AT NY HARBOR 

reasonable time as five days it cannot be said that a carrier has a d

as a matter of law to extend free time if his disability occurs a

expiration of the free time period A distinction must be made betw

the liability of a carrier arising after the expiration of free t

because of a carrier s negligent treatment of cargo in his cus

and the requirement that relief from demurrage be given when

a carrier cannot tender cargo for delivery The duty to treat c

in one scustody with due care arises by statusthe carrier is a ba

as long as the cargo is in its custody and as such must treat the c

with reasonable care for the whole of such time The carrier 

bailee also has a duty to tender cargo in his custody for delivery 

obligation to tender for delivery free of assessments of any demurr

however is as we have noted one that ends after a reasonable tim

or under normal circumstances five days This is not to say as we 

demonstrate later that under some circumstances a carrier may 

be required to tender cargo for delivery free of assessment of 

demurrage for a time period exceeding five days Nor do we m

to imply a carrier may not grant free time whenever it can not te

cargo for delivery as is the present practice of many of the car

Indeed this appears to be the more equitable approach and sh

be encouraged inasmuch as an assessment of demurrage after 

expiration of free time when the consignee does present himself 

pickup of his cargo and the carrier refuses or is unable to tend

acts to require payment from a consignee for a service he no lo

needs or desires

Accordingly we will allow carriers to retain their present pract

with respect to free time after the time at which it would norm

have terminated so long as these practices are clearly spelled ou

the applicable tariffs so that consignees will be in a position to k

the extent of the obligations assumed by respective carriers Sec

526 10 will be amended by adding a sentence to the section so 

it will read as follows

526 1eWhere a carrier is for any reason unable or refuses to tender c

for delivery free time must be extended for a period equal to the duration o

carrier sdisability or refusal If such condition arises after the expiratio

free time an additional period during which no demurrage is charged or 

period demurrage shall be applicable whichever is specified in the approp

tariff

Cf The question whether a consignee must start paying additional charges t

proprietor of the pier for allowing goods to remain there bas nothing whatever 

with the question whether a carrier has used reasonable care in discharging goods 

his ship North American Smelting Co v Moller S Co 204 F2d 384 388 19

see also Calcot Ltd v lebrandtsen Company 318 F2d 889 673 1968 iRules 

customs concerning storage charges have no relevance to the question of what const

a proper delivery of the cargo

11 PALO
254 FEDERAL MAHITIk COMMISSION

c The requirement that consignee disability under secti

be port wide or affect a substantial portion of the entire 

before demurrage is limited to first period rate

The Examiner as noted above recommended that sectio

be revised to limit demurrage to first rates during 

men sstrikes affecting one pier or less than a substantial 

the entire port area Some conferences contend that such 

rare and that no need has been demonstrated that present 

cannot properly handle them Hearing Counsel and AI

that the Examiner was correct in his partial removal of the 

requirement but erred in not removing it altogether so th

first period demurrage would apply in any situation 

a consignee is prevented from removing his cargo by fact

his control They would however require that the disab

affecting all consignees ajt any pier orpiers to prevent the 

of discrimination by those administering demurrage char

disability in some cases and denying it in others without 

of a definitive yardstick

We agree with the Examiner that the port area re

should be removed with reference to longshoremen sstrike

may be true that localized strikes are rather rare there i

less evidence of record that they do occur and such strik

strikes affecting a wider area disable consignees from rem

from the struck piers Generally carriers waive demur

least penal demurrage in all strike situations To this e

true that present procedures can properly handle all s

tions However under the present rule a simple tariff 

could change such procedures Such result must not 

to happen Strikes over which a consignee has no cont

limited to those affecting all or a substantial portion o

port area During longshoremen sstrikes affecting even a 

the penalty element of demurrage affords no incentive to re

from the pier because the consignee cannot do so for reas

beyond his control Therefore it would be an unreasona

to

strike

allow

affecting

the assessment

a consignee s

of penal demurrage

ability to remove

during

his cargo

any Lons

We 

however with the Examiner that the removal of the port s

ment should be limited to longshoremen sstrikes inasm

record

strike which

is devoid

would

of evidence

effect less

of

than

factors

a substantial

other than

portion

a longs

area and disable a consignee from removing his cargo

strike

The

exception

Delaware

to

River

the

Port

entire

Authority

port area

Philadelphia

requirement

excepted

alleging

to

that

the

it

l
FREE TIME AND DEMURRAGE PRACTICES AT NY HARBOR 

Therefore section 526 1dshould be amended to read as fol

new language in italic

Where a consignee is prevented from removing his cargo by factors b

his control such as but not limited to longshoremen sstrikes trucking s

or weather conditions which affect an entire port area or a substantial po

thereof aszd when a consignee is prevented from removing his cargo by a 

shoremen sstrike which affects only one pier or leas than a substantial po

of the port area carriers shall after expiration of free time assess demu

against imports at the rate applicable to the first demurrage period for such 

as the inability to remove the cargo may continue Every departure froni the 

ular demurrage charges shall be reported to the Commission

d The requirement of the extension of firstperiod demu

following portwide strikes of longshoremen for 05 calendar day

more

Most of the parties actively participating in this proceeding o

to some extent to the Examiner srecommendation that first perio

murrage be automatically extended following longshoremen sst

exceeding 24 days

Generally the conferences contend that any extension of first p

demurrage or free time following termination of a strike would 

aggravate congestion by removing the incentive penal demurrag

remove cargo at a time when it is most urgently needed Hea

recommendation

Counsel and AIIS

is faulty

on the

because

other hand

it fails

also

to solve

argue

the

that

post

the

strike

Exmins

co

tion problem but maintain that the proper solution would be to ex

free time or first period demurrage following a major strike dep

ing upon the position of the cargo when the strike began an

couple such extension with a truck appointment system the free 

but not first period demurrage to be tolled on the day that a ca

or terminal operator notifies a consignee or his agent of a specific 

at which the cargo may be picked up if the cargo is actually avai

for pickup at the time specified

Additionally one conference maintains that if an extensio

granted the amendment to the General Order shouldbe so worde

not to allow the application of first period demurrage to cargo alr

on penal demurrage when a strike begins and insure that the pre

more liberal rules and regulations governing free time and demurrage at New York 

at Philadelphia and thus unjustly discriminate against Philadelphia and increas

already present service disadvantage in its competition with the Port of New Yor

have found that the failure to relieve consignees at New York from penalty dem

during any strike is an unreasonable practice The simple answer to Philadelphia s

tention is that nothing prevents it from voluntarily adopting a rule removing the 

area requirement with respect to longshoremen sstrikes As the Port of New York ind

on brief there is no general Commission order respecting free time and demurrage pra

at any port other than the Port of New York yet no penal demurrage is assessed d

any longshoremen sstrikes at several North Atlantic ports

11 FMC

ASS1AI 1 SA A
256 FEDERAL MARITIME COMMISSION

practice of free time running from the date of discharge o

sel rather than discharge of particular cargo from that ve

retained

Hearing Counsel also criticize the Examiner srecomm

grounds that the automatic extension of first period dem

respect to all cargo on the pier at the commencement o

would cause cargo that was still on free time when a strike 

directly into firstperiod demurrage even though the carr

fulfilled his obligation of tendering such cargo for deliv

required free time period and might in fact refuse or b

tender for delivery

The problem of what to do to encourage prompt and 

moval of cargo following a major longshoremen sstrike 

that lends itself to a simple solution that will impress all p

its undisputed fairness The carriers understandably wan

off the piers as soon as possible to make way for new cargo 

sider the early application of penal demurrage a good wa

plish this objective Just as understandably the consignees 

to be assessed penal demurrage charges in situations in w

have noted in our review of the situation in the Port of N

is extremely difficult for consignees to pick up cargo We w

it abundantly clear that we are not placing the blame fo

strike congestion at the doorstep of any single interest It i

which was caused in the first place by factors for which 

riers nor consignees was directly responsible However 

should utilize their best efforts to see that the public intere

by prompt and efficient cargo removal so that the piers 

York port area may return to normal as soon as possible 

major strike

The solution suggested by the Examiner although an 

step in the right direction does have its problems some of 

been indicated by the parties Any automatic extension of 

nonpenalty demurrage may well tend to encourage consign

cargo on piers for the duration of the extended periods a

crease congestion On the other hand it seems unfair to 

demurrage against consignees who through no fault of the

been unable to pick up their cargo

At the outset one thing seems clear As pointed out by one 

and noted above if extensions of free time or first period 

are granted following a major longshoremen sstrike they 

be granted to cargo that was already on penal demurrag

strike began No one during the course of this proceedin
FREE TIME MID DEMURRAGE PRACTICES AT NY HARBOR 

tained such a position and in fact in oral argument counsel for M

stated that he did not contend that an extension following a s

should apply to cargo which was in a period of penal demurrage 

to the strike It seems indeed unfair to relieve one of penal demu

who has contributed to the congestion by failing to pick up his c

during the free time period or prior to the period when penal ch

were levied to force its removal

The solution seems to be an extension of free time or first p

demurrage following a major longshoremen sstrike that is conditi

upon the removal of the cargo within the extended period The 

for some extension of time following a major strike is plain Altho

we have found no violations of the present regulations governing 

time and demurrage such regulations are just not realistic during 

periods Carriers experienced much difficulty in tendering carg

delivery As noted above many of them worked their piers eve

and weekends to make cargo available for pickup and many consig

still experienced difficulty in obtaining their cargoes There w

chronic labor shortage during this period due to the abnormally 

volume of cargo that had to be handled by the same number of 

shoremen normally available Although the record does not ind

that penalty demurrage was actually assessed against consignees 

were unable to pick up cargo it does indicate that trucks were 

forced to wait for many hours in long lines often unsuccessfu

attempts to pick up cargo and that periods of time running into 

or four hours were necessary before waivers of penal demurrage 

be obtained from the ACIC In such instances it was often impos

for truckers to call at other less congested piers to pick up other 

because of the lack of remaining work time

There is nothing sacrosanct about the number five It is us

measure the minimum free time which must be granted under no

circumstances merely because it is a reasonable amount of tim

carriers to tender and consignees to receive cargo B In 1946 our 

ecessor promulgated rules to cover the conditions currently pr

ing in the Port of New York These conditions included s

of seafaring personnel and truck drivers they do not appear to 

included longshoremen sstrikes and the whole problem of pier 

gestion following as distinguished from during a strike was lef

explored However it was said that reasonable time was to be d

8 MIS would make an exception for cargo on penalty demurrage which a ca

unable or refuses to tender for delivery We have discussed this problem under 

above

8 The fact that the number is not immutable Is emphasized by the fact that p

1938 there were no requirements as to amount of free time and that between 19

1941 our predecessor had fixed ten days as the maximum free time period

11 FMC
258 FEDERAL MARITIME COMMIISSION

mined with due regard especially for the public inte

requires that congestion of ports be minimized in the inte

cient water transportation Free Time and Demurrage Cha

York supra at 103

After a strike of major proportions the prevailing fre

first period demurrage rules are not reasonable Therefore 

a major strike free time should be extended for five day

of Saturdays Sundays and legal holidays coupled with 

ment that cargo actually be picked up within such exten

Likewise first period demurrage which under normal cir

is equal to five calendar days should be extended for an add

calendarday period with a srniliar requirement for actua

up the cargo For example a consignee whose cargo was o

at the commencement of the strike would not be assessed 

if he picked up his cargo within five days excluding Satu

days and legal holidays after the time free time woul

terminate but if he picked it up on the sixth day he w

sessed for six rather than one day at the compensatory 

rate If a consignee picked up his cargo on the fifth calenda

first period demurrage would normally terminate he w

sessed demurrage at the compensatory demurrage rate H

he picked it up on the sixth day he would be assessed penal 

for the last six days Of course if cargo is not actually a

pickup during the extended free time period free time m

tended until it is If such cargo cannot be tendered for deliv

the extended first demurrage period free time or first per

rage would apply as specified in the applicable tariff Such 

periods appear adequate to allow diligent consignees an o

to remove their cargo They would also supply an incentive 

such cargo which an automatic extension would not and 

only diligent consignees to take advantage of their benef

As suggested by some respondents the modification wil

to indicate that no departure from the present practice of 

running of free time from discharge of the vessel rathe

particular cargo from the vessel is intended

10 Hearing Counsel had formerly proposed an alternative plan whereby fr

be extended in all situations in which carriers could not tender for del

period demurrage rates would apply after the expiration of free time in a

which consignees as a class are unable to pick up their cargo at any p

presents difficulties in the poststrike situation Questions of fact might arise 

particular post strike congestion had actually made it impossible for consig

cargo while all the while congestion got worse More important however 

no incentive to consignees to remove their cargo
FREE TIME AND DEMURRAGE PRACTICEbS AT NY HARBOR 

It is regrettablethat we are unable to adopt the suggestion of A

and Hearing Counsel that the extension of free time be coupled 

truck appointment system free time terminating with the makin

an appointment for a specific time at which a truck is to call 

cargo However the difficulties in establishing a workable and 

truck appointment system are numerous indeed The Examiner m

tioned some of them The possibility of discrimination in the gran

of appointments and the hardships which occur in individual c

even if a mechanical method for the fixing of appointments coul

established It is undeniable that the establishment of some so

system for the orderly removal of cargo from the piers is a desir

perhaps even necessary objective but at this juncture no one is 

to state just what kind of procedure should be set up or how it sh

be administered We can only hopefully provide that if a work

appointment system acceptable to both carriers and consignee

adopted the extension of free time or first period demurrage 

terminate within 24 hours a reasonable time for a consignee to 

range for pickup of advance notification that cargo is available 

pickup and readily accessible

In other words General Order 8 Part I is revised by the inser

of a new section 526 1f providing as follows

Following a longshoremen sstrike of five days or more free time or 

period demurrage depending upon the status of the cargo at the commence

of the strike shall be extended for a period not less than 5 days exclusiv

Saturdays Sundays and legal holidays and 5 calendar days respectively 

yond the time at which they would normally terminate Provided however 

such extensions shall apply only if cargo is actually picked up within suc

tended time or if an appointment system acceptable to both carriers and 

signees is adopted within 24 hours of advance notification that cargo is avai

for pickup and readily accessible subject to the requirement that time not b

tended more than 24 hours beyond the additional free time or demurrage pe

We agree with the Examiner sconclusion that carriers are ent

to

strikes

compensation

by cargo on

for

which

the

free

use

time

of their

had expired

piers during

before

longshorems

commencem

of the strike We also agree that no special relief need be granted 

importers of tea coffee spices food and other products whose c

is subject to United States Government inspection As our predece

indicated in Free Time and Demurrage ChargesNew York su

a In attempting to establishing such a system attention might well be given t

expressed willingness of the New York Terminal Conference to participate in adminis

free time and demurrage regulations

13 Five days was chosen because congestion problems caused by strikes of less du

should be adequately handled by the tolling of free time and the first demurrage p

for the duration of the strike and the consequent free time or first period demurrage 

remaining after the strike Strikes of leas than five days have not appeared to cause 

problems in the past

11 FMC
260 FEDER AT MARITIME COMMISSION

inspection delays are occasioned by factors other than 

to the obligation of the carrier No party indicated 

should be extended because of the delays occasioned b

inspectors Several conferences moreover grant six rath

days free time to allow for delays occasioned by 

inspections

SeaLand Service Inc SeaLand urges that all 

operations be excluded from the effect of any order issu

ceeding alleging that with the exception of one witne

no evidence or testimony was received relating to conta

tions It further alleges that inasmuch as the Examiner 

train soperations from his Initial Decision consistenc

SeaLand and other carriers be similarly excluded from 

rule issued pursuant to this proceeding to the extent th

tainerized operations The record in this proceeding do

that problems have arisen with respect to cargo shipped 

To the extent that carriers engage in the transportation 

for delivery of containerized freight rather than bre

there appears no necessity to require changes in these ca

pursuant to our amendments to General Order 8 Part I

An appropriate order will be issued and General Ord

revised herein will be published in the Federal Regist

By the Commission
IN THE MATTER OF FREE TIME AND DEMURRAGE PRACTICES ON IN

CARGO AT NEW YORK HARBOR

This proceeding was instituted by orders served upon respo

and published in the Federal Register and hearings were held 

an Examiner pursuant to which briefs were filed and an Initia

sion issued Exceptions and replies to this Initial Decision hav

considered and oral argument held before and supplemental 

filed with the Commission The Commission has this day iss

report in this proceeding which is hereby incorporated her

reference in which it determined that certain practices of t

spondents with respect to free time and demurrage on inbound 

at New York Harbor would if continued in the future be unju

unreasonable within the meaning of section 17 of the Shippin

and determined that its General Order 8 Part I which regula

free time and demurrage practices here under investigation sho

amended in certain respects to insure just and reasonable pr

in the future

Therefore it is ordered That section 526 1cis amended by a

a new sentence at the end thereof As amended section 526 1c

as follows

c Where a carrier is for any reason unable or refuses to tender ca

delivery free time must be extended for a period equal to the duration 

carrier s disability or refusal If such condition arises after the ex

of free time an additional period during which no demurrage is cha

first period demurrage shall be applicable whichever is specified in the 

priate tariff

It is further ordered That section 526 1d is amended by ins

the words longshoremen sstrikes before the words trucking s

and inserting the clause and when a consignee is prevented fro

moving his cargo by a longshoremen sstrike which affects on

pier or less than a substantial portion of the port area befo

words carriers shall As thus amended section 526 1dre

fellows

11 FMC

FEDERAL MARITIME COMMISSION

ORDER

26
262 FEDERAL MARITIME COMMISSION

d where a consignee is prevented from removing his cargo b

yond his control such as but not limited to longshoremen sstri

strikes or weather conditions which affect an entire port area o

tial portion thereof and when a consignee is prevented from remov

by a longshoremen sstrike which affects only one pier or less tha

tial portion of theport area carriers shall after expiration of free 

demurrage against imports at the rate applicable to the first demu

for such time as the inability to remove the cargo may continue Eve

from the regular demurrage charges shall be reported to the Com

It is further ordered That a new part f be added to 51

as follows

f Following a longshoremen sstrike of five days or more free 

period demurrage depending upon the position of the cargo at the co

of the strike shall be extended for a period not less than five days 

Saturdays Sundays and legal holidays and five calendar days 

beyond the time at which they would normally terminate Provid

that such extensions shall apply only if cargo is actually picked up 

extended time or if an appointment system acceptable to both carr

signees is adopted within 24 hours of advance notification that c

able for pickup and readily accessible subject to the requireme

not be extended more than 24 hours beyond the additional free 

murrage period

It is further ordered That such amendments shall be bi

all common carriers of noncontainerized cargo by water 

commerce with respect to regulations and practices affectin

and demurrage on import property at the Port of New Y

It is further ordered That on or before the effective d

order all tariffs of such carriers relative to free time and 

on import property at the Port of New York be conformed 

ings and rules herein set forth and

It is further ordered That this order become effective F

1968

By the Commission

Signed THOMAS 

S
FEDERAL MARITIME COMMISSION

DOCKET No 6513

RATES ON US GOVERNMENT GAROOES

Decided December 8 1987

Rates which are admittedly noncompensatory and which are reduced in 

to unfairly attempt to drive a competitor from the trade are contr

section 18b5

Rates which are no longer effective and which were promulgated pursu

an outdated system of rate negotiations are not amenable to section 18b

A conference of carriers by reducing its rates to an admittedly unreas

and noncompensatory level in order to drive another carrier from a 

violates section 15 and the terms of the conference agreement

Failure of a carrier to abide by its tariff provisions is contrary to sec

b

Under section 15 a dormant agreement may not remain approved but m

canceled or modified to reflect its present purpose

Eimer C Maddy and John Williams for respondent conferenc

lantic Gulf AmericanFlag Berth Operators and certain of its 

ber lines

Warner W Gardner Robert T Basseches and James B Good

for respondent conferences West Coast AmericanFlag Berth 

ators and Trans Pacific AmericanFlag Berth Operators and c

of their member lines

George F Galland Robert N Kharasch Philip F Hudock 

J K Adams Jr for respondents States Marine Lines Inc Isth

Lines Inc Global Bulk Transport Inc and Bloomfield Steam

Company

Sterling F Stoudenmire Jr for respondent Waterman Steam

Corporation

William B Ewers and Ira L Ewers for respondent MooreM

mack Lines Inc

Joseph A Klausner and Mitchell W Rabbino for respondent 

phire Steamship Lines Inc LibertyPac International Corp 

Pioneer Overseas Service Corp

263
264 FEDERAL MARITIME COMMISSION

Wilbwr L Morse and Howard A Levy for Department 

Harry R Van Cleve Thomas JOReilly and Paul J Fit

General Service Administration John A McWilliam 

Lucas County Port Authority Alan F Wohlstetter fo

Goods Forwarders Association of America Inc William 

and Philip G Kraemer for Maryland Port Authority a

Seal for Virginia State Ports Authority interveners

Donald J Brunner R Stanley Harsh and Sarnuel B 

Hearing Counsel

REPORT

BY THE COMMISSION John Harllee Chairman George 

Vice Chairman Ashton C Barrett James V Da

sioners

THE PROCEEDINGS

On May 6 1965 the Commission on its own motion in

investigation of virtually the entire spectrum of practices 

the procurement of ocean transportation of US military 

Commission named as respondents AGAFBO Atlanti

AmericanFlag Berth Operators TPAFBO Trans Pa

icanFlag Berth Operators WCAFBO West Coast Am

Berth Operators their respective member lines and Sap

Inc LibertyPac International Corp and Pioneer Sap

Corp The Military Sea Transportation Service MST

Services Administration Household Goods Forwarders As

ica Inc and ToledoLucas County Port Authority inte

ginning September 28 1965 Examiner C W Robinson h

totaling 61 days in Washington San Francisco and New 

served an initial decision on December 15 1966 The Comm

oral argument on exceptions and replies to exceptions on M

THE RESPONDENTS

AGAFBO 1 and WCAFBO 2 are conferences or associa

flag carriers which have been approved under section 15 

Commissioner James F Fanseen did not participate

1 FMC Agreement No 8086 2 Atlantic and Gulf AmericanFlag B

AGAFBO Alcoa Steamship Company Inc American Export Isbrandts

American President Lines Ltd American Union Transport Inc Bloom

Company Central Gulf Steamship Corporation Farrell Lines Incorporat

Inc Great Lakes Bengal Lines Inc Isthmian Lines Inc Lykes Bros Stea

Matson Navigation Company Moore McCormack Lines Inc Pacific S

Prudential Steamship Corporation States Marine Lines joint service o

Lines Inc and Global Bulk Transport Inc T J Stevenson Co I

Lines United States Lines Company Waterman Steamship Corporation

2FMC Agreement No 8186 West Coast AmericanFlag Berth Operator
RATES ON US GOVERNMENT CARGOES 2

ping Act 1916 46USC 814 Through AGAFBO and WCAF

carriers may discuss and agree upon rates terms conditions and 

lated services to be used as a basis for discussion and negotiation w

various military shipper services for the transportation of milit

cargoes TPAFBO a is an approved conference of USflag carr

designed to permit carriers to discuss and agree upon rates terms 

conditions principally credit arrangements between the ocean car

and the van line for cargoes moving on through Government bills 

lading TGBL under rate and service tenders approved by the 

partment of Defense DOD

Sapphire Steamship Lines Inc operates a liner service betw

United States North Atlantic ports and ports in the United Kingd

and the Bordeaux Hamburg range

LibertyPac International Corp a New York corporation form

in 1960 is a forwarder of household goods on TGBLs between po

in the United States and points throughout the world and is an 

proved tender holder for the transportation of such goods Libe

Pac ceased activity on November 11 1966

Pioneer Overseas Service Corporation a New York corporat

formed in 1963 and wholly owned by Marshall P Safir chairman 

Sapphire is a traffic management agency which performs many 

not all of the services for a fee of householdgoods movers Pion

does not represent tender holders at present

FACTS

Movement of Defense Cargoes

The Cargo Preference Act of 1904 provides as follows

Only vessels of the United States or belonging to the United States may 

used in the transportation by sea of supplies bought for the Army Navy 

Force or Marine Corps However if the President finds that the freight char

by those vessels is excessive or otherwise unreasonable contracts for tra

portation may be made as otherwise provided by law Charges made for the tra

ortation of those supplies by those vessels may not be higher than the char

made for transporting like goods for private persons 10 USC 2631

On October 20 1954 DOD and the Department of Commerce in 

WilsonWeeks Agreement agreed that the merchant shipping requir

by DOD exclusive of the MSTS nucleus fleet and consistent with m

tary requirements and prudent management would be obtained in t

American Export Isbrandtsen Lines Inc American Mail Line Ltd American Presid

Lines Ltd Isthmian Lines Inc Matson Navigation Company Pacific Far East Line I

States Marine Lines Joint service of States Marine Lines Inc and Global Bulk Transp

Inc States Steamship Company Waterman Steamship Corporation

3 FMC Agreement No 8493 Trans Pacific AmericanFlag Berth Operators TPAFB

same membership as WCAFBO note 2 aupra

11 FMC
266 FEDERAL MARITIME COMMISSION

following order berthline operators time or voyage cha

under general agency agreement with National Shipping A

foreignflag vessels

After the termination of World War IIthe Army and th

secured ocean commercial transportation for their cargo

Army Transportation Corps ATC contracts The first c

executed in October 1946 The rates and conditions for this 

tion were the same for all lines in a given trade The contr

a space charter variety and the rates were on a FAS basi

The transportation of Navy cargoes during the same per

formed under Navy contracts which were generally sim

of ATC

The procedure for obtaining ocean transportation for m

goes was changed in 1950 when this responsiblity was give

Inasmuch as the stevedoring of cargo at military termina

formed by the military the contract rate was quoted FIO 

justed where the cargo might move over commercial term

the spacecontract system employed by ATC had proved 

tory in that there was a tendency toward poor stowage the 

tract was revised so that the payment of freight would be 

of the measurement of cargo on dock with allowance 

stowage MSTS allocated cargo among the USflag carrie

the number of liner sailings a system which generally was 

to the lines Under this system an effort was made to provide 

load for each vessel

In their discussions with MSTS as with ATC previous

presented their costs and other data in support of rates The 

be revised upon demand by either party for renegotiation 

to agree within 60 days automatically canceled the cont

quently in 1957 MSTS prescribed a formula for the su

requests for increases The formula required the submis

data limited to wages subsistance repairs and maintena

supplies insurance and fuel In due time MSTS would a

decision as to the rate If the lines were dissatisfied with t

they could present their objections sometimes MSTS wou

changes MSTS had the final say in these matters When n

were concluded the rates were filed with the Commissio

AGAFBO and WCAFBO acted collectively for their m

during the negotiations the contracts were executed by the 

lines To areas not covered by shipping contracts milita

moved on berth terms on Government bills of lading at 

rates
RATES ON US GOVERNMENT CARGOES 

On April 4 1966 the Deputy Assistant Secretary of Defense 

Transportation and Logistics announced that DOD s practice 

procuring ocean freight services would be altered so that procurem

to the maximum extent possible would be obtained through p

competition The new policy was implemented by MSTS sRequest 

Proposals No 100 issued on June 1696

Carriers of military household goods moving on TGBLS at thro

rates previously filed rate proposals with MTMTS which 

ordinates the shipment of such goods The oceanrate segment a

having been negotiated by MSTS was supplied to MTMTS and 

then transmitted Iby that agency to the carriers for inclusion in th

tenders The tenders were filed semiannually for periods of six mon

The tenders submitted were made available to other carriers Prio

the effective date of the rates carriers were allowed to meet the low

rates but they could not go below such rates This was known as 

me too system After the rates became effective there were th

metoo cycles available in a given six months period new carr

could come in for the first time in these subsequent cycles and 

competitive rates MTMTS divided the available tonnage among 

carriers having comparable rates

Ocean Rates on Military Cargoes

The original ATC contracts provided for payment to the lines 

44 cents per cubic foot of space reserved whether used or not H

ever when MSTS took over in 1950 after making allowances for 

FIO factors the rate arrived at was about 15 percent lower than 

commercial rate on similar commodities This envisaged a brok

stowage allowance of 20 percent In 1961 the difference between 

berth and FIO rates was set at 225cents

The contracts contained a schedule of rates for certain gene

descriptions of cargo depending to some extent upon the trade 

general household goods unboxed vehicles unusual size unboxed gu

refrigerated explosives hazardous bulk lumber poles and pil

and empty Conex containers inbound The first five categories h

three kinds of rates basic reduced A and reduced B the latter t

being applicable to cargo when shipped in larger volume The ra

for on deck cargo were 10 percent lower In the trans Pacific trade 

fiscal year 1965 about 78 percent of the MSTS cargo moved at 

basic rates and about 11 percent each at the reduced rates the c

responding figures for the AGAFBO lines do not appear of reco

Between 1950 and 1964 the WCAFBO lines received five rate increa

go Military Traffic Management and Terminal Service

11 FMC
268 FEDERAL MARITIME COMMISSION

totaling 443percent Rate increases granted to the AGAFB

the same period approximated 30 percent increased costs of 

do not appear of record Comparing six principal comme

modities moving via WCAFBO lines with comparable M

modities moving in volume for the years 19501965 the ra

former increased an average of 66 percent as compared w

cent for the latter the corresponding figures for the AGA

do not appear of record

As illustrative of the rate picture just prior to the adve

phire upon the scene the AGAFBO rates FIO per cubi

five representative commodities from Atlantic and Gulf 

Ports in the Bordeaux Hamburg range were as follows

Basic 

General cargo 5434 

Household goods 5834 

Unboxed vehicles up to 8960 pounds 6634 

Unusual size 69 

Unboxed guns 87 

The rates of the MTCAFBO lines on the same commod

somewhat higher to basic Far East countries and even 

more distant trans Pacific areas

Sapphire sfirst tariff was issued on February 12 196

March 14 containing rates on general cargo and excep

cargoes and personal property of military personnel and G

employees Effective March 14 the tariff was broadened s

adding specific rates on farm machinery and on household 

personal effects NOS the rate on the lastnamed being 81 

cubic foot Effective March 31 Sapphire published a rate 

net 100 pounds or 45 cents per cubic foot on household goo

by any Government agency and moving on through Govern

of lading The householdgoods rates were effective for s

Also effective March 31 Sapphire published an FIO rate 

measurement ton 40 cents per cubic foot on military ca

was no FIO rate for household goods shipped by MSTS an

goods would have moved at the 40cent rate applicable to M

eral cargo Effective April 9 Sapphire extended the area c

Gulf ports A westbound rate of 38 cents per cubic foot 

effective March 31 also was published but just prior to the 

port of Sapphire sfirst vessel qualified to carry MSTS c

Europe US Lines filed a rate on POVs slightly lowe

Sapphire rates Sapphire then filed a rate of 35 cents for for

4 Privately owned vehicles

270 FEDERAL MARITIME COMMISSION

Worldwide in this period MSTS outbound cargo via 

and WCAFBO carriers occupied about66000cubic fee

revenue of about26000 The operating profit before 

allowance subsidy and income tax was about29000 

cubic foot There was an operating loss of about6300 

inbound cargo or 93 per cubic foot Allocating 48 per

incoming loss to MSTS cargo the operating loss on MSTS 

be about3000 Subtracting this amount from the outb

of29000the operating loss would be about1000

Sapphire sOperating Margin

Sapphire sprincipal interest from the beginning was t

of military household goods with a buildup of comme

and it planned a shuttle berth liner service with three ves

turnaround of 35 clays between Baltimore and Antwerp A

Sapphire felt it had in hand about 32000 pounds o

goods for its ships The outbound rate was not to be so 

support the costs of the round voyage and twoway mo

necessary with the anticipated profit to come from t

household goods movement

The three vessels originally chartered were C2s each 

cubic capacity of 54000 to 55000 feet After applying 

stowage factor for a combination of household goods a

and commerical cargo it was estimated that there wou

8000 cubic feet of usable space of a round voyage for 

about 3000 cubic feet was allocated for household goods 

to be available for MSTS general cargo on an allocation 

commercial cargo The preponderance of the household go

ment is inbound and the volume of MSTS general cargo 

nantly outbound

Since the overall costs of a round voyage exclusive of som

trative salaries were estimated at about 14000 or abo

day it was felt that a proft would be possible with a 

utilization of space Furthermore with an ocean rate low

AGAFBO rate it was anticipated that there would be a d

some cargo from New Orleans to Baltimore About 65 pe

householdgoods movement at that time from the Atlan

Gulf used New Orleans because of its location and lower rate

With a shipping contract and the receipt of cargo on an 

basis Sapphire believed that it would be entitled to 361 o

Another study based on measurement tons showed that MSTS was 

WCAFBO a discount of about 21 percent of the commercial rate before a

for broken stowage

272 FEDERAL MARITIME COMMISSION

For the 15 completed voyages just referred to the net loss 

was about 545000or about 36000 a voyage the inbound 

the greater burden

Competition for Military Household Goods

In September 1964 LibertyPao brought to the attentio

new mode of moving household goods by packing them in 

twentyandforty foot aluminum containers Household 

been moved and still are being moved in smaller plywood 

which by their nature were disposable The new container

plywood boxes could be deck stowed and were believed to b

for the shipping companies to handle At the start it wa

that three dollars per net hundredweight would be saved

At the same time LibertyPac approached certain Am

lines for a reduction in ocean freight for containers in the 

Hamburg range which was the area to be served initially 

LibertyPac mode

LibertyPac had made its proposal on the condition th

mitted to charter its own ships if necessary In order t

offer more effective it was also requested that military 

goods be removed from the allocation system when trav

a through bill of lading

The LibertyPac proposal would have given the van lin

to negotiate individually for more advantageous freight 

the ocean carriers This would have completely overturne

tional approach of negotiation with MSTS by AGAFBO 

basis

At the time of the original LibertyPam proposal to 

AGAFBO carriers began to take action to protect their 

position As a result of an AGAFBO meeting of January 

AGAFBO secretary advised a President scommittee of po

agement level action with DOD Maritime Administrat

Maritime Commission Department of Commerce and Co

committees When LibertyPao went forward with 

AGAFBO began to secure information on all phases of th

including chartering attempts agents vessel itinerarie

commercial cargoes and military cargoes

For some period of time a large number of major van l

ing as movers of household goods in US foreign com

deeply in debt to member lines of AGAFBO For insta

lines owed AGAFBO a total of5083826 40in Septemb

a total of42435041in October 1964 As AGAFBO itse
11 FMC

RATES ON US GOVERNMENT CARGOES 

they had become bankers for much of the household moving indu

The buildup of such outstanding debts resulted from a practic

extending credit contrary to the AGAFBO tariff rules then in e

Rules adopted December 20 1963 provided that outbound fre

were payalble within 15 business days from date of arrival at ves

port of discharge The rules were amended on November 16196

provide for an additional 30 calendar days to make payment for 

pers who furnished an indemnity bond of 1000 There were 

visions for shippers to be placed strictly on a cash basis in the e

of delinquencies of payment

There had been some limited AGAFBO action with respect t

ducing the indebtedness of the van lines On March 10964 there 

a meeting with the largest debtor van line concerning unpaid amo

By mid February 1965 AGAFBO had not however taken any s

measures to enforce its tariff rules as to payments nor to apply 

sanctions provided by tariff against van lines delinquent in 

payments

On February 15 1965 AGAFBO discussed at length the Lib

Pac proposal and then passed the following motion

Since LibertyPac International bas submitted a proposal to the D

ment of Defense for the carriage of all military household goods be

the Atlantic Coast and the BordeauxHamburg and United Kingdom ra

which service will be exclusively available through the Sapphire S

ship Lines Inc for which service the Pioneer Overseas Corporation 

FMC filing agent it was agreed that the new enterprise represented a I

speculative venture and since the participants were indebted to the m

lines for a considerable sum of money the Secretary should by wire 

them as the initial step in collecting delinquent accounts that unle

amounts due member lines were paid Within seven days from date o

graphic notice the Secretary should then immediately request MS

request MTMTS to take agreed action to insure collection of 

accounts or suspend the carrier stender

Following the meeting AGAFBO telegraphed the Pioneer g

that unless payment of delinquent charges was made within seven 

MSTS would be informed and would be requested to ask MTMT

take appropriate steps either fo insure prompt payment or to sus

the tenders of the lines MSTS was so notified on March 2

On March 5 1965 MSTS passed on the complaint to MTMTS 

March 10 1965 MTMTS refused to act On February 15 1965 a

same time that AGAFBO agreed to take strong action agains

Pioneer Overseas Group to collect past debts AGAFBO agreed 

On amounts delinquent subsequent to November 16 they the Pio

Overseas Group were to be notified that they would be placed 
274 FEDERAL MARITIME COMMISSION

