FEDERAL MARITIME

COMMISSION

 

43rd

ANNUAL REPORT

for

 Fiscal Year

2004
 TABLE OF CONTENTS

LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

MEMBERS OF COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

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

VISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

FMC MISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

I. THE COMMISSION

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

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

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

II. THE YEAR IN REVIEW ................................ 7

A. Realignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

B. Trade Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

C. Restrictive Trade Practices . . . . . . . . . . . . . . . . . . . . . . . . . . 13

D. Trade Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

E. Alternative Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . 16

F. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

 

III. MONITORING AND ENFORCEMENT

A. Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

B. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

IV. DEVELOPMENTS IN MAJOR U.S. FOREIGN TRADES

A. Transatlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

B. Mediterranean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

C. Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

D. Indian Subcontinent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

E. Australia and Oceania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

F. Latin America and the Caribbean . . . . . . . . . . . . . . . . . . 32

G. Transpacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

H. Worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

V. THE FOREIGN SHIPPING PRACTICES ACT OF 1988

A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

B. Top Twenty U.S. Liner Cargo 

 Trading Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-iiVI. SIGNIFICANT OPERATING ACTIVITIES BY

ORGANIZATIONAL UNIT

A. Office of the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

B. Office of Administrative Law Judges . . . . . . . . . . . . . . . . 53

C. Office of the General Counsel . . . . . . . . . . . . . . . . . . . . . . . 57

D. Office of Equal Employment Opportunity . . . . . . . . . . . . 69

E. Office of the Inspector General . . . . . . . . . . . . . . . . . . . . . . 73

F. Office of Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 77

G. Office of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

H. Bureau of Certification and Licensing . . . . . . . . . . . . . . . 93

I. Bureau of Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

J. Bureau of Trade Analysis . . . . . . . . . . . . . . . . . . . . . . . . 103

 

APPENDIXES

A. Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

B. Commission Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 122

C. Agreement Filings and Status . . . . . . . . . . . . . . . . . . . . . . . 123

D. Form FMC-1 Tariff Location Addresses - 

 Electronic Service Contract Filings

 and Special Permission Applications . . . . . . . . . . . . . 124

E. Civil Penalties Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

F. Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

G. Statement of Appropriations, Obligations

 and Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
FEDERAL MARITIME COMMISSION

WASHINGTON, D.C. 20573-0001

March 31, 2005 

To the United States Senate and House of Representatives:

Pursuant to section 103(e) of Reorganization Plan No. 7 of 1961, and section

208 of the Merchant Marine Act, 1936, as amended, I am pleased to submit the 43rd

Annual Report of the activities of the Federal Maritime Commission for fiscal year

2004.

Sincerely,

Steven R. Blust

Chairman
-ivMEMBERS OF COMMISSION 

Steven R. Blust

Chairman

Appointed 2002

Term Expires 2006

 

Harold J. Creel, Jr. Joseph E. Brennan

Commissioner Commissioner

Appointed 1994 Appointed 1999

Term Expires 2009 Term Expires 2008

 

 Rebecca F. Dye A. Paul Anderson

Commissioner Commissioner

Appointed 2002 Appointed 2003

Term Expires 2005 Term Expires 2007
SENIOR COMMISSION OFFICIALS

Counsel to the Chairman . . . . . . . . . . Cory R. Cinque

 

General Counsel . . . . . . . . . . . . . . . . Amy W. Larson

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

Chief Administrative Law Judge . . . Norman D. Kline

Director, Office of 

 Equal Employment Opportunity Alice M. Blackmon

Inspector General . . . . . . . . . . . . . Tony P. Kominoth

Director of Administration . . . Bruce A. Dombrowski

Director of Operations . . . . . . . . . . Austin L. Schmitt

Director, Bureau of Certification

 and Licensing . . . . . . . . . . . . . Sandra L. Kusumoto

Director, Bureau of Enforcement . . . . . . Vern W. Hill

Director, Bureau of

 Trade Analysis . . . . . . . . . . . . . . . . Florence A. Carr

 
-viVision

Fairness and Efficiency in U.S. Maritime Commerce

FMC Mission

The FMC’s Mission is to:

• Develop and administer policies and regulations that foster a fair, efficient and secure

maritime transportation system;

• Protect U.S. maritime commerce from unfair foreign trade practices and market-distorting

activities;

• Facilitate compliance with U.S. shipping statutes through outreach and oversight;

• Assist in resolving disputes 
I

THE COMMISSION

A. HISTORY

The Federal Maritime Commission (“Commission” or “FMC”) was established as an

independent regulatory agency by Reorganization Plan No. 7, effective August 12, 1961. Prior to

that time, the Federal Maritime Board was responsible for both the regulation of ocean commerce

and the promotion of the United States Merchant Marine. Under the reorganization plan, the

shipping laws of the U.S. were separated into two categories -- regulatory and promotional. The

responsibilities associated with the promotion of an adequate and efficient U.S. Merchant Marine

were assigned to the Maritime Administration, now located within the Department of

Transportation. The newly-created FMC was charged with the administration of the regulatory

provisions of the shipping laws.

 

The Commission is responsible for the regulation of oceanborne transportation in the foreign

commerce of the U.S. The passage of the Shipping Act of 1984 (“Shipping Act” or “1984 Act”)

brought about a major change in the regulatory regime facing shipping companies operating in the

U.S. foreign commerce. The subsequent passage of the Ocean Shipping Reform Act of 1998

(“OSRA”), with its deregulatory amendments and modifications to the 1984 Act, further signaled

a significant paradigm shift in shipping regulation. 

B. FUNCTIONS

The principal statutes or statutory provisions administered by the Commission are the 1984

Act, the Foreign Shipping Practices Act of 1988 (“FSPA”), section 19 of the Merchant Marine Act,

1920 (“1920 Act”), and Pub. L. No. 89-777. Most of these statutes were amended and modified by

OSRA, which took effect on May 1, 1999.

The Commission’s regulatory responsibilities include:

# Protecting shippers and carriers engaged in the foreign commerce of the U.S.

from restrictive or unfair foreign laws, regulations, or business practices that

harm U.S. shipping interests or ocean trade. 

# Reviewing operational and pricing agreements among ocean common carriers

and marine terminal operators (“MTOs”), to ensure that they do not have

excessively anticompetitive effects.

# Reviewing and maintaining a system containing the service contracts between

ocean common carriers and shippers, and using this system to guard against

anticompetitive practices and other unfair prohibited acts.
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# Ensuring that common carriers’ rates and charges are accessible to the shipping

public in private, electronically accessible systems. 

# Regulating rates, charges, and rules of government-owned or -controlled

carriers to ensure that they are just and reasonable and are not unfairly

undercutting private competitors.

# Issuing passenger vessel certificates evidencing financial responsibility of vessel

owners or charterers to pay judgments for personal injury or death or to repay

fares for the nonperformance of a voyage or cruise.

# Licensing ocean transportation intermediaries (“OTIs”) to protect the public

from unqualified, insolvent, or dishonest companies.

# Ensuring that OTIs maintain sufficient financial responsibility to protect the

shipping public from financial loss.

# Investigating discriminatory rates, charges, classifications, and practices of

common carriers, MTOs, and OTIs operating in the foreign commerce of the

U.S.

The Commission is authorized by the FSPA, section 19 of the 1920 Act, and section 13(b)(6)

of the 1984 Act, to take action to ensure that the foreign commerce of the U.S. is not burdened by

non-market barriers to ocean shipping. The Commission may take countervailing action to correct

unfavorable shipping conditions in U.S. foreign commerce and may impose penalties. The

Commission may address actions by carriers or foreign governments that adversely affect shipping

in the U.S. foreign oceanborne trades including the intermodal operations of carriers or the

operations of OTIs, or that impair access of U.S.-flag vessels to ocean trade between foreign ports.

The 1984 Act is applicable to the operations of common carriers and other persons engaged

in U.S. foreign commerce. It exempts agreements that have become effective under the 1984 Act

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

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

and to ensure that agreements do not otherwise violate the 1984 Act or result in an unreasonable

increase in transportation cost or unreasonable reduction in service.

In addition to monitoring relationships among carriers, the Commission is also responsible

for ensuring that individual carriers, as well as those permitted by agreement to act in concert, fairly

treat shippers and other members of the shipping public, in accordance with the 1984 Act’s

prohibition against undue discrimination. The 1984 Act also requires all carriers to make their rates,

charges and practices available in automated tariff systems that must be available electronically to

the public. Non-vessel-operating common carriers (“NVOCCs”) may only assess the rates and

charges published in their tariffs. Ocean common carriers are permitted to enter into service
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contracts with their shipper customers. Such contracts are filed electronically with the FMC in our

Internet-based system, and are provided confidential treatment by the Commission as required by

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

increases (“GRIs”) or individual commodity rate levels in the U.S. foreign commerce, except with

regard to certain foreign government-owned or -controlled carriers.

Pub. L. No. 89-777 requires the operators of passenger vessels with 50 or more berths who

embark passengers at U.S. ports to establish financial coverage to indemnify passengers in cases of

death, injury, or nonperformance of transportation. The Commission certifies such operators upon

the submission of satisfactory evidence of financial responsibility. The Commission ensures that

all OTIs operating in the foreign commerce of the U.S. have established sufficient financial

responsibility to protect shippers from financial loss. Additionally, the Commission licenses all U.S.

OTIs. 

The Commission carries out its regulatory responsibilities by conducting informal and formal

investigations. It holds hearings, considers evidence and renders decisions, and issues appropriate

orders and implementing regulations. The Commission also adjudicates and mediates disputes

involving the regulated community, the general shipping public, and other affected individuals or

interest groups.

C. ORGANIZATION

The Commission is composed of five Commissioners appointed for five-year terms by the

President with the advice and consent of the Senate. No more than three members of the

Commission may belong to the same political party. The President designates one of the

Commissioners to serve as Chairman. The Chairman is the chief executive and administrative

officer of the agency.

As of August 23, 2004, the Commission’s organizational units consist of: Office of the

General Counsel; Office of the Secretary, including the Library and Office of Consumer Affairs and

Dispute Resolution Services; Office of Administrative Law Judges; Office of Equal Employment

Opportunity; Office of the Inspector General; Office of Administration, including the Offices of

Budget and Financial Management, Human Resources, Information Technology, and Management

Services; and Office of Operations, including the Bureaus of Certification and Licensing,

Enforcement, and Trade Analysis. These offices and bureaus are responsible for the Commission’s

regulatory programs or provide administrative support.

In fiscal year 2004, the Commission was authorized a total of 180 full-time equivalent

positions and had a total appropriation of $18,362,000. That appropriation supported the actual

employment of 129 full-time equivalent positions during the fiscal year. The majority of the

Commission’s personnel are located in Washington, D.C., with Area Representatives in New York,

New Orleans, Los Angeles, South Florida and Seattle.
II

THE YEAR IN REVIEW

Fiscal year 2004 is characterized by a strong international liner market, resulting in a surge

of cargo volumes. The Commission has continued to monitor the international liner trade, while

responding to the industry and advancing several important initiatives.

International liner trade has continued to expand as import and export cargo volumes reached

record highs. The significant rise in cargo volumes has contributed to congestion at ports throughout

the U.S. The Commission continues to monitor trade developments and gather information relating

to potentially restrictive foreign trade practices. 

The Commission is in the process of responding to industry requests to modify regulations

pertaining to tariff filing requirements. Numerous petitions, supplemented by a more recent Joint

Proposal conveying a more unified approach, have been filed requesting an exemption from tariff

filing requirements. The Commission also has continued the process of updating its rules relating

to monitoring of ocean common carrier and marine terminal agreements. The revisions to the ocean

common carrier and marine terminal agreement rules would provide the regulatory certainty,

flexibility and confidentiality which parties to agreements under the Shipping Act need for efficient

operation. 

Several initiatives have enhanced the Commission’s ability to serve the ocean transportation

industry. The Commission completed a realignment in order to create a more focused agency – one

which is best suited to foster and support an environment of fairness and efficiency in U.S. maritime

commerce. The realignment sought to reallocate the Commission’s existing resources to maximize

the effectiveness of the staff and to facilitate efforts to better serve the ocean transportation industry.

Further, the Commission has expanded its outreach efforts by initiating a series of industry briefings

as a way of fostering greater awareness and understanding of the current issues and concerns

affecting the industry. 

This Annual Report highlights areas of particular interest, and then provides an office-byoffice synopsis of each unit’s activities and accomplishments during the past fiscal year. 

A. REALIGNMENT

During fiscal year 2004, the Commission reviewed its work processes and practices in light

of changes in the industry to determine how the agency could best perform its duties. Based on this

review, a realignment of the agency became effective on August 23, 2004. The new organizational

structure did not create any new programs, nor eliminate any agency projects or activities. Rather,

the restructuring reallocated the Commission’s existing resources to maximize the effectiveness of

the staff and facilitate agency efforts to better serve the ocean transportation industry. 
-5-

The former Office of the Executive Director, with oversight over the three program bureaus

and four administrative offices, was separated into two offices. The Office of Operations was

formed and given oversight of the three program bureaus: the Bureau of Certification and Licensing

(formerly the Bureau of Consumer Complaints and Licensing); the Bureau of Enforcement; and the

Bureau of Trade Analysis. Additionally, to better carry out the Commission’s compliance and

outreach initiatives, the Area Representatives (formerly assigned to the Bureau of Enforcement) now

report directly to the Office of Operations. The Office of Administration was formed and given

oversight over the four administrative offices: the Office of Budget and Financial Management; the

Office of Human Resources; the Office of Information Technology; and the Office of Management

Services.

Also, because of the rapid growth of the Commission’s consumer complaints program, it was

decided to realign some of that program’s resources. The complaints program and the alternative

dispute resolution function (previously located within the Bureau of Consumer Complaints and

Licensing) were renamed the Office of Consumer Affairs and Dispute Resolution Services and

transferred to the Office of the Secretary. The Bureau of Certification and Licensing continues to

be responsible for passenger vessel certifications, and licensing and financial responsibility

requirements of entities regulated by the FMC.

This revised organizational setup should serve FMC stakeholders more efficiently and

responsively and provide an effective regulatory structure suitable for today’s shipping industry. 

B. TRADE DEVELOPMENTS

International ocean shipping remains a vital link between the U.S. economy and the rest of

the world. The Commission continually monitors trade and economic conditions in its oversight of

our Nation’s oceanborne commerce.

Overall in fiscal year 2004, U.S. international trade continued to expand as the value of

goods and services imported and exported between the U.S. and foreign nations reached record

highs. In the worldwide liner trades, container traffic grew by over 10 percent, and 3,300 container

ships served the trades. Strong trade growth increased vessel capacity utilization rates, prompting

the need for more vessel space which put strong upward pressure on vessel charter rates. Looking

forward, the construction of new container ships is planned to increase the current fleet’s total

capacity by over 50 percent. Meanwhile, world trade growth is expected to moderate in 2005 and

2006 due to an anticipated slowdown in economic growth in the more developed countries. Many

carriers currently serving the trades reported gains in revenues and profits compared to the previous

results of last year. Carriers, however, are facing some significant cost increases brought about by

high vessel charter rates, rising fuel prices, port congestion, added security measures, and trade

imbalances.

In the transatlantic, the volume of U.S. liner exports bound for North Europe grew at a higher

rate than liner imports in the inbound direction to the U.S. The pattern of trade growth was largely

influenced by the sharp appreciation of the euro against the U.S. dollar. The growth in U.S. exports
-6-

reduced the cargo volume imbalance which has persisted in the trade for many years. Concerns for

future growth in both trade directions, particularly with respect to high-valued cargo, are escalating

as more U.S. and European manufacturing moves to Asia. Major alliance carriers in the trade

restructured their services to reduce their vessel capacity. Overall, however, vessel tonnage in the

trade increased during the fiscal year. Members of the Trans-Atlantic Conference Agreement

(“TACA”) (No. 011375) continued their rate program by implementing a series of small to moderate

tariff GRIs in both trade directions. Industry analysts, however, believe that TACA’s GRIs in the

first half of 2004 were largely eroded by the influx of new vessel tonnage in the trade. Trade

disputes between the U.S. and the European Union (“EU”) continued to erupt, which could harm

cargo growth. In 2004 the EU imposed a duty on exports of certain U.S. goods to EU nations, which

can escalate up to 17 percent. In its review of the block exemption for shipping conferences, the

European Commission (“EC”) issued a white paper recommending that the exemption be repealed

and requesting public comments on alternative proposals. Final recommendations will likely go

before the Council of the EU toward the end of 2005.

Between the U.S. and the Mediterranean, growth in the volume of U.S. export liner cargo

continued; however, import liner cargo growth was minimal. While promising for U.S. exporters,

the trade imbalance in liner cargo volume remains very high, with imports from the Mediterranean

exceeding U.S. exports by over 50 percent. In addition, weak economic conditions among EU

nations in the region could adversely affect U.S. export growth. Major carriers serving the trade

redeployed smaller vessels to reduce their capacity. Overall, the capacity cutbacks reduced the total

vessel tonnage in the trade by over 10 percent. Members of the United States South Europe

Conference (No. 011587) implemented three small to moderate tariff GRIs in both trade directions.

In the Middle East, liner import cargo from the region grew at a higher rate than U.S. export

cargo, although the trade imbalance substantially favored U.S. exports. Renewed trade growth

appears promising in the future as the area stabilizes and greater economic activity is generated from

increased oil production, higher oil prices, and the reconstruction of Iraq. In addition, the U.S. has

embarked on an ambitious ten-year plan to create a U.S.-Middle East Free Trade Area.

Trade growth between the U.S. and the Indian Subcontinent was positive in both trade

directions; however, the amount of import cargo from the region far exceeded U.S. export cargo.

The Indamex Agreement (No. 011692), a major discussion agreement in the trade, gained two new

carrier members. Economic growth within the region, particularly in India, is forecasted to remain

strong. Carriers serving the trade, however, faced major problems of port congestion and shutdowns

due to strikes by dockworkers and truckers. New projects are underway to address problems with

port congestion in India.

In the trade between the U.S. and Australia/Oceania, growth in the volume of liner cargo was

strong in both trade directions. U.S. export cargo exceeded import cargo from the region, primarily

due to the appreciation of the Australian dollar against the U.S. dollar. To enhance the flow of trade,

the Australian government is investing heavily on improvements to its transportation infrastructure

by deepening channels, building new roads, and upgrading rail lines. The newly opened AustralAsia

Railroad, a north-south transcontinental railroad, will serve as a rail-sea bridge. On other trade
-7-

developments, the U.S. government approved the U.S.-Australia Free Trade Agreement, which will

phase out tariffs on the importation of certain manufactured goods from Australia. Membership

changes occurred in carrier agreements within the trade, including the addition of Lykes Lines

Limited to several rate agreements. The Australian government is in process of reviewing its laws

that cover exemptions for ocean common carrier agreements.

The volume of liner cargo increased in all of the trades between the U.S. and Latin America

and the Caribbean, particularly in South America where double-digit growth occurred in both trade

directions. Weak currency values in South America boosted import cargo growth, while a measure

of economic recovery within the region stimulated U.S. export growth. Brazil remained the leading

South American trading partner with the U.S. South American nations began initiatives toward

improving trade and economic growth by creating a free trade zone across the continent. Some

major carriers operating in the South America trade restructured their services during the fiscal year,

and new liner services were initiated. Problems with port congestion persisted in South America,

particularly in Brazil. In the U.S. trades with Central America and the Caribbean, the volume of

liner cargo grew at a more moderate pace. Trade with Central America, however, is expected to

increase under the Central America Free Trade Agreement. As U.S. port congestion worsened,

more liner cargo is being transshipped through ports in the Caribbean.