cash basis It was further agreed that each member line 

mediately issue instructions to make certain that all its of

adhered to this cash basisrequirement

On February 18 1965 AGAFBO notified the Pione

Group that van lines which were delinquent in payment 

owed since November 16 will on February 24 be placed 

basis

On April51965 AGAFBO amended its cash requireme

manner suggested by certain unnamed van lines whereby 

paid debts owed AGAFBO for services prior to Novemb

would be taken off the cash list whether or not current d

remain unpaid

At an AGAFBO meeting of April 13 the carriers agree

action should be started against members of the Pioneer 

suits were filed

On February 24 1965 AGAFBO filed a petition with t

sion requesting an investigation of the legality of the SL

erty Pac operation The Commission did not act on the pet

On March 31 the secretary of AGAFBO was instructe

with counsel the possibility of legal action to prevent the 

reasonably low rates by LibertyPac In fact AGAFBO 

tion with the Commission asking that Sapphire stariff be 

illegal No action was taken by the Commission

On April 1 MSTS instructed its offices to book the max

tity to household goods with Sapphire On the foll

AGAFBO requested MSTS to suspend Sapphire sbookin

to the Sapphire operation as opportunist cut throat comp

charging that the use of Sapphire was contrary to the W

agreement and DOD sfinancial requirements MSTS as a 

pended Sapphire for two days but MSTS lifted the susp

concluding that Sapphire had shown sufficient proof of f

bility and otherwise had met all MSTS requirements

Thereafter AGAFBO complained of the MSTS polic

ring Sapphire because Sapphire srates had longer effecti

addition AGAFBO communicated and had meetings w

officials of DOD MSTS and MTMTS concerning the prop

tions of LibertyPac and Sapphire

On March 29 AGAFBO as a direct reaction to the ra

phire reduced its through bill household goods rate from 8

had negotiated with MSTS to 451 per cubic foot T

quoted for a 30day period and eventually expired on Ma

AGAFBO altered its PIO rate in a corresponding manne

276 FEDERAL MARITIME COMMISSION

Pac carried no empty Conex boxes from Germany 

specific provision for this transportation in its tariff 

Commission

In its letter of March 11 1965 to various van lines 

that its tariff filed that day contained a rate of 7 

for throughbill military household goods and tha

a direct saving to the van lines of approximately 1 

The purpose of this saving was to induce the van lines 

shipments from New Orleans to Baltimore since the c

two ports would be equalized and transit time via B

be shorter than via New Orleans

MSTS tendered 124 POVs to Sapphire at Philadelp

1965 for loading on one of its vessels As this vesse

special gear for handling automobiles the tender was r

of a vessel of an AGAFBO member which was availab

such equipment Sapphire thereupon agreed to pay t

loading costs about750 per vehicle and this offer w

MSTS Sapphire was then billed for the costs The 

provided at that time that where the cargo required sp

not on the vessel or the handling of cargo involved othe

equipment should be provided by MSTS who shoul

other expenses

On a voyage in May 1965 one of the Sapphire ve

truck tractors for MSTS These averaged six tons e

weighing less than two tons Sapphire did not submit t

for heavylift charges although its tariff provided tha

were applicable where the packages or pieces were in 

tons

AGAFBO srate reductions and later upward revis

made after negotiations with MSTS who did not agree t

rates should become effective when the temporary redu

Government civilian cargoes move under commerc

and not under special Government rates The AGAFBO 

berth rates on military household goods moving on th

ment bills of lading are lower than the corresponding r

in the tariffs of the commercial conferences of which 

and TPAFBO lines are members This means that ho

shipped by civilian agencies of the Government are 

higher than those paid for military household goods 

shipped on the same vessel Furthermore the commerc

do not permit negotiation by their Americanflag me

rates on cargo or property shipped by civilian ag

Government
RATES ON US GOVERNMENT CARGOES 

The AGAFBO and WCAFPO agreements require the carrier

furnish data to the Military Sea Transportation Service and 

related Shipper Services as to cargo transportation costs space a

ability sailing schedules and related matters

WCAFBO has submitted all cost data requested by MSTS 

MSTS has not been satisfied with the data submitted by AGAF

and takes the position that the data has been informative but not 

clusive as to the reasonableness of AGAFBO srates

AGAFBO carried on negotiations with MSTS in several a

served by only one USflag operator

THE ISSUES

When the Commission instituted this proceeding it specific

announced the legal questions to be resolved as follows

1 Whether the conference agreements have operated in a manner whi

unjustly discriminatory or unfair to the US Government or to any o

shipping agencies or between carriers or has operated to the detrime

the commerce of the United States or is contrary to the public inte

or is in violation of the Shipping Act and whether the agreements sh

be modified or canceled pursuant to the standards of section 15

2 Whether the conferences or member lines have carried out an agree

before it has been filed and approved by the Commission in violatio

section 15

3 Whether the member lines have charged rates on nonmilitary house

goods which rates were not properly on file with the Commission in v

tion of section 18b3

4 Whether any respondent has offered to a US Government agency a 

which was not filed with the Commission as required by section 18b

and if so whether such unfiled rate is so unreasonably low as to d

mental to the commerce of the United States in violation of se

18b5

5 Whether any respondent has charged rates which are unjustly discrim

tory with respect to goods sponsored by the US Government in viola

of sections 16 First or 17

6 Whether the rates on Government cargo filed by AGAFBO Waterma

Sapphire are so unreasonably high or low as to be detrimental to the 

merce of the United States contrary to section 18b5

7 Whether the member lines of AGAFBO have individually or together 

other lines acted to exclude any other carrier from the carriage of Go

ment cargo in violation of section 14 Second

8 Whether any respondent member of AGAFBO has violated sectio

Third by retaliating against any shipper US Governmentby refu

or threatening to refuse space accommodations when such are avail

or resort to other discriminatory or unfair methods because such shi

US Government has patronized any other carrier or has filed a 

plaint charging unfair treatment or for any other reason

11 FMC
278 FEDERAL MARITIME COMMISSION

9 Whether there exist unfiled agreements subject to sec

the transportation of Government cargo between Sapp

International Corporation or Pioneer Overseas Corp

DISCUSSION

In his initial decision the examiner concluded gen

question of rates had become moot that the record disc

agreements or rates or other violations with the except

of space to MSTS by USLines With respect to the 

ments of AGAFBO and WCAFBO the examiner rec

the agreements be permitted to remain in force until 

that it no longer has business with the groups and a

agreements will be canceled or amended to show 

application

The parties have excepted to numerous findings and 

the examiner Rather than consider the exceptions se

attempt to group them into the following general cat

ableness of rates actions taken against Sapphire unfi

unfiled rates or other violations and continued a

agreements

Reasonableness of Rates

Our findings as to the operating margin of AGAF

carriers are based upon a comprehensive study prepar

ber lines of the costs of carrying military cargo The 

admitting that the studies were not as accurate or comp

found that the AGAFBO and WCAFBO rates pass m

Shipping Act However the examiner found that w

reduced its rates to deprive Sapphire of cargo AGAs

came so low as to be detrimental to commerce con

18b5 The examiner although noting Sapphire lo

carrier entitled to a reasonable trial period to stabil

spite of these findings the examiner concluded that 

were moot

Hearing Counsel and DOD challenge the examines

of the reasonableness of rates at all they aver simp

e The examiner stated that certain acts of AGAFBO were not aut

tion 15 agreement but he made no such ultimate conclusion He also s

unlawfully discriminated in pressing claims against some van lines 

again he did not include this in his ultimate conclusions

Section 18 b 5 46 USC 817 b provides

5 The Commission shall disapprove any rate or charge filed 

by water in the foreign commerce of the United States or co

which after hearing it finds to be so unreasonably high or low 

to the commerce of the United States
jj
280 FEDERAL MARITIME COMMISSION

AGAFBO argues that the examiner is logically i

finding that AGAFBO srates were so low or unreas

to be detrimental to the commerce of the United State

section 18 b5 and yet exonerating Sapphire sidentic

says AGAFBO is illogical particularly where Sapps

these rates were enormous and their expectations of carg

optimistic

The Commission hanot found that Sapphire srates 

to section 18 15 5

Actions Taken Against Sapphire

The examiner found that when AGAFBO learned of th

proposal AGAFBO generally acted with justification to 

however when AGAFBO pressed claims against some 

lines AGAFBO violated sections 14 Third and 16 F

the examiner found that AGAFBO scommunication 

government agencies in an effort to impede Liberty 

was not authorized by its section 15 organic agreement a

fore improper

Hearing Counsel argue that the principal error and 

greatest regulatory concern in the initial decision is 

find that the joint acts of AGAFBO to eliminate Sap

authorized by the approved agreement and in violation 

Sapphire too argues that the AGAFBO agreement do

the right to attack a competitor collectively

The premise of the contentions of Hearing Counsel 

are that joint actions taken by carriers to control or re

tition must be authorized by section 15 Thus Hearing 

that the examiner failed to recognize that the many ac

AGAFBO and its members to eliminate Sapphire fro

were evidence of a larger conspiracy which was in vi

tion 15

AGAFBO excepts to the examiner sdecision to the 

finding that it acted unlawfully by pressing legal 

some of the van lines AGAFBO contends that it was jus

ing suit on long overdue claims AGAFBO argues tha

were based on valid claims and that facts do not show 

lines were singled out for any reason other than the

standing

AGAFBO also contends that it was authorized by its 

meet with officials of DOD and MTMTS In fact the

long history of such discussions Furthermore petition

ment agency should not be considered to be illegal u
RATES ON US GOVERNMENT CARGOES 2

cumstances Finally AGAFBO argues that its unilateral rate act

was not beyond the terms of the agreement because it was logical f

the AGAFBO lines to assume they had the freedom to meet comp

tion This worked to the benefit of MSTS Accordingly AGAFB

argues that its agreement should not be so narrowly interpreted p

ticularly in view of the past relationship between AGAFBO a

DOD

Although the secretary of AGAFBO pursuant to instruction a

vised the association sPresident sCommittee of the developing fa

for possible management level action with DOD Maritime Admin

tration Federal Maritime Commission Department of Comme

and congressional and Senate committees there is no proof that t

committee took any positive action There are other references in t

record of meetings between AGAFBO and DOD MSTS ando

MTMTS concerning the new proposal but it does not appear wheth

any of these were beyond the pale unless it can be said that meetin

with any Government agency other than MSTS were not within 

scope or contemplation of AGAFBO sagreement The agreem

provides

1 a They may meet from time to time and discuss cargo transpo

tion costs space availability sailing schedules and related matters 

agree as to rates terms and conditions of transportation and related s

ices for such cargo and as to matters relating thereto which are to 

used as a basis for discussion with Military Sea Transportation Serv

and said related Shipper Services for the purpose of negotiating ra

terms and conditions for the transportation and related services for s

cargo in common carriage they may also negotiate as a body or throu

committees or selected representative or representatives rates terms 

conditions which shall become binding terms and conditions which s

become binding on all parties hereto

We find that this language authorized AGAFBO to meet with v

ous DOD officials

The petitions by AGAFBO requesting the Commission 1 to 

vestigate possible unfiled rates by Sapphire LibertyPac or a rela

company and whether they were unreasonably low and 2 to 

ject Sapphire sfirst tariff because it did not conform to the stat

and was the carrying out of an unfiled agreement with LibertyP

were also justified Whereas it is true that the first petition was ba

on surmises and assumptions and the association secretary testif

that the beliefs turned out to be unfounded the whole situation at t

time was in such a state of turmoil that AGAFBO should not 

penalized for filing the petition good faith does not depend up

eventual results or hindsight In the case of the petition to reject 

tariff moreover it has been seen that Sapphire did amend the ta

11 FMC
282 FEDERAL MARITIME COMMISSION

to remove the objectionable features Therefore the fili

tions was not unlawful

The Commission has not found that AGAFBO violate

requesting MSTS to suspend Sapphire or in complaini

preferred Sapphire that AGAFBO by a series of act

to drive Sapphire from the trade in violation of sect

AGAFBO violated sections 14 Third and 16 First with 

collection of delinquent freight charges

We consider now AGAFBO sratemaking activities 

Sapphire AGAFBO reduced its rates to admittedly 

levels with the sole purpose of mitigating any advantag

These rates were used as a predatory device to destroy co

as found above were so unreasonably low as to be det

commerce of the United States contrary to section 18 b 

Section 15 allows carriers to band together for the pu

ratemaking in order to avoid the chaos which would res

open competition However a conference is not permitte

activity which is incompatible with the regulatory p

Act States Marine Lines Inc v Trans Pacific Freigh

FMC204 210 215 1962 aff dsub nom Trans Pac

of Japan v Federal Maritime Com n314 F2d 928 9

Furthermore a conference no matter what authority its 

ment may contain is not authorized to violate other pr

Shipping Act nor the general standards of section 15 

atic Black Sea and Levant Ports 2 USMC342 3

With respect to rates set by a conference the Comm

time to time stated that it may disapprove or modif

agreement where a conference rate is so unreasonably 

to be detrimental to the commerce of the United States 

Rates ExportImport 9FMC180 19293 1965 See 

Weil v Italian Line Italia 1 USB395 398 

CoastRiver Plate Brazil Rates 2 USMC28 30 19

Adriatic Black Sea and Levant Ports 2USMC342 

Outbound Rates Affecting Export HighPressure Boile

1966 the Commission Said

Thus section 15 does not limit the Commission to the for

organic conference to the exclusion of the viable implementatio

of approved agreements Consequently if circumstances warran

can act against rates on boiler parts under section 15 Such 

Respondents contend that the Commission may scrutinize ratemak

under sections 17 and 18b5 These provisions permit limited rate 

carriers both independent lines and conferences Section 15 however h

its impact is against collective action Including ratemaking 9 FMC 
RATES ON US GOVERNMENT CARGOES 2

based upon a finding that a section 15 agreement operated in a manner contr

to the public interest or upon one of the other prohibitions of section 15

Thus we will consider whether the rate reductions offended the p

visions of section 15 AGAFBO itself characterized its reduced ra

as unreasonably low The operating data submitted by AGAFBO sh

that this admission was accurate The reduced rates were simply 

attempt to deprive Sapphire of some of the cargo which Sapphire e

pected would be generated by its rates And AGAFBO by means of 

reduced rates did in fact deprive Sapphire of the nucleus cargo wh

was indispensable to Sapphire sprofitable operation Under the

circumstances we find that the AGAFBO agreement through its ra

making functions operated in a manner which was knowingly at od

with the requirements of section 18 b 5 and which was detrimen

to the commerce of the United States and contrary to the public int

est as well AGAFBO srates were detrimental to commerce becau

they were designed to and did have a disastrous effect on Sapph

AGAFBO srates were contrary to the public interest because th

were predatory in nature and in derogation of an important aspect 

the public interest the policy to foster competition to the extent co

patible with the regulatory purposes of the Act Isbrandtsen Co In

v United States 211 F2d 51 DC Cir 1954 cert denied 347 US

090 1954 We therefore conclude that the AGAFBO agreeme

operated in a manner which was in violation of section 15

AGAFBO argues that its rate reductions were authorized by Agr

ment No 8086 2 While we agree with the examiner that the rate red

tions filed ex parte were contrary to the authorization of the agreeme

to negotiate rates with MSTS we consider the crux of the issue to 

that the rates were reduced to a level which was admittedly unreas

able and which was detrimental to commerce and contrary to the pub

interest Therefore while the agreement does not contemplate ex pa

reductions it certainly does not sanction rate reductions which we

admittedly and knowingly contrary to section 18 b 5 and whi

violated the standards of section 15 as well

Other Violations

The examiner found no violations with regard to Sapphire sdi

culty in obtaining and retaining overseas agents We agree The reco

shows only that the heat of the competitive struggle between AGAFB

8 Cf Investigation of Rates in the Hong Kong United States Atlantic and Gulf Tra

FMC Docket 1083 11 FMC168

a See also Pacific Coaet European Conference 7 FMC27 37 1961 Mediterrane

Poole Investigation 9 FMC264 28990 1966 California Stevedore h Ballast do 

Stockton Port District 7FMC75 1962

11 FMC
284 FEDERAL MARITIME COMMISSION

and Sapphire was reflected in the acts of individual car

agents

The examiner stated that USLines in unbooking M

ated cargo because of its dissatisfaction with MSTS s

tributing the carriage of general cargo violated sectio

the Act AGAFBO argues thatUSLines did not retalia

the sailing because of insufficient bookings However re

telegram in which USLines canceled the booking conv

wise It was clearly an unlawful retaliation against 

patronizing a competitor We sustain the examiner It 

that USLines was not in accord with the MSTS pol

cargo

Moore McCormack is in a different position Its pa

had limited commercial bookings a maritime strike 

and MSTS did not provide general cargo in addition 

erated cargo hence cancellation of the sailing was neces

way the sailing could have been made was to secure su

cargo which would have made the sailing not subject 

The fact that the carrier chose that time to remonstrat

on the latter s policy for the use of competitive vesse

cargo is beside the point it was not the retaliation 

section 14 Third

Sapphire contends that the calling of the Waterman 

Nazaire in an attempt to take household goods away f

when they already had been booked by MSTS was 

section 14 Second of the Act 46 USC 812 which m

ful for a carrier to use a fighting ship for the purpose 

preventing or reducing competition by driving another 

a trade Waterman customarily served the various por

deauxHamburg range even though all ports were not s

voyage The act of putting the particular ship into S

load at rates below those of Sapphire was nothing m

ofthemill competition for a parcel of cargo There is 

the Waterman action was for the purpose of driving a

out of a trade

The examiner found no unified section 15 agreement 

phire and LibertyPac or other van lines AGAFBO 

agree with the examiner that something more than a m

is needed to find such an agreement

Sapphire srates were available to all shippers alik

LibertyPac Mr Safir testified that there were no agree

10 See Grace Line Inc v Skips d8 Viking Line et at 7 FMC432 
RATES ON US GOVERNMENT CARGOES 2

Sapphire and the van lines just expressions of support yes Nothi

else His affidavit in reply to AGAFBO spetition for rejection 

Sapphire sfirst tariff referred to above is to the same effect 

indicative of the absence of agreements and as already seen six 

Pioneer saccounts left and other van lines which had promised s

port to the new operation did not give it

Since the record shows only an association between Sapphire a

its customers we will not overrule the examiner There is simply 

enough evidence of an agreement contemplated by section 15

AGAFBO charges that the offer of LibertyPac to DOD to ca

empty Conex boxes without charge was in violation of sections 

First and 17 The examiner stating that our decision in Carriage 

Military Cargo Docket No 6642 10 FMC 69 aff d sub no

American Export Isbrandtsen Lines v Federal Mar Com n380 F2

609 DC Cir 1967 made those sections inapplicable to the tra

portation of military cargo refused to find such a violation T

examiner sreading of the case is in error we found only that carrie

could grant the government reduced rates not available to priva

shippers without violating the Shipping Act This does not rend

the Shipping Act inapplicable to government cargo Nevertheless 

agree with the examiner sconclusion The offer was part of ea

negotiations between Sapphire and DOD The final conditions of t

offer were never formulated and we view the matter as tentative a

incomplete

The examiner ruled that AGAFBO sallegation that Sapphire v

lated section 16 First by the absorption of railroad charges was beyo

the order of investigation While we believe the matter to be an iss

the record will not support a finding that Sapphire diverted car

unlawfully from one port to another The cargo attracted by Sapph

came by virtue of its low rates not by any absorption

AGAFBO has also alleged that Sapphire violated the Act by faili

to abide by its tariff with respect to POV loading costs and heavy l

charges The examiner found that section 18b3 which prohib

a carrier from deviating from its tariff was not an issue as to S

phire However the record discloses that in these instances Sapph

did not follow the terms of its tariff Accordingly we find that S

phire violated section 18 b 1 by failure to file appropriate pro

sions in its tariff

11 Neither was the proposal violative of section 18b1 since It was not necessary 

file such a tentative proposal

view of this finding we do not here consider whether this conduct also was contr

to the provisions of section 18b3

11 FMC
286 FEDERAL MARITIME COMMISSION

Hearing Counsel contend that AGFABO was not 

the conference agreement to negotiate on behalf of a s

A literal reading of the agreement shows to the contrary

With respect to the submission of data by the conferen

we find that the carriers complied with the established 

mitting cost information and complied with their agre

respect

The Continued Approval of the Agreements

The examiner found that the predominant function 

and WCAFBO terminated upon the commencement of t

bidding system of DOD Rather than ruling that th

should be canceled outright the examiner allowed the 

remain in effect pending the conclusion of outstandin

tween the carrier groups and the government at which t

ments would be canceled unless modified to reflect their 

Hearing Counsel assert that the agreements shoul

immediately because of proof that the government has n

for them Hearing Counsel would allow no amendment 

that since it no longer desires to deal with the carrie

groups should be found to be detrimental to commerce 

to the public interest and therefore disapproved A

WCAFBO argue that these agreements may be cance

a finding that they are contrary to section 15 The cha

of DOD alone does not authorize disapproval Likewis

ences argue that DOD may well have a future need f

groups

It is the policy of the Commission to withdraw the 

conference agreements where the agreement has become 

policy depends upon the wording of section 15 itsel

and continued approval of an agreement are dependent 

mination that the agreement is not contrary to section 

8765Order to Show Cause 9 FMC333 1966 T

requisite for approval of an agreement is the actual ex

mediate probability of transportation circumstances in 

ered by the agreement which warrant approval 9FMC

Where there is no need for or justification for a section 

the Commission feels that such an agreement remaining 

to await some future event which was not contemplated 

nal approval of the agreement tends to handicap the 

13 In Cuban Agreements Docket No 6614 10 FMC 92 the Co

dormant agreements to remain approved because their dormancy was the 

mental embargo
2

responsibility to see that section 15 agreements operate in a mann

consistent with the law The Commission feels that it is far bet

to cancel inoperative agreements than to await a future need for 

agreement so that that need may be measured against the requiremen

of section 15 We will follow that policy here

The agreements under investigation have as their very core t

negotiation of rates with MSTS This fundamental activity cann

be implemented at present Therefore we direct that the agreemen

must be modified to delete authorization to negotiate rates with MST

The remainder of the activities contemplated by the agreements ha

not been completely made obsolete by the competitive bidding syste

Therefore we will allow the continued approval of these activiti

In order to bring the agreements in line with the present functions 

the carrier groups we will order that the groups submit within 1

days appropriate modifications which delete the dormant activiti

and show the present applicability of the agreements

The TPAFBO agreement may remain in full force and effect 

previously approved

RATES ON US GOVERNMENT CARGOES

ULTIMATE CONCLUSIONS

1 The rates of AGAFBO prior to the entry of Sapphire into t

trade and the rates of WCAFBO were not contrary to section 

b5

2 AGAFBO srates which were reduced to an admittedly no

compensatory and unreasonable level in an attempt unfairly to co

pete with Sapphire were so unreasonably low as to be detrimental 

the commerce of the United States contrary to the provisions of s

tionl8 b5

3 AGAFBO by reducing its rates to an admittedly noncomp

satory and unreasonable level in an attempt unfairly to compete w

Sapphire violated section 15 by knowingly setting rates which we

contrary to section 18 b 5 and which were detrimental to comme

and contrary to the public interest

4 AGAFBO did not otherwise violate the Shipping Act

5 US Lines by canceling a booking because MSTS patroniz

Sapphire retaliated against MSTS in violation of section 14 Thi

Moore McCormack however simply remonstrated with MSTS abo

its policy and did not violate section 14 Third

6 Waterman did not use a fighting ship in violation of sect

14 Second

7 Sapphire LibertyPac or other van lines did not enter into 

carry out an unfiled agreement subject to section 15

11 FMC

355 301 0 00 20
288 FEDERAL MARITIME COMMISSION

8 Sapphire did not violate sections 16 First or 17 

carry empty Conex without charge since the offer wa

negotiations and never consummated

9 Sapphire did not violate section 16 First by direc

one port to another

10 Sapphire violated section 18 b 1 by failing to 

tariff provisions regarding POV loading costs and hea

11 The agreements of AGAFBO and WCAFBO m

to delete authorization concerning dormant functions 

ity to negotiate rates with MSTS and these carrier grou

appropriate modifications within 120 days hereof to 

activities and to show the present application of the 

12 The TPAFBO agreement may remain approve

Chairman Harllee and Commission Barrett Separate 

We wish to state for the record the following view

differ from those set forth above

The Commission has absolved AGAFBO in the Ps

mittee episode condoned the filing of petitions with t

refused to condemn the right of AGAFBO to talk to DO

denounced AGAFBO sreduced rates We agree

However we are convinced that AGAFBO violate

conspiring to destroy the competition of Sapphire In o

fellow Commissioners in ignoring the motives behind 

intrigue have failed to recognize that cumulatively all t

with a gloss of legitimacy were the effectuation of one 

crush Sapphire

At the time of the original LibertyPac proposal 

carriers began an exhaustive campaign to preserve t

position The first manifestation of this conspiracy was 

the AGAFBO secretary to a President sCommittee 

LibertyPac proposal for possible action with Govern

Thereafter AGAFBO began to secure information o

the new mode including chartering attempts agents ve

shippers and potential cargoes

Following a series of half hearted attempts to colle

charges from all van lines AGAFBO commenced a serie

acts against the Pioneer group These van lines were s

informed that unless they paid up in full AGAFBO 

MSTS to ask MTMTS to insure prompt payment or 

tender of the van lines for lack of financial responsib

followed through on this threat Subsequently AGAF

those van lines that had left Pioneer under this pressure 
RATES ON US GOVERNMENT CARGOES 28

credit standing Finally the AGAFBO members brought suit again

the remaining members of the Pioneer group although other van lin

still owed the AGAFBO carriers for back freight oharges

Also in furtherance of the concerted campaign to defeat the ne

competition AGAFBO filed several petitions with the Commissio

designed to handicap the Sapphire operation

As Sapphire began to make progress in its new venture AGAFB

sought to have MSTS suspend Sapphire from carrying Governme

cargo AGAFBO requested MSTS to suspend Sapphire sbookings 

throughbill household goods because of its cutthroat competitio

and insufficient financial stability plus the charge that the use 

Sapphire by MSTS was contrary to the WilsonWeeks agreeme

AGAFBO also complained to MSTS that the latter was preferrin

carriers which filed rates which had longer effective dates The reco

also reflects AGAFBO communications and meetings with vario

officials of DOD and MTMTSin addition to MSTSin an effo

to block and impede the proposed operations of LibertyPacSapphir

Finally AGAFBO used its ultimate weapon cutting rates to ro

bottom

The various AGAFBO activities lead to but one conclusion th

the carriers agreed to take whatever steps were necessary to driv

Sapphire from the trade The cumulative effect of all of these ac

was decidedly one to destroy competition that is to end the threat 

Sapphire and preserve the monopoly of AGAFBO This concerte

undertaking amounted to a new scheme or rate combination and d

crimination not embodied in the AGAFBO agreement Thus the

was no section 15 authorization for such conduct

It would appear that our fellow Commissioners were impresse

by the fact that for the most part AGAFBO utilized legal means t

combat Sapphire However the legality of the means is immateria

Under the antitrust laws the courts have frequently followed a gener

rule enunciated in American Tobacco v United States 328 US 78

1946 that

It is not the form of the combination or the particular means used but th

result to be achieved that the statute condemns It is not of importanc

whether the means used to accomplish the unlawful objective are in the

selves lawful or unlawful Acts done to give effect to the conspiracy ma

be in themselves wholly innocent acts yet if they are part of the sum of th

14 We drew a similar Inference in Oranie Line v Anchor Line Ltd 6 FMB199 20

1961

16 N dtlantie Mediterranean Frt Conf and United Arab Co 9 FM0431 434 1966

Isbrandtsen Co Inc v United States supra Empire State Highway Tramp Again 

FMC291 F 2d 336 DCCir 1961 Staijt Co v Gulf and South Ati Havana Con

6 FMB215 1961 aff d sub nom Swift Company v Federal Maritime Commissio

306 F 2d 277 DCCir 1962

11 FMC
290 FEDERAL MARITIME COMMISSION

acts which are relied upon to effectuate the conspiracy w

forbids they come within its prohibitions 328 US at 809

We fail to see why the rule should not apply here

With regard to pressure that AGAFBO brought t

the van line customers of Pioneer for nonpayment of 

we would find that AGAFBO retaliated against unfa

in violation of Lection 14 Third We also would hold th

of the claims and the instituting of legal proceedings 

victims to undue and unreasonable prejudice and disad

lation of section 16 First

rates

Finally

were

we

not

believe

contrary

the

to

examiner

section 18

correctly

b 5

decided

The reco

t

method by which Sapphire established its rates We w

Sapphire did not develop these rates capriciously but p

tariff after a careful analysis of the anticipated cost of 

consideration of the cargo that might reasonably be 

booked on Sapphire sships Thus Sapphire srates w

might have proved to be compensatory turned out to be 

the cost of operation principally because AGAFBO 

the nucleus cargo which was indispensable to Sapps

operation

SEAL Signed THOMA

Eastern R Conference v Noerr Motors 885 US 127 1981 wh

right freely to engage in political activity and Mine Workers v Pennin

1987 which preserves the right to petition the government to take v

action are exceptions to the role of American Tobacco Neither Noe

sanction a pervasive scheme by a group wielding its power in every d

a single competitor

j
j
294 FEDERAL MARITIME COMMISSION

Respondents on the other hand deny having en

arrangement with Martrans which could be characte

violative of either section 14b or section 15 of the act 

that what they have done is merely to establish a differe

shipments destined to the United Arab Republic Ac

Conference there are but two levels of rates applicable t

Republic cargoes under their tariff the ordinary or n

which is calculated in accordance with the provisions o

No 9 FMC 2and the contract rate which is 15 per

ordinary rate

Whatever might have been respondents intentions w

the revised tariff filing the fact of the matter is that 

special rates outlined in freight tariff No 9 FMC 2

terms are made applicable only to shipments made thro

Freight tariff No 9 makes it abundantly clear that the 

from the current cominodity rates are to be grante

ments to Alexandria and Port Said United Arab Re

United Arab Co for Maritime Transport and Agenci

Accordingly respondents statement that the revise

establishes a new rate base on cargoes destined to th

Republic is inaccurate The United Arab Republic ra

unchanged What does change however are the tariff 

Martrans becomes entitled by virtue of it being a contr

hearing counsel have pointed out Martrans is now in 

position of being the only Conference shipper receiving 

up to 15 percent below the rate paid by other signatorie

tedly exact same dual rate contract Therefore as we 

earlier it matters not whether we adopt respondents o

sel interpretation as to what rate is applicable to wha

sult is the same whether the contract rate forms the ba

reductions or vice versa In either case we are left with 

which violates the statutory standards of section 14b 

In the first place section 14b absolutely precludes a

contract which is not available to all shippers 

on equal terms and conditions This being true it fo

a dualrate contract ceases to be available on equal te

tions that contract becomes unlawful per se One o

that attaches to a dualrate contract is that all signato

tract are to be afforded the same reduction from th

Hearing counsel offer the following as illustrative of the mec

schedule

Assuming arguendo that there is an ordinary rate in the Conferenc

modity of 35 and that the usual contract reduction of 15 percent i

would become 2975 but for Martrans the applicable rate would be 

percent below the ordinary rate
j
j
FEDERAL MARITIME COMMISSION

No 6741

SPECIAL RATES TO ALEXANDRIA AND PORT SAID

NORTH ATLANTIC MEDITERRANEAN FREIGIHT CONFEREN

ORDER

This proceeding having been initiated by the Federal M

Commission and the Commission having fully considered th

and having this date made and entered of record a report co

its findings and conclusions thereon which report is hereby 

to and made a part hereof

It is ordered That respondents be and they are hereby not

required to cease and desist from engaging in the violation o

14b of the Shipping Act 1916 as herein found

By the Commission

Signed THOMAS LIS

Sec

UNITED STATES OF AMERICA V ISBRANDTS E LINES INC 

Tariff No 1 and Rule 18 of the Atlantic and Gulf American F

Berth Operators Freight Tariff No 1

USAfiled claims with ExIs for each of the overcharges agre

ing the 7552 49sought as reparation after such overcharges w

revealed by General Accounting office postaudits not completed u

more than six months afterthe dates of the shipments

DISCUSSION AND CONCLUSIONS

The complaint was brought under section 22 of the Act within 

time allowed by the section two years after the cause of action 

crued and the Commission the violation of the Act being admit

is specifically authorized to direct the payment of full reparation 

complainant for the injury caused by the violation

Respondent sonly argument to the contrary is the existence of a 

which provides that

Claims for adjustment of freight charges must be presented in wr

within six 6 months after date of shipment

Unless the rule be construed to bar recovery here it is not relev

and if it is so construed it is invalid for it would deny to the reg

tory body the Commission power expressly conferred upon it by 

applicable statute section 22 of the Act

The Commission and the predecessor Federal Maritime Board 

rule making proceedings it is true but nevertheless clearly and pow

fully has analyzed the type of case cited by respondents and con

sively refuted respondent sargument in this case

CarrierImposed Time Limits on Presentation of Claims 

Freight Adjustments 4 FMB29 334 1952 really says all t

need be said here as follows

Section 22 provides for Board investigations of alleged violations of 

Act either on sworn complaint or on the Board sown motion and prov

for the issuing of orders to abate violations of the Act and also for the 

ment of reparation for injury caused by any such violations if a comp

is filed within two years after the cause of action accrued

Petitioners draw the analogy between shippers claims for freight ad

ment and shippers claims for cargo damage The time for filing cargo d

age claims against ocean carriers was not regulated by Federal statute u

1936 Before that date carriers frequently inserted clauses in their bill

lading requiring a the filing of written notice of damage with the ca

within a fixed time limit and b the institution of suit within a fixed t

limit Unless the time limits were unreasonably short the validity of s

clauses was generally upheld prior to 1936 and the shipper was requ

to comply with both requirements in order to make a recovery The Tu

Crown 284 Fed 434 at 443 1922

11 FMC
jj
j



FEDERAL MARITIME COMMISSION

No 6751

UNITED STATES OF AMERICA

V

AMERICAN EXPORT ISSRANDTSEN LINES INC

Initial Decision Adopted Febrztary 1 1968

A conference rule providing that claims for adjustment of freight charge

be presented within 6 months after shipment date cannot bar recovery 

overcharge as reparation where the complaint is filed under section 

the Shipping Act 1916 more than 6 months but less than 2 years af

shipment date Reparation awarded in the amount of 28018 79

Terrence R Murphy for the United States of America compla

Richard W Kurrus and James N Jacobi for American E

Isbrandtsen Lines Inc respondent

INITIAL DECISION OI PAUL D PAGE JR PRESIDING EXAMIN

The parties have stipulated with the examiner sapproval th

issues herein are identical with those in Docket No 6730 11 

298 and have agreed that if American Export Isbrandtsen 

ExIs should be ordered to pay reparation to the United 

USAtherein as it was then ExIs shall in this case pay SA

as reparation the sum of 28018 79

Premises considered the initial decision in docket No 67

incorporated herein by reference and ExIs is hereby directed 

USAas reparation within 30 days after the Commission s

decision herein the sum of28018 79and if payment is not made 

more than 30 days after said decision to add to the principal 

interest at 6 percent per annum for time elapsing between 30 

after the decision date and the date of payment

Signed PAUL D PAGE J

Presiding Exam

1 This decision became the decision of the Commission on February 1 1968

11 FMC 3
NOTICE OF EFFECTIVE DATE OF DEC

February 8 1968

No exceptions having been filed to the init

Examiner in this proceeding and the Commission 

not to review same notice is hereby given in ac

13 g of the Commission sRules of Practice and 

decision became the decision of the Commission o

It is ordered That Gulf South American S

make payment to the United States of America 

manner set forth in the decision of the Examiner

By the Commission

306

FEDERAL MARITIME COMM

DOCKET No 6737

UNITED STATES OF AMERICA

v

GULF SOUTH AMERICAN STEAMSHIP 

Signed 
FEDERAL MARITIME COMMISSION

No 6737

UNITED STATES OF AMERICA

D

GULP SOUTH AMERICAN STEAMSHIP Go INC

Initial Decision Adopted February 8 1968

A tariff item captioned automobile parts and containing the statement t

this caption includes those items which are integral parts of au

mobiles necessary for their operation covers automobile engin

The fact that the tariff item includes certain examples of cargo a

automobile engines are not among such examples does not exclude au

mobile engines from the scope of the tariff Reparation awarded

Terrence R Murphy and Bertram E Snyder for the United Sta

of America complainant

Michael Joseph for Gulf South American Steamship Co In

respondent

INITIAL DECISION OF PAUL D PAG EJR PRESIDIN

EXAMINER

Complainant the United States of America USAseeks und

section 22 of the Shipping Act 1916 the Act to recover from respo

ent Gulf South American Steamship Co Inc G SA 

reparation the sum of1344 09In its answer G SAhas admitt

an overcharge of 683 02leaving in dispute an alleged overcharge 

661 07 Under rule 10v of the Commission sRules of Practice a

Procedure the facts have been stipulated as follows

1 Complainant scomplaint against Respondent dated June 6 19

alleges several instances of overcharges by Respondent in a to

amount of1344 09 Respondent sanswer admits that it inadverten

overcharged Complainant in the amount of 633 02 and that Co

plainant is entitled to recover that amount leaving in dispute betwe

khe parties an alleged overcharge in the amount of 661 07

2 The disputed overcharge of 661 07 relates to Complainas

hipinent under Government Bill of LadingCand ocean B

f Lading SP33 of cargo described therein by Complainant as 

This decision became the decision of the Commission on February 8 1968

11 FMC 807
308

Boxes engines internal combustion automobile occ

feet and one box engine diesel auto occupying 68 c

3 Atlantic GulfWest Coast of South Ame

Freight Tariff No SA11 governed the freight charg

the shipment of the 19 boxes in question The follow

provisions of that tariff which were in effect at t

shipment

Item 2 Application of Rates

c Rates published herein apply per ton of 40 cu

pounds as indicated whichever basis yields the greate

as otherwise specified

d Commodity rates take precedence over class rate

e The charge for a package containing different 

at the rate class or commodity applicable to the high

in the package This rule does not apply to ingredien

mixture

No

FEDERAL MARITIME COMMISSION

Commodity P

Item 105 Automobiles viz

Freight and Passenger SU or Dnot identified else

where in this item viz

Passenger Cars

Buses Trackless Trolleys

Motor Truck Tractors Bo

Motor TrucksFreight Trailers empty W

Also Chassis Cabs Bodies for above

Also Automobile and truck Parts when shipped by Un

Automobile andor Truck Manufacturers for assembly W

into complete units when so declared on the bill of

lading

Freight and Passenger Automobiles andor Trailers specially

equipped viz as further described in Original Page No le

Automobile Parts Not Spark Plugs see Item 1000 WM 

This caption includes and is limited to those items which

are integral parts of automobiles and trucks necessary tor their

operation Examples are parts for bodies chassis engines and

power trains engine cooling electrical and ignition systems

not including spark plugs brake and steering systems and

axles and wheels Excluded from this caption are Automobile

Motor Truck Aeracsorles viz

Air Conditioners Tire Chains

Heaters Tools

Radios Television Sets Tire Repair Materials

andor Antennas for same Windshield Defrosters and

Hub Caps Fans

Floor Mats Windshield Wipers Motors

Luggage Racks Arms and or Blades

Horns CigarCigarette Lighters

Mirrors exterior SeatCovers andor Cushions

This caption does not include storage batteries containing

liquid or when shipped with liquid in the same container

nor articles taking aD rating in this tariff or other items not

within the definition of Automobile Parts as set forth herein

All parts shipped under this caption must be prefixed by

the word Automobile
USA V GULF S AMERICAN STEAMSHIP Co 3

Item 1000 Classification and Commodity Index

Article C

s

Engines Caloric Gas Internal Combustion Oil or Steam 

4 Under Item 2bof the tariff the port of destination of the s

ment in question was a Group 1 port Under Item 999 the Cla

4 rate for Group 1 ports was specified at 62 The symbol WM

is defined by the tariff as meaning weight or measurement wh

ever basis yields the greater revenue With respect to the 19 bo

in question measurement would have yielded the greater reven

5 Respondent applied the Class 4 rate for Engines Calo

Gas Internal Combustion Oil or Steam as set forth in Item 1000 

the 19 boxes in question Complainant believes that Respondent sho

have applied the rate for automobile parts including engines as 

forth in Item 105

The primary question here is if automobile engines are automob

parts within the meaning of Tariff Item 105 If so USA was 

titled to the 31 rate therein provided and has been overcharg

661 07 by G SAs application of the 62 rate provided 

Engines Caloric Gas Internal Combustion Oil or Steam in It

1000

G SAsargument is as it must be that Item 105 does not prov

a rate for automobile engines Whatever argument might be made 

G SAif Item 105 simply provided a rate for automobile pa

and stopped the decision here must turn upon the definition of au

mobile parts which follows and reads

This caption automobile parts includes those items which 

integral parts of automobiles necessary for their operation

It simply cannot be validly asserted that automobile engines are 

integral parts of automobiles necessary for their operation and 

they are they are entitled to the Item 105 3100rate

G SAnecessarily overlooks the conclusive language just quot

and relies upon arguing that only engine parts and not whole engin

are included as examples of automobile parts Assuming that t

is true which is by no means clear for the language relied upon leav

something to be desired grammatically it does not follow that becau

engines are not listed among the examples of automobile parts th

are not automobile parts for the listing clearly does not purp

to be exhaustive

At most as USAcorrectly contends the contruction applied 

0 SAto the example language would make this tariff item a

11 FMC
biguous and as such it would be construed again

G SAwith well grounded suspicion of strength 

argument argues further that recovery should be den

tariff requires that parts must be prefixed by t

mobile emphasis by G SA whereas USA

cluded the words automobile or auto in its desc

ments but as a suffix rather than a prefix The 

of its own weight for the shipper sdescription accur

the cargo for the carrier sbenefit which is all that ca

required

Premises considered it is held that USAis enti

from G SA as reparation in addition to the 

683 02 the sum of 661 07 a total of1344 09 G 

directed to payUSAsaid sum of1344 09 within th

the Commission sfinal decision herein If payment is n

said thirtyday period interest at 6 per annum for th

between the end of that period and the date of payment 

to the principal amount

Signed PAUL D PA

Presidin

Bratti v Prudential et al 8 FMC 375 379 1965 and cases there


UNITED STATES OF AMERICA V ISBRANDTSEN LINES INC 3

parties no answer to the complaint was filed and an answer is 

required

AEIL hereby is directed to pay the United States of America with

thirty days after the Commission sfinal decision herein the sum 

11819 20and if payment is not made until more than thirty da

after said decision to add to the principal sum interest at 6 

annum for time elapsing between thirty days after the decision d

and the date of payment

11 FMC

Signed CHARLES E M0ROAN

Presiding Examine
FEDERAL MARITIME COMMISS

DOCKET No 6752

ALASKA STEAMSHIP COCANCELLATION OF FMC P

RATESWEST COASTALASKA TRADE

Decided February 8 1968

Service of Alaska Steamship Co between Seattle Wash 

in the State of Alaska found subject to jurisdiction of 

Commission

Truck movement performed by wholly owned affiliate of Alas

within Seattle commercial zone is local pickupand delivery 

which may property be included in porttoport rates filed 

The utilization of vessels of the Alaska Ferry System to eff

between Seattle and certain Alaskan ports involves only 

carrier for another for part of service and does not depriv

tion over entire movement Alaska Ferry System is car

Alaska Steamship Co sarrangement utilizing it for continu

originating point on line of Alaska Steamship Co to des

Alaska Ferry System is through route with another carrie

the meaning of section 18aShipping Act 1916 and sec

Shipping Act 1933 and rates for such movement must 

Commission Limited participation of Alaska Steamship C

and other ICCcertificated motor carriers in this moveme

tainers on and off vessels of Alaska Ferry System is 

through porttoport movement and not of type envisag

S7595 as granting to ICC jurisdiction over entire movemen

Stanley B Long and Arthur G Grunke for res

Steamship Co

H H Shull Jr and Warren Price Jr for interv

Service Inc

Donald J Brunner Norman D Kline and E Dunca

Hearing Counsel

REPORT

Br THE COMMISSION John Harllee Chairman George 

Chairman Ashton C Barrett James V Day Jam

Commissioners

The Commission instituted this proceeding on Octo

resolve the question of the Federal Maritime Comms

314 
ALASKA STEAMSHIP COANCELLATION OF RATES 

jurisdiction over the service provided by the Alaska Steamship 

Alaska Steam between Seattle Wash and the Alaskan ports 

Ketchikan Juneau Haines Wrangell Petersburg Sitka and Val

Alaska Steam filed tariff pages containing cancellation notices wh

would with minor exceptions have removed FMC jurisdiction over 

carrier sservice between these ports effective October 27 1967 w

respect to Valdez and November 1 1967 with respect to the o

ports Alaska Steam has filed rates covering movements to and f

each of these Alaskan ports with the Interstate Commerce Commis

ICC to be effective upon cancellation of its rates with us A sim

action by Alaska Steam canceling the carrier srates between Sea

Wash and Seward Alaska effective December 11 1967 was pla

under investigation in this proceeding by a subsequent order se

November 15 1967

Because the cancellation of the tariffs on file with FMC for 

above discussed movements might result in porttoport transporta

by Alaska Steam without rates on file with FMC in apparent viola

of section 18aof the Shipping Act 1916 the Act and section 

the Intercoastal Shipping Act 1933 the 1933 Act we suspended 

cancellations involved for the 4month period provided for by sec

3 of the 1933 Act

Since no factual issues were involved the investigation has b

conducted by means of affidavits and legal memorandums submitted 

Alaska Steam and Hearing Counsel We heard oral argument 

November 29 1967

The Service ofAlaska Steam

Prior to the filing of the tariff cancellations which are the subjec

this proceeding Alaska Steam maintained three facilities for ca

tendered for delivery between Seattle and the Alaskan ports un

consideration in this proceeding The carrier stariffs indicated 

any cargo could be tendered at any of the three facilities Howe

Alaska Steam generally received lessthan containerload shipment

the AAA Transfer Inc AAA Transfer terminal at 558 Occide

Avenue South Seattle Wash In fact in March 1966 Alaska Ste

announced that the AAA Transfer vanning station was designed 

I Sec 3 of the 1933 Act provides In pertinent part that FMC may Investigate the la

ness of any new individual or joint regulation or practice affecting any rate far

charge and may suspend the operation of such rate fare charge classification re

tion or practice but not for a longer period than four months beyond the time wh

could otherwise go into effect

8 Sea Land Service Inc intervened but did not otherwise participate In this procee

Alaska Steam availed Itself of the opportunity provided by FMC to file additional affid

with respect to its Seward operation

11 FMC
316 FEDERAL MARITIME COMMISSION

concentrate reception for all cargo suitable for vanning for a

ports served all year and that the facility would provid

reception and skillful modern handling methods Service r

this address included receiving checking assembling load

tainers and delivery to dock at no extra charge to the ship

words of the carrier AAA Transfer is x

ac

same capacity as are the container freight stations refe

Matson Navigation Company sTariff 14A their FMCF 

Cargoes loaded into containers at the vanning station were 

ported to Alaska Steam sfacilities at pier 46 for transpo

Alaska Steam to Alaskan ports

Containerload shipments on the other hand in prac

to have been received at Alaska Steam sfacilities at pier 46 

not suitable for vanning and certain other shipments we

at Alaska Steam sfacility at pier 42 Seattle Wash Ala

gave notice that operations at pier 42 would cease as of 

calendar year 1967

The service offered by Alaska Steam under its newly 

tariffs is identical to this prior service with the following 

Tender of less thancontainerload shipments may be mad

west Spokane Street and Colorado Avenue Seattle Wash 

at the Occidental Avenue facility and Alaska Steam p

pickup and delivery spotting of fully loaded containers a

within the commercial zone of Seattle Wash

In both the previous and present tariffs shippers may 

allowance amounting to 26 cents per 100 pounds if the

deliver the containers themselves to Alaska Steam spie

None of the subject rates of Alaska Steam appear to in

up or delivery service at shippers premises in Alaska S

Seattle is performed for Alaska Steam by AAA Transfe

control of which was acquired by Alaska Steam on Ju

pursuant to ICC authorization of May 24 1967 AAA Tr

duly certificated motor carrier under part II of the 

Commerce Act

The only operational changes in Alaska involved he

Alaska Steam s decision to serve certainports in Alask

by means of vessels of the Alaska Ferry System Alas

rather than solely by Alaska Steam sown vessels Wrange

in southeastern Alaska will be served by Alaska Steam d

ing certain weeks while on alternating weeks Alaska Ss

3 There is no provision in the tariff for delivery of such shipments to shi

except

terminal

on some individual items and shippers must obtain their goods a
ALASKA STEAMSHIP COCANCELLATION OF RATES 3

tainerized cargo will be transferred in the manner described bel

to the Alaska Ferry svessels at Ietchikan or Juneau for the remaind

of the movement Petersburg also in southeastern Alaska will 

served by Alaska Steam only by employing Alaska Ferry svess

for the transportation beyond the transfer point Prior to the ope

tional changes Petersburg had been served directly by Alaska Steas

vessels The port of Valdez similarly will be served only by means 

Alaska Ferry svessels which will be loaded at the port of Cordo

Previously Alaska Steam operated in reverse order calling direc

at Valdez and transferring containers onto Alaska Ferry for carria

to Cordova

For transferring cargo in containers from its own vessels to th

of Alaska Ferry a motor tractor must be utilized Containers wh

have been transported aboard an Alaska Steam vessel are placed 

a chassis at point of interchange A tractor then drays the contain

loaded chassis aboard an Alaska Ferry vessel after which the trac

is disconnected and driven off When the Alaska Ferry svessel c

at the destination port a tractor is again connected and the contai

and chassis are driven off the vessel

Since ICC requires that any motor carrier transporting cargo m

ing in interstate commerce must obtain operating rights under p

II of the Interstate Commerce Act such rights are a necessary p

requisite to the use of a motor tractor for driving containerload

chassis on and off vessels of Alaska Ferry In southeastern Alas

Alaska Steam itself has obtained motor carrier operating righ

Alaska Steam does not however publish a local motor carrier ta

in Alaska nor any motor tariff independent of its through service 

and from Seattle In the CordovaValdez trade Weaver Bros an in

pendent motor carrier which has obtained extensive operating rig

throughout Alaska and publishes local motor carrier tariffs perfor

the driveon driveoff service Hoover sMovers will also participate 

the driveon driveoff service at Cordova

There are no roads connecting any of the ports involved in t

proceeding The entire forward movement between Seattle and po

in Alaska is by water including the employment of the Alaska Fe

System

Issue for Resolution

The orders of investigation in this proceeding frame the followi

issue for resolution Whether or not the Commission is deprived 

4 Under sec 204 a4a of the Interstate Commerce Act 49 USC304 a4a ICC 

upon certain findings exempt motor carriers whose physical operations are solely with

single State

11 FMC
318 FEDERAL MARITIME COMMISSION

jurisdiction over the rates applicable to the movements betwe

and the Alaskan ports involved herein by reason of 1 

movement within the commercial zone of Seattle or 2 the 

tion of one vessel for another to effect transportation be

involved ports with or without the participation of anoth

Positions of the Parties

Alaska Steam

Alaska Steam s main argument is that the rates whi

attempted to cancel here and refile with ICC cover a thro

and are joint rates properly filed with ICC under section 

II of the Interstate Commerce Act 49 USC316 cas am

Public Law 87595

In support of this position the carrier maintains that t

provided under its new rate filings is substantially differen

service previously offered because of the pickupand delive

provided for full containers within the Seattle commercial 

service it maintains could not lawfully have been performe

certification by ICC Alaska Steam is not certificated t

such movement AAA Transfer is so certificated

Alaska Steam argues that the legislative history of P

87595 indicates that the rates covering the type of servic

volved are to be filed with ICC The Alaska Statehood A

Steam argues merely preserved FMC jurisdiction over tran

between the lower 48 States and Alaska until Congress h

reconsider the matter In enacting Public Law 87595 Co

reconsider the matter and in reconsidering placed withi

jurisdiction over movements participated in in any way 

certificated carriers

Alaska Steam also specifically challenges FMC sjurisd

goods transported in part by way of Alaska Ferry Ala

indicates that ICC treats Alaska Ferry as a public way an

carrier transporting goods over such public way must be 

as a motor carrier under part II of the Interstate Comme

fact Alaska Steam points out ICC required that it be cer

a motor carrier before it could lawfully use the ferry system

b Section 316 c as so amended provides

As used in this subsection the term common carriers by water includes 

carriers subject to the Shipping Act 1918 as amended or the Intercoastal S

1933 as amended including persons who bold themselves out to transport g

but who do not own or operate vessels engaged in the transportation of pro

state Or foreign commerce between Alaska or Hawaii on the one handy and 

the other States of the Union and through routes and joint rates so estab

classification regulations and practices in connection therewith shall be 

provisions of this part
ALASKA STEAMSHIP COCANCELLATION OF RATES 3

Finally Alaska Steam contends that FMC lacked the authority 

attack Alaska Steam sactions here under investigation by means 

suspension and that these actions should have been challenged 

way of a complaint filed with ICC

Hearing Counsel

Hearing Counsel maintain that Alaska Steam sservice contin

to be subject to FMC jurisdiction since the carrier is providin

porttoport service coupled with an efficient pickupand delivery s

ice at Seattle and is merely substituting vessels to continue its serv

to certain Alaska ports

Hearing Counsel maintain that the Seattle spotting operation 

a pickupand delivery service within a geographic port area and 

such is merely an incidental service which is part of Alaska Stes

porttoport operation The only change Hearing Counsel conte

in Alaska Steam sservice in the Seattle area is the institution of p

up and delivery for full containerload shipments and while t

service marks an improvement in Alaska Steam soperation it is 

same type service that has always been held subject to FMC juris

tion The fact that it is performed by a motor carrier subject to 

jurisdiction of ICC does not deprive FMC of jurisdiction over 

entire porttoport service Matson has utilized such motor carr

to perform pickupand delivery service as part of a total porttop

service which has been held subject to FMC sjurisdiction Mats

NavigationCoontainer Freight Tariff s7 FMC 480 1963

Hearing Counsel argue that the necessity of obtaining certificat

from ICC before motor carrier transportation can lawfully be p

formed does not establish that when an arrangement is entered i

with one who provides such motor transportation a joint rate 

through route within the meaning of Public Law 87595 has t

been established nor does any conflict arise between this agency 

ICC because of the necessity for such certification Additionally He

ing Counsel maintain that Public Law 87595 was not designed 

cover a pickup and delivery service because tariffs providing for s

service would always have been accepted by FMC and conseque

Congress did not intend it to apply to such service

Finally Hearing Counsel argue that the limiied use of Alas

Ferry is nothing more nor less than the substitution of one ve

for another and that Alaska Steam soperation in conjunction w

Alaska Ferry constitutes a through route with another carrier 

water and hence the rates covering this operation must be filed un

section 18 a of the Act and section 2 of the 1933 Act

11 FMC

355901 0 69 22
320 FEDERAL MARITIME COMMLSSION

DISCUSSIONS AND CONCLUSIONS

Alaska Steam in addition to the affidavits and legal mem

provided for in the orders in this proceeding also filed pet

motions asking FMC to vacate the orders and to stay their eff

pending vacation These petitions and motions were also arg

at the same time Alaska Steam delivered its oral presentat

merits We have considered all the contentions made by Alas

in our deliberations in this proceeding However inasmu

grounds raised in support of the petitions and motions ar

tially the same as the arguments made in the memoran

affidavits indeed the documents incorporate each other by r

they are considered together herein

1 The Truck Movement Within the Seattle Commerci

In SeaLand Service Inc Cancellation of FMC Po

RatesWest CoastAlaska Trade docket No 6743 11 FM

held that a pickupanddelivery service performed by an IC

icated motor carrier was an incidental part of a porttopo

and we retained jurisdiction over the entire porttoport m

which includes the pickup and delivery service performe

nection therewith

The pickupand delivery service performed in the insta

the same type as the motor services performed in conne

waterline hauls in the SeaLand and Matson cases The pr

of law in the instant case with respect to the pickupan

service are the same as those presented to us in SeaLand

We here affirm the result reached in SeaLand and we co

the reasons stated therein that the entire service offered 

Steam in connection with AAA Transfer in the Seattle c

zone is subject to our jurisdiction as a porttoport service 

which must be filed with us under sections 18aof the Ac

the 1933 Act

6I Matson Sea Land and the instant case containers are transported be

or consignee spremises and ocean carrier spier and the area Involved is th

area of a port cityin the Sea Land case Anchorage and in the Matson ca

cisco Stockton and Los Angeles In fact in the Matson case the Los Angeles 

commercial areas were like Alaska Steam sSeattle pickupand delivery area 

cial zones prescribed by ICC and the San Francisco and Los Angeles areas w

ably more extensive and included far more people than the Seattle commercial 

has also filed as a revision to the tariff under investigation in connection wit

anddelivery service a tariff covering a similar service in the Seattle area of 

scope at least as wide as the AAA Transfer operation

Alaska Steam refers to statements of former FMC Chairman Stakem and Fs

Trade Study as supporting the view that Congress intended to place in ICC 

tion over movements participated in in any way by ICC certificated carrier
ALASKA STEAMSHIP COCANCELLATION OF RATES 3

Nothing herein nor anything contained in our previous decision 

SeaLand is intended to change or expand our holding in Mats

Navigation CoContainer Freight Tarifs 7 FMC 480 1963 nor 

anything herein intended to impinge upon the jurisdiction of IC

with reference to motor carriers It is only intended to reaffirm the jur

diction of FMC over porttoport rates and not over the motor carrie

performing the pickupanddelivery services in connection therewith

Chairman Stakem sstatements on the effect of the joint rate bill or the Alaska Tra

Study Indicates that FMC does not have jurisdiction over a service of the type perform

by Alaska Steam Chairman Stakem merely asserted that if joint rates and through rou

within the meaning of Public Law 87 595 were entered into between an FMC water car

and an ICC motor carrier the FMC would lose jurisdiction over the water transportat

involved In such movement While the Alaska Trade Study does Indicate that ICC 

quires certification of motor carriers performing pickupand delivery service for carri

subject to the Shipping Act it does not indicate that when arrangements for such serv

are entered into the entire porttoport service of the water carrier is removed from F

jurisdiction It does in fact say that pickup and delivery services In the terminal area 

not a divisible service but are part of the through movement performed by the line h

carrier The Alaska Trade Study moreover rather than suggesting the FMC has b

stripped of jurisdiction over porttoport services suggests the desirability of secu

legislation which would exempt motor carriers performing pickupand delivery services 

FMC water carriers from ICC jurisdiction and placing such carriers under FMC juris

tion Alaska Trade Study ch 1 P 7

Alaska Steam alludes to the facts that AAA Transfer makes out its own bill of lad

and provides for the safe transfer of goods within its custody As an ICC regulated car

it could do no less and the fact that it transports cargo moving in Interstate comme

requires that it be certificated by ICC But this does not mean the service AAA Trans

performs somehow removes Alaska Steam sservice from our jurisdiction Nor does 

asserted independence of AAA Transfer from the direction and control of Alaska Ste

dictate a contrary result The carriers performing the motor services for SeaLand w

so far as it appears Independent of their direction and control Moreover contrary to 

affidavit filed by AAA Transfer sPresident the independence would appear to be largel

fiction inasmuch as Alaska Steam on July 20 1967 acquired complete control of A

Transfer by purchase of all the latter soutstanding capital stock pursuant to an orde

ICC entered May 24 1967

8 Counsel for Alaska Steam in oral argument appears to suggest that the failure 

Congress to exempt terminal area or incidental services performed by an ICC certifica

carrier in connection with a service regulated by FMC meant that such incidental serv

when performed in connection with an FMC carrier converted the entire service into 

subject to ICC jurisdiction However decisions of both the regulatory agencies and 

courts have made clear that the question of exemption of Incidental services and 

question of jurisdiction over a complete transportation service performed in part b

carrier not subject to the jurisdiction of the agency regulating the dominant service 

mutually exclusive When an air carrier substituted a motor haul for a portion of its 

carriage the Civil Aeronautics Board CAB in The Flying Tiger Line AirTruck Serv

30 CAB 242 245 1959 held that such motor movement was air transportation wit

the meaning of the Federal Aviation Act In so doing however it made clear that whet

or not the truck baul was to be considered incidental to air transportation and

exempt from economic regulation under that statute the Interstate Commerce Act 

matter for the Interstate Commerce Commission We do not Intend that our action h

should influence what that decision should be If the Commission ICC should concl

under the standards normally applied by It that the truck operation is not exempt 

trucker must have or obtain the required authority in order for Flying Tiger Line the 

carrier to operate in the manner it proposed

The Court of Appeals for the District of Columbia Circuit in affirming the CAB s decis

cited this language of the Board as adequately and correctly disposing of the content

that CAB could not assert jurisdiction over the truck movement as a part of the air 

rier sthrough transportation since the motor carrier performing it had not been exemp

by ICC City of Philadelphia v Civil Aeronautics Board 289 F 2d 770 774775 DC

1961

11 FMC
jjjj
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326 FEDERAL MARITIME COMMLSSION

into between Alaska Ferry and Alaska Steam important Sec

of the Act and section 2 of the 1933 Act unlike Public La

speak not of joint rates but only of through routes 18 As 

ecessor has stated a through route is an arrangement e

implied between connecting carriers for the continuous c

goods from an originating point on the line of one carrier t

tion on the line of another Emphasis supplied In Be Inlan

ways Corporation and Mississippi Valley Barge Line 2USMC

400

462463

4456

1940

1935

citing

The

lntercoastal

FMC predecessor

Investigation

went on

1935

to state

1S

Through carriage implies a through rate This through rate is 

sarily a joint rate It may be merely an aggregation of separate 

independently by the several carriers forming the through rate a

through rate is the sum of the locals of the several connecting lin

sum of lower rates otherwise separately established by them for thr

portation 1USBat 446

The only motor portion of the entire movement from 

final destination in Alaska outside the pickupand delive

already discussed is the movement performed by certific

motor carriers in transferring the containerloaded chassis 

Steam on and off vessels of Alaska Ferry There is no moto

resembling the Consolidated Freightways operation from Ut

and Montana which precipitated passage of Public Law 8

line haul overland of any kind is involved There is not eve

ment in Alaska of an extent as great as a pickupand delive

The incidental nature of this movement is clearly seen w

borne in mind that only as much land is traversed as lies be

two vessels when positioned alongside the pier This type of 

not a departure from the former operation of Alaska Steam 

Even prior to the filing of the tariff here under investigation 

substituted service was performed for a part of the movem

reverse ie Alaska Steam called directly at Valdez and us

Ferry for substituted service to Cordova

The staff of ICC indicated that the transfer service cou

performed by a certificated carrier and when rates are en

s See footnote 25 infra

w Hearing Counsel argue that the decisions of this agency indicate that the 

Is a common carrier by water within the meaning of the Shipping Acts We nee

this matter in this proceeding Inasmuch as section 18a of the Act and sec

1938 Act require the filing of an rates on a through route involving any 

water and we have determined that Alaska Ferry is such a carrier within th

that statute and insofar as this proceeding Is concerned we need proceed no fu

examination of Alaska Ferry sservice herein

m As explained in the SeaLand case Public Law 87595 was designed to en

providing line hauls by different transportation modes to enter into joint rates 

routes and file with a single agency a tariff covering the through movement

1
jjjjjj
328 FEDERAL MARITIME COMMISSION

fore the applicable provisions of Public Law 87595 amen

216 c of the Interstate Commerce Act entitle only a part 

carrier to file jointrate tariffs with an FMC water carrier H

Alaska Steam filed tariffs designated ICC Nos 96 98 and 9

are part III water carrier designations Motor carrier tariffs 

MF No designation Only the name Alaska Steamship Co 

on the title pages of the supposedly joint or motor carrie

Motor carriers such as AAA Transfer Weaver Bros and 

Movers are listed elsewhere as participating carriers These 

dicate that Alaska Steam itself visualizes the service pro

essentially a water service and moreover essentially its ow

service

Alaska Steam alleges several factual inaccuracies in the 

sion orders of investigation However with one minor e

these alleged factual inaccuracies are either semantic in n

disputes as to what conclusions are to be reached with respect t

Steam sservice In the former category are Alaska Steam so

to the Commission scharacterization of AAA svanning sta

collecting point and its motor service as drayage and a refe

one of its vessels as a shuttle barge Such appellations h

omitted from this report In the latter category are argument

in the Discussion and Conclusions section of this repo

whether or not Alaska Steam sservice is really porttop

whether or not the service it has entered into with motor c

really joint The only material factual inaccuracy mentione

Petersburg will not be served directly but only via Alaska Fer

ing Counsel do not dispute this fact and it has been correct

factual discussion above The Court of Appeals for the D

Columbia Circuit has recently affirmed the position that an ev

hearing is necessary only when material facts are in dispute T

of Los Ange es vFMCand USA CADC 388 F2nd 582 

Thus there appears no need for the full hearing demanded b

Steam

3 The Procedural Arguments

Alaska Steam makes two arguments attacking the procedure 

which FMC instituted this proceeding

1 Alaska Steam maintains that FMC is by this pro

attacking collaterally the jurisdiction of ICC because we 

lenging the validity of a tariff filing with ICC and such a c

may only lawfully be made by the filing of a complaint w

under section 216 eof the Interstate Commerce Act Suc

plaint Alaska Steam indicates has not been filed

11 
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jjjj
j


334 FEDERAL MARITIME COMMISSION

shipowners to convene the other lines in the trade to work 

ments in furtherance of the policy thus announced

Shortly thereafter a series of meetings were held among 

operating between Brazil and the United States and Canada 

at an agreement for the pooling of coffee carryings Agreem

over a dispute as to the percentage to be allocated to the third 

The national flag lines then resigned from the then existin

ences and undertook to establish a new conference About 

time the President of Brazil issued Decree No 60994 which 

that all acts of the Brazilian Executive Power egthe de

resolutions later discussed having the purpose to protect 

late the maritime transportation of goods would apply on

conferences or agreements to which a Brazilian flag line was 

or a signatory

Thus under later decrees and resolutions of the Brazilian 

ment any conference formed which did not have a Brazilian 

as a member or any pooling agreement which did not have a 

line as a signatory would be neither recognized nor sanction

Government of Brazil

Subsequently the proposed Inter American Freight C

Agreement No 9648 a set of socalled Pooling Guidel

9649 and three pooling agreements covering coffee to US

ports 9649Acoffee to US Gulf ports 9649Band coc

Atlantic ports 9649C were filed with us A petition fo

approval was denied by us on August 26 1967 and we issued 

instituting this proceeding on August 31 1967 A complain

the signatories of Agreements 9648 and 9649 filedby the third 

not parties to the agreements was consolidated with this pr

The third flag lines also filed suit in the US District Cou

Southern District of New York against the signatories of 

alleging violations of the antitrust laws There ensued a serie

ings between the third flag lines and the Brazilian autho

end result of which was not necessarily in this order 1 

drawal of Agreement 9649 and the related agreements 2 

missal of the complaint in docket No 6747 and the substitut

That order among other things set the proceeding down for bearing 

alleged errors of the Examiner was the failure to hold a bearing which It 1s ur

our order of investigation The order of course intended that such a hea

only if it was necessary The Examiner concluded It was not and as we shall d

we agree

4 The third flag lines bad since August 10 1967 been unable to carry any 

Brazil to this country because of a decree issued by the Brazilian Maritime 

No 3023 which restricted the carriage of Brazilian exports destined to the U

to signatories of Agreement 9648 The complaint of the third flag lines w

docket No 674

1

336 FEDERAL MARITTMF COMMISSION

Pan Americanism

Article 1 Preamble b provides

All parties to this Agreement recognize that the PanAmerican 

the Lines of the Pan American nations associated in this confe

paramount interest in the development of the foreign commerce 

spective countries and intend to develop their respective merchant 

services to carry a substantial portion of the foreign commerce of 

served

This preamble is objectionable to Hearing Counsel and D

so long as Articles 23 and 24 remain in the agreementa The

ARTICLE 28

Signatories to this agreement acknowledge by affixing their sign

their voluntary acceptance of all principles terms and conditions 

ference and understand and agree that membership in this Confer

that all lines charge assess and maintain Conference tariff rates i

in which they operate otherwise failure in the part of a memb

assess and maintain Conference tariff rates rules and regulatio

ject them to expulsion in accordance with Article 13

ARTICLE 24

All parties hereto recognize the authority and regulating po

government authorities of the various countries served and will 

laws statutes regulations and rules of these countries including 

with government authorities where required

Ill seeking the deletion of Articles 23 and 24 Hearing 

press concern that these articles when tied to Article 1 Pre

would provide an unacceptable precedent for our approva

out that we have never approved such a concept and to d

constitute a dangerous guideline for future agreements Hea

sel pose three questions as to the effect of the agreement sho

23 and 24 remain

In reality DOT supports Hearing Counsel sproposal for conditional 

cussed infra only if all of Hearing Counsel smodifications to the agreeme

DOT raises only two specific issues in its response to our order 1 wh

determine the legality of 9648A by examining only the agreement itself 

must consider also the facts and circumstances surrounding the agreem

certain decrees and resolutions of the government of Brazil and 2 

agreement violates section 15 because its interaction with those decrees a

precludes all outeide competition and prevents free conference exit an

similar vein Delta Steamship Lines although it remains a signatory to 

advocates in principle at least the need for a conference in the trade neverth

the proposal of Hearing Counsel Thus these parties object to the specific 

the agreement largely through their support of Hearing Counsel For the s

we shall except where necessary for clarity refer to the objections as be

of Hearing Counsel

Hearing Counsel originally sought the deletion of Preamble b but w

the removal of Articles 23 and 24
INTERAMERICAN FREIGHT CONFERENCE AGREEMENTS 337

1 Would any member line be relinquishing its right to future

negotiations to any terns and conditions of the agreement

2 Would any member line be relinquishing its right to appea

any condition that might develop in the future on some action

not considered when the agreement was executed

3 Would any member be relinquishing its right to appeal any

quota or condition set up by any pooling agreement

First our approval of the agreement with or without the preamble

or Articles 23 and 24 is not intended as an expression of opinion on the

concept of PanAmericanism The preamble is at most a neutral

provision It grants no authority denies no rights and imposes no

substantive duties It merely calls upon the members primarily it

would appear those flying third flags to recognize what could well

be termed a fact of life The Government of Brazil has made abun

dantly clear by the decrees and resolutions already referred to its

intention to develop is foreign commerce and a merchant marine

capable of carrying a substantial portion of it and certainly the

United States has unequivocally stated as its policy that

It is necessary for the national defense and development of its foreign and

domestic commerce that the United States shall have a merchant marine a

sufficient to carry its domestic waterborne commerce and a substantial portion

of the waterborne export and import foreign commerce of the United States

and to provide shipping service on all routes essential for maintaining the

flow of such domestic and foreign waterborne commerce at all times It is

hereby declared to be the policy of the United States to foster the development

and encourage the maintenance of such a merchant marine Section 104

Merchant Marine Act 1936

Little difference can be found in the policies of the two countries

Hearing Counsel would differentiate between Preamble b and sec

tion 101 of the Merchant Marine Act of 1936 by pointing out that

section 101 a is a statement of governmental policy and not an

agreement between carriers b has not been implemented by any dis

criminatory decrees or resolutions and c is implemented by a

construction and operating differential subsidy rather than through

depriving competitors of cargo We think it clear that Hearing

Counsel sconcern here is not with this agreement but with the actions

of Brazil As we shall discuss in detail later the manner in which

each country seeks to effectuate its policy may well be another matter

and one which in our view is not properly in issue here We are not

cited to nor can we find anything in section 15 or any other provision

of the Shipping Act which would render unlawful an agreement be

tween carriers operating between two countries to recognize the

1 publicly announced policies of those countries Certainly the dele

11 FMC
338 FEDERAL MARITIME COMMISSION

tion of the preamble or Articles 23 and 24 would not of its

change the policies of the countries involved

Secondly we do not share Hearing Counsel sfears ab

23 and 24 We answer Hearing Counsel squeries concern

the negative Article 23 pledges the signatories voluntary 

of the principles terms and conditions of the Confer

Article 24 embodies the signatories recognition of the au

regulating powers of the government authorities of the va

tries served and requires the parties to abide by the law

regulations and rules of those countries

Under Article 23 Hearing Counsel are obviously conc

the voluntary acceptance of the principle of Pan Ameri

have just indicated our view on the impact of the prea

injects Pan Americanism into the agreement

We do not read Article 23 as altering the provisions o

b which merely calls for recognition of the interests 

American nations and their national flag lines Article 23 

strue and would approve it does not bind the members to 

action in futherance of Pan Americanism It may be the 

national flag lines to foster this principle or concept bu

does not arise from the provisions of Agreement 9648A

As for Article 24 we do not construe a naked agreement 

the laws of a country as any form of waiver of the right 

to appeal or petition for redress Such a construction wo

some very fundamental principles of notice justice an

adhered to by all of the countries within the trades cov

agreement Should any such construction be attempted th

sion has the continuing power under section 15 to alter or 

agreement and would of course exercise it We will not 

deletion of Articles 23 and 24 as a condition of our ap

The Right of Independent Action

Article 5 of the Agreement now provides

Each section shall issue separate freight tariffs establishing and 

fair and reasonable rates which shall be fixed where conditions p

on the same commodities

Hearing Counsel would amend the article by adding the f

The parties hereto agree however that each party has the righ

itself any rates charges classification or related tariff matter prev

upon or theretofore in force which would result in a decreased cos

upon first giving the other parties at least fortyeight hours ad

thereof Any such altered rate charge classification or related 

resulting in a decreased coat to a shipper shall not become effe

publication and Sling with the Federal Maritime Commission
INTERAMERICAN FREIGHT CONFERENCE AGREEMENTS 33

Hearing Counsel spurpose in urging the inclusion of an independen

action clause is to preserve a degree of competition within the co

ference where by virtue of Brazilian decrees competition outside th

conference is absolutely foreclosed The opponents of the claus

all the parties to the agreement except Delta urge that the inclusio

of such a right of independent action would render the Conference 

nullity Hearing Counsel counter this argument by pointing to 1

other agreements which contain similar clauses Hearing Counsel poin

out that out of these agreements there has been in the last two year

only one instance by one line of an exercise of the right of independen

action

Section 15 provides only that

No agreement shall be approved 1 between carriers not me

bers of the same conference or conferences of carriers serving different trade

that would otherwise be naturally competitive unless in the case of agreemen

between carriers each carrier or in the case of agreements between conference

each conference retains the right of independent action

Here it is clear that Hearing Counsel sbasic reason for urging th

independent action clause concerns not this agreement itself but rathe

the decrees and resolutions of the Brazilian Government particularl

No 3023 which reserves Brazilian exports to members of the Co

ference thereby eliminating outside competition Thus it is the decre

and not the agreement before us that brings about the conditio

deplored by Hearing Counsel But just as Hearing Counsel urge tha

inclusion of their independent action clause would not create a nove

situation neither would the omission of such clause be a novelty i

this trade

On October 13 1960 the Brazilian Government sSuperintendent o

money and credit issued a decree known as SUMOC 202 which pr

vided in pertinent part

1 Brazilian export products with destination United States of America o

Canada will be transported exclusively by shipping companies which are membe

of the BrazilUnited States Freight Conference

2 In the case of products which transportation is regulated by specific accord

or agreements between member lines of the conference signed under the auspice

of the above conference and not rejected by the Brazilian authorities loadin

of these products will be effected exclusively on vessels of those shipping com

panies that are signatories to said agreements

Thus as early as 1960 competition outside the Conference in th

Brazilian trade has been precluded by governmental decree We ar

aware of no carrier which applied for entry into the Conference an

8 See Nopai v Moore McCormack Lines Inc 8FMC213 1964

11 FMO

INTERAMERICAN FREIGHT CONFERENCE AGREEMENTS 

While it is clear that the parties desire to adduce evidence on 

issues it is less than clear what the parties consider the relevanc

materiality of this evidence to the only issue before us in this pro

ing theapproval of Agreement 9648A

Whether or not actual malpractices in the trade can be proved 

hearing the short summary of background to this agreement al

given clearly indicates the need for the restoration of some for

order and stability in the trade Indeed Hearing Counsel in su

ing the compromise of a conditional approval urge that imme

approval may bring stability to a trade beset by controversy

Running throughout the arguments of Hearing Counsel 

and Delta has been the consistent assertion that we may not ap

Agreement 9648 without considering its interaction with the va

decrees and resolutions of the Brazilian Governments and any 

posed pooling agreements which would further effectuate thos

crees and resolutions It is of course impossible to deny the exis

of the decrees and resolutions and in granting our approval her

have carefully considered the consequences of that approval i

light of them This is quite different from accepting the assertion 

the very existence of these decrees and resolutions preclude an

proval under section 15 Resolution No 3131 quite clearly provides 

absent a conference agreement the Government of Brazil may 

undoubtedly would unilaterally allocate the shipments in the 

to assure at least the minimum participation of the national flag 

Our approval of the agreement here in no way affects the power o

Government of Brazil to do this To withhold our approval under 

circumstances would be to ignore the realities of the present postu

the trade And again we would point out that the agreement w

here approving of itself does not acomplish the deplored restric

on competition and allegedly discriminatory allocations

In a similar approach DOT would have the Conference come 

ward with evidence as to whether there are in fact any malprac

in the trade To DOT this is necessary to show the agreement is n

sary to eliminate or remedy conditions which preclude or hinde

achievement of the regulatory purposes of the Shipping Act c

our decision in the Mediterranean Pools Investigation 9 FMC

290 1966 It is apparently DOT sposition that absent any sho

of actual malpractices there would be no justification for approva

the agreement and therefore to approve it would be contrary to 

public interest

We are faced here with balancing the public interest in the foste

of free and open competition in furtherance of the antitrust pol

with the interest of the public in stability and predictability of r

11 FMC
342 FEDERAL MARITIME COMMISSION

and the orderly conduct of our foreign commerce Wha

necessary to justify approval of a pooling or other a

think that the need for a conference in this trade is be

Indeed nobody seriously disputes that need In this insta

tion be it within or without the Conference must give w

toration of order and stability There is no necessity for a

hearing to establish the need for a conference in this 

will not order one DOT urges that an evidentiary hearin

to determine the relationships between the unfiled Octo

ments and the conference agreement The agreem

to are attached as an exhibit to the exceptions filed by DO

sist of two pools to govern the carriage of green coffee in 

a number of individual agreements whereby each of the th

agree to seek dismissal of their complaints here and in co

is needed here we are told to determine whether we have 

the conference agreement a true and complete memora

agreement among the parties The flaw in this argume

but quite difficult to state

DOT does not assert that the Conference agreement is n

tained document Agreement 9648A has all the provis

by the Shipping Act and all the provisions generally c

visable to establish a workable conference To hold that 

of other agreements already filed or to be filed renders th

agreement less than complete implies at least that once h

into one agreement the parties thereto may never have an

placing themselves in violation of section 15 for having 

thing less than a true and complete memorandum of the

or that different matters may not be made the subject of se

ments Agreement 9648Ais so far as we are aware the t

plete agreement insofar as the establishment of a confe

cerned As we have already indicated if and when othe

are filed we shall take whatever action then becomes neces

In short even assuming that no malpractices may b

recognizing the existence of the various decrees and reso

admitting the possibility of further agreements in effectu

Americanism we do not agree that an evidentiary hearin

duce anything relevant or material to our decision here

Finally and at the risk of stating the obvious we wou

that by approving Agreement 9648 we are not in an

linquishing our regulatory control over the trade nor do 

relax our surveillance of future events occuring therein 

and for these reasons set forth herein we find and conclud

ment 9648A as set forth in the Appendix hereto meets 
INTER AMERICAN FREIGHT CONFERENCE AGREEMENTS 