In the transpacific, trade growth remained strong in both directions in fiscal year 2004. The

transpacific is the largest U.S. liner trade, accounting for 66 percent of all liner imports in the U.S.,

and 50 percent of all U.S. liner exports. In the inbound direction, import cargo from the Far East

grew by 14 percent over the preceding fiscal year, and vessel utilization was at near capacity. Much

of the import growth arose from the strong U.S. demand for low-cost consumer goods manufactured

in China. The huge influx of import cargo from Asia also created greater congestion at U.S. ports,

particularly Los Angeles and Long Beach. Maersk Sealand withdrew from the Transpacific

Stabilization Agreement (“TSA”) (No. 011223) at the start of the fiscal year. Reportedly, the carrier

felt that it could respond to customers’ requirements better by avoiding the delays inherent in a

collective discussion process. The remaining members of TSA endeavored to boost rate levels by

implementing GRIs; however, reports indicated that the full rate increases were not obtained. Over

the fiscal year, the Commission’s staff met with TSA representatives on two occasions to review the

compliance of TSA members with the terms of the settlement pursuant to the Commission’s Fact

Finding Investigation No. 25 - Practices of the Transpacific Stabilization Agreement Members

Covering the 2002-2003 Service Contract Season. Since the settlement of the investigation, the

Commission has received no complaints involving the activities of TSA members. In the outbound

direction of the transpacific trade, U.S. export cargo grew by 10 percent compared to the preceding

fiscal year. Nonetheless, the trade imbalance created a substantial amount of excess vessel capacity

in the outbound direction, and consequently, freight rates remained low. Many Far East nations

continued to maintain bans on U.S. poultry and beef exports stemming from the outbreak of diseases

in the U.S.; however, some progress toward restoring the foreign demand for these exports occurred.

C. RESTRICTIVE TRADE PRACTICES
-8-

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

of other countries that unreasonably favor their domestic companies or discriminate against U.S.

trade interests in ocean shipping. In this regard, the Commission may issue rules in response to

foreign practices that create conditions unfavorable to U.S. shipping in general. It also may institute

countermeasures in response to foreign laws or policies that adversely affect U.S. carriers. It also

can initiate appropriate action in instances where a U.S.-flag vessel faces unfair barriers in entering

a foreign-to-foreign trade.

In fiscal year 2004, the Commission continued its active approach in this area. In particular,

the Commission continued to address practices of the People’s Republic of China (“PRC”) and

Japan.

On December 8, 2003, the Chinese Minister of Communications and the U.S. Secretary of

Transportation signed a bilateral Maritime Agreement. The result of many years of difficult

negotiations, this Agreement addressed matters raised in the Commission’s proceeding concerning

vessel operators and NVOCCs. In fiscal year 2004, the Commission continued to gather information

to determine whether the PRC was carrying out the commitments made in the bilateral Maritime

Agreement.

The Commission also continued to monitor regulations and port practices of the Government

of Japan. In fiscal year 2001, the Commission revised its semiannual reporting requirement for U.S.

and Japanese carriers. The Commission continued to require these semiannual reports in fiscal year

2004.

Finally, the Permanent Task Force on International Affairs, established in 2000, is chaired

by the Deputy General Counsel and made up of key personnel in that office, the Bureaus of

Enforcement, Trade Analysis, and Certification and Licensing. The Task Force identifies, evaluates

and attempts to anticipate foreign practices which might have adverse impacts on U.S. shipping

interests.

D. TRADE OVERSIGHT

As part of its statutory responsibilities, the Commission maintains systematic oversight of

the commercial activities of ocean liner carriers and other regulated entities in the U.S. oceanborne

trades. On a regular basis, the Commission also monitors relevant economic and trade conditions

that affect the ocean shipping industry. The Commission’s oversight helps to ensure regulatory

compliance by uncovering unreasonable or unfair industry behavior. These efforts also help to

identify potentially unfavorable trade practices that could affect U.S. oceanborne commerce.

During the fiscal year, the Commission issued a proposed rule in Docket No. 03-15, Ocean

Common Carrier and Marine Terminal Agreements Subject to the Shipping Act of 1984. The

proposed rule would amend the Commission’s regulations in 46 CFR Part 535. Among the proposed

amendments, the regulations on the filing and content of agreements would be modified to account

for changes that have occurred in the shipping industry since the enactment of OSRA. In addition,
-9-

the proposed rule would modify the Information Form and Monitoring Report regulations and

appendices to reflect changes in the amount and kind of data needed for the Commission to monitor

the carriers’ use of antitrust immunity under filed agreements. The proposed rule also would modify

the regulations on the filing of minutes of agreement meetings. Changes to the minutes regulations

would be made to obtain more substantive information on carrier discussions, clarify the meaning

of meetings between carriers, and provide the Commission with timely access to the materials used

or discussed at meetings. Public comments on the proposed rule were due by the end of January

2004. After reviewing the comments, a draft final rule was prepared for consideration before the

Commission, with certain revisions to the proposed rule that addressed the issues raised by

commenters. The proposed final rule will be addressed by the Commission in a meeting early in

fiscal year 2005. On other matters, the Commission’s staff met with TSA representatives on two

occasions to review the compliance of TSA members with the terms of the settlement pursuant to

the Commission’s Fact Finding Investigation No. 25 - Practices of the Transpacific Stabilization

Agreement Members Covering the 2002-2003 Service Contract Season. The meetings revealed that

progress has been achieved by TSA members as a result of the investigation. Also, since the

investigation, the Commission has received no complaints involving the members’ activities under

TSA.

Other specific monitoring and research projects undertaken in fiscal year 2004 included:

economic expert reports, a deposition, and analyses for various formal proceedings; a draft proposal

on an economic methodology for analyzing the rates of controlled carriers under the Shipping Act;

quarterly Trade Profile publications with economic and industry information on major U.S. trade

developments and carrier agreements; analyses on the level of adherence to voluntary service

contract guidelines by agreement carriers in the major U.S. trades; responses to Congressional and

other informal requests on carrier agreement issues and industry information; and meetings with

industry representatives on commercial developments affecting carriers and ocean shipping.

E. ALTERNATIVE DISPUTE RESOLUTION

During fiscal year 2004 the Commission made a significant change designed to address the

increasing role of Alternative Dispute Resolution (“ADR”) in resolving shipping industry disputes,

and to continue encouraging parties to disputes to utilize the program in resolving disputes in lieu

of litigation. Under this program, parties to a dispute are encouraged to avail themselves of services

provided by the Commission to resolve disputes through conciliation, facilitation, mediation, fact

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

neutrals available to facilitate the resolution of shipping disputes at all stages. Mediation is the most

frequently chosen method of dispute resolution for matters being litigated in formal Commission

adjudicatory proceedings. Mediation is also made available to resolve disputes which have yet to

reach the litigation stage. Docketed cases in which settlement was reached through the use of

Commission mediators during fiscal year 2004 included Docket No. 03-09, Puerto Rico Freight

Systems, Inc. v. PR Logistics, Corp., and Docket No. 03-10, Puerto Rico Freight Systems, Inc. v.

R&S Trading, Inc. Also, after staff intervention in a significant service contract dispute, the parties

were able to reach an accommodation without disrupting imports of lumber products from South

America. 
-10-

The Commission also provided significant ombuds services to the shipping public by

assisting consumers and other complaining parties in resolving a number of problems without

resorting to litigation. During fiscal year 2004, the Commission continued to process a large number

of complaints, continuing a pattern established over the previous three years. The cruise industry

continued to experience bankruptcies, the most significant of which was the failure of Royal

Olympic Cruises Ltd., which had established an escrow account under Commission regulations to

reimburse passengers in the event of such a failure. Staff worked very closely with counsel for the

cruise line and the escrow agent in expediting refunds to passengers. The Commission’s ombuds

services were instrumental in facilitating communications and resolving numerous compensation

claims. The Commission’s informal complaint resolution procedures also assisted numerous

consumers in their efforts to resolve service disputes and other problems involving cruise operators.

The Commission continued to publicize its complaint resolution procedures and to make its

offices available to all users of shipping services. Information gathered from the Commission’s

Internet site directed many aggrieved parties to the available services, while state, local and private

consumer agencies, as well as various trade organizations, provided contact information to many

other complainants. During fiscal year 2004, an increasing share of ombuds services were directed

to individual and occasional users of shipping services, rather than to shipping companies engaged

in disputes with other such entities.

During fiscal year 2004, a significant number of complaints once again involved the

movement of personal effects and household goods. Many such cases involved failure on the part

of an OTI, and consequences often arising from the OTI’s failure to discharge its financial

obligations promptly. Others involved problems arising in foreign ports, and often concerned

unanticipated problems with foreign Customs agencies. While the Commission’s efforts were often

successful in resolving such disputes, the experience derived from unsuccessful efforts proved to

be of great assistance in advising individuals encountering similar problems. During the year, a

growing number of individuals contacted the Commission prior to engaging the services of an OTI,

in the hope that the advice obtained might prevent problems from occurring. The ombuds program

has used its consumer affairs contacts to encourage such inquiries.

Other complaints and disputes brought to the Commission’s attention covered a wide range

of problems and situations. Shippers frequently sought assistance in resolving financial claims of

various types, as well as a wide range of service problems. Shipping companies on numerous

occasions requested assistance in collecting unpaid freight charges, while freight forwarders sought

help in enforcing carriers’ compensation obligations. While some of these disputes fell outside of

the Commission’s area of responsibility, informal ADR techniques often helped to resolve situations

and forestall formal collection actions and possible litigation. 

F. ENFORCEMENT

The Commission maintains a presence in Los Angeles, South Florida, New Orleans, New

York and Seattle through Area Representatives. These representatives serve as a liaison between
-11-

the Commission and various maritime interests in their respective areas and also investigate activity

that may violate the 1984 Act. 

During fiscal year 2004, the Bureau of Enforcement investigated and prosecuted

malpractices in many trades lanes, including the transpacific, North Atlantic, Central and South

American and Caribbean trades. These included market-distorting activities such as various forms

of secret rebates and absorptions, misdescription of commodities and misdeclaration of

measurements, illegal equipment substitution, unlawful use of service contracts, as well as carriage

of cargo by and for untariffed and unbonded NVOCCs. Most of these malpractice investigations

were resolved informally, some with compromise settlements of civil penalties. However, some

investigations required the institution of formal adjudicatory proceedings in order to pursue remedies

under the 1984 Act.

In addition to rate malpractice enforcement activity, several matters arose with respect to

activities pursuant to filed and unfiled agreements between and among ocean common carriers.

Further, a formal investigation continued to examine the lawfulness of exclusive tug service

arrangements at marine terminal facilities on the Lower Mississippi and remained in litigation at the

end of fiscal year 2004. Also, an investigation was commenced into an exclusive arrangement at

Portland, Maine, which appeared to foreclose competition among passenger/passenger-vehicle

carriers in the Portland/Nova Scotia trade.

The Commission collected $2,959,000 in civil penalties this past fiscal year (see Appendix

E). These collections represent a wide range of violations in all of our major trade lanes. Although

the Commission continues to undertake enforcement activity, as required by its statutory mandate,

its primary objective is to encourage voluntary compliance by the regulated ocean transportation

industry. 

III

MONITORING AND

ENFORCEMENT

A. MONITORING

The systematic monitoring of carrier activities and commercial conditions in the U.S. liner

trades is an integral part of the Commission’s responsibilities under the 1984 Act, as amended by

OSRA. Such monitoring helps ensure that carriers operating in the U.S. trades comply with the

statutory standards of the 1984 Act and the requirements of relevant Commission regulations. To

that end, the Commission administers a variety of monitoring programs and other research activities

designed to keep it informed of current trade conditions, emerging commercial trends, and carrier

pricing and service activities.
-12-

The importance the Commission attaches to its ongoing monitoring activities is a direct

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

disapprove agreements. The 1984 Act provides that, unless rejected under relevant statutory

authority, agreements filed with the Commission shall become effective on the 45th day after filing

or the 30th day after notice in the Federal Register, whichever is later. Agreements can be rejected

for technical reasons or for failure to include statutory provisions in the agreement language. Also,

the Commission may extend the original 45-day period when additional information from filing

parties is deemed necessary and is requested. Finally, if the Commission determines that an

agreement, by virtue of a reduction in competition, is likely to unreasonably increase transportation

costs or decrease transportation service, it may seek injunctive relief in the U.S. District Court for

the District of Columbia.

As a consequence of the Commission’s limited authority to block agreements from taking

effect, the need for adequate and timely evaluation of post-implementation agreement activity has

increased considerably. The Commission’s monitoring program provides such an evaluation

through its examination of carrier competition, including market share, concentration, entry

conditions, general rate and service conditions, as well as pricing trends, vessel utilization, service

contracting activity, and shipper complaints.

In addition to contributing to preparation of proposed and draft final rules in connection with

Docket No. 03-15, Ocean Common Carrier and Marine Terminal Agreements Subject to the

Shipping Act of 1984, in fiscal year 2004 the Bureau of Trade Analysis prepared numerous economic

analyses and reports on the activities and practices of carriers and terminal operators serving the

U.S. international trades. Projects included: (1) a draft proposed methodology to consider

constructive costs when determining whether a controlled carrier’s rates or charges are below a level

that is just and reasonable; (2) providing economic analysis, deposition and hearing preparations in

connection with Docket No. 01-06, Exclusive Tug Franchises – Marine Terminal Operators Serving

the Lower Mississippi River; (3) auditing member carriers’ adherence to the voluntary service

contract guidelines recommended by selected agreements during the 2003-2004 service contract

season; (4) assisting in the preparation of information required for the Small Business Regulatory

Flexibility Act and Congressional review of the final rule regarding Optional Rider for Proof of

Additional NVOCC Financial Responsibility; (5) preparing for and conducting semi-annual meetings

with TSA counsel and representatives as a result of the settlement of Fact Finding Investigation No.

25, Practices of the Transpacific Stabilization Agreement Members Covering the 2002-2003 Service

Contract Season; (6) preparing a quarterly Trade Profile publication spotlighting economic and

commercial conditions in various U.S. liner trades; (7) analyzing the economic impact of newly filed

major agreements and amendments under the section 6(g) standard of the 1984 Act, one such

example being the West Coast Marine Terminal Operators’ Agreement to institute extended gates

hours and traffic mitigation fees at the ports of Los Angeles and Long Beach; (8) reviewing

quarterly monitoring report data submitted in accordance with the regulations on agreement

reporting requirements; and (9) responding to Congressional and informal requests and inquiries for

trade analyses and data.

B. ENFORCEMENT
-13-

The 1984 Act establishes an integrated system for the regulation of the shipping and related

industries in furtherance of the statutory declaration of policy to ensure a nondiscriminatory,

efficient, and economic ocean transportation system for the benefit of international trade of the U.S.

The enforcement program represents a major area of Commission activity. The principal goal of

the program is to achieve compliance with the provisions of the 1984 Act. Compliance, in turn,

provides the pathway to the statutory objectives of the 1984 Act. Enforcement is a traditional means

to achieve compliance through deterrence.

The Commission maintains a presence in Los Angeles, South Florida, New Orleans, New

York and Seattle, through Area Representatives based in each of those cities. These representatives

also serve the other major port cities and transportation centers within their respective areas. Local

presence in major port areas greatly enhances the Commission’s ability to perform its various

functions and improves communications with the regulated industry and its customers.

Interaction between the Commission’s Area Representatives and the Department of

Homeland Security’s (“DHS”) Bureau of Customs and Border Protection (“CBP”), with respect to

the exchange of investigative information, continues to be beneficial. All Area Representatives

work closely with CBP in their respective port districts and have established working relationships

which contribute to the productivity and efficiency of both agencies.

During fiscal year 2004, the Bureau of Enforcement investigated and prosecuted

malpractices in many trades lanes, including the transpacific, North Atlantic, Central and South

American and Caribbean trades. These malpractices included market-distorting activities such as

various forms of secret rebates and absorptions, misdescription of commodities and misdeclaration

of measurements, illegal equipment substitution, unlawful use of service contracts, as well as

carriage of cargo by and for untariffed and unbonded NVOCCs. Most of these malpractice

investigations were resolved informally, some with compromise settlements of civil penalties.

However, some investigations required the institution of formal adjudicatory proceedings in order

to pursue remedies under the 1984 Act.

In addition to rate malpractice enforcement activity, several matters arose with respect to

activities pursuant to filed and unfiled agreements between and among ocean common carriers.

Further, a formal investigation continued to examine the lawfulness of exclusive tug service

arrangements at marine terminal facilities on the Lower Mississippi and remained in litigation at the

end of fiscal year 2004. Also, an investigation was commenced into an exclusive arrangement at

Portland, Maine, which appeared to foreclose competition among passenger/passenger vehicle

carriers in the Portland/Nova Scotia trade.

During fiscal year 2004, the Commission collected $2,959,000 in civil penalties. Settlements

were reached with many different segments of the industry (e.g., carriers, agreements, shippers,

forwarders, and NVOCCs) operating in the U.S. foreign trades (see Appendix E).
-14-

IV

DEVELOPMENTS IN MAJOR

U.S. FOREIGN TRADES

A. TRANSATLANTIC

In fiscal year 2004, the volume of U.S. liner exports to North Europe rose by 7 percent

compared to the preceding fiscal year. In particular, significant gains occurred in U.S. exports of

automobiles, synthetic resins, and paper products, while auto parts to North Europe declined. In the

inbound direction, however, the volume of imports from North Europe remained weak at a growth

rate of 2 percent. Auto parts, tires, and wine from Germany and France to the U.S. dropped, while

wood flooring products and beer from Belgium rose. The pattern of trade growth in the transatlantic

can be attributed largely to the continued appreciation of the euro against the U.S. dollar; the euro

has shot up in value by 18 percent since 2003. The currency exchange rates have made U.S. goods

less expensive for European consumers and, alternatively, European goods more expensive for U.S.

consumers. While future U.S. export growth is expected to continue, concerns over long-term trade

growth in the transatlantic are escalating as more U.S. and European manufacturing moves to Asia,

leaving only lower-valued cargo in both trade directions. In addition, sluggish economic growth in

such major European nations as Germany, France, and the Netherlands has hampered consumer

spending in Europe and led to a preference for less expensive Asian goods.

The growth in U.S. exports served to reduce the trade imbalance. The volume of import

cargo exceeded export cargo by 32 percent, down from 51 percent in the preceding fiscal year. The

utilization of vessel capacity in the outbound direction also showed some improvement, even though

new tonnage was added to the trade. On average for the fiscal year, vessel capacity utilization was

66 percent in the outbound direction, while utilization in the tighter inbound direction was 88

percent. Vessel tonnage in the trade grew by 7 percent outbound, and 11 percent inbound. Some

carriers in the trade altered their liner services. In March 2004, Norasia Container Lines, Gold Star

Line, and China Shipping Container Lines (“CSCL”) formed a round-the-world service agreement

(No. 011867) that included a new service in the inbound direction from North Europe to the U.S.

By contrast, later in 2004, COSCO Container Lines (“COSCO”), Yangming Marine Transport Corp.

(“Yangming”), Kawasaki Kisen Kaisha (“K-Line”), and Hanjin Shipping Co. (“Hanjin”)

restructured their liner services under their alliance agreement (No. 011794) to reduce their vessel

capacity by 20 percent in the transatlantic. The alliance carriers attributed the capacity reduction

to the high cost of chartered vessels and low profitability in the trade.

Members of the Trans-Atlantic Conference Agreement (“TACA”) (No. 011375) implemented

a series of small to moderate tariff GRIs, which were staggered throughout the fiscal year. Starting

in October 2003 through September 2004, the conference initiated four tariff GRIs in the outbound

direction and three in the inbound direction. Additional tariff GRIs in both trade directions are
-15-

planned for October 2004, and the conference announced plans for more GRIs in 2005. Further, the

conference agreed to begin assessing congestion surcharges on cargo moving through the port of Los

Angeles/Long Beach starting in November 2004. TACA representatives stressed that rate increases

in the trade are necessary due to inadequate investment returns, high vessel charter rates, and

container shortages. Industry analysts indicated that TACA’s GRIs in the first half of 2004 were

likely not very effective because of the influx of new tonnage in the trade. During the fiscal year,

the average market share for TACA remained around 50 percent in both trade directions.

Trade disputes between the U.S. and the EU continued in the fiscal year. In a move that

could dampen U.S. export growth, the EU initiated a 5 percent duty in March 2004 on exports of

certain U.S. goods to EU nations. The duty automatically increases by 1 percent each month, up to

17 percent in 2005. The sanctions were levied in response to U.S. tax laws that allow for

concessions on U.S. goods exported through foreign sales corporations. In a separate dispute over

U.S. anti-dumping laws, the World Trade Organization (“WTO”) allowed the EU to suspend its

obligations under international trade agreements with the U.S. The WTO ruling permits the EU to

impose anti-dumping measures similar to those under U.S. law. On another issue, the U.S. recently

filed a complaint with the WTO against the EU’s customs laws and regulations. In its complaint,

the U.S. alleges that the customs administration in the EU varies among its member nations and

creates barriers to trade. The WTO rules require members to administer their customs laws in a

uniform, impartial and reasonable manner.

Recently, the EC issued a white paper on its formal review of Council Regulation 4056/86,

which provides liner shipping conferences with a block exemption from the competition laws of the

EU. In its white paper, the EC recommended that the block exemption be repealed. The EC further

requested public comments on alternative proposals presented by the European Liner Affairs

Association (“ELAA”). ELAA recommended that the block exemption be replaced by new laws

that would grant carriers limited immunity to set joint surcharges and compile aggregated price and

capacity statistics by trade, but no authority to discuss and agree on freight rates. The EC will likely

hold another round of oral hearings on the recommended proposals for revising Regulation 4056/86,

and present its findings before the Council of the EU toward the end of 2005.

B. MEDITERRANEAN 

Between the U.S. and the Mediterranean, growth in the volume of liner cargo continued to

improve in the outbound direction, while in the inbound direction liner cargo growth was minimal.

Specifically, as compared to the preceding fiscal year, U.S. liner exports to the Mediterranean grew

by 9 percent in fiscal year 2004. Positive gains were achieved in U.S. exports of field seeds/bulbs,

automobiles, and poultry, while exports of cotton and edible nuts to the region declined. In the

inbound trade, the fiscal year ended with a growth rate of only 3 percent for liner imports from the

region. Imported products of marble, slate, and paper from the Mediterranean rose, while furniture

and grain imports fell. As with Europe in general, U.S. export growth to the Mediterranean was

aided by the euro’s sharp appreciation against the U.S. dollar, and such growth is expected to

continue for the foreseeable future. While this trend is promising for U.S. exporters, the trade

imbalance in liner cargo volume still remains very high with imports from the Mediterranean
-16-

exceeding U.S. exports by over 50 percent. Moreover, the long-term prospects for U.S. export

growth may be adversely affected by weak economic conditions among EU nations in the region.

For instance, economic growth in Italy fell to its lowest level since 1993 as the global demand for

Italian goods declined due to increased competition from Asian manufacturers, especially in the

apparel market. The Italian economy is also burdened with a heavy public debt problem. In 2004,

the EC issued a warning against Italy after predicting that its budget deficit would rise above the

required limit for EU nations, which poses a violation of Italy’s membership in the EU. As such,

the country’s credit rating could be downgraded. Among other EU nations in the Mediterranean,

Greece had the highest rate of economic growth largely due to activities in connection with the 2004

Olympic games.

After the expansion of tonnage that occurred in 2002 and 2003, major carriers serving the

trade took measures during the fiscal year to alleviate the oversupply of capacity by implementing

cutbacks. A.P. Moller-Maersk A/S (“Maersk Sealand”) was most prominent with its reduction of

113,000 20-foot equivalent container units (“TEUs”) in annualized capacity through the substitution

of smaller vessels. The alliance group of COSCO, Yangming, K-Line, and Hanjin also redeployed

smaller vessels in the trade to reduce its annualized capacity by 60,000 TEUs. Industry analysts

indicated that the capacity cutbacks amounted to a reduction in excess of 10 percent of the total

tonnage in the trade.

Continuing their rate restoration program, members of the United States South Europe

Conference (No. 011587) implemented three small to moderate tariff GRIs in both trade directions.

Additional tariff GRIs are planned for October 2004 and on into 2005. In a statement, the

conference claimed that the increases were necessary to improve rate viability in order to sustain the

level of service demanded by shippers. Industry analysts were skeptical over the success of the

conference’s past rate increases due to the low value of cargo and the intense rate competition in the

trade, despite the rise in U.S. cargo growth from the euro’s appreciation. During the fiscal year, the

average market share of the conference was around 30 percent in both trade directions.

C. MIDDLE EAST

In fiscal year 2004, U.S. liner exports to the Middle East grew by 9 percent, and U.S. liner

imports from the region grew by 10 percent. U.S. export cargo, however, substantially exceeded

import cargo from the region by about 80 percent. Our top 3 liner trading partners in the region

include Saudi Arabia, the United Arab Emirates, and Jordan. The U.S. has a substantial trade

surplus with the United Arab Emirates that contributes to the liner trade imbalance. 

As a whole, the economy in the Middle East region is forecasted to expand at Gross

Domestic Product (“GDP”) rates of 4.1 percent in 2004, and 5 percent in 2005. Factors contributing

to economic activity in the region include increased oil production, greater revenues earned from

higher oil prices, renewed trade and tourism as the area stabilizes, and the reconstruction of Iraq.

The U.S. is in the process of concluding a bilateral free trade agreement with Bahrain, which

most likely will increase trade and liner cargo traffic between the two countries. The agreement with
-17-

Bahrain would be the second in the region after a similar agreement with Jordan was reached in

2001. These agreements are an integral part of an ambitious ten-year plan to create a U.S.-Middle

East Free Trade Area.

D. INDIAN SUBCONTINENT

In fiscal year 2004, U.S. exports to the Indian Subcontinent grew by 8 percent, and U.S.

imports from the region grew by 9 percent. India, our top trading partner in the region, ranks 12th

among U.S. liner trading partners. Lykes Lines Limited as well as MacAndrews and Company

Limited joined the Indamex Agreement (No. 011692), a major rate agreement in the trade.

The economy of India continues to perform well, with growth rates of GDP forecasted at 7.4

percent in both 2004 and 2005. Much of this growth is concentrated in the service sector of India’s

economy, but the government of India wants to improve the economy’s industrial sector by

instituting reforms that will privatize state-owned industries.

Indian ports have been affected by congestion and strikes. The Port of Jawaharlal, India’s

top container port, has been clogged by a surge of imports, particularly scrap metal. In May, P&O

Ports’ Chennai Terminal was shut down by a dockworkers strike. A truckers strike shut down the

Port of Kochi in June. 

A number of public and private construction projects are in the planning stages or are

underway to address the growing Indian port congestion problem. P&O Ports announced plans to

develop new bulk and container facilities at Port Kulpi. The state-owned Ports of Chennai and

Ennore announced plans to build two additional terminals. The Inland Waterways Authority of

India identified 25 potential projects, including a feeder service from Patna to the Port Halida that

was introduced in January 2004 to alleviate the problems.

E. AUSTRALIA AND OCEANIA

In fiscal year 2004, U.S. liner exports to Oceania grew by 17 percent, and U.S. liner imports

from Oceania grew by 15 percent. Australia, our top trading partner in the region, ranks 22nd among

the top U.S. liner trading partners. Currently, Australia is reviewing antitrust exemptions for

agreements among liner shipping companies. 

Australia’s rate of economic growth, as measured by GDP, is forecasted to peak at 4 percent

in 2004, and then drop to 3.4 percent in 2005. The sharp appreciation of the Australian dollar has

diminished foreign demand for Australian goods and slowed economic growth in Australia.

Australia has been focusing on improving its transportation infrastructure, including

deepening channels, building new roads and upgrading roads and rail lines. The Australian

government announced the $9 billion AusLink project, that includes a host of improvements

intended to reduce highway and rail congestion as freight and passenger traffic grow. Additionally,
-18-

the Port of Melbourne is pursuing an estimated $300 million project to deepen its channels by 2007,

which has become important as containerships rapidly increase in size. 

The grand opening of the AustralAsia Railway in January 2004, a north-south

transcontinental railroad from Darwin in the North to Adelaide in the South, will serve as the

backbone of an Australia-Asia rail-sea bridge. This service may compete against liners in trade

lanes serving Australia, especially feeder services. 

The U.S. and Australia concluded negotiations on a bilateral free trade agreement in

February. This agreement will eventually eliminate tariffs on manufactured goods, while

maintaining protections for U.S. farmers on beef, sugar, and dairy products. The U.S.-Australia

Free Trade Agreement (“FTA”) was approved by the House and Senate in July and signed into law

by the President in August. The FTA also was approved by the lower house of the Australian

Parliament, but awaits approval by their Senate.

Several changes in membership were made in the agreements covering Oceania. For

example, during the fiscal year, Lykes Lines Limited joined and Contship Containerlines resigned

from the U.S./Australasia Discussion Agreement (No. 011117). Lykes Lines Limited also joined

the New Zealand/United States Discussion Agreement (No. 011268), New Zealand/United States

Container Lines Association (No. 009831), and, in addition to Safmarine Container Lines, the

Australia/United States Discussion Agreement (No. 011275). 

F. LATIN AMERICA AND THE CARIBBEAN

In the trade between the U.S. and South America, the volume of liner cargo substantially

grew in both trade directions in fiscal year 2004 compared to the preceding fiscal year. Import cargo

from South America rose by 16 percent, and U.S. export cargo shot up by 24 percent. Weak

currency values in South America boosted the U.S. demand for imported goods from the region,

while economic recovery in South America generated more U.S. export growth. For 2004, the

overall economic growth rate for Latin America and the Caribbean is estimated at 4.7 percent,

ending a three-year period of stagnation. Economic growth in the region is expected to continue,

and level-off to a rate of 3.7 percent by 2006. Less strife and political turmoil within South America

helped stabilize the economy. Brazil was the leading South American trading partner, with the U.S.

accounting for 40 percent of the region’s total imports to the U.S. and 30 percent of the total U.S.

exports to the region.

South American countries have expressed their desire to create a free trade zone across the

continent. An important step in that direction was taken in 2004. The two major trading blocks in

the region, the Andean Economic Community, consisting of Bolivia, Colombia, Ecuador, Peru, and

Venezuela, and the Southern Common Market, consisting of Argentina, Brazil, Paraguay, Uruguay,

Bolivia and Chile, reached an agreement in principle that will eventually lead to a trading zone

covering 350 million people. Further details will be negotiated under the auspices of the Latin

American Integration Association. 

The U.S. and Chile implemented a free trade agreement, effective January 1, 2004. Under

the agreement, 85 percent of industrial products will be traded duty free. In less than four years, 75
-19-

percent of farm products are scheduled to be duty free. The phase-out of tariff and quotas for nonagricultural commodities is 10 years, and 12 years for all agricultural products. In the first quarter

of 2004, immediately following the implementation of this agreement, trade between the U.S. and

Chile enjoyed double-digit growth. 

The highlight of the U.S. inbound liner trade from the West Coast of South America was an

increase in imports from Chile. Out-of-season fruits and vegetables were the chief commodities.

Imports of other agricultural commodities and manufactured goods also increased when compared

with fiscal year 2003. As in previous years, imports of bananas and coffee were a large part of total

imports from the West Coast of South America. The U.S. also imported more logs and lumber, and

containerized copper ingots. 

U.S. exports to the West Coast of South America consisted mainly of paper and paperboard

products (including waste paper), general cargo, fabrics (including raw cotton), TV equipment, urea

resins, wood pulp, apparel, synthetic resins, plastics, and machinery. Exports increased mainly

because of strong demand in Chile, Ecuador, and Colombia. Trade with Chile was very diverse.

In fiscal year 2004 the U.S. exported more than five times the volume of paper and paperboard than

it exported to Chile in 2003. Also, exports of miscellaneous apparel to Chile increased by more than

20 percent. Almost all export commodities to Ecuador increased in fiscal year 2004. The greatest

increases occurred in paper and paperboard, fabrics and industrial chemicals.

In the East Coast of South America trade, the chief imports to the U.S. were furniture, logs

and lumber, ceramic and mosaic tiles, footwear, metalware, auto parts, granite, tires and tubes, meat

and paper. The U.S. imported 70 percent more furniture from Brazil in 2004 than in the previous

fiscal year. Imports from Argentina increased very little compared to the previous year, and imports

of wine, fish, field seeds and bulbs, and edible nuts fell.

In fiscal year 2004, U.S. containerized exports to the East Coast of South America increased

by 18.2 percent. Wood pulp, auto parts, fabrics, paper and paperboard, general cargo, synthetic

resins, synthetic rubber, boxes and cartons, plastics, and unclassified chemicals were the top U.S.

exports. All commodities, with the exception of unclassified chemicals, had large increases over

2003. Exports of auto parts to Argentina were particularly strong. Other commodities, such as

wood pulp, plastics and other industrial products, also had large increases. 

Several carriers changed their shipping services on the East and West Coasts of South

America in fiscal year 2004. Mediterranean Shipping Company started a new weekly service

between the U.S. and the East Coast of South America. Maersk Sealand pulled out of two joint

shipping services between the U.S. East Coast and the East Coast of South America. It then started

a new service in the same trade. Crowley Liner Services, American President Line (“APL”), and

Mitsui O.S.K. Lines (“MOL”) have announced changes in services effective next year. These

changes would add tonnage to the existing services. 

Ports in Latin America, especially in Brazil, suffered severe congestion in fiscal year 2004.

Port managers, private developers and vessel-operating companies expressed interest in investing
-20-

in key strategic ports. Maersk Sealand, Mediterranean Shipping Company, and HamburgSüdamerikanische Dampfschifffahrtsgesellschaft KG (“Hamburg Süd”) expressed the desire to

invest in some ports, such as Sao Francisco do Sol, to expand existing facilities. 

Between the U.S. and Central America, liner import cargo bound for the U.S. grew by 8

percent in fiscal year 2004 relative to the preceding fiscal year. For the same period, the growth of

U.S. export cargo to Central America was more moderate at 3 percent. Shipments of bananas to the

U.S. continued to be the top imported commodity by volume, accounting for 45 percent of the total

import cargo from Central America. Trade with Central America is expected to increase in 2005

under the Central American Free Trade Agreement (“CAFTA”). Supporters of CAFTA believe that

it will provide U.S. exporters with more access to Central American markets, and attract greater

investment from U.S. companies in the region. Industry analysts also contend that CAFTA will

provide U.S. exporters with thriving markets for capital equipment and industrial goods.

In both trade directions between the U.S. and the Caribbean, growth in the volume of liner

cargo moderately improved in fiscal year 2004 compared to the weak results of the last fiscal year.

Import cargo from the region grew by 4 percent, and U.S. export cargo rose by 8 percent. Growth

in the volume of Caribbean imports was primarily fueled by increases from Haiti and Jamaica. By

far, however, U.S. export cargo exceeded the volume of import cargo from the region.

During the fiscal year, ports in Latin America and the Caribbean were utilized more heavily

in the transshipment of ocean liner cargo. With congestion worsening in the U.S., transshipment

hubs in the region thrived. Leading transshipment hubs in the region include the Manzanillo

International Terminal adjacent to the Colon Free Trade Zone at the Atlantic opening of the Panama

Canal, the Kingston Transshipment Terminal owned by the Port Authority of Jamaica, and Freeport

Container Port in the Bahamas owned by Hutchison Port Holdings.

G. TRANSPACIFIC

Transpacific container traffic witnessed solid growth during fiscal year 2004 due primarily

to the strong demand for low-cost consumer goods from China. This growth resulted in ship

utilization levels for U.S. Asian imports being very near or at capacity. Growth in container traffic

from Asia also has resulted in congestion at U.S. ports, especially at the ports of Los Angeles and

Long Beach. Most carriers operating in the transpacific trade are reporting increased earnings and

profits due in part to this strong growth. The container trade between the U.S. and Asia is by far our

Nation’s largest, accounting for 66 percent of all U.S. liner imports and 50 percent of all U.S. liner

exports.

U.S. container imports from Asia grew by 14 percent in fiscal year 2004 to over 10 million

TEUs. Northeast Asia accounts for 88 percent of all transpacific container imports, with most of

them originating from China. Compared to fiscal year 2003, transpacific container imports from

Northeast Asia grew by 16 percent, and from Southeast Asia by 5 percent. Major imports from Asia

include furniture, toys, footwear and electronic goods.
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The Transpacific Stabilization Agreement (“TSA”) (No. 011223) is a discussion and policysetting agreement with voluntary pricing authority covering the inbound container trade from the

Far East to the U.S. Until September 2004, TSA consisted of 14 carrier members with a collective

market share exceeding 75 percent. However, in September 2004, Maersk Sealand, the largest liner

operator in U.S. trades, announced its withdrawal from TSA, stating that it could respond more

quickly to customer needs by operating outside of the Agreement. 

TSA members announced a $450 GRI per 40-foot equivalent container units (“FEUs”) for

cargo destined to U.S. Pacific Coast ports, and a $600 GRI per FEU for cargo destined to U.S.

Atlantic Coast ports. According to reports, TSA members were not successful in obtaining the full

rate increases during their individual service contract negotiations with shippers. 

In September 2003 the Commission reached a settlement with TSA and its members, and the

members of several TSA Bridging Agreements, that ended a fact finding investigation into possible

violations of certain sections of the 1984 Act. As part of the settlement agreement, representatives

of TSA agreed to meet with the Commission semiannually to review TSA activities and

developments, including committee and subcommittee structure, service contract activity, economic

conditions in the trade and any complaints about TSA that may be received by the Commission.

Pursuant to the settlement agreement, representatives of TSA met with the Commission in March

and September of 2004. These meetings help to ensure compliance with the settlement agreement

and provided the Commission with an in-depth view of related TSA activities. Since implementing

the settlement agreement, the Commission has not received any complaints involving TSA activities.

U.S. container exports to Asia grew by a healthy 10 percent in fiscal year 2004, compared

to 7 percent in fiscal year 2003. U.S. exports to Asia reached nearly 3.9 million TEUs. Northeast

Asia received 87 percent of all U.S. container exports, with most of them going to China and Japan.

U.S. container exports to Northeast Asia grew 12 percent, but only by 0.3 percent to Southeast Asia.

Major U.S. exports to Asia include wastepaper, metal scrap, animal feed, lumber, and raw cotton.

The outbreak of avian flu and reports of mad-cow disease in the U.S. crippled exports of

poultry and beef, as many Asian countries imposed bans on these products for health safety reasons.

U.S. poultry exports are beginning to recover as Asian countries, such as Japan, now permit this

commodity’s importation, though China and South Korea still have bans in place. Most Asian

countries still maintain a ban on the importation of beef from the U.S., so beef exports continue to

be impaired. Prior to their bans, Japan and Korea were major importers of U.S. beef. Japan is

expected to partially lift its ban sometime in 2005. 

Freight rates assessed for U.S. exports tend to be much lower than those for U.S. imports.

This is mainly due to the fact that U.S. imports from Asia are approximately twice the volume of

U.S. exports to Asia, resulting in substantial excess vessel capacity on outbound voyages to Asia.

The Westbound Transpacific Stabilization Agreement (“WTSA”) (No. 011325) is the

outbound counterpart to TSA. Like TSA, WTSA operates as a forum for the exchange of

information between its members and authorizes them to discuss and agree upon pricing and related
-22-

matters for cargo exported from the U.S. to Asia. WTSA’s geographic scope covers Northeast and

Southeast Asia as well as the Indian Subcontinent. WTSA’s membership consists of 13 carriers that

have a market share exceeding 70 percent. 

The transpacific container growth for 2005 is forecasted to remain close to 2004 levels.