of section 15 and should be approved However because this tra

one in which relatively short periods of time can produce signi

changes in circumstances we will limit the approval we are gra

here to a duration of 18 months from the date of service of this 

The purpose of this limitation is twofold in addition to grantin

parties an opportunity to restore order to the trade it allows th

demonstrate that the conference once established will operate 

benefit of the shipping public If the parties request continuati

the agreement beyond this period we will at an appropriate time 

whatever action is necessary An appropriate order will be issued

SEAL Signed THOMAS LIsI

Secret

APPENDIX

INTER AMERICAN FREIGHT CONFERENCE AGREEMENT

ARTICLE 1

Preamble a

In consideration of the benefits advantages and privileges to be severa

collectively derived from this Agreement the parties hereto common c

by water will cooperate in the promotion and development of the foreig

merce of the United States of America Brazil Argentina Uruguay and 

guay through establishment of regular dependable ocean transportation

Preamble b

All parties to this Agreement recognize that the Pan American Nation

the Lines of the Pan American Nations associated in this Conference 

paramount interest in the development of the foregin commerce of their 

tive countries and intend to develop their respective merchant marines an

ices to carry a substantial portion of the foreign commerce of the co

served

ARTICLE 2

Scope

This Agreement will govern the transportation of cargo between the A

and Gulf of Mexico ports of the United States of Anaemia and the po

Brazil Uruguay Argentina and Paraguay

ARTICLE 3

Division of Conference

To accomplish the aims and purposees of the Agreement the parties 

associate themselves in an Agreement to be known as the Inter American F

Conference which shall be divided into three 3 sections

AUSAtlantic and Gulf Brazil Uruguay Argentina Paraguay Sectio

B Paraguay Argentina Uruguay USAtlantic and Gulf Section

C Brazil USAtlantic and Gulf Section

11 FMC
344 FEDERAL MARITIME COMMISSION

ARTICLE 4

Definition of Sections

Under the terms of this Agreement the following defines the Se

established

Section AFrom USAtlantic and Gulf ports to ports in Brazil Uru

Argentina and Paraguay with headquarters in New York City

Section BFrom ports of Paraguay Argentina and Uruguay to 

Atlantic and Gulf ports with headquarters in Buenos Aires

Section CFrom Brazilian ports to US Atlantic and Gulf ports 

headquarters in Rio de Janeiro

Any member line of this Conference Agreement must be a member of the 

Sections of the Conference in which it operates

ARTICLE 5

Separate Tariffs forEach Section

Each Section shall issue separate freight tariffs establishing and mainta

fair and reasonable rates which shall be fixed where conditions permit e

on the same commodities

ARTICLE ea

Board of Directors

A Board of Directors shall be elected by two thirds of the active membe

in each Section of the Conference to govern direct and manage each S

through an Executive Administrator appointed by the parties of each S

The Executive Administrator shall not be financially interested in or em

by or in any way connected with any member line or agent or any represen

thereof The Executive Administrator will be subordinate to the Board of 

tors of each Section and have duties and responsibilities as outlined in 

Agreement

The Board of Directors shall be composed of five members of which a

three must be representatives of Pan American Lines who are members o

Section of this Conference

The Board of Directors shall elect a Chairman and ViceChairman fro

members in each Section to serve for a period of one year

The Board of Directors of each Section shall meet as circumstances and 

tions warrant but at least once a month

The Board of Directors of each Section shall have authority to increas

number of Directors as circumstances warrant

ARTICLE eb

Headquarters of the Conference Sections

The office of the Executive Administrator of Section Ashall be in New 

The office of the Executive Administrator of Section B shall be in B

Aires

The office of the Executive Administrator of Section 0 shall be in R

Janeiro

ARTICLE 6c

Responsibilities of the Executive Administrator

The Executive Administrator will act in accordance with instructions 

Board of Directors and Conference members of his respective Sectio

responsibilities and duties shall include but not be limited to the followi

11 FMC
INTERAMERICAN FREIGHT CONFERENCE AGREEMENTS 

1 The Executive Administrator shall act at all times in the best 

of all lines in conformity with the principles of the Conference Agreem

2 Administer manage and supervise all Conference matters an

ties in his Section by direction

3 Act as reporting and filing agent with respective government 

ities wherever required

4 Handle shipper and other complaints and report when req

proper government authorities

5 Act as liaison in all matters involving malpractices with the 

ing Committee and Neutral Body

6 Represent his respective Section of the Conference when aut

in all matters as directed

7 Attend and act aS Secretary at all Board of Directors and Pr

meetings

8 Prepare and submit for the approval of the Board of Direc

annual budget and a quarterly financial statement

9 Conduct and preside at all Conference meetings of his Section 

Principals meetings

10 Supervise and maintain current status of Conference tariffs 

respective Section

11 The Executive Administrator shall be assigned other respons

and duties as directed by the Board of Directors and members of e

spective Conference Section as circumstances or conditions warrant

ARTICLE 6

Priniepals Meetings

Principals shall meet as circumstances and conditions warrant and sha

one of their members to be chairman of their meetings Principals are aut

to discuss and agree upon any matters within the scope of this Agre

ARTICLE 7

Establishment of Rates

Subject to applicable provisions of law of the countries served each 

of the Conference is authorized to

1 Agree upon and establish rates and charges for the carriage of 

Rates and contract conditions established shall be made a part of th

tion of the Conference records and filed with the respective Gove

authorities wherever required provided that any contractnon c

rate systems as may be adopted by the Section are subject to prior ap

by the Government Agencies with jurisdiction and shall be made p

the respective tariffs

2 Declare rates for specified commodities to be open with or w

agreed minimums and thereafter declare the rates for such comm

to be closed

3 Agree upon and establish tariffs tariff amendments and supple

4 Make rules and regulations for the handling and carriage of 

5 Provide for use of contractnon contract rate systems

6 Agree on amounts of brokerage and conditions for payment of b

age as permitted by applicable law and in accordance with applicable 

provisions

7 Keep such records and statistics as may be required by the par

deemed helpful to their interests

11 FMC
346 FEDERAL MARITIME COMMISSION

ARTICLE 8

Discounts Refunds Absorptions

There shall be no discount payment or return of any descripti

indirectly to any shipper contractor consignee receiver of cargo 

person or company except brokerage or commission to duly auth

or representatives of member lines by any of the parties hereto 

associates subsidiary or parent companies There shall be no pa

or absorption at loading or discharging ports of rail or coastal st

lighterage trucking or other charges directly or indirectly by any 

hereto except as may otherwise be agreed and shown in the resp

tariff

ARTICLE 9a

Voting

The member lines of any Section shall consider and pass upon 

thing within the scope of this Agreement at any meeting of a 9e

that notice in writing descriptive of the matter to be considered 

each party thereto by the respective Executive Administrator n

4 PM of the third working day prior to the date of meeting h

Section members are in unanimous agreement a meeting may be 

held with less than three working days notice A meeting shall be 

Executive Administrator at the request of any member line If all 

thereto are present at any meeting and all agree to waive the 

may be taken on any matter within the scope of this Agreement 

notice thereof Any matter or thing properly brought before th

agreed to by twohirds 23 of the parties of the Section involve

wise provided in this Agreement shall hereby become an agre

upon all the parties of that Section with the same force and e

pressly made pert of this Agreement however in no case shall 

votes be less than onehalf of the number of active Section me

to vote A quorum in any Section of the Conference shall consis

of the active members present and with voting rights

ARTICLE 9b

Telephone Voting

In addition to taking action at meetings action may be taken 

poll of the members conducted by the Executive Administrato

voted on by telephone poll shall require in order to be adopted t

affirmative vote of those members entitled to vote under the pro

article and if so adopted shall be binding on all members The r

telephone poll will be made known to all members Any matter 

ceive unanimous affirmative vote by telephone poll shall Abe re

members at the next meeting for further consideration

ARTICLE 10

Sailing Requirements

Failure to have a sailing to the territory within applicable s

Agreement for the period of ninety 90 days shall be regarded 

of service from that section and members whose services have 

pended shall have no sight to vote on any matters within that 

Conference Agreement until such service has been resumed p

ever that saspension of voting rights shall not be regarded as e
INTERAMERICAN FREIGHT CONFERENCE AGREEMENTS 

the Conference and the restoration of voting rights shall not be regar

admission or readmission to membership in the Conference Notice of a

pension or reinstatement of a member line will be furnished promptly 

respective government authorities wherever required

ARTICLE 11

Admission

Any common carrier by water which has been regularly engaged as 

mon carrier in the trade covered by this Agreement or which furnishes ev

of ability and intention in good faith to institute end maintain such a c

carrier service between ports within the scope of this Agreement and 

recognizes and agrees In good faith to abide by all the terms and con

of this Agreement may hereafter become a party to this Agreement by a

its signature thereto and shall pay two thousand five hundred dollars U250

as an admission fee which is not refundable Every application for mem

sha11 be acted upon promptly No carrier which has complied with the con

set forth in this paragraph shall be denied admission or readmiss

membership

Prompt notice of admission to membership shall be furnished to the 

tive Government authorities of the countries served and no admission s

effective prior to the postmark date of such notice Advice of any de

admission to membership together with a complete statement of the r

therefor shall be furnished promptly to the respective Government auth

of the countries served

ARTICLE 12

Withdrawal

Any member may withdraw from a Section of the Conference in whic

a member without penalty by giving the Section at Least thirty 30 days 

ten notice of intention to withdraw provided however that action tak

the Section to compel the payment of outstanding financial obligations 

resigning member shall not be construed as a penalty for withdrawal 

of withdrawal of any member shall be furnished promptly to the res

Government authorities of the countries served

Any party hereto who shall have given notice of withdrawal as pr

above shall not after such notice shall have been given be entitled to v

any matter within the scope of the Section which shall continue in effec

the date when such party swithdrawal shall have become effective

ARTICLE 13

Expulsion

No member may be expelled against its will from a Section except for f

to maintain a common carrier service between the ports within the scope 

Agreement or for failure to abide by the terms and conditions of this 

ment No expulsion shall become effective until a detailed statement s

forth the reason or reasons therefor has been furnished the expelled m

and a copy of the statement submitted to the respective government auth

of the countries served

ARTICLE 14

Neutral Body AgreementSelfPolicing

a Each Section jointly or separately shall promptly retain the se

as a Neutral Body of such individual or firm as may be elected by a majo

11 FMC
348 FEDERAL MARITIME COMMISSION

all of the active members of the Section or Sections The term active 

is hereby defined to mean and include all of the parties hereto who

rights shall not at the date when the respective vote is taken be 

pursuant to the provisions of Article 10 of this Agreement and wh

to vote shall not at the said date have ended pursuant to the pro

Article 12 of this Agreement In the event that such a person or firm s

to act as the Neutral Body the Section or Sections shall by similar 

choose a successor or successors

b In order to qualify to be elected and retained the Neutral Body 

no financial interest in any member line and shall not be in the em

of or under retainer thereto at the time of appointment as Neutral Body 

time while acting in that capacity Any person or firm who may be em

the Neutral Body as authorized in Article 14g shall conform to the 

of neutrality applicable to the Neutral Body as defined in this Article 

so certify to the Neutral Body Each notice of a determination pursua

cle 14 j shall contain a certification by the Neutral Body that throu

period of investigation and determination the Neutral Body qualified f

and retainer as aforesaid

e The Neutral Body shall investigate all complaints made to it 

breach by any party of any term condition undertaking or provisi

Agreement and shall determine whether such breach has occurred 

however that no complaint shall be considered and dealt with in a

with this Agreement unless it shall have been delivered to the Neutra

or before Ithe date which shall be one year after the date of the occ

matters complained of or II the effective date of the withdrawal of 

complained of from this Agreement and membership in any Sections 

of the Conference whichever of said dates shall earlier occur

d All complaints charging breach by any party of any term 

undertaking or provision of this Agreement shall be addressed to the 

Administrator of the Section where the complaint originated who 

such complaints to a Screening Committee composed of three member lin

section of the Conference who shall be elected by the members of th

on a rotating basis for one 1 year provided however if memb

screening committee shall be involved in a complaint either as the pa

the complaint or accused therein of breach of the Conference Agree

such member or members shall be disqualified to consider such com

in its or their stead and for the purpose of considering the particular 

only there shall be elected to replace the disqualified line or lines by t

on a rotating basis member line or lines not so involved The Screening 

shall within thirty 30 days after receipt thereof by a majority v

members refer to the Neutral Body for investigation and determin

plaints indicating a breach of the Conference Agreement Complaints n

to the Neutral Body by the Screening Committee shall through the 

Administrator be returned to the complaining member together with a 

of the reasons for their return

e In no event shall the Executive Administrator the Screening 

or the Neutral Body disclose the fact that a complaint has been ma

identity of the complainant the accused party or any other person 

except in making the communications involved in this Article 14 or in 

to legal process

fAll disbursenients incurred by the Executive Administrator or the 

1
INTERAMERICAN FREIGHT CONFERENCE AGREEMENTS 

Committee in the performance of their functions under this Article s

reimbursed by the appropriate Section

g In making investigations and determinations herein above specifi

Neutral Body shall be authorized at its discretion to engage lawyers e

accountants and agents and they or any of them shall be authorized 

reasonable time or at any place in the world to inspect and copy such docu

papers or records or parts thereof of any of the parties hereto that 

or their discretion may be deemed relevant to the matter under investiga

determination and the parties hereto agree that they will make their 

records and documents of the Sections accessible to inspection and cop

all reasonable hours by the Neutral Body and any persons engaged by it in 

ance of its authority and in the performance of its duties hereunder The m

lines shall within a reasonable time after the effective date of this Agre

or in the case of lines which shall become members after said effectiv

upon subscribing to a counterpart of the Conference Agreement furnish 

appropriate Section commitments from their agents sub agents ando

panies affiliated with such agents andor sub agents including stevedori

forwarding affiliates over which the respective signatories exercise c

authorizing the Neutral Body to investigate inspect or copy any of thei

nent records or documents wherever located required for the proper carry

of any investigation provided for in this Agreement

h The Neutral Body shall give to any party charged with a breach 

Conference Agreement reasonable notice of the charge and opportu

adduce evidence and make arguments orally or in writing by itself or by 

in its own behalf Any party charged with such breach shall before a 

mination that it has committed such breach be given an opportunity to e

copies of documents received by the Neutral Body as evidence support

charge and shall be informed of the substance of all testimony support

charge provided that such examination and such information shall not d

the identity of the complainant

1 The Neutral Body may at its discretion conduct a bearing on any 

of breach of the Conference Agreement but in conducting such a hearin

not be limited by the rules of procedure and evidence of any jurisdict

court The Neutral Body shall consider all evidence which it deems well fo

trustworthy and probative of the issue before it and without any rules as 

burden of proof or the amount of proof necessary to reach a determinatio

determine whether or not the party charged has committed a breach 

Conference Agreement

j Promptly upon determining whether or not there has been a breach 

Conference Agreement the Neutral Body shall give written notice 

determination to each of the member lines provided however that nei

such notice nor otherwise shall the Neutral Body disclose the identity 

complainants In the event that the determination is that a party has com

such a breach the notice shall set forth the sum to be paid by such pa

liquidated damages for violation of the Conference Agreement compu

follows

1 For the first violation either a if the transaction which cons

the violation did not involve the collection of freight money on ascert

shipments by the party which committed the breach an amount com

rate with the seriousness of the breach to be determined by the N

Body but in no event more than ten thousand dollars United States cu

11 FMC
350 FEDERAL MARITIME COMMISSION

US10000 or b if the transaction which constituted the vio

involve the collection of freight money the amount of such freig

if such freight shall have been received in United States curre

wise the equivalent in United States currency at the date of rec

freight received

ii For the second violation either a fifteen thousand dolla

States currency US15000 or b the amount of freight mon

received by such party if such freight shall have been received 

States currency otherwise the equivalent in United States curre

date of receipt of the freight received whichever a or b sh

greater sum

iii For the third violation either a twenty thousand dolla

States currency US20000 or b the amount of freight mon

received by such party if such freight shall have been received 

States currency otherwise the equivalent in United States curre

date of receipt of the freight received whichever a or b sh

greater sum

iv For the fourth violation and each subsequent violation 

twentyfive thousand dollars United States currency US25000 

the amount of freight money if any received by such party if su

shall have been received in United States currency otherwise the 

in United States currency at the date of receipt of the freight receiv

ever a or b shall be the greater sum

Such notification shall also contain a statement of the fee of the Ne

for the conduct of the investigation andor determination and of all it

ments incurred in connection therewith If the determination is that s

has been committed the party which shall be determined to have comm

shall promptly pay to the Neutral Body the amount of its fee and disb

and also shall pay to the appropriate Section the amount assessed as he

provided but if the determination shall be that no such breach has 

mitted the party which made the complaint shall promptly pay to th

Body the amount of its fee and disbursements

k In the event that the Neutral Body shall have determined that 

has committed a malpractice and shall assess liquidated damages co

penses hereinafter the assessment against the party and in the eve

party shall duly have promptly paid to the appropriate Section the 

such assessment the party shall have the right by written notice de

mailed to the Executive Administrator at the time of making such paym

shall state the name and address of the arbitrator selected by the pa

for an arbitration pursuant to the Arbitration Law of the State of 

and under the Rules of the American Arbitration Association to 

whether the Neutral Body and its agents lawyers experts and others 

have acted for it hereinafter representatives shall have been q

act as such pursuant to Article 14b hereof shall have performed t

with respect to the complaint and the assessment in accordance with 

sions of this Agreement and the regulations and resolutions adopted 

thereto and shall have accorded to the party all the rights and privilege

spect to the complaint and the prosecution thereof of which a party 

by the terms of this Agreement and of any rules or regulations which 

may adopt pursuant to this Agreement

If a party makes such payment and calls for such arbitration the 

1
11 FMO

INTERAMERICAN FREIGHT CONFERENCE AGREEMENTS 

Administrator shall hold the amount paid in a separate account to be dis

of as hereinafter set forth

if the arbitration shall result in an award answering said questions in 

affirmative then the right of the party to challenge further the liquidated 

ages costs and expenses assessed against it in accordance with the provisio

this Agreement shall cease and come to an end and the Executive Admin

tor shall apply all sums received as prescribed by Article 14 j after d

ing therefrom the costs and expenses of investigation and adjudication b

Neutral Body

If the award of the arbitrators shall answer said questions or any of 

in the negative then the arbitrators in their award shall specify the respe

which the Neutral Body or its representatives shall not have been qualifi

act or in which the Neutral Body or its representatives shall have failed or 

ted to act in accordance with the provisions of this Agreement and the regula

and resolutions adopted pursuant thereto andor the respect in which they 

have failed or omitted to accord to the party all of the rights and privileges 

respect to the complaint and the prosecution thereof of which the party 

sured by the terms of this Agreement and of said regulations and resolutio

such case the matter shall be remanded to the Neutral Body or its succes

the arbitrators shall have found that the Neutral Body did not througho

investigation and determination possess the qualifications specified in A

14b with instructions to pass upon the complaint anew in complete accor

with the provisions of this Agreement and said regulations and resolution

in connection therewith to accord to the party all of the rights and priv

with respect to the complaint and the prosecution thereof of which the 

was deprived as found by said award If after the reconsideration by the Ne

Body pursuant to the award of the arbitrators the Neutral Body shall 

against the party an assessment which is other than the amounts prev

assessed the party shall make such further payment to the Section or the S

shall make such refund to the party as shall adjust the amount of the asses

theretofore paid by the party to the amount ultimately determined by the N

Body

After effect shall have been given to adjustment if any in the amount o

cided Liabilities in accordance with the foregoing provisions of this Articl

Executive Administrator shall apply all sums as prescribed in Article 

which he shall not have been required by the foregoing terms to refund t

party after defraying therefrom the expenses of the investigation and a

cation by the Neutral Body

If the party shall call for arbitration as aforesaid the Executive Adminis

shall promptly deliver a copy of said call to the Neutral Body and an arbi

shall be chosen by the Neutral Body within ten days after the receipt b

Executive Administrator of the Call for arbitration The Neutral Body 

promptly give notice in writing to the Executive Administrator and the 

setting forth the name and address of the arbitrator thus chosen by the N

Body The two arbitrators selected as aforesaid shall thereupon elect a 

arbitrator or if said two arbitrators are unable within ten days after 

appointment to agree upon the selection of the third arbitrator then the 

arbitrator shall be such person as shall be selected by the American Arbitr

Association The award of said arbitrators shall be determined by a vote 

majority of the arbitrators The parties agree to accept and abide by said a

If the award of the arbitrators shall answer the questions submitted to 

355301 0 69 24











jj
j
jj
366 FEDERAL MARITIME COMMISSION

section 18 b 3 of the Shipping Act and section 2 of the Int

Shipping Act each in its respective areas of application T

because any deviation from the rates on file with this Co

violates these sections

These sections prohibit the refunding rebating or remitti

manner or by any device any portion of the rates or charge

in the tariffs on file The Foremost fuel oil contracts are e

the same kind of scheme as that condemned in the Nicholson 

case supra where a section 2 violation was found in addit

section 16 violations

Section 16 First

The examiner found that there was nothing in the record t

anyone was an actual victim of discrimination as a result of 

mostPFEL fuel oil contracts and concluded that section 16 

not violated We agree Test Indies Fruit Co v Flota Merca

colombiana 7FMC66 69 1962

Section 14 Fourth

Hearing Counsel contend that the fuel oil supply contrac

into between PFEL and Foremost constitute a violation of 

Fourth of the Shipping Act This section forbids any commo

by water from making any unfair or unjustly discriminatory 

with any shipper based on volume of freight offered

PFEL points out that this section is aimed at the malp

granting volume discounts to large shippers on the basis 

proportion to the volume of freight offered Moreover argue

this section historically has been applied only to those arrange

which the carrier spublished tariff itself contains the provi

discounts geared to the volume of cargo offered by a favored 

While we perceive no requirement that the particular kind 

arrangement forbidden by this section must be reflected in the 

published tariffs in order to be illegal we do agree with the 

when he stated that there would have to be a discernible rel

between the comnnissions paid to Foremost and the amou

cargo offerings to PFEL before a violation could be establi

CONCLusioNs

Notwithstanding our conclusion that the practices engag

respondents amounted to violations of the Shipping Act w

But see our report in North Atlantic Mediterranean PretgAt ConfeRat

Household Goods Docket No 6649 11FMC202

1
PACIFIC FAR EAST LINESALLEGED REBATES 

regulatory purpose to be served by issuance of an order to cease 

desist

We note that the PFEL Foremost oil contracts were discontin

immediately upon the initiation of this case While mere discon

ance of an illegal practice does not preclude our issuance of a 

rective order it furnishes a persuasive reason why an order is 

necessary especially where as here we perceive 110 probability tha

illegal practices will be resumed

In summary we conclude that in connection with the arrangem

entered into between respondents Pacific Far East Lines and Fore

Dairies Inc whereby Foremost received commissions on the 

of substantial quantities of bunker fuel oil without performing 

mensurate services or incurring actual liability

1 That PFEL violated section 16 Second of the Shipping 

in that it allowed Foremost to obtain transportation for prop

at less than the regular rates or charges then established by un

or unfair means

2 That PFEL violated section 18b3 of the Shipping Ac

that it utilized the said arrangement as a device to rebate ref

or remit a portion of the rates or charges specified in its applic

tariffs then legally on file with this Commission

3 That PFEL violated section 2 of the Intercoastal Shipping 

in that it utilized such arrangement as a device to refund or rem

portion of the rates or charges specified in its applicable tariffs 

legally on file with this Commission

4 That PFEL did not violate section 14 Fourth or section 16 F

of the ShippingAct

5 That Foremost violated section 16 first paragraph in tha

knowingly and wilfully by an unjust or unfair device or me

obtained transportation by water for property at less than the 

or charges which would otherwise be applicable

6 That no violations have been established in connection 

PFEL sfuel oil transactions with respondents Connell Bros 

Ltd and Advance Mill Supply Corp

7 That the practices herein found to be illegal were prom

discontinued upon the initiation of this proceeding and there i

necessity for an order to cease and desist and

8 That this proceeding is discontinued

11 FMO

355 301 0 69 25
368 FEDERAL MARITIME COMMISSION

COMMISSIONER JAMES V DAY CONCURRING AND DISSENTI

I dissent in that I do not find that Foremost Dairies In

section 16 first paragraph Considering as did the exa

custom of reciprocity the fact that PFEL after inquiry 

that the Foremost contract was proper that Foremost also 

to believe that its participation was likewise proper and t

convincing proof of guilty knowledge on the part of eithe

conclude that Foremost cannot be charged with knowingly 

unjust or unfair device obtained transportation at less than 

applicable rates I concur with the other conclusions of the 

including discontinuance of this proceeding

Signed THOMAS L

S

n See USv Illinois Cent R Co 303 US239 1938
FEDERAL MARITIME COMMISSION

DOCKET No 6648

RATES AND PRACTICES OF THE PACIFIC NORTHWEST TIDEWAT

ELEVATORS ASSOCIATION

Initial Decision Adopted March 6 1968

The rates rules and regulations other than the overtime charge conta

in the tariffs of the respondent marine grain terminal operators do 

constitute nor result from unjust or unreasonable practices under se

17 of the Shipping Act 1916

The use of the Frees formula modified in minor respects to fit the circumsta

at a grain terminal is a reasonable method of developing and segreg

terminal costs and allocating these as between vessel and cargo

The institution of a services and facilities charge by respondent marine 

terminals similar to such a charge included in the tariffs of most 

terminals on the Pacific Coast is not an unjust or unreasonable pra

in violation of section 17

Adding an increment to a terminal overtime loading charge as an al

incentive factor to induce the terminal to work during overtime hours 

unjust and unreasonable practice in violation of section 17 when the ove

loading is required by the terminal

Thomas J White and Norman E Sutherland for respondents

George D Rives and GerardK Drummond for petitioners

Karl C Grumman Office of the General Counsel for the interve

United States Department of Agriculture Joseph A Ryan Joh

Kennedy and Charles W Bucy on the brief

Donald E Leland and Robert W Graham for intervener N

west Marine Terminal Association Inc

H Stanton Orser and John C Harley for intervener Califo

Association of Terminal Elevators

Milton A Mowat for intervener Portland Commission of P

Docks

Willard Walker and Thomas J White for intervener Port of L

view

C R Nickerson filed a brief for the intervener California Ass

ion of Port Authorities

Donald J Brununer and Roger A McShea III Hearing Cou

11 FMC 369
370 FEDERAL MARITIME COMMISSION

REPORT

Br THE COMMISSION John Harllee Chairman George 

Vice Chairman Ashton C Barrett James V Day 

Fanseen Commissioners

This proceeding is before us on exceptions to the initi

of E Robert Seaver presiding examiner issued on Augus

Exceptions were filed and oral argument was held on D

1967

The investigation was prompted by a protest filed by th

Steamship Operators Association petitioner in 1966 o

changes in the tariffs of the marine grain terminals in 

Northwest which resulted among other things in sharply 

charges against the vessels

The purpose of the investigation as specified in the o

vestigation is to determine whether the rates rules and 

contained in the tariffs of the elevator operators constitute 

unreasonable practices in violation of section 17 Named a

ents are the members of the Pacific Northwest Tidewater 

Association which operate grain terminals in question

In his initial decision the examiner concluded that the 

and regulations contained in respondents revised tariffs n

stitute nor result from unjust or unreasonable practices in 

of section 17 except as to the imposition of a flat overtime 

57 per hour for loading done at the terminal sbehest whic

to be excessive by 17 per hour

The petitioner association and Hearing Counsel excep

initial decision while the respondent terminal operators sup

examiner sposition

These exceptions fall into two distinct categories The 

disagreement with the examiner sallocation of the costs of 

the waterway and 50 percent of the shipping gallery to th

well as the level of overtime rates charged the vessel The 

directed at the cost accounting methods utilized by the term

tors and approved by the examiner whereby the overall annu

requirements of the terminals was calculated at 107 millio

Petitioners contend that this figure should not exceed 78 m

lars per year

We find that the exceptions of petitioner and Hearing C

essentially a reargument of contentions which were ex

briefed and considered by the examiner in his initial decis

careful consideration of the record the exceptions briefs 

ment of counsel we conclude that the examiner sfactual fin
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

his conclusions with respect thereto were well supported and cor

Accordingly except as noted herein we adopt the initial decisio

our own and make it a part hereof

There is some language in the initial decision which despite 

examiner scareful disclaimer might be interpreted to mean tha

are attemping to subject terminals overall rate structures and le

of return to the same kind of regulation which we exercise over ca

rates under the IntercoastaI Act We do not believe that the 

clusion of the examiner with respect to the reasonableness of 

spondents rate of return on investment or his conclusions concer

the inclusion of leased property in the rate base and respond

method of valuing land and plant facilities were necessary or 

vant to his conclusions under the second paragraph of section 

which is addressed to unjust or unreasonable practices or regulat

Thus in adopting his initial decision we neither agree nor disa

with these conclusions or the reasoning supporting them

An appropriate order will be entered

By the Commission

IssAL THOMAS LISI

Secreta

Page one of the Initial decision containing the headnotes and appearances has 

omitted

11 FMC
FEDERAL MARITIME COMMISS

Docsrrr No 6648

RATES AND PRACTICES OF THE PACIFIC NORTHWEST 

ELEVATORS ASSOCIATION

ORDER

The Federal Maritime Commission instituted this 

determine whether the rates rules and regulations c

tariffs of the respondent elevator operators effective A

stitute unjust or unreasonable practices in violation 

the Shipping Act 1916 and the Commission having 

and entered its Report adopting the examiner sinitial 

Report and initial decision are made a part hereof by re

Therefore it is ordered That the overtime rate o

contained in respondents said tariffs be and the sam

proved provided that respondents modify and amend t

said tariffs by substituting a rate not to exceed 40 p

instances where overtime loading is ordered or reque

minal except that such approval shall become null 

the tariffs so modified are filed with the Commission 

sixty 60 days from the date of service of this orde

By the Commission

SEAL

INITIAL DECISION OF E ROBERT SEAVER PRESIDING 

I BACKGROUND OF THE PROCEEDING

Institution of the Investigation

The Commission instituted this investigation unde

section 22 of the Shipping Act 1916 46 USC816 

1 This decision became the decision of the Commission March 6 1968

THO

372 
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

mine the legality of the revisions in the tariff rates rules and p

tices that were put into effect on April 1 1966 by the respon

marine grain terminals The seven corporations named as responde

operate ten marine grain terminals in the Pacific Northwest on 

Willamette and Columbia Rivers and the Puget Sound in Portl

Oregon and vicinity and Vancouver Tacoma Kalama Longv

and Seattle Washington The Louis Dreyfus Corp Harbor Is

Dock Co North Pacific Grain Growers Inc and Peavy Co 

operate one elevator Cargill Inc operates an elevator at Port

and one at Seattle and Continental Grain Co operates an elev

at Longview and another at Portland The latter elevator is no lo

in operation but it was a going concern at the time of the cost s

upon which the rate changes were based therefore its accoun

data are included in the exhibits and will be considered in this 

sion The accounts of Harbor Island Dock Co were not include

the study because its geographical location and its method of op

tion make it unique and the Cargill terminal at Seattle was no

cluded in the study because the inclusion of one of the Cargill te

nals was considered to be adequate Thus the accounting exh

cover eight terminals No objection was raised regarding the sele

of these terminals and exclusion of the others

All of the respondent terminals except Northern Pacific are o

ated by large grain merchandising corporations that operate o

national and in some cases international scale These corporations 

port 76 of the grain that moves through the terminals All 

15of the balance is exported by the United States Departmen

Agriculture

That portion

USDA

of section 17 that is applicable to this procee

provides

Every such carrier and every other person subject to this Act shall e

lish observe and enforce just and reasonable regulations and practices rela

to or connected with the receiving handling storing or delivery of prop

whenever the Board finds that any such regulation or practice is unjus

unreasonable it may determine prescribe and order enforced a just and re

able regulation or practice

Respondents in the operation of their grain terminal elevators 

other persons within the meaning of section 17 and as that term 

efined in section 1 of the Shipping Act California v United Sta

20 US577 1944

The regulations and practices that are under investigation 

The order of investigation Included the Kerr drain Corporation which operat

1narine grain terminal at Portland but before the bearing this facility was destroye

Ire and this respondent was dismissed from the proceeding

I 11 FMC
374 FEDERAL MARITIME COMMISSION

consist of respondents employment of certain accounting 

and formulas for the development and allocation of costs in c

with their April 1 1966 rate adjustments which increased t

all charges by approximately four percent A list of respon

iff charges paid by vessel owners and by grain exporters a

page 399 The respondents are authorized to adopt uniform 

tariff provisions insofar as the charges assessed against ocea

are concerned by virtue of an Agreement approved under 

of the Shipping Act 1916 and their association is called T

Northwest Tidewater Elevators Association PNTEA 

separate tariffs with the Commission but their rates rules 

tariff provisions are almost identical and can be consider

for the purpose of this decision

The changes in the rate structure increase the charges pa

vessels by about 45 percent while it leaves unchanged thos

paid by cargo the term adopted by the parties to mean 

exporters Prior to the increase the vessels paid 86 perce

tariff charges of the respondents and the cargo paid the bala

the change the vessels pay about 12 percent of the total T

of the respondents were revised in the following respects

1 A service and facilities charge was assessed for the 

against the vessels ranging from 12 to 21 cents per to

loaded on the vessel depending upon the type of v

charge was established on a sliding scale due to the 

in the ease of loading various types of vessels and t

here do not object to the sliding scale if there is to b

and facilities charge at all

2 An increase in 10 percent in the dockage charge in 

stances where the dockage is collected by respondent

terminals the dockage is collected by the public body 

the terminal property In all instances where the ter

Leased to one of the respondents the sums collected 

are paid over by the lessee terminal to the public b

own the respective plants More recently the public b

ther increased the dockage charge on the average of 2

This increase is not under investigation here althoug

in the accounting schedules

3 Elimination of the standby and deadtime charges th

during periods of delay in loading caused by the vesse

4 An increase in the rate for loading grain during pe

time hours which varied from terminal to termina

6930 and 85 per hour to 94 per hour Loading o
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 3

infrequently during the penalty overtime period and the par

have not questioned the legality of this charge

5 A reduction in the rate for loading grain during overtime ho

under the union contracts from between 5670 and 70 

hour to 57 per hour

The amount of the resulting increases and decreases in the charges 

the vessels over a year stime is shown on page 400

The Portland Steamship Operators Association Inc filed with 

Commission a protest against the revised tariff charges and petition

for the institution of an investigation of the practices that led to 

increase in the rates and charges of the respondents The investigat

was instituted at least in part as a result of that protest and petit

and the Association was joined in the proceeding as petitioner in 

order of investigation The Association is comprised of persons ho

ing executive positions with steamship companies or agents of stea

ship companies located in Portland Oregon About 95 percent of t

vessels that load grain at the terminals are operated as tramp irreg

lar carriers Petitioners represent the tramp vessels as well as the f

operators of vessels engaged as common carriers that load grain at t

terminal s

The United States Department of Agriculture USDAint

vened in the proceeding as well as a number of associations of termin

operators the California Association of Port Authorities and t

Port of Longview

The hearing

The hearing was held in Portland Oregon from February 7 19

to March 2 1967 without interruption The 109 exhibits admitted in

the record include many voluminous accounting studies prepared 

the expert witnesses who testified on behalf of respondents petitione

and Hearing Counsel At the outset of the hearing the Examiner 

the company of counsel for all the parties and the accounting witness

visited several of the terminals in order to become familiar with t

physical layout of typical plants and to observe the loading operation

In order to complete this resume of the background of the cont

versy it should be noted that the petitioner filed a complaint with t

Commission on March 31 1964 against some of the respondents co

tending that various rates charges and practices were in violation 

le Shipping Act Docket No 1177 was assigned to the complaint b

before any further proceedings were had in the action the partie

agreed to a settlement under the terms of which the respondents mad

kertain reductions in the charges complained of and the complai

11 FMO
376 FEDERAL MARITIME COMMISSION

was dismissed Under the settlement agreement the respond

to proceed immediately to have a cost analysis of their grai

operationprepared by Philip Linnekin under the princip

Freas formula The agreement further provided that upon c

and review of the results of the study respondents would re

tariffs and make such changes therein as they deemed advi

after such changes were filed with the Commission the 

should be free to take any action with respect thereto as th

advisable

The accountant mentioned in the settlement aggeement 

Linnekin of San Francisco has had a great deal of experie

analysis of marine terminal rate structures having assiste

G Freas in his cost and revenue analysis in connection w

No 640 which involved the rate structures at the marine te

the San Francisco area and having conducted the accou

ysis on behalf of marine terminals in connection with sev

proceedings before the Commission and its predecessors inv

practices of marine terminals

The accounting studies conducted by Linnekin pursuant to 

ment agreement consumed an entire year and their results c

to conclude that there was a deficiency in the revenue recei

respondent terminals from the vessels and that in order to c

deficiency a services and facilities charge should be ins

respondents Gilbert J Parr a transportation rate consu

long experience in rail rate matters reviewed the Linnekin s

testified in support of them

James Laurie who has had lengthy experience in the fiel

portation accounting devoted several months to an analy

financial experience of respondents and their rate adjustme

testified as an expert witness for petitioners William T G

Supervisory Auditor in the Commission sBureau of Finan

ysis also devoted a considerable period of time to a study 

counts of respondents and the Linnekin accounting data an

Mr Gatlin testified as an expert witness for Hearing Couns

plied accounting exhibits reflecting his conclusions Alth

Gatlin and Mr Laurie had not previously conducted a co

based on the Freas formula their testimony demonstrated 

experience in the field of transportation fully qualified them 

in this proceeding

a Terminal Rate Structure California Porta 3 USMC57 1948 The 

and Its preparation are described more fully infra
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