Carriers operating in this trade are optimistic that continued growth will translate into sustained

revenues and profits. However, if continued growth exacerbates the congestion that already exists

at some U.S. ports, carriers’ profits could be affected if they incur higher costs arising from such

congestion. 

H. WORLDWIDE

Since sliding in real terms by 1 percent in 2001, world trade has been on the rise, and this

year marked a second year of very strong growth. After expanding in 2004 by an estimated 4

percent, world trade growth is expected to be moderate in 2005 and 2006, led by a slowing of

expansion among the economies of developed countries. Throughout fiscal year 2004, U.S.

international trade in goods and services set numerous new records. For example, the U.S. trade

deficit grew to a record $50.9 billion in September 2004, as imports continued to increase more than

exports. The value of U.S. goods and services exported also set a new record of $97.5 billion in

September with the weak U.S. dollar helping to fuel export demand. In August a record $150.2

billion of imported goods and services was reached. The dollar’s weakness failed to deter U.S.

demand for foreign imports, perhaps because although the dollar weakened against Western

European currencies, it held up relatively well against most Asian currencies.

Buoyant world trade and continuing U.S. trade imbalances are reflected in container shipping

activity. The world’s container trades continued their strong expansion. By the end of fiscal year

2004, world container traffic amounted to about 100 million TEUs, representing an annual increase

in demand of over 10 percent. About 40 percent of world container traffic is generated in the EastWest trades (e.g., the transpacific and transatlantic); another 40 percent occurs in intra-regional

trades (e.g., within Asia and Europe); and about 20 percent is generated in the North-South trades

(e.g., North America to Latin America, Europe to Africa, and Asia to Australasia).

Almost 3,300 container ships were plying the world’s container trades in fiscal year 2004.

At the end of July, the capacity of the world’s dedicated containership fleet was about 6.8 million

TEUs, and by the end of the fiscal year, the order book for new containerships was approximately

3.5 million TEUs. The planned construction of new containerships amounts to over 50 percent of

the current fleet’s total capacity. More than half the new ships that are due for delivery in 2005 and

2006 will have a container capacity of 5,000 TEUs or more. Ships larger than 8,000 TEUs are

expected to account for over 20 percent of containership deliveries in 2005, and over 40 percent in

2006.

The past year was good to most liner shipping companies. APL, Hamburg Süd, Hanjin,

Hapag-Lloyd Container Linie GmbH, K-Line, MOL, Nippon Yusen Kaisha, Inc, Orient Overseas

Container Line, Limited and P & O Nedlloyd Limited each reported substantial gains in revenue and
-23-

profit compared to the previous year’s results. Higher average freight rates and increases in

container liftings boosted several carriers’ revenues substantially. Not surprisingly, the stronger

liner market encouraged some carriers to issue bonds and launch initial public offerings, CSCL

being one such example.

Looking ahead, liner companies generally seem confident that fiscal year 2005 will be

another good year for cargo growth and rates. Nevertheless, there are some issues that may be of

concern to the sector’s continued financial health. For example, time charter rates are escalating

rapidly. Daily charter rates over the last 12 months have increased 30-50 percent, depending on ship

specification. Also, the average fixture period has increased to around 16 months, compared to just

8 months one year earlier. Carriers are dealing with several other significant cost pressures, such

as rising fuel costs, more port and inland transportation infrastructure congestion, added security

measures, an accentuation in container imbalances, and escalating prices for new ships and steel

containers. As fiscal year 2005 unfolds, it remains to be seen what impact widespread cost pressures

and a large influx of new capacity will have on cargo volumes, capacity utilization, rates and,

ultimately, the industry’s financial condition.

V

THE FOREIGN SHIPPING

PRACTICES ACT OF 1988

A. GENERAL

The Foreign Shipping Practices Act of 1988 (“FSPA”) became effective on August 23, 1988.

The FSPA directs the Commission to investigate and address adverse conditions affecting

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

either under U.S. law or as a result of acts of U.S. carriers or others providing maritime or maritimerelated services in the U.S.

In fiscal year 2004, the Commission monitored potentially unfavorable or discriminatory

shipping practices by a number of foreign governments. However, no FSPA action was taken in

2004. 

In fiscal year 2004, the Commission’s Permanent Task Force on International Affairs

continued to meet. The Task Force, chaired by the Deputy General Counsel, is a network of

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

information regarding new or continuing areas of concern relating to restrictive foreign shipping

practices possibly necessitating action under one of the Commission’s statutory authorities in this

area. 
1 On July 1, 1997, Hong Kong reverted to Chinese control as a special administrative region. However, PIERS continues

to report data separately for Hong Kong because of its status as a major transshipment center.

Source: All data are aggregated from the PIERS (Port Import Export Reporting Service) database maintained by the Journal

of Commerce.

-24-

B. TOP TWENTY U.S. LINER CARGO 

TRADING PARTNERS

Section 10002(g)(1) of the Omnibus Trade and Competitiveness Act of 1988 requires the

FMC to include in its annual report to Congress “a list of the twenty foreign countries that generated

the largest volume of oceanborne liner cargo for the most recent calendar year in bilateral trade with

the United States.”

The Journal of Commerce’s Port Import Export Reporting Service (“PIERS”) database was

used to derive the Commission’s list of top twenty trading partners. PIERS obtains data on U.S.

import and export shipments from tapes of bill-of-lading manifests filed electronically with CBP via

the Automated Manifest System (“AMS”). PIERS also stations personnel at individual ports to

collect manually shipment data that is incomplete or not filed through AMS. PIERS staff edits the

raw shipment data and distinguishes liner shipments from non-liner shipments. The individual

shipment data also is compiled into a more general and useful format for convenience. PIERS uses

standardized spellings of company names, coding of ship lines, port names, and country code

assignments. The Journal of Commerce also employs proprietary artificial intelligence software to

increase the accuracy of its data.

The most recent complete calendar year for which data are available is 2003. The table on

the next page lists the twenty foreign countries that generated the largest volume of oceanborne liner

cargo in bilateral trade with the U.S. in 2003. The figures in the table represent each country’s total

U.S. liner imports and exports in thousands of TEUs.

Top Twenty U.S. Liner Cargo 

Trading Partners (2003)

Rank Country TEUs 

(000s)

 1 China (PRC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,811

 2 Hong Kong1

 .................................................. 1,672

 3 Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,655

 4 Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 977

 5 South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930

 6 Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650
-25-

 7 Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601

 8 Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535

 9 Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517

10 United Kingdom (Incl. N. Ireland) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430

11 Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402

12 India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397

13 Belgium & Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396

14 Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390

15 Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309

16 France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282

17 Honduras . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273

18 Guatemala . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266

19 Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245

20 Costa Rica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

There were several changes to the Top Twenty list for 2003, in comparison with the list for

2002. Hong Kong moved up to second place, while Japan slipped to third. Taiwan moved into 4th

place, and South Korea moved down to 5th place. Brazil edged out Thailand for 8th place, while the

Netherlands fell from 11th to 14th place, behind Indonesia, India, and Belgium and Luxembourg

(combined). While Malaysia and France retained their 15th and 16th positions, Honduras advanced

from 19th to 17th place, and Guatemala declined from 17th position to 18th. Spain also moved down,

from 18th to 19th position, and Costa Rica replaced the Dominican Republic in 20th place.

In terms of ranking order, China (PRC) continued its lead with an increase in volume of 16

percent over 2002’s volume, though less than its previous 24 percent increase over 2001’s volume.

Hong Kong registered a 5 percent increase in trade volume, about double that of Japan. Taiwan

experienced an almost 7 percent growth in trade volume over the previous year, as did Guatemala.

Brazil’s trade with the U.S. also increased significantly -- almost 13 percent over its 2002 level.

India advanced from 14th to 12th position with a 17 percent increase in trade volume. Honduras also

registered a 17 percent increase in trade with the U.S., climbing from 19th to 17th place. Other

countries, i.e., South Korea, Italy, the United Kingdom, Indonesia, the Netherlands, and Malaysia

experienced decreases in trade volume ranging from 2 to 7 percent. The volume of trade with

Thailand and France remained approximately the same as in the previous year.
VI

SIGNIFICANT

OPERATING

ACTIVITIES

BY

ORGANIZATIONAL UNIT
A. OFFICE OF THE SECRETARY

1. General

The Office of the Secretary serves as the focal point for all matters submitted to and emanating

from the members of the Commission. Accordingly, the Office is responsible for preparing and

submitting regular and notation agenda of matters for consideration by the Commission and preparing

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

processing formal and informal complaints involving violations of the shipping statutes and other

applicable laws; receiving and processing special docket applications and applications to correct clerical

or administrative errors in service contracts; issuing orders and notices of actions of the Commission;

maintaining official files and records of all formal proceedings; receiving all communications, petitions,

notices, pleadings, briefs, or other legal instruments in regulatory and quasi-judicial proceedings and

subpenas served on the Commission or members and employees thereof; administering the Freedom of

Information, Government in the Sunshine, and Privacy Acts; responding to information requests from

the Commission staff, maritime industry, and the public; issuing publications and authenticating

instruments and documents of the Commission; compiling and publishing bound volumes of

Commission decisions; and maintaining and promulgating official copies of the Commission’s

regulations. 

The Secretary’s Office also participates in the development of rules designed to reduce the length

and complexity of formal proceedings, and participates in the implementation of legislative changes to

the shipping statutes. During fiscal year 2004:

# The Commission issued decisions concluding two formal proceedings. One initial

decision of an administrative law judge became administratively final without

Commission review. Fifteen proceedings were dismissed or discontinued. The

Commission also concluded two special docket applications and six informal

dockets. During the same period, the Commission issued final rules in one

rulemaking proceeding.

Seven rulemaking proceedings were pending at the end of the year. Five petitions for

Commission action were granted or dismissed during the fiscal year, while 10 others were pending

decision at year’s end.

The Office of the Secretary also serves as a public information/press office for the Commission.

It manages the Commission’s website content; coordinates the issuance of Commission News Releases;

directs public inquiries to the appropriate Commission bureau/office for response; and monitors the trade

press for matters of agency interest for referral to the Chairman, Commissioners and Commission staff.

2. Office of Consumer Affairs and Dispute Resolution Services

With the realignment of the Commission’s organization towards the end of fiscal year 2004, the

Office of the Secretary now also is responsible for overseeing the administration of the Commission’s
-28-

Office of Consumer Affairs and Dispute Resolution Services (“CADRS”). CADRS has responsibility

for developing and implementing the Commission’s Alternative Dispute Resolution (“ADR”) program.

Through this program, the Commission provides services to assist parties in resolving disputes and

shipping problems in the U. S. ocean shipping commerce. These include a broad range of services

designed to avoid the expense and delays inherent in litigation, and to facilitate the flow of U.S. ocean

commerce. 

With respect to matters already involved in litigation, or moving toward initiation of litigation,

parties to a dispute are encouraged to avail themselves of mediation and other ADR services such as

conciliation, facilitation, fact finding, minitrials, or even arbitration, as a means to resolve the dispute.

The Commission makes trained neutrals available to facilitate the resolution of shipping disputes at all

stages. Outside neutrals also may be contracted for as needed. During fiscal year 2004, Commission

mediators assisted parties in arriving at settlements in three proceedings where the parties were already

engaged in litigation. In another significant matter, office staff facilitated the resolution of a service

contract involving shipments from Chile to the west coast of the U.S. under the service contract offered

by a discussion agreement operating in that trade. After executing the service contract, the carriers twice

attempted to increase rates by imposing a GRI in their tariffs to the service contract. In the end, the

parties agreed to a smaller increase. 

The Office also provides ombuds services to participants in ocean shipping transactions. During

fiscal year 2004, more than 3,200 complaints and information requests were processed. Of those, 802

complaints required resolution of disputes and attempts to resolve difficulties with shipments or cruise

matters. This represents an increase of 42 percent over the 566 such complaints received in fiscal year

2003. Complaints involving the transportation or handling of cargo continued to increase, partly due

to the Commission’s revitalized focus on informal and non-adjudicatory means of complaint resolution,

and the increased awareness of the availability of assistance through electronic and other means of

communication. In fiscal year 2004, 336 complaints were received from individuals and

shippers/importers about the transportation or handling of cargo, while 466 complaints against cruise

operators were received.

Other functions of the ADR program include the adjudication of small claims, currently those

seeking reparations up to $50,000, for violations of the shipping statutes. Whereas the vast majority of

small claims received in earlier years comprised freight overcharge actions against ocean common

carriers, the majority of cases now concern claims by shippers against NVOCCs. Those complaints

generally involve alleged prohibited acts in connection with the international transportation of household

goods, or the failure to establish, observe, and enforce just and reasonable regulations and practices.

The latter half of fiscal year 2004 saw a marked increase in such matters, particularly involving delivery

problems such as failure to deliver or extensive delays, and excessive or duplicate payments demanded

prior to delivery. Many of these difficulties involved shipments arranged and contracted via online

intermediaries.

ADR staff also evaluates and adjudicates applications for permission to apply other than tariff

rates, and to waive or refund freight charges arising from various errors in tariff publications, an

inadvertent failure to publish an intended rate, or a misquotation of a rate.
-29-

In fiscal year 2005, the Commission anticipates a growing number of complaints. Also, it

intends to continue development of its ADR program, encouraging the use of mediation services to

assist in resolving formal proceedings or other significant disputes in a more informal and effective

manner. Outreach programs will be expanded to make the shipping industry aware of these less

adversarial, more cost-effective means of resolving disputes in a manner that enables the parties to

control the outcome. Also, conflict resolution training will be encouraged for other Commission

managers, to better equip all Commission programs with the skills and knowledge to be more flexible

in seeking outcomes that are responsive to industry needs. As the ocean shipping community becomes

more aware of the agency’s ADR services, we anticipate more inquiries and an increasing use of

mediation to resolve disputes. 

3. Library

The FMC Library serves the Commission’s research and information needs. Its holdings consist

of specialized material primarily covering the various segments of the shipping industry, as well as

historical and current regulatory materials covering all phases of shipping in the U.S. foreign trades.

It also contains material on several related fields such as engineering, economics, political science and

an extensive collection of legal publications. The library includes such sources of information as law

encyclopedias, engineering textbooks, legal treatises, Comptroller General Decisions, and editions of

the various National Reporter systems. The Library’s holdings consist of approximately 4,000 volumes

and numerous microfiches, CD-ROMs and on-line services.

B. OFFICE OF 

ADMINISTRATIVE LAW JUDGES

1. General

Administrative Law Judges (“ALJs”) manage the development of an evidentiary record through

rulings and conferences with counsel for the litigating parties, rule upon dispositive motions, and preside

at hearings held after the receipt of a complaint or institution of a proceeding on the Commission’s own

motion. 

ALJs have the authority to administer oaths and affirmations; issue subpenas; rule upon offers

of proof and receive relevant evidence; take or cause depositions to be taken whenever the ends of

justice would be served thereby; regulate the course of the hearing; hold conferences for the settlement

or simplification of the issues by consent of the parties; dispose of procedural requests or similar

matters; make decisions or recommend decisions; and take any other action authorized by agency rule

consistent with the Administrative Procedure Act. 

At the beginning of fiscal year 2004, eleven formal proceedings were pending before the ALJs.

During the year, twelve formal cases and one informal case were added. The ALJs formally settled four
-30-

formal proceedings and dismissed or discontinued six formal proceedings. One formal proceeding

before the ALJs was dismissed by the Commission.

2. Commission Action

The Commission adopted four orders of approval of settlement and six dismissals of complaints

of the ALJs, and dismissed one formal proceeding of the ALJs.

3. Decisions of Administrative Law Judges (in proceedings not yet decided by

the Commission)

The Government of the Territory of Guam, et al. v. Sea-Land Service, Inc. and

American President Lines, Ltd. [Docket No. 89-26].

In this proceeding the Commission had found that two ocean carriers had overcharged shippers

and had earned excessive overall revenues in violation of various sections of the Shipping Act, 1916,

and the Intercoastal Shipping Act, 1933, since repealed by Congress. On remand to the presiding ALJ

to determine money damages, the judge found that complainants’ unprecedented legal theory for

determining the amount of money damages was invalid because it did not show a causal link between

the overall excess revenues received by the carriers and the particular financial injury claimed by

individual shippers. Consequently, no money damages were awarded.

Sea-Land Service, Inc. - Possible Violations of Sections 10(b)(1), 10(b)(4) and 19(d)

of the Shipping Act of 1984 [Docket No. 98-06].

In this major investigation ordered by the Commission, the Commission found that respondent

Sea-Land Service, Inc., the then-largest American carrier, had violated various sections of the 1984 Act

by charging shippers inapplicable rates under its tariff, paying ocean freight forwarders compensation

for which they had not performed requisite services, and paying compensation to other forwarders who

were not entitled to it. On remand to the presiding ALJ, he assessed civil penalties amounting to

$4,082,500, but assessed no penalties in regard to certain freight forwarder issues because he believed

the Commission regulation was unclear and respondent had not had fair notice of its duties under the

regulation.

4. Pending Proceedings

At the close of fiscal year 2004, there were twelve formal proceedings and one informal

proceeding pending before the ALJs, of which four were investigations initiated by the Commission.

The remaining eight formal proceedings and one informal proceeding were instituted by the filing of

complaints by common carriers by water, shippers, conferences, port authorities or districts, terminal

operators, trade associations, and stevedores. 
C. OFFICE OF

THE GENERAL COUNSEL

The General Counsel provides legal counsel to the Commission. This includes reviewing staff

recommendations for Commission action for legal sufficiency, drafting proposed rules to implement

Commission policies, and preparing final decisions, orders, and regulations for Commission ratification.

In addition, the Office of the General Counsel provides written or oral legal opinions to the Commission,

its staff, and the general public in appropriate cases. As described in more detail below, the General

Counsel also represents the Commission before the courts and Congress and administers the

Commission’s international affairs program.

1. Rulemakings and Decisions 

The following are rulemakings and adjudications representative of matters prepared by the

General Counsel’s Office:

(a) Rulemakings

The Content of Ocean Common Carrier and Marine Terminal Operator Agreements

Subject to the Shipping Act of 1984 [Docket No. 03-15], (December 1, 2003).

The Commission issued a Notice of Proposed Rulemaking to seek comments from interested

parties regarding possible changes to the Commission’s rules governing the content of ocean common

carrier and MTO agreements that are filed with the Commission in accordance with the Shipping Act.

The proceeding was initiated in response to comments received in the rulemaking proceeding in Docket

No. 99-13, a Notice of Inquiry published in the Federal Register on August 3, 1999. Comments were

received from carriers, shippers, and other interested parties. A Commission meeting was held on

November 19, 2003, and a Notice of Proposed Rulemaking was published in the Federal Register on

December 1, 2003. Comments were due January 30, 2004. The Commission is currently reviewing the

comments and expects to issue a Final Rule early in fiscal year 2005.

(b) Decisions

Exclusive Tug Franchises - Marine Terminal Operators Serving the Lower Mississippi

[Docket No. 01-06], 30 S.R.R. 441 (May 21, 2004).

On June 11, 2001, the Commission issued an Order to Show Cause directing 12 MTOs on the

lower Mississippi River to show cause why they have not violated sections 10(d)(1) and 10(d)(4) of the

Shipping Act, 46 U.S.C. app. '' 1709(d)(1) and (d)(4), by entering into exclusive tug assist service

arrangements resulting in unreasonable practices and/or undue or unreasonable preference or advantage

or unreasonable prejudice or disadvantage, respectively. In October 2001, the Commission referred the

entire case to the Office of Administrative Law Judges to handle all aspects of the proceeding because

of its complexity and factual nature. The ALJ consequently ordered that the parties enter ADR
-32-

procedures. Two respondents have since settled the proceeding. The Commission also addressed a

respondent’s request that the Commission issue orders pursuant to section 15 of the Shipping Act, 46

U.S.C. app. ' 1714, to obtain information from several overseas companies. The Commission denied

the request, holding that private parties do not have a procedural right to gather information in an

adjudicatory proceeding by issuance of section 15 orders by the Commission. The respondent filed a

petition for reconsideration, which also was denied by the Commission. Another respondent has since

settled the proceeding. An Initial Decision is due by July 1, 2005.

Petition of United Parcel Service, Inc. for Exemption Pursuant to Section 16 of the

Shipping Act of 1984 to Permit Negotiation, Entry and Performance of Service

Contracts [Petition No. P3-03]; Petition of the National Customs Brokers and

Forwarders Association of America, Inc. for Limited Exemption from Certain Tariff

Requirements of the Shipping Act of 1984 [Petition No. P5-03]; Petition of Ocean

World Lines, Inc., for a Rulemaking to Amend and Expand the Definition and Scope

of “Special Contracts” to Include All Ocean Transportation Intermediaries [Petition

No. P7-03]; Petition of BAX Global Inc. for Rulemaking [Petition No. P8-03]; Petition

of C.H. Robinson Worldwide, Inc. for Exemption Pursuant to Section 16 of the

Shipping Act of 1984 to Permit Negotiation, Entry and Performance of Confidential

Service Contracts [Petition No. P9-03]; Petition of Danzas Corporation d/b/a Danmar

Lines Ltd.; Danzas AEI Ocean Services and; DHL Danzas Air and Ocean for

Exemption from the Tariff Publishing Requirements of Section 8 of the Shipping Act

of 1984, as Amended [Petition No. P1-04]; Petition of BDP International, Inc. for

Exemption from the Tariff Publishing Requirements of Section 8 of the Shipping Act

of 1984, as amended [Petition No. P2-04]; Petition of FEDEX Trade Networks

Transport & Brokerage, Inc. for Exemption from the Tariff Publishing Requirements

of Sections 8 and 10 of the Shipping Act of 1984, as Amended [Petition No. P4-04], 30

S.R.R. 349 (September 2, 2004).

The Commission received petitions from seven NVOCCs and one national trade association

representing NVOCCs seeking relief from the Shipping Act=s restriction on NVOCCs from offering

service contracts in their capacity as carriers with their shipper customers and the requirement that

NVOCCs adhere to the rates published in their tariffs. 46 U.S.C. app. '' 1702(19) and 1709(b). The

basis for the petitions is that after the passage of OSRA, ocean common carriers (i.e., vessel-operating

common carriers - “VOCCs”) were for the first time allowed to provide service to their shipper

customers pursuant to the rates and terms of service specified in confidential service contracts, as

opposed to publicly available service contracts or tariffs. NVOCCs may enter into a service contract

with an ocean common carrier as a shipper customer of the ocean common carrier; however, OSRA did

not extend to NVOCCs the ability to offer service contracts as carriers to their shipper customers.

Instead, NVOCCs must provide service pursuant to its tariffs, which are open for public inspection.
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United Parcel Service (AUPS@), C.H. Robinson Worldwide, Inc., Danzas Corporation, BDP

International, Inc. and FEDEX Trade Networks Transport & Brokerage, Inc. each request individual

exemptions from the Shipping Act. They argue that changes in the ocean freight industry since the

passage of OSRA, the growth of integrated logistics services, the promotion of greater competition in

the marketplace, and the ability to provide lower-cost and more efficient service for shippers warrant

the Commission granting their requests to provide confidential service contracts as carriers to their

shipper customers. The National Customs Brokers and Forwarders Association of America, Inc.

(“NCBFAA”), a national trade association representing the interests of freight forwarders, NVOCCs and

customs brokers in the shipping industry, seeks an exemption from the tariff filing requirements for all

NVOCCs. NCBFAA presents arguments similar to UPS and C.H. Robinson, but also asserts that the

tariff system is outdated and impractical. As such, NCBFAA requests that the Commission exempt

NVOCCs from certain provisions of sections 8 and 10 of the Shipping Act, which require NVOCCs to

establish, publish, maintain and enforce tariffs setting forth ocean freight rates, thereby relieving

NVOCCs from the administrative burden and cost of tariff publication, and enabling them to negotiate

rates specific to shippers’ requirements. In the alternative, if the Commission finds that it does not have

the authority to issue the requested exemption, NCBFAA seeks a more limited exemption from section

8 and a rulemaking modifying part 520 of the Commission=s regulations that would allow NVOCCs to

establish and maintain “range rates” in lieu of specific rates covering their rates and charges. Ocean

World Lines, Inc. requests a rulemaking to expand the definition and scope of the term “special

contracts” in the Commission’s regulations to include NVOCCs if UPS and/or NCBFAA=s petitions are

not granted. Finally, BAX Global Inc. seeks a rulemaking to permit BAX and other similarly situated

entities (a determination to be based on assets, corporate format, and regulatory history) to enter

confidential service contracts as “ocean common carriers” with their shipper customers. The

Commission sought comment on the petitions from interested persons. 

On August 2, 2004, the National Industrial Transportation League, UPS, BAX, FEDEX,

Transportation Intermediaries Association, C.H. Robinson Worldwise, Inc. and BDP International, Inc.

filed a Motion for Leave pursuant to Rule 73, 46 CFR § 502.73, to file Joint Supplemental Comments

Requesting Expedited Adoption of a Conditional Exemption from Tariff Publication. The moving

parties sought acceptance of their Supplemental Comments into the record, as the comments reflect an

updated, unified version of the various forms of relief requested in the original individual petitions. The

moving parties request that the Commission use its authority under section 16 of the Shipping Act to

exempt certain NVOCC agreements with shippers from the tariff publication requirements in the

Shipping Act and the Commission’s Rules and Regulations, as well as the tariff-related prohibited acts

found in the Shipping Act. The proposed exemption would apply to any written agreements between

an NVOCC and shipper (excluding bills of lading, receipts or other transport documents), where the

shipper pledges to provide a specific volume/portion of cargo over a fixed time period while the

NVOCC commits to a defined rate and service level. According to the Movants, the proposed

exemption would be subject to the following conditions: (1) the agreements and their essential terms

must be filed confidentially with the Commission; (2) the NVOCC must publish a tariff that includes

the origin and destination port ranges, commodity involved, minimum volume/portion, and duration of

the agreement; and (3) the Commission would retain jurisdiction to the same extent as it does over

service contracts under the Shipping Act. The Commission granted the Motion for Leave and reopened

the comment period until September 30, 2004. Comments were received, and the Commission is
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reviewing those and analyzing its options. The Commission anticipates addressing this matter in a

meeting early in fiscal year 2005.

Petition of the Association of Bi-State Motor Carriers, Inc. to Investigate Truck

Detention Practices of the New York Terminal Conference at the New York/New Jersey

Port District [Petition P3-02], 30 S.R.R. 104 (February 20, 2004).

The Commission denied a petition involving the truck detention regulations of MTO members

of the New York Terminal Conference (“NYTC”) in the New York/New Jersey Port District. The

petitioner, the Association of Bi-State Motor Carriers, Inc., is an organization comprised of

approximately 40 members of various small- to medium-sized independent trucking companies that

provide the majority of local drayage at the port. Bi-State claimed that the NYTC’s truck detention

regulations were deliberately crafted and executed to avoid the fair calculation of truck detention

penalties. As such, Bi-State argued that NYTC and its MTO members were in violation of section

10(d)(1) of the Shipping Act, 46 U.S.C. app. § 1709(d)(1), which prohibits MTOs from establishing,

observing and enforcing unjust and unreasonable practices and regulations relating to receiving,

handling, storing or delivering property. Bi-State requested that the Commission initiate an

investigation of the NYTC’s truck detention activities under section 11(c) of the Shipping Act, 46

U.S.C. app. § 1710(c). 

 

Bi-State also requested that the Commission reconsider its 1994 decision to eliminate truck

detention penalty requirements for the port from Commission regulations. From the 1960s to the early

1990s, the Commission administered truck detention regulations directed specifically at the Port of New

York in an effort to alleviate the excessive and unusual delays caused by MTOs in the handling and

interchange of freight between ocean and motor carriers. In 1992 the Commission undertook a

comprehensive review of its regulations to eliminate outdated provisions. The Commission’s view was

that modern containerization and technological advancements had altered marine terminal operations

in such a way that removal of the regulations was justified. Public comment failed to prove otherwise,

and the Commission determined to abrogate the regulations in 1994.

The Commission’s reason for denial was that the petition failed to establish sufficient facts to

warrant both the initiation of an investigation and the reconsideration of the abrogation of the former

truck detention rules.

2. Litigation

The General Counsel represents the Commission in litigation before courts and other

administrative agencies. Although the litigation work largely consists of representing the Commission

upon petitions for review of its orders filed with the U.S. Courts of Appeals, the General Counsel also

participates in actions for injunctions, enforcement of Commission orders, actions to collect civil

penalties, and other cases where the Commission’s interest may be affected by litigation.

The following is representative of matters litigated by the Office:
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New Orleans Stevedoring Co. v. Federal Maritime Commission and United States of

America, D.C. Cir. No. 02-1259.

New Orleans Stevedoring Co. (“NOS”), a division of James J. Flanagan Shipping Corporation,

filed a complaint against the Port of New Orleans, alleging that it had violated sections 10(d)(3) and

10(d)(4) of the Shipping Act by refusing to lease or assign to NOS certain marine terminal space that

was under construction. The ALJ assigned to the case determined that the Port had not unreasonably

refused to deal or negotiate with NOS, because NOS was aware of the Port’s policy not to lease or

assign space under construction in order to avoid costly delays. The ALJ further determined that

although the Port had allowed limited use of the space for short periods by some of NOS’s competitors,

the Port was entitled to attempt to compensate its lessees who may have lost space elsewhere in the Port

due to the construction. As a result, the ALJ dismissed NOS’s complaint. The Commission affirmed

the dismissal of the complaint, finding that NOS had not provided any basis to warrant overturning the

ALJ’s Initial Decision. 

On August 15, 2002, NOS filed a petition for review in the U.S. Court of Appeals for the District

of Columbia Circuit. The Commission, joined by the Department of Justice, filed a brief on January

29, 2003, urging the Court to uphold the Commission’s dismissal of the complaint. Oral argument was

heard on September 12, 2003. On September 29, 2003, the Court issued a memorandum opinion in

which it affirmed the Commission’s decision in all respects. NOS filed a petition for rehearing on

November 13, 2003. That petition was denied on November 20, 2003. 

3. Legislative Activities

The General Counsel represents the Commission’s interests in all matters before Congress. This

includes preparing testimony for Commission officials, responding to Congressional requests for

assistance and information, commenting on proposed legislation, proposing legislation, and responding

to requests from the Office of Management and Budget (“OMB”) regarding proposed bills and

testimony.

During fiscal year 2004, 135 bills, proposals and Congressional inquiries were referred to the

Office of the General Counsel for comment. The Office prepared and coordinated testimony for the

agency’s fiscal year 2005 budget authorization hearing before the U.S. House of Representatives

Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime

Transportation. The Office also submitted comments to Congressional staff on the continuing efforts

to revise, codify and enact certain maritime laws as part of Title 46, U.S. Code, Shipping. 

In fiscal year 2005, the Office will continue to take the lead in providing assistance and technical

advice to Congress regarding issues for possible legislative consideration, with particular emphasis on

port and maritime security initiatives. The Office will recommend legislative and regulatory

amendments as necessary to ensure uniformity with other Federal initiatives to allow for the efficient

and secure flow of ocean transportation. The Office will continue to serve as liaison with other Federal

agencies with respect to port and maritime security, promoting information-sharing and a coordinated

approach to maritime security.
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4. Foreign Shipping Restrictions and International Affairs

The General Counsel is responsible for the administration of the Commission’s international

affairs program. The General Counsel monitors potentially restrictive foreign shipping laws and

practices, and makes recommendations to the Commission for investigating and addressing such

practices. The Commission has the authority to address restrictive foreign shipping practices under

section 19 of the 1920 Act and the FSPA. Section 19 empowers the Commission to make rules and

regulations governing shipping in the foreign trade to adjust or meet conditions unfavorable to shipping.

The FSPA directs the Commission to address adverse conditions affecting U.S. carriers in foreign trade,

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

In fiscal year 2004, the Commission continued to monitor potentially restrictive shipping

practices of the Governments of Japan and the PRC.

The Commission continued to monitor developments relating to restrictive practices in Japanese

ports, including the effects of amendments to the Port Transportation Business Law enacted in 2000.

The Commission continued to receive and evaluate semiannual reports from its ongoing proceeding in

Docket No. 96-20, Port Restrictions and Requirements in the United States/Japan Trade.

The Commission also continued to follow restrictive practices in China through Docket No. 98-

14, Shipping Restrictions, Requirements and Practices of the People’s Republic of China. On August

12, 1998, the Commission issued Information Demand Orders to vessel-operating carriers of the U.S.

and the PRC for information on Chinese policies and practices regarding port access, the licensing of

multimodal transport operations, and the establishment of representative and branch offices. The

Commission stated in June 1999 that the responses to the FMC’s inquiries indicated that Chinese laws

and regulations discriminate against and disadvantage U.S. carriers and other non-Chinese shipping lines

with regard to a variety of maritime-related services. 

However, a number of subsequent developments made it desirable for the Commission to further

review these matters and supplement the record: the entry into the U.S. trades of a new Chinese

controlled carrier, China Shipping Container Lines; resumed bilateral maritime talks between the U.S.

and China; acquisition of the U.S.-flag carrier, Sea-Land Service, Inc., by the parent of Maersk Line;

a new Chinese Regulation on International Maritime Transport, effective January 1, 2002, issued by the

PRC; and Implementing Rules for the Regulations of the PRC on International Maritime Transportation

issued by the Chinese Ministry of Communications.

A bilateral U.S.-China Maritime Agreement was signed by Secretary of Transportation Norman

Y. Mineta and his Chinese counterpart on December 8, 2003. On March 31, 2004, the Commission met

to review developments in this docket and on April 1, 2004, determined to reopen the comment period

in this docket, soliciting comments particularly on the impact and effects of the recently-signed bilateral

Maritime Agreement. Comments were due June 1, 2004. Diplomatic notes bringing the Agreement into

effect were exchanged on April 21, 2004. The Commission is reviewing the comments to determine

whether any matters previously identified in this docket by the Commission merit further action. 
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The Commission’s Permanent Task Force on International Affairs, chaired by the Deputy

General Counsel, is a network of representatives from a number of Commission bureaus and offices.

The Task Force meets to exchange information regarding new or continuing areas of concern relating

to restrictive foreign shipping practices possibly necessitating action under one of the Commission’s

statutory authorities in this area. The regular meetings and activity reports of the Task Force also aid

the Commission in developing efficient methods to address conditions as they arise.

Another responsibility of the Office is the identification and verification of controlled carriers

under section 9 of the Shipping Act. Common carriers that are owned or controlled by foreign

governments are required to adhere to certain requirements under the Act, and their rates are subject to

Commission review. The Office investigates and makes appropriate recommendations to the

Commission regarding the status of potential controlled carriers. The Office, in conjunction with other

Commission components, also monitors the activities of controlled carriers. One common carrier was

redesignated by the office as a “controlled carrier” on September 27, 2004.

In fiscal year 2005, the Office will continue to take the lead in accomplishing the agency’s

performance goals related to eliminating restrictions that unjustly disadvantage U.S. interests, by

monitoring, through the Permanent Task Force on International Affairs, foreign laws and practices to

determine whether there are any unjust non-market barriers to trade. The Office will recommend

appropriate action to the Commission as warranted.

5. Designated Agency Ethics Official

The Ethics Official is structurally located within the Office of the Chairman, but the position is

performed as a collateral duty by the Deputy General Counsel.

The Commission’s Ethics Official is responsible for administering public and confidential

financial disclosure systems in order to prevent conflicts of interest from arising in the execution of the

agency’s regulatory functions. The Ethics Official also conducts annual training and the day-to-day

dispensing of advice and guidance to ensure compliance with the standards of ethical conduct that apply

to Executive Branch officials. In March 2004, the Commission's ethics program received an award from

the U.S. Office of Government Ethics, in recognition of outstanding achievement in the administration

of the program. 

D. OFFICE OF 

EQUAL EMPLOYMENT

OPPORTUNITY

The Office of Equal Employment Opportunity (“EEO”) applies knowledge of Federal EEO and

personnel management concepts, procedures and regulations to develop, implement and manage a

comprehensive program of equal employment opportunity. The EEO program is statutorily mandated

with required activities in complaints processing, adjudication, affirmative program planning, special

emphasis programs, community outreach, monitoring and evaluation. The Director, EEO (“DEEO”)
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works independently under the direction of the Chairman to provide advice to the Commission’s

management in improving and carrying out its policies and program of non-discrimination and

affirmative program planning.

The DEEO arranges for EEO counseling or ADR for employees who raise allegations of

discrimination; provides for the investigation, hearing, fact-finding, adjustment, or early resolution of

such complaints of discrimination; accepts or rejects formal complaints of discrimination; prepares and

issues decisions for resolution of formal complaints; and monitors and evaluates the program’s impact

and effectiveness. The DEEO represents the agency on several intergovernmental committees,

coordinates all affirmative program planning efforts, directs programs of special emphasis, and

coordinates the activities of the Selective Placement and Federal Equal Opportunity Recruitment

Coordinators. The DEEO also supervises two collaterally-assigned EEO counselors. 

The Office works closely with the Commission’s Office of Human Resources, managers and

supervisors to:

# Improve recruitment and representation of women, minorities and persons with

handicapping conditions in the workforce.

# Provide adequate career counseling.

# Facilitate early resolution of employment-related problems.

# Develop program plans and progress reports.

Significant accomplishments in fiscal year 2004 included the following: 

1. Provided briefings to senior staff.

2. Planned EEO training for all employees. 

3. Provided counseling assistance to managers, supervisors and employees.

4. Conducted a survey on women’s issues and compiled and

distributed the responses to all managers/supervisors and women.

5. Reviewed and assessed management and personnel human resource activity and actions.

6. Maintained an effective discrimination complaint process

that attempted to resolve issues informally, expeditiously, and at the lowest possible level.

7. Provided support and assistance to managers and supervisors in maintaining and

effectively managing a diverse workforce.
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8. Developed information and materials for training senior executives, Area Representatives,

EEO counselors and other staff. 

9. Planned and developed special emphasis programs for FMC employees, including

multicultural and Black history programs. 

10. Improved FMC’s image and identity among Federal agencies and the community by

developing cooperative programs in the special emphasis areas.

11. Continued non-discrimination policy and programs in response to Pub. L. No. 103-123.

During fiscal year 2005, the Office will continue all existing programs and initiate additional

activities designed to increase an understanding of EEO concepts and principles.

 E. OFFICE OF THE

 INSPECTOR GENERAL

The Office of Inspector General (“OIG”) at the Commission was established pursuant to the

Inspector General Act of 1978, which was amended in 1988 to provide for additional statutory

inspectors general at designated Federal entities, including the Commission.

It is the duty and responsibility of the OIG to:

# Provide policy direction for and conduct, supervise, and coordinate audits and

investigations relating to the Commission’s programs and operations.

# Review existing and proposed legislation and regulations relating to the

Commission’s programs and operations and to make recommendations concerning

the impact of such legislation or regulations on the economy and efficiency in, and

the prevention and detection of fraud and abuse in, the administration of the

Commission’s programs and operations.

# Recommend policies for, and conduct, supervise, or coordinate other activities

carried out or financed by the Commission for the purpose of promoting economy

and efficiency in the administration of, or preventing and detecting fraud and abuse

in, the Commission’s programs and operations.

# Recommend policies for, and conduct, supervise, or coordinate relationships

between the Commission and other Federal agencies, state and local governmental

agencies, and nongovernmental agencies with respect to all matters relating to: the

promotion of economy and efficiency in the administration of, or the prevention

and detection of fraud and abuse in, programs and operations administered or
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financed by the Commission; and the identification and prosecution of participants

in any fraud or abuse.