II PRELIMINARY ISSUES

Jurisdiction

Respondents contend that the Commission lacks jurisdiction 

the subject matter of the present controversy on the ground that 

tion 17 does not grant to the Commission authority to investigat

determine the reasonableness of rates of ocean terminals Acknow

ing at least by inference that California v United States supra 

holds the Commission sexercise of jurisdiction over marine term

respondents argue that the California case did not involve the rea

ableness of rates They apparently feel that the Commission can 

into their practices so long as the inquiry doesn tget into the net d

effect of the practices Their contention that this proceeding is a

vestigation of the reasonableness of rates is based on the statemen

the brief by Hearing Counsel that this investigation is concerned 

the question whether respondents rates are just and reasonable a

level and that This means that the Federal Maritime Commissi

now subjecting marine terminals to the same species of regulatio

it has for years domestic offshore carriers under the Intercoastal S

ping Act of 1933

In its recent decision in The Boston Shippring Association In

Boston Marine Terminal Association et al June 28 1967 11 FMC 

a contention like that of respondents was rejected and the Com

sion reason is applicable here 11 FMC 4 footnote 7

Taking the position that this is a rate making case complainants also cont

that we were without jurisdiction They do not however challenge the 

of the strike storage charge and their only concern is with its assessment a

them That the proper allocation of the costs of providing terminal servic

between users of those services is a matter within our jurisdiction under S

17 is too well settled to be disputed now Practices etc San Francisco Bay 

Terminals 2 USMC588 1941 affirmed California v United States 32

577 1944 Free Time and Demurrage Charges NewYork 3USMC89 1

It is not necessary in the instant proceeding to determine wh

the Commission has jurisdiction over a controversy where the iss

the reasonableness of rates of marine terminals like the issues 

tioned by Hearing Counsel as arising under the Intercoastal Act 

is simply not such a case The question involved here is whethe

practices of respondents in their determination and allocation of 

are reasonable It was the respondents themselves who selected the 

eral method for testing these practices namely the application o

accounting as a means of determining whether there is a deficien

terminal revenue or stated in a different way whether the ch

provide a fair return on investment The Examiner and the other 

ties to the proceeding accepted this as a proper method here bu

11 FMC
378 FEDERAL MARITIME COMMISSION

use of this system does not transform this proceding into a r

The fact that that system resembles in some respects the s

mally employed in a proceeding under thhe Intercoastal A

moment The approach employed in determining the reas

of rates differs from that used here in other respects

The respondents introduced into evidence and relied upon 

and report made by Howard Freas in Docket No 640 sup

same method of investigation was employed here as was em

that proceeding Mr Freas pointed out in his report that his 

tion was confined to a cost and revenue study and that it did n

any consideration of the other rate making factors such as v

service and other considerations that go into an investigat

reasonableness of rates Such considerations played little or 

this proceeding either TheUSDAHearing Counsel and 

support the Commission sjurisdiction stating that California 

States clearly supports the authority of the Commission to 

this type of investigation Respondent terminals are an in

link in the transportation system that serves our waterborn

commerce The plan of the Shipping Act would be frustrate

rate payers would be left to the mercies of the terminals 

authorized their collective ratemaking through section 15 

inating rate competition their practices in making the rates 

to be exempt from regulation

Burden of Proof

The respondents and the petitioners each contend that t

of proof in this proceeding is on the other each arguing tha

is the proponent of a rule or order within the meanin

10oof the Commission sRules of Practice and Procedure 

502155 and section 7 c of the Administrative Procedu

USC 1006 cThe APand Rule 10o place the 

proof upon the proponent of a rule or order There is no 

proof on any of the issues in this proceeding and the evidenc

preponderate equally between the antagonists on any issue T

there is no occasion to base any conclusion here on the failu

party to sustain its burden of proof AlcoaSInc v Cia 

Venezulana 7 FMC345 358 1962 This issue therefore 

the case The Examiner has devoted considerable attenti

question of burden of proof in such a proceeding howeve

reached one conclusion with complete conviction It is that m

can be done by an attempt at generalities by way of dic

subject of burden of proof in administrative proceedings 

will be attempted here
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

TheUSDAbrief correctly points out that the various particip

in a regulatory proceeding should see to it that the record is com

for decision and thus avoid having to reach conclusions on the ba

a failure to sustain a burden of proof This has been adequately ac

plished in this proceeding

M TI3E SUBSTANTIVE ISSUES

There is no dispute with respect to the amount of respondents 

enues received during the cost study period which was the year 

ing July 1 1964 under the rates then in effect Furthermore there 

dispute concerning the amount of additional revenue or the total 

nue which respondents would have received during the cost stud

riod had the April 1 1966 rates been in effect during that perio

question is raised as to respondents combining together the fina

experience of all eight elevators in conducting its cost study and 

tioner correctly states that this practice achieves a desirable unifor

of rates The method has been followed in previous Commission 

where as here it is appropriate Pacific CoastPuerto Rico Ge

Increase in Rates 7 FMC525 533 1963 Since the parties did 

contest this method arguments based on differences in net reve

between the terminals are irrelevant

The subsidiary issues in the proceeding can best be describe

riefly enumerating the contentions of the petitioners

1 Only 233 percent of respondents terminal costs shoul

chargeable to their wharfinger operation and the other 

percent charged to the grain dealing operation

2 Respondents property should be included in the rate bas

depreciated original cost rather than the estimated and u

preciated cost of reproduction

3 In the case of the five terminals that lease their plants f

public bodies the value of these properties should not be 

cluded in the rate base for the purpose of testing the adeq

of the revenues

4 Depreciation expense should be based on actual investm

original cost rather than an estimated reproduction cost

5 They question the rate of return as related to rate base

6 They contend that none of the costs incident to the shipp

gallery or the waterway should be charged to the vessel but 

these costs should be charged to the cargo and that only 50 

cent of the costs incident to the wharf should be charged to 

vessel Hearing Counsel andUSDAtake a different pos

4 Those operated by Continental at Longview ADM NPGand Cargill

11 FMC

j
382 FEDERAL MARITIME COMMISSION

The economic life of the terminal structures is generally t

50 years The economic life of the machinery and equipment 

on the average it is about 20 years Depreciation is taken b

vators on a straight line basis and it was applied in this way 

studies here No question has been raised as to the economic 

property or to this method of taking depreciation

A facility not identifiable in the accompanying picture is 

dock which at the various terminals is either a unit separate 

wharf or a portion of the wharf used solely for berthing riv

bringing grain to the terminal It is equipped with mechanic

to discharge the grain onto the conveyor system that move

terminal The berthing facility for barges is used exclusive

purpose and is not considered part of the wharf for this inve

The Formula Employed in Establishing the Rates and Cha

A general structure for a cost formula applicable to mar

nals was first prepared by Dr Ford K Edwards at the tim

a transportation economist for the California Railroad Co

This formula called the EdwardsDifferding formula w

duced in evidence in Docket No 555 before the United States 

CommissionUSMCIn 1946 the Association of Mari

nals in California requested the USMCto conduct a st

practices and formulas for establishing rates and charges 

tion with the formal investigation that ensued Docket N

Commission employed Howard G Freas a rate consultant 

became a member of the Interstate Commerce Commission t

a financial study of the terminal operations and prepare a 

mula Freas patterned his formula almost entirely after the 

Differding formula

Philip E Linnekin who conducted the cost study on 

respondents here assisted Freas in the 1946 study Linnekin 

the Freas and Edwards Differding approach to the develo

respondents costs the allocation thereof between vessel and 

the designation of tariff charges There is no dispute here 

applicability of the Freas formula to a grain terminal 

except that Hearing Counsel suggest that the point of res

USMC

to be discussed later is inappropriate for a grain term

approved the application of Dr Edwards formula 

No 555 and the Freas formula in Docket No 640 and FMB

proved the application of the Freas formula to the termin

Pacific Northwest in Terminal Rate Structure PacificNW 

e Practices etc of San Francisco Bay Area Terminals 2USMC588 1941

4 Terminal Rate Structure California Ports 3 USMC57 1948
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

5 FMB53 1956 Docket No 744 The handling of bulk ca

was included in the operations under study in those cases but w

grain was concerned the method of operation was somewhat diff

than that employed by the respondents here At the time of the e

studies grain was either loaded in bags or by means of a clam

More recently the Federal Maritime Commission approved the 

cation of the Freas formula to modern grain terminals includin

spondents in a proceeding where the terminal charge for wha

was upheld Investigation of Wharfage Charges on Bulk Gra

Pacific Coast Ports 8 F M C 653 1965

The development or identification of the terminal costs is one 

two major goals of the formula and is at least as valuable 

second goal which is the allocation of the costs between vesse

cargo The costs were collectedby Linnekin as they were in the 

study under three general headings plant costs or carrying cha

equipment costs and labor costs including administrative expen

shown in Schedule I which is attached as an appendix This is a r

sample covering just one of the eight terminals It will be note

these costs are prorated between the various physical compone

the terminal Prorating was done on the basis of land area or re

value as appropriate Schedule II also attached demonstrates ho

plant costs and other costs are distributed to the various tariff ch

It should be borne in mind that at the time of the study there w

services and facilities charge and therefore the plant and equip

costs charged against the vessel appear under dockage Schedu

in the attached report sample was compiled for the purpose of 

gating the straighttime loading costs which are chargeable t

cargo and the overtime costs which are chargeable to the vessel I

be noted that the total loading costs in the third column on Sch

II are the same as the total loading costs shown in Schedule III 

schedules are incorporated in this decision in order to portra

method employed Some of the figures thereon must be revis

accordance with the conclusions reached herein on various is

The schedules following the report samples reflect the combine

perience of the eight terminals in the cost study year ending Ju

1964 In allocating the costs between vessel and cargo Lin

stated that it was his intention to use the same general standar

ployed by Freas that is to apportion them in the proportion tha

sel and cargo respectively use the facilities and receive the service

vided This use concept is applied in part at least by holdin

4LL Many additional Schedules are used to refine and explain the baste Schedules 

and III

11 FMC

355 301 0 69 28

RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

respondents as grain merchandisers and no allocation would be 

between vessel and cargo Hearing Counsel srecognition that the w

is an adjunct to a vessel demonstrates that its costs should be 

cated entirely to the vessel under the Freas formula

Apart from their position with respect to the allocation of the 

of the wharf petitioners advance a theory somewhat like that q

above from the brief of Hearing Counsel They argue that since n

80 of the grain loaded at the respondents terminals is exp

by respondents in connection with the merchandising end of 

business 80 of the total costs should first be allocated to the res

ents as grain dealers and only the remaining 20 should be alloca

between vessel and cargo under the Freas formula This argu

overlooks the fact that the revenues shown in the Linnekin sche

include an accounting charge made against the various responden

all of the tariff charges assessable against the cargo exported by 

es grain dealers In some instances the books and records of t

spondents terminals reflect these charges against the merchan

divisions In the other cases Linnekin properly included the e

lent of such charges as revenue As an accounting matter this 

the merchandising operation of respondents in the position 

stranger to the wharfinger operation Under a proper allocat

the costs between vessel and cargo as found herein the cargo 

sessed over 87 of all terminal costs Rsepondents will bear this 

proportion of the costs in connection with their exports of grain 

dual operation need not subject them to the payment of costs exp

for the benefit of others any more than a steamship company 

operates a wharf would have to provide facilities for cargo w

making a charge

Petitioners attempt to draw a parallel between this situatio

the nonwharfinger costs excluded from consideration in the 

formula The latter consist of such non terminal operations as 

doring public warehousing and pilotage There is no analogy be

the exclusion of the costs incident to these activities and the 

ment of truly wharfinger costs on the ground that a separate d

of respondents located far away from the terminal ships grain 

the terminal Intercoastal SS Freight Assn vNWMTAssoc

4 FMB387 195 does not require a different result as con

by petitioners The issue in that case was quite different The qu

there was whether checking service performed by the termin

done for the benefit of the ship or the cargo The Board sdecis

that question has no bearing on apportionment of terminal costs 

the terminal is the exporter of cargo

11 FMC

RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

Shipping GalleryAllocation of Costs Between Vessel and Ca

The parties are in sharp confliot regarding the proper allo

of terminal costs related to the shipping gallery Officials of t

spondents who testified on the subject would assign these costs 

vessel on the theory that the gallery is there for the sole benefit 

vessel They stated that a simple onespout device or shoot le

from the terminal to the vessel would serve the interests of the ter

adequately and that the high speed conveyor and multiple spo

tem benefits the vessel by rapid loading and eliminates delay

would be occasioned if there were but a single spout requiring fre

shifting of the vessel which saves the vessel from 1500 to 400

each day saved Loading the average ship at a single spout el

would take at least 6 or 7 days while only 21 or 3 days are re

at a multiple spout elevator

Linnekin agreed that the gallery serves the vessel in this way 

addition believed that the Freas formula bears out the conclusio

the gallery benefits the vessel because it compares to the aisle 

between the point of rest of the cargo and the vessel at a general 

terminal The point of rest concept will be discussed later Fre

signed the cost of such aisle space to the vessel Linnekin was ma

and admittedly more conservative in this regard than his prin

however and saw some benefit flowing to the cargo in this part 

terminal facilities He urged the allocation of the gallery 5

vessel and 50 to cargo The cargo as well as the ship benefits 

the faster loading and greater efficiency made possible by the g

This enures to the benefit of the seller ultimately by lowerin

loading expenses As a matter of physical use of course the gr

transported by means of the gallery While the advantages of th

lery to the cargo may not be as immediate nor as apparent as th

the vessel the Linnekin position is chargeable to the respondent

ticularly in view of their general staitement at another point th

positions they were advancing herein on all issues were those exp

by Linnekin This is not to say that the proper allocation of g

would necessarily be found to be 100 to the vessel in the abse

Mr Linnekin smore conservative approach It simply means th

are not required to strain and struggle with the question as to 

minor amount if any the vessel should be charged beyond the 

The allocation of 50 to the vessel is a conservative and acce

estimate of the vessel sobligation

The other parties would allocate the gallery solely to cargo 

additional theory that the seller undertakes in the uniform FOB 

contract to deliver the grain to the end of the spout and they 

11 FMC
388 FEDERAL MARITIME COMMISSION

tend that the buyer would be charged twice for the use of th

first as part of the purchase price of the grain and second if 

allocated to the vessel when this charge is passed on to him 

the charter hire or freight rate This theory hinges on the 

made in thebriefs that this cost has in the past been born

grain traders This latter argument is not conclusive becau

borne by the grain traders in the past will continue to be bor

in the future and not by the vessels The terminals make n

directly against buyer of the grain Having found that the

ficiency terminal revenue as will be demonstrated later th

here is Who will bear the necessary increase Whether it 

cargo this increase will onlybe paid and passed along to the 

only once

Furthermore the grain sales contract between USDA

the respondents as grain seller and a buyer of grain does 

mine the propriety of any particular allocation of costs betw

and cargo any more than does the provision of the charte

tween the vessel and the grain buyer who is the shipper Th

charter is on a free out basis and in addition expressly 

the vessel to pay the cost of loading the grain These charte

do not govern the proper allocation of terminal costs betw

and cargo Freas stated

Division of responsibility between shipper and carrier is of no cons

study of this nature The concern is with the responsibilty of 

wharfinger

The sound logic of this axiom also applies to the contra

sion of responsibility between the buyer and the seller of 

and probably with stronger reason First the seller is not 

terminal and second regardless of the identity of the s

more difficult for the seller to include terminal charges i

price than it is for the vessel to pass such charges along to th

Grain prices are determined by the world market while ch

are established by petitioners for this trade alone and can b

to reflect rising cost

The charter and the sales contract alike must be interp

this purpose to mean that the terminal charges will be bo

vessel under the charter and the seller under the sales con

insofar as such charges are assessed against either of them 

neither contract can form the basis for allocating costs betw

and seller cargo However the business practices of the re

as gram dealers and the petitioner carriers as evidence

respective contracts do provide a clue to the explanation of t
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

degree to which each party resists the allocation of costs that 

sibly would ultimately be borne by a third party the buyer an

This factor understandably hardly came to light in the evidenc

the briefs The incongruity of these contracts if they are consi

to be inconsistent cannot be corrected in this proceeding of c

However the respective positions of respondents as sellers of g

and petitioners in relation to their ability to recoup any incr

charges from their customers must be borne in mind

The Freas formula is designed to develop the total costs o

terminal and then apportion them to vessel and cargo in propo

to the use made of the facilities provided and of the services rend

The vessel is held responsible to the wharfinger for all usages and 

ices from but not including the point of rest of the cargo All 

costs are assessed against the cargo Terminal Rate StructureC

forniaPorts 3USMC57 59 1948

Taken in the context of his report the point of rest criterion w

plays such an important role in such allocations was used by 

as a shorthand expression to define the traditional concept as t

respective duties of the carrier and shipper with respect to the tra

of cargo between them for the purpose of ocean transport The sh

is traditionally obliged to bring cargo to a point where it c

reached by ships tackle and the ship has the responsibility to a

the cargo at that pointthe point of restfor loading aboa

vessel

Unfortunately we do not have the benefit of a Freas view as 

point of rest of grain moving through a modern terminal ele

for such facilities did not exist at the time he made his study 

fixed the point of rest for general cargo as a place on the pier 

the ship can reach it if there is no shed or in the shed if there i

In the latter event the aisle space is allocated to the vessel becaus

vessel has the duty to pick up the cargo in the shed and it uses the 

in the process of loading The apron of open wharves not havin

tracks are allocated to the ship for a certain distance 35 feet 

from the pier face that is deemed to be required for the lifting of 

by the ship

The parties are at odds over the location of the point of rest 

grain loaded at respondents terminals Petitioners say it is a

vessel end of the spout as does Gatlin Hearing Counsel depart

way from the view of their accountant and discredits the point o

concept as a factor to be considered in allocating the cost of the ga

Respondents place the point of rest at the terminal end of the ga

saying that it compares to the aisle space in a general cargo termin

11 FMC
390 FEDERAL MARITIME COMMISSION

The point of rest test is not entirely helpful with re

the shipping gallery because of the physical difference be

grain loading and the generalcargo loading operations T

ofship hook concept has no parallel in the case of a vess

grain

If there is an analogy the view of the respondents is mor

because the grain is in continuous motion from the terminal 

gallery until the loading process is completed Also the se

grain brings his grain to that point for loading He emplo

minal for this purpose Physically there is no other place 

can make it available for the ship to load Then the ship u

dores jointly with the services and facilities of the termin

the grain at that point for loading

Elevator employees control the volume of flow of the grai

of grain being loaded in response to signals from the steved

the operation of the system is a joint undertaking between 

elevator the latter acting for cargo The loading facility it

and benefits both ship and grain It costs should be borne j

equally by vessel and cargo

Petitioners argue that the gallery should be treated like Fre

an oil pipeline on the piers in California where none of 

was allocated to the vessel Linnekin correctly points out 

is little if any similarity between the two in cost complexity 

tion Even assuming that some degree of analogy exists thi

son is outweighed by the other considerations described ab

For all the foregoing reasons the practice of the resp

allocating 50 of the expense of the gallery to the vessel is 

sonable under section 17

Treatment of Leased Property

In the accounting procedure incident to the application o

return on investment standard the Linnekin study treats 

spondents that lease their plants from public bodies as th

own the property These five lease their properties on longt

which obligate them for periods up to 35 years The obligat

respondents under their leases have constituted the secur

issuance of revenue bonds by the public body to defray t

improvements The pledge of the faith and credit of these 

ing corporations who operate the terminals has in this wa

uted to capital improvements in the terminals and it de

the degree of the lessees commitment The longterm lease

70 NPGG as sublessee from a railroad company
a

RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

risk and a burden on these lessees that is somewhat comparable 

investment in fee ownership

However the other parties object to this treatment of leased 

erty even though the rental payments are excluded from expens

arriving at the revenue requirements of respondents on the gro

that 1 This method provides a windfall to respondents sin

would give them a return on property they do not own 2 The 

mission in Atlantic andGulf Puerto Rico General Increase 7FMC

87 1962 and its predecessor in AtlanticGulfPuerto Rico Ge

Increase in Rates and Charges 6 F M B 14 1960 excluded ce

rented property from the rate base of the carriers involved in 

cases Hearing Counsel argues in addition that to allow respon

a return on leased property would require the rate payers to p

double return on investment once to the lessor and once to the l

Respondents contend that it is necessary and proper to treat l

property as owned for the purpose of this test because 1 The 

study does so 2 The respondents would be deprived of a pro

they were not allowed to use such property as a part of the base 

3 It is desirable to have uniformity in the accounting method

terminal rates of the respondents and this cannot be achieved wi

employing a uniform measure for the rate base As to the latter 

it can be noted that petitioners favor uniformity in the rates o

terminals

That portion of the Freas study that developed the basic princ

for the development of the costs incident to marine terminal o

tions is at least as valuable and informative as that portion o

system that treats with the al location of these costs as between 

and cargo Freas found that it was desirable to treat leased pro

at though it were owned where a substantial propbrtion of th

minals leased their property and he conducted his cost accou

on that basis in the Docket No 640 study To reject this porti

his conclusions or any other substantial element and attem

apply the remainder would throw the result out of balance

As Freas points out page 28 Ex 1 it is not unusual to 

rented property in this way The Commission and its predecessor 

done so where the prevailing circumstances were such that this 

ment led to the fairest result Hawaiian Inter Island Rates 7FMC

151 156 1962 General Increase in Alaskan Rates and Cha

5FMB48698 1958

The Commission has uniformly employed the fair return te

assessing the reasonableness of rate structures in the offshore dom

commerce The only other means of determining whether alleged 

11 FMC

j

j
396 FEDERAL MARITIME COMMISSION

Return on Investment

An appropirate rate of return on investment has never 

lished in connection with a determination as to what acc

pricefixing procedures employed by grain terminals woul

a reasonable practice within the meaning of section 1

that would be considered reasonable will vary to a degree 

upon the degree of liberality employed in arriving at th

It is of little consequence whether the base is liberal and 

return scant or whether the reverse is true so long as 

properly related It is the end result of the baserate de

that is to be judged in deciding the reasonableness of char

Power Commission v Hope Natural Gas Co 320 US 

Linnekin used the conservative figure of 5a return in 

study but he based this on a valuation of property at un

reproduction cost In his opinion the return should be 12 

cost figures depreciated are used as a base The responden

aspire to a 10 return in their various enterprises and wi

take a proposed venture unless at least such a return ca

ably anticipated Freas proposed a 7 return in his stud

No 640 but theUSMCdid not decide the question of an 

rate of return in that case It is important to note that 

sidered both original cost and reproduction cost in arr

amount of the owner sinvestmenta Here we are using the s

lower original cost figures Since his standard for dete

rate base would produce a higher investment figure his re

rate of return would have to be adjusted upward in orde

an equivalent dollar return

The economic risk incident to the operation of a grain 

at least as great as that of a common carrier by water o

the offshore domestic trade Financial success depends up

and heavy flow of a single commodity through the termin

is therefore greater than that of a general cargo termin

of grain is governed by ever varying circumstances outside 

of the terminal operator such as the effect of weather on th

influence of international relations and national policy on 

aid programs the varying requirements for food among 

of the importing countries and the myriad factors that 

ability to obtain it

8 All rates mentioned in this section refer to a net return after the pay

taxes which including the 6 Oregon excise tax on corporate income wil

50 on the average

See p 55 of his report Ex 1

398 FEDERAL MARITIME COMMISSION

suit that the combined costs of the eight terminals w

by 315799 which is the amount of the excess deprec

in the Linnekin accounting exhibits

Total Costs

The 1033500total elevator costs as reported by Linn

a 10 return on undepreciated reproduction cost This 

justed in accordance with the conclusions reached herei

tracting the 315799 excess depreciation then adjusting 

in order to reflect the valuation and return on investme

in to reflect reasonable practices in these circumstances

Under the method of accounting employed by the 

they include a reasonable return on investment as a cost 

tion to taking depreciation as an expense and come out 

representing an excess or deficiency in total revenue rec

then compared with the amount of the increase in charge

give effect to the conclusions reached herein relative 

standard of valuation and rate base the Linnekin figure o

representing a 10 return before taxes on the combined 

cost of the terminal properties and the land is replaced 

which is a 20 return before taxes on the depreciated 

of the property As adjusted by this correction in the r

excess depreciation the total costs come to 10726848 

In apportioning these costs between vessel and car

sufficiently accurate for our purpose to use the ratio t

and cargo costs bear to one another in the Linnekin sch

method employed by Linnekin in apportioning the costs 

the individual elements of the terminal were estimat

and their depreciation figures were assigned to vessel or 

tated by the application of the Freas allocations modifie

a grain terminal The values of the terminal compo

original cost basis are unavailable but the above rati

sufficiently accurate comparison Vessel costs came to 128

in the Linnekin schedules Applying this ratio to the a

cost 10726848the costs allocable to the vessel are 30

the balance of9353812 represents the costs allocable to 

VII REVENUES

During the period covered by the accounting study th

terminals earned revenues in the total amount of938

14 The panties reached agreement on this figure after the hearing See 

1967 from counsel for petitioners to the Presiding Examiner The prope

as owned depreciation is allowable No contention was made to the contr

15 See Exhibit 58 line 11
j

RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 

ployed by the accounting witnesses this will suffice An attemp

set forth all the numbers that underlie these results or settle ev

disagreement on minor accounting details would unduly extend 

decision and would only cloud the explanation of the real basis for 

conclusions reached

The briefs of petitioners and respondents argue at length over 

counting details Cost finding is not an exact science and any cost 

revenue study upon meticulous examination may be criticized for

of precision or inconsequential errors All that is required in tes

the accounting evidence is a reasonable approximation of assign

costs and revenues based on appropriate methods of apportionm

Increased Rates on Sugar 7 FMC404 411 1962 Due consid

tion has been given to every aspect of the accounting studies of 

parties and it would add nothing to belabor this report with deta

comparisons of one with another

11 FMO

Ix TARIFF DESIGNATIONS

Service and Facilities Charge S and F

The respondents initiated the use of an S and F charge in connec

with the general adjustment in their rates and as a direct resu

the Linnekin cost study At the same time they discontinued 

standby and deadtime charge which accounted for a total of 3016

in revenue for the cost study year The latter charge became abso

in the S and F charge

In addition the S and F charge is designed to cover the elev

costs apportioned to vessel for a share of the wharf and 50 o

shipping gallery Also included in the charge are the relatively m

costs attributed to the use by vessel personnel of miscellaneous f

ities furnished by the terminal such as lunchrooms toilets offices 

by supercargo and other vessel personnel parking areas police 

fire protection plus electric power to the vessel and liaison serv

between the terminal and the vessel

A substantial part of the evidence in this lengthy hearing was 

voted to conflicting testimony over these latter miscellaneous it

Petitioners spent much time resisting the liaison cost In the abs

of bookkeeping records that would permit a precise determinatio

the total amount of this cost Linnekin estimated this cost at 700

representing the time of one 9000 per year employee at each term

The services consist of answering telephone calls for the ship 

concerning the ship carrying messages and information to and 

the ship coordinating the loading operation and the like Officia

respondents testified that a more reasonable estimate would be t

j
404 FEDERAL MARITIME COMMISSION

sulted from a deficiency in the total revenues received by 

nals from the vessels and not from a deficiency in dockage

Hearing Counsel andUSDAsobjection to the S an

stems mainly from their disagreement with the allocation o

the shipping gallery and wharf as between vessel and cargo 

ters are discussed elsewhere in this decision It should be rec

cidentally that Freas recommended thatUSMCconsid

all terminal costs to vessel and none to cargo since all su

passed along to the buyer ultimately regardless of their in

tionment This would avoid the complicated apportionmen

tween vessel and cargo The objection to such a course is th

effect it would have on long established tariff chartering 

sales practices and it probably could be accomplished on

making proceeding of general applicability

Hearing Counsel also argue that since the wharf is n

in the description of the property leased in three of the ter

Linnekin incorrectly included these wharf costs in arriv

and F charge The reasons for this omission of the word w

leases was not explained since the matter was raised for t

in the brief but the terminals enjoy the exclusive posses

wharves and the wharves must be considered to be part 

sideration for which the rental is paid Therefore the cos

the wharfs were properly included

The tariffs of respondents define the S and F charge as 

Service and Facilities Charge is the charge assessed ocean vessels 

operators or agents which receive or discharge cargo at the term

use of terminal working areas in the delivery of cargo to or from 

and for services in connection with the receipt delivery care custo

of cargo required in the transfer of cargo from shippers their age

ing carriers to or from ocean vessels

Non Service and Facilities Charge does not include any c

loading or unloading operations nor any labor other than tha

volved in performing the services nor any services or facilities 

which is included in other individual charges

This definition is quite similar to that in use by other 

the Pacific Coast The Chief of the Commission sDivis

minals Eugene P Stakem testified that he does not objec

erality of the terms in which this definition is phrased 

find fault with this aspect of the definition but they do not 

substitute The only alternative would be some definition 

attempt to itemize the services and facilities for which t

made There would be some merit to this because it w

eliminate the possibility that the terminals could change 

406 FEDERAL MARITIME COMMISSION

TheUSDAopposition to the increase in charges asses

the vessel directed primarily at the S and F charge is bas

concern that this increase will result in increased freight rat

attendant diminution in the amount of grain that can be pu

foreign governments under the PL 480 programs This 

purchases was not shown to have materialized but even if 

the respondents could not be expected to subsidize the p

adhering to tariff rates that do not provide a reasonable ret

The United States Government at times provides a 

American exporters of wheat in connection with the aid p

permit them to compete successfully with foreign markets 

no subsidy of this kind is being paid Even if it were or 

payments are required in the future this will not resul

increased terminal rates because the increases are not p

exporter

USDAmay be required to pay part of the increases be

of the grain is required to be shipped on United States 

under PL480 andUSDApays the difference between 

flag freight rate and the American flag freight rate Ass

foreign flag vessel owners do not raise their rates as much as 

icans as a result of the terminal rate increase which ha

proved this would increase the Government sexpenditures 

the Government is not excepted from the rule that requires 

the services of a regulated industry to pay a rate that prov

return

Wharfage

Wharfage is the tariff item charged to cargo for the us

facilities that is assessed on all grain received therein whe

such grain is eventually delivered to the vessel TheUSDA

testified that this definition was changed at the time the 

revised on April 1 1966 and he and Hearing Counsel ra

objections to the definition The record does not bear out this 

for the earlier tariff of Continental Portland Elevators r

the April 1 1966 revision contains the same definition Ex 

The objection is primarily that the definition is so vague 

tain that it does not disclose the services or usages cove

charge The definition of wharfage in Commission Genera

not mentioned by the parties is not applicable because it cove

assessed against both vessel and cargo No proposal was ad

this proceeding for a more precise definition It is sugges

definition for wharfage better suited to terminals that 

services and facilities charge be devised for general use by 
RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 40

mission sstaff if they do not consider the one presently in use at su

terminals to be adequate The use of the name wharfage comes fro

an ancient practice and the name itself is probably a misnomer toda

since it does not include the use of the wharf at such terminals

Overtime

Petitioners and respondents are also in complete disagreement ov

the reasonable amount to be charged the vessel for overtime loadin

This charge appears in the tariffs as the overtime flat charge Lind

the terminals labor contract overtime is paid to the workmen befo

800 am and after 3 00 pm weekdays and all day Saturday Sunda

and holidays Vessels loading during these periods are charged ov

time at the rate of 57 per hour under the new rates This constitutes 

decrease overall from the previous rates that varied between t

terminals from 5670 at Peavey to 70 at Archer Daniels Midlan

The average revenue per hour under the old rates was 6852 For 

total of 5089 hours overtime loading in the study year 348706 w

charged This charge is assessed during overtime in addition to t

normal straight time loading charges assessed against the cargo Gra

terminals on the Gulf Coast and on the Great Lakes assess overtim

charges that are substantially higher than those of respondents

The overtime work performed during the cost study year was 

quested by the vessels about 85 of the time and by the terminal abo

15 of the time Overtime charges at the grain terminals are le

than the cost to the owner of an idle ship and where the vessel 

loading both grain and general cargo for a single voyage less th

overtime charges at general cargo terminals When the terminals 

quire overtime loading it is sometimes because of a backlog of rail ca

awaiting unloading This has on occasion resulted in a rail embar

at the terminals but not frequently At other times the terminal h

required overtime loading because other vessels are waiting to loa

The terminals prefer not to load during overtime periods becau

they cannot find equally good workmen for employment during ov

time hours with a resulting slow down in the rate of loading Th

have also experienced casualty losses at night in a few instance

through the loading of the wrong grade of grain requiring them 

unload the grain at their expense The evidence in the record in rega

to the percentage of the time there is a vessel at the wharves show

that terminal space is normally available during straight time loadin

periods

The tariffs of respondents give the terminals the right to refuse 

Load during overtime hours There is no evidence that this right h

been exercised An inference can be drawn that the reason for this 

11 FMC

RATES OF PACIFIC NORTHWEST ELEVATORS ASSOCIATION 40

cost accounting Furthermore any reduction in overtime loadin

charges would have to be picked up by increasing other charges if th

terminal is to avoid a revenue deficiency At least a part of this woul

fall to the vessels

However it is manifestly unfair as petitioners contend for th

terminal to receive an incentive increment in the overtime loadin

charge when the overtime loading is done at the request of the te

minal Indeed it would seem more fair for the incentive factor t

weigh in favor of the vessel For this reason the inclusion of th

factor is found to be an unjust and unreasonable practice when th

terminal requests overtime loading In the Linnekin figures the ince

tive factor amounts to at least 700 per hour It actually exceed

this because the prorating done by Linnekin is questionable as to som

items and respondents have been given the benefit of the doubt due t

the incentive feature In arriving at a reasonable charge where the te

minal orders the overtime the element of increased costs for unloa

ing cars also cannot be taken into account The charge should be furthe

reduced in order to provide an incentive to the vessel It is conclude

in the light of these considerations that an overtime loading rate i

excess of 40 per hour must be deemed to be the result of unjust an

unreasonable practices in those instances where the terminal orde

the overtime

The form of charter parties often employed by petitioners place

the cost of overtime loading on the charterer when it is ordered by th

terminal On occasion the vessel owner acting through his agent ha

requested the terminal to require overtime loading so that the co

would be borne directly by the charterer and the terminals hav

acceded to the request It is hoped and expected that this highly que

tionable practice will cease The reduction of the overtime loadin

charge to a cost basis as provided above should eliminate the tempt

tion of the terminal people to go along with this practice the legalit

of which it should be noted is not the subject of this proceeding

Hearing Counsel urged with considerable emphasis in connectio

with overtime and other charges that direct charges of costs shou

oe made rather than charges based on the derivation of estimated cos

through prorating and estimates The point is a sound one but 

cannot be done when the books do not reveal the costs in separa

accounts for all the different services and facilities provided Whi

the prorating is troublesome this record will not support a conclusio

that uniform systems of more detailed accounts would have to be r

quired in order for the Commission to investigate the reasonablenes

11 FMC
410 FEDERAL MARITIME COMMISSION

of terminal practices No other means suggests itself for a

the end sought by Hearing Counsel

Billing Practices

Hearing Counsel also object to billing practices of re

those instances where they bill self trimming vessels 14 

for S and F when the charge should have been 10 cents m

the vessels had slowloading wing tanks This departs fr

rate and is therefore unlawful The practice is beyond the 

investigation however In the course of the hearing when 

came to light reminding respondents of their duty t

precise terms of their tariffs they expressed an intenti

tinue the practice

ULTIMATE CONCLUSION

For the foregoing reasons after careful consideration 

as a whole and based upon the material facts therein it 

that that the rates rules and regulations contained in the 

respondents do not constitute nor result from unjust or 

practices in violation of section 17 except that the overtim

of 57 per hour in those instances where overtime loadi

or requested by the terminal was adopted as a result of s

The rate for the overtime flat charge when overtime load

or requested by the terminal would not exceed 40 per 

lished in accordance with just and reasonable practices 

rate of respondents for the overtime flat charge when 

orders or requests the overtime loading shall be cancele

ents immediately when this decision becomes final and 

substituted therefor that shall not exceed 40 per hou

herein to be the maximum rate that could be adopted by 

and reasonable practices within the meaning of section 17

An appropriate order will be entered to carry out thes

and to discontinue this proceeding

Signed E ROBERT 

Presiding 
j
j
Line No

RATES OF PACIFIC NOR r1iwLST ELEVATORS ASSOCIATIO

REPORT SAMPLE

Schedule III Loading Costs

Cost item

Totals Straight

From time O

Schedule II

Plant Costs

1 Headbouse 49 671 49 671

2 Shipping gallery 29998 29993

3 Other 1 125 I125

4 Total plant cost 80794 80 794

Equipment Costs

5 Shipping gallery 16 018 16 018

6 Elevator legs 14 070 14 070

7 Conveyors 18760 18760

8 Roadhouse 14499 14499

9 Pollution control 897 897

10 Automotive 59 59

11 Total equipment cost 64303 64303

12 Handling labor 16089 142811 

13 Maintenance 1303 10024 

14 Sanitation etc 5419 4146 

15 Supervision 23 097 17 669 

16 Elevator clerical 8 717 6 669 

17 Total labor cost 211 226 181 319 

18 Other elevator expense 13 569 12 212

19 Administrative expense 41 984 37 786

20 Total costs

11 FMC

411876 376414
jj
jjjj
j



420 FEDERAL MARITIME COMMISSION

counting practice was later implemented by the addition 

conference tariff of a note which provided

Individual carriers may at their discretion discount these rat

amount not exceeding 30 All cargo carried at such discount pu

this rule shall be reported to the Conference Secretary for appropr

with the Federal Maritime Board

The 30percent discount rule of the conference meant that t

vidual member lines of the conference would be authorized 

rates on iron and steel moving to the destination areas of the 

ence with the conference rate discounted to a maximum of 30 

This meant that each individual line could theoretically have 

a different rate on steel and that the percentage of discou

vary from 0 to 30

The conference explained that this method had been emplo

device to meet outside independent competition and that a

to the conference sview of the procedure discount rates we

erable to open rates because under the former the fidelity 

tract signatories would be retained whereas under the la

shipper would have to be released from his contract obligation 

the period of open rates

The conference also suggested that because of large prospect

ments under the Agency for International Development AI

grams to India the conference decided to allow its member line

wished to compete for such shipments to discount the conferes

on iron and steel items

Prior to the institution of this discount rule many of the 

iron and steel had been open but effective July 1 1961 all i

steel rates which had been open were closed and reinstated 

original contract and noncontract rates

Pursuant to the discount rule conference member lines pr

to publish their discounted rates Consistent with the theory th

discounted rates were discounted conference dual rates the 

lines usually published both discounted contract and noncontra

However no traffic moved on discounted noncontract rates

This discounting practice continued in effect until short

the institution of this proceeding

The institution of this proceeding was the subject of a di

3 The items to which the discount provision applied were bars plain NOS

not coils or rolls bars in coils billet ends and billets forgings pig plates 

or bent plates curved or bent sheets in coils sheets plain galvanized or c

strip in coils strip flag not coiled tinplate and terneplate waste t

terneplate wire plain or galvanized wire rods except welding wire short

11 
CONTRACTNONCONTRACT RATES OF ITEM 735 NOTE 2 

by the conference at its meeting on October 1 1965 At this mee

the conference approved a motion to delete its provision permit

discounting of rates on iron and steel articles by as much as 30 per

On October 13 1965 at another meeting the conference agree

open certain rates on iron and steel The conference then sent a 

gram to the Commission announcing that the rates on some 16 

and steel commodities were now open to all ports effective Octobe

1965 By opening these rates the conference apparently hoped to 

isfy objections to its discount system and to obtain discontinua

of this proceeding The telegram also noted that as of its date 

single open tariff rates of the individual lines for these 16 commod

in the conference stariff would be shown at the same level as the 

mer contract rates which had been on file currently for these l

In accordance with the telegram above the individual lines in 

of their existing dwd sets of rates on the 16 iron and steel arti

published new single rates on each of these items Simultaneousl

sane of these 16 items the individual lines published superse

lower rates many of which were restricted by the United States

member lines to certain ports of origin in the United States Man

the discount rates previously in effect likewise had been restricte

certain ports of origin

The discount system as such was ended in October 1965 on th

iron and steel articles which constitute the heavy tonnage movem

to India and Pakistan Nevertheless although the discount sy

under the 1961 65 modus operandi was gone the rates to the ex

which they had been discounted prior to October 15 1965 bn th

items remained substantially in effect after that date under the 

open rate nomenclature Not only the rates in dollars and cents 

also the port restrictions remained substantially as before

The conference filed a motion to dismiss this proceeding on 

ground that the discount provision in issue was discontinued 

denied the motion to dismiss and specifically stated in an ame

order that we desired to determine the lawfulness of respond

practices instituted since the commencement of the proceeding

Portrestricted rates

As mentioned above many of the conference members had 

counted rates on iron and steel which discounts were restricted a

certain ports of origin in the United States While American flag 

in the trade namely American Export Central Gulf and Isthm

adopted such restrictions the foreign lines in the conference did 

Both American and foreign lines employed restricted rates as to p

of discharge on foreign soil

11 FMC
422 FEDERAL MARITIME COMMISSION

Restricted discounts had been instituted both under the ta

count provision and under the subsequent open rate provision

The record shows many instances of portrestricted disco

US ports Generally the Port of New York has not been giv

counts similar to those obtained by the socalled outports of Ba

Philadelphia New Orleans and Mobile

Among the three ports Philadelphia Baltimore and New Yo

ference tariff No 11 shows that in 1965 discounted rates were 

for shipments of sheets tinplate billets plates bars citting

strips with the discounts limited to Baltimore only on seven oc

Philadelphia on two occasions Philadelphia and Baltimore 

occasions and New York on one occasion in addition discoun

granted on Ialtimore shipments along wi th New Orleans and 

on five occasions and on I3aitimore and New Orleans shipments 

occasion

In late 1965 and early 1966 discounts were granted on sh

from Baltimore alone on 21 occasions Philadelphia alone on 

casions Philadelphia and Baltimore on seven occasions New 

and Baltimore on three occasions and New Orleans Mobile an

more on four occasions The discounted rates were for billets 

tinplate terneplate bars plates pig iron and stri ps

No discount rates from New York were offered during the la

and early 1966 period During 1962 however several discou

on various items were established for New York In 1963 o

discount was established for New York Again however Phila

and Baltimore received discount rates on many more occasio

did New York during these 2 years

The Port of New York Authority Port Authority winc

vened in this proceeding has strongly objected to the portre

discount rates The Port Authority suggests that the discount r

the cause of the change of position of the Port of New Yor

spect to its percentage share of iron and steel shipments handl

facts are that New York s position has deteriorated and th

Authority would attribute it to the discount rates

The record shows that in 1960 Baltimore and New York wer

equal on a tonnage basis in iron and steel exports to India an

stan The picture had changed by 1964 when Baltimore hand

largest tonnages generally but other ports such as Mobile New 

and Philadelphia were ahead of New York on export of certa

and steel items From 1960 to 1964 the Port of New York did 

ground in terms of tons handled but it did lose in the sense 

failed to gain the percentage of new tonnage that it would hav

to obtain

11 
CONTRACTNONCONTRACT RATES OF ITEM 735 NOTE 2 4

It should be pointed out that most of the increased tonnage in 

years 1960 to 1964 was generated by AID Throughout this period 

United States through AID has been supporting the industrial 

velopment of India and Pakistan by grants and loans for the proc

ment of materials in the United States conditioned on the utilizat

at least in part of Americanflag vessels for the transportation 

materials to the recipient countries

There was an increase in exports of steel mill products from 

ports in the United States to Pakistan and India between 1960 

1964 The AID program was the predominant factor in the increa

AID financed between 90 and 100 percent of one large steel c

pany sshipments to India and Pakistan AID policy does not 

ferentiate between any United States port nor does it favor any pa

ular port for the loading of AID cargo

In its attempt to show that the portrestricted discounts were ju

fied the conference through the manager of Central Gulf sou

to show that loading costs of steel are relatively higher at New Y

than at Baltimore Mobile and New Orleans The Port Autho

objected to introduction in the record of specific cost estimates in

form of stevedoring rates and loading costs but the testimony 

allowed

The testimony was to the effect that the allinclusive straight t

stevedoring costs per ton of Central Gulf were 433 at New Orlea

212 at Mobile 607 at Baltimore and 1285 at New York 

overtime and extra labor were included the allinclusive costs per 

were 704 at New Orleans 363 at Mobile 659 at Baltimore 

1436 at New York

Certain cost experts employed by the Port Authority for this p

ceeding were offered the particular invoices on which Central G

computed its costs for inspection but they refused to inspect 

invoices on the ground that in their view it would be meaningless

The Port Authority asked that the stevedoring cost data be stric

from the record The examiner refused but he stated that objecti

of the Port Authority would be given consideration insofar as t

affect the weight to be given the stevedoring cost data

DxscussloN

This proceeding involves two separate areas of consideration 

must consider the conference sdiscount tariff provision in relation 

he requirements of sections 14b and 18 b of the Shipping Act 

must also consider whether the practice of the member lines of 

conference whereby they restrict the applicability of discount rates 

11 FMG
424 FEDERAL MARITIME COMMISSION

iron and steel items to certain United States ports of loading 

lative of section 16 or 17 of the Shipping Act

Discount tariff provision

The examiner determined that the discount rates of the ind

lines established pursuant to the conference discount tariff pro

were not conference rates because they only applied to the traffic 

individual lines The examiner also determined they were not 

exclusive patronage dual rate contracts because although the

published in dual form the individual lines did not have ex

patronage contracts

The examiner then concluded that the dual rates of the ind

lines and their attempt to retain the exclusive patronage of the 

signatories to the conference sdual rate contract by means of 

count tariff provision were unlawful under section 14b of the a

examiner further concluded that the discount rates under th

discount provision were really open rates with a 30percent ma

discount Open rates are not conference rates and do not bind c

signatories

Because the discount tariff provision has been removed fr

tariff the conference and its member lines were found to no lo

in violation of section 14b

On this issue the conference argues that the use of the d

rate system was entirely proper The conference feels that the d

rates on iron and steel items were regular conference contract a

contract rates and were so published in the conference tariff jus

other conference contract commodity rates are published In t

ference sview the discount rates differed from open rates inas

there was in effect both a conference contract and noncontract 

these commodities That individual lines could discount up to 30 

from these conference rates changes nothing in the view 

conference

Hearing counsel on the other hand argue that the conference d

scheme amounts to a subversion of the intent of section 14b of 

as interpreted in the Dual Rate Cases 8 FMC16 1964 H

counsel sposition is that the discount rates of the individu

are nothing more than open rates inasmuch as the aim and impl

tion of both open and discount rates are identical Being ope

the conference cannot bind contract signatories to exclusive pa

and the conference would have to give 90 days notice of the re

the rate to the dual rate system Dual Rate Cases supra H

counsel conclude that the use of the discount rate device to av

11 
CONTRACTNONCONTRACT RATES OF ITEM 735 NOTE 2 4

open rate requirements is a violation of section 14b and the Dual R

Cases supra

Our conclusions are basically in agreement with the position 

Hearing counsel and the decision of the examiner However we f

that further discussion of the matter is warranted with the hope t

such discussion might provide ground rules for future confere

conduct of this character

The order of investigation specifically posed the question of whet

the conference had suspended the application of the dual rate sys

on iron and steel items and thereby opened rates on these items a

result of its discount tariff provision

Pursuant to the conference tariff provision individual lines are f

to discount rates on certain iron and steel items up to a maximum 

30 percent The conference retains both a contract and noncontr

rate which constitutes the rate from which the discount is comput

By means of the discount provision it is possible that each c

ference member will have a different rate on the iron and steel ite

Such a result is totally inconsistent with the idea of dual rate exclus

patronage contracts as provided for in section 14b of the act A c

ference dual rate system contemplates the existence of a contract r

and a noncontract rate which are identical for each member of 

conference The Commission has recognized that rates can be opened 

a conference but when opened contract signatories are not bound 

the dual rate contract Dual Rate Cases supra

The conference here has attempted to retain the exclusive patrona

requirements while departing from the standard dual rate structure 

sought to do so through the device of the discount rate with a ma

mum subject to control by the conference As hearing counsel and 

examiner suggested however discount rates as maintained by 

conference are no more or less than open rates with a 30perc

maximum discount

In every respect except that the discounted rates are posted on b

a contract and noncontract basis the aim and implementation of b

open and this conference sdiscount rates are identical Open rates 

typically instituted to allow conference members to meet outside no

conference competition The conference has stated such was the p

pose of instituting their discount rate provision The method used 

a conference in effectuating discount rates is substantially the sa

used in effectuating open rates Each individual member has the opti

of either discounting steel rates up to the 30percent maximum 

retaining conference rates on steel When a conference declares rat

open each individual member line has the option of setting 

11 FMC

CONTRACTNONCONTRACT RATES OF ITEM 735 NOTE 2 42

Finally the conference excepts to the examiner sgeneral conclusio

that the conference sdiscount tariff provision quoting contract an

noncontract discount rates and presuming to bind contract signatorie

to exclusive patronage was unlawful under section 14b The conferen

argues that although the Commission in the Dual Rate Cases discusse

open rates it considered only the conventional open rate procedu

when it determined that contract shippers would be released on ope

commodities The conference argues that since this discount schem

is not a typical open rate procedure the Dual Rate Cases does not pr

clude a conclusion permitting the contract shippers to be bound o

the discount rates The conference feels that no violation of sectio

14b therefore can be predicated on the conference sattempt to 

bind the contract shippers

The answer to this argument is that we thoroughly considered t

question of dual rate contracts and departures therefrom in the for

of open rates in the Dual Rate Cases There we laid down the groun

rules to be followed in the establishment and use of open rates b

dual rate conferences We did not there provide for the type of d

count system advocated now by the conference Neither can we no

decide to permit the conference suse of their discount system wh

retaining exclusive patronage contracts over users since to do so wou

be inconsistent with our reasoning in the Dual Rates Cases and sectio

14b of the act

The order of investigation also raised the specific question 

whether the conference is complying with section 14b of the a

which declares that the spread between ordinary rates and contra

rates shall in no event exceed 15 percent of the ordinary rates

The examiner stated that since there were never any dual discou

rates lawfully in effect during the period of the discount tariff rule 

issue the question of the 15percent maximum spread between contra

and noncontract rates is academic He further stated that even 

these discount dual rates had been lawful dual rates in other respec

there is no showing of a spread greater than 15 percent between th

contract and noncontract rates on any specific iron and steel item

In respect to the issue of the 15percent spread we would like to ca

tion that the conference sdiscount tariff provision could in theo

result in a violation of the Act Assume one conference member take

full advantage of the 30percent discount provision and another co

ference member chooses to effect no discount In such a case the sprea

between the contract rate of the discounting member and the nonco

tract rate of the other member would exceed 15 percent However 

the examiner found there is no showing in this case of a spread great

11 PMC
428 FEDERAL MARITIME COMMISSION

than 15 percent between the contract and noncontract 

specific iron and steel item

Other issues relating to the tariff discount provision w

the order of investigation and dealt with by the exam

exceptions being taken thereto We endorse the examines

these points and briefly paraphrase them here

1 The record does not show any violation of section 1b 

3 which concern the publication of increased rates o

and the collection of rates otherthan those specified in tari

2 The record does not show that the conference has fail

with section 14b 2insofar as it provides that tariff rat

contract be not increased until they have been in effect at 

and insofar as it requires 90 days notice on rate increases

3 There was and is no unlawful section 15 agreemen

individual lines

4 There has been no agreement in violation of sectio

Merchant Marine Act 1936 to prevent or attempt to prev

carrier from serving any port at the same rates which it c

nearest port already regularly served by it

Port restricted discount rates

The examiner concluded that the differences in disc

specific ports were not the proximate cause of any disad

rather it was the preferences of the shippers for the outp

tion of the steel mills difference in port facilities chara

and other factors such as loading costs which were the pro

of the disadvantage to the Port of New York He conclu

facts herein are inadequate proof of unjust discriminatio

unlawfulness under sections 16 and 17 of the act and that 

of section 16 First and 17 of the act have been shown

The Port Authority throughout has insisted that the 

York has been and is being subjected to unjust discrimin

due prejudice and that the competing ports of Baltimo

phia New Orleans and Mobile have been unduly preferr

of port restricted discount rates In general the Port A

tends that reduced or discounted rates came first and that 

induced to follow these reduced rates at particular loadi

as Baltimore to the detriment of the Port of New York

The conference and Hearing Counsel have contended th

other factors besides the ocean rates which attracted ste

ports that the cargoes came first to the outports and tha

rates were induced to follow the cargoes
CONTRACTNONCONTRACT RATES OF ITEM 735 NOTE 2 4

We are unable on the present basis of the record to come to a det

mination of the section 16 and 17 issues in relation to the practice 

restricting discounted rates on iron and steel to certain USports 

loading

The present record shows that the percentage volume of iron a

steel moving through the Port of New York has decreased significant

since 1960 The Port Authority attributes this decrease to the co

ference member spractice of charging higher ocean rates on iron a

steel items loading at the Port of New York than they charge on t

same items loading at the Ports of Baltimore Philadelphia etc

The respondents and hearing counsel on the other hand have offere

several explanations for New York slower proportion of the iron an

steel business These factors are offered to show that they rather tha

the restricted discount rates put New York in its current unfavorab

position

While the factors of shipper preference steel mill location chara

ter of cargo and port facilities tend to show that the iron and ste

would have moved away from New York even if there had been no d

count

rate disparities

they do not in any way serve to justify the conference membs

Of all the factors considered by the examiner only two comparativ

loading costs and carrier competition can actually be justification f

rate disparities

When the conference adopted its rate policy it chose to have unifor

rates as to commodities from all USports of loading in the trad

area The conference members continued this policy from its inceptio

until they adopted the subject port restricted rates on iron and ste

The subject discounts on iron and steel are the only portrestricte

rates on any commodity that the conference members have adopte

Having established a policy of uniform rates from all USports o

loading and continuing such policy for a considerable length of tim

the conference members should be required to adequately explain an

departure from such basic policy This the conference has attempted 

do However as mentioned above the only factors offered in explan

tion for such departure which are actually relevant to or can be offere

in support of such departure are that it was justified to meet compe

tion or that it was justified on the basis of comparative loading costs 

the various ports

This is where the final determination of this case becomes troubl

some on the basis of the present record

In respect to comparative loading costs at the various ports th

record is not conclusive The conference testimony on this subject in

dicates that such costs are higher in New York than in the other port

11 FMC
430 FEDERAL MARITIME COMMISSION

involved However the figures submitted were offered f

purpose ie to show general cost relations and not to sho

relationship between any difference in loading costs and 

ocean rates at the various ports Indeed in view of the v

tions to this testimony and the failure to include under

the record it cannot be concluded with certainty that 

New York are higher More important it cannot be con

sort of relationship exists between the difference in costs 

parity in rates and whether such cost differences migh

disparity

In reference to the issue of carrier competition and wh

counts were justified to meet such competition the eviden

scant The record shows the existence of nonconference 

nowhere does it show any information as to specific rates 

riers or whether such rates might justify the conferens

discount rates

In view of the above mentioned circumstances we ar

this proceeding for the purpose of obtaining evidence co

differences incurred by conference carriers at the various 

tion and for the purpose of determining the actual exist

conference competition faced by the conference at the va

question including evidence as to the rates of both co

nonconference lines Finally we ask the examiner on rem

mine whether any of the information gained on remand 

justification of the rate disparities in question

An appropriate order will be entered

Vice Chairman Hearn concurring and dissenting

I concur in the report of the majority in the finding o

of section 14b of the Shipping Act 1916 I dissent from th

the majority to remand the case to obtain more evidence as 

of sections 16 and 17 of the act I believe the present re

indicates and sufficiently sets forth evidence of such viola

The record in this case shows beyond doubt that since 

by the conference in 1961 of the port restricted discoun

position has deteriorated with respect to the handling of 

exports In 1961 New York was the country sleading p

for iron and steel In 1964 New York ranked second or 

such ports The percentage of iron and steel moving throug

thus substantially decreased from 1960 to 1964 as a resu

ference quoting a higher rate out of New York

The practice has been continued by the conference members under ope
CONTRACTNONCONTRACT RATES OF ITEM 735 NOTE 2 4

Shortly after this proceeding began ancl in my opinion as a res

thereof the conference claimed to have ended the discount system 

1965 and requested the Commission to discontinue the proceeding T

Commission declined to do so and the record reveals that althou

the conference sprocedures were changed in 1965 the substance of t

discount system remained The port restricted discounts continued su

stantially as before except that they were designated open rates Thu

the conference and its members have not changed their practices sin

1961 but only attempted to further disguise them in 1965 It should 

noted here that until 1961 the conference and its members maintain

uniform rates as to all commodities out of all United States ports in t

trade area and since 1961 this policy has continued as to all co

modities except iron and steel

There is no dispute as to these facts and they are acknowledged by t

majority herein In my opinion it is equally beyond dispute that t

decrease in cargo carryings out of New York was the result of t

conference member spractice of charging higher rates out of Ne

York than out of other ports such as Baltimore Philadelphia a

Mobile and that the discounts on their face are discriminatory a

prejudicial to the Port of New York

The majority report finds and I agree that various factors 5 offer

by the respondents in justification of the discounts are irrelevant 

the question of violation of sections 16 and 17 Two other facto

however are accepted by the majority as valid reasons for the d

counts if they can be supported by further evidence They are co

parative ports costs and nonconference competition To raise the

factors as possible justification is to raise a straw man Even if furth

evidence in support of these factors could be adduced the discoun

would still be in violation of the Shipping Act These facts are 

here but the majority bypasses them

The record shows that about 35 other conferences which encounter

the same problems in New York as complained of by responden

maintained identical rates on iron and steel from USranges of por

New York dominated the ports handling certain iron and steel expo

to European destinations in 1964 but in the export of the same iro

and steel articles to India and Pakistan New York could not compe

effectively despite the fact that the problems and costs of handling t

iron and steel are the same regardless of destination Also only t

The factors are shipper preference steel mill location character of cargo port facilit

and volume of movement

6 Exhibit 9

Exhibits 1723 78 88

9 Transcript pp 564 601

11 FMC

35501 0 69 29
432 FEDERAL MARITIME COMMISSION

American flag members of the respondent conference ma

port restricted discount rates The foreign flag members 

discount rates favoring other ports but continued to trea

the range equally

There cannot therefore be any substantial difference 

portation conditions in regard to export iron and steel mo

New York to India and Pakistan than to such cargo mo

other ports Thus it is unjust discrimination in violation 

where as here the same carriers charge different rates ou

ports for like cargo bound for a common destination 

stantially similar circumstances and conditions

There is no dispute that New York competes with the ot

the iron and steel cargo There is no dispute that New Y

the leading ports of export for such cargo There is no 

since the discount rates became effective the movement o

and steel through New York has decreased sharply by b

to ports where lesser rates are charged With these prel

ings it is incomprehensible that the majority fails to con

imposition of the portrestricted rates against New Y

cause of the decline in iron and steel exports through Ne

a violation of section 16 First No factor in justificatio

which could countervail the undisputed facts In fact o

ment the respondents admitted that neither higher costs n

reasons compelled the portrestricted discounts

In accordance with the foregoing I conclude that the 

violated sections 16 and 17 No further evidence is require

violations since no regulatory purpose is served by rema

purpose of developing what is already so clearly spelle

record in this case

SEAL Signed THOM

Initial Decision p 21

10 Surcharge on Shipments from Buffalo NY7FMC458 461 1962

n Transcript of Oral Argument p 86
FEDERAL MARITIME COMMISSION

DOCKET No 6534

IN THE MATTER OF DISCOUNTING CONTRACTNONCONTRACT R

PURSUANT TO TIIE PROVISIONS OF ITEM 735 NOTE 2 OF THE IN

PAKISTAN CEYLON BURMA OUTWARD FREIGHT CONFER

TARIFF No 10

ORDER

This proceeding having been instituted by the Federal Mari

Commission and the Commission having fully considered the m

and having this date made and entered of record a report containin

findings and conclusions thereon which report is hereby referre

and made a part hereof

It is ordered That this proceeding is remanded to the examine

the purpose of taking further evidence on the matters described in 

report

By the Commission

SEAL Signed THOMAS LIST

Secreta

433
FEDERAL MARITIME COMMISSION

Docket No 1095

IN TILE MATTER OF TIIE MODIFICATION OF THE SELFPOLI

SIONS or AGREEMENTS No 150 AND 3103

Decided March 19 1968

Determinations of a Neutral Body which under the terms of its 

combines both investigative and adjudicatory functions intust 

a de novo review by an impartial and disinterested panel of a

To give effect to the principle that an accused should not be sub

ntent on the basis of secret evidence arbitrators must be f

with such evidence as has been disclosed to the accused line 

accused line has had an adequate opportunity to rebut or exp

their determinations solely thereon

A review de novo by a panel of arbitrators does not require a 

merely a new evaluation of the record already established befo

Body

John P Meade for the TransPacific Freight Conferen

and the Japan Atlantic and Gulf Freight Conference

George F Oolland and Amy iScupi for States Marine 

Donald J Brunner and Roger A M1lcShea 111 Hear

REPORT

BY THE COMMISSION John Harllee Chairman Ashton 

James V Day James F Fanseen Commissioners

This proceeding is before us on remand from the U

Court of Appeals for the District of Columbia Circuit in 

rine Lines Inc v Federal Maritime Com n376 F 2d 

The case was returned to us for the resolution of certa

encountered by the court in reviewing our approval of th

ing systems established by the Trans Pacific Freight C

Japan and the Japan Atlantic and Gulf Freight Conf

1 The TransPacific Freight Conference of Japan Trans Pacific es

Agreement No 150 serves the trade from Japan Korea and Okinawa to U

Canadian Pacific Coast ports including Alaska and Hawaii The Japan 

Freight Conference Japan Atlantic established under Agreement 3103 

from Japan Korea and Okinawa to Atlantic and Gulf ports of North 

conferences are domiciled in Japan The self policing provisions are contain

of these agreements and are identical in both

434

j
MODIFICATION OF AGREEMENTS NO 150 AND 3103 4

systems all of which were disposed of by the court except the con

tion that under the system as presently constituted an accused could 

convicted on the basis of undisclosed evidence and any relations

existing between the Neutral Body and a member line could influen

the Neutral Body s decision The court sprimary concern was t

the Neutral Body because it both investigated and adjudicated 

case would be forced into a position of being privy to evidence so

of which it was forbidden to disclose to the accused line but wh

nevertheless might influence the Neutral Body sdecision

Applying the principles of Silver the court concluded that Congre

in authorizing self policing for conferences did not intend to aband

the fundamental principle that the accused should be convicted o

under fair procedures The court felt that something other than 

admittedly high ethical standards of the accounting profession w

needed to insure fair dealing in all Neutral Body investigations T

court ssuggested solution was

Rather than urge that the Neutral Body system be scrapped the Gov

ment the Department of Justice has come forward with a proposal wh

accepts the Commission sdetermination that effective self regulation dema

such a system but which at the same time seeks to accommodate the obvi

need for some kind of institutional check on Neutral Body discretion Build

on the Conferences own suggestion that undisclosed evidence be screened ou

the ultimate decisionmaking process the Government recommends that a Neu

Body sdecision to penalize a member be subject to review by a panel of arbi

tors who are free of any relationship with Conference members

Under such a system the Neutral Body would have to demonstrate the 

cused sguilt by using only the evidence made available to the accused In addit

we presume the arbitrators would take into account any rebutting evidence p

vided by the accused This system would maintain the complainant sanonym

yet substantially eliminate the danger of improper conviction on the basis 

secret evidence since the arbitrators would never see or be influenced by n

disclosable information

Such a proposal does not of course provide all the guarantees of actual c

frontation nor does it necessarily resolve all the potential problems that co

arise from a Neutral Body s exercise of discretion Nevertheless providing 

independent check of the disclosed evidence would largely neutralize any s

stantial abuse of discretion by the Neutral Body and this we think is all th

can reasonably be asked Since the Government sproposal would provide arti

25 this needed element of fairness we accept it as a workable and desira

compromise between the realities of Conference self regulation and the rig

of an accused member 376 F 2d 240 41 Footnote ours

In both conferences an international accounting firm acts as the Neutral Body

6 States Marine bad argued that fairness required that the Identity of the complain

be disclosed but the court rejected this contention

11 FMC

MODIFICATION OF AGREEMENTS NO 150 AND 3103 

on remand Basically they would require the Neutral Body to cons

only that evidence which it was actually able to disclose to the accu

line in reaching its decision The decision of the Neutral Body or a

trators would be final unless an appeal from an adverse decision 

the Neutral Body is noted within 10 days The proceeding wo

be conducted by a panel of three arbitrators one selected by the 

cused line within 15 clays and one selected by the Conference by t

thirds vote and one selected by the Japan Commercial Arbitra

Association

The Neutral Body is required to file its report decision toge

with the evidence including statements of oral witnesses if a

phis a certification that all of the evidence relied upon in reaching 

decision was shown to the accused line and that the accused line 

given an adequate opportunity to explain or rebut the evidence 

verse to it The Neutral Body is also required to file with the arbitra

any explanation or material which the accused line may have 

mitted whether relied upon or not in reaching the decision A c

of all of this material is to be furnished to the accused line at 

time it is submitted to the arbitrators The accused line may wi

10 days Object to any of the material thus furnished but this 

jection is limited to whether it was shown the evidence so filed 

whether it was given an adequate opportunity to explain or rebu

The matter is then deemed to be submitted for decision No other c

munication with the arbitration panel is allowed

The arbitrators scope of review is limited to 1 whether the 

cused line actually saw the evidence upon which the Neutral B

decided the case 2 whether the accused line was given an adeq

opportunity to explain or rebut 3 whether the Neutral Body 

the basis of the evidence filed with the arbitrators could reason

have reached the result they did on the basis of the standard of c

mon sense and persuasive information that the breach proba

occurred The arbitrators are forbidden to substitute their judgm

for that of the Neutral Body and may not disturb the level of 

fine assessed

The arbitrators are to reach their decision within 30 days and s

the parties with copies Fines must be paid within 10 clays after rec

of notice of affirmance

Hearing Counsel

Hearing Counsel would require the Neutral Body to disclose 

evidence and material developed in the course of its investigatio

the accused line but would limit arbitration to an appellate typ

review similar to that proposed by the Conferences Thus the a

11 FMC
jj
MODIFICATION OF AGREEMENTS NO 150 AND 3103 44

render the arbitrators review something less than meaningful 

would not remedy the basic concerns of the court with the prese

systemsthat secret evidence or a conflict of interest might influen

the decision In a close case either one or both of these consideratio

could well make the difference between a finding of guilt or innocenc

Yet under the Conferences proposal the arbitrators would be force

to affirm the decision of the Neutral Body unless it was utterly unsu

ported by the record furnished to it This does not constitute an i

ternal review which would effectively curb abuses of discretion by th

Neutral Body

Hearing Counsel sproposal is akin to that of the Conferences exce

that they would require the Neutral Body to submit all eviden

uncovered in the course of the investigation whether relied on by t

Neutral Body or not Under Hearing Counsel splea it is unlikely th

the name of the complainant could be successfully withheldafeatu

upon which the effectiveness of the system is largely depende

Moreover this safeguard is somewhat illusory since it would 

virtually impossible to determine whether the Neutral Body h

in fact furnished the arbitrators all of the evidence it had uncover

At this point it would seem clear that the assurance of fair pro

dures is best achieved by selecting the best from all the various p

posals Thus while we will not require a trial de novo before t

arbitrators as States Marine would have us do neither will we as t

Conferences propose limit the authority of the arbitrators to sub

tute their judgment for that of the Neutral Body We will limit t

review of the Neutral Body to the consideration by the arbitrators 

the record of the Neutral Body sproceeding together with pleadin

to be submitted by the parties but at the same time leaving the arbit

tors free to reach their own decision both on the question of guilt a

the level of the fine to be assessed

As for the other features of the various proposals such as time lim

for appeal and payment of fines selection of arbitrators finality 

decisions and liability of the Neutral Body and the arbitrators f

their decisions we have in the main adhered to the Conferenc

proposal since these proposals have the approval of the majority 

the members and are not contrary to the principles of section 15

On the basis of the foregoing we find that Article 25 as modified 

AppendixA hereto is not unjustly discriminatory or unfair as betwe

carriers shippers exporters importers or ports or between e

porters from the United States and their foreign competitors a

will not operate to the detriment of the commerce of the United Stat

and is not contrary to the public interest or in violation of the A

Accordingly we will approve it An appropriate order will be issu

11 FMC
442 FEDERAL MARITIME COMMISSION

Vice Chairman Hearn concurring

I previously expressed serious reservations as to sever

the selfpolicing system originally approved by the Com

dissented from the majority opinion at that time Althoug

tions are not entirely satisfied I now concur in the system 

proved Much of my concern arose then from the lack 

neutrality in the system With the establishment of an 

panel of arbitrators I am confident that whatever shortco

still exist will thereby be ameliorated As the Court of A

whether particular procedures are fair depends u

ticular institutional setting involved 8

In remanding this case to the Commission the Cour

said that in consideration of the complexities involved in 

ence system

the principle becomes obvious that this kind of self regu

must provide specific realistic guarantees against arbitrary and inj

The court then found that the Neutral Body self policin

approved by the Commission was inadequate to the attain

objective The system the court concluded must provid

against abuse where practicalities preclude strict neutr

In accordance with these statements and further concl

court the Commission now approves a self policing s

includes an independent panel of arbitrators I wholly 

system and as I have previously stated I would suppor

lolicing system in which the final review is by a body 

relationship to members of the conference Such a requi

dispensable for groups exercising economic power an

economic gainis their raison detre

There is another point worthy of emphasis in the A

proved herein Paragraph i provides that the conferen

the expenses of the selfpolicing system All conference m

equally an obligation to the public which they serve to 

regulations of government and the principle of fair play 

4 Agreement No 150 21 TransPacific Freight ConJ 01 Japan and 

310317 Japan Atlantic and Gulf Freight Conference 9 FMC355 388 

s States Marine Linea Inc and Global Bulk Transport Corp v Federa

mission 378 F 2d 230 235 1967

IMd 238

10bid237

See the majority report herein at 11 FMC 438

129FMC355 388
body is both prosecutor and judge and its discretion in conduc

investigations should not be influenced by financial consideration

On the basis of the foregoing I fully concur in the decision of 

fellow Commissioners

sxaL Signed THOMAS LISI

Secreta

11 FMC

MODIFICATION OF AGREEMENTS NO 150 AND 3103 
FEDERAL MARITIME COMMISSIO

Docket No 1095

IN THE MATTER OF THE MODIFICATION OF TFIE SELFPOLICING 

OF AGREEMENTS No 150 AND 3103

ORDER

The Commission has this day entered its Report in thi

which is hereby made a part hereof by reference and ha

Article 25 of Agreements No 15029 and 310326 as set 

Appendix to said Report is not unjustly discriminatory 

between carriers shippers exporters importers ports o

porters from the United States and their foreign com

detrimental to the commerce of the United States co

public interest or otherwise violative of the Shipping A

Therefore it is ordered That Article 25 Agreement

310326 as modified in the Appendix to the aforemention

hereby approved

By the Commission

sEAL Signed THOMA

444 
APPENDIX

25 NEUTRAL BODY

a Appointment and Qualifications of the Neutral Body

1 The Conference shall appoint upon terms to be fixed by separate 

tract an impartial independent person firm or organization to 

designated the Neutral Body which shall be authorized to receive wri

complaints reporting possible breaches of the Conference Agreem

Tariff Rates or Rules and Regulations involving malpractice an

investigate and decide upon such alleged breaches and if such breac

are found to assess damages and in addition to collect damages 

sessed after payment thereof becomes delinquent

2 Appointment of the Neutral Body hereafter will be by vote of 

Conference membership under Article 19 of the Conference Agreem

The appointment will be made from amongst candidates which 

qualified and willing to serve

Prior to such appointment a candidate will be required to div

to the Conference any professional or business relationships or fi

cial interests hereafter in this Article simply interests whic

may have with any of the members their employees agents subag

or their subsidiaries or affiliates hereafter in this Article sim

agents The candidate will also be required to agree in the e

of the appointment to divulge any future proposals it might receiv

create such interests and promise to obtain Conference approval the

before accepting any such proposal Such interests so divulged if 

exclusive of financial interests will not affect the qualification of 

Neutral Body when appointed by the Conference with knowle

thereof and the members will not raise an objection based on s

grounds to an investigation or decision made or damages assessed 

the Neutral Body or its agents provided however that the Neu

Body will be required before appointment to agree to disqualify it

in the event of a complaint against a member with which it may h

such an interest After disqualifying itself the Neutral Body is aut

ized to appoint an agent without such interest in the responden

conduct the particular investigation and handle the complaint 

behalf of the Neutral Bocly and such appointee shall have all of 

authority and duties of the Neutral Body for that particular ma

up through the date when the appointee reports its decision to 

Dthics Committee under this Article 25f4

3 The Neutral Body will have the authority and responsibility to eng

agents lawyers and or experts including shipping experts who 

assist with its investigation and consideration of complaints and 

pay on behalf of the Conference all costs incidental thereto Such age

or experts appointed by the Neutral Body must not have any inter

in the particular member named in the particular complaint althou

11 FMC 445
446 FEDERAL MARITIME COMMISSION

they will not be disqualified because they may have an in

sive of a financial interest with any other member or its 

4 For purposes of this paragraph a the Words financ

do not include professional or business relationships whe

tral Body or its agents or experts are engaged as indepe

tors for professional or business services

b Jurisdiction of the Neutral Body

1 The Neutral Body shall have jurisdiction to handle in ac

the procedures of this Article all written complaints sub

Neutral Body by the Conference Chairman or a member a

of the Conference Agreement Tariff Rates or Rules and 

involving malpractice or on its own motion any breache

of this Article 25

2 Malpractice as used in this Article shall mean any dire

favor benefit or rebate granted by a member or its agent

consignee buyer or other cargo interests or any of their 

other net or practice resulting in unfair competitive advant

members

3 The Neutral Body shall have no authority to inv

breach involving a malpractice which occurred more th

before the filing of a written complaint pursuant to Arti

or more than two years before the discovery thereof 

25f1

c Member Lines Responsibility to Report Breaches and Ass

tions

1 The members and or the Conference Chairman shall re

to the Neutral Body in a written complaint any and all 

whatsoever kind or nature coming to their knowledge w

opinion indicates a breach of the Conference Agreemen

or Rules and Regulations involving malpractice or any b

Article 25 by a member or its agents and failure to report 

tion by any member will be a breach of this Article

d Investigation

1 The Neutral Body and or its agents shall have the pow

and responsibility to investigate written complaints and in 

said complaints to call upon a member or its agents at any 

during office hours and inspect copy andor obtain co

records documents signed written statements ar oral inform

other materials hereinafter in this Article materials 

terials are deemed by the Neutral Body in its sole discret

vant to the complaint Upon making such a call the Neutr

have the right to see and copy such materials immediately 

prior screening by the member or its agents

2 Correspondingly each of the members shall have the dut

sibility to supply such materials and to cooperate in intervi

upon demand made in person by the Neutral Body or it

without prior screening whether said materials orpersonn

in the member sown offices or in its agents offices Failure 

or its agents to supply the materials required by the Neutr

agents promptly will constitute a breach of this Agreemen

ber and the member undertakes to thoroughly inform 
11 FMC

MODIFICATION OF AGREEMENTS NO 150 AND 3103 447

the member sliability for their couduet and obtain their commitmen

to comply with the Conference Agreement Tariff Rates or Rules and

Regulations In addition the members undertake an affirmative duty to

cooperate and assist the Neutral Body in obtaining other required

information whenever possible

3 The records of the Conference will he made available to the Neutra

Body on request and the Conference Chairman aid staff will render at

assistance possible to the Neutral Body during investigations

e Confidential information

1 The Neutral Body will under no circumstances disclose the name of the

complainant to the respondent or anyone else including the Neutra

Body sagents unless specifically authorized to do so by the complainan

2 The Neutral Body will treat all information received during invest

gations regardless of the sources as confidential and will not divulge

any such information to anyone except in reporting breaches found

and damages assessed to the Ethics Committee and then only to the

extent that the Neutral Body itself deems appropriate

f Rearing for the Rcpondeu ve trui Body Dcciaions real Announcement

Thereof

1 On concluding its investigation the Neutral Body will consider the

information obtained and decide in its absuln edi cretion whether the

facts have been sestablished to constitute a breach of the

Agreement Tariff Rates or Rules and Regulations involving a ma

practice ndif a hre tcli involving a ma Imaetieti is found which vas no

covered by the complaint such breach may also be reported and damages

may be assessed thereon against any member liable

2 In deciding whether a breach cxisis in proceedings under this article

the Neutral Body will not be restricted by legal rules of evidence or the

burden of proof required to establish criminality or even a civil claim

Instead it will employ rules of couimon sense in determining breaches

and assessing damages and the only standard required is that the

information developed is persuasive to the Neutral Body itself that the

breach occurred

3 after the Neutral Body has completed its investigation it shall advise

the respondent either that a breach has not been found or tiut there

are reasonable grounds to believe that a breach occurred In the latter

event the respondent will he informed at this time of the nature of the

alleged breach and the evidence concerning it which the Neutral Body

in its absolute discretion is able to disclose In so advising the respond

ent the Neutral Body shall disclose the actual evidence which it has

at its disposal unless for reasons tompclliug to it such disclosure would

tend to reveal the identity of the complainant or otherwise jeopardize

the confidentiality of the Ventral Body ssources of information In

all cases however the Neutral Body will inform the repoondent of the

nature of the alleged breach hearing in mind basic precepts of fair

play Within fifteen 15 days or within such reasonable time thereafter

as the Neutral Body may in its sole discretion grant if the respondent

so requests it may meet with the Neutral Body with or without its own

accountant andor attorney and offer to the Neutral Itody such expla

tions and or rebutting evidence as it may deem proper and desirable

At such hearing

355 301 0 69 30

the Neutral Body shall consider only the evidence
448 FEDERAL MARITIME COMMISSION

which it was able actually to disclose to the respondent t

such explanations andor rebutting evidence the responde

offered and make its decision thereon in accordance with t

set forth under Article 25f2 hereof

4 On the basis Of its decision the respondent shall either be 

a breach has not been found or should a breach be determ

been committed assessed liquidated damages In assessin

ages the members recognize that breaches of the Confe

ment Tariff Rates or Rules and Regulations cause substan

not only in lost freight but in consequent instability of th

rate structure The members further recognize that the dam

are cumulative with the number of breaches but the mem

recognize that it is difficult to assess such damages precise

the Neutral Body is authorized to assess liquidated damag

ance with the following schedule

a First breach maximum of Ten Thousand Dollars 10

currency or equivalent in yen at the telegraphic tra

rate of exchange of exchange banks on the date of pay

b Second breach maximum of Fifteen Thousand Dolla

USAcurrency or equivalent in yen at the telegrap

selling rate of exchange of exchange banks on the date 

c Third breach maximum of Twenty Thousand Dolla

USAcurrency or equivalent in yen at the telegra

selling rate of exchange of exchange banks on the date 

d Fourth breach and subsequent breaches maximum 

Thousand Dollars 30000 USAcurrency or equi

at the telegraphic transfer selling rate of exchange 

banks on the date of payment

Notwithstanding the difficulty in assessing such damages 

determining the amount of liquidated damages to be assesse

Body shall consider such mitigating circumstances as i

relevant

After its decision the Neutral Body will then report t

Committee the decision and the amount of the damage ass

In addition the Neutral Body may report evidence or info

covered during its investigation but the extent of such fu

ing if any shall be subject to absolute discretion of the N

and in no event will the Neutral Body report the name of the 

without consent or report confidential information

5 The Ethics Committee will notify the members through th

of the decision and damages if any and will also at the s

struct the Chairman to notify the respondent of the dec

case of a breach the respondent will be furnished with the N

report and a Conference debit note covering the liquida

assessed

g Decisions of the Neutral Body

1 The decisions of the Neutral Body shall be final and conc

within thirty 30 days after the accused line receives 

Body sreport it shall demand review by arbitration in acc

the procedures set forth in paragraph h of this Article
MODIFICATION OF AGREEMENTS NO 150 AND 3103 44