# Keep the Chairman and the Congress fully and currently informed by means of

semiannual and other reports concerning fraud and other serious problems, abuses,

and deficiencies relating to the administration of programs and operations

administered or financed by the Commission; recommend corrective action

concerning such problems, abuses, and deficiencies; and report on the progress

made in implementing such corrective action.

During fiscal year 2004, the Office issued the following audits in final:

A04-01 Audit of Simplified Acquisitions

A04-02 Audit of User Fees (OTI Applications)

A04-03 Review of EEO Program

A04-04 Financial Statement Audit - FY 04

A04-05 Federal Information Security Management Act - Inspector General Evaluation

Report

In addition to these completed audits, the OIG initiated a review of the Commission’s agreement

filings to determine whether the Commission has proper controls in place in connection with the

receiving and processing of fees in connection with agreement filings. 

During the year, various Hotline complaints were received; and investigations, both informal and

formal, were opened and pursued. At the end of the fiscal year, there were no formal investigations

pending.

In fiscal year 2005, the OIG plans to conduct two statutorily required audits – one in the

information technology area pursuant to the Federal Information Security Management Act (“FISMA”),

and the other in the financial area relating to the required audit of the agency’s financial statements for

fiscal year 2005. The Office will continue to perform evaluations of agency programs and operations

as it carries out the OIG’s statutory mandate to combat waste, fraud and abuse in agency programs.

These audits are tied to both the agency and the OIG strategic plans. The Office also will initiate

investigations, both formal and informal, as warranted. 

The IG, as an active member of the Executive Council on Integrity and Efficiency, will continue

working with that group on joint projects which affect the IG community.
F. OFFICE OF ADMINISTRATION

The Office of Administration (“OA”) provides administrative support to the program operations

of the Commission. OA interprets governmental policies and programs and administers these in a

manner consistent with Federal guidelines, including those involving procurement, information

technology (“IT”), financial management, and human resources. OA initiates recommendations,

collaborating with other elements of the Commission as warranted, for long-range plans, new or revised

policies and standards, and rules and regulations, with respect to its program activities. The Director,

OA, is responsible for the direct administration and coordination of the:

# Office of Budget and Financial Management, 

# Office of Human Resources,

# Office of Information Technology, and

# Office of Management Services.

The Director, OA, provides administrative guidance to the:

# Office of Operations, 

# Office of the Secretary,

# Office of the General Counsel, and

# Office of Administrative Law Judges,

and administrative assistance to the:

# Offices of the Chairman and Commissioners,

# Office of the Inspector General, and 

# Office of Equal Employment Opportunity.

The Director, OA, is the FMC’s Chief Acquisition Officer and Audit Followup and Management

(Internal) Controls Official. The Director also serves as the FMC’s representative, as Principal

Management Official, to the Small Agency Council (“SAC”). As the Chief Financial Officer, the

Director provides program oversight for the agency’s budget and financial management responsibilities,

and ensures agency compliance with the Financial Integrity Act, the Antideficiency Act, and the Debt

Collection Improvement Act of 1996. The Director also serves as the agency’s lead executive for

strategic planning and implementation of the Government Performance and Results Act of 1993

(“GPRA”). 

The Deputy Director of Administration is the FMC’s Chief Information Officer (“CIO”). He

also serves as the FMC’s Competition Advocate. 

At the start of fiscal year 2004, the activities of OA were part of the Office of the Executive

Director (“OED”). The OED was eliminated during an agency-wide realignment in August 2004, and

OA was created with responsibilities for a number of the functions of the former OED. 
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The former OED accomplished significant programmatic achievements in the administrative

arena during fiscal year 2004. Recruiting a full-time IT Security Officer was a major element in OED’s

efforts to enhance the agency’s IT program and address recommendations made by the Inspector

General through a contractor assessment of agency IT operations. Also, the agency’s financial

management system received an unqualified opinion in its fiscal year 2004 financial audit. OED again

directed preparation of an update of the agency’s five-year Strategic Plan, as well as preparation of the

Annual Performance Plan and the Annual Program Performance Report, as required by GPRA. OED

also prepared the Federal Activities Inventory Reform Act report, the Federal Managers’ Financial

Integrity Act report, and transmittal letters for the Inspector General’s semiannual reports to Congress,

as well as a report to Congress on the Commission’s current IT improvement initiatives and long-term

technology improvement plan. Also during the fiscal year, OED oversaw efforts to address remaining

transition activities related to the conversion to the agency’s new personnel/payroll and accounting

cross-service providers (the National Finance Center - “NFC” - and the Bureau of Public Debt - “BPD,”

respectively). OED also directed the update of the internal Commission issuances that specify

procedures for a variety of programs and activities, and guided Commission efforts to comply with

FISMA. Additionally, OED guided the development of the fiscal year 2006 budget request to OMB and

the fiscal year 2005 President’s Budget submission, and directed all efforts involving the audit of the

Commission’s fiscal year 2003 financial statements, including preparation of the Management

Discussion and Analysis (“MD&A”) portion. Also, for a portion of the year, the OED served as

coordinator for the agency-wide Technical Users Group, which seeks to improve IT decisionmaking and

provide better dissemination of IT-related information. 

OA’s key objectives for fiscal year 2005 are implementing the Chairman’s policy directions

aimed at refining and enhancing agency administrative programs and operations, as well as monitoring

the accomplishment of agency performance goals; facilitating further IT improvements, including the

enhancement of the Commission’s mission-critical Internet-based Service Contract Filing System

(“SERVCON”), the redesign of the agency’s Internet website, and the automation of forms and reporting

requirements; further development of emergency preparedness and continuity of operations planning;

and ensuring effective strategic succession planning for upper-level managers. OA also will take the

lead in ensuring an effective agency-wide computer security program, and that the agency’s financial

management system receives an unqualified opinion in annual financial audits. Additionally, OA will

continue to emphasize improved customer services for Commission staff and externally mandated

government-wide programs. 

1. Office of Budget and Financial Management

(a) General Office Responsibilities

The Office of Budget and Financial Management (“OBFM”) administers the Commission’s

financial management program and is responsible for offering guidance on optimal utilization of the

Commission’s fiscal resources. OBFM is charged with interpreting government budgetary and financial

policies and programs, and developing annual budget justifications for submission to the Congress and

OMB. The Office also administers internal control systems for agency funds, travel, and cash

management.
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(b) Achievements

During fiscal year 2004, OBFM:

# Collected and deposited $3,392,355 from user fees, fines and penalty collections, and

ocean freight forwarder and OTI application and passenger vessel certification fees.

 # Coordinated and prepared budget justifications and estimates for the fiscal year

2005 Congressional budget and fiscal year 2006 budget to OMB.

# Prepared a variety of external reports, including: the Annual Leave Year Report

and the Report on Workyears and Personnel Costs for 2003 (Office of Personnel

Management - “OPM”); the Report on International Travel for FY 2003 (OMB);

the Report on First-Class Airline Accommodations for fiscal year 2003 (General

Services Administration - “GSA”); and the quarterly Continuation of Pay Reports

(Department of Labor).

# Prepared monthly status reports on workyears, funding, travel and receivables. 

# Managed the Commission’s travel, transit benefits and cash management

programs.

# Worked with management to develop a process for the individual offices/bureaus

to forecast annual budgets in accordance with the Commission’s strategic goals.

# Developed new allocation reports to provide management with timely expense data

by program.

# Worked with BPD staff and auditors regarding the audit of fiscal year 2003

financial statements. 

# Pursued all delinquent receivables and referred a number of debts to the

Department of Treasury for collection.

# Served on the biennial committee to review and update user fees.

# Prepared the Commission’s draft MD&A for fiscal year 2004.

(c) Future Plans

Financial management goals in fiscal year 2005 include: (1) continued development of a fully

integrated financial management system; (2) in conjunction with the Offices of Management Services

and Information Technology, continued implementation of electronic commerce to automate the

processing of official travel documents, purchase orders, obligations and payments; (3) reviewing
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procedures and controls for cash management; and (4) an ongoing pursuit of initiatives leading to

economy and efficiency in budget and financial operations.

2. Office of Human Resources

(a) General Office Responsibilities

The Office of Human Resources (“OHR”) plans and administers a complete human resources

management program, including recruitment and placement, position classification and pay

administration, occupational safety and health, employee assistance, employee relations, workforce

discipline, performance management and incentive awards, employee benefits, career transition,

retirement, employee development and training, and personnel security.

(b) Achievements

During fiscal year 2004, OHR: 

# Monitored activities of the agency’s payroll/personnel service provider, NFC, and

responded to internal and external financial audits and related inquiries.

# Served as advisor for the agency’s Senior Executive Service (“SES”) Candidate

Development Program to address executive succession, and coordinated Program

close-out activities, including obtaining certification of candidates through OPM

qualifications review boards. 

# Conducted a comprehensive training program in accordance with the agency’s

budget and strategic and annual performance plans, providing executive training

for SES candidates, promoting e-learning and on-line training opportunities,

implementing the college tuition reimbursement program, coordinating with the IT

Security Officer to ensure the conduct of computer security awareness training, and

participating in the SAC Training Program.

# Conducted a comprehensive security program, including initiating and

adjudicating security investigations for new and reinvestigated employees, and

completing work necessary for reporting and updating data in the Clearance

Verification System pursuant to the e-clearance initiative.

# Conducted a comprehensive recruitment program utilizing alternatives for

recruitment such as those under the Direct-Hire Authority, delegated examining,

and the Veterans Employment Opportunities Act.

# Coordinated with OPM, OMB and pertinent partners on a variety of human capital

initiatives, such as the Partnership for Public Service.
-45-

# Promoted the Preventive Health and Awareness Program and issued a semimonthly newsletter and e-mail notices focusing on monthly preventive health

themes and related health issues, e.g., Employee Assistance and Federal

Occupational Health Programs.

# Administered action on e-government initiatives such as Recruitment One-Stop, epayroll, Enterprise Human Resources Integration, and e-learning.

# Coordinated post-appointment followup and career development for Presidential

Management Fellows.

# Managed and conducted numerous employee benefit and charitable contribution

programs and open seasons, such as the Combined Federal Campaign, Thrift

Savings Plan, Federal Employees Government Life Insurance Program, Long Term

Care Insurance Program, and Flexible Spending Account Program.

# Conducted a cyclical position management review program to maintain balanced

organizational structures, ensure positions remained current and accurately

classified, and to effect realignment of organizational programs and functions.

(c) Future Plans

In fiscal year 2005, OHR plans to continue to: (1) advise agency management and staff on all

human resources matters and ensure the maintenance of a sound and progressive human resources

program; (2) implement pertinent portions of the agency’s strategic, training and related performance

plans, particularly performance goals related to the management of human resources; (3) explore and

implement simplification, flexibility, and accountability of human resources management programs; and

(4) monitor processes and database modernization activities of the NFC in conjunction with the

government-wide e-payroll initiative and ensure timely and accurate payroll and personnel services.

3. Office of Information Technology 

(a) General Office Responsibilities

The Office of Information Technology (“OIT”) provides management support to the program

and administrative operations of the Commission with respect to IT, and thus is responsible for ensuring

that the Commission’s IT program is administered in a manner consistent with applicable rules,

regulations and guidelines. OIT receives programmatic guidance from the CIO.

The OIT Director oversees the IT security program and serves as the Commission’s Information

Technology Officer, Information Resources and Data Telecommunications Manager, Forms Control

Officer, and Records Management Officer. OIT plans, coordinates, and facilitates the use of automated

information systems.
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(b) Achievements

During fiscal year 2004, OIT:

# Developed and realigned the structure of the IT program for more streamlined

operations.

# Implemented service-level agreements and standard operating procedures for

providing Help Desk support to FMC staff.

# Initiated the upgrade of the Commission’s network infrastructure to include

increased network bandwidth.

# Upgraded the Commission’s e-mail system and workstations (desktops and

laptops).

# Created an Asset Management Committee to research and implement processes to

manage and guide acquisition, use, disposal, risks, and costs of assets over their

entire life.

# Initiated the development of an IT Test Lab and User Support Center for testing

hardware and software and to provide user assistance. 

# Implemented a formal IT change control process which incorporates major changes

being reviewed and approved by the Configuration Control Board/Technical Users

Group.

# Furnished agency-wide advice and coordination on records management, OMB

clearances and information management issues, including performing an agencywide records management review to identify records eligible for disposal, and

assisting program units in securing OMB extensions for a number of information

collections.

# Initiated a contract for the replication of and enhancements to the FMC’s

SERVCON system. 

# Maintained and enhanced the FMC website, and provided advice and technical

support to all bureaus and offices in developing Internet and database applications.

# Initiated and administered contracts to provide IT support and other services to

further the Commission’s mission.

(c) Future Plans
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Major OIT initiatives for fiscal year 2005 include plans to: (1) increase network bandwidth; (2)

ensure compliance with government programs such as FISMA and the President’s Management Agenda;

(3) lead the major enhancement or rewrite of SERVCON; (4) establish a plan to develop an FMC

Enterprise Architecture; (5) improve the Capital Planning and Investment Control process; (6) continue

to develop plans to stabilize all critical systems and recommend enhancements to the existing IT

infrastructure; (7) develop and submit to the National Archives and Records Administration schedules

for electronic records and other records not currently scheduled or covered by the General Records

Schedule; (8) provide continued agency-wide advice and coordination on records management, OMB

clearances and information management issues; (9) continue maintenance and updating of the

Commission’s website; (10) implement the Government Paperwork Elimination Act (“GPEA”)

Execution Plan; (11) continue to investigate options to partner with other agencies’ initiatives to better

serve the public in the dissemination and collection of information; (12) upgrade the network security

infrastructure (i.e., firewall, routers, switches, and DMZ); and (13) further implement the IT Test Lab

and User Support Center.

4. Office of Management Services

(a) General Office Responsibilities

The Office of Management Services (“OMS”) directs and administers a variety of management

services functions that principally provide administrative support to the regulatory program operations

of the Commission. The Director of the Office serves as the Commission’s Contracting Officer.

The Office’s support programs include telecommunications, procurement of administrative

goods and services, property management, space management, printing and copying management, mail

and records services, facilities and equipment maintenance, and transportation. The Office’s major

functions are to secure and furnish all supplies, equipment and services required in support of the

Commission’s mission, and to formulate regulations, policies, procedures, and methods governing the

use and provision of these support services in compliance with the applicable Federal guidelines.

(b) Achievements

During fiscal year 2004, OMS:

# Coordinated and completed tenant improvement alterations at the agency’s

Headquarters facilities to include redesign and construction throughout the office

space.

# Coordinated and completed the renovation of the agency’s Headquarters facilities

to include re-painting and re-carpeting of all office space. 

# In coordination with OHR, acquired, and established policies and procedures for

implementation of a new ID Security Access System for Headquarters space. 
-48-

# Coordinated with GSA and served as lead agency for monitoring and oversight of

the new security force contract at the agency’s Headquarters location, and served

as Chairman of the tenants’ Building Security Committee.

# Revised and distributed a building-wide Occupant Emergency Plan for

Headquarters building.

# Developed and distributed new Emergency Preparedness Manuals to agency

personnel in response to the changes in security and emergency preparedness

throughout the Metropolitan area.

# Developed and implemented a Headquarters Sheltering-In-Place (“SIP”) plan and

held an initial SIP drill with DHS’s Federal Protective Service as observer.

(c) Future Plans

In fiscal year 2005, the Office’s objectives include: (1) complete the construction alterations

required by the agency’s realignment of August 2004; (2) continue to work with GSA, DHS, and other

tenant agencies at Headquarters facilities and field locations to upgrade and/or improve the buildings’

security measures and emergency preparedness for better control of office space and safety of agency

personnel; and (3) continue to provide advice and assistance to FMC activities regarding innovative

support service approaches.

G. OFFICE OF OPERATIONS

The Director of Operations, as senior staff official, is responsible to the Chairman for the

management and coordination of the following Commission bureaus:

# Bureau of Certification and Licensing,

# Bureau of Enforcement, and

# Bureau of Trade Analysis.

The Office of Operations oversees the development and operations of various Commission

programs and recommends new programs and necessary changes in staff objectives. 

In addition, the Office of Operations oversees the Area Representatives. The Commission

maintains a presence in Los Angeles, South Florida, New Orleans, New York and Seattle through Area

Representatives based in each of those cities. These representatives serve other major port cities and

transportation centers within their respective areas. 

At the start of fiscal year 2004, the activities of the Office of Operations were part of the Office

of the Executive Director. In an agency-wide realignment in August 2004, the Office of Operations was

created and assumed responsibility for a number of the functions of the former Office of the Executive

Director.
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The former Office of the Executive Director supported the operational bureaus through

oversight and guidance towards the accomplishment of many programmatic achievements during fiscal

year 2004. In particular, the Office guided staff efforts in preparing a comprehensive update and

revision of the Commission’s regulations dealing with the filing and oversight of ocean common carrier

and marine terminal agreements. Additionally, the Office oversaw the continuation of a series of

outreach seminars conducted by the agency’s Area Representatives around the country, designed to

further the FMC’s visibility in port locations and to provide the public with a greater understanding of

the agency’s role, responsibilities and services. The Office assisted the staff and the General Counsel

in consideration of several petitions asking the Commission to grant NVOCCs the authority to offer

individualized arrangements to their customers.

The Office of Operation’s key objectives for fiscal year 2005 include instituting the Chairman’s

policy directions aimed at refining and enhancing agency programs and operations, as well as

monitoring the accomplishment of agency performance goals. In particular, the Office will oversee the

implementation of two rulemakings initiated in fiscal year 2004 -- the ocean common carrier and marine

terminal agreements rule, and the rule creating NVOCC service arrangements. The Office will

coordinate operational bureaus in their efforts to further automate various Commission forms and

processes. In addition, the Office will work with the other components of the agency to coordinate

various outreach programs in both the public and private sectors.

H. BUREAU OF

CERTIFICATION AND LICENSING

1. General

The Bureau of Certification and Licensing has responsibility for the Commission’s OTI licensing

program and passenger vessel certification program. At the start of fiscal year 2004, activities of the

ADR program were part of the Bureau, but now have been assigned to the Office of the Secretary. The

Bureau:

# Licenses and regulates OTIs, including ocean freight forwarders and NVOCCs.

# Issues certificates to owners and operators of passenger vessels that have evidenced

financial responsibility to satisfy liability incurred for nonperformance of voyages

or for death or injury to passengers and other persons. 

# Manages programs assuring financial responsibility of OTIs and passenger vessel

operators, by developing policies and guidelines, and analyzing financial

instruments and financial statements. 

# Develops and maintains information systems that support the Bureau’s programs

and those of other Commission entities.
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In carrying out these functions, the Bureau provides information and referrals in response to a

wide array of informal inquiries, and provides guidance with respect to licensing and bonding.

The Bureau is organized into two offices. The Office of Transportation Intermediaries has

responsibility for reviewing and approving applications for OTI licenses, and maintaining and updating

records about licensees. The Office of Passenger Vessels and Information Processing has responsibility

for reviewing applications for certificates of financial responsibility with respect to passenger vessels,

for managing all activities with respect to evidence of financial responsibility for OTIs and passenger

vessel owner/operators, and for developing and maintaining all Bureau databases and records of OTI

applicants and licensees. 

2. Licensing of Ocean Transportation Intermediaries

OTIs are transportation middlemen. There are two different types of such transportation

middlemen, NVOCCs and ocean freight forwarders. Both NVOCCs and ocean freight forwarders must

be licensed if located in the U.S. Foreign NVOCCs may choose to become licensed, but do not require

a license. Whether licensed or not, foreign NVOCCs must establish financial responsibility. In

addition, all NVOCCs must publish electronic tariffs. 

To be licensed, an OTI must establish that it is qualified in terms of experience and character,

as well as establish its financial responsibility by means of a bond, insurance or other instrument.

Licensed ocean freight forwarders must establish financial responsibility in the amount of $50,000, and

licensed NVOCCs, $75,000. An additional $10,000 coverage is required for each unincorporated U.S.

branch office of a licensee. In addition, unlicensed foreign NVOCCs must maintain $150,000 in

coverage. The financial instrument must be available to pay any order of reparation assessed under the

1984 Act, claims against the OTI arising from its transportation-related activities, and any judgments

for damages against an OTI arising from its transportation-related activities under the 1984 Act.

During fiscal year 2004, the Commission received 313 new OTI applications and 209 amended

applications, issued 245 OTI licenses, revoked 217 licenses, and reissued approximately 115 licenses.

At the end of the fiscal year, 1,242 freight forwarders, 1,401 U.S. NVOCCs, 946 joint NVOCC/ocean

freight forwarders, and 36 foreign NVOCCs held active OTI licenses. An additional 775 foreign

NVOCCs maintained proof of financial responsibility on file with the Commission but chose not to be

licensed. During fiscal year 2004, the Commission received 20 riders providing optional proof of

financial responsibility for carriers serving in the U.S./China trade. Docket No. 04-02, Optional Rider

for Proof of Additional NVOCC Financial Responsibility, implemented rules that permit U.S. NVOCCs

to file riders to their existing NVOCC bonds to meet financial responsibility requirements imposed by

the Chinese government. 

The Bureau continues to post on the FMC website a list of licensed and bonded OTIs, which

assists carriers in complying with their statutory mandate to do business only with those licensed by the

Commission. The list is updated weekly. 

3. Passenger Vessel Certification
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The Commission administers sections 2 and 3 of Pub. L. No. 89-777 (46 U.S.C. app. §§ 817d

and 817e), which require evidence of financial responsibility for vessels which have berth or stateroom

accommodations for 50 or more passengers and embark passengers at U.S. ports and territories. The

program now encompasses 190 vessels and 51 operators, which have evidence of financial responsibility

coverage in excess of $318 million for nonperformance and over $618 million for casualty. The

certificates issued pursuant to this program are necessary for CBP’s clearance of thousands of passenger

vessel sailings annually. During fiscal year 2004, the Commission received applications for 109

certificates (casualty and performance), while 53 casualty certificates and 54 performance certificates

were approved and issued. 

In conjunction with the newly organized Office of Consumer Affairs and Dispute Resolution

Services, the Bureau offers information and guidance to the cruising public throughout the year on their

rights and obligations regarding monies paid to cruise lines who experience financial difficulties and

nonperformance problems. 

Despite the war in Iraq, a weak economy, and the increased cost of safety and security for

passengers and crews, the North American cruise industry continues to grow. The cruise industry is a

rapidly expanding global industry. During the current decade, it has continued to expand capacity by

adding more than 20 ships and over 50,000 berths to its fleets. According to The Cruise Industry 2003

Economic Summary, the cruise industry has increased its contribution to the U.S. economy by 11

percent, to $25.4 billion. This is due to the passenger growth reflected by the changing deployment

strategy of the cruise industry to smaller ports near major coastal cities close to large population centers.

Even though the cruise industry is growing, smaller cruise operators continue to have difficulty

competing with larger cruise lines. In recent years, this has been evidenced by the bankruptcy or

suspension of operations of Premier Cruise Operations Ltd. (dba Premier Cruises), New Commodore

Cruise Lines Ltd. (dba Commodore Cruise Lines and Crown Cruise Lines), Cape Canaveral Cruise Line,

Inc., American Classic Voyages Company (dba Delta Queen Steamboat Company and American Hawaii

Cruise), and Regal Cruises, Inc. During fiscal year 2004, Royal Olympic Cruises, Ocean Club Cruises,

and Society Expeditions discontinued operations. When cruise lines become bankrupt, the Commission

works closely with the cruise line and financial responsibility provider to facilitate the refund process.

The public is kept informed through the issuance of press releases posted on the Commission’s website

and dispensing advice when the passenger public contacts the staff.

During fiscal year 2003, the Commission issued a proposed rulemaking, Docket No. 02-15,

Passenger Vessel Financial Responsibility, to amend other portions of the rules, including removal of

the $15 million cap on performance coverage, a redefinition of unearned passenger revenue to eliminate

certain credit card ticket purchases which are covered under the Fair Credit Billing Act, and increasing

the frequency of reports of unearned passenger revenue. The purpose of these proposed rules is to

protect passenger fares fully and increase the Commission’s ability to monitor the adequacy of the

coverage provided. Initial comments were received, and further modifications in the proposed rule are

expected. 

4. Automated Database Systems
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A significant function of the Bureau is to support all Commission programs by providing

information about all regulated entities and those doing business with the Commission. In addition, a

database is maintained that provides information about financial coverage for all OTIs, as well as the

status of license applications. 

The Bureau maintains a list of licensed and bonded OTIs on the Commission’s website, thus

assisting carriers in complying with their statutory mandate to do business only with those licensed by

the Commission. This is especially helpful as carriers may incur liability for doing business with an

unlicensed OTI. An up-to-date list is a safeguard to the shipping public, and also protects licensees from

losing business because of an inaccurate determination by a carrier as to whether the OTI is licensed.

During fiscal year 2004, the Bureau added a field to indicate whether an NVOCC had filed an Optional

Rider to its NVOCC OTI bond evidencing additional coverage to meet the NVOCC financial

responsibility requirements of the Chinese government.

In fiscal year 2002, a database of passenger vessel operators was created; and during fiscal year

2004, the Bureau developed a number of reports to aid in monitoring the cruise lines. 

I. BUREAU OF ENFORCEMENT

The Bureau of Enforcement is the primary prosecutorial arm of the Commission. Attorneys of

the Bureau serve as trial attorneys in formal proceedings instituted under section 11 of the 1984 Act,

and in investigations instituted under the FSPA. Bureau attorneys serve as legal advisors to the Office

of Operations and other bureaus, and also may be designated Investigative Officers in nonadjudicatory

fact finding proceedings. The Bureau monitors all other formal proceedings in order to identify major

regulatory issues and to advise the Director of Operations and the other bureaus. The Bureau also

participates in the development of Commission rules and regulations. On occasion, under the direction

of the General Counsel, attorneys from the Bureau may participate in matters of court or other agency

litigation to which the Commission is a party. 

Through investigative personnel, and most often as the result of information provided by the

industry and other government entities, the Bureau monitors and participates in investigations into the

activities of ocean common carriers, OTIs, shippers, ports and terminals, and other persons to ensure

compliance with the statutes and regulations administered by the Commission. Monitoring activities

include: (1) service contract reviews to determine compliance with applicable statutes and regulations;

(2) reviews of OTI operations, including compliance with licensing, tariff, and bonding requirements;

(3) audits of passenger vessel operators to ensure the financial protection of cruise passengers; and (4)

various studies and analyses to support Commission programs. Investigations involve alleged violations

of the full range of statutes and regulations administered by the Commission, including: illegal or

unfiled agreements; abuses of antitrust immunity; unlicensed OTI activity; illegal rebating;

misdescriptions or misdeclarations of cargo; untariffed cargo carriage; unbonded OTI and passenger

vessel operations; and various types of consumer abuses, such as failure of carriers or intermediaries to

carry out transportation obligations, resulting in cargo delays or financial losses for shippers. The

Bureau adheres to the agency’s objectives of obtaining statutory compliance and ensuring equitable

trading conditions and focusing enforcement efforts on activities which have market-distorting effects.
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The Bureau prepares and serves notices of violations of the shipping statutes and Commission

regulations and may compromise and settle civil penalty demands arising out of those violations. If

settlement is not reached, Bureau attorneys act as prosecutors in formal Commission proceedings that

may result in settlement or in the assessment of civil penalties. The Bureau also participates, in

conjunction with other bureaus, in special enforcement initiatives, fact finding investigations and

rulemaking efforts.

During fiscal year 2004, the Bureau of Enforcement investigated and prosecuted malpractices

in many trades lanes, including the transpacific, North Atlantic, Central and South American and

Caribbean trades. These malpractices included market-distorting activities such as various forms of

secret rebates and absorptions, misdescription of commodities and misdeclaration of measurements,

illegal equipment substitution, unlawful use of service contracts, as well as carriage of cargo by and for

untariffed and unbonded NVOCCs. Most of these malpractice investigations were resolved informally,

some with compromise settlements of civil penalties. However, some investigations required the

institution of formal adjudicatory proceedings in order to pursue remedies under the 1984 Act.

In addition to rate malpractice activity, several matters arose with respect to activities pursuant

to filed and unfiled agreements between and among ocean common carriers. Further, a formal

investigation continued to examine the lawfulness of exclusive tug service arrangements at marine

terminal facilities on the Lower Mississippi and remained in litigation at the end of fiscal year 2004.

Also, an investigation was commenced into an exclusive arrangement at Portland, Maine, which

appeared to foreclose competition among passenger/passenger vehicle carriers in the Portland/Nova

Scotia trade.

Interaction between the Bureau, the Commission’s Area Representatives, and the CBP with

respect to the exchange of investigative information continues to be beneficial to all parties.

Cooperation with CBP included staff interactions and joint field operations to investigate entities

suspected of violating both agencies’ statutes or regulations. Such cooperation also has included local

police and other government entities when necessary.

In fiscal year 2004, the compliance audit program continued. This program, conducted from

Headquarters primarily by mail, reviews the operations of licensed OTIs to assist them in complying

with the statutory requirements and the Commission’s rules and regulations. The audit program also

includes review of entities holding themselves out as VOCCs with no indication of vessel operations.

At the beginning of fiscal year 2004, 41 enforcement cases were pending final resolution by the

Bureau, the Bureau was party to 9 formal proceedings, and there were 80 matters pending which the

Bureau was monitoring or for which it was providing legal advice. During the fiscal year, 30 new

enforcement actions were commenced; 32 were compromised and settled, administratively closed, or

referred for formal proceedings; and 39 enforcement cases were pending resolution at fiscal year’s end.

Also, the Bureau participated in 4 new formal proceedings, 6 proceedings were completed, and 7 formal

proceedings were pending at the end of the fiscal year. Additionally, 44 matters involving monitoring

or legal advice were received during the fiscal year, 64 such matters were completed, and 60 were

pending in the Bureau on September 30, 2004.
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In fiscal year 2005, the Bureau will continue to pursue market-distorting, fraudulent and

anticompetitive practices and will continue to monitor U.S. trades and the implementation of the

changes and regulations resulting from OSRA, to the extent that resources permit. It will pursue

initiatives aimed at entities not in compliance with the Commission’s regulations for OTI participation

in transportation, its definition of VOCC, as well as instances of noncompliance with regulatory

requirements for service contracts and NVOCC service arrangements. 

J. BUREAU OF TRADE

ANALYSIS

1. General

The primary function of the Bureau is to plan, develop, and administer programs related to the

oversight of concerted activity of common carriers by water under the standards of the 1984 Act as

amended by OSRA. Further, the Bureau is responsible for administering the Commission’s agreements

and service contract programs, and monitoring the accessibility and accuracy of all tariffs published by

common carriers, conferences of such carriers, and MTOs. The Bureau’s major program activities

include:

# Administering comprehensive trade monitoring programs to identify and track

relevant competitive, commercial, and economic activity in each major U.S. trade,

and to advise the Commission and its staff on current trade conditions, emerging

trends, and regulatory needs affecting waterborne liner transportation.

# Conducting systematic surveillance of carrier activity in areas relevant to the

Commission’s administration of statutory standards.

# Developing economic studies and analyses in support of the Commission’s

regulatory responsibilities.

# Providing expert economic testimony and support in formal proceedings,

particularly regarding unfair foreign shipping practices.

# Processing and analyzing ocean common carrier and MTO agreements.

# Reviewing and processing service contracts and service contract amendments filed

by ocean common carriers and conferences of such carriers, including service

contract statements of essential terms published by such entities. 

# Reviewing tariff publications in private automated systems of carriers and

conferences and ensuring that tariffs under OSRA are accessible and accurate.

2. Monitoring
-55-

The goal of the Bureau’s monitoring activities is to ensure that carriers operating in U.S. ocean

trades comply fully with applicable statutory standards and Commission regulations. To that end, the

Bureau administers a variety of monitoring programs and other research efforts designed to apprise the

Commission of current trade conditions, emerging commercial trends, carrier pricing and service

activities.

For a description of the Bureau’s monitoring activities for fiscal year 2004, see Section III. A,

Monitoring.

3. General Economic Analysis

In addition to research and economic analysis pertaining to its monitoring programs, the Bureau

provides economic expertise for a variety of Commission initiatives, including rulemaking proceedings.

Bureau economists prepare testimony in fact finding investigations and cases of unfair shipping

practices under section 19 of the 1920 Act and FSPA. They also contribute to speeches and provide

briefings for senior agency officials.

Key projects begun or completed by the Bureau in fiscal year 2004 under this heading

included: (1) exploring a methodology to consider constructive costs when determining whether a

controlled carrier’s rates or charges are below a level that is just and reasonable; (2) providing economic

analysis, deposition and hearing preparations in connection with Docket No. 01-06, Exclusive Tug

Franchises - Marine Terminal Operators Serving the Lower Mississippi River; (3) preparing an audit

report of selected agreements’ Voluntary Service Contract Guidelines for the 2003 contracting season;

(4) assisting in the preparation of information for the Small Business Regulatory Flexibility Act and

Congressional review of the final rule regarding Optional Rider for Proof of Additional NVOCC

Financial Responsibility; (5) preparing a quarterly Trade Profile publication spotlighting economic and

commercial conditions in various U.S. liner trades; (6) preparing for and conducting semiannual

meetings with TSA counsel and representatives as a result of the settlement of Fact Finding

Investigation No. 25, Practices of Transpacific Stabilization Agreement Members Covering the 2002-

2003 Service Contract Season; (7) preparing OMB forms and justification materials including burden

estimates of the proposed rules on affected entities, reviewing comments received as a result of the

Notice of Proposed Rulemaking, and drafting the final rule in connection with Docket No. 03-15, Ocean

Common Carrier and Marine Terminal Agreements Subject to the Shipping Act of 1984;

(8) classification of agreements to determine each agreement’s monitoring report requirements for

calendar year 2004; (9) responding to informal requests and inquiries for industry data or information;

(10) involvement with the Automated Commercial Environment/International Trade Data System; (11)

economic analyses of newly filed major agreements and amendments under the section 6(g) standard

of the 1984 Act; (12) responding to complaints and requests from shippers on various matters, including

the imposition of rate increases and/or surcharges by certain major agreements; (13) responding to

Congressional requests for trade analyses and data; and (14) meeting with industry representatives to

discuss trends and anticipated commercial developments.

4. Agreement Analysis
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Under sections 4 and 5 of the 1984 Act, all agreements by or among ocean common carriers to

fix rates or conditions of service, pool cargo or revenue, allot ports or regulate sailings, limit or regulate

the volume or character of cargo or passengers to be carried, control or prevent competition, or engage

in exclusive or preferential arrangements are required to be filed with the Commission. Except for

certain exempted categories, agreements among MTOs and among one or more MTOs and one or more

ocean common carriers also are required to be filed with the Commission.

Generally, an agreement becomes effective 45 days after filing, unless rejected by the

Commission, made the subject of a formal Commission request for additional information, or enjoined

by a U.S. district court under section 6(h) of the 1984 Act when it can be demonstrated that it will

unreasonably increase transportation costs or unreasonably decrease service. An agreement already in

effect also can be enjoined on a similar showing by the Commission. The 1984 Act empowers the

Commission to investigate and order the disapproval, cancellation, or modification of any effective

agreement it finds to be in violation of the Act. In an investigation, the Commission may seek to enjoin,

in U.S. district court, conduct that violates the Act. Under the Commission’s regulations, certain routine

or nonsubstantive agreements are exempt from the 45-day waiting period and are effective on filing with

the Commission.

There are two broad categories of agreements filed with the Commission. The first category is

pricing agreements, where the main focus is the discussion and fixing of rates. Types of pricing

agreements include conferences and rate discussion agreements. The other category is non-pricing

agreements. Types of non-pricing agreements include non-rate discussion agreements, vessel-sharing

agreements, cooperative working agreements, and Internet portal agreements. Brief descriptions follow

of the various agreement types.

(a) Conference Agreements

Conference agreements provide for the collective discussion, agreement, and establishment of

ocean freight rates and practices by groups of ocean common carriers. Although conference carriers are

allowed to act independently, the expectation is that they will adhere to rates and terms and conditions

of service adopted by the group. These agreements publish a common rate tariff in which all the parties

participate. The significance of conferences as a primary pricing forum has diminished, especially in

the major east-west trade lanes, since the enactment of OSRA in 1999. This role for the most part has

been taken over by voluntary rate discussion agreements. There have been no new conference

agreements filed since 1999. 

The Bureau received 14 modifications to existing conference agreements and analyzed 12

modifications in fiscal year 2004. These filings consisted of name and membership changes and

continuing suspensions for two conference agreements. At the beginning of the fiscal year, three

conference agreements had suspended their activities; during the fiscal year, two of those conference

agreements were terminated. A conference agreement in the Colombian trade also was terminated

during fiscal year 2004, and a conference agreement in the Indian subcontinent trade was converted to

a voluntary rate discussion agreement. At the end of the fiscal year, there were 15 conference

agreements on file; however, activities under one conference remain suspended.
-57-

(b) Discussion Agreements

Discussion agreements fall under two types: rate and non-rate agreements. Like conference

agreements, rate discussion agreements focus on the fixing of rates; but unlike conferences, any

consensus reached under rate discussion agreements is non-binding on the parties. There is no common

rate tariff; each party publishes its own tariff.

Non-rate discussion agreements are not geared to rate matters and generally provide a forum for

discussing matters of mutual interest; in some instances, they operate much like a trade association.

Examples of this latter description are the cruise association agreements and the Box Club, a group of

containership operators that meet once or twice a year to discuss policy and legislative issues that affect

their industry.

During the fiscal year, the Bureau received two new discussion agreements and 63 modifications

to currently effective agreements; modifications were mostly membership and name changes. In fiscal

year 2004, the Bureau analyzed and processed 62

filings. At the end of the fiscal year, there were 31 rate discussion agreements and nine non-rate

discussion agreements on file. Four rate discussion agreements and one non-rate discussion agreement

were terminated during the fiscal year.

The most significant filing under this category in the past year was a new rate discussion

agreement in the Indian Subcontinent trade. That agreement, entered into by some of the parties from

the TSA, was filed following the removal of the Indian Subcontinent from the geographic scope of the

TSA. The other major filing in this category was a new bridging agreement between a carrier and MTO

rate discussion agreement and an MTO rate discussion agreement for the discussion of maritime security

matters. 

(c) Vessel-Sharing Agreements

Vessel-sharing agreements (“VSAs”) make up the largest group of agreements on file with the

Commission. There are several different varieties of these agreements, ranging from agreements that

involve a high degree of operational cooperation with respect to space and services, down to the simple

swap of container slots. The high end of these agreements are so-called alliances, while the low end are

routine space charters. Most VSAs authorize some level of service cooperation. The objective of these

agreements is to provide a high-quality service, while reducing individual operating costs.

During fiscal year 2004, the Bureau received 24 new VSAs, which represented 86 percent of all

new agreement filings during the year, and 57 modifications to VSAs. The Bureau processed 73 filings

during the fiscal year and 15 VSAs were terminated. One new VSA was withdrawn after questions

were raised about the ocean common carrier status of one of the two parties. At the end of the fiscal

year, there were 157 VSAs on file. 

(d) Joint Service Agreements
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 Parties to joint service agreements operate a joint venture under a single name in a specified

trading area. The joint venture issues its own bills of lading, sets its own rates, and acts as an individual

ocean common carrier.

No new joint service agreements and only one modification to an existing agreement were filed

during fiscal year 2004. The Bureau processed the single filing during the year. One joint service

agreement was terminated, leaving only six joint service agreements on file at the conclusion of the

fiscal year.