2 Any fine imposed by the Neutral Body shall be paid to the Conferenc

within thirty 30 days after the accused line receives the report of th

Neutral Body unless review by arbitration is sought under paragrap

h of this Article

k Review by Arbitration

1 Notice of Intent to Seek Arbitration Upon receiving actual notice o

an adverse determination by the Neutral Body the respondent sha

have thirty 30 days within which to notify the Conference Chairma

in writing of its intent to seek review of the Neutral Body sdetermin

tion by arbitration Failure to give such timely notice shall constitut

a waiver of the right to review

2 Location of Arbitration All parties hereto agree to arbitration in Japa

by a panel free of any professional business or financial relationsh

with any of them Upon agreement of the parties arbitration may be he

in any other place

3 Selection of Arbitrators Within fifteen 15 days after serving i

notice of intent to seek review by arbitration the respondent shall su

mit to the Chairman the name of one arbitrator and within five 5 day

thereafter the Conference shall select one arbitrator by a twohirds

vote of all members present and entitled to vote excluding responden

with prompt notice to respondent of the selection made The two arbitr

tors so named shall within ten 10 days select a third arbitrato

except that if they are unable to agree upon the selection of a thir

arbitrator within said period then and in that event the Chairman sha

immediately file the names and addresses of the first two arbitrato

with the Japan Commercial Arbitration Association which shall prompt

appoint the third arbitrator who may be a national of any country

4 Arbitration Procedures When the designation of the panel of arbitr

tors has been completed it shall notify the respondent the Conferenc

Chairman and the Neutral Body of its composition Within three 3 day

after such notification the Neutral Body shall file with the panel i

report together with all evidence or data which it relied upon in

cluding statements of oral witnesses if any in its determination th

a breach had occurred its certification that all of the evidence and da

relied upon in reaching its decision was shown to respondent and th

respondent was given an adequate opportunity to explain or rebut suc

evidence and data during the hearing process and any evidence e

planation or material the respondent may have submitted during th

hearing process whether relied upon or not in reaching its decision 

copy of this material shall be served upon respondent at the same tim

it is filed with the arbitration panel The material thus furnished sha

constitute the record on review

Within ten 10 days after receipt of the Neutral Body sReport an

certified record the respondent may file in writing its objections if an

to the certification and its exceptions and brief in opposition to th

Neutral Body s Report Within ten 10 days after respondent ssu

mission the Neutral Body may file its reply which is to be confined 

platters raised or argued by respondent In the event that responde

files nothing the matter will be considered solely on the basis of th

report and certified record as furnished by the Neutral Body

11 FM0
450 1fDERAL MARITIME COMMISSION

5 Arbitrators Scope of Review The arbitrators by major

affirm the Neutral Body s determinations or set aside o

finding they deem erroneous and may cancel reduce or 

fine which they deem improper subject to the maxima 

Article 25f4 hereof Their decision shall be in writing 

their findings of fact and conclusions and shall be made w

after the natter is submitted A copy thereof shall be serve

ent the Neutral Body and the Ethics Committee

6 Finality of Arbitrators Decision The decisions of the arb

be final binding and conclusive subject only to an appea

eral Maritime Commission on the ground that the enforc

arbitration award constitutes a violation of the Shippi

7 Payment of Pines After Arbitration Any fine imposed by 

tors shall be paid to the Conference within thirty 30 

receipt of a debit note from the Chairman following s

arbitrators decision in accordance with subparagraph 5 

of a payment of a fine by the due date the Conference m

the security posted by the line under Article 12 and the 

deemed delinquent raider Article 28 It is understood betw

bers that decisions of the Neutral Body and or the arbitr

an admission or proof of guilt or liability under law

i Payment of Fecs and Expenses

The payment of the fees and the necessary expenses of 

Body and the arbitrators incurred in the performance o

under this Article shall be borne by the Conference

j Legal Proceedings Involving Self Policing Activity

The members agree that they will neither jointly nor se

any legal action whatsoever against the Neutral Body 

or the arbitrators for damages allegedly arising out of th

or for any act or omission occurring in the discharge of th

under this Article In addition each member agrees to h

members of the Conference the Neutral Body and its ag

arbitrators harmless from any claims which may be br

agents or employees against another member the Co

Neutral Body or its agents or the arbitrators for dama

arising out of the acts omissions or functions of the N

or the arbitrators
FEDERAL MARITIME COMMISSION

Docket No 6663

UNITED STATES BORAX CHEMICAL CORPORATION

v

PACIFIC COAST EUROPEAN CONFERENCE ET AL

Docket No 6727

PACIFIC COAST EUROPEAN CONFERENCE ET AL

v

UNITED STATES BORAX CHEMICAL CORPORATION

Decided 31a rah 29 1968

The dual rate contract between Pacific Coast European Conference and United

States Borax Chemical Corporation which was not amended to include

provisions permitted or required by the Commission became unlawful and

unenforceable on April 4 1964

In charging United States Borax Chemical Corporation a higher rate than

charged other shippers of borax and borax products for similar services

between April 4 1964 and January 1 1967 without the benefit of a valid

dual rate contract the Pacific Coast European Conference and its member

lines violated section 14b section 16 First and section 17 of the Shipping

Act 1916

In denying United States Borax Chemical Corporation the use of a dual rate

contract after January 1 1967 the Pacific Coast European Conference and

its member lines violated section 14b of the Shipping Act 1916

United States Borax Chemical Corporation awarded reparation with interest

against the member lines of Pacific Coast European Conference

The complaint of Pacific Coast European Conference and member lines against

United States Borax Chemical Corporation dismissed because not filed

within two years after the cause of action accrued

Lauren M Wright and Edwin A McDonald Jr for United States

Borax Chemical Corporation

Leonard G James F Conger Fawcett and Herbert Schepps for

Pacific Coast European Conference and member lines

Donald J Brunner Samuel B Nemirow and Arthur A Park Jr

Hearing Counsel

11 FMC 451

US BORAX CHEM CORP V PAC COAST EUROPEAN coNF 4

FACTS

On March 10 1961 Borax and the Conference entered into a Sh

pers Rate Agreement dual rate contract whereby Borax agreed 

ship all of its products transported between ports served by the C

ference via Conference vessels in return for the application of ra

of 15 lower than the rates charged non contract shippers This agr

ment did not contain a charter exclusion clause which would per

Borax to ship its cargoes on vessels chartered by it without forfeiti

its right to contract rates for other shipments made on Conferen

vessels

Subsequently on October 3 1961 Congress enacted Public Law 8

346 75 Stat 762 which inter alia added a new section 14b to t

Shipping Act 1916 This section 14b authorized the Commission 

permit the use of dual rate contracts under certain circumstances b

imposed a number of specific requirements 14b14b 8which 

such contracts must meet In addition section 14b 9required th

dual rate agreements shall contain such other provisions 

inconsistent with section 14b as the Commission shall requ

or permit

In order to accomplish the transition from the old unregulated c

tracts to the new regulated contracts section 3 of Public Law 873

provided for interim validity of existing dual rate contracts and 

quired the conferences to revise their contracts to comply with the p

visions of section 14b and to file the revised contracts for approv

within six months after enactment of the 1961 amendment ie 

April 3 1962 after which their use was lawful until approved by t

Commission or until April 3 1963 whichever occurred sooner Pub

Law 885 77 Stat 5 extended this period of interim validity 

April 3 1964

On March 21 1962 the Commission published an interpretat

ruling on section 3 of Public Law 87346 which provided that a m

chant could continue as a contract shipper subsequent to April 3 19

by advising the Conference that

he agrees to be bound by said contract rate agreement amended to 

extent necessary to comply with the provisions of section 14b of the Shipp

Act 1916 Provided That the conference has Sled with the Federal Mariti

Commission a proposed form of contract pursuant to section 3 of Public L

87346

In accordance with the directives of the ruling quoted above t

Conference filed with the Commission a proposed form of contra

which included the eight mandatory provisions On March 29 19

Borax accepted the dual rate contract as amended and until April 

11 FMC
454 FEDERAL MARITIME COMMISSION

1964 such contract represented the relationship between the 

As a charter exclusion clause was not made mandatory by 

was only later to be prescribed under the other provisions c

section 14b 9such a clause was not included in this contract

In April 1963 the Commission entered an Order of Inves

and Hearing respecting the dual rate contracts of several con

including the Pacific Coast European Conference The Con

dual rate contract was made the subject of Docket No 1007 

Coast European Conference Exclusive Patronage Dual Pat

tract and hearings before an examiner were held upon the p

contract Subsequently on petition of various shippers and 

associations certain issues were severed from most of the proc

including Docket No 1007 supra and consolidated for hearing 

a panel of five examiners in Docket No 1111Dual Rate Co

1963 Adjudication of Major Issues

On December 3 1963 the panel of examiners rendered its 

in Docket No 1111 Shortly thereafter on December 5 1963 

aminer in his Initial Decision in Docket No 1007 approved t

ference scontract if modified in certain respects not pertinent h

the approval was made subject to the decision of the C

sion in Docket No 1111 and to the inclusion of suc

provisions as the Commission requires or permits

On March 18 1964 the Commission recognizing the adm

tive burdens involved in executing contracts between conferen

shippers clue to the limited time which would remain after 

review and decision in Docket No 1111 issued its Interpretat

Statement of Policy It was provided therein that if a carrier 

ference decides to use a dual rate contract subsequent to April 

its agreement form must be approved or modified by th

mission and pending submission and approval of such new 

ments

carriers may accept from shippers and consignees who desir

tinue under the new agreement a writing stating merely that the s

consignee wishes to be bound by the new agreement and that he wil

a copy of the new agreement form upon one being tendered by the 

Shippers and consignees so indicating to the carrier or conference 

accorded contract rates

On March 27 1964 the Commission issued its Report in 

No 1111 hereinafter referred to as 7he Dual Rate Cases 

the same time approved the contract of the Conference in 

No 1007 subject to certain modifications and provided t

25FMC16

11 
as BORAX CHEM CORP v PAC COAST EUROPEAN CONF 45

attached form of order should become effective April 4 196

to the exclusion of any other terms and provisions The for

of contract attached to the order contained a charter exclusion clau

which the Commission pursuant to the other provisions clause se

tion 14b 9 required to be included in all dual rate contracts

Pursuant to the Commission saforementioned Interpretation an

Statement of Policy of March 18 1964 Borax on April 2 196

advised the Conference that it desired to be bound on and after April 

1964 by the form of dual rate contract as the same may be amende

to conform to the decision and order of the Commission dated Marc

27 1964 and requested the continuance of contract rates on its sh

ments via Conference vessels The Conference however did not acce

the contract provisions prescribed by the Commission but rather no

fied its contract shippers on May 8 1964 that an appeal of the Co

mission sdecision in Docket No 1111 ordering it to cancel existin

rate agreements had been filed with the United States Court o

Appeals

From April 4 1964 until November 16 1964 Borax shipped v

Conference vessels at contract rates On November 12 1964 Bora

was informed by the Conference that all Borax shipments on or afte

November 16 1964 would be assessed noncontract rates The Co

ference predicated its refusal to accord Borax contract rates upon th

fact that Borax had breached the terms of its existing contract b

making shipments of its product on the non conference vessel M

Johann Schulte which had been chartered to Borax for a period 

excess of six months

After November 16 1964 Borax was unable to find non conferenc

vessels chartered vessels not considered to carry its shipments ove

the routes served by the Conference although it had made reasonab

attempts to fincl such vessels Therefore Borax continued to ship v

the Conference paying the excess amount over contract rates unde

protest

American Potash Ampot and Stauffer Chemical Compan

Stauffer have at material times competed with Borax in the Euro

pean market European customers have at times shifted from one su

plier to the other then carne back to the original supplier and hav

0 Borax further agreed to execute a copy of such a dual rate agreement and to conside

it effective from April 4 1964

4 The Conference motion for a stay of the operation of the Commission sorder i

Docket No 1007 pending appeal was denied

On October 5 1964 the Conference bad advised Borax that such shipment was co

sidered an evasion of the dual rate contract and demanded liquidated damages in th

amount of 317955 04 which amount was to be paid within 30 days and if not paid Boras

right to ship via Conference vessels at contract rates would be suspended

11 FMC
456 FEDERAL MARITIME COMMISSION

also purchased a part of their requirements from all thre

there being an effective competition between the supp

April 4 1964 to the present time the Conference has c

ments of borax and borax products for Ampot and Sta

lower contract rates There is testimony to show that su

April 4 1964 Borax increased its European trade but it 

ably have lost European customers after November 16 

not absorbed the increased cost of transportation

On January 1 1967 the Conference put into effect a 

approved form of dual rate contract meeting all the requ

section 14b of the Act and criteria established by the Co

its decision in The Dual Rate Cases supra The Conferen

this approved form of contract available to its contract s

cluding Ampot and Stauffer but has refused to make it 

Borax until the liquidated damages due the Co

breach of the existing contract by US Borax in 1964 

paid

DISCUSSION AND CONCLUSIONS

Borax in its complaint alleges that the dual rate cont

the parties prior to April 4 1964 became unlawful afte

pursuant to Public Law 87346 that since the lower con

remained in the Conference tariff and were not themselv

illegal after April 3 1964 they became the rates lawfully a

all shipments of borax and borax products in question th

of it being charged the higher noncontract rate while 

tors continued to ship at the lower contract rate Comp

subjected to the payment of rates for the transportation o

borax products which were when exacted and are prese

prejudicial in violation of section 16 First of the Act u

criminatory in violation of section 17 of the Act and illega

sive in violation of section 14b of the Act As a result of 

going Complainant seeks an order requiring the Confere

and desist from these alleged violations of the Shippin

and to establish and put in force contract rates visavis 

pay reparation to it in the amount of90872

The Conference on the other hand seeks relief on alter

ositions First the complaint in Docket No 6727 alleges t

ference scontract with Borax was in effect on April 4 19

tinued to bind the parties after that date On the basis of thi

the Conference seeks to recover liquidated damages under 

6 Letter to Borax from Conference Chairman dated December 27 1966
US BORAX CHEM CORP v PAC COAST EUROPEAN CONF 45

that contract in the amount 17955 04contending that since the co

tract did not contain a charter exclusion clause Borax was in violatio

thereof in shipping via a chartered vessel In the alternative and shou

it be determined that no lawful contract existed between the partie

the Conference prays for an award of undercharges in the amount o

130079taking the position that if no lawful dual rate contract wa

effective between the parties the lawful rate was the higher nonco

tract rate and having carried Borax sshipments from April 4 to N

vember 16 1964 at the lower contract rate it should be reimbursed 

the amount of the difference between the lawful rates and the rate

applied

motion

In his

to

Initial

stay

Decision

this proceeding

the Examiner

pending

after

arbitration

denying the

found

Conferencs

and co

cluded that 1 subsequent to April 3 1964 no dual rate contract law

ful or enforceable under the Shipping Act 1916 existed between th

Conference and Borax 2 the lower contract rate was the lawfull

applicable rate to all of Borax sshipments in question and 3 th

Conference and its member lines by virtue of their having charge

Borax transportation rates higher than those charged Borax scom

petitors on the same commodities have violated sections 16 First an

17 of the Shipping Act 1916 Borax was awarded reparation withou

interest for shipments of record on Conference vessels in the amount o

90872

and additional amounts to be computed as the difference between th

noncontract rate charged to and paid by Borax and the lower contract rat

on subsequent shipments made by Borax via conference vessels to be determine

pursuant to rule 15b of the Commission sRules of Practice and Procedur

Finally the Examiner considered the Conference scomplaint agains

Borax and recommended its dismissal on the grounds that 1 it wa

filed more than two years after the cause of action accrued and barre

under section 22 of the Act 2 the Conference failed to prove tha

Borax had violated section 16 of the Act as alleged and 3 the rat

charged and collected by the Conference on shipments made by Bora

s Rule 15 b of the Commission sRules of Practice and Procedure provides

b Reparation statements 46 CFR 50225 When the Commission finds that repar

tion is due but that the amount cannot be ascertained upon the record before it th

complainant shall immediately prepare a statement in accordance with the approved re

aration statement in Appendix II4showing tails of the shipments on which rep

ration is claimed This statement shall not Include any shipments not covered by th

findings of the Commission Complainant shall forward the statement together wit

the paid freight bills on the shipments or true copies thereof to the carrier or othe

person who collected the charges for checking and certification as to accuracy Statement

so prepared and certified shall be filed with the Commission for consideration in dete

mining the amount of reparation due Disputes concerning the accuracy of amounts ma

be assigned for conference by the Commission or in Its discretion referred for furthe

bearing

11 FMC
458 FEDERAL MARITIME COMMISSION

via Conference vessels from April 4 1964 to November 16 19

lawfully applicable rate This proceeding is now before us on e

to the Initial Decision

The Borax sexceptions to the Initial Decision are limited 

objection namely the Examiner sdenial of interest on dam

reasons set forth herein we are of the opinion that Borax is 

interest as part of its reparation

Respondents take exception to each and every other findin

clusion of the Examiner For the most part however these 

present but a recapitulation of contentions already advanc

Examiner Except to the extent modified herein we agree wi

aminer sfindings and conclusions on these issues

I Contractual Relationship Between Borax and the Conferen

Respondents assert that the Examiner committed an erro

concluded that subsequent to April 3 1964 no contract law

forceable under the Shipping Act 1916 existed between th

Respondents contention is that section 3 of PL 87346 can

terpreted to render all existing contracts invalid a

istent at the stroke of midnight on April 3 1964 While t

cisely the effect of section 3 Respondents are concerning t

with an irrelevancy It was not section 3 itself which ren

spondents existing contract unlawful but our cancellation o

was the inescapable result of our order in Docket No 100

16 267 That order approved and prescribed a form 

rate contract and made that contract the only contract tha

employed by the Conference after April 3 1964 Thus it w

tion 3 which rendered Respondents olcl contract unlawful 

8 Exceptions and proposed findings not specifically discussed in this Report 

in our findings have been considered and found not justified by the facts o

to material issues in this proceeding

0 Section 3 of Public Law 87346 as amended by Public Law 885 provides t

Notwithstanding the provisions of sections 14 14b and 15 Shipping A

amended by this Act all existing agreements which are lawful under the 

1916 immediately prior to enactment of this Act shalt remain lawful unless 

cancelled or modified by the Commission pursuant to the provisions of the 

1916 as amended by this Act Provided however that all such existing agre

are rendered unlawful by the provisions of such Act as hereby amended mus

to comply with the provisions of such Act as hereby amended and if such 

are filed for approval within six months after the enactment of this Act suc

so amended shall be lawful for a further period but not beyond April 3 1964 

period the Commission shall approve disapprove cancel or modify all suc

and amendments in accordance with the provisions of this Act

The effect of section 3 of Public Law 87346 was merely to give the car

of time in which to amend their contracts and file them with the Commissio

Commission a period of time to review these contracts and finally determine 

terms to be permitted Contracts which had not been expressly approved withi

date fixed by section 3 could not be continued
US BORAX CHEM CORP V PAC COAST EUROPEAN CONF 459

approval of the new contract1 Respondents approach to the question

of just what if any contractual relationship existed between the parties

here would semi dictated by the precise circumstances giving rise to the

present disputerthe shipments by Borax on a chartered vessel Re

spondents only hope of prevailing here is to establish the proposition

that if their contract was amended to comply with the first eight num

bered requirements of section 14b they were free to continue usin

their existing contractwhich did not of course contain a charte

exclusion clause The successful establishment of this proposition is i

turn dependent upon assigning our order of March 27 to some adminis

trative limbo wherein it would languish without any force or effect Fo

if our order controls the resolution of the question of the contractua

relationship any such relationship between the parties would have a

one of its elements the charter exclusion clause Indeed Respondent

attack on our inclusion of the clause in their contract would seem t

indicate that they are not unaware of this However this exercise o

respondents while ingenious remains irrelevant since in fact and law

no contractual relationship of any kind existed between the partie

after April 3 1964 This absence of any contractual relationship wa

brought about by respondents themselves when they chose not to accep

and use the contract we had approved for them The path they chos

was continued use of the old contract and judicial review of orders i

Dockets Nos 1007 and 1111 It is true that respondents sought a stay o

the operation of our order in Docket No 1007 pending appeal but thi

was denied It is also true that the court in Pacific Coast Europea

Conference v United States 350 F 2d 197 9th Cir 1965 cert denie

382US958 1965 agreed with Respondents that during the course o

the proceedings in The Dual Rate Cases we had reverted to a rulema

ing proceeding without complying with the requirements of sectio

4 b of the Administrative Procedure Act and remanded the procee

ing to us But that remand concerned only two provisions not materia

10 Section 14b expressly provides that

Any contract amendment or modification of any contract not permitted by tn

Commission shall be unlawful and contracts amendments and modifications shall b

lawful only when and as long as permitted by the Commission before permission Is grante

or after permission is withdrawn it shall be unlawful to carry out in whole or in pa

directly or indirectly any such contract amendment or modification

As for this somewhat belated attack we agree with the Examiner who quite correctl

concluded in his Initial Decision at page 14

Inasmuch as the parties did not execute a contract with a charter exclusion clause an

ts Borax could not rely on the Interpretation and Statements of Policy of March 18 196

as constituting a contractual relationship with the conference which included such a claus

tne issue of the lawfulness of a charter exclusion clause is not material to a determinatio

of whether either party is entitled to reparation It is noted however that the conferen

has accepted a charter exclusion clause In the dual rate contract which it made effectiv

on January 1 1967

11 FMC
460 FEDERAL MARITIME COMMISSION

herein and significantly the court itself recognized that 

ence sexisting forms of dual rate contracts were no longer 

effect when it stated

The remedy however is not through judicial action to restore 

ences their own forms of contract but rather to restore to the con

opportunity to participate 350 F 2d 203

Respondents contention that their rights under their 

contracts constituted property rights protected by the 5th A

and that Congress through enactment of section 14b and t

sion by imposing a mandatory agreement have deprived 

right freely to contract about their business affairs has b

cally litigated before the court in Pacific Coast European 

v United States supra The court in rejecting this argum

that although in contract form what the Congre

Commission have imposed upon the conferences is simply 

Finally Respondents argue that

the Commission cannot reasonably interpret Section 3 o

to render the contracts of this Conference invalid on April 3 1964 

other conferences valid for 180 days

To Respondents this is the result of our Interpretation 

ment of Policy of March 18 1964 and July 2 1964 

referred to as the Statements which they contend 

extended the validity of existing contracts of some obed

ences Respondents by distorting the clear meaning p

effect of these statements seek to create an issue wher

genuinely exist

The Statement of March 18 1964 was promulgated in 

of the administrative burden imposed by the necessity o

new agreement forms following Commission approval a

ification of the new agreement and merely allowed c

conferences to accord contract rates to shippers who a

bound by the new agreement when it was tendered to them 

Statement of June 26 1964 merely allowed carriers and 

who were according contract rates to shippers pursuant t

interpretative ruling to continue doing so until September 

Respondents advance the erroneous proposition that the 

cancelled their contracts but allowed others to continue in e

of course had no such impact The Statements in no way 

fact that unapproved dual rate contracts would not be effec

April 3 1964 The fact of the matter is that section 3 of 

set a time limit on the legality of existing contracts Purs

provisions of section 3 existing contracts expired on Ap
US BORAX CHEM CORP v PAC COAST EUROPEAN CONF 461

unless these contracts were disapproved cancelled or modified prio

to that date

The Statements did not as Respondents clearly imply extend th

validity of existing dual rate contracts rather they merely granted

carriers or conferences of carriers the right to accept notices from

shippers and consignees that they agree to be bound by the new

agreement once approved Only in this manner could the shippe

be accorded contract rates until such time as the carriers or conference

decision

executed such

in The

new

Dual

agreement

Rate Cases

in conformity

As Hearing

with

Counsel

the Commissios

have so su

cinctly stated

The Commission was not bound to issue these interpretations It was done fo

the benefit of carriers to ease the administrative burden of executing new

contract forms No carrier or conference was forced to follow the suggeste

procedure

Respondents were equally free to adopt the procedures propose

and they have simply misconceived the effect of the Statements o

them There is no merit in their contentions

II The motion to stay the proceedings pending arbitration

Before we touch upon other aspects of this proceeding it would b

well at this juncture to consider the Examiner sdenial of Respondent

motion to stay the proceedings pending arbitration iIn denying th

Conference smotion the Examiner stated

The existing contract between the parties provided for arbitration and 

having been found that such contract is unlawful and not enforceable in 

proceeding brought under the provisions of the Act it is not determinative of th

motion unless as the conference contends the validity of the contract itse

is a proper question for arbitration and that the question should be submitte

to arbitrators for decision prior to the Commission sdecision in this proceedin

A decision by a board of arbitration would not be conclusive of the question o

the validity of the existing contract In Swift Company v Federal Afaritinz

ormission 306 F 2d 277 282 1962 the Court held

No private arbitration could negate the Board sstatutory power to determin

the validity of the dual rate agreement

A stay of these proceedings pending submission of the question of the validit

of the existing contract would serve no purpose except that of delay

Respondents in their exceptions reargue the same contentions a

ready advanced before the Examiner and rejected by him We thin

the Examiner quite properly disposed of these issues and we concu

la The Examiner denied the Respondents earlier Motion to Dismiss or Stay made prio

to the Prehearing Conference without prejudice to Respondents renewing it after all th

evidence was in

11 FMC
462 FEDERAL MARITIME COMMISSION

in his conclusions His determination that Respondents c

on the arbitration clause of an unlawful and unenforceab

is fully supported by the authorities In Goldall Trading c 

Etc v Caribbean Ship Co 56 F Supp 31 32 SDNY

court held that before it could compel arbitration under 

itmust

first determine whether the contract in which the arbitratio

is contained is valid The reason for this is clear if the contract is v

arbitration clause falls along with the remainder of the contract 

Shipping Co v Ailztorg Trading Corp 2 Cir 126 1 2c1 978

III The legally applicable rate subsequent to April31964

A dual rate system approved by the Commission under 

of the Shipping Act 1916 is somewhat unique in transpo

in that it permits a carrier or group of carriers to publish a

different but lawful rates applicable to the same transport

ice Absent a valid dual rate contract however there exists 

Lawful authority for a tariff provision the effect of which 

lish two rates for the same transportation service r 0 

Co v D do R G 1i 1i Co 20TC93 94 1911 It is fir

lished to the contrary that generally 1 there may 

lawful rate for a particular service Emphasis added 

Milling Co Inc v Chicago N TV 14 Co 216 IC 

1936 Cf Boise Commercial Club v Adams Express Co 

115 1909 rII Alpert Co vDRR R Co supra

At all times relevant to this proceeding the Conference has

and filed with the Commission tvorates applicable to sh

borax and borax products a non contract and a contract 

have heretofore determined however that between April 4 

January 1 1967 the Conference had no valid and enforc

rate system Accordingly consistent with established princ

could be but one lawfully applicable rate to any one parti

modity it therefore now becomes necessary for us to determ

of the two rates appearing in the Conference stariff was th

applicable rate to shipments of borax and borax prod

between April 4 1964 and January 1 1967 The resolut

Likewise it has also been held that when part of a contract is Illegal an

of a statute the entire contract is illegal Regan v Lenkowsky 137 F Supp 

1936 and that patties cannot agree in an invalid contract to arbitrate the 

contract Wrap Vertiscr Corp v Piotnick 143 NC 2tt 360

14 At all material times the contract rate has always been 15 bel

contract rate

15 Although the effect of section 3 of PL 87346 as amended by PL 

render unlawful the granting of lower contract rates pursuant to exist

contracts after April 3 1964 without prior Commission approval the lowe

selves were not rendered ipso facto unlawful and they remained on file with th
US BORAX CHEM CORP V PAC COAST EUROPEAN CONF 46

question is an essential element not only of Borax scomplaint b

also as shall be developed later of the Conference sclaim again

Borax as well

Borax sclaim for reparation is dependent upon the conclusion th

of the two rates contained in the Conference stariff the lower 

contract rate was the only lawfully applicable rate to its shipmen

during the period in question The Conference on the other hand a

serts that the legally applicable rate was the higher or non contra

rate and claims reparation for the period during which Borax wa

granted the contract rate

The Examiner applying the legal principle advanced in Unite

States v Gulf Ref Co 268 US542 546 1925 that where tw

tariffs are equally appropriate the shipper is entitled to hav

applied the one specifying the lower rates concluded that the low

rate was the legally applicable rate on the shipments of borax an

borax products

conclusion on the

in

grounds

question

that

Respondents

there can be

except to

no

the

ambiguity

Examines

the meaning of tariff terms contract and non contract rates an

where there is no ambiguity there is no need for constructio

They submit therefore that the doctrine relied on by the Examin

is inapplicable under the present circumstances

The conference spocstir is arly dependent ipon n valid du

rate contract in effect at the tine of l3orax sshipments The term

contract and non contract rates could only have clear meanin

when considered within the context of a viable dual rate system I

the absence of a valid dual rate contract this distinction ceased 

exist and there was immediately raised the question of which of th

two rates should applyin a word an ambiguity was created A

cordingly lye think it clear that the Examiner correctly disposed 

this contention

While we agree with the Examiner there is yet another and perhap

equally important reason for rejecting the Conference scontention

as to the lawfully applicable rate The exaction of the higher no

contract rate from Borax was predicated upon an asserted breach of 

contract which was unlawful Thus were we to accept the higher no

contract rate as the applicable rate here we would in every practic

effect be allowing the Conference to enforce an unlawful contra

Moreover acceptance of the Conference argument would result 

1e Certainly a shipper could not be required to assume as Respondents have intimat

that the non contract rate being the higher of the two rates formed the basis for t

lower contract rate and accordingly was the applicable rate under the circumstanc

Indeed quite to the contrary it has been our experience that in virtually every instan

where a carrier or conference Inaugurates a dual rate system it merely establishes 

existing rate as the contract rate and files a new non contract rate 15 percent higher

11 FMC
j



jjj

j
jj
jj
j

US BORAX CHEM CORP V PAC COAST EUROPEAN CONF 4

2 That the member lines of the Conference pay to Borax repa

tion with interest at six percent in the amount of 90872 a

such additional amounts on subsequent shipments to be compu

on the basis of the rate actually collected and the rate which we ha

determined in our report in these proceedings to have been lawfu

applicable

3 That such additional amounts shall be determined pursuant 

Rule 15b of the Commission sRules of Practice and Procedu

4 That the Conference scomplaint in Docket No 6727 be a

hereby is dismissed

By the Commission

SEAL Signed THOMAS Lisi

Secretary

11 FMC
FEDERAL MARITIME COMMISSION

DOCKET No 688

DISPOSITION OF CONTAINER MARINE LIlNES THROUGH I

CONTAINER FREIGHT TARIFFS Nos 1 AND 2 FMC Nos 1

Decided April 18 1968

Tariffs of Container Marine Lines CML providing for a throug

tion service comprised of port tport transportation between 

and United Kingdom and inland transportation iu United Kingdo

for filing under section 13b Shipping Act 1916 if they 

indicate ports or ranges of ports between which water transp

be performed 2 break out the charge for such water po

transportation 3 identify inland points to and from whic

provided and 4 include a specimen bill of lading all th

which provide for common carrier liability for the throug

consistent with the bolding out in the remainder of the filing

Proposed filing presently defective with respect to 4 and will 

when specimen bill of lading providing for common carrier liab

out which in turn is consistent with holding out in remainde

received

Alleged conflict between porttoport portion of rates and portt

in tariffs of conferences of which CML is a member and dualra

of the conferences nonexistent inasmuch as intermodal service 

CML is not within scope of conference agreements or approve

dualrate contracts

Richard W Kurrus and James M Jacobi for responden

Marine Lines

Burton H White and Elliot B Nixon for interveners An

Belgian Line Bristol City Line Cunard Steamship Co Fu

ren Lines Manchester Lines SeaLand Service Inc Un

Lines Inc member lines of North Atlantic United Kingdo

Conference other than Container Marine Lines

Ronald A Capone Robert Henri Binder and Stuart S 

lin Campbell Keating for member lines of North Atla

bound Freight Association other than Container Marine 

Atlantic Container Line interveners

47 6 
DISPOSITION OF CONTAINER MARINE LINES 4

George F Gotland Amy Scupi and Robert N Levin Galla

Kharasch Calkins Lippman for intervener Atlantic Container L

Ltd

L A Parish and Sterling F Stoudenmire Jr for Waterm

Steamship Corp intervener

Martin 4 Weissert and Terry G Fewell for North American V

Lines Inc intervener

Gregory M Rebman for United States Van Lines Inc interve

Homer S Carpenter and Richard R Sigmon for Household Go

Carriers Bureau intervener

Herbert B Ruskin for United Cargo Corp intervener

Clarence William Vandegrift for Universal Carloading D

tributing Co Inc intervener

Alan F Wohlstetter Denning Wohlstetter for Household Go

Forwarders Association of America Inc intervener

Blair P Wakefield for Virginia State Ports Authority interve

Philip G Kraemer for Maryland Port Authority intervener

Curtis L Wagner Jr and Carlton E Crotty for the Departmen

Defense intervener

Peter S Craig and Elroy H Wollff for Department of Transpo

tion intervener

Donald J Brunner and Norman D Kline Hearing Counsel

11 FMC

REPORT

BY TILE COMMISSION John Harllee Chairman George H He

Vice Chairman Ashton C Barrett James V Day Comm

sioners

This proceeding was instituted by the Commission by or

served February 1 1968 to determine whether tariffs filed by C

tainer Marine Lines CML naming rates for transportation fr

and to interior points including porttoport transportation sho

be accepted or rejected by the Commission Because the question 

the tariff filing did not present any disputed issues of fact wh

necessitated an evidentiary hearing and a prompt determination w

required the proceeding was limited to the submission of affidav

memoranda and oral argument Numerous parties intervened a

submitted documents including the member lines of the two c

ferences of which CML is a member North Atlantic Westbou

Freight Association NAWFA and the North Atlantic Uni

Kingdom Freight Conference NAUKFC two State port auth

ties the Department of Defense and vessel operating and nonvec
478 FEDERAL MARITIME COMMISSION

operating common carriers by water NVO sWe heard or

ment on April 2 1968

The CML Through intermodal Contaner Freight Tariff

CML is a division of American Export Isbrandtsen Lin

a common carrier by water operating in the foreign comm

the United States On January 3 1968 CML filed with th

mission a publication designated Through Intermodal C

Freight Tariff No 1 which established Container Rates a

ditions from Points in the United Kingdom via the Port of Fe

to Points in the United States via the Port of New York A 

publication filed January 8 1968 was designated Throug

modal Container Freight Tariff No 2 and established simi

in the opposite direction Each of these tariffs originally s

to become effective February 7 and February 15 respectiv

postponed for 30 days Both tariffs would have established 

factor intermodal container rates between the inland points 

tioned Each provided for a cargo nos rate of 500 per 

240 pounds or 40 cubic feet applicable to doortodoor m

if the container is loaded by the shipper at his inland point o

and unloaded by the consignee at his inland point of destina

a 250 cargo nosrate applicable to westbound doortoterm

eastbound terminaltodoor shipments These 250 rates un

500 rates did not include inland transportation in the Iinited 

CML withdrew these publications and replaced them with 

filings bearingFMCNos 10 and 11 on February 23 1968 w

now scheduled to become effective May 6 1968 A revised bill o

has also been submitted These revised filings provide for sing

intermodal container rates between the ports in the US Nort

tic Eastport Maine to Hampton Roads Range and point

United Kingdom via the Port of Felixstowe Inland transpor

the United Kingdom between the Felixstowe terminal on the o

and point of origin where containers are loaded by the shipp

point of destination where containers are unloaded by co

on the other hand is included in all rates The rates do no

any inland transportation in the United States With respe

treatment of cargo within the United States shippers and co

have an option Two rates are to be listed for each commodi

tariffs one called doortopier which applies when cargo is 

by the carrier at the USport terminal and the carrier loads t

into or unloads the cargo from its containers and the oth

doortodoor which applies when cargo is tendered to the 

11 
DISPOSITION OF CONTAINER MARINE LINES 4

at its USport terminal in carrier scontainers or made available 

consignee at the carrier sport terminal for unloading by consignee 

inland point of destination In the case of the socalled doort

door rates a 5percent discount is to be allowed on the ocean port

of the through rates The tariffs contain two specific commodity ra

Eastbound there is a rate on tractor parts from New York to Ta

nochside Scotland of 3690 W per ton of 240 pounds doortop

and 350 doortodoor subject to a per container minimum weig

of 175 WT and the porttoport portion of the rate included in 

charge is stated to be 32 Westbound there is a rate on wines a

spirits bottled in wooden cases or fibreboard cartons from Dumbart

Scotland to New York of 3775 doortopier and 3611 doortodo

40 cubic feet This rate is subject to a per container minimum 

20 measurement tons and the porttoport portion of the rate includ

is said to be 3275

The tariffs also include cargo nosrates of 250 WMdoortop

and 246 46 doortodoor eastbound porttoport portion 7

WM and 250 WM doortopier and 247 31 doortodoor we

bound port tport portion 5370 WS

CML has issued a bill of lading on the face of which it appears 

assume common carrier liability for the entire through moveme

although the bill of lading offers problems vhich are discussed bel

Positions of the Parties

All of the vessel operating common carrier interveners and all 

one of the NVOs 2 in this proceeding which have filed papers c

tended thatCILsoriginal proposed tariffs should be rejected

In response to the objections of these parties CML submitted 

revised tariffs and bill of lading which

1 Broke out port toport portions of the through rates

2 Named specific commodity rates and charges

3 Covered no inland US movement

4 Named specific inlandUKpoints and

5 Appeared to assume common carrier liability between inla

UKpoint and USport

There are however several objections to the proposed operat

which CML did not attempt to meet with its second set of tariffs a

Although the inland point of origin for the westbound movement was not origin

identified in the proposed tariff this omission has been corrected

2 Household Goods Forwarders Association of America Inc urged the Commission 

accept the tariff on the basis that the publicity achieved by the publication with a si