(e) Cooperative Working and Other Agreements

Cooperative working agreements (“CWAs”) do not fit under any of the foregoing agreement

types. Generally, they deal with policing matters, unique management arrangements between carriers,

joint service contracting, and sharing administrative services. Other agreements include agency,

transshipment, and equipment interchange agreements. 

The Bureau received and processed 13 filings under these categories of agreements in fiscal year

2004. One new equipment interchange agreement was filed, and 12 modifications were filed amending

CWAs and equipment interchange agreements. Ten CWAs and four Other agreements were on file at

the end of fiscal year 2004. A CWA and an equipment interchange agreement were terminated during

the year.

(f) Marine Terminal Agreements

Marine terminals, operated by both public and private entities, provide facilities, services and

labor for the interchange of cargo and passengers between land and ocean carriers and for the receipt

and delivery of cargo from shippers and consignees. The Bureau is responsible for reviewing and

processing agreements related to the marine terminal industry.

During fiscal year 2004, the Bureau received 32 and analyzed 

30 terminal agreement filings relating to port and marine terminal services and facilities. Certain

terminal agreements become effective upon filing under Commission rules that exempt particular classes

of MTO agreements from the waiting period requirements of the 1984 Act. Terminal agreements not

entitled to an exemption are processed under applicable statutory requirements. At the end of the fiscal

year, 322 terminal agreements were on file with the Commission.

Significant filings in this category during the fiscal year included a new MTO agreement

between the Port of Long Beach and the Port of Los Angeles, an amendment to an MTO agreement

among MTOs on the U.S. West Coast, and a CWA between the Port of Portland, Maine, and a cruise

line. The new MTO agreement between the Ports of Long Beach and Los Angeles and the amendment

to the West Coast MTO agreement both were intended to allow the parties in those respective

agreements to discuss and develop a program for extended gate hours at the two ports. The CWA

between the Port of Portland and the cruise line has an exclusivity clause that is currently being

examined by the Commission in a formal proceeding.
-59-

The number of marine terminal agreement filings generally has been declining since 1992. That

year, to lessen the regulatory burden on the industry, the Commission exempted terminal lease

agreements from filing. Prior to that time the Commission was receiving approximately 340 terminal

agreements a year. 

5. Overview of Agreement Filings

In fiscal year 2004, the Bureau received 231 agreement filings, an amount identical to the

number of agreement filings received in the previous fiscal year. The Bureau processed 220 agreement

filings during fiscal year 2004. At the end of the fiscal year, there were 232 carrier agreements and 322

terminal agreements on file. Appendix C contains a breakdown of receipts and processing categories

for fiscal year 2004. 

6. Tariffs

Since May 1, 1999, section 8 of the 1984 Act, as amended by OSRA, requires common carriers

and conferences to publish tariffs in private automated systems. These electronic tariffs contain rates,

charges, rules, and practices of common carriers operating in the U.S. foreign commerce. The Bureau

reviews and monitors the accessibility of the private systems, and reviews published tariff material for

compliance with the requirements of the Shipping Act. The Bureau also determines whether to grant

applications for special permission to deviate from tariff publishing rules and regulations and

recommends Commission action on tariff publishing activities and regulations. 

Two Circular Letters, No. 00-1, Public Access to Tariffs and Tariff Systems under the Ocean

Shipping Reform Act of 1998, and No. 00-2, Charges Assessed for Access to Tariffs and Tariff Systems,

have been issued by the Commission to address the carriers’ automated tariff systems (“CATS”). The

circulars were issued because the Commission was concerned that the public’s ability to access some

tariff systems appeared to be limited. In fiscal year 2004, the Commission’s staff continued to contact

carriers, conferences and tariff publishers to assist in the resolution of problems in certain CATS.

Further, the staff reviewed electronically published tariffs to ensure that the provisions of the tariffs

were in compliance with the Commission’s tariff content rule. The Bureau continues to monitor

electronically published tariffs to ensure that appropriate public access is provided and tariff content

provisions are compliant.

The Bureau also collaborates with other components of the Commission to verify that NVOCCs

comply with the Commission’s licensing, bonding and tariff publication requirements. Further, the

Bureau is directly involved in processing the electronic Form FMC-1 required to be filed with the

Commission by carriers, conferences and MTOs. The data on this form identifies the location of carrier

tariffs, including carrier and conference service contract essential terms publications or any MTO

schedules. At the end of fiscal year 2004, a total of 3,613 tariff location addresses were posted on the

Commission’s website. Of the 3,613 tariff locations, 10 involve single carriers with multiple locations

where their tariffs can be viewed. An additional 77 MTOs with Form FMC-1 submissions opted not

to make tariff schedules publicly available. 
-60-

During fiscal year 2004, the Bureau received and processed seven special permission

applications to deviate from the statutory provisions of the 1984 Act and/or the Commission’s tariff

publishing regulations. 

7. Service Contracts

Service contracts offer an alternative to transportation under tariff terms. Their flexibility

enables contract parties to tailor transportation services to accommodate specific commercial and

operational needs.

In fiscal year 2003, the Commission added a new rule to its service contract regulations (Docket

No. 03-03, Amendment to Service Contract Regulations) to permit VOCCs to correct an original filing

that is defective due to an electronic transmission clerical error. The time to correct such SERVCON

filing errors is limited to two business days after the initial, defective, electronic transmission. The rule

became effective September 8, 2003. During fiscal year 2004, 1,480 records were filed into SERVCON

involving electronic corrected transmission copies of service contract filings.

During fiscal year 2004, the Commission received 46,025 new service contracts (compared to

46,492 in fiscal year 2003), and 216,526 amendments (compared to 192,807 in fiscal year 2003).

8. Controlled Carriers

A controlled carrier is an ocean common carrier that is, or whose operating assets are, owned

or controlled directly or indirectly by a government. Section 9 of the 1984 Act provides that no

controlled carrier may maintain rates or charges in its tariffs or service contracts that are below a level

that is just and reasonable, nor may any such carrier establish, maintain, or enforce unjust or

unreasonable classifications, rules or regulations in those tariffs or service contracts. In addition, tariff

rates, charges, classifications, rules, or regulations of a controlled carrier may not, without special

permission of the Commission, become effective sooner than the 30th day after the date of publication.

By Order on March 27, 1998, the Commission granted one controlled carrier, China Ocean

Shipping (Group) Company (“COSCO”), a limited exemption from the 30-day notice period applicable

to controlled carriers to reduce rates to meet or exceed the filed rates of competing ocean common

carriers. (Petition No. P1-98, Petition of China Ocean Shipping (Group) Company for a Limited

Exemption from Section 9(c) of the Shipping Act of 1984.) The Commission streamlined and updated

the procedures for COSCO to comply with this Controlled Carrier Act limited exemption in fiscal year

2001. In fiscal year 2004, COSCO exercised the authority granted by the Commission’s Order in six

instances.

In October 2000, China National Foreign Trade Transportation (Group) Corp. (“Sinotrans”)

petitioned (No. P2-00) for an exemption similar to that granted COSCO under P1-98, so that it could

lawfully reduce rates to meet or exceed the published rates of competing ocean common carriers on one

day’s notice. This petition was withdrawn in June of 2003 in favor of the petition by Sinotrans

Container Lines Co., Ltd. (“Sinolines”) discussed below.
-61-

In fiscal year 1999, COSCO petitioned for a further exemption from the 30-day notice period

applicable to controlled carriers in order to publish rate decreases in the U.S. foreign commerce that

would be effective upon publication without regard to whether they were the same as, or lower than,

rates published by competing carriers. (Petition No. P3-99, Petition of China Ocean Shipping (Group)

Company for a Partial Exemption from the Controlled Carrier Act.) In fiscal year 2003, similar

petitions were made by China Shipping Container Lines Co., Ltd. (No. P4-03) and Sinolines (No. P6-

03). These three petitions were granted on April 1, 2004.

On June 9, 2003, the Commission published an updated list of controlled carriers in the Federal

Register to supersede the list published on September 27, 2000. Eight carriers were removed from the

previously published list because they no longer operated as ocean common carriers in the U.S. trades.

Some of these carriers had gone out of business altogether. One carrier, Sinolines, was added to the list

as a replacement for Sinotrans.

On September 23, 2004, American President Lines, Ltd., and APL Co. Pte., Ltd. (“APL”), the

ocean common carrier subsidiaries of Neptune Orient Lines (“NOL”), notified the Commission that

Temasek Holdings (Private) Ltd., a holding company of the Government of Singapore, had acquired an

ownership interest in NOL that exceeded 50 percent. Consequently, APL was classified as a controlled

carrier effective September 27, 2004.

9. Non-Vessel-Operating Common Carriers

OSRA amended the 1984 Act by creating a new, combined, term for ocean freight forwarders

and NVOCCs under the generic label of ocean transportation intermediaries (“OTIs”). OTIs must

comply with the licensing and bonding requirements as modified by OSRA. The Commission’s Bureau

of Certification and Licensing monitors and reviews compliance with OTI/NVOCC financial

responsibilities under OSRA, while the Bureau of Trade Analysis reviews the accessibility requirements

of NVOCC tariff publications in private automated systems. 

At the end of fiscal year 2004, a total of 3,105 tariff location addresses for NVOCCs had been

posted on the Commission’s website. The Commission has been considering various petitions filed on

behalf of NVOCCs to establish a service contract mechanism similar to the confidential service

contracting system that became effective May 1999 under OSRA for ocean common carriers. The

Commission anticipates addressing this matter early in fiscal year 2005. 

10. Marine Terminal Activities

Pursuant to OSRA, an MTO may make available to the public, subject to section 10(d) of the

1984 Act, a schedule of rates, regulations, and practices, including limitations of liability for cargo loss

or damage, pertaining to receiving, delivering, handling, or storing property at its marine terminal. Any

such schedule made available to the public shall be enforceable by an appropriate court as an implied

contract without proof of actual knowledge of its provisions. Pursuant to the Commission’s regulations

governing MTO schedules, any terminal schedule that is made available to the public must be available

during normal business hours and in electronic form. Each MTO must notify the Bureau of the

electronic location of its terminal schedule by submitting Form FMC-1 before commencing operations.
-62-

A total of 244 MTOs have Form FMC-1 filings. At the close of fiscal year 2004, of these 244 MTOs,

167 published their terminal schedules. The electronic location addresses for these MTO terminal

schedules were posted on the Commission’s website. Further, follow-up letters were sent to 49 other

MTO entities to clarify whether they were still providing marine terminal services and, if so, informing

them of the regulatory requirements to file a Form FMC-1 with the Commission.

11. Automated Database Systems

The Bureau currently maintains and uses the following automated databases and filing

systems: (1) Form FMC-1 System; (2) Tariff Profile System; (3) SERVCON, the system for filing

service contracts, and related Form FMC-83 system for registration to file service contracts;

(4) Microfiche System; (5) historical ATFI tariff database system; (6) the tariff and service contract

portions of the FMC Imaging System; and (7) the Agreement Profile System.

During fiscal year 2004, the Form FMC-1 System reflected the tariff location addresses of 315

VOCCs, 3,105 NVOCCs, 15 conferences, and 167 MTOs. The FMC-1 System also allows the

Commission to quickly track the current status of any Form FMC-1 submitted. Information in the

Tariff Profile System is used to review and analyze carrier tariffs and service contract essential terms

publications to ensure compliance with Commission rules and regulations under OSRA, particularly the

accessibility of carrier tariffs. SERVCON contains service contract data, most of which is only available

to the Commission’s staff due to OSRA’s confidentiality requirements. Registration to file service

contracts into the system is authorized through the submission of Form FMC-83. The historical ATFI

database contains all tariff and service contract essential terms publication data filed electronically with

the Commission between February 22, 1993, and April 30, 1999. The Microfiche System provides a

means of locating canceled tariffs and amendments that have been microfiched. The FMC Imaging

System, among other things, provides for document storage and retrieval of canceled tariffs and service

contracts. The Agreement Profile System contains information about the status of carrier and terminal

agreements, as well as related monitoring reports. 

These databases and systems provide support for many of the Commission’s programs. Certain

information contained in the databases also is available to the public.

12. Future Plans and Proposed Activities

The Bureau’s overall monitoring program will: focus on systematic oversight of carrier and

trade activity with emphasis on upgrading monitoring systems to incorporate data and information that

will be provided by carriers and MTOs; assess the impact of key issues facing the industry in order to

monitor and anticipate developments in major trades and analyze agreements in the foreign trades under

the standards of the 1984 Act; and continue to refine its section 6(g) monitoring methodology in

evaluating the degree of anticompetitiveness generated by agreements within the context of their

commercial environments. The Bureau also will continue to review tariffs and service contracts to

ensure that they comply with the Shipping Act and the Commission’s regulations, including the statutes

and regulations related to controlled carriers. Proposed activities include: (1) streamlining features

necessary to enhance the reliability and efficiency of SERVCON; (2) redesigning the internal agreement
-63-

database to enable more efficient oversight of agreement activities; (3) improving staff understanding

of the shipping industry relating to activities of carriers agreements, tariffs, service contracts and MTOs;

and (4) implementing any provisions that may be adopted by the Commission addressing the NVOCC

petitions to, among other things, file NVOCC confidential service arrangements. Final Rulemakings

will be recommended in connection with Docket No. 03-15, Ocean Common Carrier and Marine

Terminal Agreements Subject to the Shipping Act of 1984, and the establishment of criteria for

determining ocean common carrier status under the 1984 Act. Further, a system is being developed to

facilitate electronic filing of carrier agreements, minutes, monitoring reports and signatures for various

FMC information forms to comply with the requirements of GPEA.

The Bureau also will continue to furnish support and prepare economic testimony in formal

Commission proceedings arising in the areas of its expertise; provide analyses and recommendations

on petitions, information demand orders, and Commission-initiated rulemakings; perform preeffectiveness analyses of newly filed agreements to determine whether they are likely to raise issues and

specific questions under sections 5, 6(g) and 10 of the 1984 Act, or to raise general policy questions;

prepare recommendations to the Commission on the more complex agreements and those agreements

that raise policy issues; and process other agreement matters under authority delegated by the

Commission.

APPENDIXES
APPENDIX A

FEDERAL MARITIME COMMISSION

ORGANIZATION CHART

Fiscal Year 2004

Commissioner Commissioner Chairman Commissioner Commissioner

Office of Equal

Employment Opportunity

Office of the Inspector

General Office of the Secretary Office of Operations Office of Administration Office of the GeneralCounsel

Office of Administrative

Law Judges

Office of Consumer

Affairs and Dispute

Resolution Services

Bureau of Certification

and Licensing

Office of Budget and

Financial Management

Bureau of Trade Analysis Office of Human Resources

Bureau of Enforcement Office of Information

Technology

Area Representatives

New York

 Los Angeles New Orleans

Seattle 

South Florida

Office of Management

Services
-65-

APPENDIX B 

COMMISSION PROCEEDINGS 

Fiscal Year 2004

Formal Proceedings

 Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

 Discontinuances & Dismissals . . . . . . . . . . . . . . . . . 15

 Initial Decisions Not Reviewed .................. 1

 Rulemakings - Final Rules . . . . . . . . . . . . . . . . . . . . . 1

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Special Dockets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Informal Dockets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

APPENDIX C

AGREEMENT FILINGS AND STATUS

Fiscal Year 2004

Agreements Filed in FY 2004

 (including modifications)

Carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

Terminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231

Agreement Processing Categories in FY 2004

Forty-Five Day Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Shortened Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Exempt-Effective Upon Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Rejection of Filing ............................................. 0

Formal Extension of Review Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Not Subject . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-66-

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

Carrier Reports Submitted for Commission Review

Minutes of Meetings and Ad Hoc Reports . . . . . . . . . . . . . . . . . . . . . . . . . 661

Monitoring Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 933

Agreements on File as of September 30, 2004

Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Joint Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Vessel-Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Cooperative Working & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Terminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554

APPENDIX D

FORM FMC-1 

TARIFF LOCATION ADDRESSES - ELECTRONIC SERVICE CONTRACT

FILINGS AND SPECIAL PERMISSION APPLICATIONS

Fiscal Year 2004

Form FMC-1 Filings

VOCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315

OTI/NVOCC . . . . . . . . . . . . . . . . . . . . . . 3,105 . . . . . . . . . . . . . . . . . MTO

244

Conferences . . . . . . . . . . . . . . . . . . . . . . . . . 15

Electronic Service Contract Documents

New Service Contracts . . . . . . . . . . . . 46,025

Service Contract Amendments . . . . . . 216,526

Special Permission Applications

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Denied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-67-

APPENDIX E

CIVIL PENALTIES COLLECTED

 Fiscal Year 2004

Antillean Marine Shipping Corp. ................ $60,000.00

Atallah Business Group. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000.00

Cap Barbell, Inc., et.al. . . . . . . . . . . . . . . . . . . . . . . . . 180,000.00

China Shipping Container Lines . . . . . . . . . . . . . . . . . 1,850,000.00

Deans International Shipping . . . . . . . . . . . . . . . . . . . . 50,000.00

Formerica Consolidation Services, Inc. . . . . . . . . . . . . . . 25,000.00

FSL International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000.00

Global Alliance Logistics. . . . . . . . . . . . . . . . . . . . . . . . . 50,000.00

Green Master International. .................... 105,000.00

Hub Shipping Co. d/b/a Hub Logistics. . . . . . . . . . . . . . . 35,000.00

Logical Logistics International Ltd. . . . . . . . . . . . . . . . 50,000.00

Margaret J. Zimmer .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000.00

MP Line de Mexico SA de CV . . . . . . . . . . . . . . . . . . . 45,000.00

Patron Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000.00

Perfect Express Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . 52,500.00

Quality Express USA , Inc... . . . . . . . . . . . . . . . . . . . . . . 45,000.00

Ronald Pfeiffer d/b/a Auto Shipping Int’l. . . . . . . . . . 17,500.00

Sea Line Cargo, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000.00

Star Trans Container Line Ltd., et.al. . . . . . . . . . . . . . 85,000.00

Zen Continental & Sunway Line, Inc.. . . . . . . . . . . . . . . 79,000.00

Total Civil Penalties Collected . . . . . . . . . . . . . . . . $2,959,000.00

APPENDIX F

INVESTIGATIONS

Fiscal Year 2004

Investigations Opened:

VOCC Audits: 1

NVOCC Audits: 19

Freight Forwarder Audits: 4
-68-

Total Openings: 24

Investigations Completed:

VOCC Audits: 10

NVOCC Audits: 15

Freight Forwarder Audits: 9

Total Completions: 34

APPENDIX G

STATEMENT OF APPROPRIATIONS, 

OBLIGATIONS AND RECEIPTS FOR

THE FISCAL YEAR ENDED

SEPTEMBER 30, 2004

APPROPRIATIONS:

Public Law 108-199, 108th Congress: For necessary expenses of the Federal Maritime Commission as authorized by section

201(d) of the Merchant Marine Act of 1936, as amended (46 App. U.S.C. 1111), including services as authorized by 5 U.S.C.

3109; hire of passenger motor vehicles authorized by 31 U.S.C. 1343 (b); and uniforms or allowances therefor, as authorized

by 5 U.S.C. 5901-5902, $18,471,000: Provided, that not to exceed $2,000 shall be available for official reception and

representation expenses.

$18,471,000

Public Law 108-199, 108th Congress

Government Wide Rescissions, 2004 - 108,979

Revised Appropriation $18,362,021

OBLIGATIONS AND UNOBLIGATED BALANCE:

Net obligations for salaries and expenses for the fiscal year 

ended September 30, 2004. $18,347,203

STATEMENT OF RECEIPTS: Deposited with the General 

Fund of the Treasury for the Fiscal Year Ended September 30, 2004:

Publications and reproductions, 

Fees and Vessel Certification,

 and Freight Forwarder Applications $ 433,287

Fines and penalties $2,959,068

Total general fund receipts $3,392,355