regulatory agency of the through rate would protect shippers from discrimination

See discussion below

11 FMC

355 301 0 89 32
480 FEDERAL MARITIME COMMISSION

subsequent submissions The members of the conferences a

to the extent CML is engaged in providing transportatio

the United States and foreign ports within the scope of c

agreements of which it is a member it must charge the rate

in the conference tariffs on file with the Commission and t

to do so will result in a violation of section 18 b 3 of the 

Act 1916 the Act which requires that only the properly 

rate be charged and various provisions of Commission Gene

13 prohibiting duplicative or contradictory tariff filings

Several specific discrepancies are pointed out between th

port portion of CML sthrough rate and the corresponding c

tariff provisions covering water transportation between the s

For example absorptions by water carriers are specifically 

by the conference NAWFA tariff and to the extent C

absorb inland costs NAWFA alleges that it violates not only 

but also 18b1 because its tariff does not specifically p

such absorptions Further examples of discrepancies be

tariffs of the conferences and CML stariffs are wine and 

computed on a different revenue basis no shipper allowance 

on wines and spirits in the conferences tariffs CML stari

include heavy lift charges unlike the conference tariffs a

tariffs do not contain as do the conference tariffs brokerage 

tainer demurrage rules Moreover NAWFA additionally 

that CML stariffs would breach NAWFA sdualrata co

violation of

dual rate signatory

the Commission s

merchants

order

were carried

of approval

by CML

if cargo

at the

of

po

Ns

portion of its rate inasmuch as this rate level differs from 

ference porttoport contract rate because of these discrepa

The revised bill of lading filed by CML while purport

face to assume common carrier liability for the whole of 

ment covered by the revised tariffs nevertheless contain

clauses on the back thereof which appear to be inconsistent 

responsibility Portions of paragraphs 1 3 4 6 7 8 11 1

appear to enable CML to limit its liability to just the wate

of its movement

Additional arguments are made by the conference lines tha

rates are unlawfully high and unjustly prejudicial to B

porters from all places other than Dumbarton Scotland

The NVO swhich had originally opposed CML stariffs 

so mainly because of an alleged conflict with the ICC wh

have been caused by the inclusion of inland UStransporta

the revision of the tariffs these carriers objections now s
DISPOSITION OF CONTAINER MARINE LINES 48

confined largely to possible discriminations caused by the applicatio

of the rates to and from only certain inland points and the possibili

of unreasonably high nosrates

The Department of Defense supports the concept embodied 

CML samended tariffs as the initial step in the direction of prov

ing a single through transportation service for shippers The Virgin

State Ports Authority and the Maryland Port Authority expre

concern over problems of preference and prejudice as between shippe

or ports caused by the application of CML stariffs

Hearing Counsel while recognizing the difficulties with and t

deficiencies in CML stariffs and bill of lading noted in the filings 

the carriers argue that the Commission should accept them upon co

dition that certain changes are made Specifically they would requi

1 If modification of the conference agreements is not possible 

permit CML srates as now filed withdrawal of CML from the co

ferences in accordance with the terms and conditions of the Co

missions General Order 9 and the conference agreements

2 Modification of the bill of lading to eliminate sections whic

appear to be inconsistent with CML scommon carrier liability wi

respect to its inland UK movement as specified in its tariff and o

the face of the bill of lading itself

3 The updating of the free time and demurrage rules contained 

CML stariff to conform with the rules to be issued in the Comm

sion Docket No 6514 when such rules become effective

These actions Hearing Counsel maintain will remove all of th

problems with CML sfilings which are properly within the sco

of this proceeding The decision of a carrier to limit services wi

respect to shippers or ports or to make inland absorptions is not im

proper as a matter of law nor are nosrates unlawful per se Que

tions of preference and prejudice and the unreasonably high lev

of the nosrates are questions of fact not determinable in the pr

ceeding which is designed to determine only whether or not CM

may lawfully file its proposed tariffs

CML maintains that its tariffs are not contradictory to those 

the conferences or violative of section 18 b or General Order 

because they involve a service not covered by the conference agre

ments For the same reason it claims that it may charge any wat

rate specified in its tariffs to either dual rate contract signatories 

nondual rate contract signatories whether it is the same as or differe

from the conference contract rate Moreover to allow the conferenc

agreements to be expanded to apply to inland as well as ocean tran

portation would it contends be contrary to the public interest if 

11 FMC
482 FEDERAL MARITIME COMMISSION

had the effect of preventing CML from performing a throug

Lastly CML contends that the action of the members of N

other than CML in filing papers in this proceeding in the 

the conference constitutes an unapproved section 15 agreem

much as CML did not authorize the filing and the conferenc

ment requires unanimous vote on such conference action

DISCUSSION AND CONCLUSIONS

In waterborne transportation today the primary factor re

by a shipper when selecting a carrier after an evaluation of t

portation available is the service provided by the carriers in t

Conversely to insure a successful operation a carrier mus

as much cargo as he can profitably carry by providing trans

services in accordance with the needs of the shipper Where 

conference service and the rate level is no longer a determinin

for the shipper in making his choice the conference memb

compete with each other in promoting better service The 

ences as herein involved cannot be satisfied merely to provide 

of rates and regularity of service The conferences as the d

commercial units in this trade in our opinion should he at 

front in stimulating and encouraging improvements in tra

tion They cannot impede additional transportation service b

available to shippers whether offered by an outsider or one 

own members especially when it involves an advancemen

state of the art

Such disputes as here involved are better handled thro

managerial decisionmaking processes of conferences and carr

ferences and carriers have an obligation to conduct themse

manner commensurate with their responsibilities as transporte

foreign waterborne commerce of the United States There is 

that conferences are beneficial to the maritime industry and 

ferences well serve their own ends There comes a point 

when self interest must yield to the public interest and car

conferences must conduct their business decisional 

accordingly

The fact is nonetheless that the Commission must res

case and settle the matter of CML stariff filings In doin

Commission need be ever mindful of its responsibilities as a 

which Congress has delegated certain responsibilities The 

of that delegated authority was intended by Congress and 

interpreted by us to be performed in the most judicious m

our quasi judicial capacity and in our best discretion The 

t
istration of the Commission sduties requires flexibility of action an

purpose when necessary and possible

The determination of the issues in this proceeding will have fa

reaching importance Traditional methods of transporting cargo a

rapidly being replaced by the growth of new techniquesand transpo

tation systems The Federal Maritime Commission has not been u

mindful of these developments and has sought to facilitate wherev

possible the implementation of improved shipping systems In th

Order of Investigation in this proceeding the Commission stated that 

does not wish to discourage the inauguration of any transportatio

services which might be of great benefit to shippers It is in accordan

with that injunction that the Commission must arrive at its decisio

herein

In its present posture this proceeding presents substantially few

issues than it did when it was instituted The submissions of the partie

and the subsequent revisions by CML of its tariffs and bill of ladin

have removed most of the original problems Firstly CML has broke

out the ocean portion of its rates We hold that this breaking out 

the proper course of action and find that the provision of section 

b 1 requiring the filing of all the rates and charges of commo

carriers by water in foreign commerce 3 for transportation to and fro

United States ports and foreign ports dictates that such brea

out be made The provision of section 18b1 requiring that tarif

shall plainly show the places between which freight will be carrie

further makes mandatory the clear indication of the ports or ranges 

ports between which water transportation will be performed

While we are inclined to agree with those interveners which ha

maintained that the word places in section 18b1 is not intend

to include inland points because the jurisdiction of the Commission 

only porttoport including services in terminal areas provided for 

sections 18aand 18b we are convinced that inland points to a

from which transportation is provided by a carrier subject to our reg

latory statutes must be identified This is the case not because we c

assert jurisdiction over the reasonableness of the level of the charg

assessed by CML for the services performed by the inland line ha

carriers but because the statute section 18b1 requires th

tariffs shall state separately any rules or reg

lations which in anywise change affect or determine any part or t

aggregate of the carrier srates or charges The identity 

a A common carrier by water In foreign commerce is defined by the first section of 

Shipping Act 1916 as a common carrier engaged in the transportation by wa

of passengers or property between the United States or any of its Districts Territor

or possessions and a foreign country whether in the import or export trade

11 FMC

DISPOSITION OF CONTAINER MARINE LINES 48
484 FEDERAL MARITIME COMMISSION

the inland points is certainly a critical factor in CMI2ts tariff r

providing for inland transportation The Commission must in

it retains effective regulatory jurisdiction over those activit

are within the scope of its authority and the failure to disclo

land points to and from which the carrier sservice applies 

indicate the purported charge for the inland movement wou

impossible for the Commission to determine whether or not 

portion of a rate is one which a carrier lawfully may charge 

the failure to disclose inland transportation points would e

carrier to treat similarly situated shippers differently in poss

tion of sections 16 and 17 of the Shipping Act 1916 and w

Commission sknowledge

The inland points in the United Kingdom for the specific c

rates have been identified in CML srevised tariff filing N

inland points have been indicated for the application of the nos

however and CML has stated that the level of these 

unrealistic and that they will be reduced on short notic

purpose of effecting specific commodity rates The validity 

rates not intended for use but utilized as a device to effectua

ductions on short notice 6 raises a problem outside the sco

proceeding which is directed solely to the sufficiency of CMs

under sections 18b1 and 3 of the Shipping Act 1916 

any questions relating to the level of CML snosrates or spe

modity rates or the possibility of their unlawfully preferent

criminatory effect are of necessity questions of fact which 

resolved in a proceeding of this type

There are as noted above several clauses on the back of Cs

posed bill of lading which are inconsistent with the carries

responsibility with respect to the total movement between US

inland point in the United Kingdom The principle that ta

the bills of lading filed with them be clear and unambiguous 

that revisions be made in those paragraphs 1 3 4 6 7 8 1

which appear to enable CML to limit its liability to just the w

For example no realistic determination could be made is to Whether an 

so unreasonably high or low as to be detrimental to the commerce of the U

and thus subject to disapproval under section 18b5 of the Shipping Act 

Cf Intercoastai Investigation 1935 1 USB400 447 449 1935 d

need for publication of all privileges absorptions or discounts in a carrier star

anlawful preferences and discriminations and statements in Grace Line In

Maritime Board 280 F 2d 790 2d Cir 1960 affirming Banana Distributors 

Lune Inc 5 FMB615 1959 suggesting that any services provided by a 

rier must be offered on an equal and fair basis to all similarly situated shippe

e Section 18b2 requires 30 days advance notice absent special perm

to the effective date only of changes which result In increased costs to the 

creases may become effective upon publication and filing

7 See eg In the Matter of Intercoastai Charters 2USMC154 156 157 
DISPOSITION OF CONTAINER MARINE LINES 48

tion of the movement Those paragraphs must be conformed to th

car rie sintent as expressed on the face of the bill of lading and in th

tariffs themselves to accept common carrier responsibility for th

through movement

These technical deficiencies in CML sbill of lading can easily 

cured CML acknowledges their existence and is apparently willing 

eliminate them priorto the tariffs going into effect As noted by CM

also the Commission sstaff is authorized to reject the tariffs until suc

deficiencies are remedied

There remain for resolution only those problems caused by the a

leged conflict between the porttoport portion of CML srates and th

porttoport rates in the tariffs of the conferences of which CML is 

member CML admits that as long as it operates as a common carrie

by water between ocean ports it must separately publish the ocea

portion of the through rates It further admits it must charge the co

ferences rates for its porttoport as distinct from its intermod

service Inasmuch as the conference agreements involved herein cov

all rates and charges for a porttoport transportation service 

logically follows that as long as CML remains a member of the confe

ences it must charge the conference rates for its solely porttopo

service These rates are the rates on file with the Com mission and du

published and in effect at the time within the meaning of section 

b3 of the Shipping Act 1916

However the organic conference agreements pursuant to whic

NAUKFC and NAWFA are authorized to operate plainly are i

tended to apply only to cargo shipped under tariffs which are app

cable to a porttoport service The NAUKFC agreement states in i

introductory paragraph that it covers transportation of goods by se

from United States North Atlantic Ports in the Eastport Main

8 The free time and demurrage rules contained In CML stariff must of course confo

with the rules to be issued In the Commission sDocket No 6514 when such rules beco

effective

8 Counsel for CML made some statements in oral argument which suggested that the

Is some doubt In his mind as to whether one performing through services between inla

points Including a water movement In the foreign commerce of the United States a

not offering a separate porttoport service would have to file a break out correspondi

to the charge for the port tportion of its service There is no such correspondi

doubt in our minds Neither the first section nor section 18b of the Act stipulates th

the common carrier by water in foreign commerce subject to the jurisdiction of th

Commission and which must file tariffs with us can evade regulation by offering more th

n porttoport service The definition of such carriers in the first section applies to 

engaged In the transportation by water of passengers or property between the Unit

States and a foreign country and 18b requires that they file tariffs Indicati

all the rates and charges for transportation to and from United States porta a

foreign ports These sections do not say that when one offers more than finch transpor

tion it need not file anything with us Such a result would not only be contrary to t

plain language of the statute but would defeat the Congressional intent that we exerc

our authority to protect the publicagainst unlawful discriminations and preferences a

to disapprove rates detrimental to our commerce

11 FMC
486 FEDERAL MARITIME COMMISSION

Hampton Roads range to ports in the United Kingdom and E

emphasis supplied and the NAWFA agreement limits 

over which it applies to movements from Great Britain an

ern Ireland and Erie to the North Atlantic and South Atlan

of the United States of America Both agreements moreo

their membership to those persons operating vessels or ev

ability and a good faith intention to institute and maintain a 

service between the ports within the scope of this agreemen

emphasis supplied Both agreements restrict their appli

the trade covered by this agreement The NAWFA agreem

ther specifically characterizes the lines operating within the 

the agreement as operating from a port article 10 e

supplied

The inescapable conclusion to be drawn from a consisten

of these provisions can only be that the member lines of the tw

ments are subject to their terms 1 only to the extent they 

service involving the ports within the scope of the agreements 

only to the extent the service they operate is a regular service 

these ports beginning and terminating at a port

The same observations are of course true with respect to 

rate agreements of the member lines of the conferences inas

they specifically limit their application to vessels operatin

trade Furthermore any attempt to broaden the scope of t

rate agreements beyond the operations authorized by the co

agreements would of course be a nullity in the absence of an a

ate modification of the conference agreements with approva

Commission

The case of Swift Co et al v Gulf and South Atl Hava

6FMB215 1961 aff din relevant part sub nom Swift C

v Federal Maritime Commission 306 F 2d 277 DCCir 19

vides a comprehensive case study of the problems involved in d

ing the scope of a conference agreement and the effect of at

to broaden the scope of a dual rate agreement beyond the auth

provided for in the conference agreement Analysis of that 

ports our determination with respect to the conference and 

agreements here under consideration and leads inevitably to 

clusion that the through sea and land transportation service w

be provided by CML is outside the scope of these agreemen

the conferences as now constituted are prohibited from apply

agreements to such CML operation because such applicatio

amount to the effectuation of unapproved agreements in vio

section 14b and 15 of the Shipping Act 1916

11 
In the Swift case the conference operating in the trade from Gu

and South Atlantic ports to Cuba attempted to apply its dualrat

agreements to through shipments by Swift a dualrate contract sign

tory from St Louis down the Mississippi River to New Orleans b

barge towed by a river tug and then on to Havana after transferring a

oceangoing tug to the barge The dualrate agreement there involve

applied to all goods shipped directly or indirectly from Gulf an

South Atlantic ports of the United States to Cuba The conferenc

had argued that the word indirectly covered cargo originating 

any inland port as long as it passed through a Gulf port named in it

agreement This interpretation was rejected by the Federal Maritim

Board and the Court of Appeals later affirmed the Board then Fe

eral Maritime Commission in its holding that the attempt to app

the dualrate agreement to a throughwater movement from St Lou

to Cuba via New Orleans constituted a modification of the dualrat

agreement unauthorized by and hence unlawful under section 15

Nor was the conference in a better position legally to control carg

moving on through routes from St Louis after it specifically modifie

the dual rate agreement to include cargo moving from inland por

or places and flowing through any Gulf or South Atlantic port becaus

its basic conference agreement did not name St Louis as a port or plac

subject to the conference agreement and further contained a claus

limiting the scope of the agreements to the ports and territories name

therein As the Board observed the scope of any freighting agre

ment is necessarily limited by the agreements between common ca

riers by water or other persons subject to the Act which are filed an

approved as required by the first sentence of Sec 15 of the Act 6

FMB215 at 223

The Board considered the arrangements whereby the conferenc

attempted to control cargo originating at any inland port or plac

which had not been approved by the Board and which required a

proval before they could be effectuated and found them unlawful unde

various provisions of the Shipping Act They subjected to undue an

unreasonable prejudice or disadvantage 1 shippers by preventin

them from using economical transportation alternatives and 2 rive

port cities by preventing them from obtaining cargo and were u

justly discriminatory and unfair to these ports and shippers by for

Swift had formerly shipped cargo to Cuba by transporting It by rail to Florida an

from there to Cuba via the ships of one of the conference smember lines

u We think that the Board acted reasonably iu finding that the conference Interpret

tion and Its effectuation constituted a modification and was the kind of agreement co

demned by Section 15 unless approved by the Board Swift cf Company v Federal Ma

time Commission supra at 281

11 FMC

DISPOSITION OF CONTAINER MARINE LINES 48
488 FEDERAL MARITIME COMMISSION

closing transportation alternatives such as through movemen

Board observed generally

The interests and needs of shippers in foreign commerce should domina

competing methods and new techniques of water transportation are 

An arrangement would seem to operate to the detriment of the commer

United States or be unfair as between shippers and exporters from th

States and their foreign competitors which prevents the former from 

tree choice among competing methods of transportation for cost ad

Anything which impedes such free choice among constantly changing alte

provided by technical changes in traffic and transportation methods is 

ment to commerce in the long run 6FMBat 226

The conference agreements of the two conferences of which C

member in the United KingdomUnited States trade like t

ference agreement in the Swift case limit their application to th

as defined by the range of ports included therein They therefo

not apply to through transportation from inland port or pla

more than the agreements in the Swift case did In fact a 

case exists here for not so applying the agreements because S

is at least a port and the conference agreement in the Swift case 

to ports while the places in the United Kingdom to and from 

the through transportation moves are inland points and no

As noted above the Board said in Swift that the unauthor

striction applied to cargo originating at any inland port or 

emphasis supplied 6FMB215 at 234

The approved dualrate contracts here involved limit their 

tion to the trade as defined by the conference agreements Ev

conferences attempted to broaden their scope however such br

interpretations would constitute a modification of the co

agreements and would require approval by the Commission 

in the Swift case before they could be effectuated

The new technique of water transportation involved in th

case was like the one here a through movement from an inla

tion and the Board wanted to preserve the shipper sability t

to utilize this form of shipment rather than a combination of 

inland and porttoport movements pointing out possible 

vantages It is important to note moreover that the transp

system to which the shipper sright was preserved in Swi

traditional if not old fashioned system ie a tug and barg

tion rather than the modern selfpropelled conference carr

22 Approval of dualrate contracts is now granted or denied pursuant to s

which was enacted after the events which were the subject of the Swift cas

Oct 3 1961 to apply specifically to dualrate contracts rather than pursuant t

general section 15 authority which had applied at the time of the decision in Sw

11 
DISPOSITION OF CONTAINER MARINE LINES 48

ice Thus this Commission now has a stronger reason than it

predecessor for preserving the shipper sright to avail himself o

competing services where as here a modern container service is in

volved in the through movement In fact the Federal Maritime Com

mission can and must play an important role in encouraging improve

services for shippers As was said in the Order of Investigation th

Commission does not intend to create or permit impediments to th

improvement of shipping services Enlightened regulation is the ke

to effective regulation no regulatory agency can permit regulatio

to be outstripped by new techniques in the industry Progressiv

regulation is required in the interest of encouraging the moderniz

tion of shipping services Outmoded principles and rules will surel

stifle advancements in all fields and especially transportation wher

developments have followed so quickly upon each other

The Supreme Court has recently espoused this idea in a case involv

ing the Interstate Commerce Commission

flexibility and adaptability to changing needs and patterns of transport

tion is an essential part of the office of a regulatory agency Regulatory agencie

do not establish rules of conduct to last forever they are supposed within th

limits of the law and fair and prudent administraition to adapt their rules an

practices to the Nation sneeds in a volatile changing economy They are neithe

required nor supposed to regulate the present and the future within the in

flexible limits of yesterday American Trucking Assns Inc vAtchison Topek

Santa Fe Ry Co 387 US397 416 1967

It is indisputable therefore that the Federal Maritime Commissio

must assume a flexible posture and must view broadly when necessar

its regulatory purposes and governing laws and rules

The language quoted from the Swift case also suggests the difficulty

in attempting to extend the obligations of conference agreements an

dual rate contracts to inland transportation The further inland suc

conference arrangements are extended the greater the danger of un

lawful prejudice or discrimination against persons or localities no

provided a direct conference service For exampie such persons o

localities may be foreclosed from utilizing transportation service

which do provide such direct service

The danger from such extensions may be mitigated somewhat b

the adoption by the conference carriers of through liability from and

to inland points which may result in savings to the shipper but th

shipper nevertheless may still be faced with the foreclosure of alte

nate methods of transportation if he elects to be bound by dualrate

contracts

We do not mean to imply that the conferences could not obtain ou

approval to extend their operations inland In fact we assume that the

11 FMC
490 FEDERAL MARITIME COMMISSION

conferences have the expertise to develop modern shipper s

the interest of improving transportation systems Problem

crimination and prejudice are always matters of fact whic

solved only upon the presentation of sufficient evidence More

lawfulness of the conference arrangements is not in issue 

merely wish to indicate as an aid to the conferences some of 

lems which may be involved should they desire to expand the 

their present operations We are of course not in any way pr

any arrangements which may be presented to us for our app

1osummarize then upon the filing of a tariff in accordance 

decision 1 to the extent CML will transport cargo in a 

movement between inland points and ocean ports it will e

activities beyond the scope of the approved conference agreem

dual rate contracts and thus not subject to their provisions t3 

corollary of 1 CML will not be free to utilize a system o

contract noncontract rates for any portion of its through m

as distinguished from its porttoport movements unless 

authorization apart from that which now covers its po

activities as a conference member to institute a dualrate sys

system would be required to be submitted for our approva

proved by us before it could lawfully be effectuated by CML 

observations with respect to the factual problems involved 

approval would of course be applicable to COIL as well as 

ferences 15 3 to the extent CML will engage ina porttopo

The fact that some of the matters Included within the scope of such exp

ments eg reasonableness of the level of the rates charged by the water car

inland portion of the transportation may be outside the jurisdiction of the a

not prevent approval of such agreements providing they were otherwise lawful 

Carriers by Water Status of Express Com pnnies Truck Lines and Othe

Carriers 6 PMB241 257 1961 Approved Scope of Trades Covered by Agre

10F MC9196m

14 Likewise the urovisions of CILstariff are not duplicating or conflic

the meaning of our General Order 13 inasmuch as they do not refer to or cov

service as that for which rates are published in the conferences tariffs

15 One of the contentions of the conferences is that CML may under its th

modal tariff absorb Inland transportation costs in violation of the conference 

The answer to this contention Is that because CML sservice does not fal

scope of tbe conference agreements there can be no violations thereof Howev

arguendo that it did CMIs activities insofar as they resulted in a decrease In 

amount paid for ocean transportation would not constitute absorptions of i

portation costs within the meaning of the conference tariff rules prohibiting 

NAWFA s rule states that conference members will not be responsible directly 

for any expenses Incurred in the inland movement of containers by whatever m

vessels

tariff

loading

CiIL is

or

not

discharging

however making

terminals

itself responsible

a similar

for

rule

expenses

is contained

for inla

in 

tation That would he the case If it paid the shipper for all or a part of the 

shipper incurred in transporting his property inland or if it acted as shipps

such transportation and reimbursed the shipper for all or a part of his expen

movement CML on the other hand is itself providing the transportation it 

through rate and all shippers must pay this rate there are no absorptions 

1
11 FMC

DISPOSITION OF CONTAINER MARINE LINES 4

than a through movement CML will still be subject to all of its c

ference obligations including those under its dual tae contrac

and 4 to the extent the conferences attempt to apply their arran

ments to cargo involved in other than porttoport movements th

conduct is unlawful as unauthorized by their presently approved 

rangements of course the conferences may wish to amend their 

rangements accordingly

One last general observation flows from what we have said w

respect to the scope of the conference arrangements involved he

and it follows logically from the conclusion that CML sthro

movements are beyond the scope of the conference arrangeme

If such activities by CML are not covered by the conference 

rangements a fortiori through movements from and to inland po

by any carriers including NATO s not members of the confere

would also not be included within such conference arrangeme

Dualrate contract signatories would be free to transport cargo by n

conference carriers but only to the extent such carriers provid

through service with through liability as distinguished from port

port service within the scope of the conference arrangements

One might be tempted to maintain that even if the through ser

of CML is not incluclecl within the scope of the conference activit

insofar as the water portion of CML srates is concerned the cha

should be the same as the porttoport rates in the conference ta

inasmuch as the same transportation is involved The simple ans

to this contention however is that the same transportation is 

involved The Interstate Commerce Commission has long held t

rates between inland points published in conjunction with wa

transportation in our export or import trade need not be the same 

local rates between the same inland points The lawfulness of s

a difference in rates the ICC holds must be determined by consi

ing whether the circumstances and conditions controlling the imp

and export rates are the same as or different from those surround

the domestic rates ine uding the circumstances affecting the movem

of foreign commerce before reaching the United States 7ex ce P

It is of course essential that COIL accept responsibility for the total transportation u

a through bill of Lading for If it did not it would be performing merely a portto

service with additional arrangements made as agent for the shipper The consequ

of this Is that Its service would be subject to the conference tariff and any allowa

it may make to the shipper for Inland transportation would be absorptions In viola

of the conference stariff rule The conferences themselves acknowledge that there is not

In the conference agreements or rubs which would prohibit a member from assu

responsibility as distinguished from expenses for the movement beyond ocean p

and the reason why this is so is plainsuch activities are as we have seen outside 

scope of the approved conference arrangements

le We have no reason to believe that British Mw or practice Is different from ours in 

respect
492 FEDERAL MARITIME COMMISSION

Railway v Interstate Com Com 162 US 197 1896 

Pacific Ry Co v US289 US627 1933 Likewise the qu

whether the ocean portion of a through rate is unjustly 

natory or unreasonably prejudicial because it differs from a co

porttoport rate is a question of fact to be determined after a 

consideration of all the circumstances and conditions inclu

circumstances affecting the inland transportation

We cannot say that the minor discrepanices between the rat

water portion of CML sthrough rate and the rate it is bo

conference member to assess for its porttoport service are 

face so discriminatory or prejudicial as to be unlawful per set

CONCLUSION

Tariffs of CML providing for a through transportation se

cluding inland transportation in the United Kingdom and por

transportation between United States and United Kingdom 

ceptable for filing under section 18bof the Act if they 1 

indicate ports or ranges of ports between which water transp

will be performed 2 break out the charge for such wate

of the transportation 3 identify inland points to and fro

service is provided and 4 include a specimen bill of ladin

articles of which provide for common carrier liability for the 

movement consistent with the holding out in the remainde

filing

CML sproposed tariff is at present unacceptable for filing 

of the inconsistencies in the bill of lading incorporated ther

respect to CML sliability The tariff is therefore rejecte

prior to its intended effective date CM files amendments cu

these defects

CML scontention that the filing of papers in this proceeding by the members 

other than CML in the conference name constitutes an unapproved section 15 

inasmuch as CML did not authorize the filing and the conference agreement req

imous vote is completely without merit Such an interpretation of the confer

ment would have the effect of thwarting a conference from bringing an action 

of its members for any violation of the Shipping Act if the allegedly wrongdoi

did not consent Such an effect would plainly be contrary to the public inter

have not and could not approve any agreement authorizing such an effect As n

Court of Appeals for the District of Columbia Circuit in affirming our decision w

to our findings as to which agreements had been approved in the Swift case sinc

ment subject to our jurisdiction is not simply a private contract between priv

the intent of the parties is only one relevant factor and the Board not only ca

weigh such consideration as the effect of the interpretation on commerce and 

Moreover the agreement exists legally only because approved by the Board 

must be given reasonable leeway in delineating the scope of the agreement an

the extent of Its prior approval Swfft d Company v Federal Maritime C

supra at 251

11 




BALLMILL LUMBER V PORT OF NEW YORK ET AL 49

the stevedore and placed on the dock in accordance with Mahes

tariff The stevedore is neither employed by nor controlled by Mahe

Forklift trucks of Maher carry the bundles to the transit area behin

the berths There the bundles are stacked six or seven high and picke

up by lorries and hauled to Dallmill spremises where they are droppe

in designated areas

The final step is taken by Ballmill sown forklift trucks which mov

the lumber to areas assigned to particular sizes and types this may b

as far away as 400 yards

The lumber of nontenants who use Maher sterminal is picked up b

forklift trucks at the end of ship tackle by lot and taken to the trans

area and deposited where instructed If the lumber is not removed a

the end of free time it is taken by forklift trucks to Maher sarea ad

jacent to the transit area becoming a part of the nontenant sinventor

Maher provides free time of 7 days but this is not applicable t

lumber handled to open areas leased from the Port Authority such a

Ballmill spremises

Maher also provides storage and truck loading services which ar

used by the nontenant lumber dealers Ballmill has never used thes

services since Ballmill has its own leased premises for storage purposes

and has its own equipment and personnel which it uses to load truck

which remove lumber from its premises

Atlantic furnishes various terminal services to receivers of lumbe

and to water carriers at rates published in its own tariff on file with th

Commission Ballmill has used these facilities but only when the lum

terminal

ber mill loaded

or when

small

lumber

quantities

in transit

on a

was

ship

purchased

to be discharged

by Ballmill

at Atlantis

from 

competitor A Port Authority representative in a trip to the Pacifi

Northwest endeavored to correct this situation inasmuch as Ballmi

is required by its lease to use Maher

When unloaded at Atlantic sterminal Ballmill sbundles are picke

up by straddle trucks at the end of ship tackle and taken dire ctt

Ballmill spremises across the street The straddle truck carries to th

proper area two bundles of the same size and grade of lumber There

after Ballmill sforklift trucks position them in proper piles

The controversy about rates for the various services stems partl

from the fact that Ballmill is forced to use Maher while many of it

competitors can use either Maher or Atlantic and partly from the fac

that because of its lease Ballmill cannot practically avail itself o

Maher sstorage and truck loading services

Ballmill renewed its lease with the Port Authority in 1960 for 1

more years Its decision to renew was based on its determination tha

11 FMC
498 FEDERAL MARITIME COMMISSION

at then current rates it would be cheaper to rent its premi

only Maher sbackhandling services rather than to use all 

services of backhandling storage and truckloading

From 1960 to 1962 Maher srates remained constant Ho

lantic srates available to nontenants and Weyerhaeuser 

Nontenants took advantage of the lower rates at Atlant

was bound by the terms of its lease and could not By 1962 o

volume of nontenant lumber passed through Maher sterm

Ballmill asked for lower rates from Maher to enable him 

with competitors who could use Atlantic slower rates Bas

testations had little effect until in 1965 Maher secured a red

125 to 1G0 per 1000 bd ft of its required payment to th

thority for lumber it backhandled This was followed by a 

tariff effective December 6 1965 The new tariff did little 

Ballmill however

AIaher scharges for backhandling from shipside to ter

reduced from 30 to 315000net board feet The rate 

plicable to backhandling to leased areas Balhnill srat

changed

Maher snew tariff also contained a volume discount prov

is the basis for much of Balhnill scomplaint in this proc

discount provision is applicable to the combined service

handling to the terminal truckloading and wharf usag

r Maber sdiscount provision reads as follows

VOLUME DISCOUNT

The following volume discount is applicable to the services of backhandling to the 

loading and wharf usage as such terms are described In this tariff To be eligible for 

the consignee must move more than three million board feet pursuant to this tariff w

secutive months commencing no earlier than Jan 1 1966 1n calculating the number of 

pursuant to this rule lumber movements under Paragraph 1Q3 shall be Included in

does not exceed fifty percent of the consignee stotal lumber movement for the year T

apply only to the volume that moved to Terminal under Paragraph 1A Lumbe

for volume discount under the service provided for herein above shall also be accorded a 

on the storage charges set forth in Paragraph 6

Up to 3 million board measure feet net No

Over 3 to 6 million board measure feet net 03

Over 6 to 10 million board measure feet net 4

Over 10 to 15 million board measure feet net 

Over 15 to 20 million board measure feet net 

Over 20 to 25 million board measure feet net 9

Over 25 to 30 million board measure feet net 1 

30 million board measure feet net 13

13mfhoard measure foot 1 inch thick by 12 inches wide

13ackhandlin

truckloading a

wharf usage p

1000 bmfn
BALLMILL LUMBER 7 PORT OF NEW YORK ET AL 49

plied discount rate would be based on the total volume of lumber whic

moved through the terminal by a particular dealer both to the publi

yard and to the leased area but this discount was not applicable to th

portion that moved to the leased area Lumber moved through th

leased area could not be included if it exceeds 50 percent of the co

signee total movement for the year In other words if the total mov

ment was 17 million bmfof which nine went to the public yard th

discount on the 9 million feet only would be in the 15 to 20 millio

bmfrate but there would be no discount at all on the 8 million bmf

that went into the leased area If 8 million of the 17 million move

through the public yard and 9 million to the leased area the discoun

was figured at the 6 to 10 million bmfrate on the 8 million with n

discount at all on the 9 million bmfmoving to the leased area Thi

meant that Balimill could not practically avail itself of the volum

discount unless it chose to use the package of services and to use th

public terminal rather than its own leased premises No discount wa

offered on the single service of backhandling

On January 1 1967 Maher sbackhandling rate to apply both t

the terminal and to leased areas was increased to 301000net boar

feet The package discount provision was retained

Atlantic reduced its rates following the steps taken by Maher As o

the time of the hearin gAtlantic srates for backhandling to truc

delivery area and to storage were up to 5000 feet 285 per 1000

feet from 5001 to 10000 feet 255 and over 10001 feet20 Fo

backhandling and transportation without interruption to designate

terminal areas other than its own the rates are up to 10000 feet250

within 12 mile and 450 for over 17 mile for 10000 and over 25

and 425 respectively

Facts relevant to the question of the Port Authority scontrol ove

Maher and its rates and to the question of reparation as well as othe

relevant facts will appear in the discussion portion of this report

IhscussioN

Ballmill scomplaint alleges violations of sections 16 and 17 of th

Act by the Port Authority and the other respondents Ballmill request

an award of reparation in the amount of 1 million

Four areas of controversy arise from Ballmill scomplaint

1 Whether the lease between the Port Authority and Weyerhaeuse

results in undue and unreasonable prejudice and disadvantage to Bal

mill in violation of section 16 First of the Act and constitutes and

unjust and unreasonable regulation and practice in violation of sec

tion 17 of the Act

11 FMC
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RATE AGREEMENT EXCLUSIVE PATRONAGE SYSTEM 5

differential took full cognizance of the foregoing As Senator En

stated during debate on the bill which ultimately added section 14

the Shipping Act 1916

The spread provided by this measure is 15 percent Some may argue 

it should be 10 percent some may argue that it should be 20 percent But 

committee examined the entire situation and arrived at the 15percent figur

the basis of the information which appears on page 14 of the report as follo

Of the 62 dualrate conferences serving US ports in 1959 21 expre

their spread between contract and noncontract rates in percentage fig

showing the percentage above the contract rate of the noncontract r

Of the 21 18 were using a 20percent spread 1 15 percent and 2 10 per

See Hearings Before Antitrust Subcommittee of Committee on the Judic

House of Representatives on Monopoly Problems in Regulated Indust

Ocean Freight Industry 86th Cong 2d sess pt 1 vol 1 at 740

1959

Another example of the reasoning behind the 15percent sprea

found in this statement of the Committee on Merchant Marine 

Fisheries

The provision authorizing a maximum spread between the rate charged 

casual shipper and the exclusive patronage contract signer of 15 percent appe

to the committee in the light of its experience as reasonable The problem 

to find a figure that would not act as a penalty upon the shipper who did 

choose to limit his shipments to conferences and at the same time would pro

sufficient inducement to others to execute such agreements As stated it is 

belief of the committee which was shared by carrier and shipper witnesses a

that the dual rate conference system provides definite advantages in assuri

nucleus of cargo to established carriers thus enabling them to provide the e

ment and service required by the majority of shippers The contractnoncont

spread is the best practical device to assure these aims and the 15percent d

ence in rates is in the judgment of the committee fair and reasonable to ach

this end without imposing a penalty on or discriminating against the nonsi

HRRep No 498 With Cong 1st Sess 1961 Emphasis added

Therefore in arriving at the 15percent spread found in sec

14b 7 Congress was not acting arbitrarily On the contrary th

was as expressed by the Senate Commerce Committee a gene

satisfaction with the 15percent spread

it S Rep No 860 87th Cong 1st Sess p 14

It Hearing Counsel misinterpreting the Examiner sdecision with respect to his discu

of the legislative history of section 14b 7contend that

Nowhere can this legislative history be seen to justify a conclusion that Con

Intended that In all circumstances the differential should or must be 15

The Examiner has not as Hearing Counsel allege made any finding that the differe

between contract and ordinary rates must be 15 percent but merely has determined 

on the basis of the present record and the legislative history of section 14b 7the 15 

cent spread in the proposed dual rate contract Is reasonable In all the circumstances 

reports of both Houses of Congress make It clear that what Congress did was mere

find that based on its study of existing dual rate systems a maximum spread of 15 pe

was reasonable so far as they were concerned but left it to the Commission app

its expertise to determine under the provisions of section 14b 7 a spread bet

ordinary rates and rates charged contract shippers which is reasonable i

circumstances

11 FMC
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statute

It is incumbent upon this Commission to evaluate every proposed

agreement in the light of this standard and it should not be forsaken

even though only a simple and innocuous agreement is involved We

are here presented with an agreement which does not qualify for

approval under our congressional mandate or under the guidelines we

have set heretofore

The time an agreement is presented for initial approval is when we

must evaluate it thoroughly and determine the anticompetitive scope

it is to possess We are not soothsayers We cannot predict what in fact

will happen as a result of approval We can however predict the

probable consequences of approval That is our expertise When ap

proving an agreement we should understand the gamut of activity in

herently concomitant to the specific conduct as set forth in the agree

ment We should not grant antitrust immunity to agreements which

are overbearing or unnecessary and which thereby might contain lati

tude for unauthorized actions within the approved area of conduct

It is an undesirable situation when we must call upon hindsight to

uncover the pitfalls of an agreement which may trap a conference in

violations of the law

As I said in docket 6615 thedesire of the parties to enter into

agreements alone is not considered sufficient to warrant approval

For presumptively all anticompetitive combinations run counter to the public

interest in free and open competition and it is incumbent upon those who seek

exemption of anticompetitive combinations under section 15 to demonstrate that

the combinations seek to eliminate or remedy conditions which preclude or hinder

the achievement of the regulatory purpose of the Shipping Act

i Mediterranean Pools Investigation 9 FMC 264 at 288

s Isbrandtsen Co Inc v United States et al 211 F 2d 61 at 57

s Transcript Oral Argument p 20

Agreement for Consolidation or Merger Between American Mail Line Ltd American

President Lines Ltd and Pacific Far East Lines Inc

Mediterranean Pools Investigation 9 FMC 264 290

11 FMC